All Commentary
Saturday, March 1, 1997

We Have Yet to Learn

The U.S. Economy is Embedded Not in Freedom but in Self-Indulgence and Greed


Mr. MacDonald, a trustee of The Foundation for Economic Education, resides in Issaquah, Washington.

The ideas of man, expressed in one way or another, have come down to us over and over again for the past 50 centuries. As we approach the twenty-first century, it is almost impossible to come up with an original thought. What a great thing Adam had, quipped Mark Twain. When he said something good, he knew nobody else had said it before. One would think we would have learned something after 5,000 years, but it just hasn’t happened. As the nineteenth-century philosopher Georg Hegel observed, What experience and history teach us is that people and governments never have learned anything from history, or acted on principles deduced from it.

Hegel was right. People and governments never learn from history, and go on repeating the same mistakes.

If we had learned anything at all from the past, we would know that every economy must sooner or later rely upon some sort of profit-and-loss system to spur groups or individuals to productivity. Slavery, police supervision, or ideological enthusiasm have always turned out to be too unproductive, or too expensive—not to mention too immoral.

Prosperity depends on the incentive of profit, but more than that, it depends on freedom. Those who failed to learn this from the past should certainly learn it from the present by looking at the collapse of communism in Russia, the failure of communism 90 miles off our coast in Cuba, or the tragic legacy of communism in China.

What We Can Learn from Rome

When we think of the Roman Empire (and it seems that everybody today tries to draw an analogy between the decline of America and the fall of the Roman Empire), we think of Roman citizens as being free, even though there were a great many slaves in the Empire. Roman politicians lusted after citizens’ votes and support just as politicians do today. Commerce and business thrived in this free economy. Farmers, shoemakers, estate agents, bakers, manufacturers, builders, innkeepers, and a host of other tradesmen and professionals flourished. In the early centuries of the Empire, just as in the early days of the United States, the farmers were the backbone of the nation, providing stability and food as well as strong, free men to defend Rome and fight its battles.

Under the Emperor Diocletian, however, Rome succumbed to outright socialism. Government spending led to inflation and increasing poverty. In A.D. 301, Diocletian issued an Edictum de pretiis, which set maximum prices and wages for all important goods and services. (In today’s world such measures are simply called wage and price controls.) The results were disastrous and set the stage for the fall of the Empire and the beginning of serfdom in the Middle Ages.

Diocletian put extensive public works into operation to boost employment, and food was given to the poor at little or no cost. The government brought nearly all major industries and guilds—unions—under explicit control. Paul-Louis, in his Ancient Rome at Work, tells us that in every large city, the state became a powerful employer . . . standing head and shoulders above the private industrialists, who were in any case crushed by taxation. Will Durant noted that businessmen predicted ruin, but Diocletian explained that the barbarians were at the gate, and that individual liberty had to be shelved until collective liberty could be made secure.

Diocletian’s expanding, expensive, and corrupt bureaucracy proved to be too much to handle. To support all this government—the army, courts, public works, and welfare—taxes rose so high that men lost the incentive to work or earn. Lawyers kept finding ways to evade taxes, but other lawyers formulated laws to prevent evasion. To escape the tax men, thousands of Romans fled over the frontiers to find refuge with the barbarians Diocletian said were at the walls of Rome. (It makes one wonder why the barbarians wanted to get in.)

In an effort to stem the tide of fleeing citizens, and to facilitate regulations and taxation, the government issued decrees binding the farmers to their fields and the workers to their shops until all their debts and taxes had been paid in full. And, as mentioned, serfdom entered its initial stage.

The Modern Welfare State

Technologically, the modern world, and the Western world especially, are no more like ancient Rome than the moon is like the sun. But, technology and science aside, the civilization of Rome in the time of Diocletian vividly reminds us how much our own government parallels the Roman government that existed then. The welfare state, the huge bureaucracy to run it, stifling government regulations, and exorbitant taxes to pay for it all—is there that much difference between our present-day American government and the regime that prevailed in Diocletian’s Rome? And, again, technology and science aside, ideas and thoughts seem to have changed little.

There can be no lasting, healthy economy without freedom. When we are told by government bureaucrats just what we are allowed to do on our property, told whom we must employ, and where we must send our children for an education—can we honestly say we are free?

The average American worker pays government forty-seven percent out of each dollar he or she earns. This money is taken by the IRS, FICA, local and state taxes, property taxes, sales taxes, and on and on. Many people don’t realize this. How can you say you are free if half of everything you earn is taken away from you by government?

A healthy economy, in order to grow and spread and benefit the most people without taking away from others, needs freedom to expand. What we have in the United States today is an economy that has evolved through government control to satisfy self-indulgence and greed. Nor is it an economy embedded in freedom. Somerset Maugham warned us that If any nation values anything more than freedom, it will lose its freedom; and the irony of it is that if it is comfort or money that it values more, it will lose that too.

The people of the United States at the end of the twentieth century have certainly placed a high value on comfort and money. Entitlements, golden parachutes, and rich government pensions are just a few of the programs and schemes that are relentlessly driving our economy onto dangerously thin ice. If enormous bureaucracies on the local, state, and federal levels are the price we are willing to pay for government contracts, welfare, and entitlements in order to retain comfort, then can a sick economy be far behind? And is the loss of freedom even closer?