Sometimes we forget how radical this statement was in 1944.Hayek’s little book evoked contempt from his fellow intellectuals.To suggest, in the midst of the Second World War, that centralplanning does not work and is generally self‐defeating anddangerous was a dramatic statement that the political class couldnot accept. To argue that government should be so limited as tobe able to do little beyond protecting life, liberty, andproperty was antiquated, eccentric, even bizarre. And yet, today,looking back over the decades, who would say that the socialistsand central planners ere right, and Hayek wrong?
Events, of course, have proved him prophetic. Indeed, he hadthe good fortune to live long enough not only to see national socialismsmashed but also to see Soviet socialism relegated to the ashheap of history. And I’d like to think he is up there somewheretonight smiling down on us, as big government liberalism followsthose two great, tragic “isms” into oblivion.
What was it that so enraged left‐wingers about Hayek? It wasthe assertion that liberal paternalism is just as dangerous to humanityin the long run as fascism or communism. Liberalism, he argued,differs from those evil systems only in degree, not in kind.Hayek was a humble man, genuinely humble before reality. And thathumility gave his words the boldness of honesty and the audacityof truth. And the liberals could not forgive him.
Reading back over The Road to Serfdom, I could not helpthinking of the old quip that a conservative is someone who says,“I’ll believe it when I see it,” and a liberal issomeone who says, “I’ll see it when I believe it.“While Hayek always called himself a liberal in the classicalsense of “one who is for liberty,” he was trulyconservative in the sense I’m talking about. He never thoughthuman nature or the constitution of reality could be changed orreshaped by force of will. He was a rarity, an intellectuallyhonest man in an intellectually dishonest age. What an ideal namefor an auditorium dedicated to the promotion of human freedom.
And what an ideal think tank to have helping our new majoritytransform Washington. Your devotion to truth, like that of Hayek,has cast you as mavericks. It has put you at odds with thereceived opinions of the conventional left and right. But it is thatprincipled consistency that has made the Cato Institute so “hot“these days. I mean, who would have imagined, a year ago, that theleaders of Congress would be looking to those crazy libertariansover at Cato for advice? Who could have imagined we would be discussingabolishing whole programs, turning others back to the states, repealingill‐conceived laws, and dismantling cabinet agencies, just asyou’ve always recommended?
You have been successful because you believe what Hayek neverceased to point out — and indeed what the entire 20th centurymakes plain — that freedom, and only freedom, works.
What a hopeful time this is. Socialism is finished. Theliberal welfare state is passe. And I’m more optimistic than I’veever dared to be that we are entering a new era of limitedgovernment. Congress is run by Americans who believe ordinarypeople can be trusted to spend their own money and make their owndecisions. We will send power back from the hallowed halls of Congressto the more hallowed kitchen tables of America, where night afternight families bow their heads in thanks and make decisions abouteducation, charity, jobs, spending, debt, and personal behaviorwith a wisdom and a compassion that no agency head, no cabinetsecretary, no member of Congress could ever match.
Just today, we shook the foundations of Washington by doingsomething that hasn’t been done for a quarter century. We proposeda balanced budget.
True to our word, and despite the skeptics, we’ve produced aspecific, detailed plan to balance the budget in seven years. Andwe get there with real spending cuts. No accounting gimmicks. Notax increases. In Hayekian fashion, we asked basic questions:Does the typical American family really need a Department ofCommerce? Could our children learn without an EducationDepartment? Could the Republic survive without a NationalEndowment for the Arts? Would the economy grind to a halt withoutan Interstate Commerce Commission?
While this budget faces a tough road, we believe the Americanpeople demand no less, for the sake of freedom. Americans wantnot just a smaller government, but the government of the Framersof the Constitution. And that’s what we intend to restore.
Can I give you a peek at where we’re headed? Just look atEstonia. Three years ago that tiny republic was a typical, ex‐Sovietbasket case, with negative growth, staggering unemployment, and skyrocketing inflation.But in late 1992 Prime Minister Mart Laar’s reform governmentdecided to throw the dice. They abolished all tariffs. Theyprivatized 90 percent of state‐owned enterprises. They scrappedevery last subsidy, right down to farm subsidies. To create asound money supply, they threw out the worthless ruble andcreated a new local currency, pegged to the German mark. Here’s myfavorite part: They established a flat tax. And yes, theybalanced their national budget.
What’s the result? Today, the Estonian economy is growing at avigorous 6 percent a year, twice America’s growth rate. Unemploymentis just 2 percent. Inflation has collapsed from 1,000 percent to 40.Sixty thousand new private businesses have sprung up in apopulation of only two million.
Mart Laar came to my office the other day to recount hiscountry’s remarkable transformation. He described a nation of peoplewho are harder working, more virtuous — yes, more virtuous,because the market punishes immorality — and more hopeful aboutthe future than they’ve ever been in their history. I asked Mr.Laar where his government got the idea for those reforms. Do youknow what he replied? He said, “We read Milton Friedman andF. A. Hayek.”
Ladies and gentlemen, if Estonia is not a vindication ofeverything we believe in — from free trade to privatization tosound money to balanced budgets — I am at a loss as to how elseone could validate our ideas. To quote my friend and hero, ThomasSowell, we don’t have faith that freedom works. We have evidence.
And by the way, if I can advertise for a moment, it turns outEstonians LOVE their flat tax. They like the postcard‐sizereturn. Compliance has actually gone up. People are willing topay their taxes voluntarily now, because they feel the system isfair. Their only complaint: They think the rate is too high. Butof course, there’s an easy way to cure that.
And speaking of taxes, isn’t it amazing that the debate overhow we restructure America’s tax system for the next century is comingdown to a contest between a flat tax and a consumption tax? Howfar we’ve come.
As I say, I’m hopeful for the future of freedom. But I do haveconcerns. Let me just mention one. More and more these days, immigrantsare being viewed as if they were the source of America’s problems.It seems the old Malthusian notion that people are a drain ismaking one of its regular revivals. Well, it’s good to know Catohas always held fast against that misguided teaching. At a time whensome are turning against immigrants, you continue to view them ashuman beings, in Julian Simon’s beautiful phrase, as the ultimateresource.
Anti‐immigration has always been ironic, because throughoutour history newcomers have been a source of strength, not weakness.America still
attracts the world’s best talent. And surely that is noliability. Think of it. We can avail ourselves of much of theworld’s intellectual wealth simply by opening our doors. Americanever has to grow old. We can always take in new talent and new ideasand new blood. No ruling elite can dominate us for very long, becausewe always have younger, smarter, more entrepreneurial spiritswilling and eager to move up.
The impulse to limit immigration is really a manifestation ofthe protectionist impulse. And it’s misguided. It’s a desire touse government’s monopoly of coercive power to benefit oneself atthe expense of somebody else. And that, as Hayek taught us, isself‐defeating. But the biggest problem with the closed‐borderidea is that it embraces the liberals’ world view. And thus it leadslogically down the path to bigger government.
Should we have an orderly immigration policy? Of course.Should we give the Border Patrol the appropriate tools? Of course.But in so doing, should we infringe on the personal liberties of law‐abidingAmericans? Absolutely not.
We need immigration reform. But our goal should be to makeimmigration more orderly, not more restrictive.
We have too many immigrants coming here to get on welfare. Butthe reasonable response is not to build a police state. It’s to shrinkthe welfare state.
We have an educational system that no longer promotesassimilation. But the sensible response is not to exclude foreign children.It’s to scrap multiculturalism in the schools and give parentsreal school choice.
Should we reduce LEGAL immigration? Well, I’m hard‐pressed tothink of a single problem that would be solved by shutting offthe supply of willing and eager new Americans. If anything, inthe spirit of Hayek, we should be thinking about increasing legalimmigration.
Should we turn private employers into auxiliary border guards?I think unfunded mandates are bad enough without that.
And as for a national ID card, which I understand theadministration is considering, let me just say this. I oppose it.And I will fight it. Let me be clear here. What some are callinga “national computer registry” is just a euphemism fora national ID card. And any system in which Americans would be forcedto possess such a card, for any reason, is an abomination andwholly at odds with the American tradition of individual freedom.
Lest I close on such a defiant note, let me leave you bysaying how much comfort it gives me to know that when it comes to thatissue, as so many others, we’ll be able to count on our goodfriends at Cato.
The coming months promise major battles with the liberals overspending, taxes, crime, education, the environment, welfare, propertyrights,and a hundred other issues. And, as always, Cato will bethere for us, arming our legions of righteousness with facts,statistics, policy briefs, and four‐color charts.
For like the great man we are celebrating tonight, you havethe boldness of honesty and the audacity of truth. You believe,as he always reminded us, that true human progress lies, not inpower or planning, but in markets and the rule of law. It is with thosesafeguards, and those alone, that we may dare hope to avoid theroad to serfdom and “create a world of free men.”