by Michael S. Rozeff
by Michael S. Rozeff
Toward the end of the American Revolutionary War (1775—1783), the 13 colonies joined together under the Articles of Confederation (1781—1788), which was succeeded by the U.S. Constitution in 1788. The Constitution created the Federal government and the United States of America. Several of the Founding Fathers (John Jay, James Madison, and Alexander Hamilton) in 1787—1788 launched a campaign to get the new Constitution adopted by the 13 states. Their essays, collected in the Federalist Papers, contain powerful and persuasive arguments by writers who were skilled users of rhetoric.
The Federalist Papers helped launch the ship of American state on its voyage. The entire country went along for the ride. The course adopted at the outset is the same course we are still on. Arguments expressed in the Federalist Papers are still made today. Sentiments they expressed still persuade Americans today that they need a central government with appreciable powers.
Looking back, we can now see that very little time passed before the ship's motion revealed its course was opposite the hope represented by "life, liberty, and the pursuit of happiness." Section 2 of the Alien and Sedition Acts of 1798, for example, imposed a fine of up to $2,000 and a sentence of up to 2 years in jail for anyone convicted of uttering, writing, printing or assisting in causing to be produced speech that brought any arm of the Federal government into "contempt or disrepute" or to "excite against them...the hatred of the good people of the United States." The American ship of state early on began to run into tyrannical waters and it still does. It has often instituted laws (with approving majorities) that decimate the rights of not only large minorities but also majorities of the American people. Logic suggests that if we are on the wrong course and if the Federalist Papers helped to establish that course, then there must be incorrect argumentation in the Federalist Papers. Our Founding Fathers must have presented false rationales. If we are on the wrong track, then we need to go back and re-examine the launching to understand why we have gone so far off course.
We will find that important presumptions in the Federalist Papers are entirely false and wrong. We will find cases where the persuasive rhetoric of its writers has substituted for wisdom and truth. The adoption of false ideas gives rise to destructive and counterproductive policies. The tragedy is that we are following these policies to this day. The presumptions of the Federalist Papers are a part of American culture, passed on and inculcated in endless ways to each succeeding generation. This article focuses on Federalist #2 in order to point out the false ideas in it that are giving us trouble today.
Coercive government assumed
John Jay begins with: "Nothing is more certain than the indispensable necessity of government..." True. Government, in the sense of upholding natural rights, is indispensable to a society.
"...and it is equally undeniable, that whenever and however it is instituted, the people must cede to it some of their natural rights in order to vest it with requisite powers." False. Jay assumes that all government must be coercive government, run and administered by a coercive state. He means that all people must allow themselves to be taxed and interfered with, in order to achieve some ends. He does not acknowledge the possibility of self-government within an order of market anarchism. In the latter, people do not cede natural rights. But, for the sake of evaluating his arguments, let us stipulate along with Jay that we shall have such a coercive government. Let us ignore the many questions that arise such as: How can such a government be instituted without unanimous consent? How can it be legally binding on new voters and new generations? What powers shall it have? How shall they be limited?
Jay then poses two alternatives: separate confederacies or one national government, "each [with] the same kind of powers." He unnecessarily assumes away many other possible alternatives including no sovereignties at all. Jay goes on to present arguments in favor of a single central government.
Prosperity linked to government
Argument 1: Continuing American prosperity depends on the people being united under one government. False. He is referring in part to the fact that the people united to end British rule and to create the Articles, but he is also making a general argument. But even if winning the war required coordination of American forces, prosperity does not require like coordination under a single central political leadership. Political coordination or centralization requires the exercise of political power, and this goes beyond maintaining individual rights. It involves taxing, regulating, tariffs, drafting, printing money, giving away land, subsidizing enterprises, military ventures, transfer payments, etc. Such exercises of power necessarily harm some persons to benefit others, and this must cause a diminishment of overall prosperity by altering incentives to produce, by introducing property rights uncertainty, and by establishing rivalries to utilize the power for private ends. A monopolized political power is especially dangerous in its propensity to expand and be used to tyrannize.
Prosperity is the result of peaceful pursuits. It has several roots, one of the most important of which is private property rights. A culture of respect for property rights creates an atmosphere of trust, security, and fair dealing, all of which lower the costs of trade and production and enhance prosperity. A united central government, by Jay's own admission, diminishes such rights at the outset by people's ceding some rights. Subsequently, unless restrained, such a government can infringe rights and thus decrease prosperity. And how is one to restrain a monopoly government? One is likely to observe such a government grow, as has occurred in our history and in the history of many countries.
Today, whenever politicians recount how well off Americans are, what a great country this is, and how advanced our civilization is, and then go on to link these with the American system, the nation, democracy, the federal government or related political constructs, they are making Jay's argument anew. Jay wrote "that the prosperity of the people of America depended on their continuing firmly united" and "under one federal government." The U.S. Department of State, writing about John Hay's Open Door policy of 1899 writes: "Americans dreamed of building prosperity at home through trade with China. To achieve this political leaders and businessmen assumed that China needed to be stable, unified, and open to international commerce." Jay's seed sprouted into the notion that it was up to America and European powers to assure prosperity by uniting China under a single (friendly) government. Here was sown a conflict with Japan that ultimately brought on Pearl Harbor and World War II! It is no distance whatever to the notion that Middle Eastern oil is crucial to American national security and prosperity. I quote from the November, 2005 White House (National Security Council) policy document titled "National Strategy for Victory in Iraq" as follows: "Ceding ground to terrorists in one of the world's most strategic regions will threaten the world's economy and America's security, growth, and prosperity, for decades to come." Is this war about terrorism? Only peripherally. According to our government, it is about American prosperity, American wealth, American growth, and American profits.
Jay saw American prosperity as a function of the 13 states being under one government. Hay saw American prosperity as being a function of China being under one unified government. The National Security Council sees American prosperity as a function of Iraq being under a democratic government. It lays out its strategy for "Helping the Iraqi people defeat the terrorists and build an inclusive democratic state." Americans now believe not only that prosperity and one central government (democracy) are linked, but that American prosperity justifies extending this linkage to foreign lands in the same way that it was extended to the American continent. The idea of prosperity under one government has become more virulent, more expansive, and more dangerous. It leads to great wars. American expansionism is happening under the confused guise of a war on terrorism. The Iraq War reflects (among other things) how Americans think about prosperity and government. This is how they have thought for a long time, and this is a fundamental error in their thinking.
Today President Bush says: "The advances of free markets and trade and democracy and rule of law have brought prosperity to an ever-widening circle of people in this world." Again we see prosperity identified with government, a single government now being taken for granted. Bush's statement carries the rhetorical confusions even further than Jay's. He falsely mingles government (today called democracy) with free markets and trade. Governments today do not allow free markets and trade; they vigorously regulate them. And the rule of law has come to mean (among other things), not that natural law is supreme, but that the legal system should operate impartially even if the laws are unjust.
Jay's argument, heard today, confuses the prosperity that arises from property rights with the central government's existence. An airplane flying against prevailing winds flies because it burns fuel, not because it encounters these headwinds. And the stronger the winds are, the more difficult the flight. A cynic might say that the goal of this confusion is to identify a beneficial institution (private property rights) that brings prosperity with the government, that is, with a parasitic institution that destroys rights and prosperity. This may be so. But whether or not Jay, Hay, Bush, and many others in American history believed what they were saying is not the central issue. What is central is that identifying prosperity with a unified government is incorrect. In the case of the United Nations, the idea is enshrined in the notion that the earth needs to be divided up among monopoly states with fixed boundaries. In the case of the U.S., the ever-expanding application of this notion attempts to lead in one direction, which is a unified world government under American control. The attempt will fail as all such prior attempts have failed.
Argument 2: America is one country or one land that is geographically suited to being ruled by one government. False. Jay appeals to a romantic notion of a land in which Providence has given its people natural water boundaries. However, the Holy Bible makes no reference to America; and natural boundaries are in the eye of the beholder. Furthermore, even if America did have a single natural-looking geography, it does not follow that it should have a single government over it all. If this principle operated throughout the globe, what would become of a native people inhabiting an area that another country thought should be annexed because the geography suggested it should be? Where is the justice in such a principle?
This argument was an elastic one that eventually was used in praise of the American expansionary drive, northwards, southwards and westwards. God had made the Mississippi River for America to expand to. Then we realized the Rocky Mountains had been made for that purpose. Then we realized, no, God had created the Pacific Ocean as a boundary. And that was not correct either. We were supposed to reach across the Pacific to the shores of Asia. Meanwhile, if Florida was next to Georgia, shouldn't Florida be part of the country? And after reaching the Rio Grande, why not incorporate Mexico? There was a brief "all Mexico" movement around 1847. Why not Cuba and the Caribbean Islands? Why shouldn't President Monroe declare South America off limits to European powers?
Argument 3: America has one people as well as one country, as if by Providential design. "Providence has been pleased to give this one connected country to one united people..." Therefore, it should have one government. False. This argument is powerful because of its religious overtones: "What therefore God hath joined together, let not man put asunder." (Mark 10:9). It is powerful because of the appeal to unity. A powerful Nazi slogan was "Ein Volk, ein Reich, ein Führer," (one people, one empire, one leader.) Appeals to unity, which are common from American politicians of all stripes, tap into the most basic fears of us vs. them and order vs. chaos. The appeal to unity is related to the idea that God blessed America, as one nation, under God, indivisible.
Jay invoked the fear of a "band of brethren" being "split into a number of unsocial, jealous, and alien sovereignties." But why should Americans have conceived of unusual enmities when they had every incentive to prosper by cooperation? Why should a rights-loving people divide into warring sovereignties? Would one state try to conquer the rest? This might happen, but there was no intimation that it would; and the costs of such maneuvers would be very high. Jay would be the last person, of course, to mention that the central government might itself cause such splits, or magnify them, leading perhaps to civil wars.
In Jay's words, Americans were "a people descended from the same ancestors, speaking the same language, professing the same religion, attached to the same principles of government, very similar in their manners and customs, and who, by their joint counsels, arms, and efforts, fighting side by side throughout a long and bloody war, have nobly established general liberty and independence." All of these commonalities make it easier for people to govern themselves without a central authority. By contrast, a central government would increase the chance that a party or a clique would attempt to make its voice and opinions the predominant ones in the land. The chances of civil war would be enhanced. Furthermore, the items that Jay recites as uniting Americans (language, religion, manners, and customs) exist prior to any political state and they require no central government for their existence or preservation. They are social, not political, matters. In truth, Americans could still be Americans, even if they lived in 50 separate states, as they now do.
Defects in the Articles of Confederation
Argument 4: The Articles of Confederation brought a valued union and therefore that union should be preserved. The Articles are "greatly deficient," partly because they were drawn up under trying conditions of war when their composers could not think straight. The people perceived these defects and convened the Constitutional Convention. Now therefore is the time to perfect them. Nearly all of these statements are false.
Jay is a very clever debater. He wants to have his cake and eat it too by arguing that the Articles brought a valuable union, yet should be discarded because they are defective. In this way, he wraps the halo of the Articles, union, and continuity around what is really a bald assertion that the country should have union under a new and strong central government. And he slides over the fact that whatever union the Articles brought was not the kind of union promised under the new Constitution.
It is true that the country experienced economic problems while the Articles were in effect, but it had experienced such troubles before and has felt them many times thereafter under the Constitution. We had a Constitution during the Great Depression. Economic problems are frequently the result of the misuses and misdeeds of political actions upon such matters as currency, banking, taxes, tariffs, war, and regulations. Scott Trask and others have argued that the Articles were not responsible for the post-war deflation and recessionary economy, these being the aftereffect of inflationary wartime finance. Nor, as historian Charles Beard has shown, was the Convention called upon popular demand of the people. Jay's storytelling is pure spin.
Authority of wise men
Argument 5: The Constitution should be accepted because it is the product of "minds unoccupied with other subjects" who have "passed many months in cool, uninterrupted, and daily consultation; and finally, without having been awed by power, or influenced by any passions except love for their country, they presented and recommended to the people the plan produced by their joint and very unanimous councils." The Secret Proceedings and Debates of the Constitutional Convention 1787 makes hash out of this depiction. See also Gary North.
In any event, this is an argument to accept the authority of wise and virtuous men. Jay bemoans a prior case, the Congress of 1774, whose measures met with disapproval: "...yet it is fresh in our memories how soon the press began to teem with pamphlets and weekly papers against those very measures." Yet, he relates, the wisdom of the American people prevailed in supporting the Congressional measures. And with even more wise grey hairs at the helm, the public has "still greater reason... now to respect the judgment and advice of the convention..." Jay again wants his cake and eat it too, for he simultaneously mentions that he is neither recommending "blind approbation" nor "blind reprobation." He is asking that people make up their own minds while placing the largest weight on the authority of those who wrote the Constitution.
Jay closes Federalist #2 by returning to its most important argument: "not only the first, but every succeeding Congress, as well as the late convention, have invariably joined with the people in thinking that the prosperity of America depended on its Union." He proposes in succeeding papers to explain why the "cause of the Union rests on great and weighty reasons."
There have been all sorts of "Unions" in this world since Jay wrote Federalist #2. There has been the Soviet Union. There has been the German Empire. There is the People's Republic of China. There are hundreds of peoples united in the political unions we call nation-states. Some have prospered. A great many have not. Some have failed miserably, in fact, those with the strongest unions, the totalitarian states, have come to the greatest grief and inflicted enormous damage on their own and other peoples.
We should have learned by now that political union does not assure prosperity, nor is political union a necessary condition to gain prosperity. The same goes if we substitute the words democracy or socialism for political union. Indeed, political union provides the state with powers that it uses to undermine prosperity. Yet we have not learned this. The long-lived myth that prosperity and union are one lives on in an even more deadly form. Today we are told that American prosperity demands democracy everywhere on earth. These are not mere words meant to cover up other motives that may also be operative. These words reflect ideas that took root here in America hundreds of years ago and that have now spread everywhere and are reflected in major institutions like the U.N.
Jay was wrong. The prosperity of America does not depend on its Union, that is, on a Federal government. The opposite is true. The Federal government sabotages prosperity. It does this because it sabotages property rights. Bush is wrong. America's prosperity (and security) do not depend on creating new democracies or perfecting the imperfect ones that everywhere prevail.
The correct concept is this: Prosperity depends on private property rights.
September 5, 2006
Michael S. Rozeff [send him mail] is the Louis M. Jacobs Professor of Finance at University at Buffalo.
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