Principles That Made America Great
by Gary North: How
To End the Federal Reserve System
you are traveling abroad. You get into a discussion with a foreign
national who wants to know what makes America unique. He asks you
to summarize the origins of America's success in a sentence or two.
What would you say?
No matter what
you say, if he asked ten other Americans the same question, he would
not get the same answers. America is a complex society. Its citizens
have widely varying views on what makes America tick.
I have come up with two sentences in eight words. These two sentences
encapsulate what makes American society great. (Note: I distinguish
American society from the American state.) Here are my two sentences.
They are slogans, but these slogans reflect a uniquely American
Live and let live.
Let's make a deal.
There is more
to America than this. For one thing, there is a widespread religious
faith that undergirds these two slogans. If you do not understand
this faith, you do not understand America.
So, I have
boiled down the principles of America into five sentences. These
five sentences are five slogans. These five slogans are five principles
of a way of life. Taken together, they identify a unique outlook
that undergirds a unique way of life: a unique social order. For
over 300 years, these five principles have been dominant – uniquely
dominant – in America. Here they are.
- God helps
those who help themselves.
- Mind your
- Live and
- Let's make
- Our kids
will have it better.
HELPS THOSE WHO HELP THEMSELVES
was made famous by Benjamin Franklin in Poor
Richard's Almanack. Anyway, that is the standard view of
the origin of the phrase. When writing my Ph.D. dissertation, I
found something quite similar in a sermon by Samuel Moodey in 1715,
"The Debtors Monitor."
It is the
diligent hand that gathers in, because its works are blessed.
. . . And now, not any further, and more particularly to add,
how it is most God's glory, and man's good, that we should help
ourselves, that God may help us.
Like so many
of Poor Richard's clever aphorisms, this one was likely believed
widely by the time Franklin published it in 1757. It was part of
the American culture before there was political America.
The faith that
it reveals is a faith based on God's providence. God operates in
terms of ethics. A man reaps what he sows. God sees to this. By
its fruit, ye shall know something. God sees to this. No good tree
bears bad fruit, nor does a bad tree bear good fruit. God sees to
this. All of these are sayings of Jesus. They were widely believed
in eighteenth-century America. They announce: "There is consistency
between right actions and profitability." This outlook undergirded
Franklin's famous aphorism, "Honesty is the best policy."
insists that the world is not random. It is not mechanical. It is
also not organic. It is at bottom ethical. There is predictability
between ethical cause and economic effect.
in ethical cause and effect still prevails in the United States.
This is why the public was enraged over the bailout of the big banks
by the Federal government and the Federal Reserve System in late
2008. They saw this as a corrupt bargain, sacrificing the interests
of the taxpayers for the benefit of super-rich bankers. Voters believed
that the banks had pursued high-risk profit at the expense of the
depositors' safety. Their suspicions were correct. That was "moral
hazard" in action: faith in a government bailout encourages large
financial organizations to pursue profit. "Heads, I win; tails,
I still win." It is worth noting that this is called "moral hazard."
widespread faith in the underlying trustworthiness of ethical cause
and effect, people would be tempted to pursue profit by means of
unscrupulous behavior. Honesty would not be the best policy.
Any loss of
faith in ethical cause and effect undermines trust. A loss of trust
in turn undermines social cooperation: the division of labor. The
basis of modern prosperity would break down.
We are seeing
a loss of faith in ethical cause and effect. So, the government
steps in and promises: "We will make things right. We will restore
Then it bails
out the biggest banks.
YOUR OWN BUSINESS
This has two
meanings. Americans believe in both.
should pursue his own business, conceived in the broadest sense.
Everyone who is capable of working should work. Americans are hard
workers. They take shorter vacations than any other industrial work
force. They try not to waste time.
The word "goldbrick"
in the military is a term of contempt. The word "slacker" is another.
Americans honor the guy who finds ways of working fewer hours on
his assignments. That is seen as working smart. But Americans don't
respect the man who retires to do nothing. (Note: golfing is not
seen as doing nothing. It is seen as a challenge – a never-ending
challenge that calls forth greater effort.)
but they see this as a reward for a life of hard work and thrift.
It is earned.
rests on principle #1. Because the Lord helps those who help themselves,
the hard-working person is seen as part of a productive economy.
This economy rests on the combination of God's providence and hard
work. While Adam Smith's famous invisible hand persuaded some intellectuals
for a century or so, 1776–1875, the general public assumed that
there really is an invisible hand guiding the process of productivity.
This legitimized every man's labor.
The other meaning
of "mind your own business" is a resentment at those who interfere.
If someone has no authority to interfere, then the typical American
thinks he should keep his mouth shut. "It's none of your business"
means that the do-gooder should look to his own affairs. Jesus said
the same thing: do not try to remove the mote (speck) in your neighbor's
eye before you remove the plank in your own eye.
Until the era
of the New Deal, Americans had this attitude regarding civil government.
They did not have any love of, or toleration of, the nanny state.
Only in recent decades have Americans learned to be subservient
to bureaucrats. This marks a major break in American history.
In 1775, a
flag with a picture of a coiled rattlesnake bore the slogan, "Don't
tread on me." It was adopted by the first Marines in 1775. South
Carolina adopted it as the state flag within a year.
The idea that
everyone should mind a business of his own, while minding his own
business, is an old one in the United States. It is inherently anti-bureaucratic.
It is increasingly on the defensive. The nanny state is on the offensive.
AND LET LIVE
This is an
extension of "mind your own business." It accepts the legitimacy
of any person's hard work. It reflects an attitude of acceptance
of the other person's way of life.
decades, it rested on the assumption that the other man "carried
his own load," "paid his own way," and "took responsibility for
his own actions." This meant that he was a productive member of
the community. Poor Richard put it this way: "He that is good for
making excuses is seldom good for anything else."
recognized the legitimacy of each individual's contribution to society.
As long as he did not hamper other men's work, he was to be left
alone. This is the heart of the doctrine of laissez faire. "Let
us alone" implies "live and let live," and vice versa.
As in the case
of "mind your own business," as the state has extended its subsidies,
it has extended its control. People are less willing to accept the
premise of "live and let live" when they are taxed to finance the
other person's lifestyle. They are more ready to mind the other
person's business whenever he is seen as the recipient of something
for nothing. The growing acceptance of the legitimacy of political
plunder has undermined principles 2 and 3.
is the visible hand. The state tells people what to do. It taxes
successful people and rewards unsuccessful ones, especially senior
executives of very large banks that should have been allowed to
go bust. The nanny state is the bailout state.
As the increasingly
messianic state had steadily replaced God as the protector, it has
replaced Him as the director.
Then, in 2008,
the visible hand got palsied.
"Live and let
live" works only when it is not "live and let live at my expense."
Faith in the politics of plunder has steadily replaced men's confidence
in both versions of the invisible hand. It has therefore displaced
the older outlook. The messianic state has become the do-gooder
state, or the nanny state, or the caretaker state.
MAKE A DEAL
If there is
a single characteristic feature of the American in history, it is
this one. This is the legendary Yankee. This Yankee was the person
who knew how to cut costs, increase output, and offer a better deal.
His enemy was
his do-gooder Yankee neighbor who wanted to interfere in everyone's
business. One Yankee was a ship owner who traded in slaves in the
eighteenth century. The other became an abolitionist in the nineteenth
century and a Social Gospel meddler in the twentieth. The second
Yankee has been replacing the first one for almost two centuries.
love of the deal made America a haven for small businessmen. Immigrants
prospered. The Jew with his push-cart, the German with his craft,
the Armenian with his rugs, the Scot with his invention, the Dutchman
with his farm implements: everyone had a little money to invest
and projects that needed an infusion of capital. There were deals
to be made.
wanted to mind the other man's business, he could . . . for a price.
The extension of the limited liability corporation in the late nineteenth
century was to business what church trust papers had been for religion
in the nineteenth century. America made extensive use of both. No
society in history ever made more effective use of both. Churches
and businesses conquered a continent from 1803 to 1898 – with a
lot of help, geographically speaking, from the Federal government,
which bought a third of the nation from Napoleon, who could not
defend it, and stole the other third from Mexico, which could not
got to the interior in third place. The Spanish got to it second.
The native Americans got here first. Why couldn't they defend their
territory from the invading immigrants from the Atlantic coast?
Because there were too few of them. Why? Because their people were
not equally committed to the five points – above all, to "let's
make a deal."
KIDS WILL HAVE IT BETTER
There has been
a bedrock optimism of Americans from the beginning. It pervades
the entire social order. The immigrants hear about it, and come.
Then they adopt it. I think of the Jews, who lived for millennia
by means of this slogan: "It could be worse." I think of the Armenians
who had lived for centuries under the Turks, and who wanted a way
out. So did the Irish. So did the Poles. Every group had some cloud
hanging over it. Then, family by family, they arrived in the land
of the silver lining. There are always clouds, but in America, they
were equal opportunity clouds (except for Africans, who did not
"It could be
worse" became "it will be better." That changed the character of
life in the United States.
There was no
guarantee of immediate success. There was only a chance to make
a few deals, so long as you lived and let live, minded your own
business, and helped yourself so that the Lord might help you.
will have it better." Everyone believed this, and most of them saw
it come true if they lived long enough.
They cut costs, worked long hours, hustled, did deals, took risks,
and sent their kids to school. They had great faith in formal education.
That became the great lure, the baited hook. The government took
advantage of this dream of social mobility through education. The
battle for control over the public schools began in the 1840s and
has never ceased.
today are steadfastly opposed to God, business, individuality, and
deals. They do retain official faith that it will be better for
the kids, but their failure to deliver since the mid-1960s has eroded
confidence, beginning with the teachers.
could see the shift before it hit a decade later. We watched Rebel
Without a Cause. We watched Blackboard
Jungle. We saw that high school was becoming more of a battlefield
than an armory. A decade later, the decline began. It has not been
It took three
decades for the new reality to set in. But, over the last decade,
about half of Americans have come to the conclusion that their children
will be no better off. The only exception are Hispanics. They remain
is a major change in the United States.
As faith in
the future has waned, government has gotten bigger. The Federal
deficit is now gargantuan. No one seriously expects this to change.
But it will change, when lenders will no longer lend.
belief is this: "Our kids will have to pay off this debt." No, they
won't. They will default. It's the oldsters who will pay the price
of their own folly. This is as it should be. But, meanwhile, Americans
have grown skeptical about the American dream: that our kids will
be better off than we are.
The five principles
of America are being challenged. They are not dead yet. They still
characterize Americans. But the older confidence in them is waning.
As the government has grown, Americans have shifted their trust
to government. "The government helps those who fail to help themselves."
It does so by taxing those who succeeded.
this is called moral hazard.
in government is now visibly waning. The government has been unable
to deliver the goods.
rests on a set of different principles.
taxes those who help themselves.
minds our own business.
- Tax and
- Let's regulate
will have it better.
There is a
war of religious confessions between these rival sets of five principles.
It looks as though the government's set is winning. But this will
end when Washington's checks bounce, or fail to buy much.
will end when lenders tell Washington: "No more loans at low, low
It will end
when the kids say, "We won't pay off the debts our parents ran up
in our name."
It will end.
be enormous pain when it ends, until this nation goes back to the
original five principles.
Don't get trapped
in the transition.
North [send him mail]
is the author of Mises
on Money. Visit http://www.garynorth.com.
He is also the author of a free 20-volume series, An
Economic Commentary on the Bible.
2011 Gary North
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