Sunday, November 27, 2011

Recent financial crises and economic stagnation are symptoms of constitutional failure

Published in The Tennessean, Sunday, November 27, 2011

by Richard J. Grant

The progressives among us often insist that we need stronger laws and greater regulation. But they don't really mean it – at least not in any consistent sense. While happy to load us up with regulations at all levels of government, they do so only by either ignoring or defining away any limitations on government at the constitutional level.

If we are now dogged by a flourishing pack of sharp-toothed regulators, it is because the constitutional leash intended to limit the range of politicians’ powers has been loosened from its anchor. The U.S. Constitution was intended as a conservative document that would give the national government a few defined powers and no more. Government was constitutionally limited to protect citizens from the whim of the aspiring oligarch and the appetites of the mob.

The Orwellian phrase, “living constitution,” really describes a constitution that is moribund. Any constitution that is dislodged from its roots and ceases to be an effective anchor on the actions of the government that it once defined will also cease to be worthy of the name “constitution.” If its words can be interpreted to mean whatever our political leaders choose them to mean, then it would be at most a set of rules through which we choose our de facto rulers.

The recent financial failures and economic stagnation, as well as the cynically polarized political environment and increased systemic economic risks, are all symptoms of the process of constitutional failure. They are symptoms of unfettered government and politically empowered greed. Each of us is ever more at the mercy of the vagaries of the political market.

It is a sign of intellectual confusion when people use military terminology to describe business. Such terms as “captains of industry” or “robber barons” or “market power” all imply some coercive command over competitors, employees, and customers. But the defining feature of business is the voluntary exchange of property rights. Power, in the coercive sense, has nothing to do with it except when necessary to defend legitimate property rights.

A constitution that protects property rights from confiscation or arbitrary diminution is a constitution that protects a free people. A person's property is a product of that person's life; and a government that fails to protect that property from predation fails to protect the fullness of that life. This remains true whether people control their property as individuals or in voluntary associations such as cooperatives or corporations.

Such cooperation under well-constructed constitutional rules enables people to improve their property and their lives. This explains the exceptional history and economic development of the United States. Perhaps the exceptional moral leadership that arose in the 18th century was an accident of history, but its constitutional product served to shape the moral destiny of its citizens and to make them better able to withstand future historical accidents.

The progressive breakdown of this morality is manifested in an anti-constitutional mentality. It is now confusing when the President of the United States preaches to the Chinese about “following the rules of trade” as well as the need to “respect intellectual property rights” and have a sound currency. The Chinese need to hear it, but not from a president who is uninhibited in his ambition arbitrarily to redistribute the property of his own citizens, to force them to purchase prescribed products, and to regulate how they live.

Richard J. Grant is a Professor of Finance and Economics at Lipscomb University and a Senior Fellow at the Beacon Center of Tennessee. His column appears on Sundays.


Twitter: @RichardJGrant1

Copyright © Richard J Grant 2011