The "Miracle" We Missed
According to Larry Burkett and many other pessimists, our nation is on the brink of bankruptcy. To those of us with a mature recollection of the Great Depression of the 1930s, that is a frightening prospect. If one remembers also what has happened to other countries in times of crisis, it is doubly so. This is an old problem, however; the Greeks1 noted long ago that when the city-states became democracies the voters demanded so much of their governments that they became insolvent. In the ensuing confusion a tyrant took over and they lost their freedom. There have been enough modern examples of that tendency to indicate that their observation was correct.
Nor are "we, the people," the only ones who can bankrupt a nation. Spain "struck it rich" after 1492, but Carlos and Felipe II, the grandson and great-grandson of Ferdinand and Isabella, managed to squander it all. James A. Michener2 even suggests that perhaps the mother of Carlos, Juana "la Loca" (the Mad), might have managed the affairs of Spain more wisely than her brilliant son in spite of her presumed insanity. That is a sobering thought. Of great interest also is the fact, briefly mentioned by Michener,3 that scholars at the University of Salamanca knew perfectly well that Carlos was doing everything wrong and tried to tell him, but he wouldn't listen. Carlos and his son flunked their economics and Spain and her colonies have suffered ever since.
The Spanish monarchs were not the only ones to bankrupt their countries. To take another example, the later kings of France did the same thing. Louis XIV reigned long and lavishly; when he died in 1715, France was broke but managed to cripple along almost to the end of the century. In 1789 the day of reckoning came (the French Revolution). Like Carlos of Spain, the kings had scholars close to the throne who tried to bring order out of chaos and avoid catastrophe,4 but they were not listened to either. In both countries an incredibly complicated system of regulations and controls stifled the economy and impoverished the people.5 Of course, the powerful, rich, but blind aristocrats could not see that they better help get their national house in order for their own survival. Louis XV is said to have remarked: "Let the good machine run itself; it will last our time. After us the deluge." In 1789 the flood came.
What Spanish and French would-be reformers were trying to tell their rulers was that the economy would run by itself much better than the government was doing it, if they would reduce the legal code to what was called the "Natural Moral Law." To take one example, if I were a farmer, as my ancestors were, I should be able to raise any amount of any legitimate crop on my own land and market it in any honest way without getting anyone's permission. This principle, applied to the entire economy, was what Adam Smith6 called "the obvious and simple system of natural Liberty." It should be noted that Smith was no anarchist; he was just saying that if we all did `right" (in the ethical sense of that word), our problems would begin to find solutions. He was not, as many people believe, trying to promote the interests of big business; he trusted no one - businessmen, bureaucrats, or tradesmen - as is obvious to anyone who has read his Wealth of Nations. He published his ponderous tome in 1776, the year of Thomas Jefferson's "Declaration of Independence." Both have the same theme - freedom.
What happened after the great book was published? In so far as national policy was concerned not much change took place for many decades. In fact, with the French Revolution and Napoleonic Wars following soon after, there were twenty-six years of chaos and conflict (189-1815) before peace returned to Europe. As the war wound down, a terrible depression hit England and, of course Europe had been devastated, so things got worse before they got better Since the landlords7 who ran England were ruined by the depression, they tried to restore their own prosperity by keeping out foreign grain. These so-called "Corn Laws" made bad matters worse for ordinary people who were suffering more than the aristocrats. This was a period of history when many Englishmen took their Bibles very seriously and people were seeking to reform society. They had just abolished slavery in the British colonies and, like Alexander, they were looking for ways in which they might make additional "conquests." Needless to say, this practice of keeping working people hungry so the landlords could prosper came under bitter attack. Smith's "obvious and simple system of natural liberty" seemed to be the solution. As everyone knew, there was no shortage of food; with the opening of the West in America and an impressive list of inventions in agriculture and transportation, grain could be produced in abundance and brought to market. But the landlords permitted only a little of it to enter the British Isles. Adam Smith might be all right in theory, but they were not interested in trying his ideas in practice. In the meantime there was widespread hunger - needless hunger, too.
In this time of crisis, Christians went on the offensive and organized a society, the so-called "Anti-Corn Law League,"8 which covered the country with their educational material ("propaganda," according to their enemies). They used their Bibles as much as economics books and trade statistics. Of course, others joined them, but the leadership and approach of the campaign was definitely Christian. But the landlords didn't budge. Then the crisis became a catastrophe. In 1845 heavy fall rains and potato blight destroyed the crop in Ireland9 and soon the people were starving. Keeping out cheap grain from America and elsewhere was now indefensible; England went free trade in food and later in almost everything else. This policy was to serve them well during the Victorian era when the British invested heavily around the world and promoted economic development in many lands. But we should remember that the English knew what to do when disaster struck, because the Christian community had educated the nation in sound principles before it happened.
Now let us look at what our nation did in our time of crisis after the "Crash of `29." As one writer10 remarked, in the mid-1920s we Americans were quite pleased with ourselves; we had recently won "The war to end all wars" by making "the world safe for democracy." We were then rapidly winning the battle in what was later called "The War on Poverty." Then in October of 1929 the economy and our dreams came crashing down to earth. The Republicans were in power then and had been during the period of prosperity. They now sought to restore our "Paradise Lost" by excluding imports; we would make everything we needed ourselves which should provide everyone a job at high wages. The economists in our universities protested as did foreign governments, but nobody paid any attention to them." The "trade war" which followed intensified the depression, since we found we could no longer find markets for our staple exports such as agricultural products, since other nations retaliated. Worse still, this economic autarky was an important cause of World War 11, because some countries could hardly feed their people without access to the markets of the world.12
It seems to be a truism that the party in power when depression comes in America will be voted out at the next election. In November of 1982 we elected Franklin D. Roosevelt. The economists of our universities sent the president-elect a letter telling him how to restore prosperity; they also published it in the papers." They did this before he took office too. It was a simple two-point program and he had to do only one thing; they said to stay on gold and open our markets to the world. The economists believed recovery would start at once as foreigners started buying our "surplus"; the president chose to plow it under and he paid the farmers to grow less, while our neighbors across the world were going on short rations. We then started down the road to national bankruptcy. Have we now arrived at the brink more than sixty years later?
What proof can one give that a free-trade policy in the spring of 1988 would have brought rather rapid recovery? "Exhibit A"14 is the German "Economic Miracle" after World War II. In the spring of 1945 Germany collapsed. The victors divided up the country and we got our share too. The American commander, General Lucius Clay, decided he needed an economic adviser, but finding a non-Nazi made the search somewhat more difficult. However, Ludwig Erhard was found and given the task of rebuilding Germany's shattered economy. The people were poor beyond our ability to imagine for the country's industries had been bombed to rubble. The little that was available was rationed. In 1948 the military government decided to issue a new currency, since American cigarettes had become a medium of exchange for the want of anything better Dr. Erhard also had a reform ofhis own to institute, although he had not gotten permission to do it; he simply went on the radio and announced to the nation that controls and rationing were being abolished. Many Americans and Germans were angry, but the general decided to give it a try. In an amazingly short time the world learned of the "Wirtschaftswunder"15 (the economic miracle). Could we not have had an even more spectacular ECONOMIC MIRACLE in the spring and summer of 1938 here in America? As it was the second World War got our economy going again, but we had to wait until after Pearl Harbor in 1941 for this to happen. And think of the terrible cost "in blood, sweat and tears" of that conflict plus a mountain of debt which is still with us. Let us not despair. If Germany could rise like the mythical Phoenix from the ashes of a burned-out nation, surely there is hope for us if we can learn from our blunders and get back to sound principles. In the words of our Lord: "And ye shall know the truth and the truth shall make you free." (John 8:32)
1 C. Northcote Parkinson, The Evolution of Political Thought, p. 24.
2 JamesA. Michener, Iberia, p. 514.
3 lbid., pp. 34 and 85. See also Murray N. Rothbard, Late Medieval Origins of Free Market Economic Thought; The Journal of Christian Reconstruction (Summer, 1975), pp.62-75.
4 Robert I. Hejibronar, The Worldly Philosophers, pp. 44.45.
5 John Chamberlain, The Roots of Capitalism, p. 20.
6 Adam Smith, The Wealth of Nations, p.651.
7 G. F. Warren and F. A. Pearson, The Agricultural Situation, pp. 242-244.
8 Asa Brigge, Victorian People, pp. 202-211.
9 Dean Russell, Frederic Bastiot: Ideas and Influence, p.75.
10 J. Russell Smith and M. Ogden Phillips, North Amerten, p. it'.
11 Paul A. Samuelson, Economics, pp. 698-700.
12 Glenn T. Trewartha, A Geography ofjapon, pp. 141 and 823.
13 Benjamin M. Anderson, Economics and the Public Welfare, pp. 802-804.
14 Bruce Bartlete, "Ludwig Erhard and the German Economic Miracle," The Journal of Christian Reconstruction (Summer, 1980), pp. 72-77.
15 John J. Putman, `West Germany: Continuing Miracle,' National Geographic (August, 1977), pp. 149-181.