Institutions -- established law, custom and practices -- matter
and should not be ignored. How is it that Western Europe and the United
States managed to amass unprecedented wealth while countries of the former
Soviet Union, China, Africa, South America and the Middle East haven't? The
answer has little to do with the people of those countries. After all,
people who migrate to Western Europe or the United States often wind up
doing quite well.
The reason why the West has been able to amass great wealth is
that rule of law is embedded in Western values. Where there's rule of law,
human initiative flourishes. Rule of law refers to freedom of contract and
enforcement of contracts, protection of private property, stability of laws,
a requirement that all persons, private individuals and government officials
are subject to the same laws, and most importantly, limitation of the
authority of government.
For more than a half-century, various elements of the rule of
law have been under ruthless attack in America. Private property means the
person deemed as the owner makes decisions on its uses, and that applies to
the most valuable property we own -- ourselves. Sanctions are taken against
persons who use their property in ways that violate the property rights of
others. However, when the U.S. Fish and Wildlife Service bans an owner from
using part of his property because some animal has chosen it for a habitat,
that's a private property rights violation, resulting in losses to the
Government attacks on private property have become routine in
today's America. John Adams warned, "The moment the idea is admitted into
society that property is not as sacred as the laws of God, and there is not
a force of law and public justice to protect it, anarchy and tyranny
Freedom of contract has come to be viewed with contempt. Suppose
you offer to pay me for $3 an hour and I agree; suppose I live in Virginia
and want to purchase liquor in Washington, D.C.; suppose in rent-controlled
New York and San Francisco a landlord and tenant mutually agree to pay a
higher rent; suppose I'm a California navel orange grower who wants to sell
his entire crop; and suppose you want to provide taxi services in New York
but don't have $170,000 for a license. There are literally thousands of
restrictions like these on freedom of contract.
You might say, "Williams, there are good reasons for restricting
the freedoms of others." You're right, and every tyrant who has ever existed
has had what he considered a good reason.
Another part of rule of law is simply the stability of laws. For
most of our nation's history, people could make plans. For the most part,
they could expect today's laws to be tomorrow's laws; hence, they could plan
for the future. Today, that's not true. A businessman making investment
decisions doesn't know what Congress is going to do a year or two down the
line making today's investment decisions worthless. As such, it produces the
quick-buck mentality -- get in and get out.
Another increasingly prevalent violation of the rule of law is
seen in companies using government to overturn lost competitive advantages
in the market. The Microsoft case is an example where its competitors, not
customers, employed the heavy hand of government to accomplish what they
couldn't accomplish in the market. It's increasingly paying companies to
invest more resources, currying favor with government officials rather than
investing those resources in real productivity.
We're such a rich nation that the immediate effects of attacks
on rule of law aren't readily apparent. But enough pinpricks, even into an
elephant, will eventually kill.