Story by Joseph Ford Cotto
In the American political scene of today, few would dare argue that unfettered free trade is something worth aspiring to. Untold numbers of Make America Great Again-ers and Bernie Bros would pitch a fit should someone merely theorize such a policy.
Nonetheless, a band of dedicated advocates for laissez-faire capitalism are not backing down. Far from it, in fact.
Don Watkins is one of these people. An Ayn Rand Institute fellow who, in the words of his employer, "studies inequality, Social Security reform, the welfare state and the moral foundations of capitalism", Watkins formerly wrote a column at Forbes.com. He co-authored of two books: Free Market Revolution: How Ayn Rand's Ideas Can End Big Government -- a bestseller -- and Equal is Unfair: America's Misguided FightAgainst Income Inequality. On his own, he penned Rooseveltcare: How Social Security is Sabotaging the Land of Self-Reliance.
As the title of each of book makes clear, Watkins's limited government philosophy is delivered with no holds barred. For more insight, this publication featured a review of Free Market Revolution which can be read here.
Watkins spoke with me about American trade policy, our national monetary program, and the Donald Trump presidency. Some of our conversation is included below.
Joseph Ford Cotto: Some claim that the surest way for America to enjoy monetary stability is a return to the gold standard. Do you believe that, given current socioeconomic affairs, this is a viable option?
Don Watkins: It’s certainly true that the most stable monetary system in history was the classical gold standard, which flourished during the 19th century until it collapsed thanks to World War I.
The most important thing to learn from that period, however, is not that we should use gold as money but that sound money is a byproduct of monetary freedom. Monetary freedom means that individuals are free to adopt any medium of exchange they choose, whether gold or silver or Bitcoin or anything else. The government’s only role is to define what form of private currency it will accept for public payments.
The classical gold standard worked because the government could not control the money supply. This put a check on government spending by limiting the ability of governments to finance their spending through creating new money, i.e., through inflation. Whether it is gold or some other private currency, a key virtue of monetary freedom is that it stops the government from meddling in money.
Is monetary freedom a viable option? Only as part of a larger project to rein in government intervention. Above all, you would need to liberate the entire financial sector from government control and government support. This would include repealing Dodd-Frank, abolishing deposit insurance and “too big to fail,” shutting down Fannie Mae and Freddie Mac, and—as a first step toward eliminating the central bank—forcing the Federal Reserve to adhere to something like a Nominal GDP targeting rule.
Cotto: Many have heard about the fair tax, but fewer know much about it. In a summary sense, what are your views on the concept?
Watkins: Our top priority should be to end using the tax code as a tool to conduct government policy. Today’s tax code is only partly about raising the money necessary to fund the government. It is largely about subsidizing groups and actions the government approves of (e.g., mortgage borrowers, buying electric cars) and penalizing groups and actions the government disapproves of (e.g., highly paid wage earners, buying gasoline).
So long as the government raises money through taxes, a tax code should aim to raise funds in the most neutral, least destructive way possible. Whether that is through a flat tax or a consumption tax like the FairTax is something we can debate.