Business Week: Mr. Candidate, with such outlandish ideas as abolishing the Federal Reserve System, can you really expect any support from members of the business community? Every country in the world has a central bank. How else can a society assure itself of a stable and expanding supply of money to sustain growth and prosperity over time?
The Candidate: During the last decade, we have watched the demise of socialist central planning in Eastern Europe and the former Soviet Union. It is now generally accepted that modern societies are simply too complex to plan and direct from “the center” by even the wisest of well-intentioned men. All that socialist central planning produced was economic chaos, material shortages, and human hardships.
If socialism was unable to provide people with the simplest of desired consumer goods — things like decent food and properly fitting shoes — why should we expect that monetary central planning can work any better? And it is necessary to realize that that is exactly what central banking is. The government assumes monopoly control and management of the supply of money in the society. The central bank decides how much money will be in the economy; it determines the rate at which the money supply will increase or decrease; and it dominates and manipulates the entire banking system of the economy through its powerful ability to determine the amount of loanable funds the financial institutions have at their disposal.
How can a handful of men on the Board of Governors of the Federal Reserve System — even with the most expert staff of researchers and assistants — know what the value of money should be; whether the value of money should be stabilized or changed; how changes in the money supply should be introduced into the economy and to what extent; what impact such changes in the money supply should or will have on the market rates of interest; and whether such influences on the rates of interest may not, in fact, throw out of balance the entire savings and investing process in the economy?
For over eighty years, the United States has had a central bank. What have been the results? A false prosperity in the 1920s, a Great Depression in the 1930s, and a roller coaster of inflationary booms and often severe recessions in the post-1945 era. These are not “mistakes” from which the monetary central planners can supposedly learn so as to “get it right” the next time. The central monetary planners can never get it right, because central planning itself is inherently defective.
What should be the value of money? There can never be a definite answer to that question. For value can come only from the buying decisions of multitudes of people in the marketplace. How much money should be in the economy? That’s no different from asking how many pairs of size 9-wide black shoes or size 42-regular brown sports jackets should be supplied on the market. No one can ever know the answers to these questions. We must simply allow the market to discover how many people want these items at various prices and how many such sizes various suppliers are willing to offer at those market prices. The market — the valuations of millions of buyers and sellers — is the best determinant of how much money is needed in an economy.
What, then, needs to be done? First, legal tender laws need to be repealed. People must have the freedom to exchange and contract in any money they so choose, having the agreements recognized and enforced in the courts.
Second, the Federal Reserve Act must be repealed and the Federal Reserve System must be abolished. The market — which means people themselves interacting with one another — will then decide what types of commodities are most advantageous and mutually beneficial to utilize as media of exchange. Based on historical experience, it will not be surprising if the market ends up selecting a commodity like gold or silver as the primary medium of exchange.
How much money will then be supplied on the market? This will be determined by the supply of and demand for such commodities in the marketplace. Supply will be affected by the profitability of supplying the commodities in monetary form, which in turn will depend upon the cost of mining, refining, minting, and transporting the commodities and the profitability of those commodities in alternative uses in the market.
The denationalization of money will also be beneficial in a number of other ways. First, it will depoliticize the money-creation process. This means that government will no longer have the power or authority to arbitrarily create money to serve its political interests — to finance budget deficits, the real costs of which the politicians always wish to hide from the voting public. Second, it will eliminate the government’s manipulation of interest rates and private-sector savings and investment decisions. This will do away with the primary cause of inflationary episodes followed by wasteful recessions and depressions. Third, it will improve the general financial climate for long-term growth and rising standards of living. The likelihood that dramatic fluctuations in the supply and value of money will have been minimized will create greater investor confidence for long-term investment.
It is precisely because money is such an important element for the successful functioning of a market economy that its control cannot be left in the hands of the government or any government-appointed monopoly agency. Money cannot be safely trusted in the hands of any group of monetary central planners any more than the Soviet central planners in Moscow could be trusted with the management of the Russian economy. Planners lack the knowledge and ability to do better than leaving money matters in the hands of the people themselves in the market. And the political powers controlling the monetary central planners will always be tempted to use and abuse the printing press for their own gain and that of the special interests with whom they are connected.
Jet: Mr. Candidate, how do you propose to use the government to help eliminate the underlying racist forces that continue to prevent the equal opportunities that minorities are entitled to in America? How do you propose to see that the injustices committed against minorities in the past are redressed? Your opening statement can easily be understood as a green light for racial bigotry, since you do not want government to play any positive role in race relations in America.
The Candidate: There is injustice, inequality, and denial of opportunities to all in America today. And this is causing a deep division in American society. We need to correctly pinpoint the source and causes of these injustices and denials of opportunity.
To begin with, the philosophy of freedom that I am espousing in this campaign is the opposite of all forms of racist ideologies. Freedom always refers to the rights of individuals. Freedom always refers to the dignity, uniqueness, and importance of the individual. Freedom can never refer to the rights, dignity, uniqueness, or importance of a group or a collective, because groups and collectives have no independent or autonomous existence separate from the individuals comprising them. Take away the individuals comprising a group or collective and it ceases to exist. For the advocate of freedom, what distinguishes a man is not the pigmentation of his skin, the shape of his nose, the color of his hair, or his gender. What distinguishes a man is that he is a human being — a conscious, valuing, volitional, potentially creative being. These are among the essential qualities or attributes that define all men as the same — and, therefore, equal and deserving and possessing of rights equal to all other similar human beings.
Yet, each man uses his consciousness, decides what things to value, makes choices among the alternatives he weighs in his mind, and applies his creative potentials in ways that are different from his fellow human beings. Hence, each man is different, unique, and unequal from all others in terms of what he makes out of himself. Due to the choices made and the outcomes that result, therefore, men are not — and can never be — sequal in terms of either opportunities or results.
Of course, rarely are our opportunities and outcomes independent of the attitudes or actions of our fellow men. And often the choices, actions, and beliefs of our fellow men constrain our own set of possibilities. Sometimes men judge their fellows on grounds other than their individuality. Sometimes they judge and act towards their fellows on the basis of race, gender, religion, ethnicity, or language.
The question is: If some of our fellow men act towards us on the basis of such categorizations, how should we respond? We can choose to ignore them — go our own way, accepting the fact that their behavior limits some options that we wish we could have, but recognizing that as free men, they also are allowed to follow their values and choices no matter how much we may regret their conduct and vehemently oppose their standards of evaluating us.
Or we can choose to try to persuade them that their conduct towards others and the standards they use in doing so are wrong and even harmful to their own long-run self-interest. By refusing to associate or exchange with some people because of their prejudice, they are making themselves worse off by forgoing potentially mutually beneficial gains from trade. We may try to demonstrate this by associating and trading with others who do not have such exclusionary biases. And our mutually acquired gains from trade may make the exclusionists rethink whether they are not making themselves, in fact, worse off by behaving the way they do.
But what is impermissible in a free society is to use private or governmental force or the threat of such force to compel either segregationist or integrationist conduct on some of our fellow men who do not share our views and values. Once the threat or the use of force is introduced into human relationships — no matter how reasonable or meritorious it may seem — the floodgates of coercion are opened. Who, on the same rationalizing grounds, cannot equally claim a right to apply force to achieve whatever he considers to be “good,” “just,” “virtuous,” or “proper” behavior among men?
The injustices and denials of opportunities that have generated racial hostilities in contemporary America are due precisely to the introduction of force and the threat of force into human relationships. First slavery and then legal segregation denied those of different races from voluntarily interacting, trading, and associating with each other. And now, during the last thirty years, force and the threat of force have increasingly poisoned racial relationships through coerced integration and affirmative-action laws.
We will not begin to heal the racial tensions and hostilities in modern America until we give up the attempt to impose either legal segregation or integration on each other. To separate races or to compel their members to associate in ways they otherwise consider disadvantageous is precisely to think of, classify, and politically act towards people not as individuals but rather in terms of their racial characteristics. Both compulsory segregation and integration heighten and reinforce “race consciousness.” We will diminish racial awareness and racial antagonisms only when we return to a philosophy of individualism that reminds us of those things that make us all equal, yet individually distinct and unique.