Ghanaian Student Leaders Stranded At The Border

On July 26 and 27, more than 350 students gathered at the University of Ibadan in Nigeria for Students For Liberty’s first ever West African Regional Conference to learn about liberty. The majority of attendees were exposed to the fundamental ideas of liberty for the first time and left the conference pondering questions they had never before considered about the role of government. The conference also gave students from various schools an opportunity to network and begin to repair the ethnic tensions that continue to divide Nigeria.

Unfortunately, other West African nations were sorely underrepresented at the event due to prohibitively high transportation costs as a result of poor infrastructure, corruption, and bad policies. Regional transport is still incredibly dicey. In theory, any West African is allowed to cross borders with a passport or a national identity card, but in practice Africans are forced to pay exorbitant bribes or face the threat of violence.

Twenty-five Ghanaian students experienced firsthand a bitter reminder of how far Africa still has to go before it can be claimed that freedom reigns on the continent. They spent four torturous days on the road in hopes of attending the conference and meeting their Nigerian brothers and sisters. On July 25 their first border crossing from Ghana to Togo was delayed because Togo closed its borders for elections. As one student remarked, often in Africa going to the polls is like going to war. The group was eventually able to cross after paying a hefty bribe but the situation worsened as they attempted to cross through Benin at the Idi Irokko border the following day. They lost the last of their money – about $130 – to bribes to the Beninois security officials.

On July 27, the final day of the conference, they were denied entry to Nigeria at the Seme border where the guards demanded a ludicrous 120,000 Naira, or $750. Stranded, they were left with no money to either move forward or to return home. Out of food and water, they resorted to eating leftover scraps of gari, or grated cassava. Their third night sleeping at a border town, one of the students was robbed. They attempted to lighten their moods by playing music with the instruments they had brought along but found it difficult not to dwell upon the men nearby with guns. Afrikanus Kofi Akosah, president of Africa Youth Peace Call and one of the trip organizers said, “From Aflao, Lome, Lapagi, Seme through Port Novo to Idi Irroko, I’ve not seen so much humiliation, extortion and disrespect for human rights throughout my life.” I myself have crossed through Togo and Benin and witnessed a Ghanaian friend nearly get beaten for standing in the wrong line; I can second his characterization of the borders.

On July 28, the group managed to return to Ghana after a group of libertarian friends in Nigeria in Idirroko sent them 115,000 Naira, or over $700 for food and bribe money. Their absence at the conference was a great loss not only at their own personal expense but also because their attendance would have gone a long way in repairing Ghanaian-Nigerian relations among the youth. However, in telling their story and shining a light on the injustices perpetrated by West African governments, we can demonstrate just how important liberty is, particularly the fundamental freedom of movement that all people should enjoy.

Their story serves as a rallying cry and a reminder of why Students For Liberty exists. The West African Regional Conference created an environment of hope at the University of Ibadan that must be built upon for change to occur in the region. With unprecedented attendance at the first African SFL conference and with a group of strong and capable SFL charter team members in Nigeria, it certainly seems that Africa is on the move. The corrupt government officials across the region will soon discover that liberty knows no borders.

African Countries Continue to Bypass Real Reform in Favor of Affirmative Action Programs

As a result of the Western media’s appallingly deceptive news template of covering the supposed violence and backwardness in Africa, news about Kenya’s general election on March 4th was buried underneath stories about Al Qaeda in Mali, modern day pirate attacks, and suicide car bombings.

Kenya has been undergoing much unrest after the election of their fourth president, with protests breaking out over the questioned legitimacy of the voting process. Here, I wish to discuss an even lesser known constitutional issue of gender representation that is also manifesting itself in the aftermath of the election.

Despite the constitutional requirement that “not more than two-thirds of the members of elective public bodies shall be of the same gender,” none of the 47 county assemblies reached this threshold. In the coming weeks, it is likely that government officials will be discussing possible plans of action modeled after the steps other African countries such as Rwanda and Uganda have taken on behalf of gender equality.

Rwanda and Uganda have seen dramatic increases in the number of women in public office. While women only make up 18.6% of parliaments globally, 25% of Ugandan members of parliament are women and in 2008, Rwanda became the first country to elect a female majority (56%) to parliament. While Uganda and Rwanda have succeeded in increasing women’s representation in politics, they have failed to see significant political reform. Their failures should be a lesson to Kenya that they should scrap the affirmative action clause altogether and focus instead on increasing overall accountability.

The truth is, Uganda and Rwanda have only succeeded in rapidly increasing the number of women in public office through non-democratic means. Neither country has legitimate political parties, nor is there a healthy respect for the rule of law. Elections are marred with ballot box stuffing and an overall lack of transparency that allows powerful leaders to push through their favorite candidates. Both governments maintain support through patronage and quell dissent through political repression.  It is unsurprising then, that their efforts to include more women in politics were equally underhanded. Both countries implemented “add on” constitutional amendments in which women were granted their own exclusive public seats and appointments. Both men and women welcomed this arrangement, men because they remained unthreatened by new competition and women, because it offered a counter to the historic lack of interest in women’s issues. However, women in both countries soon discovered that the amendments represented yet another attempt of the central government to extend its reach through patronage.

Uganda has a “no party” system in which candidates are supposed to run on individual merit to support broad based governance. In reality, the no party system furthers clientelism and squashes dissent. Women have no means of developing political clout around a gendered voting gap so the very isolation from competition that they sought has been their undoing. Their elections to national assembly are held two weeks after the general election and are determined not by popular suffrage, but by an electoral college composed of mostly male leaders. Unsurprisingly, they have been unable to pass new legislation that would improve women’s lives.

Similarly, the Rwandan government created “women’s councils” and appointments to promote women’s inclusion in politics. While Rwandan women have successfully improved women’s property rights, there have been no substantial changes in policy outcomes to disrupt the Rwandan Patriotic Front’s larger agenda. Every woman who has challenged abuse of power with unpopular legislation has lost her job and has been labeled a ‘genocidaire’ or a committer of genocide. Additionally, there have been many reports of ‘disappearances’ of politicians who have attempted to circumvent central government control.

The limited ability of Ugandan and Rwandan women to affect change is rooted in the fact that it is their gender rather than their politics that is their admission ticket to power. The affirmative action programs rest on the common assumption that women’s increased political presence will automatically improve their governments. However, unless real reform is implemented, the words of one anonymous Rwandan will remain true: “[The government] puts women in the National Assembly because they know they [the women] will not challenge them.” Let’s hope Kenya learns from Rwanda and Uganda’s mistakes going forward.

Clearing Up Some Misconceptions about Identity Politics and Oppression

In her article, “It’s Time for Libertarians to Embrace Identity Politics,” Gina Luttrellreceived a lot of negative feedback for tackling the issues of group identity and oppression. I would like to give my take on why libertarians refuse to embrace these issues. Like Luttrell, I think the common libertarian response of denying the existence of oppression by simply asserting the primacy of individualism is troubling. The fact is that people do adopt group identities based on gender, race, class, and sexual orientation through a combination of individual choice, societal pressure, and biological and environmental factors. As Gina asserted, women, people of color, poor people, and LGBTQ people face many disadvantages based on their group identities. In my experience, when libertarians reject this claim it is often because they emphatically take issue with the highly stigmatized terms “identity politics” and “oppression.” I think the salience of these terms is obscured by two damaging preconceptions: 1) the association of oppression with collectivism and 2) the association of identity politics with the typical underhanded Democratic pandering towards key voting demographics. I think these ideas can and should be disassociated. Such conflations cause some libertarians to reject identity politics because they reject the legitimacy of oppression while others refuse to recognize oppression because they reject the legitimacy of identity politics.

Let’s start with the first misconception: that oppression is inherently collectivist. Many libertarians think people like feminists who raise awareness about oppression pit groups of people against each other when in fact their goal is to alleviate group antagonism in order to uphold the autonomy of the individual. Saying, “Hey, don’t you hate that the government and society curtail your individuality by pressuring you to conform to a definition of womanhood that isn’t your own? Don’t you hate that your gender is denied many of the opportunities afforded to men? We do too and we’re trying to figure out how to change that,” is not collectivist; it’s individualist. I really think it’s that simple.

When it comes to libertarian distaste for identity politics, I think the issue boils down to the ethics of marketing. It seems plausible that more targeted marketing could help close the gender gap, yet many libertarians seem to reject such a pragmatic approach. I would hazard a guess that to many libertarians, marketing still has a negative connotation when it pertains to selling ideas instead of products. For example, in a discussion about closing the libertarian gender gap, a young man recently asked me, “Are we supposed to pander to women or not?” The phrasing of his question betrays how some libertarians view marketing. Due to our enormous respect for logic and reasoning, we often view emotional and personal appeals as below us. We think we are being more high-minded than the two major parties by selling our ideas straight. However, our loftiness comes at a high price. Currently, it takes a lot of mental stamina and a bit of intellectual masochism to become a libertarian. One has to unflinchingly disseminate all of one’s preconceptions and discard most of them in a very counter-intuitive process that the vast majority of people don’t have the time, energy, or desire to undertake. We need to make our ideas more accessible. We need to realize that logical arguments and emotional and personal appeals are not mutually exclusive. We need to stop affiliating appeals to emotion and group identity with the underhanded tricks employed by Democrats and Republicans and instead, embrace them as our own. We shouldn’t cast aside the power of persuasion from our toolbox simply because it is exploited by others to promote bad ideas. That would be like denying citizens the right to own firearms because law enforcement officials and criminals often abuse them to promote violence. Such exploitation demonstrates precisely why it is so important that we embrace such tools if they prove effective.

In summation, emotional and personal appeals don’t necessarily detract from logical purity; they can strengthen a logical argument. Similarly, appeals to group identity don’t necessarily detract from individualist principles. Such appeals aren’t just consistent with libertarianism; our principles demand that we adopt them.

While You Wait for Seasteading to Take Off, Try a Home Exchange

Cruise ship disasters, always a favorite topic of journalists looking for a cheap headline, have abounded the past month or so. Carnival’s the Triumph was recently described as a “floating Petri dish” after an engine fire stranded the ship in the Gulf of Mexico, causing passengers to endure five days without power with sewage running down cabin walls. This PR nightmare reminds me of why I have a different preferred form of travel—home exchanges.

Home exchanges are a perfect example of markets at work: they function based on mutually beneficial exchange and subjective value and they lower costs of travel for all, and they bridge cultures across the world.

People always ask, “Aren’t you afraid someone will steal your stuff?” In the twelve home exchanges I have done, I have never had property damaged or stolen. Why? Because anyone who agrees to do a home exchange understands that the system is built on trust. Home exchanges incentivize people to respect property rights because their own property is, or will be, in an equally vulnerable position. The majority of exchanges I have done have been with very affluent people. Their willingness to offer their valuable homes to strangers is a testament to the power of mutually beneficial exchange.

Indeed, my family shows that home exchanging isn’t just for the rich. My parents are public school teachers who live in a modest three-bedroom house and can’t afford expensive vacations. Home exchanges are incredibly cheap because your costs are roughly the same as they would be at home. Most of our host families have been generous enough to lend us their cars and we shop at local grocery stores to avoid the high costs of eating out. Home exchanges are accessible to people of all income levels.

They also demonstrate the power of subjective value. While my family travels to see crumbling historic sights, most of our visitors come to revel in the consumer economy of Super Target. Home exchanges immerse you in a foreign culture in a way that planned tours can’t. For example, in Germany, I milked a cow and learned how to make spaetzle noodles from scratch.

The most valuable aspect of house swapping is the lifelong friendships you make. Our hosts have played chauffer, tour guide, and chef and have gone far beyond your average hospitality to make our visits enjoyable. I’ll never forget the family we stayed with in a tiny, rural Bavarian village who spoke almost no English but still welcomed us with open arms. The day that we left, they sprinkled us with holy water, literally offered us the shirts off their backs, cried, and made us promise to come back.

I’ll admit that home exchanging isn’t as convenient as cruising. There are lots of headaches involved in coordinating swaps and learning the lay of a foreign land, but if you’re looking for an affordable, authentic, liberating vacation, I highly recommend it.

Liberty and Entrepreneurship Take Root in Ghana

From June 2-6, forty college students and recent graduates came together in Kumasi, Ghana for the Summer 2013 Liberty and Entrepreneurship Camp run by Africa Youth Peace Call. Throughout the week, students interacted with influential thinkers such as Jeffrey Tucker and Steve Horwitz through live video conferences on topics ranging from Bitcoin to free market environmentalism. Three Americans, including myself, an accountant and writer, and a self-made small business owner and plumber, also volunteered our time to travel to Ghana to facilitate the students’ learning.

The institutional problems preventing Ghana from achieving more fruitful economic progress quickly became clear at the camp. While the nation’s access to electricity has improved in recent years, the state-owned service is shared with the neighboring countries of Benin, Togo, and Nigeria rather than utilized by its own citizens. Almost every day, our program was interrupted by electricity outages that lasted up to eight hours, limiting access to much-needed cameras, computers, projectors, and lights. Meals had to be cooked over coals and bedtime came prematurely. Most frustrating, even though we had paid for a backup generator, it was used exclusively by the government official living in a fenced-off home on the state-owned property where the camp was held. Apparently, this was not an exception to the rule. One of the students told me that he has reliable access to electricity at home only because he lives near a politician.

However, quite used to these daily hardships, the Ghanaian students patiently waited while the problems were resolved. Many of them shared with me their own business dreams. One aspiring pastor, Akua, sells tea that she makes herself on campus to pay for her education. Another student, Albert, dreams of starting his own private community sheltered from the corrupt practices that permeate his country. Several of the attendees were experienced businessmen who served as role models to the students, such as Addai Bonsu Williams and Armstrong Kwadjo, who started a music school in Kumasi with only $25 and a secondhand keyboard by attracting students with free music lessons. Today, the New Orleans Music and Talent School offers piano, guitar, drums, trumpet, and saxophone lessons and the owners dream of taking their business to the United States. Other success stories came from camp alumni, including Kwame Obeng Agyemang, who provided the meals for the camp through his catering service. Another alumnus, Kwaku Adusai, had been a socialist until attending the Liberty and Entrepreneurship in 2008. Today, he is nicknamed Ghana’s Ron Paul after he ran for parliament on a free market platform. Still stirring up trouble, he sparked a heated debate amongst the students after his talk about religion and politics.

One of the most valuable activities of the week was when the students split into groups to interview local businessmen and women about the challenges facing their enterprises. The students took the project very seriously because as one young man informed me, there is a wide gap in communication between the successful and knowledgeable members of society and those with lower income and education levels. The project was a unique opportunity for them to seek advice from people not accustomed to answering many questions from its youth about business. One hotel manager spoke about the difficulties of having to cater to government officials who frequently eat and drink at the hotel on a whim, free of charge. Several street vendors told us about the serious theft issues they faced. Even though there was a police station just down the road, we were informed that the police refuse to intervene unless paid. The main issue students encountered was that the majority of businesses are unregistered black market operations with no legal standing or access to bank financing, formal markets, or exports. The strong informal economy remains in place because registering a business can cost four times the average annual income and registered businesses still deal with issues of extortion and bribery.

Students applied the information they acquired through these interviews while crafting their own business plans for the end-of-the-week competition. Final projects included a vegetable refrigeration service, a cell phone repair company, and an organization dedicated to spreading libertarian ideas. The students took great pride in their work. Due to their enthusiasm, they spent many additional hours expanding their ideas and hopefully in the coming years they will turn their projects into reality.

Throughout the week, I was blown away by the hospitality shown to me by the Ghanaian people. Everywhere I looked, strong bonds of civil society thrived. Unconditionally, Ghanaians will drop everything to help a friend because they have no one to rely on but each other. They demonstrated similar zeal for the ideas that mattered to them. Afrikanus Kofi Akosah, who runs the camps each year, continually sacrifices everything, including his health, to spread liberty to a younger generation. I encourage everyone to discover for themselves the enormous potential for freedom and growth in Ghana. In the words of George Kimble, “The darkest thing about Africa has always been our ignorance of it.”

The Racism Behind Occupational Licensing Circa 1865

While many people believe that protesting government regulations like occupational licensing requirements is merely a pastime for privileged, white middle-to-upper class businessmen with too much time and money on their hands, the Institute for Justice does great work fighting for the low-income, less-educated racial minorities that occupational licensing hurdles disproportionately hurt.

On average, licensing requirements force workers to spend almost nine months in training and to spend over $200 in fees. One-third of the required licenses take over a year to earn. The jobs most effected by licensure- interior designers, cosmetologists, florists, funeral attendants, home entertainment installers, and barbers- do not pose high health or safety risks. Many such workers are budding entrepreneurs and licensing requirements prevent the creation of new jobs in addition to increasing consumer costs.

While the percentage of the American workforce impacted by licensing requirements has greatly increased from 5% in 1950 to 33% today regulations aimed at racial discrimination, have a long tradition in American history.

Before the Civil War, 5.6% of African Americans worked in artisan careers as blacksmiths, carpenters, barbers, shoemakers, and vendors. After slavery was abolished, African Americans had many more opportunities for economic advancement. They were able to navigate the economy far more freely, had greater access to education, and increased consumption levels heightened demand for artisans’ services. Yet, by 1870, the black artisan population had actually decreased to 3.5% of the black population. In many areas in the South, the number was even lower.

While this decrease can be partially explained by broader changes in the economy, racism clearly played a role as well. In Competition and Coercion, historian Robert Higgs wrote that the benefits African Americans obtained from competitive forces in the private sector were limited by non-market discriminatory influences. In most cases, a white artisan would not hire a black artisan — even for reduced wages — if doing so would turn away racist clients. The effects of racism in the private sphere are also demonstrated by the fact that merchants charged African Americans exorbitant prices for credit, or denied them altogether.

However, racial discrimination in the public sphere was far more prominent. While a businessman might be incentivized by profit to break with the racism of the day, a Southern politician stood to lose his job for being perceived as sympathetic to African Americans. As a result, it was in politicians’ best interest to implement policies that would disadvantage black businessmen. And that is precisely what they did.

In 1865, the government of Macon, Georgia issued market ordinances in the name of “public health” to rein in black autonomy. They imposed quality requirements, restricted the sale of fresh meat and produce during set hours of operation and threatened to seize the goods of all violators. In Louisville, regulations placed minimum levels on amounts of meats and vegetables, which could be offered for sale and prohibited selling cooked provisions. The Daily Telegraph applauded the dispersal of fifty black vendors who were peddling their wares on street corners and said, “streets and pavements were made to ride and walk upon, and not for eating chicken pies and goober peas.” Vendors clashed with city inspectors up through July, requiring constant surveillance by the provost guard. These restrictions pushed many black vendors out of their traditional livelihood and by 1870, only four black household heads in Macon were vendors. By reducing the value of the market, the local government encouraged the proliferation of grocers; nearly all of them were white.

Many state and local governments also imposed licensing requirements on butchers and draymen (wagon drivers). In December of 1865, South Carolina passed a law forbidding African Americans from pursuing or practicing “the art, trade, or business of an artisan, mechanic, or shopkeeper…on his own account and for his own benefit…until he shall have obtained a license…which shall be good for one year only.” Black shopkeepers and peddlers had to pay $100 a year for a license and black artisans had to pay $10 while white men were required to pay neither fee. In Mississippi, draymen had to pay an astounding $500 for a license.

A writer in the Jackson News decried the discriminatory motivation of such requirements by pointing out that the saloon keepers, draymen and barbers of the city of Vicksburg, the majority of which were black, had to pay licensing fees while the lawyers, doctors and dentists, the majority of which were white, did not. The author wrote, “It is easy to see that a few turns of such screws as the above ‘license fees’ are sufficient to confiscate the negro’s property and drive him out of the State or into slavery. A new meaning will thus be given to pregnant text: ‘To him that hath (the ballot) shall be given but from him that hath not (the ballot) shall be taken away.’”

In Louisville, vendors had to pay between ten and thirty dollars each year for a license and an additional ten cents for each sale made without a license. Licensed peddlers and vendors were almost exclusively white, suggesting that these restrictions did discourage black artisans from selling, at least in popular public markets. Typically black artisan occupations were also often assigned unique taxes. For example, one letter in the Christian Recorder reported that barbers and draymen were taxed $5 a month, candy shops $6, and vendors $25. An article in The Jackson News noted that barbers had to pay a $10 tax for each barber chair, amounting to $50 to $100 per year. It stated that this was evidence of an attempt “to make free negroes pay all the taxes if they cannot make them do all the work.”

Unfortunately, the following quote from W.E.B. Du Bois is increasingly relevant for racial minorities today suffering from unjust economic regulations. Hopefully, the work being done by IJ and other organizations will change that.

When one group of people suffer all these little differences of treatment and discriminations continually, the result is either discouragement, or bitterness, or over-sensitiveness, or recklessness…The mass of the Negroes have so often been discouraged in efforts to better their condition that many of them say, as one said, ‘I never apply-I know it is useless…’ And this social environment has been built up slowly out of the disappointments of deserving men and the sloth of the unawakened. Few men will persist in knocking on a door that is usually slammed in their faces.

 

 

A Brief Overview of Early American Monetary Policy: The Rise and Fall of A Private Solution to A Public Problem

Libertarians love to theorize about how a true free market economy would regulate business sans government. Cynics often write off such conjecture as unrealistic and naïve by claiming libertarian theory has no historical precedent. Detractors assume that in the early history of the United States, there was little government interference in the economy. They point to the many financial panics of the nineteenth century and blame the chronic economic instability on the government’s laissez faire approach towards the issuance of the more than ten thousand types of private banknotes circulating throughout the country. In fact, the financially irresponsible bank behavior that contributed to these panics was indirectly promoted by the policies of President Andrew Jackson. Detractors of libertarian monetary theory paint an incorrect picture of the early years of the United States and deem our cause hopeless, stopping the debate in its tracks. Here, I hope to show that some historical evidence does suggest that participants in a free market economy could regulate business and that such efforts have been rendered ineffective in the past by government interference in the economy.

To begin with, state governments regulated banking in the antebellum United States. To open a single office (branch banking was illegal), a bank had to acquire a corporate charter from the state and once approved, it had to deposit bonds and other assets with the government. They were also often required to buy government bonds and the bonds of railroad and canal companies to prop up unwise internal improvement projects. These regulations greatly furthered economic instability. Corporate charters were not issued based on merit, but rather motivated by bribes and log rolling. The number of banks in the United States jumped from close to 200 in 1815 to 711 in 1840. Historian Stephen Mihm has written that these tactics “permitted most every special interest or class to have its own bank: tradesmen, merchants, mechanics, farmers, and others.” Without government privilege, it is conceivable that fewer irresponsible institutions would have been created. Additionally, as Steve Horwitz has pointed out, the ban on branch banking prevented banks from diversifying, making their failure much more likely. The bond requirements also skewed the incentives of bankers and diverted their time and resources towards ventures they otherwise would not finance. It was in their best interest to serve the government rather than to focus on competing for the support of workers and consumers due to the benefits offered by state governments, such as the ability to raise money from state lotteries.

Despite these incentives, at least one bank bucked the trends of faulty loaning and speculation. The Suffolk Bank of Massachusetts was the ultimate success story of responsible banking. It regulated regional banks by buying up their notes and sending them back for specie redemption, thus forcing the banks to keep permanent reserves. This private solution to a public problem eliminated the uncertainty, risk, and costs created by multiple currencies. Other banks welcomed and encouraged this centralization and the Suffolk was able to curtail the overissue of banknotes and lower the number of bank defaults in the Northeast. They formed the New England Association to combat counterfeiting, a problem state governments were notoriously incapable of remedying. Prior to the Civil War, counterfeit notes comprised between 10% and half of circulating bank notes. The lines between legal and illegal were blurred with lawyers frequently helped out the counterfeiters they were supposed to prosecute. Indeed, the infamous New York counterfeiting twins Horace and Hannibal Bonney started out as police officers.

The New England Association provided an alternative and at its peak, over half the banks in New England joined. The only bank in Boston that did not join, the Commonwealth Bank, was run by David Henshaw, the head of the Democratic Party in Massachusetts. Henshaw was notorious for his corruption; as federal collector of the port in Boston, he deposited taxpayer money into his own accounts to finance his own speculation. The New England Association created a fund that financed investigations and prosecutions as well as bounties for private agents to make arrests. Their crowning achievement was a massive attack on the counterfeiters’ headquarters in Canada in 1833. They tried to expand their mandate to prosecuting bank robbers as well, but the Massachusetts legislature proved uncooperative, refusing to reimburse the association’s expenses and vetoing their appeal.

Unfortunately, the New England Association had to suspend specie payments during the Panic of 1837 and gradually fell apart as banks lacked the resources to continue to contribute to the fund in such a hostile economic climate. However, their failure rates were much lower than the rates of many regions, when a quarter of all the nation’s banks failed. What caused the panic? While there were many important international factors, the economic downturn was exacerbated by the policies of President Jackson. He issued an executive order in 1836 to force specie out West in hopes of curbing inflation but actually ending up doing the opposite. His Deposit Act of the same year also had disastrous consequences. While he had the noble goal of dismantling the Second Bank of the United States, his actions were far more indicative of cronyism. He deposited federal funds in 100 politically motivated pet banks and prevented them from issuing paper money in amounts smaller than $5 in hopes of creating a cash and carry economy. Instead, his efforts hurt laborers who often made less than a dollar a day. These two policies caused western banks, flushed with funds, to pump credit into the economy. The number of banks doubled in the five years following Jackson’s reelection and rampant land speculation underwrote the wave of bank loans, which increased from $200 million in 1830 to $525 million in 1836. As a result, prices increased while wages stagnated and specie was transferred from the main commercial hubs in the East, forcing Eastern banks to scale back their loans, contributing to the panic.

With horrible timing, the nation’s first free banking laws were passed in Michigan in 1837. Unfortunately, by 1842 all but three of the banks created under these laws failed as a result of market corrections for the inflated real estate prices that had resulted from government-induced speculation through stay laws, which prevented banks from collecting debts. Most historians don’t recognize the types of free market regulations exhibited by the New England Association and those that do simply point to its ultimate failure, and the failure of Michigan’s free banking laws, as proof that banks can’t be trusted to operate without government regulation, failing to realize that government regulation actually significantly helped cause their demise. Hopefully some day historians will learn to look beyond first glance and realize philosopher kings of finance and supposedly disinterested aristocrats cannot outthink the dispersed knowledge of millions built into free markets.