Wednesday, August 4, 2010

Economic Policy Turning Points

At one of those great free market institutions known as the yard sale, I was speaking to a mother who teaches her son history. They had recently been going through the Great Depression and noticed a number of similarities between Roosevelt's economic policy in the 1930s and our present economic policies, noting that FDR's regime was an important starting point for much of the welfare state. It occurred to me that, while Roosevelt certainly did his share of the heavy lifting, the descent from liberty began even earlier.

One can see the beginnings of the mercantilist corporate state in the minds of people like Alexander Hamilton and then Henry Clay's so-called "American System." Regardless of one's opinion regarding the causes of the Civil War (slavery, tariffs, or simply states rights vs. the Union), the legacy of that conflict was a major tipping of the balance of power to the centralized national state.

The Progressive era added the ideology of social engineering and achieving the great society through a benevolent bureaucracy overseen by wise technocrats. It was during Woodrow Wilson's presidency that certain key parts of the economic statist apparatus--the Federal Reserve and the Income Tax--were put in place.

FDR erected even more of the institutional structure of interventionism by implementing social security and the framework for the welfare state. Lyndon Johnson greatly escalated the welfare state with his Great Society programs. And then we left the international gold standard in 1971 under Nixon and we've had serious inflationary credit expansion ever since. Now the interventionist state is accepted by all branches of the national government--the President, Congress, and the Supreme Court.

In such a legal environment, what is our best course of action? The very bright historian Thomas E. Woods, Jr. has an idea that stretches back to Thomas Jefferson and 1798 and is worth serious consideration. Nullification: How to Resist Federal Tyranny in the 21st Century is Woods' tenth book and in it he makes the provocative claim that "states can and must prevent the enforcement of unconstitutional federal laws within their borders." I have not read Nullification yet, but I do know that everything Tom Woods writes is worth reading.  Here's an interesting and, dare I say, educational interview of Woods by the Mises Institute's ever-dapper Jeff Tucker.

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