French political economist Frederic Bastiat noted , “ All the measures of the law should protect property and punish plunder .”
Bastiat from his deathbed . “ Life , liberty , and property ,” he explained , “ do not exist because men have made laws . On the contrary , it was the fact that life , liberty , and property existed beforehand that caused men to make laws in the first place .” “ All the measures of the law ,” he noted , “ should protect property and punish plunder .” This is a point on which one would think there would be universal agreement . Alas , many laws remain simply a form of “ lawful plunder ” that “ takes property from one person and gives it to another .”
Bastiat classified as legal plunder any law that “ benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime .” Slavery and tariffs were especially glaring cases but other examples abounded . Bastiat ’ s views were widely held by America ’ s founders . The founders were essentially the world ’ s first development economists , though none put matters quite as succinctly as Bastiat did . Of course , Bastiat wrote well after the founding of the American republic , so the economic development views of America ’ s founders remain best characterized as Smithian , as exemplified by the head quote . In other words , economic growth will occur as a matter of course whenever and wherever governments remain limited . Where governments are non-predatory and follow good policies , such as not burdening people with excessive warfare or taxation , and providing adequate courts of justice , success is sure to follow .
Natural resource endowments were clearly secondary in Smith ’ s view . As he
Portrait of Secretary of the Treasury Albert Gallatin , by Gilbert Stuart , circa 1803 . Gallatin shared Adam Smith ’ s belief that “ laws and institutions ” were the key factors in determining income levels , not natural resource endowments .
explained in his 1776 opus , An Inquiry into the Nature and Causes of the Wealth of Nations , “ China seems to have been long stationary and had probably long ago acquired that full complement of riches which is consistent with the nature of its laws and institutions . But this complement ,” he added , “ may be much inferior to what , with other laws and institutions , the nature of its soil , climate , and situation might admit of .” Smith knew that “ laws and institutions ” were the key factors in determining income levels , not natural resource endowments .
Smith ’ s model was shared by Albert Gallatin , the new nation ’ s Treasury Secretary from 1801 until 1814 . Gallatin wrote in 1831 that “ the increased wealth and prosperity of Europe and America are the cause , and not the effect , of the increased amount in value of gold and silver , which they now possess . The causes of that great increase of wealth , are not to be found in the fertility of the mines of America , but in the general progress of knowledge , skill , and every species of industry , in the consequent improvement of governments , laws , and habits , in all that constitutes civilization .”
Prosperity ultimately must stem from people working longer , harder and / or smarter . Prosperity therefore began with limited government , and not with grandiose economic plans , tariffs , tax breaks or other specific economic policies . The nation ’ s founders knew that the one key public good was protection of the inseparable triad of life , liberty and “ property of every sort ” and that covered all three components of the triad because every
The Metropolitan Museum of Art man “ has a property very dear to him in the safety and liberty of his person .”
America ’ s founders spent the final quarter of the 18th century struggling to understand what type of government would best protect the triad and then establishing it on as permanent a basis as possible . Thankfully , they were intelligent enough to realize that money spent voluntarily was not money wasted , but rather resources committed to achieve outcomes that donors wanted to see . Some lament that such monies could have been spent building more factories or railroads . There is more to life than making and transporting physical things . Donors and recipients were both better off for having traded .
Growth Diamond Institutions Established
Establishing a good government proved a difficult undertaking from the start because about one third of Americans remained unmoved by the long train of British abuses delineated in the Declaration of Independence . Another third remained content to sit out the discussion and , to the extent possible , the war that followed . The remaining third , however , were adamant that neither the King nor Parliament adequately protected the colonists ’ lives , liberties or property and followed political theorist John Locke in the belief that such failure was sufficient justification to erect a new government , as Locke put it , “ by the change of Persons , or Form , or both as they shall find it most for their safety and good .”
Patriots believed , as Alexander Hamilton wrote in 1775 , that “ the origin of all civil government , justly established must be a voluntary compact , between the rulers and the ruled ; and must be liable to such limitations , as are necessary for the security of the absolute rights of the latter .” They also clearly perceived that the British government had not protected the colonists ’ absolute right to the triad of life , liberty and property . In 1785 , for example , some inhabitants of Lunenberg County , Virginia recalled that “ When the British Parliament usurp ’ d a right to Dispose of our Property , it was not the Matter , but the Manner adopted for that purpose , that alarm ’ d us ; as it tended to establish a principle which might one day prove fatal to our rights of Property .” It was necessary , “ in order therefore to fix a Tenure in our property on a Basis of Security not to be
30 FINANCIAL HISTORY | Fall 2023 | www . MoAF . org