Tuesday, May 21, 2019

Interview: Richard Ebeling says America needs "a monetary regime free from the hand of government"

Editor's note: This interview was originally published in March 2017.

This is the fifth of seven articles spanning my discussion with Dr. Richard Ebeling. The firstsecond, third, and fourth pieces are available. 
Story by Joseph Ford Cotto
"Soon after taking the oath of office, President Donald J. Trump signed a series of Presidential Memoranda to fulfill his promise to make America Great Again on trade and other issues," the White House's public relations arm declared shortly after Trump assumed office.
It continued: "The first executive action the President took was to permanently withdraw the United States from the Trans-Pacific Partnership, a multinational trade agreement that is not in the best interest of American workers. 
"This action ushers in a new era of U.S. trade policy in which the Trump Administration will pursue bilateral free trade opportunities with allies around the world, wherever possible, to promote American industry, protect American workers, and raise American wages. It is the policy of the Trump Administration to represent the American people and their financial well-being in all negotiations, particularly the American worker, and to create fair and economically beneficial trade deals that serve their interests."
A few days later, the Donald announced his plan to change the conditions of America's participation in the North American Free Trade Agreement, a trilateral commerce bloc which binds us with Canada and Mexico.    
“I’m deeply concerned by President Trump’s statements today reaffirming his commitment to renegotiate the North American Free Trade Agreement (NAFTA)," John McCain said shortly after. "While renegotiations could help to strengthen and modernize NAFTA to benefit American businesses and consumers, any effort to restrict or impose new barriers on our ability to trade with Mexico and Canada could jeopardize the future of this trade agreement and have serious consequences for Arizona and the country." 
McCain later added: “The free flow of trade has been the foundation of U.S. economic policy for decades, and a major factor in our prosperity and greatness. We should not have to relearn the lessons of history. Retreating from NAFTA and other international trade agreements will harm our ability to compete in today’s global economy, raise costs for consumers, threaten jobs, and undermine our relations with our closest neighbors.”
What is going on here? So many sparring perspectives on trade from such powerful people.
The Trump-McCain spat is but one theater in a battle of ideas between protectionist and laissez faire personalities. This disagreement has come not only to dominate the right, but our country's left -- think of the difference between Bernie Sanders and Hillary Clinton on economic policy.
Few people are so familiar with the limited government perspective as Dr. Richard Ebeling.
As his employer, The Citadel (South Carolina's prestigious military university -- an unlikely site for such a titan of libertarianism), tells, he "is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership .... Among the courses he offers are "Entrepreneurial Leadership and Capitalist Ethics" and "Ethical Entrepreneurship and Profit-Making."
"Dr. Ebeling is recognized as one of the leading members of the Austrian School of Economics and is the author of Austrian Economics and Public Policy: Restoring Freedom and Prosperity (Future of Freedom Foundation, 2016); Monetary Central Planning and the State (Future of Freedom Foundation, 2015); as well as the author of Political Economy, Public Policy, and Monetary Economics: Ludwig von Mises and the Austrian Tradition (Routledge, 2010) and Austrian Economics and the Political Economy of Freedom (Edward Elgar, 2003)." 
Ebeling recently spoke with me about several issues concerning the American economy. 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?

Dr. Richard Ebeling: For a century, now, the world (including the United States) has “experimented” with monetary systems based on paper money. During these one hundred years, the world has experienced inflations and recessions (or depressions), and the booms and busts of the business cycle. Paper monetary systems have given governments and their central banks virtually unlimited power and authority to manipulate the quantity of money, distort interest rates, and bring about imbalances and misuses of the capital and labor in their respective economies.

In the nineteenth century, following the inflationary episodes during the wars with Napoleon, the free market economists of that era argued that monetary stability and sustainable economic growth required a sound monetary system. In their eyes, this meant the gold standard, which limited the government’s control over the creation of money.

The nineteenth century gold standards that were implemented were not perfect or always free of political abuse. But it gave almost a century of relative monetary stability that served as one of the institutional foundations of the economic prosperity that began in that era.  

It would be desirable to move towards a monetary regime free from the hand of government. From a consistently free market point-of-view, the ultimate goal should be the separation of money from the state through a private competitive free banking system. But in the current political environment and ideological currents this is not likely to happen in any near future. Thus, if some form of a gold standard were to be introduced, and if were successful in significantly limiting the government’s abuse of the monetary printing press, this would be great step foreward.

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?

Ebeling: There have been a variety of proposals to reduce the burden and distortions of the tax system that diminish the incentives for work, savings and investment. The fair tax is one such proposal. But the real task is to bring about the political changes within the United States that could result in a noticeable reduction in the size and scope of government, so that a government with much fewer duties and responsibilities than at present would need far less tax dollars to cover its constitutionally-limited activities.

At that point, a decision could be made as to the least intrusive or distorting tax system that would serve this purpose. Before 1913 and the implementation of the income tax amendment to the U.S. Constitution, all levels of government  -- federal, state and local – absorbed only about eight percent of national income. The federal government covered all the expenditures of that time through a low tariff meant to serve as a revenue source, a few excise taxes on such things as alcohol and tobacco, and the sale of government lands to private individuals.  

We should return to this situation, including the repeal of the income tax amendment.