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Over the past few months the Distress Index had fallen slightly from an alarming 61.7 in June, which marked the highest economic distress in over 30 years. Many had hoped this would lead to a full economic turnaround. But rising unemployment and the return of consumer price inflation dashed those hopes and confirmed the economy is still in deep distress.

“The minor excitement about turning the corner and coming into a recovery may have been premature. Even the President is now warning of a double-dip recession,” said Prof. Paul Cwik, co-creator of the index. Cwik, an associate professor of economics at Mt. Olive College in North Carolina, warned that the “current recession is far from over” and noted that the trillions of dollars that have been pumped into the economy are now “starting to have an effect on some prices, which will only hinder the necessary liquidation process.”

To learn more about the Distress Index, visit (http://fee.org/distress-index/) or contact Mike Van Winkle at (708) 289-3136 or mvanwinkle@fee.org.

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These are the times that try men’s souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly: it is dearness only that gives everything its value. Heaven knows how to put a proper price upon its goods; and it would be strange indeed if so celestial an article as freedom should not be highly rated.

So began the first of 16 pamphlets under the title “The American Crisis,” by patriot Thomas Paine. These very words were read aloud to General George Washington’s forlorn and bedraggled men on Christmas 1776, the night before the Battle of Trenton.

Consider the backdrop: For the six months since the Declaration of Independence, Americans had been in almost constant retreat. To a disinterested observer, the American cause must have seemed hopelessly quixotic.To many patriots as well, it appeared all but lost. But Paine’s stirring words helped give the troops the morale boost they needed. The next day they accomplished the impossible, capturing nearly the entire force arrayed against them. Desertions plummeted and reenlistments soared.

Lovers of liberty need a little Paine today in the face of all the pain around us. It seems at times that the world has gone mad. Companies that lose billions are being bailed out by a government that loses trillions.The same federal Leviathan that outlaws competition in first-class mail delivery but still can’t deliver letters at a profit now supposedly knows how to run auto companies, banks, and insurance firms. Debt, deficits, bureaucracy, regulation, government spending–the depressing stuff already in frightful superabundance pre-financial crisis–now threaten our diminishing liberties more than ever before. The cover of the March 15 issue of Newsweek proclaimed, “We Are All Socialists Now.”

No Sunshine Soldiers

Maybe we have good reason to feel like those dispirited troops on Christmas Day in 1776, but we should learn from what they did just a day later. We can either be summer soldiers and sunshine patriots, or we can let the very principles we profess be our rallying cry for the battles ahead.

Eternal optimist though I am, I admit that pessimism really tugs at me when I read the morning papers. At every speech I give these days, there’s a sizable portion of the crowd that seems ready to crawl under a rock and let the world go to a statist hell in a hand basket.  

But then I ask myself, what good purpose could a defeatist attitude possibly promote? Will it make me work harder for the causes I know are right? Is there anything about liberty that an election or events in Congress disproves? If I exude a pessimistic demeanor, will it help attract newcomers to the ideas I believe in? Is this the first time in history that believers in liberty have lost some battles? If we simply throw in the towel, will that enhance the prospects for future victories? Is our cause so menial as to justify deserting it because of some bad news or some new challenges? Do we turn back just because the hill we have to climb got a little steeper?

Readers of this magazine should know the answers to those questions.

This is not the time to abandon time-honored principles. I can’t speak for you but someday I want to go to my reward and be able to look back and say, “I never gave up. I never became part of the problem I tried to solve. I never gave the other side the luxury of winning anything without a rigorous, intellectual contest. I never missed an opportunity to do my best for what I believed in, and it never mattered what the odds or the obstacles were.”

A Tradition of Courage

Remember that we stand on the shoulders of many people who came before us and who persevered through far darker times. The American patriots who shed their blood and suffered through unspeakable hardships as they took on the world’s most powerful nation in 1776 are certainly among them. But I am also thinking of the brave men and women behind the Iron Curtain who resisted the greatest tyranny of the modern age, and won. I think of those like Hayek and Mises who kept the flame of liberty flickering in the 1930s and ’40s. I think of the heroes like Wilberforce and Clarkson who fought to end slavery and literally changed the conscience and character of a nation in the face of the most daunting of disadvantages. And I think of the Scots who, 456 years before the Declaration of Independence, put their lives on the line to repel English invaders with these thrilling words: “It is not for honor or glory or wealth that we fight, but for freedom alone, which no good man gives up except with his life.”

As I think about what some of those great men and women faced, the obstacles before us today seem rather puny.We just need to gird our loins.We have to get a lot smarter and better at reaching more fellow citizens with a compelling alternative to the dead hand of the corrupt and incompetent State. We need to put confident smiles on our faces and sally forth.

Time to Rally

We should not squander a second feeling bad for ourselves.This is a moment when our true character, the stuff we’re really made of, will show itself. If we retreat, that would tell me we were never really worthy of the battle in the first place. But if we resolve to let these tough times build character and rally our dispirited friends to new levels of dedication, we will look back on this occasion someday with pride at how we handled it. Have you called a friend yet today to explain to him or her why liberty should be a top priority?

Nobody ever promised that liberty would be easy to attain or easy to keep. The world has always been full of greedy thieves and thugs, narcissistic power seekers, snake-oil charlatans, unprincipled ne’er-do-wells, and arrogant busybodies. Sometimes they’re nattily dressed in custom-tailored, pin-stripe suits and give good speeches; sometimes they’re bedecked in jewel-studded robes and give lousy speeches; on yet other occasions they wear well-worn street clothes and don’t bother with a speech at all as they hold you up. It doesn’t matter how they’re dressed or what they say. No true friend of liberty should just roll over and play dead for any of them.

Wipe that frown off your face and get to work. Liberty’s future depends on you.

For all the tough talk about responsibility, the Barack Obama administration should not go into the automobile business (or the banking business, or the insurance business, or the mortgage business). We can be assured that the automobile industry in this country will be thoroughly politicized, the last thing the American economy needs now.

Beyond the consternation about the “loss of jobs,” we need to understand why GM and Chrysler are in their present fixes and why permitting them to experience bankruptcy – real bankruptcy – actually will save jobs. Second, we have to point out why saving these companies through government directives actually will damage the U.S. economy and make things worse, and potentially much worse.

While GM and Chrysler are at death’s door, we cannot say that for every automaker. Honda, Nissan, Toyota, and other companies with operations in the USA are doing fine, and while times are hard everywhere, they are not candidates for the undertaker.

Government critics of GM and Chrysler claim that they did not build the right kinds of cars: the small, fuel-efficient vehicles that people on the left want to force us to buy (when they are not trying to force us to take public transportation). The reason GM did not build those cars was that they could not make them profitably thanks to their labor contracts, which guarantee the highest industrial wages paid anywhere. (And that includes pay given to people who don’t work at all, per the United Autoworkers contracts.)

Unfortunately, GM and Chrysler (and Ford to a lesser extent) could not compete with other auto manufacturers when gasoline prices skyrocketed, which were brought about in large part because of concern about the strength of the rapidly inflating U.S. dollar. Furthermore, because of their bloated labor contracts, the Little Three (formerly the Big Three) had fewer profits squeezed out of automobile sales, which is a nice way of saying they were paying more for production than their foreign competitors. Start multiplying this times the numbers of cars sold and a definite pattern arises: Domestic companies were uncompetitive because they and their unions chose a higher cost structure.

One of the enduring myths in economics is that the higher the cost, the greater the wealth created. People still insist that Henry Ford “created the American middle class” when he doubled the pay of his autoworkers from $2.50 to $5 a day. That is nonsense. Higher costs do not create more wealth. Increased productivity does. On the other hand, higher costs imposed through government or coercive union contracts destroy wealth. The infamous UAW contracts required that the Little Three use more resources than were necessary to build cars and trucks, which meant those resources couldn’t be employed at their highest-valued uses, making everyone else poorer.

Even though the government is talking responsibility and even bankruptcy, nonetheless the market already has spoken on GM and Chrysler. At present the sum of the parts is greater than the value of the whole, which means these companies would be worth more by having their physical assets sold in a bankruptcy proceeding than kept together by government fiat.

By artificially keeping GM and Chrysler alive, the government not only is wasting scarce resources and forcing lower-income Americans to create “make-work” for higher-income people, it is also placing a hardship on those U.S. subsidiaries of foreign auto companies. Given the realities of American politics, I can imagine that sooner or later the government will take aim at those subsidiaries in hopes it can damage them in order to protect its “investment” in GM and Chrysler. Stay tuned.

Commentators on the present financial crisis have noted some interesting parallels to the Great Depression of the 1930s. Even if we survive Washington’s spending spree, Congress and the Obama administration could still tip us into catastrophe if they sharply raise taxes or tariffs as Congress did in 1930 and ’32. But more ominous parallels to an earlier age should not escape our notice.

Monumental sums for bailouts. Staggering increases in public debt. Concentration of power in the central government. A mad scramble by interest groups with endless claims on the treasury. Demagogic class warfare appeals. These things ring familiar in the ninth year of 21st century America just as surely as they dominated the ill-fated Roman welfare state of two millennia ago.

In the waning years of the Roman republic, a rogue named Clodius ran for the office of tribune. He bribed the electorate with promises of free grain at taxpayer expense and won. Thereafter, Romans in growing numbers embraced the notion that voting for a living could be more lucrative than working for one. This set into motion Kershner’s First Law, named for the late economist Howard E. Kershner: “When a self-governing people confer upon their government the power to take from some and give to others, the process will not stop until the last bone of the last taxpayer is picked bare.”

Candidates for Roman office spent huge sums to win public favor, then plundered the population afterwards to make good on their promises to the rent-seekers that elected them. As the republic gave way to dictatorship, a succession of emperors built their power on the huge handouts they controlled. Nearly a third of the city of Rome itself received public relief payments by the time of the birth of Christ.

In response to a severe money and credit crisis in 33 A.D., the central government extended credit at zero interest on a massive scale. Government spending in the wake of the crisis soared. 

In 91 A.D., the government became deeply involved in agriculture. Emperor Domitian, to reduce the production and raise the price of wine, ordered the destruction of half the provincial vineyards.

Following the lead of Rome, many cities within the empire spent themselves deeply into debt. Beginning with Emperor Hadrian early in the Second Century, municipalities in financial difficulty received aid from Rome and lost a substantial measure of their political independence in the bargain.

The central government also assumed the responsibility of providing the people with entertainment. Elaborate circuses and gladiator duels were staged to keep the people happy. The equivalent of a hundred million dollars per year in the city of Rome alone is one modern historian’s estimate of what was poured out on the games.

Under Emperor Antoninus Pius, who ruled from 138 to 161 A.D., the Roman bureaucracy reached mammoth proportions. Eventually, according to the historian Albert Trever, “the relentless system of taxation, requisition, and compulsory labor was administered by an army of military bureaucrats. . . .Everywhere were the ubiquitous personal agents of the emperors” employed to crush tax evaders.

There were plenty of taxes to evade. Emperor Nero is said by Roman historian Gaius Suetonius in De Vitae Caesarum to have once rubbed his hands together and declared, “Let us tax and tax again! Let us see to it that no one owns anything!” Taxation ultimately destroyed the wealthy first, followed by the middle and lower classes. “What the soldiers or the barbarians spared, the emperors took in taxes,” according to historian W. G. Hardy. 

Late in the Third Century, Emperor Aurelian declared government relief payments to be a hereditary right. He provided recipients government-baked bread (instead of the old practice of giving them wheat and letting them bake their own bread) and added free salt, pork, and olive oil. 

Rome suffered from the bane of all welfare states, inflation. The massive demands on the government to spend and subsidize created pressures for the multiplication of money. Roman coinage was debased by one emperor after another to pay for expensive programs. Once almost pure silver, the denarius by the year 300 was little more than a piece of junk containing less than five percent silver. 

Prices skyrocketed and savings vanished. Businessmen were vilified even as government continued its spendthrift ways. Price controls further ravaged a battered and shrinking private economy. By 476 A.D. when barbarians wiped the empire from the map, Rome had committed moral and economic suicide.

Another Great Depression should indeed concern us. The one that followed the Roman welfare state is known as the Dark Ages and it lasted for several hundred years.