It’s hardly a secret that the 2012 election is shaping up as a contest between free markets and big government.  And while the choice seems clear in the current political environment, it’s important to recall that government does play a critical role in the development and maintenance of functioning markets.  Yet, as Tea Partiers, Occupiers, and Ron Paul acolytes all note, government has both abdicated that critical role and inserted itself where it does not belong.

If markets were magical places that flourished whenever government disappeared, Somalia would be the world’s leading economy.  Markets are sophisticated mechanisms that enable informed parties to exchange resources, voluntarily, to mutual benefit.  There’s a lot packed into that sentence.  For markets to work, participants must trust the system.  They must believe that they have—or least can access—the information they need to make informed decisions.  They must feel free from coercion—both explicit coercion and unacceptable take-it-or-leave-it offers.  They must trust the inherent fairness of the system, and they must believe that it is possible to enforce the rules of the marketplace by sanctioning cheaters.  The closer an actual market comes to meeting these needs, the better it will function.  The further a market drifts from these goals, the more likely it is to fail.  It is thus absolutely critical that someone—presumably the government—serve as the market referee and the guarantor of market enforcement.

First and foremost, market participants must believe that courts will honor contracts and property rights fairly, dispassionately, and smoothly.  Contracts allow strangers to exchange promises; property allows people to focus on matters in front of them without worrying about possessions that may be out of sight.  In the absence of enforceable contracts and property rights, people could never travel far from home, leverage their assets, or exchange current payment or performance for a promise of future delivery with anyone unfamiliar.  In short, a society that distrusts its courts cannot progress beyond a tribal or a village economy—even if it employs tribal or village markets.

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The Minnesota chapter of a national civil liberties legal group is going to court to fight for the property rights of a Winona man who’s got other battles on his hands:  He’s currently serving as a U.S. advisor in war-torn Afghanistan. The Institute for Justice (IJ) will ask a Minnesota District Court in Winona to strike down a city ordinance prohibiting Ethan Dean, now on his fifth tour of duty in the Mideast, and three other homeowners from renting out their property.

“This is a law that started in Winona and has spread to other cities in Minnesota and what we need to do is stop this trend before it goes any further,” said Anthony Sanders, staff attorney with IJ’s Minnesota chapter. “The right to rent out your home is a fundamental property right, a traditional and accepted use of your property and Winona is trampling on that.”

The Freedom Foundation of Minnesota reported earlier this year on Dean’s campaign on the home front against the controversial Winona ordinance known locally as the “30 percent rule.” Dean says the ordinance is a double whammy.  By restricting rental properties to only 30 percent of houses per block, it deprives homeowners of rental income. Without a rental permit, houses are also less appealing to prospective buyers. Dean says the ordinance has cost him more than one opportunity to sell his $139,000 house, located in a prime rental area in this college town.

“I don’t really understand how someone believes they have the right to tell someone else how and what they can do with their home, but it is a strange world at times, I guess,” Dean told FFM at the time. City officials view the measure as a way to preserve the single family character of city neighborhoods particularly near Winona State University by regulating the number of houses rented mainly to college students. Complaints over student parties, vandalism and absentee landlords led to the imposition of the ordinance in 2005.

“It’s not ideal, but it’s working right now and it’s helping to address our problem of density of rental properties around the downtown core area and Winona State,” city council member Debbie White told FFM earlier this year. “We’ve been losing residences and homes and trying to keep a balance in our neighborhoods.”

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I’m not a big fan of the Girl Scouts of America, because I think the organization — at least on the national level — has skewed far to the left since the days, decades ago, when my older sisters wore the uniforms with green sashes. Still, I felt obligated to share the story below which, in my view, constitutes an assault on individual freedom.

Each February and March for the past six years, Caitlin Mills, 16, and Abigail Mills, 14, have put a card table in front of their home in Hazelwood, Mo., and sold Girl Scout cookies to drivers passing by. This year, however, city officials in the St. Louis suburb notified their mother, Carolyn Mills, that the girls’ cookie stand violated city ordinances and must be shut down.

According to a recent news release from Freedom Center of Missouri, the Mills family — but not the Girl Scouts of America as they are not involved in the case — filed suit in state court to ensure that children in Hazelwood and all over the state will be free to set up similar stands in their own front yards.

“It is a time-honored tradition for American children to set up a stand in the front yard and sell lemonade or baked goods to people passing by,” said Dave Roland, Freedom Center of Missouri director of litigation. “These stands are not only a fun way to pass a summer afternoon, they are frequently children’s first encounter with the basics of entrepreneurship, customer service, and money management.”

Notice of the city’s move to shut down the cookie-selling stand came as a surprise to Mrs. Mills.

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Georgia has some of the worst civil forfeiture laws and practices in the country.  This morning, five Atlanta citizens teamed up with the Institute for Justice to change that.

Civil forfeiture threatens the property rights of all Americans.  These laws allow government officials to seize your home, car, cash or other property upon the mere suspicion that it has been used or involved in criminal activity.

In an attempt to ensure civil forfeiture is subject to public scrutiny, Georgia law requires local law enforcement agencies to annually itemize and report all property obtained through forfeiture, and how it is used, to local governing authorities.

But many—perhaps most—local Georgia law enforcement agencies fail to issue these forfeiture reports.  Today, the Institute for Justice issued a report of its own: Forfeiting Accountability: Georgia’s Hidden Civil Forfeiture Funds. It finds that among a random sample of 20 law enforcement agencies, only two were reporting as required.  Of 15 major agencies in Georgia population centers, only one produced the required report.  Yet federal data show Georgia agencies taking in millions through forfeiture.

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It appears that 2011 will continue to be another challenging year for many looking to sell their home, particularly given a glut of inventory sure to be on the market from an increase in foreclosures. That’s just the latest hurdle, however, for a Minnesota man who says a controversial city rental ordinance not only restricts his property rights, but also his ability to sell his three bedroom house.

Ethan Dean recently wrapped up his fourth tour of duty as a U.S. advisor in Iraq, but soon he’ll be carrying on the battle from his new post in Afghanistan—his battle, that is, with the City of Winona, Minnesota.

Dean’s campaign on the home front involves a controversial city ordinance that he says has cost him the opportunity to sell his $139,900 house that’s located in a prime location near Winona State University.

The conflict involves the so-called “30 percent rule” that limits the number of rental properties to 30 percent of residences per block in this college community.  Home owners who live on blocks above the 30 percent cutoff are not only prevented from renting their property, but also in effect from selling to buyers looking to invest in rental housing for college students.

“If it weren’t for the 30 percent rule, I’d have sold my house two years ago,” Dean emailed  from Iraq recently.  “There are many in town, some elderly who need the money from their house sale for medical issues. They are being punished for being Winona residents more than anyone.”

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The Republican Party’s 2010 Agenda, “A Pledge to America,” is in many ways an impressive document.  It contains both principles and policies that answer the call for a more accountable government in Washington.  It is particularly strong on the health-care issue.  Should the Republicans succeed in repealing ObamaCare, it will be rightly regarded as one of the most crucial victories in stopping the growth of the progressive welfare state.

As I look over the Republican Pledge, however, I am not convinced that it has all the power and principle it needs to change the direction of politics in Washington and actually to return the federal government to the limited—though important—role envisioned by the Founding Fathers.  Is, for example, cutting “government spending to pre-stimulus, pre-bailout levels” a temporary tactic or a permanent goal?  The ultimate purpose of the Tea Party movement would appear to be not just a return to the status quo ante Obama, but actually a restoration of the first principles of government as understood by the Founding Fathers and as practiced in this nation for a century and a half.

While holding those elected in 2010 to their own Pledge, we should urge Republicans and concerned citizens to press beyond the necessary tactics for winning elections in 2010 and consider a more complete set of first principles that will return government to its more limited place in our lives.  To this end, I offer the following.

Human beings are individuals.  They are born not into a class or a race or a special interest but into the human community.  The American ideal has always been to treat individuals not as belonging to preferred classes or groups but as individuals.  Attempts to categorize and hyphenate individuals, particularly for political purposes, are far from being American.

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Carla Main wrote an outstanding book called Bulldozed.  A veteran journalist, she brought to life a heart-wrenching, true-life tale of eminent domain abuse in a Texas fishing town.  She told the truth.  And for that, she’s being sued.

Today, Carla is fighting back.

This morning, Carla asked a Texas appeals court to dismiss a defamation lawsuit filed against here by a developer involved in the Texas case.

Some background:

The Texas developer behind this abuse project is H. Walker Royall.  As the video makes clear, millions of taxpayer dollars later, the project is now an epic debacle.

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55 years ago, Rosa Parks helped launch the modern civil rights movement.

Today, the government is bulldozing her old neighborhood.  Here’s the real kicker:  The homeowners are forced to pay the cost of demolition.

Nobel prize-winning libertarian economist F.A. Hayek famously wrote that “the great aim of the struggle for liberty has been equality before the law.”  There is no better example of this fundamental struggle than Rosa Parks, known today as The Mother of the Freedom Movement.

She refused to be treated as a second-class citizen.  But her hometown of Montgomery, Ala., segregated blacks on public transits.  Minorities were forced to sit in the back, forced to give up their seats to whites, and sometimes were left standing on the side of the road after paying their fare.  Rosa stood up to the Big Government Bullies and said enough is enough.  Her demand for equality before the law forever transformed America.

Rosa once said:

I would like to be remembered as a person who wanted to be free . . . so other people would be also free.

Indeed, she made the world a better place.  So how despicable is it that today officials in her old hometown are forcing people to give up their homes?  The government is tearing down houses against the property owners’ will and then sticking them with the bill.

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With great sadness, I convey the news I have just received that Manuel F. Ayau has died. Known to his friends as Muso, Ayau was one of the greatest persons I have had the privilege to know. I am not given to hero worship, but I do not hesitate to affirm that, to me, Muso was a hero.

Ayau was the principal founder of the Universidad Francisco Marroquin in Guatemala City. He was also a successful entrepreneur, an active participant in the public affairs of his country, and a dedicated champion of liberty there and throughout the wider world. The proud patriarch of a beautiful family, a warm friend to countless adherents of classical liberalism, and man of tremendous energy and striking courage, he exemplifies the realization of the finest potential that human beings can achieve.

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You’ve probably heard about eminent domain abuse.  That’s where the government takes your land and hands it over to another private party….one that is more politically connected.

But you may not have heard about civil forfeiture.  And yet, today, it could very well be the most egregious abuse of private property rights in America.

We all know that one of the many beautiful things about the United States is that citizens are innocent until proven guilty.  But civil forfeiture turns that fundamental principle on its head.

This sounds bizarre, but with civil forfeiture, your property is guilty until you prove it innocent.

Consider the case of Margaret Davis.

As a 77-year-old woman living alone with multiple medical problems, Margaret left her Pennsylvania home unlocked so her neighbors could regularly check on her.  One day while the police were chasing alleged drug dealers through her neighborhood, they all ran through Margaret’s house.  The dealers dropped some of their stash on Margaret’s floor, in plain sight.

Instead of apologizing to Margaret for the traumatic experience, the government seized her house.

Under civil forfeiture laws, Margaret’s property—her house—was guilty until she could prove it innocent to get it back.  And that’s not all.  As it turns out, most state and federal laws allow the government to keep the property they take through civil forfeiture.  So authorities have a big incentive to pursue property over justice.

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The Little Pink House that changed America still stands strong.

Five years ago this week, the U.S. Supreme Court issued what would soon become one of the most despised decisions in its history.  In a controversial 5-4 opinion, the Court ruled in Kelo v. City of New London that governments could take your home—or business, farm or church—and hand it over to another private individual, provided the new owner promised to generate more tax revenue with your property.

The Institute for Justice, the libertarian public interest law firm that litigated Kelo and cases like it around the country, just released this video announcing that, while they lost the Kelo battle, they are winning the eminent domain war:

Simply put, the backlash to Kelo has been unprecedented.  In the past five years:

• 9 state high courts have limited eminent domain powers
• 43 state legislatures have passed greater property rights protections
• 44 eminent domain abuse projects have been defeated by grassroots activists
• 88 percent of the public now believe that property rights are as important as free speech and freedom of religion

The U.S. Supreme Court typically leads the state courts, which usually adopt its rulings and interpret state laws in a similar manner.  But with Kelo, the exact opposite happened.  In January 2006, the Ohio Supreme Court ruled unanimously to reject the Supreme Court’s eminent domain analysis. The Oklahoma and South Dakota supreme courts soon followed in expressly rejecting the high court decision.  So far, Kelo has prompted nine state high courts to limit eminent domain powers.

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In a June 14th editorial entitled “Politicizing the Fed,” the Wall Street Journal sheds light on one of the dubious regulations of the upcoming financial reform bill.  The Journal states:

The biggest underreported threat comes from Subtitle I, Section 1801 of the House financial reform bill titled “Inclusion of Minorities and Women; Diversity in Agency Workforce.” Sponsored by California Democrat Maxine Waters, the provision requires each federal financial agency, the Fed Board of Governors and the 12 regional Fed banks to “establish an Office of Minority and Women Inclusion.”

So what else is new, you say? Don’t the feds already dictate racial and gender hiring? Yes, they do, through the Equal Employment Opportunity Commission and assorted other federal laws. As a matter of racial and gender diversity, the Waters provision is at best redundant.

But Ms. Waters and the House are hunting bigger game—to wit, the political allocation of credit.

[...]

The House provision makes that very clear by making each diversity officer a Presidential appointee who must be confirmed by the Senate.The post, says the bill, will be “comparable to that of other senior level staff.”  The post, says the bill, will be “comparable to that of other senior level staff.”

The law says this diversity czar will “ensure equal employment opportunity and the racial, ethnic and gender diversity” of the work force and senior management of these institutions. More ominously, this creature of Congress and the White House will also be charged with “increas[ing] the participation of minority-owned and women-owned businesses in the programs and contracts” of each agency and conducting “an assessment” of stated inclusion goals.

Mull over that one for a minute. Having recently lived through a financial mania and panic caused in part by political pressure for “affordable housing,” Congress will now order regulators to allocate credit by race and gender.

In an article I wrote on February 28th entitled “Fiscal Death by Welfare,” I argued: “I believe that as the downturn goes on the government will blame the banks for the lack of economic growth and force them to allocate credit to chosen political entrepreneurs and other bad credit risks…”  I truly wish I had been wrong in my assessment.

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We’ve learned that Keynesianism does not make sense and that Obama’s so-called stimulus was misguided. In the final installment of this three-part series, let’s discuss the policies that actually would improve economic performance. As this video explains, both Economic Freedom of the World and the Index of Economic Freedom identify sound money, rule of law, property rights, small government, low tax rates, open markets, and laissez faire as the key conditions for prosperity.

The simple summary of the video is that economic liberalization and small government boost economic performance, not “jobs programs” or “stimulus packages.” But things are never as simple as they seem. Many Republicans, for instance, act as if any economic problem can be solved by cutting taxes. That’s a laundable instinct, to be sure, but fiscal policy only accounts for 20 percent of a nation’s economic performance and it is unreasonable to assume good tax policy can solve the problems caused by bad monetary policy or foolish regulatory interventions. Moreover, there is a big difference between good (supply-side) tax cuts that increase incentives for productive behavior and useless gimmicks such as tax credits and tax holidays. If Republicans want to rebuild their credibility on economic issues, they need to apologize for the reckless statism of the Bush years and rededicate themselves to shrinking the size and scope of the federal government.