Book Reviews

BOOKS The Vandals' Crown: How Rebel Currency Traders Overthrew the World's Central Banks by Gregory J. Millman The Free Press. 1995 • 305 pages. $23.00 Reviewed by Raymond J. Keating T he first 225 pages of The Vandals' Crown generally make for interesting reading-describing some fascinating de velopments in financial markets and the economy. The remaining 50 or so pages unfortunately skew off in a different direc tion-either better left for another book or simply discarded altogether. Much of this book, though, lives up to its tantalizing subtitle-"How Rebel Currency Traders Overthrew the World's Central Banks." Author Gregory J. Millman explores var ious intriguing moments in monetary his tory. He writes of France's great inflation between 1418 and 1423 and takes note of John Locke's contribution to monetary thought. He also offers a brief discussion of the gold standard, pointing out that one of the great merits of gold is its ability to restrain the activities of monetary authori ties. After all, inflation results from govern ment's mismanagement of monetary policy.

Indeed, the author clearly shows that even gold-based monetary systems go awry when government officials tinker with and try to circumvent the system's disciplines. Among the examples of government mischief he cites are the trade war and currency deval uations of the Great Depression, and the inflationary U.S. monetary policy that even tually destroyed the flawed Bretton Woods monetary regime. As the U.S. dollar was de-linked from gold-effectively in the late 1960s and offi cially in 1971-a new source for monetary discipline had to be found. This is where The Vandals' Crown shines. Millman tells the 241 story of how currency markets developed and grew, and eventually how more power ful, efficient, and integrated financial mar kets now work to impose some checks and balances on both government fiscal and monetary policies. Millman sets the tone for this story early on by noting: "Although investors have always had to take into consideration the quality of a government's management of its economy, traders now have an unprece dented degree of power to sweep the finan cial foundation out from under poorly man aged, politically unstable, or uneconomic governments before the bureaucrats even know what has happened." He continues: "For better or worse, since the collapse of the Bretton Woods international monetary order, traders provide the only financial discipline the world knows."

The reader might expect the author to wrap up such a book perhaps with an analysis of how the economy performs un der today's intertwined monetary, fiscal, and financial systems. However, Millman concludes this book with a look at a host of legal infractions and shady schemes con cocted by various financial traders over the past few years. Millman sought to show "the weaknesses of a financial system that is more efficient than any financial system in history, but may also be more vulnerable to moral hazard than ever before." The Van dals' Crown tarnishes in these last pages. After showing the shortcomings (namely, inflation) of monetary policy under the dis cretion ofgovernment bureaucrats, Millman seemed compelled to attack the individuals operating in the financial markets as well.' Human nature is human nature, but the author offers no comprehensive and com pelling arguments as to why more efficient financial markets might be more "vulnera ble to moral hazard." His substantial em phasis in the closing pages on the wrongdo ings of a handful of players in the financial markets also gives the mistaken impression that corruption is widespread and such in dividuals possess the capabilities to wreak catastrophic economic havoc.

Markets ensure that individuals rarely, if 242 THE FREEMAN • APRIL 1996 ever, possess such power. The competitive marketplace possesses real checks and bal ances, which make widespread corruption impossible. After offeringan often eloquent explanation as to how markets can act as a disciplining force on government, Millman should understand that markets, operating within a sound system of property rights, discipline themselves. In the end, the ability of the government to do substantial economic evil far outstrips that of the individual. Even with the checks provided by financial markets, as explained in The Vandals' Crown, government mis deeds continue, with markets, the economy, and individuals paying the price. This should have been Mr. Millman's closing caveat. [] Mr. Keating is chief economist with the Small Business Survival Foundation. Shake-Down: How the Government Screws You From A to Z by James Bovard Viking. 1995 • 141 pages. $14.95 Reviewed by William H. Peterson I tem: A federal program routinely subsi dizes welfare families living in oceanfront apartments in upscale La Jolla, California.

Item: The Food and Drug Administration refuses to approve a machine that gives CPR to heart attack victims because the victims cannot give their informed consent. Item: The Federal Highway Administra tion proposed a special waiver for the dis abled to allow truck drivers to be qualifiedto drive even if they were blind in one eye and had weak vision in the other. The above items are gleaned from this expose of overweening, inept, ham-fisted government, prodding James Bovard to ask: Has our government run amok? Good question, and one put forth by the author of Lost Rights: The Destruction of American Liberty. James Bovard, a con tributor to the Wall Street Journal and the New York Times, here exposes a host of outrageous and absurd infringements on life, liberty, and the pursuit of happiness. The infringements are rife and they spring from petty bureaucrats and zealous officials, elected and unelected.

Mr. Bovard reminds us of an April 1995 Gallup Poll revealing that 39 percent of Americans hold that "the federal govern ment has become so large and powerful that it poses an immediate threat to the rights and freedoms of ordinary citizens." He notes that President Clinton meanwhile regularly denounces public cynicism about govern ment goodness and purity. The Bovard approach alphabetically ar ranges cases of government running amok from A to Z. Under A, for example, he treats affirma tive action, noting Equal Employment Op portunity Commission chairman Clifford Alexander making the case for quotas and declaring in 1968: "We ... here at EEOC believe in numbers. . . . Our most valid stan dard is in numbers.... The only accom plishment is when we look at all those numbers and see a vast improvement in the picture." The U.S. Forest Service got criticized on numbers for not hiring enough female fire fighters (many woman applicants are unable to pass the Service's strength tests for lugging heavy firefighting equipment). Up shot: It advertised: "Only unqualified ap plicants may apply."

Under M, Mr. Bovard observes the lengths to which the Drug Enforcement Administration goes to stamp out the evil of medical marijuana: In La Mesa, California, a citizen was sentenced to prison for 16 months for raising a tiny amount of mari juana to treat his AIDS symptoms. DEA steadfastly refuses to allow doctors to prescribe marijuana to treat glaucoma that could turn into total blindness, despite findings by Yale medical Professor Steven Duke and others of marijuana's positive therapeutic effects on the disease. Under Z, Mr. Bovard goes after zoning abuses: Coral Gables, Florida, charges res idents $35 to get a permit to paint the bathroom in their home-or the diningroom or any other room. Local building inspec tors patrol the streets looking for painting trucks parked at homes which may have not paid the fee. In 1993 the New York City building in spector bushwhacked Fordham University.

Fordham had gotten a permit to build a 480 foot radio tower on its Bronx campus. But after getting the tower half-finished, NYC reversed its position and revoked the per mit, setting Fordham back by $500,000. (Was Fordham reimbursed? You must be kidding.) As Bovard quotes Albert Jay Nock: "How little important it is to destroy a government, in comparison with destroying the prestige of government." Agreed. D Dr. Peterson, an adjunct scholar at the Heritage Foundation, is Distinguished Lundy Professor Emeritus of Business Philosophy at Campbell University in North Carolina. Revolution at the Roots: Making Our Government Smaller, Better, and Closer to Home by William D. Eggers and John O'Leary The Free Press. 1995 • 405 pages + index. $25.00 Reviewed by James L. Payne F or the general reader, Revolution at the Roots provides a comprehensive survey of government-shrinking attempts around the nation. Prodigiously researched, it takes us to every comer of the land: welfare reform in Wisconsin, Michigan, and New Jersey; budget control in New York and Philadelphia; tax and spending limits in Arizona and Colorado; community policing in Houston; vouchers in Milwaukee. Prom inently mentioned are the private, voluntary organizations which prove they can do a better job than government: the Marcus Garvey school for inner city youngsters in Los Angeles (where second-graders read college texts), the St. Martin de Porres shelter for women in Chicago, and dozens of others.

BOOKS 243 For partisans of liberty, however, this book is something of a disappointment. Eggers and O'Leary are staffers at the Reason Foundation, the libertarian think tank that publishes Reason magazine. Their problem is a familiar one for those on the Right: how to criticize government without offending the mainstream politicians and journalists who are so deeply committed to it. Not surprisingly, they pull their punches. The result is a book about shrinking gov ernment which fails to explain why govern ment should be shrunk. They mean their book to be a right-wing answer to David Osborne and Ted Gaebler's Reinventing Government. The premise of that book, eagerly embraced by the Clinton administration, is that government should not be viewed as a necessary evil: it is a worthy problem-solving machine that just needs an injection of efficiency and flexibil ity. While Eggers and O'Leary make some conservative points, they don't take issue with this basic outlook. Their remedies closely resemble Osborne and Gaebler's: introduce competition, cut down on red tape, and so on. As a result, they say, we willend up with' 'better" government. Kept under cover is the argument that govern ment has a fatal flawthat cannot be reformed away.

Mter a few hundred pages, the reader starts to wonder whether Eggers and O'Leary are purposely omitting discussion of this fatal flaw, or just aren't aware of it. Their principal reform idea is actually rather pro-government, the so-called "Tenth Amendment Revolt." The aim is to reduce the federal government by getting state governments to take over many of its activ ities. For example, they are all for having government fund mental hospitals; they just don't want the federal government to do it. A libertarian would hardly concede a governmental role so easily. The fatal flaw looms too large in his thinking, namely that government action is based on the initiation offorce, which is an inherently corrupt, and corrupting, way to approach public prob lems. For real libertarians, talking about 244 THE FREEMAN • APRIL 1996 better government is like speaking of better war: an oxymoron. Ignoring libertarian roots also means that Eggers and O'Leary give away the moral highground. Thinking people on all sides are now coming to realize that government does not have a promising future. Nobody ex pects-as the socialists of earlier genera tions expected-that government will bring us to utopia, or even to a harmonious, functional community. Now the debates are about limiting the damage. By accepting government as society's problem-solver, Eggers and O'Leary join the fatigued pes simism of the modem mainstream. They concede that none of their reforms, even if fully implemented, will bring impressive results. The best we can hope for, they say, are "minor improvements."

Is this all we have to offer future genera tions? Is this what we want on our tomb stones, that we made minor improvements in a fundamentally sick system? What hap pened to the vision of a voluntary society? We have abundant proof that voluntary institutions do work. Think of the glorious future that beckons if we deliberately ex panded these approaches. We can see, al most within reach, a society based on co operating with our neighbors instead of forcing them. Idealistic? Probably a little. But if liber tarians don't do the dreaming, who will? D Dr. Payne, a contributing editorofThe Freeman, is a Bradley Fellow at the Heritage Foundation and the author of Costly Returns: The Burdens of the U.S. Tax System. Wildlife in the Marketplace edited by Terry L. Anderson and Peter J. Hill Rowman and Littlefield Publishers. 1995 • 191 pages. $22.95 paperback Reviewed by Jane M. Orient T his compendium of nine articles takes examples from the Hudson's Bay Com pany, 1700-1763, to emerging Africa, to show how to tum wildlife from a liability into an asset. It is not a collection of rhetoric but of detailed economic analyses of how to manage wildliferesources, including endan gered species, buttressed with a wealth of references, tables, and graphs.

The extinction of species is not a modern phenomenon. In the British Isles, the wol verine, wild boar, and lynx were probably gone before historic times. However, in modem times, property rights to large hold ings in Britain (where 92 percent of the land was privately owned in the late 1800s, in contrast to 28 percent in the United States) gave English landowners ownership rights to the ambient wildlife as well. English law is a more promising model for preserving species than is the myth of the "noble savage" (the American Indian). One particularly interesting analysis of the" economics of fatal mistakes" concerns endangered predators such as eagles. We currently have a fine-and-imprisonment sys tem, but the bounty for killing an eagle is nonetheless about $25. Ranchers have an incentive to kill eagles because of the dam age they cause. In a free-market scheme to protect eagles, someone (groups of conser vationists?) would have to compensate own ers for livestock lost to predation.

The discussion of elephants shows how conservationists often have things back ward. The ivory trade, rather than being a threat, may be a means to preserving an animal that is very destructive to agricul ture. "The African farmer's enmity toward elephants is as visceral as western mawk ishness is passionate," states the book, quoting David Western. The right to profit from their ivory would give someone an incentive to preserve the elephant. The book challenges the assumption that public management is always the best way to preserve wildlife. Natural areas now have to pay their way in political currency: "It is entirely possible, depending upon who hap pens to exercise political control, that they willfare better in the economic market than they do in the political market. Those who seek the free lunch promised by public management always run the risk that others will be served."

Parts of the book are quite technical, and it is not on the whole intended for casual reading. It is a valuable resource for those engaged in serious study of innovative ways to conserve wildlifewhile meeting the needs of human beings. 0 Dr. Orient is an internist in solo private practice. She serves as the Executive Director of the Association of American Physicians and Sur geons. She wrote Your Doctor Is Not In: Healthy Skepticism about National Health Care (Crown, 1994). Private Cures for Public Ills: The Promise of Privatization edited by Lawrence W. Reed The Foundation for Economic Education. 1996 • 208 pages. $14.95 paperback Reviewed by E. S. Savas T his volume might well be called A Pri vatization Anthology, for it brings to gether a fine selection of articles on the subject that have appeared over the last dozen years. Most of the 24 chapters (nine teen of them) were first published in The Freeman; another, by the editor, Larry Reed of the Mackinac Institute in Michigan, is an original article written expressly for this book.

The book is well organized, divided into six sections: (1) the conceptual basis for privatization, studded with well-chosen quotations from Adam Smith, Ludwig von Mises, and Friedrich Hayek; (2) opportuni ties for privatization at the federal level; (3) transportation privatization; (4) privatiza tion applied to the natural environment; (5) opportunities for privatization at the state and local level; and (6) overcoming the opposition to privatization. The chapters in this slim tome are brief and snappy. Aver agingabout seven pages in length, each is an easily digestible morsel. The reader can dip in anywhere and find rewarding intellectual nourishment. Despite the fact that three quarters of the chapters first appeared in print in the 1980s, their message is neither dimmed by time nor faded by familiarity: BOOKS 245 They are as valid today as they were when first written. Many more recent writings provide much greater detail and depth, of course, and many well-documented experi ences since then have confirmed the expec tations of those of us who are among the earliest "privatizers." But for the reader who wants just a light exposure that never theless covers the waterfront, this book satisfiesthe need. Considering that there are now about 150 English-language books on the subject, this is no mean accomplish ment.

In his chapter, Hans Sennholz deems divestment to be the only acceptable form of privatization, and warns that other forms of privatization-contract, franchise, or voucher-will save no· money and will in stead perpetuate a large and even growing government role in society as private firms join the chorus for more government spend ing. That concern was not misplaced in 1987,but the evidence now is overwhelming that large savings and a decline in the number of government employees are real-' ized by introducing competition into the delivery of public services. Indeed, this is the most common form of privatization in the United States, and it has been adopted most effectively at the local level, where financialconstraints have been most binding (unlike the federal government, cities can't print money) and services are most visible to the populace. "Contracting out" works, when it's done right, and in my opinion this is a good way to privatize collective (that is, "public") goods. One must remain alert, however, to the dangerthat programs which government should not be engaged in at all (providing individual or private goods) would be maintained through contracts or vouchers and sold under the banner of privatization.

The section on federal privatization op portunities focuses on welfare, space, and postal service. The one on transportation deals with railroads (in Japan and Michigan) and private roads, and explains how priva tization of roads can greatly improve high way safety. The section on privatization in state and local government addresses 246 THE FREEMAN • APRIL 1996 planned communities, prisons, and schools, and ends with a chapter that rightly raises the alarm that further federal intrusion into education, under the guise of aiding and improving the schools, will bring down pri vate schools to the low level of many gov ernment-run schools. Dwellers in metropolitan areas are too rarely exposed to the idea that privatization can protect the environment and preserve natural resources. Instead they are sub jected to a steady drumbeat from an urban elite-the self-styled, virtuous guardians of the environment-that the private sector, in its lust for profits at any cost, is a ruth less despoiler of the environment. It is particularly satisfying, therefore, to find four fine essays that address this topic, in a section entitled ' 'Private Property and Environmentalism. " Clint Bolick points out that under public (Le., government) owner ship of forests and grazing lands, manage ment and effective property rights are exer cised by self-interested bureaucrats and, as a consequence, the public interest is gener ally overlooked or thwarted. He provides a fine primer on the issues and explains per suasively and without rhetoric how private ownership can better achieve the public purpose. Reed continues the section with his eye-opening chapter that presents case studies of private firms and not-for-profit groups that preserve wilderness sites and provide full access to the public.

The next chapter, by two South Africans, Nancy Seijas and Frank Vorhies, gives a fascinating account of private preservation of wildlife in the South African bush. Twenty private reserves, bound together in a voluntary consortium, enable visitors to see lions, cheetahs, elephants, giraffes, hippos, rhinoceroses, and other exotic (to Americans) species in their natural habitats. It is in the interest of these businesses to maintain cohditions and to protect the ani mals from poachers-an ever-present prob lemwhen animals are owned by "the public" in government sanctuaries. The last chapter in this section brings us back to the United States in a discussion of private ownership and other privatized approaches to the support and operation of bigcity zoos. Those whose only prior exposure to privatization has been newspaper stories about garbage collection and private prisons should find this entire section to be an awakening as to the breadth and full import of privatization.

My own definition of privatization is re flected throughout the book: privatization means relying more on the private institu tions of society-the market, voluntary groups, and the family-and less on govern ment to satisfy people's needs. D Professor Savas is Director, Privatization Re search Organization, School of Public Affairs, Baruch College, City University of New York. The Sacred Fire of Liberty: James Madison and the Founding of the Federal Republic by Lance Banning Cornell University Press. 1995 • 543 pages. $35.00 Reviewed by William J. Watkins, Jr. H istorians have painted James Madison as a young centralizer and nationalist who later defected to the philosophy of states' rights and strict construction of the Constitution. Madison was also accused of philosophical apostasy by his contemporar ies. Alexander Hamilton, his collaborator on The Federalist, bitterly complained that after 1789 Madison was "seduced by the expectation of popularity" in Virginia and thus opposed his former allies.

Madison's political thought, however, is much more complicated than critics and historians would have us believe. In The Sacred Fire of Liberty, Lance Banning at tempts to demonstrate that Madison did not change horses in midstream, but rather acted consistently throughout his career. Banning begins by examining Madison's stances in the Continental Congress in the early 1780s.The young Madison, according to Banning's research, was strikinglysimilar to the Madison of the 1798 Virginia Resolutions, which boldly enunciated the com pact theory of the Constitution. Whilein the Continental Congress, Madison opposed an independent federal power to impose taxes, insisting that his native Virginia was abso lutely sovereign within her chartered bounds. In an incident foreshadowing a clash with Hamilton, Madison fought a plan for a national bank on the grounds that the power to charter a corporation was not enumerated in the Articles of Confedera tion. Madison evinced frustration at the Congress's powerlessness to carry out its delegated functions, but did not seek to expand these functions except in the realm of trade.

Madison's experiences in the Continental Congress led him to craft the Virginia Plan at the Constitutional Convention. At the convention, Madisonjoined with the nation alists in recreating the federal government, but Madison the nationalist was far different from the Hamiltonian nationalists. Madi son, in Banning's view, merely sought "a constitutional device that could secure the general government's supremacy within a system where the overwhelming burden of responsibilities would still be carried by the states." (Italics in original) The Northern commercial elites, on the other hand, had plans for a much more energetic government than Madison expected. Though Madison did collaborate on The Federalist to defend the same plan of gov ernment, Banning shows that Madison and Hamilton's interpretations of the plan were antipodes from the start. Whereas in Hamil ton's contributions there are numerous ref erences to the value of a great commercial republic, no such language can be found in Madison's. Madison's support of the new plan of government was predicated on his belief that agricultural producers would be dominant and keep the regime within its proper bounds.

Perhaps the greatest contribution Ban ning makes is his reevaluation of Federalist No. 10. Banning unabashedly asserts that No. 10 was neither an unequivocal endorse ment of a large republic nor an endorsement for multiplying the variety of interests in the BOOKS 247 nation. According to Banning, Madison was arguing that a large republic offers more security from majority abuses. In Madison's view, the extension of the republic could only curb democratic ills when local and general interests were properly and strictly divided. Increasing the number of factions, which Madison considered a great evil, was not his intent. In short, the research presented in this book makes it apparent how the Father of the Constitution could both oppose the Washington Administration and later frame the VirginiaResolutions. The Sacred Fire of Liberty is an excellent examination of the thought of James Madison and an important work of historical revisionism. Banning's portrayal of Madison as a son of the Virginia piedmont, consistent advocate of states' rights, and strict constructionist, does much to aid our understanding of the Father of the Constitution. D Mr. Watkins is assistant editor ofThe Freeman.

America First! Its History, Culture, and Politics by Bill Kauffman Prometheus Books. 1995 • 296 pages. $25.95 Reviewed by Gregory Pavlik B ill Kauffman's new book is a mix of biographical essays, historical com mentary, and contemporary criticism. America First! sets out to describe a way of looking at the culture and politics of the United States that is distinctly American. In one sense, it is a history of nativist populism and isolationist sentiment. On the other hand, Kauffman mixes in to the equation a strain of aristocratic, blue-blood American ism that makes it harder to pin his America Firsters down on class lines. When applied to contemporary politics, Kauffman lumps together Gore Vidal, Jerry Brown, Pat Buchanan, and Ross Perot under one roof. And, as he explains, they "fit together like pieces of ajigsaw puzzle: the true puzzle [is] how it could ever have been otherwise."

248 THE FREEMAN • APRIL 1996 Kauffman's seemingly odd. union makes sense because Vidal, Brown, Buchanan, and Perot all react against the United States Empire in one way or another. Kauffman pines for an older America that minded its own business and made virtue of republi canism. As he asks in the conclusion: "do we really want to live in an America in which the flickering image of a starving Rwandan on CNN is more immediate to us than the plaintive cries of the hungry girl down the road; a world in which young Americans don blue helmets and travel halfway around the world to enforce the resolutions of the United Nations, while in small towns across America volunteer fire departments are un dermanned?" He'll have none of the globa loney that dominates the contemporary in tellectual scene. He holds up American dissident voices for admiration, not because they are dissidents, but because they're still Americans.

What emerges is a brief for Jeffersonian decentralism, strict noninterventionism in foreign squabbles, and authentic localism in politics, business, and life. He lays out his ideal. through the lives of Americans who shared this vision in some way: Hamlin Garland, the midwest literary populist; Amos R. E. Pinchot, the wealthy, cantan kerous left-wing populist described by his torian Arthur Ekirch as "better than any one, except perhaps A. J. Nock in our time, . . . a precursor of the libertarian move ment"; literary master Edmund Wilson, who hated war and refused to pay income taxes on principle; Gerald Nye and John T. Flynn, heroes of the Old Right resistance to the Roosevelt New Deal and War Deal; Alice Roosevelt Longworth, daughter of Theodore and nemesis of Franklin; Sinclair Lewis, literary champion of small town America; Gore Vidal, whose foreward to America First! doesn't shrink from remind ing the reader how much of our supposed "defense" budget is squandered in the ser vice of the American Empire; "the other Arkansas Bill," isolationist Senator William J. Fulbright; Edward Abbey, Earth First!

Luddite and hill-billy particularist; and a gaggle of other notables who exemplified what it means to be an American. The last half of the book or so is com prised of essays on rebuilding an America First movement around the republican prin ciples championed in the first half. It brings to mind another recent book on American politics: David From's Dead Right. Not because there are any meaningful parallels, but because Kauffman's outstanding analy sis·will go largely unpromoted and ignored by the big journals of liberalism and con servatism, while Frum's neoconservative work remained the talk of the New York Washington establishment for months. Frum vigorously promoted the global activ ist-beltway Right, gently chiding them for their over-reliance on big government. In contrast, he treats America Firsters and Old Right holdovers as neanderthals and moss backs-more fit for the fever swamps than the intellectual scene. It speaks volumes about the price of dissent in America. Be tween the two wings of the ruling class of faux liberals and faux conservatives, "there's not," to quote another America Firster, "a dime's worth of difference."

My only complaint about the book is that it is too short. There are so many America First heroes, most of whomfellon the wrong side of history, that it is an absolute neces sity to revive their memory. A secondary problem which emerges from its brevity is that the book seems to be plagued by gaps. It jumps from progressive to Old Right to anti-Cold War figures without filling in the details of their struggles. It doesn't convey the feeling that many of these individuals represented-and still do represent-mass public sentiment, rather than cranky-but correct views. Nevertheless, America First! is a highly relevant and readable book from start to finish. It deserves the attention I'm sure it won't get. D Mr. Pavlik is associate editor of The Freeman and editor of Forgotten Lessons: Selected Es says of John T. Flynn, published by FEE.