“The Highest Level of Prosperity Occurs when there is a Free-Market Economy and a Minimum of Government Regulations.”
Having a good idea of what was possible with setting up a political and social structure based on natural law, the founders sought for natural law for the market place as well. In 1776 the book “The Wealth of Nations” came out. It was not easy reading, but became the watershed between mercantilism and the doctrines of free-market economics. It fit the experiences and thinking of the Founders.
Thomas Jefferson wrote, “In political economy, I think Smith’s Wealth of Nations the best book extant.”
There was no where on earth that these principles were being practiced by any nation of any consequence. The United States was the first people to undertake the structuring of a whole national economy on the basis of natural law and the free-market concept described by Adam Smith. Among other things, this formula called for the Following:
1. Specialized production: Let every person or corporation of persons do what they do best.
2. Exchange of goods takes place in a free-market environment without governmental interference in production, prices or wages.
3. The free market provides the needs of the people on the basis of supply and demand, with no government imposed monopolies.
4. Prices are regulated by competition on the basis of supply and demand.
5. Profits are looked upon as the means by which production of goods and services is made worthwhile.
6. Competition is looked upon as the means by which quality is improved, quantity is increased, and prices are reduced.
There are four laws of economic freedom:
1. The freedom to try.
2. The freedom to buy.
3. The freedom to sell
4. The freedom to fail.
By 1905 the United States had become the richest industrial nation in the world. With only 5% of the earth’s continental land area and merely 6% of the world’s population, the American people were producing over half of almost everything, clothes, food, houses, transportation, communications, even luxuries. It was a great tribute to Adam Smith.
The Founding Fathers agreed with Adam Smith, that the greatest threat to economic prosperity was the intervention of the government into the economic affairs of private businesses and the buying public. Historically, governments have tried to do this through fixing prices, fixing wages, controlling production, controlling distribution, granting monopolies, or subsidizing certain products.
There are four legitimate areas of responsibility which properly belong to the government.
1. Prevention of illegal force in the market place to compel purchase or sale of products.
2. Preventing Fraud in misrepresenting the quality, location, or ownership of the item being sold or bought.
3. Preventing a Monopoly that eliminates competition that results in restraint of trade.
4. Preventing Debauchery of the cultural standards and moral fibers of society by commercial exploitation of vice pornography, obscenity, drugs, liquor, prostitution, or commercial gambling.
George Washington said, “Let vigorous measures be adopted; not to limit the prices of articles, for this I believe is inconsistent with the very nature of things, and impracticable in itself, but to punish speculators, forestallers, and extortioners, and above all to sink the money by heavy taxes. To promote public and private economy; encourage manufacturers etc.”
After 1900, these principles were lost in the shuffle. Many prominent and influential leaders began to lose confidence in the system. These included wealthy industrialists, heads of multi-national banking institutions, leaders in the academic world, and some of the more innovative minds of the media. The same restlessness was taking hold of similar circles in Europe.
There were many organizations that were demanding that the government get involved in the redistribution of wealth. Many of the problems of the time were created by the very individuals that were demanding a new system. The new system would involve extensive government regulation and outright expropriation of major industries and natural resources. This greatly accelerated the idea of a strong centralized government with regulatory power over every aspect of the marketplace.
By the 1920’s debunking of the Founding Fathers was in full swing. Discussion of the Constitution being obsolete was discussed openly. The ideas of Adam Smith were referred to as out of date, or ancient.
John Chamberlain eventually came to realize what was going on, what the intellectual leaders were doing. They were deliberately tearing down the founders and the free-market economy in order to create a void that they could fill with there new formula. And it was the very economic nostrum that was the very toxin that the Founders had warned about. Chamberlain states that before Franklin Roosevelt that we had the Republic, meaning that the checks and balances were in place, and after 1933 we began to be centralized and there were interventionist controls of industry. That prior to that America had been hallowed out in the Twenties because the colleges ceased to teach anything important about our heritage. You had to be a graduate student to even catch up with the” Federalist Papers” or “The wealth of Nations.” He states that is generation was the ignorant generation. He said that the depression began their education, but the first book in economics that they read was Marx’s “Capital.” They had nothing to put against it, and it laid the foundation brick by brick for Keynes.
W. Cleon Skousen mentions that he too had a similar experience of trying to find America’s roots coming less then a decade behind Chamberlain. He states that the Founders had been relegated for about 25 years at this point. Many had their eyes opened after reading “The Socialist Tragedy,” which explained what socialism had done to Europe. Max Eastman wrote “Reflections on the failure of Socialism,” explaining what socialism had done to America and the world in 1962.
The Founders determined that they would make the American dollar completely independent of any power or combinations of powers outside of the American people. They gave the exclusive power to issue and control money to the people’s representatives, the congress and forbade anyone else from meddling with it.
Not only was congress responsible for issuing the money, but it was to see that is purchasing power remained fixed. In other words, the value of the money was to remain steady and reliable not only in the United States but in relation to foreign money. All money was to be coined in precious metal. Paper notes were to be a promissory note, or a promise to pay in gold or silver. The States were to make certain that they did NOT allow debts to be paid except in terms of gold or silver.
Washington stated, “We should avoid the depreciation of our currency; but I conceive this end would be answered, as far as might be necessary, by stipulating that all money payments should be made in gold and silver, being the common medium of commerce among nations.”
If you are not yet familiar with our monetary system, studying about Fractional banking would be a good start. Jefferson, forsaw that the banks would inflate the economy by loaning out fictitious paper money, with no assets behind it. This would boom the economy and once the financiers had lured borrowers into a precarious situation, they would call for a bust and foreclose on the properties for which the bank had virtually furnished NOTHING. The financiers that gained control of American finance built the economy on debt instead of wealth.
Jefferson, Jackson and Lincoln all tried to get the monetary program turned around so that congress would issue its own money and banks would required to loan on existing assets rather then use fictitious money based on merely a fraction of their assets. At one point when it seemed to be catching on, the London Times came out with a frantic editorial stating:
“If that mischievous financial policy, which had its origins in the North American republic during the late war of that country (the civil war), should become indurated down to a fixture, the that government will furnish its own money WITHOUT COST. It will pay off its debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and the wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe.”
In close, I leave you with the words of Thomas Jefferson toward the latter days of his life, “We are overdone with banking institutions, which have banished the precious metals, and substituted a more fluctuating and unsafe medium..These have withdrawn capital from useful improvements and employments to nourish idleness..These are evils more easily to be deplored than remedied.” On another occasion he also said, “We are completely saddled and bridled, and…the bank is so firmly mounted that we must go where it will guide.”
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