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FDR and the End of Economic Liberty

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The watershed years were 1932-1937 — the first two presidential terms of Franklin D. Roosevelt. This was the crucial period in American history — the period in which Americans abandoned the principles of economic liberty on which our nation was founded. For it was during this time that the welfare-state, planned-economy way of life replaced the private-property, market-economy way of life which had existed up to that time.

Of course, this is not what Americans have been taught. From the first grade in their government-approved schools, the American people have been indoctrinated into believing that the Great Depression was the failure of America’s free-enterprise system, that FDR’s New Deal saved free enterprise, and that the economic system which characterizes the United States today is one of free enterprise. And the indoctrination is so effective that adults continue to believe the myths with falsehoods despite truth and reality and, even worse, continue to force their children to undergo the same political indoctrination in today’s government-approved schools.

With exceptions (slavery being the worst), during the first 150 years of America’s history, people were free to live their lives in any way they chose as long as their actions did not entail violence or fraud against others. Americans could engage in any economic enterprise without permission or regulation … accumulate unlimited amounts of wealth without political interference … do whatever they wanted with their money … and travel anywhere in the world without a passport or other evidence of governmental consent.

This unique way of life was what distinguished the United States from all other nations in history. It was this way of life that became known as one of “free enterprise.”

And our American ancestors believed that charity — the caring of human beings for each other — meant nothing unless it came from the willing hearts of individuals. And so our ancestors provided a way of life in which people could not be forced to help or serve others. The result was the most charitable nation in the history of man.

In 1913, the abandonment began. For it was during that year that the 16th Amendment — the income tax — was enacted. Appealing to the sins of envy and covetousness, the American politicians and bureaucrats promised that the tax would be levied only on the rich and that it would never exceed a very minute percentage. Ignoring the warnings of their ancestors, the American people rendered unto Caesar the omnipotent power to control the fruits of their earnings.

But that wasn’t all. Also in 1913, the American people permitted the passage of the Federal Reserve Act which created a central bank, enabling governmental officials to control the amount of credit and currency in the economy. It was an action which ultimately would match — if not exceed — the destructive power of the income tax.

As documented so well by free-market economists Ludwig von Mises, Friedrich Hayek, and Murray Rothbard, during the 1920s, the Federal Reserve Board, exercising its power to expand the money supply, caused an inflationary binge — an action which created a false aura of prosperity. When the political authorities — faced with this inflationary threat and restrained by the gold standard — finally ceased the monetary expansion near the end of the decade, the inevitable economic hangover was reflected in the 1929 stock market crash and in generally depressed economic conditions. In other words, contrary to the indoctrination which the American people have received from their political authorities, the Great Depression was not the failure of America’s free-enterprise system — it was the failure of political manipulation of money and credit.

Franklin D. Roosevelt was elected President in 1932. Faced with the Great Depression — a depression which had been caused by government itself — Roosevelt’s “solution” was to implement the socialist-fascist economic system under which Americans now suffer. Under the banner of “saving America’s free-enterprise system,” FDR was directly responsible for the abandonment of America’s 150-year history of free enterprise.

Arguing that the American people could no longer be trusted to be charitable to others, FDR claimed that government — the organized means of coercion and compulsion — was needed to help those in need. And to effect this claim, he secured the passage of his New Deal for Americans. Roosevelt used the disastrous results of one governmental intervention — political manipulation of money — to justify another — the socialist ideal of using government to steal from those who have in order to give the loot to those who need.

And what the American people had permitted to be done to them in 1913 came back to haunt them in a terribly disastrous way, for it was through the income tax and the power to expand money and credit that Roosevelt was able to accomplish effectively his political plundering and looting, not only from the rich but from everyone in all walks of life.

But Roosevelt did more than just enshrine into the American political and economic system the ideas of Karl Marx and Joseph Stalin (the mass murderer FDR affectionately referred to as “Uncle Joe”). Greatly admiring Benito Mussolini’s fascist system in Italy, Roosevelt proceeded to implement the same type of economic system in the U.S. For example, his National Recovery Act gave him virtually unlimited dictatorial powers over American business and industry. And any American citizen who did not do his “patriotic” duty by supporting the NRA and its “Blue Eagle” soon found himself at the receiving end of FDR’s vengeance and retaliation.

And it was during this period of time that such alien schemes as the Social Security Act, the FDIC, the Agricultural Adjustment Act, the Emergency Banking Relief Act the Tennessee Valley Authority, the Federal Securities Act, and the National Labor Relations Act came into existence — all with the aim of taking control of people’s lives as well as absolving them from responsibility for errors and foolhardiness by giving them the political loot that had been stolen from others.

But all of this was not sufficient for FDR. He persuaded Congress to provide him a power which Stalin and Mussolini proudly possessed: the power to nationalize people’s gold. And his confiscation of gold was accompanied by one of the most shameful acts in American history: the repudiation of government debts payable in gold — the noteholders, most of whom were Americans who had in good faith trusted their government, were instead paid in devalued paper money.

And what was the reaction of the American people to the evil, immoral, and tyrannical acts of FDR? Like people in other parts of the world who were suffering under dictatorial rule — Russians, Germans, and Italians — most of them reacted like sheep — meekly going along with their own slaughter and, in many instances, ardently supporting it. Having lost the sense of self-reliance which had characterized their ancestors — having lost their faith in freedom and themselves — having lost their faith in God Himself — the American people proceeded to relinquish to Caesar the power to direct their lives and plunder their fortunes, just as people throughout history had done.

But there were great patriots who stood fast and fought hard against the evil and immoral machinations of FDR. Some were well-known — men like John T. Flynn, Albert J. Nock, Garet Garrett, and Hamilton Fish. Others were less well-known — and now long forgotten — but who were equally devoted to the principles of America’s Founding Fathers — men like Benjamin Wallace Douglass, a farmer from Brown County, Indiana; William S. Mudd, a newspaperman from Tuscaloosa, Alabama; and J. Edward Jones, an oil man from Kansas. Knowing that FDR was one of the most ruthless men who have ever held political office, these individuals nonetheless pledged their lives, fortunes, and sacred honor in the defense of what they knew to be right.

For several years, the U.S. Supreme Court, led by four justices — Sutherland, Butter, Van Devanter, and McReynolds — declared FDR’s socialist and fascist New Deal policies in violation of the United States Constitution — in violation of every principle of individual liberty and limited government on which this nation was founded.

But the end came in 1937. In what many judicial scholars say was a result of Roosevelt’s disgraceful and pathetic attempt to pack the court with some of his cronies, a fifth justice — Owen J. Roberts, whose vote had helped to invalidate much of the New Deal — shifted his vote in favor of Roosevelt’s policies. And with Roosevelt thereafter being able to replace dying and retiring justices with ones who would do his bidding, the era of American economic liberty came to a sad and tragic end.

Is it possible to recapture the principles of freedom on which America was founded — to end the welfare-state, planned-economy way of life — to return to a true free-enterprise system — to regain the moral principles associated with individual liberty and limited government? You bet it is! But it will take a willingness to confront reality and to free our minds — and those of our children — from years of political indoctrination … a readiness to fight for what we know to be right and true … a faith in freedom and the caring nature of others … and a conviction that man, not government, should ultimately control his own destiny.

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    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.