Our Patrick Henry Moment is Here

Patrick Henry

Obama’s election was supposed to transform America, at least in his mind.

This country’s first Socialist President strode into office confident he would remake this country. Unfortunately for him and fortunately for the country, the timing of his election was twenty if not fifty years too late. Socialism failed in its pure form wherever it was tried. Now it has failed in its modified form. While much of the world realizes this, President Obama is either ignorant or has more sinister plans for the country.

In the 1920s Ludwig von Mises demonstrated via economic reasoning why socialism could not work. His argument was that without market prices, there was no way to properly allocate resources. About 10 years later Friedrich Hayek supported Mises’ conclusion from a different angle. He approached it as a “knowledge problem” and argued that no central authority, regardless of how intelligent, could possess enough information to make proper and efficient decisions for tens of millions of people and businesses.

History validated the theory of the two Austrian economists. Russia, China, Eastern Europe, Cuba and North Korea produced the misery, poverty and brutality that were inevitable. The two countries that continue the system are amongst the poorest countries in the world, held together only by totalitarian rule and outside economic support.

With the recognition that socialism did not work, “do-gooders” changed their efforts to a system that would be part capitalism and part socialism. They believed that capitalism could be used for resource allocation while the “caring nature” of socialism could ensure equitable distribution of wealth. President Clinton expressed interest in what was then referred to as a “third-way.” Western Europe had adopted this approach decades earlier.

Interestingly, Mises argued that a “third way” could not work either. In the 1940s, Mises demonstrated that one intervention begets additional interventions. A so-called mixed system is nothing more than capitalism with interventionism imposed. Mises showed that any such system eventually degenerates into full-fledged socialism. In a collection of essays entitled “Planning for Freedom,” Mises concluded:

There is no other alternative to totalitarian slavery than liberty. There is no other planning for freedom and general welfare than to let the market system work. There is no other means to attain full employment, rising real wage rates and a high standard of living for the common man than private initiative and free enterprise.

The countries of Western Europe have, as Mises predicted, deteriorated into social welfare states likely never imagined or intended at their inceptions. As full-blown socialism approached, these countries became insolvent. Soon all will be forced to either dismantle their welfare states or incur sovereign defaults.  The U.S., while never formally adopting either socialism, drifted into the mixed system by gradually adopting many socialist programs. As a result, the U.S. faces the same future of insolvency as its European counterparts.

In terms of history, the mixed system dates back only to Bismark in the 1880s. It was initiated in a few countries in the first quarter of the Twentieth Century. Its wide-spread acceptance occurred after World War II when several countries chose not to return to the decentralized economies that existed prior to the war. England was the prime example. Industries nationalized for the war effort remained nationalized after the war. England rapidly devolved into a third-rate economy as a result. Prime Minister Thatcher reversed the decline by re-privatizing most of these industries.

It took only about 50 to 70 years for the mixed systems to fail. That is literally a moment in terms of history. Many people are still reluctant to admit that socialism is a failure despite the theoretical warnings and the actual failures themselves. With socialists, it is never the system and always the people that are the cause of failure. If only we had better leaders. As Hayek and Mises pointed out, it has nothing to do with leadership. There is a fatal flaw in the concept.

As a result of attempting to extend the socialist myth, governments and their populations are now burdened with debt, much of which will never be paid. We are on the verge of a worldwide Depression that will hit as governments run out of resources. It is likely that politicians will continue to play the game of “extend and pretend.” But we have reached the Ms. Thatcher end-point:

The problem with socialism is that you run out of other people’s money.

How ironic that President Obama’s first major achievement was Obamacare. In May, Greece was ordered to privatize their healthcare system. This month it was reported that England was going to overhaul their healthcare system. England was reference several times as a model of affordable, efficient healthcare. Apparently the English government and its people view it differently.

These instances are not one-time events. Nor will they be limited to healthcare. The welfare states of Europe will soon be dismantled in part or whole. So too will the entitlement programs in the U.S. The laws of economics and physics are immutable. They are above legislation. Countries do not have the resources necessary to honor their commitments, period!

Our Founding Fathers, without using the term socialism, designed a Constitution to protect against such incoherent schemes. Over time the Constitution was vitiated by “living document” interpretations, penumbras and other nonsense. Now, the U.S. stands on the precipice of failure just as Western Europe. It is insolvent and there are no other alternatives other than to default or dismantle.

The world is at a very dangerous inflection point. We are about to enter a Depression. Politicians are not going to back away from socialism willingly. They and large numbers of other beneficiaries will do whatever they can to retain the status quo. Despite the unequivocal failure of the modern welfare state, it is unlikely to disappear quietly. The status quo is always difficult to change. It becomes especially so in desperate economic times and for people that believe they are entitled to be taken care of by others.

The welfare state is headed for the dustbin of history. That is certain because it is no longer sustainable. The critical question is what will replace it. As Mises pointed out, there are only two alternatives: freedom or totalitarianism. There is no middle ground. There is no political compromise that can bridge this gap.

Regardless of which side of the issue you are on, the battle will be bitter and likely last a decade or more. Economically, everyone will be hurt, including many of the “well-off.” Whether our moral and ethical code is strong enough to get through this together is moot. We are not like our ancestors in the sense of their strong commitment to community, responsibility, forbearance and integrity. We are the pampered generation, entitled to gratification now and willing to cut corners to get it.

In many ways this problem is more serious than that faced by our Founding Fathers. After all, King George had little control over their lives or fortunes. Yet these principled men risked both rather than accept even a little bit of tyranny. Theirs was a fight of principle, ours is one of survival. The fight is made more important when it is coupled by a Depression. We know what monsters rose to power during the last Depression and their effect on the world.

We will either get liberty or totalitarianism. There is no middle ground. For me, the choice is clear and was stated by Patrick Henry more than two centuries ago:

Give me liberty or give me death

I am willing to sacrifice just as much as our Founding Fathers did so that my grandchildren and their grandchildren can live in the same country I grew up in. I hope enough others feel the same.

Monty Pelerin originally posted this on American Thinker

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  1. Dear Mr. Nickelthrower: I’ve lived in Europe too. I notice that the standard of living there is much lower too; usually people rent not own and when they do own, two or three generations occupy the same house (i.e., children never move out). And they don’t have to pay for protecting themselves since the US military bases there since the end of WWII have done the heavy lifting in the area of security, not to mention the stimulus of US dollars and jobs provided by the US bases. Before you insult Mr. Pelerin, do your own homework. The US has been subsidizing Europe by buying their goods (e.g., their cars, BMW, Mercedes, Porsche, etc.) and by providing security for them.

    1. Greetings,

      Now I’ll have to disagree with you too. Of course Americans buy European cars and other goods. They do so because they are so well made. Last I checked, Italy was know for its high end furniture, hand made glass, hand built cars (often costing millions) its leather and, of course, its wine. Italy is smaller than California.

      I lived in Germany for 5 years and I even had my work Visa so I could work there. Sure, families tend to live together in the same house – my family did, but the house was divided into three separate apartments. We had a nice garden in the back and even a summer kitchen. Who could possibly complain about that?

      I also own our family home in N. Italy. The house is 400 years old but it isn’t going any where any time soon. You can’t say that about houses built in this country. I plan on leaving it to my children – bought and paid for centuries ago.

      Finally, the Europeans have seen what happens when they put too much money or effort into the military. Can you blame them for allowing us to do the heavy lifting. Who is the sucker? Who?

      1. The US was a sucker. You’re right. They should have just let the Soviets have Western Europe. That would have been better. Perhaps you’ve forgotten too that Germany was rebuilt using the Marshal Plan–i.e., they had a lot of help to rebuild their economy and they have never repaid us for the favors that we extended to them. The success of Germany is not thanks to socialism or European superiority, but thanks to US protection and investment: paid for decades ago, by American tax payers.

        Italy has less unemployment. So did Weimar Germany.

        Don’t get me wrong. I love Europe. But it would be incorrect to suggest that socialism has helped them have a higher standard of living. As Thatcher said, pretty soon you run out of other people’s money, and that time is coming now in our own generation, both here and in Europe.

        Finally, the catastrophe of European socialism is that it requires an expanding work base in order to pay entitlements. Thus, workers are brought in legally or illegally from other countries. For Europe, those other countries are predominantly Muslim, and the Muslim population has a much higher birth rate, ca. 6 per woman, while the native Europeans are 1.2 or less per woman. This means, and the pressure is already being felt, that the Muslim races will probably overtake the native Europeans in numbers within my lifetime (I am 47). Then perhaps your family castle will be converted to a mosque.

        I am keeping the light on here in Canada for my European friends as their children will move here as refugees–they are most welcome.

        1. Greetings,

          I still have to disagree. The United States spent about 300 billion on WWII and spent just 12 Billion on the Marshall Plan. This 12 billion did not just go to Germany but was divided up among all of war torn Western Europe. The United States spent way more on destroying Europe than it spent on “rebuilding” it. Regardless, economic output in Western Europe was 1/3 higher than prewar levels before the end of the Marshall plan but had more to do with the removal of trade barriers than the tiny tiny Marshall Plan.

          You are also correct in that the Soviet Union could have easily taken and been welcomed by Western Europe (it was the communist resistance, misguided as they were, that fought the Germans hardest) which is why the US waited until Stalin had nearly destroyed the German army before invading France.

          Next, the European economy is not a Ponzi economy like we have here. They do not have growth for the sake of growth. The Muslims that are settling in Europe, like in France, are there legally as a result of former European colonization. The way I see it, the Europeans had no problem colonizing Africa, extracting its resources and using its people to fight two World Wars – let the Muslims settle in France and England if they want. As for Italy, only 1% of the population is Muslim. I don’t see any big threat there.

          Finally, Germany has a wonderful mass transit system. It has universal health care. It has free child care and Kinder Geld (a monthly stipend for new mothers that lasts 18 years). Free Education. I could go on for a while on all that.

          It does all this without borrowing any money and the taxes paid by the people are fairly comparable to the taxes paid here in the USA. The US, on the other hand, is probably about 75 trillion dollars in debt. We have a debt so large that it can never be paid back.

          Now, you tell me which system worked and which one didn’t.

  2. Greetings,

    I would have to disagree with this particular post. It is easy to point fingers around the world and say that this or that system doesn’t work and Americans buy it because so few of us ever leave the country. As a matter of fact, only 3% of Americans even have passports which tells me that 97% or more (having a passport doesn’t mean you use it) have never ever set foot inside one of these terrible socialist countries.

    If socialism is so terrible then how does Germany, which is the size of Arizona, manage to sell more exports than the United States? They are pretty much the definition of socialism but their people have a much higher standard of living, live longer and healthier lives, get 6 weeks of paid vacation (plus 11 other paid holidays) and they pay for it all without having to borrow trillions of dollars.

    If socialism is so terrible then why do we owe so much money to the Chinese? Also, last I checked, the Chinese were connecting all of their large cities with high speed bullet trains (that go 220mph). Our rail system would make Bulgaria ashamed.

    A system based entirely on profit and greed does not do a better job of allocating resources than socialism. If it did, then the top 1% would not have more wealth than the bottom 95% which is the situation we find ourselves in today.

    I lived and worked in Europe for years and I took my new wife there recently for her first visit to Europe. We’ll be moving there soon because she realized that she likes food that isn’t genetically modified, mass transit, affordable daycare, free education, socialized medicine (yeah, even socialized medicine), walkable communities, homes that are not built out of styrofoam and chicken wire (we live in the Southwest) and the fact that people have more than just two political parties to choose from.

    Even Italy, with all of its problems, has an unemployment rate that is 1/2 of ours here.

    Do your homework before you bash the socialist countries – better still, go and live in one for a while.

  3. We might do well to understand that “socialism”, as it is called, is our natural and instinctive state; well ordered liberty is a state discovered after three thousand years of trial and error, and by studious application. That is why even after repeated failure the left is never out of business.

    Foolish ideas are immortal.
    Each new generation invents them anew–
    Nicholas Davila

  4. “The welfare state is headed for the dustbin of history. That is certain because it is no longer sustainable. The critical question is what will replace it. As Mises pointed out, there are only two alternatives: freedom or totalitarianism. There is no middle ground. There is no political compromise that can bridge this gap.”

    The left strongly favors totalitarianism and their ‘useful idiots’, liberals, would out of ignorance and gullibility, facilitate and enable pursuit of tyranny by the left.

    The right and most ‘independents’ strongly favor freedom. Demographically, America is a center right country, so one might assume that America would choose freedom.

    Several important factors however make that less probable. First is the ‘instant gratification’, immaturity and entitlement mentality of so many Americans. They shall be inclined to accept the false promises of demagogues.

    Second, the coming economic collapse that any serious, objective student of economics sees coming. And specifically, the timing of such an event. Arthur Laffer is predicting such a collapse in 2011; Tax Hikes and the 2011 Economic Collapse

    Should a collapse of the economic system occur in 2011 or at any point before the 2012 election, civil disorder will compel many on both sides to demand that Obama declare martial law. Congress will then feel compelled by the circumstances to grant Obama extraordinary and unprecedented powers to deal with the crisis. And given FDR’s previous demonstration of the ease with which radical legislation during the Great Depression was passed, any observer of Obama would have to consider his probable actions.

    Some worry that should an economic collapse occur, Obama plans to seize power in a coup and effectively abrogate the Constitution. I do not accept that as a realistic possibility because in my judgment, the US Military would never support such a coup.

    What would undoubtedly happen is Obama proposing legislation designed to move the country away from freedom and toward socialistic tyranny. I believe this to be Obama’s Plan, as it is the only explanation that fits the observed facts.

  5. Mr. Pelerin– It was a great article but I believe you missed a perfect opportunity to improve it. (Perhaps you were restricted to a certain number of words?) You explained how Hayek attacked socialism on economic grounds. You explained how von Mises attacked socialism on epistemological grounds. That would have been the perfect spot to include Ayn Rand’s attack on socialism on *moral* grounds – the real Achilles heel of socialism. I would have included something like:

    “Socialism is the doctrine that man has no right to exist for his own sake, that his life and his work do not belong to him, but to society, that the only justification of his existence is his service to society, and that society may disposed of him in any way it pleases for the sake of whatever it deems to be its own tribal, collective good.”

    …or perhaps:

    “Whoever claims the “right” to “redistribute” the wealt produced by others is claiming the “right” to treat human beings as chattel.”

    …or even:

    “When one observes the nightmare of the desperate efforts made by hundreds of thousands of people struggling to escape from the socialized countries of Europe, to escape over barbed-wire fences, under machine-gun-fire –one can no longer believe that socialism, in any of its forms, is motivated by benevolence and the desire to achieve men’s welfare. No man of authentic benevolence could evade or ignore so great a horror on so vast a scale.”



  6. Our Founding Father’s Freedom (from tyrany) was not free. They paid with their deaths.
    We believe that God is a higher power than ourselves.

    Obama’s “Freedom” (from responsibility) is not free. He want us to pay for it with our lives (slaves for the state).
    Progressives believe themselves to be the higher power (GOD).

    America is now choosing their faith.

  7. I received off-line this commentary and decided to add it to the comments. Naturally, any identifying information has been removed.

    Folks, I could not agree more with Monty Pelerin.

    Some people seem to believe it is appropriate for them to renew their marriage vows. Well, I believe it is appropriate for me to renew my pledge of allegiance to my country.

    I’m also reminded of the ending of our Declaration of Independence; “- And for the support of this Declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our Lives, our Fortunes, and our sacred Honor.” For these men, the signing of the document was not the equivalent of pledging to lose weight as a New Year’s resolution. There were real consequences to their action. I suggest you review what happened to some of these men as a result of their “treason”.

    Many Americans have forgotten, or have never been taught, that the rights that we enjoy have been paid for by the blood of fellow citizens. There is no such thing as a right without a corresponding responsibility. So some of us have devolved into the secular version of “cheap grace”.

    One of my heroes is Dietrich Bonhoeffer, the Christian theologian who was executed for his “treason” in participating in the attempts to assassinate Adolf Hitler. Here is his explanation of “cheap grace”. “How are we, who go on sinning in the expectation of grace, to go on taking seriously the forgiveness of sins and prayer to God? We make cheap grace and, with the justification of the sinner through the cross, forget the cry of the Lord that never justifies sin. “You shall not kill”, “love your enemies”, are commandments, requiring simple obedience.”

    As Monty reminds us, for Patrick Henry, our declaration of independence from King George was not intellectual dissertation, it was life or death reality.

    Patrick Henry made his choice. Over the past 234 years, other patriots made the same choice as he, and paid for it with their lives so that we could have cheap rights.

    Think about it.


  8. FTA-
    With the recognition that socialism did not work, “do-gooders” changed their efforts to a system that would be part capitalism and part socialism. They believed that capitalism could be used for resource allocation while the “caring nature” of socialism could ensure equitable distribution of wealth. President Clinton expressed interest in what was then referred to as a “third-way.” Western Europe had adopted this approach decades earlier.
    Do-gooders, now there’s a group you could write books about. Consider africa……… think of the food and medicine that upped their life expectancy and live birth rates sky high from 1900. Now, picture 1950-1960, the famines and droughts accelerate while people lay around covered with flies…… and now, 1970-2010, the great migration from africa to europe and the US. Church groups (see do gooder esp. lutheran) are bringing in somalians and ethiopians and other africans as fast as they can…….YOU will appreciate diversity!! Most of these imported africans have no skills, a proclivity for lots of children and just to make us real diverse, many are muslim…….. do gooders, yes, their road to hell is paved…………

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