Champions Of Nonsense

From Lew Rockwell.com:

Champions of Nonsense


by Thomas J. DiLorenzo

by Thomas J. DiLorenzo





A friend from Hawaii who is well schooled in free-market economics recently sent me an example of Lincoln idolatry that manages to distort and pervert both economic theory and natural rights philosophy. It is an essay entitled "Locke, Lincoln, and American Capitalism" by Lucas E. Morel, a political science professor at Washington and Lee University who holds a doctorate in "government" from Claremont Graduate School, is a "fellow" of the Claremont Institute, and is also associated with the neocon Ashbrook Center for Public Policy at Ashland University. He’s a card-carrying Claremontista, in other words.



The essay is published as part of Hillsdale College’s "Champions of Freedom" monograph series (the new president of Hillsdale, Larry Arnn, was president of the Claremont Institute for fifteen years prior to taking the job). In one of the most extreme examples of circular reasoning that I have ever seen, Morel claims that Lincoln was a protectionist because of his alleged devotion to natural rights. This of course would draw huge belly laughs from such natural rights theorists as Frédéric Bastiat, Murray Rothbard, and even Adam Smith, who defended free trade – the opposite of Lincoln’s protectionism – on natural rights grounds.



Morel devotes the first half of his essay proclaiming that Lincoln was a steadfast proponent of "that premier philosopher of the Enlightenment, John Locke," and his natural rights philosophy. He amusingly admits, however, that "we have no clear evidence that Lincoln actually read any of Locke’s writings." But that doesn’t matter to a Straussian: Straussianism is all about reading between the lines, i.e., making things up. If there’s no evidence that Lincoln, who had one year of formal education, was familiar with Locke, let’s just assume he was anyway, says Morel.



He then claims that Lincoln’s advocacy of protectionism was consistent with natural rights because "he believed the freest trade was that done close to home." Thus, according to Morel, Lincoln championed the cause of free trade by opposing free trade.



Lincoln was indeed an ardent protectionist, following in the footsteps of his professed political role model, Henry Clay, the author of the infamous 1828 "Tariff of Abominations." For example, in a February 15, 1861, speech delivered in Pittsburgh, Pennsylvania, Lincoln proclaimed that "the tariff is to the government what a meal is to the family," and instructed his audience that "no subject should engage your [congressional] representatives more closely than that of a tariff." When he was lobbying Pennsylvania Republicans to support his nomination at the 1860 Republican convention, Lincoln wrote the prominent Pennsylvania Republican, Dr. Edward Wallace, to assure him that "in the days of Henry Clay I was a Henry Clay-tariff man [i.e., protectionist]; and my views have undergone no material change upon that subject" (see Reinhard H. Luthin, "Lincoln and the Tariff," American Historical Review, July 1944). And of course he supported the Morrill Tariff, which more than doubled the average tariff rate from 15 percent to over 32 percent, and then signed several more tariff bills as president, raising the average rate to over 47 percent, with the tariff rate on some items exceeding 200 percent.



As Morel correctly points out, Lincoln claimed that all transportation cost was "useless labor." And, since Lincoln supposedly hated "waste," says Morel, he advocated the abolition of all imports of goods that are also produced in the U.S. If we produce steel in the U.S., for example, there should be no steel imports at all, but coffee imports would be allowed. According to Lincoln’s convoluted logic, there should also be no trade between say, Illinois and Indiana, or even between Springfield and Chicago, since that would necessitate the "useless labor" of transportation costs.



The notion that Lincoln’s protectionism was consistent with Lockean natural rights is absurd nonsense. No one has ever made a stronger case for free trade on natural rights grounds than the great French economist Frédéric Bastiat, who was a contemporary of Lincoln’s (Bastiat died in 1850). In his famous monograph, The Law, Bastiat enunciated the natural rights position that life, liberty and property are all "gifts from God" and "precede all human legislation, and are superior to it." The purpose of government, according to Bastiat and most other proponents of Lockean political theory, such as the American founders, is to secure these rights.





In sharp contrast, such policies as protectionism are the result of "stupid greed," by which people attempt to use the powers of the state "to live and prosper at the expense of others." Protectionism was Bastiat’s primary example of what he called "legal plunder" – using the state to plunder one group of citizens for the benefit of another. It amounts to nothing less than "seizing and consuming the products of the labors of others," or theft. A policy of protectionism violates a man’s right to life, liberty and property, and is therefore the exact opposite of a natural rights–friendly policy.





Writing about the America of his day, Bastiat observed that the two great flaws in the American system of government – flaws that violated the natural rights foundations upon which the nation was founded – were:



"slavery and tariffs. These are the only two issues where, contrary to the general spirit of the republic of the United States, law has assumed the character of plunder. Slavery is a violation, by law, of liberty. The protective tariff is a violation, by law, of property."

Writing in the late 1840s, Bastiat forecast that this "double legal crime" could, "and perhaps will, lead to the ruin of the Union."



Protectionism is a violation of natural rights because it is a use of governmental coercion to prevent people from peacefully pursuing their own interests in enhancing their lives, exercising their just liberties, and making use of their legitimately-owned property. It is a coerced transfer of income from consumers and foreign businesses to a small, politically active cabal of domestic businesses. It raises the prices consumers must pay for their goods and gives them nothing in return, thereby reducing their standard of living. Even worse, the lack of competition always results in lower quality products as well. By reducing the incomes of our trading partners – leaving them with less income with which to buy American-made goods – protectionism harms American exporters as well. Protectionism is legal plunder.



Lincoln was a mercantilist – the European-style system of special, monopolistic privilege granted to a select few at the expense of the general public. Morel offers a bundle of excuses for this that is even more ridiculous than his defense of Lincoln’s protectionism. From the time he entered politics in 1832, Lincoln was a tenacious supporter of corporate welfare – tax-financed subsidies to select, politically-connected corporations. This was the hallmark of the Whig economic program. The Whigs understood that a key to political success was to use the powers of the state to transfer income from the ordinary citizens (i.e., taxpayers) to the wealthy and powerful corporate elite, who would then help keep them in power. Corporate welfare, euphemistically called "internal improvement subsidies" in Lincoln’s day, is a perfect example of legal plunder and is an affront to the natural rights philosophy of government.



Such subsidies at the state and local levels of government during the 1830–1860 period resulted in such colossal corruption, inefficiency, and graft, that by 1860 nearly every state in the union had amended its constitution to prohibit them. Nevertheless, Lincoln and the Republican Party continued to pursue federal subsidies, which they succeeded in doing with the 1862 Pacific Railway Act. This Act inevitably resulted in some of the worse political corruption in American history, including the notorious Credit Mobilier scandal during the Grant administration.



But to Morel, Lincoln’s advocacy of corporate welfare was not motivated by political ambition but by his quaint belief that "the freest trade was that done close to home." Subsidized transportation only encouraged "the freest trade," and protectionist tariffs were supposedly needed to pay for these projects. Only a naïve child could believe such nonsense.



One of the tenets of the economics of international trade is the dictum first enunciated in Adam Smith’s Wealth of Nations that "the division of labor is limited by the extent of the market." That is, as markets expand through international commerce, domestic manufacturers have more of an ability to benefit from larger-scale production and the increased specialization and division of labor (and lower per-unit costs) that it entails. The greater the size of the market, the greater is the division of labor and the benefits thereof, in the form of lower costs and prices. Protectionism stifles this process by reducing the extent of the market.



Morel gets it exactly backwards, arguing that tariffs will lead to "national self-sufficiency" or autarky (the official policy of European fascists in the early twentieth century), which in turn will supposedly enhance "the division of labor and specialization." Nothing could be more the opposite of the truth and in direct contradiction of the received economic wisdom for the past 225 years (the Wealth of Nations was published in 1776). Trade restrictions, such as protectionist tariffs, stifle the international division of labor that is the source of our prosperity and of civilization itself.



Mercantilists were also inflationists because they wanted the state to be able to print paper money to finance their corporate welfare schemes. Inflation is another form of legal plunder, in that the benefits of the government spending financed by printing money accrue to one group – the politically-connected merchant class – while the average working people suffer when their purchasing power is reduced by inflation.



Lincoln was an advocate of a central bank that could print paper or fiat money that was not necessarily redeemable in gold or silver. Central banking was the third plank of the Lincolnian/Mercantilist agenda which, along with the protectionist Morrill tariff and corporate welfare for railroad corporations, was put into place during the Lincoln administration with the National Currency Acts. These laws created the Greenbacks and initiated a federal monetary monopoly. Lincoln’s banking legislation was the precursor to the Fed, and all the monetary instability Americans have suffered because of it.



In What Has Government Done to Our Money?, Murray Rothbard explained the significance of a central banking authority that could "suspend specie payment," a policy that Lincoln and his fellow Whigs and Republicans advocated for decades.



The bluntest way for government to foster inflation is to grant the banks the special privilege of refusing to pay their obligations, while yet continuing in their operation. While everyone else must pay their debts or go bankrupt, the banks are permitted to refuse redemption of their receipts, at the same time forcing their own debtors to pay when loans fall due. The usual name for this is a "suspension of specie payments." A more accurate name would be "license for theft," for what else can we call a government permission to continue in business without fulfilling one’s contract?



More legal plunder, in other words. But not to Morel. No, he believes that Lincoln’s "support for a national banking system" was motivated by the angel-like intent of helping out "farmers and artisans" by providing a stable currency. With Straussian Lincoln idolaters there is always a sharp difference between the sweet sounding rhetoric that they use to describe Lincoln’s motivations and historical reality.



As Jeffrey Hummel shows in his book, Emancipating Slaves, Enslaving Free Men, the pre-Lincoln American banking system that existed from roughly 1845–1862, known as the "free banking era," was arguably the most stable banking system in American history despite all of its flaws and imperfections (which exist in all banking systems). Central banking introduced the instability of inflation that only fiat currency that is not backed by gold or silver can create. Once again, Morel gets it all backwards.



The last thing anyone would expect from Hillsdale College is a defense of mercantilism, let alone a defense of mercantilism based on natural rights grounds of all things. Nothing could be more absurd. But absurdity is what you get when your objective is not the pursuit of the truth based on the accumulated knowledge of such disciplines as economics and philosophy, but to prop up the top political icon of the Republican Party.



February 26, 2004



Thomas J. DiLorenzo [send him mail] is the author of The Real Lincoln: A New Look at Abraham Lincoln, His Agenda, and an Unnecessary War, which was just re-released in paperback with a new chapter by Three Rivers Press/Random House.



Copyright © 2004 LewRockwell.com



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