This is the second sub-section of The Economics of a Free Society. I understand that the central argument under this heading is that in order to grasp the economics of a free society, one must first study the condition of the US Republic. To my mind, the study of the condition of US Republic will also help us understand the situation of the world. And since US economy is central in this study, the present economic situation of the world will also be illumined through a closer assessment of the US Republic.
In my brief period of studying Austrian economics, I came to a conclusion that despite the present economic situation of the world, US economy remains closely associated with global economy. And also, despite the reports of the bad refutation of US dollar due to Federal Reserve increasing the money supply, still the US currency remains the reserve currency of the world.
Due to this association, it is vital to the health of global economy to take a closer look at the general condition of the US Republic. The knowledge of this condition must shape public opinion in order to exert pressure on responsible policy makers to address any discovered political and economic fallacies in the land.
In February 7, 2001, Dr. Ron Paul, the Tea Party Congressman, delivered a speech at the US House of Representatives assessing the condition of the US Republic. In this speech, he explored numerous critical issues that remain relevant up to the present time. He mentioned about the “Third Way,” the difficulty to spread the principles of genuine freedom, international military interventionism, inflation, social conflicts, illusory wealth, and basic morality.
The “Third Way”
Concerning the “Third Way,” Dr. Paul argued that it was actually a subtle propaganda to expand the power of the government by presenting before the public a “compromise” between the liberals and the conservatives. But as Dr. Paul correctly analyzed, in reality, the “Third Way” is not a compromise, but serves as propaganda to advance the agenda of the government at the expense of freedom and free market. It was in this regard that the Tea Party Congressman argued that no substantial philosophical difference exists between the Republicans and Democrats. Both parties never questioned the role of government and the impact of its expanding power on personal liberty and capitalism.
As popularly claimed, the “Third Way” is a bipartisan compromise that is less threatening and more acceptable to the people. But from a libertarian perspective, the “Third Way” is a more dangerous threat to personal freedom and free market. Dr. Paul claims that available alternatives offered to the public including the “Third Way” are no real alternatives. All the provided three alternatives are basically similar. They are simply three different versions of state interventionism.
The Difficulties in Propagating Freedom
It is ironic that a society built on the principles of freedom is now having difficulty to propagate personal liberty. Two major obstacles include the elites who benefit from state policies and the beneficiaries of welfare program. The recipients of welfare program may give a lip service to personal liberty, but will certainly oppose ideas that propose the removal of such government program. Most people think that both welfare and personal liberty can be maintained at the same time. The welfare program in this sense serves as a diversion from the real political and economic issues that confront not only the US but other parts of the world as well.
International Military Interventionism
International military interventionism is another distinguishing mark of the present condition of US Republic. A long list of just causes is used to justify foreign military intervention. In the old days, it was a campaign against communism. Now, the causes are multiplied and they include protection of oil supply, war on drugs, preserving global peace and order, and securing the objectives of foreign aid.
Commercial interests of the powerful few behind military interventionism remain unnoticed and never reported in mainstream media. What they feed us is the necessity of military interventionism to protect freedom and promote prosperity. But in reality, military interventionism undermines personal liberty, global peace, and economic prosperity.
Financial resources and lives are sacrificed on the altar of military aggression. This is a subtle contradiction that describes the present condition of US foreign military relation. Reality contradicts political rhetoric. The promised freedom and prosperity are actually deprived from the citizens while the powers that be reap the political and economic harvest.
Among the many just causes promoting military interventionism, the economic consequences of distributing foreign aid under the campaign of helping the poor of developing countries are almost invisible. In reality, foreign aid does not help the poor of developing countries. It only serves the interests of powerful foreign leaders. Add to it the fact that providing foreign aid is actually a process “of taking money from poor Americans and giving it to rich foreign leaders, with kickbacks to international corporations” like the WB, the IMF, the WTO, and the ICC (p.30). This is an invisible attack on the economic liberty of American taxpayers for such decision does not come from them, but always from global elites.
Among the many features of the US Republic, none of them threatens its very foundation than inflation. As long as the US government has a legal control to increase its own money supply through the Federal Reserve, the welfare and warfare programs of the government will continue to increase. The only solution to the increasing power of the government and threat to personal liberty is to stop its control over the money supply and restore it back to the free market. Without this action, booms and busts, wealth transfer, and social conflicts will remain as ugly features of the socio-economic condition not only of the US, but of the world.
Basing on his economic insights, Dr. Paul reports that the decision of President Nixon in 1971 to separate the US dollar from gold was a great mistake in monetary history and unleashed financial chaos since that time. The combined efforts of all central banks of the world cannot prevent the coming economic catastrophe resulting from that great mistake.
Together with other Austrian economists, Congressman Paul describes inflation as an act of “counterfeiting” sound money. The law allows this act of “fraud” and “theft.” It is a legal way of robbing the people of the purchasing power of their money. Savers and laborers depending on fixed salaries are the real losers in this kind of financial system.
Inflation is a serious threat to the stability of society. Various types of social conflicts are inescapable consequences of inflation. Recession, unemployment, erosion of standard of living, and rising prices of both production and consumption goods are all connected to inflation. Dr. Paul even predicted that in severe inflation, the middle class would be wiped out.
Resulting from the disappearance of the middle class, social and political conflicts will appear as common. The Congressman already described in 2001 the appearance of “conflicts between classes, races, ethnic groups, and even generations” (p.33). Blaming will be rampant, but the general public as usual will be unable to identify the real culprit unless Austrian economics becomes part of mainstream consciousness.
Another noticeable facet of the US Republic is the inability of the people to distinguish the difference between real and illusory wealth. I understand illusory wealth as a result of increasing the money supply at the expense of the free market, personal liberty, and economic freedom of the people. The fixed salary workers and savers are deprived of their monies’ worth through legal means.
Yes, it cannot be denied that the increase in the supply of money brings temporary prosperity. However, in reality, this temporal prosperity is but a dream for it is neither a result of entrepreneurial creativity nor an outcome of increase in production. Instead, it is built on the money supply injected by the Fed into the economy. Dr. Paul describes this illusory wealth.
“Yes, the Fed does help to finance the welfare state. Yes, the Fed does come to the rescue when funds are needed to fight wars and for us to pay the cost of maintaining our empire. Yes, the Fed is able to stimulate the economy and help create what appear to be good times. But it’s all built on an illusion. Wealth cannot come from a printing press. Empires crumble and a price is eventually paid for arrogance toward others. And booms inevitably turn into busts” (pp. 26-27).
It is alarming to observe that with the introduction of legal counterfeit in monetary system, a corresponding decline in basic morality is also taking place. Ron Paul was describing not only the widespread acceptance of abortion, but the legal use of taxpayers’ money to fund abortion. To him, such moral decline was considered preparatory to euthanasia. He accepts that in a free society, issues like these do not disappear. But instead of the state participating in undermining the value of life, it actually protects life.
Conclusion and Summary
There is a need to reverse the identified trends that describe the US Republic if the Americans do not wish to end with a fascist government. The increasing expansion of government’s power is contrary to the principles of a free society. The paragraph below offers a good summary:
“Our economic, military, and political power, second to none, has perpetuated a system of government no longer dependent on the principles that brought our Republic to greatness. Private property rights, sound money, and self-reliance have been eroded, and they have been replaced with welfarism, paper money, and collective management of property. The new system condones special-interest cronyism and rejects individualism, profits, and voluntary contracts. Concern for the future is real, because it’s unreasonable to believe that the prosperity and relative tranquility can be maintained with the current system. Not being concerned means that one must be content with the status quo and that current conditions can be maintained with no negative consequences. That, I maintain, is a dream” (p. 39).
A genuine alternative badly needed in our time includes the return to basic morality, space for the free market, restoration of honest money, living within the parameters of the Constitution, and the recovery of personal liberty.
Creator of heaven and earth, our Redeemer, we acknowledge that you are the King of kings and the Lord and lords and you hold governments and rulers in your mighty hand. We also acknowledge that you established human authorities.
In this critical time in human history, we pray for the United States of America. You know what is going on. You know about the Federal Reserve, the Occupy Movement, the Tea Party Movement, and the present status of the US Republic.
Enlighten the people to see that the answer to the present crisis lies beyond the solutions offered both by liberals and conservatives, by Republicans and Democrats.
Forgive America and the world for abusing freedom; for thinking that our freedom is absolute; and for failing to distinguish among our libertine excesses, our self-proclaimed freedom, and the freedom granted to us by Christianity.
Forgive those in power for making numerous excuses to justify militarism. Forgive USA for her inconsistencies between her message and her action; forgive her for declaring herself as defender of liberty, promoter of prosperity, and preserver of peace; but in her action, destroys freedom, breeds poverty and sows terror. Forgive her for corporatism, greed, and lust for power.
Forgive those responsible for inflating the money supply, for taking the wealth of the middle class, the saving of the savers, and the hard-earned salary of the workers. Let them know that they cannot hide their theft from your eyes behind sophisticated monetary and economic systems.
Forgive those addicted to illusory wealth, those who live beyond their means, those who depended on credit, and those who sold their future.
Forgive us all for undermining the value of life.
Source: Paul, Ron. (2008). Pillars of Prosperity: Free Markets, Honest Money, Private Property. Auburn, Alabama: Ludwig von Mises Institute.