The liberty principle for this Freedom Friday is that a minimum of government regulations and a free-market economy brings about the highest levels of prosperity. Our Founding Fathers first obtained independence and then they organized a government based on natural laws. They received some assistance in writing laws about the marketplace from a college professor in Scotland named Adam Smith. Smith wrote a five volume work called The Wealth of Nations, which came out in 1776. This brilliant work was just what the Founders needed. Thomas Jefferson wrote: "In political economy, I think Smith's Wealth of Nations the best book extant." (Bergh, Writings of Thomas Jefferson, 8:31.) The Founders structured the entire national economy of the new nation on the basis of natural law and Smith's ideas about a free-market economy.
According to W. Cleon Skousen, there are five parts to Smith's formula: 1) There is specialized production. 2) The government does not interfere in production, princes or wages. 3) The free-market operates on supply and demand with no government-imposed monopolies. 4) Competition based on supply and demand regulates prices. 5) Profits are an indication of whether the goods and services produced are worthwhile. 6) Competition improves quality and reduces prices.
Skousen also wrote that "there are four laws of economic freedom which a nation must maintain if its people are to prosper at the maximum level. These are: 1) The Freedom to try. 2) The Freedom to buy. 3) The Freedom to sell. 4) The Freedom to fail.
"By 1905 the United States had become the richest industrial nation in the world. With only five percent of the earth's continental land area and merely six percent of the world's population, the American people were producing over half of almost everything - clothes, food, houses, transportation, communications, even luxuries. It was a great tribute to Adam Smith." (See The Five Thousand Year Leap.)
Even though the United States was becoming the biggest and richest nation in the world, the system needed some adjustments. Many powerful leaders thought the system needed to be replaced. At the same time, the Founding Fathers and the Constitution were being criticized and the ideas of Adam Smith were considered old fashioned. The intellectual leaders were creating a vacuum in order to build a new system based on the teachings of Karl Marx. This new system was exactly what the Founders were trying to eliminate.
The colleges and universities in the 1920's stopped teaching anything about the heritage of our nation; therefore, there were no assignments to read The Federalist Papers or The Wealth of nations or anything similar. President Franklin Roosevelt did his best to trade the rights of the Republic - such as checks and balances, limited government, inalienable rights to liberty and property - for a centralized state and controls on industry.
The Founders wanted to "make the American dollar completely independent of any power or combination of powers outside of the American people" (Skousen). They gave exclusive responsibility to issue and control money to Congress because the people had control over who would represent them in Congress. All money was to be precious metal. This plan of the Founders never was completely implemented. First, the Bank of the United States was created to issue money, a task given to the Federal Reserve System today.
Thomas Jefferson stated, "If the American people ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied. The issuing power of money should be taken from the banks and restored to Congress and the people to whom it belongs." (Quoted in Olive Cushing Dwinell, The Story of Our Money, p 84.)
Jefferson must have been looking at circumstances similar to our day when Fannie Mae and Freddie Mac own approximately 90 percent of all the home mortgages. I feel certain that the situation saddened Jefferson as it does many today. If we truly want to return to our First Principles, we must convince our political leaders to reform our economy to the point that Congress again has the exclusive responsibility to issue and control money.
Ideas and quotes for this post came from The Five Thousand Year Leap by W. Cleon Skousen, pp 131-139. There is much more information on this principle in this book.