The Great Enrichment Is Real

From about 1800 to the present the world's economy did something good, which looks to be permanent and looks to be justified. If contrary to the evidence we cling to our prejudices about economic history—our view that the Industrial Revolution was improverishng, or that the Grteat Enrichment was an irremediable environmental disaster, or that Europe is rich only because of poverty in the Third World, or that the new rich are always getting relatively richer, or that after all any enrichment is vulgar—we will mistake how we got here and will give mistaken advice on how to move forward. We will betray the remaining poor of the world.

—Deirdre Nansen McCloskey, Bourgeois Equality

TGIF: Trump Fibbed about Favoring Free Speech

Trump fibbed when he signed his first executive order in January, the one that promised never to repeat the Biden-era barriers to free speech. Everyone knows this by now. FIRE (the Foundation for Individual Rights and Expression) summed it up well, yet only scratched the surface: "We cannot be a country where late night talk show hosts serve at the pleasure of the president."

The Maestro dislikes being criticized, and he regularly displays his willingness to use government power to get revenge. We see this with his string of lawsuits against newspapers and networks for being "unfair" and defamatory (Trump apparently hasn't been informed that in 1964 the Supreme Court, in New York Times v. Sullivan, raised the defamation bar for public figures extremely high). It's also clear in his expressed interest in yanking licenses from broadcasters. There is little need to rehearse FCC Chairman Brendan Carr's Don Corleone impression aimed at ABC and affiliates over late-night host Jimmy Kimmel. Carr offended even Sen. Ted Cruz, who's on the red team. Trump has other television talk shows in his sights.

More broadly, Attorney General Pam Bondi, ignorant of the First Amendment and its underlying philosophy, distinguished protected free speech from presumably unprotected "hate speech." The non-rookie made an embarrassing rookie error (U.S. law makes no such distinction), and Trump applauded. She later said (after having it explained to her?) that she meant speech that incites violence. Conservatives ought to tread lightly here. Some Americans think it's hateful and inciteful to say (correctly) that for human beings, sex is binary and unchangeable or that people should be judged according to their talent and not their skin tone, ethnicity, or gonads. Red and blue hypocrisy has been thick throughout this whole controversy. The blue team cheered when Biden violated freedom of speech over social media during the pandemic. Now it's red's turn. Who supports cancel culture now?

Re Kimmel, the pro-Trump narrative is that the preemption by ABC and its affiliates (since partly reversed) was a business response not to government threats, but to upset viewers. Unlikely. Nevertheless, Trump and Carr muddied the waters with the threats. Had they kept quiet, we might have been able to see how bottom-up the preemptions were.

But even then, we couldn't be sure because the government holds life-and-death licensing power over traditional broadcasters, who surely did not need reminding. (Trump has renewed his threats against ABC, which owns some stations, and its affiliates that reinstated Kimmel's show.) Broadcasters are not free in the land of the free to thumb their noses at the FCC or at a president who expects the FCC to do its bidding. Furthermore, the FCC and other regulatory agencies have the power to cast thumbs up or down for company mergers and acquisitions, which means businesses that displease the administration could have their plans destroyed by frowning bureaucrats. That's not capitalism, i.e., free private enterprise.

Traditional television and radio stations are privately owned companies, but they do not own the frequencies over which they broadcast. In contrast, factories and stores sit on private land. We would not regard an economy as capitalist if the government owned all the land and licensed it to businesses in return for promises to serve the public interest as defined by government officials.

But that is precisely how it works with broadcasters. The airwaves are not treated like private resources that were homesteaded by pioneering entrepreneurs who grasped the potential of radio and television. That could have been the case except that one man, about a century ago, kept it from being so: Herbert Hoover, the Republican secretary of commerce before he was elected president in 1928. Hoover gave us the regime under which the government "permits" companies to use "the public's airwaves" in return for the promise to serve the public. Of course, a government commission decides what's in the public interest. Mere consumers acting in the market can't be trusted with such a grave mission. (A former FCC chairman once said that the public interest is not necessarily what interests the public.) The public-ownership theory was always inane. How could the collective that didn't even know the airwaves existed have an equal ownership claim to individuals who saw the potential and did something about it?

That Hoover nationalized the broadcasters' key means of production should be a tip-off that he was not the crusty laissez-faire president the teachers make him out to be. Far from it. He was a "progressive" statist who derailed the common-law, private-property evolution of the airwaves that was underway in the 1920s with court recognition. (On Hoover's "progressive" presidential conduct after the stock market crashed in 1929, see Murray Rothbard's America's Great Depression.)

Here's a question: how does government licensing power square with the First Amendment, which guarantees that "Congress shall make no law ... abridging the freedom of speech, or of the press"? The circle cannot be squared.

A great myth of American history is that nationalizing the airwaves was the only answer to the chaos that was said to be occurring at the dawn of radio. That's false. Economist and historian Thomas W. Hazlett, a long-standing authority on this matter, debunked that myth most recently in "Abolish the FCC," published by Reason last year.

In 1927, mass-market electronic communications had already arisen under the common law rule of "first come, first served" and did not need federal micromanagement. What the new Federal Radio Commission later deemed "five years of orderly development" (1921–26) was disrupted by strategic regulatory dancing that preempted enforcement of such property rights. Sen. Clarence Dill (D–Wash.), author of the 1927 Radio Act, explained that the purpose "from the beginning … was to prevent private ownership of wave lengths or vested rights of any kind in the use of radio transmitting apparatus." [Emphasis added.]

Predictably, the regulatory apparatus did not serve any authentic public interest; that was a fig leaf. Instead, the bureaucrats, among other insults, impeded new technologies as a favor to incumbent interests, to the detriment of consumers and upstart, innovative producers. Hazlett writes:

FM radio, invented in the 1930s, was stymied for decades; cellular telephone networks, designed during World War II, were sandbagged by the spectrum allocation process until the 1980s. Countless other wireless innovations died stillborn.

Besides stifling technology, the FCC has long been used by presidents for political purposes. What would you expect? (On the slippery notion of the public interest, see this.)

Markets serve the public (consumers), and governments don't. As Hazliett puts it, "It's taken too long to grasp the marvel of spectrum markets. Another century for the brainchild of Herbert Hoover seems needlessly inert. Let the invisible hand regulate the invisible resource."

The old media are declining because consumers prefer all of the alternatives that use new technologies. The irony is that while critics of capitalism exploit those alternatives with gusto, they have yet to acknowledge that capitalism is what has made those cheap or free alternatives possible.

Privatizing the airwaves wouldn't stop Trump from interfering with free expression, but it would be a worthwhile first step.

TGIF: Social Peace through Government Retrenchment

For at least 200 years, classical liberals (aka libertarians) have warned that the more power the government wields, the greater the lengths people will go to get their hands on it before their ideological opponents do.

This is not rocket science, yet resistance to the implications endures. If politicians and bureaucrats can readily confiscate wealth from its producers and distribute it to others, or if they can grant privileges to those they favor and impose restrictions on those they don't, you can bet that individuals and groups will work overtime for access to that power. That's a recipe for civil strife; it leads to what Ayn Rand called an institutionalized civil war.

Imagine what our society would look like if there were no liberty-robbing political power to vie for. People would have to mind their own business and set up the communities they deem suitable. They could engage in persuasion, but they couldn't tap the taxpayer to pay for coercive crusades against others. (I leave aside the heretofore unsolved problem of limiting government strictly to the protection of life and property, as well as the question of whether market-ordered individualist anarchism is the only promising approach.)

All attempts to turn the government into something other than a due-process-bound peacekeeper must incite conflict. The early classical liberals in France identified the state and its power to legally plunder—that is, to tax—as the source of "class conflict." The state (the great fiction by which everyone seeks to live at the expense of everyone else—Bastiat) necessarily divides society into tax producers (the industrious, whether employer, employee, or independent) and tax consumers (who prefer the fruits of plunder to work). Most people do not fall neatly into one or the other category, so the term net applies. Classes—or better, castes—were not a natural outcome of society; they were political constructs, imposed by state force. In the free market, open-border classes will exist, but not castes.

The state does more than take money from A and give it to B. At A's request (or not), the government may impose requirements or prohibitions on B. He usually objects. Such may be done for A's financial gain, but it may also be done in the sincere belief that B and everyone else would be better off morally if they were forced to live this way or that. Sometimes the motives coexist. Examples have included forced abstention from various alleged sins, such as alcohol, drugs, and racial color blindness.

In a virtually unlimited democracy, one can immediately see the danger this poses to social peace. Any meddlesome group that manages to amass a majority of voters has the potential to impose values on the rest. It helps to have a leader with something like charisma. That potential will attract those who have a taste for lording it over others, but it will also attract those whose motive is only defensive: "If I don't have the power, my opponents will." Those are different motives, but the consequences are the same. Someone imposes; others are imposed on. A third motive might be retribution for past wrongs, real or imagined.

The high-stakes quest for power promotes the demonization of adversaries, increasing the social temperature and danger. Every election becomes the most important in our lifetime or even perhaps the last. The Other must be stopped because civilization depends on it. This is a time bomb whose source is the omnipotent state. Someone needs to write a book titled (without apologies to Christopher Hitchens) Government Is Not Great: How Politics Poisons Everything.

Classical liberalism seems to be the only approach that rejects this framework. Or to put it another way, any approach—whatever you call it—that rejects aggressive force qualifies as classical liberal. The only thing that gets "imposed" is the nonaggression obligation. Not to put too fine a point on it, in a fully liberal society, the law (in Hayek's bottom-up sense) is similar to the rules of the road: it doesn't tell you where to go, but only how to get where you want to go. Distinguishing between aggression and defense may occasionally be difficult, but that's why we have courts, which would exist as well under market-ordered anarchism. Violence is costly, peaceful bargaining much less so. (See David Friedman's The Machinery of Freedom, among others, for details.)

Another way to put this is that we should avoid utopianism. The utopian has a vision of the ideal society down to the smallest detail and harbors the temptation not only to impose his vision, but to punish those who see things differently. Utopianism rejects the liberal insight, as the late historian Ralph Raico said many times, that "society runs itself." The welfare-enhancing market order is produced by individuals who peacefully pursue their chosen ends, freely trusting, coordinating, cooperating, and trading with others, often strangers. But for this to happen, the institutions and mores must be right, among them respect for persons, property, and contract. There are no guarantees, but those can be best protected by small government (if not market-based rights protection), small jurisdictions, and the freedom of exit.

Original pro-market liberalism is not so much a set of answers as a moral-legal-political framework in which individuals search for answers by relying on persuasion and consent, never aggressive force. Worthy causes are left to voluntary organizations, such as mutual-aid societies and charities. Social power replaces state power, to use individualist Albert Jay Nock's exhaustive alternatives.

Why would anyone who favors peace accept anything else?

(For more, see my "Disagreement without Conflict.")

Mass Production Equals Mass Consumption

[R]elative shares in national income have remained substantially constant over the last hundred years. This, however, is true only if we measure them in money. Measured in real terms, relative shares have substantially changed in favor of the lower income groups. This follows from the fact that the capitalist engine is first and last an engine of mass production which unavoidably means also production for the masses....

Electric lighting is no great boon to anyone who has money enough to buy a sufficient number of candles and to pay servants to attend to them. It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as a rule improvements that would mean much to the rich man. Queen Elizabeth [I] owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.

--Joseph Schumpeter, Capitalism, Socialism, and Democracy, 1942

Murder

Why would anyone think that condemning a murder must imply any particular judgment about the victim?

TGIF: Hurray for the Industrial Revolution!

Unbelievably, in 2025, walking among us are people, many of them young and college-educated, who believe the Industrial Revolution (spawned by the liberal Enlightenment) was a disaster for most of mankind. They yearn for what they imagine was the tranquil, plentiful, and happy communalism of the Middle Ages. I'm not referring only to people on the fringes. Glenn Greenwald, the cosmopolitan journalist who has done important reporting on civil liberties and foreign policy, recently lamented the loss of medieval life in a paean to the anti-industrial manifesto (but not the murderous actions) of Ted Kaczinski. He was the Unabomber.

What's shocking is that the data showing what a blessing industrial capitalism has been are readily available. It's a big literature, and it may seem difficult to know where to start. So thanks (again) to Phil Gramm and Donald Boudreaux for presenting the facts in a succinct but detailed chapter in their important book, The Triumph of Economic Liberty: Debunking the Seven Great Myths of American Capitalism. The first chapter is "The Genesis Myth: The Industrial Revolution Impoverished Workers."

No, it did not, the authors demonstrate. It enriched them.

The propagators of the myth begin with a distorted picture of what preceded the Industrial Revolution. As Gramm and Boudreau correct the record:

In the communal world of the Middle Ages, the worker owed fealty to the crown, church, guild, and village. Those “stakeholders,” as they would be called today, extracted large shares of the output produced by the sweat of workers’ brows and the fruits of their thrift. Rewards for effort and saving were thus leeched away. Unsurprisingly, the economic output was so sparse and economic growth so slow that they were noticeable only across the span of centuries.

Life was not solitary (privacy was nonexistent), but it was certainly poor, nasty, brutish, and short, wracked with violence, disease. Serfdom, anyone? Who could lament the end of that era? Fortunately, it did end. Had it not ended, hardly anyone alive today would have been born, much less be flourishing. Gramm and Boudreaux write:

This dreary reality suddenly (in historical terms) changed in the seventeenth and eighteenth centuries. Starting in northwestern Europe, the Enlightenment of the era gave birth to liberalism, which—true to its name—liberated mind, soul, and property. Individuals were freed and empowered to think their own thoughts and, ultimately, have a voice in their government. Men and women secured the right to worship as they chose, as well as to own the fruits of their labor, thrift, risk-taking, and entrepreneurial creativity.

Even Karl Marx, the infamous resentful nihilist, had to acknowledge capitalism's astounding record of production for the masses. Before the liberal, capitalist industrial era, mass production was not even a figment of the imagination.

In this newly enlightened and liberated world, individuals were empowered to pursue their own private interests instead of being conscripted by law or tradition into assisting the elite in pursuing their private interests. The economist W. H. Hutt described the change succinctly: “One of the main social results of the factory regime seems to have been the evolution of the idea of a wage contract, replacing the former idea of servitude.”

To some people, that was barely progress. Noam Chomsky thinks that chattel slavery is only slightly worse than wage employment. He rejects the proposition that "renting" someone is much different from buying him. Contract labor, chattel slavery: it's pretty much the same. The wage earners would have disagreed.

Gramm and Boudreaux explain that endless Victorian poetic and fictional depictions of how bad life was in the industrial cities were in fact a sign of capitalism's progress in enriching the masses. When everyone but the nobility was poor, no one noticed it; that's just how things were. But once life began to improve, thanks to capitalism and industry, those who did not experience progress as quickly as others stood out. The authors quote F. A. Hayek: "Economic suffering both became more conspicuous and seemed less justified, because general wealth was increasing faster than ever before.”

"Remarkably," Gramm and Boudreaux write, "these historical and romantic critiques were written about a period that, by every available economic measure, was the beginning of a golden age of material well-being—especially for workers."  The claim of impoverishment, they add,

is refuted by every major measure of material well-being. In a single century, from 1800 to 1900, wages, life span, and literacy expanded at rates never before experienced. The Industrial Revolution, beginning in Britain and then spreading to continental Europe, the United States, and eventually, most of the globe, ushered in a golden age for workers that continues to this day.

When they say every "major measure," they mean not only material wealth, but infant and child mortality, survival in childbirth, literacy, nutrition, and much more. The graph makes a hockey stick: no progress for thousands of years, and then around 1800—Zoom!—all signs of progress skyrocket.

As Gramm and Boudreaux suggest, it is absurd to judge those early years of growth by today's standards. Poverty is the natural state. Wealth is artificial (manmade). The proper comparison, then, is with what went before the industrial era, feudalism and mercantilism. Once human freedom and ingenuity were liberated, progress took time. Even so, set against all of human history, progress was swift. And recall that this was the beginning of mass production, which must precede mass consumption.

Gramm and Boudreaux turn to the economic historian Deirdre McCloskey for more evidence. I've been reading McCloskey's eye-opening work (Bourgeois Virtues, Bourgeois Dignity, and Bourgeois Equality; also, with Art Carden, Leave Me Alone and I'll Make You Rich). I can attest to its power. McCloskey, write Gramm and Boudreaux,

estimates that since the Industrial Revolution—what she calls the “Great Enrichment”—began just over two hundred years ago, living standards in countries such as Britain, the United States, Japan, and Finland have risen by at least 3,000 percent and perhaps—if improvements in product quality are more fully taken into account—by as much as 10,000 percent!"

Let that sink in. Per capita wealth has increased 3,000 to 10,000 percent since 1800.

You need more evidence? Citing economic historian Gregory Clark, Gramm and Boudreaux write,

At the dawn of the nineteenth century, real wages were no higher than they had been at the dawn of the thirteenth.... [A] revolution in economic production accelerated around the start of the 1800s, and the quality of life in Britain underwent more rapid improvement than had ever occurred in recorded human history. Wages that had largely stagnated for thirty generations began to rise rapidly.... During the Victorian era, from 1840 to 1900, the real wages of skilled builder craftsmen increased by 113 percent, and the real wages of unskilled builder helpers rose by 124 percent.

Explain that one, you lovers of the Middle Ages. Or this: compared to life as a "downstairs" servant on an aristocrat's estate, "The factories," write Gramm and Boudreaux, "offered higher pay, shorter hours, better working conditions, and even more fresh air."

Okay, but what about child labor? That will always come up. Gramm and Boudreaux quote economic historians Carolyn Tuttle and Simone Wegge: “Child labor did not begin during the Industrial Revolution of Great Britain but had existed for centuries across Europe." Remember, it took time and ingenuity for per-worker productivity to increase to where an adult could support a family. That wasn't the fault of capitalism. Little boys were chimney sweeps before the industrial era. At any rate, Gramm and Boudreaux say that "most young working children did not toil in factories or mines. Agriculture, services, trades, and clerical duties together employed far more children than did factories and mines....

"Furthermore, the economist Clark Nardinelli of the University of Virginia found that the employment of children in factories was declining before the Factory Acts were passed.... The Factory Acts codified the market process that was already underway. In closing the ugly ten-millennial chapter of child labor by the end of 1900, the Industrial Revolution had ushered in a new chapter of more intense childhood nurturing and learning."

What did the workers think about industrialization? Gramm and Boudreaux note that historian Emma Griffin, who read 350 writings of regular workers, reported, "It is time to think the unthinkable: that these writers viewed themselves not as downtrodden losers, but as men and women in control of their destiny; that the industrial revolution heralded the advent not of a yet 'darker period', but of the dawn of liberty...."

Gramm and Boudreaux sum up: "The best evidence, which can be found both in statistics and in the written testimony of workers who lived during the Industrial Revolution, strongly suggests that the initial spark of the lavish material prosperity that we enjoy today was not struck at the expense of the first few generations of workers who toiled in Britain’s water- and steam-powered factories. They, too, benefited, as the Great Enrichment made even those workers and their families richer, freer, and happier."

The same is true for America. In the second half of the 1800s, Americans "experienced unprecedented and broad-based economic growth. Between 1865 and 1900, inflation-adjusted GDP nearly tripled, expanding by an extraordinary 297 percent. Nothing
like this had ever happened in American history."

Thus, "The Gilded Age, in short, was an era of unparalleled improvement in living standards for almost all Americans."

Read this book.

Enclosure Revision

More than a decade ago, I ventured into the subject of English agricultural land enclosure as the Industrial Revolution was coming on. I regret that I did so before doing adequate research. It's a complicated subject. To somewhat rectify my offense, I refer readers to Donald Boudreaux's recent Cafe Hayek post on the subject.

Boudreaux points out that economic historian Deirdre McCloskey, in Bourgeois Dignity (p. 54), notes that Karl Marx:

instanced enclosure in England during the sixteenth century (which has been overturned by historical findings that such enclosure was economically minor) and in the eighteenth century (which has been overturned by findings that the labor driven off the land by enclosure was a tiny source of the industrial proletariat, and enclosure happened then mainly in the south and east where in fact little of the new sort of industrialization was going on, and where agricultural employment in newly enclosed villages in fact increased).

Then McCloskey writes (172-3):

By now, though, several generations of agricultural historians have argued (contrary to the Fabian theme first articulated in 1911, which followed Marx) that eighteenth-century enclosures were in many ways equitable and did not drive people out of the villages…. Contrary to the pastoralism of [Oliver Goldsmith’s 1770] poem – which as usual reflects aristocratic traditions in poetry back to Horace and Theocritus more than evidence from the English countryside – the commons was usually purchased rather than stolen from the goose. One can point with sympathy to the damaging of numerous poor holders of traditional rights without also believing what appears to be false – that industrialization depended in any important way on the taking of rights from cottagers to gather firewood on the commons. Industrialization, after all, occurred first in regions to the north and west, mainly enclosed long before, such as Lancashire or Warwickshire, and especially (as Eric Jones pointed out) in areas bad for agriculture, not in the fertile East Midlands or East Anglia or the South – the places where the parliamentary acts of the eighteenth century did transform many villages, though non “deserted.” In such freshly enclosed areas, I repeat, the local populations increased after enclosure.

TGIF: Trump and the Separation of Powers

The U.S. Court of Appeals' rejection last week of the Trump administration's global "emergency" tariff program was a welcome affirmation of the separation-of-powers doctrine. Next stop: the U.S. Supreme Court. I'm keeping my fingers crossed for a 9-0 ruling that Trump grossly exceeded his constitutional powers. One can hope.

Liberty is never secure. However, if we must have a state, the separation of powers may provide some measure of security. The framers, drawing on Montesquieu, understood this. Unfortunately, politicians have weakened the doctrine over the centuries. Most egregiously, presidents have waged war without congressional authorization, as the U.S. Constitution requires.

The first U.S. constitution, the Articles of Confederation, was better than its successor because, among other things, it lacked the powers to tax and regulate trade. (Hard to believe.) The replacement, alas, did assign Congress those powers in Article I, Section 8. Too bad, but at least it did not give them to the executive under Article II. Autocracy is always a danger. (See my America's Counter-Revolution: The Constitution Revisited.)

Trump's minions apparently hadn't informed him that he lacks these powers, but now the Court of Appeals for the Federal Circuit has told him. He is not happy. He condemned the "Highly Partisan Appeals Court" for its "incorrect" decision.

In V.O.S. Selections, Inc. v. Donald Trump, the court, by a 7-4 vote, held that Trump exceeded his power under the International Emergency Economic Powers Act (IEEPA) when, through five executive orders, he imposed tariffs virtually across the board and on virtually all countries after declaring national emergencies ostensibly related to trade reciprocity and drug trafficking.

No, you don't, Mr. President, said the court. In so saying, the judges upheld a ruling by the U.S. Court of International Trade (CIT). The government was "permanently enjoined from imposing the tariffs, but was allowed to continue them until October 14. The administration appealed to the Supreme Court.

All that is at issue in the case is the separation of powers. The administration claimed that the IEEPA authorizes the president to "regulate," with "importation" mentioned as a factor that might trigger the finding of an emergency. Hence, Trump's people said, the president can impose tariffs.

The majority of judges felt it necessary to give Trump a history lesson:

The Constitution grants Congress the power to “lay and collect Taxes, Duties, Imposts and Excises” and to “regulate Commerce with foreign Nations." ... Tariffs are a tax, and the Framers of the Constitution expressly contemplated the exclusive grant of taxing power to the legislative branch; when Patrick Henry expressed concern that the President “may easily become king,” ... James Madison replied that this would not occur because “[t]he purse is in the hands of the representatives of the people.”

Tariffs are a tax. Right.

The judges went on to point out that "at the time of the Founding, and for most of the early history of the United States, tariffs were the primary source of revenue for the federal government.... Setting tariff policy was thus considered a core Congressional function."

Since the late 1800s, the Court stated, Congress has delegated "limited authority to 'activate or suspend' tariff rates through international agreements." But those acts were express delegations of tariff authority and bound by "substantive limitations." As the Court put it:

Taken together, these other statutes indicate that whenever Congress intends to delegate to the President the authority to impose tariffs, it does so explicitly, either by using unequivocal terms like tariff and duty, or via an overall structure which makes clear that Congress is referring to tariffs. This is no surprise, as the core Congressional power to impose taxes such as tariffs is vested exclusively in the legislative branch by the Constitution; when Congress delegates this power in the first instance, it does so clearly and unambiguously.

The IEEPA says nothing about tariffs. It only allows the president to:

investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States.

"Notably," wrote the Court, "IEEPA does not use the words 'tariffs' or 'duties,' nor any similar terms like 'customs,' 'taxes,' or 'imposts.' IEEPA also does not have a residual clause granting the President powers beyond those which are explicitly listed."

How have other presidents used the IEPPA?

Since IEEPA was promulgated almost fifty years ago, past presidents have invoked IEEPA frequently. But not once before has a President asserted his authority under EEPA to impose tariffs on imports or adjust the rates thereof. Rather, presidents have typically invoked IEEPA to restrict financial transactions with specific countries or entities that the President has determined pose an acute threat to the country’s interests.

Finally, the Court made it clear that "we are not addressing whether the President’s actions should have been taken as a matter of policy. Nor are we deciding whether IEEPA authorizes any tariffs at all. Rather, the only issue we resolve on appeal is whether the Trafficking Tariffs and Reciprocal Tariffs imposed by the Challenged Executive Orders are authorized by IEEPA. We conclude they are not."

Trump has predicted calamity if his tariffs are erased. He has bragged that the Treasury has collected more than $200 billion in duties and warns that refunding that money would sink the economy. Earlier his lawyers argued against a preliminary injunction on the grounds that the money could easily be paid back. Now he seems to have forgotten that when the government takes, private individuals are taken from. Thus the Treasury's loss would be the people's gain. That would be good for "the economy" (that is us). On the other hand, the government runs a $2 trillion deficit, so the money must be gone, and the government would have to sell more bonds—monetized by the Fed—to pay it back. We lose no matter what.

Trump has faced judicial setbacks on tariffs, deportations, and his National Guard deployment in Los Angeles. What's next? How will he react if the Supreme Court affirms the decisions? Buckle your seatbelts.

Capitalism Civilizes

"Participation in capitalist markets and bourgeois virtues has civilized the world. It has 'civilized' the world in more than one of the word's root senses, that is, making it 'citified,' from the mere increase in a rich population. It has too, I claim, as many eighteenth-century European writers also claimed, made it courteous, that is, 'civil.' 'The terrestrial paradise,' said Voltaire, 'is Paris.'"

—Deirdre N. McCloskey, Bourgeois Virtues

TGIF: The Chicanery Behind Inequality Data

If self-described progressives decry anything more fiercely than poverty, it is income and wealth inequality. Some have even suggested that they would prefer low-income equality to inequality, regardless of how affluent the lowest level was. What counts is the gap.

The terms poor and low-income are relative, of course. We'd be better off talking about the poorer and lower-income. Also, it's better to be poor in America than anywhere else if we factor in immeasurables such as good prospects. However, some people don't understand the point or perhaps don't want to understand it. Reasonable people ask, "How am I doing and how can I do better?" not, "How much less am I making than Jeff Bezos and Elon Musk [but not Taylor Swift or Juan Soto]?"

So let's talk about inequality—not in the legal and political sense but in terms of income and wealth. You can't go a day without hearing politicians and commentators complain about the top 1, 10, or 20 percent. Those complaints seem to be backed up by government statisticians and parts of the economics and sociology professions. Dissenters are rarely invited on television and podcasts. The impression given, to which compassionate laypeople will be vulnerable, is that America is riddled with extreme, even obscene (so Bernie Sanders says) inequality. Is it true?

Economists Phil Gramm and Donald Boudreaux make an overwhelming case against it in their book, The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism. Gross inequality is one of those myths. (Last week I discussed their chapter on poverty.)

"[T]he claim that income inequality in America is high and rising on a secular basis is almost universally accepted as true," Gramm and Boudreaux report. But: "Census numbers overstate the difference between the top and bottom quintile household incomes by over 300 percent." Can they back up that claim? Let's see.

The U.S. Census Bureau tells us that in 2017 the average income of households in the richest quintile (the top 20 percent) was 16.7 times greater than the average in the lowest quintile. No one can say, without other information, whether that number is appropriate or not. But is it accurate?

"The official Census data also show," Gramm and Boudreaux continue, "that income inequality has grown on a secular basis and, by 2017, was 22.9 percent higher than in 1947." That's not all. According to the Organization for Economic Co-operation and Development, the United States has the worst record on this count among the wealthy countries—and it's been getting worse.

Let's pause for a word about the morality of income and wealth inequality. Individuals contribute unequally to the production of wealth, which improves living standards even for those who contribute little or nothing. So why would anyone expect their incomes and wealth to be equal? Now back to our regularly scheduled program.

Gramm and Boudreaux disclose a puzzle about the government's numbers: "According to the official statistics of the nation’s two leading statistical agencies, the bottom 20 percent of American households had an average income of $13,258 in 2017 yet, in that same year, consumed $26,091 of goods and services."

This fact raises the obvious question of how the bottom 20 percent of households can consume twice their income. This extraordinary gap between the official measure of income and the official measure of consumption has grown more or less steadily since 1967, when funding for the War on Poverty began to ramp up."

That indeed is a puzzle. Could it be that the government agencies do not count everything that's relevant? Write Gramm and Boudreaux:

[T]he Census Bureau does not count two-thirds of all transfer payments to the recipients as income [88 percent for the lowest quintile], instead counting only $0.9 trillion of $2.8 trillion of government transfer payments. In addition, the Census Bureau neither adjusts household income for taxes paid nor counts tax credits as income received by the recipients, even though they receive checks from the Treasury. Census does not count food stamps as income, despite beneficiaries receiving debit cards to pay for groceries. Also not counted as income are benefits received from Medicaid, under which the government pays for each beneficiary’s health care. And also uncounted as income are the transfer payments dispensed through more than one hundred other federal, state, and local programs.

In other words, the government understates the incomes of the poorest, while overstating the incomes of the richest, ignoring that America has a generous welfare state (coercively paid for) and the most progressive income tax in the world. That strikes me as a rather shoddy way of estimating income inequality.

"Because the Census Bureau excludes $1.9 trillion of transfer payments as income received and fails to count $4.4 trillion of taxes paid as income lost to taxpayers," Gramm and Boudreaux write, "the Census measure of household income ignores some 40 percent of national income, which is either gained in transfer payments or lost in taxes."

The advocates of even more confiscation and distribution do not want to acknowledge what is really going on. Why not? The resulting distortion is scandalous. The authors show that instead of the officially estimated top-versus-bottom income ratio of 16.7 to 1, the real ratio is 4 to 1, a fourth of the often-lamented official estimate.

"But even these numbers for household income," Gramm and Boudreaux write, "overstate income inequality by failing to account for differences in the number of individuals living in the average-sized household of each income quintile." The average top-level household contains more people than the bottom-level household (3.10 versus 1.69). (See the book for details.)

What has happened to inequality over time, considering that transfer payments and taxes have increased? Gramm and Boudreaux report:

Over the seventy years from 1947 to 2017, after adjusting for inflation, the real value of all transfer payments grew 212.2 percent, faster than earned personal income had grown. Taxes grew less dramatically, rising only 7 percent faster than earned income over these seventy years. Income and payroll taxes rose 21 percent faster than income. Sales, excise, and property taxes rose 8.3 percent slower than income. The net result was that the US income-tax system became significantly more progressive in the seventy years leading up to the COVID-19 pandemic as an ever-larger share of the tax burden has been shifted from low- and middle-income households onto higher-income households, reducing income inequality. [Emphasis added.]

They also show that while the standard international method for measuring inequality, the Gini coefficient, indicates an increase, "much of this increase was due simply to two very significant changes made in the way the Census Bureau collects and records data." The Bureau acknowledges that those changes distort the picture, but it does not adjust accordingly.

In fact, "the [adjusted] Gini coefficient is actually slightly lower today than it was in 1947...," Gramm and Boudreaux write. "America’s Gini coefficient falls to a level roughly in the middle of the seven largest developed countries."

I began by denying the importance of income equality to human wellbeing. As Gramm and Boudreaux explain, more equal does not mean richer: "Major developed nations that have more equal distributions of income than the United States have significantly lower incomes overall....  [They] also have larger portions of their populations that are poor." Beware a fixation on equality. Better to agitate for the repeal of government obstacles to the creation of wealth, starting with taxes on savings and investment.

A closing note for envious readers who despise the 1 percent. Gramm and Boureaux write that according to a study titled “Income Inequality in the U.S.: Using Tax Data to Measure Long-term Trends” (2024), "when all transfer payments and taxes are counted, the share of national income going to the top 1 percent of American households is about the same as it was in the mid-1960s." [Emphasis added.]

Of course, there is no such thing as "national income," as Gramm and Boufdreaux would agree. That's a statistical category. In reality, there is only your, my, and their income.

TGIF: The Poverty of Poverty Data

"Poverty has no causes; prosperity has many. As history attests, poverty is humanity’s default condition.... But prosperity is not natural; it does not just happen."

—Phil Gramm and Donald J. Boudreaux

To hear some people tell it, America is in the grip of a vast conspiracy in which billionaires get richer, the middle class stagnates at best, and the poor get poorer. Poverty and inequality, by this account, are the shame of America. How can we let this go on!

Do not fall for it. Except for the part about billionaires (those who get rich by innovatively serving consumers), the story is hokum. The middle class shrinks because its members move up, and the "poor" get richer with mass production and lower prices. If a monolithic predatory ruling class has been making war on the rest of us, it has been bloody bad at it. Do you need proof (besides the abundant evidence in your home and out the window)? Check the data! This doesn't mean all is well with the American political system—far from it. Rather, it means that the market economy and the freedom it entails can take a licking and keep on ticking—better and better as years go by. Free the market (that's us) of government shackles, including Trump's tariffs, and the pace of wealth creation for all will quicken.

Phil Gramm and Donald J. Boudreaux document the real story in their book, The Triumph of Economic Freedom: Debunking the Seven Great Myths of American Capitalism. Let's see what they have to say about poverty.

Admittedly, the officially released statistics are a downer. Data compiled by many prestigious-sounding agencies and organizations, Gramm and Boudreaux write, "show that a higher percentage of Americans live in poverty than in any other developed country in the world." If true, that might be a mark against a commercial society like the United States. (Then again, it might be the government's fault.) "All of these damning conclusions," the authors continue, "are buttressed by the US Census Bureau’s official measure of poverty, which shows that the poverty rate has not declined on a secular basis for more than fifty years."

That stinks, but is it so? Actually no.

Gramm and Boudreaux, both economists, show that from 1947 to 1967—before the Great Society got into gear—the U.S. poverty rate dropped by over 50 percent. So "It seems strange that ... when the War on Poverty began and its programs were funded at significant levels, beginning in 1967, the poverty rate then remained essentially unchanged for over a half-century."

That is strange, especially because "the average bottom-quintile household has seen the inflation-adjusted value of government transfer payments rise from $9,700 per year in 1967 to $45,400 in 2017...." (That excludes the administrative costs.)

"Obviously," they write, something is wrong here."

What could be wrong? How about this? The data leave out quite a few important things.

[T]he official Census measure of poverty fails to count 88 percent of all the benefits that poor American families receive from the government as part of their income." [Emphasis added.]

Eighty-eight percent!

The omitted benefits include "refundable tax credits where the beneficiary receives a check from the Treasury, debit cards loaded with food stamp allowances, and benefits from over a hundred other major programs, including Medicaid and housing subsidies in which the government simply pays bills that are incurred by the programs’ beneficiaries." (This curious practice of omitting benefits is left over from when government benefits were mainly in cash.)

How do things look when that data is restored? Gramm and Boudreaux write, "When all transfer payments, net of the costs of making those payments, are counted as income to the recipients of the transfers":

• The 2017 overall poverty rate drops from the official 12.3 percent to 2.5 percent;
• The child poverty rate drops from the official 17.5 percent to 3.1 percent; and
• The poverty rate for seniors drops from the official 9.2 percent to 1.1 percent.

Gramm and Boudreaux account for the small percentages remaining by people who "have fallen through the cracks" because of medical and other problems. In any society, no matter how rich, some people choose poorly. The authors cite other studies that support this adjusted overall poverty rate.

Moreover, Gramm and Boudreaux point out that "the number of people who are classified as poor changes dramatically over time."

Less than a quarter of families classified as being poor have been poor for two years or more. It should also be understood that twice as many families were poor for only some part of the year as those families who were poor the entire year. Experiences such as being laid off, suffering illness, or being employed in seasonal work contribute to people alternating between being on the poverty rolls and rising off of them."

The misleading official picture, Gramm and Boudreaux note, is also exposed by the fact that, according to a different Census Bureau study, "42 percent of poor households own their own homes, the average of which has three bedrooms, one and a half baths, a garage, and a porch or patio. Of the households considered to be poor, 88 percent have air conditioning, and the average poor American family lives in a home that is larger than that of the average middle-income family in France, Germany, and Britain."

And this is impressive: "Of all American households in 2017, 66.3 percent had real incomes, after transfers and taxes, that only the top 20 percent enjoyed in 1967." That hardly looks like stagnation.

Does this mean the welfare state works? Not if the goal is to foster independence in lower-income people. But the data do tell us that the welfare state does not need expanding, as the progressives claim.

For one thing, it discourages people from working and thus encourages dependence on the coerced taxpayers. Gramm and Boudreaux write,

The explosion in poverty benefits since 1967 caused the prepandemic employment rate among the bottom 20 percent of income earners to plummet from 67 percent to 36 percent, as well as the employment rate among the second quintile of earners to fall by almost 6 percent.... The growth in the welfare program has largely delinked the bottom 20 percent of income earners from the American economy....

It is not good when working people in the second lowest quintile have only slightly higher incomes than those who work little or not at all.

What's unseen is that without the welfare state, not only would the incentive not to work disappear, but the most innovative and productive people would have more money with which to make everyone more affluent.

TGIF: Immigration Control Threatens the Rule of Law

Immigration control strikes at the heart of the rule of law. That fact is badly unappreciated, even by some libertarians. If for no other reason, people who cherish individual liberty ought to be appalled by what the Trump administration is up to. Trump did not invent this unequivocal assault on a key protector of freedom—blame Congress for that—but never has the assault been so flagrant in America.

To see this, let's look at libertarian political philosopher Jacob T. Levy's 2018 article "The Rule of Law and Risk of Lawlessness." Levy wrote the article in response to the intensification of so-called border protection in the early days of the first Trump term, when children were separated from their parents and locked in cages. (Levy and Nathan Goodman recently discussed immigration and the rule of law in this Mercatus Center podcast.)

Levy begins his article by getting down to the basics of how freedom is protected in the classical-liberal tradition. This is a crucial point because it goes to the essence of the term limited government.

In public law and politics, the core meaning of the rule of law is this: that the executive branch of the government, in control of the violent agencies of state power and the tools of punishment, shall not use them lawlessly. It shall not imprison, execute, or otherwise punish except in accordance with prospective, promulgated law and trial conducted through fair and regular procedures. The writ of habeas corpus is the most famous instantiation of this value in the Anglo-American tradition, with medieval roots that early modern, protoliberal Whigs exaggerated into a full-blown centuries-old legal rule.

Liberty is not protected by magic or by abstractions. Protection requires concrete institutions and procedures to preclude arbitrary power. That is, it requires that politicians, judges, bureaucrats, and armed agents do and not do particular things. That's what we mean by the rule of law.

Citing Montesquieu's original and radical formulation of the classical-liberal approach to liberty-protecting governance, Levy notes that the rule of law importantly "included a separation of powers that distinguished judicial trial from executive punishment and an understanding of liberty as security from extrajudicial punishment.... [T]he key insight was that despotic states punish people even though they have broken no law, or never been properly convicted of it." A separation of powers implies checks and balances.

Montesquieu heavily influenced America's founders. Limitations and flawed implementation notwithstanding, we must credit the group of men who aimed at what John Adams called "a government of laws, not men." That had to be better than regimes of the past and future, such as those in Nazi Germany and Soviet Russia, in which the rule of law was not the objective. Despite some egregious exceptions, the rule of law has served us well. We would do well to understand that.

As Levy points out, critics miss the mark when they claim that rule-of-law procedures would be consistent even with bad law. Drawing on the theorists Lon Fuller and Judith Shklar, Levy responds, "This is not how terror states and totalitarian regimes function. They deliberately leave their whole populations at the mercy of the executive with its police, secret police, and paramilitary agencies."

In other words, "[W]hile the rule of law so conceived is not sufficient for a free and liberal society, it surely is necessary—and it goes some way toward preventing some of the greatest of political evils." That must not be forgotten. "Where people are constantly subject to the whim of the police and related agencies, they are not free. Even notionally very liberal laws do little good if state violence can be inflicted and bodies imprisoned without crimes or trials."

This brings us to immigration enforcement and a crucial choice. Levy sees "a real tension between the rule of law and what happens at or outside a country’s borders." (Leave war aside for this discussion.) Will the rule of law prevail or not?

Those borderline cases could be approached through the strategy of projecting the rule of law and liberal values out onto them as far as possible. But all too often the influence goes the other way: the lawlessness of the border undermines the rule of law and civil liberty within.

This is ominous not just for "undocumented" persons, but for citizens and legal residents too. "Even at the best of times," Levy writes, "border policing veers toward lawlessness: at the point of entry, the enforcement officer makes a basically unreviewable and processless decision to exclude by armed force. And these are not the best of times."

Those who want immigration ruthlessly controlled will argue that unauthorized border crossings and visa overstays foster lawlessness. Levy challenges that claim: "This circumstance is no more corrosive of the rule of law, however, than the fact that millions of American drivers speed on the highway every day without getting a ticket." Overstaying a visa is a civil violation; crossing a border without permission is a misdemeanor.

On the contrary, he continues, "The threat of lawlessness comes instead from a president" who wants his executive-branch agencies to be free to act unimpeded by judicial review of arrests (by masked agents), detentions (in perilous facilities), and deportations (including to third countries with horrible human-rights records). Levy reminds us that the immigration courts are part of the executive branch (Article II of the Constitution). They are within the independent judiciary (Article III). As Trump put it in 2018, "When somebody comes in, we must immediately, with no Judges or Court Cases, bring [sic] them back from where they came." (Emphasis added.) Levy writes:

Mass expulsions without judicial oversight or procedural protection would be not only a violation of international law and of the U.S. Constitution (which guarantees due process to persons, not only citizens). It would also be a grave threat to the liberty-as-security of all American residents. Trump proposed to let the lawlessness of border control seep into domestic American space.

This is no mere purple prose. And it is more than a slippery-slope argument. The area of the country within 100 miles of the borders and coasts is under the jurisdiction of Customs and Border Protection (CBP). That's where two-thirds of the residents of the United States live. What does that mean? CBP "holds expanded authority in that zone to conduct searches and seizures, create checkpoints, and ask for papers, in ways that would be illegal for ordinary police," Levy writes. "The only-partial rule of law at the border has already been projected inward."

Whither the Fourth and Fifth Amendments?

Do you think the current Immigration and Customs Enforcement (ICE) raids, detentions, and deportations have no effect on peaceful life in America? What about the abduction of people who have done nothing more than look for low-skilled work at a Home Depot parking lot, or who write or say things the president dislikes? "[I]n states and localities without the protection of sanctuary status," Levy writes, "residents of Latino neighborhoods often fear calling the police even to protect themselves against violence lest the police begin checking citizenship status." This reluctance extends to seeking medical care for their children and so on. Needless to say, this toxic legal environment also licenses unscrupulous private individuals to blackmail and exploit innocent people.

Libertarians compromise themselves and their honorable philosophy when they applaud or merely ignore how "the cruelty, arbitrariness, and militarization of border policing undermine the rule of law within—through the sacrifice of civil liberties within the hundred-mile zone, the authorization of a terrorizing internal police force outside the normal boundaries of law in ICE, the imprisonment of the innocent, and the threat of deportations without due process."

With few exceptions, Americans have not had to worry about the midnight knock on the door from the secret police or extrajudicial detention and expulsion. Without exaggeration, we can say that Trump's immigration policy moves us in that direction. The terror police state can happen here.

Congress, you have some laws to repeal.

Immigration Control and the Rule of Law

If you think that immigration control does not strike at the heart of the rule of law, you need to listen to this:

The Palestinians: The Libertarian Take

Even if the Palestinians are not a People, they nevertheless are and always have been people—that is, individual human beings with natural rights, namely, the rights to life, liberty, property, and the pursuit of happiness. Like everyone else.

But individuals can come to be regarded as a People as a result of a long, continuous way of life in a particular area. This is true of the Palestinians. They are both a People and people. See this.

TGIF: Socialist Confusion

Recent polls indicate that many people under 30 view socialism and communism favorably. (For Marx, those words were synonyms.) It seems that socialism and communism are "in." What's going on?

A self-described "democratic socialist," Zohran Mamdani, won the Democratic nomination in the New York City mayoralty primary. He promises to set up city-owned nonprofit grocery stores and plans other giveaways. He favors a $30 minimum wage. He also says billionaires should not exist. Will he set up camps?

Members of Congress, such as Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez, also call themselves "democratic socialists," but it's unclear what they mean by the term. When Sanders was asked what he meant by socialism, he said it was the realization that "we're all in this together." That's helpful.

Sanders, Ocasio-Cortez, and their ilk do not call for expropriating and nationalizing the means of production. (I'm not sure about Mamdani.) Instead, they want an even bigger welfare state, for instance, "Medicare for all." That's bad—the welfare state makes people poorer—but it's not socialism. They further illustrate their confusion by claiming that the Scandinavian countries are socialist, which they're not. They score high on rankings of economic freedom. That would be a strange sort of socialism, no?

This tilt toward a murkily defined socialism and communism suggests cultural and ethical considerations, not social science, are at work. These days, it's edgy and romantic to declare oneself a socialist, especially if you wear a Che Guevara T-shirt. I suppose the word democratic is intended to make socialism, the record of which is horrendous, sound humane. It does no such thing, no more than the word national makes socialism sound sweet.

At any rate, as the Cato Institute's Michael Chapman wrote this year:

A recent survey by the Cato Institute and YouGov paints a troubling picture: 62 percent of Americans aged 18–29 say they hold a “favorable view” of socialism, and 34 percent say the same of communism. This is shocking given that communism is responsible for 100 million deaths worldwide and is rooted in socialism, the same philosophy that spawned both Mussolini’s fascism and Hitler’s National Socialism. To favor socialism is to flirt with tyranny.

That is stunning, considering that free-market capitalism, however imperfectly practiced —that is, profit-motivated global investment and trade—has increased per-capita wealth and lengthened life spans worldwide by an astonishing degree over the last few hundred years. What used to be called the "Third World" got wealthier to the extent it had economic dealings with the developed world. If young people don't understand what economist and historian Deirdre McCloskey calls "the Great Enrichment," what does that say about government-run education?

What do fans of liberty and prosperity do about this? We can become better promoters of capitalism and bourgeois culture, which have enabled so many people to achieve such high living standards. In 1947 economist Ludwig von Mises, writing in Planned Chaos, said, "Nothing is more unpopular today than the free market economy, i.e., capitalism." That was shortly after World War II. Despite a few bright spots, how little things have changed! (Trump's devotion to global trade restrictions at least has brought out latent free-trade impulses in some people.)

Mises noticed something that is still true today, despite differences in detail:

Everything that is considered unsatisfactory in present-day conditions is charged to capitalism. The atheists make capitalism responsible for the survival of Christianity. But the papal encyclicals blame capitalism for the spread of irreligion and the sins of our contemporaries, and the Protestant churches and sects are no less vigorous in their indictment of capitalist greed. Friends of peace consider our wars as an offshoot of capitalist imperialism. But the adamant nationalist warmongers of Germany and Italy indicted capitalism for its “bourgeois” pacifism, contrary to human nature and to the inescapable laws of history. Sermonizers accuse capitalism of disrupting the family and fostering licentiousness. But the “progressives” blame capitalism for the preservation of allegedly outdated rules of sexual restraint. Almost all men agree that poverty is an outcome of capitalism. On the other hand many deplore the fact that capitalism, in catering lavishly to the wishes of people intent upon getting more amenities and a better living, promotes a crass materialism. These contradictory accusations of capitalism cancel one another. But the fact remains that there are few people left who would not condemn capitalism altogether.

How convenient to have such a scapegoat for your problems. Unhappy? Blame capitalism. Too few people will speak up for it.

Although capitalism is the economic system of modern Western civilization, [Mises wrote,] the policies of all Western nations are guided by utterly anti-capitalistic ideas. The aim of these interventionist policies is not to preserve capitalism, but to substitute a mixed economy for it. It is assumed that this mixed economy is neither capitalism nor socialism. It is described as a third system, as far from capitalism as it is from socialism. It is alleged that it stands midway between socialism and capitalism, retaining the advantages of both and avoiding the disadvantages inherent in each.

Mises rejected the equation of interventionism with socialism.

There are many supporters of interventionism who consider it the most appropriate method of realizing—step by step—full socialism. But there are also many interventionists who are not outright socialists; they aim at the establishment of the mixed economy as a permanent system of economic management. They endeavour to restrain, to regulate and to “improve” capitalism by government interference with business and by labour unionism.

For the market to work to the advantage of all people, it is not enough that property be owned in the strict legal sense. Legal title must be accompanied by real control. When private parties nominally own property while government authorities control property, that is fascism, even if people vote now and then. (Economist Charlotte Twight has coined the term participatory fascism.)

Mises made an important point about interventionism.

If within a society based on private ownership of the means of production some of these means [such as grocery stores] are owned and operated by the government or by municipalities, this still does not make for a mixed system which would combine socialism and private ownership. As long as only certain individual enterprises are publicly controlled, the characteristics of the market economy determining economic activity remain essentially unimpaired. The publicly owned enterprises, too, as buyers of raw materials, semi-finished goods and labour, and as sellers of goods and services, must fit into the mechanism of the market economy. They are subject to the law of the market; they have to strive after profits or, at least, to avoid losses.

Mamdani promises that his city stores will forgo profit and charge only wholesale prices. How then will they pay their expenses, such as wages? Mises addressed that issue:

When it is attempted to mitigate or to eliminate this dependence [on the market] by covering the losses of such enterprises with subsidies out of public funds, the only result is a shifting of this dependence somewhere else. This is because the means for the subsidies have to be raised somewhere. They may be raised by collecting taxes. But the burden of such taxes has its effects on the public, not on the government collecting the tax. [Emphasis added.]

Well, Mamdani may say, he'll tax the rich. It's not that simple, Mises noted:

It is the market, and not the revenue department, which decides upon whom the burden of the tax falls and how it affects production and consumption. The market and its inescapable law are supreme.

If you tax the rich, they will produce less and take more leisure. Or they will move—harming the nonrich, who will have fewer goods, services, and amenities. And more taxes to pay. Do politicians never learn?

But, bad as that is, it is still not socialism.

The system of the hampered market economy, or interventionism, differs from socialism by the very fact that it is still market economy. The authority seeks to influence the market by the intervention of its coercive power, but it does not want to eliminate the market altogether. It desires that production and consumption should develop along lines different from those prescribed by the unhindered market, and it wants to achieve its aim by injecting into the working of the market orders, commands and prohibitions for whose enforcement the police power and its apparatus of coercion and compulsion stand ready. [Emphasis added.]

Ah yes. Behind every progressive interventionist lurks the police force. We should be little comforted that our so-called democratic socialists are not true socialists, but only interventionists on steroids.

However, all the methods of interventionism are doomed to failure. This means: the interventionist measures must needs result in conditions which from the point of view of their own advocates are more unsatisfactory than the previous state of affairs they were designed to alter.

They might hope to produce abundance at low prices, but they will fail, as theory and history have consistently demonstrated.

Minimum wage rates, whether enforced by government decree or by labour union pressure and compulsion, are useless if they fix wage rates at the market level. But if they try to raise wage rates above the level which the unhampered labour market would have determined, they result in permanent unemployment of a great part of the potential labour force.

Government spending cannot create additional jobs. If the government provides the funds required by taxing the citizens or by borrowing from the public, it abolishes on the one hand as many jobs as it creates on the other. If government spending is financed by borrowing from the commercial banks, it means credit expansion and inflation. If in the course of such an inflation the rise in commodity prices exceeds the rise in nominal wage rates, unemployment will drop. But what makes unemployment shrink is precisely the fact that real wage rates are falling....

No less than the socialists, the interventionists despise consensual profit-driven market activity as unsightly and exploitative. This aversion is as much aesthetic as moral, but on both counts it is wrong. That Adam Smith's "system of natural liberty" has improved the lot of mankind, and will continue to do so if left unmolested, is a beautiful thing. Self-made blindness explains why so many people do not appreciate it. Workers and consumers are not victims. They are beneficiaries. The world is increasingly divided into haves and have-a-bit-mores. The have-nots have been moving on up, especially if they work at it.

Mises reminded us that capitalism is not about profits only. It's also about losses, which shines a whole different light on the matter.

In the eyes of the interventionists the mere existence of profits is objectionable. They speak of profit without dealing with its corollary, loss. They do not comprehend that profit and loss are the instruments by means of which the consumers keep a tight rein on all entrepreneurial activities. It is profit and loss that make the consumers supreme in the direction of business. It is absurd to contrast production for profit and production for use. On the unhampered market a man can earn profits only by supplying the consumers in the best and cheapest way with the goods they want to use. Profit and loss withdraw the material factors of production from the hands of the inefficient and place them in the hands of the more efficient. It is their social function to make a man the more influential in the conduct of business the better he succeeds in producing commodities for which people scramble. The consumers suffer when the laws of the country prevent the most efficient entrepreneurs from expanding the sphere of their activities. What made some enterprises develop into “big business” was precisely their success in filling best the demand of the masses.

Who loses when interventionists get their way? Regular people do.

TGIF: By Right or Permission?

"Trump administration approves sale of CBS parent company Paramount after concessions" —NPR

If the deal struck by Paramount and President Donald Trump sickens you, your intuitions and perhaps your principles are in good working order. Make no mistake about what's at the root of such things: ominipotent government. You need its permission for all kinds of things—so much for individual rights.

As the NPR story states, the headline termination of The Late Show (which I've never watched) came "amid a flurry of steps taken by Paramount and Skydance Media—which has been seeking to acquire the media conglomerate—to appease the Trump administration. On Thursday, federal regulators announced they had voted to approve the deal valued at $8 billion." It goes on:

Paramount paid $16 million to resolve a lawsuit filed by Trump as a private individual against CBS and 60 Minutes. Skydance CEO David Ellison promised to eliminate all U.S.-based DEI programs at Paramount and to create a new ombudsman to field complaints of ideological bias in news coverage. Skydance has not denied Trump's assertions the network will run $20 million worth of public service announcements consistent with his ideological beliefs.

Federal Communications Commission Chair Brendan Carr cited Skydance's promises to make "significant changes in the once storied CBS broadcast network."

Hang on. Paramount/CBS accepted the series of conditions—which you may or may not like—demanded by the Trump administration as the price for having its sale to Skydance Media approved ... by the same Trump administration. It's the principle, not the conditions, that matters.

What's wrong with this picture? Here's a good first crack at the answer: that's not capitalism, although this happened in that supposedly quintessentially capitalist country, the United States. In a market economy, two companies are free to combine if that's what their owners want. The offensiveness of the "settlement" is even more egregious because it involves a media company—I've heard rumors that there's a First Amendment in the Constitution. But does the First Amendment apply? Thanks to Herbert Hoover, who was secretary of commerce in the 1920s, the airwaves are treated as public property, that is, government property, in the United States, giving the state broad power to set terms on their use.

A good deal of activity in America requires government permission. Sometimes a government agency, perhaps with a push from the president, imposes conditions before saying yes. Sometimes it just says no. A government that has the power to approve or veto mergers and acquisitions has the power to set the terms of business. Bye-bye capitalism, freedom, and steady prosperity. (The Great Recession was partly caused by the government's requiring banks to make mortgage loans to bad credit risks if they wanted mergers, etc., approved.) Needless to say, bureaucrats can't know what "the market" knows because knowledge is dispersed throughout society and is often unarticulated and even inarticulable. Any system that smacks of central planning is for losers.

Donald Trump did not start this, however much he enjoys exercising the frightfully expanded powers of his office. This goes back over a century. Think of the Interstate Commerce Act of 1887, Sherman Antitrust Act of 1890, Radio Act of 1912, Federal Reserve Act of 1913, Federal Trade Commission Act of 1914, Radio Act of 1927, Federal Communications Act of 1934, Banking Act of 1935, and the Civil Aeronautics Act of 1938. They all interfere with business conduct, which means individual conduct. Businesses are associations of theoretically free people. I'm sure that's not an exhaustive list. Individual states have their own regulatory agencies too. (The Civil Aerorautics Board and Interstate Commerce Commission were abolished in the 1980s and 1990s, respectively, after a weird fit of deregulation that started under Democratic President Jimmy Carter. Go figure.)

A society is free to the extent that one needs no meddling authority's green light to engage in, in Leonard Read's phrase, "anything that's peaceful," or in Robert Nozick's phrase, "capitalist acts between consenting adults." As Timothy Sandefur of the Goldwater Institute writes, "freedom means not having to ask permission." Contrast that with totalitarian states, such as National Socialist Germany and the Bolsheviks' international socialist Soviet Union. There, the rule was, more or less, that which is not prohibited is required. As F. A. Hayek pointed out in The Road to Serfdom, in those states, one was not even free to decide how to spend one's "free time."

By the rights-not-permissions standard, America fails to live up to its reputation as a free country. Of course, this can be exaggerated. Freedom has not (yet?) been abolished, which is why we are still wealthy and getting wealthier. Persevering, enterprising people work around political obstacles, and in a traditionally private-property system, the state can't keep tabs on everything. God bless the loopholes! Less-than-full capitalism goes a long way, but not far enough.

Still, freedom has been eroding from the high, however imperfect, level it had reached in late 19th-century America. The erosion, alas, has not ceased, despite some setbacks. Rule by permission rather than by right obviously suits The Maestro, The Sun King, that is, the current resident of 1600 Pennsylvania Avenue. If you doubt that those titles fit the man, check out his latest trade deals with South Korea and Japan, according to which those countries will reportedly invest billions of dollars in the United States in ways directed by Donald Trump. (That's what he says anyway; the foreign governments aren't quite so sure.) One commentator dubbed this "Republican socialism" in contrast to Democratic socialism. Well put.

Sandefur asks:

So how have we come to the point where today you need to get the government’s permission for a wide variety of the things that you spend your daily life doing? You need a permit to build a house, own a gun, get a job, to buy some things, run businesses, pay your employees—even freedom of speech now often comes with some sort of permit requirement. We have colleges and political conventions setting up “free speech zones,” which are basically cages where you’re allowed to express your opinion.

And let's not forget mergers and acquisitions. "The most offensive part of the permission system, across the board, is how it deters innovation," Sandefur writes. That's what bureaucracies do. (See his book The Permission Society: How the Ruling Class Turns Our Freedoms into Privileges and What We Can Do About It. Also, The Institute for Justice, heroically, has been devoted to helping ordinary people challenge the "permission society" in the courts.)

The socialists of all parties will defend such government power on the grounds that people should have a say in everything that affects them. That may sound good on first hearing, but a moment's scrutiny exposes it as a recipe for total state control. What does "affect" mean? Should you have a say in which religious institution, if any, your neighbors attend? Should you have a say in what restaurant opens down the street? Should you have a say in the wage contract your business-owning neighbor offers prospective employees? These things may "affect" you.

The principle that all should have a say in whatever affects them, of course, usually means that democratic, representative government should oversee those peaceful activities. But in reality, that "power" is a joke. One vote is a drop in the ocean. The idea that you have a real say by voting periodically for politicians is a delusion. Beware "democratic socialists." They are hawking snake oil.

There is, however, one sense in which you do have a say in what affects you. In the free market you control your spending. If you don't like a product or a company, you can do business with someone else. Hence, through your buying and abstention, you and your fellow consumers determine who controls scarce resources for the production of consumer and producer goods. That's real control. It puts democratic power to shame, and it is exactly the sort of control that the socialists of all parties despise.

 

TGIF: What Is Capitalism?

So, what is capitalism? The answer will depend on who's being asked. Language, like markets, basic law, and customs, is a spontaneous order. No one plans it. Words drift in their meaning in ways that probably can’t be fully explained. Language is a tool that people use to think and communicate, so it’s adapted according to needs, changing circumstances, and even confusion.

That doesn’t mean we can say nothing about words like capitalism. My views on that word have changed over the years; I once contributed to a book called Markets, Not Capitalism. The book was meant to show that the free market differs from capitalism. Is it right? Again, that depends on how one defines capitalism. As far as I can tell, most people who dislike capitalism also dislike the idea of a market-based society. Some prominent pro-market thinkers, Nobel laureate F. A. Hayek among them, disliked the word for a variety of reasons. 

At any rate, the word is not going away. Since no one controls the language, we should put communication before personal preferences. Let's define our terms clearly and then talk about reality.

Despite variation in the definition of capitalism, most people would agree that market orientation is at its heart. They evaluate the market differently, but it is the market that they are evaluating. So we have some common ground, even as we disagree over whether capitalism is a good or bad social arrangement or whether it conceptually includes or excludes a given practice.

I, along with many others, consider capitalism to be the social arrangement in which people are free to engage in the production and exchange of goods and services, typically for money. Left unmolested, that is what people do. Those activities generate prices, which reflect supply and demand and guide further action. To live is to act, which is to aim at ends by deploying means, which is to value. The root of this never-ending process is the wish to sustain life and to live in a particular way. (See the work of Carl Menger, Ludwig von Mises, and Ayn Rand for details.)

The institution of interpersonal exchange logically has presuppositions. It stands on a foundation. It presupposes that persons own themselves and the things they nonaggressively obtain; it also presupposes the security of contracts. These things can be violated in practice, but they are departures from the logic of the system. Historical capitalism developed over a thousand years as persons, their property (including their bodies), their contracts, and their enterprises came to be more and more respected—that is, as political power decentralized and, consequently, diminished, thanks in part to jurisdictional competition, that is, the power to vote with one's feet. (People disliked paying taxes for war and having their trade and investments disrupted.) Growing religious toleration played an important role in this process of individual liberation and spreading cooperation.

Where property and contracts became more secure, per capita wealth dramatically increased, setting an example for others. As Adam Smith put it, “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.”

This is not to say that injustice and aggression disappeared abruptly and completely. Of course, it did not. Who could have expected that? It would take time. Another way of saying this is that capitalism—to be clear, that means laissez-faire or free-market capitalism—was not fully achieved anywhere. It still hasn't been. But it would be wrong to attribute the great wealth generated by capitalism to injustice such as slavery and conquest. Advanced civilizations of the past conquered, plundered, and enslaved, but they did not produce astonishing, sustained, and widespread wealth. Capitalism and classical liberalism in Western Europe and America did something different, something special.

Societies can be judged by how close they came to achieving capitalism. We can distinguish particular practices and institutions as either capitalist or anticapitalist. It follows that crony capitalism, state capitalism, and political capitalism, etc., are not capitalist variations but moves away from capitalism (that is, from self-ownership, property rights, contract, and free exchange). Those labels are contradictions in terms because they entail limits on peaceful, productive market interaction. The predatory, which supposedly acts in the name of the collective, in effect makes itself the senior part-owner of what was or should have been private property. The system is no longer a fully market system, even if people who own capital ask for the intervention. Thus free-market capitalism is a redundancy.

For example, a political arrangement in which slavery and slave markets exist does not qualify as capitalism. Why not? Because in that basic respect, the arrangement does not fully embody self-ownership, property rights (which flow from self-ownership), and free exchange. Southern slave holders claimed that "their" slaves were property, but that was a category error because persons can be property owners, not property. Good Lockeans, the abolitionists called the slave holders "man stealers." 

Similarly, a political system in which politicians and bureaucrats may interfere with people’s property and free exchange through taxation, regulation, trade barriers, subsidies, government ownership, etc., should not be called capitalist. It would be a mixture of capitalism and interventionism or socialism.

We can sum up by saying that only laissez-faire capitalism—the consistent separation of state and economy—qualifies as real capitalism. Anything less than laissez faire is less than capitalism. The government cannot regulate an economy, which is an abstraction. What it can do is restrict real individuals in their peaceful, productive market interactions. Restriction requires the use or threat of aggressive force and violence. In contrast, a capitalist society is a humane society.

Call it what you will, the system that respects our freedom to engage in mutually beneficial market relations—and its prerequisites—is worth defending against its Classic Marxist and Marxist Lite detractors, who have to distort categories like “exploitation” to make their spurious case. Capitalism, despite not being fully embraced, ushered in an era of unprecedented personal freedom and sustained, widespread wealth. Capitalism is anti-exploitationism.

(I have not reinvented the wheel. Thus related reading: “The European Miracle” by Ralph Raico, “Reconsidering Gabriel Kolko: A Half-Century Perspective” by Robert L. Bradley Jr. and Roger Donway, "Capitalism, Socialism, and 'The Middle Way': A Taxonomy" by Bradley and Donway, "Beyond 'The Money-Making Personality': Notes toward a Theory of Capitalist Orthopraxy" by Roger Donway (Journal of Ayn Rand Studies 21:1 July 2021) and The Libertarian Mind by David Boaz (especially chapter 2: "The Roots of Libertarianism.")

TGIF: Immigration and Free Association

Immigration. Despite other headline-grabbing news, this issue persists.

How could it not? Trump's masked goon squad, ICE (Immigration and Customs Enforcement), abducts peaceful people off the streets, from their workplaces, and from Home Depot parking lots, then shuttles them without due process to detention centers, including the ominously named Alligator Alcatraz, and prepares to deport them to third countries deficient, shall we say, in their devotion to individual rights. Many detainees have been unable to contact family and attorneys. Even American citizens have been swept up, subjecting them to the trauma of confinement until they demonstrate that they "belong here." Trump's quota of 3,000 detainees per day creates the most perverse of incentives for ICE agents. He reportedly has berated ICE because the arrest numbers are too low.

Need I say that this should not be happening in America, and Americans should not forget that it is happening? Fortunately, some glimmers of hope penetrate the dark clouds. The latest to come to my attention is the reported bad morale among ICE agents. Apparently, they don't enjoy "arresting gardeners." Why don't they quit?

Moreover, recent polls indicate that a growing number of Americans dislike how Trump is handling immigration. Naively, they seem surprised that Trump did not confine his hunt to real criminals (that is, murderers, muggers, rapists, thieves, etc.) but is going after people who hold jobs, live normal lives, behave neighborly, and bother no one. (And, alas, pay taxes.) We're also seeing federal district judges smack down ICE raids and Trump's autocratic bid to rewrite the Constitution on birthright citizenship. (See the 14th Amendment.)

For example, ABC reported the other day, "A Los Angeles federal judge issued a pair of temporary restraining orders today limiting the ability of U.S. immigration-enforcement agents to detain people absent reasonable suspicion beyond merely their race, ethnicity or occupation, while also requiring that detainees be given access to legal counsel." (Emphasis added.) No profiling, that is. It's a start. Yet it still might be good policy for people with accents and darker skin tones to avoid Home Depot parking lots, car washes, restaurant kitchens, and farms. 

We can hope that future generations will look back on this terror with shock and shame.

I've heard it said that libertarians should favor government control of immigration in principle (and so such roundups) because free movement constitutes "forced integration." Specifically, it has been said that laws against discrimination in employment, housing, and public accommodations violate our freedom of association and, hence, a property owner's right to exclude immigrants, among others. Freedom of association, of course, should be respected, and it logically includes the freedom not to associate, or the freedom to exclude, even when it takes irrational and bigoted forms. Freedom must be defended—even when it is exercised obnoxiously. Absolutely true.

But would open borders increase coercion in America by prohibiting discrimination and exclusion? Before I answer that question, let me pose another one. If all the antidiscrimination laws were repealed tomorrow, would the libertarian restrictionists withdraw their opposition to open borders? I think not. 

As a practical matter, free immigration under today's laws would not effectively compel individuals to associate. Open-borders champion Bryan Caplan explains why in his newest collection of blog posts, Pro-Market and Pro-Business: Essays on Laissez Faire ("Association, Exclusion, Liberty, and the Status Quo").

Caplan writes,

One of my conservative friends keeps telling me that, “The right to associate is the right to exclude.” As a libertarian, I agree.  But the subtext of his slogan is that libertarians focus far too much on government regulations that abridge the freedom of association—and far too little on government regulations that abridge the freedom of exclusion. His claim, in fact, is that the only feasible way to protect the freedom to exclude is to restrict the freedom to associate. Since discrimination laws make it impossible for voluntary contracts to keep foreigners out of a neighborhood, for example, it’s OK for immigration laws to keep foreigners out of the country entirely.

Some otherwise-libertarians make the same argument. Since we are not free to exclude foreigners from our personal affairs, we must not let them in.

That prompts Caplan's question: "To what extent do existing policies that restrict freedom of association and exclusion actually bind? In other words, how different would the modern U.S. look if people were free to live, work, and play anywhere if and only if the property owner consented?" He responds:

Let’s start with exclusion.  Many existing laws restrict the right to refuse to hire workers and serve customers. In real estate, restrictive covenants and home owners’ associations are common, but if you try to use them for racial exclusion, courts won’t enforce them.  Single-gender clubs also occasionally face lawsuits.

I’m against all of these limitations on the right to exclude, but how much do they actually change behavior in the modern U.S.?

His answer: "Only slightly, for a long list of reasons."

Among his reasons are: businesses want money too badly to exclude people without good cause; most people frown on exclusion and would feel funny about a business that practiced it; and alternative methods of exclusion are available, such as "high prices..., dress codes..., and educational credentials." Where there's a will, there's a way.

"I don’t deny, he says, "that laws against exclusion occasionally have important effects.  But their main effect in the modern U.S. economy isn’t to reduce exclusion, but to pressure businesses" to find workarounds.

So much for the consequences of mostly paper violations of freedom of exclusion. What about the consequences of government limits on free association, that is, immigration control? Remember, border restrictions prevent Americans from selling to, renting to, buying from, employing, befriending, dating, and marrying would-be immigrants.

"Indeed," Caplan responds, "they [border restrictions] probably have a bigger effect than all other regulations combined."

It’s simple. Billions of people around the world live on a few dollars a day or less.  Under open borders, tens of millions of them would migrate to the U.S. every year.  Remember: Even if you’re an illiterate peasant from Bangladesh, credit markets and/or employers would be happy to front the money for airfare.

This immigration flow wouldn’t stabilize until real estate prices massively increased and low-skilled wages drastically declined. The U.S. population could easily increase by 50% in a decade. New cities would blanket the country. The level of output would skyrocket—and its composition would rapidly change, too. Whether you love this vision or hate it, you can’t deny that free association would radically and rapidly reshape the face of America.

The upshot: "restrictions on the right to associate are massive, and there is enormous pent-up demand to migrate. Hundreds of millions of people want to move here, landlords want to rent to them, employers want to hire them—but the law won’t allow it.... While restrictions on exclusion are occasionally irksome, they rarely ruin lives. Immigration laws, in contrast, usually condemn their victims to life—and often early death—in the Third World."

Like free trade, free immigration is overwhelmingly win-win.