A Judicial Pascal's Wager

As we saw in the previous posting on this subject, there appears to be a bit of a bruhaha (but no one is laughing . . .) following the death of Ruth Bader Ginsberg and a possible successor.  In an age focused on mindless prejudice to the point of obsession, it’s interesting that the objections to the possibility of a practicing Catholic being appointed to the United States Supreme Court seem virtually unchanged from the rhetoric of a number of fringe groups from the late 1700s down to the 1950s.

Need for a Strategic Plan

In the previous posting on this subject, we discovered that using the United States Supreme Court to create law and impose the views of one group on everyone else in the country is something of a double-edged sword.  Specifically, when the slave-owning “interests” in the American South succeeded in making human chattel slavery a federal issue instead of confining it to the individual states, they got what they wanted — legal justification to extend slavery anywhere in the United States, regardless whether or not it was legal in a specific state.

Legislation by Judiciary

Here’s today’s brief history lesson.  The Roman emperors preferred to respond to specific circumstances by deciding cases on an individual basis without getting a law passed.  This was to maintain the fiction that the Senate was still in charge, and only the Senate could pass laws.

Toward a False Equality

This past Friday the Alabama Supreme Court overturned a DeKalb Circuit Court summary judgment in favor of defendants who maintained that a wrongful-death action could not be maintained because an unborn child is not viable. Pro-Life activists are hailing the decision by Justice Thomas Parker as a great victory, and a further erosion of the U.S. Supreme Court's ruling in Roe v. Wade. As technology advances, the issue of viability of the fetus becomes in many cases irrelevant. As one commentator put it, "What stays constant is that at the moment of conception the child is a human being."

There's the problem. In Roe v. Wade the Supreme Court did not deny that a fetus is a human being. Logically and legally the Court could do no such thing. They could equivocate and feign ignorance of a self-evident fact, claiming that they did not know whether a fetus is a human being, but they could not deny that fact outright. "Being" is the quality or state of having existence. The fact that a fetus exists from the moment of conception is not the issue. Abortion is a meaningless act if there is nothing there to abort.

What the justices could do and did was deny that, whatever a fetus happens to be, it is not a person, and therefore not entitled to protection under the law. "Person" is a legal and social concept, where "being" is a simple statement of fact. What Roe v. Wade did was make personality dependent on something other than mere humanity or being. This is similar to what the Court did in Scott v. Sandford in 1857 when Justice Roger Brooke Taney declared in his opinion that,

"It is difficult at this day to realize the state of public opinion in regard to that unfortunate race which prevailed in the civilized and enlightened portions of the world at the time of the Declaration of Independence, and when the Constitution of the United States was framed and adopted; but the public history of every European nation displays it in a manner too plain to be mistaken. They had for more than a century before been regarded as beings of an inferior order, and altogether unfit to associate with the white race, either in social or political relations, and so far unfit that they had no rights which the white man was bound to respect."

The ruling in Scott v. Sandford upheld the presumed principle of the natural inferiority of blacks, whether slave or free, maintaining, in effect, that members of "that unfortunate race" may be human beings, but they are not human persons. Only persons have rights. When the natural law is jettisoned, it is entirely "logical" to take the position that Dred Scott or a fetus may be a human being, but he is not a human person.

Thus, it seems evident that, however encouraged people in the Pro-Life movement may be about the decision by the Alabama Supreme Court, it really changes nothing. The probability is that, given the U.S. Supreme Court's orientation toward legal (and moral) positivism, the argument would not be admitted.

As became clear in the recent blog series on "Raw Judicial Power" when analyzing the U.S. Supreme Court's re-writing of the Constitution beginning with Marbury v. Madison in 1803, but reaching its nadir with Scott v. Sandford in 1857, the Slaughterhouse Cases in 1873 and Roe v. Wade in 1973, the Court can make the words in any part of the Constitution mean anything they want in any set of circumstances. As William Crosskey observed regarding the ruling in the Slaughterhouse Cases, the opinion was so vaguely worded as to allow the Court to make decisions 180 degrees from one another, using the same precedent — and the ruling in Slaughterhouse as it pertains to the meaning of "person" in the 14th Amendment is the basis for Roe v. Wade.

In their book The Basic Symbols of the American Political Tradition (1970), Willmoore Kendall and George Carey maintained that Congress has the power to reverse any decision of the Supreme Court and put it back in its place, but it simply does not do so. Perhaps the object lesson of how the Court was able to effectively nullify the 14th Amendment — specifically intended to overturn Scott v. Sandford — and use the same reasoning in Slaughterhouse, giving the Court power over the other two branches of government is too graphic a reminder of their own, self-imposed impotence.

The Congress can amend the Constitution all it wants, and other courts can hand down decisions to their hearts' content, but until the Court — and, before it, the people and the other branches of the government — reorient themselves and their philosophy toward "virtue" (in the Aristotelian sense), nothing is going to happen except pendulum swings between whichever group holds power at the moment. As John Adams noted, "Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other." The history of the decisions of the Supreme Court demonstrates the truth of Adams's observation in the most graphic manner possible.

The problem is that the United States has fallen victim to the very thing against which Alexis de Tocqueville warned as being the single greatest danger to democracy in America: false notions of equality. As de Tocqueville concluded the second volume of Democracy in America (1840),

"Providence has not created mankind entirely independent or entirely free. It is true that around every man a fatal circle is traced, beyond which he cannot pass; but within the wide verge of that circle he is powerful and free: as it is with man, so with communities. The nations of our time cannot prevent the conditions of men from becoming equal; but it depends upon themselves whether the principle of equality is to lead them to servitude or freedom, to knowledge or barbarism, to prosperity or to wretchedness." (Alexis de Tocqueville, Democracy in America, II.4.viii.)

Kendall and Carey make the same point, although they tend to muddy the water by giving too much weight to modern understandings of the false notions of equality, neglecting the obvious Thomist understanding as it applies in the "analogy of being" of equality of opportunity or capacity for virtue. Whatever your specific frame of reference, however, people today seem to have forgotten that the State is not the source of all good. The demand has grown, from Coxey's Army in 1894 to today's "Occupy" movement, that the State guarantee everyone an adequate material standard of living, imposing an acceptable equality of results by whatever means deemed necessary.

This is directly contrary to the role the State is intended by nature to play. The State is the primary (but not sole) guardian of the common good, not each individual's personal good. The common good, properly understood, is that network of institutions within which people, as special creations of God, acquire and develop virtue, thereby becoming more fully human — and the State a more perfect union to enable people to pursue their personal good within the limits imposed by membership in a free society.

Consistent with the belief that, contrary to the precepts of the natural law and Catholic social teaching, the State, and the State alone, is the guarantor of all individual goods ("the State is the sole intercessor available to the poor," as one misguided enthusiast put it), and the sole guardian of the common good, leads directly into decisions such as Roe v. Wade.

Worse, the fixed belief that all good comes from the State makes people susceptible to "Welfare Blackmail." People begin to accept abortion and intrusive State control of every aspect of their lives as the presumably necessary price for material benefits conferred by the State. The misguided enthusiast cited above (we'll grant him anonymity for obvious reasons), has, in fact, while proclaiming himself to be "Pro-Life," criticized others for agitating against abortion when war, poverty, and lack of adequate wages abound.

That the demand that the State take care of everyone's material needs and impose an equality of condition — especially economic condition — involves the complete economic disenfranchisement of ordinary people through the effective abolition of private property is either ignored (by the capitalists), or viewed as a positive good (by the socialists). This is why the popes have harshly criticized capitalism, but condemned socialism outright. While both the criticism and the condemnation were necessary and salutary, the ease with which both have been widely misunderstood, reinterpreted, or ignored by Catholics and non-Catholics alike suggests that what is needed at this point is the explication of principles that, when applied in a consistent and logical manner, will lead to something above and beyond both capitalism and socialism.

Absent that, the popes can claim all they like that widespread direct ownership of capital is a moral and social necessity, but it will have no effect. People will continue to reinterpret what the popes say in light of discredited economic theory that, for example, asserts contrary to established fact that the only way to finance new capital formation is by cutting consumption and accumulating money savings. The legal, social and economic "experts" will simply continue to ignore or suppress papal teachings on the grounds that it contradicts what they have chosen to accept as economic dogma.

Without private property in capital, however, we cannot hope to reverse the current trends in this country or around the globe. "Power," as Daniel Webster observed, "naturally and necessarily follows property." Ownership of capital is also the means by which we interact in society in a meaningful way — as far as Aristotle was concerned, a nominally free person who owns no capital is a masterless slave. Ownership of capital — and, as Leo XIII observed, we have that right by nature itself — not a declaration by the Supreme Court or Congress, makes us "persons," at the same time that it vests us with the power to protect that very personality and the other rights of life and liberty that necessarily accompany it.

This is why we at CESJ advocate Capital Homesteading as a Pro-Life economic agenda. By vesting ordinary people with ownership of capital, "the rest of us" gain the power necessary to reverse the social and political trends that led to Roe v. Wade — and, incidentally, eliminate the debt that threatens to enslave future generations even more than is the case today. Not until we have a society characterized by widespread direct ownership of capital will the Pro-Life movement make any headway. The Congress can pass all the laws it wants, the Constitution can be amended, but until ordinary people are vested with the power that ownership brings, and thus the means of acquiring and developing virtue, the Court, the president and even Congress will continue to interpret the Constitution and even the role of the State in a way that furthers the goal of false equality against which de Tocqueville warned.

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Raw Judicial Power XXIII: Solution

A search for a viable solution for the current political and economic situation is, as we have seen, handicapped by an unspoken, possibly unconscious assumption at work. We have gone into this in some depth in this blog series, explaining how, in a country presumably based on the natural law, natural rights are often ignored or redefined in order to achieve political or economic goals. What we have to do now is come up with a solution.

Fortunately, coming from the perspective of the Just Third Way, that is a relatively straightforward process. First, however, we have to "re-educate" ourselves about that critical assumption. The best way to do this is to take a look at how the presumably mutually exclusive systems of capitalism and socialism operate within the "past savings paradigm."

Both capitalists and socialists assume as a given that the only way to finance new capital formation is to reduce consumption, accumulate money savings, then invest. (If you just said, "Of course" to yourself, that does not mean you are necessarily a capitalist or socialist, but that you have made the same assumption that leads inevitably to one or the other.)

That being the case, it follows that as capital instruments become increasingly expensive as technology advances (and replaces labor in the production process), there must be a class of persons, necessarily small, who cannot consume all the income their capital generates. Assuming they act rationally, such people reinvest their excess consumption income in additional capital. This presumably creates jobs for everyone else. In capitalism the class of owners is a small private elite, the smaller, the better in order to finance increasingly expensive capital instruments. In socialism, it is the State.

We are, obviously, defining capitalism as concentrated private ownership of capital, and socialism as concentrated public ownership of capital.

As technology replaces labor as the predominant input to production, the market value of labor declines relative to capital. This creates problems, for when ordinary people lack sufficient income, there is insufficient demand to clear production at market prices.

Capitalists claim that new jobs will be created by investment in new capital. This is true up to a point, but eventually the productive capacity of the new capital itself outstrips the need for additional labor input. When that happens, the number of new jobs, and then existing jobs, starts to decline.

For example, from 1919 to 1929 when the U.S. economy was rapidly expanding and creating millions of new jobs, the number of people engaged in direct manufacturing declined dramatically. The new jobs came in administration, sales, and logistical support — jobs that are now disappearing in response to advances in computer technology.

The socialist solution to the inequities of concentrated ownership of capital is for the State to take over either ownership directly, or exercise a degree of control that amounts to de facto ownership. The economy is manipulated to achieve political ends.

The solution to the problems seen in both capitalism and socialism was given by Leo XIII in 1891 in Rerum Novarum: "We have seen that this great labor question cannot be solved save by assuming as a principle that private ownership must be held sacred and inviolable. The law, therefore, should favor ownership, and its policy should be to induce as many as possible of the people to become owners." (§ 46.)

This, however, gets us right back where we started . . . if we assume that the only way to finance new capital formation is to cut consumption and save. Most people clearly cannot afford to save. They don't even have enough income on which to survive now. The pope, therefore (so the reasoning of both capitalists and socialists goes) must have been giving a prudential suggestion, because what he's talking about is impossible . . . if we assume that the only way to finance new capital formation is to cut consumption and save.

The argument between socialists and capitalists can never end, because both sides make valid points — but points based on a false assumption: that in order to finance new capital formation, you must cut consumption and save.

Fortunately, there is a way out. As Adam Smith explained in Book II of the Wealth of Nations (1776), Henry Thornton in The Paper Credit of Great Britain (1803), Jean-Baptiste Say in his Treatise on Political Economy and Letters to Malthus (1821), and Harold Moulton in his counter proposal to the New Deal, The Formation of Capital (1935), the optimal method of financing new capital formation is not to reduce consumption.

Reducing consumption to finance new capital actually makes the new capital less feasible. Consequently, a rational investor will not put his or her money into capital that is not expected to make a profit. Socialists substitute State subsidies, punitive taxation, and other measures to make it profitable (or at least less economically harmful) to finance new capital and thereby presumably create jobs, but that misses the point. If capital will not pay for itself out of future profits, it is contrary to common sense to finance it.

If, however, it is reasonably certain that the new capital will pay for itself out of future profits, then the present value of those future profits can be "monetized" by drawing up a contract to deliver a portion of those profits when they are realized to someone who will accept that contract in exchange for what is necessary to form the new capital. This contract is called a "bill of exchange." It can either be used directly as money, or taken to a commercial bank and exchanged for the bank's promissory note. To ensure a uniform and stable currency, commercial banks should have their own bank, a central bank, so that all the member banks use the same standard(s).

Because capital can be (and usually is) financed in this way instead of by cutting consumption and saving (retained earnings are, one, not cash, but ownership of assets of the business, and two, used as collateral, not direct expenditure for capital), anyone who can come up with a financially feasible project can become an owner, simply by using increases in production in the future ("future savings") rather than decreases in consumption from the past ("past savings") to finance the capital.

The remaining problem is collateral. That can be solved by using capital credit insurance in place of traditional collateral in the form of accumulated wealth.

A proposal that integrates these principles is called "Capital Homesteading." Capital Homesteading is an analogue of the nineteenth century American programs enacted to bring about a broad distribution of the ownership of land. Capital Homesteading expands the concept to include ownership of advanced technologies, including management, marketing and distribution systems, through equity shares in enterprises capable of competing without special protections within a free and just global economy.

Under "Capital Homesteading," a citizen's tax-sheltered capital asset accumulation account, similar to an Individual Retirement Account (IRA). Each capital homesteader's account would be able to receive annual allocations of interest-free, productive credit and new asset-backed money issued by the central bank and administered by local commercial banks. This new money and credit would then be invested in feasible private sector capital formation and expansion projects of businesses that would issue new shares to be purchased and sheltered in the citizen's Capital Homestead Account. After the "future savings" (future profits) generated by the productive assets paid off each year's Capital Homestead investment (loan), the citizen would continue to receive in the form of dividends the incomes generated by those capital assets.

The goal of Capital Homesteading is the enactment of a Capital Homestead Act. Such an act would be a national economic policy based on the binary growth model, designed to lift barriers in the present financial and economic system and universalize access to the means of acquiring and possessing capital assets. A Capital Homestead Act would allow every man, woman and child to accumulate in a tax-sheltered Capital Homestead Account, a target level of assets sufficient to generate an adequate and secure income for that person without requiring the use of existing pools of savings or reductions in current levels of consumption.

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Raw Judicial Power XXII: Summary

As we have seen in this series, the abandonment of the natural law as the basis for the social order and the framework for understanding the Constitution of the United States is, in part, due to a misunderstanding of money, credit, banking and finance. A moment's reflection will demonstrate the truth of this proposition.

As long as new capital formation was financed by cutting consumption and accumulating money savings (i.e., savings not — yet — in the form of investment in capital), the rate of economic growth remained slow. Bound by the supply of existing savings in the system, the development curve was almost flat until the middle of the 17th century.

It was then that the reinvention of commercial banking and, toward the end of the century, the invention of central banking began to affect the rate of capital formation, as did the concept of insurance. As a result of shifting from the present value of existing savings (reductions in consumption) as the source for capital investment, to the present value of the profits from future marketable goods and services (increases in production) the development curve went from nearly horizontal to almost vertical. Freeing economic development from the limits imposed by what had been accumulated in the past, to what could be produced in the future meant that a reasonable standard of living became possible for everyone.

The problem was that government monetary and tax policy has tended to adhere to the idea that existing savings generated by reducing consumption are the only source of financing for new capital. Added to this was the idea that only government, which produces nothing, has the power to create money. That is, only a non-productive entity, the State, could supply the means whereby people could engage in industry, commerce and agriculture and produce marketable goods and services. This led not only to socialism as the remedy for the evils of capitalism, but to the mistaken ideas about scarcity popularized by the Reverend Thomas Malthus and embodied in the "currency principle" that rejected or redefined Say's Law of Markets and its application in the real bills doctrine.

Say's Law, as we have seen, is best summarized by realizing that we do not purchase what others produce with "money." Money is only the medium through which we exchange what we produce with our labor and capital, for what others produce with their labor and capital. The real bills doctrine can be summarized as, if the amount of money created by offering and accepting all forms of "bills of exchange" (negotiable contracts) equals the present value of existing and future marketable goods and services in an economy, there will, ceteris paribus, be neither inflation or deflation, but a stable, uniform and "elastic" asset-backed money supply.

Rejecting or redefining Say's Law of Markets and rejecting the real bills doctrine locks an economy into acting as if existing accumulations of savings are the only possible source of financing for new capital formation. This in turn leads to what Harold Moulton called "the economic dilemma": if you cannot finance new capital except by cutting consumption, then the increase in consumer demand that justifies investment in new capital will not exist. Consequently, no new capital will be financed because it cannot be justified, i.e., shown to be "financially feasible" — able to pay for itself out of its own future profits.

An even more damaging result of the belief that only existing accumulations of savings can be used to finance new capital formation is that it requires that ownership or control (the same thing in law) of capital be concentrated, and the more concentrated, the better in order to generate sufficient savings to finance the increasingly expensive new capital. Since an owner of immense wealth cannot possibly consume all the income generated by the capital owned, the excess is reinvested in more capital. This presumably results in hiring more wage workers and keeps the economy in balance. As noted, it also leads to either capitalism (concentrated private ownership of capital) or socialism (concentrated State ownership of capital) as the only perceived alternatives.

One problem is that, since the vast bulk of new capital formation is not actually financed out of existing accumulations of savings, the "past savings assumption" leads to serious distortions in the economy. Among the more serious distortions are the "business cycle" and the belief that an outstanding government debt is necessary if the economy is to have an adequate money supply. An even more serious problem is that, since the past savings assumption is, considered as the sole source of capital finance, false, both the private sector and the government are forced to change definitions of natural rights to life, liberty and property — "re-edit the dictionary," as Keynes put it — in order to try and make the system work in both capitalist and socialist economies.

The first target in the redefinition process in an economy in bondage to the currency principle is almost always private property, then liberty (freedom of association/contract), and, ultimately, life itself. The situation in the United States is somewhat anomalous, due to the relative ease of acquiring and possessing landed capital before the Civil War, the generally low level of industrial and commercial development at that time, and the institution of chattel slavery.

That being the case, liberty, not property, was the first casualty in the United States in Scott v. Sandford, the Dred Scott case. Admittedly, the issue was related to private property, and maintaining illegitimate exercise of the legitimate, even essential right to be an owner was inextricably linked with the issue of humanity's natural right to liberty. The fact remains, however, that in America, because it was possible to become an owner of capital, the ground and the "terms of engagement" shifted in the culture war. This was the case until the "free" land available under the Homestead Act of 1862 ran out.

The result, however, was the same as in societies in which all access to the means of acquiring and possessing capital was cut off for most people. In what could only be described as a desperate attempt to maintain chattel slavery in the face of changing social, economic and political conditions, as well as world opinion, the Supreme Court of the United States changed the whole basis for understanding the Constitution from the natural law, to political and, especially, economic expedience. The "living constitution" was "born."

It is thus no coincidence that Scott v. Sandford in 1857 followed hard on the heels of the publication of David Christy's Cotton is King in 1855. Christy's book, with its claim that the economic survival of the United States and the British Empire depended absolutely on slave cultivation of agricultural commodities, chiefly "King Cotton," was the most persuasive economic argument for the continuance and expansion of slavery published in the 19th century. It was rendered all the more powerful because Christy, a former abolitionist, professed to abhor slavery personally, but clearly believed that economic expedience and the needs of the State came before humanity's natural right to liberty.

As a result of Scott v. Sandford and Cotton is King, natural rights — personality — were no longer understood as inalienable, that is, inhering absolutely in each human being by nature itself. Instead, rights were viewed as coming from the State. The exercise of formerly inalienable rights could therefore be limited, abridged, redefined, or even abolished entirely without reference to the underlying natural right (and thus the dignity of the human person) if, in the considered judgment or even whim of those in power, it would achieve some desired end.

Consequently, in such cases as Dodge v. Ford Motor Company (1919) and Citizens United v. Federal Election Commission (2010), the natural right to private property, and the significance of what it means to be a natural person, respectively, were ignored in furtherance of economic or political goals. Roe v. Wade, far from being an anomaly, was simply another application of an approach to law established by precedent for more than a century, and which had provided the guiding philosophy of the Supreme Court almost from the beginning in an effort to preserve slavery.

The American Civil War could thus be viewed, as Orestes Brownson pointed out, as a struggle between two forms of capitalism. These were the well-entrenched yet economically decaying agrarian capitalism of the South, and the new and increasingly powerful industrial and commercial capitalism of the North. With the Northern victory, the struggle shifted from between two forms of capitalism, to between capitalism and socialism.

Following the Civil War, two factors stood in the way of the triumph of either capitalism or socialism. The first was the natural right to private property, already secured in the Constitution with its basis in the natural law. The second was the opportunity to exercise private property, open to everyone who would take advantage of it through the Homestead Act of 1862.

As we have seen, however, the exercise of private property was limited by being confined to land. Land is a form of capital in fixed supply, and cannot expand to meet the needs of a growing economy. The natural limitation on land was exacerbated by the artificial limitation on money and credit, resulting in a lack of access to capital credit by small owners to develop the land properly. This left the right to be an owner, presumed absolute in each human being by nature itself, as the target. The Fourteenth Amendment that secured the full spectrum of natural rights to each human being stood in the way of the redefinition of personality, and thus the concentrated control — ownership — of capital that both capitalism and socialism require.

Consequently, in the Slaughterhouse Cases the United States Supreme Court effectively nullified the Fourteenth Amendment. As William Crosskey pointed out, the opinion in Slaughterhouse was so vaguely worded as to allow the Court to do whatever it wanted in the future, regardless of anything the Constitution might actually say, or the intent of the framers.

Thus, depending on whether states' rights or those of the central government favored the Court's agenda, the Court could go either way, and still claim to be acting constitutionally. Similarly, the Court could force a capitalist or socialist interpretation on the Constitution by re-editing private property, life and liberty, whatever suited the current needs or desires of the Court.

The underlying issue was, as always, the natural law, and the restrictions that the natural law, centered on humanity, necessarily puts on the growth of State power. While the "slavery of past savings" and the perceived need to support capitalism or socialism was the underlying cause of the Court's actions, it could not justify them.

The problem then becomes what to do about this situation.

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Raw Judicial Power XXI: Roe v. Wade, Effects

Public reaction to Roe v. Wade was immediate. The decision was widely seen, as dissenting Justice Byron White put it, as an exercise of "raw judicial power." The Supreme Court's decision seemed to many people to be a new philosophy of jurisprudence and understanding of the role of the State, even a revolution. The ruling was so contrary to public opinion that it could only have been forced on a nation with an almost inherent respect, even reverence for its own laws and traditions, and where the great mass of people had lost virtually all ability to act directly on the common good through the disappearance of widespread ownership of capital.

Still, given the violence that often characterizes fundamental social change in other parts of the world, the generally peaceful acceptance of such a profoundly flawed decision in the United States is a virtual anomaly. Other laws that went against the public conscious, such as the Fugitive Slave Act of 1850 and the Volstead Act (Prohibition) were widely flouted. Only the fact that no one was forced to go against his or her conscience kept the public outcry within bounds — that and the concurrent decay of the principle of subsidiarity, in consequence of which many (if not most) people felt completely helpless in the face of an obviously unjust situation.

The principle of subsidiarity involves resolving issues through social action and the formation of associations by individuals at levels "below" that of government rather than by force of arms or other coercion. It was noted by de Tocqueville as the chief characteristic of political life in the United States. Its decay has the unfortunate effect of obscuring the fact that the decision in Roe v. Wade was actually a logical development of a chain of events that began as an effort to preserve the archaic institution of chattel slavery, and continued to preserve outdated assumptions about financing new capital formation that, seemingly inevitably, concentrated ownership of capital in a small private elite or State bureaucracy.

Paradoxically, even though rooted in the principle of subsidiarity, however distorted, the chain of events barely outlined in this blog series culminated in the belief that only the State has the power — and thus the right and duty — to control every aspect of life for both individuals and groups. This belief grew apace as America shifted from being a nation of owners, to being a nation of wage workers following the Civil War as a result of the loss of the opportunity to own landed capital was not replaced with the opportunity and means — access to capital credit — to own industrial and commercial capital.

Without the buffer of institutions between them and the government, people became increasingly dependent on the State and isolated from one another in furtherance of their personal survival. The habit of organizing for the common good faded, and, in many cases disappeared altogether, except in a collective sense under State authority as socialism took greater hold through State manipulation of the monetary and financial system.

As people lost the power over their own lives through loss of ownership of capital, the State took over more and more of the business of daily life, and the feeling of individual helplessness increased. The idea that the State is made for man, not man for the State was necessarily discarded. The human person (recognized as such only when expedient for the State) became, ipso facto, a "mere creature of the State," recognized and protected as a person only as an expedient insofar as it advanced the interests of the State.

The primary institutions that traditionally intermediated between the individual and the State — religion and the family — began to be perceived as threats to the all-encompassing power of the State. Cloaked under the issues of "separation of Church and State," and "Gay Rights," both religious society ("Church") and domestic society ("Family") have been targets of abolition by redefinition, just as the natural rights to life, liberty and property have been eliminated by "re-editing the dictionary." It seems not to occur to anyone in power that the First Amendment clearly states that Congress shall make no law respecting establishment of religion, not "shall only make punitive laws"; the First Amendment is a recognition that religious society is distinct from civil society over which the State exercises its power, not a declaration of war.

Keeping in mind the politicization of the Church of England after Henry VIII declared himself head of the Church of England and established religion as a branch of the government, the intent of the First Amendment is to keep religious society qua religious society safe from government interference and from being used by the government to carry out mandates in civil society. Purely religious rights and matters do not come under the purview of the State. Nor can the State legitimately require that people or institutions — even civil institutions — act against the dictates of a well-formed conscience.

Further, as religion is the primary interpreter and teacher of natural law in any society, the State's abolition of natural rights in civil society cannot justly be applied to religious society however expedient it may be politically. The State can only intervene in religious society when civil rights, not religious rights, are violated, just as the authorities of religious society have the right to intervene in civil affairs when actions by the State threaten religious rights.

Similarly, domestic society — the Family — is, under common law, distinct from civil society; "a man's home is his castle," the "Castle Doctrine," is a recognition of this separation of civil and domestic society. As long as the civil rights of family members are not violated, the State has no right to intervene in domestic society. It doesn't seem to occur to anyone in the "same sex marriage" controversy that marriage is a domestic right, not a civil right.

The State may regulate marriage to a degree, e.g., require a license or forbid bigamy or polygamy in the interests of the common good or to protect individuals. The State, however, lacks the competence to redefine marriage, abolish it, or to regulate it out of existence. The claim that marriage is a civil right protected under the penumbra of rights allegedly "granted" by the State under the Fourteenth or any other Amendment reveals a profound misunderstanding of the Constitution, the role of the State, and even society itself, to say nothing of the political philosophy on which the United States is based.

No civil court can rule that a ban on same sex marriage is unconstitutional, because the State has no competence under the Constitution (the highest civil law) to define marriage, an institution in domestic society. Any constitutional amendment defining marriage in any form would, in effect, extend State power even further than before by granting the State a power it never had. The most any such amendment could do would be to declare that the Congress shall make no law affecting the definition of the family or marriage, or words to that effect.

Thus, what quickly became the Pro-Life movement in the wake of Roe v. Wade was caught off guard by a profound yet seemingly unnoticed fundamental shift in the general understanding of essential human dignity and the respective roles of individuals and the State, and in mistaking Roe v. Wade for the cause, rather than an effect of the breakdown of the culture. The Pro-Life movement has been struggling ever since to secure the high political ground as well as the high moral ground. Not understanding or appreciating the relationship between economic power and political power, however, the Pro-Life movement has stressed the necessity of conforming human positive law to the natural law, but without the effective power to do so. The movement as a whole has ignored or viewed as a diversion efforts to secure political power through implementing and maintaining the principles of economic justice.

Since the entrenched philosophy that led to Roe v. Wade takes for granted certain economic — and thus political — assumptions, downplaying or even ignoring the importance of a Pro-Life economic agenda has been both a tactical and a strategic disaster for the Pro-Life movement. Even worse has been the fixed belief that the State necessarily controls the whole of society, and that the only real quarrel is which draconian measures best meet the material needs of the citizens, not which arrangement of the social order best conforms to the demands of human dignity.

This virtual "State worship" has led to otherwise charitable religious people giving in to what can only be described as "Welfare Blackmail" and viciously attacking anyone who would reduce the role of the State and put both political and economic sovereignty back in the family and the individual. Within the framework dictated by the Supreme Court since the Dred Scott case, the State is viewed as necessarily all-powerful. Efforts to decrease the role of the State are thus believed to represent a serious danger to material wellbeing.

After all, the reasoning appears to go, the only possible alternatives for social and economic development are capitalism and socialism. Private individuals — as the capitalists themselves sometimes aver — are motivated solely and exclusively by greed; "greed is good," as the late Nobel Laureate Milton Friedman declared in an interview with Phil Donohue. That being the case, only the State can be trusted to control economic and social life and ensure an acceptable material standard of life for everyone. If abortion is the price the nation must pay in order to secure State control and thus the material welfare of its citizens, the cost is high, but unavoidable — at least until "we" can seize control of the State and force "our" views on everyone else the way "they" have forced theirs on "us."

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Raw Judicial Power XX: Roe v. Wade (1973)

As one of the most controversial decisions by the United States Supreme Court, Roe v. Wade has split the nation into factions in what is now a global culture war. Unlike similar conflicts in the past, however, violence between factions (at least in the United States) has been minimal. This is despite the standard Pro-Choice rhetoric, now largely symbolic and ritualized, about the inherent vicious tendencies of the "antis," as they are almost exclusively known in the mainstream media.

What is even more surprising about the effort to overturn Roe v. Wade, however, is the ineffectiveness of the political strategy and the tactics chosen to implement that strategy: public demonstrations to raise consciousness of the problem and exert pressure on Congress and the President. As Father William J. Ferree explained the proper role of such tactics in his uncompleted manuscript, Forty Years After . . . A Second Call to Battle (cir. 1984),

"The favorite 'social technique' of our own time is the 'peaceful' demonstration, especially when media coverage is likely or can be arranged. Subsidiary aspects of the demonstration are boycotts, sit-ins, organized lobbying pressures, single-issue 'advocacy' and then — crossing an invisible line which is hard to define and harder still to hold — civil disobedience, violent demonstrations, and, ultimately, terrorism!

"Despite the social intent of all such techniques, and their almost universal arrogation to themselves of the terms 'Social Justice' or 'Justice and Peace,' these techniques are all radically individualistic. There are several criteria which can be applied to test this:

"1) They are directed immediately to some specific solution already determined in the mind of the 'activist'; they are never a willingness to dialogue with other and differing opinions on what the problem really is.

"2) They are always intensely concerned with the methodologies of pressure, not with those of competence in the matter in question.

"3) They all require 'time out' from the day-to-day social intercourse of life, and raise the question of how many objects one can juggle at any one time without dropping some or all.

"4) Any 'demonstration' is by definition a demand on someone else to do something. It takes for granted that whatever is wrong is the personal work of someone else, not the common agony of all; and it always knows exactly who and where the someone is.

"All this can be summed up in the observation that the 'social activist' as we have seen them so far, is an earnest amateur by profession.

"This is not to say that such 'professional amateurism' is always wrong. It is wrong as a normal methodology. If it obeys the same principals which would permit a just war, or the insurrection against an entrenched tyrant, more power to it! But it is a hopeless and hence unjust substitute for the patient and full-time organization of every aspect of life which we have seen in the necessary implementation of Social Justice and in the now defunct techniques of 'Catholic Action.'"

The problem, of course, is obvious. The objects of all these demonstrations are not the most effective targets. It does minimal social good (although sometimes immense individual good, such as when a life is saved) to demonstrate outside abortion clinics or in public venues, and write letters to Congress and the president.

This is because decisions such as Roe v. Wade — and, as we have seen, Scott v. Sandford and the Slaughterhouse Cases — are rooted in a profoundly flawed understanding of the natural law basis of the United States Constitution by the United States Supreme Court. A "personhood amendment" or "right to life amendment" to the Constitution would do nothing to overturn Roe v. Wade. Such an amendment would be nullified at the first opportunity, just as the Fourteenth Amendment, intended in part to overturn Scott v. Sandford, was nullified by the decision in the Slaughterhouse Cases, and just as Scott effectively nullified the Constitution itself by its redefinition of "person."

As Crosskey pointed out in his book, Politics and the Constitution in the History of the United States (1953), the words of the Constitution have been twisted to mean anything that the Supreme Court wants them to mean. This is so much so that modern constitutional scholars can claim with a straight face that "the theory that the Constitution is a written document is a legal fiction." (Charles A. Beard and William Beard, The American Leviathan. New York: The MacMillan Company, 1930, 39, quoted in Charles Herman Pritchett, The American Constitution. New York: McGraw-Hill, 1977, vi.)

How this was accomplished in the case of Roe v. Wade demonstrates graphically how the Supreme Court has wielded "raw judicial power" to the detriment of individual sovereignty, the common sense of the Constitution, and American civilization as a whole.

In the first place, it appears extremely doubtful that, had it not been for its alleged power to rewrite the Constitution, the Supreme Court had the power to make any decision at all in Roe v. Wade. It is a basic principle of U.S. constitutional law that federal courts have no power to hear moot cases — and this includes the U.S. Supreme Court. As one source put it, "The US Supreme Court does not hear cases that are moot, hypothetical or consist of intellectual exercises. If a valid case becomes moot, they will deny certiorari, remove the case from the docket, or issue a per curiam decision declaring the case moot if they've already granted cert." (http://wiki.answers.com/Q/What_does_the_US_Supreme_Court_do_if_a_case_becomes_moot, accessed Friday, February 10, 2012)

The fact is that "Jane Roe" had already had the baby and put the child up for adoption — three years before the case reached the Supreme Court. Any decision that the Court would make could not possibly affect the outcome as it had already taken place; the matter was settled. In American law, a point is "moot" when it has become irrelevant, and it would not change anything in the case to consider the matter further. "Jane Roe" did not have the abortion, and that should have ended the matter right there. As the Wikipedia explains the issue,

"In the U.S. federal judicial system, a moot case must be dismissed, there being a constitutional limitation on the jurisdiction of the federal courts. The reason for this is that Article Three of the United States Constitution limits the jurisdiction of all federal courts to 'cases and controversies'. Thus, a civil action or appeal in which the court's decision will not affect the rights of the parties is ordinarily beyond the power of the court to decide, provided it does not fall within one of the recognized exceptions.

"A textbook example of such a case is the United States Supreme Court case DeFunis v. Odegaard, 416 U.S. 312 (1974). The plaintiff was a student who had been denied admission to law school, and had then been provisionally admitted during the pendancy of the case. Because the student was slated to graduate within a few months at the time the decision was rendered, and there was no action the law school could take to prevent that, the Court determined that a decision on its part would have no effect on the student's rights. Therefore, the case was dismissed as moot."

The Wikipedia entry is extremely useful here because it includes something that the Supreme Court effectively added in its rewrite of the Constitution. The underlined phrase, "provided it does not fall within one of the recognized exceptions," is, in constitutional terms, utterly meaningless except as a way of nullifying Article Three of the Constitution that limits the power of the Court to actual cases!

If the Constitution has any meaning at all, the fact that Article Three allows no such exceptions means that there aren't any. If a case is moot, it is moot, and cannot be heard by the Supreme Court. Period. To "recognize" an exception, all the Supreme Court need do is, obviously, to admit it, and, ipso facto, the Court excuses itself from being bound by the Constitution!

Like the "Scopes Monkey Trial" of the 1920s, Roe v. Wade was a put-up job, intended to overturn existing laws by circumventing the legislative process. The difference was that the Scopes trial did not involve a moot point. Scopes had broken the law, and the Tennessee Supreme Court upheld the law as constitutional. John Scopes's conviction was overturned on a legal technicality — and the law against teaching evolution was repealed in the proper way, through the state legislature.

Another apparent contradiction in the Roe v. Wade decision is that it was based on the understanding of the Fourteenth Amendment that came out of the Slaughterhouse Cases. In the Slaughterhouse Cases, however, the Supreme Court decided that states' rights — and thus laws — were somehow superior to privileges and immunities granted under the U.S. Constitution in the original Bill of Rights and the Fourteenth Amendment . . . where in Roe v. Wade the Court did exactly the opposite, claiming that state law could not contravene the "penumbra of rights" (privileges and immunities) covered in the Fourteenth Amendment. Evidently Crosskey was correct when he claimed that the Slaughterhouse opinion was written as it was in order to give the Supreme Court what amounts to absolute power over the Constitution, to make it mean anything the Court pleases, so long as it advances the Court's agenda.

Perhaps the most remarkable thing of all relating to Roe v. Wade is the way in which the Pro-Life movement has accepted the Court's right to (as Keynes put it) "re-edit the dictionary" when it comes to natural rights guaranteed in the document that gives the Court its power. By controlling the interpretation of the Constitution uninhibited by any constraints imposed by natural law or original intent, the Court removes all checks on its own power except for public opinion, which is worse than useless in this case.  Demonstrations without the power to back up the demands gives the illusion that something is being done when, in point of fact, nothing is being accomplished in social justice.

The problem with public opinion is that, absent the empowering aspect of widespread direct ownership of capital, people can say what they want in public, but in the privacy of the voting booth will necessarily elect the people whom they believe will best secure their material wellbeing. For the past forty years at least, that has been an illiberal elite that uses welfare benefits as blackmail to ensure acceptance of less palatable items on the agenda, and have a vested interest in promoting and protecting decisions such as Roe v. Wade, much as the pro-slavery forces were the chief motive behind the decision in Scott v. Sandford.

Putting pressure where it belongs, on the Supreme Court, is virtually impossible because the Court is, to all intents and purposes, unaccountable to anybody, which means it can get away with anything, even the effective nullification of the Constitution. Even given our admittedly limited understanding of constitutional law, the decision in Roe v. Wade appears to be seriously flawed with respect to both procedure (no power to try moot cases) and substance (abolition of natural rights guaranteed by the Constitution). Lacking the power that only direct ownership of capital vests in the citizens, however, the Supreme Court may do as it will, and thumb its collective noses at the Constitution, the natural law, and common humanity.

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Raw Judicial Power XIX: The New Deal

The Crash of 1929 ushered in a new era of misunderstanding of the role of the State, especially the degree to which government can or should directly control economic and social life by infringing on the natural rights of liberty and property. The New Deal, characterized by rapid, almost explosive growth of government through manipulation of the financial, tax and monetary systems (see Harold G. Moulton, The New Philosophy of Public Debt. Washington, DC: The Brookings Institution, 1943) was the logical end of the decayed populism of the 1890s, and the derailed progressivism of 1900-1912.

The new understanding of private property embodied in the New Deal was a direct result of the distortions forced on the Constitution in the Slaughterhouse Cases, integrated into government monetary and fiscal policy largely through the work of Adolph Berle and Alvin Hansen. To a significant degree, the economic policies of the New Deal were determined by the fixed — and erroneous — belief that the only way to finance new capital formation is to cut consumption, accumulate money savings and invest.

Analysts operating within this "currency principle" framework were baffled by the causes of the Crash and the Great Depression of the 1930s. As Moulton made clear in a number of his books (most in-depth in The Recovery Problem in the United States, 1936, in which he accurately predicted the "Depression within the Depression" of 1937-1938), by assuming that the only source of financing for anything is existing accumulations of savings, the presumed experts could not understand why, at one and the same time, there was plenty of money for capital expansion and speculation on Wall Street.

Under the currency principle common to Keynesian, Monetarist and Austrian economics, the allocation of credit, presumed fixed by the Production Possibilities Curve that in turn is determined by the amount of existing savings, is an "either/or" situation, "guns or butter," as it is usually expressed. On the contrary, as Moulton pointed out, because commercial and central banks have the power to issue promissory notes in exchange for accepted bills of exchange, i.e., by discounting and rediscounting eligible paper, it is possible to create as much money as necessary to finance all feasible capital projects in the economy by the expansion of bank credit without upward pressure on the price level.

The problem in the 1920s, similar to the situation that prevailed in 1873 and 1893, was that by 1929 productive capacity had temporarily outstripped the capacity of consumers to absorb the new production. Business had more capacity to produce than consumers had the capacity (effective demand) to consume — a discontinuity that led to the non-functioning of Say's Law of Markets: that we can only consume if we produce, and that we can only obtain what others produce by offering what we produce in exchange.

Thus, as wage labor became less productive relative to advancing technology (Moulton noted that the number of jobs in direct manufacturing actually declined in the United States between 1919 and 1929), wage workers became less able to consume what was being produced. (The solution to this, as Louis Kelso explained a generation later, is to make "every worker an owner," ideally, every person, so that replacing labor with capital in the production process will no longer result in a discontinuity between production and consumption.)

If, at the same time, money is being created for speculation in secondary equity issues — as it was in the 1920s at a tremendous rate — then the prices of shares on the secondary market will reflect the influx of money and rise accordingly. Many people in the 1920s and even today failed to realize that purchasing equity shares and debt on the secondary market is not investment in new capital, but the purchase of existing capacity. When the purchaser buys and sells secondary issues in the hope of realizing a gain from a change in the value per share or the price of the bond instead of for the stream of dividends or interest to be paid in the future out of profits generated by the production of marketable goods and services, it must be classified as "speculation," not investment.

Consistent with the "banking principle," money for speculation, consumption and government expenditures must come out of existing accumulations of savings. Unfortunately, the Keynesian policies implemented in the New Deal assumed as a given that all expenditures for any purpose come out of existing accumulations of savings. Per the currency principle, increasing the money supply simply divides the savings accumulation into smaller and smaller pieces.

Issuing new money thus presumably only redistributes existing wealth, so that the amount of government debt issued is irrelevant as long as the debt is held within the domestic economy. To retire excess debt, it is only necessary to drain excess money out of the economy by taxation. If additional money is needed for consumption or investment, it is only necessary to increase outstanding government debt.

Keynesian monetary and fiscal theory — an application of Georg Friedrich Knapp's "chartalism" (now called "Modern Monetary Theory," or "MMT") — is thus based on the utterly false assumption that government debt — and thus the money supply — represents the present value of existing wealth in the economy. On the contrary, as has been graphically demonstrated by the colossal sovereign debt burdens of many countries today, the issuance of government securities to finance the modern Welfare State can rapidly outstrip the ability of the economy to be taxed and repay the debt. Many modern governments have made, and continue to make promises they cannot possibly keep.

This is because what is being monetized by the issuance of government debt is not limited to the quantifiable present value of existing wealth in an economy. To this must be added the present value of future tax collections based on the unquantified present value of marketable goods and services to be produced in the future, limited only by what politicians can spend, not what the private sector can produce. Governments are not only redistributing existing wealth through inflation by deficit spending monetized by their central banks. They are mortgaging future production that does not yet exist, and which may never exist if the capacity of the private sector to produce is destroyed or damaged beyond recovery.

To allow governments to take over money and credit and control the economy required a fundamentally different conception not only of natural rights, but of the source of those rights. The architects of the New Deal, principally Adolph Berle and Alvin Hansen, found this different conception in the devolution of natural law theory and the growth of legal positivism that began in the United States with the effective nullification of the U.S. Constitution by the Supreme Court in the Dred Scott decision, and was congealed into amorphous dogma in the opinion in the Slaughterhouse Cases. The demand for increased government control of the economy could be justified by the new conceptions of property and freedom of association (liberty) implied in Slaughterhouse, which due to the vagueness of the Court's opinion could be used to make the Constitution mean anything the government or the Court found useful or expedient.

Underlying the new conceptions of property and liberty, however, was an even more dangerous idea: that rights such as life, liberty (freedom of association/contract) and property are not inherent in the human person, but are a grant from the State. By changing the orientation of the Constitution away from natural law, the idea that every human being is by nature automatically a person having inherent or inalienable rights was utterly abolished.

Within the framework dictated by adherence to Keynesian economics, the State assumes absolute power; man becomes "a mere creature of the State." In fulfillment of Walter Bagehot's idea of "democracy" expressed in The English Constitution (1867), the transformation of the American system from the vision of the Founding Fathers to a government of the State, by the State, and for the State was complete.

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Raw Judicial Power XVIII: Dodge v. Ford Motor Company

As we saw in the previous posting in this series, prior to the entry of Theodore Roosevelt into the 1912 presidential campaign on the Progressive ticket, the outlook was extraordinarily grim for the United States. The choice was between William Howard Taft, who had caved in to the reactionary Old Guard Republicans, and Woodrow Wilson, who, in defiance of the populist leanings of the Democratic Party, supported laissez-faire capitalism.

This put the American voter between a rock and a hard place as far as choice was concerned. Elect Taft and get more ineffectual progressive rhetoric as the Old Guard dismantled Roosevelt's reforms while they purged the G.O.P. of progressive elements, or elect Wilson and keep things as they were, with a stalemate between a reactionary president and a populist Congress.

By forcing both the Democrat and Republican presidential candidates to adopt a more progressive stance, Roosevelt made the election a genuine contest between Wilson and himself, instead of a landslide for Wilson. Taft was, to all intents and purposes, unelectable no matter what happened. He had lost the confidence of the progressive Republicans by caving in to the Old Guard, and all the Democrats and independents, and had never had the confidence of the populists and socialists in the first place.

Roosevelt thereby managed to turn the tide for a short time, but progressivism as a movement depended too much on him personally at that point; it had not been institutionalized, that is, become truly a part of the system. Had Taft not previously caved, or had Roosevelt been elected in 1912, the reforms could have taken root and grown, restoring the American system, but they did not, and the brief chance that reform had under the Democrats came to nothing in the end.

Still, the Democrats kept their biggest promises and instituted the Federal Reserve and the income tax. These institutions, however, necessary as they were and remain, were not integrated into a holistic approach. They were tacked on, so to speak, to a system that still embodied several flaws, notably lack of democratic access to the means of acquiring and possessing capital to replace the Homestead Act.

This became evident when, for the sake of political expedience, both the income tax and the Federal Reserve were misused to finance the entry of the United States into World War I. Rather than raise the necessary funds by the politically unpopular move of raising taxes — although taxes were raised; just not enough to defray the full cost of the war — the money creation powers of the Federal Reserve were used to monetize government deficits by purchasing the securities floated in the Second Liberty Loan and Victory Loan issues.

Bad as the misuse of these institutions was and remains, however, they can be corrected by relatively simple changes in government policy. This was not the case with the institution of private property, especially after the distortions that resulted from the decision in the Slaughterhouse Cases became embedded in constitutional law. Nowhere was the change more evident than in the decision of the Michigan Supreme Court in Dodge v. Ford Motor Company (204 Mich. 459, 170 N.W. 668. (Mich. 1919)).

As a result of the "slavery of past savings" assumption that forces an economy into capitalism, socialism, or the Servile State, the new definitions of private property that resulted from the Slaughterhouse Cases had the world economy in their grip. The Great War had accelerated the process of proletariatization and the economic disenfranchisement of small owners. The next step was to start undermining or eliminating the rights of minority owners, leaving only the richest and thus most powerful in total control. In Dodge v. Ford Motor Company the abolition of private property for the majority of the population even in a capitalist society was recognized as a legal principle.

The story is rather ugly. In the first quarter of the 20th century, Henry Ford decided to finance a plant expansion using accumulated cash instead of selling new equity or borrowing the money. The Dodge brothers, minority owners, protested. They wanted the dividends to which they were entitled under the traditional rights of private property. Ford refused to pay dividends, and the Dodge brothers sued.

In Dodge, among other issues, the court ignored the traditional definition of private property, embodied in all codes of law, as the right to control what is owned. (Louis O. Kelso, "Karl Marx: the Almost Capitalist," American Bar Association Journal, March 1957.) The court, in effect, redefined the traditional right to receive the "fruits of ownership" (i.e., income from what is owned — dividends) for minority shareholders as limited to the power to sell their shares if they were not happy with the dividend policy of the majority owner(s).

The court ruled, in effect, that minority shareholders are able to enjoy their full "fruits of ownership," including the right to receive any and all income generated by what is owned, only if the majority owner so agrees. That is, the majority owner(s) alone, through control of the Board of Directors, have the right to set dividend policy for a company, and do not need the consent of a minority owner or owners to withhold that which belongs by natural right to the minority owner(s).

Ford built his case on the "business judgment rule." That is, if the individual elected by the shareholders (who happened to be Ford, as he retained the majority block of shares) decided it was in the best interests of the company — and therefore the shareholders — to stop or reduce payment of dividends, the minority shareholders had no recourse other than to retain their shares and take whatever the majority owner(s) chose to dish out. The alternative was to exercise their "take-it-or-leave-it" right to sell their shares and wash their hands of the whole business — in other words, to exercise their property rights solely to become non-owners.

The "business judgment rule" is a concept in U.S. corporate case law in which "directors of a corporation . . . are clothed with [the] presumption, which the law accords to them, of being [motivated] in their conduct by a bona fide regard for the interests of the corporation whose affairs the stockholders have committed to their charge." (Gimbel v. Signal Cos., 316 A. 2d 599, 608 (Del. Ch. 1974).) In order for someone to bring suit for violating the rule, the one suing must prove that there was a conflict of interest, i.e., "the burden of providing evidence that directors, in reaching their challenged decision, breached any one of the triads of their fiduciary duty — good faith, loyalty, or due care." (Cede & Co. v. Technicolor, Inc., 634 A. 2d 345, 361 (Del. 1993).)

If it cannot be shown that the Board of Directors had a self-interested motive in reaching its decision, the individual or group alleging a breach of fiduciary duty "is not entitled to any remedy unless the transaction constitutes waste . . . [that is,] the exchange was so one-sided that no business person of ordinary, sound judgment could conclude that the corporation has received adequate consideration." (In re The Walt Disney Co. Derivative Litigation, 906 A. 2d 27 (Del. June 8, 2006).)

The suit that the Dodge brothers brought against Henry Ford was one of the earliest cases in which this rule was invoked. In a line of reasoning that appeared to advance the claim that minority owners are not owners in the same sense or manner as majority owners, the Michigan Supreme Court ruled that, "courts of equity will not interfere in the management of the directors unless it is clearly made to appear that they are guilty of fraud or misappropriation of the corporate funds, or refuse to declare a dividend when the corporation has a surplus of net profits which it can, without detriment to its business, divide among its stockholders, and when a refusal to do so would amount to such an abuse of discretion as would constitute a fraud, or breach of that good faith which they are bound to exercise towards the stockholders." (Dodge v. Ford Motor Co., 204 Mich. 459, 170 N.W. 668 (1919).) This is simply using a rule of law — the business judgment rule — to ride roughshod over the natural right to be an owner, whether one is a minority, small, or majority owner.

It might thus be argued at some time in the future, when the rights of private property have been restored, that by deciding to deprive minority owners — shareholders — of their traditional rights of property in furtherance of what might be interpreted as vindictive or malicious acts on the part of Henry Ford to deprive the Dodge brothers of their rights as shareholders, the court in Dodge v. Ford Motor Company might not have applied the business judgment rule properly in the case that seems to have been used most often to validate the concept.

What is also frequently ignored in analyses of the case is the fact that Ford had dismissed another right of private property, that of control. He had previously blocked every effort of the minority shareholders to have input into decisions and exercise some degree of control over the business, such as design improvements and marketing strategy. This was particularly egregious with respect to the Dodge brothers, who owned the next largest block of shares (10%) after Ford, and who were increasingly unhappy with Ford's dictatorial actions.

Consequently, prior to their lawsuit over Ford's restriction of dividend payments, the Dodge brothers began setting up their own automobile manufacturing company in secret, using their Ford dividends to finance the effort. Ford got wind of this and began withholding dividends. Ford was also suspected of wanting to reduce the price of Ford automobiles as a way of justifying the proposed reduction in dividend payouts and reducing the company value per share.

After the Michigan Supreme Court ruled in his favor, Ford threatened to set up another rival automobile manufacturing company, probably to be wholly owned by Ford personally. This was apparently as a way to compel the Dodge brothers to sell their shares back to the Ford Motor Company at the reduced value per share that Ford had manipulated. In this he was successful — and thereby undermined another right of private property, that of disposal, by taking away the Dodge brothers' free choice in the matter of whether or not to sell their shares.

Thus, consistent with the redefinition of private property that came out of the Slaughterhouse Cases, Henry Ford, one of the "high priests" of capitalism, did more than almost anyone else to wreck the institutions of private property, liberty, and free markets on which capitalism is ostensibly based.

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E. J. Dionne v. Citizens United

Give credit where credit is due, especially when an act by someone you had presumed to be opposed to everything you stand for appears to signal a change of heart. It was, after all, not long after the late Senator Russell Long of Louisiana opposed worker ownership along the lines proposed by Louis Kelso that Long made a complete about-face and became the champion of the Employee Stock Ownership Plan that has made more than 10 million workers in over 10 thousand companies part owners of the enterprises in which they work — and all without risking one cent of their own savings or taking any reductions in pay or benefits. As Long said, once he understood the concept, "I don't care who's right, I care what's right — and this is right."

Raw Judicial Power XVII: The Second Civil War

Theodore Roosevelt's accomplishments as president appear to be little appreciated, even by his admirers. As for those who tend to disparage everything about the first Roosevelt, what was done was — as far as they are concerned — in spite of, not because of the Rough Rider . . . a nickname that suggests a certain pugnacious attitude unacceptable these days except for politically correct causes.

Although known as the "Trust Buster," today's commentators like to point out that William Howard Taft "busted" more trusts than Roosevelt. Yes — but had Roosevelt not laid the groundwork, it is highly unlikely that Taft, who put himself under the thumb of the Old Guard Republicans almost from the first, would have done any trust busting at all — or even been president.

Roosevelt's first notable act as president was to deliver a 20,000-word speech to Congress asking them to begin curbing the power of the trusts. His aggressive action in investigating conditions and causes of the miners' strike in 1902 led to pay increases and shorter hours. Roosevelt was also responsible for the Meat Inspection Act of 1906 and the Pure Food and Drug Act.

By the end of his second term, it appeared that the danger to the country caused by the growing conflict between socialism and capitalism had been averted. This was an illusion. The radicals on both sides of the political spectrum, somehow understanding that it was Roosevelt's prestige and energy alone that had brought about the reforms, had simply been biding their time. The extreme socialists felt that Roosevelt had not gone anywhere far enough and was still a hidebound capitalist, while the Old Guard Republicans — the capitalists — claimed that he had socialized the country. Both sides felt that drastic action was necessary. Tensions were, while more subtle and hidden than a decade previously, even greater than before.

Both groups claimed to believe that Roosevelt was simply an opportunist, able and personable to be sure, but still out only for his own advantage; with his dog Spot, he could have made a fortune selling used automobiles, had there been many around. To a large degree, this is the view that has persisted down to the present day. As one commentator summed up his understanding of Roosevelt's character and motives,

"He was a shrewd opportunist with an eye on the main political chance, it is true, and the sum of his legislative accomplishments was small. Yet his constant sermonizing about the malpractices of big business and high finance, and his successful and important struggle for the conservation of natural resources, stirred millions of citizens into a high state of righteous indignation. In brief, his chief contribution to the reform cause was the publicity he gave to it." (Arthur S. Link, Woodrow Wilson and the Progressive Era. New York: Harper and Row, Publishers, 1954, 2.)

Not surprisingly, there is little understanding of the act of social justice in this analysis, and no appreciation of the immense difficulties Roosevelt faced in trying to reverse the direction in which American society was heading. He was up against the combined forces of socialism and capitalism.

Both capitalism and socialism are based on the belief that only by cutting consumption and saving can new capital formation be financed. This is the one thing on which capitalists and socialists (and to which today we add the Keynesians, Monetarists and Austrians) can all agree, and on which they can all be equally wrong.

The capitalists and socialists were thus united on the one issue by means of which they could do the most damage: the redefinition of fundamental rights presumably secured by the Constitution. While this tendency had been evident from the beginning of the republic, it accelerated dramatically following the Supreme Court's decision in the Slaughterhouse Cases.

All things considered, it is astounding that Roosevelt was able to do as much as he did. Even more astounding is the fact that what could legitimately be called his greatest achievement was yet to come — and has widely been interpreted as a failure.

In 1908 Roosevelt evidently felt safe enough to retire from the presidency. He picked William Howard Taft as his successor, slighting his vice president, Charles Fairbanks. The selection of Taft turned out to be the worst political decision of Roosevelt's career.

In Roosevelt's defense, Taft seemed the obvious choice. His honesty and integrity were unquestioned, and he had been personally groomed by Roosevelt to take over the presidency. Understanding progressivism in the sense that Roosevelt employed the term, and not how it has been redefined since 1912, Taft was, to all appearances, solidly progressive, and committed to restoring the vision of America's Founding Fathers, purged of the "original sin" of chattel slavery.

Taft, however, had a serious flaw in his character. He liked to be liked. Where Roosevelt used his personality to help persuade people to support his political efforts, Taft used his political efforts to try and get people to be his friend. There is some evidence that Taft realized his mistake and tried to make up for it. He became an exemplary Chief Justice of the Supreme Court (1921-1930), possibly inspiring to some degree the work of William Winslow Crosskey, who clerked for him in the 1920s.

As Justice Felix Frankfurter commented to Justice Louis Brandeis, he could not "understand why a man who is so good a Chief Justice . . . could have been so bad as President." Taft evidently felt such remorse at his failure to continue Roosevelt's program that he refused even to think about it, allegedly remarking once that he didn't even remember being president.

Given Taft's evident weakness, the Old Guard Republicans, led by Senator Nelson Aldrich, moved quickly to try and dismantle Roosevelt's reforms. They managed a few victories, but these came at great cost, alienating the moderate Republicans and Democrats who had been Roosevelt's power base.

As a result of the scandals that followed seemingly one after another during Taft's administration — the "Ballinger Affair" being the most notable — the socialists grew rapidly in power. In reaction, moderate Republicans began distancing themselves from the Old Guard. Moderate Democrats, disgusted with the reactionary core of the Republican Party, seemed to lump all Republicans together. They began drifting into the socialist/populist camp almost by default, evidently believing that, while socialism wasn't all that good, capitalism was definitely bad.

Outraged, Theodore Roosevelt allowed himself to be persuaded to run again for president, this time as the candidate of the newly formed Progressive Party, originally formed in 1906 in Utah as the American Party by disgruntled Republicans convinced that the Church of Jesus Christ of Latter Day Saints wielded far too much political power. Jettisoning the anti-Mormon elements, the party adopted the name "Progressive Party" and eventually persuaded a reluctant Roosevelt to run.

This is not the way either history or contemporaries recorded Roosevelt's acceptance of the Progressive Party's nomination. One cartoon depicted Roosevelt (in full "Rough Rider" garb, naturally) handing over the presidency to Taft in 1908, then in the next panel holding a gun in Taft's face in 1912 saying, "Give it back!" Granting Roosevelt the dignity of having some honesty, however, we can take him at his own words, as reported by Henry Knox Smith:

"Some time in 1911 I called upon Colonel Roosevelt at the Outlook office, on leave from Washington. I told him I was going home for a few days. He pounced down on me instantly: 'H. K., don't you dare go back to Connecticut and do anything for my nomination for the Presidency in 1912!' Then he said: 'I've had eight years of the Presidency. I know all the honor and pleasure of it and all of its sorrows and dangers. I have nothing more to gain by being President again and I have a great deal to lose. I am not going to do it!' — then he went to the window and looked out on Fourth Avenue for some moments, and turned and added with great emphasis — 'unless I get a mandate from the American people.' I know much better now than I did then what was before his far-seeing eyes as he stood there looking out over the housetops — the fierce strife ahead, the menacing issues lying within it, the far-reverberating results that would follow, the sacrifice that would be required of him." (Herbert Knox Smith, "Introduction," Social Justice and Popular Rule, Volume XVII of the Complete Works of Theodore Roosevelt. New York: Charles Scribner's Sons, 1926, xiv.)

A master-stroke at the Progressive Party convention was to include women as delegates. Both Taft and Woodrow Wilson (who got the Democratic nomination) avoided the issue of women's suffrage. Jane Addams herself gave a seconding speech for Roosevelt's nomination.

Roosevelt, however, annoyed the South by insisting on excluding Southern black Republican delegates, whom he regarded as selling out to the reactionary element in the Republican Party to gain power. That this was not an instance of racism is made evident by the fact that black delegates from other areas were welcome, and Roosevelt alienated whatever remnant of Southern support he might have possessed by publicly dining with blacks during the campaign — after the "notorious" dinner at the White House in 1901 with Booker T. Washington.

The results were almost as good as could have been expected, falling just short of what was needed to win the election — the closest the United States has ever come to a third party candidate getting elected president. While today's hardcore conservative Republicans blame Roosevelt for splitting the Party, the G.O.P. had already split over disgust with the reactionary elements.

The Democrats, too, lost people to Roosevelt, but possibly more to Eugene C. Debs, the Socialist Party candidate, than to the Progressive Party. On the whole, it was the independent voters and the moderate Republicans who went with Roosevelt over fear of the Democratic Party's increasingly socialist slant — and therein lies the real cause of the Democratic Party's victory.

In a sense, the popular history of how Roosevelt won the election for the Democrats is correct, but not because he split the Republican Party. The Democrats won because, initially coming across as extremely socialist/populist, they realized that the more effective Roosevelt and his progressivism were far more acceptable to the average American. The Democrats began to copy Roosevelt, and modify their socialist stance by adopting explicitly progressive planks — chief among which were an income tax and reform of the financial system.

This kept the moderate Democrats, who were inclined to Roosevelt, in the Party, but alienated the radical socialists, who went to Debs. It also helped the Democratic Party "sell" the cold and aloof Woodrow Wilson, a "laissez-faire Jeffersonian," to the American voter, especially the progressive elements in the Democratic Party. As one historian favorable to Wilson admitted,

"One of the most interesting developments of the campaign was the manner in which progressives reacted to Roosevelt's and Wilson's appeals. In the early weeks, before Wilson found himself and his great vital issue [i.e., economic freedom], progressives wondered whether he was a progressive after all. In contrast to Roosevelt's warm appeals for social justice, Wilson's early speeches seemed cold indeed. But as he gathered momentum, as he began to talk in glowing, if general, phrases of social righteousness and economic justice, many progressives claimed him as their new leader and hastened to his support. The significant development of the campaign was Roosevelt's failure to unite progressive Republicans and progressive Democrats." (Link, Woodrow Wilson and the Progressive Era, op. cit., 22.)

By having the free marketer Wilson as a candidate, the Democrats were at one and the same time able to paint themselves as anti-socialist, bring in the support of the socialist-populists who had supported William Jennings Bryan, accuse Roosevelt of being a socialist who desired to enslave the people (some of Wilson's speeches against Roosevelt have been described as "vicious") and promote the "New Freedom" of promised federal indifference and states' rights over Roosevelt's "New Nationalism" and an increasing regulatory role for the federal government as well as social legislation. The Democrats won, but with a relatively small margin. Roosevelt came in second, Taft — who also tried to present himself as a progressive — third, and Debs a distant fourth.

Roosevelt, however, still won in a very real sense. Had he not "forced" the Democrats to adopt the main elements in his progressive platform — and, with the unconscious assistance of William Jennings Bryan to stick with them and keep the promises — the voters would very likely have re-elected Taft. The Old Guard Republicans, using that as a mandate, would have been able to implement financial reforms in a way that favored the wealthy over the good of the country.

The Federal Reserve System, even for the few years it was allowed to operate properly (1914-1916), would have been a very different institution, one more closely resembling the creation of conspiracy theorists than anyone will admit. The financial hegemony and alliance between government and big money that has had such a devastating effect on the global economy recently would have been solidly in place by 1914. This would have caused a reaction far worse than we have so far experienced with the rioting over the European debt crisis, the Tea Party, and the Occupy movement, especially in light of the stresses on society caused by World War I.


The Progressive Party disappeared almost immediately after the election, but it's work, in a sense, had been done.  Bereft of Roosevelt's leadership, progressivism would, from that time forward, follow the lead of populism and become just one more form of socialism.

Even though he did not win, Theodore Roosevelt can be credited with saving the country by running for president in 1912. It is a lesson today's candidates and potential candidates for public office would do well to keep in mind. The flexibility he was able to get built into the system by his insistence on financial reform and social justice ensured that America would emerge relatively unscathed from a global conflict that destroyed Russia and laid the foundation for World War II. It would not be until the second Roosevelt and the "New Deal" that the seeds sown by the Supreme Court in the Slaughterhouse Cases would again take root and threaten America — only this time more effectively.

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Raw Judicial Power XVI: The Progressive Response

At the end of the 19th century the United States was, by any measure, in serious danger. By 1900 the two camps of capitalism and socialism were stalemated. Attitudes had solidified to the point where compromise, even reaching a reasonable accommodation, seemed impossible. As Herbert Knox Smith recalled years later,

"The years from 1901 to 1909 were the prologue for 1910 to 1914. In 1900 the surface of American life was, as it were, hardening, was growing less plastic. Dangerous division lines were opening from the pressures beneath, splitting the unity of the nation. The great trust movement was in full force, sweeping into a few hands special industrial privileges, the control of natural resources, and decisive advantages in transportation. Individual opportunity and the open highways of commerce were narrowing. Great corporations were considering themselves above the law, with the cynical but increasing concurrence of the public. A sinister atmosphere was gathering, menacing to American initiative and American ideals." (Herbert Knox Smith, "Introduction," Social Justice and Popular Rule, Volume XVII of the Complete Works of Theodore Roosevelt. New York: Charles Scribner's Sons, 1926, xi.)

With the reelection of William McKinley on the wave of prosperity that followed the bumper crops of 1897-1898 that ended the Great Depression of the 1890s, the capitalists believed they had the upper hand — an opinion shared by the socialists. In McKinley, the capitalists had a "safe" man who, while not dishonest or corrupt, could be counted on to do the "right" thing . . . for the capitalists, in the sincere belief that it was best for the country.

Ever since the Pullman Strike of 1894 "Labor" had felt itself under siege, with the combined strength of the government, finance, industry and commerce ranged against the working man and woman. An uneasy alliance still existed with populism, but populism was, where not considered just another form of socialism, a spent force politically and, with the growing economic disenfranchisement caused by the decay of small ownership, economically as well. There was a definite air of desperation throughout the country.

At the same time, however, there was a wildcard in the deck. McKinley's vice president was a man with known reforming views, a "progressive Republican" by the name of Theodore Roosevelt. Roosevelt had been selected by the Old Guard Republicans as vice president in order to get him safely out of the way. The ultra-conservative Old Guard Republicans were suspicious of the young New Yorker because of his demonstrated reforming spirit. The ultra-radical socialists were suspicious of the hero of San Juan Hill because he was a Republican of a wealthy family. Both groups evidently felt that the potential problem Roosevelt represented was shelved for at least four years, possibly more, as the vice presidency was frequently the road to political oblivion.

Then came McKinley's assassination and Roosevelt's sudden ascension to the presidency. While it took a great national tragedy to bring about, Roosevelt quickly demonstrated that he was the right man in the right place at the right time. It is quite possible that no other man — or woman — in the United States combined the prestige, charisma, intelligence and sheer ability that gave Roosevelt exactly what was needed to avert what threatened to become a second, and even more vicious civil war.

Extremists on both sides were increasingly uncomfortable with Roosevelt as time went on. The accusation that "TR" stood for "Theodore Rex" came from both ends of the political spectrum. There was, nevertheless, something in his personality that resonated well with the vast American middle. This was what was called in the late 20th century "the Silent Majority," those who, ironically, make the news and keep the country going, but rarely get reported.

Roosevelt used his prestige wisely and effectively. He laid the groundwork for breaking up the trusts, and recognizing and for protecting of the rights of propertyless workers, farmers, and small businessmen. He was handicapped to a great extent by operating from within a paradigm dictated by the currency principle (although he seemed to have an inherent understanding that there was something profoundly amiss in the financial system), but — even given that debilitating constraint, he never forgot the principle that all men have rights, not just those currently popular with the government or the public. As he said a decade later when the danger from both individualists and collectivists had resurfaced,

"If I could ask but one thing of my fellow countrymen, my request would be that, whenever they go in for reform, they remember the two sides, and that they always exact justice from one side as much as from the other. I have small use for the public servant who can always see and denounce the corruption of the capitalist, but who cannot persuade himself, especially before election, to say a word about lawless mob-violence. And I have equally small use for the man, be he a judge on the bench, or editor of a great paper, or wealthy and influential private citizen, who can see clearly enough and denounce the lawlessness of mob-violence, but whose eyes are closed so that he is blind when the question is one of corruption in business on a gigantic scale. Also remember what I said about excess in reformer and reactionary alike. If the reactionary man, who thinks of nothing but the rights of property, could have his way, he would bring about a revolution; and one of my chief fears in connection with progress comes because I do not want to see our people, for lack of proper leadership, compelled to follow men whose intentions are excellent, but who eyes are a little too wild to make it really safe to trust them." (Theodore Roosevelt, "The New Nationalism," Social Justice and Popular Rule. New York: Charles Scribner and Sons, 1926, 18.)

The problem is that Roosevelt was, in common with almost everyone else since the conquest of the global financial system by the assumptions embodied in the British Bank Charter Act of 1844 and the National Bank Act of 1863, a slave to past savings. He did not see any way that new capital could be financed except by cutting consumption and accumulating money savings. Obviously this required a class of persons, necessarily small, who controlled sufficient wealth to be able to set sufficient cash aside without suffering deprivation. As technology advanced and new capital became increasingly expensive, the concentration of wealth must, it was believed, become increasingly greater.

While an orientation based on the banking principle would have solved this dilemma, Roosevelt was not an economist or a financier. Consequently, like any good leader, he went with experts he felt he could trust — and what the experts were telling him was that new capital formation requires reductions in consumption in order to accumulate sufficient financial capital to bring new productive capital on line, and thus concentration of capital ownership: "Combinations in industry are the result of an imperative economic law which cannot be repealed by political legislation." (Ibid., 12.)

Unfortunately, the natural tendency of a reliance on past savings is to force an economy into capitalism (concentrated private ownership of capital) or socialism (State ownership or control of capital). A remarkable and very strong leader can, for a time (and if he or she faces no solid opposition from special interests), hold back these tendencies by judicious use of the State's power to regulate commerce. By this means, even within a system based on past savings, the leader can ameliorate the harshness of capitalism and the false and forced equalities of socialism without succumbing to the temptation to impose direct control of the economy and establish the Servile State.

Given the reliance on past savings to finance new capital formation, however, and the consequent rise of capitalism and socialism, most people are ill-prepared to recognize the sometimes subtle difference between regulation and control. From a systemic point of view, internal controls by means of which the system regulates itself, and the enforcement of which is linked through widespread capital ownership to the public's self-interest, are most effective, and thus most socially just.

Unfortunately, with concentrated ownership of capital, whether in the private hands or the State, internal controls are, paradoxically, rejected as ineffective. In socialism, this is because the laws of economics and the self-interest of the public can operate to produce results at odds with short-term political ends. In capitalism, this is because the controls themselves interfere with maximizing short-term gains, even to the detriment of the long-term survival of a company, even an industry or an entire economy.

The "solution" in the case of both capitalism and socialism is the same — and the reason why both capitalism and socialism inevitably merge into the Servile State: imposition of external regulation by the State that is tantamount to direct control of the economy, but through the private sector. Without a strong and principled leader, however, in capitalism the external regulations are evaded in the pursuit of business-as-usual. Violations are either ignored if immaterial (which can hide serious systemic problems), or debated endlessly, usually in the courts, in an effort to avoid responsibility — and cost. To try and plug the loopholes that allow vague interpretations, the State imposes more and more regulatory requirements and, finally, direct control.

In socialism, the failure of political methods to achieve economic ends also results in imposing more and more regulatory requirements, and (ultimately) direct control. "Free market reforms" usually take the form of favoring the managerial class over workers, and of allowing private ownership within a larger framework of State control — a phantom freedom that can be taken away at any time.

In both cases what results is the Servile State, which can be understood within the context of this discussion as either capitalism with a socialist veneer, or socialism with a capitalist veneer. In both cases it is the ordinary citizen who suffers by outright elimination or re-definition of fundamental rights to life, liberty and property.

Thus, on becoming president, Roosevelt faced a crisis that had been developing since the founding of the American republic, but which had become critical with the new understanding of private property in particular, and human rights in general that became "official" with the Supreme Court's opinion in the Slaughterhouse Cases.

As both the majority and dissenting opinions made clear (and which Justice Field acknowledged as an error twenty years later), the ruling in the Slaughterhouse Cases assumed as a given that rights come from the State instead of being inherent or inalienable in the human person. This meant that instead of merely defining the exercise of rights — as required by man's political nature — the State was defining (re-defining, actually) what it means for something to be a right, and the substantial nature of specific rights.

Roosevelt, of course, as one of the last true "Lincoln Republicans," was still going on the assumption that people grant rights to the State, not the other way around. This put him at odds with both the Old Guard Republicans, who tended to be reactionary-style capitalists, and Populist/Socialist Democrats, who (as we might expect) tended to some form of socialism, but increasingly drifting from more or less benevolent Fabian socialism to radical Marxism.

Roosevelt-style progressivism, then, was based on traditional American acceptance of the un-re-defined natural law principles that guided the Framers of the Constitution — but with one, fatal flaw: reliance on the assumption that new capital formation can only be financed out of existing accumulations of savings.

Roosevelt's leadership had the potential, based on him personally, to avert the crisis that threatened the country. In this, Roosevelt can be compared to a Caesar, but not the Julius that today's critics and those of his day assumed. It was, rather, Augustus Caesar, who claimed to have restored the Roman Republic, but by keeping the outward forms of old institutions and adapting them to the needs of the Empire.

Roosevelt's job was much harder than that of Augustus Caesar, and not just because Roosevelt did not have the public and governmental support that Augustus could take for granted. Roosevelt had to restore the substance of Americans' natural rights using new institutions, not simply adapt existing institutions to serve new needs. This, as anyone who understands the social doctrine of Pope Pius XI as explained by Father William Ferree, is a much harder task.

The fact that Roosevelt succeeded at all within a paradigm dictated by the slavery of past savings could almost be described as miraculous. Augustus Caesar was able to lay the foundation of a system that survived, in one form or another, until 1918, because he was able to effect genuine institutional and systemic reforms. Roosevelt's reforms, which are little understood today, and which depended on him personally, lasted barely a decade and a half before being subsumed back into the conflict between capitalism and socialism.

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