We are in the midst of an economic conflict of visions. Over a range of vital issues, MEF strongly makes the case for economic freedom.
We are in the midst of an economic conflict of visions. Over a range of vital issues, MEF makes the case for economic freedom. Both the philosophical and the practical elements are explored, and conclusions are reached on the overwhelming benefits to humanity from economic freedom.
Published in time to prepare for the November 2012 election, Modern Economic Freedom will provide the reader with thoughtful insight and analysis on the salient economic fronts. It lays down the basic precepts of economic freedom to forge the foundation. A history of economic freedom is explored. The concept of Friedman's Law is introduced to explain inefficiencies in a market where there is distance between spender and consumer (such as healthcare). Our current entitlement society is scrutinized, with emphasis on government spending, as well as the unfunded liability of the entitlement system. The rationale for a pro-growth, pro-freedom tax system is presented. And several other areas are covered.
While the bookstore shelves are filled with political banter and blather, Modern Economic Freedom focuses on the economics. In the mold of Free to Choose, Road to Serfdom and Economics in One Lesson, MEF arms the reader with the clear argument for economic freedom. It is truly a must read, and a must share, as the conflict of visions is debated.
Here is the actual introduction in the book:
Ronald Reagan’s election in 1980 ushered in the modern era of economic freedom. For 50 years prior, the United States lurched in the opposite direction towards socialism and stifling government. The economic philosophies and policies of the modern era reversed the trend and, not surprisingly, the United States experienced an unprecedented economic boom that dwarfed anything in history. In 2008, a severe economic recession and resulting shift in political philosophy and power threatens freedom’s progress, and along with it America’s prosperity and way of life. A crossroads has been encountered, and the path chosen will dictate if the era of modern economic freedom will cease or persist.
The stage for the modern era was set in 1979, as Milton Friedman’s Free to Choose encapsulated the concepts of economic freedom. It represented a culmination of decades, and even centuries, of economic thought and works on the topic. It started in the birth year of the United States, with Adam Smith’s Wealth of Nations in 1776. It included works from the likes of Ludwig Von Mises, Friedrich Hayek, and Henry Hazlitt. A blue print was created. The world had been suffering on what Hayek termed the Road to Serfdom, and with an economy retarded by policies of oppression that were counter to freedom. The understanding that freedom is at the core of human existence and that only economic freedom can lead to widespread prosperity, enabled the modern era. The real threat to its continuance is a disregard for the principles of economic freedom.
Thus, this book is intended as a progress report on economic freedom and to provide the basis for an argument to continue both the philosophical thinking and the tangible policies that spawned and cultivated the modern era. The period began after an exponential growth in the role of government, and a coincident decline in economic freedom, both in the United States and abroad. The results were clear as prosperity was diminishing by many measures. Beginning in 1980, the trajectory of government and freedom was altered. The tax burden was decreased and elements of the entitlement society were slowly changed. Prosperity also changed course, and an awe-inspiring and historical creation of wealth ensued. It was a departure from the socialistic tendencies of the prior 50 years. Freedom increased, and the world prospered.
This book makes the case for economic freedom. Both the philosophical and the practical elements are explored, and conclusions are reached on the overwhelming benefits to humanity from economic freedom. However, it is fundamentally an economic text, and not political. The cause of freedom is consistent. As in, people are free to choose a course which restricts economic freedom. This book argues that such policies are detrimental to a society - it does not claim that a willing society cannot choose them. The path towards socialism and collectivism, in many places, was chosen. Because leaders are democratically chosen does not necessarily mean their actions will promote freedom. Hayek wrote, “Perhaps the fact that we have seen millions voting themselves into complete dependence on a tyrant has made our generation understand that to choose one's government is not necessarily to secure freedom.” For example, socialized medicine is prevalent in many places throughout the world. It has been a much debated issue in the United States for many decades. The argument proposed here is not that people cannot be allowed to choose for themselves a system of socialized medicine. Rather, it is that the economic conclusion is obvious that socialized medicine is detrimental. This book makes the economic argument that it drives up costs and limits services for everyone, and thus is counter to its intent as the net effect is harmful to healthcare. In general, people can make choices to limit the economic freedom of the group, but that will always lead to dire consequences. In principle, some arguments for the cause of limiting economic freedom come from positive intention. They might be generated from a desire to help all of society. Yet, they lack any reasonable basis of proper economic thought, and with near certainty end up being harmful. Those whose interests are in a robust and prosperous economy will feel compelled towards freedom as the correct path.
The overall contention is that an understanding of the fundamental economics of policies is essential. Hazlitt wrote “The tragedy is that…we are already suffering the long-run consequences of the policies of the remote or recent past. Today is already the tomorrow which the bad economist yesterday urged us to ignore.” And continued, “A little economics can easily lead to the paradoxical and preposterous conclusions we have just rehearsed, but that depth in economics brings men back to common sense.”
This book, then, intends to clarify the means and the ends of economic freedom. It begins by laying the foundation of economic freedom with a group of precepts. These can be viewed almost as mandates. The first is that freedom is an inalienable right. Liberty is inherent to humanity. Friedman wrote, “Underlying most arguments against the free market is a lack of belief in freedom itself.” The other precepts follow in similar nature and form a foundation upon which the rest of the book is built. They begin to explore what economic freedom really means.
President Abraham Lincoln, in a speech at New Haven, CT on 6 March 1860, defined economic freedom thusly:
“So while we do not propose any war upon capital, we do wish to allow the humblest man an equal chance to get rich with everybody else. When one starts poor, as most do in the race of life, free society is such that he knows he can better his condition; he knows that there is no fixed condition of labor, for his whole life…. I want every man to have the chance…in which he can better his condition – when he may look forward and hope to be a hired laborer this year and next, work for himself afterward, and finally to hire men to work for him! That is the true system.”
A history of economic freedom is then explored. While possibly overused, Santayana’s aphorism that “Those who cannot remember the past are condemned to repeat it” is more than appropriate in this case. The world’s history is replete with a treasure trove of evidence in favor of economic freedom. As mankind evolved, societies were formed. Plato wrote in The Republic, “A state comes into existence because no individual is self sufficing, we all have many needs.” The history section hones in on how people have organized themselves and the performance in terms of freedom and prosperity. It begins with the Roman Empire and the elements, with respect to economic freedom, that led to its rise and fall. The dark ages are looked at in the context of a period with no discernible basis of a free economy, and the chaos that ensued. The next step is the enlightenment – the path out of the darkness. The beacon is, of course, the United States and the principles of freedom it was founded on. As Ayn Rand writes in Atlas Shrugged, “This country was the only country in history born, not of chance and blind tribal warfare, but as a rational product of man’s mind. This country was built on the supremacy of reason – and…it redeemed the world.” History, as it is apt to do, then condenses. The Great Depression thwarts the path of freedom and prosperity, and the course is changed and runs counter to economic freedom. This period lasts until the modern era begins in 1980. The modern era then leads to where we are today, at the crossroads of economic freedom.
Once the history is acknowledged, the principles of economic freedom can be explored in detail. It begins with an examination of how freedom impacts a market. A properly functioning market will have willing participants exchanging goods and services with one another. As freedom is restricted, inefficiencies arise which harm the participants. A crucial such impediment involves the interference between participants. This book develops the concept of Friedman’s Law, which states that in a market, the distance between payer and consumer is directly proportional to the level of pricing inefficiency. The examples used include auto body repair and college education, building up to a focus on the healthcare industry. Again, certain market distortions might actually help particular participants, but it will always be at the expense of others. In sum, the entire economy is worse off.
Following an examination of the impact on a particular industry is a wider look into the entitlement society as a whole. The regressing of economic freedom which began in the Depression era is for the most part linked to the redistributive efforts of government and a collectivist mind frame. Potentially with good intentions, the economic consequences were dire, and many remnants survived the modern era. Social Security and Medicare are a part of the entitlement society. But the first step is the role of the government in general. Thomas Jefferson in his first Inaugural Address on 4 March 1801 said, “A wise and frugal government… shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.”
Yet by Jefferson’s definition, government became bad. In 1776, Adam Smith wrote, “What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.” The government of the United States, however, grew to conduct itself in an imprudent manner. Government involvement in the economy has grown to extraordinary proportions. Government spending, a major aspect of government involvement in the economy, dwarfs what might be considered any sort of rational level. Overall government participation in the economy restricts freedom and tends to cause harm. As Von Mises wrote, “Government interventions create unintended consequences that lead to calls for further intervention, and so on into a destructive spiral of more and more government control.” This concept was prescient, written in 1927 before the Great Depression triggered a monumental intervention by the government. In turn, the control over the economy by the government, and the respective decline in economic freedom, continually fed upon itself and spawned the behemoth that exists today. While its growth was somewhat halted during the modern era, the role of government is nonetheless gargantuan. At the crossroads, there is potential for it to resume its pre-modern era ascent.
Specific areas of the entitlement society and role of government are explored. The first is Social Security, which emerged directly out of the Great Depression. Intended as a safety net for retirement, it has morphed into a government program that not only worsens the financial condition of the people in working years and during retirement, but also is a hindrance to overall economic growth and prosperity.
Immigration is then explored. From an economic perspective, it is simply not feasible to have even a moderately open immigration policy with an entitlement society. Absent the abandonment of one the consequences are what have been experienced in the United States – further and extreme pressure on an already strained system. Economic freedom dictates the correct solution to be an end to the entitlement society.
Part of that end was achieved during the modern era, as major changes to the welfare system were enacted. The positive effects are shown as an example of how the intents of the entitlement society rarely coincide with the products, and how it is vital to take steps that further end it.
The tax code is tackled next. Much of the means by which the government can control the economy is via taxation. Aside from feeding the giant and thus enabling its gorging on the economy, the tax system also forces major distortions that are harmful and counterproductive. Lower taxes lead to economic growth. This is an essential economic concept. While some level of taxation is required to fund those aspects of government which are deemed essential, that level should not be a dollar more nor collected in a manner that distorts economic activity. The “Tax Once” concept is introduced as a means to simplify the extraordinarily complex and anti-growth system currently in place. The core component of the “tax once” concept is a simple flat tax. One standard rate is applied to income, and it is only taxed once. All other components are eliminated, along with the taxation on investment. An introducible bill is included as Appendix A.
There are also a group of topics which merit attention and assist in the case for economic freedom. These include education, free trade, global warming, and sound money. Each is relevant to the modern era and the path taken from here.
Finally, the future of economic freedom is addressed. Freedom is the natural course. Economic freedom is simply an extension. Alexander Hamilton wrote, “In the general course of human nature, a power over a man’s subsistence amounts to a power over his will.” Yet throughout history it has been thwarted in various ways and for various reasons. The results have been recorded, and the rationale for economic freedom is exceptionally difficult to refute. Thirty years in, the modern era is threatened. A 1929-like recession and the subsequent shift in power places the United States at the crossroads. Will the path of economic freedom and prosperity be irreparably stunted, or will reason prevail?
In a speech entitled, A Time for Choosing delivered in 1964, Ronald Reagan challenged the people of the United States:
“Are you willing to spend time studying the issues, making yourself aware, and then conveying that information to family and friends? Will you resist the temptation to get a government handout for your community? Realize that the doctor's fight against socialized medicine is your fight. We can't socialize the doctors without socializing the patients. Recognize that government invasion of public power is eventually an assault upon your own business. If some among you fear taking a stand because you are afraid of reprisals from customers, clients, or even government, recognize that you are just feeding the crocodile hoping he'll eat you last. You and I have a rendezvous with destiny. We will preserve for our children this, the last best hope of man on earth, or we will sentence them to take the first step into a thousand years of darkness.”
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