Confronting the Leviathan of the COVID-19 Crisis

Anthony Rozmajzl – April 16, 2020

The COVID-19 outbreak has made one thing clear: we are a nation that is quickly forgetting how to be free. How many people, in the face of economic panic, have knelt before our elected officials and financial authorities, yearning to be led out of this crisis and made secure in their livelihoods? How many people have taken comfort in the small amount of safety that comes from knowing that millions are not allowed to go to work and support their families, or leave their homes for anything other than what the government deems necessary?

Increasing Government Powers

How many have taken comfort in knowing that the police, in complete violation of the fourth amendment, are conducting unwarranted searches for civilians not following quarantine mandates? How many have gained a sense of peace in the idea of forced checkpoints and the government’s ability to dictate what companies ought to produce? How many people have taken comfort in their measly share of the $2 trillion stimulus package, which was financed from their own income and savings in the first place? And how many people have marveled at the government’s power to indefinitely shut down the economy and bring millions of lives to a halt?

It appears we live in a nation of people who have chosen to dismiss, or are blissfully ignorant of, the wealth of historical evidence—expertly documented in Robert Higgs’s Crisis and Leviathanwhich lays bare the state’s tradition of arrogating unwarranted powers during crises and emergencies, powers that never fully recede from its arsenal of economic and political manipulation once the crisis subsides. Higgs described this pattern as the “ratchet effect” and documented its unfolding throughout critical events of the 20th century—most notably the Great Depression and both World Wars.

In each crisis, the government assumed incredible powers to manipulate both the economy and the court of public opinion. For example, World War I alone saw the initiation of the War Industries Board, the War Labor Board, the Espionage Act, the Food Administration, the Fuel Administration, the Railroad Administration, and many others. The War Industries Board and War Labor Board, for example, represented one of the most invasive economic planning attempts by our government to date. And the Espionage Act, created to prohibit interference with military operations, military recruitment, and punish enemy support, was also used to silence opponents of the draft and those who exercised their right to speak out against American involvement in the war.

After the war ended, every bureaucratic creation mentioned above was formally scrapped, except for the Espionage Act, which remains on the government’s books to this very day. This is but one example of Higgs’s “ratchet effect” where not every power assumed by the government during an emergency is fully relinquished after the emergency subsides.

Coercive Government Action

Even today our president has invoked the Defense Production Act—established during the Korean War in 1950!—to force private manufacturers to produce medical equipment in response to the COVID-19 pandemic. This invocation, along with the slew of social distancing mandates and forced closures of “non-essential” businesses, constitute part of the “ratcheting up” of government powers triggered by the COVID-19 pandemic. Only time will tell how many of these unprecedented powers the government will actually relinquish, but so far it has enjoyed zero pushback on behalf of the public.

Maybe we simply can’t conceive of our public servants and their “experts” as being capable of wreaking nationwide political and economic destruction, especially when tasked with the delicate responsibility of keeping 320 million people safe from infection. “This is the United States,” we say, “our dear leaders won’t let things get that bad!”

But the question of whether or not private citizens are permitted to keep their “non-essential” businesses open, go to work, or attend church isn’t even up for debate. We can only hope that the government will continue to permit us to do certain things, and then shrug our shoulders with mumbles of “Well, that’s the price we have to pay” as more of our freedoms slowly come under siege. In the meantime, we are to do as our elected officials and their experts have told us, because our unquestioned obedience is necessary to secure our safety.

Many are likely to believe that private citizens are too greedy, irrational, or unpredictable to handle this pandemic on their own; and because of this, we need elected officials and their experts to help us grasp the importance of staying home and socially distancing ourselves to prevent the spread of infection. Others are probably asking the question, “How could any group of private actors possibly devise a more efficient and effective solution for the COVID-19 pandemic than our wise experts in the government?”

Well, in light of the fact that we live in a nation whose private enterprises have solved countless problems to catapult living standards to the highest degree ever attained in all of human history, and have given us just about every modern technological advancement and luxury that we’d go crazy to live without, I’d say it’s possible, wouldn’t you?

Our Nation’s Predictable Response

Sadly, as is the pattern with every national crisis, the fallout of our nation’s economic and political decline will be met with cries for more government intervention into an economy whose impending recession only stands to be accelerated by this virus.

No doubt there will also be cries for additional regulation on behalf of the institutions whose laws have hindered the resourcefulness and productivity of the market’s response to this crisis.

Perhaps most important will be the neglect of the biggest culprit behind our economy’s poor health, the Federal Reserve: the most unaccountable, most influential, and therefore the most dangerous financial institution in the United States. Directed by its presidentially appointed Chairman, the monetary operations of the Federal Reserve stand completely removed from any trace of democratic accountability.

Adding insult to injury, very few people care to understand the deep interconnectedness between the Federal Reserve, the big banks, and the United States Treasury. The Federal Reserve enjoys a totally unbridled monopoly on interest rate manipulation and determination of the money supply.

Fortunately, the Austrian School of economists has correctly focused blame for the Great Depression, the Dot Com crash at the turn of the 21st century, and the housing crisis of 2008 and 2009 on the Federal Reserve and its manipulation of interest rates and generation of abundantly cheap credit.

It was also the Austrian economists who predicted these recessions, giving immense credibility to their teachings on the business cycle, which are more valuable now than ever. Our understanding of the coming recession will be key in determining whether or not more restraints and regulations will creep their way into our everyday lives.

Nevertheless, the Federal Reserve, by continuing to engage in the same type of monetary policy that has weakened our economy leading up to the COVID-19 outbreak, has set the stage for a tremendous recession, a recession that will impoverish far more individuals than have been hurt by our economy’s shutdown, and to a much greater extent.

If the pattern holds, we can expect a vast majority of people, when severe recession settles in, to turn to the Federal Reserve and other state officials for economic salvation.

How Much Are We Willing to Give?

As Larry Reed pointed out, our nation’s true test is yet to come. When the crisis is over, we will be able to fully assess, Reed notes, the extent of the measures taken to combat the virus; we will gain a much clearer picture of just how far the government overstepped its supposed bounds.

Until then we should ever be on guard against the government’s arrogation of unwarranted powers, especially in light of what history shows the state is capable of doing in times of emergency. Once certain freedoms have been forfeited, that forfeiture will always serve as the precedent for future power grabs.

We have already given up the freedom to work and provide for our families, the right to avoid inspection without the presumption of having committed a crime, the right to go to church, and the right to travel at certain hours and to certain locations without the threat of facing arrest and/or imprisonment. We have allowed the government to determine whose livelihoods are “essential” and whose are “non-essential”, and we will sooner look to the government to resolve the fallout of the economic destruction for which it ought to be held responsible.

Originally published at Fee.org.  

Image Credit: Flickr-Gage Skidmore | CC BY 2.0 (https://creativecommons.org/licenses/by/2.0/)

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