Book Reviews

It just so happened that Edmund Burke was too wrapped up in heading the Englishoppositionto Robespierre and the revolutionary French Jacobinsto pay any direct attention to 55 men in Philadelphia. Just who read Burke and who read Locke are mattersfor argument.RussellKirkdoeshisbest to getat the truth ofinfluence.CharlesBeard,the his torian,was insistentthat the 55 men had economic intereststo protect.Kirkdoes not disagree.But he writes that factors other than economicinterests stronglyinfluencedthe delegates,"and their votes at the Conventiondo not follow the pattern that Beard thought he had discerned;nor did ratifica tion of the Constitutionin the severalstates actu allyfollowthe linesof Beard'seconomicinterpretation."The flaw in Beard'sthesisis "the hard fact that mercantile,manufacturingandpublic-security investmentswerenot the moreimportantproperty holdingsof the Convention'sdelegates."Agricul tural property,particularlyin the caseof the richer delegates, bulked far larger in value. "There occurred no contest at the Convention between capitalist and farmer, nor any other discernible classconflictalongeconomiclines."

The Beard thesis that the line of cleavagewas between personal property interests (capitalistic classes) on the one hand and small farming and debtor interestson the other is, as Alabama'sFor rest McDonald told Kirk, "entirely incompatible withthe facts." McDonald,a goodHamiltonianresearcher,had undone Beard by followingBeard'sown methods, but with greater thoroughness. Kirk is perfectly safeintakingMcDonald'sword.But thisleadsto a great injustice.It so happens that a Michiganpro fessor,Robert E. Brown,anticipatedboth McDon ald and Kirk by some30 years. When I was doing the reviewcolumnfor The Wall StreetJournal in the fifties, my editor, Ver mont Royster,handedme Brown'spioneeringcrit icalanalysisofBeard,a bookcalledCharlesBeard and the Constitution.Youmight find this interest ing,said Royster. Indeed I did. Let me quote from my own flab bergastedreviewcolumn."As thingswereactually constituted,"I wrote,"the Americaof 1787was an agrarian nation in whichproperty was widelyand beneficentlydiffused.As ProfessorBrownputs it, quoting Gouverneur Morris, 'At least 90 percent of the men were voters because they were free holders.' Some 97 percent of the people lived in rural areas, and the local freehold voting qualifica tion admitted the small farmers, including the debtors among them, to the franchise. States in which farming was practically the sole economic interest were among the first to ratify the Constitu tion. And towns whose citizens owned a lot of 'per sonality' actually voted to reject the document that had been allegedly rigged in their interest. ...

"The Founders felt, and rightly felt, that they had a mandate from the people to balance the powers in such a way that the tyranny represented by King George III would never be repeated in America. And, while they admittedly had econom ic motives, their main effort was to protect the life, liberty and property (small farms included) of everybody, not merely the few who had put their money into movable securities which would bene fit by the funding of the debt." I concluded my review of the Brown book by saying that it failed to give justice to the totality of Charles Beard's work. Beard ended his life believ ing that the Founders had wrought well. He said many interpretations, economic, moral, and esthetic, were possible. Later I played the part of honest broker when Henry Luce lured Beard into doing a piece extolling the Constitution as a docu ment in which moral factors were even more important in history than economic.

None of my praise for Brown should detract from Kirk's book. It is sound even though he gets some of his figures from a secondary source. My only consideration here is to see that pioneers get credit. I am sure Russell Kirk would agree with me. [] UNFINISHED BUSINESS: A CML RIGHTS STRATEGY FOR AMERICA'S THIRD CENTURY by Clint Bolick PacificResearchInstituteforPublicPolicy,177PostStreet,SanFran cisco,CA 94108•1990•159pages • $24.95cloth,$12.95paper Reviewedby Steven Yates O ne cannot close the cover of this new book by the author of ChangingCourse:Civil Rights at the Crossroads (Transaction, 1988) without a disquieting sense of how fragile a thing economic liberty really is: how it depends crucially on the recognition of certain principles 197 and their embodiment in law, and how easily these principles can be compromised. It is clear that the civil rights movement is in a deepening crisis. We once heard calls to create con ditions for black empowerment by removing the legal obstacles restricting blacks' economic activi ties; now we see preferential treatment, set-asides, and group entitlement-claims. We have witnessed the empowerment of bureaucrats instead of blacks, the rise of victimology as a growth industry whose clients now outnumber non-victims, the smothering of institutions by all sorts in Federal regulations, and the gradual deterioration of race relations. Meanwhile, evidence is mounting that current civil rights policies leave average blacks no more well off than before and even discourage their economic advancement.

But these remarks only go so far. After all, the problems such strategies were intended to address were real. For years, Constitutional commitments to equality of all citizens under the law were marred by slavery and, later, by the legally sanc tioned exclusion of members of nonwhite ethnic groups from significant economic influence. So once we note that "conventional" civil rights strategies fail to rectify things, the next question is, "Where do we go from here?" Unfinished Business takes up where critics of affirmative action leave off, and offers a strategy very much committed to a free society and a mar ket economy. Bolick's roots are in the 18th-century natural rights tradition, particularly Thomas Paine's version of it. This tradition emphasized individual natural rights and accompanying responsibilities in civil society, a limited govern ment, and equality of all citizens under the rule of law. Civil rights, in this view, are individual rights embodied in and protected by civil law.

Thus the struggle for civil rights must not be merely a struggle againstdiscrimination but also for individual rights, including the right to own property, to trade one's skills for money on an open market (the right of entrepreneurship), to assem ble and bargain for wages, and so on. Excluded are all forms of coercion against other people, includ ing entitlements that can be fulfilled only at the expense of others. Bolick follows F: A. Hayek in noting that liberty is a negative concept, the absenceof coercion by others. This, Bolick argues persuasively, is the real heritage of the civil rights 198 THE FREEMAN • MAY 1991 movement; what has happened in the past two decades is an aberration that shouldn't be seen as a real civil rights strategy at all (his term for it is "civil rights revisionism"). ) The original civil rights vision was an ideal that had to be implemented gradually over a long peri od of time. Its first phase began with the formula tion of the concepts of natural rights and of politi cal and economic liberty by John Locke, Thomas Paine, Adam Smith, and others, leading to the Declaration of Independence and culminating in the writing and signing of the U.S. Constitution and the Bill of Rights. The abolition of slavery and passage of the 13th and 14th Amendments, with the latter's equal protection clause, was its second phase. The third phase culminated in the Civil Rights Act of 1964 and the Voting Rights Act of 1965 which, in their original interpretations, did away with the last of the laws designed to keep blacks "in their place" and would have prepared the way for an increasingly color-blind society in which, to abbreviate Martin Luther King, individ uals would be judged solely on the content of their character-and, of course, on their abilities. As a civil rights attorney with experience in the Justice Department and the Equal Employment Oppor tunity Commission, Bolick has some specificviews on what led to the downfall of the original civil rights vision, and this brings us to specifics.

After the Civil War, the 14th Amendment applied equal protection to all citizens regardless of skin color, but new state laws soon restricted the activities of blacks, particularly in the South. The Civil Rights Act of 1866 was designed to protect blacks against such laws and reaffirm the role of the federal government in protecting individual liberties. But two Supreme Court rulings soon weakened its effects, leaving the door open for government to parcel out favors to some and erect barriers against others on the basis of race. The first Supreme Court ruling was the Slaugh ter-Housedecision in 1873;the second was the bet ter known Plessyv. Fergusonin 1896,which estab lished "separate but equal" educational facilities. In the first, the Court upheld five-to-four a Louisiana state law that four years earlier had granted a monopoly to certain slaughterhouses in the New Orleans area and ordered others closed, in effect barring newcomers or "outsiders" from entry into a market. The Court's reasoning used a restricted interpretation of the equal protection clause, in effect dividing citizenship rights into two categories, those of the country as a whole and those of the individual states.

Slaughter-Houseset a dangerous precedent that was used to uphold similar laws in other states and led to a decline in the willingness of the Federal judiciary to defend economic liberty. In the arena of race relations, it permitted "separate but equal" facilities years before Plessy.In the professions, its eventual effect was to permit a legally protected formation of machinery that privileged some at the expense of others. "Establishments" developed in the professions that could protect themselves from competition with an arsenal of government regula tions, contracts, and licenses aimed at discouraging or even blocking the advances of outsiders. Such laws did not discriminate against blacks, as such, but rather against outsiders who included nearly all blacks. As for Plessy,the conventional wisdom has it that this decision was effectively overturned by Brownv. Boardof Educationafter a long struggle by the NAAC~ But to borrow an expression from affirmative action's backers, what was overturned was the letter but not the spirit of Plessy.While the "separate but equal" doctrine was repudiated, left intact was the view that government can rely on special "racial facts" as a basis for legislation, and therefore can classifypeople on the basis of race if such classifications are "reasonable." Thus was the door left open to civilrights revisionism, which has set the agenda for the last two decades.

The cornerstone of Bolick's strategy, then, is bold: to chip away at Slaughter-Housetype legisla tion until this crucial decision can be overturned, the culmination of an effort similar to the NAACP's campaign to defeat Plessy.The over turning of SlaughterHouse,given its precedent setting status, would clear the way for a return to judicial protection of fundamental economic liber ties for individuals and for, full Federal enforce ment of the equal protection clause. Such a deci sion could then serve as the basis for eventually removing every law requiring group classification and every provision protect'ing some at the expense of others. Then the struggle for civilrights can be set back on course as a struggle for individ ual economic empowerment in a free market soci ety-a struggle depending on equal protection, creating conditions for individual self-empower ment through individual action.

In other words, today's situation is the result of two mistakes: the abandonment of the doctrine of individual natural rights and the compromising of the equal protection clause. Both are necessary conditions for economic liberty, in its turn a condi tion for individual empowerment, black or white. Unfinished Business is a powerfully argued work, with a wealth of legal citations and a number of case studies illustrating how civilrights revision ism has worked to the detriment of the people it originally set out to help. But Bolick doesn't answer all the questions. One potential problem is that Bolick, like many others, wishes to separate the concept of affirmative action from that of quotas in order to argue for affirmative action strategies that avoid quotas. This introduces confu sion for, contrary to Bolick, when the former term was introduced it had no "original and highest meaning" or any clear meaning at all. This might seem a quibble; but it was partly the abuse of lan guage by civil rights revisionists that created our present dilemmas. Rather than calling his strategy for black empowerment a kind of affirmative action, he should recognize that this term belongs in the vocabulary of the revisionists and according ly drop it altogether.

As we conclude UnfinishedBusiness,a far more troubling question arises, one that returns us to the reflection in my first paragraph. Bolick's premises are clearly stated throughout, and his emphasis on the need for litigation shows that the protection of individual economic liberties by government is no easy matter either to institute or to preserve. This is an issuewhichfreedom philosophers are eventually going to have to address in more detail: individual liberty,the freedom from coercion by others, is nei ther self-establishing nor self-preserving, as history shows conclusively.Hence it is agreed to be a legit imate function of government to protect it. But how much governmental machinery are we looking at here? Could we find ourselves in the unenviable position of having derailed the drift toward social engineering only to replace it by an arsenal of new rules, this time in the name of economic liberty?

Without careful development in the context of par ticular situations, calls for economic liberty and equal protection will degenerate into slogans. Bol ick knows this; accordingly, he does not present OTHER BOOKS 199 them as universal panaceas. But the issue of how much governmental and legal machinery is required to safeguard individual economic liberty in an imperfect world bears pondering. UnfinishedBusinesshas the merit of proposing a strategy based on principle instead of expedi ence-even if it doesn't answer every question, offering not a new direction so much as a proposal to get an old one back on course. Everyone involved in one way or another with the civilrights issue can benefit from reading this book. D ProfessorYates teachesin the Departmentof Philosophy, Auburn University. THE GREATEST-EVERBANK ROBBERY: THE COLLAPSEOFTHESAVlNGSAND LOANINDUSTRY by Martin Mayer CharlesScribner'sSons, 866 Third Avenue,New York, NY 10022 1990 •368 pages•$22.50cloth Reviewedby WilliamH. Peterson M artin Mayer, the wise and witty author of The Bankers and The Money Bazaars, here spins out a tale of wantonness, of banking naivete, dereliction, and culpability reach ing into the highest levels of government and busi ness. The culpability is not without irony-the cul pable include high government officials such as "the Keating Five," then-Speaker of the House Jim Wright, and other assorted banking regulators elected or appointed to protect the public trust against, ironically,the very malefactors or bunglers they themselves became.

The irony brings to mind Juvenal's unanswer able enigma: "Sedquis custodietipsos Custodes?" (But who is to guard the guardians themselves?) It also brings to mind Acton's oft-demonstrated truth on the corruptibility of power as well as the regu latory implications of McCullochv. Maryland,the landmark case of 1819in which Chief Justice John Marshall forbade a state from taxing the Federally chartered Bank of the United States on the grounds that "the power to tax involves the power to destroy" -a line that could be rewritten to the effect that "the power to regulate involves the power to destroy." In this closelydetailed account of recent banking regulation and resulting repercussions, Mr. Mayer 200 THE FREEMAN • MAY 1991 names names (including that of Neil Bush) and reveals the extraordinary ins, outs, and dimensions of the S&L scandal. He makes it clear that the scandal grew from regulatory roots reaching back more than a half-century to the New Deal, that thus was born today's "made-in-Washington"

debacle. This debacle willend up costing American taxpayers upwards of $500billion over the next 50 years, dwarfing the scandals of the Credit Mobilier in the Grant Administration or the Teapot Dome in the Harding Administration. Here then is reference to the brazenly named bipartisan Competitive Equality Banking Act of 1987,passed by a Democratic Congress and signed by Republican President Reagan well after every one inside the Beltway knew the S&L dam had broken, explicitly charging regulators to exercise "forbearance" so as to alleviate insolvent thrifts which should have been immediately shut down, stemming losses that were snowballing day after day-lost money to be made good by the nation's perennial forgotten man, the taxpayer. Or here are background and details on the cen tral role played by the PAC-financing U.S. League of Savings and Loan Associations, the octopus lobby with virtual veto power over S&L legislation, a situation reflecting one more exam ple of Milton Friedman's brilliant perception of an "iron triangle" or cabal ever at work in Wash ington (apart from state capitals) of legislators, bureaucrats, and organized interests.

Or here is the bipartisan Democratic Congress Bush Administration's Financial Institutions Reform, Recovery, and Enforcement Act of 1989 Get Organized! (FIRREA). FIRREA's centerpiece was an initial injection of $50 billion into the Resolution Trust Corporation, a newly created government agency serving as the receiver for busted S&Ls and mak ing certain that insured depositors got their money back. But once again Congress and President Bush ducked the hard questions, especially of what to do about government deposit insurance, which con tinues serenely along at $100,000 per account (which originally topped out at $2,500 per account). Comments the author: "Deposit insur ance has been an entering wedge for the socializa tion of losses, for establishing governmental safety nets not only under those who cannot take care of their own interests but also under active and con senting adults who demand to be rescued from the consequences of their own mistakes."

The looting of insured deposits is what this book is all about, validating the idea of Ludwig von Mis es that intervention breeds intervention, that inter ventionism only makes bad situations get worse and worse. Martin Mayer may be a bit shy of putting forth the philosophy of limited government and free market economics (hardly de rigueurin a book of this type), but he performs an invaluable public service as he traces corruption between gov ernment and business, calls a spade a spade, an inveigler an inveigler. In this era of cover-ups of public venality, that's something. D Dr. Peterson,an adjunctscholarat the HeritageFounda tion, holds the BurrowsT. and Mabel L. Lundy Chair of BusinessPhilosophyat CampbellUniversity,BuiesCreek, North Carolina. Attractive blue binders for twelve issues of The Freeman will keep your 1991 issues in order. Price: $12.00 postpaid. Order from: The Foundation for Economic Education 30 South Broadway Irvington-on-Hudson, New York 10533 VISA and MasterCard orders accepted. Please give us your name, address, card num ber, expiration date and signature.