LUDWIG VON VOLUME 8, NUMBER 6 JUNE 1990

iots in the streets; protest Mrs. against a hated government; cops arresting protesters. A Thatcher's familiar story these days. RBut suddenly we find that Poll Tax the protests are directed, not BY MURRAY N. against a hated Communist tyr­ ROTHBARD anny in Eastern Europe, but against Mrs. Thatcher's regime in Britain, a supposed paragon of liberty and the . What's going on here? Are anti­ government demonstrators al­ ways, by definition, heroic free­ dom-fighters in Eastern Europe, but only crazed anarchists and alienated punks in the West? The anti-government riots in London at the end of March were, it must be noted, anti-tax ~ riots, and surely a movement in tion that the new Thatcher "com- revenue in Great Britain has been opposition to taxation can't be all munity charge" was a bold and derived from the property tax bad. But wasn't the protest move­ fascinating experiment. Local ("rates" in Britain) which are ment at bottom an envy-ridden government councils, in many levied proportionately on the call for soaking the rich, and hos­ cases havens of left-wing Labour value of property. tility to the new Thatcher tax a power, have been engaging in Whereas in the , protest against its abstention runaway spending in recent conservative economists tend to from egalitarian leveling? years. As in the case ofAmerican hail proportionate taxation (es­ Not really. There is no ques- local governments, basic local CONTINUED ON PAGE THREE

he United States owes its tax. Several dozen won enact­ As the decade wound down, the Tax Revolts birth in part to a tax strike, ment at the local level. In addi­ real estate component of the tax yet tax rebellion has not been tion, every state and hundreds of yielded an ever-mounting per­ 01 the a favorite topic of American counties witnessed the formation centage oftotal collections. Since Thistorians. Remarkably few of taxpayer's leagues. Measured real property could not be effec­ Great studies deal with the politics of by number of organizations, the tively hidden from their purview, taxation-much less tax revolt­ tax revolt of the 193 Os makes the assessor and collector did not Depression after the Whiskey Rebellion of those of the 1970s and 1980s look have to engage in costly and un­ BY DAVID T: BEITO the 1790s. Yet in studying them puny. popular detective work. And tax­ we find that America has a long Even amidst the relative pros­ payers could not conceal their and noble history ofanti-big-gov­ perity of the 1920s, taxpayers taxable real estate from the au­ ernment thought and action, es­ showed signs of cracking under thorities. When real-estate tax­ pecially during the early years of the mounting pressure. payers, either by choice or neces­ the . Throughout the 1920s, the gen­ sity, lapsed into arrears, their de­ . Between 1932 and 1934, seven eral property tax accounted for linquency became apparent for states put into place overall lim­ over 90% of taxes levied by all all to see. itations on the general property cities over 30,000 in population. CONTINUED ON PAGE FOUR n the U. S., with most Re­ Although New Hampshire's ponents are "insatiable." We must Taxpayers publicans and Democrats total tax burden is the lowest in focus, he said, on all the govern­ united in bipartisan scamship America, its per capita property ment "extravagance." in Revolt: against the taxpayers, only one taxes are almost double. the na­ In Fairfax, Virginia, where ( thing gets the politicians' at­ tional average. property taxes have increased up \ 1990 Itention: tax revolt. And-despite To fight this, taxpayers are try­ to 50% this year, Citizens on Sen­ little national publicity-local re­ ing to roll back the boom in edu­ sible Taxation has collected bellions are scaring the wallets off cation spending. In Manchester, enough signatures for a referen­ our rulers from Massachusetts to one anti-tax group ran a full- page dum to change Fairfax's form of From the California. ad about school boondoggles and government. The goal: to throw voters have dumped bureaucrats, and afterwards, out the entire Board of Super­ President Democratic Gov. Jim Blanchard's more than 4,000 furious citizens visors. The government has tried new education taxes. And the crowded into a local high school every trick to derail the anti-tax Massachusetts legislature ditched for a budget hearing. The result: plan, but this has only increased Democratic Gov. Michael Du­ massive layoffs in the school loaf­ public anger. And a sob story in kakiss swansong call for $1 billion ocracy. The Washington Post on "embattled in new taxes. "We're probably going to be but brave" Fairfax tax collectors In Detroit, for the first time the first generation to leave our had the same effect. ever, the people turned down de­ kids worse off than our parents Much of the trouble in Fairfax mands for more school taxes. In left us," whined the head of the is caused by higher property-tax New Jersey, voters are rejecting BY LLEWELLYN H. ROCKWELL, JR. school taxes at an historic rate. And in Houston, city coun­ nly one thing gets the cilmen face ouster in the next politicians' attention: election because of their pro-tax stand. tax revolt. And--de­ More and more Americans are fuming about taxes. And who spite little national could blame them? The phrase publicity-local re­ "government services" has be­ come a joke. bellions are scaring the Commentators call the Dis­ ~allets off our rulers frOIll trict of Columbia "third world." Residents wish it were that good. Massachusetts to California. The streets are a network of pot­ holes held together by an occa­ sional strip of asphalt; the police New Hampshire Municipal As­ assessments, which are tax hikes play dice and cards while crimi­ sociation, forgetting that one of incognito. But regardless of the Writers nals run free; the teachers are the benefits for previous genera­ assessment, the tax itself is IN THIS ISSUE barely literate; the ambulance tions was lower government wrong. If the government can David T Seito - author of drivers can't read maps; and the school spending and interfer­ seize your house because you Taxpayers in Revolt-is a DMV makes motorists dream of ence. The head of the New don't pay its extortions, then you visiting lecturer at UNL\1. car bombs. Hampshire teachers union com­ don't really own your home. The late 1970s tax revolt passed plained that low taxes have be­ Lawrence Reed is president of As these revolts spread, watch the District by, but today's zoom­ come "a matter of theology." the Mackinac Center and an for taxpayers to become more and ing taxes have angered property Damn right, and taxpayers don't adjunct scholar of the LvMI. more confrontational. Ifeveryone owners. One group is tying the want to be sent to Hell in a gov­ Sheldon Richman is senior from animal rightsers to the bureaucracy in knots with mass ernment handbasket. editor of the Institute for "homeless" can milk billions from appeals on new assessments. An­ As the chairman of the Board Human Studies and an the taxpayers with these tactics, other is urging class-action suits of Selectmen in Dover put it, adjunct scholar of the LvMI. then the people who pay the bills against city tax assessors. "The attitude of people is, 'Gov­ Llewellyn H. Rockwell, Jr., is are bound to try the same thing. the founder and president of In Chicago, the tax revolt is fed ernment is bad, government is the LvMI. by fury not only at higher taxes, not efficient, and the only way to Government is supposed to Murray N. Rothbard is the S.J. but at lush government salaries. control government is to cut rest upon the consent of the gov­ Hall distinguished professor of For example, the head of what is down on expenses. '" In neighbor­ erned, but the legions of tax eat­ at UNLV and probably the worst public school ing Massachusetts, the head of ers have made this a joke. We have academic vice-president of the system in America makes the big Taxpayers Association in no choice but to put them on a' LvMI. $250,000 in pay and perks. ultra-liberal Newton said tax pro- starvation diet. ~ FreeMarket J UNE 1 990 2 pecially on incomes) as ideal and jects, body and soul. raise their tax levels substantially, Mrs. "neutral" to the market, the The second deep flaw is bound so that the average British citizen I'hatcherites have apparently un­ up with the problem ofcoercion. is being forced to pay approx­ Thatcher's derstood the fallacy of this posi­ It is certainly heroic of Mrs. imately one-third more in local tion. On the market, people do T'hatcher to want to scrap the taxes. No wonder there are riots Poll Tax not pay for goods and services in property tax in behalfofan equal in the streets! I'he only puzzle is

CONTINUED FROM PAGE ONE proportion to their incomes. tax. But she seems to have missed that the riots aren't more severe. David Rockefeller does not the major point of the equal tax, In short, the great thing about have to pay $1000 for a loaf of one that gives it its unique charm. equal taxation is using it as a club bread for which the rest ofus pay For the truly great thing about an to force an enormous lowering of $1.50. On the contrary, on the equal tax is that in order to make taxes. To increase tax levels after market there is a strong tendency it payable, it has to be drastically they become equal is absurd: an for a good to be priced the same reduced from the levels before the open invitation for tax evasion throughout the market; one equality was imposed. and revolution. In Scotland, good, one price. It would be far Assume, for example, that our where the equal tax had already more neutral to the market, in­ present federal tax was suddenly gone into effect, there are no deed, for everyone to pay, not the shifted to become an equal tax for penalties for non-payment and an same tax in proportion to his in­ each person. l~his would mean estimated one-third of citizens come, but the same tax as every­ that the average person, and par­ have refused to pay. In England, one else, period. Everyone's tax ticularly the low- income person, where payment is enforced, the should therefore be equal. Fur­ would suddenly find himselfpay­ situation is rougher. In either thermore, since democracy is ing enormously more per year in case, it is no wonder that the pop­ based on the concept ofone man, ularity of the Thatcher regime One vote, it would seem no more has fallen to an all-time low. l'he than fitting to have a principle of Thatcher people are now talking one man, one tax. Equal voting, o ~onder about placing caps on local tax equal taxation. rates, but capping is scarcely The concept of an equal tax there are enough: drastic reductions are a per head is called the "poll tax," riots in political and economic necessity, and Mrs. Thatcher decided to if the poll tax is to be retained. bring the local councils to heel by the Unfortunately, the local tax legislating the abolition of the lo­ case is characteristic of the cal rates, and replacing them with streets! l'hatcher regime. Thatcherism is an equal poll tax per adult, calling all too similar to Reaganism: free­ it euphemistically a "community market rhetoric masking statist charge." At least on the local content. While Thatcher has en­ level, then, soaking the rich has taxes-about $5,000. So the gaged in some privatization, the been replaced by an equal tax. great charm of equal taxation is percentage ofgovernment spend­ But there are several deep flaws that it would necessarily force the ing and taxation to GNP has in­ in the new tax. In the first place, government to lower drastically creased over the course of her re­ it is still not neutral to the market, its levels of tax and spending. gime, and monetary inflation has since-a crucial difference­ Thus, if the U. S. government now led to a severe price infla­ market prices are paid voluntarily instituted, say, a universal and tion. by the consumer purchasing the equal tax of $10 per year, confin­ Basic discontent, then, has good or service, whereas the ing it to the magnificent sum of risen, and the increase in local tax "charge" is levied coercively on $2 billion annually, we would all levels has come as the vital last each person, even if the value of live quite well with the new tax, straw. It seems to me that a mini­ the "service" of government to and no egalitarian would bother mum criterion for a regime receiv­ that person is far less than one's about protesting its failure to soak ing the accolade of "pro-free­ charge, or is even negative. the rich. market" would require it to cut Notonly that: buta poll tax is a But instead of drastically total spending, cut overall tax charge levied on a person's very lowering the amount oflocal tax­ rates, and revenues, and put a existence, and the person must ation' Mrs. l~hatcher imposed no stop to its own inflationary crea­ often be hunted down at great such limits, and left the total tion of money. Even by this expense to be forced to pay the spending and tax levels, as be­ surely modest yardstick, no Brit­ tax. Charging a man for his very fore, to the local councils. l~hese ish or American administration existence seems to imply that the local councils, Conservative as in decades has come close to government owns all of its sub- well as Labour, proceeded to qualifying...... 3 J UNE 1 9 9 0 Free Market The 1929 crash introduced new, of course, but opposition against the idea of levying any Tax Revolts many Americans-who had has seldom been so spontaneous, new taxes at all. 'I buy less food, hitherto taken 'matters of public so universal, so determined. The less tobacco, less recreation,' says of the finance for granted-to the pain­ nearest thing to a political revolu­ the man who still holds his job, ful realities of an unprecedented tion in the country is the tax re­ 'and I would like to buy less gov­ Great tax burden. From 1930 to 1933, volt. For the first time in a genera­ ernment.'" the tax load on the American peo­ tion taxpayers are wrought up to ].M. Setten, an unschooled Depression ple increased more than it had the point ofwillingness to give up farmer from Bloomington, Illi­ during the entire decade of the public services. 'We'll do without CONTINUED FROM PAGE ONE nois, penned a radical and revolu­ 1920s. Not even during World county agents,' they say, 'We'll tionary indictment ofpolitical au­ War I had taxes taken such a large give up the public health service. thority in a letter to Governor percentage of the national in­ We can no longer pay the cost of Henry Horner. "A tax strike is come. Taxes at the local level government.'" brewing," he wrote. "In some more than doubled and state lax strikes were not just lim­ states at taxes sales the people taxes surged even faster. ited to big cities. "Farmers," The bought their property for 50 Motivated by some combina­ New Republic observed, "are in cents with shot guns. Politicians tion of willful rebellion and eco­ fact revolting against this burden only understand the language of nomic impoverishment, tax de­ in many parts of the country. bombs and bullets." He de­ linquency ballooned steadily They are doing so by direct ac­ nounced the "racketts" like public after 1930. For the first time in tion-they are not paying their health, welfare, and conserva­ decades, local and state officials taxes. The authorities are, in tion, which "should be abol­ had to confront organized and many ofthese cases, not trying to ished." He predicted that the far-ranging tax revolts. collect. T'hat is why armed re­ state tax league, then contemplat­ The tax rebels of the early sistance has not followed." In late ing a tax strike, "will become the 1930s wanted to put constraints 1931, a mass meeting of tax pro­ most powerful organization in on government. They distrusted testers in Freeborn County, Min­ the U.S.A. as WE taxpayers have politicians, bureaucrats, and mu­ Teaching the Free Market to nesota, demanded the abolition all the money to back us. The Lithuania. The deputy prime nicipal-bond holders. They of the county agent, county goose that lays the golden eggs is minister of Lithuania and six feared that government would other officials received an nurse, weed inspector, and home dead and turnips are not giving protect entrenched special inter­ intensive briefing in free-market demonstration agents, in addi­ blood any more.... The schools ests, retard economic recovery, economics at a Mises Institute tion to a 20% salary reduction for are just a graft and rackett for seminar, after which they junked and sap individual autonomy. all government employees. In jobs, keeping lobbyists at Wash. the Keynesian advice they'd They argued that government gotten at Harvard. Teaching at neighboring Faribault County, a and Springfield at 10,000.00 a could best fight the depression by our Fertig Student Center were protest gathering of 2,000 tax­ year to have unjust laws passed deflating to the same level as the Joe Cobb of the Joint Economic payers voiced almost identical de­ against us." Committee; Ed Hudgins of the economy. Many resisters even mands. Heritage Foundation; David blamed excessive taxes and Many resisters saw receivers of Meiselman of Virginia Tech; spending for causing the depres­ Proponents of tax reduction government funds as a "tax- Richard Hite and Jeff Tucker of frequently linked their efforts to the Mises Institute; Roy Cordato sion in the first place. spender"("or tax-eater") c1ass. of IRET; Sheldon Richman of In 1932, journalist Anne a general hostility toward govern­ They opposed government's ex­ IHS; constitutional lawyer Edwin O'Hare McCormick observed: mental paternalism. T'he presi­ pansion beyond providing Vieira; syndicated columnist "Wherever you go you run into dent of the Wisconsin Taxpayers' courts, police, and national de­ Doug Sandow; Yuri Maltsev of Alliance lamented, "Instead of ICDP; and Alex Tabarrok of mass meetings called to protest fense. The Washington Taxpayer George Mason. against taxes. That is nothing simply protecting the citizen in predicted that unless taxpayers the enjoyment ofthe natural right take action, "some group of tax to live and to follow his vocation spenders, better organized and unhindered, government is now more versed in political pressure, telling him how he must live, and will get the ears ofthe candidates is, regardless ofhis wishes, chart­ and formulate their program ing the path which he must fol­ whch will always be for more low." money and more government." It William B. Munro, a former warned that "every effort to affect president of the American Politi­ a reduction" will be met "with cal Science Association, framed stubborn oppositon from those the issue in succinct terms. "The selfish individuals and organized loudest protests today are not groups who prey upon the gov­ being directed...against the pro­ ernment." posal to tax this or that, but Resistors also held coherent

FreeMarket J UNE 1 9 9 0 4 "~"'-he cou­ views of economics. Ashton C. such as water. He urged the press taxes. 1~he National Municipal Re­ Shallenberger argued in the to deny advertising space to view said "Water would cease to rageous American Taxpayers' League's ARET. As a result, two daily flow from faucets. Sewer pumps Handbook on Taxation (1932), "No newspapers refused to carry their would stop... Millions of school patriots nation ever can or did make itself ads and two radio stations can­ children would roam the streets. are those prosperous by taxation. 1axes celed their shows. 10 reach ordi­ Criminals and lunatics would prey upon national wealth and nary tax delinquents, Cermak break from their cells. " By 1932, a '-Vho '-ViII industry. Governments do not promoted a "pay-your-taxes" coalition of municipal reformers, ...stand produce wealth. They consume campaign and the newspapers academics, and government em­ it. " donated full pages urging citizens ployees took to the national air­ four square-­ The tax strike was the most to pay up. Local governments dis­ waves to sell the virtues of a far serious weapon of resistance. Al­ tributed posters throughout the more active state with a program and refuse to though taken seriously, and city, with slogans designed to in­ called "You and Your Govern­ pay­ threatened often-in Milwaukee, spire boycotts oftax delinquents, ment." Detroit, Newark, Trenton, such as "Take Your 1rade Where By the end of 1933, the tax­ thereby., by Houston, Boston, Memphis, and T'he Taxes Are Paid." resistance movement had largely passive and New York City-it rarely took The tax strikers were routinely been beaten. Having gotten some hold. accused ofbeing anarchists. Mill­ relief, many taxpayers lost enthu­ active re­ One place where it did was ard J. Bilharz, a Chicago realtor siasm. And civic reformers had Chicago. From 1930 to 1933, Chi­ and activist with ARET, replied: won new allies from the segment sistance., cago was the scene of one of the ''Apparently you would call those of the business community that force an early largest illegal tax boycotts in anarchists who participated in emphasized "good government" American history. At its pinna­ that little 'Tea Party' quite some instead of cutting the size of gov­ correction be­ cle, the Association ofReal Estate years ago down in Boston. They ernment. fore -vve are Taxpayers (ARET) had a paid also had a 'civic duty' to perform But what finally led to the re­ membership of 30,000 and a bud­ in the way ofpaying an unjust tax sistors' undoing was the lack of a all sunk." get of $600,000. In 1931, the city to the King of England. But did systematic political philosophy. treasurer disclosed that only 55% they? No! And more power to l~hey railed against high taxes, of the total tax levies, an all-time them.... The courageous patriots political paternalism, and graft­ low, had been collected prior to are those who will ignore your ing bureaucrats, but often fell the penalty date. Much of this remarks, stand four square-and short when it came to formulat­ was due to ARET"s efforts. refuse to pay- thereby, by pas­ ing their own proposals for re­ The city government stood sive and active resistance, force an trenchment in government. helpless in the face ofthe growing early correction before we are all What motivated these long­ strike. A judge of the municipal sunk." quiescent taxpayers to rebel? court complained that when he l~he strikers even forced the Economic motivations were cen­ paid taxes in 1931, his neighbors local Chicago government to seek tral, but tax resistance was not jeered and laughed. a bailout from Congress. l~he tax automatically caused by eco­ The political authorities re­ strike, however, was eventually nomic self-interest. It was not sorted to the only strategy left crushed through a combination that taxpayers adopted an anti­ open to them: to persuade or of propaganda and coercion. big-government pose when the shame delinquents into paying. Nevertheless, ARE1~ had re­ depression cut into their in­ Mayor Anton Cermak castigated markable success. They man­ comes. Rather, the depression delinquents as wealthy individ­ aged to hold off the tax collector was only a catalyst to action. l'he uals who, although financially for two years. And they presided depression forced taxpayers to able to pay, shirked their civic over what may have been the big­ think for the first time about the duty at the expense of ordinary gest concerted tax strike since the burden and the purposes of high taxpayers. My own studies show, aftermath of the Revolutionary taxes.' To use a popular term of however, that strikers were War. the period, the depression moti­ mostly small shopkeepers and But many economists, bank­ vated taxpayers to become "tax petty proprietors; skilled blue­ ers, and businessmen knew that conSCIOUS.. " collar workers constituted the undisputed taxation was vital to The Great Depression tax re­ biggest single group of ARET' big government. Pro-tax groups volts show that widespread re­ members. engaged in massive propaganda sistance to big government has a The mayor threatened to re­ campaigns deriding tax delin­ powerful presence in American move police protection from the quents as disloyal and un­ history, even when conventional property of delinquents and patriotic. 1~hey created night­ history makes little or no men­ deny them other city "privileges" mare scenarios of life without tion of it..... 5 J UNE 1 9 9 0 Free Market n the schools of Kansas City, ing and screening rooms, and a requirements that the Constitu­ Overriding Missouri, the children learn temperature-controlled art gal­ tion imposes on them." It was that government in the United lery. Judge Clark ordered the clear, he said, "that a local govern­ the Tax States is distinguished by its state to pay 75% of the bill, and ment with taxing authority may division of powers, both hori­ the school district the rest. be ordered to levy taxes in excess Revolt Izontally (executive, legislative, But the state and .school dis­ of the limit set by state statute BY SHELDON L. judicial) and vertically (federal, trict could not raise the money where there is reason based in the RICHMAN state, and local). They are also because under state law, a tax in­ Constitution for not observing taught that the division protects crease has to be approved by the the statutory limitation." If any­ the citizens' freedom and that the voters and they refused to ap­ one needed decisive evidence that authority for these branches is prove it. In 1987 Judge Clark or­ the separation and dispersion of the consent of the governed. But dered the school district's prop­ power has become a fairy tale they are being lied to. They need erty tax rougWy doubled and im­ used to pacify the citizenry, here look no further than their own posed an· income-tax su~charge. it is. city for evidence of that lie. A year later, the federal appeals The minority (Kennedy, For on April 18, 1990, the U.S. court struck down the surcharge, Scalia, O'Connor, and Rehn­ Supreme Court ruled, in a 5-4 but let the property-tax hike quist) condemned this as an "ex­ decision, that federal judges may stand. pansion of power in the federal command local governments to The Supreme Court declined judiciary beyond all precedent." raise taxes to undo alleged vio­ to review Judge Clark's plan, It envisioned "judicial taxation" lations of the Constitution. In a focusing exclusively on the tax for prisons, hospitals, and other manipulation ofwords worthy of increase. Writing for the ma­ government facilities. Orwell's characters, the court jority, Justice Byron R. White This bodeful case also jeopar­ said judges could not themselves said that the judges direct im­ dizes the prospects ofa successful raise taxes, but could order local position of higher taxes was an tax revolt. Whenever the tax­ authorities to do so. "abuse of discretion." But White payers go too far in rolling back The case is ominous in every added: "Before taking such a taxes, the authorities can argue in respect. The Kansas City schools drastic step, the district court was the courts that they are being were once racially segregated by obliged to assure itself that no kept from carrying out their con­ law, but later they became heav­ permissible alternative would stitutional duties and ask to have ily black because whites moved to have accomplished the required the tax-limits superseded. Teaching the Free Market to the suburbs. Federal Judge Rus­ task." In other words, had the The ruling also illustrates the Eastern Europe. Joseph sell G. Clark in 1986 ordered im­ school district refused to comply flaw in government-controlled Sobran (left) of National Review provements in the facilities and with the judge, he would have education. If educating children and Hans-Hermann Hoppe curriculum to attract white sub­ been justified in raising the tax is regarded as a responsibility of (right) of UNLV participated in the Mises Institute's conference urbanites back to the city schools. himself government, there is no prin­ on desocializing the East Bloc, The magnet-school plan, which But there was no chance ofthe cipled way to draw the line. along with Murray N. Rothbard would cost more than $600 mil­ school district's defying the Everything bears on educa­ of the UNLV; Krysztof lion, called for the installation of judge. The school board was in tion: television, movies, bill­ Ostaszwski of the University of Louisville; Yuri Maltsev of the air-conditioning and 15 micro­ favor of higher taxes all along. boards, breakfast-cereal boxes, International Center for computers in every classroom, a When the board president, Julia not to mention how parents run Development Policy; Kestutis planetarium, a broadcasting sys­ Hill, heard the ruling, she said, their homes. Why shouldn't the Baltramaitis of the Lithuanian tem, swimming pools, a 25-acre "I'm delighted." Republic's Council of Ministers; state, once granted the power to and of the farm, a model United Nations Thus, this was not a dispute oversee the education ofchildren, American Enterprise Institute. wired for translation, movie edit- between two levels of govern­ not concern itself with all these ment, butrather between the tax­ things? payers and all government. This And if it is valuable for chil­ should surprise no one. When dren to go to school with children did a taxing authority.ever sup­ of other races and religions, then port the people's right to reject a of course the state, which has as­ tax? sumed responsibility for the well­ Justice White seemed un­ being ofchildren, logically ought bothered that the judge's order to assure that schools are ar­ overrode a state statute giving the ranged in the proper racial ane voters final say over tax increases. religious composition. Anything "To hold otherwise would fail to less would make it remiss in its take account of the obligations of duties. Once the legitimacy of local government...to fulfill the this is granted, it is no great leap

FreeMarket J UNE 1 9 9 0 6 to begin to see parental control as the Supreme Court jurisdiction them. Ifwe value liberty, we can­ a needless impediment. Further­ in such cases. not countenance the use of coer­ more, the taxpayers' un­ But something more drastic is cion except to maintain a frame­ willingness to finance what the needed. 1~he government's near­ work of rights in which people government regards as proper monopoly on education must be are free to do the best they can. also must not be allowed to stand broken by allowing parents to 1~his is the rule of law, which just in the way. T'hus Missouri tv. withdraw their support for the died another death at the hands of Jenkins flows from the premise state schools and spend their the Supreme Court. that government should run edu­ money on private, market-sen­ 1~he plaintiffs in Missouri v. cation. sitive schools. More broadly, we Jenkins have hailed the decision l~here is talk in Congress of must oppose the politics of out­ as a victory for civil rights. But spot remedies to reverse this case. come, that is, the doctrine that any purported rights that require A constitutional amendment the government should aim for dictatorship by the judiciary are may be introduced. Congress by particular socioeconomic results bogus, and have no place in a free a simple majority could also deny and use any means to achieve society.....

hen it comes to the Great l~hat basic outline applies to notable exceptions of stocks and Are Mules Depression, old myths the events of the 1920s as well as Florida land). Nonetheless, the never die; they just show to all the earlier boom-bust expe­ Fed fostered distortions and mal­ Smarter up in college textbooks. riences in our history. 1~he fin­ investments that would sooner or With only an occasional gerprints on the door to the Great later have to be corrected. than exception, it is there you \vill Depression belong to the money In early 1929, the Federal Re­ find, decked out in arrogant aca­ monster of the century: the serve took the punch away. It Politicians? demic splendor, the fable that the Federal Reserve System. choked off the monetary growth. l~he BY LAWRENCE W. free-market economy caused the definitive study of the For the next three years, it pre­ REED Great Depression. Fed's inflationary actions prior to sided over a money supply which T'he Great Depression was not 1929 can be found in Murray N. actually shrank by 35%. l~he de­ the country's first depression, Rothbard's classic America's Great flation that followed the inflation though it proved to be the long­ Depression. In meticulous detail, wrenched the economy from tre­ est. But like all the others, before Rothbard traces the easy money mendous boom to colossal bust. and since, it was caused by gov­ policy which bloated the supply With the change in Fed policy, ernment manipulation of the ofunbacked dollars by more than the economy was a brand-new money supply. Government bal­ 60% from mid-1921 to mid-1929. ballgame. When the masses of looned the quantity of money During the 1920s, the mone­ investors sensed it, the stampede and credit in the economy. A tary authorities were actively ma­ was underway. Note that the boom resulted, followed later by nipulating the economy, partly to stock crash was a symptom, not a the painful day of reckoning. stimulate an artificial boom at cause, ofthe Great Depression. It l~he of eco­ home, and partly to assist the rose and fell in almost direct syn­ nomics has long observed the Bank of England in its professed chronization with what the boys close relationship between desire to maintain pre-war ex­ at the Fed were doing. money supply and economic ac­ change rates. Ifthis depression had been like tivity. When government ex­ l~he flood of money drove in­ previous ones, the hard times pands the money and credit, in­ terest rates down, pushed the would have ended in a year or terest rates at first fall. Busi­ stock market to dizzy heights, two, but that was not to be, nesses invest the "easy money" in and gave birth to "the Roaring thanks to ten years of incredible new production projects and a lwenties." l~he economy was political bungling. boom takes place in capital having a party, the Federal Re­ President Herbert Hoover did goods. As the boom matures, serve was spiking the punch, and his part to trample the free mar­ business costs rise, interest rates everybody was having a good ket. He jawboned businessmen readjust upward, and profits are time. to keep wage rates high in the face squeezed. T'he easy money ef­ Interestingly, a relatively stable of falling prices, creating unem­ fects thus wear offand the mone­ "price level" in the 1920s masked ployment. He adopted deficit tary authorities, fearing price in­ the money inflation. A burst of spending as a deliberate policy. flation, may even contract the technological advancement and He spent billions on public money supply. In any event, just entrepreneurial discoveries of works boondoggles and created a altering its growth to a lower cheaper ways ofproducing goods Reconstruction Finance Corpo­ track is usually enough to blow offset much ofthe Fed's inflation­ ration to prop up shaky big busi- over the house of cards. ary impact on prices (with the CONTINUED ON NEXT PAGE 7 J UNE I 9 9 0 Free Market nesses and thus prevent a quick and estate taxes were raised, new ment in control of production Are Mules and orderly adjustment in the gift, gasoline, and auto taxes were and pricing. Codes that regulated economy. And he championed imposed, and postal rates were prices and terms of sale, accom­ Smarter the nation's first federal welfare sharply hiked. Rothbard esti­ panied by fines and prison terms legislation. mates that the combined fiscal for violators, transformed much than Hoover took the heat from op­ burden offederal, state, and local ofthe American economy into a ponent Franklin Roosevelt in the governments nearly doubled dur­ fascist-style arrangement. And Politicians? 1932 election for spending and ing the period, rising from 16% of the NRA was financed by new

CONTINUED FROM PAGE SEVEN taxing too much, boosting the na­ net private product to 29%. taxes on every industry it con­ tional debt, choking off trade, Under the weight of all this trolled. There were production and putting millions on the dole. government, is it any wonder codes for hair tonic, dog leashes, Roosevelt accused Hoover of that the second phase ofthe Great and even musical comedies. The "reckless and extravagant" spend­ Depresion saw conditions dra­ NRA boosted business costs by ing, ofthinking "that we ought to matically worsen? 40%. center control of everything in In the first year of FDR's New As if that were not enough, Washington as rapidly as pos­ Deal, he proposed spending of FDR threw thousands onto un­ sible~" and of presiding over "the $10 billion though revenues stood employment lines by enacting a greatest spending administration only at $3 billion. He torpedoed minimum wage which boosted in peacetime in all of history." the London Economic Con­ business costs further and priced Roosevelt's running mate, John ference in 1933, convened at the the least-skilled out of the job Nance Garner, charged that request of other major nations to market. Hoover was "leading the country bring down tariff rates and re­ Fortunately, the "nine old down the path of socialism." store the gold standard. He se­ men" of the Supreme Court out­ A crowning folly of the cured passage of the Agricultural 1awed the NRA in 1935 and the Hoover administration was the Adjustment Act (AAA) which AAA in 1936. Thus freed of the Smoot-Hawley Tariff in June levied a new tax on agriculture burden of the worst of FDR, the 1930. The most protectionist law and used the revenue to supervise economy showed signs of life, in u. s. history, it virtually closed the wholesale destruction ofvalu­ but collapsed again under the the borders to foreign goods and able crops and cattle. pressure of the National Labor ignited a vicious international Federal agents oversaw the Relations Act of 1935. It gave trade war. ugly spectacles of perfectly good enough privileges to labor unions When farming went to pieces, fields of cotton, wheat, and com that they ballooned their mem­ rural banks failed in record num­ being plowed under and healthy bership by a factor of five. Soviet Economist Lauds bers, dragging down hundreds of cattle, sheep, and pigs being Mises. Professor Yuri Maltsev, T'hreats, boycotts, strikes, sei­ thousands of their customers. slaughtered and buried in mass formerly of the University of zure of plants, and widespread The stock market, which had re­ graves. FDR's secretary of agri­ Marxism-Leninism in Moscow, violence pushed labor productiv­ recently lectured for the Mises gained half the ground it had lost culture personally gave the order ity sharply down and unemploy­ Institute at the Heritage since the previous October, tum­ to slaughter six million baby pigs Foundation. ment dramatically up. bled on the day Hoover signed before they grew to full size. was the great anti-socialist On the eve ofWorld War II, 10 champion, said Maltsev, and so the tariff law, and fell almost Meanwhile, one of the biggest is revered by free-marketeers in without respite for the next three problems in.plowing under cot­ million Americans were jobless. communist countries. years. ton was convincing the mules to FDR had pledged in 1932 to end Then, with the economy flat trample the crop; they had been the crisis. Almost a decade and on its back and millions in de­ trained to walk between the countless interventions later, the spair, Congress passed and rows. Professor American economy still lan­ Hoover signed the incredible wonders whether this shows that guished in depression. Revenue Act of 1932, which dou­ the mules were smarter than the The Great Crash of 1929, and bled the income tax for most politicians. the decade of economic distress Americans; the top bracket went The National Recovery Act of that followed, marked an explo­ from 24% to 65%. Exemptions 1933, passed at the behest of the sion in the same ill that had were lowered, the earned income corporate establishment, car­ caused them-government credit was abolished, corporate telized industry and put govem- power......

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