November 9, 1999

by Peter J.M. Orvetti

A Great Day For Liberty...
...And A Sorry Day For Freedom
Got A Dollar?

A Great Day For Liberty...

Ten years ago today, the Berlin Wall, which for more than a quarter-century was the world's foremost symbol of totalitarianism, fell, inaugurating the series of collapses of Communist regimes in Eastern Europe that marked the autumn of 1989. Today, Germans celebrated a decade of openness between East and West with a massive celebration, AP reports. Official observances got under way with a religious service at St. Mary's church in central Berlin and a ceremony at City Hall in the heart of former East Berlin. Chancellor Gerhard Schroeder, former Chancellor Helmut Kohl and former U.S. President George Bush, who was named an honorary citizen of Berlin Monday for his role in assisting the fall of Communism in Europe, were scheduled to address parliament.

"I spent most of 1989 and 1990 in Eastern Europe spreading the ideas of the free society -- smuggling books, photocopiers and the like and holding seminars, lectures and meetings with dissidents, students and others who were beginning to confront socialism openly. I observed the fall of communism up close," writes Cato University director Tom Palmer in today's commentary, "The Fall of the Berlin Wall". "This is what I learned. The collapse of the communist ideal came about quickly; it surprised the leaders of the socialist states, not to mention almost all American observers. But the rot had set in many years before. I remember the Polish workers who complained, 'Forty years of Socialism, and still no toilet paper!'… The whole rotten structure came tumbling down when people realized that the 'real' communists among them were but a small minority. As they learned that, it became possible to express opposition to the system and not be singled out as the lonely dissident who could expect to be manacled and thrown down the memory hole.

"What lessons can friends of liberty learn from this? Let's look at the apparently entrenched interventionist welfare states of the West. Consider the case of drug prohibition, a serious infringement on individual freedom and responsibility that has demonstrated terrible consequences: urban blight, crime, prosecutorial abuse and police corruption, and countless wrecked lives. Politicians and pundits fear to express doubts about the prohibitionist state because they think that others will accuse them of condoning drug use. But many of those others who are silent are silent because they fear the very same consequences of expressing dissident thoughts... When narcotics are finally legalized, the movement is likely to happen much more rapidly than most would expect.

"The same goes for Social Security privatization. Only a few years ago the scholars of the Cato Institute were almost alone in promoting privatization of the current bankrupt pay-as-you-go system. But as more people have begun to express the previously heretical thought that the federal government is not such a good manager of our retirement futures, it became easier for even more to express that heresy. In a remarkably short time, it wasn't a heresy anymore. Now Social Security privatization is a part of the mainstream debate. In ten years' time, we may look back on the interventionist welfare state with a puzzled expression and say, 'How did it last so long?'"

Collected Cato Institute writings on "The Fall of the Berlin Wall: 10 Years Later" are also available, as are Cato Institute President Edward Crane's comments on "Fear and Loathing in the Soviet Union" from 1982.

...And A Sorry Day For Freedom

Fallout continues from Judge Thomas Penfield Jackson's release of findings of fact in the Microsoft/Department of Justice antitrust case Friday evening. Jubilant U.S. government lawyers Friday hailed the ruling, with Assistant Attorney General Joel Klein saying the Redmond, Wash., software maker had caused "substantial harm to consumers and innovation," AP reported. Presidential candidates were largely silent on the matter Monday, but Republican contender Steve Forbes denounced Jackson's findings, while Sen. Orrin Hatch (R-Utah) praised the decision. Microsoft stock was down slightly on the news; Jackson has yet to issue a final ruling in the case.

"Here's the lesson that high-tech companies can glean from Judge Thomas Penfield Jackson's findings in the Microsoft case: If you're sufficiently ambitious, competent, and hard-working; if you're willing to risk your time and fortune; if you succeed at rising above your competition by serving customers with better products; then watch out, because our government will come down on your neck with the force and effect of a guillotine," writes Robert A. Levy in the commentary "Why Microsoft Should Have Won", published yesterday in the Washington Times. "Jackson's knee-jerk recitation of the Justice Department's line is a mockery of objectivity, scornful of the facts, and congenial only to those who prefer a sterile marketplace in which vigorous competition becomes legally actionable.

"Let's start with the judge's big picture: an industry crippled because Microsoft's competitors are unable to innovate. Yet how to explain Netscape's $10 billion price tag, or continued market leadership by Microsoft arch-rivals Oracle, Intuit, AOL, Sun Microsystems, and RealNetworks? How to explain Apple's growth in both sales and profits? Sun's CEO, Scott McNealy, recently crowed that 'Windows is dead' when it comes to new software applications. McNealy may be right. Despite Judge Jackson's snapshot view of the software market, the Internet has profoundly and permanently altered the dynamics. Will Microsoft lose out to consumer electronics products? McNealy doesn't know, and neither does Jackson. But those products are out there, they're selling well, and they are competition."

The Cato Policy Analyses "Microsoft Redux: Anatomy of a Baseless Lawsuit", "Microsoft and the Browser Wars: Fit To Be Tied", and "Dismal Science Fictions: Network Effects, Microsoft, and Antitrust Speculation" all focus on the assault on Microsoft.

Got A Dollar?

Sen. Connie Mack (R-Fla.) has introduced legislation that would make it easier for nations with emerging economies to adopt the U.S. dollar as their currency, Reuters reports. The International Monetary Stability act would allow the U.S. Treasury to encourage countries to adopt the dollar by offering a rebate of 85 percent of the resulting increase in U.S. seignorage, the income a country receives when the value of its currency exceeds the cost of producing it. The bill would also make clear that the United States would not become the lender of last resort. "By encouraging dollarization, we have an opportunity to share with other countries a key factor responsible for our own economic success," Mack said.

Earlier this year, the Cato Foreign Policy Briefing "A Dollarization Blueprint for Argentina" discussed dollarization ideas for that country. Steve H. Hanke and Kurt Schuler write: "President Carlos Menem of Argentina has advocated replacing the Argentine peso with the dollar. Dollarization would benefit Argentina because it would eliminate the peso-dollar exchange-rate risk, lower interest rates, and stimulate economic growth. Argentina's currency board system--under which the peso trades at a fixed one-to-one rate with the dollar and is convertible on demand--has produced currency stability and helped that country achieve free-market reforms and high growth. However, the currency board is not orthodox, a factor that heightens uncertainty and undermines confidence in the peso.

"The empirical evidence shows that developing countries without their own central banks have not suffered from a lack of monetary flexibility and have in fact had higher growth rates and no greater incidence of or vulnerability to external shocks than other countries. Argentina should unilaterally dollarize its economy without entering into a treaty with the United States. Access to the Federal Reserve's discount window is unnecessary and undesirable for Argentina. Other mechanisms already exist to supply emergency liquidity."