the freeman 1980 · 516 the freeman september 1775, not long before the opening shots of the war...

the

FreemanVOL. 30, NO.9. SEPTEMBER 1980

Against All Enemies, Part I Robert Bearce 515A call for the better practice of freedom in the United States withinthe framework of the Constitution.

How to Return to GoldGold as the alternative to further inflation.

Henry Hazlltt 523

Remonetizing Gold, Again Randall R. Rader 527A review of the Greenback era and its message for today.

The Corruption of Language Leslie Snyder 537How language is corrupted to darken truth and unsettle people'srights.

The Property Basis of Rights Clarence B. Carson 543All rights are dependent on property for their conception, delineationand exercise.

Competition Charles R. La Dow 554The case for competition and suggestions for curbing the resw-aintsupon it.

Law, Legislation, and Liberty:Hayek's Completed Trilogy Arthur Shenfield 558

An article-review of the prospects for liberty set forth in the latestworks of F. A. Hayek.

Book Reviews: 572"With Wings as Eagles" by Perry E. Gresham"Cutting Back City Hall" by Robert W. Poole, Jr.

Anyone wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

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Robert Bearce

AGAINST~TIf~ALLENEMIES

Part!

THE elected and appointed officials ofour federal government take an oathof office before undertaking theirconstitutional duties. Let's take alook at that oath, expressed as aquestion and answered by UI do."

Do you solemnly swear that youwill support and defend the Con-stitution ofthe United States againstall enemies, foreign and domestic;that you will bear true faith andallegiance to the same; that you takethis obligation freely, without anymental reservation or purpose ofeva-sion; and that you will well andfaithfully discharge the duties of theoffice on which you are about to en-ter: So help you God?

In this three-part series, Robert Bearce of Houston,Texas identifies the basic principles of limited gov-ernment as set forth in the Constitution of the UnitedStates. He shows how we have forsaken many of thebasics, and points the way toward a restoration offreedom.

In response to their oath of office,our Congressmen and Senators an-swer uI do," but do they really meanit?

Unfortunately for the cause offreedom, the oath of office has oftenbecome only a hollow formality. Toomany members of the adminis-trative, legislative, and judicialbranches of the federal governmenthave failed to ((support and defendthe Constitution of the UnitedStates" and ubear true faith andallegiance to the same."

The Constitution has been misin-terpreted, abused, and subverted. Asit continues to be violated, weshould see how freedom is graduallybeing destroyed.

The word (~destroyed" might ap-pear to be somewhat harsh, but it isappropriate. We ought to heed awarning made by Patrick Henry in

515

516 THE FREEMAN September

1775, not long before the openingshots of the War for Independencewere fired at Lexington and Con-cord. Henry clearly understood howfreedom was being threatened byoppressive government rule. Hewarned against indifference, com-placency, and apathy.

Ult is natural to man to indulge inthe illusions of hope. We are apt toshut our eyes against a painfultruth, and listen to the song of thatsiren, till she transforms us intobeasts. Is this the part of wise men,engaged in a great and arduousstruggle for liberty? Are we disposedto be of the number of those who, hav-ing eyes, see not, and having ea~s,hear not, the things which so nearlyconcern their temporal salvation?For my part, whatever anguish ofspirit it may cost, I am willing toknow the whole truth; to know theworst and provide for it."

By ((temporal salvation," PatrickHenry meant the preservation offreedom-the freedom to work andprovide for our personal lives as webest see fit. Henry and other patriotsbelieved that freedom meant indi-viduals had the ability and respon-sibility to plan their own lives with-out unnecessary government inter-vention. That freedom was beingthreatened, and Henry was tellingthe colonists to wake up and con-front the danger before them. Hisadmonition applies to us today.

If we truly want to strengthen

freedom and regain what we havealready lost, we will pledge our-selves to defending the Constitution.We cannot support our Constitution,however, unless we face the fact thatit is being continually ignored andbetrayed. It is time that we givesome serious thought to the Con-stitution.

Protection from Enemies-Foreign and Domestic

The Founding Fathers whoframed our Constitution in 1787knew that individuals have certainunalienable rights-Hlife, liberty,and the pursuit of happiness," asearlier expressed in the Declarationof Independence. These rights wereGod-given rights. No government orconstitution gave them to the indi-vidual. Rather, the purpose of gov-ernments and constitutions was toprotect these basic, God-givenrights.

The Founding Fathers compre-hended how and why people behavethe way they do. Men like JamesMadison and Alexander Hamiltonunderstood human nature. Theysaw that some human beings wouldalways resort to force, deceit, war,stealing, and killing to get whatthey wanted. Thus, there was anobvious need for government-legit-imate, just government to carry outtwo main functions:

(1) protecting free people fromforeign enemies and invaders;

1980 AGAINST ALL ENEMIES 517

(2) protecting honest, self-re-sponsible, hard-working citizenswithin the nation from domesticlawbreakers who would use coer-cion, fraud, or force to deprive othersof ttlife, liberty, and the pursuit ofhappiness."

Good government would do theabove, and the Founding Fathersoutlined that kind of government inour Constitution. Just as they gavethe government certain authority,they also placed limitations on gov-ernment power. The framers of theConstitution realized that whilegovernment was needed to protectindividual freedom, government it-self had to be placed within limited,strictly defined boundaries. IT gov-ernment was not restrained, itwould destroy individual liberty andlead to tyranny. Government had tobe controlled. James Madison ex-plained the matter:

ttIt may be a reflection on humannature that such devices should benecessary to control the abuses ofgovernment. But what is govern-ment itself but the greatest of allreflections on human nature? IT menwere angels, no government wouldbe necessary. If angels were to gov-ern men, neither external nor inter-nal controls on government wouldbe necessary. In framing a govern-ment which is to be administered bymen over men, the great difficultylies in this: you must first enable thegovernment to control the governed,

and in the next place oblige it tocontrol itself."

When Madison wrote that gov-ernment should ttcontrol the gov-erned," he was thinking aboutnecessary government laws re-quired to maintain impartial lawand order-law and order that pro-tected individual liberty. This issueof defending individual rights andlimiting the power of government isthe central theme of the Constitu-tion.

Preserving Personal Liberty

Four aspects of the Constitutionshow the Founding Fathers' concernfor preserving personal libertywithin the boundaries of limitedgovernment.

First, we have a written constitu-tion. Having the powers of govern-ment and the rights of the citizenryspelled out in print is no assurancethat freedom will be observed, but awritten constitution does act as asafeguard to liberty. When the Con-stitution is snubbed or disregarded,we can at least hold up a warninghand and say something to the ef-fect: ttStop, government bureau-crats! The law you have just passedis unconstitutional. The FifthAmendment says . . ."

Second, our Constitution providesfor a republic. That is, we have arepublican form of governmentbased upon the citizenry electingrepresentatives to carry out the


functions of government. TheFounding Fathers did not frame aconstitution that would set up ademocracy-a kind of governmentwhere political power lay directly inthe hands of the people. Under apure democracy, the citizens of thestate would exercise popular vote todecide what laws should be made.The majority view would be regis-tered and then carried out by theadministrative hand of the centralgovernment. There would be no rep-resentation (legislative branch ofgovernment) between the citizenryand the administrative branch ofgovernment.

A democracy might appear to bemore ((democratic" than a republic,but the authors of the Constitutionknew· that a democracy would leadto a loss of individual freedom . . .followed by anarchy or tyranny.While the Constitution was beingconsidered for ratification by theMassachusetts Convention, MosesAmes observed:

((It has been said that a pure de-mocracy is the best government for asmall people who assemble in per-son.... It may be ofsome use in thisargument ... to consider, that itwould be very burdensome, subjectto faction and violence; decisionswould often be made by surprise, inthe precipitancy of passion, by menwho either understand nothing orcare nothing about the subject; or byinterested men, or those who vote

for their own indemnity. It would bea government not by laws, but bymen."

The Dangers of Democracy

Seeing the dangers of a democ-racy, the Founding Fathers adopteda republican form of government. Itis true that the history of our nationshows that a republic can suffer thevery weaknesses of a democracythat Ames described, but the factremains that a republic comesnearer to preserving individualrights than does a democracy.

Madison and others rejected popu-lar vote as the method of makinglaws. Instead, Article I of the Con-stitution provides for representationthrough the election of Senators andCongressmen to the Senate andHouse of Representatives. Theselegislators would represent us andmake laws-laws that should pro-tect and promote individual free-dom. The government was to beguided by clearly defined laws, notby direct majority rule, which wouldlead to oppression.

Although Thomas Jefferson didnot participate in the work on theConstitution, he understood why arepublic was superior to a democ-racy. He also knew what the basicpurpose of a republic was: ((The truefoundation of republican govern-ment is the equal right of everycitizen, in his person and property,and in their management."


A republic meant a governmentthat allowed the people of theUnited States to work freely, as-sociate freely, and otherwise plantheir own lives in the way theypleased-equal rights shared by allcitizens. Speaking of the national orcentral government of the UnitedStates, Article IV, Section 4 of theConstitution says: ((The UnitedStates shall guarantee to everyState in this Union a RepublicanForm of Government, and shall pro-tect each of them against Inva-sion ..." (emphasis added).

A third principle of our Constitu-tion that defends individual libertyis federalism. When we speak todayabout the ((federal government," werefer to the executive, legislative,and judicial branches of the centralgovernment located in Washington,D.C. In the minds of the FoundingFathers, though, federal govern-ment was an all-encompassing termused to describe a nation made up ofsovereign states-a nation com-posed. of a central or national gov-ernment (the folks in Washington,D.C.) and state governments (Dela-ware, South Carolina, Connecticut,etc.).

Notice that the Constitutionrecognizes that the United Statesare, not uis," a union of sovereignstates. Article III, Section 3 reads:((Treason against the United States,shall consist only in levying Waragainst them, or in adhering to their

Enemies ..." (emphasis added). Al-though the Founding Fathers con-sidered themselves as Americansand citizens of a unified nation, theyalso considered themselves citizensof separate, self-governing states.The United States were consideredin the plural, not the singular. Thus,treason against the United Stateswas against them, not it. This factstresses the federalist nature of thegovernment established by the Con-stitution.

The Separation of Powersto Protect the Citizenry

The Constitution provides forfederalism that grants some powersto the national government andother powers to the states. This fed-eral separation of powers acts as asafeguard to personal freedom.Federalism places the burden oflaw-making and political decisionsupon power units close to the super-vision of the citizenry. The Found-ing Fathers did not want the na-tional government in Washington,D.C., telling the people of Virginiaor North Carolina what to do.

Thus, political power was distrib-uted among the different state,county, and local governments,enabling the people to govern them-selves. This widespread distributionof authority makes it more difficultfor one power unit to infringe uponthe constitutional rights of the citi-zens.


The Founding Fathers providedfor another form of separation ofpowers. This is the fourth aspect ofthe Constitution's defense of indi-vidual liberty. The national gov-ernment, or, as we say, the federalgovernment, was split up into threeseparate branches with each branchhaving distinct, limited powers.

Basically, the executive branch ofgovernment headed by the Presi-dent and his Cabinet carries outconstitutional laws and duties. Thelegislative branch made up of theSenate and House of Representa-tives makes the laws, while the judi-cial branch (the Supreme Court andfederal courts) decides whether ornot laws have been violated in lightof the Constitution.

Three Branches of Government

The authority and powers of thethree branches of the federal gov-ernment are balanced and checkedby one another. For example, thePresident can veto laws passed byCongress. Congress, on the otherhand, can withhold funds fromexecutive agencies. Although Con-gress can pass legislation, the Su-preme Court has the power to declarecertain laws unconstitutional, mak-ing them null and void. The Presi-dent appoints federal judges andvarious civil servants, but the Sen-ate can refuse to ratify major ap-pointments. The federal judiciarycan find individuals guilty ofcrimes,

but the President has power to grantpardons and reprieves.

This separation of powers, likefederalism, should act as a checksand balances system to keep gov-ernment from going beyond theboundaries of its constitutional au-thority. No single branch of gov-ernment should have the combinedpower to make, interpret, and en-force laws.

The United States Constitution isreally a remarkable document. It isa monument to personal freedom.The Founding Fathers distrustedgovernment, and they attempted toshackle political power when theyadopted the Constitution. It restrictsgovernment to the primary respon-sibilities of providing for the com-mon defense, maintaining domesticsecurity and peace, and protectingindividual rights.

The Bill of Rights

When we think of individualrights, we usually have in mind thefirst ten amendments to the Con-stitution, the Bill of Rights. Muchhas been written about the firsteight amendments which includeassurances of freedom of religion,speech, and press . . . the right tobear arms . . . the right to trial byjury, etc. Not enough is said, though,about the Ninth and Tenth Amend-ments.

The Ninth Amendment statesthat uThe enumeration in the Con-


stitution of certain rights, shall notbe construed to deny or disparageothers retained by the people."

This amendment assures the in-dividual that he has other rightsbesides those listed in the Constitu-tion and previous eight amend-ments. These unnamed rights can-not be taken away just because theyare not mentioned in the Constitu-tion. We have such rights as ((thepursuit of happiness," not includedin the Constitution but stated ear-lier in the Declaration of Indepen-dence.

Now look at the Tenth Amend-ment: uThe powers not delegated tothe United States by the Constitu-tion, nor prohibited by it to theStates, are reserved to the Statesrespectively, or to the people."

This important amendment saysthat all powers not granted by theConstitution to the national gov-ernment are retained either by thestates or individual citizens. Like-wise, all powers not prohibited bythe Constitution to the states areleft in the hands of the states orpeople themselves.

Unfortunately, many of our gov-ernment officials today act as if theNinth and Tenth Amendments donot exist. They have twisted themeaning of the Constitution and therole of government. They look uponthe Bill of Rights as rights grantedto us by a supposedly benevolentgovernment. In reality, the first ten

amendments are a list of prohibi-tions against government interfer-ing with those rights. Our legis-lators should listen to Daniel Web-ster.

Webster was only a youngsterwhen the Constitution was ratifiedin 1788, but in later years he earnedthe reputation of being (~The Defen-der of the Constitution." During aSenate speech in 1830, he declared:

((The people, then, Sir, erected thisgovernment. They gave it a Con-stitution, and in that Constitutionthey have enumerated the powerswhich they bestow on it. They havemade it a limited government. Theyhave defined its authority. Theyhave restrained it to the exercise ofsuch powers as are granted; and allothers, they declare, are reserved tothe states or the people."

A Framework for Freedom

The Founding Fathers knew thatthe basic responsibility of govern-ment was to serve as a ~(watchdog"to maintain a free society of freeindividuals working together freely.Improved working conditions . . .better education ... good health care... material progress-all of theseare goals that people work toward.The purpose of government is toensure the necessary freedom thatwill permit individuals to work forthose goals through self-respon-sibility, individual initiative, thefree market, and voluntary ex-

522 THE FREEMAN

change. Government has the re-sponsibility of providing aframework that will allow individ-uals to achieve prosperity and dig-nity on their own.

The Founding Fathers were notmen who felt that the purpose ofgovernment was to plan, formulate,and then implement specific ways toachieve the goals of a nation. Gov-ernment was not to be in the busi-ness of providing public housing orjob training through its political,economic, or social legislation. Gov-ernment was not to mold society but,instead, allow society to mold itselffreely.

Let's consider some advice fromJefferson: ((... Still one thing more,fellow citizens-a wise and frugalGovernment, which shall restrainmen from injuring one another,shall leave them otherwise free toregulate their own pursuits of in-dustry and improvement, and shallnot take from the mouth of labor thebread it has earned. This is the sumof good government...."

We need to see how far we havestrayed away from the Constitution.Not only is government poking itsbureaucratic nose into where itshould not be, it is not fulfilling oneof its primary constitutionalresponsibilities-deterring crime.Government is supposed to prevent,prosecute, and punish crime, butnow government itself has becomethe lawbreaker of the Constitution.

The Enemy Within

Many· of our public officials havebroken their oath of office. Theyaffirm or swear that they will sup-port the Constitution and defend itttagainst all enemies, foreign anddomestic." There is the foreignthreat of Marxist subversion andaggression. More dangerous, how-ever, are the domestic enemies-individuals whose actions and at-titudes are corrupting the Constitu-tion. Those individuals include someof the very government officialssworn to uphold the Constitution.

Actions by the executive, legisla-tive, and judicial branches of thefederal government have proventhat many officeholders apparentlydo not understand the Constitution.If they do know what the Constitu-tion stands for, then we should holdthem responsible for willfully re-pudiating their oath of office.

Two tasks are before us. First, wemust have a firm appreciation forthe Constitution. Second, we musthave a clear understanding how andwhy the Constitution is being de-fied. Until we face the truth, we willslide steadily towards the eventualdestruction of freedom in the UnitedStates. ,

(Editor's note: Part II of ttAgainstAll Enemies" will appear in the nextissue of The Freeman.)

Henry Hazlitt

HOWTORETURNTOGOLD

THE economic letter of the TexasCommerce Bank, dated April 18,discussed the problems of returningto the gold standard, and decidedthat such a return should not beattempted. The bank's discussionreveals a number of misconceptionsofhow a gold standard functions. Asthese misconceptions are probablywidespread, they are worthanalysis.

The bank takes for granted, with-out explicitly saying so, that theonly form of gold standard nowbeing recommended is a full, 100percent gold backing for out-standing money and credit. This is

Henry Hazlitt, noted economist, author, editor, r.viewer and columnist, is well known to readers of theNew York Times, Newsweek, The Freeman, Barron's,Human Events and many others. For moreon inflation,see his recent book, The Inflation Crisis, and How toResolve If.

not the system that prevailed in thenineteenth century, or at any timesince. What the world then had-and now calls the uclassical" goldstandard-was a fractional gold re-serve system-that is, one in whicheach nation's gold stock representedonly a fraction of its outstandingmoney and credit.

My own preference happens to befor a full gold standard. But as mostadvocates of a return to the goldstandard have in mind the previousfractional reserve system, thatshould be discussed first. The basicobjection to it is that until the re-serve falls to the legal minimumfraction permitted, there is continu-ous pressure from banks to continueexpanding their loans. But when theminimum reserve is reached, politi-cal pressure is likely to develop toreduce the required gold reserve

523


still further to permit the volume ofcredit to be further increased. Thehistoric tendency, therefore, is forthe required gold reserve to be con-stantly attenuated.

Dwindling Reserves

When the United States officiallyceased gold payments in 1971, forexample, its outstanding quantity ofmoney and credit (M-2, includingboth demand and time bank depos-its) had expanded to $454.5 billion.Against this, the U.S. gold stock wasonly about $12.3 billion (291.60 mil-lion fine troy ounces at $42.22 anounce), or only 2.7 percent. In otherwords, there was only one dollar ingold to redeem every thirty-sevendollars of paper credit.

The situation was even worsethan this, because under the thenexisting ((gold-exchange" standard,the currencies of all other coun-tries-more than 100 of them-inthe International Monetary Fundwere convertible merely into dol-lars, while only the dollars weredirectly convertible into gold. Thismade our American gold reserveequal to only some small fraction of1 percent of· the total outstandingmoney and credit which was sup-posed to be directly or indirectlyconvertible into it.

When the Texas CommerceBank's letter contends that a returnto the gold standard would Utiechanges in the money supply to

changes in the quantity of gold inFt. Knox," and on a dollar-for dollarbasis, it is assuming, as I have al-ready pointed out, that the returnwould be to a 100 percent gold re-serve system.

It falls into a number of othermisconceptions. It assumes, forexample, that to return to a goldstandard the government wouldonce more have to establish a fixedrelationship between the dollar andan ounce of gold-a new officialuprice" for gold-and it mentions$450 as a possibility.

But under today's conditions,when every nation on earth hasabandoned the gold standard, andnearly all of them have followedrecklessly inflationary policies forthe last ten or twenty years, it wouldbe practically impossible for themonetary managers of anyonecountry to establish a fixed relation-ship between its present currencyunit and gold that they could counton not to prove either dangerouslyinflationary or dangerously de-flationary.

When the United States, after itsgreenback adventure in the CivilWar, decided in 1875 to return thedollar to the previous gold parity,beginning in 1879, and when Bri-tain decided rn early 1925 to workits way back to the old parity of$4.86 for the pound, both countriesexperienced several years of severedeflation and unemployment.

1980 HOW TO RETURN TO GOLD 525

Today it would not only be dif-ficult and dangerous, but unneces-sary, for any country to try to tie thepurchasing power of its existingpaper money to any fixed ratio witha new gold-standard currency. Allthat would be necessary would bethe minting of a new gold coin (andperhaps the issuance of gold certifi-cates), stamped not in dollars,pounds, marks, or any other na-tional unit, but simply with itsweight-an ounce, a gram, tengrams, or whatever. (If coined in ametric unit of weight, such as aten-gram piece, it would circulate asan international medium of ex-change no matter by what leadingcountry issued.)

Countries issuing such coinsshould make neither them nor theirprevious irredeemable paper cur-rencies compulsory legal tender.The market rate between theirpaper currencies and gold would beleft free to fluctuate daily. Privatecitizens would be free to make con-tracts with each other for repaymentof new long-term debts in either pa-per or gold, and such contractsshould be enforceable. Private citi-zens, corporations or banks shouldalso be free to mint gold coins andissue gold-certificates against them,subject to suit for fraud, short weightor non-performance. Within such alegal framework, an alternative anddependable currency system wouldalways be available for increased

use whenever a paper currencybegan depreciating so fast that no-body wanted to continue doing busi-ness in it.

Two Possibilities

Let me sum up. There are twopossible kinds of gold standard, onerequiring only a fractional gold re-serve against outstanding currencyand credit, the other requiring a 100percent gold reserve against it. Thefirst was the kind the Western worldactually operated on from about themiddle of the nineteenth century to1914 (and to some extent in laterperiods until 1971). The problemwith it is that either the requiredfraction of gold reserve keeps beingreduced as the legal minimum re-serve is approached, thus permittinga great deal of inflation even underthe gold standard; or credit that hasbeen expanding must be suddenlytightened to prevent the gold re-serve from falling below the setlegal limit. In the second case, whichfrequently occurred, individualcountries, seeking to safeguard theirgold reserves, suffered the familiarcycles of credit expansion and con-traction, boom and depression.

A 100 percent gold reserve systemprevents this consequence. Butunder it, prices do depend upon theexisting gold supply; the volume ofmoney and credit cannot be ex-panded at will. There can be noinflation. And that is precisely why

526 THE FREEMAN

80 many people oppose the system.That is why the author of the TexasCommerce Bank letter opposes it. Inhis words, it Hcannot support theincreased needs for liquidity arisingfrom greater world trade.... Thegold standard does not provide suffi-cient flexibility to deal with today'scomplex domestic and internationalconditions."

By ((flexibility" the bank meanscredit expansion. And credit expan-sion, when left to the whim of gov-ernment authorities, means infla-tion. The great merit of the goldstandard is precisely that it takesthe decision regarding the quantityof money out of the hands of thepoliticians. The quantity of gold canonly be determined by the physicalamount that is discovered, extractedand refined, whereas the quantity ofpaper money can be determined bypolitical caprice.

Misplaced Fears

Opponents of the gold standardsometimes express the fear that newannual supplies of gold will finallyprove insufficient to u carry on thegrowing volume of world trade."Such fears are misplaced. The exist-ing amount of money is always suf-ficient to carry on the existing vol-

ume of trade; it is merely the overallprice average that is affected.

There is, of course, a theoreticpossibility that the annual increasein gold supplies might finally proveinsufficient to keep commodityprices from falling dangerously anddisruptively. Such a shrinkage innew gold production has never actu-ally occurred. The opposite has.There have been ((gold inflations,"like that following the gold rush toCalifornia in 1849 and later discov-eries. But the worst that could hap-pen, if new gold supplies started todry up, would be a return to a frac-tional instead of a 100 percent goldstandard.

((The myriad problems of adoptingthe gold standard," reads the lastsentence of the bank's letter, ((sug_gest that its adoption is not theoptimal way to control inflation." Itis significant that the bank letterdoes not tell us what this optimalway would be. The experience overthe last decades of 140 members ofthe International Monetary Fundproves that it could not be con-tinuance of irredeemable currenciesunder government regulation.Return to the gold standard is notonly the ((optimal" way to controlinflation; it is the only way. (f)

The Gold Room, .Vea' YrJrk City, 1869

SINCE 1933 when President F. D.Roosevelt prohibited private own-ership of gold, United States moneyhas been completely in governmenthands. Monetary instability has,consequently, been institu-tionalized. Inflation has fol-lowed wave of inflation. Just con-sider some figures: From 1967 to1978, the consumer price index dou-bled. In 1979, the index rose by 14per cent-a pace that would doublethe CPI again in only 5 years. Yetthe first months of 1980 have shownthe CPI increasing at an annual rateof around 20 per cent. These figuresspeak for themselves. Governmenthas lost control of inflation. An-ticipating two centuries ago that the

Mr. Rader is Legislative Counsel in the office of Con-gressman Philip Crane.

Randall R. Rader

RemonetizingGold,

Again

federal government would not havethe restraint to avoid the temptationto inflate, the Constitutional Con-vention carefully circumscribed thegovernment's monetary authority.

~~The congress shall have power tocoin money, regulate the valuethereof, and of foreign coin, and fixthe standard of weights and mea-sures." (Article I, Section 8.)

The framers of the Constitutiongave Congress authority to ~~coinmoney," but specifically withheldauthority to create money. By care-fully choosing the verb ~~coin," theywisely designed to limit the gov-ernment to stamping metal intomoney. The Articles of Confedera-tion, from which was derived theidea to give the government powerto ~~coin" metal, granted as well only

527


the specific power to ttstrike coin."At the time of the Constitution'sratification, it was clearly under-stood that the Congress should onlyhave authority to strike coin andregulate its alloy and value:

The Federalist Papers, Number44, clarify:

The right of coining money, which ishere taken from the States, was left intheir hands by the Confederation, as aconcurrent right with that of Congress,under an exception in favor of the exclu-sive right of Congress to regulate thealloy and value. In this instance, also,the new provision is an improvement onthe old. Whilst the alloy and value de-pended on the general authority, a rightof coinage in the particular States couldhave no other effect than to multiplyexpensive mints, and diversify the formsand weights of the circulating pieces. l

Fixing the Weight

The framers of the Constitutionknew the dangers of irredeemablepaper currency. They had experi-enced the uncertainty and disap-pointment of an unbacked currencyduring their struggle for indepen-dence. Therefore, they placed thecoining authority in the same sen-tence with the authority to setweights and measures. They wereonly giving the central governmentthe power to decide what weight ofmetal each coin would contain. Thisallowed Congress to mandate uni-form denominations nationwide.Thus, as explained in Federalist

Paper 44, Congress would providefor harmony and smooth commerceamongst the states. But Congresscould no more debase its coinagethan it could reduce its fixed stan-dard of twelve inches to the footdown to seven inches. Just as itcould ttfIX" a permanent standard ofmeasurement, Congress could ttcoin"a permanent standard of money.

The Constitutional ttcoining"clause needs only one further expla-nation. The ttpower to regulate thevalue thereof' did not imply any-thing more than the right to add, ifnecessary, new standard coins. Inthe words of the Supreme Court,ttThis power of regulation is a powerto determine the weight, purity,form, impression and denominationof the several coins, and their rela-tion to each other, and the relationsof foreign coins to the monetary unitof the United States."2

The framers in an earlier clauseallowing Congress to ttborrowmoney" expressly avoided statingthe Congress could ttregulate thevalue" of the money it borrowed.The framers were wary that borrow-ing would be the means of debasingthe nation's money. Moreover, ifthey had meant to give Congress theright to debase the nation's coinagewith the ttregulate" language, theywould have extended that regulat-ing power to borrowed money aswell. Perhaps the Constitution'sview of money is best expressed in

1980 REMONETIZING GOLD, ·AGAIN 529

summary by this Supreme Courtpronouncement:

The power of coining money and reg-ulating its value was delegated to theCongress by the Constitution for thevery purpose, as assigned by the Fram-ers of that instrument, of creating andpreserving the uniformity and purity ofsuch a standard of value.3

Thus, under the Constitution, theCongress launched the gold stan-dard. The dollar was simply a namefor a specified weight of gold, one-twentieth of a gold ounce. Becausethe rest of the world also used goldas money, the world enjoyed theeconomic blessing of a universalcurrency. One money worldwidefacilitated freedom of commerce,travel, and investment across na-tional borders. Without force or ex-ternal governmental constraint,workers specialized and cooperatedinternationally. No wonder thenineteenth century saw unpre-cedented economic growth. Indeed,much of our current progress mustbe attributed to the accumulation ofcapital that occurred during thecCgolden" economic decades.

The result of leaving the goldstandard in 1933 has been clear. TheConsumer Price Index in 1933 was38.8 (1967 dollar equals 100) on allitems. In 1979, that index hassoared to 217.4-nearly a six-foldincrease. The index only failed torise in three ofthe 46 years since thegold standard was abandoned.4 The

government has demonstrated itsinability to maintain price stability.Once before, the United States leftthe gold standard only to learn thatit must return. A review of that his-tory reveals some instructive paral-lels with our current plight.

The Civil War Era

The Civil War demanded that thefederal government immediatelyproduce wealth it did not have. Thisled to a sad experience with fiatcurrency.

As the clouds of war began togather (South Carolina seceded inDecember, 1860), the Treasury-already weakened by three years ofdeficits-began to experience greatdifficulty in borrowing money. Intothis tenuous atmosphere stepped thenew Secretary of Treasury, SalmonP. Chase. Already the national debtstood at $75 million, of which $18million had been incurred in the fewmonths since the secession.5

Supposing that the impendingwar would be won in a few weeks (acommon miscalculation), SecretaryChase decided to finance the conflictby issuing more debt. Chase did notanticipate how much he would haveto borrow. Throughout 1861, theTreasury was incurring obligationsat an alarming rate, faster than itcould finance them. In a vain at-tempt to meet these obligations, theTreasury issued bonds, i.e., bor-rowed, so swiftly that gold was pour-


ing out of the banks. Confidencethat the banks could redeem inspecie began to waver. The banksfeared a run on their remainingspecie reserves.

At this juncture, Chase made agrievous mistake which turned thestate banks against him. Chase hadbeen using the banks as temporarydepositories for the proceeds of theloans. Many of the loans came fromthe banks themselves. The banksexpected to hold the specie until thegovernment needed it. But Chaserequired the specie to be trans-ferred, without delay, to the Trea-sury. The banks thus saw the deple-tion of their gold reserves acceler-ate.

In July of 1861, the North lost theFirst Battle of Bull Run. The ·finan-cial community realized that thewar would not soon be over. Inmid-December, Chase's financialreport to the nation increased anearlier 1862 budget by $200 million.The federal government's borrowingwould grow even more. Alreadybanks saw their gold stocks disap-pearing daily. In New York Cityalone, the banks were losing $7 mil-lion of specie a week. Finally, onDecember 16th, the British de-manded return of two Southernemissaries forcibly removed fromthe British steamer Trent. GreatBritain seemed to be siding with theSouth. Panic spread in the financialcommunity. On December 30th, the

private banks suspended speciepayments. The government sus-pended specie payments the nextday.

Greenbacks

Chase still had to meet obliga-tions that were approaching $2 mil-lion a day. The people were not pre-pared to absorb such enormousloans, and the banks could not in-vest all their funds in governmentloans. Accordingly, voluntarydomestic loans were not coming infast enough to fund the war effort.Nor could loans be obtained over-seas due to an unfavorable balanceof trade and uncertainty about theoutcome of the war. The pressure onthe government to meet its financialpromises mounted.

Chase continued to issue notes,but now they were not redeemable.No one would accept them as pay-ment. Seven weeks after suspensionof specie payment, at Chase's re-quest, Congress passed a law mak-ing the notes legal tender. Thegreenbacks were born. The firsttttemporary" issue was set at $150million. In July 1862, another $150million was allowed. Later, yetanother $150 million was au-thorized. These were the infamousLegal Tender Acts. In essence, Con-gress decided to impose involuntarydebt upon the nation.

In retrospect, Chase was later toadmit that this was a great error. He

1980 REMONETIZING GOLD, AGAIN 531

said to Congress in 1863 that it wasnot too much, and perhaps hardlyenough, to say that every dollarraised by taxation for extraordinarypurposes or reduction of debt isworth two in the increased value ofnational securities. He learned toolate that a nation, like any individ-ual, must live within its means, thatcurrent taxes must at least covercurrent expenses.

Overt Taxation Preferredto Hidden Tax of Inflation

Taxes are always undesirable be-cause they deprive individuals ofthecapital and incentive to continue toproduce, especially when they reachconfiscatory rates. Nonetheless,overt taxation is preferable to thecovert tax of inflation because it ismore easily monitored. The repre-sentatives of the people in Congressmust vote unambiguously to deprivetheir constituents of wealth whenapproving an overt tax. The coverttax of inflation also deprives theconstituents of wealth, but the rep-resentatives escape the conse-quences. The constituents do notfile an ((inflation tax" return everyyear to acquaint them with the ex-tent of their losses. Thus the repre-sentatives are tempted to perpetu-ally inflate the currency to raiserevenue which they can spend.

An economist Chase never en-countered, John Maynard Keynes,offered a concise, though somewhat

fXlironic, appraisal of inflation. Hecautioned that inflation tCengages allthe hidden forces ofeconomic law onthe side ofdestruction, and does it ina manner which not one man in amillion is able to diagnose."6 Chaseapparently sensed, too late, the ul-timate evil of inflation: it circum-vents the citizen's ability to hold hisgovernment accountable.

Many representatives arose inCongress to criticize the Legal Ten-der Acts. Nonetheless they were ap-proved by wide margins because ofthe temporary emergency. (Isn'tevery fatal poison administered as aserum to alleviate some Utemporaryemergency"?) Everyone, includingPresident Lincoln, swore that thenation would soon mend its errone-ous ways. In December 1862, Lin-coln thus addressed the Congress:

The suspension of specie payments bythe banks, soon after the commencementof your last session, made large issues ofUnited States notes unavoidable. In noother way could the payment of thetroops, and the satisfaction of other justdemands, be so economically or so wellprovided for. . . . A return to speciepayments, however, at the earliestperiod compatible with due regard to allinterests concerned, should ever be keptin view. Fluctuations in the value ofcurrency are always injurious. Converti-bility, prompt and certain convertibilityinto coin, is generally acknowledged tobe the best and surest safeguard againstthem.7

The greenbacks began to depre-


ciate in terms of specie almost assoon as they were issued. On theNew York gold market (conversionto specie was allowed in this singlelocation to facilitate internationaltrade), gold could be purchased at apremium with greenbacks. In 1864,greenbacks depreciated to their all-time low: $1 of gold equal to $2.85 ofpaper or $1 of paper worth only 35¢of gold.8

The Post-War Era

After the war, Federal expendi-tures dropped sharply. While thegovernment was spending $37 percapita in 1865 to finance the war,spending was only $14 per capitathe following year.9 Due to tax reve-nues, the go~ernmentalready had asurplus in 1866.

In 1865, Congress voted· (withonly a single dissenter) to begin re-tiring the greenback debt. McCul-loch, the new Secretary of Trea-sury, implemented that policy withrevenue surpluses.

At that point, however, sentimentbegan to grow in favor of retainingthe greenbacks as non-interest-bearing debt. The masses (primarilyin the agrarian states) mistakenlybelieved that retiring greenbackswas depriving them of money. Somedebtors, however, knowingly advo-cated inflation to escape the fullconsequences of their borrowing.They urged the government to use((cheap tender" to payoff its war

debts. Greenbackism began to takehold.

The Democratic party took up thecause of greenbackism. Many of theleaders who had stood on the floor ofthe House and declared paper«money" unconstitutional now ar-gued that gold-convertible bonds bepaid in greenbacks. Only two yearsafter all the fervor to retire the debt,a Republican congress enacted a billhalting contraction of the debt. Thismeasure was intended to allow thepeople to escape debt and cope withhigh prices. Instead~ prices re-mained high; debt multiplied; de-pression spread. The greenbackswere in fact causing the problemsthey were supposed to cure.Throughout the next few years,Congress would occasionally con-sider a measure to replace the non-interest-bearing debt (greenbacks)with interest-bearing debt (bonds).These were defeated.

Supreme Court Rulings

The Supreme Court entered thedebate over the integrity of ourmoney in 1870. Chief Justice Chaseissued in 1870 a finding that theLegal Tender Acts were unconstitu-tional as applied to pre-existing con-tracts. Speaking for the Court, hestated:

For no one will question that theUnited States notes, which the actmakes a legal tender in payment, areessentially unlike in nature, and, being


irredeemable in coin, are necessarily un-like in value, to the lawful money in-tending by the parties to contracts forthe payment of money made before itspassage.10

This is the same Chase who as Sec-retary of the Treasury issued thepaper nine years earlier. He pro-nounced this judgment upon his ownaction:

And there is abundant evidence, thatwhatever benefit is possible from thatcompulsion to some individuals or to thegovernment, is far more than out-weighed by the losses of property, thederangement of business, the fluctua-tions of currency and the values, and theincrease of prices to the people and thegovernment, and the long train of evilswhich flow from the use of irredeemablepaper money. 11

This statement now echoes as a grimprophecy about the current age ofinflation. He did not base his deci-sion merely on the effects of infla-tion, however, but went on to sub-stantiate his decision with reason-ing based on the ttcoining" clause ofthe Constitution and the FifthAmendment which prohibits thegovernment from impairing privatecontracts or depriving citizens ofproperty without due process of law.He concluded that his own action asSecretary of Treasury violated boththe letter and the spirit of the na-tion's most sacred document.

No effort was made to conform tothe 1870 decision. On the contrary,every effort was directed at chang-

ing the make-up of the Court toreverse the ruling. President Grantappointed two railroad lawyers tothe bench who were sympathetic tothe railroad's deep debt and desire torepay loans with inflated currency.The monumental Hepburn v. Gris-wold decision, which could haveprevented the United States fromever suffering from wholesale infla-tion, was retried and fell, 5-4, thefollowing year. The heart of theCourt's reversing decision was anexpediency argument:

If it be held by this court that Congresshas no constitutional power, under anycircumstances, or in any emergency, tomake treasury notes a legal tender forthe payment of all debts, ... the govern-ment is without those means of self-preservation which, aU must admit,may, in certain contingencies, becomeindispensable even ifthey were not whenthe acts of Congress now called in ques-tion were enacted.12

Chief Justice Chase, now writing abitter dissent to the majority deci-sion, could only reiterate:

We perceive no connection betweenthe express power to coin money and theinference that the government may, in acontingency make its securities performthe functions of coined money, as a legaltender in the payment of debts.13

Ifone Supreme Court decision couldbe expunged to have the greatestaltering effect on our currenteconomic conditions, this would bethe one. Inflation could have been


pronounced dead and sealed in atomb of law, instead it was reincar-nated by this last Legal TenderCase.

The Legal Tender Cases did notquiet the constitutional debate,however. The Court had impliedthat the greenbacks were constitu-tional only because the war emer-gency warranted drastic action. Theemergency was over and green-backism persisted. Despite thedoubts, Boutwell (another TreasurySecretary) began to issue moregreenbacks.

Resumption

Specie coins continued to circulatethroughout this period. The green-backs were, of course, always worthless than the coins. In fact, the coinvalue of greenbacks varied with theamount of paper in circulation, thedegree of uncertainty that the paperwould ever be redeemed, and thestrength of general consent to acceptpayment in paper. Early in 1873,the coin value of paper currencydipped significantly. Due toGresham's law, ttbad money drivesout good," coins were held out ofcirculation. Moreover, lenders hesi-tated to extend credit, fearing pay-ment in depreciating currency.Traders were reluctant to acceptgreenbacks. At harvest time, theseinflationary pressures caused ascarcity of money. This developedinto panic in 1874.

The treasury, ofcourse, was askedto print more greenbacks. The na-tion's attention was focused on a billto authorize more unbacked papercurrency. It passed Congress and thedebate shifted to the White House.The eastern establishment (primar-ily creditors) protested against thisinflation bill and urged a veto. Theagrarian debtors west of Ohio werearrayed in favor ofthe measure. Thewhole issue of greenbackism hadreached a climax.

As long as the matter of the cur-rency's integrity was only debated inthe intellectual circles of Washing-ton, D.C., no wave of popular fervordeveloped on either side of the ques-tion. This bill made the issue public.In the perspective of the bulk of thepeople, the nation's honor was atstake. Grant, sensing the publicmood, vetoed the bill on April 22,1874, reminding the nation thatCongress had repeatedly passed res-olutions promising to discharge thewar debt and return to soundmoney:

Among the evils growing out of therebellion, and not yet referred to, is thatof an irredeemable currency. It is an evilwhich I hope will receive your most ear-nest attention. It is a duty, and one ofthehighest duties, of Government to secureto the citizen a medium of exchange offIXed, unvarying value. This implies areturn to a specie basis, and no substi-tute for it can be devised. It should becommenced now and reached at the ear-liest practicable moment consistent with


Debtors and Creditors

A poor man never gets to be a big debtor. Only a rich man, or a manwith a reputation of being rich, can get into that situation. It iseconomic nonsense today to talk of a "debtor class" and a "creditorclass" as if these represented separate groups necessarily at differ-ent economic levels. Each of us is to some extent debtor, to someextent creditor. Even if it were possible to work out a statisticalaverage, based on the net position of each of us, it is more thandoubtful that the "creditors" would prove on the average to be richerthan the "debtors"; it is much more probable that the relationshipwould prove to be the other way around. Nothing but injustice,discouragement of work and thrift, encouragement of speculationand gambling, and economic disruption can follow from an effort toswindle creditors at the expense of debtors by a constant lowering ofthe purchasing power of the monetary unit.

HENRY HAZLlTT, from his introduction to the 1959 edition of AndrewDickson White's Fiat Money Inflation in France.

a fair regard for the interests of thedebtor class ... Fluctuation, however, inthe paper value of the measure of allvalues (gold) is detrimental to the inter-ests of trade. It makes the man of busi-ness an involuntary gambler, for in allsales where the future payment is to bemade both parties speculate as to whatwill be the value of the currency to bepaid and· received.14

The issue, which had bubbledalong beneath the nation'sconsciousness for years, was now inthe open and decided. There was noturning back. Congress felt honor-

bound to uphold its promises. A billquickly passed to limit greenbackdistribution. Congressional elec-tions in 1874 restored the Republi-cans to power in Congress and theyimmediately adopted the Resump-tion Act which effected specie pay-ment by 1879. The conversion hap-pened smoothly.

Results of 1879 Resumption

In 1861, when the U.S. abandonedthe gold standard, the consumerprice index rested at 27 (1967 dollar

536 THE FREEMAN

equals 100). By 1864, the index hadsoared to 47-almost a doubling.Prices remained high, between 36and 46 on the index scale, until theResumption Act was adopted in1875. The value of the currency fluc-tuated wildly during this period. In-deed it lost one-tenth of its value ina single day. This decade providessome instructive lessons about thecauses of our own age of inflation.The politicians of this period, inorder to stay in power, were willingto sell the notion that more papercurrency meant more wealth. Advo-cates of greenbackism thought theywanted more paper currency; theyreally needed more capital, agreater capacity to produce.Nonetheless, it took the nation adecade to learn that lesson.

The year 1879 brought the re-sumption of the redeemable cur-rency. The consumer price indexstabilized at 28 in that year. Formore than three decades thereafter(World War I interrupted the pricetranquility), the index never roseabove 29 or dipped below 25. Theindex remained at 27 for a decade.15

Never did it rise or fall more than asingle point in a year. The goldstandard worked throughout thatentire period to keep prices remark-ably stable.

The United States has been lockedfor years in a devastating cycle ofinflation. Each flare up of inflationis followed by recession. But the

bottom figure for inflation each timethrough the cycle is higher than thelast bottom. The launching platformfor the inflation take-ofT is alwayshigher. If the cycle continues, ourinflation may go over 50 per cent inthe eighties. The current 20 per centrate is already intolerable. Ameri-ca returned to the gold standard in1879. A century later, it needs toreturn again. @

-FOOTNOTES-

IThe Federalist Papers, Alexander Hamil-ton, James Madison, John Jay; The NewAmerican Library of World Literature, 1961.Republication of original essays explainingand defending the Constitution.

2Hepburn v. Griswold, 8 Wallace 604, 616(1869).

3U.S. v. Marigold, 9 Howard 567 (1850).4Jlandbook of Labor Statistics 1978, U.S.

Department of Labor, Bureau of Labor Statis-tics Bulletin 2000,1979; Table 116, Page 369.

"Financial History ofthe United States, PaulStudenski and Herman E. Kroos, McGraw-HillBook Company, Inc., 1952.

8 Address delivered by John MaynardKeynes at 1919 Paris Peace Conference.

7Messages of Presidents, Volume VI, De-cember 1862.

'Financial History of the United States,supra.

9Financial History of the United States,supra.

l°Hepburn v. Griswold, supra at 607.llHepburn v. Griswold, supra at 621.12Legal Tender Cases, Knox v. Lee and

Parker v. Davis, 12 Wallace 457, 529 (1870).13Legal Tender Cases, supra at 574.l~Congressional Record, 43rd Congress,

First Session, 3270-3271 (April 22, 1874).l"Handbook ofLabor Statistics 1978, supra.

Leslie Snyder........................The Corruption

ofLanguage........................

JOHN LocKE said ((Language is thegreat bond that holds society to-gether." Language is the commonconduit whereby knowledge is con-veyed from one man and one genera-tion to another. It accomplishes thiscrucial task by enabling us to recordour own thoughts and to communi-cate with others.

Today we are witnessing a corrup-tion of our language, effectively de-stroying the bond that holds societytogether. There are several reasonsfor this, but all of them have acommon goal-Uto darken truth andunsettle people's rights," as Lockeput it.

To appreciate the crucial and in-dispensable task that language per-forms, one needs only to understand

Leslie Snyder has specialized in finance and eco-nomics, business and investments. Her latest book,Justice Or Revolution, was published in 1979 by Booksin Focus, Inc.

what language is and how it func-tions; that is, language is primarilya tool of cognition. It provides uswith a system of classifying and or-ganizing knowledge. It enables us toacquire knowledge on an unlimitedscale and to keep order in our minds,which means, enables us to think.The principal consequence of lan-guage is communication.

Thus it is by the retention of con-'cepts, Le., language, that man re-tains knowledge. And to the extenthe files his knowledge efficiently,the easier it is to recall it, add to it,change it, discard it, and communi-cate it to others. Locke, whothoroughly appreciated this, en-couraged mankind to think clearlyand concisely, so that all shouldknow what their rights are, thatprogress could take place, and man-kind live in peace.

Why do some people choose to cor-

537


rupt words? Perhaps to persuadeothers of a certain point ofview or towin an argument at any cost, re-gardless of where the truth lies.Some do it simply to sell a product orto make a profit. But we are con-cerned here with those of evil inten-tions who wish to ~~unsettle people'srights." They will employ anymeans to gain their end, such asobscurantism, obfuscation, decep-tion, and falsification.

Other techniques of corruptinglanguage, according to Locke, are toabuse words by either applying oldwords to new and unusual significa-tions, introducing new and ambigu-ous terms without defining either,or else putting words together toconfound their ordinary meaning.

The Dollar Devalued

To illustrate the technique of ap-plying new and unusual meaningsto old words, here is how the stand-ard of value-the Dollar-was cor-rupted. Prior to 1933, the Dollar wasa ~~standard unit of value," oftwenty-five and four-fifth grains ofninety percent fine gold. Since thenthe United States government hasphased out the gold standard andsubstituted its own absolute controlover the value of the currency (withthe resulting depreciation of the dol-lar, Le., inflation).

As a result of the corruption ofthis crucial standard, other valueshave been likewise corrupted:

productiveness, self-reliance, hon-esty, independence, and integrity.For the promise of security, manyAmericans have sold their birth-right of freedom.

This is clearly deceptive for whilegovernment promises to pay forsecurity-free education, health in-surance, social security, and thelike-it is corrupting the verymedium ituses as payment, namelythe currency. Eventually there willbe no education, no. health insur-ance, no employment, no real cur-rency, no security, and no freedom.

Another method of undermining afree country, to udarken truth andunsettle people's rights," is to cor-rupt the citizens' sense of justice.Frederic Bastiat's The Law ex-plains how governments use lawsand justice interchangeably, be-cause most people view law and jus-tice as one and the same thing. Thusit is only necessary for a law todecree something and it appears justand proper. Examples of using lawsto sanction injustices are compulsoryeducation, progressive taxation,conscription, welfare programs, andlegal tender. Once the distinctionbetween justice and injustice hasbeen· obscured· the citizen has beenplaced in the tenuous position. ofchoosing between justice and disre-spect for such laws and those whopassed them.

Justice, however, is a state wheremen live honestly, hurt no one, and

1980 THE CORRUPTION OF LANGUAGE 539

give to every one his due; it is not anexcuse to rob Peter to pay Paul. Anunjust society not only darkenstruth, it leads to an unhappy anddiscontent society. The corruption ofwords is an insidious process whichspreads like a cancer, corruptingand destroying everything aroundit.

At Whose Expense?

The word ttfreedom" has also beenperverted. It once meant to be freefrom political oppression. Now itmeans freedom from wants andneeds-from hunger, unemploy-ment, sickness, illiteracy, old-ageworries, and the like. The questionto ask here is, at whose expense?Then it becomes obvious that thesenew freedoms are at someone's ex-pense, and are not really freedoms,but irresponsible promises by gov-ernment.

Related to these newly promul-gated freedoms is the ambiguousphrase ((economic rights." Thus thenew freedoms have become political((rights." But while governmentpromotes nefarious Heconomicrights," it is actively destroying ourtrue political rights: life, liberty,and pursuit of happiness. Becausesomeone must pay for thesetteconomic rights" we are actuallyenslaving some part of the populacein the name ofand benefit for someother part of the populace. Butthere can be no right to enslave

another. Either the nation is free orit is not. As Albert Jay Nock said inresponse to Franklin Roosevelt'sFour Freedoms: ((There is no suchthing, four or forty. Freedom has noplural. Freedom either is, or isn't."

A second technique of corruptingthe meaning of rights is quite sub-tle, but highly effective, because itseems to call attention to them.Locke called this Upretending to in-form." Nowadays it takes the form ofadvocating Hhuman rights." Wehear this phrase constantly, and yet,what does it mean? Do we hear any-thing about the right to life, liberty,and pursuit of happiness in connec-tion with it? We get the feeling thatsomehow it is an empty phrase, de-void of any worthy meaning.

As there can be no other rightsthan to sustain, protect, and enjoyone's life, any slogans advocatingother rights are in fact ((anti-rights."They necessarily abrogate the veryessence of a right and substituteinstead privileges or favors, whichare bestowed on one group at theexpense of another by a higher au-thority, in this case the government.

Confounding the meaning ofwords can successfully corruptthem. As for example, the meaningof the word Ucontrol" has been dis-torted by connecting it with an ob-ject such as price, wage, gun, orcredit. But to control an inanimateobject is nonsense. The real issue isttpeople" control. Under the guise of


~~regulating" certain vital segmentsof the economy, the government hasacquired control over individuallives.

Control of People

All knowledgeable people willadmit that wage, price, and creditcontrols can never end currency de-preciation. They merely suppresssymptoms. They distract the unin-formed person from the cause of in-flation, which is government'smonetary policy, to focus on the ef-fects, which are the continually ris-ing cost of labor, products, andmoney. The government gives thefalse impression of taking positiveaction. But, in fact, it is only inter-fering with free markets, which aretrying to .cope with a depreciatingcurrency. In reality, the governmenthas acquired control over people.

One should always be .on guardagainst any political phrase whichcontains the word ((control" in it.For whenever a government decidesto control some thing, it invariablymeans to control some one.

Regulations are used in the samemanner. To regulate a business, tolicense a practitioner, is to regulateand control a person. The horrorbecomes obvious when regulationsand licenses are applied to the arts,where individuals deal directly withabstractions. The alarm is quicklysounded when authors, composers,news media, artists, and the like are

threatened by any loss of freedom.Although the principle holds truefor every businessman, professional,laborer, and trader, the issue hasbeen successfully obfuscated by gov-ernment calling for some kind ofUregulation." But individuals shouldnever be regulated.

When a government promises toinsure quality products, honestbusinessmen, competitiveness, andintegrity by utilizing controls andregulations, it only insures highercosts, lower standards, and thewaste of resources.

All forms of human rights,economic rights, the Four Freedoms,wage-price-credit-gun-controls, freeeducation, legal tender, welfare pro-grams, regulations, and so on are inreality, different ways of corruptingthe things they are supposedly de-signed to protect. By employing var-ious forms of obfuscation, obscuran-tism, deception, falsification, and bypretending to inform, the AmericanRepublic has been successfully cor-rupted from within-morally, politi-cally, and financially.

This state of affairs is properlytermed socialism, where individualrights have been replaced by gov-ernment bureaus and bureaucratswho enforce the decreed regulationsand controls. This is the definitionand essence of tyranny. It makeslittle difference whether our rulersare domestic or foreign, American orRussian, whether they are called

1980 THE CORRUPTION OF LANGUAGE 541

secretaries, leaders, commISSIons,presidents, or departments; individ-ual freedom has been confined andlimited; government power has beenunchained and is unlimited. We arean oppressed people.

Improve the Understanding

Where lies the solution? Or shouldwe ask, with whom does the solutionlie? How can we sift through themorass of deceptive meanings andcorrupt language to reach the truth?

To begin, individuals must as-sume their own responsibility foracting as thinking, judging citizens.They must question unclear andambiguous pronouncements comingfrom politicians, educators, andnews media. Fuzzy thinking mustnot be allowed into the reasoningprocess. If the general public issatisfied with half-truths, lies, anddistortions, this is what it will re-ceive. So we must raise our stand-ards of acquiring knowledge; thenthese deceptive practices cannot beused against us.

Furthermore, since plain and di-rect words cannot be ((employed todarken truth and unsettle people'srights," as Locke aptly put it, weought to simplify our lives and thewords we use. Long, hard-to-define,ambiguous words, like those coinedby bureaucrats and pseudo-intellectuals, are no longer impres-sive or appropriate. By ambiguouswe mean terms like ((national

wealth," ((national state of the econ-omy," and ((general welfare," whenthere are no such things, only indi-vidual wealth and individual wel-fare. We should not want the woolpulled over our eyes nor our emo-tions comforted with familiarcatch-phrases. We must demand thetruth in all matters, for the truthalways gives a favorable impressionto the mind and spirit of man.

In The Federalist No. 37, JamesMadison said, ((The use ofwords is toexpress ideas. Perspicuity, there-fore, requires not only that the ideasshould be distinctly formed, but thatthey should be expressed by wordsdistinctly and exclusively appropri-ate to them." When we return tousing specific concepts to declare ourmeanings, then our writing, speak-ing, and language will once moreacquire the force of truth and use-fulness it should possess.

The Individual Is Responsiblefor the Freedom Sought

Actually, to end the corruption ofthe language, individual rights, andour wonderful life-style of freedomand productivity, needs merely thedesire and willpower of the peoplewho are the victims being hurt bythis insidious process. As in all actsof irresponsibility, it requires theassumption of the responsibility bythe individual, who is sanctioninghis own destruction, to continuallyjudge issues presented to him, to

542 THE FREEMAN

seek the truth, and to settle for noth-ing less. Dishonest individuals andgroups will always try to gain theirends by any means available. So evilcan only flourish where the good isignored and left unattended.

What all of this boils down to isethics and morality. The corruptionof the language is merely a reflec-tion of the corruption of the moralsand ethics of the general public.Therefore, just as morality is a per-sonal responsibility, so is the use (orabuse) of language. Keeping Ian-

',.,. ..~~~}~~:;;:;:~>s;£:;;J;:~:··:guage pUre~ meaningful, and accu-rate is thus the responsibility ofevery thinker, speaker, writer, lis-tener, and reader, in addition, everyreporter, journalist, publisher,newscaster, and editor.

A free people require individualintegrity of purpose· and justice inall things. That is what it took towin our liberty. That is what isrequired of us today to reclaim ourliberty, and to make sure that lan-guage is indeed the bond that holdssociety together. i

IDEAS ON

LIBERTY

Liberty is Limited Government

LIBERTY is limited government. I know that is not the philosophicaldefinition but it is the practical definition. I go along with the theologi-cal experts who will say-and I agree-that liberty is merely my right todo what I ought to do. I am not at liberty to kill the man next to me. Imay have the power but not the liberty to destroy his right. Butpractically, liberty means limited government. What is the opponent ofliberty throughout history? Is it the big corporation, the big union? No.The only institution that has destroyed human liberty irrevocably is biggovernment. The Founding Fathers looked over 6,000 years of humanhistory, and saw the God-given rights of man burned to a crisp at leastonce in every generation by the fire of government.

. . . We couldn't get along without government, because we are a be-nighted race. But at the same time, unless you keep government as youkeep fire, under control, checked and balanced, separated, divided, tieddown, government will destroy you. That is the rationale of our Consti-tution. It doesn't make sense otherwise.

CLARENCE MANION, "Right and Wrong-Not Right and Left"

Clarence B. Carson

The PropertyBasis

ofRights

THERE has been an attempt to sepa-rate property rights from other rightsin this century. It has usually beendone by labeling some rights asHhuman rights" and referring toothers as ((rights" of property. Thisdistinction has been accompanied bythe claim that ((human rights" aresuperior to ((property rights." Forexample, in the late 1950s when theMcClellan Committee held Senatehearings on labor union activities, alabor leader put the matter thisway: ((Well, Senator, my primaryconcern was the safety and welfareof the people in that area. It simplywas against my religion and againstmy principles and religion at thistime to have placed property rightsabove human rights.... I think the

Dr. Carson has written and taught extensively, spe-cializing in American intellectual history. He is a fre-quent contributor to The Freeman.

obligation was more to protect thehuman rights than the propertyrights at that particular time."l

The distinction did not go unchal-lenged. In the 1960s there was evena sort of slogan coined which calledit into question. It went somethinglike this: ((Property rights arehuman rights." The idea had someappeal. After all, rights are notsomething ordinarily thought of asbelonging to plants or the loweranimals. IT there is a right to prop-erty, it must be first and foremost ahuman right. That was not, ofcourse, quite the distinction the cri-tics of property rights were attempt-ing to make. They referred to prop-erty rights as if they were rightsbelonging. to property. Those whochallenged this concept maintained,to the contrary, that property rightswere really rights of human beings

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to property. Thus, UProperty rightsare human rights."

At the time, I not only agreed withthis line of reasoning-I stilldo-and thought it stated the caseadequately. However, further studyand reflection have led me to asomewhat different conclusion.Property rights are not just anotherhuman right; such a statement un-derstates the case. They are muchmore fundamental than that. Prop-erty rights are basic to all rights.

This relationship first occurred tome while studying the loss of rightsin totalitarian countries. My gen-eral conclusion was that the loss ofproperty rights either preceded oraccompanied.the loss of other rights.This was so in Hitler's Germany. Itwas so in Lenin's and Stalin's Rus-sia. It has also been the case in othertotalitarian countries. It is possiblethat some property rights could beretained while other rights, such asfreedom of speech, freedom of press,freedom of religion, freedom of as-sociation and so on, would be se-verely curtailed or taken away. Butit is now inconceivable to me thatother rights could be maintainedwhen property rights were gone.

This suggests to me that there is acausal connection between propertyand other rights. The historical con-nection can be seen not only in coun-tries where rights have been lost butalso in countries where they werebeing established. For example, in

England in the seventeenth andeighteenth centuries, real propertywas being made private and per-sonal. At the same time, there was amovement for substantial freedomof religion. In the wake of the estab-lishment of these came the protec-tion of other rights.

Freedom Is Indivisible

To my knowledge, no gen-eraltheory has been propounded on theconnection between property andother rights. True, the position hasbeen often stated, sometimes ac-companied by proofs or arguments,that freedom is indivisible. Themeaning of the phrase is that youcannot pick and choose among basicliberties; you must buy the wholepackage or end up with none. Therehave also been assertions madethat rights such as freedom of pressare dependent upon private prop-erty. If there is no access to a print-ing press, the freedom· to publish isempty.

Here and there, tOQ, statementscan be found which imply the cen-tral role of property. For example,here is one from John Stuart Mill:

. . . If the roads, the railways, thebanks, the insurance offices, the greatjoint stock companies, the universities,and the public charities, were all of thembranches of the government; if, in addi-tion, the municipal corporations andlocal boards, with all that now devolveson them, became departments of the cen-

1980 THE PROPERTY BASIS OF RIGHTS 545

tral administration; if the employees ofall these different enterprises were ap-pointed and paid by the government, andlooked to the government for every risein life; not all the freedom of the pressand popular constitution of the legisla-ture would make this country freeotherwise than in name.!While Mill here entangled the mat-ter with distribution of poweramong governments, it is rea-sonably clear that private propertyis a key factor in his position.Natural Rights

In general, though, little atten-tion has been paid to the relation-ship among rights. The Founders ofthe United States tended to equatethem, trace them to the same source,and worked to establish those theyrecognized as important rights.They were particularly concernedwith those that government hasbeen given to invading and violat-ing. For example, Thomas Jeffersonsaid: ttThere are rights which it isuseless to surrender to the govern-ment and which governments haveyet always been found to invade.These are the rights of thinking andpublishing our thoughts by speak-ing or writing; the right of freecommerce; the right to personalfreedom."3 They relied upon a re-ceived theory rather than propound-ing new ones.

They commonly referred to thoserights which they accepted as natu-ral rights. They were understood to

be a gift of God, implanted in thenature of things. As AlexanderHamilton put it, Uthe Deity, fromthe relations we stand in to Himselfand to each other, has constituted aneternal and immutable law. . . .Upon this law depend the naturalrights of mankind...."4 There werethose who held that these rightswere altered when man entered intosociety. The Founders did not concurin this view. Jefferson said that «theidea is unfounded that on enteringinto society we give up any naturalright."5 Hamilton declared thatttCivil liberty is only natural libertymodified and secured by the sanc-tions of civil society."6

What are these natural rights?John Adams stated it this way in theMassachusetts Declaration ofRights:

All men are born free and independent,and have certain natural, essential, andunalienable rights, among which may bereckoned the right of enjoying and de-fending their lives and liberties; that ofacquiring, possessing, and protectingproperty; in fine, that of seeking andobtaining their safety and happiness.7

Jefferson said: ttl believe . . . that aright to property is founded in ournatural wants, in the means withwhich we are endowed to satisfythese wants, and the right to whatwe acquire by those means withoutviolating the similar rights of othersensible beings; that no one has aright to obstruct another exercising


his faculties innocently for the reliefof sensibilities made a part of hisnature. . . ."8 The United StatesConstitution along with the first tenamendments, and state constitu-tions of the time, provide a morecomplete list of what were reckonedto be the most essential rights, orthe ones most likely to be interferedwith. Certainly, the right to prop-erty was reckoned to be essential, asthe above statements show, but thedependence of other rights on it wasnot made clear or elaborated.

The Socialist Concept of Rights

It was not many decades, how-ever, before the natural rights doc-trine was challenged and began tobe supplanted. The utilitariansturned away from the natural lawbasis of rights to justifying them bythe social benefits to be derived fromthem. Democratic theory tacitly de-rived rights from the desires of thepeople. Socialists generally deniedthat there was any individual rightto property, at least to productiveproperty. Democratic socialism,which became the dominant intel-lectual creed of the twentieth cen-tury, not only downgraded, when itdid not dismiss, private propertyrights but also devised a host of newrights. Many of these were in con-flict with the right to private prop-erty.

Perhaps, the United Nations De-claration of Human Rights is the

most authoritative compendium ofrights to come from the democraticsocialist outlook. If it is not the mostauthoritative, it is surely the mostcomplete. The Declaration runs to29 articles, and many of these haveseveral subheads, which may bethought of as distinct rights. If so,we may be entitled to somethinglike 49 rights according to thisdocument. The right to own propertyis mentioned in Article 17, but noreference is made either to the rightto use it or to have the fruits from it.That is understandable within thecontext, for many of the other rightsenumerated are adverse to propertyrights. However, many of the rightsare not only in coriflict with propertyrights but also internally inconsis-tent. For example, Article 26, whichdeals with education declares that((Elementary education shall becompulsory." It goes on to say, how-ever, that ((Parents have a priorright to choose the kind of educationthat shall be given to their chil-dren."9 They have the right tochoose, we are left to conclude, solong as they choose to have themreceive an uelementary education."

This brief summary of the de-velopment of ideas about rights doesnot begin to suggest the significanceof the changes entailed. The originof rights had shifted from naturallaw to society, to people, and, inevi-tably, to government. This develop-ment not only focused attention on

1980 THE PROPERTY BASIS OF RIGHTS 547

the origin of rights but also intro-duced ideas about what are rights.In the course of it, thinking shiftedfarther and farther away from anyconception of the property basis ofrights. It will be my contention herethat this almost totally obscured themeans for establishing any rights.

It is necessary, then, to explorethe property basis of rights. A goodplace to begin is with a definition ofright. A right is something to whichone is entitled by virtue of being aman (generically). Whether it becalled a natural right or a humanright, it must be in accord with thenature ofman and the human condi-tion. Consistency requires, too, thatone man's right not diminish therights of others. In .the finalanalysis, a right is what is right andderives its standing from the stan-dard of justice. It is doubtful that acomplete list of rights could be con-trived, for right comes down ulti-mately to equity, to a law deeperand broader than the acts of legisla-tures and the precedents made bythe courts. Right is a matter ofprin-ciple, and like all principles, it iscapable of numerous applications.

With that in mind, then, the rela-tionship between property andrights can now be explored. Theproperty basis of individual rightshas at least two dimensions. One isconceptual. The other is in the effec-tive ability to exercise rights.

Conceptually, all rights are either

~;:t.;~~t?is;J,;:r~elaborations or extensions of prop-erty rights. For example, in theUnited States a person has the rightto order the disposition of his bodilyremains after death, by will. Theright to one's body is an elaborationof property rights; indeed, it may bethe most basic property right. A willis written to dispose of one's prop-erty. Hence, the right to order bywill what disposition shall be madeof the body is an extension of theprocess.

Property Undergirds Rights

Many rights are so closely tied toproperty rights that they are virtu-ally indistinguishable from them.For example, the right to buy andsell or, more broadly, to trade freely,is a property right. It is an aspect ofthe ownership of property. Freespeech and a free press are funda-mentally property rights. We proba-bly do not ordinarily think of themthat way, because we think of themas something asserted when there isan attempt to interfere with them.Such a view treats of the exceptionrather than the rule, and tends tomislead us as to their character.

Speaking and other forms of pub-lication are valuable and valuedmeans of conveying information.They are, if you will, items of com-merce. That is, many people are paidand even make a living from speak-ing, writing, and other forms of pub-lication. That is, others want, and


will pay for, the information theyhave to convey. Teachers, preachers,public speakers, journalists, com-mentators, advertising men, and soon, come readily to mind. Speech is aproperty right in the market; othersmay not reproduce it without per-mission and can benefit from it or-dinarily only by paying the price forit. Literature is a property, vouch-safed by copyright law.

The value of communication is indirect proportion to its accuracy,validity, and truthfulness. To put itnegatively, an utterance obtainedby compulsion, by twisting the arm,for example, has value only for amasochist. On the other hand, if oneis prevented from speaking thetruth as he understands it by fear ofcompulsion, the value of his com-munication is diminished thereby.Free speech and a free press are thenecessary conditions for securingthe property values in these, bothfor speakers and for hearers.

Individual Rights Are Extensionsof Property Rights

There is probably no way of con-ceiving of individual rights otherthan as either property rights orextensions of property rights. Ourright to life stems from the fact thatit is our own (and only) life. Ourright to the disposal of our timestems from the fact that it is our owntime. Our right to the use of ourfaculties stems from the fact that

they are our own. Remove fromthem the concept ofprivate propertyand the claim to them goes as well.

The concept of property is not, ofcourse, peculiar to our age. It hasprobably been around approxi-mately as long as man, and even thelower animals appear to have aninstinct for it, if they cannot actu-ally conceive it. Actually, there havebeen many conceptions of property.Some societies have conceived ofproperty rights in other persons, andhave established slavery. Othershave conceived of property rights inthe services of others, and have es-tablished serfdom. Some have sodispersed property rights thathardly anyone could be said to ownanything. We appear to be bent on acourse in that direction today. Prop-erty rights in some. societies havebeen assigned to various classes. Itis interesting to note in all thesecases that all other rights, to theextent that they were recognized,tended to be parceled out in muchthe same way as property rights.

This suggests to me that our con-ception of rights in general is tied toour conception of property. Morespecifically, as I have said, it sug-gests that our conception of individ-ual rights is dependent upon a con-ception of private property. The rea-son for this, I believe, is that allrights are either property rights orextensions of them. It might be pos-sible to establish what we think. of

·1980 THE PROPERTY BASIS OF RIGHTS 549

as rights to private property withoutestablishing what we have thoughtofas other rights. But it is greatly tobe doubted that the Uother rights"could be established in the absenceof rights in private property. That,as I understand it, is much likesaying it would be possible to lay afoundation without building a houseupon it, but one could hardly expecta roof to stand without walls to holdit up.

How Rights Are Exercised

There is another reason for thisconnection. Private property is es-sential to "the exercise of individual

. rights. To turn it around, in theabsence of private property, theexercise of whatever may be pro-claimed as rights will be dependentupon who controls the property.

This latter principle has been wellillustrated in the Soviet Union inthe matter of religion. The SovietConstitution proclaims the right tothe free exercise of religion. It isvery nearly an empty right, how-ever, because churches do not havethe private property to facilitate itsfree exercise. All schools are gov-ernmentally owned and run, and re-ligion may not be taught in. them.Most seminaries were closed andmuch of church property confiscatedin the wake of the Revolution. (TheKremlin, once the seat of RussianOrthodoxy, now houses the govern-ment.) There is a shortage both of

clergymen and of church buildings.Missionary efforts are severely cir-cumscribed. Since productiveequipment cannot be privatelyowned, the churches are entirely de-pendent upon a hostile governmentfor Bibles, musical instruments,prayer books, song books, and otherreligious paraphernalia. The exer-cise of religion is clearly a privilege,when it can be done, not a right, inthe absence of private property.

The same principle has been illus-trated in American schools in recentyears on a much smaller scale. TheFirst Amendment to the UnitedStates Constitution declares, inpart, that UCongress shall make nolaw respecting an establishment ofreligion, or prohibiting the free exer-cise thereof...." (Italics added.) TheSupreme Court has prohibited vari-ous religious exercises in the publicschools. These prohibitions relyupon the fact (or premise) that thepublic schools are governmentallyowned and operated. The courtshave said, in effect, that we mayfreely exercise our religion on pri-vate property, but not on that whichis governmentally owned. Its exer-cise in the public schools was aprivilege which has now been with-drawn.

But the exercise of any right re-quires the use of property. Withoutreal property, there is no place tostand, sit, lie, walk, ride, or do any-thing. The making of a speech re-

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quires a platform from which tospeak, as it were. The publication ofa book requires a printing press, ofcourse, but much more besides.There must be a desk at which to sitor stand, pen with which to write,paper on which to write, boxes inwhich to place the manuscript,printing ink and paper, a store inwhich to display the book, andmoney with which to buy it. Free-dom of assembly requires for itsexercise a place within which to as-semble. The right to the use of one'sfaculties depends upon property onwhich to use them.

It is true that property oftenserves an humble and unobtrusiverole in the affairs of men. Fre-quently, it has only a subordinatepart

the freeman 1980 · 516 the freeman september 1775, not long before the opening shots of the war...

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