One of the interesting aspects of the Honduran coup debate is with respect to the economic policies of ousted President Manuel Zelaya. Those who defend Zelaya’s ouster are quick to criticize his leftist philosophy and programs, along with his ideological alliance with Hugo Chavez, the leftist ruler of Venezuela.
Why is that interesting?
Because Zelaya’s and Chavez’s economic philosophy and programs are no different, in principle, from those of U.S. President Franklin Roosevelt, who many Americans view as an icon and whose policies are still credited by many to have “saved America’s free enterprise system.”
The obvious question arises: If socialism and interventionism are bad for Latin America, why do so many Americans still extol and praise Roosevelt for foisting them on the American people?
In fact, I couldn’t help but be amused over reading that Zelaya had raised the minimum wage in Honduras by 60 percent. The purpose? To help the poor, of course. That’s the standard explanation that every statist gives for the minimum wage
Of course, as every libertarian knows, that’s ridiculous. If poverty could be ended through minimum-wage mandates, poverty would have disappeared eons ago. It doesn’t take much for a government to issue a minimum-wage decree. The truth is that minimum-wage laws hurt the very people they purport to help because they lock out of the labor market those people whose labor is valued in the marketplace at less than the minimum wage.
So, what happens to those unemployed people? They starve to death, unless the state puts them on welfare, which then makes them submissive, obedient, dependent wards of the state, scared to death that their dole is going to be cut off.
Let’s not forget that the minimum wage was one of Roosevelt’s principal socialist and interventionist programs too. In fact, it was during the FDR administration that one of our nation’s most important legal battles took place in the U.S. Supreme Court, a battle in which American statists prevailed over the advocates of economic liberty.
In the 1923 case of Adkins v. Children’s Hospital, the Supreme Court had declared that minimum-wage legislation was unconstitutional. The idea was that such legislation infringed upon people’s liberty of contract, an aspect of liberty that was protected by the due process clause of the Fifth and Fourteenth Amendments. People have a fundamental right, the court held, to enter into mutually beneficial exchanges with one another. Liberty of contract was part of what became known as economic liberty.
Who benefited from liberty of contract? Both the employer and employee! After all, if two people voluntarily enter into an agreement, both of them benefit from it. Otherwise, they wouldn’t enter into it. Oftentimes, poorer people would work for what would seem to others to be a low rate of pay, acquire skills in the trade or business, and then go out and start their own businesses.
Then Roosevelt came into power. Like Zelaya and Chavez, Roosevelt adopted various forms of socialism and interventionism, purportedly to “help the poor.” His statist programs included Social Security, the AAA, the NIRA, agricultural subsidies, federal housing relief, mortgage moratoriums, confiscation of gold, redistribution of income, tax increases, and paper money.
Not surprisingly, Roosevelt, like Zelaya and Chavez, was also an ardent supporter of the minimum wage. In 1937 — at the height of Roosevelt’s New Deal — the Supreme Court overruled the decision in Adkins and upheld the constitutionality of the minimum wage.
What was Roosevelt’s role in this? After the Supreme Court had declared much of his socialist and interventionist programs unconstitutional, Roosevelt refused to follow the proper course of seeking a constitutional amendment for his alien plans. Instead, he came up with a notorious scheme that would enable him to pack the Court with ideological cronies who would vote to uphold the constitutionality of what he was doing to America. While the scheme failed, it might have placed sufficient pressure on one justice — Justice Owen Roberts — to cause him to shift his vote in favor of Roosevelt’s position. While Roberts later denied that he had succumbed to such pressure, his vote became known as the “switch in time that saved nine.”
West Coast Hotel was a watershed legal decision, not only because of the minimum-wage issue but also because never again would the Supreme Court declare any law unconstitutional on the ground of economic liberty. Statism became an established way of life in America, as it is in Honduras, Venezuela, and other parts of Latin America.
So, how come some people are so quick to criticize Zelaya and Chavez for their socialist and interventionist policies while extolling and praising those of Roosevelt?
That’s a good question!
