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Economy

Rothbard: The Constitution Was a <em>Coup d'État</em>

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[Conceived in Liberty: The New Republic, 1784–1791. By Murray N. Rothbard. Edited by Patrick Newman. Mises Institute, 2019. 332 pages.]

We owe Patrick Newman a great debt for his enterprise and editorial skill in bringing to publication the fifth volume, hitherto thought lost, of Murray Rothbard’s Conceived in Liberty. The details of his rescue of the lost manuscript are indeed dramatic, but rather than recount them here, I should like to concentrate on a theme central to the new book.

It is well known that Rothbard took the American Revolution to be mainly libertarian in its inspiration. The libertarian impulses of the Revolution were betrayed by a centralizing coup d’état. As Rothbard puts it:

Basically, urban merchants and artisans, as well as many slaveholding planters, united in support of a strong nation-state that would use the power of coercion to grant them privileges and subsidies. The subsidies would come at the expense of the average subsistence yeoman farmer who might be expected to oppose such a new nationalism. But against them, to support a new constitution, were the commercial farmers aided by the southern plantation-farmers who also wanted power and regulation for their own benefit. Given the urban support, the split among the farmers, and the support from wealthy educated elites, it is not surprising that the nationalist forces were able to execute their truly amazing political coup d’état which illegally liquidated the Articles of Confederation and replaced it with the Constitution. In short, they were able to destroy the original individualist and decentralized program of the American Revolution. (p. 128)

The theme I should like to concentrate on is this: what happens to the way we understand the Constitution if Rothbard is right that it was a centralizing document? The Anti-Federalists, with whom Rothbard agreed, denounced it for that reason. For example, in Virginia Patrick Henry, one of Rothbard’s heroes, said:

When the American spirit was in its youth, the language of America was different: liberty, sir, was then the primary object….But now, sir, the American spirit, assisted by the ropes and chains of consolidation, is about to convert this country into a powerful and mighty empire….Such a government is incompatible with the genius of republicanism. There will be no checks, no real balances, in this government. What can avail your specious, imaginary balances, your rope-dancing, chain-rattling, ridiculous ideal checks and contrivances? But, sir, we are not feared by foreigners; we do not make nations tremble. Would this constitute happiness, or secure liberty? (p. 262)

With all this as background, we can now consider the theme I’d like to stress. If the Anti-Federalists were right. We cannot say that the Constitution as originally written gave us a limited government that later regimes have ruthlessly and recklessly expanded. In taking this approach, Rothbard set himself firmly against the dominant trend in American conservative thought. He remarks:

The Constitution was unquestionably a high-nationalist document, creating what Madison once referred to as a “high mounted government.” Not only were the essential lines of the nationalistic Virginia Plan Report carried out in the Constitution, but the later changes made were preponderantly in a nationalist direction….While it is true that the general congressional veto over state laws and the vague broad grant of powers in the original Virginia Plan were whittled down to a list of enumerated powers, enough loopholes existed in the enumerated list: the national supremacy clause; the dominance of the federal judiciary; the virtually unlimited power to tax, raise armies and navies, make war, and regulate commerce; the necessary and proper clause; and the powerful general welfare loophole; all allowed the virtually absolute supremacy of the central government. While libertarian restraints were placed on state powers, no bill of rights existed to check the federal government. (p.211)

We can argue that later regimes extended national power beyond what the Constitution contemplated, but if Rothbard is right, the Constitution as written provides ample scope for tyranny.

One of the leading arguments of Constitutional conservatives is that since Congress is granted the power to declare war, military engagements by later presidents that bypass Congress are unconstitutional. (In several reviews, I have argued this way myself.) Rothbard does not agree. He says:

Congress’ proposed broad military powers occasioned much debate. The nationalists tried to narrow Congress’ power to make war into a more concentrated, and therefore a more controllable, form: Pinckney to the Senate only, Butler to the president himself. While these were defeated, Madison cunningly moved to alter congressional power: ‘make war’ became ‘declare war,’ which left a broad, dangerous power for the president, who was grandiosely designated in the draft as the ‘commander in chief’ of the U.S. army and navy, and of all the state militias. For now, the president might make war even if only Congress could formally declare it.” (p. 185)

Rothbard finds similar slippery language in the Tenth Amendment, imagined by some defenders of limited government to be a principal means to thwart efforts by the federal government to centralize power:

This amendment did in truth transform the Constitution from one of supreme national power to a partially mixed polity where the liberal anti-nationalists had a constitutional argument with at least a fighting chance of acceptance. However, Madison had cunningly left out the word “expressly” before the word “delegated,” so the nationalist judges were able to claim that because the word “expressly” was not there, the “delegated” can vaguely accrue through judges’ elastic interpretation of the Constitution….The Tenth Amendment has been intensely reduced, by conventional judiciary construction, to a meaningless tautology. (pp. 302–3)

(Note that Rothbard does not disagree with the nationalist judges’ interpretation.) Rothbard does see some hope of restraining the central government in the “forgotten” Ninth Amendment, but this was not to be invoked in a serious way by the Supreme Court until the 1960s.

Defenders of the Constitution as a bulwark of limited government often invoke the wisdom to be found in the Federalist Papers, but Rothbard views them as deceptive propaganda:

The essays contained in The Federalist were designed not for the ages—not as an explanation of nationalist views—but as a propaganda document to allay the fears and lull the suspicions of the Antifederal forces. Consequently, these field marshals of the Federalist campaign were concerned to make the Constitution look like a mixed concoction of checks-and balances and popular representation, when they really desired, and believed that they had, a political system of overriding national power. What is remarkable is the fact that historians and conservative political theorists have seized upon and canonized these campaign pieces as fountains of quasi-divine political wisdom, as hallowed texts to be revered, even as somehow a vital part of American constitutional law. (pp. 269–70)

James Madison’s argument that a large national republic would better cope with the dangers of factionalism than a small one is often invoked for its profundity, but Rothbard is not impressed:

Madison claimed that the greater diversity of interests over a large area will make it more difficult for a majority of the interests to combine and oppress a minority. It is difficult to see, however, why such a combination should be difficult….But the main fallacy in Madison’s argument is that it is part and parcel of the antidemocratic Federalist doctrine that the danger of despotic government comes, not from the government, but from among the ranks (i.e., the majority) of the public. The fallacy of this by now should be evident. Even if a majority approves an act of tyranny, it almost never initiates or elaborates or executes such action; rather they are almost always passive tools in the hands of the oligarchy of rulers and their allied favorites of the state apparatus. (pp. 270–71)

Rothbard concludes with this verdict on the Constitution:

Overall, it should be evident that the Constitution was a counterrevolutionary reaction to the libertarianism and decentralization embodied in the American Revolution. The Antifederalists, supporting states’ rights and critical of a strong national government, were decisively beaten by the Federalists, who wanted such a polity under the guise of democracy in order to enhance their own interests and institute a British-style mercantilism over the country. Most historians have taken the side of the Federalists because they support a strong national government that has the power to tax and regulate, call forth armies and invade other countries, and cripple the power of the states. The enactment of the Constitution in 1788 drastically changed the course of American history from its natural decentralized and libertarian direction to an omnipresent leviathan that fulfilled all of the Antifederalists’ fears. (p. 312)

There is evidence that Rothbard wrote the manuscript of this book before 1967 (see p. 312, editor’s note 7). But I do not think that he later changed his mind about the Constitution. Those who wish to challenge his brilliant analysis have a difficult task ahead of them.



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Economy

The NO BID Evaporation of Wealth

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COMMENT #1: Marty,

Good morning. I knew you were going to get blamed for having too much “influence”. And then after emailing you about it, I see the comment in the Fake News blog this morning, just too funny!

Can’t these people just try to learn why they were wrong? I always try to learn from my experiences and I’m nobody. I’ve learned more after college through trading experiences and attending your conferences than I ever did in college. They just fed me a bunch of BS that I had to repeat for a good grade, which is why I almost dropped out. I probably had two good professors total in Economics and Finance, they both had real-world experience, go figure!

There will always be haters.

Best,
EM

COMMENT #2: Great article today

One question I can’t answer is when capital flees(whether it’s from virus or Bernie). It’s not flowing back towards Europe or Asia. So is It (mostly)all flowing into US Bond market? Which we know is the worst spot to be as investors flee the public sector.

Two instead of Bernie being the reason for the very large drop in the Dow (and I think he’s a large problem for equity markets). Could It be the Coronavirus will substantially reduce economies all over the world and therefore equity valuations and earnings as well = equity sell-off and into cash?

Regards,

DJCL

ANSWER: For now, the US debt market is the best in the world and really the only viable one. The comments about capital fleeing just illustrate the fake news. If capital was fleeing the USA, then you would expect to see the currencies move with such a capital flow. That has not been the case. They just make up excuses for they must always apply some reason to every market move.

When I was called into the 1987 Brady Commission, they too began with the proposition that some mythical person sold the market and they were going to hang them. I explained that every investigation began with that same directive and nobody has ever been found. I asked if they even understood how markets functioned. They said simplistically that you borrow stock from one person and sell it to another. I asked, “Then how does a short ever outnumber the longs?” I had to explain that a crash takes place when people try to sell and there is NO BID. They never understood that. Value evaporates, it does not flee dollar for dollar.

These people will look at Buffet or Bill Gates and have no idea that their “wealth” is based upon share value — not cash.  Bernie stands up and says he will go after the 1% and fails to understand that if he confiscated all their wealth, assuming it was cash, he would not even balance the budget for one year. It would make no difference. But people like Bernie love to point the finger at the rich rather than government because they cannot admit this is the worst management debacle in recorded history.



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Economy

Is it time for Hannah Mather Crocker?

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Sometimes women’s contributions to the political and economic life of past centuries are overlooked, not because they were minor, but simply because they were seen as stories of daily ‘domestic’ life and therefore inherently less significant than accounts of war, conquest, and statecraft. Since the 1960s, there has been a movement within the discipline of history to correct these omissions. Historians like Gerda Lerner, Anna Firor Scott, Deborah Gray White, and so many more began the work of filling in forgotten and otherwise neglected aspects of history, often in the newly emerging subfields of women’s history and black history.

However, despite all the excellent work that has been done over the past sixty years, there are still gaps in our knowledge. The evidence that I’d like to offer on that point today is the life and work of Hannah Mather Crocker. Despite being a leading political theorist in the post-Revolutionary era and the first woman to write a book-length discourse on women’s rights, Observations on the Real Rights of Women (1818), Crocker was overlooked for most of the 20th century. A 2006 APSR article—one of only a handful of academic publications to deal seriously with Crocker’s work—suggests that Crocker may have been set aside in part because Elizabeth Cady Stanton, Susan B. Anthony, and Matilda Gage were critical of her arguments in their first-moving and highly influential 1886 History of Woman Suffrage.[1] This goes to show the importance of going beyond standard ‘textbook’ accounts of intellectual history. Every contribution is a filter, and what was filtered out when answering yesterday’s questions may be exactly what we want to understand today.

In defense of Stanton and friends, Crocker’s ambitions do seem pretty modest compared to those of the later 19th century feminists. She prefaces Observations on the Real Rights of Women as a “little work” that was “not written with a design of promoting any altercation or dispute respecting inferiority or superiority, of the sexes” (p. 2; all page numbers below refer to this same book). She also often seems to uphold traditional gender roles, conceding to her contemporary readers that the actions of “females trespassing on masculine ground” are both “morally incorrect, and physically improper.” (p. 3). Yet! She writes to us from 1818 in defense of an idea that remains in dispute 200 years later: that despite any and all biological differences, woman are every bit as capable of intelligence and discernment as their male counterparts and deserve the same rights to make their own decisions. Despite the biological reality of being a woman, with all its “duties peculiar”—the most singular of these being childbirth and childcare–“the wise Author of nature has endowed the female mind with equal powers and faculties, and given them the same right of judging and acting for themselves, as he gave to the male sex” (p. 2)

Perhaps the most consistent argument throughout is this argument about how much is lost when women do not or are not able to cultivate their intellectual capabilities. Like other early thinkers on questions of women’s rights, including Mary Wollstonecraft and John Stuart Mill, this emphasis leads focuses on barriers to women’s education as particularly harmful: “it has been fairly proved, even to demonstration, that the female powers and faculties are equal with the men; but their mode of education often checks their progress in learning” (p. 26). Part of the harm Crocker sees in limiting women’s education is that any ignorance will be transmitted to the little “olive branches around her table.” This prioritization of women’s role as mothers is a tough one to grapple with. In emphasizing maternal responsibility, Crocker is well in line with her times. Yet this idea that women’s most appropriate role is as the caretaker will later on come to be twisted for use in political arguments about whether or not women should be allowed particular rights or admitted into particular spaces. This may be another reason why her contributions have been discounted by later generations of feminists.

Overall, Crocker’s treatise on women’s rights may be much more important than it’s been given credit for. She makes strong arguments about women’s intellectual and moral equality. Further, she is offering these arguments during a period of time in American history that was arguably the most restrictive in terms of what women were considered capable of managing. My next post will share some ideas from Crocker that deal directly with women’s productive and managerial roles, particularly in civil society and household government.

 

 

[1] Botting, Eileen Hunt, and Sarah L. Houser. 2006. “‘Drawing the Line of Equality’: Hannah Mather Crocker on Women’s Rights.” The American Political Science Review 100 (2): 265–78.

 

 


Jayme Lemke is a Senior Research Fellow and Associate Director of Academic and Student Programs at the Mercatus Center at George Mason University and a Senior Fellow in the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics.

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Economy

The Entrepreneurial Advantages of Building Human Capital While Young

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While you were young, did you gain knowledge and learn skills that gave you the human capital necessary to become an entrepreneur or a small business owner? Human capital consists of the knowledge and habits developed as a youngster that form skillsets that later in life can be used in the business world. These skills are developed either through the family unit, culture, or regional location and determine the success or failure of entrepreneurial pursuits and performance. In the young, the development of skills and knowledge are applicable to future ventures in entrepreneurship or small business ownership.

Everything you learned from family dinner conversations and your culture served to build your human capital. Across the globe, the people of various regions cultivate certain skills that enable individuals to consider entrepreneurship as a viable choice of work. Some of you never had the social or family setting that gave you entrepreneurial insights. Some people get this while they are young, and some do not. Acquiring human capital at a certain age bolsters the chance of entering entrepreneurship or small business ownership. If human capital or business insights are not embedded culturally or acquired at a certain point, some individuals will never consider entrepreneurship or be successful at it.

We cannot all become successful entrepreneurs, especially if only a few of us come from a cultural background that rewards an ethic of hard work and related values versus a cultural background in which achieving entrepreneurial success is never even thought of.1 What is valued in the family unit and what is rewarded or praised contributes to our future entrepreneurial skills. Ludwig von Mises noted, “the inequality of men, which is due to differences both in their inborn qualities and in the vicissitudes of their lives, manifests itself.”2 The region of the world in which one lives and the context of the acquired human capital skills are equally vital to having an entrepreneurial skillset.

We hear from many entrepreneurs, and those who are not entrepreneurs per se, that much of their education occurred around the family dinner table, or that they lived in a place where small business activity was plentiful.3 Human capital that is based on family, culture, and regional differences has consequential effects for many considering entrepreneurship.

Cultural factors are critical in developing entrepreneurship. Often these cultural factors are overshadowed by the technical aspects of operating a business—the seen versus the unseen. Parents and the elderly pass on their values to their children, values such as taking risks, being independent, challenging uncertainty, etc. Children who are rewarded or not rewarded will either be encouraged or discouraged to pursue entrepreneurial activities in the marketplace. If a child is never taught to be independent, how is he or she able to systemically think of and identify potential profit opportunities and bring opportunities to fruition?

Habits form over time, and many are culturally based. In some cultures, some children spend up to twelve hours a day playing videogames and entertaining themselves on social media. In other cultures, children are expected to work long hours helping mom and dad with their business or studying to earn the best grade. These youths may work at an uncle’s garage learning all about vehicles or attend college to gain business knowledge. In either situation, these youths are learning about private property, e-commerce, revenues, profit and loss, bookkeeping, and so on—gaining skillsets and knowledge in order to run a business of their own in the future.

Generally, whatever is cultivated in the family unit and culture will manifest and have consequences in the marketplace. Children who acquire a work ethic and values related to entrepreneurial success will have an advantage over their peers who have not had the same experience. The children who have not learned these things will have a much later start or never acquire the skills and the know-how needed to pursue entrepreneurship or small business ownership.

Not everyone has an equal opportunity to become an entrepreneur, as some must acquire a collection of basic skills, knowledge, and habits that may take decades to develop. Taking risks, working longer hours, and making critical decisions require a certain upbringing. Entrepreneurs are not created overnight but over time. However, ten years of working with mom, dad, or an uncle as a youth, gaining practical knowledge, surely provides advantages later in life.

We cannot disregard the location and region in which we lived during the time of our early human capital acquisition. Being located in one region of the earth versus another can surely impact our ability to develop a predisposition or entrepreneurial insights needed for entrepreneurial behavior. Perhaps we live in an area where several industries exist. Being surrounded by these industries allows us to either work for or start a business in a vein that is familiar to us.

As with any location or local market, our human capital can be stymied in a region or location where a product or service is not valued or not supported although it might be highly valued in another market (i.e., if one has to take their product knowledge to another region where the consumers have higher subjective valuations of their productive goods or services).

Unfortunately, the opportunity to attain the same human capital at the same time and place that leads to entrepreneurship is not equally available to everyone. Without the requisite human capital, one can only dream of becoming a successful entrepreneur or business owner. Families and family cultures vary among peoples across the globe, and so does the dissemination of knowledge at the family dinner table. We all come from backgrounds that either reward or punish certain behaviors that later transform into predispositions and values that underpin our ability to, at a minimum, think like and be an entrepreneur. Ludwig von Mises said that entrepreneurs “owe their position exclusively to the fact that they are a better fit for the performance of the functions incumbent upon them than other people are.”4 An interpretation of Mises on this point is that the skills and knowledge develop over time that enable entrepreneurs to uniquely perform the production of products and services for the consumer.

  • 1. See Thomas Sowell’s The Quest for Cosmic Justice. In the section titled “Freedom versus Equality,” he discusses equal performance and social barriers.
  • 2. See Ludwig von Mises’ Planning for Freedom.
  • 3. See Ryan McMaken’s article “Three Economics Lessons I Learned from My Dad.” For example, three lessons that he learned were: lower the cost of doing business, politicians drive up the cost, and the world is always changing.
  • 4. See Ludwig von Mises’s Human Action on the Entrepreneurial Function.



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