If Men Were Angels
by L. Carlos Lara
There is a lot being said these days about “greed.” It seems we cannot enter into a conversation, pick up any sort of publication, watch the news on television, or check our e-mails on our computer, that the mention of this one human character defect is not brought up in reference to our current world crisis. Everyone, it seems, is pointing to the fact that human nature is something less than angelic.
What lies behind all of this rampant corruption and impish display on the part of so many financial elites? This is the question all concerned citizens are asking and many answers are pouring forth from the media to help us sort this out. But, at the end of the day, are we sure we really know who or what is at fault? Are we pointing our finger at the real source of the problem? Perhaps these written thoughts, pulled together from our ancestors and reliable economists from the past, can be helpful in establishing an order to our own thinking and finally put some questions to rest.
To begin to put the matter in perspective, we must not forget that in the long history of man and government, the larger part of humanity has been oppressed by those who govern. Slavery and peasantry have been the norm. Clarence Carson mentions in his economic text one such example by pointing out that “the vast wealth of Louis XIV was mostly wrung from the poor peasants and squandered on his projects and mistresses.” 1 The history of the Pharos and the Caesars is virtually the same. All of this to say, that the hours of work for those that produced throughout history has been long with virtually little or no compensation leading to a permanent disparity between the wealthy and the poor.
Human Nature
Natural law theorists long ago pointed to the problems of human nature. It is foundational to all schools of economic thought. The framers of our Constitution were also very familiar with this reality. They believed that man is a limited and fallible creature and that all of his organizations, institutions, and structures are affected by this limitation. Accordingly, they felt that the power and sway of anything must be limited and that government, above all, must be severely limited.
In reading the Federalists Papers, a series of 85 articles which appeared in newspapers between 1787 and 1788, we can comprehend for ourselves our Founders’ philosophy and motivations for the ratification of the United States Constitution. Article Number 51, written by James Madison, is considered unparalleled in scope as the clearest exposition of the Constitution and one particular paragraph is acclaimed to be a short course in political science. A portion of that paragraph states the following:
“Ambition must be made to counteract ambition. It may be a reflection on human nature, that such devices should be necessary to control the abuses of government. If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.” 2 – James Madison
The one thing that is being made crystal clear is that we need government to protect ourselves from ourselves. The reason for this is because man is naturally inclined to avoid pain and discomfort. Since work is and always has been painful, men will resort to stealing whenever stealing is easier than work. Historical evidence makes this abundantly clear and present-day examples confirm it. Neither religion nor morality has been able to stop this flawed natural tendency. Only the force of Law can stop it. Therefore, the force of law must be made to protect property and punish stealing in order for a society to function and prosper. This is and should be the only proper role of government. It is precisely the limitations the Founders of our government intended.
Observe, however, that our present-day government has moved away from its proper constitutional role and is now operating in similar fashion to ancient practices and dogmas. It is involved in areas it should not be involved. We all somehow sense this and when the governed of a nation are able to identify that lawmakers themselves take from some persons what belongs to them, and gives it to other persons to whom it does not belong, we, the victimized citizens, are bound to be affected by that injustice. It would be a crime if we did what government does. We witness that stealing is organized by law for the profit of those that make the law. This unlawfulness, committed by our own government, forces upon the governed to make the difficult choice of either losing their moral sense or losing respect for the law altogether. Depending on their degree of understanding to this reality, the governed will either wish to stop the legal theft they see occurring with impunity, or share in it themselves.
If the recent examples of dishonesty are truly the indicators of the reality our ancestors warned about and fought to limit with constitutional laws, yet we see that they have been for naught, what hope is there for the future of free markets and free enterprise in America?
Can Free Markets and Free Enterprise exist?
To answer this question, it is necessary to first clarify some terms and ideas because no one of this present generation has ever witnessed completely free markets; or for that matter, a genuinely free enterprise system.
To begin with, free enterprise is essentially “economic” freedom. This means the freedom to produce whatever one chooses with one’s own materials and to offer them for sale at whatever price one chooses without any hindrance from any source, especially government. The only restraint is that one may not use one’s faculties and property to injure others. In other words, freedom carries with it responsibility.
Additionally, private property is absolutely essential to free enterprise. It is the pre-condition of free enterprise. Without private property there can be no free market or freedom of enterprise. Therefore, restraints on private property are restraints upon enterprise.
“It is true that every economy operates within the framework of government, and free enterprise does as well. But under free enterprise the economy and government are distinct and separate entities, performing different functions. The government maintains peace, order and performs protective functions. The economy provides goods and services, and under free enterprise those functions are performed without government intervention, control, coordination, or direction” 3
– Carson
Only one time, in all of the history of the world, has there ever been the nearest expression of free enterprise and this occurred in the 19th century; beginning first with Great Britain and then followed by the United States. In the United States, with one notable exception, enterprise was about as free as it has ever been anywhere during the years 1789-1860. That exception was slavery which was eventually removed after the Civil War. Even so, free enterprise was the rule or dominant practice from 1789 until 1914. Over 100 years of what we can truly call economic freedom! How was it accomplished? In what seemed like an impossible experiment, the United States government in the first half of the 19th century, made a determined effort to keep itself and economy from being entangled. Enterprise was not regulated or controlled or directed by government. The result transformed the United States into the leading commercial nation of the world. The increase of production was so spectacular that it even exceeded the increases in population of consumers. The average person, the middle class, became wealthier than ever in history. In fact, all of the economic growth and achievements we have today we owe to the efforts of this class of people and to this system. And, the genesis of that system began in the 18th century with an “idea”; the idea of limiting government and freeing men.
Did this mean that man is naturally good, that he is naturally inclined to pursue the public interest?
Adam Smith, who argued forcefully for this idea in the economic realm, did not believe that man was naturally good and neither did those of the Anglo-American tradition. On the contrary, they generally subscribed to the view that man is a flawed being.
“Smith argued that when man pursued his interest justly in the market, it was in the nature of things that he not only benefitted himself but others as well. Beyond that, however, the view that man is flawed could be, and was, turned against rulers as well as the ruled. Thinkers of this era dared to penetrate the mystic veil behind which those who rule have always tried to hide. They are only human beings, the thinkers argued, nomore free from flaws than the rest of us. Thus, they are unfitted to use power to direct our lives.” 4 – Carson
The French thinkers also had a similar idea in the 18th century to match those of Adam Smith which they called “laissez faire” which meant to let people go their way in managing and directing their affairs. The point is that this powerful idea took hold and it changed the world. When free men were able to use their own materials and receive the rewards of their labor, the world witnessed for the first time the highest incentives in men for doing their best. This is one main reason why free enterprise potentially puts more minds and hands behind producing what is wanted, or most wanted, than any other arrangement. Government has never been able to do this, cannot do this, nor can it force men or markets to do this.
However, one very important fundamental must be fully grasped; under free enterprise people must be responsible for their own well-being. People who are old enough to work and are able to do so must provide for their needs and wants by their own efforts. Those who are not able to work must be provided for by families and voluntary organizations. Unless free men assume these responsibilities, they forfeit their freedom to governmental powers.
Do we dare, as our Founders once did, to penetrate the mystic veil behind which those who rule have always tried to hide?
Strange as it may seem, freedom is not easy to convincepeople to want and accept, or to install in practice. The profession of the belief is not difficult to do, but the details of freedom are another matter entirely. Freedom is indeed rare and we really do not have it today; perhaps relatively, but not fully. What we do have is “Capitalism” which we must understand is not Free Enterprise. It is not economic freedom. There is a big difference between these two and if we should want to return back to free enterprise, we must know what are the differences. A closer examination of Capitalism may be of some help.
Point No. 1: The Meaning of Capitalism
There is today much confusion about the meaning of capitalism. The term was actually coined by Karl Marx, a political-economic theorist of the 19th century and the ideological father of communism. He used it in referencing a way of thinking combined with actual practices by which the middle class took unfair advantage of workers. A system, which he believed, made the rich get richer and the poor get poorer to the point that eventually all of the wealth would be concentrated in the hands of the wealthy.
For those that championed and defended the “private ownership” of capital, the term capitalism actually did define such a system. For example, Ludwig Von Mises, one of the leaders of the Austrian School of Economics said the following:
“The capitalistic system was termed “capitalism” not by a friend of the system, but by an individual who considered it to be the worst of all historical systems, the greatest evil that had ever befallen mankind. That man was Karl Marx. Nevertheless, there is no reason to reject Marx’s term, because it describes clearly the source of the greatest social improvements brought about by capitalism. These improvements are the result of capital accumulation; they are based on the fact that people, as a rule, do not consume everything they have produced, that they save-and invest-apart of it.” 6
For all of us that have come along much later and who favor the term in much the same way as Mises and others, have inadvertently equated our capitalistic system with economic freedom, free enterprise, free markets, freedom of trade, and private property. The problem is that without understanding its inherent meaning, not only do we lose our focus as to what has historically happened in our modern world, but we are helping to confuse and obscure what is happening today.
Capitalism’s basic definition stems from the word “capital” which is one of the three elements of production; the other two being, “land” and “labor”. More precisely, capital is “equipment” or rather the wealth invested in the production of goods. When “ism” is added to a word it describes an ideology, a system of thought.
“Capitalism means most basically a system of ideas in which capital, i.e. equipment, is given preference over the other elements of production. Considered as a system, capitalism is the establishment of that preference by the exercise of government power. Thus, capitalism cannot be economic freedom, since it is a system that must be forced by government. It is a linking of government to capital. In political terms, capitalism is the legalization and instituting of a preference for capital.” 6 – Carson
Capitalism in our world is of two kinds, “private capitalism” and “state capitalism.”
Point No. 2: Private Capitalism
The United States has today what is known as private capitalism. However, if it is true that capitalism involves government established preference for capital, and it does so by government force, how private can it be? Though a free market form of capitalism would certainly be the ideal, in practice, private capital in the United States is becoming less and less private as government has become more involved in private capital undertakings. More specifically, government is usurping more and more of the rights of control that pertain to private ownership.
Additionally, today’s instituted preference for capital in the United States tends to produce dislocations, imbalances and uneconomic allocations of funds in the economy. For example, when government inflates to create money for investment, as it so often does, it creates recessions, price increases on goods and services, unemployment, and indebtedness, to mention only a few negative consequences. Since 1914, government has been propping up the institutions which support capital accumulation, such as the stock market and fractional reserve banking, while at the same time collecting ever higher taxes on profits and income. This is all representative of glaring ambiguities and contradictions in the policies which govern private capitalism in this country today.
Nevertheless, our form of private capitalism continues to serve the consumer, especially where there is competition. The main economic point, however, is that as increases in control, regulation and direction mount on private ownership, the loss of authority and control of the owners may result with the consumer being the ultimate loser.
Point No. 3: State Capitalism
State capitalism exists when government owns, controls, and directs the use of capital. Such arrangements are usually referred to as Socialism or Communism.
“The Soviet Union (before its fall) was capital hungry from the outset. Russia had lagged behind Europe in industrialization. Marxist-Leninist doctrine taught that Communism could only be achieved in industrialized countries and the Communists were bent on using the full power of the state to press industrialization. The stone rejected by the architects of Socialism and Communism has become the cornerstone of these systems, and the working man who was supposed to be elevated has instead been subject to the state which controls the capital.” 7 – Carson
In fact, wherever Communism is more or less established, such as in the case of the People’s Republic of China, state capitalism is on its way to being established as well. There should be no mystery why this takes place. There is simply no way that even a small portion of the population in any country in the world could be fed, clothed, and housed without extensive capital or equipment.
When private ownership of the means of production is abolished or completely taken over, capital must then be acquired by confiscation. Therefore, state capitalism is the end result of a government instituted preference for capital. Since government is by nature monopolistic, when it focuses its force on the side of capital, it is bent toward the monopoly of capital. State capitalism is actually the linking of power and wealth. Socialism is the doctrine which is bringing it to its fruition in the contemporary world. It is a fearful combination.
Message of Hope:
I would like for you to stop and think about this statement made by Ludwig Von Mises because it is so powerful.
“Prophets who in their heart know themselves to be false cannot prevail against those filled with the power of sincere conviction. Nothing can corrupt ideas. Neither by money nor by other rewards can one hire men for the fight against ideas… What is needed to stop the trend towards socialism and despotism is common sense and moral courage.”
Can you align with that? Sincere conviction, common sense, and moral courage, those are not the qualities of super humans, but rather qualities of normal human beings empowered by a super human purpose. It is the kind of purpose that makes one step out in front and tells the truth without fear; a purpose that keeps one forever motivated and inspired. It is the kind of purpose that makes one want to join in the intellectual battle, to push for freedom with every breath. Can you see yourself involved in such a battle?
The good thing is that there are many who have already joined in the fight. We are not alone. Many others are on our side. Already hundreds of thousands throughout the country and worldwide are publishing scholarly journals, publishing books, holding conferences, teaching students and holding seminars. Plus, privately funded freedom think tanks have sprung up throughout the land and are contributing the fuel to this intellectual fire. The changes are being felt everywhere.
And then there is the power of the Infinite Banking Concept and what we now as The Nelson Nash Institute.
Already there is evidence of success. Do you not see the evidence? Look again. Paper money is not working. Central banking is not working. Wars are not working. Bail outs are not working. Everything the State is doing is not working, just the way the Austrians predicted it. The question is do you understand why and how, and most importantly, do you know what to do about it?
Your own economic education is first and foremost. If we remain passive and uninformed the state can and will succeed. On the other hand, if we can grasp what is really happening, become convicted and intolerant of power, and embrace our rights to person and property, liberty can prevail. Next, we must teach our families, our children and grandchildren. Finally, we must do all that we can to spread the word to others, especially young thinkers.
Remember, this is not a battle against certain people or political parties; we are fighting an idea; an idea which is false, delusional and destructive. It must be beaten back. Won’t you join us? We have a world to win for freedom.
Notes
(1.) Clarence B. Carson, Economic Text Book: Basic Economics, Second Edition 1988, American Textbook Committee, 3105 Fourth Avenue, Phoenix, AL , Boundary Stone Publishers
(2.) James Madison, The Federalist Papers: (Or, How Government is Suppose to Work) Zebra Edition. Oaksdale, WA Lucky Zebra press, 2007
(3.) Clarence B. Carson, Basic Economics ( see above)
(4.) Clarence B, Carson, Basic Economics (see above)
(5.) Ludwig Von Mises, Lecture in Argentina, reprinted from the Freeman December 1979
(6.) Clarence B. Carson, (see above)
(7.) Ludwig Von Mises, Human Action, 3rd revised edition, Contemporary Books, Inc.