Guest Post: How Communism Almost Ruined The First Thanksgiving

The Plymouth Pilgrims progressed from the false dream of communism to the sound realism of capitalism.

by Richard M. Ebeling

This time of the year, whether in good economic times or bad, Americans gather with their families and friends and enjoy a Thanksgiving meal together. It marks a remembrance of those early Pilgrim Fathers who crossed the uncharted ocean from Europe to make a new start in Plymouth, Massachusetts. What is less appreciated is that Thanksgiving is also a celebration of the birth of free enterprise in America.

The English Puritans, who left Great Britain and sailed across the Atlantic on the Mayflower in 1620, were not only escaping from religious persecution in their homeland. They also wanted to turn their back on what they viewed as the materialistic and greedy corruption of the Old World.

Plymouth Colony Planned as Collectivist Utopia
In the New World, they wanted to erect a New Jerusalem that would not only be religiously devout but be built on a new foundation of communal sharing and social altruism. Their goal was the communism of Plato’s Republic, in which all would work and share in common, knowing neither private property nor self-interested acquisitiveness.

What resulted is recorded in the diary of Governor William Bradford, the head of the colony. The colonists collectively cleared and worked the land, but they brought forth neither the bountiful harvest they hoped for, nor did it create a spirit of shared and cheerful brotherhood.

The less industrious members of the colony came late to their work in the fields and were slow and easy in their labors. Knowing that they and their families were to receive an equal share of whatever the group produced, they saw little reason to be more diligent in their efforts. The harder working among the colonists became resentful that their efforts would be redistributed to the more malingering members of the colony. Soon they, too, were coming late to work and were less energetic in the fields.

Collective Work Equaled Individual Resentment
As Governor Bradford of the Plymouth Colony explained in his old English (though with the spelling modernized):

For the young men that were able and fit for labor and service did repine that they should spend their time and strength to work for other men’s wives and children, without recompense. The strong, or men of parts, had no more division of food, clothes, etc. than he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labor, and food, clothes, etc. with the meaner and younger sort, thought it some indignant and disrespect unto them. And for men’s wives to be commanded to do service for other men, as dressing their meat, washing their clothes, etc. they deemed it a kind of slavery, neither could husbands brook it.”

Because of the disincentives and resentments that spread among the population, crops were sparse and the rationed equal shares from the collective harvest were not enough to ward off starvation and death. Two years of communism in practice left alive only a fraction of the original number of the Plymouth colonists.

Private Property as Incentive to Industry
Realizing that another season like those that had just passed would mean the extinction of the entire community, the elders of the colony decided to try something radically different: the introduction of private property rights and the right of the individual families to keep the fruits of their own labor.

As Governor Bradford put it:

And so assigned to every family a parcel of land, according to the proportion of their number for that end . . . This had a very good success; for it made all hands very industrious, so as much more corn was planted then otherwise would have been by any means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little-ones with them to set corn, which before would a ledge weakness, and inability; whom to have compelled would have been thought great tyranny and oppression.”

The Plymouth Colony experienced a great bounty of food. Private ownership meant that there was now a close link between work and reward. Industry became the order of the day as the men and women in each family went to the fields on their separate private farms. When the harvest time came, not only did many families produce enough for their own needs, but also they had surpluses that they could freely exchange with their neighbors for mutual benefit and improvement.

In Governor Bradford’s words:

By this time harvest was come, and instead of famine, now God gave them plenty, and the face of things was changed, to the rejoicing of the hearts of many, for which they blessed God. And the effect of their planting was well seen, for all had, one way or other, pretty well to bring the year about, and some of the abler sort and more industrious had to spare, and sell to others, so as any general want or famine hath not been amongst them since to this day.”

Rejecting Collectivism for Individualism
Hard experience taught the Plymouth colonists the fallacy and error in the ideas that since the time of the ancient Greeks had promised paradise through collectivism rather than individualism. As Governor Bradford expressed it:

The experience that was had in this common course and condition, tried sundry years, and that amongst the Godly and sober men, may well convince of the vanity and conceit of Plato’s and other ancients; -- that the taking away of property, and bringing into a common wealth, would make them happy and flourishing; as if they were wiser than God. For this community (so far as it was) was found to breed confusion and discontent, and retard much employment that would have been to their benefit and comfort.”

Was this realization that communism was incompatible with human nature and the prosperity of humanity to be despaired or be a cause for guilt? Not in Governor Bradford’s eyes. It was simply a matter of accepting that altruism and collectivism were inconsistent with the nature of man and that human institutions should reflect the reality of man’s nature if he is to prosper. Said Governor Bradford:

Let none object this is man’s corruption, and nothing to the curse itself. I answer, seeing all men have this corruption in them, God in his wisdom saw another course fitter for them."

The desire to “spread the wealth” and for government to plan and regulate people’s lives is as old as the utopian fantasy in Plato’s Republic. The Pilgrim Fathers tried and soon realized its bankruptcy and failure as a way for men to live together in society.

They, instead, accepted man as he is: hardworking, productive, and innovative when allowed the liberty to follow his own interests in improving his own circumstances and that of his family. And even more, out of his industry result the quantities of useful goods that enable men to trade to their mutual benefit.

Giving Thanks for the Triumph of Freedom
In the wilderness of the New World, the Plymouth Pilgrims progressed from the false dream of communism to the sound realism of capitalism. At a time of economic uncertainty and growing political paternalism, it is worthwhile recalling this beginning of the American experiment and experience with economic freedom.

This is the lesson of the First Thanksgiving. This year, when we, Americans sit around our dining table with family and friends, we should also remember that what we are really celebrating is the birth of free men and free enterprise in that New World of America.

The true meaning of Thanksgiving, in other words, is the triumph of Capitalism over the failure of Collectivism in all its forms.




Richard M. Ebeling is BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel in Charleston, South Carolina. He was president of the Foundation for Economic Education (FEE) from 2003 to 2008.

This article was originally published on FEE.org. Read the original article.

From the Archives: James Robinson discusses 'why nations fail' at George Mason University

James Robinson discusses 'why nations fail' at George Mason University
May 4, 2013 7:37 PM MST

In his first speaking engagement at George Mason University on the evening of May 2, Harvard political scientist James A. Robinson paid a compliment to the school by noting its “distinct intellectual atmosphere.”

Robinson appeared at the Arlington campus of GMU at the invitation of the Mercatus Center to discuss his recent book, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, which he co-wrote with MIT's Daron Acemoglu.

In his lecture, Robinson explained how his and Acemoglu's empirical research had led to a predictive theory about how nations develop economically and politically. All countries, he said, can be plotted on a matrix using the categories “inclusive” (politics and economics) and “extractive” (politics and economics).

Success or failure for nations depends on whether they have inclusive or extractive institutions, Robinson said, and these institutions have their origins deep in history – although circumstances can change through the adoption and adaptations of new, better institutions.

England and Virginia

As an example of this kind of change, Robinson noted that 200 years before the Industrial Revolution, England was an economic backwater on the edge of Europe. Elizabeth I's defeat of the Spanish Armada in 1588 was unexpected and unpredictable, yet by 1788, Great Britain was Europe's most formidable economic power and the world's leading colonizer. This was the result of institutional change in law and society.

After signing books for fans and admirers, Robinson clarified and expanded some of his remarks in an interview with the Charlottesville Libertarian Examiner.

He explained that although the Spanish and English colonies in the Americas both began with the same model, the English experience at Jamestown, Virginia, set North America down a more economically prosperous path than the colonies in South America trod.

The circumstances in Virginia and, for instance, Buenos Aires, “were very different,” Robinson said.

“Because there were very few indigenous people [who were] organized in a very different way in Virginia as compared to, say, the central valley of Mexico, a very different type of society emerged.” This society was “based on creating incentives and opportunities for European [settlers] rather than exploiting indigenous people,” which was the case in Latin America.

Mysterious development?

Asked whether there is a difference in the questions of “why nations fail” and “why nations succeed,” Robinson replied that “they're two sides of the same coin.”

The reason his book has the title it does is that he and his co-author “don't think of economic development as being mysterious.”

Instead, he said, “to us, the puzzling thing is, why on earth don't poor countries that ought to be able to generate huge amounts of wealth and improve the living standards of their people” do so by investing in education, adopting technologies, and securing property rights?

“Why don't they do it?,” he repeated. “We've always found failure more puzzling. Why is it people don't take advantages of these huge opportunities?” This question is particularly salient when countries have abundant mineral resources, climates and soils conducive to agriculture, and convenient locations for trade and industry -- yet still fail to develop economically.

Cultural predictors

Many commentators on economic development – Thomas Sowell, for instance – focus on cultural values as the basis for success or failure. Robinson and Acemoglu take a different approach by emphasizing institutions.

Their approach, Robinson said, came about “mostly because of the empirical work we've done, all the scientific research. We've always found measures of institutions to have much more predictive power than different measures of culture.”

He conceded that “there's a problem of language here. When I talk about institutions, I don't just mean things written down, like the U.S. Constitution.”

He gave the example of the limit of two presidential terms, which was established as “a social norm that lasted for 150 years” by George Washington, before Franklin Roosevelt parted with the tradition and, eventually, the Constitution was amended to make the tradition statutory.

Nobel laureate economist Douglass North, he pointed out, “talks about informal institutions, social norms, and I think that's enormously important. It's not just about written-down laws. Social norms and informal institutions are quite similar to what a lot of people talk about when they talk about culture.”

When Robinson and Acemoglu talk about culture, however, “it's not about values or normative beliefs or normative principles or religious principles. We don't find that to be important; we don't think it's important” in terms of predictive value for economic success or failure.

Why Nations Fail is published in hardback by Crown Business and in paperback by Profile Books Ltd.


Publisher's note: This article was originally published on Examiner.com on May 4, 2013. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Guest Post: Dave Chappelle Understands Free Trade Better Than Most Politicians

Chappelle’s words of wisdom should be inscribed on plaques to be placed on the wall in the White House.


by Allan Golombek

Dave Chappelle is a great comedian. But he may be an even better economist. He certainly understands free trade a lot better than some of the people who are currently in charge of directing U.S. trade policy.

In a recent comedy routine, Chappelle provided a succinct explanation of why it makes more sense for the United States to import some goods from China rather than try to pursue a protectionist trade policy aimed at producing everything domestically.

The Difference Between Wearing and Making Nikes

Chappelle summarized President Trump’s position vis-à-vis China: “I’m gonna go to China, and I’m gonna get these jobs from China and bring ‘em back to America.” Chappelle then interrupted his Trump soliloquy, asking: “For what, so iPhones can be $9,000? Leave that job in China where it belongs … I wanna wear Nikes, I don’t wanna make those things. Stop trying to give us Chinese jobs.”

Chappelle’s words of wisdom should be inscribed on plaques to be placed on the wall in the White House, the office of the US Trade Representative, and the Department of Commerce — and the trade ministries of some other countries. The reason people buy imported goods is because they feel they are getting a better deal for their money than if the product was made domestically.

Would it make sense for us all to make our own footwear, assemble our own smartphones, grow our own food, and — for that matter — build our own homes? If we tried to do that, where would we get the time and energy to treat cancer, create new technologies and medications, or give Pilates lessons? If we had to make our own iPhones and Nikes, would we be able to afford to buy them? And what would we have to give up to be able to?

Moreover, by offshoring the assembly of iPhones and Nikes, we actually keep domestic jobs competitive. Most of the value added to an iPhone occurs in the United States — Chinese workers assembling them and adding some of the parts just makes Americans more competitive. Nike employs tens of thousands of people in Vietnam, but the company also employs thousands in metropolitan Portland — jobs that pay better, jobs that can be maintained only by offshoring some of the less complex and lower-paying work.

Warning: NSFW Language

An Economy Needs More than Exports

Growing an economy is not a matter of turning imports into exports. Robust economies do more of both. The opportunity to import actually helps achieve productivity and prosperity more than the opportunity to export because it does more to broaden choice. Importing widens the circle of potential suppliers competing to meet the needs of intermediate producers. When a country opens its borders to imported goods, it facilitates comparative advantage, importing inputs from countries that are more efficient at making them — and thereby making domestically-produced final products more competitive.

On the other hand, countries that have tried to fight reality and produce everything for themselves have paid the price. In which economy would you rather live — North or South Korea? In the early 1970s, both countries had roughly the same GDP per capita. One of the reasons South Korea has raced ahead is that North Korea has pursued autarky. South Korea has become so much wealthier not simply because it exports far more, but because it exports and imports far more. By buying things they need from other countries, they free themselves to do the things they are best at doing. Importing is not a necessary evil; it is a necessary ingredient.

Unfortunately, many look at imports as money leaving an economy instead of value entering it. Many look back fondly to a time when almost all goods sold in the United States were manufactured in the United States. Perhaps we could resurrect that world — but only if we were willing to give up the iPhones, Nikes, laptops, medical technologies, and all of the other modern goods that trade has made possible.

The reason we are able to maintain a 21st-century lifestyle is because we pursue a 21st-century economy. Bringing back the 1970s economy would also entail bringing back the 1970s lifestyle that came with it.

By importing from developing countries, we are in effect hiring people at a cheaper price than we could obtain at home. There is a word for the result — “progress.”

Reprinted from RealClearMarkets.

Allan Golombek is a Senior Director at the White House Writers Group.

This article was originally published on FEE.org. Read the original article.

Guest Post: No, Capitalism Is Not Ruining Your Christmas Market

by Bill Wirtz

Glowing Christmas lights fill the cold streets of medieval European cities with little wooden booths selling steaming hot wine and cinnamon biscuits. However, the traditional look and idyllic atmosphere seem to be threatened by the evil of modern-day capitalism. That is, at least, the common saying of visitors of these markets. But are big companies actually ruining your favorite winter experience?

All We Want for Christmas Is... Sales
Your local Christmas market is a money-making machine regardless of it selling candles or car insurance. 

Christmas market, Barcelona, 1986

First off: Christmas markets are, at least in Europe, a billion euro industry. In 2014, the largest sales were counted in Germany with almost €2.5 billion ($2.9 billion) in revenue, followed by France with €820 million ($965 million). In a more detailed analysis on Christmas markets in the UK, researchers found that in the example of the city of Manchester, an average stall at a Christmas market generated £3,500 ($4,600) per day.

They add that if you also account for the tourism factor — as large amounts of visitors are either from abroad or coming from a different city and staying overnight — you're seeing spending of £10 million ($13.3 million). Christmas markets in Brussels, Belgium, and Strasbourg, France count between 1.5 and 2 million visitors. The Christmas market on Paris' Champs-Elysées counts over 200 booths and over a staggering 15 million visitors each year.

Your local Christmas market is a money-making machine regardless of it selling candles or car insurance. Claiming that the hot wine salesman in his wooden booth isn't as interested in making a profit as Coca-Cola which is giving out free samples would mean being blinded by emotion.

It's Beginning to Look a Lot Like... Prosperity
When presented with the choice of living under socialism or free-market capitalism, even those who preach socialism choose the latter. 

The Christmas spirit is supposed to advocate for empathy and compassion, as the biblical stories describe Jesus, a poor man, who preached charity despite receiving very little of it in return. These days, most "charity" is in the hands of the government through welfare programs. The reasons to oppose the welfare state are numerous, but outside of the inefficiency and cost of government bureaucracy, both government spending on welfare and charity fail to create value.

World Bank and UN reports celebrate a global success story: between 1990 and 2008, the world cut by half the share of the world’s poor, those living on less than $1.25 a day. The United Nations also points out that 2.6 billion people have gained access to improved drinking water while the number of hungry people has declined by 20 percent in the last 20 years. 

The origin of development is, of course, the wealth created by entrepreneurs and large businesses which have not only provided jobs in areas in which there were none before but whose reduced production costs have made high-end goods accessible to all. 

Compare this to socialism, the likes of which create starvation in Venezuela and North Korea or unclean drinking water in Cuba, not to speak of the massive injustices and infractions on people's individual liberty. When presented with the choice of living under authoritarian socialism or living under free-market capitalism, even those who preach socialism choose the latter.

Who Do We Celebrate?
Next time you see a large coffee machine retailer, think of the people whose lives were made better through these companies. 

Christmas decorations, Oxford Street, London, 1986

We are aware that the success stories of free-market capitalism improving the living conditions of the poorest of the poor through reducing living costs and improving access to quality good and services. However, they fail to be the ones who are actually celebrated around Christmas for providing these essential opportunities to people. We worship those who give handouts to the poor, but we hold those who enable poor people to rise and improve their living conditions in utter disdain.

When there is a large company selling their products on a traditional Christmas market, many see a greedy company ruining the flair of the Christmas spirit. It doesn't occur to them that millions of people are able to put food on the table and buy gifts for their children: something that prior to the emergence of free-market capitalism was a privilege reserved for the very few. All it takes to see this is to think of the millions of people oppressed by socialism, like those in Venezuela, who will, this year, spend among the worst Christmas Eves they have ever witnessed.

Next time you see a large coffee machine retailer or a booth advertising cleaning products at your local Christmas market, think of the people whose lives were made better through these companies.

The greatest gifts aren't wrapped in paper, but stats about poverty reduction.





Bill Wirtz is a Young Voices Advocate. His work has been featured in several outlets, including Newsweek, Rare, RealClear, CityAM, Le Monde and Le Figaro. He also works as a Policy Analyst for the Consumer Choice Center.

This article was originally published on FEE.org. Read the original article.

From the Archives - Dick Armey on the U.S. Congress: 'the most dangerous gang of economic illiterates I've ever seen'

Dick Armey on the U.S. Congress: 'the most dangerous gang of economic illiterates I've ever seen'
September 15, 2010 2:52 AM MST

According to its co-author, former Texas Congressman and House Majority Leader Dick Armey, the new book, Give Us Liberty: A Tea Party Manifesto, came about in response to mean-spirited attacks on Tea Party participants.

“We were sitting around looking at these horrible, mean ways in which these good folks were being characterized,” Armey related, “and we said, ‘Somebody needs to tell the whole story, the true story.’”

Tea Party’s ‘true story’
That “true story,” Armey explained to the Charlottesville Libertarian Examiner, was that, even before the movement had a name, Tea Party activists from around the country sought advice from FreedomWorks, the advocacy group that Armey chairs.

“Almost without exception,” he said, “wherever you look in the country -- California, Florida, wherever -- where somebody wanted to put a group together and start getting the ball rolling, they called us.”

Armey answered questions about his book, the Tea Party, and the 2010 and 2012 elections in an interview on the eve of the second 9/12 Taxpayer March on Washington, which this year attracted a crowd of 100,000 or more protesters who gathered on the West Front of the U.S. Capitol to hear a range of speakers from Colombian immigrant Tito Munoz to former New Mexico Governor Gary Johnson to Virginia Attorney General Ken Cuccinelli.

Understanding Economics

The average Tea Party member, Armey agreed, has a better grasp of economics than the average Member of Congress.

“No doubt about it,” he said. “That’s one of the things that really distresses me.”

The country is in trouble, he added, if Congress Members' “understanding of economics, how the economy works, the world of commerce, where the money comes from, is less than” that of the typical citizen.

“This is a serious problem and I have no doubt about it,” Armey said with emphasis.

“You take a look at the leadership in the House and the Senate and the Executive Branch of government, starting with the President, it is the most dangerous gang of economic illiterates I’ve ever seen in my life.”

No ‘honest curiosity’
Having served in Congress for nearly two decades, Armey had observed the capacity of its Members to understand basic economic concepts.

“It is frightening,” he said. “They don’t have an honest curiosity about economics. I just don’t believe any one of them ever looked at this and asked the question, where’s this money coming from?”

Armey described legislators as “a bunch of kids that found the money tree” who say, “’We can just spend all we want.’”


Publisher's note: This article was originally published on Examiner.com on September 15, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Guest Post: Old Man Potter Lived a Wonderful Life

by Tom Mullen

December is upon us and that means plentiful opportunities to watch the enduring classic, It’s a Wonderful Life. Unfortunately, the overwhelming majority of viewers completely misinterpret Frank Capra’s dystopian nightmare as a heartwarming Christmas tale.

The emotional appeal of angels getting their wings is undeniable. Crying out for correction, however, are the vicious slanders regarding the film’s real hero, Henry Potter.

We first hear of Potter from George Bailey’s father, Peter Bailey, who badmouths Potter with the usual falsehoods about businessmen. But during Bailey’s envious rant, we learn something important: Henry Potter is a board member of the building and loan. We later learn Potter is, in fact, a stockholder.

That puts a somewhat different light on his subsequent motion to liquidate the business upon Peter Bailey’s death. Yes, we hear George Bailey repeating the familiar socialist tropes his father did: that Potter only wants to close the building and loan because he “can’t get his hands on it” and considers the little people cattle, etc. 

But Potter responds with some rather inconvenient facts: the building and loan has been making bad business decisions, providing what we’d now call subprime loans to people who can’t pay them back.


Potter the Stockholder
The Baileys squander their investors’ money on a do-gooder, subprime loan scheme to make everyone a homeowner.

We don’t know how Potter became a stockholder, but the Bailey Building and Loan does not appear to be a publicly traded company. The most likely explanation is Peter Bailey asked Potter for capital, just as George Bailey does later in the film, in between rounds of disparaging Potter as a greedy capitalist. That would be perfectly consistent with today’s “progressives,” who rail against capitalists out of one side of their mouths while sucking up to them for money out of the other.

But regardless of how Potter became a stockholder, Peter Bailey has a fiduciary duty to him to run the business for maximum profit, providing Potter and the other stockholders a return on their investments, something George Bailey confirms they never intended to do. Instead, the Baileys squander their investors’ money on a do-gooder, subprime loan scheme to make everyone a homeowner. It worked out in fictional Bedford Falls about as well as it did in early 2000s America.

Meanwhile, the Baileys constantly slander Potter’s rental houses as “overpriced slums.” These are the same Baileys whose housing opportunities are more expensive than Potter’s.


But People Like Potter’s Houses
Their accusations constantly beg the question: If Potter’s houses are so bad, why do so many people choose to live in them? It’s constantly implied Potter’s customers have no other choice, but what exactly does that mean? Why has no one else, including any of the businessmen on the board of the Bailey Building and Loan, developed rental properties that are higher in quality, lower in price, or both?

The inescapable truth is Potter is wealthy because he provides a product that most satisfies his customers’ preferences for quality and price. If there were an opportunity to provide a higher quality product at a lower price than Potter was charging, a competitor would do so and take market share away from Potter, until Potter either raised his quality, lowered his price, or both.

The Baileys burn with resentment that so many residents of Bedford Falls prudently choose to live in Potter’s less expensive housing than buy a house they can’t afford, financed by the Baileys’ Ponzi scheme. Thus, even after shirking their fiduciary duty to run the business properly, the Baileys spend decades assaulting Potter’s character in a transparent attempt to lure away his customers.


Potter the Rescuer
When the Depression hits and the Bailey Building and Loan is exposed for the fractional reserve fraud it is, Potter offers to come to the rescue with a generous offer to buy out its customers. It is noteworthy there is a run on the Bailey Building and Loan and the local bank, but Potter is financially secure enough to save them both, proving once again he is the only honorable businessman in the film.

But we must give the devil his due. George Bailey, the ultimate huckster, saves the building and loan without Potter’s help, convincing the yokel mob making a run on his business to keep their money tied up in his fundamentally insolvent confidence game.

That brings us to the one regrettable act Potter is guilty of, which is concealing the $8,000.00 the incompetent Billy Bailey inadvertently handed him while attempting to make a deposit. It’s true this was an underhanded act, although not unprovoked.

We don’t know how much Potter had invested in the Building and Loan to become a stockholder, but suspect it was a lot more than $8,000. One could make the case he was merely getting back some of the money the Baileys had previously defrauded him of, but there are courts for such matters and Potter should have sought their help if he had a case.


Smearing Potter
Nevertheless, two generations of Baileys had led a decades-long assault on Potter’s good name, resulting in most townspeople disliking him, even though he has quite literally saved their lives on numerous occasions. Without him, a large portion of Bedford Falls would be unemployed, have nowhere to live, or both. It is not an exaggeration to say that without Henry Potter, Bedford Falls would cease to exist. Yet, thanks to the Baileys, he is the most hated man in town.

Compare Potter’s vindictive reaction when George Bailey crawls to him for help after the $8,000.00 is lost to Potter’s reaction at the board meeting at the beginning of the movie. At the board meeting, Potter dismisses George’s unhinged attack upon him and redirects the discussion to the subject of the meeting: what is best for Bedford Falls. By the latter confrontation, Potter tries to have George arrested for embezzling.

Potter’s dastardly act is totally out of character with the Potter of the earlier scene or any other event we know of in Potter’s life. As far as we know, he has always been a hard-nosed, unsentimental businessman, but has never committed a crime or held a grudge, as he does now. Everything we know about Potter up to this point tells us his vindictive attempt to have George Bailey prosecuted is precisely the kind of emotional decision-making Potter has avoided for most of his life. That is why he is so wealthy at the beginning of the film.


Potter’s Breaking Point
Everyone has a breaking point. Potter had evidently reached his. Had he been prosecuted for keeping the $8,000.00, which may have been tricky from a legal standpoint, given that Billy Bailey had handed the money to him, he could easily have plead temporary insanity caused by years of psychological warfare waged against him by the Baileys.

We’ll never know, because before Potter has any opportunity to allow his passion to cool and clear up the misunderstanding, George Bailey sets off on his suicide melodrama, followed by a long, self-aggrandizing hallucination about angels and how Bedford Falls would be worse without him. By the time he concludes his childish escape from reality, the same yokels he previously conned during the Depression are now bailing him out once again, foreshadowing so many future bailouts of dishonest financiers whose assets should have been turned over to better management in bankruptcy court.


The Triumph of Evil
In one of the darkest moments of the film, George Bailey’s Christmas tree is jostled and one of the bells adorning it rings. George Bailey, now confident he and his fraudulent real estate scheme are safe, suggests the bell signifies an angel has earned his wings, as if his dishonest business dealings and ruthless defamation of legitimate competitors had divine sanction.

Nothing more is heard of Henry Potter, the man without whom Bedford Falls would not exist. He is left friendless and without the one thing he could cling to before George Bailey, the Devil incarnate, wrested it from his grasp: his honor. As the credits roll, evil has triumphed. The economic fallacies inherent in Baileyism become accepted truth, resulting in disaster after disaster, including the most recent in 2008.



Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? and A Return to Common  Sense: Reawakening Liberty in the Inhabitants of America. For more information and more of Tom's writing, visit www.tommullen.net.

This article was originally published on FEE.org. Read the original article.

From the Archives: Will 2011 state election voters feel enough pain to solve state budget crises?

Will 2011 state election voters feel enough pain to solve state budget crises?
December 4, 2010 1:22 PM MST

At the annual holiday dinner hosted by the Mercatus Center on December 1, economist Eileen Norcross spoke to the Charlottesville Libertarian Examiner about the impending crisis in state budgets. Norcross is a senior research fellow at Mercatus and co-founder of the web site StimulusWatch.org.

Norcross answered questions about state budget shortfalls and the “fiscal evasion” tricks that state governments play to create the appearance of balanced budgets. Most states, she explained, are facing serious consequences as a result of distended pension obligations and growing expenditures.

Some better than others
Still, she said, “there are a few states that are not in terrible shape,” such as South Dakota and Wyoming.

Some states are doing better because they “are simply smaller” and “don’t have as big of a public sector workforce. They don’t have the same pension obligations that some of the mismanaged states like Illinois and California do.”

Even so, Norcross warned, “all states are facing one crisis, and that is in Medicaid and rising health care costs. That is a feature of all state budgets.” Another universal feature, she added, is education spending, which “has been baked into the cake.”


Stimulus problems
Referring to research that shows that the federal stimulus money of the past couple of years may lead to budget problems for state governments in the future, Norcross cited research conducted for the Mercatus Center by Russell Sobel and George Crowley on the effects of intergovernmental transfers.

Sobel and Crowley “found that for every dollar of federal money that’s transferred to the state government, that raises future taxes by 40 cents,” Norcross reported.

Why is that?

“Once you undertake a public works project and the stimulus money goes away, you still have to finish that project. You have to pay for those workers [and] you might have to issue bonds to complete the project. In other words, they may have expanded commitments that they now have to fund themselves.”

2011 state elections

Eileen Norcross

In 2011, Kentucky, Louisiana, New Jersey, and Virginia will be holding state legislative elections, and these budgetary issues may have an effect on their outcomes but, Norcross cautioned, “that’s going to depend on the pain that the electorate feels.”

She said the case of New Jersey is “interesting,” because recently “when property taxes got so onerous on the average homeowner, [voters] actually turned out in force during the school budget election and they voted down a lot of school budgets in New Jersey.”

The number of school budgets rejected was “the greatest number since 1976,” she said, “because they were really voting against a tax hike.”

The results of next year’s elections, Norcross concluded, is “really going to depend on the extent to which the electorate is feeling the pain today or whether legislators are engaging in that kind of fiscal evasion, trying to buy more time, [and] pushing that debt onto future taxpayers.”


Publisher's note: This article was originally published on Examiner.com on December 4, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

From the Archives: Balanced-budget gimmickry hides states' fiscal crises, says Eileen Norcross

Balanced-budget gimmickry hides states' fiscal crises, says Eileen Norcross
December 4, 2010 12:58 PM MST

Economist Eileen Norcross, who specializes in state and local budgetary policy at the Mercatus Center at George Mason University in Northern Virginia, spoke to the Charlottesville Libertarian Examiner on December 1 about the impending crisis in state budgets.

She explained that states are experiencing persistent budget deficits, often as the result of ballooning pension obligations.

She noted that these budgetary shortfalls are taking place even though most states have a constitutional requirement to balance their budgets.

Balanced-budget 'gimmickry'
This happens, Norcross explained, because “it’s possible to have a balanced budget yet to grow spending every year.” There are different answers to the question, “What does budgetary balance mean?”

Norcross pointed out that “while on the books they can claim budgetary balance, they also engage in a lot of gimmickry, what I call ‘fiscal evasion.’”

Eileen Norcross

She explained:

“For years, states have been finding ways to balance their books without having to raise taxes directly, so they take on more debt, they dump trust funds into the general fund, they defer their pension obligations: That’s how some of these states have been balancing their books. It gives them the temporary illusion that they’ve met their commitments yet they really haven’t. That’s revealing a structural instability in these revenue streams.”

Noting that “Virginia is doing relatively well compared to the other states,” Norcross added that “there are a few things that concern me.”

For one thing, the Virginia state government “deferred [its] pension payment this year. It’s not a good practice.”

This is not unique, she said.

Pension obligations
“All the states have undervalued the size of the obligation that they owe to their public sector employees by an order of magnitude. What they claim on their books looks bad, but what they actually owe is far greater.”

In Virginia and other states, Norcross continued, “what concerns me is when [they] defer their pension obligations, they’re basically passing the buck [or] kicking the can down the road, but that’s not going anywhere. They’re going to owe those public sector workers” eventually.

In the third part of this interview, Norcross looks at which states are doing a better job, and whether fiscal matters will affect the behavior of voters in 2011 state legislative elections.

Publisher's note: This article was originally published on Examiner.com on December 4, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

From the Archives: Mercatus Center economist Eileen Norcross notes state budget ‘fiscal evasion’

Mercatus Center economist Eileen Norcross notes state budget ‘fiscal evasion’
December 4, 2010 12:43 PM MST

On December 1, the Mercatus Center at George Mason University hosted its annual holiday dinner, this year featuring novelist Christopher Buckley as after-dinner speaker. About 300 people attended, also hearing pre-dinner remarks from GMU economics professor Russell Roberts, co-creator of the viral video, “Fear the Boom and Bust” with rapping versions of F.A. Hayek and J.M. Keynes.

Economist Eileen Norcross is a senior research fellow at the Mercatus Center who closely follows state and local budgetary policy. Two of her recently published working papers are “Fiscal Evasion in State Budgeting” and “The Crisis in Public Sector Pension Plans.”

At the cocktail reception preceding the dinner, Norcross spoke to the Charlottesville Libertarian Examiner about the crisis in state budgets across the country.

‘Persistent budget deficits’

State and local budgets are an important research topic, she said, “because so many state and municipal governments are experiencing persistent budget deficits. They’re finding it difficult to balance their books and it’s projected that states are not likely to find fiscal balance until 2013.”

There are common reasons for this situation that cross state lines, Norcross explained.

“States have growing pension obligations that they have not funded. These bills are coming due. They’re going to have to contribute more to their pension systems to pay public sector workers. This is going to crowd out their ability to meet their growing Medicaid obligations.”

Workforce cutbacks

Eileen Norcross

Moreover, with state revenues falling, their spending grew “in the decade leading up to the recession,” she said. “They’ve built commitments into their budgets that they’re now finding it very difficult to cut. That means cutting back on the public sector workforce and other things have become very challenging for states.”

Even with money from the federal government, the situation is still serious.

“With the stimulus drying up they don’t have much to go on here,” Norcross said. “They’ve either got to raise taxes or find other places to cut.”

In the second part of this interview, Norcross answers questions about constitutional requirements for balanced budgets, deferred pension obligations, and the negative effect of stimulus money on state budgets.


Publisher's note: This article was originally published on Examiner.com on December 4, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.