Editor’s Note: Welfare and liberty were the subjects of a recent submission by John Hill about rhetorical shifting of important concepts in the US Constitution. Here, he investigates changes to the concept and definition of economic liberty.
The meanings of welfare and liberty changed significantly from the revolutionary era to the present. But this shift did not occur in a political vacuum. It also had economic roots. In the founding era, economic liberty flourished based on individuality within multiple communities; today liberty is often selfish, crass individualism.
The founders certainly valued economic liberty. After all, that was one of the most important reasons we fought for independence. But the founders lived in a time when individual liberty was firmly embedded in community. Individualism as we know it today was outside their experience. The founders believed that everyone had a responsibility to the community; citizens were expected to have public spirit. That meant sacrificing individual desires for the common good.
Hiring accountants, lobbyists, and lawyers to avoid taxes and gain special tax treatment would have been incomprehensible.
For example, John Adams gave up a lucrative law practice (he was the most successful lawyer in Massachusetts which at that time also included Maine); his public service in the Continental Congress and as a diplomat in Europe meant long periods of time away from his beloved family and farm. Anyone with talents needed by the community was expected to sacrifice private gain for the public good; this included paying taxes. “No taxation without representation” was the slogan, not “No taxation.” Hiring accountants, lobbyists, and lawyers to avoid taxes and gain special tax treatment would have been incomprehensible to that generation. In fact, notable founders, like Adams and Thomas Jefferson, advocated progressive taxes. Independence was won because so many people, from all classes, acted for the common good.
Individuals made enormous sacrifices but there were also benefits. After independence both national and state governments made significant investments in the infrastructure needed for a thriving market economy. Well into the 19th Century, US governments invested in canals, highways, harbors, railroads, even banks. In addition, the national government authorized diplomats to negotiate commercial treaties, including attempts to end piracy by the Barbary States that was hurting our commerce and enslaving our seamen. But as volume 18 of the Papers of John Adams makes clear, Adams’ and Jefferson’s attempts to negotiate trade treaties were impeded by the weakness of the national government under the Articles of Confederation. That generation of leaders understood that government was not the enemy of liberty; they also understood that weak government most certainly undermined international trade.
Several founders feared that once independence was gained the public spirit of the revolutionary era would be forgotten as individuals pursued their own commercial gain.
The public-private partnership in economic development of the new nation was not seen as impinging on liberty. However, several founders feared that once independence was gained the public spirit of the revolutionary era would be forgotten as individuals pursued their own commercial gain. Their fears were well-founded; such individualism with little or no concern for the public good gradually took hold and was firmly implanted by the end of Andrew Jackson’s presidency. Why? The wide expanse of the new nation and the richness of its resources gave white men immense opportunities. They benefited from government services, but the myth that the nation developed because of rugged individualism became widely accepted.
This myth conveniently ignored the large government role in establishing the conditions that enabled individuals to succeed: infrastructure investments, political and military actions to secure more land (such as the Louisiana Purchase and conquest of much of Mexico), genocidal actions against native inhabitants as part of a policy to protect settlers in the West, and constitutional and other legal support for slavery.
Misinterpretation of Adam Smith’s Wealth of Nations was also important in this change. Smith’s formula for a wealthy nation combined justice, liberty, and equality. He argued that wealth should be diffused widely, even to the lowest ranks of the people. At the risk of oversimplifying Smith’s complex thought, he advocated an ethical, market capitalism; but he understood that if businessmen were not ethical, the government would have to intervene to provide fairness in the market. One can compile a long list of government interventions suggested by Smith in Wealth of Nations.
However, early in the 19th Century, interpreters of Smith, both in the United States and in Europe, ignored equality and justice and emphasized liberty, often arguing that Smith’s was a laissez-faire system. This was a colossal and pervasive distortion of his thought. Ironically, Smith had great respect for the French economists who developed the concept but he never used the term because he disagreed with it. However, by the end of the 19th Century, laissez-faire was so firmly embedded that the President of MIT stated that belief in laissez-faire was a prerequisite for being an economist.
Smith’s ethically-based liberty was replaced with a no-holds-barred free market which produced enormous economic inequality in the richest nation in the world. Ironically, this means that liberty is real for those who can afford it. It includes enormous government benefits for the wealthy. But, because the tax code is written to minimize the taxes of the wealthy, including no taxes (legally) for at least some billionaires, these benefits come with little or no cost to the individual, but enormous cost to society. At the same time, for most people liberty is highly constrained by poverty, debt, and minimal government services.