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Economic Crimes in China and the U.S.

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The U.S. government is criticizing the Chinese government for one of the communist regime’s favorite tactics: using “economic crimes” as a legal cover to prosecute, convict, and incarcerate people who are actually guilty of political crimes. The latest instance involves Chinese celebrity artist and social critic Ai Weiwei, who is being held on suspicion of violating “economic crimes.”

As Ayn Rand pointed out in Atlas Shrugged, that’s one of the primary purposes of economic crimes. Since economic regulations and tax regulations are so extensive and complicated, they provide government officials with the ability to prosecute businessmen whenever they want, which serves as a tremendous incentive for businessmen to keep silent and cooperative.

As the New York Times explained in a story about the Ai prosecution: “Such crimes can include prosaic failures to properly comply with regulations on business registration or taxation…. The government has convicted citizens of financial fraud before when trying to silence them.”

Actually though, U.S. officials are, once again, being disingenuous and hypocritical in leveling their charges at Chinese officials. Ever since the advent of the regulated economy under President Franklin Roosevelt, U.S. officials have done the same thing that the Chinese communists are doing: use economic crimes to prosecute American businessmen who fail to tow the official line.

Consider Joe Nacchio, who served as chief executive officer of Qwest Communications. After the 9/11 attacks, President George W. Bush and his people approached various heads of U.S. telecommunications firms to solicit their participation in an illegal and unethical scheme in which the telecoms would turn over confidential information about their clients to the federal government.

Not surprisingly, most of the telecom heads acceded to the president’s request. They were not dumb. They knew what the feds could do to them if they refused the president’s request to become lawbreakers and sell out their customers.

To his everlasting credit, one telecom head said no to the president. That man was Joe Nacchio. He refused to compromise the interests of his customers. He refused to break the law.

And so they went after Nacchio. No, they didn’t go after him for refusing the president’s request to violate the law and sell out his clients. That would have been too flagrant. Instead, the feds did exactly what the Chinese communists do. They went after Nacchio for committing an “economic crime,” to wit: violating the ridiculous insider-trading laws. For that economic crime, Nacchio got sentenced to six years in the federal penitentiary.

Or consider Mark Cuban, the billionaire owner of the Dallas Mavericks. He helped finance a movie named Loose Change, which posited that President Bush orchestrated the 9/11 attacks to justify his subsequent war on Iraq. That set off a man named Jeffrey B. Norris, an S.E.C. lawyer in Fort Worth, who accused Cuban of being unpatriotic for financing a “vicious and absurd documentary.”

So, did the feds go after Cuban for accusing them of orchestrating the 9/11 attacks? Of course not. That would be violating his right to freedom of speech. Like the Chinese communists, they just figured out some economic crime that Cuban supposedly committed, and went after him for that. What was Cuban’s economic crime? You guessed it — insider trading. While they haven’t indicted him for the crime, the SEC is going after him with a civil suit.

It’s no different with the IRS Code. Every election cycle we hear promises by candidates for federal office to simplify the tax code. But they’ll never do it because they know they’d lose one of the biggest hammers they have over people’s heads. The tax code consists of countless complex rules and regulations. That ensures that they’ll always be able to go after anyone they want because most everyone is guilty of violating at least one provision of the tax code. The scheme works especially well against businessmen in major companies, whose activity exposes them to many more tax regulations (and economic regulations) than other people.

What better way to ensure that wealthy and powerful businessmen remain in line, both in communist China and the United States? If they step out of line, federal officials can do precisely what their Chinese counterparts do — go after the recalcitrant businessmen for tax crimes or economic crimes while claiming that the prosecution has nothing to do with the political positions being taken by the prosecuted person.

There really is only one solution to this problem, and it lies not with getting “better” people into public office, either in China or the United States. Instead, it lies with a total separation of the economy and the state, in the manner the Framers separated church and state. The solution lies in the embrace of the principles of economic liberty, as reflected in constitutional amendments along the following lines: “No law shall be enacted respecting the regulation of commerce or abridging the free exercise thereof” and “No tax shall be levied on income.”

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.