The Big Lie in America

The Big Lie dominates Washington and much of our American culture. The lie, in a nutshell, argues that as government increases regulation, our society improves.

This lie has lasted a long time, mainly because our society is divided between two versions of The Big Lie. The Democratic version contends that as the government increases regulation on various sectors of society and the economy, our nation progresses. The Republican version maintains that as the United States expands it power around the globe, the whole world benefits.

Both lies are passed down to the rising generations, despite the fact that there is a preponderance of evidence that debunks them.

For example, the Republican Big Lie claims that after each major war (WWI, WWII, Korea, Vietnam, and the Cold War) U.S. leaders have reduced military budgets and hollowed our national defense — and that this has inevitably helped contribute to continued world conflict.

The evidence, however, tells a different story. In times of reduced military budgets, the Executive Branch has actually upped its strategic planning.

Indeed, as Melvyn P. Leffler put it in Foreign Affairs:

Decreased military budgets “forced U.S. policy makers to make tough but smart choices…to think hard about priorities and tradeoffs…And in this regard, history shows that austerity can help rather than hurt…”

The same is true of the Democratic Big Lie. For example, few things have been pursued by Democratic leaders as doggedly as the desire to increasingly regulate big banks, big business, and big health care.

But such policies have caused more harm than good. To date, we have little data about what Obamacare regulation will do to the economy, but there is ample information about banking regulation and its results.

As Charles W. Calomiris and Stephen H. Haber pointed out, nations that highly regulate their banks have experienced less stability and more banking crises than those with fewer regulations. For example, when Britain and Scotland adopted central banks in 1694 and 1695, respectively, both were ruled by King William III.

The King treated the two banking systems very differently, and the results were drastically different as well. Because William III saw the Bank of England as the source of his government’s borrowing, he wanted to regulate it to ensure access to easy capital. In contrast, he thought it “was easier to adopt a policy of laissez faire with respect to the Scots…”

The results are interesting, and instructive. Under the weight of extensive regulation, the English banking system was usually “fragmented,” “unstable” and “England suffered frequent major banking crises…In sharp contrast to England, Scotland [with it’s free, less regulated banking system], by the middle of the eighteenth century, had developed a highly efficient, competitive, and innovative banking system, which promoted rapid growth” in the economy.

In short, higher regulation hurt the economy, while less regulation helped it.

This same pattern was repeated by U.S. and Canadian banks, with the U.S. banks highly regulated and Canadian banks operating under less regulation.

Again, The Big Lie is that government regulation makes things better, but the evidence shows a different reality.

Calomiris and Haber noted:

“The banking system in the United States has been highly crisis prone, suffering no fewer than 14 major crises in the past 180 years. In contrast, Canada…experienced only two brief, mild bank…crises during that period…The Canadian banking system has been…so stable, in fact, that there has been little need for government intervention in support of banks since Canada’s independence, in 1867.”

What is the difference? The Canadian banks were set up, like in Scotland, as free and independent banks, while the U.S. banking system was established like the British model as a highly regulated source of ready capital for the federal government. As a result, Washington continues to increase banking regulation — which nearly always hurts the American economy.

The biggest problem in all this was pointed out by Murray Rothbard in his classic book, The Mystery of Banking, first published in 1983. Rothbard argued that few people understand banking, or how the government works with banks, and so they ignore what is really happening and just let it keep occurring. The connection of banks and the government in a highly-regulated system, Rothbard warned, decreases our freedoms and weakens our economy.

But since most people don’t even think about this, or consider it too complex, it just keeps happening. The truth is that banking really isn’t that much of a mystery, but most people find it too boring to study.

That’s how The Big Lie survives. It’s big, but it’s a bit boring. So the people don’t stand up against it. That’s how it starts.

But in our time, it’s reached another level. Now, in reality, most people actually seem to believe The Big Lie. They actually believe that government regulating something will make it better. They believe that more government regulations on banks will help the economy (truth: it does the opposite), that more government regulations on business will bring more jobs (truth: it does the opposite), and that more Obamacare regulations on health care will bring cheaper, better insurance and health (truth: it is doing the opposite).

The Big Lie is strong and growing in America. And the more it grows, the more it ensures the decline of our economy.

Those who point it out, from either the Right or the Left, or the middle, are simply ignored by most Americans. As a result, it is very difficult to fix the problem.

We are a nation in denial. We think more government will fix things, and so it grows. As it grows, it causes more problems.

And the cycle repeats.

At some point, we need to face The Big Lie. More government regulation from Washington won’t fix our nation. More government power from Washington won’t fix other nations.

We need to apply principles, not increase regulation. The principles of freedom work. We need them. Most of all, we need the average American to study them and understand them.

Oliver DeMille is the New York Times, Wall Street Journal and USA Today bestselling co-author of LeaderShift: A Call for Americans to Finally Stand Up and Lead, the co-founder of the Center for Social Leadership, and a co-creator of TJEd.

Among many other works, he is the author of A Thomas Jefferson Education: Teaching a Generation of Leaders for the 21st Century, The Coming Aristocracy, and FreedomShift: 3 Choices to Reclaim America’s Destiny.

Oliver is dedicated to promoting freedom through leadership education. He and his wife Rachel are raising their eight children in Cedar City, Utah.