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My mom had left and I was lying alone atop my boyhood sheets in my new and unfamiliar college dorm room. With nothing else to do, I traipsed across grounds to get my student ID. There I spotted Josh—whom I knew only casually after we’d met at a conference two summers before. I had no idea he was also attending the University of Virginia, but that incredibly chance encounter changed the course of my life.
Josh took me to meet some of his roommates in the so-called new dorms (I was in the “old dorms”). One of them was in the architecture school and suggested I read this book about an architect—Ayn Rand’s The Fountainhead. I was struck by the idea that man can be an end in himself, and that end is best achieved through voluntary exchange—capitalism—not by decisions of government. It was from that point that I can definitively trace my development from dispassionate about philosophy to fervently in love with liberty.
It was that book, and the many books that followed, that educated me on the primacy of the individual, the power of free markets, and the morality of capitalism. I started to think more critically about the proper moral relationship between people, government, and markets, ultimately settling on the belief that underlies our nation’s founding—liberty is best.
To say this has all affected me profoundly would be insufficient. I became so dedicated to the idea of maximizing individual liberty that I’ve devoted my professional life to securing it.
I’ll forever be grateful for the stroll across UVA’s grounds that led me to discovering my life’s guiding principles. We explore those principles in this issue of Sword&Scales. I hope they speak to you as much as they did to me.
Where are these better angels?
IN 1979, Nobel Prize-winning economist Milton Friedman appeared on The Phil Donahue Show and gave his most memorable interview about the nature of greed. Today, there are over 100 clips of the interview uploaded to YouTube. Some have hundreds of thousands of views; others, millions.
Phil Donahue: When you see around the globe, the maldistribution of wealth, a desperate plight of millions of people in underdeveloped countries. When you see so few “haves” and so many “have-nots.” When you see the greed and the concentration of power. Did you ever have a moment of doubt about capitalism and whether greed is a good idea to run on?
Milton Friedman: Well, first of all, tell me: Is there some society that doesn’t run on greed? You think Russia doesn’t run on greed? You think China doesn’t run on greed? What is greed? Of course, none of us are greedy, it’s only the other fellow who is greedy. The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way.
The only cases in which the masses have escaped from the kind of grinding poverty you’re talking about—the only cases in recorded history—are where they have had capitalism and largely free trade.
If you want to know where the masses are worst off, it’s exactly in the kinds of societies that depart from that. So the record of history is absolutely crystal clear that there is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.
Donahue: But it seems to reward not virtue as much as ability to
manipulate the system....
Friedman: And what does reward virtue? You think the Communist commissar rewarded virtue? You think a Hitler rewarded virtue? You think—excuse me, if you’ll pardon me—do you think American Presidents reward virtue?
Do they choose their appointees on the basis of the virtue of the people appointed or on the basis of their political clout?
Is it really true that political self-interest is nobler somehow than economic self-interest? You know, I think you’re taking a lot of things for granted. Just tell me where in the world you find these angels who are going to organize society for us? Well, I don’t even trust you to do that.
The morality of capitalism
SOCIALISM IS POPULAR again. The rise of politicians such as Bernie Sanders and Alexandria Ocasio-Cortez shows how the promises of socialism are once again influencing our political debate. It’s not easy to pin down a single reason for socialism coming back in vogue, but one undeniable factor is the longstanding belief that socialism is a more moral and caring system than capitalism.
This belief, however, overlooks the moral bankruptcy of socialism while denying the moral virtues of capitalism. We explore in this issue many ideas behind these two political systems and their consequences, both good and bad. It’s no coincidence that capitalism’s morality is a driving factor in its success.
America was founded on the moral ideal of individualism—the view that each of us is sovereign, possessing an inalienable right to life, liberty, and the pursuit of our own happiness. Our government was created to secure these rights. Its aim, according to the Constitution, is to “establish justice” and “secure the blessings of liberty.”
The social system compatible with America’s Constitution is capitalism. This is the political-economic system that fully recognizes individual rights—including property rights—leaving each person at liberty to think, produce, and trade voluntarily for mutual improvement. It is the system that respects individuals as free and independent.
Yet today, the capitalist system has been emblazoned with the scarlet letter of immorality.
On its surface, this is surprising. Capitalism has lifted millions of people out of poverty and has proven to be the most practical system for fostering large-scale prosperity. Economists from Adam Smith to Ludwig von Mises have demonstrated that free enterprise enables economic progress. History has shown that wherever capitalism is tried, innovation and production flourish. After millennia of relative economic stagnation, capitalism’s emergence in the late 18th and early 19th centuries transformed the modern world with continuous growth in living standards. People living only a few generations ago would be shocked at the comforts we enjoy today.
So why does socialism continue to attract so many?
While most people acknowledge that capitalism produces wealth, many are not fully convinced the system is right. These critics view capitalism, entrepreneurs, and business owners with suspicion.
Meanwhile, they discount the practical failures of socialism because they view the system as more noble or compassionate
Under capitalism, pursuing one’s self-interest is a matter of disciplined virtue.
But this moral confusion has devastating consequences. People clung to dysfunctional political systems in the 20th century, even in the face of misery, because they believed these systems had moral aims. Communists did not give up on collectivism after 75 years, even as tens of millions of corpses piled up. Even today, there are apologists for the ongoing catastrophes in Cuba and Venezuela.
Socialists do not typically oppose capitalism because they believe it is an economic failure. Rather, they feel that on some level it is immoral. The fact that capitalism champions the profit motive and depends on and rewards self-interest is seen as selfish.
We should ask, then, what is the moral status of the profit motive?
One profits by gaining something for oneself through trade. Under capitalism, no government bureaucrat commands and controls your economic choices. A person gets what he wants only by offering something of value to others in exchange for labor, service, savings, or a valuable idea or product.
Under capitalism, pursuing one’s self-interest is a matter of disciplined virtue. It requires a person to accept responsibility for her own life—to engage in thought, effort, independence, and productivity to create and contribute something useful. Moreover, the hallmark of capitalism is justice: Each of us is paid only what we have earned according to the uncoerced judgment of those who trade with us.
Under capitalism, wealth is not static and trade is not zero-sum. New ideas, effort, productivity, and trade lead to the constant creation of new wealth. Under capitalism, people don’t fight for their share of a single economic pie; we create an ever-expanding number of new pies.
The profit motive is therefore not merely practical, but good—an economic expression of each individual’s constitutional right to live responsibly and productively in pursuit of happiness.
Is every businessperson and individual living under capitalism a moral exemplar? Of course not. Dishonest and unethical people exist in every society. But capitalism encourages and rewards virtue, while the market works against the unthinking, the unproductive, and the immoral.
By contrast, socialism penalizes a person for his virtues—as the slogan made famous by Marx says: “from each according to his ability; to each according to his need.” It takes from those who think, plan, and create, for the sake of those who do not. Seen in this light, capitalism—not socialism—is the moral system.
Innovation:
A modern-day miracle
PEOPLE ALIVE TODAY are, on average, the richest that have ever lived. We enjoy a standard of living beyond the wildest dreams of kings and emperors in times past.
Even the poorest of us are richer than ever before. The World Bank estimates that in 1820, 80% of the world’s population lived on the equivalent of $1.50 a day. Today less than 10% of the world lives on that meager income.
After 6,000 years of civilization, absolute poverty has gone from the default to the exception in an astonishingly short time. But why is the modern world so wealthy?
In my recent book, The Wealth Explosion, I explore how innovation drove intensive economic growth (producing the same or higher output from less input) and transformed our world.
Innovation is more than simply a series of breakthroughs by Promethean visionaries. Such people do exist, but most innovation is the product of multiple small improvements made by many (often unknown) people.
History shows several aborted modernizations before our time. There were periods of intensive growth and innovation in the Hellenistic era after the death of Alexander the Great, Antonine Rome, the Gupta Empire in India, the Abbasid Caliphate in the later 8th century, and especially in China under the Song dynasty (960 AD to 1279 AD).
While these periods of innovation petered out or buckled under government suppression, the innovation spurt that began in 1770 in Northwest Europe spread to the rest of the world and is still flourishing today.
The difference lies in liberty. Innovation is fostered and sustained by a world that leaves people to their own devices, allows them to exchange goods and ideas without restraint, and encourages experimentation and exploration of new ideas and new ways of doing things. Freedom of thought, expression, exchange, and association are the foundation and driving force of the innovation that has so improved the lives of human beings.
Property rights and contracts are essential for this, but not enough on their own. Innovation is paradoxically one of man’s most powerful—but fragile—attributes.
If cultures and laws are hostile to innovation, or try to protect people from changing circumstances, then that innovation will wither and die. To nurture innovation, our laws must protect property, provide security, and allow people to do what they wish without directly harming others.
In the last 50 years or so, developed democracies have increasingly sought to tie down and restrain spontaneous innovation with a web of laws and regulatory constraints.
None of them seem severe by themselves, but their collective effect is to kill exploration, discovery, experimentation, and the free exchange of goods and ideas. This often recreates the kinds of barriers to innovation that held back our ancestors.
Occupational licensure, for example, recreates the kinds of guild regulations that throttled innovation throughout the world before the 19th century. Entrepreneurs across the United States are forced to get arbitrary and expensive state permission to open barbershops, pet care services, moving, and even medical transportation companies. History has shown us that the world’s largest company in 50 years likely doesn’t exist today. Innovation-killing policies like these bleed the future of untold opportunity.
If we allow the web of anti-capitalist controls to reappear, we will return to the historical norm when growth was rare and the world was brutally poor. We must not think that modern wealth is inevitable nor that it will go on forever. It can fade in our era just as it did in Rome, the Middle East, and China.
Today the world is wealthier, healthier, and more prosperous than ever centuries of hard work, new ideas, and yes, innovation made that possible. Only by staying dedicated to that innovative spirit—and the legal foundations that sustain it—will we continue to prosper.
Dr. Stephen Davies is the Head of Education at the Institute of Economic Affairs in London.
The road from serfdom: How Geza Karakas escaped socialism and thrived under capitalism
GROWING UP IN 1950s Hungary, Geza Karakas developed a unique pair of exceptional skills: bicycle riding and troubleshooting. Both served him well in his socialist home country. But more importantly, they led to a life of achievement and prosperity in his new home, the United States.
Geza and his wife, Cynthia, have been PLF donors for years. In this magazine, we explore the data, philosophies, and political theories behind socialism and capitalism. But political theory didn’t motivate Geza to escape socialist Hungary—the capitalism-enabled American Dream did. I sat down with Cynthia Karakas to understand how the true impacts of socialism and capitalism are illustrated in the lives of people like Geza.
Geza Karakas left his homeland on a bike under the cover of darkness to escape socialism.
As a young man, Geza’s biking skills earned him a spot on Hungary’s national cycling team and favor under the communist regime. His mechanical aptitude led to a job as a radio station technician and, as Cynthia says, more dubious favor among those in the regime needing wristwatch repair.
“The Russians loved wristwatches. Of course, many weren’t working properly,” she recalls. “Geza remembered several Russians coming up to him, saying, ‘I need this [watch repaired] by two o’clock tomorrow.’ And he would tell them, ‘Yes, comrade, you will have it at two o’clock.’”
And the repercussions if he didn’t meet the deadline? “He told me, ‘Well, you can only guess.’”
This taste of oppression didn’t sit well with Geza, and as time wore on, he saw freedom losing ground to increasingly corrupt government control.
“He felt that they had no choice in anything,” says Cynthia. “For instance, they had state-provided healthcare—but it was still expensive. Geza said you would get pretty good attention if you could afford to bribe the doctors.”
Cynthia believes despair finally set in for Geza during the Hungarian uprising in October 1956, when peaceful protests against Soviet tyranny began to break down.
“He was 28 years old, and I think it was just that sudden realization that things were not going to change,” she says.
So, he left. Before the Soviets and their tanks wiped out the sprouting revolution, Geza and his cyclist friend Andre literally pedaled for their lives, riding 150 miles from Budapest to Vienna. There, they were awarded refugee status and a one way ticket to New York aboard the U.S.S. General W. G. Haan.
After two weeks across rough seas, Geza arrived in New York on January 7, 1957, with more than 1,700 other Hungarian refugees— eager for a fresh start and a shot at the American Dream.
He settled in New York and got a job as a TV repairman. Cynthia says he became so good he was soon known as “one of the best troubleshooters of the bunch.”
Geza was proud of his work, but he was destined to be more than a TV repairman. He got a new job with American Optical Company, where he worked on cutting-edge projects including the heart pacemaker. American Optical was also where Geza met the woman he would spend the rest of his life with: Cynthia.
By then, it was the early 1960s, and Geza’s friend asked him to join a new electric company called Vectel Corporation in Palo Alto, California. Geza knew the opportunity that awaited if they took the chance. But it took some convincing for Cynthia.
“Geza encouraged me to take a vacation out West, which I did,” Cynthia explained. “I found that the IBM subsidiary that I worked for back East had a branch in Palo Alto and a job opening. I fell in love with the Bay Area, and of course I loved Geza, so I moved.”
Because of all his hard work, Vectel became a successful business, and in 1971, Geza bought out his partner and doubled down. Geza and Cynthia spent years working six, sometimes seven, days a week—she even cleaned the bathrooms. They grew the company from 10 employees to more than 50 and began making power supplies for Sylvania for installation in U.S. submarines.
As a young man, Geza Karakas left his homeland on a bike under the cover of darkness to escape socialism. As an adult, he moved across the country and built a business that employed dozens of people and provided for his family. Geza’s story is the American Dream.
Geza and Cynthia sold their company in 1987 and bought property along Lake Erie outside of Buffalo, New York. In their retirement they visited Cynthia’s family, and Geza took long, peaceful bicycle rides.
Geza passed away in 2012, but Cynthia keeps his legacy very much alive by sharing his journey from a regime that stifles freedom and ambition to a nation that embraces both.
“Geza told me that if he had not come to America, he’s not sure he would ever have been able to achieve what he had in life. He is a shining example of what is possible when you allow capitalism to prevail.”
Interview with a CEO: How capitalism got blamed for the fiscal crisis
THE MARKET CRASH of 2008 was the worst financial crisis in a generation. Millions of people lost their jobs, their homes, and their livelihood.
Many anti-capitalists like Bernie Sanders view the ’08 financial meltdown as the perfect display of capitalism’s failings: American greed, massive deregulation, and corruption finally bleeding out after infecting the marrow of the economy. But is that what actually happened?
To get a firsthand account of the fiscal crisis, I spoke to the man who saw it coming.
As the CEO of BB&T bank from 1989 to 2008, John Allison had a front-row seat to the financial crisis. Under Allison’s leadership, BB&T was healthy through every downturn and recession, and Allison was one of the few bank CEO’s who fought against the government bailout money so many other banks clamored for.
“A lot of young people believe the myth that capitalism caused the financial crisis,” Allison explained when I interviewed him. “Many people believe deregulation of the banking industry and greed on Wall Street caused a crash and the government had to step in and save us. But that’s absolutely not true. Banks weren’t deregulated. They were mis-regulated.”
In the decades leading up to the crash, the irresponsible and inconsistent way government bureaucrats regulated banks let bureaucratic whims shape our economy instead of predictable market actions.
For example, in the 1980s and ’90s, government regulators were strict with unhealthy banks and put many of them—even banks that might have recovered with reorganization or better leadership—out of business. But regulators largely left healthy banks alone, even if they were making risky loans and investments. Then when the crash began, regulators forced all banks to be overly selective with their loans, which made the crisis even worse.
“In the good times, it’s not good [for regulators] to call out banks that are doing dumb things because banks have political clout and it’ll get [regulators] in trouble,” Allison said. “But then in the bad times, regulators always grossly overreact, they let the horse out of the barn and close the barn door. And they do this over and over again.”
Another example of how government regulators morphed what would have been a fiscal downturn into a fiscal crisis was the completely random way that the government bailed out some banks but let others fail.
The 2008 market crash had many causes. An undeniable one was the immense power and unpredictable actions of government bureaucrats.
The government bailed out Bear Stearns but let Lehman Brothers fail (even though Lehman was a larger and arguably more important institution to the economy). Then the government negotiated a merger between Citigroup and Wachovia but four days later broke that deal and negotiated a separate merger between Wachovia and Wells Fargo. Allison characterized regulators’ actions during this time as “Russian roulette.” The unpredictable government bailouts mixed with the inconsistent regulatory actions in the preceding decades led to confusion that stymied the market’s ability to self-correct.
The 2008 market crash had many causes. An undeniable one was the immense power and unpredictable actions of government bureaucrats.
“The housing crisis [and resulting financial crash] was caused by well-intended government policy [like affordable housing policies incentivizing subprime mortgages],” Allison explained. “This is where socialism fails. It allocates resources on what sounds good and what is politically correct, instead of market sanity. The irony is, of course, the big losers are low-income people who get creamed.”
It’s much easier to believe that greed, and not the government policies meant to help, caused the crash. But like so many failed big-government experiments, the 2008 crisis was caused by years of well-intended—but disastrous—policies.
Allison fights so fervently for capitalism because, “If you look at human history from the first Homo sapiens to the mid-1700s, there was no progress in life expectancy. And then something transformed the quality of life on this planet: the age of reason, science, technology, rule of law, individual rights, and free markets. All these things that we call capitalism.”
One of the greatest ironies of modern history is how capitalism is wrongly blamed for the crash that almost derailed the world economy that capitalism helped build.
As CEO of a major bank for almost 20 years, John Allison witnessed rivals—abetted by regulators—give in to greed and make bad decisions. He also worked with elected officials and government bureaucrats whose actions created uncertainty and instability.
More than anything, though, Allison saw the opportunities capitalism can create for millions of people willing to work for something better—and the disaster that happens when we move away from it.
The failure of blaming market failure
THERE’S A COMMON refrain in the modern calls for socialism: It’s up to government to prevent markets from failing and corporations from taking advantage of us. The multiple financial downturns and crashes of the past few decades seem to prove this desperate need. But this argument fails to understand what a market failure truly is and what the most effective remedies are.
The definition of a market failure runs as follows: When two parties voluntarily do business, they both benefit, and society as a whole is better off. But sometimes their activities can have unintended effects on a third party. And society as a whole is worse off when the unintended costs are greater than the benefits of the exchange.
For example, everyone is better off if a factory opens in a town and hires local workers. The factory owner has a successful business and the workers have good, steady work. But if that factory dumps waste into the river and it makes people in the towns downriver sick, then society is made worse off. Based off examples like this, many people believe that the market fails to properly weigh the social costs of capitalism, and strict government regulations and control can prevent these socially destructive transactions.
But this argument ignores the fact that we already have laws designed to remedy these negative externalities.
Tort law is the body of private law that allows people hurt by the unintended consequences of others to be compensated by the people (or businesses) that caused them harm. Tort laws require everyone to be reasonably careful not to harm others and—in some cases—to compensate anyone they injured, regardless of how careful they were.
When private businesses create social costs, anyone forced to bear those costs can take the businesses to court and make them pay.
Tort law—not overreaching government bureaucracy or socialist policies—is the most powerful and effective regulatory force in contemporary society.
This issue of Sword&Scales explores at length the theory, practice, and outcomes of capitalism. At its core, capitalism gives people the freedom to live their lives as they choose without hurting others. But when others are hurt—at a large-enough scale— the “market” fails. However, our legal system creates solutions for these failures and makes whole the people who are hurt. Anyone arguing to dismantle the capitalist system because of market failures is failing to appreciate the solutions our legal system already provides.
John Hasnas is a Professor of Law (by courtesy) at the Georgetown University Law Center.
Why capitalism and socialism?
IT MIGHT SEEM unusual for a public interest legal organization to focus so intensely on the debate over capitalism and socialism. After all, these are economic systems, and PLF’s main interest is law. But hopefully you’ve seen through the other articles in this issue that law and economics are inextricably linked. That’s why it’s critically important for PLF to engage in the ongoing debate about these competing systems.
For 46 years, PLF has existed for one purpose: to defend individual liberty. We believe that when people are free to live peacefully and productively without government interference, they improve themselves, their families, and their communities.
Our belief in individual liberty has two dimensions. First, it’s the right thing for its own sake. Giving people freedom to make their own decisions is how you treat adults with respect, as they deserve. Second, liberty leads toward peace, prosperity, and progress.
This is where capitalism comes in. When people are secure in their liberty and property, they are able to exchange with each other on a voluntary basis. For instance, when I buy a loaf of bread at the grocery store, that trade creates a win-win: Not only do I get the food I need, but the baker gets income he needs. Both sides are better off after the trade.
This is the magic of the market economy. Wealth is created through the aggregation of voluntary exchanges between people. When people make economic exchanges for their own good, and the good of those they care about, they unintentionally contribute to a richer, more prosperous world.
Socialism, based on the belief that government edicts will lead to more prosperity than people making their own decisions, is the antithesis of the capitalist system. But socialism can’t work on a foundation of individual liberty. Implementing a socialist economy requires undermining the legal foundations of liberty that PLF fights for:
Property Rights: A defining factor of socialism is the abolition of private property, so that governments make economic decisions instead of individuals.
Economic Liberty: This too must be abolished under socialism. People must follow central government dictates rather than make their own economic choices.
Free Speech: Socialist governments must clamp down on free speech to keep their control of the economy.
Equality Before the Law: Socialist governments profess to treat people equally. But in reality, those connected to government get preferential treatment. And it’s usually minority groups that lose out.
Separation of Powers: The Soviet Union may have had the trappings of separated government powers, but power was centralized in the Communist Party. It’s an inescapable fact: If a socialist government is going to control the economy, it must have centralized power. In most PLF cases, we’re not fighting these extremes. But we do combat the gradual chipping away of our rights that lead us down a path to socialism, and sometimes it gets pretty darned close.
At the U.S. Supreme Court last year, we fought a bogus “critical habitat” designation that threatened to take most of the value of Edward Poitevent’s land in Louisiana. The U.S. Fish and Wildlife Service wasn’t trying to completely take away his ownership of the property, but by taking away most uses of that property, they would make his ownership essentially in name only.
In the state of Washington, we successfully challenged Seattle’s “wealth tax,” which targeted high-income earners with an added tax, despite provisions in the Washington Constitution that prohibit levying taxes on targeted segments of the population.
Thankfully, in both of these cases, PLF was able to convince courts to undo these encroachments of government power on individual liberty. We must be ever vigilant to make sure that the foundations of individual liberty and capitalism are strengthened to avoid the creeping growth of socialism.
There are no winners without competition
CAPITALISM, AT ITS CORE, is about the freedom to compete. It permits entrepreneurs to pursue creative ends, and it empowers consumers to choose for themselves which products and services meet their needs. Our newest client, Phillip Truesdell, understands well the transformative power of this entrepreneurial freedom, and the pain of its absence.
After growing up poor and dropping out of high school, Phillip was determined to earn a living for himself and his family. Several years and businesses later, Phillip’s grown children lost their jobs at a local power plant. Phillip feared they would need to move to find new jobs. So the day he saw an ambulance for sale, he didn’t see a vehicle, he saw an opportunity to keep his family together.
Phillip’s company, Legacy Medical Transport, is a non-emergency ambulance service, meaning it takes patients to and from medical appointments and transports people between hospitals in non-emergency situations. Legacy operates in Ohio, just miles from the Kentucky border. But because Kentucky has “Certificate of Need” laws, Legacy is unable to bring patients back from their appointments in Kentucky to their homes in Ohio.
“Certificate of Need” laws allow existing businesses to choose who may enter the market, and thus they’re sometimes called the “Competitor’s Veto.” Under a Competitor’s Veto law, an aspiring entrepreneur must seek permission from the government before opening a business. Once someone applies, the relevant governmental body notifies all existing companies in that industry. Any existing businesses may then protest the application, often for any reason—even simply not wanting any new competition. A protest sends an entrepreneur to an expensive and onerous government hearing, where he or she must prove that a new business is “necessary.”
Last year, Phillip applied for a Certificate of Need. Thousands of dollars in attorney fees later, Phillip was eventually denied a certificate because he had not proven a “need” for his service. Phillip and his daughter were unprepared for the tribunal they faced. They expected questions about their qualifications. Instead, they were assailed with questions about how existing businesses would be affected.
This turns the free market on its head. In a capitalist system, entrepreneurs are free to innovate. Indeed, they must innovate and cater to consumer demands in order to stay in business. Under Competitor’s Veto laws, entrepreneurs must get permission to innovate, and consumers are stuck choosing among the privileged few.
The result of Competitor’s Veto laws is an entrenched cartel. Entrepreneur Arty Vogt’s lawsuit challenging West Virginia’s Competitor’s Veto laws for movers uncovered that no new moving company had been granted permission to operate in the state in the past 10 years.
Perhaps the best way to understand the detrimental effect of Competitor’s Veto laws is to study what happens once they’re repealed. PLF clients have built many successful businesses after being freed from these anti-competitive laws. After a federal court struck down Kentucky’s law, for example, Raleigh Bruner was able to grow and expand his moving company into carpet cleaning, home organizing, storage, furniture repair, and even a dog kennel.
Bruner also created an in-house program that helps employees open moving companies of their own, which has led to new operations across eight states. The program creates value not just for those companies, but for all their new employees and their communities.
One of this country’s founding principles is that the government may not use its regulatory power to protect favored businesses from competition. Yet unbelievably, some courts have ruled that protectionism alone is an acceptable justification for economic regulation, and that states may act simply to dole out political favors to industry players.
Because Competitor’s Veto laws are antithetical to the Constitution’s promise of economic liberty, PLF has challenged them in seven states, leading to their repeal in Missouri, Montana, Oregon, West Virginia, Pennsylvania, and Kentucky. The goal is to restore the Constitution’s promise of economic freedom and opportunity.
In a capitalist system, entrepreneurs are unleashed to compete, and the best ideas succeed. By embracing competition, we can return to the symbiotic system where entrepreneurs and consumers cooperate freely for their mutual benefit. When PLF fights against the Competitor’s Veto, it fights for that system.
Reflections from a Supreme Court champion
PEACE AND QUIET. That’s all Rose Knick—heroine of our 12th and most recent victory at the U.S. Supreme Court—wanted when she purchased her homestead in Eastern Pennsylvania nearly five decades ago. No matter how you ask Rose to describe her land and the memories it’s provided over the years, she always returns to that most basic concept.
But it’s exactly that peace and quiet that her local government thwarted when it required landowners like Rose to open their property permanently for the public to traipse through looking for old cemeteries—taking away her right to privacy without paying her for it.
Rose didn’t expect to fight her government. But as a farm girl, it wasn’t in her to back down.
“I never imagined that I would be in this situation, and that the township would do this to private property,” she said while explaining why she pursued the case. “They are very well familiar with eminent domain. They know the procedure. To me they are just playing games. I’m sticking to it. I’m not going anywhere till this is resolved one way or another.”
Rose first heard rumors swirling in 2008 that the township would force her to make her land accessible to the public. It took another four years for the township to make it official, also marking the official beginning of Rose’s quest to upend the ordinance. For the past seven years, Rose has been on an odyssey to vindicate her rights under the Fifth Amendment by challenging the ability of government to take property without paying compensation to the landowner.
She started in state court, but the local government withdrew its complaint that she was violating the cemetery ordinance, and that case ended. Eager to have her constitutional rights addressed, Rose then went to federal trial court, which bounced her lawsuit for not following the rules laid out by an obscure but consequential 1985 case called Williamson County that prevents federal courts from hearing all Fifth Amendment property rights claims until a state court has weighed in. That didn’t make sense to Rose.
“I never heard of Williamson County,” she said. “I didn’t know any of this stuff. I just knew about the Constitution—I knew that it wasn’t right.”
I’m just elated. Elated for everybody. To think that finally they’re following and doing the Constitution the way it’s supposed to be. Finally. It’s just thrilling.
Another setback came in the federal appellate court, which was constrained by the older Supreme Court case.
Despite the earlier obstacles, and against significant odds, Rose finally received her own day at the Supreme Court (well, days actually—her case was argued a second time in early 2019 to allow now-Justice Brett Kavanaugh to participate). The momentous 5-4 decision, authored by Chief Justice John Roberts, definitively overturned the Williamson County doctrine and allowed property owners around the country to do exactly what any other American can do—get immediate access to a federal judge to determine the constitutionality of state and local government action.
For almost 35 years, property owners around the country have been stuck in legal limbo, unable to have a neutral arbiter—especially one disconnected from the provincial legal scene—hear their case. No longer.
Rose understood the significance of her battle, even if she never imagined stepping on the field.
“I think it will be the best thing that ever happened now that I’ve read all of these briefs and got familiar with this,” she said. “[but] I had no reason to be involved in any of it.”
The implications of this win for Rose are deep and far-reaching. Now, when faced with the unconstitutional shenanigans of local land-use regulators, the American property owner can escape the clutches of the local system, where they’d been relegated for so long, and file in federal court.
Or as Rose puts it: “Private property owners will finally be respected.”
There’s peace returning to Scott Township for Rose, but when we told her about the historic victory, there wasn’t much quiet. Her response was classic Rose.
“It just takes my breath away,” she explained after the decision. “I’m just elated. Elated for everybody, everybody. To think that finally they’re following and doing the Constitution the way it’s supposed to be. Finally. It’s just thrilling. Thrilling for everybody. Thank God. Thank God that finally everybody in the United States is going to have a fair chance.”
Yes, and thanks as well to Rose, a Pennsylvania farm girl who wouldn’t back down—and who now joins the pantheon of Supreme Court winners who changed our nation’s course for the better.
How rock-and-roll killed communism
Behind the Iron Curtain, Western-loving youths embraced American pop culture and fashion with feverish enthusiasm. Lacking ready access to these goods on the open market, they improvised by painting flashy colors over their state-issued ties; listening to black-market music such as jazz and, later, rock; and using heat rollers to style their hair like their favorite American idols.
Communist leaders sought to root out the corruptions of “American primitivism” and “capitalist cultural imperialism” by targeting these rebellious youths with abuse and arrest, hoping to check the spread of “amoral” American pop culture. But they couldn’t cut off America’s most valuable export: its ideals. This is how self-expression, individuality, and, yes, rock-and-roll killed communism.
After Stalin’s chief aide, Andrei Zhdanov, warns that jazz would “poison the consciousness of the masses,” the Communist Party cracks down on jazz performances, outlawing saxophones and “the playing of drums with too much rhythm.” Many jazz musicians, now enemies of the state, are arrested and sent to Siberian prisons or exiled to remote cities for “rehabilitation.”
The crackdown extends to East Germany, where jazz ensembles are disbanded, jazz is barred from radio, and jazz recordings are seized at the border. East German leaders encourage “civilized” dancing with no “excessive movement” of the hips, arms, or legs.
When thousands of young East Germans travel across the nation to join two days of anticommunist demonstrations, Soviet tanks arrive to break up the stone-throwing protesters. The East German prime minister alleges that the “Western provocateurs with the colorful plaid striped socks, with the cowboy pants [jeans], and Texas shirts wanted to cause a large-scale political provocation.”
With American clothing styles, jazz music, and dancing gaining ground with younger East Germans, the communist leaders soften their opposition. But relaxing prohibitions against American popular culture only emboldens the rebellious youths. As the new sounds of rock-and-roll spread, young protestors nationwide take to the streets demanding further freedoms.
Years of fighting a losing battle for the soul of East Germany’s young people has leaders despairing for communism’s future. The head of the Commission for Culture urges loyal communists to “save the cultural and social life of the… nation from this destruction.” In a futile effort to preserve national culture, officials promote approved East German musicians and socialist dance steps, which are roundly rejected by discriminating youths.
Official reports detail alarming increases in juvenile delinquency, protest activity, youth crime, and other forms of instigation against the East German regime. Authorities credit these unwelcome trends to the baleful influence of the United States and West Germany. Both countries are believed to be deploying rock music, comic books, and Western fashion as a “means of seduction” to corrupt young East Germans.
The widespread availability of reel-to-reel tape recorders fosters a large and growing underground distribution network for rock and rhythm-and-blues music (and, in the decades to follow, disco and hip hop). One newspaper warns, “The epidemic of bawdy and vulgar songs copied from tape recorders is spreading faster than a flu virus.”
The construction of the Berlin Wall as a hard barrier between East and West Germany is intended not only to keep East Germans in—but also to keep dreaded Western cultural products out. One official describes the wall as an “antifascist protection dam.”
As simmering hatred against the oppressive communist regime grows, so does the demand for American music. When authorities attempt to shut down rock concerts behind the Iron Curtain, attendees riot. Meanwhile, the soulful grooves of disco music are the newest threat to communist rule. In Latvia, one newspaper derides disco clubs as “incubators of violence.”
Limping into its last decade, the Soviet regime essentially surrenders in the battle against popular music. One historian dubbed rock music “the soundtrack to glasnost” as restrictions on the performance and playback of rock and pop music are relaxed. The 1989 fall of the Berlin Wall is heralded around the world—not least by East German music fans, who flood West German record stores to get their hands on recordings by their favorite artists.
Rejecting the promise of utopia
The Cold War could be thought of as a “war of ideals,” a decades-long confrontation between the political, economic, and social systems of capitalism and international socialism. These battles were fought through public debate, academic articles, and polling stations—but also in the simple everyday decisions made by citizens around the world.
In this confrontation, even people who had been raised from birth under communism made their preferences clear through their behavior, embracing both Western consumer products and ideals. Given the choice between living in captivity with the promise of utopia or living in freedom under imperfect capitalism, people choose freedom every time. In any war of ideals, the best ones win out.
