It is one of the few places on earth where nothing but a line on a map separates the third world from the first. A line that allows some to live in abundance while condemning others to a life sentence of squalor. A line that separates the land where the dreams can come true from one where dreams are the exclusive domain of a wealthy few. A line marking the have from the have-nots. A line that marks the transition from a nation that is recognized for its economic and political stability to one that is just as renowned for its instability.
That line is the border between the United States and Mexico.
But it is more than a line separating two countries. It is a boundary separating two philosophies that can trace their origins back to the Roman Empire and the Germanic tribes that resisted their autocratic rule.
As Alexis de Tocqueville observed nearly two centuries ago, colonies inherit their political mores from their colonial masters. Unfortunately, for the people south of the border, this meant the Spanish and French Empires. These empires considered themselves the descendants of the Rome . Their kings having the power of Caesar, who was perhaps the purest and most absolute monarch the world has ever seen. These values would evolve eventually into the principles of Devine Right and Absolutism that would dominate the politics of continental Europe far into the 19th century. From it would stem the Inquisition, the Reign of Terror, and tyrants such as Napoleon. The citizen would remain a peasant living in abject poverty and servitude.
These mores did not go away once a colony has gained its independence. As we have seen throughout the history of Latin America, local despotism immediately replaced that of their former masters. Politics of the cuadillo, or strongman, became the dominant form of government with little Caesars having unlimited power over their people. The people themselves were nothing more than chattel to be exploited by the elites. As one Mexican adage puts it, “Mexico is a ranch and the president is the owner.”
Such a political culture could not produce a Washington, a Jefferson, or an Adams. It would give birth to despots such as Santa Ana, Iturbide, and Porfirio Diaz in Mexico and, more recently, Castro in Cuba and Chavez in Venezuela.
Fortunately, the cultural values of the United States and Canada came from a different source.
The Germanic tribes to the north of Rome resisted Roman subjugation. One of those tribes were the Saxons who had a very different set of values. Their leader was often elected and his authority was limited by a body of elders. The king was considered the first among equals and subject to the same laws as the common man. Although taxation existed, especially in times of war, there were limits on the power of the king to impose taxation and he had very little influence on the economic activity of his people.
The fall of Rome provided the opportunity for the Saxons to expand into Britain. There they mixed with the Angles and the combined peoples would become known as the Anglo-Saxons. Over the centuries, their style of government would evolve into the classical liberal principles of limited government, individual rights, private property, and free-market economics. It would be these principles that would unleash the potential of the common man and make Anglo-Saxon based societies the most free and prosperous societies the world has ever seen.
It is no accident that the freest, wealthiest, and most stable democracies in the history of mankind are based on the principles of limited government, individual rights, private property, and free-market economics. It is also no accident that these nations have been, until recently, immune to the state-centered ideologies of Marxism, Socialism, Fascism, etc. that still plague Romanized Europe.
This is why there is so much disparity between the Saxonized United States (and Canada) and their Romanized neighbors to the south. One side unleashes the potential of the individual, creating freedom and prosperity for the society as a whole. The other sees him as nothing more than a subject, there to serve the needs of the elite controlled state. One becomes a flourishing modern democracy with a vibrant financial system, while the other remains stagnant with a peasant-style economy.
A Mexican anecdote tells the tale of a girl who was visiting her cousins north of the border for the first time. As they drove around sightseeing, her cousins explained that it was all once part of Mexico but that the Americans took it. The girl, upon looking at the affluence, sorrowfully remarked, “And they took the best part, too”.
Unfortunately, that is how most people see the differences between the two nations; never understanding the root causes for the economic inequality that exists between the United States and Mexico.
In part 1, I covered the criticism that capitalism is a flawed system because it creates economic inequality within the society. But the analogy that the capitalist “tide does not raise all boats equally” actually has two parts; one expressed and the other implied. By not going beyond the initial critique of capitalism, the opponent of the system is silently implying that the alternative he is proposing will address this flaw. In this article, I will examine the past performance of the alternative systems to determine if they can produce the implied result of creating wealth for all.
To do this, we need to understand that all the alternative economic systems that are being pursued have their roots in Marxism. This in itself does not make it good or bad. It only means that we have about a 150 year track record to assess. To some it may seem unfair to make a determination on the effectiveness of these alternatives, much less compare them to a system that has had 700 years to develop, but in those 150 years, the Marxist-based philosophies of communism, fascism, Nazism, and socialism have left an indelible mark. Furthermore, that mark has been extraordinarily consistent in the results that are produced.
Last century marked the high point of the experiment with Marxism. By the early 1900s, progressives around the world were aggressively promoting their versions of the Marxist dream. Russia was their first success and after the Revolution of 1917 full-blown communism was established. This was followed by success in Italy, which established the fascist version in 1922. The depression of the 1930s offered the critics of capitalism a crisis to exploit and a chance to spread the Marxist philosophy to other countries. They successfully convinced the people of many countries that capitalism was flawed and that their system was better by being more scientific, more enlightened, more perfect. Although their greatest success was in Germany, with its own version called Nazism, many other countries of the world fell for the claims and embraced or adapted Marxist alternatives, including France which adopted the milder socialism.
These Marxist-based, big government systems initially had some extremely remarkable success. This was especially true of Nazism, which created what was hailed as the “German Miracle.” At the height of the depression, Germany had almost 11 million unemployed; by 1938, unemployment was almost nonexistent. Similar, though less dramatic, results were being achieved in Communist Russia (renamed the Soviet Union) and Fascist Italy. This brought worldwide acclaim, especially from celebrities, academics, and media elites. Many, jumping onto the Marxist bandwagon, flocked to view for themselves the new “workers’ paradise and utopias.” They eagerly claimed that man had created the ideal economic system and that the antiquated, flawed, and cold-hearted Capitalism was dead. The enthusiasm was so widespread that even the stalwarts of free-market economics, Britain and the Unites States, incorporated aspects of Marxism into their economies.
The fact is that the admirers of Mussolini, Stalin and Hitler had been thoroughly duped. These ruthless leaders understood that their admirers (or “useful idiots” as Lenin would call them) would see only what they wanted to see. This voluntary blindness meant that those praising these dictators refused to recognize that the immense economic achievements of communism, fascism, and Nazism had more to do with the tyrannical practices of the government than it did with their economic systems. In Germany, for example, women and Jews were excluded from employment and were replaced by male, non-Jewish workers. Furthermore, since they were prevented from working, women and Jews were excluded from the unemployment count. Soviet Russia’s success relied heavily on the slave labor of its Gulag system, and Stalin’s collectivization and industrialization programs resulted in the death of tens of millions of people. Although it did result in a better standard of living for those who survived the “Great Terror,” that prosperity was paid for with the blood of its victims.
Winston Churchill was one of the few who were not blinded by the charade. From the very beginning, he wailed against and warned of the dangers these systems posed to the world. He recognized what insiders, such as the architect of the Nazi economic plan, Dr. Hjalmer Schacht, knew; that the Marxist economies could not be sustained since they could not generate the required wealth. Once all the current wealth had been redistributed the society would begin to descend economically. The only way to stave off such an outcome was to find new sources of wealth. This set these three countries, plus fascist Japan, upon a course of imperialism and exploitation that makes capitalist imperialism look benign. Within a decade, Marxist-based imperialism would kill, enslave, exploit, and pillage more people than the British Empire ever did in its almost 400 year history. By the end of fascist Italy in 1944, Nazi Germany and fascist Japan in 1945, and Soviet Russia in 1989 over 100 million individuals would lose their lives to the wars, starvation, deprivation, and genocide these economic-political philosophies caused.
With such a conclusion, one would think that Marxism would be discredited and discarded forever. But its supporters were quick to point out that the problem with communism, fascism, and Nazism is that they took Marxism too far to the extreme. What was needed was capitalism mixed with the perfect amount of Marxism. This hybrid system, called socialism, would use capitalism to create wealth and Marxism to distribute it. In other words, capitalism would create the “tide” and Marxism would ensure that the tide “raised all the boats equally.” It was perfect since it incorporated the best of both systems while eliminating their flaws.
After the deprivations of the Second World War, the democracies of Western Europe were eager to restart their war-torn economies and Socialism appeared to be the ideal system. By the 1950s, every country in non-communist Europe, from Spain to Sweden and Italy to Britain was socialist to one degree or another. Once again, the new system showed promise. In quick time, the war savaged economies rebounded and had growth rates on par with the United States. The prosperity of these countries was considered proof of what could be accomplished with Socialism.
Unfortunately, once again, the system demonstrated that it was not the panacea it promised to be. The main flaw was that if the perfect combination of capitalism and Marxism could be found it could not be maintained. One of the by-products of socialism is that the people became dependent on the government. As that dependency grows the people feel more and more entitled to government services. This sense of entitlement results in people placing more demands on the government. In turn, the government feels compelled to meet the demands of its citizens, and the perfect balance between capitalism and Marxism is lost. Additionally, the dependency on government means that once the balance is lost it is almost impossible regain. (This last point is painfully evidenced by the riots and civil disturbances that have recently rocked Britain, France, Spain, Italy, Portugal, and, of course, Greece.)
Over time, this results in the decline of prosperity and societal wealth. At a recent lecture Nobel Laureate and economist Robert Lucas points out that, for the first 70 years of the 20th century, the economies of Western Europe grew at nearly the same rate as the United States. That changed in the 1970s when the negative effects of socialism started to be felt. During that time, Socialist Europe’s GDP per person dropped 30 percent, thus resulting in a 20 to 40 percent income gap between it and the United States. This coincides with what Daniel Hannan writes in his book, The New Road to Serfdom. In the book, he notes that Western (Socialist-based) Europe’s share of the World’s GDP shrunk from 36 percent in 1969 to 26 percent in 2009 and is projected to be only 15 percent in 2020.
During the same period, the United States share had remained steady at around 26 percent. Additionally, in 1970 the unemployment rate of Western Europe was just above 2 percent while in the United States it was about 5 percent. By the end of the decade the rates flipped and, for the rest of the century, Europe’s unemployment rate ranged from 2 to 3 percent higher than that of the United States. Today, several of the socialist economies of Europe are on the verge of total economic collapse. Any attempt dial back the Marxist component of their economies is met with resistance by their government-dependent populations. This opposition is often expressed with violent protests, civil disturbances and rioting that threatens to undermine the society as a whole.
History shows us that the claims of the critics of capitalism are valid. That capitalism does not benefit all members of its society equally. But there is nothing in history that indicates that their Marxist alternatives offer anything better. The 20th century experiment with Marxism ended as a complete and catastrophic failure. The death, destruction, and deprivation it created resulted in the century being the most bloody and brutal in the history of man. Even the socialist hybrid, by slow draining of wealth, has proved itself more of a bane than a boon for the societies that embrace it. So, while the “tide” from the sea of wealth that capitalism creates does not “raise all boats equally,” it does raise all boats. Whereas, the alternatives, rather than being oceans of wealth, create landlocked seas that, once drained, leave all boats stuck in the mire and muck.
The current economic crisis has intensified the fifty year assault on capitalism (also called free-market economics) to the point that even the average American is questioning if there is a better system. He is beginning to wonder if the critics of capitalism are correct; that the free-market economy hurts the individual because it creates economic inequality by concentrating money in the hands of a few. The common analogy that “a rising tide does not raise all boats equally” does seem to make sense. After all, we are the wealthiest country in the world with people living in poverty. It just does not seem fair! Something must be wrong! Maybe it is time to look for an alternative. But where do we look? How do we know which alternative is the best? As Americans, we would want a system that has a solid record of creating prosperity. For that, we need to turn to history. For, although past performance does not guarantee future results, it is an exceptionally reliable indicator.
Free-market economics has a track record of nearly 700 years. During that span, it has proven itself to be the best economic system that humanity has ever conceived and a blessing for the average individual. Although it is true that there are economic differences between individual members of a free-market society, history has proven that wherever it is practiced it produces a society that is as a whole much wealthier than that of any alternative system. In his book, The Origins of English Individualism, anthropologist Alan Macfarlane details how by the mid-1300s England had developed a free-market economy. He further notes that, around the same time, there was remarkably little evidence of a peasantry within England. This does not mean that there was not a poor or servant class, which there was. But that class differed from the typical peasant model found in the rest of the world. Even in class conscientious England, there was a social and economic mobility that would not be seen on continental Europe for another 500 years. In fact, traditional peasant societies, which lacked social and economic mobility, were still firmly in place up until the 19th century in Western Europe (including France) and as late as the 20th century in Eastern Europe.
History shows that this socioeconomic mobility benefited the population as a whole. Even the poorest individual in the society had the potential of changing his station in life or, at least, make preparations for his children to do so. This was incentive enough for most individuals to work towards creating a better life for themselves. Those who were ambitious found that with sacrifice and hard work they could move up from the son of a servant to being the master. While such drastic leaps were not common, records of the time demonstrate that the upward mobility of individuals was the norm rather than the exception. A family could move from the lower class through middle class and into upper-class within a couple of generations.
While it is true that capitalism does create economic disparity, the less able, the less willing, and the less ambitious are not excluded from its benefits. The system creates a societal wealth that allows even its poorest members to live reasonably well when compared to those in non-capitalistic societies. Between 1300 and 1600, the wealth of English society grew to the point that the lifestyle of the poorest Englander was vastly superior to that of his continental counterpart. He ate more meat, had better dwellings, and, more importantly, had the ability (freedom) to change his lot in life. Visiting foreigners would be amazed at how well the lower classes of England lived compared to that of their homeland. This is similar to what we experience in modern day America. Americans living in “poverty” have a standard of living that is the envy of many living in non-capitalistic countries. When referring to Britain Alexis De Tocqueville rhetorically asked, “Is there any single country in Europe, in which the national wealth is greater, private property is more extensive, more secure, more varied in character, society more settled and more wealthy?” This same question could be applied to 21st century America.
Capitalism has proven track record that spans almost seven centuries. It has demonstrated over and over again to benefit any society that embraces it. The common free-market heritage of America, Australia, New Zealand, and Canada are evidence of this. Throughout the history of the countries, there was never a peasant class and, today, all of them are considered first-world nations whose citizens enjoy extremely high standards of living. This cannot be said for any of the former colonies of France and Spain, both of which were countries that were antagonistic towards capitalism. The Dutch had no such qualms and, in 16th century, wisely adopted free-market economics. By the 17th century, their wealth made them the “bankers of the world.” So, while the tide may not raise all the boats equally, it does raise all boats. How high each boat rises depends on the individual in charge of it.
But is there a better alternative to capitalism?
In A Historical Argument in Favor of Capitalism Part 2 I will analyze the historical record of alternative economic systems to see if they live up to the promise of creating wealth for all.
After more than two centuries of unprecedented freedom and prosperity, it is easy to take this great nation as something divine or preordained. But that was not always the case. Prior to the founding of the United States, the state of the common man was one of poverty and servitude. Using history as a guide, many who were against the colonies separating from Britain did so on the very reasonable belief that the colonies 1) without British protection would be absorbed into the authoritarian French or Spanish Empires or 2) that any independent government would eventually become despotic.
When the Continental Congress met in Philadelphia in the summer of 1776, after fifteen months of bloody warfare between North American Englishmen and their fellow British-born countrymen, these concerns were still alive and well in the minds of many of the delegates. It was these very realistic concerns — and not loyalty to the crown — that was at the core of the heated debate. Those opposed could not understand how those in favor could maintain their optimism despite thousands of years of history to the contrary.
“What form of government could possible resist the man’s natural instinct to control and exploit his fellow man?,” they asked.
The answer was provided by the architect of the Declaration himself, Thomas Jefferson, when he rose and asked:
Has not every restitution of the ancient Saxon laws had happy effects? Is it not better now that we return at once into that happy system of our ancestors, the wisest and most perfect ever yet devised by the wit of man…?
It is important to note that the flag that the Continental Congress debated the issue of independence under was not the “Betsy Ross” flag. It was a flag that is almost unknown to most Americans today, but it represented everything the men like Jefferson stood for. It was also the flag that the forces of George Washington fought under and the one which a young lieutenant by the name of John Paul Jones raised on the first American naval ship. It was, in fact, the national flag of the United States of America until 1777.
Image from high school history text book cir. 1880
What is significant about this flag is that it had the British
Union Jack where today we have the stars. This would be the first of many former British colonies, including Australia and New Zealand’s, which would honor Britain in their national flags. This is unique to the English-speaking countries and something that you do not see in former French and Spanish colonies.
This is because the Founding Fathers understood that being an Englishmen in the 18th century was something unique. As George Washington would write at the end of the war, the foundation of the British Empire:
“Was not laid in the gloomy age of ignorance and suspicion but in an epoch when the rights of mankind were better understood and more clearly defined, than at any other former period.”
Whether he was a leader like Washington or the lowest private in the army, had the genius of Ben Franklin or the remedial education of a frontier farmer, the Englishmen of North American understood that they were fighting for their rights as “freeborn Englishmen.”
It is important to note that it was not their rights as men or even their human rights. The fact that they stated that they were fighting for their rights as free born Englishmen meant that they understood that the liberties and rights they were fighting to preserve were unique to a certain people. Those people were not Frenchmen, they were not Spaniards, they were not Russians, they were not Chinese: they were Englishmen!
The Founding Fathers were men who were well-versed in English history and its system of government. They understood that the liberties and rights that they enjoyed had evolved over a period that predates the Magna Carta and back to the fall of Rome. They understood, as renowned historical anthropologist and Cambridge professor Alan MacFarlane notes, that:
“England as a whole was different from the rest of Europe… a central and basic feature of English social structure has for long been the stress on the rights and privileges of the individual as against the greater group or the state.”
This was unique in a world where the norm for the average man was servitude and subservience to the state.
The fact is, as Jefferson eloquently pointed out, there is only one system of government that has a 500 year track record of bringing freedom and prosperity the every society that embraces. Based on the on the Saxon principles of limited government, individual liberty, private property rights, and free market economics the United States resisted despotism and, along with other English-speaking countries with the same foundation, became the freest and most prosperous nation of the modern age.
In 1854, the famed 19th century historian, John Motley, wrote that “every schoolchild knows that the so called revolutions of Holland , England , and America  are all links of the same chain.” As the illustration shows, this history was taught well into the 1880s.
Now, it is unknown to the vast majority of Americans.
This is because history tells us that no other ideology could compete with or defeat the Saxon system. Competing ideologies can claim to be a better alternative, but they always falling short – often with bloody consequences. Therefore, the Grand Union flag, like anything else that represents the values and principles that made America (and the English-speaking nations in general) exceptional, had to be purged from the political consciousness of the people. Thus, it became another victim of the Left’s distortion of history and the forgotten symbol of freedom.