Obama: Look to Lincoln for Free Markets

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About-to-be-President Obama and his team continually invoke Abraham Lincoln and his presidency. Obama’s cabinet is even said to be modeled after Lincoln’s “Team of Rivals.” Most recently, Obama announced his intention to be sworn in as president with the bible Lincoln used for his inauguration.

In these troubled times, Obama should particularly review the ideology of Lincoln. Although today’s economic crisis greatly differs from the impending civil war issues at the time Lincoln took office, the basic ideals of a free society remain the same. The founding principals of freedom apply to civil liberty as well as market regulation.

A few months after his inauguration, Lincoln described his understanding of the founding fathers’ approach to government in his July 4, 1861 message to congress: “the leading object of government is … to lift artificial weights from all shoulders; to clear the paths of laudable pursuit for all; to afford all an unfettered start and a fair chance in the race of life. Yielding to partial and temporary departures, from necessity, this is the leading object of the government for whose existence we contend.”

The current discussion about proper regulation of the financial markets involves the age-old debate of whether free markets work more effectively or whether more government regulation helps the economy.

In answering this question, one should consider Lincoln’s interpretation of the founding fathers’ “leading object of government.” When a government imposes legislation and regulations on the markets that discourage certain enterprises and encourages those with artificial weight from the government, there is both a financial and a social cost.

In seeking to remove artificial weights, Lincoln looked to the Declaration of Independence. Lincoln believed that the statements in the Declaration of Independence were not object truths in existence, but were aspirational goals to be sought by our government. He recognized that while “all men are created equal” and “endowed by their creator with certain unalienable rights”, the government of the United States had not, and could not, reach the perfect place so described. Nevertheless, Lincoln pushed the country toward that goal and led the country closer to those ideals.

Now we are faced with a much different question regarding how best to apply government power. The answer, though, stems from the original role set forth for the government. We should not abandon the ideals established by our founding fathers, but rather use them to lead us through difficult times – as Lincoln did.

Government should not choose which businesses to encourage and which ones to discourage. It is the marketplace that decides those that are most productive and essential and those that should flounder. It is the markets that drive innovation and creation of new and vital ventures.

Yet, for now, we have accepted and embraced certain government intervention. We have, as Lincoln stated, “yield[ed] to partial and temporary departures, from necessity.” Such acceptable temporary departures include the temporary propping up of frozen credit markets and the economic stimulus given to government industries, such as defense and infrastructure. But these temporary departures, yielded to upon necessity, should not make us think that it is necessary to enact permanent legislation.

We have not reached – and probably will never reach – the perfect free marketplace in which all participants have complete transparency and freedom, but that does not mean that we should abandon the pursuit of the best marketplace we can achieve. Nor does it mean that we should allow the government to control and choose the activities to be pursued by those it governs.

Part of what makes up a free society is a free marketplace in which individuals succeed and fail on their own, not because the government has chosen their success or failure. Lincoln did not abandon the concept of “all men are created equal” simply because he did not believe that it could exist in reality. Instead, he pursued the “unalienable rights” of all men, regardless of the imperfect ability of the government to deliver those rights.

If Obama is to bring “change” to Washington D.C., he must live by the high ideals adhered to by Lincoln. In particular, he must avoid regulation and interference in the markets that lay artificial weights upon the shoulders of men and women.

Eric R. Smith is an attorney with Venable LLP in Baltimore, Maryland. His practice focuses on securities law disclosure obligations, mergers and acquisitions and corporate finance.
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