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THE HERITAGE OF ECONOMIC LIBERTY

By RICHARD M. EBELING

For the Founding Fathers, economic liberty was inseparable
from the case for political freedom. Many of the grievances
enumerated in the Declaration of Independence concern British
infringements on the free movement of goods and men between
the thirteen colonies and the rest of the world.

It was not a coincidence that the same year that saw the
Declaration of Independence also saw the publication of Adam
Smith's Wealth of Nations. Both represented the ideas of the
age. When Smith spoke of a "system of natural liberty" in
which, "every man, as long as he does not violate the laws of
justice, is left perfectly free to pursue his own interests
his own way and to bring both his industry and capital into
competition with those of other men," he was expressing the
economic vision of most of those who fought for freedom from
British imperialism in the thirteen colonies.

Following independence, the thirteen independent states were
loosely bound together by the Articles of Confederation. Many
of the Founding Fathers, however, raised concerns about
economic policies which the sovereign states were
implementing. They had introduced various forms of economic
nationalism into their relationships with not only European
countries, but also among themselves.

They imposed tariffs against the goods of other states. They
gave monopoly trading privileges to their respective citizens
in various lines of manufacturing and commerce. They passed
legal tender laws excluding or hampering the free choice in
media of exchange by private individuals. They entered into
trade wars with each other. Having broken free from the
shackles of British mercantilism when they declared their
independence in 1776, by the late 1780s the sovereign states
were all practicing that against which they had fought in the
war for independence.

To overcome these economic barriers, the writers of the
Constitution (that replaced the Articles of Confederation in
1787) included in Article 1, Section 8 that, "the Congress
shall have the Power . . . To regulate Commerce with foreign
Nations, and among the several States . . ."

For many, the meaning of "to regulate" in the Constitution was
meant to prohibit economic nationalism and make the several
states a single, unified free trade area. Most of the Founding
Fathers were very familiar with the free trade ideas of
Scotsmen like Adam Smith and David Hume and their French
colleagues, the Physiocrats. They knew that these free traders
were correct when they advocated the free movement of goods,
men, and ideas from one part of the globe to another. Freedom
and prosperity were to be linked together in one system of
human liberty.

The philosophy of wide economic freedom was believed in and
advocated during most of the 19th century. Said Daniel
Webster, for example, in 1814: "It is the true policy of
government to suffer the different pursuits of society to take
their own course, and not to give excessive bounty or
encouragement to one over another. This also is the true
spirit of the Constitution. It has not, in my opinion,
conferred on the government the power of changing the
occupation of the people of different states and sections and
of forcing them into other employments."

The same view was still respectable and defended toward the
end of the nineteenth century. President Grover Cleveland, in
his 1893 inaugural address, "condemned the injustice of
maintaining protection . . . . It perverts the patriotic
sentiment of our countrymen, and tempts them to a pitiful
calculation of the sordid gain to be derived from their
government maintenance. It undermines the self-reliance of our
people, and substitutes in its place dependence upon
governmental favoritism." It created, President Cleveland
said, the spirit of governmental "paternalism."

While the United States government never completely removed
itself from the economic affairs of the people, broad economic
freedom was more the rule than the exception in the last
century. Why? To quote Daniel Webster once more, "The general
sense of this age sets with a strong current in favor of
freedom of commercial intercourse and unrestrained action."
Economic liberty, Webster argued, was "the general tide of
opinion."

In our time, the general tide of opinion in the United States
has not been kind to either freedom of commercial intercourse
or unrestrained individual action. The reverse has been the
case. Listen to two voices from the contemporary business
community.

Lee Iacocca believes that, "the 1980s were a time of quick
bucks, greed, and a lot of corruption . . . . [W]e've got to
work and pull this country up by its bootstrap." And Mr.
Iacocca sees an important role for government in guiding us
away from our "lustful and greedy" ways.

Steve Jobs, founder of Apple Computer, argues that, "getting
rid of General Noriega is important, but I wish the computer
industry would get a tenth of the space on our national agenda
that he has. We have to make these issues national
priorities." Technological achievements are still possible for
America, he believes, through "government leadership." The
problem is that "the private sector [is] dancing to its short-
run tune," while government leadership can offer us the long-
term vision for intelligent decision-making.

Many economists no longer share Adam Smith's vision. Lester
Thurow, dean of the Sloan School of Management at MIT, says
that the Japanese "pick out an industry to conquer" and unless
we (read: the government) do something to stop their invasion
of America, "they" will own and control and "we" will work and
obey. Edward Ellwood, of the Harvard John F. Kennedy School of
Government, insists that, "We also need to make sure everybody
has medical protection outside of the welfare state. Every
other major industrialized country has found a way to do this.
In the next ten years, we will do the same . . . . We ought to
move toward a uniform national system of child support with
payments deducted automatically by the government from the
employer."

For one hundred years, Adam Smith's economic system of natural
liberty has been under attack. The idea that men, left to
their own decisions, can make better choices for themselves
than a paternalistic government, and that free men interacting
with each other through voluntary exchange can produce more
wealth and prosperity than any form of government planning or
intervention, has been denied and often ridiculed.

At the same time, the Marxist view of society has permeated
the conscience of the world, including America. Great wealth
and financial success bear the stigma of unscrupulous behavior
and deceitful conduct. How could a person or company have
accumulated so much wealth and influence in a market unless
they have been dishonest and exploitive? Besides, why does
anyone need so much while so many in the society still have so
little?

The only solution to government regulation and redistribution
of wealth in 20th century America is an amendment to the
Constitution that recognizes and guarantees a separation of
the economy and the State. Only the establishment of economic
freedom on a par with freedom of speech, religion and the
press can assure that there will be fewer ambiguities
concerning the rights of the people and their economic
affairs.

But such a constitutional reform will not be possible until
there occurs a change in "the general tide of opinion." Not
until people fully realize that the cherished freedoms under
the Constitution are truly protected only with inviolatable
private ownership of all property; not until people are
convinced that each man is a better judge of his own affairs
than any economic planner or social engineer; not until there
is a firm belief that a man has a right to that which he has
honestly produced or acquired through voluntary exchange; not
until it is recognized that redistribution of wealth through
the political process is merely one person plundering another
via the use of an elected middle man--will we be able to
remove the power of Congress to regulate and intrude into
peaceful and mutually-beneficial economic activities of the
American people.

This Fourth of July, as we wave the flag and watch the rockets
red glare, let us also, as the Founding Fathers, "mutually
pledge to each other our Lives, our Fortunes, and our sacred
Honor" to awaken in ourselves, and all those with whom we
interact, a renewed faith in free men and an understanding of
the peace and prosperity that can only come from unhampered
free markets and free trade.

Professor Ebeling is the Ludwig von Mises Professor of
Economics at Hillsdale College in Michigan and also serves as
Vice-President of Academic Affairs of The Future of Freedom
Foundation, P.O. Box 9752, Denver, CO 80209.

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From the July 1990 issue of FREEDOM DAILY,
Copyright (c) 1990, The Future of Freedom Foundation,
PO Box 9752, Denver, Colorado 80209, 303-777-3588.
Permission granted to reprint; please give appropriate credit
and send one copy of reprinted material to the Foundation.