Hypothesis #1—The Ideal: A world of plenty is attainable on the basis of a superior economic system supported by the culture and the political structure.
Economic freedom has demonstrated the capacity to eliminate material scarcity, elevate spirits, and unite people. The satisfaction of the basic needs for food, clothing, and shelter through economic freedom is naturally coupled with improvement in health and education; this, in turn, stimulates hope for further improvement in future generations. Changes in the culture and political structure, unless directed to improve the economic system, do not improve the lives of people and frequently make them worse.
A world dominated by violence among nations and concentrated wealth does not improve lives; instead, it leaves a large part of the world living in misery, not free of want; a good part of the world living under tyranny, not free of oppression; and most of the people of the world fearful for the future. During the twentieth century, 160 million people were killed by governments and wealth was concentrated in record amounts. This empirical evidence demonstrates that the direction of the world is under the control of those whose mission is to build and use nationalistic power, no matter how many innocent people are killed, and to concentrate wealth, no matter how badly they damage the world’s economy. The most fundamental of all principles in human affairs, the worth of each individual, was obscenely violated throughout the century by the killing of so many innocent people. The obscenity was so pervasive and repetitive that many citizens were conditioned to accept it as the norm as they watched its repetition early in the 21st century.
In prioritizing the support of the economic system by the culture and political structure, we begin with affirmation of the most basic tenet that all people can reach their potential only after satisfaction of their needs for adequate food, shelter, clothing, health, and education, and that only the economic system can satisfy these needs. A superior economic system provides jobs, income, products, and services to fulfill these needs of society, and it also generates the tax revenues with which we can assist those not included in the benefits of the economic system. The economic system, further, underwrites good education and health that elevate peoples’ spirits and foster an expanding sense of shared community. On the first premise, that a superior economic system ought to be sustained by the culture and the political structures, the ideal of individual development for all in a harmonious whole is attainable.
As obvious as this may seem, the world has been managed another way because leaders have repetitively given priority not to the economic system but to the culture and political structure. If the terms of this hypothesis are both obvious and ignored, then we must acknowledge the economic and social tragedies caused by failing to act according to them, and we must acknowledge that similar or worse tragedies are liable if we do not validate hypothesis #1 and act accordingly. For example, Woodrow Wilson tried to substitute fuzzy idealism for economic principles at the post-WWI conference with tragic consequences for the direction of history during the rest of the 20th century. Wilson’s biographer wrote the following:
Wilson had little time to ponder deeply on the economic causes of war, from the beginning of the peace process he had relegated economic matters to subordinate places. Wilson’s first love was politics, not economics.1
The most powerful man at the post-WWI peace talks ignored the principles and implications of hypothesis #1 that social progress depends on movement to a superior economic system. Others at the peace talks were appalled at Wilson’s ignorance. John Maynard Keynes (1883-1946) left the British team to go home and write a book on the subject.2
I propose that Marx’s priority for the superior economic solution can be applied in retrospect as the way to have avoided violent events in history. At the time of the American Revolution, as another example, British Parliamentarian Edmund Burke warned King George III that British economic interests were being sacrificed in the effort to maintain political control of the Colonies. George III did not listen.
The American Civil War killed 620,000 young Americans and added enormous economic cost to the national tragedy. Most Americans, including many Southerners, had realized that slavery was an ideological contradiction to everything that America stood for, but slavery was also an economic problem that in the course of a generation could have had an economic solution.
The Russian Bolsheviks stole the 1917 Revolution and made radical changes in the political structure that deflected attention from Marx’s intended rearrangement in the relationship between labor and capital. This priority for changes in the political structure instead of economic reform led to decades of violence and misery.
The Social Democrats in Germany in the 1920s were poorly trained in economics and could not overcome the problems left over from the faulty peace talks of 1919, Wilson’s legacy. The resulting desperate economic circumstances in Germany destroyed social cohesion and set the stage for Hitler and his reign of evil.
The argument that the bloody 20th century was the result of avoidable errors can be demonstrated both by analyzing the failures and by evidence of other leaders who gave the necessary priority to economic freedom. After WWII the United States used its power and money to repair the ravages of war and set the world on the way to economic growth and better lives for many. The Marshall Plan was one of America’s proudest moments because President Harry Truman and General George Marshall understood history and economics well enough to make the right moves. Any criticism that it was self-serving, and in time helped the U.S. economy, misses the point, for mutually beneficial results are the essence of economic common purpose.
The United States provided the money and encouragement, but free market-experts such as Ludwig Erhard, German Finance Minister and later Chancellor, made it work with an amazing 8% sustained national growth rate. The economic recovery in both Germany and Japan demonstrates what can be accomplished when the national mission is improving the lives of the people through economic freedom, not war and geopolitics.
Each of these cases, I argue, supports hypothesis #1: When the priority is movement to the superior economic system, not changes in the culture or political structure, then the lives of the people can be improved.The ideal of plenty through economic freedom, as proposed by the Enlightenment, has never been reached because neither have conducive circumstances been put in place nor have the impediments been removed. At the head of this chapter, I cite FDR’s observation: The problem is not that free enterprise has failed; the problem is that free enterprise has never yet been tried on a sustained basis.
Validation of hypothesis #1 will serve as the first building block for the improved organization in human affairs. The examination can then proceed to a definition of the superior economic system, hypothesis #2.
1 Arthur Walworth, Woodrow Wilson: American Prophet (New York: W. W. Norton Company, 1979), vol. II, p. 335.
2 John Maynard Keynes, The Economic Consequences of the Peace Process (New York: Harper & Row, 1971).