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R&L: You have written, “The triumph of persuasion over force is the sign of a civilized society.” Could you explain what you mean by this?

Skousen: I made this statement in a pamphlet I wrote several years ago titled “Persuasion vs. Force.” Alfred North Whitehead, the British philosopher and Harvard professor, elaborated when he said, “Commerce is the great example of intercourse by way of persuasion. War, slavery, and government compulsion exemplify the reign of force.” (Adventures of Ideas, p. 83)

The point is this: every time we pass another law or regulation, every time we raise taxes, every time we go to war, we are admitting failure of individuals to govern themselves. When we persuade citizens to do the right thing, we can claim victory. But when we force people to do the responsible thing, we have failed.

For example, when the Florida legislature recently passed a regulation requiring teenagers to wear headgear while riding a bicycle, our representatives were basically admitting defeat. They gave up on persuading our young people to ride bicycles safely. They demonstrated their low opinion of the good citizens of Florida by giving up on education and other persuasive means to encourage teenagers to act responsibly.

When Congress passes a minimum wage law, they are essentially giving up on the poor. They are saying, “We don’t believe you are capable of making your efforts to be paid a decent wage.”

Passing more legislation simply ignores long-term solutions to our problems. Too often, our national and local politicians don’t think twice about passing more social legislation. Have they really exhausted all means of persuasion before pushing through more rules and regulations on the American people?

R&L: What means of persuasion are available in a republic such as ours? What are the limits of persuasion?

Skousen: Our communities have numerous institutions of persuasion to rely on instead of government, the institution of force. Examples of voluntary organizations include families, friends, churches, charities, civic clubs, foundations, private schools and colleges, and private enterprise. Free-enterprise capitalism, with its many corporations and small businesses, advances good causes of all kinds. We should all be engaged in good works of our own free will and choice. I admire private organizations like Habitat for Humanity or the Salvation Army. They do a lot more good than most government agencies and at a reasonable cost.

Social critics and government leaders claim that private charity and private schools cannot do enough to handle welfare, education, and the social problems of our time. I question this thesis. Historically, it is interesting to note that as the size and scope of government involvement in social welfare have increased, private organizations have been stifled, for two reasons: one is that taxation removes funds from private individuals and organizations, and the other is that private citizens feel less needed when they think the state is handling everything. I say cut taxes and public welfare, and private citizens will respond favorably as never before.

R&L: What is the role of religious leaders in this project of persuasion?

Skousen: Persuasion reflects two characteristics: freedom and morality. It is not enough to give people their liberty; they must also be taught the difference between right and wrong. As one church leader once declared, “We teach them correct principles, and they govern themselves.”

Ministers and church leaders should do many things. First, they need to encourage their congregations to engage in more private acts of charity and welfare. It is not enough to vote and pay your taxes and think you have done your civic duty. We must be anxiously engaged in good causes. St. Paul said it best, “Every man according as he purposeth in his heart, so let him give; not grudgingly, or of necessity: for God loveth a cheerful giver.” (2 Corinthians 9:7)

Second, they should offer alternatives to government welfare, which tends to be impersonal and perpetual. They should encourage their congregations to depend on themselves, their family and relatives, and on private charities before turning to the public dole. Catholic Services and the Mormon Welfare Plan are two excellent examples of alternative social services.

Third, they need to teach that money, wealth, and free-market capitalism are not necessarily evil, but can achieve much good. They can increase everyone’s personal standard of living and their opportunity to engage in charitable actions. The rich are not necessarily bad people. In fact, without the hard work and generosity of wealthy citizens, there would be no surplus wealth to be used to build churches, universities, museums, and hospitals.

R&L: Supreme Court Justice Oliver Wendell Holmes is quoted as saying “Taxation is the price we pay for civilization.” In light of your comments above, how would you respond to this assertion?

Skousen: Chief Justice Holmes was a great man, but his statement on taxation–which is inscribed on the IRS headquarters in Washington, D.C.–is plainly wrong. Taxation is not the price we pay for civilization. Taxation is the price we pay for failing to build a civilized society, since taxation represents force. The higher the tax level, the greater the failure. A centrally planned totalitarian state represents a complete failure of the civilized world, while a totally voluntary society represents its ultimate success.

Raising taxes to solve our problems indicates that our leaders don’t have the vision to seek voluntary solutions. Moreover, raising taxes reduces the funds private citizens and organizations have available to engage in charitable causes, thus worsening our social welfare crisis.

R&L: One implication of this outlook is that individuals are free to make their own choices. But what about the individual who makes bad choices–shouldn’t a civilized society have laws to protect these people?

Skousen: In a free society, there will always be individuals who make mistakes. No matter how hard we try to educate and persuade people to be responsible, some will go out and use drugs, drop out of high school, or commit crimes. That is the risk we take when we create a free society. But we can’t protect everyone from making mistakes. As Sir James Russell Lowell said, “The ultimate result of protecting fools from their folly is to fill the planet full of fools.”

Fortunately, most people learn from their mistakes, and are better citizens because of it. If they pay the consequences early enough, they have time to become mature, productive members of society. But individuals who are always forced to do right, or who are bailed out with welfare programs when they do make mistakes, will never progress.

R&L: How would you respond to Karl Marx’s statement, “From each according to his ability, to each according to his needs,” which is a corruption of Acts 4:35 and 11:29?

Skousen: This high-minded slogan has been adopted by many Christian Marxists and social reformers. However, the effects of such a system are often just the opposite of their intent. If each individual in society were forced to give up his income and assets beyond his needs, there would be little incentive to work beyond the fulfilling of basic needs. Under a socialist system, any income earned beyond one’s needs is turned over to the central authorities and distributed to those who earn less than their needs. In essence, it amounts to a 100% marginal tax rate on income! Thus we see why pure Christian socialism imposes huge disincentives to work and causes an eventual collapse in the economy.

Of course, I see nothing wrong with voluntary contributions of surplus wealth. But when a community forces everyone to give up their surplus income, disaster is inevitable. There’s a big difference between someone who says “All I have is yours” and another who says “All you have is mine.”

R&L: You have written extensively in the field of economics, especially finance and investment. What role does your faith play in approaching these subjects?

Skousen: My church leaders always taught the virtues of thrift, honesty, hard work, and a good education. Throughout my life, I’ve always tried to learn more, even after obtaining a Ph.D. in economics. I have also tried to stay out of debt and save as much as I can, seeking to follow the counsel of the Methodist founder, John Wesley, in his famous “Sermon on Wealth”: “Earn all you can, save all you can, give all you can.”

While attending Brigham Young University, I was surprised when one of my economics professors taught the Keynesian theories that consumption, federal deficit spending, and big government were good, while savings, balanced budgets, and laissez faire government were bad. I rejected this “New Economics” of Keynes immediately because it went counter to my faith, although at the time I didn’t know what was wrong with the theories. It made me search for other philosophies of economics more compatible with my religious values, and I soon discovered the free-market theories of Ludwig von Mises, Friedrich Hayek, and Milton Friedman. Although these economists were religious agnostics, they developed economic principles compatible with the virtues of thrift, hard work and balanced budgets.

Finally, in my work as a financial advisor and writer, I have always tried to take the high road. Too often the world of Wall Street and high finance is criticized as a world of greed, get-rich-quick schemes, and unethical practices. In our business, we all need to do more to follow the Golden Rule.

R&L: Social observers and financial analysts alike are noting what they think is an alarming trend: That more and more people are going into debt than ever before. I am here thinking of student loans, credit cards, etc. What are the moral guidelines regarding indebtedness?

Skousen: My church leaders have always taught that debt was a great burden and should be paid off as soon as possible. Sometimes, however, taking on personal or business debt cannot be avoided, such as when buying a car, a house, or starting a business. If your income is sufficient to service the loan, debt can be beneficial. Many successful businesses have been created through bank loans and other financial arrangements. That’s the basis of capitalism, isn’t it? Remember, the opposite of debt is saving, and without borrowing, there would be no savings accounts and no commercial banks!

Having said that, I should also add that personal consumer debt is a clear danger and should be reduced and eliminated as quickly as possible. Most Americans are way over their heads in personal and credit card debt and are not saving enough for emergencies and retirement. If you can’t pay off your monthly credit card bill each month, you should seriously consider getting rid of your credit cards. Use debit cards, checking accounts, or cash instead.

Finally, avoid personal bankruptcy at all costs. Bankruptcy is a form of theft and violates the eighth commandment. If you get into trouble, work out a deal to pay off your creditors, but above all, be responsible for your financial obligations. That includes business debt.

I might also add that we are suffering as a nation because we are not saving enough, undoubtedly due to the influence of Keynesian thinking over the past fifty years. Most workers are not saving sufficiently for their retirement. Social Security is a poor substitute for a genuine pension plan. In addition, we are not spending enough on our infrastructure–our roads, bridges, sewage and water systems, buildings and, most importantly, primary and secondary education. Spending more on consumption will not necessarily stimulate capital investment. We need to spend more now on physical and human capital so that we can enjoy a higher standard of living in the future.

R&L: There are those who think that investments only aid the rich, and that people should rather give what they have to the poor and trust in God to provide for the future. How would you respond to this claim that financial expertise and faith are incompatible? How do wise investments aid the poor?

Skousen: A bull market on Wall Street and around the world is highly beneficial for everyone, not just the rich. Rising stock prices mean creating new issues, new financing, and fresh new capital to expand businesses everywhere. Expanding business means more capital equipment and machinery, new technology, new products and services, more jobs, better paying jobs, and higher wages and salaries–in short, a higher standard of living for all concerned. In addition, millions of lower-income and middle-income workers have pension and profit-sharing plans which invest in the stock market, thus benefiting directly from Wall Street.

In short, we can pray all day for the poor, but what the poor really need are jobs that give them hope and self-esteem. Wise investing in private enterprise opens the door of opportunity for the poor.

R&L: Many are concerned with investments in enterprises they consider morally noxious; the issues of South African enterprises or companies with environmentally destructive practices come to mind. What moral considerations ought to guide one’s investment strategies?

Skousen: There’s an old saying on Wall Street, “Never let politics interfere with your investments,” but I don’t agree. Ethical investing should play an important role in your financial decision-making. If you are against gambling, don’t purchase Bally Entertainment. If you are opposed to smoking tobacco, don’t buy Phillip Morris. If you object to pornography, don’t invest in Playboy. If you are opposed to federal deficit spending, avoid buying Treasury securities and U. S. Savings Bonds.

However, nothing is black and white in this business. Take Walt Disney Co., for example. It produces many wonderful G-rated movies and wholesome family entertainment at its theme parks, but it also owns Touchstone films, which produces many degrading R-rated films. Should you invest in Disney stock or not? The same question could be asked about RJ Reynolds. Yes, it produces cigarettes, but it also owns Nabisco, which produces food products. In the end, I think you have to make up your own mind which stocks to buy. In any case, I don’t think brokerage firms or the government should limit your choice of investments.

R&L: Finally, how important is religion and morality to the preservation of a free market?

Skousen: Religious and moral principles are absolutely critical to the preservation of a free society. Freedom without morality leads to a libertine existence, where men and women constantly violate their moral nature and eventually self-destruct. As Alexis de Tocqueville said, “Despotism may govern without faith, but liberty cannot.”

In fact, I would argue that the reason more laws and regulations are constantly being passed is because America is losing its moral senses.

Throughout my life, I have been taught by my family and church leaders that America is a promised land, blessed with rich resources and good people. The most repeated scripture in the Book of Mormon is, “If ye keep my commandments, ye shall prosper in the land.” But it goes on to say, “If you do not keep my commandments, the land shall be cursed.” This is still a land of liberty, but our freedom is eroding. The only way we can reclaim our God-given freedom is through faith, virtue, and good works. If we don’t, I fear for my country.

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