I was a liberal back in my late 20s. I was practicing law in my hometown of Laredo, Texas, where I was serving on the board of trustees for the local Legal Aid Society, a government agency that provided free legal services for the poor. I also served as the local representative for the ACLU. I believed that government’s role was to help the poor.
As a kid, I had campaigned for John Kennedy and Lyndon Johnson in the 1960 presidential race. I actually met Johnson and shook hands with him at a campaign barbecue at the LBJ Ranch that a delegation from Laredo, including my father, was attending. After Johnson became president, I traveled to the White House as a youth representative of Lady Bird Johnson’s Beautify America campaign.
Whenever libertarians tell me that they got their start through Barry Goldwater’s presidential campaign, I respond with, “Well, my man beat yours!” After I returned to Laredo after law school, I campaigned for several Democratic candidates for public office.
I was a bona fide liberal.
I couldn’t understand why anyone would oppose welfare and other government assistance to the poor. After all, the federal government had lots of money. Why shouldn’t much of that money be used to help the needy? Like other liberals then and now, I thought that anyone who opposed government welfare programs hated the poor, needy, and disadvantaged.
But doubts about liberalism began entering my mind, primarily because of what liberals were doing to illegal immigrants. I grew up with illegal immigrants. We hired them on the farm outside Laredo on which I grew up. They also served as servants and nannies for countless families in Laredo. They were among the hardest-working people I’ve ever encountered in my life. While some of them occasionally committed crimes of violence, I’d estimate that 99 percent of them were honest and caring people.
Yet every week agents of the Border Patrol would travel onto people’s farms and ranches, or stop travelers on highways, or respond to some disgruntled housewife’s complaint, and arrest and incarcerate illegal immigrants, transporting them to a compound outside town that consisted of barracks, guard towers, and high fences. I never had any fear walking into that camp, since I knew that the people there had been jailed simply for committing the heinous “crime” of trying to improve themselves and their families through labor, an act that was entirely consistent with natural law and God’s law.
The end of my liberalism
One day it hit me: If liberals loved the poor, needy, and disadvantaged as much as they professed, how in the world could they treat illegal immigrants in that way? After all, it would be difficult to find a better example of “the poor” than the people whom liberals (and conservatives) were incarcerating along the border.
Around that time, I was also discovering libertarianism. That combination — the liberal attitude toward illegal immigrants and libertarian moral and economic principles — caused me to break through the liberal statist nonsense that had held my mind in its grip. I came to the realization that welfare programs were all nothing more than socialistic devices that often served no other purpose than to advance the money-seeking and power-seeking interests of liberal politicians and bureaucrats. I also discovered that the most effective way to help the poor was through economic liberty, a way of life in which people were free to engage in economic enterprise without government interference.
Most important was the realization that the socialistic welfare state violated fundamental moral and religious principles in the manner in which welfare money was seized and redistributed. You see, when I was a young liberal I thought that the government earned its money like everyone else. When I realized that government instead gets its money by forcibly taking it from others through taxation, forcing some people to help others by forcibly taking their money, I realized that government welfare programs could not be reconciled with freedom of choice, free will, or God’s commandments.
Back in the 1960s liberals could seduce people into thinking that a new dawn was ahead. Using the Social Security program that his mentor Franklin Roosevelt had adopted in the 1930s, Johnson got his Medicare and Medicaid programs enacted, programs that ensured the destruction of the finest health-care system in history, one based on the principles of free markets. Ever since, the welfare state has grown exponentially, along with federal spending, taxation, and debasement of the currency through the inflationary expansion of money and credit by the Federal Reserve.
Today, the socialistic welfare state is cracking apart. Practically everywhere you look, the welfare state is in crisis. Social Security? Busted. Medicare and Medicaid? Busted. Fannie Mae and Freddie Mac? Busted. The FDIC? Busted. The dollar? Busted. The federal budget? Busted. Federal spending? Out of control. The national debt? Soaring. Taxation? Increasing. Inflationary debasement of money? Expanding.
Yet all we hear are the same laments: That it’s all the fault of too much freedom and that the cure for what ails America is more socialism, control, spending, taxes, debts, and inflation.
If Americans fall for this liberal foolishness, they will deserve the full consequences of that choice. For it won’t be as though they haven’t been warned. For decades we libertarians have been telling people that America was on a bad road — a road to socialism, a road to serfdom, a road to dependency on the state. But Americans wouldn’t listen because the siren song of welfare largess was just too powerful.
The lies of liberalism
Today, however, given the severe economic woes besieging the welfare state, not just here but also in Europe, more and more Americans are not automatically falling for the statist cries for more welfare-state socialism. Thanks in large part to libertarians and the libertarian think tanks and educational foundations, whose work over the years is posted on the Internet for everyone to access, increasing numbers of people are discovering how badly they’ve been lied to, especially in their public (i.e., government) schools when they were students in those institutions.
For example, among the biggest lies Americans have been told is that the Great Depression was caused by America’s free-enterprise system. They are realizing what an enormous lie that was. As libertarians have been saying for decades, the Great Depression was actually caused by the Federal Reserve System, a governmental operation that came into existence in 1913, and was greatly exacerbated by Roosevelt’s socialist and interventionist New Deal programs.
The significance of that particular lie cannot be understated. Since Americans were told that the Great Depression was caused by free enterprise, they easily fell for the solution that the statists were proposing: socialism, the premier example of which would be Social Security, a governmental program of confiscation and redistribution that originated among the socialists of Germany. Of course, to sell their new system the liberals didn’t call it socialism but instead government “reform” programs intended to “save free enterprise.”
Liberals love to focus on the causes of poverty. But that’s the wrong thing on which to focus. After all, poverty is the natural state of mankind. Most people in history have been poor. Indeed, most people living in America prior to the 1900s were poor, including the Indians who lived here before 1492.
Thus, the truly important question — the one liberals never ask — is the one that Scottish philosopher Adam Smith asked: What are the causes of wealth? Or to paraphrase Smith’s famous work, what is it that makes some nations wealthy?
You see, liberals think of wealth as a given. They not only see an enormous pie, they also see that the pie is unequally distributed among people in society. The wealthier have bigger pieces of pie while others have smaller pieces of pie. When liberals see the pie, they can’t help themselves. They immediately begin coveting and think to themselves, “If I can just gain political power, I can use the force of government to seize the pie and divide it more equally among the people.”
In the process of doing that, liberals never think to ask themselves, “How did that pie come into existence?” And in failing to ask that question, they fail to realize that their efforts to equalize the pie inevitably cause it to become smaller and ultimately shrink to nothing, which means there is no more pie to confiscate and redistribute.
A bigger pie
How does wealth come into existence? Let’s use the United States to answer this important question.
It is impossible to overstate the unusual nature of the economic system that our American ancestors brought into existence with the adoption of the Constitution in 1788. While there were certainly many violations, both large and small, of the principles of economic liberty in the 19th century (tariffs and slavery, for example), the economic system under which our American ancestors lived was fundamentally different from the system under which Americans live today. Their system was what became known as “free enterprise.” What was meant by that term was a system in which economic enterprise was free of government control or regulation.
Imagine: People were free to enter into any profession or occupation without a permit or license from the state. For example, they could become lawyers and doctors without state permission.
They could enter into mutually beneficial exchanges with others without government controls or regulation. There were no price controls or minimum-wage laws or regulatory agencies.
They could accumulate unlimited amounts of wealth from all their economic enterprise because there was no income tax. Nobody had to file income-tax returns because there was no IRS.
They were free to do whatever they wanted with their money. No one was forced to give money to the poor. No one’s money was taken away from him and given to the poor. There was no welfare state. No Social Security, Medicare, Medicaid, or other welfare program. Charity was entirely voluntary. And guess what: In free-enterprise America there was the greatest outburst of voluntary charity the world had ever seen. That’s how hospitals, universities, opera houses, and museums got built — those who had accumulated wealth voluntarily donated money to build them.
What about the poor? This unusual system of free enterprise was the greatest thing that had ever happened to the poor. In fact, many of the wealthy people were the poor — that is, the poor who had gotten wealthy. But even for those at the bottom of the economic ladder, such as young people just starting out in life, the standard of living was significantly higher than that of their counterparts in other countries.
In other words, while the American system produced vast inequalities of wealth, it simultaneously made everyone’s “piece of the pie” larger, especially those at the bottom of the economic ladder.
Here’s what libertarian economists discovered about what was going on: Prior to the adoption of this type of economic system, life was extremely difficult for people because of widespread poverty. Life spans were short. Most children died before reaching adulthood. Despite their best efforts, people simply couldn’t earn enough money to provide for themselves and their families.
All of a sudden, that situation changed in America in the 1800s. People suddenly discovered that under their unusual economic system, they were earning more money and gradually even accumulating some wealth. Now, that’s not to say that things weren’t difficult in the beginning years of this process. Of course they were. In the early years, for example, people were sending their wives and children into the factories to work, but only because that was the only way to make enough money to survive. The factories, in fact, were providing families with the chance of surviving.
But what was it that was causing a factory, for example, to appear out of nowhere? Why then and not before? Because it takes wealth to build a factory and hire people, and if there is insufficient wealth in a society, a factory cannot be built and neither can anything else.
So where did that wealth come from? It came from people who were freely engaged in enterprise, exchanging goods and services with each other and others around the world, and keeping everything they earned in the process. Then, as they began earning more than what they needed to survive, people began saving a bit of money.
And it was those savings — capital — that provided the key to ever-rising standards of living for the American people, especially for the poor.
Families would take their savings and deposit them into a bank. The bank would lend out those savings to businessmen who wanted to, say, purchase some big piece of equipment for their business, the business in which many of the poor were working. That piece of equipment would increase the productivity of the workers, bringing in more revenue (i.e., wealth) to the business.
Since other businesses were doing the same, employers would use part of that new wealth to pay higher wages, not because they were being nice but because of competitive pressures. Businesses knew that workers would look around and see the wage rates that were being paid by other prospering businesses and either their employer matched it, or he lost his workers to the competition.
Thus, as libertarian economists were discovering, there was a natural harmony between capital and labor. The more savings by workers, the more capital that came into society. The more capital, the more productivity. The more productivity, the more revenue that came into the firm. The more revenue, the higher the wages.
What was being produced? Whatever consumers demanded. As libertarian economists have explained, in the unhampered market economy it was the consumer, not the government, who was sovereign and supreme. Through their buying habits, consumers were the ultimate deciders of which businesses would survive and which ones would go under. It was a process that economist Joseph Schumpeter described as “creative destruction.”
That’s how America’s “pie” of wealth got built. It was a magnificent system, one that was actually working to reduce poverty to the greatest extent in history.
Then along came the statists, the people we know today as liberals, many of whom were deeply influenced by the socialist ideas pervading Europe. Seeing the enormous amount of wealth that America’s unusual free-enterprise system had brought into existence, all that liberals could think was, “We need to stop this. It’s not fair for people to have so much when others have so little. We need to gain the reins of power to confiscate, distribute, and equalize all that wealth.”
And they were smart because they knew that Americans would never knowingly embrace socialism. So, they seized upon the crisis known as the Great Depression, falsely convinced people that it was the fault of free enterprise, and induced people to embrace socialism — in the form of the welfare state but in the name of “saving and reforming free enterprise.”
A smaller pie
For decades, the pie was large enough to handle all the socialist programs that the statists were bringing into existence. It was a time of great joy and glee for liberals. All that money to confiscate and dole out to the American people, who expressed their gratitude for all this “free” largess through votes at the ballot box!
Ultimately, however, the demands on the system became too large, especially given that the warfare state — that is, expenditures for the military and the military-industrial complex — were being added to the welfare-state confiscations and redistributions.
Thus, what we’re seeing today is that the pie is no longer growing and might even be shrinking. Owing to the enormous taxes that people must now pay to fund the combined welfare-warfare state, along with the ever-growing government debt burden and the inflationary debasement of the currency, most people can no longer save a portion of their income.
The collision looms ahead. Liberals (and many conservatives) do not want to let go of their socialistic welfare state. Yet everyone knows that the citizenry cannot continue bearing the burden of the enormous, ever-increasing taxes needed to pay for all the welfare largess.
What lies ahead? If Americans choose to remain on this same road — the road to socialism and serfdom — they should be under no illusions. At the end of this road are poverty and the total loss of economic liberty.
Fortunately, there’s another choice, the one that libertarians have been advocating for decades: Repeal, don’t reform, all the socialistic welfare-state programs, beginning with Social Security, Medicare, and Medicaid. Dismantle the warfare state empire. Abolish the income tax and the Federal Reserve.
In other words, Americans, and especially the poor, should reject the siren songs of the statists and heed the warnings and recommendations of us libertarians: Restore our nation’s heritage of economic liberty before the statists do any more damage to our freedom and our economic well-being.