Thursday, August 18, 2011

Money and History

It is impossible to keep political history, social history, economic history and cultural history completely separate from one another. These areas of life are all inter-related. When the United States began in 1776, and when it replaced its Articles of Confederation with the Constitution a few years later, it was clear that the political and religious freedom which Americans wanted needed to be harmonized with financial freedom. Although these areas of life many seem unrelated, the principle was clear: if you lose one, you'll soon lose the other. Having the freedom to speak your political opinion goes hand-in-hand with keeping taxes low. Having the liberty to exercise whatever religion you choose is inseparable from a free market economy.

It is no coincidence the end of slavery, being an expansion of personal freedom, gave rise to economic growth. Temple University's Mark Levin writes:

The free market is the most transformative of economic systems. It fosters creativity and inventiveness. It produces new industries, products, and services, as it improves upon existing ones. With millions of individuals freely engaged in an infinite number and variety of transactions each day, it is impossible to even conceive all the changes and plans for changes occurring in our economy at any given time. The free market creates more wealth and opportunities for more people than any other economic model.

Economic systems are very sensitive to any trend which seeks to reduce individual liberty. Just as the abolition of slavery increased personal freedom, a few decades later the Populists would try to reduce it. Most attempts at reducing individual liberty are hidden behind promises of more freedom, not less. The Populists, or People's Party, was a political movement formed in 1891 that claimed to work in the interests of labor and farmers, and pretended to seek more economic liberty in the free coinage of silver. But in reality, they wanted a graduated income tax, and government control business. The presence of the Populist Party, and its attempt to place candidates into elected offices, slowed economic growth.

Happily, the ordinary voters saw through the claims of the Populists, and by 1896, the People's Party was no longer a force in the nation's political life. Prosperity could continue. Cengage's history book states:

With the collapse of populism in 1896 and the end of the depression in 1897, the American economy embarked on a remarkable stretch of growth. By 1910, the United States had secured its status as the world's greatest industrial power.

The lesson is clear: personal political freedom and individual religious liberty lead to free markets and lower taxes - all of which brings prosperity for the entire nation.