Date: 1950-01-01T07:00:00+00:00
Keywords: liberty
Description: The Foundation for Economic Education The Freeman 1966

The Freeman 1966

Foundation for Economic Education

Williamrlenry Chamberlin 27 Edmund A. Opitz 3 Miller Upton 6 Anne Wortham 13 Sam H. Husbands, Jr. 18 Joel Dean 22 JANUARY 1~~66 Author of Liberty. The Relativity of Relativity. Individualism versus Racism . Sweden's Great Society Six Misconceptions about Consumer Welfare State Economic Planning: Tragedy or Futility . The Flight from Reality: 16. From Ideology to MythologYI I . The Serpentine' Gauntlet Money and free Markets: A Summary . The Human Desire for Freedom . Books: This Independent Republic. Other Books 0 Clarence B. Carson Journal of Commerce V. Orval Watts Edward Y. Breese John Chamberlain 34 45 48 56 59 62 COAST FEDERALSAVINGS AND LOAN ASSOCIATION Department F, 9th & Hill Sts., los Angeles, California 90014 :-·1111 o Please send me a FREE copy of "What's Inflation?" o I enclose my check (or money order) for $ _ o Please open a Coast Federal Savings accounto Individual o Joint in the name(s) of NAME _ STREET _ CITY STATE _ 5-1l2A ··::::}}}n~ o ~ COAST FEDERAL SAVINGS ~".; ANa LOAN ASSOCiATION .:~ II" The Reverend Edmund Opitz starts the New Year with a sermonette for the individual who is not self-created nor fully self-contained in his search for freedom p. 3 ~ Despite the appeal of relativity, there are certain absolutes and stan dards to be observed in the search for truth, believes the president of Beloit College p. 6 ~ A young American thoughtfully re examines the issue of civil rights and how individuals may hope to earn and enjoy them p. 13 ~ Inexorably, the tax collector as sumes an increasingly prominent role in the life of every participant in Sweden's "great society" p. 18 ~ An economic and management con sultant spells out six of the most pop ular misconceptions concerning con sumer welfare in the United States .......... p. 22 ~ William Henry Chamberlin, an eye witness to Stalin's famine in 1932-33, points out that central government planning fails miserably wherever tried ...... p. 27 II" In this chapter, Dr. Carson explains how facts are distorted by false the ories into myths that rule and can wreck our lives p. 34 ~ The recent legislative struggles over the sugar bill strike the editors of The Journal of Commerce as reason enough to rely upon the market for such matters p. 45 ~ Dr. Orval Watts draws a distinction between money and credit that may lead away from some of the confusion surrounding these instruments .. p. 48 "" The human desire for the freedom of recognition is a major reason why the totalitarian state is unlikely to prevail p. 56 "" John Chamberlain finds some un popular but timely comments on the state of the nation in This Independent Republic by Rousas Rushdoony.

...... p. 59 ~ Robert Thornton delights in Mr. Krutch's analysis of the life and mean ing of Henry David Thoreau; also re viewed favorably is Daniel Boorstin's The Image: A Guide to Pseudo-Events in America ....p. 62 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

JANUARY 1966 LEONARD E. READ PAUL L. POIROT Vol. 16, No.1 President, Foundation for Economic Education M anag'ing Editor THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit educational champion of private property, the free market, the profit and loss system, and limited government, founded in 1946, with offices at Irvington-on-Hudson, New York. Any interested person may receive its publications for the asking. The costs of Fbundation projects and services, in cluding THE FREEMAN, are met through volun tary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are invited in any amount - $5.00 to $10,000 - as the means of nlaintaining and extending the Foundation's work. Copyright, 1966, The Foundation for Economic Education, Inc. Printed in in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each.

Permission is hereby granted to anyone to reprint any article in whole or in part, providing customary credit is given, except "The Flight from Reality," "The Serpentine Gauntlet," and "Money and Free Markets." Any current article will be supplied in reprint form if there are enough inquiries to justify the cost of the printing.

Author ofLiberty EDMUND A. OPITZ SAMUEL SMITH wrote the words for "America" in 1832, while a student at Andover Seminary. The fourth verse is virtually a prayer, beginning with the familiar words: Our father's God, to Thee, Author of liberty. The prayer is addressed, not to some god in the Hindu pantheon, nor to the gods of the Medes and Persians, but to the God of the Bible, the God of our J udeo-Chris tian heritage. What is unique about this idea of God, and in what sense is he the Author of liberty? Let's go back a few thousand years. The common opinion in the ancient world - an opinion still prevalent - was that a god is use ful to have around to sanction so cial practices, to guarantee prosThe Reverend Mr. Opitz is a member of the staff of the Foundation for Economic Education. This is a Sunday morning ser monette at a recent FEE seminar. perity, and to insure victory in battle. When the gods were angry, you had a run of bad luck, so you had to butter them up until you changed their attitude. If a crop failed, the god in charge either responded to your incantations, or you fired him. If your tribe lost a battle, this signified the superior medicine of the victor's gods, so you adopted them. The Victorian novelist, Samuel Butler, felt that many of his contemporaries still clung to such childish notions, which he satirized by declaring: "To love God is to have good health, good looks, good luck, and a fair balance of cash in the bank."

Too many people, and not only in the ancient world, act as if they regard God as a sort of cosmic bellhop eager to run their celestial errands for them, while revealing the short cut to success and the secret of get-something-for-Iess schemes. 3 4 THE FREEMAN January One God The ancient Israelites were the first people to discard the notion of a god kept on tap for luck and tricks. They lapsed now and then, but were jerked up hard by their prophets, who proclaimed the God of righteousness and truth; these men saw the workings of God even in their own poverty and defeat. Theirs was not a kept god who could be worked on by magic to serve the devious ends of men. He was the God of religion who laid down the rules for an orderly uni verse in· which men, by learning and obeying the commands, earn their own way. This God cannot be bought or. bribed - in contrast to the god of magic - and men see his handiwork in the preponder ance of order, harmony, balance, and economy in the workings of the universe. This universe plays rough but fair; it can be trusted.

Its trustworthiness, translated over into the material world, be comes the natural sciences tracing cause and effect sequences and drafting laws to describe the workings of natural phenomena. A stone falls because it has no choice in the matter; hydrogen cannot refuse to enter into a com bination with oxygen under cer tain conditions. There's no free dom at the level of physics and chemistry. But life comes onto the scene and adds a new dimension. On the biological spectrum with an oyster, say~ at one end, and a chimpanzee at the other, we note an increasing freedom in the higher forms of life, culminating in man. The universe is not ran dombut intentional, and one of its intentions issues in a creature gifted with a novel kind of free dom of choice. Man appears on the scene, Na ture~s wayward son. The eminent biologist, Lecomte duN oily, broadly surveys the planetary scene and declares that "every thing has taken place as if, ever since the birth of the original cell, Man had been willed."!

Here, at last, is a creature so radically free, so insulated from the instinctual controls that guide animals, that he can defy the laws of his own being. Man's will is free; all other creatures obey the laws of their nature, but he alone possesses that radical freedom 'which makes it possible for him to deny his Maker. We sometimes accuse tyrants of trying to play god, but this is not an apt meta phor: God himself does not "play god"! We have the gift of an in ner freedom so far-reaching that we can choose either to accept or reject. the God who gave it to us, and it would seem to follow that 1 Lecomte du Noily. Human Destiny, a Mentor paperback, available from FEE at 60,.

1966 AUTHOR OF LIBERTY 5 the Author of a freedom so radi cal wills that we should be equally free in our relationships with other men. Spiritual liberty, of the sort men have, logically demands conditions of outer and social liberty for its completion. The goal of collectivism is the perfect adaptation of man to so ciety and society to nature. We challenge this goal· with the con viction that every person has a destiny beyond society. He has a soul, for whose proper ordering he is responsible, not to society or to the state, but ultimately to God. Inner Freedom Such an understanding of the nature and destiny of man is the cornerstone of a free society. Whenever a significant number of people become aware of their inner freedom and its demands, they will have little trouble in estab lishing the secular institutions of liberty in their society. They will limit government so that there will be no political invasions of the sacred prerogatives of individual persons; they will secure every person's rightful property, and trust their economic problems to the market for solution. These things are in the realm of means, but they are indispensable means for shaping the right kind of so cial conditions out of which in divid ual persons may emerge as society's completion and fulfiII Inent.

Man does not create himself, nor write the laws of his being; but man does make hjmself. And as he does, he begins to discover who he is and what he may be come. "That wonderful structure, Man," wrote Edmund Burke, "whose prerogative it is to be in a great degree a creature of his own working, and who, when made as he ought to be made, is destined to hold no trivial place in the creation." May we then seek to serve the Author of our liberty, in whose service we find our perfect free dom. ~ Ancient Advice IF THOU SEEKEST RESPONSIBILITIES, apply thyself to being perfect. If thou takest part in a council, remember that silence is better than an excess of words. From Instructions of Ptah-H otep, (written for the use of Egyptian. princes some 5,300 years ago.) As THE PRESIDENT of Beloit Col lege and the princip.al sp.eaker at this colorful and (hopefully) im pressive opening convocation, I reckon my responsibility to be that of saying something to the college community that is both relevant and profound: relevant in terms of the beginning of a new college year and your needs during the year; profound in terms of the social relevance of what we are or should be engaged in here. This is quite a price to pay for having the honor of being president!

But I think maybe I can rely upon my experience to offer some thing relevant and helpful to at least the younger members of the community. I will leave to your judgment the element of profunThis article is from Dr. Upton's Opening Convocation remarks at Beloit College, Sep tember 11, 1965. 6 THE RELATIVITY OF RELATIVITY MILLER UPTON dity. I have discovered over the years a technique for escaping a discussion in which one has been involved and become bored or trapped - or at least changing the s'ubject to something more person ally palatable. And since part of our educational technique here at Beloit is to encourage discourse, dialogue, conversation, and discus sion both in and out of class, one is well-advised to have such a handy technique readily available. The technique I have reference to is to lean back in your chair, put your hands behind the back of your head, cross one leg over the other, and say in a most profound way: "Well, you know, everything is relative!" You will find that im mediately silence will blanket the area, and it will eventually be re moved either by all agreeing you are right and discussion ceasing 1966 THE RELATIVITY OF RELATIVITY 7 or by someone else barging in with a new topic. It is just like writing Q.E.D. at the end of a mathematical proof.

Now I wish that having pro vided you with this gem of advice I could sit down, lean back, cross my legs, and feel my job was done. But whereas this technique is very relevant to the real world of avoid ing or winning discussion, it is not very profound. It works, but not being a pragmatist myself I would feel cheap offering it to you with real support. You see, like so many things fashioned by man's limited intellect, this statement promises more than it can really deliver. It is in essence a clever device and not a profound solution. Without always being intended as such, it is in fact a sham and a trick. It is only a partial statement with the superficial appearance of profundity. Everything may be relative in terms of man's limited power to measure or to comprehend or in terms of man's own world of knowledge, but this does not mean that in the truth of the universe everything is relative. If every ...

thing were relative, where would this leave the principle of rela tivity? You know, "every general ization is false including this one." Well, by the same token, every thing is relative including the principle of relativity. I wouldn't give the matter so much importance were the prin ciple limited to the use for which I have commended it. But when it is extended to possess the charac ter of an absolute itself - to justi fy individual action, not merely curtail discussion - there is great danger involved. It becomes in essence a false God - a clever ra tionalization, not a qualified reason. The New Morality This is how I see its role in 'what is now being preached and peddled under the title of The New Morality. As I understand the thesis, since "everything is rela tive," there can be no basis on which to judge moral values in any absolute sense. Morality is a mat ter of circumstance, of prevailing conditions. What may be right in one situation may not be right in another. Or what may be wrong for one culture may not be wrong for another. Certainly there would seem to be strong evidence in sup port of this proposition, for differ ent cultures throughout the world do in fact have different and even diametrically opposed customs, mores, and standards of value.

The whole proposition is very plausible, and certainly it is ap pealing to those who are threat ened by the existing standards of value. In fact, it is so plausible and 8 THE FREEMAN January appealing that its advocates have become the moralistic and even pietistic spokesmen of the day--., with all of the accompanying arro gance and smugness generally as sociated with the religious leaders of the day. Theirs is not the offi cial orthodoxy, but theirs is the practicing orthodoxy just the same. But despite its current ascend ancy, this so-called new morality is just another of man's passing fancies in his historic quest for meaning and moral judgment. It is destined to eventual decline, if not· extinction, for it is founded upon the shifting sands of the princi pIe of rela tivity. It has built-in contradictions, an-d is bound to dissipate itself through the centrifugal force of its circular reasoning. For, you see, the moral relativists, by mak ing an absolute of the principle of relativity, have created a value structure that is subject to the same deficiency that they claim of all others. The only consistent rela tive value structure would be one that says there is no absolute and therefore no intrinsic values - not even a principle of relativity. Un der no circumstances can there be a good or bad, or a right or wrong, for there is no absolute standard by which to measure such. There can be no purpose to life - no pur pose in living - no meaning to society or social welfare. Therefore, bring on the atom bomb, the H bomb, suicide, homicide, fratricide, slavery, racial discrimination, thievery, rape, sexual promiscuity - so what?

Their Own Standards Preferred The truth of the matter, of course, is that the moral relativ ists don't go this far. They don't really believe in the absence of moral standards; they merely want to substitute their own standards for the prevailing ones, and their adherence to relativism is a convenient device, albeit an inconsistent one. Logic would seem to establish quite clearly that there can be no good or bad, no better or worse, no right or wrong without reliance upon some absolute frame of ref erence by which to make such judgments. There are some who judge values in only an evolution ary sense rather than an intrinsic sense. That is, they claim an act is good or bad on the basis of whether it is good or bad for so ciety - whether "it works." But in so doing they tacitly concede the need for society, which in turn assumes a purpose to life, and this in turn rests upon the assumption of some ultimate good or ultimate truth. They are therefore not moral relativists, for they adhere to certain absolute presupposi1966 THE RELATIVITY OF RELATIVITY 9 tions, even though it may be sub consciously. There are few, if any, practicing atheists, which one would have to be if he were to be a true moral relativist.

In essence, then, the new moral ity is neither new nor moral. Whenever man has become bored with or dubious of the existing moral code he has challenged it on the basis of the underlying ab solutes. And when he wearies of the search for the real absolute, he is inclined to agree that there are no absolutes, that "everything is relative." But once he takes this position he forecloses his right to substitute another moral code, for he lacks a frame of reference by which to make moral judgments in general. What is really at stake is not a new morality but a new absolute a new frame of reference for mak ing moral judgments. It is one thing to question the existing frame of reference, but it is quite another thing to say there is no need for a frame of reference. We may be correct in being disen chan ted with the existing moral code, but we dare not try to say that no moral code can be defended on absolute grounds. For the fact is, this is the only basis on which a moral code can be established or defended. We may differ on what we believe to be the absolute, but we cannot differ on the need for an absolute if we are to agree on the need for a moral code.

But what has all this to do with education at Beloit in the year 1965-66? Simply that there is no purpose in education anywhere un less there is a purpose in life. Without an absolute assumed, there can be no truth to seek. If everything is relative, then ignor ance is not merely bliss - it's ex cellence. Upgrading the Intellectual Level In the final analysis education is a goal and not a process, and in this respect it is fundamentally a religious enterprise. Its goal, is to upgrade society by upgrading the intellectual level of the members of society. But such a goal presup poses an importance to society and the individual, which in turn pre supposes a purpose to life, which in turn presupposes a basic truth of the universe - an absolute - a God. By being at Beloit College every one of us, student and teacher alike, is committed to the assump tion that there is an absolute - be it called God, love, brotherhood, justice, truth, infinity, XYZ, or what have you - and let us not try to weasel out of accepting this cold fact by some form of rationaliza tion. We don't have to agree on what the absolute is or how it is manifested, but we do have to 10 THE FREEMAN January accept the existence of some ulti mate truth, some ultimate goal to life. If such were not the case, then why should we be concerned with the intellectual growth of the individual student and the quest for truth? Our whole effort would be an elaborate system of mean ingless busywork rather than an orderly process for the upgrading of humanity.

An Unk.nown Power While I cannot prove there is a God (however defined), certainly no one can prove .there is none. And to maintain the position that there is no God requires a reckless disregard of circumstantial evi dence for the simple reason that nothing is likely to develop from nothing. For me it is enough for the time being to define God as that unknown and unseen power which is at the heart of the crea tion and operation of the universe and whose existence gives mean ing to Iif e. And it is the goal of human inquiry to identify and de fine this power in all its manifes tations. It is unfortunate that so many of us have tended to take such a hard and undeviating attitude toward the question of God as a result of a strong reaction against the historic and standard defini tions of God. We should be able to differentiate between the concept of an absolute truth in the universe called God and prevailing definitions and descriptions of God. For example, I would agree completely with Hugh Hefner of Playboy fame as quoted in the July 19 issue of the National Ob server when he claims that when we say that God created man in his own image we are tripping over our own ego, for what we really are saying is that man cre ated God in his own image. This, of course, is the ultimate of arro gance and anti-intellectualism, but it should not cause us to react vio lently and irrationally by saying there is no God simply because we resent the definitions of God that now prevail.

The assumption of God, of an absolute truth, in other words, is necessarily at the heart of every educational effort. We don't have to know what it is in order to seek it. But we do have to believe that there is such in order to have the courage to persevere in the search and in order to have a stable so ciety while we search. Let's differ, if we will, on the manifestations of God, but let us all agree on the existence of a God. Otherwise we will simply be spinning our wheels as are our moral relativist friends. Truman Douglass, the Execu tive Vice-president, Board for Homeland Ministries, of the United Church of Christ, has 1966 THE RELATIVITY OF RELATIVITY 11 stated in a magnificent capsule form what I have labored so hard here to try to get across. "If humanity is to live," he says, "there must be men who know why they live. There must be not only persons of grea t skill in devising the means of life, but persons of great amplitude and zest and passion in th~ir A.ffirm.nti~n ~£ li£~. Th~re must be not only men with sharp ened intelligence but men of vigor ous purpose and strengthening hope.

The Church should labor to insure that those who are members of the informed community shall also be members of the responsible commun ity. "There is a tragic waste repre sented by the gifted who remain uneducated. But there is an even greater waste represented by the educated who remain uncommitted." Education Cannot Be Given, But Must Be Acquired Again, what does all this mean for us here at Beloit College in the year 1965 as we begin a new college year - the second under our new plan? Simply this: If there is anyone here who came "to receive" an education, he should go back to his room after this con vocation, pack up, and leave. (I really mean it!) Education like wisdom is acquired, not given. You must look upon it as something you are out to get on your own initiative - not be given. We can't give you an education, but we can help you acquire an education. We have what we consider to be a curriculum second to none, an undergraduate faculty second to none, and a physical plant that is \vell on its way to becoming second to none - all of which means that you should have a better chance of g~tting ~ducat~d h~re than most anywhere else. But you must con stantly realize that the institution of Beloit College is merely the catalytic agent to the process. We don't dole out capsules of learning, we only provide the environment and means to encourage and facili tate your learning. The teachers aren't your competitors; rather they are your doctors of learning.

You individually have hired them to help you in your individual quest for learning. Use them in this regard and expect them to serve you in this regard. Also keep in mind that the meas ure of learning is not how many courses you have passed or course credits you have garnered; it is only represented by how much you have grown intellectually - how vigorously you think, how well you see relationships, how concerned you are for the life of the mind, how informed you are, how reflec tive you are, how concerned you are for "the responsible commun ity." We can't give you these qual ities, but we can and will con12 THE FREEMAN January stantly challenge you to develop them and help you do so to the best of our ability. Remember, too, that in this proc ess "doubt is the beginning of wisdom." To question is the first labor pains of learning. But don't fall into the easy trap of thinking that it is the essence of learning.

Asking the right questions is not enough; eventually you have to come up with the right answers. In the final analysis, the main pur pose of education is to provide answers to the yet unsolved prob lems of man. This goal presupposes that there is a purpose to life and that there J must be a logic to life. It is not enough to say that everything is relative. This is merely an interim or stop-gap statement. Everything is relative only so long as we have not yet discovered the absolute, but this does not mean there is no absolute to be discovered. Everyone's life must be founded upon some assumption as to the absolute or else there can be no stability to life, no basis for moral values. It is not necessary to say what the absolute is, only that there is such despite the fact that our small and finite minds can't conceive it at once in its entirety. In a way, all of education - all of learning - is a search for the ab solute. And during the search we must each set our standards on what we assume it to be. We must be committed to some standard even while we are looking for it.

This, as I see it, is our mission in the year ahead - and for every year to come. ~ SelJ-Reliance WHAT I MUST DO is all that concerns me, not what the people think. This rule, equally arduous in actual and in intellectual life, may serve for the whole distinction be tween greatness and meanness. It is the harder because you will always find those who think they know what is your duty better than you know it. It is easy in the world to live after the world's opinion; it is easy in solitude to live after our own; but the great man is he who in the midst of the crowd keeps with perfect sweetness the inde pendence of solitude. RALPH WALDO EMERSON Individualism versus ANNE WORTHAM THE DECLARATION of Independ ence of July 4, 1776, laid the foundation for a new society among men on grounds that each individual of right ought to be free to act on his own judgment, for his own goals, by his own choice. Human dignity, in other words, involves self-responsibility for life, liberty, and one's pursuit of happiness.

That essence of the Declaration of Independence is being subor dinated and forgotten by today's black and white leaders of the Ne gro Revolution whose banner is "equality." Let us recall what Abraham Lincoln said about this: "I protest against that counterfeit logic which concludes that because I do Miss Wortham, who spent two years as a Peace Corps Volunteer in East Africa following col lege graduation, looks for a career in freelance writing. not want a black woman for a .r;;lave, I must necessarily want her for a wife. I need not have her for either; I can just leave her alone. In some respects she certainly is not my equal; but in her natural right to eat the bread she earns "vith her own hands without ask ing leave of anyone else, she is my equal, and equal to all others." There can be no greater condi tion of equality among men than this. Anything less than this is slavery; and the direction in which the American people today are be ing led by civil rights leaders, in and out of government, tends to ward slavery. A free man is not something emerged from a stew called society. The nature of a man's thoughts and actions, the life he lives, his concept of him self are the qualities of being hu man - the qualities of individual13 14 THE FREEMAN January ity, rather than the gray same ness of imposed equality.

The Constitution of the United States was designed to protect the rights of the individual against trespass by other individuals, or by government. But the original code made no provision for the abolition of slavery or recognition of the Negro as an individual. Sec tion 9 of Article I denied to Con gress power to prohibit the impor tation of slaves prior to 1808, and Section 2 of Article IV required the states to comply with the claims of lawful owners for the return of fugitive slaves. Based in part upon these provisions, the United States Supreme Court ruled in 1857 that Dred Scott - a Negro slave - did not acquire the rights of citizenship when taken into a free state. A Civil War was waged before the Thirteenth Amendment cleared the Constitution of a serious con tradiction and established that, if men are to live as men, they must be free to do so. The Reconstruc tion Era further clarified the ex tent to which states' rights could be practiced without interfering with the individual's human rights and without denying his civil rights. While these rights had been defined befor~ they had not been extended to Negroes.

The Constitution, as supple mented by the Bill of Rights and subsequent amendments, makes clear that the powers of the state ( governments as well as of the Federal government extend no further than needed for protec tion of the human and civil rights of the individual against encroach ment by government and other in- 'd~ dividuals. Neither mentioned nor recognized are any "rights of so ciety," society having no rights. By 1875, all questions concerning citizenship for Negroes in the United States, and their rights as individuals, were answered in the \ Constitution. Solving the Problem Voluntarily During the last quarter of the nineteenth century, the question before the people - all citizens, with inalienable rights as mem bers of the human race - was this: ' How are we to live together? "In all things purely social we can be as separate as fingers, yet one as the hand in all things essential to mutual progress," answered Ne gro leader, Booker T. Washington i in 1895. The national concensus at the close of the nineteenth cen tury was that black and white men should live separately; but such concensus did not empower gov ernments to legislate how men should live or where each must sit, eat, dance, learn, and other wise lead his life.

Nevertheless, the United States 1966 INDIVIDUALISM VERSUS RACISM 15 Supreme Court's separate-but equal doctrine of 1896 had stood as law until 1954, when the' Court reversed itself to the effect that henceforth men must live, sit, eat, dance, and learn in the same places. But the compulsory inte gration of the schools was no more required by the Constitution nor necessary for fulfillment of the human rights and civil rights of Negroes than had been the com pulsory separation before 1954. Education is no more the business of the Federal government than is eating or dancing or the seating arrangement on a train or bus. The Negro role in the civil rights movement gained impetus after the Supreme Court decision in 1954, and their main thrust was to the effect that Negroes had been deprived of their rights as a group. Scarcely anyone bothered to ask what rights inhere in groups or to stand in defense of the rights of the individual. It seems safe to say there were few individuals, if any, among the 210,000 marchers on Washington on August 28, 1963; and the net effect was a Congress and a nation made more race conscious than ever before. The resultant Civil Rights Act of 1964 elevated the dubious principles of altruism, col lectivism, and racism above life, liberty, and the pursuit of happi ness.

A Staggering Sense of Guilt The brotherhood of selfless love espoused by Martin Luther King, Jr., has not left a situation of mu tual respect among Negroes and whites but a nation staggered by a sense of guilt. Irresponsible leadership in the name of civil rights is conning a nation out of its incentives to productivity into sanctioning the undeserved, caus ing the freest people on earth to sacrifice that freedom for the com pulsory equality of slaves. Civil rights leaders and their followers stress self-sacrifice to the point that self-respect is made to seem a sin. To love and choose without discrimination displaces sound reasons among men to love or choose one person or thing above another. This strained and strange love of racist agitators provokes men to hate them more. They turn simple prej udices into acts of crazed violence - that they might passively endure and resist. They twist man's right to dis criminate into an immorality, thrown at a nation as its major guilt. As virtuous victims, they demand freedom, equality, and re spect for the pitiable little they have to offer, challenging the na tion to redeem itself by redeeming them.

How goes the redemption? Look in the eyes of blacks and whites who are afraid to think, to judge, 16 THE FREEMAN January to discriminate, and you will see an uncertainty embedded in hatred. Negroes, who are told they have gained the respect and grat itude of society but who have no self-esteem, are frightened by a power of redemption which they secretly know they - as individ uals - have not earned. No rational, self-responsible in dividual relies upon the racism that plagues the nation. He does not beg for patronage, sympathy, and smiles. Instead of asking that others grant him a living, he knows he has been born with an inalienable right to whatever life he is capable of earning, accord ing to his own purpose, his own virtues, which others cannot give to him and cannot take away. Student Demonstrations It was inevitable that the youth ful students of America would be drawn by their immaturity into the fight for civil rights. From the beginning of the collective move ment, climaxed by the March on Washington, the racism of the na tion was reflected by the young and selfless black and white youth of America.

White youths, in all sincerity, ",'anted to share the plight of their Negro counterpart. They had no "cause," so they made his cause their own. They evaded the real issue - that they did not kno\v themselves - and transformed this ignorance into a feeling of guilt ( for being different from the Negro. In search of virtue, they marched and shouted, "Freedom Now," clenching a Negro's hand, entering restaurants with him where they knew he would not be served, scouting the countryside singing songs of deliverance for him. Young Negroes joined their white counterparts, believing that any happiness to be achieved on earth must be achieved collec-I tively; they had never been al lowed to forget the collective mis ery of their forefathers. Lacking the individuality that can only come through earned self-esteem, they were content with the mo tives of the group. Personal moti ves? None. Among black and white youth alike, their relationship with the group was primary when it should have been secondary. They hid be hind the apron of a race, a church, a university, an SNCC, a CORE; and they claimed identities accord ing to the characteristics of such groups. They repeated to them selves what others said of them; their self-regard was the regard they thought others had for them; their self-esteem dependent upon the esteem of others; their achievements what others claimed to be achievements; their failures 1966 INDIVIDUALISM VERSUS RACISM 17 what others said were failures; their place in the world where others said it was. They had no standards of their own; and so these youths were misled. Their guilt was not in being black or white, but in being nothing, in seeking virtue in the impossible, encouraging one another simply to suffer and wave flags.

The fact is that within the con text of our society, they will al ways be black or white; and by some persons they will be treated as such, regardless of laws, treaties, and proclamations to the contrary. But a more important truth that escaped those young persons is that they are human beings; that each has a life for which he is responsible; that this is what he holds in common with other human beings; that to live with one another in peace, each must first manage to live with himself. Such were the "drummer boys" of America who led forth a nation, their elders following, in the rev olutionary movement capped by the signing of the Civil Rights Act on July 2, 1964. This new law of the land deals with eleven basic aspects of what the nation's legis lators call civil rights: voting, public accommodations, public (governmentally managed) facili ties, school desegregation, the Federal Civil Rights Commission, nondiscriminatory use of Federal funds, equal employment oppor tunity, voting census, a Federal Community Relations Service, civil rights court procedures, and jury trials.

A careful study of the detailed provisions of these 11 titles under the Act may reveal some minor clarifications of points already covered by the Constitution and existing legislation, as in Title 1 on Voting and Title 10 on Court Procedures. But these are hardly what the civil rights revolution was all about. For the most part, the major provisions of the new Act tend to arrogate powers to the Federal government, in the name of Civil Rights, that are none of the government's business because they have to do with regu lation and control of what ought to be strictly private business re lationships. The overwhelming tendency of the Act is to deny the civil rights of producers - property owners in favor of the wishes of those seeking something for nothing, making the Federal government the instrument of compulsion for the implementation of such injus tice. Thus, the attempt to appease organized racists has invoked a condition of legislative enslave ment on the entire nation - and it will take a police state to en force this condition. ~ SWEDEN'SGREAT SOCIETY SAM H. HUSBANDS, JR.

SWEDEN frequently is offered as a shining example of successful so cialism. A picture is drawn of the attractive, cheerful, and socially conscious Swede living out his days in the euphoria of the wel fare state; and the visitor to that country finds his cursory observa tions seem to confirm that ap praisal. The accuracy of that picture, however, depends on 1. How prosperous the people are, 2. Whether Sweden's prosperity is because of, or in spite of, its de gree of commitment to social ism, and 3. The cost of state intervention in material as well as human terms. As an American banker manag ing a Scandinavian branch of his bank recently told me, "The Mr. Husbands is with Dean Witter & Com pany in San Francisco. 18 Swedes are too smart to kill the source of the wealth which makes possible their massive welfare pro grams. There are few nations in the world that rely more on the free enterprise system in the pro duction end of the economy." The following figures confirm this point by indicating the extent of private ownership of production in promi nent areas of industry and trade.

Not only has the productive end of the economy remained for the most part in private hands, but the Swedes have also made sure that within a framework of gov ernment guidelines, there remain some real incen tives and rewards for producing. While there are both local and national corporate tax rates, the national rate is 40 per cent and the combination will seldom reach 50 per cent. In turn, the determin ation of income for tax purposes 1966 SWEDEN'S GREAT SOCIETY 19 shows the relatively liberal treat ment the corporation receives in Sweden. Swedish tax law is es pecially lenient on inventory evalu uation, depreciation, and certain investment reserves. Swedish tax rules allow a corporation discre tion within a wide area to take large or small deductions in any one year. This discretion allows a corporation considerable latitude in leveling out annual results in building up reserves. Though de tails of the three areas would be too extensive to present here, the liberality of depreciation of ma chinery and equipment is worth noting. 4 In areas of capital gains and losses, the Swedes are again rela4 Martin Norr, Claes Sandels, The Corporate Income Tax in Sweden, 1963.

PERCENTAGE OF OWNERSHIP OF INDUSTRY (Based on Number of Employees in 1951) 1 Private Government Forest 82.3 17.7 Mining & Manufacturing 92.4 6.1 Timber 96.7 2.6 Pulp & Paper 97.0 1.5 Food 83.5 7.9 Textiles 97.7 1.1 Chemicals 90.9 8.5 Electric, Gas & Water Power 31.7 61.72 Building 71.6 27.7 Wholesale Trade 97.4 0.6 Retail Tr'ade 88.3 1.1 Transport & Communication 45.7 54.3 Shipping 97.5 2.5 Railways 5.5 94.5 Bus & Tram Companies 61.4 38.5 Commercial Banks 3 92.6 7.4 Insurance 92.8 7.2 Cooperatives 1.5 0.7 1.5 8.6 1.2 0.6 6.6 0.7 2.0 10.6 0.1 1 Stockholm's Enskilda Bank, Some Data About Sweden, 1965. 2 State 10.2 per cent, municipals 51.5 per cent. S Number of employees 1963.

20 THE FREEMAN January tively liberal in their tax treat ment. Stocks and bonds and other capital assets (apart from real property) are not subject to in come taxes if the capital gain is taken after five years - real prop erty is nontaxable if held for ten years. A Lot of Welfarism Does this relatively liberal pol icy toward corporate enterprise and capital gain mean that Swe den is, in fact, the world's best example of the free enterprise state? Hardly - Sweden, like al most all of the Western nations, embraces a mixture of the free market and considerable state di rection. In Sweden, however, the line seems rather clearly drawn be tween the relative freedom of the productive end, and the massive interference of the government in the distributive or consumptive end of the economy. Social security, compulsory health insurance, a recently-enact ed supplementary pension to the basic old-age pension, family and child welfare programs, unemploy ment insurance programs, direct rent subsidies, and government housing loans are well known insti tutions to the Swede (as they now are to Americans). Rent control was enacted in 1942 with rents on housing built as of that date fixed at the 1942 level. Rents on new housing are set to supposedly re flect the cost of construction. But rent control has affected the hous ing supply to the extent that some 400,000 persons are on the waiting list for housing in Sweden - 120, 000 in Stockholm alone. Admitted ly, were rents allowed to stabilize at free market equilibrium, many of those now a.pplying for housing at below market rates would no longer be applicants. But the free market advocate would maintain with much empirical evidence that, to the extent government inter feres in any market, including the housing market, the consumer is denied the standard of living and personal freedom he would other wise achieve.

Welfare Costs to a Typical Swedish Wage Earner What is the actual cost of so cialist schemes to the Swedish wage earner? It is, of course, impossible to arrive at an actual monetary price. Seldom are government welfare programs funded from taxes at tributed to a particular program. General tax revenues invariably are drawn upon for the major por tion of the cost of a "social bene fit." At the least, this blurs the price to the individual of the gov ernment services. However, read ing between the lines of Some Data About Sweden, one discovers 1966 SWEDEN'S GREAT SOCIETY 21 that a typical Swedish household has earnings of about $3,000 a year, of which $1,050 goes for tax es. In return for such taxes a typi eal household might anticipate some $150 worth of free education, another $150 worth of free medi cal care, $150 worth of national defense, and an old-age pension promise of about that same $150 current value. Supplemental pen sion benefits recently have been promised, but these will call for higher tax rates, too, before they can be realized. These four major governmental services thus ac count for approximately $600 of the $1,050 paid in taxes. What of the remaining $450? There is a family allowance of about $140 a year for each child under 16. Un employment insurance, housing loans and rebates, and miscellane ous costs of government should ac count for the remainder.

It would seem obvious that the wider the dispersal of tax-paid services among the entire popula tion, the wider the tax base must be. Lawrence Fertig says that "in the United States 80 per cent of tax revenue is derived from tax able income up to $6,000. If the governmen tactually confiscated all income remaining to taxpayers whose annual income was $50,000 a year or more, the Treasury would collect about $173,000,000, hardly enough to run the Federal government for a few hours."5 The principle applies to Sweden as well. It is obvious that for prac tical purposes capital accumulation must occur in Sweden as it must in the United States, through cap ital gains. Materially, any citizen of an ever-growing socialist state finds he must work harder and harder to keep up with the tax burden treadmill, which in turn progressively binds him to the state. The loss of spiritual values resulting from ever-present gov ernment can only be measured in the hearts and minds of individ ual citizens.

Must America Follow Sweden? The socialist would defend the Swedish pattern, and probably treat its welfare programs as only a step in the right direction. Though many Western world so cialists have dropped nationaliza tion of industry from their design for utopia, they all advocate con tinually increasing government in trusion into service areas and equality of material possessions through redistribution of income. Their defense is invariably that their policies provide for "the peo ple's security" (and one might add, "whether they like it or not"). However, the pattern of 5 Lawrence Fertig, Prosperity Through Freedom, Henry Regnery & Co., 1961.

22 THE FREEMAN January life which one sees emerge, while perhaps on a higher material scale, is merely another one of the au thoritarian social structures which evolved from the revolutionary doctrines of Rousseau, Hegel, Ba beuf, and Marx. The American can no longer smugly claim this country as the last defender of the free market and individualism, when it is ob vious that almost every device for effecting the eventual total welfare state in Sweden is now a feature of our own system of government. And both nations prosper relative to their more socialistic neighbors only to the extent that the social planners pragmatically allow the free market to function. ~ JOEL DEAN Misconceptions about Consumer Welfare THE AMERICAN CONSUMER is, in the Great Society, the forgotten man. Antipoverty programs, the closed shop, foreign aid, minimum wage hikes benefit him little and are ultimately at his expense.

The consumer cannot count on the unselfish munificence of the government to look after his in terests. Instead, he had best place Mr. Dean is President of Joel Dean Associ, ates, a firm of economic and management consultants, and is Professor of Business Eco nomics in the Graduate Faculties of· Political Science and the Graduate School of Business of Columbia University. himself in the hands of the self serving competitor. The forces of competition alone can be counted on to compel suppliers, in an en terprise system geared to self-in terest, to achieve results which will advance the welfare of the consumer. The vigor of the competitive process is, therefore, our main assurance of social benefit and con sumer welfare. Protecting and strengthening the competitive proc ess (which is quite different from protecting the individual compet1966 SIX MISCONCEPTIONS ABOUT CONSUMER WELFARE 23 itor) is the white hope of the con sumer.

The main peril to competition is not bigness, not concentration, not conglomerates (variegated product lines), not mergers, not even price conspiracies. Instead, the main peril is prej udice: dis trust of the competitive system in its modern guise. The roots of this prej udice are basic misunder standings concerning the econom ics of consumer welfare. Six eco nomic fallacies are particularly important: 1. That competition is declining and is now an untrustworthy control device. 2. That competition becomes "cut throat" unless curbed by gov ernment. 3. That profits are at the expense of the consumer. 4. That advertising makes con sumers captive and is economic waste. 5. That the best way to take care of the incompetent. is to make competition soft. 6. That job security is best at tained by slowing down eco nomic progress. Let's look briefly at each of these misconceptions. Although unobtrusive and eminently re spectable, these economic misun derstandings are pervasive and perilous. They are working to un dermine the protection that the consumer gets from vigorous com petition.

J. Competition Is Declining and Is Now an Untrustworthy Control Device Looking back nostalgically at the Tom Sawyer economy, we get a glowing glimpse of a structure of competition quite different from today's. We see small, in dependent, local business firms by the thousands: the local grist mill, lumber mill, brewery, and carriage shop. What we forget is that each of these glorified com petitors had a tight little loca tional monopoly sheltered by mis erable transportation. What we often fail to see in our modern economy is the competition that counts. This competition is outside the purview of the conventional antitrust case. It creeps in on lit tle cat feet, unobtrusively at first. It is not quite respectable at the start (for example, the discount houses and early supermarkets). It often works its beneficial mira cles below the surface of consumer consciousness through the vehicle of "value-analysis" by industrial purchasers (such as the revolu tion in welding, die casting, and oxygen furnaces) . I ts fiercest fighting front is often the research laboratory. This is the competi24 THE FREEMAN January tion that counts because it pro duces decisive cost savings, usual ly as a result of revolutionary new technology or spectacular re arrangement of functions, or dra matic displacement by substitutes.

Generally speaking, it is outside the purview of the conventional antitrust case and the stereotyped concentration indices. It is frequently an invader from outer space, that is, from a differ ent industry or a foreign nation. This is the competition that keeps the American economy among the most competitive in the world and that assures the Ameri can consumer a high and rising standard of living. 2. Competition Becomes IICut-Throat ll Unless Curbed by Government One heritage of the great de pression is a generalized fear of excessive competition. This fear leads on to the belief that the gov ernment must restrain these ex cesses by legislating minimum profit margins, for example, state "fair trade" statutes and laws against "selling below cost." This misconception has had an impor tant role in shaping public policy, which is opposed to competition in several sectors of our economy, notably agriculture and transpor tation. Thus, despite formal pro fessions of faith, the evidence is that we really don't believe in an enterprise economy - at least in these sectors. The precedent and the preconception that lie behind it are perilous for other sectors of our economy.

"Cutthroat" competition is a bogeyman whose influence is pow erful but unwarranted. It is unwar ranted because the degenerative tendency is a myth, probably. Even if true, it's hard to see how com petition can really be excessively vigorous from the viewpoint of the national interest. The mis conception arises partly from con fusing injury to an individual competitor with injury to the com petitive process. Competition, if it is effectively to serve the con sumer, must injure individual ri vals and even annihilate some. And the notion that this elimina tion of the unfit will inevitably reduce surviving competitors to a sole monopolist is a theoretical ex trapolation, unsupported by ex perience and applicable in only a few industries where scale econ omies are overwhelming relative ~ to the small size of the market. 3. Profits Are at the Expense of the Consumer It is almost standard operating practice for people who profess concern for consumer welfare to view corporate profits as being at the expense of the consumer and opposed to his welfare. This anti1966 SIX MISCONCEPTIONS ABOUT CONSUMER WELFARE 25 profit bias infuses the viewpoints of many officials in big govern ment and particularly of those in regulatory commissions.

We should all recognize that profits are usually an index of suc cess in serving the public. In a competitive industry, most of the profits go to the more efficient suppliers, not to the marginal sup plier whose costly output is none theless required to satisfy the full demand at the prevailing mar ket price. The consumer gets a bargain in the few profit pennies per dollar he appears to pay. He pays less than appears for two reasons. First, because losses that are not formally book-kept are not offset against reported corpo rate profits. Second, because eq uity capital, which is costly, is treated in accounting as a free good. The consumer gets a bar gain, not only because corporate profits are partly illusory, but be cause the hope of profits and fear of losses (what makes the mare go) is the cheapest known form of incentive and remuneration. 4. Advertising Makes Consumers Captive and Is Economic Waste Appalled by the huge sums spent on the advertising and an noyed by being a part of a cap tive audience, grieved by the gul libility of all consumers except themselves, and aroused by exposures of the hidden pers uaders, many well-meaning reformers be lieve that advertising disfran chises the consumer and waste fully cancels claim against out rageous counterclaim.

Looking at the matter from the standpoint of the national inter est in consumer welfare, we should recognize that advertising econo mizes leisure and is a cheap way for consumers to pre-shop. The most that advertising can do is to get a person to try the prod uct ; and his own experience with it, plus reports from his acquain tances and the synthetic experi ence of consumer research ser vices, develops immunizing skep ticism. We should also recognize that advertising opens many more doors to new and beneficial com petition than it closes. The best weapon against the hidden per suader of one manufacturer's ad vertising is that of his competitor, particularly the countervailing power of distributor brands which erode the consumer franchise of a manufacturer's brand. 5. The Best Way to Take Care of the Incompetent Is To Make Competition Soft Much anticompetitive legislation and administrative and judicial case law is rooted in the thorough ly American and highly laudable 26 THE FREEMAN January desire to take care of the incom petent. The question is not whether society will look after the unfortunate. In this our society is doing a good job. The danger, instead, is that we will take care of them in the wrong way, that is, in a way that will deter incentives for self-improvement and will block the automatic adjustments of a competitive economy and pre vent its serving consumers best.

Charitable treatment of the less fortunate will be more efficient and less damaging to the growth and strength of our economy if it is entirely divorced from trying to protect the individual competitor against the consequences of his own non-competitiveness. 6. Job Security Is Best Attained by Slowing Down Economic Progress The quest for job security is universal. Each of us is very much alive to any peril to our job. Most of us would like to feel that a beneficent government will look after this vital matter and make sure that economic change will not imperil our job. Unfortunately, the competitive process has few champions and no lobby. The job security of the in dividual citizen can best be achieved, not by placing road blocks in the path of technological progress, but instead by removing them. Society is better off to help the individual solve his problem of adapting to economic progress by supplying information, incentives, and opportunities for re-education, rather than by trying to slow down economic progress.

Economic misunderstandings like these six are causing a wide spread, almost unconscious preju dice against competition. There is disconcerting reluctance to rely upon competition for the imper sonal force which compels individ ual competitors, each geared to self-interest and trying to in crease his own market power, to unconsciously serve society. ~ Reprihts available, 2 cents each. The Crafty Communists RED CHINA has investments in Hong Kong which exceed that of American firms. These investments are in profit-making going concerns so as to earn hard currencies. - Item from the souvenir book supplied guests of the Peninsula Hotel in Hong Kong.

OR TATE ECONOMIC hagedY PLANNING: Rtility WILLIAM HENRY CHAMBERLIN DESPITE ITS PRESTIGE in some cir cles, there is convincing evidence to show that/state economic plan ning regularly ends either in tragedy or in futility. Tragedy is foreshadowed when the planning is compulsive, under a system where the government concen trates all political and economic power in its own hands. Futility is the more likely outcome when the planning has no teeth in it and comes down to a mere exer cise in exhortation or a statistical analysis of what would be desir able if a long string of doubtful condi tions should be realized. Among the innumerable victims of Josef Stalin's paranoid tyranny must be reckoned several million Russian peasants who perished, from maltreatment or starvation, because the Soviet dictator deMr. Chamberlin was Moscow correspondent for the Christian Science Monitor from 1922 to 1934. He is a skilled observer and reporter of economic and political conditions at home and abroad.

cided to force the abandonment of small farming in favor of large so-called collecti ve farms, under close state and Communist Party supervision. One of the first con sequences of this policy, which started in 1929, was a barbarous measure euphemistically described as "the liquidation of the kulaks as a class." The kulaks, some 5 per cent of the Soviet peasantry, were a Iittle better off than their neighbors, although they were certainly not prosperous by United States or West European stand ards. As they had more to lose under the collective farm system, they were naturally out of sympathy with it. So the government de cided to get rid of them by whole sale expropriation and consign ment to slave labor in northern timber camps and other state en terprises where living conditions were so bad that a high death rate was unavoidable. All over the 27 28 THE FREEMAN January Soviet Union the so-called kulaks (and the term was sufficiently elastic to apply to anyone who was outspokenly critical of col lective farming) were rounded up, men, women, and children, torn from the farms which they and their ancestors had cultivated for generations, and packed in crowded freight cars for deporta tion to forced labor.

This was bad enough; but even worse was to come. During the winter of 1932-33 reports came into Moscow from many parts of the country, including the nor mally most fertile regions, the Ukraine and the North Caucasus, of hunger deteriorating into out right famine. .Life was hard enough in Moscow, still harder in provincial towns; but thereat least the people got a regular bread ration. The Soviet authori ties displayed extreme reluctance to permit foreign journalists to go into the country districts and see conditions for themselves. But in the autumn of 1933, after the vic tims of the famine had been buried and a ne\v favorable har vest improved the atmosphere, permits were granted. Three Communities Sampled Traveling with my wife, whose Russian is more fluent and idio matic than mine, I picked at ran dom three districts, separated by hundreds of miles from each other, and came on grisly evidence of one of the biggest mass mur ders in history. The first district was in the normally fertile and productive Kuban Valley, near the town of Kropotkin. One of the first noticeable things was the complete absence of the dogs, formerly numerous and loud bark ers, in the homesteads. "All died or were killed and eaten during the famine," was the explanation.

In the first house which we en tered seven members of the family had died of hunger. Three had survived. The president of the local So viet in Kazanskaya, one of the largest villages we visited, told us that 850 people had died out of a population of 8,000. He also showed us a set of local mortality statistics indicating how the curve of death had mounted steeply as the last reserves of grain were consumed toward spring and the supply of dogs, cats, and weeds that were eaten as food substi tutes began to run short. So there had been 21 deaths in January, 34 in February, 79 in March, and 155 in April. From the Kuban we went to Polta va, a town in the Ukraine which had acquired a very bad reputation in Moscow; there were stories of carts that moved through the streets in the early 1966 STATE ECONOMIC PLANNING 29 morning to pick up the dead bodies. The authorities were ner vous and defensive and gave us as much official chaperonage as possible. But as soon as we went from the town into the surround ing villages the peasants told us precisely the same stories as in the North Caucasus. Indeed, the possibility of lying about the tragic famine diminished steadily as one got away from Moscow and into the regions where the starva tion had occurred. Here again there was a 10 percent mortality figure, as against a normal rate of 2.5 per cent.

And I still remember the testi mony of a fourteen-year-old girl, huddled on the bench which ran around the wall of the house. Had she a father? Yes, he was at work in the fields. A mother? No, her mother and four brothers and sisters had died of hunger. And her father was still hanging on to his own little plot of land, unwill ing to accept the new servitude of the collective farm, even after most of his family had perished of starvation. Still more terrible was the im pression from the village of Cher kass, in the Belaya Tserkov dis trict, farther to the West in the Ukraine. Here, with grim uncon scious irony, one could see a blank space where a zealous communist had removed the ikon of Christ, but left the crown of thorns. And the president of the local Soviet, a young communist named Fish enko, told us that over 600 of the village's 2,000 inhabitants had perished. Of six children born during that grim year, one sur vived.

The Concealed Horror of Wholesale Starvation In contrast to the situation in the earlier big Soviet famine of 1921-22, there was no doubt in 1932-33 about the responsibility of the Soviet government for the wholesale starvation, with its grisly accompaniment of bloated stomachs, cracking bones, and other aspects of death from hunger. The famine of 1921-22 was the result of a severe drought and of years of civil war. And the Soviet authorities admitted the need and invited foreign aid; Her bert Hoover's American Relief Administration undoubtedly saved millions of lives and various re ligious and humanitarian organ izations, with their smaller re sources, also made a contribution to relieving the disaster. In 1932-33, on the other hand, the Soviet government did every thing in its power to conceal that there was any starvation at all. With amazing mendacity its offi cials assured foreign visitors to Moscow that there was no famine.

30 THE FREEMAN January No outside relief effort was per mitted. Yet the 10 per cent mini mum death rate which I found in the villages which I visited (30 per cent in Cherkass), if carried over to a famine-stricken area in habi ted by some 50 million people, warrants the conclusion that at least four million people, over and above the number who would have died from natural causes, perished in the concealed famine of 1932 33. To this must be added the number of "kulaks" who did not survive their "liquidation" earlier. Indeed, Stalin himself, in a mo ment of truth, gave a still higher figure of casualties in conversa tion with Winston Churchill in 1942. Here is the relevant excerpt from the fourth volume of Win ston Churchill's work, The Second World War, pp. 498, 499: "'Tell me,' I asked, 'have the stresses of this war been as bad to you personally as carrying through the policy of the collec tive farms?' "This subject immediately aroused the Marshal.

"'Oh, no,' he said, 'the collec ti ve farm policy was a terrible struggle.' "'I thought you would have found it bad,' said I, 'because you ,vere not dealing with a few score thousands of aristocrats or big landowners, but with millions of small men.' " 'Ten millions,' he said, holding up his hands. 'It was fearful. Four years it lasted.' .... " I record as they come back to me these memories, and the strong impression I sustained at the mo ment of millions of men and wom en being blotted out or displaced forever." So there is the testimony of Stalin himself for the proposition that the war which he waged against a considerable section of his own people to enforce collective farming was more bitter and ter rible than the struggle with Hit ler's Germany in the second World War. Stalin's excuse for his cru elty, that collective farming was a higher form of agriculture, is completely phony. Today, almost fifty years after the establishment of the Soviet regime, the Soviet Union is only saved from hunger, if not outright starvation, by re peated big purchases of grain from the individualist farmers of the United States, Canada, and Australia.

Similar Results from Red China's Agrarian Reform Measures There have been equally appall ing results, in terms of human death and sufferings, from the at tempts of the communist rulers of China to impose extreme forms of communism on the peasants of that much suffering land. Again, 1966 STATE ECONOMIC PLANNING 31 even greater suffering has only been averted because the Chinese Reds have diverted a considerable portion of their scarce foreign currency to purchases of wheat from capitalist countries. State economic planning has its farcical as well as its tragic sides. For a long time the merit of a Soviet plant was evaluated by its quantity output, with no regard for quality or salability. Khru shchev himself, before his down fall, reported one result of this method. Plants manufacturing chandeliers made them so heavy that they broke down the ceilings to which they were attached. This is why one of the most im portant news stories coming out of the Soviet Union and its satellite communist-ruled countries is the fumbling, bumbling effort to achieve, within a general commu nist framework of political dic tatorship and economic collectiv ism, some of the benefits of a market pricing system. These ex periments are certain to fall short of their goals. For the dynamo of the free economy is the element of private ownership and the chain reaction of motivations and incentives which it releases. No such chain reaction can take place under a system where ultimate authority rests in the hands of anonymous groups of faceless bu reaucrats.

Government Planning in Britain What of the possibilities of state economic planning in coun tries where the peoples enjoy po litical and civil liberties, where most of the economy is in private hands? In such cases the objec tion is not that planning may lead to the ghastly horrors of the So viet Union and Red China. It is that the whole attempt to plan an economy that is not completely under government control is cer tain to turn out as a pretty futile experiment in patchy guesswork. Take the recently published Brit i.sh National Plan, a document of 492 pages with impressive tables and charts. This document assumes that, by 1970, British output will grow by 25 per cent, the take-off point be ing the beginning of 1965, and the average projected rate of growth per annum 3.8 per cent. Exports are supposed to rise by 514 per cent and imports by 4 per cent, the former rising and the latter falling from previous levels so as to take care of the embarrassing deficit in the bal ance of international payments which has been a root cause of the periodic spasms of interna tional distrust in the stability of the pound sterling in foreign ex change. There are similar assump tions about wages, incomes and productivity, and supply of labor.

32 THE FREEMAN January Unpredictable Possibilities What planners overlook is that economic trends are determined by a multitude of factors which the most technically competent forecaster cannot reasonably hope to anticipate. A "breakthrough" new invention, for instance, may divert investment and labor into some entirely ne~ direction. The course of production and interna tional trade is dependent on the feelings and reactions of enor mous numbers of individuals, which defy any attempt to plot accurately on a neat diagram. Who knows, for instance, how the bankers of Ziirich ("gnomes" in the derogatory language of a Bri tish Labor Minister) and of other international financial cen ters may react to some British financial or legislative measure, \\rith the result that the pound may be subjected to new pressure? Who can be sure that the habitu ally independent British trade unions will abide by government pleas to keep wage increases with in a range of 3 to 4 per cent or that, even if the unions are compliant, they will not be bypassed by wild cat "unofficial" strikes? Should developments in this field turn out unfavorably, all the calcula tions of the Plan would be out of the window.

And where is the proof that imports, which have been rising at the rate of 5per centfor the last ten years, will shrink to 4 per cent while exports, which have been going up 3 per cent a year during the previous decade, will go up by 51;4 per cent? The trends in for eign trade depend on factors out side the control of the planners: \\'hether British goods will meet the competitive requirements of foreign customers, for instance. In the same way, the rising vol ume of imports is partly accounted for by the failure of British man ufacturers, in some cases, to pro duce goods of the quality and de sirability of those manufactured abroad. Can the planners guaran tee that this situation will change ~t Of course, imports can be throt tled by quotas and other forms of direct controls. But such pro cedure is apt to be a boomerang, inviting reprisals and leading to a decrease in the volume of for eign trade.

Ma/distribution of Capital Another serious defect of state planning, if it is taken seriously, is its tendency to divert long-term capital investment to the wrong places. During the last decade, for in stance, the figure of 200 million tons of output annually proved too high for coal. On the other hand, there was a big unforeseen demand for more gas. Had a "Na1966 STATE ECONOMIC PLANNING 33 tional Plan" been in effect, the result would most probably. have been overinvestment in coal, un derinvestment in gas. Writing in the weekly, The Spectator, a Brit ish commentator, Mr. John Brun ner, asks some pointed questions and cuts the significance of the National Plan, hailed by some so cialist enthusiasts as a panacea for all Britain's ills, down to size as follows: "Is all this figuring supposed to enumerate what we can achieve by 1970, or what we will achieve, or what we should achieve? At different moments the Plan ap pears to be subscribing to all three interpretations, but the three are really quite incompat ible ... The National Plan is there fore in essence neither a serious measure of potential nor a gen uine forecast of future develop ments but a political manifesto, a blueprint of what the government feels ought to be done ....

"Have we really reached such a pass that we are no longer cap able of taking any action in this country without reference to a more or less illusory picture of the future? The craving for cer tainty is no doubt something deeply human .... and the popu lar papers have long ago learned to exploit it with their horoscopes. Is it really necessary for the gov ernment to indulge us further and do so moreover in a thoroughly ambiguous manner?" The Ironical Twist It is indeed ironical that, just when the communist governments of the Soviet Union and the East European states are groping around, so far without much suc cess, in an effort to correct the errors and inadequacies of their planned economies by injecting some artificial imi tations of the free market and pricing system (but without the vital dynamo of private ownership) Western dem ocratic countries such as Great Britain and France are succumb ing to the delusive opiate of plan ning. It would be good if more attention were paid to this grave admonition of Adam Smith: The statesman who should at tempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted to no council and senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.

Compulsive planning, as Russia and China show, leads to tragedy; permissive central planning, to futility. ~ 16. From Ideology to Mythology I CLARENCE B. CARSON THE STUDY of the history of ideas has produced some interesting re sults. Among these is the conclu sion that at any given time in a so ciety there is apt to be a prevailing set of ideas. These are not, of course, readily apparent to the su perficial observer, not even to the superficial historian. Superficially, it is the disagreements among men, their debates, the points over which they contend that catch the atten tion. But beneath these there are often broad and fundamental areas of agreement in terms of which discourse takes place and disputed questions are settled, or compro mises are worked out. These broad areas of agreement Dr. Carson is Professor of American History at Grove City College, Pennsylvania. Among his earlier wntings in THE FREEMAN were his series on The Fateful Turn and The American Tradition, both of which are now available as books.

34 which constitute the prevailing ideas have been called by a variety of names: weltanschaung (world outlook), frame of reference, basic premises, ethos, underlying philos ophy, and so on. Historians can often discern that this ethos (or whatever name it should be called) is reflected and articulated in the arts, literature, politics, religion, morals, and institutions of a peo ple. Periods in history have now quite often been given names which are meant to signify the prevailing ethos at that time: the Age of the Renaissance, the Age of the Baroque, the Age of the En lightenment, and so on. Such classifications should be ac cepted, however, with some reser vations. The extent of agreement, even upon fundamental premises, can be easily exaggerated. Neat 1966 FROM IDEOLOGY TO MYTHOLOGY - I 35 classifications appeal more to those who have only a passing acquaint ance with an "Age" than those who have studied it deeply. Dissent from the prevailing ethos can be uncovered at almost any point in history. There is a tendency, too, to exaggerate the extent of the change from one of these periods to the other. There is a continuity in the basic ideas and beliefs of Western Civilization which cuts across the periods which historians define. Also, there is a rela tivism implied in many of these accounts of changing world outlooks which should be entertained cautiously.

Prevailing ideas do change, to greater or lesser extent, from epoch to epoch, but this does not mean that one set of ideas is as good as another or that truth is rela tive to the premises of a given age. The results of logical deduc tions are relative to the premises from which they are deduced. Their truth content, however, depends upon the validity of the premises, that is, upon their conformity to reality. The Age of Meliorism With these reservations in mind, let it be asserted again that at a given time in society there is usu ally a prevailing ethos. This work has to do with such an ethos. Now, according to the unconventional wisdom of our age-that is, according to the uninhibited imaginations of a goodly number of would-be seers - we live in an Age of Tran sition. Indeed, it is often held that we have been in the slough of this transition for some time. At best, such a nonclassifying classification is a convenient dodge. It certainly avoids coming to terms ,vith the ethos of our time, with describing it, with classifying it, and with holding it up for examination.

Moreover, it is not a classification that can be validated with evidence. True, there can be assembled evi dence that changes are occurring. But such evidence exists for all times for which there is any evi dence. In short, to call an epoch an age of transition does not distin guish it, or classify it, from any other age. We may indeed hope that much of the contemporary ethos may be transitory; it has certainly focused upon the ephemeral. But when the presen tly prevailing ethos has passed from the scene, its passing will not mark the end of an Age of Transition. For this ethos has a distinctive character. Moreover, it has been with us for a sufficient time to enable us to classify it with confidence. Ours is an AGE OF MELIORISM. The prevailing ethos supports continuous reform with the ostensible aim of improvement. For seventy or eighty years this ethos has been building. The men 36 THE FREEMAN January whose thought is reckoned to be so influential upon our times have been meliorists: Edward Bellamy, Lester Frank Ward, John Dewey, William James, Thorstein Veblen, Charles A. Beard, Louis D. Bran deis, Woodrow Wilson, Walter Lippmann, Herbert Croly, and so on. The words which connote ap proval in our society are quite often those cond ucive to the reform effort: e. g., innovative, inventive, imaginative, progressive, creative, cooperative, flexible, pragmatic, open-minded, and involved. The arts, literature, religion, social thought, and education are per meated with the innovative and re formist spirit. There exists a bountiful literature describing the need for amelioration and contain ing proposals for collective effort to bring it about.

Ideological Origins This work, thus far, has been an attempt to describe the historical development of this ethos and its propagation in American society. The story has been traced from the breakdown of philosophy to the birth of ideology to utopianism through the elaboration of a new conception of reality and creativity to some of the ways that meliorism (or socialism) was made attractive to Americans. In the final analysis., Americans generally began to ac cept the programs and policies of melioristic reform as they began to view things from a new ethos, a new outlook, a new frame of refer ence, or from a different set of fundamental premises. Men were drawn into this framework in a variety of ways: by being told that it was democratic, that it was an extension of that to which they were already devoted; by an appeal to concern for others; by having the programs of education for the young instrumented to this new way of looking at things which, when accepted, constituted a new frame of reference.

The intellectual sources of this melioristic frame of reference are in various ideologies. Nineteenth century thought has been categor ized, at least once, by the phrase, the Age of Ideology. Certainly, ide ologies abounded in the nineteenth century. All thought tended toward the formation of ideologies. This tendency was mirrored in the lan guage which came to be used to de scribe the products of thought. The attachment of the "ism" suffix in dicates the ideological tendency of the system of ideas to which it re fers. This formation of words be came epidemic in the first half of the nineteenth century. As one his tory book points out, "So far as is known the word 'liberalism' first appea'red in the English language in 1819, 'radicalism' in 1820, 'so cialism' in 1832, 'conservatism' in 1966 FROM IDEOLOGY TO MYTHOLOGY - I 37 1835. The 1830's first saw 'individ ualism,' 'constitutionalism,' 'hu manitarianism,' and 'monarchism.' 'Nationalism' and 'communism' date from the 1840's. Not until the 1850's did the English-speaking world use the word 'capitalism' •••"1 Many others were to follow: "romanticism," "Marxism," "Dar winism," "scientism," and so on.

Some of these concepts with the suffix "ism" were not ideologies, properly speaking, but the tenden cy to attach the "ism" to all con cepts and beliefs reflects the ideo logical propensities of thinkers. Tangled in Abstractions A great variety of ideologies de veloped in the wake of the break down of philosophy in the nine teenth century, and some even be gan to appear earlier. Rousseau propounded a democratist ideology, Bentham and the utilitarians an economicist ideology, Comte a so ciologist (or socialist) ideology, Hegel a statist ideology, Marx a materialistic and historicist ideol ogy, Mill an ideology of liberty, Spencer an evolutionist ideology, George a neo-physiocratic ideology, and so on. Technically, an ideology is a sys tem or complex of ideas which pur1 R. R. Palmer with Joel Colton, A History of the Modern World (New York: Alfred A. Knopf, 1958, 2nd edi tion), p. 431.

ports to comprehend reality. Actu ally, modern ideologies have usu ally been both more limited than this would suggest and much more zealously attached to by their pro ponents. The makers of ideologies have usually operated in some such fashion as the following. They quest for and think they have found the philosopher's stone, a magic key that will unlock the mysteries of the universe. It is some abstraction from the whole of reality. For Rousseau it was the general will, for Comte the stages of the development of the mind, for Hegel the conflict of ideas, for Marx the class struggle, for Spen cer it was the evolutionary process, for Mill something called liberty, for George the unearned incre ment on land, for Bentham social utility, and so on. With the phi losopher's stone in hand, the ideo logue proceeds to spin out - to rea son abstractly - an account of how things got the way they are, what is wrong with the way things are, and what is to be done about them, if anything.

The ideological version of real ity is at considerable variance with existent reality. This is under standable, for the ideologue has not only proceeded by reducing it to abstractions - which are always less than and different from the reality to which they refer - but also hung all his abstractions upon 38 THE FREEMAN January some central abstractions. If he concludes, as· he seems invariably to do, that things should be brought into accord with his ideo logical version of them, he becomes a reformer. Indeed, all that does not accord with his version is irra tional (and those who op.pose-it, anti-intellectual), for he has reached his conclusions logically, that is, by abstract reason. It is as if an inventor should construct an automaton on the basis of his anal ysis of actual men and then pro claim that all men should be like his mechanical figure. Utopias are just such parodies of the possibili ties of reality, and are no more de sirable than men would be if turned into mechanical contraptions.

The ideologue tends to fanati cism. Whatever it is that he thinks will set things aright - that is, bring them into accord with his mental picture of them - becomes for him a fixed idea. This fixed idea may be democracy, equality, the tri umph of the proletariat, the coming of the kingdom, the single tax, the realization of an idea for society, or whatever his panacea happens to be. Come the proletar ian revolution, one will say, and the good society will be ushered in. Employ creatively his abstraction, the "state," another will hold, and a great and productive social unity will emerge. Extend democratic participation into every area of life, and life will be glorious. Abolish property, abolish govern men t, single tax the land, redis tribute the wealth, maintain ra cial solidarity, organize interest groups, form a world government, develop an all embracing commi t ment to the nation, use government to make men free, and so on through the almost endless num ber of enthusiasms which have animated those under the sway of some ideology or other. The totali tarianisms they create when they try to put these ideas into effect stem from the total commitment to a fixed idea, an abstraction, in the first place.

Forgotten Influences Meliorism has drawn such intel lectual substance as it has had in America from these nineteen th century ideas. It drew sustenance from democratism, from egalitari anism, from nationalism, from uto pian socialism, from Darwinism, from Marxism, and from statism. But the attempt to reconstruct society has not usually been ad· vanced by the avowal of an ex plicit ideology. After the early years of the twentieth century, American intellectuals began to avoid ideological labels for the most part, even as more and more of them were influenced by ideas drawn from ideologies. Even those who thought of themselves as so1966 FROM IDEOLOGY TO MYTHOLOGY - I 39 cialists became less and less defi nitely aligned with an explicit socialist ideology. There has been considerable talk lately of an end to ideology; a book has been writ ten on that theme. And yet, the pressure toward melioristic reform continues to mount, and the argu ments for reform and the direc tion that it takes is still drawn from ideology.

In general, American reformers, those who have gone by the name of "liberal" for a good many years now, have no consistently explicit ideology. Certainly, the generality of Americans who have come to expect and favor reforms are un aware of holding any ideology. What has happened is that many of the ideological assumptions that propel us toward melioristic re form have become a part of the mental baggage of most people. They have taken on a frame of reference, a way of looking at things, which makes increasing governmental activity seem natu ral to them. Myths and Images How did this come about? In the main, ideology was subsumed into mythology. People pick up the ideology through the myths which they have come to accept. A myth ology is a body of myths or legends which purports to account for the way things are. In traditional usage a mythology is a kind of sacred history for a pagan reli gion. It contains the stories of the doings of the deities, and is a means of inculcating religious teachings. In the common parlance, a myth is a commonly believed view of something that is not true to fact, that will not stand up un der careful scrutiny. However, some contemporary scholars use the word in a much more neutral and descriptive manner. The fol lowing definition tells what an thropologists are apt to mean when they refer to myths: Myths are the instruments by which we continually struggle to make our experience intelligible to ourselves. A myth is a large, con trolling image that gives philosophi cal meaning to the facts of ordinary life; that is, which has organizing value for experience. A mythology is a more or less articulated body of such images, a pantheon .... This is not to say that sound myths of gen eral application necessarily support religions; rather that they perform the historical functions of religion they unify experience in a way that is satisfactory to the whole culture and to the whole personality.2 Another writer, thinking along the same lines, defines mythology in this way: 2 Mark Schorer, "The Necessity of Myth," Myth and Mythmaking, Henry A. Murray, ed. (New York: George Braziller, 1960), p. 355.

40 THE FREEMAN January Briefly stated, what I have in mind are first, the images (imagined scenes or objects) and imagents (imagined actions or events) under lying, sustaining, and activating some conceptually represented, de velopmental philosophy of life, or ideology, individual and social, and second, more particularly, a large assemblage of narratives in prose or poetry, each illustrative of a better or worse course of action, a better or worse state of being, or a better or worse mode of becoming, for an individual, for a society, or for the world at large. 3 Psychological Justifications It is symptomatic of the con temporary state of mind that elaborate and serious studies of mythology should be made, tricked out in the paraphernalia of schol arship. It is one more indicator of the loss of confidence in our cul ture, for to many such intellec tuals all beliefs are inculcated by myths, and all myths stand more or less equal in their sight. The test of an adequate mythology, one gathers, is the extent to which it is psychologically satisfying. Note, too, that such studies tend to justify mytps, just as William James justified religion, on psy chological grounds. Their truth or falsity is not to be objectively de3 Henry A. Murray, "The Possible Na ture of a 'Mythology' to Come," in Ibid., p.300.

termined; they are useful and ap propria te, in general, if they sat isfy the indi vid uals in a given so ciety. Even so, it is these latter usages of "mythology" to which I refer when I say that ideology has been subsumed in mythology. There are some differences, however. It is assumed, in the above, that the stories and legends by which myths were purveyed were imaginary. This is not the case, at least gen erally, with the twentieth century mythology which propels us toward ameliorative reform. The stories and legends are quite often as accurate factually as modern research can make them. At any rate, the details are factual, or are supposed to be. Their mythi cal character is most profoundly to be found in the assumptions which are provided from ideology. This modern mythology, the mythology of meliorism, is pur veyed as history. That is, it is what people understand to have happened in the past, though it is most revelant to what is now hap pening and the trends presently at work. This does not mean that it is only something taught in the schools from history books. On the contrary, it has been purveyed in popular nonfiction, in imaginative literature, in newspapers and magazines. The mythology is evoked in political speeches, in 1966 FROM IDEOLOGY TO MYTHOLOGY - I 41 sermons, in newscasts, in lectures, and in all of the ways that people communicate with one another.

That is to say, it is a part of the way people see, interpret, and un derstand (or misunderstand) what is going on. A Century's Distortion The basic mythology concerns American history from about the time of the CiviI War to the pres ent. The myths can be found in al most any textbook on the subject. The following is a bareboned sum mary, hopefully not a parody, of some of the central myths found in such accounts. America was plunged into crisis in the latter part of the nineteenth century. This crisis portended catastrophe if something were not done. The signs of the crisis were all around: industrial depressions, increasing tenant farming, the growth of slums and tenements, periods of unemployment, labor strife, fall ing industrial wages, falling ag riculturaJ prices, the decline of craftsmanshi p, and generally wors ening conditions. The sources of the crisis, according to. the myth ology, were to be found in pro f ound under lying changes that were taking place. These changes are evoked by such words as ind us trialization, mechanization, urban ization, and, perhaps, proletarian ization. Fundamentally, rapid changes in technology, and the manner of its utilization, were producing vast maladjustments in society.

These changes called for funda mental alterations in attitudes, in social institutions, and in the pat terns of behavior of a people. In stead of this having taken place, however, older American patterns had been extended and had ossi fled. Individualism had become rugged indi vid ualism, economic liberty become license to plunder the resources of America for pri vate aggrandizement, the govern ment of the people an instrument for advancing the fortunes of a nascent plutocracy. Vernon Louis Parrington, no mean mythmaker himself, describes the development this way: The war ... had opened to capi talism its first clear view of the Promised Land. The bankers had come into control of the liquid wealth of the nation, and the industrialists had learned to use the machine for production; the time was ripe for exploitation on a scale undreamed-of a generation before .... It was an abundant harvest of those freedoms that America had long been struggling to achieve, and it was making ready ground for later harvests that would be less to its liking. Freedom had become indi vidualism, and individualism had be come the inalienable right to pre empt, to exploit, to squander ....

42 THE FREEMAN January In such fashion the excellent ideal of progress that issued from the so cial enthusiasms of the Enlighten ment was taken in charge by the Gilded Age and transformed into a handmaid of capitalism. Its duties were narrowed to the single end of serving profits and its accomplish ments came to be exactly measured by bank clearings .... Having thus thrown the mantle of progress about the Gold Dust twins, the Gilded Age was ready to bring the political forces of America into harmony with the program of pre emption and exploitation .... 4 In consequence of these things, according to the mythology, the rich were getting richer and the poor were getting poorer. Farmers were oppressed by high and dis criminatory rail rates, and work ers were being exploited by robber barons. The wealth of America was being channeled into the hands of a few beneficiaries of special privilege by both government ac tion and inaction. Farmers were muttering, becoming angry, begin ning to organize. Workers were feeling the pinch of deprivation, becoming increasingly discon tented, and beginning to organize.

These clouds upon the horizon surely portended a coming storm. 4 Vernon L. Parrington, The Begin nings of Critical Realism in America: 1860-1920 (New York: Harcourt, Brace & World, 1930, 1958), pp. 8-19. Let the Problem Fit the Answer The solution to the problem is usually carried implicitly within the mythology. Fundamental ad justments must be made in keep ing with the changed condition. The power of the people collec tively, that is, government, must be used to tame these forces let loose in the land, to restore balance and harmony, to bring about an adjustment. But, as everyone who is familiar with the mythology knows, the cavalry did not come dashing to the rescue, or, to be literal, the government did not act forcefully to bring about this har mony in the late nineteenth cen tury. True, it did begin to tinker, to prohibit trusts and regulate in effectively the railroads, to allot a few crumbs of the governmental bounty by way of inflation to the poor and dispossessed. But these were puny efforts beside the mas sive transformation called for by these forces at work in society.

Things did begin to look up in the early twentieth century, ac cording to the legend. Reformers began to be heard in the land; pol iticians began to advance some of their programs; even Presidents began to use the language of re form. Local governments, state governments, and even the United States government began to make faltering efforts at more compre hensive reforms. But alas, the ef1966 FROM IDEOLOGY TO MYTHOLOGY - I 43 fort was shortlived; the advance gave way to retreat once more in the 1920's. Business returned to the saddle once more; the roaring twenties witnessed the last fling of a moribund capitalism. The public was drawn into this Roman holi day, spending its substance in ri otous living or engaging in the speculative boom occurring on the stock market. The Great Depression The long expected catastrophe finally came - the Great Depres sion. As fate would have it, the country was saddled with the last of the rugged individualists, Her bert Hoover, when the day of ac counting arrived, and he fiddled with puny ameliorative efforts while Rome burned. The situation went from bad to worse. Arthur Schlesinger, Jr., himself a myth maker of the first order, describes conditions on the day of the first inauguration of Franklin D.

Roosevelt: The fog of despair hung over the land. One out of every four Ameri can workers lacked a job. Factories that had once darkened the skies with smoke stood ghostly and silent, like extinct volcanoes. Families slept in tarpaper shacks and tinlined caves and scavenged like dogs for food in the city dump. In October the New York City Health Department had reported that over one-fifth of the pupils in public. schools were suffer ing from malnutrition. Thousands of vagabond children were roaming the land, wild boys of the road. Hunger marchers, pinched and bitter, were parading cold streets in New York and Chicago. On the countryside un rest had already flared into vio lence.... 5 Following Roosevelt's inaugural address, of course, "across the land the fog began to lift."6 Whether the fog lifted or not (some think it settled permanently upon Washington), government in tervention was certainly under taken in earnest thereafter. Ac cording to the legend, government took up its proper role in affairs.

I t began to tame the wayward and destructive forces let loose by in dustrialization, to bring order out of the economic chaos induced by an economy of private aggrandize ment and cutthroat competition, to take sides among the citizenry to rectify the imbalance beween labor and management and between agriculture and industry. The United States government under took planning, regulating, control ling, subsidizing, inflating, har nessing, spending, and taxing with a right good will. Of course it took some time for those in gOV~ ernment to learn just how to man5 Arthur M. Schlesinger Jr. The Crisis of the Old Order, 1919-i933 '(Bos ton: Houghton Mifflin, 1957), p. 3. 6 Ibid., p. 8.

44 THE FREEMAN January age all these things in the best possible way. Some relics of the depression remained throughout the 1930's, and it was only after the outbreak of the war that full prosperity was finally restored. But the right direction had been taken, so the mythology goes. Gov ernmen t has now mastered most of the economic forces which once wrought such hardship in the land: that is, depression, unem ployment (well, not quite!), de structive competition, hoarding (of money), and so on. There remain problems, of course, and the proc ess of reform must go on, but the basically right direction has now been taken. The great progress that has been made in the last thirty years should be . attributed to this governmental activity. And How It Was Cured! Government intervention, then, has produced great and lasting good. One will rarely find a dis senting voice about this in text books. On the other hand, it has done little if any demonstrable harm. This summary of the myth ology can be closed with a quota tion to this effect from one of the most consistent mythologizers of this generation, Senator Joseph Clark of Pennsylvania: That nightmare of "federal con trol" which haunts the dreams of our conservative friends is an hal lucination. I cannot think of one ex ample of the "heavy hand of the federal government reaching out into our private lives" that has ac tually been restrictive of our per sonal freedoms or detrimental to our economy ....

The federal government has been subsidizing education in this country ever since the Northwest Ordinance of 1784 [sic]. No harm and much good have resulted. The same is true of social security, housing, urban re newal, and government plans for the health care for the aged. 7 There is enough truth in this account to make it superficially plausible. Men can thrust their ex periences into this framework, and it will seem to make sense .of them. After all, two generations of publicists and researchers have collected mountains of facts with which to buttress the mythology. In like manner, two generations of interpreters have woven these facts into smooth and plausible ac counts of what has been and is happening. Nor is there any rea son to suppose that many of them have any doubts about the correct ness of their interpretations. For aught we know, the deluders are deluded by their own delusions.

Be that as it may, the above ~n Edward Reed, ed., Challenges to Democracy: The Next Ten Years ,(New York: Frederick A. Praeger, 1963), p. 102.

1966 FROM IDEOLOGY TO MYTHOLOGY - I 45 summary is of a full-fledged myth ology, believed and accepted by millions of Americans, so far as judgments of such things can be made. To perceive its mythical character, it will be helpful to ex amine some of the myths that go to make it up, and to see how they took shape. Such an examination will be forthcoming. ~ The next article ,in this sel"ies will further covel' "FTorn Ideology to ~lythology." An Editorial from The Journal of Commerce: ANYONE who has followed the ser pentine twists of this year's sugar bill through the House and on into the dungeon of the Senate Finance Committee knows that the visible signs of its progress-if it can be called progress - were not very pretty. Its path was less a path than a gauntlet strewn with ambuscades. At every turn in the marble corridors, in every committee room where it was detained, little knots of determined men were lying in wait, each with a sheaf of amend ments plus hammers and nails with which to affix them to a meas ure that looked stranger and stranger until it literally fell asun der and broke up into three or more entities that could not at this point be reassembled by all 46 THE FREEMAN January the king's horseg or all the king's men.

There is the original Adminis tration bill, with its country-by country allocations on the basis of deliveries during the critical sup ply periods of 1963-64. There is the House-passed bill that uses the allocation formula of the 1962 Sugar Act which favors Western Hemisphere sources. There are the proposals of Senators Fulbright and Williams for a simple six month extension. Separate plans have been advanced by Senator Douglas, who wants an import fee, by Senator Morton, who feels that even the House bill does not sufficiently favor Latin American producers, and by Senator Mc Carthy, who wants import quotas based on actual deliveries from 1960 to 1964. Many, including this newspaper, have deplored the machinations of lobbyists representing all kinds of domestic and foreign interests in confounding the issues involved in the sugar bill. Beet and cane growers are feuding as usual. For eign suppliers are feuding with each other. Foreign policy and domestic farm policies are collid ing at every step of the way. And so it goes.

Nevertheless, it is not only un fair but a little aside from the point to blame all this shoving and pushing on the lobbyists. These, after all, merely represent Amer ican and foreign business inter ests and a sizable number of for eign governments whose futures are deeply involved with every twist and turn of American sugar policy. If there are some who take advantage of this confusion for reasons that strike a number of critics as "crass," there are others who rightly feel their very livelihood is at stake. They can hardly be blamed for fighting for it. W ho' s to Blame? Where, then, does the blame lie? We would say it lies, in the con siderations that do with sugar, as with any other commodity, in the foolish conviction that the deter mina tions of Congress are in some way beyond the ken of the aver age person - superior to an over riding degree to any decisions that could ever possibly be reached in the market place.

If sugar had been left un touched, its marketing today would be determined solely by the price established by supply and demand. If foreign producers of cane could market their sugar here at lower prices than domestic beet or cane producers, there would be no prob lem. There might be no domestic beet or cane producers, but neither would there be any problem of choosing between foreign pro1966 THE SERPENTINE GAUNTLET 47 ducers. If,on the other hand, do mestic producers could beat the foreign competition hands down, would there be any question as to which (if any) foreign pro ducers should be favored? It is only because Congress de cided that it, and it alone, should be the supreme arbiter concerning the source and the price of every pound of sugar sold in the United States that this awful impasse came to pass. In such a circum stance, who can be surprised at learning that Congressmen are the target of each and every in terest that can be brought to bear?

In such a circumstance, who can be surprised at learning that the (almost) annual debate over the sugar bill evidences traces of the worst kind of logrolling that have disgraced democratic government in this country since the machina tions leading up to the Hawley Smoot Tariff Act of 1930? We admit - the editors of this newspaper - that some of our for eign friends and allies might suf er if sugar marketings here were determined solely by the laws of supply and demand, which is to say, by the laws of the market place. But who, after witnessing the deplorable results of Congres sional horse-trading, could honest ly say the market has in the slight est degree been improved by Fed eral intervention? The fact is, it hasn't been im proved in one single degree, or tenth of a degree. It would, today, prove far less chaotic if there had been no Federal intervention whatever. Let all liberals who be lieve in Federal marketing con trols pause over this. Let them consider only sugar for the mo ment, but then consider how far down the road to ruin their fol lies have already led them. ~ Reprinted by permission from The Journal of Commerce and Commercial, October 20, 1965.

Order To ORGANIZE ONE'S LIFE, to distribute one's time, to take the measure of one's duties and make one's rights respected; to employ one's capital and resources, one's talents and one's chances profitably - all this belongs to and is included in the word order .... Order is man's greatest need and his true well-being. From the Journal of HENRI AMIEL (1821-81) PROSPERITY LIFE is purposeful and creative action by individual creatures showing infinitely great ranges of variations in structures and ca pacities. The basic purpose of living action seems to be that of achieving greater awareness and understanding of the environment and increased pow-er to organize it so as to make it more favorable to the preservation of higher forms of life. In such achievement we find the meaning of "welfare," "prosperity," and "progress" for every living thing including man. For man, as for all forms of life, therefore, progress requires indi viduals to exert effort and to take the risks inherent in experiment and invention.

Dr. Watts is Chairman of the Division of Social Studies at Northwood Institute, a private college dedicated to the philosophy and practice of free enterprise. This article is from lecture material for his course: Sur vey of American Life and Business. 48 It follows that human welfare, prosperity, and progress do not consist in escape from stress and strain, nor in mere abundance of the means of subsistence or enter tainment. Instead, welfare, pros perity, and progress correspond to the level of creative activity and the rate of achievement in dis covering and developing new abili ties and instruments for making the environment more hospitable to higher levels of living. Prosper ity is pursuit of a flying goal. It is pursuit of abundance that es capes our grasp because human aspirations and capacities for achievements appear to know no bounds. RESPON SIBILITY In man, however, creative action has reached a new stage of evolu tion. In the human being the life force has become self-conscious, self-controlUng, and self-directing.

AND FREE MARKETS A SUMMARY .... V. ORVAL WATTS The creature, man, can now help control and direct creation and humans progress only insofar as individuals become aware of this unique opportunity and take ad vantage of it. In other words, hu mans prosper and progress only as they become aware of their powers of choice, self-control, and self direction, and as they learn to exercise these powers crea ti vely. This is what we mean by saying that the human individual must accept responsibility for his own acts. He must learn that he is re sponsible as the primary cause for what he does, and to survive and progress he must gain wisdom and take charge of the process of ac quiring those habits we call "char acter," "virtue," "morality," and "personality." PRIVATE PROPERTY The first condition for this learning process and development is pr'ivate property, or, more sim ply, property, for all true property is private. Individual appropria tion of standing room and of the means of subsistence is necessary for mere existence, and individual appropriation of land and tools is equally necessary for anything more than mere existence, that is, for any degree of prosperity and progress. The prosperity and progress of every human society correspond to its members' respect for the right of the individual to own, control, and use land and the fruits of his labor, thrift, and enterprise in production and ex change.

This individual appropriation and responsibility for finding, de vising, and employing the "means of production" (land, natural re sources, tools, machines, and other forms of capital) is capitalism. It follo,vs from freedom from vio lence and intimidation (threat of violence). Where such freedom, or 49 50 THE FREEMAN January peace, exists, individuals have property in what they find, pro duce, or obtain by voluntary gift or exchange. COOPERATION Equally essential for human prosperity and progress is coopera tjon. Humans need one another. None is sufficient unto himself. One of the most critical problems of human progress, therefore, is to maintain and improve coopera tion while individuals exercise and develop their powers of self-direc tion and invention. These powers are the most important of all qualities distinguishing humans from animals or beasts. They are the qualities which also make a human - at least potentially - far more useful than any domesticated animal or inanimate machine.

But the risks of depending on the cooperation of free persons correspond to the opportunities for progress. Fear of these risks - knowledge that our welfare and even our very Iives depend on the work and service of other persons - tempts us to resort to violence or threat of violence to assure con tinued cooperation or to increase it or improve it. The result of such coercion, however, is increasing antagonism and conflict or irre sponsibility and apathy, which reduce cooperation. We cannot get true cooperation by force or threat of force because humans are self controlling and will exert their peculiarly human powers (e.g., initiative and inventiveness) only in pursuit of self-selected pur poses. In perfect freedom, or pure capitalism, an individual would try to get the help of his fellows only by offering in return an induce ment - something which other persons want and which they do not have or do not have in suffi cient abundance. This inducement might be merely expressions of gratitude. But since man does not live by gratitude or praise alone, inducements in capitalistic (free) societies include offers of rela tively scarce and desirable services and commodities - economic goods. This is the Golden Rule as it applies in the business of mak ing a living.

MARKETS But how can an individual know what goods to produce in order to get what he wants from others who may be distant from him in space or tastes? The answer is to be found in the operation of the market place. Exchange values - wages, interest rates, rents, profits, and losses1966 MONEY AND FREE MARKETS 51 act as signals and incentives to producers. A relatively high price is more than a "trumpet call to production." It provides also an increased opportunity to those getting it to increase the supply of the relatively scarce service or commodity. MONEY For efficient marketing, or ex change, hoth money and credit are essential. Money is necessary as a measure of values and a medium of exchange. Credit is necessary whenever it takes time to complete an exchange. In contrast with economic goods, money is useful only when scarce. Air and water are still useful even when they are so ahundant that no one will pay anything to get n10re, but money becomes useless when everyone has all he wants of it. Gold would still have a use for filling teeth or for plating a man made satellite if we had all we "ranted of it, but it would no longer have use as money, because no one would give anything in ex change for it.

CREDIT Credit and money are often con fused with one another, but they are actually as different as day and night. Money is a means of payment, credit is only a promise to pay. It arises in connection with an incomplete exchange. Except in the case of simple barter, it is seldom possible or economical to make a simultaneous and complete exchange of services between two persons or to complete payment at the same instant each unit of services is performed. Most exchanges in all societies except the most primi tive take time to complete, and while incomplete, credi t is given and received. From the lender's standpoint, credit involves trust that the bor rower (the person who gets goods or money on credit) will complete the exchange (pay later). From the borrower's standpoint, credit involves a promise to pay - a promise to complete the exchange at some future time by giving value in exchange for the goods or money presently received.

To repeat, credit arises in an incomplete exchange. CREDIT CURRENCY The borrower may give the creditor a written promise to pay, but such records, or credit instru ments, are not credit, and the number or face value of such in struments has only a loose and 52 THE FREEMAN January indirect relation to the volume of credit in actual use. Neither are such instruments money even though they pass from one person to another in settle ment of obligations. Circulating credit instruments, such as private bank notes or bank checks, are a form of currency, but they are promises to pay money rather than money itself. Their usefulness as a medium of exchange, or cur rency, depends on creditors' con fidence in the maker's ability and willingness to pay the money promised when due or to deliver claims of equal value against other credit-worthy producers or prop erty owners. GOLD STANDARD When a debtor promises to pay in gold or some other commodity, he accepts the value of this com modity as the standard (measure) of value for his payment. He does not always or necessarily deliver the standard money (e.g., gold) in payment, but to avoid doing so and yet satisfy his creditors he must deliver goods or claims on goods which the creditor prefers to gold. This means that the debt or must price his goods (or those assets he liquidates in order to get the wherewithal to pay his debt) low enough so that buyers will prefer them to gold and give him gold or its equivalent for them.

In this way, a standard money, such as gold, exerts constant pres sure on individuals to use credit productively and to keep their prices in line with the value of the standard. If the standard com modity, e.g., gold, becomes abun dant and cheap, sellers may cor respondingly raise their prices. But gold has become the generally accepted standard in free markets precisely because - although widely distributed in nature - it has not come on the market faster than the demand for it has in creased, except for comparatively brief periods. BANKING The specialists in credit (e.g., bankers, savings institutions, in surance and investment com panies) record the values ad vanced as loans, or "credits," act as producers' agents in making ad vances and collections, and serve as clearing-houses for drafts, or ders, and other forms of credit currency used as evidences of loans and payments, exchanges, and repayments.

Since a borrower commonly uses a credit from one producer (or from the financial agent of a pro1966 MONEY AND FREE MARKETS 53 ducer, such as a bank) to make fun and satisfactory payment to another producer, it is easy to con fuse credit (especially bank credit) or the evidences of this credit (currency) with money, and to believe that the demand for goods and the supply of credit de pends on the amount· of borrow ing and the spending of borrowed funds. In this limited view, the borrower is a public benefactor merely because he borrows, buys, and consumes. When this limited and fallacious view of credit and of credit currency dominates polit ical policy, it leads to waste of productive resources and to stat ism (governmental restriction of freedom) . In freedom, the borrower is ex pected to repay the loan, and lenders who fail to collect payment suffer losses and find themselves correspondingly deprived of their credit and lending power. To repay the loan, however, the borrower must either reduce his later spend ing by the amount of the loan (in ,vhich case there is no net increase in demand or spending for goods), or he must produce and sell more goods to get the means of pay ment. Since lenders usually charge interest for their loans, thus re quiring repayment of more than was originally loaned, borrowers have a corresponding incentive to use their borrowings to maintain their earning power or to increase it. Hence, in freedom, borrowers and lenders tend to use credit eco nomically and productively.

We should note, too, that cred itors and sellers of goods in free markets tend to reject or discount inferior currencies, i.e., currencies that are inferior in convenience and intrinsic worth. Consequently, in freedom, good money drives out bad money. Or, more precisely, among private currencies in free markets, more trustworthy and convenient forms of currency tend to replace inferior currencies.! FIAT MONEY Governments, and only govern ments, may deClare certain credit instruments (usually government IOU's or the IOU's of banks con trolled by government) to be full legal tender. This means that cred itors can legally demand nothing better or more valuable in payment of debts owed to them. This legal1 Since, so far as I know, this law is my own discovery, stated in my classes and public lectures nearly 20 years ago, friends have named it "Watts' Law of Money." Long study of banking and mon etary history, as well as economic analy sis, convinces me that it is a valid ob servation of an economic uniformity, or law. Therefore I am willing to accept re sponsibility for putting the statement of it into circulation.

54 THE FREEMAN January tender act by government trans forms the credit instruments into "fiat money," or "paper money." The purpose of this act is com monly to increase the means for paying debts (including the gov ernment's own debts) and thus make them easier to pay. It there by aids debtors at the expense of creditors. It is to such legal tender money that Gresham's Law ap.plies. Gov ernments compel creditors to ac cept all legal tender money at face value. Yet they sometimes issue new kinds of money having less in trinsic worth than coins of the same stated legal tender value still in circulation. This was the case when the Tudor monarchs were de basing the coinage during the life time of Sir Thomas Gresham, Lon don merchant and government financier. Gresham then noted (as Oresme and Copernicus had before him) that "bad money drives out good money." That is, debtors and buyers of goods make their pay ments in the money of less intrin sic worth, while they hoard, melt down or ship abroad the coins hav ing greater intrinsic worth. 2 2 We have seen this verified in the United States for two years or more as paper dollars replaced silver dollars and half dollars in circulation, as wartime nickels of higher silver content disap peared from circulation, and now as the new "sandwich" quarters and dimes re place coins of much higher silver content.

DEFICIT SPENDING When the fallacious view that borrowing per se is a public ser vice prevails in politics, the gov ernment is likely to manufacture "lawful money" (legal-tender paper, or fiat money) to permit the borrower to avoid a cut in his fu ture spending as he pays his debt. It may then issue paper money to lend or give to "needy," or "de serving," spenders, or to buy the products of favored producers re gardless of the economic value or usefulness of these goods. Such policies waste labor and capital which might otherwise increase the supply of goods (and of credit) in the free markets, and they encourage unproductive bor rowing and consumption of goods. Furthermore, when government gets the authority to print legal tender money , it is likely to use this easy method for increasing its own spending for political pur poses, as, for example, for molding public opinion to support its ex pansion of power, for hiring police, spies, soldiers, and tax col lectors to enforce its multiplying rules and levies, or for buying votes, wholesale or retail.

But as government thus expands its activities beyond those neces sary to· establish freedom (Le., to suppress private coercion, such as 1966 MONEY AND FREE MARKETS 55 banditry, assault, and stealing), it takes from individuals a corres ponding amount of freedom to use their energies and capital accord ing to their own best judgment. It thereby restricts their opportunity to develop their most important powers - those powers which most of all distinguish humans from animals; and so it restricts human progress. This encroachment of government on individual freedom is commonly called "statism." Political constitutions are sys tems of rules by which freedom seeking humans have tried to re strict government activities to those believed necessary for wel fare. In this sense, the state and Federal constitutions of these United States were originally the most restrictive constitutions of which we have record, and until about 1898 they served as effective barriers to the advance of statism in this country. ~ Opportunities to "Do Good"

Too MANY OF us get it into our heads that to "do good" we must go far outside our daily routine interests. Glenn Frank once said: "The rich man's greatest oppor tunity for public service lies inside his private business. That is to say, statesmanship in business is of greater so cial value than philanthropy outside business." A man with the genius for successfully running a busi ness is right where he belongs; the opportunities to "do good" are greater in business than outside business. WILLIAM FEATHER, in The William Feather Magazine, July, 1965 SOME THIRTY years ago surveys of employee motivation were con ducted in great depth by some pretty hard-headed personnel or ganizations, and the eventual re sults were published and widely studied in such magazines as Fortune. To the surprise of everyone con cerned, the primary goal of the employee, both clerical and indus trial, was neither salary nor "se curity" but a sense of personal worth, of achievement in the job, and the desire to receive a fair deal and recognition from the em ployer.

Unless John Doe can see the chance of achievement in status and in accomplishment of some thing he feels to be important in Mr. Breese is former chairman of the Depart ment of Humanities, School of Engineering, at Embry-Riddle Aeronautical Institute in Florida. 56 Tho Human D09irofor Froodom EDWARD Y. BREESE the job, he is unhappy no matter "'Thatthe rates of payor the fringe benefits offered him. No findings since these surveys were made in the thirties have in any way contradicted or super seded them. In other words the typ.ical man puts above anything else the need to feel that he is doing something worthwhile and that he can in crease his skill and move forward by his own efforts. He is not fool ish enough to believe that, under any system, everyone can become a millionaire. He does need to know that he can earn status and the recognition of his fellows in his own life and his own job.

It is j list this sense of achieve ment which he cannot attain under any system except that of free competition and free enterprise. And it is for just this reason that 1966 THE HUMAN DESIRE FOR FREEDOM 57 man cannot fulfill himself as an individual within the termite hill of a totalitarian system. This is the inescapable truth which dooms totalitarianism from the start. The seed of destruction lies within the Republic of Plato, the' latifundia of slave-powered second-century Rome and eigh teenth-century Brazil, the Russian Gosplan, the British modified so cialism, and all other totalitarian efforts. The socialist condemns the com petitive activities of the men at the top of the human pyramid as a sort of "original sin" which is des tined to destroy mankind. Success in competition and in achievement is condemned in terms of morality and with religious fervor. Yet, no totalitarian regime has ever succeeded in destroying or even seriously limiting the activi ties of the sort of predatory com petitor whom they all alike con demn. Under the socialist regime this fellow flourishes even more freely than before. He •merely transfers his activities from pri vate to public enterprise. As J 0 seph Wood Krutch observes in his Essays on Man and Nature, When men cannot compete for wealth they compete for position, for authority, for influence in the right places. When they cannot own a pal ace, four automobiles, and ten serv ants, they manage to get themselves appointed to jobs in connection with which these things are assigned them. More dreadfully still, when these same men find themselves no longer required to pay the common man to do their work for them, they quickly discover that when the profit motive has been abolished, the fear motive 'affords a very handy substi tute.

Socialism, in fact, does nothing at all to hamper or eliminate the sort of competition against which it is continually preaching; it merely puts it on a dog-eat-dog basis. What the totalitarian actually accomplishes is something very different from what he says he wants to do. It is the elimination of the opportunity for achieve ment from the lives of the gen erality of mankind, and this is, in very truth, a cardinal sin against the human spirit. When the totalitarian removes from man his freedom of achieve ment within the framework of a free economy, he performs a spir itual amputation more deadly than the physical removal of an arm or a leg. Rather, he attempts such an amputation; for in fact, no essen tial component of humanity can ever actually be cut away. The termite and the ant can live within the tight straitjacket of a controlled and regimented hive precisely because they are not hu58 THE FREEMAN January man. The need of achievement, which is the root and basis of all competitive activity, is lacking in the insect. But it is present in the man.

Without this need, the man is no longer a man. If it should be cut away, he would no longer live and exist as a man. The Haitian concept of the zombie suggests what would remain of man with out his competitive drive to achieve something of value. Seldom has the need to achieve been given as free a rein as in our own American economy from the founding of the first seaboard colonies through the second decade of the present century. And it was precisely within this period that the great American achievements were made. The efforts to grow and to achieve by millions of individual Americans over the years were multiplied into national achieve ment in the free functioning of republican political institutions, the creation of a technology un matched in history, and the build ing of a more prosperous society for a larger group of people than history had ever known. Let us grant that the growth of America was favored and aided beyond measure by the environ ment within which it took place.

There was an immense surplus of land, of raw material, and - in time - of labor and of capital. Yet, without the framework of the free economy established by the writers of the Declaration and the Con stitution, there could not have been that added factor which made all the difference in the American achievement. The greatest factor in our growth lay in the fact that for so many decades the ordinary Amer ican was free to grow and to achieve right up to the limits of his ability, and that he knew he was free to do so. It is precisely this freedom and this knowledge of freedom that has to be destroyed if socialism and the monolithic state and controlled welfare economy are to endure. Yet the hunger for this freedom is the one thing which can never be destroyed, because it is a deep seated and essential part of the humanity of every man. It cannot be destroyed by brainwashing or sold for a mess of pottage. To cut it away would be like amputation of the head.

To awaken consciousness of this need in any man, it is only neces sary to ask of him, "What do you really want in your life?" The to talitarian can never stop any man from asking himself this question. Because he is a man he must ask. And so long as he continues to ask, the totalitarian state can never prevail. ~ A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN rffMY ~nr+~~~aJ~ ROUSAS J. RUSHDOONY, who has been a pastor of two churches and a missionary among the the Paiute and Shoshone Indians, has been called to his greatest work as a writer who specializes in .the in tellectual, religious, and moral ori gins of the United States. The word "called" is used here ad visedly, with full realization of its religious shading. For Dr. Rush doony considers that constitution alism, in the United States, is, as he puts it, "a form of covenan talism," with civil policy limited by antecedent considerations of the "rights of Englishmen" which had been established in feudal Britain under the religious dispensation of the Christian church. He speaks always in terms of a higher law to which positive law must con form if our nation is to continue to observe its Burkean contract with its traditional past.

The Rushdoony way of thinking is becoming increasingly quaint in the age of collectivism, and his searching book, This Independent Republic (The Craig Press, $3.95), must mystify a generation tha t has been nurtured on the pure majoritarianism that is preached by James MacGregor Burns, Arthur Schlesinger, Jr., and other historians who care little for the rights of individuals as citizens of the separate cove nanting states. In a way, the chapters of This Independent Re public consist of pellets thrown into the teeth of a howling gale. The U.S. Supreme Court no longer thinks of law and sovereignty in Rushdoony terms; it has turned against the covenanting states and told them how they must appor tion the representation in their own local legislatures, and it has long since repudiated the idea that there can be such a thing as real intrastate commerce. The public, whether through apathy or fear, has gone along with the superim posed idea that no rights are sac rosanct against the decision of "one man, one vote." Hence Rush doony, and those who believe with 59 60 THE FREEMAN January him, must think of themselves as a "remnant."

Whether this remnant can be a "saving remnant," or a "happy few," is an interesting question as the Great Society carries on its work of blotting out the small Burkean platoons. But there is no virtue in trying to be with history when history itself is riding to a fall. The Rushdoony hope must be that some of the pellets thrown into the wind will be picked up and used once the gale has blown itself out. A Contract Broken by King George "' Picking up one pellet and un wrapping it, the man of the fu ture will have to consider Dr. R ushdoony' s amplification of Peter F. Drucker's contention that the American Revolution was, in actuali ty, a coun terrevol ution against King George Ill's as sumption of the arbitrary power of "the king in parliament" over colonials who had never relin quished their rights as English men. It was King George III who broke the contract, not George Washington, Johp Adams, and Thomas Jefferson. Drucket, in his own now-forgotten book, The Fu ture 0 f Industrial Man, recalled the wide development of freedom in the Middle Ages, when the king was bound by his own feudal duties as "first among equals" in a society in which the basic struc ture of society was the local land unit. It wasn't until after the big emigrations from England to America that the British parlia ment ceased to be what Rushdoony refers to as "a nonstatist feudal body, a court of contract and law between king and vassals" in which "representation was based on feudal classes," Since they were never consulted in the shift that made parliament over into "a statist body, exercising divine right," the colonists were merely holding to their own inheritance when they proclaimed their inde pendence of King George Ill's gov ernment of usurpers.

Tenth Amendment Voided Rushdoony's description of America as the land of "cove nanters" assumes that the Tenth Amendment to the Constitution has never been repealed. Only spe cified powers were delegated to the Federal government by the con tracting states in 1787. But what is the actual status of the Tenth Amendment today? According to this amendment, Federal interven tion in the self-government of states --'- and, "by implication, of their constituent units, the coun ties" - is forbidden. Alas, a vaguely worded clause of the Fourteenth Amendment has been 1966 THIS INDEPENDENT REPUBLIC 61 stretched totally out of its context by modern Supreme Court justices to nullify the Tenth Amendment, which the formulators of the Fourteenth Amendment had no in tention of repealing. The "cove nant" of 1787 has been broken as arbitrarily as the covenants be tween the colonists and the Brit ish government were shattered by King George III way back in the seventeen seventies.

Areas of Intervention So we have arbitrary govern ment by Federal intervention. Dr. Rushdoony is unblinking in his re cital of the scope of this interven tion. In economics, the Federal welfare economy presumes to tell individuals what and where they may plant; where funds must be channelled to rehabilitate "de pressed areas"; how much a marginal laborer must be paid; who shall hire whom; in what manner the right to free speech shall be fettered if your radio or TV company has been allotted a wave length; and so forth and so on (the list could be extended al most indefinitely). Foreign policy, under the Con stitution, is left to the President acting with the advice and consent of the U.S. Senate. But the Con stitution did not give Presidents the right to employ huge armies. Dr. Rushdoony insists that Article I, Section 8, of the Constitution makes universal military conscrip tion possible for "the stated pur poses only," which are" (1) to ex ecute the laws of the Union, (2) to suppress insurrections, and (3) to repel invasions." This means that "conscripted men ... could not be used in foreign wars."

Well, they have been so used in World War I, World War II, the Korean War, and the present war in South Vietnam. I personally happen to think we are fighting a just war in Southeast Asia, but the Rushdoony interpretation of Article I, Section 8, makes the point that men can be illegally conscripted to fight in even the most justified crusades. In the matter of money, the Constitution imposes restrictions on the states as well as on the Federal union. Yet modern banks effectively "coin" paper money in a way that would have horrified Andrew Jackson or even Alex ander Hamilton. The Fifth Amendment to the Constitution says that "no person shall be ... deprived of property ... without due process of law" and "nor shall priv~te property be taken for pub lic use, without just compensa tion." Yet urban renewal consist ently takes property from some for the profit of others, which is hardly consistent with the qualifi cation about "just compensation."

62 THE FREEMAN January Modern Trends Based on Changes in Underlying Faiths Dr. Rushdoony notes that the wide ramifications of Federal in tervention mean that "we are less and less under the Constitution and increasingly under the Su preme Court." But he does not particularly blame the Court for this state of affairs. The trend, he says, is a cultural phenomenon, and its origins are religious. The eighteenth century meanings of words have changed because our informing faith has changed. We have lost our old character. We produce shortsighted Supreme Court justices because we fail, in the first instance, to educa te po tential judges as men. It is hard to visualize a Great Societarian reading This Ind,e pendent Republic. The very con cepts would be alien to him. He would not grasp your meaning if you tried to tell him that 1776 rep resented a "conservative counter revolution." Law, today, is any thing that 51 per cent of the peo ple want to impose on 49 per cent.

It's "one man, one vote." So it was for a moment in Hitler's Ger many; so it has been in some of the modern African states. But (see the Ghana of Nkrumah) "one man, one vote" can easily turn into "one man, one vote, once." The italics would meet with Dr. Rushdoony's approval. ~ ~ HENRY DAVID THOREAU by Joseph Wood Krutch (New York: Dell Publishing Company, Inc., 1965), 298 pp. $1.95. Reviewed by Robel"t M. Thornton ALBERT JAY NOCK once remarked that Thoreau is a man to know, not merely to know about. Mr. Krutch agrees, for his study is not just a collection of biographical data; it helps us understand the uniqueness of the man who wrote Walden. Everyone knows that Thoreau lived in a shack by a pond. "He knew quite specifically how he wanted to live," writes Krutch, "and what he wanted to live for; he was also sure that his discover ies had general relevance - not that everybody should live as he did but that each should go about the solution of his own particular problem in the same radical way."

In seeking the solitude of Walden Pond Thoreau "was not merely running away from human society but attempting to run forward in to something, and it was not a sense of emptiness but a sense of richness which his solitude brought him." Thoreau is renowned as a lover of nature; but Krutch, himself one of the breed, explains that this does not mean going out to view nature as one visits an art gallery. Rather, Thoreau wished 1966 OTHER BOOKS 63 to become, in a sense, one with na ture instead of being an intruder as are most men; his approach to nature was that of the poet. Thoreau has two chunks of wis dom for those of us living a cen tury after his death. His most fundamental injunction was "sim plify, simplify," and this is espe cially urgent in an age when trivi alities occupy so much of our time and energy. In our eagerness to "go places" and "do things" we do not truly live but rather go through life, gaining the whole world, perhaps, but losing our souls.

Secondly, there is Thoreau's con tempt for group action, his rejec tion of mass movements as a cure for the ills of the world. As Mr. Krutch explains,. the great ques tion of our day is whether man is a responsible being or a mere prod uct of the environment. Whenever the latter answer prevails, we seek to change the system, believing that improved social machinery will produce better men. Thoreau disagreed; he accepted responsi bility for himself. He saw no rea son to postpone life while waiting for a new world, but sought to live the good life in nineteenth-century Concord. He did not come into the world chiefly to make it better, he said, but to live in it good or bad. Thoreau knew that if he busied himself with trying to reform others, he would neglect the only true reform possible, the upgrad ing of himself. ~ ~ THE IMAGE: A GUIDE TO PSEUDO-EVENTS IN AMER ICA, Daniel J. Boorstin. Atheneum (cloth) $5.00; Harper (paper) $1.75. 315 pp.

Reviewed by Robert M. Thornton "THE VILLAINS who are said to be responsible for our perplexity - the hidden persuaders, the or ganization men, Madison Avenue, Washington bureaucracy, the egg heads, the anti-intellectuals, the power elite," and so on, do not im press Mr. Boorstin with their vil lainy. What ails us, writes the Chicago professor of American history, "is not so much a vice as a 'nothingness,'" and in seeking to relieve our boredom by filling the void with the pseudo-events he describes in this book we are divorcing ourselves from reality. Mr. Boorstin is "suspicious of all mass medicines for national malaise and national purposeless ness. . . . Our real problem," he asserts "is personal." Ours is a nation founded, and in earlier years guided, by ideals - chiefly, the freedom of persons to work out their own destinies, to discover purpose in their indi vidual lives. But we are losing our 64 THE FREEMAN January VISIon, and American ideals are being replaced by American im ages - dreams by illusions. As per sons, whether individually or in groups, our concern is not, for instance, to be good or kind, but to create the image of being good or kind. We "talk constantly not of things themselves, but of their images."

In the last few paragraphs of his book, Mr. Boorstin pretty well sums up what he has to say about America's lost dream: ". . . the prescriptions which nations offer for themselves are also symptoms of their diseases. But illusory solutions will not cure our illusions. Our discontent begins by finding false villains whom we can accuse of deceiving us. Next we find false heroes whom we expect to liberate us. The hardest, most discomfiting discovery is that each of us must emancipate himself .... "Each of us must disenchant himself, must moderate his expec tations, must prepare himself to recei ve messages coming in from the outside . . . from our own past, from God, from the world ,ve may hate or think we hate .... One of our grand illusions is the belief in a 'cure.' There is no cure. There is only the opportunity for discovery. For this the New World gave us a grand unique beginning ....

"The least and the most we can hope for is that each of us may penetrate the unknown jungles of images in which we live our daily lives. That we may discover anew where dreams end and where illu sions begin. This is enough. Then we may know where we are, and each of us may decide for himself where he wants to go." ~ Treason To Freedom THE GREATEST ENEMIES of democracy, the most violent reactionaries, are those who have lost faith in the capacity of a free people to manage their own affairs and wish to set up the government as a political and social guardian, running their business and making their decisions for them. This is statism, or Stalinism, no matter who ad vocates it, and it's plain treason to freedom. MAXWELL ANDERSON, The Gu.aranteed Life Also available in standard clothbound volume, $2.50 in a new, attractive, low-priced paperback: $ .95 2.00 6.00 45.00 Single copy 3 copies 10 copies 100 copies 9 .

~~~ ~rst e~~ion of MAINSPRING (279 pp., in dexed) was published in 1947. Since Mr. Weaver's passing, this great book has been the property of FEE. Previous to this new paperback edition, 350, 000 copies have been printed. One large company's circulating library for em ployees required 150 volumes to meet the demand. Based on FEE's experience, MAl NSPRING tops all books as a starter for any aspiring student of liberty. Easy reading - indeed, exciting - the be ginner becomes so interested in freedom that he can hardly help pursuing the subject further. FEE's recommendation: Keep a good supply of the paperbacks on hand to present to any individual who shows·a spark of interest in freedom. THE FOUNDATION FOR ECONOMIC EDUCATION, INC. IRVINGTON-ON-HUDSON, NEW YORK, 10533 The Pursuitof Happiness • Let these truths be indelibly impressed on our minds - that we cannot be happy without being free - that we cannot be free without being secure in our property-that we cannot be secure in our propertyif withoutour consent others may as by right take it away.

JOHN DICKINSON, Letters from a Farmer in Pennsylvania to the Inhabitants of the British Colonies (1768) William Henry Chamberlin 3 Paul L. Poirot 10 W. A. Paton 16 Edmund A. Opitz 21 Clarence B. Carson 24 M. E. Bradford 38 Henry Hazlitt 41 Leonard E. Read 52 FEBRUARY 1966 The Cure for Poverty: Individual Effort . Property and Poverty . U.S.A. - Disaster Area . The Rats Are Chasing the Cats The Flight from Reality: 17. From Ideology to Mythology II . Sacrilege and Cupidity: A Plea for Perspective . The Fallacy of Foreign Aid . The Macro Malady. Books: A Way to Beat the Heat. Other Books • John Chamberlain 60 63 COAST FEDERAL SAVINGS AND LOAN ASSOCIATION Department F, 9th & Hill Sts., Los Angeles, California 90014 STREET_~ ---------CITY STATE _ 6·112A :::::::::::::))t~ o Please send me a FREE copy of "What's Inflation?" o I enclose my check (or money order) for $ _ o Please open a Coast Federal Savings accounto Individual o Joint in the name(s) of NAME _ ~ ~ COAST FEDERAL SAVINGS ~, ANO LOAN ASSOCIATION ~~ ~1IIIII~m.·jin/·::;:::;::::·:·:::-:: ::.:{(fff ff}Wl~.?'·~~\}}>.

1..:::iWWWWlIIIlIillmltiY??/£; ", William Henry Chamberlin con cludes that there is no reliable sub stitute for individual effort as a cure for poverty p. 3 '" And one of the greatest incentives toward individual effort is the institution of private property p. 10 '" There may be a good reason, be lieves Dr. W. A. Paton, why the entire United States might be proclaimed a disaster area. .p. 16 '" The Reverend Edmund Opitz spec ulates on the outcome if a rat were to catch a cat. ... . . ..p. 21 '" Dr. Carson here concludes last month's chapter on the development of the socialist ideology into a mythology in the United States p. 24 ", Concerning the importance of lov ing some persons and things more than others, see p. 38 '" Henry Hazlitt looks at the record of foreign aid and finds no facts to fit the theory of the intergovernmental handout p. 41 '" Leonard Read has a theory of his own as to what will happen when in dividuals take on problems beyond their competence p. 52 '" The subject of this month's re view by John Chamberlain is the economics of the tropics, based on Contribution and Reward by Mogens V. Hermann. . p. 60 Y' And reviewer Opitz adds a word of commendation for Introduction to Po litical Science by Oscar Ibere and the History of Political Philosophy edited by Leo Strauss and Joseph Cropsey.

...p. 63 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

FEBRUARY 1966 LEONARD E. READ PAUL L. POIROT Vol. 16, No.2 President, Foundation for Economic Education Managing Edito1· THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit educational champion of private property, th~ free market, the profit and loss system, and limited goYernment, founded in 1946, with offices at Irvington-on-Hudson, New York. Any interested person nlay receive its publications for the asking. The costs of Foundation projects and services, in cluding THE FREEMAN, are met through volun tary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are invited in any amount - $5.00 to $10,000 - as the nleans of maintaining and extending the Foundation's ,vork. Copyright, 1966, The Foundation for Economic Education, Inc. Printed in in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each.

Permission is hereby granted to anyone to reprint any article in whole or in part, providing customary credit is given, except liThe Flight from Reality." Any current article will be supplied in reprint form if there are enough inquiries to justify the cost of the printini.

WILLIAM HENRY CHAMBERLIN THE SUBJECT OF POVERTY, individ ual and national, is receiving a good deal of attention and dis cussion. Large sums are being ap propriated for a so-called .crusade against poverty in "underprivi leged" city and rural areas. And it is a current intellectual fad to suggest that there is danger of war, or some other kind of un pleasant e,xplosion, in the wide gap in living standards between the relatively prosperous nations of North America and Western Eu rope and the poorer countries of Asia, Africa, and South America. There has been a plethora of proposals for "sharing the Mr. Chamberlin is a skilled observer and re porter of economic and political conditions at home and abroad. In addition to writing a number of books, he has lectured widely and is a contributor to The Wall Street Journal and numerous magazines. wealth," nationally as well as in ternationally. And a fair start has been made in this direction by the graduated income tax and other devices for pillaging the thrifty for the benefit of the thriftless and by setting up an unprece dented system of peacetime subsi dies from the United States and various European countries to the needy states of the world.

But the poor are still with us at home; the campaigns in the loudly advertised war against pov erty often seem to-break down in an atmosphere of squabbling over who gets what when, and charges of misappropriation of funds. In the case of the HARYOU organi zation .in Harlem the argument in reply to these accusations was that lots of money had to be spent 3 4 THE FREEMAN February fast as a kind of payment of black mail to disorderly characters not to engage in riot, arson, and pill age. It might be noted that, ac cording to all experience, paying blackmail in this fashion does not purchase permanent immunity from violence. For the blackmailer always comes back. Nor has foreign aid, extended by the United States and other countries, proved a panacea for most of the newly independent states. Such countries as Indo nesia, Algeria, the Congo are con spicuously worse off than they were under Dutch, French, and Belgian administration; and this is true as regards a number of other fledglihg states.

The prediction of war unless, in some miraculous way, the poorer countries of the world are raised to the economic level of the more prosperous is not impressive or convincing. There was a time when hordes of barbarians could overrun much more civilized em pires, if the latter had gone soft and neglected their defenses. But in the twentieth century only a nation sufficiently developed eco nomically to produce modern nu clear and other sophisticated weap ons could start a war against a nuclear "have" power without in viting devastation to the point of annihila tion. The big wars of modern times have been fought between states with maturely developed econ omies. The days of sudden irrup tions of hosts of unknown barbar ians, often fleeing from the pressure of still more formidable barbarian forces, are over. In order to see the problem of poverty and its cure or alleviation in perspective, several points must be borne in mind.

Compared with What? First, poverty is relative. A family that would be considered poor in the United States would be the envy of most families in India, Albania, Chad, or Upper Volta. John Steinbeck's novel, The Grapes of Wrath, was a bitter in dictment of the depression suffer ing that drove many tenant farm ers in Oklahoma to migrate to California - where, incidentally, most of them found new oppor tunities and got along quite well. Yet, when a film based on this novel was shown in the Soviet Union, its propaganda value missed fire. Where did these peo ple, if they were so poor and miser able, get their automobiles, was one question that occurred to So viet audiences. How could they move without permission of the authorities? How could they be wearing such good shoes? There was this same element of rela tivity when Red Army peasant 1966 THE CURE FOR POVERTY 5 soldiers, breaking into working class quarters in Vienna, could not believe that workers lived in apartments with individual baths and kItchens.

I was in the United States at the height of the depression in the winter of 1932-33. An old ac quaintance in Milwaukee, con nected with the relief organiza tion there, gave me a list of gro ceries supplied to persons on re lief. I took the list back to Russia with me and showed it to·a non communist Soviet friend. He could hardly believe his eyes. "There isn't an employed worker in Rus sia who could count on a diet like this," he said. "Even highly placed Party and Soviet officials would be happy if they could count on a regular allotment of oranges and other food items on this list, some of which we haven't seen for years." Some Poorer than Others Second, no matter how high a country may raise its standard of living, there will always be· a bot tom tenth, or fifth, or third, what ever fractional measurement is chosen, of the people who will be less well off than others. This is partly a matter of misfortune in the case of those who are physi cally or mentally handicapped, partly a matter of comparative in telligence and aptitude in acquiring skills, partly a matter of will ingness to work. This last element becomes especially important in keeping people on the unemploy ment rolls and in the general classification of poverty when Fed eral and state relief programs be come so generous that there is little incentive to perform the jobs which are lowest in economic value and remuneration.

Moreover, a certain number of people will always, of their own volition, withdraw from the com petitive world. In some cases this may be for high motives, as when a writer, an artist, a musician, a scientist is willing to live on a subsistence minimum while he de votes himself to literary, artistic, or scientific creation and experi mentation. More frequently the cause is temperamental aversion to or incapacity for steady work. So, under any economic system, some people will have less earning capac ity and live in poorer houses, wear cheaper clothes, eat less luxurious food than others; although the average standard of living in some countries will be much higher than it is in others. Compulsory Equality Challenged If one desires a convincing prac tical illustration of the futility of trying to establish a society based on complete equality of compensation for all its members, 6 THE FREEMAN February one need only look at the contrast between the Soviet Union, as it was in the first years of the com munist revolution and as it is today.

There was no means of fore thought by which a man of thrift and property could have insured himself against the consequences of the wave of nationalization, confiscation, and robberization that swept over Russia as Lenin and his followers seized and con solidated their power. The factory owners, the factory stockholders were expropriated. The hanks and their assets were nationalized. The owner of a house was lucky if he could stay on in the basement after the local Soviet had taken over the dwelling and assigned the more desirable rooms to de serving comrades. All land was taken over by the state and par celed out to the peasants on the basis of the size of their families. The individual who preferred to hide his money savings in a sock found himself with only waste paper as the value of the ruble dwindled to zero. Perhaps the first challenge to the wild-eyed egali tarianism of the time - an equal ity, incidentally, of hunger, cold, and general misery - was that of the famous singer, Chaliapin, un forgettable in the roles of Boris Godunov and Mephistopheles.

It was decreed that all the personnel in the state opera, from leading singers to stagehands, should receive the same scanty ration. Chaliapin, a husky peas ant with an enormous appetite, balked and carried out a one-man strike with conspicuous success. "Very well," he said, "I worked at manual jobs before I became a singer. I will be a stagehand now." And the authorities, anxious at least to give the public some en tertainment, gave in and winked at Chaliapin's receiving a sub stantial individual ration, so long as he would continue to sing. Income Variations in Russia But after this initial sweeping universal impoverishment, a whole new system of differential wages and salaries grew up. In the be ginning members .of the ruling Communist Party, as a means of preserving their idealism, were re quired to accept only a skilled worker's pay, regardless of the importance of the post they might occupy. This rule has long been discarded and today, ironically enough, membership in the Com munist Party is one of the surest roads to wealth, provided the holder of the party card possesses enough ability and ingenuity to climb to the top of the political and economic ladder. Visitors to Moscow are often strongly im pressed by the tremendous spread 1966 THE CURE FOR POVERTY 7 in standards of living between the privileged class at the top in Rus sia today and the masses of workers, peasants, and employees.

This is reflected in such perqui sites of membership in the Soviet elite as chauffeur-driven cars, ex pensive apartments with luxuri ous furnishings, country homes, ability to patronize expensive res taurants - all things far beyond the dreams of the ordinary citizen. The Necessity of Inequality The Soviet experiment, and the Chinese, offer convincing proof that there is no cure for poverty in wholesale expropriation and spoliation. This may temporarily produce equality of a sort, but only equality of extreme priva tion and misery. As soon ·as eco nomic life begins to revive, new favored classes begin to appear, and new inequalities. This process is as inescapable as the working of some law of natural science. The necessity - not of poverty in its more extreme and squalid forms, which tend to abate or disappear in more prosperous so cieties, but of inequality as a con dition of human progress - is forcefully put by one of America's most powerful conservative politi cal thinkers, John C. Calhoun, in his Disquisit'ion on Government: Now, as individuals differ greatly from each other, in intelligence, sa gacity , energy, perseverance, skill, habits of industry and economy, phy sical power, position and opportun ity, the necessary effect of leaving all free to exert themselves to better their condition, must be a corres ponding inequality between those who may possess these qualities and advantages in a high degree and those who may be deficient in them.

The only means by which this result can be prevented are, either to im pose such restrictions on the exer tions of those who may possess them in a high degree as will place them on a level with those who do not, or to deprive them of the fruits of their exertions. But to impose such restrictions on them would be de structive of liberty, while to deprive them of the fruits of their exertions would be to destroy the desire of bettering their condition. It is indeed this inequality of con dition between the front and rear ranks, in the march of progress, which gives so strong an impulse to the former to maintain their posi tion, and to the latter to press for ward into their files. This gives to progress its greatest impulse. To force the front rank back to the rear, or attempt to push forward the rear into line with the front, by the interposition of the government, would put an end to the impulse and effectually arrest the march of progress.

These wise reflections should be borne in mind when it is lightly 8 THE FREEMAN February assumed that large appropriations of government funds will end poverty at home or that big enough government-to-government handouts will end poverty among nations. Among all the factors promoting human progress toward higher living standards, perhaps the most dynamic is competition. And the existence of a fairly com petitive society is the best guar anty against extreme poverty that has yet been discovered. (There was a good deal of homely truth in the sticker which figured in a recent political campaign: "I Fight Poverty. I Work.") The Cure for Poverty Is to Spark Personal Ambition The only hopeful real cure for poverty is not a proliferation of bureaucratic social agencies and eager-beaver crusaders. It is the kindling of the vital spark of per sonal ambition in the hearts of those whose poverty is not the re sult of causes beyond their con trol. How to kindle this spark is not a simple or easy problem. But surely one of the most hopeful means is to hold out the prospect that the man who is poor today may be well-to-do or even rich in the future. And it is only in a fluid, competitive society that this prospect becomes a reality. There is much truth in Macaulay's for mula for continued economic progress, which may be summed up as follows: Leave capital to find its most lucrative course, commodities their fair price, industry and intelligence their natural reward, idleness and folly their natural punishment, by maintaining peace, by defending property and by observing strict economy in every department of the state. Let the government do this and the people will assuredly do the rest.

The only effective cure for in dividual poverty is individual effort. The best stimulus to this effort is the constant spectacle of what other individuals, no more favored by early surroundings and circumstances, have been able to achieve by their own efforts. Handouts are of no permanent value. Still less is any benefit to be expected from resort to vio lence and rioting. Imagine what impression a rioter would make on a prospective employer by offering as a job recommendation some such statement as this: "I took part in looting four stores and burning six others." With nations as with individ uals, there is no short magic road from destitution to affluence. No one owes the more indigent areas of the world a living, although one would never suspect this from the yeasty oratory that is popular in some quarters. Asians, Africans, 1966 THE CURE FOR POVERTY 9 South Americans must work for their living like everyone else.

How quickly and successfully these economically retarded areas of the world will achieve their goals of better schools and roads, more food and clothing, and other good things of life depends mainly on the policies which their govern ments pursue. On the International Scale Unfortunately, these policies have not always been marked by wisdom. All developing lands need capital; but the new governments often frighten away foreign in vestment by hostile and confisca tory measures. Foreign aid, when it is given, is often frittered away in mistaken projects of state planning. Some years ago a distinguished Indian member of the Mt. Pelerin Society - an organization com mitted to the ideal of integral liberty, with economic liberty as its base - after pointing out many examples of misapplication of American aid by Indian state planners, drew a round of ap plause when he announced his conclusion: "What India needs is not dollars, but the spirit of the Mt. Pelerin Society."

For nations, as for individuals, the cure for poverty is intelli gently directed individual effort, free from the blunders and dis tortions of state direction. ~ Marxism in One Minute THE WHOLE GOSPEL of Karl Marx can be summed up in a single sentence: Hate the man who is better off than you are. Never under any circumstances admit that his success may be due to his own efforts, to the productive contribution he has made to the whole community. Always attribute his success to the exploita tion, the cheating, the more or less open robbery of others. Never under any circumstances admit that your own failure may be owing to your own weaknesses, or that the failure of anyone else may be due to his own defects - his laziness, incompetence, im ~providence, or stupidity. Never believe in the honesty or disin terestedness of anyone who disagrees with you. This basic hatred is the heart of Marxism. This is its animat ing force. You can throwaway the dialectical materialism, the Hegelian framework, the technical jargon, the "scientific" analy sis, and millions of pretentious words, and you still have the core: the implacable hatred and envy that are the raison d'etre for all the rest.

HENRY HAZLITT PAUL L. POIROT IF HUMAN BEINGS were constituted the way communist or socialist doctrine contends they ought to be for perfect implementation of the formula, "from each according to ability, to each according to need," then such terms as property and poverty would lose all mean ing and might be expected to drop from use. Nor would there be need for such a word as individuality to signify marks of distinction among equally characterless com rades. Property, then, must be a dis tinguishing feature in any society where the dignity of the individual is recognized and respected - pri vate property, under individual ownership and control, restricted only to the extent that such per sonal use might injuriously in fringe upon the comparable dig nity and rights of other human beings. In other words, respect for the dignity of an individual presumes that individual to be 10 responsible for the development and the use of his faculties, his qualities, his properties. Private ownership of property presumes a personal responsibility and lia bility for the use of that property - property being one aspect of the character of an individual. Re spect for the dignity of an indi vidual presumes his property to be a vital part of his life - his right, and his responsibility.

To respect the dignity of an in dividual is not to expect perfection of that individual; nor could any one who presumes himself to be perfect honestly respect the dig nity of anyone at all different from himself. "Perfect" men are bound to organize utopias and try to manage the inmates. Only im perfect individuals can be ex pected to tolerate either real or imagined imperfections in others and live together with mutual re spect and human dignity. So, to practice freedom is to tolerate 1966 PROPERTY AND POVERTY 11 xnh:;take5, not in the sense of in viting or cultivating error, but as one of the prices to be paid in the endless search for improved ways and means toward meeting man's rising expectations. Freedom of the individual to make his own mistakes in the use of his life and his property places squarely upon him an unlimited liability for the consequences. To act in ways that trespass against the lives and properties of others is to invite claims for damages and punitive reactions from them.

Governments are constituted and laws enacted among men to iden tify and suppress those abuses of freedom that deprive others of their freedom. But it is neither necessary nor desirable to pass laws to prevent mistakes at one's own expense. The Right to Fail Should Not Be Outlawed Such laws are unnecessary, be cause the direct victim of his own mistake ought to be afforded every opportunity to bear the burden and learn from it. And he should need no further incentive to avoid similar mistakes in the future no law to tell him to stop hurting himself. To the extent that poverty results from personal mistakes, it serves as incentive to correct or avoid such mistakes and should not be outlawed. Notonly are such laws unneces sary, but they are undesirable. With our capacity for hindsight, the following may not now seem true; but, at the time, almost every great discovery, break through, invention, or bit of prog ress toward civilization must have seemed to the vast conservative majority of his contemporaries to have been a mistake on the part of the innovator. If hewere different, he must be wrong! So, society's laws to prevent mistakes almost certainly would be aimed to sup press differences, and thus, in advertently, would stifle progress.

Let there be no mistaking what has just been said. A society with laws to preclude mistakes by in dividuals is a· collectivistic form of society that elevates the group above the individual and lacks respect for the dignity and the life of the individual human be ing. And a most obvious charac teristic of such a society is com mon ownership or government control, rather than private owner ship and control of economic goods and services. Laws and govern ment programs to abolish or al leviate poverty, regardless of the good and honorable intentions of their sponsors, must be recognized and counted as laws to prevent mistakes or to relieve the individ ualof the consequences of his mis takes. Tending in that same direc12 THE FREEMAN February tion are certain features of our bankruptcy laws and the laws af fording limited liability to indi vidual participants in corporate and cooperative business ventures and to the members of labor unions.

Any law that relieves any in dividual of the consequences of a mistaken use of his life or his property must necessarily and at the same time at least partially deny him and other individuals the benefits of the wise and judi cious use of their faculties and properties. This encourages irre sponsible human action and re sults in the loss of self-respect as well as respect for the dignity of one's fellow man. Herein lies the great threat and harm of com pulsory collectivism among men, that it diminishes the incentive of every individual involved to achieve his greatest potential as a human being. Compulsory Programs Have Failed The countercharge, of course, must be faced: that the intent of compulsory collectivism is quite the opposite, that the objective of sharing the wealth is to give the poor individual a greater chance than he might otherwise have had. However, the results do not in practice, and cannot in theory, measure up to that laudable aim.

History profusely records the failure of compulsory programs to alleviate poverty. The ways of identifying the poverty problem have varied, as have the details of the coercive methods applied to ward its solution. But perhaps the most common manifestation of poverty has been hunger and the threat of starvation - a population in excess of the available food supply. And the most common manifestation of the proposed compulsory cure has been "the man on horseback," some aristo cratic ruler presumed able to plan and manage the lives of "lesser" human beings. Another distin guishing feature of such societies has been the classification of in dividuals according to status or caste in some form of master slave arrangement. And closely re lated to this classification of peo ple has been the concentration of property under the control of the ruler and his court. In other words, when human poverty has been considered pri marily in terms of hunger, star vation, and other physical needs of masses of people, the customary "cure" has involved "Superman,"

or a small ruling clique of super men, managing the great body of mankind as though these people were simply a number of mindless ordinary animals constituting a useful herd; the dignity of man has been denied.

1966 PROPERTY AND POVERTY 13 A Faulty Solution No dream should have been necessary under the rulership of the Pharaoh's of ancient Egypt to foresee famine threatening such a slave society. But wise indeed would have been an inter preter of dreams in those days who could have known that the voluntary transactions of free men in a free market, with private ownership and control of scarce goods and services, might afford a solution to the problems of chronic and acute surpluses and shortages. For all Joseph knew, the only cure for too much gov ernment intervention was more intervention, planning, and con trol. To be saved from starvation by that arrangement was to be further enslaved to the Pharaoh. The early history of the Ply mouth Colony in the New World affords further evidence of the disastrous consequences of collec tive trea tmen t of the poverty problem. The first years. of com munal effort, pooling the harvest and sharing "according to need,"

were marked by dissension, dearth, and death. Fortunately, the solution was to try private ownership of the land and the fruits of each owner's labor; and hunger and famine have been un known in the land since tha t change. In his 1869 essay on "The Famille of 1770 in Bengal," John Fiske attributed the severity of the famine to the prevailing laws prohibiting all speculation in rice. In this, as in earlier and also in subsequent famines that have periodically plagued so much of the Orient from time immemorial, governments have intervened with price controls, rationing, and simi lar restraints and compulsions. Always, the justification is that this is "for the good of the peo ple." Always, the consequence is "people control," as if they were animals - and famines have pre vailed to this day. William Henry Chamberlin re minds us that the serious famines of the twentieth century, notably in Russia and Communist China, must be attributed in their extent and severity to the agrarian re form efforts and other manifesta tions of compulsory collectivism on its way to "the classless so ciety."! The darkest cloud on the horizon of man today is the inevitability of famine on a scale previously undreamed, if popula tions continue to expand at pres ent rates in countries such as Rus sia, Red China, India, Cuba, and others where private property is subject to arbitrary governmental expropriation and individuals are 1 "State Economic Planning: Tragedy or Futility," THE FREEMAN, January 1966, p. 27.

14 THE FREEMAN February denied their rights of entry for voluntary exchange in the open competitive market. Shakespeare caught the essence of the problem of poverty in this passage in Othello: Who steals my purse steals trash; 'tis something, nothing: 'Twas mine, 'tis his, and has been slave to thousands; But he that filches from me my good name Robs me of that which not enriches him And makes me poor indeed. In other words, the concept of private property is quite mean ingless unless there be respect for the dignity - the good name - of the individual human being. Poor indeed is the individual who counts for nothing in terms of the well-being of the collective. Yet, if there be no respect for private property, neither is there within such a society any meaningful measure of poverty. And even the mass murder of millions of kulaks through man-made famine can be passed off as a necessary detail in communism's march toward "progress."

From a strictly economic point of view, poverty might be con strued as the scarcity of a given resource relative to the demand for it. In other words, the price of a given item is beyond the reach of certain potential customers. But this is only another way of saying that the limited resour ces of such potential customers their pennies, their services, or whatever marketable items they might in turn have to offer - are priced beyond the reach of so called suppliers. For it must be remembered that in the market economy the customer for one thing is bound to be the supplier of another, and vice versa. If Hen ry Ford, for instance, had held the world's supply of automobiles at prices beyond the means of all customers, it might have been con tended that Henry Ford was a victim of poverty in that he could not - or would not - afford to buy the things others were willing to offer in exchange for his auto mobiles.

The fact, of course, is that Mr. Ford could and did "buy" what customers offered for his cars, the result being a "nation on wheels." His genius was in his capacity to mass produce for the masses, through the operation of the laws of supply and demand and price in the competitive market. And the "poor" customers of America handsomely rewarded Mr. Ford for that contribution toward the alleviation of their poverty. Mes srs. Woolworth, Kresge, Penney, and countless others similarly at tained fortunes through thus ca tering to the wishes of property1966 PROPERTY AND POVERTY 15 respecting consumers according to the free market method of wag ing war on poverty. The result has been referred to as the "affluent private sector" of the economy by those who cannot or will not see that the public (government) sector inevitably will be starved-even if they themselves were put in charge of other people's problems.

Poverty, then - in this sense of the term - is the great persuader as well as the great conservator, the incentive each of us has either to hoard or to bring to market those scarce and valuable resour ces that others want in exchange for their own goods or services. Poverty and property are closely related, personal, private condi tions, meaningful and applicable only to individual human beings. Those who would use their rela tive poverty to justify seizure or denial of the property rights of others thereby revert from man to animal, destroy their own ac cess to the market, and commit themselves to the authoritarian ways that always have spelled starvation. Where Do We Stand? In the light of the foregoing observations, how goes the real war on poverty in the United States of America and in the world today? In Russia, in Communist China, in India, in Cuba, and in most other totalitarian economies, the threat of starva tion is too near to admit any other answer. But do not the to talitarian measures rampant in the United States and elsewhere in the "free world" portend that same end?

What else can be expected from these government-enforced grants of special privileges for labor, and agriculture, and one pressure group after another? What can be the hopeful end of the regres sive Social Security taxes that already exceed the progressively graduated personal income taxes of at least half of the families in America? What is the state of health of those now relieved of per sonal responsibility for their medi care? Is a man's home still his cas tle under the threat of eminent domain to achieve the ends of pub lic housing, urban renewal, area re development, flood control, and re lated efforts at group salvation? Not even in America can we hope to escape the inevitable star vation that has always resulted from governmental subsidization of poverty - unless we turn back to the defense of private property and the open competition of the 1narket, based upon respect for the dignity of every human be ing. ~ W. A. PATON BACK .IN 1887 President Grover Cleveland disapproved a bill to provide $10,000 of Federal aid to farmers in some drouth-stricken counties of Texas. His veto mes sage included the following: "I can find no warrant for such an appropriation in the Constitution, and I do not believe that the power and duty of the general govern ment ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. A prevalent tendency to disregard the limited mission of this power and duty should, I think, be stead fastly resisted .... "

There has been quite a change since Cleveland's day. The "prevDr. Paton is Professor Emeritus of Accounting and of Economics, University of Michigan, and is known throughout the world for his outstand ing work in these fields. His current comments on American attitudes and behavior are worthy of everyone's attention. 16 alent tendency" that he observed has grown from a trickle to a tor rent. Turning to Uncle Sam for help in meeting local emergencies and difficulties has become stand ard practice. A few years ago there were complaints among ap ple growers in one of the states regarding prices anq marketing methods, and the gov~or .of the state promptly hopped on a plane and flew to Washington to seek assistance. That same season a couple of other governors made the trek, with plenty of publicity, to ask for aid to relieve the dis tress caused by local crop failures. But such journeys, apparently, are no longer required. All that is necessary today is to telephone the bad news to the White House and the President himself will fly over the floods, the dry fields, the frost.;bitten orange groves, the 1966 U.S.A. - DISASTER AREA 17 forest fire, the tornado's path, or other trouble spot, and on the basis of this high-level and high speed inspection decide upon the appropriate relief program.

The Habit Acquired The habit of begging rides on the Federal gravy train is easily acquired, especially when the Boss Man and his crew are eager to attract passengers. Last summer the current governor of the state that had the apple troubles earlier proposed that some twenty coun ties, which had had no substantial rainfall for four or five weeks, be designated as disaster areas. A person driving around the state at that time would have had trou ble picking out the afflicted coun ties making up the governor's list. And undoubtedly an investigator could have found many people in almost every community through out the state - and especially in the towns where governmental water departments, not noted for good management, had prohibited sprinkling of lawns and gardens who were complaining about the dry weather. (A careful observer might have noticed, too, that Sol & Co. don't pay much attention to county lines in providing or withholding precipitation.) Shortly after the governor's an nouncement, as it happened, there were hea vy rains almost everywhere, and before long there was considerable grumbling about the "unusual" wet weather, and re sulting troubles encountered in harvesting and other outdoor op erations. There was little or no critical comment, however, re garding the governor's efforts an indication of the extent to which we are all becoming ac customed to the idea of relying on Washington to bail us out of dif ficulties, both ordinary and extra ordinary.

Adverse Weather Anyone who has lived in the U.S.A. for long, done the usual amount of domestic traveling, and kept up with the news about me teorological conditions, is well aware of the fact that in most sec tions of the country the weather is highly variable, seasonally and within seasons. He knows that there are drouths, hurricanes, floods, freezes, and other unpleas ant happenings somewhere every year (which is not to deny that some years are worse than others). He also knows that no where are ideal conditions to be found, for any considerable peri.,. od, and that there is no possible weather formula for an area that will satisfy everybody, continu ously. In other words, adverse weather is a commonplace, one of the fac18 THE FREEMAN Febnta1~1/ tors that makes life still a bit rugged, despite the marvelous im provements in housing, transpor tation, construction equipment, ag ricultural methods, and so on. And if a spell of unfavorable weather provides justification for the label "disaster area," it would seem reasonable to describe the entire U.S.A. as such an area and be done with it, instead of employ ing piecemeal procedure.

To Get One1s Share One thing we can be quite sure of: Before long it will become very apparent to the residents of counties and communities that have been left out of a regional relief program that they are get ting shortchanged with respect to the outflow of Federal funds, and that they must make an effort to qualify for a cut. In most cases it will not be difficult to find local troubles and problems that will suffice to put the area on the needy list, especially in view of the present tendency to welcome new clients for Federal handouts. It is not necessary to look very far ahead, moreover, to see a situ ation in which the rare community which wants to be independent, which would like to take care of its own emergencies, which has a citizenry that believes that local problems should be solved locally, by those directly concerned, will find itself regarded as a maverick if not a menace by the Federal octopus, and will be pressured vigorously and unrelentingly to get in line. Indeed, this state of affairs is already in evidence in the handling of Federal aid to education and some of the other programs, both minor and mas sive. And while major cities such as Chicago, with considerable political influence, may offer some resistance to discriminatory pres sures, the smaller communities will generally feel obliged to knuckle under promptly, without serious protest.

Everyone Pays It is amazing, but quite appar ent, that many of us are unwilling to face up to the plain fact that it is the taxpayers of the country (and that means nearly everybody, when all forms of tax levies, direct and indirect, are taken into account) who foot the bill for governmental handouts, of every kind and description. Where there is awareness of this fact, more over, there is a widespread ten dency to forget that the process of assessing and collecting taxes, to provide the money for Big Brother to spend in our behalf, plus the development and opera tion of an administrative and dis bursing apparatus, heavily manned, means that the return 1966 U.S.A. - DISASTER AREA 19 "relief" flow to states, localities, and specific families and. individ uals, is a much reduced stream. In short, the cost of taking our money away from us and spending it for us is very substantial. Another common misunder standing is found in the view that some states or regions get back more than the Federal take from such states or regions. Of course, levies on taxpayers generally can bring a net gain to a strictly lim ited list of localities or groups, with low taxpaying power. But with relief and aid programs wide ly applicable as they are now, on a tremendous scale, and keeping in mind the cost of such programs and the broad impact of .present day tax burdens, it can hardly be expected that any region of sub stantial size will recover 100 per cent of its contributions to the programs.

Statistical demonstration of this state of affairs is somewhat diffi cult, but such data and estimates as are available indicate that none of the fifty states gets back more than the outgoing amount. It is fairly obvious that no kind of tax handout program can improve the lot of all of us. The formula of from-everybody-to-everybody has never been made to work. It is literally impossible, of course, to improve the per-capita standard of living without per-capita improvement in economic effort and performance. Trying to accom plish this by governmental redis tribution programs is just as fu tile as trying to lift ourselves up by tugging at our bootstraps. Coercive Powers Lack Magic At times many Americans evi dence an ,almost mystic faith in the ability of government agencies to cure all our ills. They forget that government is nothing more than people, operating with coer cive powers either seized in one way or another or granted and sanctioned, more or less com pletely, by the citizenry. These people have no Aladdin's lamps or other magic tools, as should be very apparent to anyone who has had the opportunity to observe closely either local or central gov ernment in action. At the best, government consists of some con scientious and capable persons try ing hard to accomplish certain specified and limited chores that have been delegated to them; at the worst, government consists of one or more racketeers and ty rants interested largely in living high from the efforts of their subjects, and in maintaining them selves in power. And even a quick look at what we know of human history makes it very plain that keeping those inclined to dicta tor ..

ship and exploitation from climb20 THE FREEMAN February ing on the White Horse seems to be well-nigh impossible - for any considerable period. The R.eal Disaster This brings me, finally, to the main point. The justification for referring to the entire U.S.A. as a "disaster area" is not to be found in regional variations and difficulties, nor in aid and handout programs as such. The disaster that has befallen us is the change in attitudes. The decline in will ingness to assume responsibility and take the initiative, at individ ual and family levels; the increas ing feeling of helplessness and accompanying eagerness to cast our burdens on the state; the fail ure to remember - despite the American experience of which the astonishing results are still right before our eyes - that the road to prosperity for all is a climate that encourages the talented, the innovators, the enterprisers, and thus produces a surge of creative energy and drive that stimulates even the laggards to try to hang on to the fast-moving coattails of the hustlers: these are the changes that have brought us to the very brink. And there are few signs on the horizon that we will wake up in time to avoid going over the cliff into full-fledged socialism.

Just a few years ago "ham-and eggs" Townsend of California failed to get even a respectful hearing when he appeared before a Congressional committee to urge his modest program of help for the old folks. If he were to return to our midst now, he couldn't be lieve his eyes or ears. ~ Reprints available, 3, each. Persons and Groups IT IS MAINLY when persons combine into mobs and other militant pressure groups that tolerance and an instinctive respect for others are lost in an illogical and mad attempt to force peaceful individuals and minorities to conform to the viewpoints and prejudices of the herd. When this happens, love and charity and respect for one's fellow man receive a mortal blow. DE AN R US S ELL, Equality and Security The Rat~ Are Chasing the Cats EDMUND A. OPITZ KARL MARX, a century ago, claimed that he stood Hegel on his head; thus putting the phi losopher right side up! Friedrich Nietzsche, at about the same time, preached a "transvaluation of all values." Practice tends to follow theory, and the world in our time is topsy-turvy. Values are in verted ; good and evil have changed position; and things are turned inside out.

• I tern. There used to be honor even among thieves. The. pirates of ancient Greece, we are told by Sir Alfred Zimmern, thought little of murder and robbery, "but an unfair division [of the spoils] was the gravest of social offenses." There are modern crimes to match The Reverend Mr. Opitz is a member of the staff of the Foundation for Economic Educa tion. piracy, but let us focus on offenses outside the purview of the law and ask first how honor fares among us. The theater holds a mirror up to society, and a recent television show undoubtedly reflects a seg ment of the changing mores. It concerned college student cheating. The classroom cheat really harms himself, of course, although cheat ing may help him pass a given exam; socially, his actions violate the gentleman's code. When this code is observed generally in a school or a society, the cheat is on his own. He knows he does wrong, and he attempts to suppress, as best he can, his sense of guilt.

But when the code of the gentle man is not felt as personally bind ing, the sanction that replaces it is that "everybody's-doing-it." The television drama dealt with mass 21 22 THE FREEMAN February cheating in a college chemistry exam; the cheaters took pride in their cleverness, whereas the one student holdout felt guilty because he did the right thing. He refused to go along with the crowd and the crowd turned on him in self righteous scorn. Publicans thank ful that they are not like that Pharisee! • Item. Then there are turncoat words. "When I use a word," Humpty Dumpty said, "it means just what I choose it to mean neither more nor less." Take the word "LiberaI." A nineteenth cen tury L.iberal strove to free society by placing principled limitations on government. A twentieth cen tury Liberal, on the other hand, works to unfetter government from constitutional, legal, and moral restraints. A government of laws was the earlier ideal; now, a government of men. The accents of Milton and Locke, of Burke, Mill, Gladstone, and Morley were the authentic sounds of Liberal ism in the classical sense. The political words and music are to tally different today; but the label is the same.

• Item. Americans of the nine teenth century believed in the ideal of a society without priv ileged orders or classes, where government renders an evenhand ed justice to all men alike and maintains conditions of equal lib erty. Such was the American dream. Now, it goes without say ing that this ideal was frequently violated. Men have never lived up to their highest visions; but daily striving for unattainable goals puts the life of men on a plane higher than would be the case otherwise. Moreover, the defec tions from and violations of a principle do not, in and of them selves, constitute a case against the principle, nor provide adequate grounds for dropping it. The older principle has been dropped, how ever, and another has taken its place. Where did it come from? From the malpractices! Defections and violations are treated as raw data, and a hypothesis is drawn up to cover this data. The hypoth esis is then sold as the latest prin ciplefor social organization.

Government, in the theory of Liberalism which was in the as cendent during the nineteenth cen tury, protects individual rights by deterring or punishing acts of ag gression. Peaceful persons are free from governmental interven tions. But some men who live un der regimes erected on this theory will violate its principles. They will seek to turn a political instru' ment designed to secure liberty and justice for all into one which awards economic advantages to themsel ves at the expense of 1966 THE RATS ARE CHASING THE CATS! 23 others, in direct violation of classical theory. The twentieth century response to such wrongs has been to reduce the theory to the low level of the malpractice! Thinkers of our time have whipped up a new theory in which the dispensing of economic privi lege is the chief function of the political agency! This is today's "Liberalism" which has violations of person and property as a built in feature of its operation; it is designed to produce precisely what the previous theory was designed to deter! It refuses to function un less appeased by sacrificial vic tims, for there's no way to give politically distributed advantage to some without thereby taking advantage of others. This is a symptom of social disintegration.

• Ite'm. A given society exists be cause most men in it feel them selves bound individually by ties of loyalty to the things that so ciety stands for. In every society, however, there are to be found men in whom these ties are weak, able to be loosened still further by combinations of persuasion and cash. Treason is an ancient crime, and a serious one in the eyes of most men, including the traitors themselves. But treason has a new dimension and a new meaning in our time, writes Rebecca West: "Never before has treachery been so sunny and lighthearted, pre senting itself not as Judas, con scious of the last suspension from the elder tree, but as some inno cent little figure in straw hat and sailor suit." The advent of the atomic age has involved the scien tific community in politics, and worse, and Miss West describes the case of a well-known physicist. She observes that "the gaiety with ,vhich he faced the suspicion of treachery gives some indication of the curious mental climate in 'which he and his associates had their being." This is a climate in which the betrayers look down their noses at the parochial loyal ties of their fellow citizens, while smugly proclaiming their dedica tion to a police state system which is the most deeply rooted and far fl ung tyranny of all time. All, of course, in the name of Humanity and the Larger Good!

• Itern. Oddballs, kooks, and freaks regard themselves as nor mal and the rest of us as queer. Those who live by predation and parasitism think that only squares work. The Yahoos take over; the deviant becomes the norm. • Moral. Only when rodents and felines alike are hallucinated do rats chase cats. But let one rat catch one cat and the spell is broken; a caught cat means a d~d rn! • 17. From Ideology to Mythology II CLARENCE B. CARSON MANY AMERICANS have come un der the sway of a mythology which inclines them toward the promo tion and acceptance of social re form. This mythology is purveyed as history, consists of what many people think has happened. This history-as-mythology does contain distortions and exaggerations, but it must be kept in mind that it is not a mythology simply because of these.,Nor is it rescued from myth ology by the number of facts which can be summoned to give it the ap pearance of validity; these are but grist to its mills. It is a mythology because it stems from a mental construct instead of reality, be cause it embodies ideologies.

Let us examine first the myth that the rich were getting richer Dr. Carson is Professor of American History at Grove City College, Pennsylvania. Among his earlier writings in THE FREEMAN were his series on The Fateful Turn and The American Tradition, both of which are now available as books. 24 and the poor poorer in the latter part of the nineteenth century. However the myth arose, it was given a dramatic and effective for mulation by Henry George. The idea is captured in the juxtaposi tion of words in the title of his most famous book, Progress and Poverty. The central thesis is pre sented in the following words: And, unpleasant as it may be to admit it, it is at last becoming evi dent that the enormous increase in productive power which has marked the present century and is still going on with accelerating ratio, has no tendency to extirpate poverty or to lighten the burdens of those com pelled to toil. It simply widens the gulf between Dives and Lazarus, and makes the struggle for existence more intense. The march of inven tion has clothed mankind with powers of which a century ago the boldest imagination could not have dreamed.

But in factories where labor-saving 1966 FROM IDEOLOGY TO MYTHOLOGY - II 25 machinery has reached its most won derful development, little •children are at work; wherever the new forces are anything like fully utilized, large classes are maintained by charity or live on the verge of recourse to it; amid the greatest accumulations of wealth, men die of starvation, and puny infants suckle dry breasts ; while everywhere the greed. of gain, the worship of wealth, shows the force of the fear of want. The prom ised land flies before us like the mir age. 1 Postulating the Problem Without Regard for Fads These assertions can be phrased so as to make them into a problem, and it was as a problem that George, along with many other nineteenth century economists and would-be economists, treated them. They constitute a nice "problem" indeed! How can increasing pro ductivity result in more and more poverty, or grea tel" poverty? The problem can be dramatized by in troducing some statistics, though George could not have been famil iar with these. American farmers produced approximately 100,000, 000 bushels of wheat in 1850; this had risen to 600,000,000 by 1900.

They produced 4,590,000 bales of cotton in 1850, and 20,226,000 in 1900. Corn production increased 1 Henry George, Progress and Poverty (New York: Schalkenbach Foundation, 1955), p. 8. from 590,000,000 bushels in 1850 to 2,662,000,000 in 1900. This rep resented a considerable increase in productivity per acre generally, too, for land in cultivation had less than tripled. 2 The value of the an nual product of manufacturing in creased from approximately $2 bil lion in 1860 to $13 billion in 1900.3 This represented great increases in consumer goods. In 1859, men's clothing manufacturers turned out a product worth $73,219,765 ; in 1899, they made a product worth $276,861,607. The worth of the fac tory produce for women's clothing was 20 times as great in 1899 as it was in 1859. In 1849, flour and grist mill products were valued at approximately $136 million; in 1899, this had increased to about $560 million 4 • These figures repre sent increases in goods, rather than inflation. In fact, prices de clined generally during the period under consideration. One writer notes that if wholesale prices be in dicated by the figure 100 for 1860, they had fallen to 95.7 in 1890, and would decrease somewhat more during the next decade. 5 2 Henry B. Parkes, The United States of America: A History (New York: Al fred A. Knopf, 1953), p. 435.

3 Ibid., p. 395. 4 Walter W. Jennings, A History of Economic Progress in the United States (New York: Thomas Y. Crowell, 1926), pp.430-33. 5 Ibid., pp. 483-84.

26 THE FREEMAN Feb'fuary I t is difficult to see how this greater production and increasing productivity could result in in creasing poverty. Of course, popu lation might have increased faster than production (shades of Mal thus!) , though such resulting pov erty could hardly have been attrib uted to the productivity. But it did not. The population of the United States was 23,191,000 in 1850; by 1900 it was 75,994,000. Population had a little more than tripled; pro duction of staple agricultural prod ucts had quadrupled, quintupled, and sextupled, while the production of many manufactured products had increased in a much higher ratio than that. Again, these goods might have been shipped out of the country in return for foreign gold, thus shorting Americans of the goods they produced (though surely foreigners would have had a great bounty of goods). But the value of exports only trebled between 1866 and 1900, having fallen drastically during the Civil War.

Improving the Situation There is no need, however, to wrestle with phantoms. The poor were not getting poorer generally in America. Such evidence as is available presents quite a different picture. Private production income (all income except that from government sources) increased from about $4 billion in 1859 to $28 bil lion in 1914, and grew especially fast from 1869 to 1899. Per capita income, in terms of actual money, rose from $134 in 1859 to $185 in 1899. "Considering dollars of con stant purchasing power, the in crease was from $285 to $488 in the period betwen 1859 and 1914."6 It can be objected that no one receives the income per capita, that this is only an average, and that the increase might have only made the rich richer. This does not appear to have been the case. One historian estima tes that the proportion of the income of Americans derived from wages and salaries rose rela tive to that from rent, interest, and so forth. 7 At any rate, "the index of money hourly wages for men in all industries practically doubled be tween 1860 and 1890.... Since the index of commodity prices fell rapidly [that is, commodity prices fell, not the index] after 1865, the purchasing power of wages, 'real wages,' often attained a spectacu lar improvement."s Samuel Gomp ers, head of the American Federa tion of Labor and one who should have known about such matters, 6 Gilbert C. Fite and Jim E. Reese, An Economic History of the United States (Boston: Houghton Mifflin, 1959), pp.

304-05. 7 Edward C. Kirkland, Industry Comes of Age (New York: Holt, Rinehart and Winston, 1961), p. 402. 8 Ibid.

1966 FROM IDEOLOGY TO MYTHOLOGY - II 27 was asked this question in 1900: "You would not agree to the state ment sometimes made that the con ditions of the working men are growing worse and worse?" His answer, "Oh, that is perfectly ab surd."9 Where did this absurdity spring ftom? Some may suppose that it was drawn from earlier develop ment, drawn, for example, from the "early stages of the Industrial Rev olution" in England. This period has long been the whipping boy of reviewers of the horrors of indus trialization. Horrors there may have been, but they could hardly have been the product of indus trialization generally. A competent and thorough eco nomic historian, T. S. Ashton, has lately exorcised this demon from the pantheon of historical myth ology. He says, "An historian has written of 'the disasters of the in dustrial revolution.' If by this he means that the years 1760-1830 \vere darkened by wars and made cheerless by dearth, no objection can be made to the phrase. But if he means that the technical and economic changes were themselves the source of calamity, the opinion is surely perverse." He points out that there were a great many more people to be fed and clothed at the time. Ireland did not solve this problem and consequently lost 9 Quoted in ibid.

much of her population. If England had followed the agricultural pat tern of Ireland, he thinks that a like fate would have befallen her. Instead, "she was delivered, not by her rulers, but by those who, seek ing no doubt their own narrow ends, had the wit and resource to devise new instruments of produc tion and new methods of adminis tering industry."lo The Labor Theory of Value The roots of the p,rogress-and poverty notion do not lie in what happened (though the myth was no doubt assisted by interpretations of what happened) ; they lie rather in ideology. The seeds of the myth were planted, so far as I know, by David Ricardo, with an assist from, Thomas Malthus. They were deeply embedded in economics for most of the nineteenth century. ,Ricardo held that the price of labor must ever and again fall to a level that will maintain workers at a bare subsistence of livelihood. He ar rived at this conclusion by a gro tesque bit of ideological hocus pocus. According to what is now called classical economics, to which Ricardo subscribed and contrib uted, commodities have a natural price (or value and a market 10 T. S. Ashton, The Industrial Revo lution, 1760-1830 (New York: Oxford University Press, A Galaxy Book, 1964), pp. 110-11.

28 THE FRE'EMAN February price. The natural price is deter mined by the costs of production. The market price is determined by supply and demand. Under condi tions of free competition, the mar ket price will tend always toward the natural price. Ricardo proceeded to apply this theory to the price of labor; that is, he ideologized by applying an ab straction about one phenomenon to an analogous one, ignoring the dif ferences. The cost of production applied to labor came out as the cost of maintaining life. "The nat ural price of labor is that price which is necessary to enable the laborers, one with another, to sub sist and to perpetuate their race, without either increase or diminu tion."ll The market price of labor will fluctuate, he held, due to the operation of supply and demand. When wages rise above their nat ural level, he thought, population will increase because more life can be maintained. That is, the supply of labor will increase, thus driving the market price of labor down to the natural price, or even below it, for a time. In short, the price of labor will tend toward the subsis tence level. Malthus maintained, of course, that population increase would inevitably outdistance any 11 David Ricardo, "Principles of Polit ical Economy," The Age of Reason, Louis L. Snyder, ed. (Princeton: D. Van Nostrand, 1955), pp. 153-54.

increases in production. Thus was the "dismal science" loaded down with its freight of notions about contin ued and widespread poverty. Later thinkers did not generally accept the demographic theories of the classicists. Moreover, there was a sloughing off of the philosophic dualism, of which natural price and market price were an extension, perhaps unwarranted. What was accepted by revolutionists and re formers was the existence of pov erty. But as thinkers began to think in terms solely of a temporal con text in which society was the pre eminent reality, some of them be gan to attribute this poverty to the social system. Exploitation According '0 Marx We are now back to the original problem: How can increasing pro ductivity result in continuing pov erty? The problem was, of course, ideological, not actual, but ideo logues abounded in the nineteenth century.12 It is not logical, if the demographic theory is not ac cepted, that the great increase of goods made available by the use of machines should result in the main tenance of the status quo, or worse, in the material well-being of peo ple. Surely, the goods had to be 12 It should be noted that an explana tion of the demand for labor was even tually forthcoming that did not entail the dismal conclusions of Ricardo. It was the marginal utility theory.

1966 FROM IDEOLOGY TO MYTHOLOGY - II 29 consumed for there to bea market, and this should improve the situa tion, not make it worse. Something must be fundamentally wrong with the system. There must be hoard ing, waste, unjust distribution, and so on. Marx concocted the theory that it was the consequence of the ex ploitation of the workers by the bourgeoisie. So great was the ex ploitation, and so essential was pro duction to capitalism, that capital ists must have periodic wars in or der to dispose of or destroy the goods that they produced. Henry George thought that the problem arose fundamentally from land "monopoly," and that the private expropriation of the unearned in cremen t on land led to poverty. Thorstein Veblen thought that some considerable part of the bounty made available by produc tivity was dissipated in conspicu ous consumption by the wealthy. At any rate, men wove ideologies, en visioned cataclysms, and conceived of programs of reconstruction to right the wrongs that were sup posed to be in the system.

These ideological constructs alone probably would not have been sufficient to attract many people in to reform or revolution. Nor would it be fair to the intellectuals in volved to suggest that they were simply led astray by ideology. There was poverty, hardship, suffering, and malnutrition. In the latter part of the nineteenth cen tury many children did work in factories. There were times of un employment in industries; mone tary wages did sometimes decline; debtors were hard hit by deflation. Some farmers did lose their farms; tenant farming was on the in crease in many areas. Poverty has not disappeared in the twentieth century, nor is it likely that it ever will completely. Of course, this does not stem from increased pro ductivity, nor from the system that makes it possible. The Muckrakers But the existence of poverty made it possible to embed the ideo logical preconceptions in mythol ogy, that is, to describe poverty and implicitly attribute it to the system. This has, of course, been done. Muckrakers did it to great effect in the early twentieth cen tury, but this has been done over the years, and is still being done.

Instances of poverty and hardship have been told in lurid detail: pinch-faced children going off to work in factories, fathers with hungry families unemployed, men the victim of technological unem ployment, the unsavory character of life in the slums. Some of the titles of books suggest the charac .. ter of the indictment: Jacob Riis, How the Other Hall Lives (1890) ; 30 THE FREEMAN February Robert Hunter, Poverty (1905); John Spargo, The Bitter Cry of tlhe Children; and Edwin Markham, Children in Bondage.l 3 One exam ple from the stories told in such books should suffice. The one below is from an account of life in the slums in the latter part of the nine teenth century: Enough of them everywhere. Sup pose we look into one? No. - Cherry Street. Be a little careful please! The hall is dark and you might stumble over the children pitching pennies back there. Not that it would hurt them; kicks and cuffs are their daily diet. They have little else. Here where the hall turns and dives into utter darkness is a step, and another, an other. A flight of stairs. You can feel your way, if you cannot see it. Close?

Yes! What would you have? All the fresh air that ever enters these stairs comes from the hall-door that is for ever slamming, and from the win dows of dark bedrooms that in turn receive from the stairs their sole supply of the elements God meant to be free, but man deals out with such niggardly hand. That was a woman filling her pail by the hydrant you just bumped against. The sinks are in the hallway, that all the ten ants may have access - and all be poisoned alike by their summer stenches .... Here is a door. Listen! That short hacking cough, that tiny, 13 See Louis Filler, Crusaders for American Liberalism (Yellow Springs, Ohio: Antioch Press, 1950), pp. 268-~tl. helpless wail - what do they mean? They mean that the soiled bow of white you saw on the door downstairs will have another story to tell - Oh! a sadly familiar story - before the day is at an end. The child is dying with measles. With half a chance it might have lived; but it had none.

That dark bedroom killed it.l 4 Government Intervention The origins of these conditions were, of course, "the system." Riis said, "We know now that there is no way out; that the 'system' that was the evil offspring of public neg' lect and pri vate greed has come to stay, a storm-centre forever of our civilization."15 That is, tenements are a fixture; the only hope lay in amelioration. Among the things that Riis suggested might be done was that the "state may have to bring down the rents that cause the crowding, by assuming the right to regulate them as it regulates the fares on the elevated roads."16 The circle is completed with these sug gestions: from ideology to myth ology to reform. These stories of conditions are usually told in such a way as to suggest that only by government intervention can the situation be righted. If the wages of the poor are held down to the 14 Jacob A. Riis, How the Other Half Lives (New York: Sagamore Press, 1957), pp. 33-34.

15 Ibid., p. 2. 16 Ibid., p. 217.

1966 FROM IDEOLOGY TO MYTHOLOGY - II 31 subsistence level continually, there would be no way for them to get out of the slums and tenements. Once government intervention got under way on a large scale, the character of the myth began to change. N ow articles, stories, monographs, and textbooks began to present bright pictures of life in America. Happy children now play in uncluttered parks; families live in low-rent housing; farmers use bright new equipment; and work ers are joyously bargaining collec tively. The following are from cap tions under upbeat pictures and drawings in a recent textbook. They ascribe this fine state of things to government: Senior citizens like these in Sun City, Arizona, are helped by their federal social security payments to live comfortably after retirement and to enjoy a variety of pleasure-time activities. Federal grants of money assist cities in replacing slums with satis factory low-rental dwelling units.

Reciprocal trade agreements with other countries aid in bringing loaded cargo ships to our ports. Workmen have gained many bene fits and services since the day in 1900 [captio'n to an unhappy sketch] when this luncheon counter exposed to dust and contamination, was used to pro vide a hot meal in the center of a Inachine shop. Wheeler Dam, with its eight out door generators, is one of many dams built by TVA to assist in flood con trol and provide cheap hydroelectric power for industries and residents in the Tennessee Valley. With TVA's help, Tennessee farm ers have learned the importance of fertilizing their soil [something that was once believed to have been taught to the early settlers in America by Indians]. With low-cost fertilizers produced by TVA plants, the soil has been built up and now yields profit able crops.17 There is still poverty, of course, according to the prevailing ethos, but it, too, has changed in charac ter. It is "hard core" poverty, a va riety which may be expected to yield ground before political min istrations, but only after an ex tended war upon it.

The poverty myth is only one of a large num,ber of myths that make up the mythology. Space does not permit going into others in such detail. However, it is important to provide another example or so to demonstrate the process of myth ologizing more adequately. Competitive IIWarlare" One of the most pernicious of myths is the one that equates com petition with war. The following may serve as a generic assertion of the myth: "Competition is of the nature of warfare; in warfare the 17 Lawrence V. Roth, et. al., Living in Today's World (River Forest, Illinois: Laidlaw, 1964, 2nd edition), pp. 267-76.

32 THE FREEMAN February victory is with the strongest .... "18 The roots of this myth are trace able to a variety of ideological for mulations: to the Malthusian con cept of the pressure of population on the means of subsistence, to the Marxian notion of the class strug gle, to the Darwinian idea of the struggle for survival and survival of the fittest, among others. The description of the rise of the bourgeoisie by Marx and Engels encapsulated this notion of com petition-as-war in the revolution ary framework of their historicist eschatology; that is, they thrust it into the historical stream so that it could be mythologized as history. They said, "The bourgeoisie finds itself involved in a constant battle. At first with the aristocracy; later on, with those portions of the bour geoisie itself, whose interests have become antagonistic to the prog ress of industry; at all times with the bourgeoisie of foreign coun tries."19 The next step, of course, was to find an actual instance of such con flict. J. P. Morgan and associates and Jim Fisk supplied the instance which became the classic example 18 Washington Gladden, Applied Chris tianity (Boston: Houghton Mifflin, 1886), pp. 31-32. His particular reference was to the "conflict" between capital and labor.

19 Karl Marx and Frederick Engels, The Communist Manifesto in Eugen Weber, ed., The Western T'radition (Boston: Heath, 1959), p. 611. in books on American history. It occurred in connection with the contest over control of the Albany & Susquehanna Railroad. The fol lowing is a summary of the battle that ensued: The combat took ever new and fan tastic turns. Feeling ran high. To end the deadlock, the Ramsey-Morgan party finally despatched a force of armed men, estimated by the press to be between 150 and 450 in num ber.... At the same time, an equally formidable. mixed body of Erie's Bowery toughs and sheriff's deputies departed for battle from Binghamton behind their own engine. Outside of a long tunnel, fifteen miles beyond Binghamton, the enemy locomotives, whistling and tooting their bells wildly, breathing fire and fury, met in head-on collision .... The warriors of both armies had all jumped off as the two steam char iots collided, and yelling defiance had fallen upon each other with clubs, spades, axes and firearms. But the Ramsey-Morgan thugs were the better armed, and the Erie soldiers soon had the worst of it. Retreating as fast as they could, tearing up tracks and destroying trestles, they went back toward Binghamton, where they barricaded themselves anew and called regiments of the National Guard to their rescue. 20 Such an occurrence is no more a 20 Matthew Josephson, The Robbe1' Barons (New York: Harcourt, Brace, 1934), p. 139.

1966 FROM IDEOLOGY TO MYTHOLOGY-II 33 natural consequence of business competition than is rape. of rela tions between the sexes, and prob ably less common, but it provided excellent propaganda for those under the sway of ideology. Writers with good imaginations could, and did, take facts, surmises, and interpretations about the be havior of businessmen and weave them into a picture of jungle life, red in tooth and claw. Henry De marest Lloyd, perhaps the earliest of· the muckrakers, writing in the latter part of the nineteenth cen tury, declared: "We are still, part, as Emerson says, in the quadruped state. Our industry is a· fight of every man for himself. The prize we give the fittest is monopoly of the necessaries of life, and we leave these winners of the powers of life and death to wield them over us by the same 'self-interest' with which they took them from US."21 Matthew Josephson probably did the most thorough job of mytholo gizing competition-as-w~r in The Robber Barons. In this ~ook, busi nessmen were likened td medieval barons, and the story is told in a framework and with the terminol ogy drawn from medieval warfare.

Note the martial language used to describe the actions of western railroad builders in the following: 21 Henry D. Lloyd, Wealth against Commonwealth, Charles C. Baldwin, ed. (Washington: National Home Library Foundation, 1936), p. 330. Power such as they had foreseen but dimly came to the hands of the empire-builders. . . . By seizing one valley, or the passageway to it, they brought an adjacent one into their effective control, as the medieval barons had done of old.... Their net work of branch lines was spread throughout the Pacific Slope, through the payment of proper ransoms by the communities which required such outlets as a matter of life and death. But more ingenious, the new barons who held the only overland route to the Pacific connected these lines with water-front facilities, which they, upon a large scale, wrested from the coast cities by the threat of extinc tion. 22 Similar terminology was used to describe the behavior of the oil men: Tomorrow all the population of the Oil Regions ... might rise against the South Improvement Company ring in a grotesque uproar .... But Rockefeller and his comrades had stolen a long march on their oppon ents,. their tactics shaped themselves already as those of the giant indus trialists of the future conquering the pigmies. Entrenched at the 'nar rows' of the mighty river of petro leum they could no more be dislodged than those other barons who had formerly planted their strong castles along the banks of the Rhine could be dislodged by unarmed peasants and burghers. 23 22 Josephson, Ope cit., p. 88. Italics mine.

23 Ibid., p. 120. Italics mine.

&4 THE FREEMAN February This myth went into the warp and woof of history as many Amer icans were to understand it. Here is an example of it in a recent text book. Rockefeller flourished in an era of completely free enterprise. So-called piratical practices were employed by 'corsairs of finance,' and business ethics were distressingly low. Rocke feller, operating 'just to the wind ward of the law,' pursued a policy of rule or ruin .... The Standard Oil Company was undeniably heartless, but its rivals were no less so in this age of dog-eat dog competition. A kind of social economic Darwinism seemingly pre vailed in the jungle world of big busi ness, where, in certain areas, only the fittest survived .... :!4 The myth of competition-as-war has served over the years as the major propellant of government in tervention, from antitrust legisla tion to fair trade laws to inspection acts to a great variety of other reg ulatory measures. It has even served as the basis of the interpre tation of the coming of wars among nations as a result of trade com petition. In short, the myth serves to promote reform.

24 Thomas A. Bailey, The American Pageant (Boston: D. C. Heath, 1961, 2nd edition), p. 532. For a soberer evalua tion of these men and events, see John Chamberlain, The Enterprising Ameri cans (New York: Harper & Row, 1961 63), ch. 8. IIPrivileges ll to Business One other myth will be examined with some little care. The examina tion of this myth is particularly instructive as to exaggerations and distortions involved in the making and purveying of myths. This myth has to do with the privileged posi tion of business vis a vis govern ment, with how businessmen were supposed to have been the benefi ciaries of government largess, with how a plutocracy used government for its own ends, particularly in the late years of the nineteenth and the early years of the twentieth centuries. According to Vernon Louis Parrington, America was spread out upon a table like a great barbecue: Congress had rich gifts to bestow - in lands, tariffs, subsidies, favors of all sorts; and when influential citizens made their wishes known to the reigning statesmen the sympa thetic politicians were quick to turn the government into the fairy god mother the voters wanted it to be.25 Lincoln Steffens proclaimed that businessmen corrupted govern ment: Another such conceit of our ego tism is that which deplores our poli tics and lauds our business. This is the wail of the typical American citizen.

Now, the typical American citizen is the business man. The typical busi ness man is a bad citizen; he is busy. ~5 Parrington, Ope cit., p. 23.

1966 FROM IDEOLOGY TO MYTHOLOGY - II 35 If he is a "big business man" and very busy, he does not neglect, he is busy with politics .... I found him buying boodlers in St. Louis, de fending grafters in Minneapolis, orig inating corruption in Pittsburgh, sharing with bosses in Philadelphia, deploring reform in Chicago, and beating good government with cor ruption funds in New York. He is a self-righteous fraud, this big busi ness man. 26 "Grants ll to Railroads The most common example of this sort of thing cited in histories is the one about government grants and subsidies for the building of the railroads. Now there were land grants from the United States gov ernment (and indirectly, or di rectly, from state governments) made for the building of some rail roads, and there were loans made also. However, the extent and char acter of this has been greatly ex aggerated and distorted generally.

Some years ago, Colonel Robert S. Henry examined the treatment of these loans and grants in 37, Amer ican history textbooks. A .few of the books gave an approximately correct description or account of the land granted. But, for example, "eight others show the area granted ... as anywhere from 26 Lincoln Steffens, The Shame of the Cities (New York: Young People's Mis sionary Movement, 1904), p. 5. nearly one-fifth more than it was, up to about four times the correct area .... Others make neither arithmetical nor graphic presenta tion of the area granted, but rely entirely on adjectives. In most of the books, in fact, such adjectives as 'huge,' 'vast,' 'enormous,' 'stag gering,' and 'breath-taking' are parts of the treatment of the sub ject of area .... " He points out that less than 8 per cent of the railroad mileage in the United States was built by land grant aid from the United States government. "The fact that more than 92 per cent of all the railroad mileage in the United States was built without the aid of an acre of Federal land grants is nowhere brought out in the texts examined .... "

A similar exaggeration was made in the texts regarding loans. The loans made were to be repaid with interest. Virtually all of the principal was eventually repaid, along with a large sum of interest. "Thirty-four of the thirty-seven texts examined men~ion the bond aid to these Pacific roads. In one third of the works, it is not made clear whether the financial assist ance referred to was a loan or a gift. Three describe the aid defi nitely as gifts - which they were not. Twenty-one refer to the trans actions as loans, but only four men tion the fact that the loans were re paid, while· three make the posi36 THE FREEMAN February tively erroneous statement that the loans were never repaid."27 Such is the fabric of exaggera tion, distortion, misstatement, error, and ignorance by which a myth has been bolstered and pur veyed. This myth early served as a basis for demands for govern mental regulation of the railroads.

It may even have added to the ap peal of the perpetual socialist agi tation in the late nineteenth and early twentieth centuries for gov ernment ownership of the roads. It certainly contributed to the "image" of the railroads as villains. The Growth of Myths The above are only a sampling of the myths that have been and are given currency. There is the myth of the class struggle read into American history, the myth of the "people" as an originative force, the myth of the connection between increasing government interven tion and progress, the myth of the conservative businessman who is opposed to change and progress, the myth of the spontaneous rise of labor unions in response to op pression, the myth of the role of the environment in perpetuating poverty, the myth about the United 27 Robert S. Henry, "The Railroad Land Grant Legend in American His tory," Issues in American Economic His tory, Gerald D. Nash, ed. (Boston: D. C.

Heath, 1964), pp. 324-25. The article was originally published in 1945. States being a democracy, and so on. There is even an extensive myth to the effect that older American beliefs were myths: for example, the "myth of the self-made man," the "myth" that the budget should be balanced, the "myth" that sav ing and frugality are economically useful, and the "myth" that pri vate initiative and free enterprise account for American economic productiveness. In the 1930's, Thurman Arnold published a book called The F olklore of Capitalis1r~ in which he castigated the beliefs of Americans as articles of faith, superstitions, myths, and folklore. By 1956, the book had been through fourteen printings! Myths have been got up which inhibit the ex ploration and exposure of the mythology of reform: the myth of the "extreme right," the myth of the Red Scare, the myth of Mc Carthyism, and so on. Platform for Reform In short, an ethos has been de veloped, spread, and more or less accepted which promotes contin uous reform by the use of govern ment power. This mental frame work has become the angle from which millions of Americans see things. They have imbibed it by way of a mythology which they have supposed was history. A lan guage was developed, along with 1966 FROM IDEOLOGY TO MYTHOLOGY - II 37 the mythology, which has been used to evoke it to promote reform measures. The language consists of such terms and phrases as "la bor," "agriculture," "privileged,"

"underprivileged," "monopoly," "oligopoly," "economic royalist" "rob ber barons," "profiteers," "hoarders," "black marketeers," "vested interests," "extremists," "unearned increment," "social sur plus," "general welfare," "malefac tors of great wealth," "absentee ownership," "conspicuous con sumption," "right winger," "nean derthals," "sweat shop," "rent lord," "speculator," "anti-intellec tual," "witch hunter," and so on. The terms used change somewhat over the years, depending upon the standing of reform among the American people and what is con ceived to· be the immediate danger to the continuation of reconstruc tion. Finally, it should be noted that a mythology is much more difficult to deal with than an ideology, and a much more effective way to draw people generally under. its sway. An ideology consists of ideas; it can be examined; the ideas can be refuted if they are false. But when an ideology has been embedded in a mythology, and this has. become widely accepted, many people will not even know that their beliefs are rooted in ideologies. They think that what they believe is simply the way things are, or have been.

That government action can pro duce prosperity, for instance, will not be thought of as rooted in ide ology but as something that has historically happened. Moreover, it is much easier to manufacture myths than it is to give a valid historical account; one needs only to examine such evidence as seems to prove his point, read his view of things into the account, and make it come out according to the mythological or ideological version one starts with. There is also the near certainty that the process of exploding myths and giving more accurate and valid historical ac counts will proceed much more slowly than mythmaking, be much less dramatic, and probably occur after the object for which the myth existed has been obtained. At any rate, a mythology has been formed and spread in Ameri ca. The attitudes and beliefs of many Americans have been shaped in conformity with it. The minds of men have been remade. It is this mythology that promotes the con tinuous reform efforts. It is this that has catapulted us into the Age of Meliorism. • The next article in this series will treat of "The Origins of Reform Methods."

Sacrilege and Cupidity A PLEA FOR PERSPECTIVE M. E. BRADFORD THE SOCIAL GOSPEL is old hat. Its shiny newness has long since worn away; and even in theologi cal circles it has experienced an embarrassing interrogation. But it is by no means dead. After apol ogizing for the doctrinal excesses of some of its early champions, and after developing a new and conciliatory idiom for use on the theological and political conserva tive, it now sits comfortably in the councils of Christendom, its essentially political and utopian character effectively masked. Tele vision programs and books have been recently devoted to its re surgent influence. And, in fact, that influence has never been di minished. All we can say is that, for a time, it was checked. The heterodox order of priorities it represents has long been a pulpit commonplace. And it is with ref erence to that order of priorities that I here propose to examine Mr. Bradford is assistant professor of Eng lish at Northwestern State College of Louisi ana at Natchitoches.

38 and define the origin of social gos pel as a political force. For it is this politics cum faith that pre sents American conservatism with its most serious challenge. It is by no means easy to debate with men who insist they speak for God. American liberalism (whose theological voice the social gospel is) has always had a plenti ful supply of adherents who speak for God; and they have, I am sorry to admit, had no monopoly in this business of sacrilege; American politicians of various persuasions have claimed a pipe line to the deity. By now Ameri can conservatives should have learned that this is a degrading strategy - and that the very na ture of their position makes it dif ficult, if not impossible, for them to "play the game" this way. And what is more important, they should have learned how to answer the latter-day bogus "thus saith the Lord," on its own theological ground.

1966 SACRILEGE AND CUPIDITY: A PLEA 39 The Rhetoric of Love The backbone of the popular brand of the social gospel is what I call "the rhetoric of love." Its argument goes something like this: "God is love; God has given us (we, the liberals) a clear defi nition of what he means by love; those who oppose what we urge are the enemies of love." No nor mal American will admit that he is against love (or deficient in it); and the American conserva tive, when charged with such an enormity will "crawfish," "hedge," or perhaps try to "outlove" his op ponent. In brief, he will do any thing but insist that there is such a thing as an excess or misplace ment of love. He knows in his bones tha t man is indeed prone to excess in all things (including love) ; and a reluctance to indulge excessive impulses is part of what we mean by conservative. But he is unwill ing to examine political .and phil osophical sentimentalism (by de finition, expression of emotion out of proportion to its occasion) in its theological dimension. And he must do so if he is not to fall vic tim to the rhetoric of love.

The good old theological name for this excessive or misdirected love is cupidity; it was the orig inal sin and has, since Adam put the love of Eve before the love of God, been among the most fre quently repeated. And it is the error into which good men and true fall most readily. Assuredly, it is the sin into which the social gpspel should lead us through the rhetoric of love. For this rhetoric makes no distinction among the objects of love. It sees all objects as equally worthy and thus abol ishes all order of priorities in our obligations. For example: American grants of aid to free nations may at times prove wise, necessary, or even suc cessful. But the conservative maintains that the virtue of any foreign aid program is conditioned by its effect on our economic and military posture. The rhetoric of love may call for greater and grea ter largess in the name of humanity; but the theologically grounded answer to its insistence is that our obligations to preserve our own economy, and with it our capaci ty to assist and protect those nations which depend upon our strength, is greater than our obligation to relieve completely any single nation in its distress.

When compassion outreaches judg ment, cupidity is the result. And the political voice of the social gos pel is short on judgment. It is with reference to a form of the doctrine of cupidity that we may define excessive liberty as license, excessive tolerance as in difference, excessive or forced equality as anarchy. In its name 40 THE FREEMAN February we may, in the face of the rhetoric of love, reject sociological, senti mental juggling of the letter and intent of the law done in the name of "civil rights"; impious "non violence" in the streets done in the name of brotherhood; and sur render of national sovereignty called for in the name of world u nity.For it is cupidity to put even the honest demands of minority groups for redress of grievances they "suffer" before the mainte nance of the integrity of a consti tutional system or a hard-won and slowly evolved social order. And it is even more of an inversion to surrender national sovereignty in the name of world peace when only our 'sovereign strength preserves that peace.

Love Some Persons or Things More 'han O,hers None of the answer to the social gospel is very difficult. Most of it may be had out of Aristotle, John Adams, Calhoun, or Burke. But the best reply to the rhetoric of love is a general theological reply. We must love some things, some men, more than others. The love of God and of the general well-be ing of a number of men often pre cludes the perfect love of individ ual .men. Our obligation to our own family or "clan" is greater than our obligation to the faceless multitude. As Burke said, "N0 cold relation is a zealous citizen. We begin our public affections in our families." Our obligations move outward in a circle from the near to the remote. For if we un dermine the ground of our own being, our integrity and capacity to act responsibly in our own proper affairs, we are of no use to any man. Thus replied to, the social gos pel - which I suspect grew out of the clergyman's deep-seated dis trust of providence and the "other worldly" promise of his own faith - returns to its place; and then the pulpit ceases to be a political tool of a "this-worldly" eschatol ogy based on a denial of the tran scendental character of the faith it should draw upon for support.

Thus answered, the sacrilegious mask of the rhetoric of love can be torn from the face of the quasi totalitarian liberal will-to-power, and the conservative can return the dialogue of American politics to a ground where the odds are in his favor. For without the advan tage of his mask, the politico curn prophet is merely the aggressor in a power struggle, not the "agent of the Lord." And even though they may differ about the merit of various programs for achieving the common good, Americans and other civilized Westerners do not like a bully - especially a sancti monious bully! ~ HENRY HAZLITT THE ADVOCATES of foreign aid be lieve that it helps not only the country that· gets it but the coun try that gives it. They believe, therefore, that it promotes world wide "economic growth.". They are mistaken in all these assumptions. I should make clear at the be ginning that when I refer here to foreign aid I mean government-to government aid. Still more specif ically, I mean government-to-gov ernment "economic" aid. I am not considering here intergovern mental military aid extended either in wartime or peacetime.

The justification of the latter will depend, in each case, only partly on economic considerations, and mainly on a complex s,et of polit ical and military facto~s. Mr. Hazlitt is the well-known economic and financial analyst, columnist, lecturer, and au thor of numerous books. It ought to be clear, to begin with, that foreign aid retards the economic growth and the capital , development of the country that grants it. If it is fully paid for out of taxes at the time it is granted, it puts an additional tax burden on industry and reduces incentives at the same time as it takes funds that. would otherwise have gone into new domestic investment. If it is not fully paid for, but fi nanced out of budget deficits, it brings all the evils of inflation. It leads to rising prices and costs. It leads to deficits in the balance of payments, to a loss of gold, and to loss of confidence in the sound ness of the currency uni t. In either case foreign aid must put back the donor country's capital development.

All the consequences just de scribed have occurred in the 41 42 THE FREEMAN February United States. In the last twenty years American foreign aid has reached the stupendous total of $115 billion. As the public debt has increased from $259 billion at the end of 1945 to $321 billion now, this means that $62 billion of this foreign aid was in effect paid for by borrowing and by in flating the currency, and $53 bil lion by added taxation. Without the foreign-aid handouts we could have avoided both the inflation and the added taxation. We could have avoided both the cumulative def icit of $27 billion in the balance of payments and the loss of $9 billion gold in the last eight years. Today, American "liberals" are talking about all the billions we ought or will need to spend to extend and improve our roads and highways, to improve and increase our hous ing and to rehabilitate our blighted cities, to combat air pol lution and water pollution, to bring more water to the cities and to turn salt water into fresh. The $115 billion that went into foreign aid would have covered practically all the improvements in this di recti on that most of these "lib erals" are demanding.

The Pump-Priming Argument We sometimes hear it said by American advocates of foreign aid (and we very frequently hear it said by many of the foreign recipients of our aid, and alwa'Ys by the communists) that the U.S. has got great economic advantages out of its foreign aid program. We desperately need "outlets" and "new markets" for our "surplus." We must give part of our goods away, or give foreigners the dol lars with which to buy them, to keep our factories going and to maintain full employment. This program was even necessary, ac cording to the communists, to "postpone" the ."inevitable col lapse" of capitalism. It should not be necessary to point out that this whole argu ment is unmitigated nonsense. If it were true that we could create prosperity and full employment by making goods to give away, then we would not have to give them to foreign countries. We could ac complish the same result by mak ing the goods to dump' into the sea. Or our government could give the money or the goods to our own poor.

It ought to be clear even to the feeblest intelligence that nobody can get rich by giving his goods away or making more goods to give away. What seems to con fuse some otherwise clearheaded people when this proposition is ap plied to a nation rather than an individual is that it is possible for particular firms and persons within the nation to profit by such 1966 THE FALLACY OF FOREIGN AID 43 a transaction at the expense of the rest. The firms, for example, that are engaged in making the exported foreign-aid commodities are paid for them by the aid-re ceiving country or by the U.S. government. But the latter gets the money, in turn, from the American taxpayers. The taxpay ers are poorer by the amount taken. If they had been allowed to keep it, the'y would have used it themselves to buy the goods they wanted. True, these would not have been precisely the same goods as those that were made and exported through the foreign-aid program. But they would have supplied just as much employ ment. And Americans, rather than foreigners, would have got what was made by this employment.

Buying Friends "Yes," it may be· conceded, "all of this may be true; but let us not look at the matter so selfishly, or at least not so nearsightedly. Think of the great blessings that we have brought to the aid.-re ceiving countries, and think of the long-run political and other in tangible gains tothe United States. We have prevented the aid-re ceiving countries from going com munist, and the continuance of our aid is necessary to continue to keep them from going communist. We have made the recipient countries our grateful allie·s and friends, and the continuance of our foreign aid is necessary to continue to keep them our grate ful allies and friends." First, let us look at these al leged intangible gains to the United States. We are here admit tedly in the realm of opinion, in the realm of might-have-beens and might-be's, where proof either way is hardly possible. But there is no convincing evidence that any of our aid-recipients that have not gone communist would have done so if they had not got our economic aid. Communist Party membership in aid-receiving France and Italy did not fall off; in fact it has shown a tendency to increase in both countries with increasing prosperity. And Cuba, the one· country in the Western Hemisphere that has gone com munist, did so in 1959 in spite of having shared freely in our for eign aid in the preceding twelve years. Cuba had been favored by us, in fact, beyond all other coun tries in sugar import quotas and other indirect forms of economic help.

As for gaining grateful allies or even friends, there is no ev idence that our $11 billion of lend lease to Russia in World War II endeared us to the Russian lead ers; that our aid to Poland, Yu goslavia, Indonesia, and Egypt 44 THE FREEMAN February turned Gomulka, Tito, Sukarno, or Nasser into dependable allies; that it has made Gaullist France, or India, Mexico, Chile, Laos, Cambodia, Bolivia, Ghana, Pan ama, Algeria, and scores of other nations that have got our aid, in to our grateful friends. On the other hand, there is good reason to suspect that our aid has often had the opposite effect. Countries have found that when ever they look as if they are in danger of going communist they get more American aid. This veiled threat becomes a recognized way of extorting more aid. And the leaders of governments getting our aid find it necessary to insult and denounce the United States to prove to their own followers that they are "independent" and not the "puppets" of "American imperialism." It is nearly always the U. S. embassies and informa tion offices that periodically get rocks thrown through their win dows, not the embassies of coun tries that have never offered any aid.

Humanitarian Motives "Still," it may be (and is) ob jected, "to mention any of these things is to take a shortsighted and selfish point of view. We should give foreign aid for pure ly humanitarian reasons. This will enable the poor nations to conquer their poverty, which they cannot do without our help. And when they have done so, we will have the reward of the charitable deed itself. Whether the recipi ents are grateful to us· or not, our generosity will redound in the long run to our own self-interest. A world half rich and half poor is an unsafe world; it breeds envy, hatred, and war. A fully prosper ous world is a world of peace and good will. Rich nations are ob viously better customers than poor nations. As the underde veloped nations develop, Ameri can foreign trade and prosperity must also incre'ase." The final part of this argument is beyond dispute. It is to Ameri ca's long-run interest that all other countries should be rich and productive, good customers, and good sources of supply. What is wrong with the argument is the assumption that government-to government aid is the way to bring about this desired consum mation.

The quickest and surest way to production, prosperity, and eco nomic growth is through private enterprise. The best way for gov ernments to encourage private en terprise is to establish justice, to enforce contracts, to insure do mestic peace and tranquillity, to protect pri vate property, and to secure the blessings of liberty, in1966 THE FALLACY OF FOREIGN AID 45 eluding economic liberty - which means to stop putting obstacles in the way of private enterprise. If every man is free to earn and to keep the fruits of his labor, his incentives to work and to save, to invent and invest, to launch new ventures, to try to build a better mousetrap than his neigh bor, will be maximized. The effort of each will bring the prosperity of all. Under such a system more and more citizens will acquire the cap ital to lend and invest, and will have the maximum inducement to lend and invest at home.

Very quickly more and more foreigners will also notice the in vestment opportunities in (let us call it) Libertania, and their money will come in to speed its development. They will place their funds where they promise to earn the highest returns consonant with safety. This means that the funds will go, if the investments are wisely chosen, where they are most prod ucti vee They will go where they will produce the goods and services most wanted by pro ductive Libertanians or by for eigners. In the latter case they will produce the maximum ex ports, or "foreign exchange," either to payoff the investment or to pay for. the import of the foreign goods most needed. The surest way for a poor nation to stay poor, on the other hand, is to harass, hobble, and straitjacket private enterprise or to discourage or destroy it by subsidized government competi tion, oppressive taxation, or out right expropriation.

Socialism versus Capitalism Now government-to-government aid rests on socialistic assump tions and promotes socialism and stagnation, whereas private for eign investment rests on capital istic assumptions and promotes private enterprise and maximum economic growth. The egalitarian and socialistic assumptions underlying govern ment-to-government aid are clear. Its main assumption is that the quickest way to "social" justice and progress is to take from the rich and give to the poor, to seize from Peter and give to Paul. The donor government seizes the aid money from its supposedly over rich taxpayers; it gives it to the receiving nation on the assump tion that the latter "needs" the money - not on the assumption that it will make the most pro ductive use of the money. From the very beginning gov ernment-to-government aid has been on the horns of this dilemma. If on the one hand it is made without conditions, the funds are squandered and dissipated and 46 THE FREEMAN February fail to accomplish their purpose.

But if the donor government at tempts to impose conditions, its attempt is immediately resented. It is called "interfering in the in ternal affairs" of the recipient na tion, which demands "aid without strings." In the twenty expensive years that the foreign aid program has been in effect, American officials have swung uncertainly from one horn of this dilemma to the other - imposing conditions, dropping them when criticized, silently watching the aid funds being grossly misused, then trying to impose conditions again. But now American officials seem on the verge of following the worst pos sible policy - that of imposing conditions, but exactly the wrong conditions. President Johnson has an nounced that our future foreign aid will go to those countries "will ing not only to talk about basic social change but who will act im mediately on these reforms." But what our aid officials appear to have in mind by "basic social change" is to ask of the countries that receive our grants, not that they give guarantees of the secur ity of property, the integrity of their currencies, abstention from crippling government controls, and encouragement to free markets and free enterprise, but that they move in the direction of govern ment planning, the paternalistic state, the redistribution of land, and other share-the-wealth schemes.

Land Reform Measures The so-called "land reform" that our government officials are de manding has meant and still means destroying existing large-scale agricultural enterprises, dividing land into plots too small for ef ficient or economic cultivation, turning them·over to untried man agers, undermining the principle of pri vate property, and opening a Pandora's box of still more radi cal demands. Socialism and welfare programs lead to huge chronic government deficits and runaway inflation. This is what has happened in Latin America. In the last ten years the currency of the Argen tine has lost 92 per cent of its pur chasing power; the currency of Chile has lost 94 per cent; of Bo livia 95 per cent; of Brazil 96 per cent. The practical consequence of this is the expropriation of wealth on a tremendous scale. Yet, a United States Senator, recently demanding "land reform" and ignoring this history, made it a charge against the rich in these aid-receiving nations that they do not "invest in their own economies" but place their funds 1966 THE FALLACY OF FOREIGN AID 47 abroad. What he failed to ask himself is why the nationals of some of these countries have been sending their funds abroad or put ting them in numbered accounts in Switzerland. In most cases, he would have found that it was not only because no attractive private invegtment opportunitieg were open to them at home (because of burdensome controls, oppressive taxes, or government competition) , but because they feared the wip ing out of their savings by rapid depreciation of their home curren cies, or even the outright confisca tion of their visible wealth.

The Benefits? In the last twenty years foreign aid has made American taxpayers $115 billion poorer, but it has not made the recipients .anything like that much richer. How much good has it actually done them? The question is difficult to answer in quantitative terms, because for eign aid has often been a rela tively minor factor out of the scores of factors affecting their economies. But the advocates of foreign aid have had no trouble in giving glib and confident answers to the question. Where, as in Western Europe and Japan, our aid has been followed by dramatic recov ery, the recovery has been attrib uted wholly to the aid (though just as dramatic recoveries oc curred in war-torn nations after World War I when there was no aid program). But where our aid has not been followed by recovery, or where recipient nations find themselves in even deeper eco nomic crises than they were before our aid began, the aid advocates have simply said that obviously our aid was not "adequate." This argument is being used very widely today to urge us to plunge' into an even more colossal aid pro gram.

A careful country-by-country study, however, shows pretty clearly that wherever a country in recent years (such as West Ger many) has reformed its currency, kept it sound, and adhered in the main to the principles of free en terprise, it has enj oyed a mirac ulous recovery and growth. But where a country (such as India) has chosen government planning, has adopted grandiose socialistic "five-year plans" arbitrarily di recting production into the wrong lines, has expanded its currency but kept it overvalued through ex change controls, and has put all sorts of restrictions and harass ments in the way of private en terprise and private initiative, it has sunk into chronic crises or famine in spite of billions of dol lars in generous foreign aid. As Charles B. Shuman, pres i48 THE FREEMAN Februa'ry dent of the American Farm Bureau Federation, recently put it, the one common denominator in virtually all the hungry nations has been "their devotion to a so cialist political-economic system - a government-managed econo my. The world does not need to starve if the underdeveloped areas can be induced td accept a mar ket price system, the incentive method of capital formation competitive capitalism."

Our conclusion is that govern ment-to-government foreign aid, as it exists at present, is a deter rent, not a spur, to world econom ic prosperity, and even to the eco nomic progress of the underdevel oped recipients themselves. Wasteful Projects This is true partly because of the very nature of foreign aid. By providing easy outside help without cost, it often fails to en courage self-help and responsibil ity. Moreover, government-to-gov ernment economic help almost in evitably goes to governntent proj ects, which frequently mean so cialized projects, such as gran diose government steel mills or power dams. It is true that there are many economic services, such as streets and roads, water supply, harbors, and sanitary measures, that are usually undertaken by governments even in the most "capital istic" countries, yet which form an essential basis and part of the process and structure of all pro duction. Foreign as well as do mestic funds may legitimately go to governments for such purposes.

Yet intergovernmental aid is like ly to channel a disproportionate amount of funds even into such projects. If governments had to depend more on domestic or for eign private investors for these funds, less extravagant projects of this nature would be embarked upon. Private investors, for exam ple,might lend more freely for toll roads and bridges, and similar projects that promised to be self liquidating, than for those that yielded no monetary return. As a result, the recipient government's planners would make more effort to put their roads and bridges where the prospective use and traffic would prove heavy enough to justify the outlay. In addition to the conditions in the very nature of government to-government aid that make it on net balance a deterrent rather than a spur to private enterprise and higher production, there is the recent disturbing trend in the attitude of American aid officials, who have begun to insist that un derdeveloped nations cannot get more aid unless they adopt "land reform," planning, and other so1966 THE FALLACY OF FOREIGN AID 49 cialistic measures-the very meas ures that tend to retard eco nomic recovery.

Conditions for Private Investment If our aid program were now tapered off, and the underdevel oped nations had to seek foreign private capital for their more rap id development, the case would be far different. Foreign private in vestors would want to see quite different reforms. They would want assurance (perhaps in some cases even gua.rantees) •against nationalization or expropriation, against gove,rnment-owned com petition, against discriminatory la ws, against price controls, against burdensome social secur ity legislation, against import license difficulties on essential ma terials, against currency exchange restrictions, against oppressive taxes, and against a constantly de preciating currency. They would probably also want guarantees that they could always repatriate their capital and profits. Foreign private investors would not demand the active cooperation or an enthusiastic welcome by the government of the host country, but this would certainly influence their decision considerably. In fact, foreign private investors, un less the would-be borrowers came to them, would not demand any conditions at all. They would place their funds where the deter rents and discouragements were fewest and the opportunities most inviting.

What the anticapitalistic men tality seems incapable of under standing is that the very steps necessary to create the most at tractive climate for foreign invest ment would also create' the most attractive climate for domestic in vestment. The nationals of an un derdeveloped country, instead of sending their money abroad for better returns or sheer safekeep ing, would start investing it in enterprises at home. And this do mestic investment, and reinvest ment would begin to make foreign investment le,ss and less urgent. It is unlikely that reforms in the direction of free enterprise will be made by most socialistic and control-minded countries as long as they can get intergove·rn mental aid without making these reforms. So a tapering off or phas ing out of the American aid pro gram will probably be necessary before a private foreign invest ment program is launched in suf ficient volume.

A More Hopeful Alternative I should like to renew he·re a suggestion for an interim program that I put forward a few years ago.! This is that, from now on INational Review, May 6, 1961.

50 THE FREEMAN February out, economic foreign aid would be continued solely in the form of loans rather than grants. These would be hard loans, repayable in dollars. They would bear interest at the same rate that our own gov ernment was obliged to pay for loans of equal maturity - as of to day, say about 41j2 per cent. They would be repayable over not more than twenty-five to thirty years, like a mortgage. Like a mortgage, they would preferably be repay able, principal and interest, in equal monthly or quarterly install ments, beginning immediately after the loan was made. Such loans would not be urged on any country. The would-be bor rowers would have to apply for them. They would be entitled to borrow annually, say, any amount up to the amount they had previ ously been receiving from us in grants or combined loans and grants. All these requirements would be written into law by Congre,ss.

Congress would also write into law the conditions for eligibility for such loans. Among such conditions might be the following: The bor rowing government would have to refrain from any additional so cialization or nationalization of industry, or any further expropri ation or seizure of capital, domes tic or foreign. It would undertake to balance its budget, beginning, say, in the first full fiscal year after receiving the loan. It would undertake to halt inflation. The borrowing government, for ex ample, might agree not to increase the quantity of money by more than 5 per cent in anyone year, and not to force its central bank to buy or discount any increased amount of the government's own securities. The borrowing govern ment might be required to dis mantle any exchange controls. In brief, the borrowing country and government would be obliged to move toward the conditions that would be necessary to attract pri vate domestic or foreign capital.

Anticipated Consequences My guess is that the mere re quirement for repayment of prin cipal and interest, to begin im mediately, would in itself p,rob ably reduce applications for aid to about a third of the amounts we now payout. The other conditions of eligibility would probably cut the applications to a sixth or a tenth of these amounts. For the borrowing governments would have to think twice about the' ad visability of projects for which they would have to start paying themselves. Projects would tend to be reduced to those that were self-liquidating, i.e., demonstrably economic. The borrowing nations could 1966 THE FALLACY OF FOREIGN AID 51 not complain that we were trying to interfere in or to dictate their domestic economic policies. . These would merely be the conditions of eligibility for loans. The .borrow ing nations would be. neither forced nor urged to borrow from us. The American administrators of the foreign loan program would not be authorized either to dictate or remove any conditions or to discriminate among borrow ers. In any case, their discretion should be very narrowly circum scribed.

The benefits of such a program would be many and obvious. It would immediately cut down dras tically the outflow of American funds in foreign aid. Most of the aid that we granted through such loans would be rep,aid with in terest. We would not be courting foreign favor. The would-be bor rowers would have to come· to us, openly. We would cease;, as now, to subsidize and expand foreign socialism. I should make it clear that I am not proposing such a program for its own sake, but as a purely transitional measure to phase out our existing foreign-aid program with the least possible disturbance, disruption, or recrimination. This scaled-down lending program might run for, say, a maximum of three years. At the end of that time it could easily be terminated. For meanwhile the borrowing gov ernments, and particularly private enterprises in their respective countries, would have created an attractive climate, and would have become attractive media, for both domestic and foreign private investment.

In such a revitalized capitalistic' climate the improvement in world economic conditions might even be come spectacular. ~ First Principles EVERY MAN should expend his chief thought and attention on the consideration of his first principles: are they or are they not rightly laid down? and when he has sifted them, all the rest will follow. PLATO. Cratylu8 HAD NAPOLEON been asked to sit atop the Cosmos and manage everything in interstellar space, probably he would have demurred on the grounds that such an as signment was beyond his com petence. Yet, he unhesitantly strove for a role no less preten tious: managing millions of human beings, each of whom is as phe nomenal as the Cosmos itself. A *Macro: meaning large; comprising the universe; as distinguished from the individual components. Macro economics, for instance, refers. to the economy as a whole without relation to the individ ual components. The term recently has come into popular use for what might otherwise be called the economics of collectivism, the centrally planned econ omy, the welfare state, with emphasis on national income, social progress, full employment, and the like, instead of private property, freedom of choice, self responsibility, and other aspects of in dividualistic "micro economics."

In earlier times, macro economics had its equivalent in tribal custom, feudal ism, mercantilism, and other variants of collectivism. 52 The Macro Malady* LEONARD E. READ master at his specialization-coer cion - he was grossly ignorant of the limits of his wisdom. Knowing so much in so narrow an area, and being unaware of his limitations, led him to assume a role for which no man - not even a Napoleon has any competence whatsoever. Napoleon was a "macro." His torically, he and his ilk have been the exceptions. Most people have been "micros." While victimized by authoritarianism, they have nevertheless been content to wres tle with social problems of the micro sort. That's the way the past reads to me. But the picture changes! Mil lions upon millions of people are now presuming to settle problems that are over their heads - macro problems. This accounts, in no small measure, for our headlong return to coercive collectivism. At least, this is my thesis.

A typical case in point: A noted 1fJCC THE MACRO MALADY 53 biologist, extrapolating population trends, predicts that there will be one billion billion of us on earth no further in the future than the Norman Conquest is in the past" •••~ome 12Q per50n6 per 5quare yard of the earth's surface ..."1 This, of course, is a horrendous statistic! But the nub of the mat ter is that the biologist has taken on a problem that's over his head. Such would be the case even were he limiting himself to the prob lems of our nation at the present moment. This scientist, however, takes on the social problem of the whole world, and some centuries hence! Now, how does this biting off of more problems than one can chew lead to coercive collectivism? Listen to one of the several sug gested remedies: . . . a program in which everyone is temporarily sterilized (perhaps with a substance added to water supplies or staple foods) will be necessary. This would make positive action, in applying for and taking an antidote, necessary before repro duction.

1 See "The Biological Revolution," Stanford Review, September-October, 1965. Predicting the future by extrapolation can easily lead to fantastic conclusions, points' out Dr. Henry Margenau, Yale physicist. By projecting the rate of in crease in the number of scientists against general population trends we would have more scientists in 2000 A.D. than people! Mass sterilization \ rrhe only way to have a baby is to apply for an antidote, a drug that will restore fertility. Who is to pos sess this permit-granting author ity ~ Not the scientist; he won't be here. The answer is that a gov ernment official will decide who is or is not to be born. Would an Abe Lincoln be given dispensation of life by this political god? Booker T. Washington? Sa.m Goldwyn? You? I? The biologist himself? Shades of 1984!2 The above, while somewhat startling and sensational, is no less out-of-bounds than Napoleon atop the Cosmos, or any more fa.r fetched than millions of Richard Does and Joe Doakeses who now take on social problems bigger than they are and end up by turn ing the problems over to govern ment for solution. Joe Doakes, who votes in favor of a resolution for the government to finance the· lo cal hospital, is in exactly the same category as the biologist - each trying to focus on a problem that is beyond his competence.

What has brought on this rash of macro addicts? Nearly every one trying to solve problems big ger than the would-be problem solvers? Perhaps we can put our finger on the reason. 2 I refer to George Orwell's book, 1984, his nightmare vision of England's future.

54 THE FREEMAN Feb1'uar-y Reflect on my farmer grand fathers. The social problems they dealt with - welfare, security, prosperity - were of a size befit ting their men tali ties; they thought in micro terms - that is, they did their thinking in terms of the few individuals with whom they had acquaintance and whose needs could be personally judged. Grandfather operated within an orbit of 7-10 miles radius; a trip to "the city," some 50 miles away, was as much of an occasion as one of my trips to London. Frankly, grandfather didn't know of any "need" except what he personally scanned. His communication with and vision of the nation or the world never went beyond a stint in the Civil War, a macro event. Unless a neighbor's barn were on fire, in which case everyone within seeing distance lent a hand, "need" wasn't much in evidence except for the now-and-then peri patetic beggar or hobo. In his mi cro-vision orbit just about every family looked out for itself; self reliance was in the driver's seat.

These people knew each other too intimately to fool each other. Pre tense seldom reared its head. What we should keep in mind is the fact that America's era of micro vision broke all the world's records for security, welfare, pros peri ty. Governor Bradford of the Plymouth Colony, when commenting on the results of dropping coercive collectivism, in effect the macro madness of the Old World, wrote: ... any generall wante or famine hath not been amongst them since to this day. Following that momentous deci sion in 1623, there has been no famine or involuntary starvation in our land for over three centur ies. However, we must not, in this analysis, give too much credit to our grandfathers. By and large, our ancestors had no more capac ity to think for themselves or to see beyond the surface of things than do their progeny who now people this country. Those who cannot think for themselves - an cestors, or us - must, perforce, re spond to their environment.

How the environment has changed! Replacing grandfather's little world of micro vision is a brand new world of television, radio, telephone, astro vision, "rorld-wide news coverage in daily papers, magazines, books; we hop in an auto and see America; we board a jet and view the world in a word, macro vision. Of a sudden - one might say, without warning - grandfather's progeny are constantly having dinned into their heads all the "needs" of all the people on earth. Appalachia is no less an intimate 1966 THE MACRO MALADY 55 and pressing need today than was a bucket brigade to put out grand father's fire. Distressed areas, backward countries the world over, foreign ideologies and isms, Negro unrest at home and in far away Africa, all the poor farmers and all the suffering wage earn ers, prices for steel, aluminum, copper (the list grows), the. cot ton surplus, downtowns .deserted for shopping centers, the threat ening efficiency of the Japanese, the vanishing gold supply, the weakness of the pound sterling, watel" famine on the Hudson, get ting to the moon "because it's there," Russian sputniks - you name it - are problems which most Americans ·now feel they must find solutions for.

Grandfather had to figure out how to milk his sick friend's cows as well as his own; I have to con trive ways to get all of mankind out of the mess it's in; I do un less I can see beyond the surface of things and, thus, not let my micro mentality be drawn into tackling macro problems. Why Do They Do It? Those persons who cannot see beyond the surface of things their number is legion - take on problems bigger than they are and, as a consequence, push us into coercive collectivism, that is, into the all-powerful state. But we may never understand why this is true, why they act as they do, unless we can effect a self-in duced blindness equal to their myopia, until we bring ourselves to seeing no more than they now see.3 In short, we can explain them only as we put our own vision .into reverse and back up to where they are - put ourselves in their shoes, as the saying goes. With this mental gymnastic ac complished, what is it we no longer see ? We now cannot see any ef ficacious results that could possibly flow from thinking in micro terms.

A leading labor official put it clear ly and succincti y : Only a moron would believe that the millions of private economic deci sions being made independently of each other will somehow harmonize in the end and bring us out where we want to be.4 3 For further exploratory reading on this point, see the chapter, "What Is Seen and What Is Not Seen" in Se lected Essays on Political Economy by Frederic Bastiat (Princeton: D. Van Nostrand Co., Inc., 1964), pp. 1-50. Or, on the same subject, read the chap ter, "The Broken Window" in Econom ics in One Lesson by Henry Hazlitt (Irvington, N.Y.: The Foundation for Economic Education, Inc., 1962) ,pp.15-16. 4 See The New York Times, June 30, 1962. For an extended explanation of why the labor official's view is false, see the chapter, "Incomprehensible Order" in my book, The Free Market and Its Enemy. (Irvington N.Y~: The Founda tion for Economic Education, Inc., 1965), pp. 50-67.

56 THE FREEMAN February The implication here is clear. The labor official, not being able to see any possibilities in micro economics (the free market), can see no solution to social problems except through the political im plementation of macro economics. That he in his blindness refers to free market see-ers as morons is only because the term is stronger than extremists, crackpots, nuts. There is nothing new or strange in this. Most of us have a. tendency to regard as slightly tetched the connoisseur of any speciality about which we know nothing. I use the labor official as a pro totype only because he expresses his blindness more brilliantly than do the vast majority of citizens who are in his unseeing state. The labor official simply does not see what a few at least dimly per ceive. 5 However, the fault may be as much with us as with him. Free market see-ers aren't able to throw enough light on the matter. In deed, some of "us" entertain a doubt now and then about the free market being adequate to the occasion - mail delivery, for in stance. Or monopoly, or disaster, or education. Who among "us"

has no blind spots? There is no man, present. or past, who achieves more than a micro 5 For an explanation of what one micro thinker sees, refer to my chapter, "The Miraculous Market," Ibid., pp. 6-21. mentality. As the distinguished French scientist, Lecomte du Noily, put it, "Man's image of his universe is founded on less than one-trillionth of the vibrations which surround him." In any event, our inability to recall a single see-all, know-all, individual should make this affirmation self evident. Noone of us ever sees more than a wee fragment of the whole universe, of another person, or even of the whole self. Now suppose a person - such as the labor official - is unable to see how ordinary mentalities focused on micro problems, if left free to act independently of each other, could possibly attend to social and economic problems. Remember, we have put ourselves in· his position. Blindfolded thus, we can see no opening to the free market (mi cro) avenue - none whatsoever!

What to do? Surely, there are macro problems galore. One ave nue, and one only, appears open to us; a macro-solving formula. Having only micro mentalities our selves, we don't quite know how to solve a macro problem. So, how are micro mentalities to be made into macro-problem solvers? What's the formula? This is the question we must, in our self-in duced blindness, ask ourselves. Our answer? Thoughtlessly, and f or the most part, we turn the macro problems over to governt9(J(J THE MACRO MALADY 57 mente But, by this process, what is it we really do ? We do· no more than give the macro problems to micro mentalities with but one in gredient added: a, police force! Reduced to its essence, we give micro thinkers the gun power of a constabulary on the naive as sumption that this renders a com petency to cope with macro prob lems. We add only force - not one iota of wisdom - and feel relieved by how intelligently, neatly, effi ciently we discharge our respon sibilities! This is the view we get when we cannot see beyond the surface of things.

The blindfold having s,erved its purpose, let's remove it.· The fal lacy of the above course of action, and the unj ustified sense of ac complishment, are immediately ap parent when we distill what we have done to micro dimensions: you and me. Let us say that you are insuffi ciently secure and prosperous. What can I do to ameliorate your plight? I can give or loan you something that is mine or, per.;. haps, give you some helpful coun sel. Isn't it obvious that my as sistance cannot be increased by forcibly imposing my will on you? What can I do with a gun that I can't do better without one? Noth ing whatsoever! For, surely, you won't sanction my employing this coerci ve means to take from others and give to you. Not in a you-and me micro situation, you won't. But if you start thinking in macro terms you will - as do millions. No plague has ever destroyed or impoverished or kept from self realization more human beings than has the macro malady. The pilgrims who starved and died during the three years after land ing at Plymouth Rock were its victims. Several million Russians perished during 1931-32 at the hands of macro thinkers - not by men playing God but by men playing against God.6 Every sol dier who loses his life on the bat tlefield dies of the macro malady micro men undertaking macro roles.

Causes of War Any observer can see that wars, the preparation for them, and their aftermath, lead toward the total state, that is, toward more governmental takeover and an in creasing number of macro prob lems. But only those who can see beyond the surface of things can see that when a people collectivize in a power organization - social ism, authoritarianism, the welfare state, the planned economy - in short, when they "macronize," 6 William Henry Chamberlin was in Russia at the time of this enormous disaster. See his article, "State Eco nomic Planning: Tragedy or Futility," THE FREEMAN, January, 1966, p. 27.

58 THE FREEMAN Ji'ebruary wars become possible, indeed, more than likely. Men in a free market, a people who limit them selves to micro problems - acting indi vidually and in response to free choice - do not make war; they create and trade! Just as do the people in the abutting states of Illinois and Wisconsin, so will any people who, when free of busybodies, tend to mind their own business. We cannot help concluding that the mac~o malady is but the social and economic manifestation of a vicious circle: macro organization brings on wars, and wars make macro problems which, in turn, compel us into macro organization. Inflation helps to make the point. This dilution of the medium of exchange is the fiscal outcome of excessive government, that is, of macro organization. And what are the solutions? One control atop another: price, wage, rent, inter est, production, exchange, all of which are of macro dimensions. 7 The water famine on the Hud son is now a macro problem aris ing from macro (socialistic) or ganization. s I see no point in ex tending the list; it is clear, if we 'l See "The American Setting: Present and Past," in my Anything That's Peaceful (Irvington, N.Y.: The Foun dation for Economic Education, Inc., 1964) .

8 See "Water Famine on the Hudson," THE FREEMAN, September, 1965. focus the eye aright, that micro mentalities, when trapped into macro-problem solving, contami nate society with mankind's most destructive disease: the macro malady. The Remedy What, then, is the remedy for the macro malady; how do we get ourselves out of this vicious cir cle? The answer, it seems to me, is simple enough but, in our world of macro vision, difficult to put in to personal practice. Perhaps the wise Socrates gave us the cue when he said, in effect, "That man thinks he knows every thing, whereas he knows nothing. I, on the other hand, know noth ing, but I know that I know noth ing." The first step, it seems, is to recognize that "1"- no matter who - am a micro mentality and, thus, incapable of coping with or solving macro problems. In short, when asked how to solve macro problems, I must learn to tell the truth: "I don't know."

The next step is to realize that no other person, regardless of pre tensions or the amount of force at his disposal, possesses anything beyond micro mentality himself and is no more capable of solving macro problems than I am. Re quired is a penetrating skepti cism: trust no man beyond his infinitesimal area of competence; 1966 THE MACRO MALADY 59 hold him to the very little he knows. When enough of this kind of realistic skepticism exists, we will have no more truck with "pre tenders to the throne." Only then may we begin to see slightly be yond the surface of things, at least beyond what the aforemen tioned labor official can see: the therapeutic power of freedom. True, "millions of private eco nomic decisions made indepen dently of each other" may not bring us out where he wants us to be; but this micro, free mar ket, individual, freedom-of ..choice process will bring millions of peo ple as close to where each of them wants to be as is possible. There is a distinction.

As stated above, the nearest ap proximation of the micro approach ever practiced broke all the world's records for security, welfare, pros perity, and the release of creative human energy. The argument that this worked all right in a simple economy but is inapplicable in a complex economy does not hold water. The more complex the econ omy the more must the micro way of life be relied upon. For, as the complexity of the economy in creases, man's ability to. manage it correspondingly diminishes. No self-respecting individual will con cede to any other person the com petency to manage his own creative life for him. Think, then, how absurd it is to expect a competency to direct the complex arrange ment involving millions of lives! The micro a.pproach - each per son operating within the limits of his knowledge and competence should require no theorizers; its record is so remarkable and pro fuse. Those of us who are priv ileged to apprehend its perfor mance know full well that its prac tice will put an end to macro problems. There'll be no more water famine on the Hudson, for instance, than there is a famine in chickens, or cornflakes, or mink coats. Only micro problems will remain: each person trying to fig ure out how best to improve his own little world in free and vol untary cooperation with others.

Problems will fit the problem sol vers and, thus, find such resolu tion as each is capable of. When individuals attempt to solve prob lems over their heads, they are in a wild and dangerous guessing game, like children trying to ex plain what makes the world go round, and with the power to im pose on the rest of us the vagaries of their imagination. But when in dividuals are at work on problems of their own size, they will be· at their best as problem solvers; they will, as we say, come to them selves. ~ A REVIEWER'S NOTEBOOK THE WHEN ADAM SMITH wrote his Wealth of Nations, he had North America very much on his mind. The British colonies along the North Atlantic littoral had been thriving in spite of the prevailing mercantilist philosophy. Wages were high because land was cheap and the pull of the frontier made city labor scarce. Smith read a lesson in this which helped make the nineteenth century the freest of all time.

Now, almost two centuries later, Mogens V. Hermann, a Denmark born economist and statistician, has applied Wealth of Nations cri teria to the modern world with the tropics very much on his mind. His Contribution and Reward (Ex position Press, $6.50) might be called an exercise in geoeconomics, for it seeks to determine what mon soon rains, enervating heat, and such diseases as malaria and dysen tery, do to affect the energies of men. His conclusion is that hot60 JOHN CHAMBERLAIN country geography can be overcome by the application of classical eco nomic principles only with diffi culty. But even though the virtues of hard work, self-reliance, avoid ance of waste, thrift, and a knowl edge of one's own assets may be hard to perceive in a steaming and superheated atmosphere, they are still a better bet than letting the "government" dominate the pic ture with forced industrialism, "nationalization" of foreign enter prises, and a series of Five-Year plans.

Experience in the Tropics Mr. Hermann's credentials as an adviser to tropical nations are suf ficiently impressive to make Con tribution and Reward a "must" reading in such variegated places as the Congo, South Vietnam, and the Dominican Republic. A gradu ate in economics, statistics, and law at the University of Copenhagen, he served in Danish government i.{UJB A WAY TO BEAT THE HEAT 61 offices and in the Danish army for two years ..Thus he knows. the ad vantages and defects of state-ad miniBtered Bystems from· experi ence at an impressionable age. Fol lowing his military training, he be came a statistician for the State Bank of Ethiopia, where he do mesticated the idea of compiling monthly statistics. Still pursuing a career in the tropics, his next job was as Assistant Chief of the Department of Economic Research for the Banco Central de Honduras, where he worked on such immedi ately relevant topics as evaluations of foreign companies and the bal ance of payments. In the early nineteen fifties he was sent by the International Monetary Fund to reorganize the National Bank of Nicaragua. Then, before taking up his current occupation as a cur rency analyst in New York· City, he studied the problems of Thai land, Malaya, and the Philippines for the International Bank for Re construction and Development.

It is as important to mention all this in connection with Oontribu tion and Reward as it is to stress Adam Smith's observation of the workings of the corn laws and the herring bounty when one is talk ing about the attack onmercan tilism in the Wealth of Nations. Mr. Hermann draws his theoretical conclusions from an experience that is practically unique for an economist born in the temperate zone. He knows how men in the tropics feel. Historically, the idea in the trop ics has been to "beat the heat." One does this best by letting other people do the work. Hierarchies, aristocracies, and ruling priest hoods were based on the idea that idleness was a superior virtue. The clever man tried to corner enough land to support serfs who could yield him a life of luxury. Priests studied their parishioners' means with an eye to where the gift of a chicken or a handful of cereals might be expected. The social levels became stratified, and the expecta tions of peasants were dulled by a daily contact with an agriculture that knew little about the use of fertilizers or insecticides or better seeds.

The North Sets Examples of Law and Order Mr. Hermann, in his own exten sive travels, has observed that the incursion of temperate zone "col onial exploiters" in tropical lands has had good effects in countering the "beat the heat" mentality. In dia benefited by the administrative training and example brought by the British. The Filipinos, after two or three generations' contact with Americans, are better pre pared to live in the modern world than, say, the Ethiopians, who were 62 THE FREEMAN February never conquered. This is not an ar gument for "colonialism"; it is merely an explanation that the tropics would do well to imitate northern methods of administra tion and a northern view of the desirability of "law and order." But even in lands where colonial administrators and enterprisers have provided examples of the vir tues of hard work and avoidance of waste, the old "beat the heat"

tradition hangs on as "freedom" takes over. Education becomes a fetish with the emerging tropical nations, but it is not the sort of education that is needed to com bat the notion that the clever man lives by the work of others. The idea is to go to school long enough to be trained as a planner in a semi socialistic system, then take a job with a Fabian government th~t has wangled a "spectacular" such as a steel mill or a big dam as "foreign aid." The "educated" Fabian won't care that the steel mill won't have much of a domestic market, owing to the absence of small metal-work ing shops and retailers. He won't care that farmers who know little about soil nutrition aren't in the market for steel plowshares or tractors. The idea that an economic system must grow out of a, score of small enterprisers who mesh their needs, their skills, and their ideas will be anathema to the "edu cated" planner with a background in the sort of economics taught by the late Harold Laski.

Mr. Hermann admits that a semi-socialistic "planning" gov ernment in the tropics can offer short-term advantages to an elec torate that has had "one man, one vote" for at least one time around. Technical aid from abroad will come in to put native labor to work building the "spectacular." Some ideas about the organization of an enterprise will rub off on local people. But a government-owned spectacular will offer a haven for political appointees. It won't have to show a profit. (In Mexico, the "nationalized" oil industry, "Pem ex," has been regarded as a fertile field for stowaway berths for any one supporting the "revolution." A Vicious Circle What the "planner" won't see is the private investment that "gov ernment" industry and the threat of "nationalization" have scared away. They won't see that the "edu cated" class have been siphoned off by the high "social overhead" im posed by the very existence of big bureaucracies. People ·with brains will be pushing paper at the capital, not designing new small businesses out in the provinces. High taxa tion will be encouraged to pay for the planners' retinues. And infla tion will bother nobody in a gov ernment that can raise its own 1966 A WAY TO BEAT THE HEAT 68 salaries as its paper money floods the market.

Mr. Hermann has a theory that hjgtofY jg a matter of pendulum swings. A mercantilist age will give way to the age of Adam Smith. Then, in the space of a few gener ations, the Marxists and the Fab ians will begin to have their way. But Marxism and Fabianism, he thinks, must lead to disillusion ment, for socialism yields inferior production. In Europe "indicative planning" is still popular. But Marxism is losing its good repute, and the "indicative planners" are ~ INTRODUCTION TO POLITI CAL SCIENCE by OscarH. Ibele (Ne,v York: The American Press, 1964), 810 pp. $7.50. ~ HISTORY OF POLITICAL PHI LOSOPHY edited by Leo Strauss and Joseph Cropsey (Chicago: Rand McNally & Company, 1963), 790 pp. $8.50. Re'oiewed by Edmund A. Opitz A UNIVERSITY PROFESSOR of sociol ogy, generally regarded as at the top of his trade, proclaims him self "a man of the Left." And he believes that this is "a nation in which Leftist values predominate."

This observation appears to hold true of the academy, at any rate, and especially of the departments more inclined to accept the neces sity of a market that is at least 50 per cent free. So, as Mr. Hermann sees it, the pendulum is swinging back toward Wealth of Nations ideas. The swing will probably take some time to reach the tropics. But when Mr. Hermann, in humble tones, says that God would not have led him "on a guided tour of certain wide ly separated areas" without a "pur pose," he does not doubt that, even in the tropics, common sense is bound some day to take over. + of social science; economists, so ciologists, and political scientists incline more in the direction of the welfare state than toward the market economy and the free so ciety. Many of the most widely used college textbooks reflect this prevailing bias. A professor of political science who leans toward the conservative-libertarian posi tion is a rare bird, and still rarer is a competent and comprehensive textbook of political science. Pro fessor Ibele of Kent State Univer sity is not "a man of the Left,"

and his book is an excellent intro duction to politics. This volume is designed for an introductory political science course, and it has emerged from 64 THE FREEMAN February the author's long experience teach ing the subject to college students. It is mainly descriptive and ana lytical. There's no sound of an ax being ground in the background; the facts and ideas are permitted to speak for themselves as the student learns some of the argu ments for .limited government and free market theories. He is also, of course, exposed to an exposition of other philosophies of society which hold millions of people in their sway. The student gets a brief back ground of the history of govern ment, a description of the govern ments of other nations, good cov erage of our own form of govern ment in theory and practice, the workings of our systems of law J international politics, and much else. Now a textbook is not exciting reading, but the general reader might find this a useful book to have on his shelves for browsing and consultation. Each of its thir ty-two chapters has a bibliog raphy, and the extensive index means that topics can be readily located.

The Strauss-Cropsey book is a handsome anthology consisting of thirty-three essays on the great political philosophers from Plato on down, written by twenty-eight authors. Most of the influential names in Western political thought are here, and the discussion is high level and expert. The individ uality of the authors is not cur tailed, but a certain unity of treat ment is attained because these authors form part of what might be called The Strauss School, that is to say, they are students and associates of the venerable Leo Strauss, University of Chicago political philosopher. This con stitutes recommendation enough for any book! ~ WHEN YOU CHANGE YOUR ADDRESS We'll find out about it eventually,so why not tell us in advance? Otherwise, there's postage on THE FREEMAN you missed, plus more postage to locate you, plus still more to send anothercopy. And it may be your money! Write to: THE FREEMAN, Irvington-on-Hudson,N. Y.

NEW INDIVIDUALISTREVIEW "The net result of our urban renewal program has been increased cost of housing for the poor and the destruction of the livelihoods of hundreds of small businessmen . ... As the minimum wage rate has been raised, more and more people have been laid off who were not worth the higher wage rate. ... We would have less in stability if the Federal Reserve Board stopped toying with the supply of money." THESE are some of the conclusions of an article by Prof. Yale Brozen, of the University of Chicago, in a recent issue of NE~ INDIVIDUALIST REVIEW. On the basis of the latest research, Prof. Brozen documents the failure of government intervention in many fields - including agriculture, utilities, power and transportation. NEW INDIVIDUALIST REVIEW attempts to present articles of a high calibre, in non-technical language, on all aspects of the individualist, limited-government philosophy. Our contributors have included Ludwig von Mises, F. A. Hayek, Milton Friedman and many other established authorities, as well as articulate libertarian college stu dents and instructors. Articles fronl NEW INDIVIDUALIST REVIEW have been reprinted in The Freeman, The Wall Street Journal and Barron's.

A year's subscription (4 issues) is $3.00 (students, $1.50). A sam ple copy is available on request. FREEMAN readers who sub scribe now will receive a reprint of Prof. Brozen's article, cited above. ,- -- - - - - - - - . NEW INDIVIDUALIST REVIEW I Dept. B., Ida Noyes Hall I University of Chicago, Chicago; Ill. 60637 Please enter my subscription for one year I at $3.00 Students, $1.50 I NAME _ I ADDRESS IF STUDENT: SCHOOL _ I YEAR OF GRADUATION~~=~~~== AUTOMATION AND JOBS • There are persons who regard it as a great disasterwhen they hear that 150,000 persons in our spinning works now produce as much yarn as could hardly be spun with the little handwheel by 40,000,000. These people appear to cherish the absurd opinion that if there were no machines, manufacture would really give employmentto as many millionsas now; nor do they reflect that the whole of Europe would be inadequate for all this work; and that in that case a fifth of the whole population would need to be occupied with cotton-spinningalone! Both experienceand reflectionteach us just the contrary;and we should certainly maintainthat, if we still had to spin by the handwheel today, cotton manufacture would employ only a fifth of the present number.

EDWAR 0 B A I N ES, History of the Cotton Manufacture in Great Britain, 1835 Clarence B. Carson 8 Ralph W. Husted 23 Vermont Royster 33 Edmund A. Opitz 36 K. Fritz Schumacher 42 Martin Anderson 46 MARCH 1966 Why Humans Must Be Free The Flight from Reality: 18. The Origins of Reform Methods . The Moral Foundation of Freedom . To the Gallows . Lord Gifford's Legacy Today's Robber Barons. The Fiasco of Urban Renewal . Books: Mercantilism Invites Corrup.tion . Other Books V. Orval Watts John Chamberlain 3 60 63 COMPOUNDED DAILY, your savings earn 4.97% when held one year at cur rent rate of 4.85 %, paid semi-annually. COAST FEDERAL SAVINGS & LOAN ASSOCIATION Department FM, 9th & Hill Sts., Los Angeles, California 90014 STREET _ NAME(S) _ (please print) o Please send me a FREE copy of President Crail's IIAdam Smith vs. Karl Marx" speech. o I enclose my check (or money order) for $ _ Please open a Coast Federal Sav ings account D Individual D Joint in the name(s) of CITY STATE _ 6-121 Y' "Man fulfills his Creator's purpose only as he develops the power to know and choose good and reject evil." .. p. 3 Y' Dr. Carson, in this chapter, traces the development of the methods of re form employed in the Flight from Reality. ... . ......... p. 8 Y' A businessman explains· why suc cessful private enterprise requires spir itual and political, as well as economic, freedom. .. ...... p. 23 Y' Governments that persist in deficit financing of profligate spending are bound to blame their victims for the consequent rise of prices. . . .p. 33 Y' The Reverend E. A. Opitz scholarly reviews Lord Gifford's legacy - The Gifford Lectures. .. .. ..p. 36 Y' An old friend of the "iron horse"

explains how tax authorities have dis criminated against the railroads. .... p. 42 Y' Professor Martin Anderson docu ments chapter and verse in the long record of failure in governmental ef forts at Urban Renewal. ....p. 46 Y' in Clal'\k MoHenhoff's Despoilers of Democracy, John Chamberlain finds ample documentation for his distrust of overgrown bureaucracy p. 60 Y' Life Without Prejudice, by the late Richard Weaver, is reviewer Thornton's book-of-the-month . p. 63 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

MARCH 1966 LEONARD E. READ PAUL L. POIROT Vol. 16, No.3 President, Foundation for Economic Education llJar/aging Editor THE FREEMAN is published nlonthly by the Foundation for Economic Education, Inc., a non political, nonprofit educational champion of private property, the free market, the profit and loss systenl, and limited goYernment, founded in 1946, with offices at Irvington-on-Hudson, New York. Any interested person may receive its publications for the asking'. The costs of Foundation projects and services, in cluding THE FREEMAN, are nlet through volun tary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are invited in any amount - $5.00 to $10,000 - as the means of nlaintaining and extending the Foundation's work. Copyright, 1966, The Foundation for Economic Education, Inc. Printed In In U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each.

Permission is hereby granted to anyone to reprint any article in whole or in part, providing customary credit is given, except "Why Humans Must Be Free," liThe Flight from Reality," liTo the Gallows," and liThe Fiasco of Urban Renewal." Any current article will be supplied in reprint form If there are enough inquiries to justify the cost of the printing.

WHY HUMANS MUST BE v. ORVAL WATTS HUMANS DEVELOP their human qualities, they prosper and pro gress, as indi vid uals exercise their powers of choice and recognize re sponsibility for their own acts. This is why government cannot promote human progress except as it establishes freedom, which is the political condition for volun taryaction. For humans are not only pur posive and inner-directed, as all living creatures are. They are also self-controlling. They choose their purposes and their methods for pursuing their purposes. They gain human quality only as they exercise this power of choice and learn to use it skillfully - that is, ~visely. Dr. Watts is Chairman of the Division of Social Studies at· Northwood Institute, a private college dedicated to the philosophy and practice of free enterprise. This article is from lecture material for his course: Sur vey of American Life and Business.

Other creatures pursue purposes largely dictated by built-in re flexes and instincts. By instinct a bird seeks out certain kinds of food, builds its nest, preens its feathers, flies north in the spring and south in the fall. By instinct a hen scratches for food, and by in stinct and conditioned reflexes a lion stalks its prey. But man acts according to ideas which he himself fashions and se lects in much the same way that he makes his clothing and selects his food. True, he has certain reflexes and a few vague instincts. These take care of some of his more basic needs, such as his need for air and water - if he permits them to do so. But he may, if he chooses, re condition his own reflexes and act completely contrary to his in stincts. Thus, expert swimmers 4 THE FREEMAN March and divers learn new breathing habits, and Hindu yogis learn to control even their heart beats. Man gets his controlling ideas by using the evidence brought hiIn by his senses. But he himself de termines what senses he will use, how, when, and where he uses them, and what ideas he forms con cerning the sensations they bring him. He may close his eyes and refuse to see what is before him, or he may reject what he sees as useless or unreal.

And as he sifts and reworks the data supplied him by his senses, he forms patterns of ideas, values, and purposes which govern his ac tions. Man Is Responsible Because of this power of self control, man is not only account able for his acts, he is responsible for them. Like every other crea ture, he is accountable in that he must suffer penalties for error as he enjoys the rewards for being wise and efficient. But he is also responsible for his acts, in a way tha t others are not, in the sense of being "answerable as the primary cause, motive, or agent." (W eb ster's Unabridged Dictionary) For each individual human being can act or refuse to act as he wills, and whether he acts wisely or foolish ly depends on ideas which only he, individually, can control. It is true that a man may try to evade his responsibility by claim ing that others compel him to act as he does. But as long as a person retains his human faculties, he re mains self -controlling. When a bank teller obeys· the command of an armed bandit and surrenders the bank's funds, we may excuse him on the ground that his em ployers and the bank's depositors do not expect him to risk his life by refusing. But he is neverthe less responsible for his act in that he chooses to make the surrender.

We recognize this fact when we condemn a similar surrender by a guard who has pledged himself to resist such coercion. Would we hold blameless the father who killed his child at the command of an armed thug? Then neither can we hold irresponsible any person who yields to intimida tion, even though we agree that discretion is often better than valor. Not the Same Purpose We should realize, however, that when a person yields to a threat of violence, his self-determined pur pose is to avoid the violence rather than. to accomplish the purpose of his assailant. If he wanted to do what his would-be masters com mand him to do, no violence or threat of injury would be neces sary. When violence or intimida1966 WHY HUMANS MUST BE FREE 5 tion is necessary to make men act, it is because the victims of it have purposes contrary to the purposes of the aggressors. No external force can change either these purposes or the ideas from which they spring. They can be changed only by the will of the DlJpgOn who jg to !let. If the victim of violence chooses to act as his assailant directs, he does so, not because he has adopted his assail ant's purpose, but in order to ac complish the quite different pur pose of avoiding the threatened injury.

Force. Can't Control Purpose It is this inescapable conflict of purposes that makes slavery, the "planned society," and the "wel fare state" destructive of human values and character. The purpose of the slave masters may be to get certain work done. The purpose of the government officials may be to improve the understanding and character of their subjects. But in creasingly, as time passes, the sub jects of the coercion seek to es cape from the threat of violence. Fear of a master's lash or of a communist firing squad, for ex ample, may cause men for a time to go through certain dictated mo tions, but these motions do not make efficient farmers. Instead, the private purposes of those who suffer from the coercion cause increasing inefficiency in pursuing the masters' purposes because these private purposes of the vic tims have to do with escape, re sistance, or retaliation. These pri vate purposes are the ones which enlist the victims' will and ingenu ity. They are the only ones which the victims can pursue with en ergy or skill.

The final result depends on the victims' ideas about how they may best escape the threatened vio lence. They may decide on open flight or resistance, or they may choose secret sabotage and slow downs. If they decide that all flight or resistance is hopeless, they are likely to feel increasing fatigue and depression ("lazi: ness") when at work, with the gradual atrophy of will and initia tive, along with increasing desires for the wasteful dissipation, or "vice," that characterize people long subject to enslavement and tyranny. To his report of a strike of trolley-car workers in Lodz, Po land, a few years ago, the Warsaw correspondent of Newsweek added these comments: The complaints of Lodz are echoed everywhere except among the peas ants who have benefited from Go mulka's de-collectivization policy. In the cities, low living standards, des perate consumer-goods shortages, and hopelessness over the future all combine to throttle initiative. Walk6 THE FREEMAN March outs and work stoppages are on the increase. Thievery and drunkenness are rampant. Absenteeism runs as high as 30 per cent. Apathy char acterizes the Polish worker. As a leading intellectual put it: "Gray ness has entered our spirit."

forced Goodness Turns into Evil Other victims of communist "planning" show similar evidences of demoralization. Says Mihajlo Mihajlov, Yugoslav lecturer at Zagreb University, writing of his recent experiences as an exchange student in Moscow: In each district there is a vytrez vitelj, a dispensary for sobering up drunks. . .. A liter of vodka costs as much as six long-playing records, and I cannot understand where all the drunks come from, yet at night you often meet drunks. . . . In the outlying sections of town, it is dangerous to go into the streets at night despite numerous patrols of druzhinniki, the special people's mi litia. ( The New Leader, March 29, 1965, p. 4.) If a man is to become an ef ficient farmer, he must want to farm, and he must recognize his responsibility for doing the things necessary to produce the crops. The slave can never become an ef ficient farmer if his real purpose is to avoid the lash rather than to raise crops, for it is to his private purpose that his thoughts and in gen uity turn even when he is un aware of the fact.

Similarly, when a person or group tries to compel others to be charitable, industrious, or thrifty, the victims of the coercion lose their sense of personal responsibil ity for acquiring these virtues. De pri ved of opportunity to use and develop their human qualities of self-direction, they revert toward the animal level. At this lower lev el, they become more like domesti catedcattle, lacking ingenuity, en terprise, and reasoning ability. Or, they may become as intractable as the tiger, the zebra, or the polar bear. Says Mihajlov in the articles on Soviet Russia mentioned above: "Never was and never will any thing be created in a man by force. Fortunately, as Berdyaev [Rus sian philosopher whose works are on the communist "black sheet"] says: 'Truth makes man free, but man must freely accept the Truth, he cannot be forced to accept it. Forced goodness is no longer good; it turns into eviL'" (The N ww Leader, June 7, 1965, p. 6.) The Limits of Government's Power Now, government is an agency for compulsion. Men organize it and use it only to apply force and threat of force against their fel lows. As a means for applying force, it can imprison or execute wrongdoers, recover stolen prop erty, punish fraud, and repel in1966 WHY HUMANS MUST BE FREE 7 vaders. In short, it can do to or for humans whatever force and violence can do: hurt them, re strain them, destroy them, take from them things they prize, or make them fear it will do one or more of these things to them.

As it uses its force to combat thieving, gangsterism, rioting, and armed invasion, government can free producers from interference. The more effectively it thus pre vents such interference, the greater is the output of goods, and the greater are the revenues gov ernment can· get for its own uses. It is this service to producers that explains whatever production and progress we observe in the rel atively more socialistic countries, ~uch as Soviet Russia and Yugo slavia. The price (in terms of med dling and spoliation) which the rulers charge producers for their services in these more or less en slaved nations is exorbitant but not quite prohibitive. Beyond this protective service to producers, government coercion not only has no usefulness, but it actually works to limit and reduce government's power. For, as it bullies producers in its effort to direct their labor and to get more production from them, it restricts their output and so reduces the flow of goods from which the gov ernment gets its own coercive weapons and manpower.

Such government bullying of producers has this effect because no external force can form a man's ideas or determine his purposes. No force or threat of violence, le gal or illegal, can inspire the de sire to do good or the will to do evil. It cannot make men compas sionate, thrifty, foresighted, or in dustrious. It cannot awaken their sense of responsibility. In short, force, violence, and in timidation cannot make bad men good or good men better. For no man is merely clay to be molded by his fellows, whether they be government officials, teachers, em ployers, or his neighbors. Nor is he a machine for going through certain prescribed motions at the command of any master or gov ernment. Instead, man fulfills his Crea tor's purpose only as he develops the power to know and choose good and rej ect evil. The compulsions of the welfare state can no more de velop this power in its subjects than riding men about in wagons can make them into long-distance runners or star football players.

Every human being's progress de pends on the amount of effort that he himself exerts in pursuit of good purposes. Among the essen tial conditions for this effort are the opportunities, the risks, and even the obstacles, of freedom. ~ 18. The Origins of Reform Methods CLARENCE B. CARSON THERE IS NOT, to my knowledge, any thorough historical study of the origins of reform methods. References to this subject are apt to be casual; for example, that Marx did not tell precisely how a country went about achieving communism. This absence of care ful study is the more amazing in view of the tremendous amount of scholarly activity in this cen tury, accelerated by the increas ing numbers of students under taking and completing doctoral work. Revolutionaries, reformers, and their assorted "isms" have come in for a great deal of study, of course. But the focus of such studies has usually been upon ideas and ideologies, their origin, development, and spread. It is as Dr. Carson is Professor of American History at Grove City College, Pennsylvania. Among his earlier writings in THE FREEMAN were his series on The Fateful Turn and The American Tradition, both of which are now available as books.

8 if ideas, aims, and purposes were all-important but how they were put into effect was of little or no account. It is likely that historians are reflecting their materials when they give this emphasis, for re formers have been concerned mainly with their central ideas, or obsessions, and with the great results that would occur once they were put into effect, not deigning to concern themselves overmuch with the vulgar business of mak ing them operational. Yet method is extremely im portant; for social reformers, it should be all-important, for their ideas are instruments for chang ing the existing state of things. If this could be done, it would have to be done by the methods adopted for the purpose, and by methods adapted to the purpose. The results achieved will be those that follow from the methods used.

1966 THE ORIGINS OF REFORM METHODS 9 The consequences of actions are determined by the methods rather than by the intent, purpose, de sire, will, wish, hope, or faith of those who act. Dreams, hopes, vi sions, ideas, purposes, and desires may move a man to act; but, how ever noble his purpose, however much enthusiasm he brings to the matter, however much thought he may have given to the idea that something ought to be done, his actions will still be only as effec tive as the methods he adopts for achieving his end. The Theory in Practice It may well be that many re formers and revolutionists have believed their aims would be achieved by such things as the in evitable working out of the inher ent processes of history, by the victory of some ideology in the contest of ideas, by men of good will when they have in their hands the instruments of government, by the withering away of govern ment, by a politically conscious elite acting for the "people" or the "proletariat," by a return to na ture, or by the enfranchisement of whole adult populations. But when revolutionists and reformers have actually come to power, they have come face to face with the prob lem of m.ethod which they had hitherto evaded. That is, how is the sought-after social reconstruction to be brought about? How is an ideology to be turned into actu ality? How does one go about, for example, realizing the "principle,"

"from each according to his abil ity, to each according to his need"? How can the ability of a man be determined? It cannot be with any exactitude, but if it could, it would only pose a new problem. How can a man be in duced to perform according to his ability? If he does not, what is to be done? In general, either the rewards or punishments will have to be increased. But, according to the Marxian formulation, the re wards are not to be apportioned in terms of performance. That means that the punishment will have to be increased, an excellent device for tyranny but not one calculated to get from each accord ing to his ability. The latter part of the famous formulation poses just as great practical difficulties as the first. What are the needs of a person? Who is to determine them? If they could be deter mined, how would they be met? By what instrumentalities would the goods be gathered and handed out to the needy? What assurance would there be that this would be done "justly"?

Nearer home, note these pro nouncements by Theodore Roose velt in his acceptance speech fol lowing his nomination by the 10 THE FREEMAN Progressive party in 1912. "Our aim is to promote prosperity, and then see to its proper division .... We wish to control big business so as to secure among other things good wages for the wageworkers and reasonable prices for the con sumers." What are "good wages" for workingmen? What are "rea sonable prices" for consumer goods? Even if these questions could be answered, other than in the marketplace, how could gov ernment go about securing these ends? Who would decide what are "reasonable" prices? How would he go about administering them? By what instrumentalities would such controls be effected? What institutions are appropriate to such regulation? Scant Attention to Methods In the nineteenth century, re formers and revolutionaries usu ally talked in the broadest gener alities. They favored the expropria tion of the expropriators, a single tax upon the unearned increment or social surplus, government own ership of the means of production, or government ownership of public utilities. How would property be taken over? Who would manage it? Who would determine what should be produced? Who would determine what prices should be paid for goods? How would these things be determined? Americans did not usually talk the language of revolution, not if they expect.ed to be elected to office; but they, too, often talked vaguely about how their ends were to be achieved and glowingly about the ends.

This lack of attention to meth ods has often become apparent when socialists have come to poli t ical power. In Soviet Russia, fol lowing the Bolshevik seizure of power, chaos reigned, particularly from 1917 to 1921. The commu nists were rather adept at the de struction of the existing order, at murder, at regicide, at expropria tion; but they knew almost. noth ing about building and producing. Force is, after all, much better suited to destruction than to con struction. Moreover, ideologues often have only the foggiest of no tions about how the world's work gets done. But the important point here is that the socialists in Rus sia had not devised methods, if such could be devised, for accom plishing their aims. Almost thirty years later, when the Labor party finally came to power with a full commitment to the "nationaliza tion" of major industries in Eng land, they still had only the va guest of ideas as to how this could be accomplished.

That is not to say that methods of reform have not been adopted. Even communist revolutions have become somewhat stylized. Fa1966 THE ORIGINS OF REFORM METHODS 11 bians, or gradualists, have adopted methods, too, and these have tended to be universalized. In the United States, where the socialist tendency has been gradual, meth ods have been adopted for each reformist move, and the move has been made by and with the method adopted. This reflects the legalis tic approach to socialism .. In other words, insofar as reform has been undertaken within the existing framework, and insofar as the ex isting framework requires gov ernment by law, reforms have been given a semblance of lawfulness. This has meant, to some· consider able extent, that the methods of reform have been adopted prior to or concurrent with the introduc tion of the reforms themselves. This was necessary to give the re forms the appearance of legality.

Reversion to the Past The central question is: Where did these methods come from? American reformers have usually claimed that their reforms were new, unique, and innovative, that they were adopted to deal with new and unique conditions. The old, the traditional, the custom ary, was held to be out of date, no longer appropriate to these mod ern times. The new reform meth ods were progressive, as opposed to the outmoded methods to be re placed. There has been much talk of bold, new social planning. Lester Frank Ward and John Dewey wrote confidently about "social in vention." The pragmatic approach, according to the lore of the con temporary orthodoxy, is one of continual innovation, testing, and adjustment as to methods. Such claims are interesting, but the only reality to which they refer is the mythology of reform from which the rhetoric emanates. The methods of the reformers are not new creations; they are usually variations upon methods that have a considerable antiquity. The meth ods of reform have been obtained by the process of abstraction of older or contempora.ry methods, the abstraction of them from the context in which they existed, and the application of them to different purposes. Many of them have long histories and have been subjected to a variety of uses. Let us examine some of the sources of reform methods, and in so doing look at some of the methods themselves.

Reform in America, and else where, has proceeded by dealing with the population as if it were divided into classes. To put it another way, reforms have usually been aimed at, or provided for, peo ple in certain groups; and these groups are often thought of as composing classes. For example, it has been common to refer to the business class, the working class, 12 THE FREEMAN March the professional class, the white collar class, and so on. In practice, reformers have extended this idea considerably; there are many other classes or sub-classes: farm ers, women, the aged, teenagers, Negroes, minority groups, and veterans. Americans have always spoken of classes; the word was a part of the English language which they inherited. It is a word which had rather precise meaning in the Middle Ages in Europe, and had rather definite descriptive meaning in many European coun tries down to the twentieth cen tury. It referred to divisions with in society which were established at law or were protected by law, to a system in which one was born into a particular class and might be expected to remain in that class for the whole of his life. A class system, in short, is a system in which certain groups are em powered and/or disabled by legal prescription, and the condition has usually been hereditary, though it need not be.

Dividing Americans into Classes Now, in this sense, America has hardly had classes at all. After the adoption of the Constitution, the only definite class was tha t made up of Negro slaves. After the abolition of slavery, there were no classes in America, though Ne groes suffered some disabilities by law, and women may have, also, in some places. Americans still re ferred to upper, middle, and lower classes; but these were vague classifications which one might ap ply according to his predilections. Into the breach came sociologists with their baneful penchant for "thingifying" abstractions. To be more specific, there came Karl Marx and assorted hosts of so cialists and reformers. Marx con cocted a theory of universal his tory in terms of class struggle. His idea of class was probably drawn from earlier history, but he applied the abstraction of it to the industrialization going on around him. The bourgeoisie and proletariat were for him classes as rigid as any that had ever ex isted. This conception, or, rather, misconception, of class was spread by socialists in the latter part of the nineteenth century. Many American intellectuals came to hold this conception also.

According to the rhetoric of re formers, "labor" was sinking into a permanent state of dependence, "farmers" being reduced to the perpetual state of sharecropping, Negroes bound over to a new ser vility, and small businessmen squeezed out. "Big business" was often the villain of the piece. The point here is that the population was divided into classes. This di vision provided reformers with 1966 THE ORIGINS OF REFORM METHODS 13 one of their methods, the method of using government to disable certain "classes" and to empower others. Anyone familiar with the reforms of the last fifty years or so should recognize the method as it has been employed: regulate and control "business," particu larly big business, subsidize farm ers, and use the power of govern ment to support labor unioniza tion, for example. Government-like Institutions Other general methods of re form were abstracted from the system of government in the United States. One of the most prominent of these abstractions is that of the "democratic process,"

that is, of voting, majority rule, and representation, and its broad application to all sorts of under takings. For example, the meth ods drawn from government have been generally applied to union organization and activity. There are votes as to whether the work ers in a craft or plant shall be represen ted by a union, votes on whether to strike, whether to ac cept the terms of contracts. The decision of the majority is usually binding upon all. Representatives of the workers negotiate with companies; and these, too, are chosen by the vote of the workers. These are clearly methods ab stracted from the American governmental framework. This partic ular method has become a method of reform because the United States government has long since thrown its weight behind these processes, and undertakes to guar antee that they will be faithfully applied. Thus, methods which have an important and legitimate role in government are applied to a supposedly nongovernmental mat ter.

Federalism, too, has been instru mented to reform purposes. In the American system of government, as conceived, local governments performed most governmental functions, local initiative was es sential to political action, and lo cal customs and traditions deter mined the character of action tak en. Some reforms have been un dertaken at the local level, but over the years the tendency has been to have them initiated, financed, and administered by the central governmen t. Local governmen ts have been used increasingly as ad ministrative units and as a frame work within which to impose and control governmental programs by the central government. An exam ple of this would be the welfare program, that· is, the program of old-age assistance, aid to depen dent children, and aid to the dis abled. Moneys are provided by both the United States govern ment and the state government in14 THE FREEMAN Ma,rch volved. The program is adminis tered at the county level; but it is administered according to pre scriptions laid down by the cen tral government, in the first place, and, within that, according to sta te law and procedure. Thus, the county is reduced, in this and many other instances, to an ad ministrative unit. The federal sys tem of government becomes an in strument for reformers by revers ing the direction of the flow of authority; it becomes one of the methods for reform.

The Perversion of Voluntarism Many of the methods of gov ernmental reform have been ab stracted from practices, proce dures, and services of voluntary or ganizations. For example, cases of need and hardship were generally looked after and provided for in the nineteenth century by volun tary charitable organizations. In rural areas and small communi ties, permanent organizations might not exist; each case would be handled by relatives, neighbors, and churches as it arose. But in cities, more nearly permanent charitable organizations were formed and maintained. Many services provided by such organi zations were eventually taken over and provided by governments. It would make an interesting and in formative study to examine into the question of how many ser vices now provided by govern ments were originated and initial ly provided by private industry, individuals, and voluntary groups.

My guess is that it would include almost all of them. Many roads and bridges were built and oper ated by private companies in the United States in the first half of the nineteenth century, though they were often chartered monop olies, in keeping with the mer cantile mode of operation. Educa tion was generally provided dur ing the same period by voluntary means. Voluntary associations within professions, such as the legal and medical, have maintained standards and "policed" them selves. Industries had inspectors before government provided them. Insurance was a private func tion long before government got into the business. There were pri vate savings banks before the United States government set up Postal Savings in 1910. Hospitals were built and maintained by phy sicians, churches, and voluntary organizations. Volunteer fire de partments even preceded city fire departments. Housing for the poor was provided by private enter prise long before "public housing"

measures were undertaken. Even the tenement, which is surely the model for government-financed housing in large cities, was ini1966 THE ORIGINS OF REFORM METHODS 15 tially built by private initiative. It was, after all, the apartment house in times when capital, technology, and entrepreneurship had not made the labor of many workers sufficiently remunerative to afford better. The chances are good that "Duncan Hines ate here" before state inspectors did generally, and his is still considered the more im portant recommendation. In per spective, it looks as if the vaunted "social invention" of reformers has been restricted largely to in venting arguments why govern ment should perform services that were already being performed. Business-like Bureaucracy Not only have many of the ser vices now performed by govern ments been taken over from the individuals and voluntary groups who originated and maintained them, but administrative organiza tion and procedure was taken over, too. Boards of trustees, boards of directors, boards of dea cons, committees, and boards of education - the control bodies of private organizations - often have been perpetuated by governments.

When a state takes over a private college, for example, it usually continues the same mode of ad ministrative control, having a president 'or chancellor and what ever its board of control happens to be called. It will, of course, be brought under the sway of the government, in one way or an other. The various "authorities" by which governments engage in business activities, as, for ex ample, the Tennessee Valley Au thority, will have some figure as head who will likely be called chairman, patterned after the chairman of the board of directors of a private corporation, and a board or commission which itself appears to have been abstracted from corporation organization. Some methods of doing things have had a long and checkered career. Take, for example, the re cording of births, marriages, and deaths. A few hundred years ago such records were ke'pt by churches. In nineteenth century America, following the change in the political position of churches, many families kept such records in the family Bible. Counties took over the function, and began to require that reports be made to them of these affairs, authoriza tions be got from them in some cases, and certificates began to be issued commonly. The Federal cen sus, authorized as a population count for the purposes of appor tionment of electors and represen tative among the states, began to collect and contain more and more information about the citizenry,.

Now, the information which gov ernments collect through these and 16 THE FREEMAN March other devices is being made into an instrument for the advance ment of reform by way of govern mental planning based upon the projection of figures drawn from the information. Feudal Practices Revived A goodly number of the meth ods of reform are adapted from other eras. An example of this is the use of the power of eminent domain to acquire property for reform uses. The power of eminent domain is the power to take pri vate property for public use by government. Such a power was assumed to be appropriate to gov ernment at the time of the adoption of state constitutions and the United States Constitution, for pro vision was made for its exercise. The theoretical justification then was that it derived from the sov ereignty of a government. The idea of sovereignty was carefully for mulated in the sixteenth century, was drawn from the powers of the monarch, and served to buttress the thrust of kings to absolute power in the seventeenth and eigh teenth centuries. But the powers of the monarch over the land of the realm go back to the Middle Ages and the feudal system, when the patents or rights to land belonged to and stemmed from the king. It is somewhat a matter of choice as to whether one traces the power of eminent domain to feudalism or to divine right monarchy. The use of the term "eminent domain"

appears to be peculiarly American, but the power is not. For most of American history, the power was used only to a. limited degree, and some limitations upon it were em bedded in constitutions. However, in recent years it has tended to be used as an open sesame for gov ernmental appropriation of land for reform purposes. This is par ticular ly glaring in the case of ur ban renewal projects, but its use is not restricted to this arena. Other practices can be traced back to the Middle Ages, at least. The "just price" is a Medieval conception and practice which has been used in price controls. Maxi mum wages were set by the Eng lish government as early as the fourteenth century, in connection with the Black Death. The setting aside of lands as forests and parks has its model in the Medieval "commons" and the king's for ests. Mercantilism Refurns The most fecund historical source for commercial regulation and control is mercantilism, which reached its earlier apogee in the seventeenth and eighteenth cen turies. The protective tariff was the classic mercantile device for regulating and inhibiting trade 1966 THE ORIGINS OF REFORM METHODS 17 among the peoples of various na tions. Monarchs also issued pat ents and charters which gave to individuals and companies monop olies of trade. Regulations upon the export of precious metals were adopted. Monarchs inflated the currency, as governments have done from time immemorial, large ly by reducing the metal content of coins supposed to have a cer tain and fixed value. Practices to promote the "economic self-suffi ciency" of nations were used with in the mercantile framework. Sub sidies and bounties were paid for the production and manufacture of certain goods. Sumptuary laws were passed to discourage or pro hibit the consumption of certain goods.

Virtually all of these mercantile practices have been revived within the last century. Modern reform ers have made some alterations in them, however. They are more apt to set minimum wages than maxi mum wages. They call their "just price" a "fair price." Mercantilist governments usually subsidized the growing of scarce items, while modern reformers tend to subsi dize the production of goods in surplus. However, the recently au thorized reduction of the silver content in American coins differs not at all from the ancient prac tice. Other reform methods ha ve been borrowed from the Europe of more recent times. Many Ameri can intellectuals have been, of course, enamored of things Euro pean. For some of them, it has been enough recommendation of a practice to declare only that it is what is done in Europe. If Euro pean countries have government financed radio and television sta tions, it is taken to be a proper way to do things. If European countries subsidize the arts and maintain theaters and concert halls, it is presumed to be an en lightened undertaking. Be that as it may, reformers have learned some of their methods from the Europeans. England undertook to impose an income tax in the first half of the nineteenth century.

Imperial Germany set up welfare programs in the latter part of the nineteenth century, and England got into the welfare business just before World War 1. Reforms at tempted in England are quite often copied by American reform ers, without making royalty pay ments either. War a Prolific Incubator of Reform Methods But perhaps the most prolific womb of methods has been war; it has been a veritable incubator of reform methods. Reformers have long been fascinated by the "accomplishments" of a country 18 THE FREEMAN March at war. They have noted the full employment, the rise in wages, the immense production, the rise in farm prices, and, altogether, the aura of prosperity. There are those who suppose that war does indeed bring prosperity. A con siderable myth was propagated by Charles A. Beard and others that the great industrial surge in the latter part of the nineteenth cen tury was a product to a large ex tent of the Civil War. No one has ever explained how the great waste and destruction of war could pro duce prosperity, or why construc tion is the product of destruction.

Such history is on a par with a history that would claim that be cause roosters crow before the sun comes up that their crowing causes the sun to rise. Still, these myths have attracted a large fol lowing. Reformers have abstrac ted methods used in wartime from their context and applied them in peacetime .. One history, in deal ing with the origins of the New Deal, contains these remarks: "The power which the federal gov ernment could exert over the econ omy had been amply demonstrated by the War Industries Board and other wartime agencies in 1917 and 1918. Roosevelt and a number of his advisors, including George N. Peek, H ugh Johnson, and Ber nard Baruch, seem to have been greatly influenced by their experiences in economic planning during World War 1."1 Wartime Inflation This does not begin, however, to tell the impact of war upon re form. Perhaps the most momen tous abstraction from war has been the inflationary device. Now inflation - that is, the increase of of the amount of currency in cir culation - has not been restricted to war. But in the United States the government inflated most ex tensively during wars until well into the twentieth century, if not to the present. This has been true because those in power have not seen fit - have not thought it pol itic - to finance the wars by the ordinary route of taxation. They have, instead, employed surrepti tious tax measures such as infla tion. The first time that this meas ure attracted the attention of re formers to any extent was after the Civil War. The government had issued a large number of greenbacks during the war. It later began to retire them from circulation, which was a respon sible fiscal undertaking. Nonethe less, it drew the fire of reformers.

A political party called the Green back party was even organized. 1 Gilbert C. Fite and Jim E. Reese, An Economic HiBtory of the United States (Boston: Houghton Mifflin, 1959), p. 590.

1966 THE ORIGINS OF REFORM METHODS 19 This particular movement died out but not the desire to inflate. The silverite movement of the latter part of the century was an exten sion of the inflation· movement. During World War I the govern ment had a much more potent mechanism for inflation - the Fed eral Reserve Banks. The extensive use of this system to facilitate government financing during World War I was continued after ward, and this system became an important auxiliary of the Treas ury and for manipulating the cur rency supply. Large-Scale Government Planning During World War I, the first concerted attempt in American history was made to coordinate, regulate, and direct the economy by the government to a definite end. Economic planning was car ried out on a large scale. The War Industries Board, under the guid ance of Bernard Baruch, was even tually given powers to establish priorities for all types of mater ials for war use, and to convert old facilities for manufacturing from their former use and to cause new facilities to be brought into being. Baruch had a life-and-death power over manufacturing and could, through the threat of the denial of materials, bring a busi ness into line. An Advisory Food Committee, with Herbert Hoover as Food Commissioner, was set up. It was soon given great pow ers over certain kinds of agricul tural activities. Food processors had to be licensed by the govern ment. The act granting these pow ers prohibited the use of foodstuffs for making alcoholic beverages; thus began the "great experiment"

in national prohibition. The price of wheat was set by the govern ment, and a corporation was set up to achieve this end. A War Trade Board was authorized and given power to regulate exports and imports. An Emergency Fleet Corporation was organized with power to buy, lease, build, and op erate ships. The model for this was the private corporation, but the government was going into business. The first government dam on the Tennessee River was built during and after World War 1. A War Labor Board was set up to mediate labor disputes, the first time the government became of ficially involved in these matters. The government could manipulate wages by the wages it paid in gov ernment-owned war plants. "Wil son used this power to make an informal but firm bargain with labor. He undertook to establish the principle of union recognition in government plants and to secure wage increases as rapidly as prices rose. In return, he extracted a no strike pledge from organized la20 THE FREEMAN March hor in basic industry for the dura tion of the war."2 This experience was abstracted and much of it applied to reform ist ends. The crisis motif has been taken from its war context and applied to depression conditions, for instance. Reformers have come to talk about wars on poverty, on death, and so forth. But the meth ods used during World War I have been specifically applied to peacetime uses also. The concen tra tion of powers in the hands of the President, done during war, has now become a common mode of operation by government. The creation of all sorts of boards and commissions has become standard operating procedure. The War In dustries Board served as a model, of sorts, for the National Recov ery Administration. The costs of the agricultural programs in the early New Deal were to be paid by a tax on food processers, a tac tic obviously drawn from the meth od of control during World War I. The National Labor Relations Board was modeled after the War Labor Board. A dam built because of the exigencies of war became the first of a large number to be built upon the Tennessee River by the government. The list is not 2 George H. Mayer and Walter O. For ster, The United States and the Twenti eth Century (Boston: Houghton Mifflin, 1958), p. 244.

complete, but it should be sug gestive. Means and Ends On the face of it, all of this may not appear to matter much. After all, does it make any difference whether reformers are original, in some kind of "creative" sense, or not? Is it not appropriate to use the methods with which one is familiar, or which may be learned from history, for the accomplish ment of new ends? Is this not how everyone operates, more or less? Perhaps so, but it must be kept in mind that it is the reformers who have insisted upon the uniqueness of the times and upon the new and experimental character of what they were doing. If it were not new and different, it would not be "progressive." Moreover, if the methods had been tried before, there would be historical evidence as to their efficacy. As to the validity of the proc ess of abstraction employed in this way, it should be kept in mind that this depends upon the identi ty of the nature of the things to he dealt with. It may be appro priate to adapt a method used in one undertaking to use in another, if the undertakings are similar in kind. For example, if a corpora tion is an effective business or ganization for manufacturing bolts, it is reasonable to suppose 1966 THE ORIGINS OF REFORM METHODS 21 that it will be equally efficient in organizing for the manufacture of nuts. The assembly line method for manufacturing buggies may be abstracted from this undertaking and applied to the manufacture of automobiles. But the assembly line cannot be utilized to produce cus tom-made automobiles. They may be called custom-made, but they will be uniform because products of an assembly line must be, or, rather, they must be if the meth od is to be effectively used.

The Method Affects the Result Weare back now to the original point of departure in this article. The methods employed determine the results produced. Aim and pur pose have bearing upon the matter only if they have determined the methods to be used. To be more specific, feudal methods produce nea-feudalism when they are ap plied. Mercantile methods produce mercantilism. The reason for this c~n be readily understood. When government deals with groups within a population as if they were a c~ass, it creates a new class sys tem. In short, if it grants privi leges or immunities to some ele ment of the population, empowers or disables it, it has brought into being a class. When wartime meas ures are applied to civil purposes, the measures· retain their warlike character. War mobilization methods are suited, if to anything, to the augmentation of governmental power for the destruction of an enemy. When these methods are used for civil purposes, if they could be, their character is un altered. Their use still results in the augmentation of governmental power, and such power remains, in the main, destructive. There is no real enemy - of flesh and blood, with weapons and war plans - that can be designated by the name, "poverty," against which to use this power. There are only people and goods, and such power as is exercised will be exercised against these, not against some abstrac tion. This should have been clear when the New Deal's war on pov erty was conducted; it was con ducted initially by plowing up crops and shooting animals. But, then, war is war, and its methods are the methods of destruction.

However subtlymethods abstracted from war may be applied to the domestic situation, they continue to be wars on person and property: whether they be wars on savings by inflation, wars upon possessions by taxation and confiscation, wars upon human relationships by the prescription of behavior, or wars upon production by way of crop limitations. Methods abstracted from other kinds of activities are equally inap propriate to reform by the use of 22 THE FREEMAN March governmental power, though they may not always be so devastating in their consequences when ap plied. The use of force or the threa t of force by labor unions is nonetheless a use of compulsion an assumption of pseudo-govern mental powers - regardless of whether the principle of majority rule has been applied or not. When governments provide welfare for the needy, it ceases to be charity, even though the same organization for the provision of the service be ada pted from pri vate and chari ta ble societies. The adoption of the forms of business organization by governmental bodies does not re sult in maintaining responsibility along the lines that it was estab lished in private companies. A gov ernment board is just not respon sible for what it does in the way that the board of directors of a private corporation is. When the power of eminent domain is joined to presidential power, or to that of somebody under the President, it takes on its old ,character of ab solutism, embedded in the method all along.

We are not to suppose that re formers are aware of the grotesque incongruities that exist between their professed aims and the meth ods they use. It is unlikely that many of them are aware of the origins of the methods they em ploy. They have a rhetoric which hides them from such recognition. They talk in terms of bold, new ex periments, of breakthroughs and innovation, of pragmatic testing; but theirs are the age-old methods of feudalism,of absolutism, of mercantilism, of war, and of vol untary methods joined to political power. The flight from reality is in the mind; in the real world the results of actions follow from the methods used. + T he next article in this series will concern tiThe Flight from Economics."

RALPH W. HUSTED My JOB occasionally takes me to Philadelphia. I never miss an op portunity, when I am there, to look at that small room where the ar chitects of this nation in a rela tively short time drafted, debated, and finally adopted the Constitu tion; where the vision of a great republic was given to a handful of men who, when opportunity came, were prepared by education, cour age, and faith to discharge one of the greatest responsibilities ever undertaken by men. I do not believe it was an ac cident that those men were brought together at the same time and at the same place in history. I think it was no accident that among that small group were some of the Mr. Husted is Vice-President and Secretary of the Indianapolis Power & Light Company. This article is from his 1965 Veterans Day address before the IPALCO Young Men's Forum. greatest thinkers of their day, either in Europe or in America.

To one who sees about him a world of infinite plan and design, things do not just happen. There were times, we are told, when the Constitutional Convention ap proached disruption. I believe the fact that it was finally successful was not an accident. I believe the courage and wisdom de,monstrated on that occasion were not acciden tal. And I believe it was no accident that Madison was able to draft in a short time a document containing the wisdom of ages, and at which men have marveled ever since. The man who sees history as a great laboratory in which it has been proved time and again that cause has its inevitable effect, according to the design of a power greater than any of us can envision, can not believe that the birth, educa23 24 THE FREEMAN March tion, and experience of Washing ton, Adams, Hamilton, Jefferson, and Madison were mere accidents of history and that the founding of America was merely a fortunate coincidence of men and circum stances.

Our Founding Fathers believed tha t we Iive in an ordered uni verse. They believed themselves to be a part of the universal order of things. Stated another way - they believed in God. They believed that every man must find his own place in a world where a place has been made for him. They sought inde pendence for their nation but, more importantly, they sought freedom for individuals; freedom for men as individuals to think and act for themselves. They established a re public dedicated to one purpose above all others - the preservation of individual liberty, the protec tion of a society where men would be free to pursue their purposes in life as they see them. They did not think man's purpose in life is to be determined by government or that government has any business decid ing what purposes our society shall serve. Spiritual, Economic, Political When we speak of individual lib erty, just what do we mean? In fi nal analysis, I think it has three es sential elements-namely: freedom of worship, economic freedom, and political freedom. I will not say much about religious freedom ex cept to make a point which is very significant, especially in the light of the recent school prayer cases.

Freedom of worship meant to our forefathers exactly what the words imply, Le., freedom to worship as one pleases. But remember, it also meant to them the right not to worship at all. We know, of course, that very few of them were dis posed to make that choice. For most of them, worshiping God was an essential part of their lives. It is true that they believed in and advocated the separation of church and state, but they certainly did not believe in separation of the people from God. In 1835 the French lawyer, Alexis de Tocqueville, wrote about what he had seen in America: ... in America religion is the road to knowledge, and the observance of the divine laws leads man to civil freedom .... I have said enough to put the character of Anglo-American civil ization in its true light. It is the re sult (and this should be constantly kept in mind) of two distinct ele ments, which in other places have been in frequent disagreement, but which the Americans have succeeded in incorporating to some extent one with the other and combining ad mirably. I allude to the spirit of re ligion and the spirit of liberty.

1966 THE MORAL FOUNDATION OF FREEDOM 25 There is one more point I want to make in connection with reli gious freedom, and it leads to the central idea of what I have to say here this evening. Religious free dom means nothing without eco nomic and political freedom. Life is not divided into ne'at little com partments one of which can be con sidered without regard to all others. Life can't be divided, nor can freedom. It is impossible to have religious freedom without political and economic freedom. It is equally impossible to. have eco nomic or political freedom without religious freedom. Now let us con sider economic freedom in that light. Importance of Economic freedom Economic freedom means, liter ally, freedom to seek the means of satisfying one's material needs; but I doubt that any man ever con sidered his own well-being in terms of material needs alone. Considera tion of man's material needs neces sarily involves thinking at the same time about his spiritual needs, be cause his well-being depends upon satisfaction of both, and both con sciously or unconsciously influence his efforts to satisfy his wants.

Hence the interdependence of eco nomic and religious freedom. The significance of economic freedom lies in the very nature of creation. We are made one at a time, and no two of us alike. The differences between us are great, and by far the greatest differences are spiritual. The bare necessities of life are few but the. number of material things necessary to give expression to the spirit of man kind is endless. The millions of forms in which property is mold ed by the hand of man and the mil lions of uses to which it is put are but extensions of the millions of human personalities who gather property and adapt it to their needs. Whether it be a pencil or a steel mill, property is but a reflec tion of the infinite spirit of man. It reflects the desire of the human spirit for self-expression. If you agree with this, I think you will also agree that property, to serve its purpose best, must be private property. By the very na ture of creation, no two of us can have the same desires, the same skills, or the same mental endow ments. No two of us can express ourselves in the-same way. Proper ty cannot possibly serve the same purpose for one owner as it serves for others. What we call ownership is the right to the use, possession, control, and disposition of proper ty; and it is these incidents of own ership which make property useful in satisfying the needs of individ uals.

Clearly, therefore, ownership must be private if a particular item 26 THE FREEMAN March of property is to satisfy the needs of a particular man as he and no one else sees them. If you still have doubt as to the necessity for pri vate ownership of property, con sider for a moment that all of us are property owners; a man's la bor is his property, and unless he is free to control and dispose of his labor as he wishes, he is a slave. Men have coordinated their ef forts in countless ways to satisfy their material wants, but always, and regardless of how interdepen dent their lives may become, their efforts are directed to satisfaction of the wants of individuals. Men have created business organiza tions both large and small, both simple and complex, but such or ganizations have no life, no philos ophy, and no ability to create or produce separate and apart from the individuals comprising them.

An organization or corporation may become so large, that a person begins to feel that his individuality has become completely swallowed up in it, but the fact remains that he is the one endowed with life and not the organization. Only individ uals can: grow and progress, and only individuals can generate eco nomic progress. Only an individual can want. Only an individual can know what he wants; and unless he is free to make the choices that will satisfy his wants, he is not really free. It is inconceivable that in a so ciety where choices are made for us by government we could ever enjoy complete satisfaction of our material and spiritual needs. It is equally inconceivable that any group of economic or social plan ners could make choices for us in a way that would satisfy us, be cause one man can never under stand another well enough to do so. The division of labor in a free society is a vast voluntary coopera tive system. In America it has enabled men to enjoy a standard of living that taxes the imagina tion of people living in other parts of the world where such freedom is denied them. Complex as our system may be, it is, nevertheless, built upon something that all of us understand - the promise of one man to another. It is built on the right to contract, to contract freely without the intervention of government. It is built on freedom of individual choice. A planned society may enforce specialization of work, but compulsion has never performed the miracles of produc tion that have become common place among men who are able to contract as they wish.

Meaning 01 Political Freedom So much for economic freedom. What about political freedom? Po litical freedom in the minds of 1966 THE MORAL FOUNDATION OF FREEDOM 27 many people is something which they define vaguely by the word "democracy," and which they as sociate with freedom of speech and the right to vote. To think of politi cal freedom only as democracy is dangerous indeed because a democ racy can become a tyrannical mob. To think of political freedom only as freedom of speech and the right to vote is to fall into a socialist trap, because even the socialists profess to believe in both. The right to vote may be essential to freedom, but we should remember tha t time and again people have given away their freedom by ma jority vote. Then what do we mean by politi cal freedom? I think it is this. Every right which we insist upon as free men carries with it the duty not to interfere forcibly with the enjoyment of the same right by others. Man's desire for self-ex pression is natural and good and the right to self-expression is es sential, but unless it is accompa niedwi th a proper sense of re sponsibility it may manifest itself in the use of force. Weare respon sible beings but we all know that in the present state of civilization, and as it probably will be for ages to come, no one is or will be per fect. Noone has or will have a perfect sense of right and wrong.

We must, therefore, have law to restrain the use of force. But let us also keep this in mind. The law is not self-execut ing. The law itself must employ force or the threat 'of force to restrain those who would act ir responsibly. It may seem trite to repeat here that that government governs best which governs least, but it needs to be said now as much as when first spoken. Politi cal freedom means. freedom from government restraint orcompul sion beyond what is needed to curb irresponsible men. When govern ment goes further than that, it becomes the oppressor of freedom. When we turn over to government the job of planning, managing, or controlling any undertaking, re gardless of how humanitarian it may appear to be, we must weigh the cost in loss of freedom because loss of freedom inevitably accom panies the delegation of such power. The Role of Government Now, some of you may ask, "What about the many services which the government renders for the people? Does not the govern ment do for us many things which we could not do for ourselves?"

Does it? Perhaps we have been deluding ourselves. Dr. F. A. Har per has said, The government could do for us what we cannot do for ourselves only if it sits on the right hand of Crea28 THE FREEMAN March tion itself. Otherwise, unless it be possessed of the powers of God, it cannot possibly do anything that peo ple can't do for themselves, for the simple reason that people comprise all that is government. Government is manned by the very same persons whose deficiencies are presumed to disappear when combined into a legal structure with bureaucratic, political trappings - a process which makes an ordinary person, if anything, less able than before to accomplish things. The bureaucratic whole is, for this reason, really less than the sum of its freely cooperating individual parts. Edmund Burke once said, To make a government requires no great prudence. Settle the seat of power; teach obedience; and the work is done. To give freedom is still more easy. It is not necessary to guide; it only requires to let go the rein. But to form a free govern ment, that is, to temper together these opposite elements of liberty and restraint in one consistent work, requires much thought, deep reflec tion, a sagacious, powerful, and com bining mind.

It was no accident that Wash ington and his contemporaries es tablished something the world had never before seen, a nation dedi cated to freedom of the individual. Theirs were the minds which un derstood that the only real liberty is individual liberty. Theirs were the powerful and combining minds which understood the moral foun dation of freedom - man's per sonal relationship with his Crea tor - and they made that the foun dation for the greatest nation on earth. The Danger We face Today we are faced with the most serious attack on our free dom which has ever confronted us. I say the most serious because it is an attack on the very moral foundation which I have just de scribed. It is little comfort to know that the attack may have been inspired initially by people beyond our borders. The disturb ing fact is that the burden of the attack is now being carried by persons in all walks of life who prof ess to be and think they are good Americans. I think it has not been a case of knowingly aban doning our faith, but rather we have been led without thinking to accept many beliefs which in fact deny that men have a personal relationship with God. Individual liberty has been sacrificed and government has come to be looked upon, primarily, as an instrument for social and economic planning.

We have allowed to infect our political philosophy the belief that men are no longer able to take care of themselves. We have es tablished an enormous bureauc racy to plan for them. We still 1966 THE MORAL FOUNDATION OF FREEDOM 29 profess the need for religious freedom, but we have repudiated the conviction of our forefathers that unless we also have economic and political freedom, religious freedom is meaningless. We have, for example, adopted a graduated income tax for the avowed purpose of supporting es sential government functions, but we have changed our concept of what is essential and we are now using the tax in shocking measure for the redistribution of wealth and as a means of controlling the lives of people. We have subsidies for housing, subsidies for farmers, subsidies for power, subsidies for shipping, and subsidies for the aged. We take one man's property to give to another and think it is right simply because it is accom plished by majority vote. We have adopted the Marxist principle of "from each according to ability, to each according to need."

We have outright government ownership of hundreds of enter prises. We have government inter ference with the right to contract in practically every area of eco nomic activity. In many areas such interference is so great that the free market, freedom of economic choice, is gone. We have allowed ourselves to think that a little socialism will not hurt uS,but the acorn has now grown into a giant of the forest. The Mixed-Up Economy Many of our politicians, political scientists, economists, school text book writers, and even some of our financial and industrial leaders see great hope for the future in what they call a mixed system of pri vate enterprise and public enter prise. They speak of the "public sector" of our economy as con trasted with the "private sector" and of the necessity for a partner ship between the two. They praise what is now fashionably called the partnership of government and business. They speak of the mar velous adaptability of our system of free enterprise because, as they say, it has been able to join hands with government to meet what government planners consider the needs of society. What kind of partnership is it where one part ner is supported entirely by the other? What kind of partnership is it where one has become such a burden to the other that there is evidence today of the load becom ing too great? How long can it last?

We have accepted fiscal im morality as a national policy. This is not something that has been forced upon us. The fact is that we insist upon it. Every downturn in business is the occasion for further demands that the govern ment increase spending, even defi cit spending; that the Federal Re30 THE FREEMAN March serve System reduce interest rates and buy government bonds so as to increase the supply of bank credit; all of which, of course, re sults in an increase in the supply of spendable dollars but contrib utes nothing to the real wealth of the people. People are really not better off, because dollars are not wealth, nor are dollars a true meas ure of wealth when they are sub ject to arbitrary devaluation by ar bitrarily increasing the supply of them. If one concedes that private property is indispensable to the achievement of man's happiness, then it must also be conceded that any artificial manipulation of the medium of exchange by which the value of property is measured is morally wrong, and that is exactly what our Federal government does when it tinkers with interest rates to expand or restrict credit, or reduces gold reserve requirements, or puts pressure on the Federal Reserve System to buy or sell government bonds to increase or decrease bank credit, or engages in deficit spending.

What is immoral about these practices? Let me mention only one thing that is obvious to all of you. It is simply the fact that everyone holding or depending di rectly or indirectly on fixed in come obligations and contracts is deprived of a part of his property without receiving anything in ex change for it. Money that is sub ject to tinkering by government becomes the instrument by which people are robbed of their prop erty. By Majority Vote in the Name of Democracy We have done it all by majority vote and in the name of democ racy. Now I do not want to be misunderstood. The word democ racy still has meaning to me and I believe in it, but I would ask you to remember always that de mocracy is not an end' in itself. Despite the preaching of our pres ent-day textbook writers and gov ernment social planners, democ racy is not the goal of America. Democracy can be and has been many times an instrument for the abuse of individuals. Our goal is, and must continue to be, individ ual freedom.

Of course we believe that every one should have a decent house, that a farmer should enjoy a high standard of living, and that the aged should not want, but how are these things to be accomplished - by resorting to more economic and social planning by govern ment and to a program of mas sive government spending? Shall we ignore the fact that when we speak of government planning we presuppose the existence in gov1966 THE MORAL 11'OUNDATION OF FREEDOM 31 ernment of someone with super human wisdom to do the planning? Shall we ignore the fact that when government does the planning, the coerci ve powers of government will be used to carry the plans into effect at an enormous sacrifice of individual freedom? Apparently some of our present-day leaders, both in government and out, be lieve we should. Shall we accept the notion that merely because government planning for the peo ple is done under the label of de mocracy, and is claimed to repre sent the interests of a majority of the people, it is right?

Toda.y many of our people, both in government and out, believe the "welfare of the majority" is the criterion by which we should meas ure the extent of government in terference in and control of eco nomic affairs. We find people, both in government and out, urging an expanded program of government planning and spending in order, as they say, to improve society and strengthen freedom. How can the strengthening of centralized gov ernment dedicated to a program of social and economic planning assure individual liberty to any one? The· free man is the man who can make choices for himself and not have them made by gov ernment. We find today,· among people ranging from textbookwri ters to respected businessmen, whole hearted endorsement of the Uni versal Declaration of Human Rights, drafted by the U. N. Com mission on Human Rights, which declares that men are entitled, as a matter of right, to favorable working conditions, just pay, so cial security, adequate housing, and an adequate standard of liv ing.

Of course, these things are de sirable, but let me remind you that in the America conceived by our Founding Fathers, man's in alienable rights -life, liberty, and the right to own property - are not granted by the state. They are God-given. A decent house, ade quate pay, and social security are not God-given. God gives men the capacity to acquire these things for themselves, but no more. God gives men the capacity and free dom to work and create. He gives them nothing they can create for themselves. We renounce the great religious heritage handed down to us by our Founding Fathers when we speak of the material things which men are intended to work for as though they too are some thing we have a God-given right to demand. Christian Responsibility We are a nation with Christian traditions, and I know some of you are saying, "What about our re32 THE FREEMAN sponsibility as Christians to our fellow men?" Well, let me discuss that for a moment. I suspect that what really prompts us to think only the government can handle some of our present-day problems is that we do not really trust the sense of responsibility of our fel low citizens. We are afraid that if care of those in need were left to the people to handle voluntarily, they would let the job go undone.

Perhaps they would in some cases. Some people might suffer if their welfare were dependent solely on the charity of their fellow men. But is the welfare state the an swer? Now some of you will say that care of those in need is a much bigger problem than it used to be. "We are living in a different age," you say, "and care of the needy is so big now that only the gov ernment can handle it." That is a myth. I lived through the depres sion of the 1930's. I saw people go hungry and without enough cloth ing. But I never saw or read of anyone starving or freezing to death. On the contrary, in the early days of the depression, I saw the greatest voluntary re sponse of people to the needs of their fellow men that this nation had ever seen. Without being asked by anyone, people who had less thafl enough to satisfy their own needs shared what little they had with those who were in worse con dition.

And then something happened. Someone decided that the govern-. ment could do a better job of feed ing and caring for the unemployed, and a vast government handout program was launched. What hap pened? The spirit of charity that brought people to the aid of their fellow men was destroyed. The government tried to assume the mantle of Christian charity, the noblest characteristic of mankind, and the people themselves thought it would work; but it didn't. Oh yes, the poor were fed. The un employed were given work of sorts; but the people of this coun try were changed. They had lost something. They had surrendered to government their moral respon sibility - the thing that made them men and women - and from that \ve have not recovered to this day. If we believe as our Founding Fathers did, then we must let man be free to develop his sense of responsibility in his own way, and we must have faith that he will.

Christian charity is an individual act. It cannot be anything else. It springs from within men. It can't possibly be imposed on men by law; and how utterly ridiculous it is of us to think that it could be! Christian charity can't be expressed by any two people in the same way, 1966 THE MORAL FOUNDATION OF FREEDOM 33 because no two of us think and feel alike; and it is exactly for that reason that our responsibility as Christians can't be delegated. Christian charity is not a respon sibility which we can delegate to government; and when we attempt to do so, we only weaken ourselves and rob our society of the spiritual vigor which advances civilization. Christian charity springs from re spect of one individual for the dignity of another, from recogni tion by one of the divine spirit in another. When we come to un derstand that all men are en dowed with the divine spirit, I think then, and only then, will we understand why men were meant to be free. ~ TO THEGA 'l.

VERMONT ROYSTER ws NEXT ITEM on the agenda: Price controls.; You don't have to have an in side pipeline to White House se crets or Jeanne Dixon's mystic gift of precognition to be tempted to tha t prophecy. All you need is a bit of perception and a good mem ory. As a matter of fact, being privy to Administration councils might be a hindrance to foresight.· Quite possibly the phrase has never been mentioned, and almost surely, if it has, the idea of resorting to the paraphernalia of coercive economic controls has been rejected as politically undesirable and eco nomically unnecessary. President Johnson, having lived through two periods when the government tried to decide the wages of every plumber and the price of every handkerchief, is hardly eager to rush back into that maelstrom. His economic ad visers, whatever else they may be lacking, are full of confidence in their ability to manage the econo my with such a deft touch that in flation can be kept upon a perfect and joyous balance.

34 THE JI'REEMAN March So an inquiry as to intent would bring a sincere denial of plans for government fiats to fix prices, wages, interest rates, import quotas, foreign exchange rules, tourist allowances, or any other part of the panoply of economic controls. All the same, mark it down. Barring the unlikely event of a complete reversal in the Admin istration's economic policy, we shall likely soon see one or more of these put forward. And before vve're through, we may see them all. The portents aren't obscure. For years now, under several Adminis trations, the Government has been steadily counterfeiting money. In effect - although modern tech niques are much more sophisticat ed - it has been simply running the printing presses to "create" dollars out of pieces of paper. The process is in no wise different from the ancient one of alloying talents or clipping coins. There is nothing obscure, either, about the historic results of that counterfeiting. Examples abound from the distant days of Dio cletian to the modern times of Brazil.

With each depreciation of the currency, the prices of goods and labor rise; that is, the sovereign's solemnly issued money is worth less today than it was· yesterday. At first the change is slow and to the apparent prosperity of all. Then it proceeds more rapidly as the authorities find they must print more money to redress the imbalance from the higher prices caused by the earlier inflation. Finally, there is so much dis turbance that these same authori ties feel they must try to quash the consequences of what they have done. In Diocletian's day they cut off the hands of "profiteers" who asked a dozen denarii for a loaf of bread. In eighteenth cen tury France they hung the butcher. But of course all this happened in ancient times or in distant climes. Things are different now, we are assured. Noone denies that we are en joying the first stage of the tra ditional inflationary process. On the contrary, everyone in author ity boasts of it. To inflation, and to their perspicacity in managing it, they attribute all our pros perity.

Their perspicacity was also to keep it in hand so that we would not have to pay any of the his toric penalties for our happy rev els. For a time they could point with pride, and quite accurately, that 10 years or so of inflation had brought only imperceptible in creases in the cost-of-living index.

1966 TO THE GALLOWS 35 Some prices, in fact, declined. Even now such things as house hold appliances and many food items cost less than a year ago. However, not everything has been coming up roses. In the past five years that "slow" increase in the cost of living has raised the index from 103.3 to 110.4, a total rise that's quite perceptible. In the last year alone there have been some spectacular increases in many areas, notably in clothes, meat, education, and medical care. And in key areas elsewhere the pressures are mounting, the most publicized being steel, aluminum, and interest rates. The last item, incidentally, is especially signifi cant because it is the price of bor rowing today's dollars to be paid back 'with tomorrow's dollars and so closely reflects the effects of currency. depreciation. So now what are we told? Why, the whole trouble is caused by those wicked steel makers, alumi num makers, and bankers. All that's necessary to put everything right as rain is for them to volun tarily agree to restrain them selves. If they won't, by Lyndon, they'll just get bashed over the head.

We have already, then, the first efforts at price control. The fact that it is selective, and doesn't yet touch the butcher and candlestick maker, or that the coercion is not by fiat but by threat, doesn't alter the fact that the government is undertaking to control prices. The government is also, by the same device, trying to control other economic activity, such as deci sions on foreign investment. In short, we are right on sched ule. The country has passed through the primary stage of in flation, in which the cheapening of the money has only happy ef fects, and into the second stage where those effects appear less happy and even begin to threaten other economic desires and objec tives. The response of the authori ties is also right out of the book. It's true enough that the proc ess could stop at this point. All the government needs to do is stop clipping the coins. But quite apart from the normal difficulties of kicking the habit, we have now an added factor. The peril of im prudent men is always the unex pected, and in this case it's a war - a long and costly war. This year's deficit will be billions big ger than anticipated, and after that in unknown figures.

How long it will take to reach the tertiary stage is anybody's guess. But don't be surprised when the agenda includes a debate on hanging the butcher. ~ This article is reprinted by permission from the December 3, 1965 issue of The Wall Street Journal, of which Mr. Royster is editor, rb Ifforb's gocy EDMUND A. OPITZ THE MOST DISTINGUISHED lecture ship in the English-speaking world is sponsored in turn by the four Scottish universities - Edinburgh, Glasgow, Aberdeen, and St. An drews - according to the terms laid down in the will of Adam Gifford. Lord Gifford drew up his will in 1885, died in 1887 at the age of 67, and the first series of Gifford Lectures was delivered in 1888. At regular intervals ever since a fat and solid volume has dropped from the presses. Taken together, this more-than-five-foot shelf of books - still growing represents a monumental achieve ment of the mind in our time.

By splitting his endowment four ways, Lord Gifford intro duced an element of competition into the intellectual scene. Four The Reverend Mr. Opitz of the Foundation staff is active as a lecturer and seminar leader. 36 separate committees, each having access to the finest scientific and philosophical brains in the world, vie with each other to bring the most prestigious lecturer to the local campus. And the scholar nominated for this post is put on his mettle. The appointment itself is a high tribute to his attain ments, far outranking any honor ary degree, and the realization that he is to address an audience loaded with distinguished scholars is just the stimulus needed to bring out a man's best efforts. William James never wrote any thing more fascinating than The Varieties of Religious Experience, The Gifford Lectures for 1901 1902. Arthur Stanley Eddington, astronomer at the University of Cambridge, has made some last ing contributions to certain ab struse questions in astronomy and 1966 LORD GIFFORD'S LEGACY 37 physics, but his reputation in the world of literate men endures with The Nature of the Phy.sical World, The Gifford Lectures for 1927. Philosophers, scientists, the ologians, and men of letters have trekked to Scotland, for the past three-quarters of a century, and our intellectual heritage is vastly enriched as a consequence.

Adam Gifford was a jurist and judge. He was born in 1820, son of a man who had risen from humble beginnings to become treasurer and master of The Mer chant Company. His mother was an independent thinker who in structed her children at home un til they were sent off to learn Latin and Greek - at the age of eight! Adam later attended Edin burgh Institute and in 1849 was called to the bar. Seventeen years later he was Sheriff of Orkney and Zetland, and in 1870 was made a judge. He took his seat in the Court of Sessions, the su preme civil tribunal, as Lord Gif ford. The Giffords were a pious fam ily. Adam's father was an elder in the United Secession Church and a zealous Sunday school teach er. This oddly named denomina tion had been formed the year of Adam's birth by the fusion of two dissident bodies which had seceded from the established church in the eighteenth century. It was based on the princi pIe of voluntary association, and it bred men given to independent thought and action, unwilling to take things for granted; men like Lord Gifford.

The Gifford Lectures The private life of Lord Gif ford is no concern of history, but the terms of his will are in the public domain. The Gifford L.ec tures are in the realm of natural theology, the discipline which seeks to trace the nature, mean ing, and direction of the cosmic purpose by pondering the relevant evidence, and by reasoning hard and long. "I wish the lecturers to treat their subject as a strictly natural science, the greatest of all possible sciences, indeed, in one sense, the only science, that of In finite Being, without reference to or reliance upon any supposed spe cial exceptional or so-called mi raculous revelation. . . ." These words have a distinctly old-fash ioned ring, for natural theology is out of favor, for the moment, among the popular philosophers and theologians of our day. Much hinges, of course, on the connotations of the word Hnatu ra!." Human nature, strictly speak ing, is not "natural"; it is a culti vated or learned thingsuperim posed on a biological substratum.

The piety "natural" to Lord Gif38 THE FREEMAN March ford was that of the Scotch Cov enanter strain, not that of some aborigine, and this faith is evi dent in the opening words of the will: "Having been for many years deeply and firmly convinced that the true knowledge of God and the felt knowledge of the relations of man and of the universe to Him ... is the means of man's highest well-being .... " But so con fident was Gifford of the ability of the unimpeded human reason to attain vital truths that he laid down no qualifications for the lec turers except unimpeachable com petence and integrity: The lecturers appointed shall be subjected to no test of any kind, and shall not be required to take any oath, or to emit or subscribe any declara tion of belief, or to make any promise of any kind'; they may be of any denomination whatever, or of no denomination at all (and many earnest and high-minded men prefer to belong to no ecclesiastical denom ination); they may be of any reli gion or way of thinking, or as is sometimes said, they may be of no religion, or they may be so-called sceptics or agnostics or freethinkers, provided only that the "patrons" will use diligence to secure that they be able reverent men, true thinkers, sincere lovers of and earnest inquir ers after truth ....

Four of the Gifford Lecturers have been Americans. William James of Harvard University has been mentioned above. His book, he tells us, "would never have been written had I not been honored with an appointment as Gifford Lecturer." The lectures immedi ately prior to James were deliv ered by his Harvard colleague, Josiah Royce, resulting in a huge tome entitled The W orold and the Individual. Harvard has not won the nod again, and we note that the recent paperback edition of Royce is introduced by Professor John E. Smith of Yale University! A quarter of a century was to pass before another American was invited to lecture, and this time it was John Dewey. His ten lectures, half the customary series, resulted in the book, Quest f or Certainty. I had a semester seminar on this volume, which disqualifies me from commenting impartially! Reinhold Niebuhr lectured at Edinburgh in the spring and fall of the fateful year, 1939. To those of you who know only the Niebuhr who charges wildly about the political arena, and who is forever making dubious pronouncements on eco nomics, be advised that there is an other Niebuhr or, more precisely, another and more important facet of the same man. The lectures were published in two volumes as The Nature and Destiny of Man, and they are brilliant. They are hard reading, occasionally disputatious, but bracing.

1966 LORD GIFFORD'S LEGACY 39 Scot/and l s Contribution Scotland has never lacked phi losophers. Adam Smith, it will be recalled, taught moral philosophy at the University of Glasgow. His like number at Edinburgh until 1941 was the late A. E. Taylor whose Gifford Lectures published in 1930, The Faith of a Moralist, remains my favorite of kind. This nearly 900-page treatise by the great Platonist is a modern phil osophical classic, but it has none of the jargon philosophers employ when they talk to each other. Lord Gifford stipulated that "the lec tures shall be public and popu lar..." and most of the speakers have tried to comply. But "natural theology," the-stipulated subject matter, is intrinsically difficult, and "popular" in this context means only that the writer has taken pains to be lucid; none of these books is easy reading. Taylor, incidentally, is one of the few moralists who is aware that the term "value" in ethics does not have the same connotation as the word "value" in economics. When the economist speaks of "values,"

he is not referring to moral norms, but to the degree of consumer preference for this' item over that which issues in the pricing of eco nomic goods. w. MacN eile Dixon taught Eng lish literature at the University of Glasgow for more than forty years, retiring in 1935. He was called abruptly out of retirement upon the death of philosopher Emile Meyerson, the 1935 choice, and delivered two courses of lec tures. T he Human Situa,tion is a far-ranging and beautifully writ ten book. Most of the other Gif ford Lectures are books to wrestle with; this is a book to live with and live by. It has a poetic quality found only rarely in conjunction with deep thought. The Human Situation, appro pria tely enough, is bounded on the one side by theology and on the other by physiology. The lecture series immediately prior to ,Dixon was delivered by the eminent Eng lish churchman who later became Archbishop of Canterbury, Wil liam Temple. Nature, Man and God floored me at first exposure in a seminar course, and I still find it hard going; but it is a great book. Following Dixon came Sir Charles Sherrington, the eminent medical man and physiologist, with Man on His Nature. "Individuali ty would seem to be through com plexity an aim of life," says Sher rington, thus continuing a stress which runs like a thread through the Gifford Lectures - an empha sis on the individual person and his latent possibilities.

Sherrington worked after the manner of the historian and es pecially the scientist, reasoning 40 THE FREEMAN inductively from a" body of data. The other approach is deductive reasoning which seeks to draw out the full implications from a seem ingly simple axiom or observation. This is the approach of the Cam bridge philosopher, W. P. SorIey, who began his series of lectures in 1914; Moral Values and the Idea of God is one of the finest examples of sustained logic in the language. Most philosophers, Sor ley notes, frame a theory of the cosmos, and then from their meta physics derive an ethic. But it is a fact that men at every cultural level do make moral decisions and cannot avoid doing so; therefore, any theory of the cosmos which fails to include the fact that men make choices according to their understanding of right and wrong is to this extent based on incom plete data. Sorley starts with the axiom that human experience in cludes valuations and judgments based on moral factors, and 510 pages later he has extracted all the meat and juice from this idea.

An English churchman, the Bishop of Woolwich, recently made quite a stir on both sides of the Atlantic with a thin thing called Honest to God. The old metaphors aren't what they used to be, the Bishop appears to be saying, and never were! It is our bad habit, he points out, to think and speak of God as being "out there." Spatial metaphors are misleading, true, but then the Bishop - influ enced by Freud and depth psychol ogy - declares that God is "in here." This appears to continue a spatial metaphor, or at least a di rectional one. Man is a symbol using animal, not only in his re ligion but in his science. A sym bol is a thing standing for some thing else, and if we mistake it for the thing it signifies, the con fusion is compounded. The noted Hellenist, Edwyn Bevan, explored these matters with characteristic thoroughness in his Lectures, pub lished as Symbolis'm and Belief. When this book was repTinted in this country in 1957, the event passed unnoticed.

liThe Honor Is Very Pleasant" It would be interesting to go be hind the scenes with the Gifford Lectures and watch these men re act to their task, but such auto biographical data is not available, except where personal journals and papers have been made public, as in the case of the late Dean lnge. William Ralph lnge was a classical scholar as well as a theo logian, and his articles in the \veekly press put his name before a wide public. His Gifford Lec tures on Plotinus, the great pagan philosopher of the third century of our era, is still the standard work on the man. The offer came 1966 LORD GIFFORD'S LEGACY 41 to lnge on March 13, 1917, and the full journal entry reads, "A letter from Lord Haldane. The University of St. Andrews has de cided by a unanimous vote of the Gifford Committee to offer me the Gifford Lectureship. I shall have to break up my book on Plotinus into lectures, but this I can do easily. The honor is very pleasant."

The invincible calm of these Eng lishmen! we say. But go back in the Dean's journal. A 1908 entry reads, "My wish now is to write a modernised defense of Plotinus' philosophy of religion, which I think would make a good book for the Gifford Lectures, if I am ever invited to give them." That hope was nourished for nine years be fore being consummated. One would also like to know vvhat goes on at a meeting of the Gifford Committee. Why, for in stance, should a lectureship cen tering on natural theology be of fered to a man who denies the very idea of natural theology even if he is the world's most fa mous theologian? Karl Barth opened his lectures with these words : "It can only be to the good of 'natural theology' to be able once again to measure itself as the truth - if it is the truth! - by that [Barthianism] from which its point of view is the greatest of errors. Opportunity is to be given to do this here." The wraith of old Gifford must have squirmed at this, trying to learn what natural theology is from a long and in volved discussion of what it is not!

Why was the unsympathetic Barth given the nod when men of the stature of Henri Bergson, F .C.S. Schiller, Alfred North Whitehead, and C.D. Broad went untapped? Two other names come to mind: Bertrand Russell and Friedrich von Huegel. The former might have been written off as a head line hunter; and as for the latter, well, no Roman Catholic delivered the Gifford Lectures until 1947, when the eminent historian, Chris topher Dawson, produced the im portant work published as Religion and Culture. Dawson's second set of lectures appeared as Religion and the Rise of Western Culture. The high repute of Dawson's work needs no touching up from me. The Unfinished Task Mention of von Huegel raises another question. His major work is a huge two-volume study of The Mystical Element of Religion. Mysticism receives more than pas sing attention at the hands of many of the lecturers, but not one of the series is devoted entirely to this subject, as perhaps the most important facet and feeder of natural theology. Von Huegel would have been up to such a task; likewise Rufus Jones, the Ameri42 THE FREEMAN March can Quaker; likewise Evelyn Un derhill. Mention of this last name reminds us that no woman has yet delivered the Gifford Lectures.

Now, philosophy is not woman's forte, but Evelyn Underhill is top rank in her specialty, and women like Susan Stebbing and Dorothy Emmet are sounder than certain popular male philosophers who shall remain nameless. It would be pleasant to conclude by saying that the things Adam MODERN robber baron state tax assessors are more ruthlessly pred atory than their medieval counter parts who looted commerce on the River Rhine. Ancient commerce was not restricted to one unim proved waterway or primitive overland route. It was free to se lect the route least subject to Though long retired, Mr. Schumacher con tinues "workin' on the railroad" through his one-man "FreeLance Society for Prevention of Cruelty to the Iron Horse." Gifford exemplified in his life and tried to perpetuate in his will things like personal piety, individ ual self-reliance and hard work, the validity of reason and the power of philosophy - were stronger now than in 1887. Alas, they are weaker. But they are not lost! The old landmarks are still there for those-who would search them out, and old Lord Gifford's legacy is the fountainhead of an end uring series of them. ~ K. FRITZ SCHUMACHER depredation by local "tax col lectors."

In this respect, modern inter state commerce by railroad is less fortunate. It is chained to its pri vately owned and improved right of-way, inhibited by government regulation in all matters, including re-routing. State property tax as sessors take advantage of out-of state owned corporations with no local vote. They assess railroad 1966 TODAy'S ROBBER BARONS 43 property at a higher percentage of market value than similar lo cally owned property. Thus, they appropriate the inherent economy of railroad transportation for tax purposes. Local taxpayers, so re lieved of part of their burden, naturally do not object. The indulgent North American taxpayer has been thoroughly brainwashed to believe the fable of railroad obsolescence. This fa ble offers a convenient smoke screen behind which politicians cannibalize railroads for the bene fit of subsidized nonrail transport, spawned in political pork barrels.

The ability of self-reliant rail roads to withstand political abuse is their weakness. They offer no opportunity for waterway - style pork barrel rolling. Discriminatory taxation levied against railroad property began innocently enough in the early days of the industry. Railroads then had little or no competition and taxes were moderate. A tax on railroad transportation could be evaded only by resort to horse drawn vehicles. Railroads, then as now, leaned over backward to dem onstrate good citizenship in states which, then as now, searched fran tically for sources of additional tax revenue. Many state constitutions spec ify uniform property tax rates, but do not prohibit nonuniform assessment values. Resourceful as sessors take full advantage of this loophole. They assess railroad property at a higher percentage of market value than other compa rable commercial property. Every property owner is painfully aware of skyrocketing property taxes due to reckless political spendocracy.

Taxes on punitively evaluated railroad property, raised in pro portion, have reached ruinously confiscatory levels. Self-preserva tion dictates firm resistance to further political attempts to kill the goose that lays the golden railroad tax egg. In 1961 the railroad property overassessment ranged from 1lf3 times that on other private prop erty in Virginia to 6lf4 times in Arizona. The table below shows the relative overassessment of railroad property in 24 states, listed in descending order of mag nitude, and computed from figures published in Railway Age for De cember 9, 1963. The overtax in dollars appears in the same ar ticle. Instances are on record in which railroad property, placed on the market, sold for less than the yearly tax take. This, according to Railway Age, happened in Hudson County, New Jersey: Pennsylvania Railroad un loaded property of assessed value of $621,000 for a selling price of $19,471 and thereby shed a yearly 44 THE FREEMAN March 1961 COMPARABLE PRIVATE COMMERCIAL AND RAILROAD PROPERTY TAX Rail Overtax State Commercial Railroad (Estimated) Arizona $100 $627 $6,348,366 Wyoming 100 490 2,592,636 Montana 100 473 5,764,795 New Mexico 100 446 1,787,999 Idaho 100 382 3,293,139 New Jersey 100 343 11,874,423 Tennessee 100 299 4,597,737 Kansas 100 290 8,472,279 Oklahoma 100 259 3,927,851 California 100 258 14,150,498 Mississippi 100 250 1,974,756 Iowa 100 245 4,464,561 South Dakota 100 236 797,271 IlIinois l 100 217 20,725,603 Kentucky2 100 217 3,127,387 North Dakota 100 210 2,884,610 Alabama 100 198 1,557,587 Louisiana 100 196 2,039,064 Missouri 100 194 4,571,649 Utah 100 193 1,919,882 North Carolina 100 154 791,270 Nevada 100 151 808,960 West Virginia 100 148 2,487,902 Virginia 100 137 2,019,192 Total 1961 Railroad Overtax: $112,979,417 1 In 1963 Illinois enacted a law (SB 946, approved August 26, 1963) re quiring assessments of railroads at the same percentage of full value as local property is assessed. However, a number of Illinois lines contested the 1963 assessments, claiming that arbitrarily increased values offset equalization.

2 In recent years, the State of Kentucky has made a substantial effort to bring railroad property assessments into line with the assessment of local property and hopes to accomplish this objective in 1966.

1966 TODAy'S ROBBER BARONS 45 tax load of $52,226. Another road sold land assessed at $857,000 with annual taxes of $66,000 for only $40,000. Examples of flagrant overassessment of railroad prop erty, given in Railway Age, are not limited to the 24 states tabu lated. New York Central's dis continued West Albany car repair shops were sold for $500,000. As sessed value for railroad taxes was $1,500,000. The new owner, not in railroad business, enjoyed a miraculous depreciation to a mere $300,000! The "Doyle Report" on trans portation policy to the United States Senate gives the experience of the Pullman Company at Rich mond, California, in 1960. Prop erty, sold by the company and carried on the tax rolls at $342,830, was reassessed for the new private owner at $190,000. Tax proceeds in most states are used indiscriminately for high ways, airports, waterways, and other indirect subsidies to rail road competitors. Thus, bureau crats are in a position to re-allo cate railroad traffic to subsidized, pro per t y -t a x -exem pt, non 1'" a iI transport. The results of arbitrary, political traffic redistribution are all too evident. A new public high way is immediately congested by long-haul truck traffic. A tax-pay ing parallel railway line loses traf fie, to operate far below capacity.

It is high time that adminis trators of Mid-Victorian railroad taxing and regulating policies un derstand that railroads were built in good faith to provide vital transportation service. State tax looting practices severely hamper railroad ability to serve customers and invite long overdue congres sional action to stop depredations on interstate commerce. Robber baron tax collectors for 24 states are looting travelers and shippers residing in all 50 states. + Lincoln, Today PAUL FISHER, of Redondo Beach, California, suggests, that if Lincoln were commenting today, his statement might have been: "We cannot use the law to favor some of the people some of the time without endangering the freedom of all of our people, for all time."

the Fiasco of Urban Renewal MARTIN ANDERSON 46 BUSINESS LEADERS have heard many times .in recent years that our housing and our cities are de caying, that private enterprise cannot save them, that the gov ernment must step in and "help" private enterprise with urban re newal, and that they - as respon sible citizens and businessmen should collaborate with the gov ernment in this effort.! In my judgment, none of these state ments is true. The purpose of this article is to evaluate the federal urban renewal program - its goals, its methods, its accomplishments - and to compare them with those of the free marketplace. A comparison of the results that these two forces - the federal urban renew al program and private enterprise - have produced since 1949 brings out some fundamental issues and questions that have been obscured in a fog of good intentions and platitudes. The basic question is this: Should the federal urban re newal program be continued and expanded, or should it be stopped?

I shall argue that it should be stopped. 1 See, for example, Leland Hazard, "Are We Committing Urban Suicide?" Thinking Ahead, Harvard Business Re view, July-August 1964, p. 152. Dr. Martin Anderson is Associate Professor of Economics and Finance, Graduate School of Business, Columbia University, and author of The Federal Bulldozer. This article is reprinted by permission from the January-February 1965 issue of the Harvard Business Review.

1966 THE FIASCO OF URBAN RENEWAL 47 Goals of Renewal In response to continual exhor tation and pressure to do some thing to "save" the cities and im prove housing, Congress enacted the federal urban renewal pro gram in 1949, proceeding on the conviction that a program of this type would help to· .. eliminate substandard and other inadequate housing through clear ance of slums and blighted areas; · .. stimulate sufficient housing pro duction and community development to remedy the housing shortage; · .. realize the goal of a decent home and a suitable living environment for every American family. I doubt that anyone can argue with these goals. Better· homes, improved neighborhoods, and the elimination of slums - all are desirable. The difficulty is not with the goals, but with the means of accomplishing them and with the consequences that result. What the Program Is And How It Works In essence the federal urban re newal program attempts to re build rundown areas of cities by feeding large amounts of public money and government power into the normal operations of the pri vate marketplace. It does not com plement the private market; it short-circuits it.

This is how the program works. First, a section of a city is desig nated as an urban renewal area, and plans are drawn up and ap proved by the local renewal agen cy, the local governing body, and the federal authorities in Wash ington.A public hearing is then held at which local renewal officials document their case for urban renewal. At this time other per sons interested in the project have the opportunity to speak for or against it. Once the planning is complete, execution starts. Though some ex ecution activities may be carried on simultaneously, there are six basic steps: (1) Land acquisition. The land and the buildings are usually ac quired by negotiation with the own ers, but if this fails, the renewal authorities will use the power of eminent domain to force the recalci trant owners to sell; in cases like this, the purchase price is deter mined by independent appraisers.

(2) Displacement and relocation. Individuals, families, and businesses located in the area are forced to move and find homes or establish businesses elsewhere. The law pro vides for some compensation and re quires renewal authorities to relo cate them satisfactorily, although in practice this does not always happen. (3) Site clearance. The wrecking cranes and the bulldozers demolish 48 THE FREEMAN March any buildings not considered useful by the renewal authorities. (4) Site improvements and sup porting facilities. The cleared land is usually improved by the construc tion of streets, sewers, water mains, lighting systems, schools, libraries, and parks. (5) Disposition of impt'oved land. The cleared and improved land can be sold, leased, donated, or retained by the renewal agency. Usually the land is sold to private persons either by competitive bidding or by negoti ation between renewal officials and the private buyer.

(6) New construction. The new construction may be residential, in dustrial, commercial, or public; so far it has been predominantly pri vate residential. The private devel oper is usually obliged to build ac cording to a general plan approved by the renewal authorities. This, then, is urban renewal damned by some, praised by many, and understood by very few. At first glance, urban renewal would seem to be a most desirable pro gram, both plausible and appeal ing. The picture is often painted like this: before - dirty, dark, ugly slums; after - clean, bright, beautiful buildings. The contrast is clear, the appeal seductive, but this picture shows only the hopes and wishes of urban renewal. The realities of its costs and conse quences are drastically different. Everybody Pays Urban renewal is, of course, ex pensive. The gross project cost of urban renewal includes all ex penses incurred by a local renewal authority - planning costs, land, buildings, overhead, interest, relo cation, site improvements, and supporting facilities.

Assume that all this costs $9 million for a good-sized project. Where does the money come from '! Some of it comes from private developers who buy the cleared and improved land. On the aver age, private developers have been buying urban renewal land for about 30 per cent of the gross cost of the project - say, $3 mil lion for our $9 million project. This leaves the city with a net cost of $6 million. The federal government will pay two-thirds of this net cost, or, in this case, $4 million. Thus, for our $9 million proj ect, we get $3 million from the private developer who becomes the new owner, $4 million from taxpayers all over the United States, and $2 million from tax payers living in the community with the urban renewal project. Additional features, called non cash grants-in-aid, can reduce the net cost to the city still further. Because the federal govern ment subsidizes two-thirds of the net cost to the city, some people 1966 THE FIASCO OF URBAN RENEWAL 49 feel that urban renewal is a bon anza that cannot be passed up.

This might be true if .only one city were engaged in urban re newal; but there are over 1,500 projects in about 750 cities throughout the country. Through federal taxes, the residents of any one of these cities are helping to pay for all the other projects. As more and more cities attempt to "get their share" and the overall cost of the program rises, the cost to all necessarily increases. Better Housing? One of the most serious conse quences of the federal urban re newal program is the effect that it has had on the supply of housing, especially low-rent housing. This is ironic because one of the goals of the program is to improve liv ing conditions. Why has this goal not been realized? The typical urban renewal proj ect destroys a great many homes. Between 1950 and 1960, the pro gram was responsible for the de struction of approximately 126,000 housing units. Of these homes, 101,000 had been classified as sub standard by the local renewal au thorities, while 25,000 were in good condition. The good ones \vere destroyed because they were judged to be incompatible with the proposed plan for the area.

I have estimated that in this same decade approximately 28,000 new housing units were completed within urban renewal areas. 2 About 25,000 of these were pri vately owned homes; 3,000 or so were public housing units. Score: 126,000 down, about 28,000 up. This means that almost four times as many homes were destroyed as were built. The total effect on housing con ditions was even worse. All the 126,000 homes that were destroyed were located in older sections of cities, and almost all were low rent units. It is doubtful whether the average rent paid exceeded $50 or $60 a month. On the other hand, the rents of the new pri vately owned homes were very high. For example, those homes built in 1962 in urban renewal areas had rents averaging $195 a month. (A small percentage rented for over $360 a month!) Hence it was virtually impossible for any person displaced from an urban renewal area to move back in; he could afford it only if he moved into public housing. And only 3,000 units of public housing were built - an insignificant number in comparison to the number of units destroyed.

Thus the net effect of the fed eral urban renewal program in ~ The Federal Bulldozer (Cambridge: The Massachusetts Institute of Tech nology Press, 1964), pp. 65-67.

50 THE FREEMAN March the field of housing for the period I have studied can be summed up in this way: • More homes were destroyed than were built. • Those destroyed were predomi nantly low-rent homes. • Those built were predominantly high-rent homes. • Housing conditions were made worse for those whose housing con ditions were least good. • Housing conditions were im proved for those whose housing con ditions were best. Improved Living Conditions? Private studies indicate that the people displaced by urban re newal usually move into housing of approximately the same quality as the housing they were forced out of - but they often pay more for it. Their predicament is com pounded, not alleviated, by urban renewal. Government studies, on the other hand, indicate that about 80 per cent of the displaced people move into standard housing. Ob viously, both the private studies and the government studies can not be correct.

I suspect the reason for the dis crepancy between them is that lo cal government officials decide whether or not a dwelling unit in an urban renewal area is standard or substandard, and their esti mates are therefore subject to bias. An official interested in speeding up the process of an urban renewal project may be tempted to apply high housing standards to justify the taking of the property, and then, when it comes to relocating the people dis placed, he may be tempted to use qui te low housing standards to justify the quick relocation of these people. The notion that over 80 per cent of the displaced people move into good housing is difficult to reconcile with other relevant facts. The people living in these areas are relatively poor. A great many of them come from minori ty groups; approximately two-thirds of all those forced to move are Negroes and Puerto Ricans. Good quality, conveniently located hous ing costs so much more than poor housing that it is difficult to con ceive of hundreds of thousands of low-income people, many of them subject to racial discrimination, suddenly moving from low-quality housing into higher-quality hous ing at rents they can afford.

And then one might ask the fol lowing question. If it is true that all this good-quality, conveniently located, low-rent housing is avail able, why then is it necessary to force these people out of their homes with a bulldozer? Would it not be far simpler, more just, and much cheaper just to tell them 1966 THE FIASCO OF URBAN RENEWAL 51 about the better homes available elsewhere? One Million Evictions The numher of people affected by the program was small during its first few years of operation. But I have estimated that as of Decemher 31, 1962, approximately 1,665,000 persons were living or had lived in urban renewal areas. This is about the same number of people that live in Detroit, Michi gan - the fifth largest city in the United States. Some of these peo ple have already heen forced out; the rest will be on their way even tually. The number of people actually evicted so far is very large. By March 31, 1963, about 609,000 per sons had been forced to move, and the number has, of course, con tinued to go up. I estimate that at least 1,000,000 people will be evicted by the end of 1965. And this is by no means the end; in fact, it is probably just a small start. In 1962, William Slayton, the Commissioner of the Urban Renewal Administration, stated that approximately 1,00(},000 fam ilies would be displaced during the next decade. This means that somewhere around 4,000,000 per sons will be actually displaced by 1972 - or about one person out of every 50 Iiving in the .United States.

Good for Business? Although most urban renewal areas are predominantly residen tial, they often contain a number of businesses. These businesses range from one-man offices to in dustrial concerns with several hun dred employees. According to a 1960 report financed by the Small Business Administration: It is estimated that there are over 100,000 business firms in all 650 project areas .... The approximately 100,000 firms scheduled for disloca tion from proj ect areas on December 31, 1959, represent a beginning only . . . . New projects have been started at an increasing rate. Although no precise forecasts have been made, it is expected that the volume of business dislocations from renewal areas over the 1960-1970 decade will be at least twice the 100,000 already underway or planned. 3 What happens to a business when it is forced to move? Does it stay in business? Where does it move to?

According to the study quoted above, many firms never relocate at all. This study covered 14 cities with 21 urban renewal projects containing a total of 2,946 dis3 William N. Kinnard, Jr. and Zenon S. Malinowski, The Impact of Dislocation from Urban Renewal Areas on Small Business, prepared by the University of Connecticut under a grant from the Small Business Administration, July 1960, pp. 2-3.

52 THE FREEMAN March placed firms. The finding: 756 of them either went out of business or disappeared. Similar findings have been made by others: • A study conducted by Brown University in the city of Providence, Rhode Island, found that 40 per cent of the businesses displaced went out of business. 4 • A study prepared by the Library of Congress concluded that urban renewal proj ects "are destroying small businesses and jobs and con tributing to the unemployment prob lem."5 What about rents for firms forced to relocate? In the study prepared for the Small Business Administration, a sample was tak en of four cities that contained 1,142 displaced firms. Only 41, or 3.1 per cent, actually moved back into the urban renewal area. The researchers observed: ... Approximately 75 per cent of those who do relocate find quarters within one mile of their former lo cation; and nearly 40 per cent within one-quarter mile. They generally occupy about the same floor area they did before (which is less than they claimed to want or need), at a square foot rental at least double what they were paying (which is much more than they claimed to be 4 Chamber of Commerce of the United States, Washington Report, December 20, 1963.

5 Ibid. able to afford or to be willing to pay) .6 The Tax Myth One of the most valued argu ments presented by those who favor expansion of the urban re newal program is that it will strengthen and increase the tax base and thus increase tax reve nues to the city. Unfortunately, this has not happened, and the chances of urban renewal produc ing a significant tax revenue in crease in the future are small. The latest data I have on ne,,, construction actually started in urban renewal areas goes through March 31, 1961. It shows that the urban renewal programs actually decreased the tax revenues flowing into the cities' tax coffers. By the end of 1960, approximately $735 million of real estate had been destroyed in urban renewal proj ect areas. About $824 million of real estate construction had been started, $577 million of which was privately owned and thus taxable. If we optimistically assume that 70 per cent of this total amount privately started was ever fin ished, the net result is about $400 million worth of taxable property - $335 million less than we had before urban renewal!

Is this a temporary situation, 6 W. N. Kinnard, Jr. and Z. S. Malin owski, Ope cit., p. 75.

1966 THE FIASCO OF URBAN RENEWAL 53 or is an adverse tax effect a fun damental quality of urban renew al? Several factors militate against net tax increases: (1) Interim tax losses from real estate destroyed are often overlooked. Once buildings are down, no taxes are paid on them. Nor are any taxes paid until new buildings have been put up. The new buildings will prob ably be worth much more than the old ones. But the length of time be tween the destruction of the old buildings and the construction of the new ones can easily be five years or more. During this time the city is losing tax revenue. (2) Tax revenue increases that would have occurred in the absence of urban renewal must be considered. In most cases, a certain amount of new construction and rehabilitation would probably have been accom plished with private funds, thereby increasing the tax base with no cost to the city. (3) Much of the new construction in the urban renewal area would have been built elsewhere in the city anyway. Some experts in the field estimate that from 50 per cent to 75 per cent of this construction would have been accomplished by private enterprise. 7 ( 4) Many of the new tenants in an urban renewal area will come from"other parts of the city. What happens to the value of the buildings they vacate?

7 See The Federal Bulldozer, pp. 180, 181. (5) Some cities have had to give special tax abatements to induce private developers to come in. This, of course, will further reduce any net gain in tax revenues that might materialize. To be sure, some of the factors operating ma.y tend to increase the tax revenues. If an urban re newal project is successful, it is possible that the value of the sur rounding buildings may increase. But before this is translated into increased taxes, the assessment on the buildings must be raised. The whole issue of tax revenue changes is still a cloudy one and will probably remain so. It should be kept in mind that the net change will be the result of many complex factors. It is not enough just to compare the value of the old real estate with the proposed value of the new real estate. Tim ing of payments, effect on the rest of the city, what would have hap pened without urban renewal these must all be considered, along with the fact that the process of urban renewal itself costs the city a considerable amount of money.

Constitutional? Under the Constitution of the United States, it is understood that a man is free to use his prop erty as he desires as long as he does not interfere with the rights of others. Traditionally, public 54 THE FREEMAN March use is the only reason for which the government may seize private property. The Supreme Court changed this in 1954, and today, under the federal urban renewal program, it is possible for the gov ernment to seize the property of one man, destroy it, and then sell the cleared land to some other man at a negotiated price. The Constitution clearly states that the power of eminent domain may be used only to seize private property for public use. Approxi mately 70 per cent of the new con struction in urban renewal areas is privately owned. By no distor tion of the thinking process can this be construed to be a public use ; it is clearly a pri vate use. The Supreme Court essentially justified this procedure on the grounds that it was in the public interest. They neatly sidestepped the problem of clearly defining the public interest. The use of the public interest to justify a govern ment program often means that one group of people will gain at the expense of some other group.

Those who do not mind sacrificing the rights of a few persons in the narne of the public interest even tually may end up sacrificing the rights of the public in the name of the public interest. The equation of public interest with public use is a dangerous principle to accept. It means that the government theoretically could seize anyone's property for any reason that an official claimed was in the public interest if he could justify it to the satisfaction of the court. Every citizen has the re sponsibility of questioning the decisions of the Supreme Court. The Court is not infallible in its interpretation of the law; and its decisions can be reversed. Power of free Enterprise According to certain experts, things are getting worse in urban housing. In a report of the Presi dent's Commission on National Goals in 1960, Catherine Bauer Wurster stated: There is a great deal of seriously substandard housing in American comnlunities, and spreading "gray areas" in various stages of actual or potential decay, plus commercial and industrial blight. It is quite evident that economic progress alone does not cure these evils, and that local governments cannot do the necessary job alone .... 8 Others have made similar state ments. If they are correct, it seems that we are in for serious trouble.

Fortunately, the actual develop ments of recent years contradict these pessimistic opinions. 8 "Framework for an Urban Society," Goals for Americans - The Report of the President's Commission on National Goals (Englewood Cliffs, New Jersey: Prentice Hall, Inc., 1960), p. 229.

1966 THE FIASCO OF URBAN RENEWAL 55 Impressive progress has been made toward achieving the objec ti ves set forth by Congress in 1949. Overall housing conditions have improved dramatically, in cities and outside of cities, for the poor and for the rich, and for the nonwhites as well as the whites. This progress has been furthered by businessmen operating in the free marketplace. To summarize some of the more important as pects of the record: • Both the relative and absolute changes in housing quality between 1940 and 1960 were striking. In 1940, 51 per cent of all housing in the United States was considered stand ard or sound; in 1950 the propor tion had moved up to 63 per cent; and in 1960, fully 81 per cent was classified as standard. If this trend continues, it is likely that the Census of 1970 will reveal that 90. per cent to 95 per cent of all ·our housing is standard. • From 1950 to .1960 alone the total number of standard homes in creased from 29.1 million to 47.4 million, a 63 per cent increase in just ten years. This increase of over 18 million standard homes was the result of both new construction and rehabilitation. Over 12 million new units were built, and the number of substandard units declined from 17 million to under 11 million. Virtually all of this was accomplished by pri vate construction, rehabilitation, and demolition efforts; massive amounts of private funds were invested in housing. These investments were in no way connected with the federal urban renewal program.

• From 1945 to 1960, private mort gage debt outstanding increased by almost $170 billion. Although ap proximately 40 per cent of this total was insured by the federal govern ment through the Federal Housing Administration and the Veterans Ad ministration, this does not mean that the government was responsible for the increase in housing quality. The underlying demand for housing and the growing income of those who de sired better housing were clearly the predominating factors. The effect of government insurance programs was probably to produce a slight increase in the amount of housing starts; but it should be kept in mind that if these government insurance pro grams had not existed, private in surance companies, such as the Mort gage Guaranty Insurance Corpora tion, would have surely developed at a n1uch faster rate than they did. • The amount of really bad hous ing - that classified as dilapidated by the Bureau of the Census - de clined from 9.8 per cent in 1950 to 5.2 per cent· in 1960. The 1960 over all vacancy rate was slightly over 9 per cent. The number of dilapi dated homes was actually smaller than the number of vacant homes.

Vacancy rates were much higher for poor housing than for good hous ing. In 1960, 6.8 per cent of the standard housing was vacant, where56 THE FREEMAN March as the vacancy rate was 20 per cent for dilapidated housing. Then, as now, the fact seemed to be that there were a certain number of people who either could not or would not spend enough money to rent or to buy the available standard housing. Housing for Minorities It is sometimes charged that the free working of capitalism cannot produce gains for some groups of people, particularly the nonwhite population. Many are convinced that the only answer must lie in the direction of greater govern ment intervention and higher pub lic subsidies. In fact, the nonwhite population of the United States has enjoyed a very substantial increase in the quality of its housing. From 1950 to 1960 there was an overall net increase of 1,813,000 standard units and a decrease of 537,000 substandard units. Between 1950 and 1960, the per cent of standard housing occupied by nonwhites doubled - going from 28 per cent to 56 per cent. Most of the bad housing is now located in the South, where only 38 per cent is standard. In the Northeast, 77 per cent is standard; in the North Central, 73 per cent; in the West, 79 per cent. In comparisons like this it should be remembered that the rents paid by whites are about 29 per cent higher than those paid by nonwhites, and that the values of the homes owned by whites are over 82 per cent 'higher.

The housing conditions of non whites have improved substan tially, and although the quality of their housing does hot yet equal that of the whites, it is rapidly ap proaching it, particularly in areas outside the South. Compared to the federal urban renewal pro gram, the private marketplace is making swift, substantial prog ress. Marching Metropolises The same type of improvement in housing quality that has taken place throughout the country has taken place in our cities. In 1960, fully 88.6 per cent of the housing located in central cities of over 100,000 population was classified as standard. In these same 128 central cities, the dilapidated hous ing had declined to slightly over 3 per cent of the total. In our 13 largest cities, taken as a group, 90.1 per cent of all housing was standard in 1960; only 2.6 per cent was dilapidated. Housing quality in cities has been continually improving, and now, as in the past, housing in cities is substantially better than in the country taken as a whole.

Today the bulk of the relatively small amount of bad housing that still exists lies outside of our 1966 THE FIASCO OF URBAN RENEWAL 57 cities, particularly in the rural areas. Only 18 per cent of the substandard housing lies within cities having populations of more than 100,000. There appears to be a definite correlation between the degree of urbanization and the amount of good housing. Since the war, construction ac tivity has been booming all over the United States and its cities. From 1950 to 1960, approximately $52.6 billion of new building con struction went up in cities with populations over 100,000. Only a little over 1 per cent of this was urban renewal construction. If our cities are "declining," as is often claimed, how does one account for the steady increase in building ac tivity? What about the worrisome claim that the middle-income group is disappearing from the city? The city of the future is prophesied by some as the city of the very rich and the very poor. The facts indi cate that this has not happened and probably will not happen. If we define "middle-income" as $4,000 to $10,000 a year, we find that almost 57 per cent of all peo ple living in large cities fall with in this range. In fact, the income distribution in large cities is roughly the same as that for the country as a whole. Today's city is not the city of the very rich and the very poor; it is predominantly the city of the middle-in come group.

By any objective measure, the indications are clear that our cities - in overall terms - are contin u ally improving and that today they are better than they ever were before. Validity of Data. The foregoing facts were taken from the data on housing quality collected every ten years by the Bureau of the Cen sus. These Census data were the result of observations made by 150,000 enumerators, all of whom were given careful instructions on how to classify housing. The three categories used in 1960 were "sound," "deteriorat ing," and "dilapidated." Categories or definitions of categories vary slightly from decade to decade, but adjustments were made to make the data comparable in time, and the effect of the slightly changed definitions was negligible. Generally speaking, "sound" hous ing has no defects or has slight defects that would normally be corrected during regular mainte nance (lack of paint, for example).

"Deteriorating" housing needs more repair than that required by normal maintenance (a shaky porch or broken plaster, for ex ample) . "Dilapidated" housing does not provide safe and adequate shelter.

58 THE FREEMAN March Although the Bureau of the Census data can be criticized, they are by far the best available today - most accurate, broadest in scope, and most consistent over time. I emphasize this because a considerable number of self-styled experts consider their lone opin ions superior to those of 150,000 trained enumerators. They would justify their conclusion that the city or housing is deteriorating solely on the basis of their visual impressions. This is not a valid way to measure changes in hous ing quality. The amateur's experi ence is very limited, his standards cannot be identified, and there is no way of knowing whether his standards change from year to year. The next time you hear that the city is deteriorating, ask: "In what way? By whose standard?" Conclusion Since 1949 two different meth ods have been used to grapple with the "problems" of housing and cities. One of these is basically the system of free enterprise, guided by the complex interplay of the marketplace. The other force is the federal urban renewal program, guided by overall plans prepared by city planning experts and backed up with the taxpayers' money and the police power of the government.

The facts tell us that private enterprise has made enormous gains, while the federal program has not. Contrast, for example, the fantastic increase of 18 mil lion homes in areas outside urban renewal projects with the net de crease of homes within urban re newal projects. Consider also the decrease in low-rent flousing and the increase in high-rent housing in the urban renewal areas; urban renewal actually subsidizes high income groups and hurts low-in come groups. Add to this the de struction of businesses and the forcible displacement of people from their homes. The program endangers the right of private property - commercial and resi dential-in its equating of public interest with public use. The overall results of the gov ernment's program, when com pared to the results of private forces, are negligible. Its overall costs, when compared with its re sults, are high. On balance, the federal urban renewal program has accomplished little of benefit in the past, and it appears doubt ful that it will do better in the future.

However, there are times when participating in a federal urban renewal project - as a contractor, a banker, or a businessman - may be attractive if only short-run gains or profits are considered.

1966 THE FIASCO OF URBAN RENEWAL 59 Participation may make it possible for a businessman to get that 10 cation he wants from an owner who has been unwilling to sell; it may renovate an adjacent area and thus increase the value of his property; it may eliminate build ings that are visually offensive to him; and he may even make some money out of it. But in supporting the program for these or other reasons, the businessman should be aware that he is supporting a government pro gram that, in the long run, is det rimental to his own interests. It uses the concept of eminent do main in such a way that private property - business as well as residential - can be taken and re sold by the government to other private persons for their own use simply because it is supposed to be in the public interest. It im plies acceptance of the idea that private enterprise cannot work ef fectively in the field of housing and that government must inter vene, when, in fact, this is not true. It subsidizes some businesses and construction interests that are in direct competition with those of other private businessmen. During execution it lowers the tax base of the city - in some cases perhaps permanently-and thus increases the tax burden for the rest of the city.

And, finally, the businessman may be hurt directly when the lo cal renewal authorities decide that the area in which he is located is blighted! The irony of Washing ton's urban renewal program is that without the enthusiastic col laboration of many businessmen it would come to a grinding halt. In my judgment, the program should be repealed now. This could be accomplished simply by not authorizing any new projects. All projects currently under contract could be carried through to com pletion if the individual cities de sired to do so. As the Greek philosopher Aris totle stated more than 2,200 years ago: "Even when laws have been \vritten down, they ought not al \vays to remain unaltered." What would be the results of such clear-cut, positive action? Would slums proliferate? Would housing get worse? Would cities die? Clearly, no. The record of what has been achieved outside of the federal urban renewal pro gram by private forces is concrete evidence of what can be done by an essentially free-enterprise eco nomic system. If this is what can be accomplished by free enter prise, the rational course of action is to encourage it to function, not to attack it or to sabotage it. ~ A REVIEWER'S NOTEBO'OK JOHN CHAMBERLAIN WE LIVE in a mercantilist age.

Great industries, depending on government for sales and con tracts, feel compelled to think twice before taking a case to the public. As in the days of King George III, there is the "court" to consider. There is a "partner shi p" between industry and gov ernment' but since one "partner" has the power to inspect the tax reports of the other, or to deny him a contract, it is not precisely a partnership among equals. The "court" comes first. There is not much point in com plaining about this state of affairs. The defense necessities of the nuclear age make the United States government a huge buyer of hardware. The aircraft manu facturers, the missile makers, the providers of steel, aluminum, and copper, would be not only remiss to their stockholders but tremen dously unpatriotic men if they were to refuse their services to Sec60 retary McNamara. When the mili tary budget is upwards of fifty billion dollars a year, the free en terprise system will find itself im plicated with mercantilist doctrine whether it wishes it or not. Some body is going to get those con tracts, and the business concern that doesn't have its courtiers on hand to present a case to the sov ereign may find itself in hot water in trying to explain .a sagging sales chart to the board of direc tors.

Under the circumstances, it is probably miraculous that we don't have a lot more corruption than we already have of the type which Clark R. Mollenhoff describes in his Despoilers of Democracy (Doubleday, $5.95). With busi nessmen going to work for gov ernment, there are always psycho logical ties to the old company, or the old bank, or the old home town. Even though all physical symbols betokening a "conflict of interest"

1966 MERCANTILISM INVITES CORRUPTION 61 may be stored away for the mo ment in trust, or even disposed of for good, men cannot escape the pull of their pasts. "Integrity" must become a matter of degree because of subconscious factors. So, if Texas gets a contract and California does not, it may not mean very much provided most of the other - and more objective factors are equal. The soil, however, will always be ready for the growth of "raw" corruption. Mr. Mollenhoff's book is concerned with "raw" cases and not with the general development of the modern mercantilist system. A third of his book is devoted to the scandals developing from the Bobby Baker case. A fourth of the pages detail the quarrels that have beset the Department of De fense over such things as the TFX contract (it went to General Dynamics, a Texas company, in stead of to Boeing, of the State of Washington). Then there are chapters on the Billie Sol Estes business, and the stockpile scan dals, and the Otepka case (which involved "security" inside the State Department), and some skuld uggeries and inj ustices in the administration of foreign aid.

Mr. Mollenhoff is a first-rate re porter who belongs to the dimin ishing tribe of those who are cap able of combining indignation with an ability to marshal facts in a calm and orderly manner. Back in the nineteen twenties, when Paul Anderson was reporting for the Natiorn, we used to have a lot of Mollenhoffs around. But in our ideological age they are growing scarce. Today exposures usually follow party lines. So it is refresh ing to get a book which doesn't pull its punches to let a Democrat or a Republican, a liberal or a con servative, get the better of a bargain. Growth of Government Leads to Corruption For my taste as a libertarian, however, Despoilers of Democracy would have been a better book if Mr. Mollenhoff had stopped to consider where the growth of mercantilist capitalism is bound to lead us. Won't it be to a sort of generalized state of diffused cor ruption that takes in just about everybody? The advance of gov ernment - Le., the "court" - into the business domain must turn us all into courtiers of sorts. Where we used to live by competition, we will find ourselves cultivating the courtier's assets of flattery, sub servience, and willingness to con form.

I wish Mr. Mollenhoff had sche mati zed his book along lines that would have separated corruption in the defense sector of the econ omy, which must in the nature of 62 THE FREEMAN March things deal with government, and corruption in things like agricul ture, which don't have to be im plicated with government at all. When Secretary McNamara insists there were compelling reasons for taking a General Dynamics plane instead of a Boeing plane, it is difficult for me, a civilian who is mystified by aerodynamics, to know whether he has a case or not. The only thing that is certain is that the United States, as one of the two superpowers in the world, is' going to need a good military defense. But when a Billy Sol Estes manipulates cotton al lotments and mortgages on non existent liquid fertilizer storage tanks to pile up a few million dol lars, I know that none of this could have happened if the gov ernment had not been implicated in the futile attempt to "control"

agriculture in the first place. Any government is bound to make some mistakes, and have some corruption, when it must go to private industry to get air planes and rifles and army blan kets and armor plate. But the at tempt to control the price level or the distribution of incomes in agriculture is an unnecessary bit of corruption in itself. It makes the government a prime evader of the antitrust laws. I can forgive an Administration for letting poli tics seep into the award of defense contracts. But when an Adminis tration finds itself embarrassed by a Billy Sol Estes, I have no sym pathy for it. Stockpile Manipulation When there is money being passed around, the ravens - or should one say the vultures? - will gather. It could be nobody's fault in the White House or in the office of the Majority Leader of the Senate when a Bobby Baker has an interest in a food-vending com pany that is trying to sell its ser vices to defense plants. This sort of thing will happen under mer cantilism anywhere, and when the mercantilism proceeds from de fense necessities we have to count on Bobby Bakers turtling up. But where is the justification for gov ernment to go into stockpiling of raw materials beyond a certain point?

We have just been witness to what can be done with stockpiles. But Mr. Mollenhoff's pages on the stockpile scandals make one feel a lot less sorry than we should be for certain big metals companies over their mistreatment in the re cent government-manipula ted price crackdowns. There is no moral or legal justification for Federal use of stockpiles to effect price control. But some of the metals companies helped dig their own graves here by encouraging 1966 MERCANTILISM INVITES CORRUPTION 63 the government in mercantilist practices when it came to building up the stockpiles not only for de fense but to support the market. At one point President Kennedy and Senator Stuart Symington were astonished to discover that "the value of the aluminum in the stockpile exceeds the amounts we would need for three years in the event of war by $347 million." Kennedy also said the "excess sup ply of nickel is $103 million." The implication is that some of the big metals companies were willing to connive at price control on the way down. Well, the whole busi ness boomeranged on them when President Johnson decided to work the process in reverse. We've all heard about poetic justice, and we know that sauce for the goose is always sauce for the gander. If we had not permitted mercantil ism to dominate the business of stockpiling in the first place, Lyndon Johnson wouldn't have had a handy boomerang to hurl at the businessmen. He would have had to go to Congress to get price control, which is the proper place to apply for it if we are to have a government of laws and not of men.

Mr. Mollenhoff's book is de signed to improve our civic tone. But it could have a most impor tant by-product in improving our economic thinking. + ~ LIFE WITHOUT PREJUDICE by Richard Weaver (Chicago: Henry Regnery Company, 1965), 167 pp., $4.50. Reviewed by Robert M. Thornton I VENTURE to predict that Richard Weaver's influence over the years will be all out of proportion to the number of books he wrote. The one under review is only his fifth - the second to be published since his death in 1963 - and is made up of eight essays which appeared in various publications between 1956 and the year he died. While not a great .stylist, Weaver was a careful writer who did a lot of hard thinking before he put his ideas down on paper; consequently, he is a great pleas ure to read. Keen insights and provocative ideas abound, and there are no superfluous words in this intellectual feast - all good lean meat!

My favorite of the collection is the title essay, "Life Without Prejudice." Prejudice is, of course, a "bad" word today although life as we know it could not go on if many times each day all of us did not prejudge. Most persons, for instance, are prejudiced against murder; that is, if ques tioned on the subject, they would instantly declare themselves op posed to such an act without paus ing to reason out a judgment. "A 64 THE FREEMAN prejudice may be an unreasoned judgment . . . but an unreasoned judgment is not necessarily an illogical judgment. . . . [There are] three types of belief for which we cannot furnish immedi ate logical proof, but which may nevertheless be quite in line with truth." There are "judgments whose verification has simply dropped out of memory . . . opin ions we adopt from others - our betters in some field of learning or experience [and those] which have a subconscious origin" - the "intuitions, innuendoes, and shad owy suggestions which combine to form our opinion .... "

"A man who frankly confesses to his prejudices is usually more human and more humane. He ad j usts amicably to the idea of his limitations. A limitation once ad mitted is a kind of monition not to try acting like something su perhuman. The person who admits his prejudices, which is to say, his unreasoned judgments, has a perspective on himself." Mark Twain, Weaver notes, gave "a therapeutic insight into the phenomenon of prejudice" when he wrote, "I know that I am prej udiced in this matter, but I would be ashamed of myself if I were not." The theme running through all of these essays, indeed, through all of Weaver's work, is that hu manity is not a theoretical ab straction or "a number of atoms or monads knocking together," but a spiritual community. It is a function of education, he writes in the essay, "Education and the Individual," to nourish this com munity "in which to feel deeply is to feel widely, or to make one self accessible to more of one's fellow members. In consequence, it cannot be too forcefully argued that the education which regards only development with reference to externals is not education for a higher plane of living, for the individual and for the society of which he is a part, but for a lower-for an artificially depressed level of living which, were it to be realized, would put an end to human development."

Ours is a cocky generation that denies its debt to the past and its obligations to the future. Wea ver reminds us that human so ciety is more than a conglomera tion of bodies but is a mystical bond uniting the living, not only with one another, but with the dead and with the generations to come. He reminds us also of the mystery of creation and the ex pression of awe that should be ours before the individual as a "unique creation, something fear fully and wonderfully made." ~ Also available in standard clothbound volume, $2.50 in a new, attractive, low-priced paperback: $ .95 2.00 6.00 45.00 Single copy 3 copies 10 copies 100 copies ~~ ~e first e:~ion of MAINSPRING (279 pp., in dexed) was published in 1947. Since Mr. Weaver's passing, this great book has been the property of FEE. Previous to this new paperback edition, 350, 000 copies have been printed. One large company's circulating library for em ployees required 150 volumes to meet the demand.

Based on FEE's experience, MAl NSPRING tops all books as a starter for any aspiring student of liberty. Easy reading - indeed, exciting - the be ginner becomes so interested in freedom that he can hardly help pursuing the subject further. FEE's recommendation: Keep a good supply of the paperbacks on hand to present to any individual who shows a spark of interest in freedom. THE FOUNDATION FOR ECONOMIC EDUCATION, INC. IRVINGTON-ON-HUDSON, NEW YORK, 10533 GAIN All YOU CAN • Gain all you can, by common sense, by using in your busi ness all the understandingwhich God has given you. It is amazing to observe how few do this; how men run on in the same dull track with their forefathers.But whatever they do who know not God, this is no rule for you. It is a shame for a Christian not to improve upon them, in whatever he takes in hand. You should be continuallylearningfrom the experience of others, or from your own experience, reading, and reflec tion, to do everythingyou have to do better to-day than you did yesterday.And see that you practise whatever you learn; that you make the best of all that is in your hand.

J aH N WE S LEY, from Sermon 50, "On the Use of Money"

Clarence 8. Carson 3 Sudha R. Shenoy 18 Timothy J. Wheeler 23 Hans F. Sennholz 33 Elizabeth Gillett 38 AI8ellerue 44 Irving E. Howard 46 Der Spiegel 51 APRIL 1966 The Flight from Reality 19. The Flight from Economics. On the Redistribution of Incomes. The Armchair Skirmish Against Poverty. Progress or Regress? Pay Television: The Right to Compete and to Speak . Market Price of Burros . Will the Real Price Administrator Please Stand Up! . Of Birds and Men Books: King of the Road . Other Books . John Chamberlain 54 57 COMPOUNDED DAILY, your savings earn 4.970/0 when held one year at cur rent rate of 4.85 0/0, paid semi-annually. To: George Ross, Department FM, Coast Federal Savings and Loan Association 9th & Hill Streets, Los Angeles, California 90014 o Please send me the free brochures Name(s) _ on "Law and Order." (Please Print) o Yes, I'd like to open a savings ac count. Enclosed is my check (or money order) for $. _ o Individual Account Street o Joint Account o Please transfer my account. City State Zip _ .J;I' There'll doubtless be protest among proponents of the "new economics"

when a historian traces their flight from reality - so, On Guard! p. 3 J;I' Miss Shenoy, of India, offers some provocative views of the harmful con sequences of the compulsory redistribution of incomes. '" p. 18 J;I' The co-editor and publisher of a new journal for young conservatives carefully examines the war on poverty, and finds it wanting p. 23 yI In ancient history, Professor Senn holz finds the familiar pattern of most of the interventions proclaimed as to day's new keys to progress ...... p. 33 III'" Some vital aspects of the problem of freedom in general are involved in the verbal, economic, and political developments surrounding pay-television. .. .p. 38 yI The purchase and subsequent sale of a pair of "ornery critters" illustrate how everyone gains from any volun tary exchange. . .. ...p. 44 J;I' Those who fear the consequences of "administered pricing" should know that the only force powerful enough to enforce its monopoly is the government. . p. 46 " Our feathered friends should take exception to the notion that the wel fare state is "for the birds." ...... p. 51 ~ John Chamberlain congratulates Ralph and Estelle James for their Hoffa and the Teamsters: A Study of Union Power. . p. 54 yI Reviewer Opitz finds cause for con cern in a pair of volumes dealing with the uses of Church land and Church wealth p. 57 ~ And Robert Thornton draws some lessons on liberty from Hans Morgen thau's Scientific Man versus Power Politics. ......... . ........ p. 61 ~ Finally, there's a wealth of political wisdom in Carl B. Cone's analysis of Burke and the Nature of Politics.

...p.62 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

APRIL 1966 LEONARD E. READ PAUL L. POIROT Vol. 16, No.4 President, Foundation for Economic Education Managing Edito1' THE FREEMAN is published monthly by the Foundation for Economic Education, Inc" a non political, nonprofit educational champion of private property, the free market, the profit and loss system, and limited goYernment, founded in 1946, with offices at Irvington-on-Hudson, New York. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, in cluding THE FREEMAN, are met through volun tary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are invited in any amount - $5.00 to $10,000 - as the means of maintaining and extending the Foundation's work. Copyright, 1966, The Foundation for Economic Education, Inc. Printed in in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each.

Permission is hereby granted to anyone to reprint any article in whole or in part, providing customary credit is given, except "The Flight from Reality," "The Armchair Skirmish Against Poverty," "Pay Television: The Right to Compete and to Speak," and "Of Birds and Men." Any current article will be supplied in reprint form if there are enough inquiries to justify the cost of the printing.

19. The Flight from Economics CLARENCE B. CARSON JOHN K. GALBRAITH, 1958 · .. In these crises there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity - the epidemic of overproduction .... Be cause there is too much civilization, too much means of subsistence, too much industry, too much commerce. KARL MARX and FREDERICK ENGELS, 1848 · .. The essence of social progress lies not in the increase of material wealth but in a rise of the mar'gin of consumption. SIMON N. PATTEN, 1893 · . . In industry after industry potential output is vastly greater than demand - a condition which grows steadily worse. STUART CHASE, 1931 · .. Shall we continue to believe that panics, deflation, and bankruptcy are our only remedy for overproductivity in industry? Or shall we ... control overcapacity and reconstruct the purchasing power of our people? REXFORD G. TUGWELL, 1935 Given a sufficiency of demand, the responding production of goods in the modern economy is almost completely reliable. We have seen ... why men once had reason to regard the economic system as a meager and perilous thing. And we have seen how these ideas have persisted after the problem of production was conquered.

THE METHODS of reform have been drawn from a variety of inDr. Carson is Professor of American Hi4Oltory at Grove City College, Pennsylvania. Among his earlier writings in THE FREEMAN were his series on The Fateful Turn and The American Tradition, both of which .are now available as books. congruous sources - from war, from business, from charitable or ganizations, from voluntary so cieties, from feudal practices, from mercantile policies, among others. The consequences that 3 4 THE FREEMAN April have followed attempts to use these methods have been deter mined by the methods. But there is more to the matter of the meth ods of the reformers than their origin. There have been strange justifications for the use of the methods and peculiar, as well as particular, applications of them. The particular orientation of most reformers has been materi alistic. They have professed con cern with the material well-being of people. Their interest and con cern has had to do with hunger, deprivation, disease, malnutrition, poverty, poor housing, infesta tions, and exposure. Such matters fall in the realm of economy. Many of the programs and policies of reformers are aimed at or have to do with things economic. These emphases make economics the cen tral discipline for reformist atten tion; their programs succeed or fail to the extent that they are more or less economically sound.

It would not be too much to say that the vast meliorist reform ef fort would only be morally, social ly, and rationally justified if it were in accord with sound eco nomics. Uneconomical Programs On the face of it, many reform programs appear to be uneconom ical. Reformers have, at various times, advocated crop restrictions and control upon industrial pro duction, subsidies for products al ready in "surplus," loans to for eign governments to enable them to buy American goods, give-away programs both domestic and for eign, deficit spending by govern ment in order to produce prosper ity, inflation in order to increase "purchasing power," easy money policies to promote spending, the raising of wages by promoting unionization and establishing min imum wages, the establishing of prices above or below market prices, special taxes upon corpo rations which had become major instruments of production, gradu ated income taxes which would fall proportionately heaviest upon those with the highest incomes, the governmental provision of in come to those who do not produce, and so on. These are not measures of a character that would usually be called economical. Men have not customarily thought it economical ly sound to spend more than they make, to take from those who pro duce and give to those who do not, to pay more than the market price for goods and services, to give away their substance.

A deeper look at economics re veals that such actions are, in deed, uneconomical. Economics has to do with scarcity. This character of economics is indicated by the conventional uses of words related 1966 THE FLIGHT FROM ECONOMICS 5 to it. For example, one dictionary defines "economical" as "avoiding waste or extravagance; thrifty." It "implies prudent planning in the disposition of resources so as to avoid unnecessary waste .... " To "economize" is to "use spar ingly or frugally." "Economy" re fers to "thrifty management; fru gality in the expenditure or con sumption of money, materials, etc." Economics can be defined as the study and exposition of the most effective means for men to main tain and increase the supply of goods and services at their dis posal. These goods and services are understood to be scarce; and economics has to do with the fru gal management of time, energy, resources, and materials so as to bring about the greatest increase in the supply of the goods and ser vices most desired. An aspect of economics, one with which much of academic and theoretical eco nomics has dealt, is the study and setting forth of answers to the question of what are the best so cial conditions within which eco nomic behavior may take place.

Such a study is known as political economy, but it, too, has been premised upon the existence of scarcity. Aggravated Scarcity With these definitions in mind, it should be clear that the methods of reformers have not been eco nomical. Crop restrictions are means of increasing scarcity rath er than diminishing iL Minimum wages, above the market rate, in crease the shortage of labor by pricing it out of use (cause un employment). Price supports for goods make them unavailable to those who cannot afford them at that price, thus increasing their scarci ty. Infla tion increases the supply of money, not the supply of goods. The giving away of goods decreases their supply; and if these are taken from someone by government, this action de creases the incentive for the pro duction of goods. Loan~ to enable the buying of goods are not eco nomic, though if the loans be re paid with interest, at or above the market rate, it would be economi cal for the lender. None of these devices involves frugal manage ment of limited means to deal with the problem of scarcity.

Mercantilism Perpetuated Modern (Le., post-Medieval) economics took shape from pro posals dealing with scarcity. Some of these developments in the six teenth, seventeenth, and into the eighteenth centuries are known now as mercantilism. Mercantilism was, and is, nationalistic, that is, a proposed economy for dealing with the scarcity which confronts 6 THE FREEMAN April a particular nation. The particular scarcity which mercantilists em phasized was the scarcity of gold, but the value of gold was gen erally understood to be its virtu ally universal acceptability as a medium of exchange. At any rate, mercantilists focused attention upon means for increasing the supply of gold within a nation. They thought of one nation's wealth as being got at the expense of other nations and conceived of a variety of devices for getting gold from other nations. Their main invention was the favorable balance-of-trade idea, by which a nation would sell more goods to a nation than it bought from that nation, the difference being made up by gold. Mercantilists favored manufacturing, for thereby the value of a product would be en hanced before it was sold, and they promoted colonization for the se curing of raw materials and mar kets. Regulatory measures were endorsed as means for enhancing the trade and gold supply of a nation.

Economically Sound Behavior Advantageous to Everyone Dealing with scarcity was the object of mercantilism, but were such practices economical? It was the great work of the physiocrats and Adam Smith in the latter part of the eighteenth century to show that they were not. These writers took a cosmopolitan or universal view of economics. They were con cerned to discover and set forth the natural order for economic be ha vior. From this broad view, Smith, particularly, demonstrated that true economic behavior is so cial, that when everyone behaves economically, everyone benefits. In a century beset by world wars-wars rooted mainly in trade conflicts spawned by mercantilism -Smith held that trade is by na ture peaceful, that the wealth of a people is not obtained at the ex pense of other peoples, that when peoples of one country trade with those of another, bo~th benefit. He maintained that when each man pursues his own interest, when ex change is free from arbitrarily imposed obstacles, when each man may buy at the lowest price any where in the world and sell to the highest bidder on the world mar ket, when competition is allowed free play, all will benefit. Each man will be able to get the highest price possible for his goods and services and be able to obtain those he wants at the lowest possible price, that is, roughly, at the cost of providing them. There is an in visible hand - an order in the uni verse - that brings harmony out of the diverse actions of men, if they may act as they choose and are prohibited to use force, fraud, 1966 THE FLIGHT FROM ECONOMICS 7 or deception in their dealings with others.

Smith held that government in tervention was not necessary to bring about these beneficent re sults. On the contrary, government intervention is a positive deterrent to economic behavior; it places ob stacles in the way of free ex change, promotes uneconomic (viewed socially) behavior, and distorts the market. In short, mer cantilist practices are not eco nomic. Adam Smith Displaced Economic thought, after Smith, consisted largely of refinements, extensions, and modifications of positions which he and the physio crats had set forth. But the philo sophical framework within which Smith worked hardly survived the eighteenth century for most think ers, as we have seen in earlier chapters. The breadth of vision made possible by the cosmopolitan ism, universalism, and belief in a natural order within a rational universe gave way to the particu larism of romanticism and the nu merous abstractions which served as a base for the proliferating ide ologies of the nineteenth century.

Economics became the "dismal science," the discipline which justified the ways of scarcity and privation to men. Economists were soon, once again, wrestling with the conun drum which ever and again besets them. The 'l-conundrum has had many formulations, but the one which follows may, perhaps, state the essence of them all. If man is confron ted with scarci ty, if the supply of goods and services is less than the desire for them, it looks as if one man's gain is another man's loss. That is, when one man takes from the limited supply of goods, he has them at the expense of others who might have· used them. If this were the case, the quest for goods and services would be a clash or contest between those who had them and those who wanted them for possession, with one side the winner and one the loser. Mercantilists had con ceived of such a struggle among nations. Ricardo and Malthus con ceived of the matter as a contest between increasing population and the limited means for subsistence.

Marx rendered it into a class strug gle. The social Darwinists, Spencer and Sumner,saw it as a struggle in which the fit survived. Developing Economic Theory Economists adopted a variety of postures about the struggle and the scarcity. Ricardo held that that was the way things were and there was nothing much to be done about it (though technological in novations might temporarily ame8 THE FREEMAN April liorate conditions for workers). Utilitarians held that free ex change and competition were all to the good; though some might get hurt, the greatest good for the greatest number would be achieved. Marx opted for revolution. The Austrians - Menger and Bohm Bawerk - concluded that everyone benefited from free exchange be cause wants and values are subjec tivee The social Darwinists held that it all added up to progress. Utopians, who did not accept scar ci ty, were searching ou t the sources of privation in supposed exploitation and envisioning their perfect societies.

The main lines of economic thought in the nineteenth century run from the classicists - Smith and Ricardo - to the utilitarians Bentham and Mill-to the Austri ans. These schools shared the view, more or less, that true economic behavior is that of free men, will ingly exchanging goods, making their own calculations, and seek ing their own ends. Government intervention was not economic to them; it produced distortions which were antithetical to eco nomic action. Even Karl Marx did not hold much brief for palliative action by governments. Concerned with Scarcity Two points need particular em phasis. Historically, economic thought has been concerned with scarcity, however much the import of this may have been distorted by some thinkers. Nor was this sim ply an historical accident. The reason for being of economy is scarci ty. If there were no scarcity, there would be no justification for economics. There would be no oc casion for saving, for careful man agement, for priorities as to the order of satisfying desires, for choices among goods, or for effi ciency. Second, economic thought has been, in the main, noninter ventionist. Individual economists have favored this or that inter ventionist measure-the protective tariff, compulsory workmen's com pensation insurance, government inspections - but not on economic grounds (the tariff being a possi ble exception). If it were economi cal, for instance, for an employer to take out insurance on his em ployees, he could he persuaded of this, and compulsion would be ir relevant.

There is no body of thought which demonstrates that it is eco nomical for governments to inter vene in the lives of people. There have been numerous claims, of course, that governments could manage businesses more effec tively than would private inter ests, that governments will con serve scarce resources, that gov ernment action will render this or 1966 THE FLIGHT FROM ECONOMICS 9 that economic benefit. A careful ex amination will show, I believe, that these are not economic argu men ts, tha t they are based not upon the premise of a scarcity of goods and services but an abun dance. They are based, in short, upon the premise that economic behavior is unnecessary. The "Plague of Abundance" At any rate, interventionist thought has been based upon the view that there exists an abun dance of goods and services. The idea that mankind is confronted with a glut of goods and services is not particularly recent. It goes back at least to The Communist Manifesto (1848), and possibly be fore that time. But it has had its particular American articulation.

This was provided mainly by that school of "economics" known as the institutionalists. Prominent leaders of this school have been Thorstein Veblen, John R. Com mons, Stuart Chase, and, lately, John K. Galbraith. Their basic position is that con ditions have changed, that it was once true, indeed had been from time immemorial, that societies were confronted with scarcity, but that this condition is no longer the case for some societies, no tably the United States. Stuart Chase held that the United States reached a condition of abundance in 1902. "Abundance," he said, "is self-defined, and means an eco nomic condition where an abun dance of material goods can be produced for the entire population of a given community."i Rexford G. Tugwell, the irrepressible New Dealer, described the change to plenty in this way: "Our economic course has carried us from the era of economic development to an era which confronts us with the neces sity for economic maintenanc'e. In this period of maintenance, there is no scarcity of production. There is, in fact, a present capacity for more production than is consum able, at least under a system which shortens purchasing power while it is lengthening capacity to produce."2 John K. Galbraith, who plays Stuart Chase to post World War II America, describes the develop ment as historical in the follow ing: "Nearly all [people] through out all history have been very poor. The exception, almost in significant in the whole span of human existence, has been the last few generations in the small corner of the world populated by Europeans. Here, and especially in the United States, there has been 1 Quoted in Charles S. Wyand, The Economics of Consumption (New York: Macmillan, 1937) , p. 54.

2 Rexford G. Tugwell, The Battle for Democracy (New York: Columbia Uni versity Press, 1935), p. 7.

10 THE FREEMAN April great and quite unprecedented affluence."3 Vance Packard, who is to Galbraith as Galbraith is to Veblen and Keynes -that is, de rivative - states the development with his usual dramatic flair: Man throughout recorded history has struggled - often against appall ing odds..-to cope with material scar city. Today, there has been a massive breakthrough. The great challenge in the United States-and soon in West ern Europe-is to cope with a threat ened overabundance of the staples and amenities and frills of life. 4 The Overproduction Theory The evidence which purports to support these claims of abundance has run the gamut from Veblen's conspicuous consumption of the leisure class to Packard's charges that industrial waste makers prey upon the gullible public with their shoddy merchandise with its built in planned obsolescence. The terms which have received the widest acceptance for describing abundance are overp~oduction, un employment, surpluses, unused in dustrial capacity, and undercon sumption.

The following is some of the evidence Stuart Chase submitted in 1931: 3 John K. Galbraith, The Affluent Soci ety (Boston: Houghton Mifflin, 1958), p. 1. 4 Vance Packard, The Waste Makers (New York: David McKay, 1960), p. 7. American oil wells are capable of producing 5,950,000 barrels a day, against a market demand of 4,000,000 barrels, according to the figures of the Standard Oil Company of New Jersey.5 The real problem [in coal] is excess capacity. The mines of the country can produce at least 750,000,000 tons a year, while the market can absorb but 500,000,000 tons. 6 American shoe factories are equipped to turn out almost 900,000, 000 pairs of shoes a year. At present we buy about 300,000,000 pairs-two and one-half pairs per capita. There is admittedly a considerable shortage of shoes [1], but could we wear out, or even amuse ourselves with, five pairs per capita 1 I doubt it. For my self two pairs a year satisfy both util ity and style. Yet if we doubled shoe consumption - gorging the great American foot, as it were - one-third of the present shoe factory equipment would still lie idle. 7 Jumping now across the economic front to agriculture, we find that the basic problem of the American farm er lies in his "surplus." The govern ment at the pre~ent writing has bought and holds in storage millions of bushels of wheat in a heroic and possibly calamitous attempt to keep the surplus from crushing wheat farmers altogether. 8 5 Stuart Chase, The Nemesis of Amer~ ican Business (New York: Macmillan, 1931), p. 88.

6 Ibid., p. 89. 7 Ibid., p. 79. 8 Ibid., p. 76.

1966 THE FLIGHT FROM ECONOMICS 11 One might suppose that these writers would rejoice at the abun dance of goods, be glad that an age-old problem has been solved, be jubilant at the prospects of plenty. They might even have been grateful for an economic system that provided them with such an abundance. How good it is, they might hnve snid, to live in Amer ica where this has taken place. Of course, they were in the mood to say no such things. Instead, they held that abundance had produced great and difficult problems, prob lems of a monumental scale tha t threatened to grow. Poverty has continued to exist alongside abun dance, overproduction resulted in waste and profligacy, mechanical production eventuated in techno logical unemployment, and pro ducers reduced to all sorts of stratagems to dispose of their mounting goods and services. Intervention Rationalized One writer attempted to account for many of the untoward develop ments of this century as a con sequence of the efforts of pro ducers to maintain artificial scar ci.ty. The following are methods tha t he claims have been used to maintain scarcity: 1. The Destruction of Surpluses by Warfare. For the temporary creation of scarcity, no more effective means has, yet been devised than modern warfare. Within a relatively short time it can dissipate industrial sur pluses and create an additional de mand for goods that taxes productive equipment to capacity ....

2. The Extension of Loans. With the disappearance of wartime de mands, other markets are sought in an effort to avoid an immediate and complete collapse of the industrial structure .... The result [after World War I] was a series of ... loans that by 1929 totaled about $11,023,000, 000.... 3. Public Subsidy of the Consumer. When the process of lending purchas ing power to the consumer failed, the Federal government commenced what is now an established practice of giv ing to the indigent funds with which to buy.... 4. The Destruction of Goods and the Curtailment of Output. Having failed through wars, loans, "gifts," and a variety of other means to make purchasing power keep pace with large-scale production, attempts are now being made to preserve condi tions of scarcity by deliberately con trolling output so that it does not ex ceed profitable demand. 9 Many different specters have been raised over the years which have been supposed to have arisen from this overproduction, but none has been more persistent than that of rising unemployment. Stuart Chase declared, in the early 1930's, 9 Wyand, Ope cit., pp. 44-48.

12 THE FREEMAN April that the "current depression will pass." However, What threatens to continue una bated, in good times and bad, is tech nological unemployment with its three faces - the machine, the merger, the stop watch. In four years oil refineries increased output 84 per cent, and laid off 5 per cent of their men while do ing it. Tobacco manufacturing output climbed 53 per cent in the same peri od, with 13 per cent fewer men at the end. This is the trend throughout in dustry. It can mean only one thing. An equivalent tonnage of goods can be produced by a declining number of workers, and men must lose their jobs by the thousands - presently by the millions.l° This would, according to his analysis, lead to a further increase of surpluses, for there would be less and less income to buy the goods produced. The System Accused All those who have written in this vein about abundance have pointed finally to one thing: some thing wrong in the system itself.

r:I'heir reasoning is not difficult to follow. Productive power has been developed which can and does pro duce a glut of goods. All sorts of devices have been got up to dis pose of these surpluses. On the other hand, many are in need be10 Chase, Ope cit., pp. 15-16. cause it does not require many workers to produce this great bounty. One recent writer has pro claimed that we have been wor shi ping a false god. He said, Some people even seem to think that mass production can cure all the world's economic and social ills. You might almost say that it has become a world mania. Mass production has become our god, our cure-all, our eco nomic savior)! Writer after writer has pro claimed that the flaw lies in dis tribution. Stuart Chase put it this way: In respect to the whole body of fin ished goods, it is not so much overpro duction as underconsumption which is the appalling fact. As a nation we can make more than we can buy back.

Save in certain categories, there is a vast and tragic shortage of the goods necessary to maintain a comfortable standard of living. Millions of tons of additional material could be mar keted if purchasing power were avail able. Alas, purchasing power is not available. 12 Charles Wyand declared, More goods are being produced than can be profitably sold. On the other hand, it can be clearly shown that most people are consuming at but a fraction of their potential capacity . . . . As will be shown later, the con11 Walter Hoving, The Distribution Revolution (New York: Ives Washburn, 1960), p. 4. 12 Chase, Ope cit., p. 78.

1966 THE FLIGHT FROM ECONOMICS 13 sumer's buying power cannot absorb all. that the nation can .produce be cause (1) incomes are insufficient, (2) too much of the nation's income is saved, and (3) prices are too high.13 Horace Kallen said, Indeed, at no time in the history of industrial society has the production of the necessities of ··life been suffi cient to meet all needs. It was not need which limited demand. It was price. Prices had so outdistanced wages that wages could not catch up with them.l 4 Palliatives Proposed Those who have written in this vein have not always been quite consistent. On the one hand, they have often indicated that there is an absolute surplus-actually more goods produced than can or will be consumed. On the other hand, and in certain moods, they hold that the problem is only one of maldistribution. Then, too, some writers have focused upon the wastefulness of private enterprise and have advocated the conserva tion of scarce resources. In recent years, many of those who have dealt with such matters have pro fessed great concern for "eco nomic growth." It would, there fore, be a misconstruction of what has been going on to deal with all 13 Wyand, op. cit., p. 40.

14 Horace M. Kallen, The Decline and Rise of the Consumer (New York: D. Ap pleton-Century,1936),p.404. of it in connection with scarcity. What all these positions share -whether it be a concern with over prod uction, undercons umption, maldistribution, wastefulness, or economic growth-is the view that government must intervene in one way or another to correct the situ ation. They hold that the "system" produces these unwanted conse quences and that collective action must be taken to set it straight. Simon Patten, an early advo cate of the notion that a surplus exists and a teacher of Rexford G. Tugwell, advocated the absorp tion of the surplus by taxation. He declared that taxation should "be placed not on particular forms of prosperity, but on general pros perity. The State should not try to hunt up the individual who prof its by each of the improvements it makes, but should make taxa tion a reduction of the general surplus of society." His justifica tion of this was that "we can con ceive of the State as a factor in production, and hence entitled to a share of the undistributed pro duce of industry. It has helped to promote general prosperi ty, and can demand a part of the surplus of society along with landlords, employers, capitalists and labor ers."15 15 Simon N. Patten, Essays in Eco nomic Theory, Rexford G. Tugwell, ed.

(New York: Alfred A. Knopf, 1924), p. 98.

14 THE FREEMAN April John R. Commons, an early and late reformer, called in 1893 for a guaranteed right to employment in order to take care of the "sur plus" of laborers: The right to employment when en forced would have the effect of guar anteeing to every worker, even the lowest, a share of the total income in excess of his minimum of subsistence. It would give steady work through the year, which would increase the wages of the lowest labourers by 30% to 50%. And by overcoming the chronic excess of labourers beyond the opportunities for employment, it would raise the marginal utility of the marginal labourers, thus raising the wages of all. 16 So it has gone through the years: the apostles of surplus, overproduction, technological un employment (surplus workers), underconsumption, and maldistri bution have been proposing some variety of reform or intervention. Stuart Chase proclaimed that the situation called for detailed plan ning: In my judgment the only final way out lies through planned production.

We have to scrap a large fraction of laissez-faire, and deliberately orient productive capacity to consumption goods .... For America, industrial coordina tion must probably take the form of a 16 John R. Commons, The Distribution of Wealth (New York: Reprints of Eco nomic Classics, 1963) , pp. 84-85. drastic reVISIon of the antitrust laws; an alliance between industry, trade association, and government to control investment (i. e., plant ca pacity) on the one hand, and to guard against unwarranted monopoly prices on the other; a universal system of minimum wages and guaranteed hours of labor to frighten off fly-by night entrepreneurs and to stimulate purchasing power; and finally • • • , the setting up of a National Planning Board asa fact gatherer and in turn an advisor . • • on every major eco nomic undertaking in accordance with a master blueprint.l 7 Rexford G. Tugwell said, Let me summarize: In this era of our· economic existence, I believe it is manifest that a public interest • . • commands the protection, the main tenance, the conservation, of our in dustrial faculties against the destruc tive forces of the unrestrained com petition .... For today and for tomor row our problem is that of our na tional economic maintenance for the public welfare by governmental inter vention .... 18 Charles Wyand held thatThe gross effect of these trends is to offer American business the choice of some sort of private control of business practice or of growing gov ernmental interference to prevent the complete collapse of the capitalistic economy.t 9 17 Chase, op.·.cit., pp. 95-97.

18 Tugwell, Ope cit., p. 9. 19 Wyand, Ope cit., p. 73.

1966 THE FLIGHT FROM ECONOMICS 15 New Means to Old Ends The emphasis has shifted some what over the years but not the goal of government control and direction. The problem, according to John K. Galbraith, is one of private affluence and public pen ury. There needs to be a great deal more spending in the govern mental realm. Following his lead, Vance Packard emphasized the desirability of spending for edu cation, government provided rec reation facilities, support of re search for the desalinization of water, and so forth. The claims of abundance, sur plus, and underconsumption are but a prelude, then, to the calls for positive government action. The arguments move, gradually and subtly or swiftly, from eco nomics to the political arena. Their import can now be spelled out. If the problem were one of produc tion, which it would be if there remained the fundamental diffi culty posed by scarcity, it would be a matter for economics. To deal with scarcity, there needs to be frugal management, saving, in vestment, balanced budgets, cal culations as to the best means to use to get the greatest return from materials, and determina tionsas to how to produce the most goods with the least expendi ture of energy. But if the situa tion were reversed, if abundancehad replaced scarcity, economic behavior would no longer be in order. It might be helpful to spend more than was taken in, to employ more workers than the task at hand required, to use more ma terials than would be called for by the undertaking. To be eco nomical, at any rate, would be anachronistic.

Most important, economic anal ysis has long shown conclusively that individuals and private com panies have the incentives when they may exchange freely to deal as effectively as can be done with general scarcity. But the case might be quite different if abun dance were the problem. This is the character of the arguments which have been recapitulated above. When the problem becomes one of distribution, it then be comes feasible to argue that gov ernments can intervene for amel iorative purposes. In short, it might be admitted that force would be a poor way to achieve production, but the same would not necessarily go for distribution. Governments can redistribute; they can take goods from some and give them to others; they can spend, expropriate, set aside lands and resources, confiscate, and even waste rather effectively. These are tasks which governments alone, because of their monopoly of the use of force, would be suited to 16 THE FREEMAN April perform, if anybody had to per form such tasks.

The United States government has indeed been engaging in such practices for't-a good many years, assisted on occasion by local and state governments. The methods for doing these things are many and varied. They run the gamut from low interest rates for those in favored categories to the con fiscatory taxation of the wealthy, from the subsidizing of some kinds of production to the limi ta tion of other kinds, from minimum wages to maximum prices, from public welfare to social security, from financing low-rent housing to taxing high-rise apartments, and from the extension of power to organized labor to the intimate regulation of business activity. These are not economic actions; they are, instead, political. They have to do with power and its use. They have to do with artifi cially crea ting shortages, with driving prices above or below the market price, with the allocation of manpower according to political considerations, with arbitrary con servation and profligate spending.

Even "surpluses" can be created that is, goods priced higher· than anyone can or will pay for them by the use of force. This shift from economics to politics is mirrored in the activ itiesof many of those who now bear the name of economist. A popular news magazine noted this change recently. It said, "In the palaces and Parliaments of a hun dred countries, economists are in creasingly called upon to build, revive, or draw together national economies. Their home is no longer the ivory tower, and their profes sion is no longer the 'gloomy science' but a romantic and re warding wielding of power." More over, "the Presidents and Minis ters are receptive to the advice .... Several economists have risen to head governments, including West Germany's Ludwig Erhard, Portu gal's Antonio Salazar, and Boliv ia's Victor Paz Estenssoro. Others, such as Britain's Harold Wilson, are hopefully planning their own takeover [since achieved in his casel."20 In America, many econ omists have become well-known names in government circles over the years: Rexford G. Tugwell, Walter Heller, John K. Galbraith, among others. Below this exalted rank, hundreds more toil away in the numerous government depart ments which lay seige to economy in the land.

Economics as a Tool for Reform There has, then, been a flight from economics, a flight from eco nomics as a discipline for study and exposition to "economics" as 20 Time (June 26, 1964), p. 86.

1966 THE FLIGHT FROM ECONOMICS 17 a tool for social reform, a flight from economics to politics. This has been, also, a flight from real ity, though the full demonstration of this will follow later on in this "'Ylork. It may be of s-ome use, how ever, to observe here that scarcity is still with us, and may be ex pected to remain. Scarcity arises from the nature of the universe and the nature of man. Man wants a great variety of commodities and attentions. The want of them makes them economic goods and services. In order for these goods and services to be provided, some one has to labor, to use resources, to defer the gratification of wants. Labor and materials are in limited supply (always); deferment re quires discipline; wants are un limited by these or any other physical considerations. Hence, scarcity is an enduring fact of life. Production is not something that is solved, once and for all.

Goods must continue to be pro duced, else the supply that exists will be exhausted. Continued pro duction requires the making of economic decisions·- of decisions as to which materials in short supply and how many men in the limited labor pool and how much capital from the small store of it to employ to make what goods that will be in greatest demand. Distribution is not something separable from production, not, tha t is, if production is to be maintained. Distribution - that is, exchange - is the great spur to production;. it is the close relation between efforts and rewards that induces individuals to apply their energies economically to produc tion. Surpluses do not indicate abundance; they rather indicate misallocation of materials, poor judgment, false signals in the economy, price rigidities, and/or the use of force to bring these about. Scarcity remains. There is no better testimony .to this fact than the desperate efforts of socialists to increase productivity, to achieve, as they say, "economic growth." But even these efforts are misunderstood by contempo rary "distributionist economists."

One writer notes that the Soviet Union has been using all sorts of devices to spur production. "But, nowhere in his talks did Khrushchev say anything about distribution. As a matter of fact he didn't seem to be aware of this side of the economic picture at all. He seemed to think production is the alpha and omega of the eco nomic system."21 The view that America is now saddled with problems of abun dance has been used to justify in21 Hoving, Ope cit., p. 4.

18 THE FREEMAN April tervention, but the roots of eco nomic' misunderstanding are even deeper than this. There is a whole body of pseudo-economic literature devoted to attempts to demonstrate that economic behavior results in contradictions that can only be resolved by government interven tion. These arguments deserve some examination. ~ , The next article in this series will concern "Meliorist Economics." ON THE REDISTRIBUTION OF'INCOMES SUDHA R. SHENOY THE IDEA of redistributing in comes and wealth has become a virtual dogma which few dare to question. It is one of the oldest parts of the socialist ideology ; even th'ose social democrats who oppose communism because it stands for "violent revolution," nevertheless argue that a "fairer" Miss Shenoy, from Ahmedabad, India, is a B.Sc. (Econ.) student at the London School of Economics. distribution of income is •one' of the best· safeguards against such revolution. And many who other wise oppose interventionism argue that redistribution is necessary to "correct" or "ameliorate" the "unfair" distribution of wealth and· income, .which they. believe' is one of the major flaws in, the' work ing of the free market. Thus, we hear protests that: "A mere 6 per cent of the people own 42 per cent 1966 ON THE REDISTRIBUTION OF INCOMES 19 of the nation's wealth"; or, "The distribution of. income in our. so ciety should not be allowed to be come so unequal that the great wealth at one end of the scale endangers the low incomes at the other."

What is most remarkable, how ever, is that this idea of redistri bution should· have tlcaught onu in just those areas-Western Europe, North America, and Australasia - that are distinguished from the rest of the world precisely. by their astonishing mass prosperity. What especially strikes the visitor from the underdeveloped world (and I would include here the areas be hind the Iron and Bamboo Cur tains) is that the wide range of products and services, which at home are enjoyed only by the miscroscopic minority, are here bought by the masses. The dif ferencebetween the developed and the underdeveloped parts of the world lies not in the amenities en joyed by the wealthy - who in cer tain respects, such as personal services, are better off in the un derdeveloped areas - but in the condition of the mass of the peo ple in the respective areas. In the one, a wealth of goods and services (with a corresponding variety of jobs) is available to virtually everyone; in the other, the lives of the masses are marked by a poverty, the very memory of which has vanished in the West if we may judge from the comments in economic history textbooks.

The Process Misunderstood Perhaps the basic reason for the plausibility of redistribution ist ideas is a, misapprehension of the nature of owne'rship and pro duction. and what earning an in come means in the context of a free market. The redistributionist seems to think that goods are "so cially produced" and then thrown onto a common heap, from which incomes are "individually appro priated" - quite arbitrarily. But there is a pattern to the earning of incomes in a free market: the size of the income earned depends on the extent to which the individ ual-in cooperation with other individuals - succeeds in satisfy ing the wants of his fellow men. Even capitalists must use "their" capital to produce for their fellow men. Legal title· to any collection of capital goods does not guaran tee that income will flow in auto matically.! For example, legal title to a hula-hoop factory in the United States today does not mean automatic profits to the owners more likely, it means heavy losses lOne. of the basic fallacies of Marx was the notion that capital would "auto matically beget profits." But the theory of a capitalist conspiracy to keep wages low and price~ high does not explain. why capitalists sometimes have losses.

20 THE FREEMAN April and strenuous efforts to salvage something from the wreckage. In other words, in a free market, even capitalists' incomes are "earned": by producing what their fellow men wish to buy.2 Since, in this context, the fulfillment of consum er needs is the rationale of the production of capital goods, it is the mass of consumers who, in a free market, must be regarded as the real economic directors, if not the legal owners, of capital. 3 In short, though legal title to all the thousands of factories and millions· of machines may lie with a numerical minority, this vast accumulation of capital is not used to produce exclusively those items consumed by the few. The super markets are not stocked with cavi ar and champagne for "the 6 per cent who own 42 per cent of the nation's wealth": the supermar kets bulge with ite·ms for mass consumption. The vast amounts of capital equipment in the developed nations are used principally to pro duce an enormous variety of goods and services - includipg leisure for the vast majority of the peo ple. The production of luxury 2 Aristocrats and manufacturers, for instance, certainly were not the chief buyers of the coarse-and cheap-cottons produced by the first factories at the be ginning of the Industrial Revolution.

S Ludwig von Mises, Socialism (Lon don: Cape; and New Haven: Yale Uni versity Press, 1951) pp. 37-42. goods is a mere trickle compared with this outpouring of goods for mass consumption. Contrast this with conditions in such countries as China or Soviet Russia - where vast amounts of resources are drawn into the con struction of industrial or hydro electric complexes that are useful only in the light of their rulers' military ambitions or for such technologically spectacular but otherwise useless feats performed b-y Sputniks and Cosmonauts. How much easier life could have been for Ivan Ivanovitch and his wife and family if these resources had been allocated according to the principle of consumer sovereignty! Production and Trade What does redistribution mean in practice? The goods and ser vices we consume - and which con stitute our real income - have all been produced for us by our fel low men, in exchange for what we have produced for them. If any of us wishes to consume more - i.e., have a higher income - he must either produce more of the things his fellow men want - or some of his fellow men must voluntarily turn over to him what they have produced, without asking any thing in return. In other words, if we wish to consume more with out producing more, someone else must produce for us without him1966 ON THE REDISTRIBUTION OF INCOMES 21 self consuming. The principle is not changed if some third per son, on our behalf, pays those who produce for us.

There is, of course, a third method of having more; and that is by seizing what others have produced, and thus forcing them to do without. And this is what is really involved in theredistribu tion of incomes via the state ap paratus - progressive .taxation to "soak the rich," and various "wel fare" measures ostensibly aimed at raising the real income of the very poorest. Aside from the ques.. tion of whether these aims are in fact achieved (which they are not4 ) it must be seen that compul sory redistribution of this type is just another form of capital con sumption. 5 How is this? We must ask what the "rich" would have done with the income if it had 4 Progressive taxation actually serves to maintain the existing distribution of wealth and income: true, the already wealthy are prevented from getting wealthier, but those seeking to rise are prevented from rising at all. See Ludwig von Mises, Human Action (New Haven: Yale University Press, 1949), pp. 803 if., and David McCord Wright, Democracy and Pro,gress (New York: Macmillan, 1948), pp. 94-103. For the British experi ence with "equalitarian" welfare serv ices, see the various Hobart Papers is sued by the Institute of Economic Af fairs, London.

5 See F. A. Hayek, The Pure Theory of Capital (London: Routledge and Kegan Paul, 19(1), ch. xxv. been left in their hands. The an swer is, they would have saved it Le., demanded capital goods. But if this income were handed over to those whose incomes are very much lower, they ·would not save it; they would use, it to .purchase consumption goods. The effect then of such redistribution would be that' consumption goods are pro duced where capital goods would have been produced - i.e., there' is capital consumption. 6 Redistribution cannot, there fore, continue indefinitely. Once the capital has been consumed, the "high" incomes derived from its use will no longer be available to be redistributed. Nor can we as sume that those who do earn higher incomes will passively ac quiesce in having ever greater pro portions of their income taxed away. After a time, progressive taxation defeats its own ends. The individual simply ceases to earn the income in taxable form - or as in some countries, is forced to start keeping two sets of books.

Observe, too, the inconsistency here: on the one hand, it is the 6 If resources are scarce, we cannot have more of both; if, with the Keynes ians, we wish to argue that there are always unemployed resources, then we are implicitly assuming either (a) that these resources are perfectly versatile, or (b) exactly the right sort of resourc es are available in exactly the right proportions.

22 THE FREEMAN April people themselves who, in a free market, create these "high" in comes by buying what the "cap italists" help to produce - and then, the people propose to "cor rect" the "unequal" distribution of the market via the political process!7 Redistribution in Backward Countries What about redistribution in other contexts - say, in an under developed country, or under feu dalism? Now, the characteristic mark of such precapitalistic or noncapitalistic situations is the extreme poverty of the masses, against which the comparative wealth of the few landlords and nobles appears even more harsh. In these situations, the problem is to produce sufficient goods; i.e., to buildup the capital resources re7 I am not saying that the developed areas today are, or at any time were, paradigms of the free market. In fact, only 80me free market principles were ever applied in the past; and the last 100 years have seen an accelerating movement away from even this. What I am saying is that we should try to clari fy the ideas in terms of which we at tempt to interpret the real world. If we wish to have a system based on gov~rn mental direction rather than one based on the principle of consumer sovereign ty, we should be clear about this.

quired to produce the consumption goods for the masses. The question of political redistribution hardly arises. This is not, of course, to dis parage the ideal of voluntary giv ing. It would not be necessary to add this, were it not for the per sistent misunderstanding of the implications of free market prin ciples with respect to charity. Economics certainly does not as sume that all men are selfish mon sters - though a great many peo ple, who should know better, go on talking in this fashion. Eco nomics is concerned only with the principles governing the allocation of scarce resources among com peting ends; it says nothing about the ends themselves. And, for most people, these ends will in clude, as a matter of course, the assisting of those who are in need. The pity is that in so many coun tries, especially underdeveloped ones, heavy taxation - including direct taxes, indirect taxes, and the hidden tax of inflation - is making it more and more difficult to continue all those traditional forms of giving that formerly were regarded as the privilege and the duty of the many who felt they could afford it. ~ miniTHOSE WHO SPEAK glibly of "allo cating purchasing power" - by which they mean the 'forcible re distribution of wealth, patently a political function - are prepared to employ means that are both im practical and immoral, and alas, these persons are in full charge of the poverty debate today. If the sentimentalists casually prescribe, and get, massive crop supports to aid poor farmers, it is because there are all too few cool heads around to point out that such aid is at the expense of the urban poor, in the form of higher food and cloth ing prices, loss of jobs, and an infla tionary attack on the value of sav ings and fixed pensions, not to mention the bad psychological ef fects on both the' farmers and the urban poor involved in the unjust transfer of wealth.

It is about time, then, that the poverty problem be analyzed, in rigorous simplicity, as part of the basic problem of the market econ omy: overcoming scarcity. The evidence is that economic progress is rapidly overcoming material impoverishment, and that Mr. Wheeler edited the conservative student journal, Insight and Outlook, at the Univ~r sity of Wisconsin, then worked three years for National Review before resigning to found Rally, a new national monthly journal of opinion geared for the young, to advance free market ideas and provide a new voice for "second generation" libertarians and conserva tives. This' article is slightly condensed and re printed by permission from the Winter 1965 issue of RamPart Journal. ices,. I!JJ6R~.Ltjf!\Sb rea ona ice I den 0 s r to marry to the poor, spe ment for veterans, the insane, widows, children, the aged, i h digab!~'l~E: (;les, and un mployment compensaIndustry! ,.( O~IH~n-"'PQ tion of the 001", free contract, ex:j;;l~f~~~~on and snffr~~~ codes, pure food and drug regula tio, railroad and utility legisla t' .ihwst laws, iwusi g and i 1 e t'd' ina23 24 THE FREEMAN April in the process much of the misery and demoralization that attends economic deprivation is evaporat ing.(This is not to suggest that misery and demoralization and crime are not increasing on the whole: they are, but in my opinion for spiritual reasons.) Therefore, as a tentative hypothesis it would seem that a properly directed in crease in production should form the core of any accelerated attack on poverty, and that, conversely, the kiss of politics should be em phatically avoided.

Panac:eas Past and Present Just about every panacea devis able by man has already been wheeled out against poverty. Few, if any, of these, however, have ever jarred the correlation be tween the expanding supply of goods and services, broadly dis tributed by a contractual economy, and the steady improvement in the lot of the poor. Professor Robert Lampman of the University of Wisconsin has taken note of past legislative at tempts to help the poor. 1 These include: The English poor laws, mini mum income allowances, work houses, orphanages, asylums, alms 1 Robert J. Lampman, "The AntiPov erty Program in Historical Perspective" (a paper presented to the UCLA Facul ty Seminar on Poverty, February 25, 1965). houses, (Bentham's) Houses of Ind ustry, (John Cary's) Corpora tion of the Poor, free contract, ex tension of education and suffrage, work relief for the able-bodied, reg ulation of health and education, abolition of slavery, bankruptcy and usury laws, industrial safety codes, pure food and drug regula tions, railroad and utility legisla tion, antitrust laws, housing and zoning ordinances, antidiscrimina tion laws, minimum wage laws, collective bargaining laws, child labor laws, work-hour regulations, minimum price controls, price supports, social insurance, pro gressive taxation, tariff and immi gration policy, job retraining, pub lic works programs, rehab~litation programs, vocational training, family services, hospitals, schools, libraries, clinics, information serv ices, public housing, nurseries, rec reational facilities, sanitary serv ices, denial of suffrage and right to marry to the poor, special treat ment for veterans, the blind, the insane, widows, children, the aged, the disabled, and the unemployed, tax cuts and rebates, public em ployment agencies, welfare agen cies, and unemployment compensa tion.

Whatever miseries are suffered by the poor, they do not suffer from political neglect. In brief consideration of Pro fessor Lampman's awesome list, it 1966 THE ARMCHAIR SKIRMISH AGAINST POVERTY 25 is readily seen that antipoverty legislation has been· sometimes in effective and often harmful. We might very well wonder if we haven't been killing the .poor with kindness. Pending further analy sis, it might tentatively be sup posed that such programs as have been effective in· helping the poor with no strings attached are pre cisely those which removed legis lative interventions into the pro duction process,· such as the abo lition of slavery and the extension of free contract. Progress in Profile In 1798, Jeremy Bentham wrote: "The multitude included under the denomi~ation of the poor compose the bulk of the community - nine teen-twentieths might perhaps be found to belong to that class."

A century ago, more than half of the U.S. populace was poor by contemporary definitions. Jacob Riis estimated in 1892 that 20 to 30 per cent of New York City lived in penury. Studies made in 1939 and 1949 established poverty lines of $1,950 and $2,500 respectively. The 1965 poverty line, suggested by the President's Council of Economic Advisers, is $3,000 income per family, or $1,500 per unattached individual per year. Since the 1949 survey, by CEA figures, the number of those living in poverty has dropped from 32 per cent to 20 per cent, while at the same time the standard of pov erty rose by $500, or 20 per cent. Both of tbese trends - towards fewer poor, and a rising standard of poverty - have been in effect since Bentham's time. So dramatic has been the improvement in the status of the poor that a truly rev 01utionary belief in the final abo lition of poverty has obtained in the U.S. and Britain since about the turn of the century. "In con trast to the people of less fortu nate lands, who have regarded poverty as inevitable, Americans have tended to regard it as an ab normal condition," writes econom ic historian Robert Bremner. 2 Towards a Sharper Definition The concept of poverty, like art, does not readily lend itself to ob jective definition. This has proved to be the biggest stumbling block for serious analysts.

Dorothy Brady of the Univer sity of Pennsylvania put it suc cinctly: "When faced directly with the problem of determining [pov erty] f or a given time and place, the theorist will deny the possibil ity of a· unique answer and the propagandist will settle for one of 2 Robert H. Bremner, From the Depths: The Discovery of Poverty in the United States (New York University Press, 1956).

26 THE FREEMAN April many solutions if the result suits his purpose." This is not to suggest that pov erty is indefinable, but rather that anydefinition.,..is necessarily arbi trary. There are quite as many definitions as there are poverty fighters. But for economists, per plexed in many cases by an inabil ity to distinguish the poor from the nonpoor, setting workable standards .is the first order of business. Most efforts thus far have adopted either the "poverty line" or the "market basket" approach. The poverty line defines as poor all those whose current cash in come is less than a given amount, $3,000 in the case of the present CEA standard. 3 It is by all odds the least precise method of defini tion, but it has the advantages of being easily understood, simple to work with, and adaptable to re liable and available figures. Market basket studies define poverty as some multiple (usually twice) of the cost of a subsistence diet. They are a great deal more reliable and discriminating than poverty line studies, but chron ically lack. dependable data.

Some effort to cross-pollinate the two approaches has been made, one report concluding that either 3 Economic Report to the President, prepared by the President's Council of Economic Advisers. yielded about the same percentage of poor .. However, the evidence is slight, and no .. information exists abol\t comparable degrees of pov erty. Several highly flexible. defini tions of poverty have been ad vanced by economists who find in superable the difficulties in lump ing together as co-equals. in pov erty a sharecropper's family with nine kids and one tired cow, and a retired couple with a fat portfolio and an urgent desire to do nothing more taxing than rock on the front porch of their retirement bunga low. One school suggests that pov erty is relative; thus, at any given moment, a certain proportion of the population is defined as poor. Allowing for the steady change in socially-determined poverty stand ards, this approach is not as whim sical as it appears at first blush, and in fact has a good correlation with poverty statistics assembled over the years by contemporary investigators.

Another school seeks to define poverty by first establishing who the poor are. This method obliges the investigator to look closely into an individual's circumstances and, by using any or all provisional definitions of poverty, decide whether the individual is poor. Such detailed studies are time consuming, so relatively few cases 1966 THE ARMCHAIR SKIRMISH AGAINST POVERTY 27 can be handled and statistics of this sort for large cross-sections of the population are unavailable. Nevertheless, this method has the virtue of open-mindedness· and is free of the distortions of mass statistics. Once several case-stud ies are collected, the investigator usually has a good idea of the economic characteristics of pov erty, and he may also have good insights into its causes. Rags and Patches? Who are the poor? The question is. troublesome, partly because the poor are rela tively few and often isolated from affluent America, partly because we are blinded to the new poor by lingering images of mortgage fore closures, tattered clothing, dilapi dated hovels, and the other para phernalia of poverty in years past.

According to figures developed from the CEA's $3,000 poverty line - bear in mind that these figures are meant to invoke the gloomiest possible view of the problem - 33 to 35 million Ameri cans live in poverty, one-third of them children. These include 9.3 million . families (30 million peo ple) and some 5 million unattached individuals. 4 Again by CEA fig ures, 5.4 million. families have in comes under $2,000 a year, and ( Ibid. 1.3 million unattached individuals have incomes under $1,000. Even if extravagantly over stated, the figures make it clear that poverty is still a serious matter. Poverty in the United States cuts across lines of age, sex,edu cation, race, and locality. But it is by no means random. Persons in several distinguishable categories, the most important of which are the aged, farm families, non whites, and fatherless families, appear among the poor appreciably more frequently than the average.

Curiously, unemployment is well down the list, which suggests that much of the government antipov erty effort aimed at alleviating unemployment is misdirected. Against a figure of 20 per cent poverty overall nationally, statis tics indicate that among the poor are: 5 76% of families with no earners. 48% of families with part-time earners. 34% of families whose heads are unem ployed. 47% of families whose heads are 65 or older. 31 % of families whose heads are 24 or younger. 37% of families whose heads have under eight y~ars of education. 48% of families whose heads are female. 5 Prof. Harry G. Johnson, "Poverty and Unemployment."

28 THE FREEMAN April 44% of nonwhite families. 43% of farm families. 84% of nonwhite farm families. Categories such as these are not to be understood as causes of poverty, but rather as areas that incur a high risk of poverty for other reasons. When the categories overlap, as in the last-mentioned figure, the risk of poverty is much greater. 80 the· statistics unfold. There are, happily, some pleasant sur prises. In Harlan County, Kentucky scene of some of the nation's bit terest labor battles,and by any standard a very poor county, in deed - 88 per cent of the families have their own washing machines (even if they lack running water) ; 67 per cent have television sets; 42 per cent have telephones; and 59 per cent own an automobile. In Tunica County, Mississippi, the poorest county in the poorest state, 52 per cent have television, 46 per cent have autos, and 73 per cent have washing machines. 6 The Michigan 8urvey Research Center reported last year that: - of all families reporting in comes from $2,000 to $3,000 in 1962, 45 per cent owned their own hom~s, and 66 per cent of these had 6 Herman P. Miller, Rich Man, Poor Man (New York: Thomas Y. Crowell Company, 1964).

no mortgage; 42 per cent of the $1,000 to $2,000 bracket owned their homes, and 35 per cent in the under $1,000 bracket. -in 1960, 14 per cent of families with incomes under $3,000 pur chased new cars. 40 per cent of these families owned cars. - of families with less than $3,000· income in 1960, 700,000 purchased television sets during the year; 500,000 bought refriger ators; and 300,000 bought washing machines. The large categories of the poor deserve further note: 7 Tthe aged. Numbering 2,581,000 families, this is the largest group of poor. However, the figure is substantially overstated due to the smaller than average size of fam ilies headed by the aged, and due also to their generally decreased needs and greater assets (the median net worth of the aged is $8,000 as opposed to $4,500 for the population as a whole). At least one upward statistical ad justment is needed, on the other hand, to allow for medical ex penses among the aged two and one-half times the average.

The aged are mostly white, usu ally live in urban areas, and strongly tend to live as couples (two million). In addition, a halfmillion elderly women live with their children. The maj ori ty of 'l Miller, Ope cit.

1966 THE ARMCHAIR SKIRMISH AGAINST POVERTY 29 the aged receive Social Security or a pension; 36 per cent. of them receive all of their income from these sources. Many older people own their own home •. free and clear. Half have incomes over $2,500 a year (half, that is, of the aged poor), and 64 percent have incomes over $2,000, most of whom would be removed from the rolls of the poor given a more realistic estimate of their circumstances. Farm families. The second larg est group of poor is found among farmers, although, again, the num ber is much inflated due to non cash incomes common on farms in the form of food, fuel, and lodging. A lower consumer price index in rural areas also adds to the over statement. About 1,570,000 farm families are counted among the poor, the majority of whom have incomes under $2,000. At the same time, farmers. tend to have relatively high assets. One study of functioning farms in 1963 found average net assets of $35,800. Another sampling, of two million farmers, yielded an aver age net worth of $43,973.

Half the poor farms are in the South. The number of Negro farmers has dropped sharply in recent decades, and the exodus of Negroes to urban areas is con tinuing. Colored farm families presently number only about a quarter of a million. Three-hundred thousand farm families are headed by men over sixty-five, but over half are headed by men in the thirty-five to sixty five bracket. Farm families headed by women are rare. Fatherless families. Sometimes called broken homes, 1,560,000 families are counted in this group, almost all in large metropolitan areas. One-third of all fatherless families are colored (as opposed to a tenth of the general popu lace), a disproportion sociologists feel reflects the relatively greater instability of Negro marriages. Nonwhite families. The last ma jor category of poor is the non whites, of whom 950,000 families live under the poverty line, or al most half. the total Negro popula tion of 2,030,000 families. It is al together likely that the number of Negro poor is understated, al though not seriously. In a number of ways, American Negroes still must deal with markets and em ployment opportunities constricted by discrimination, voluntary seg regation, and a variety of other causes. As a result of the dimin ished supply of goods and services available to him, the .Negro's cost of living rises, especially for hous ing.

Hidden Roots The causes of poverty resist economic analysis. They may be 36 THE FREEMAN April lost in the secrets' of' the mind,' as in'the case ,of men too lazy or too nervous' to hold a job.··Or they may be lost in complex external events, such as caste, custom, or· dogged misfortune. Or, routinely~ poverty can be caused by the interaction of the internal and the external the vexing Negro',' question is a case in point. What the economist may say js that the market assigns a high risk of poverty to the unproductive and the' underproductive. This is corroborated by the high incidence of poverty among sman family farmers, the market for whose product has long been depressed, or among fatherless families, in which the mother must stay home and care for her children rather than obtain outside employment, and so on. It is worthy of remark that one major cause of poverty is poverty itself.

Professor' Lampman has ob served, "It is interesting that few children, even those of below-av erage ability, who are not born and raised in poverty, actually end up in poverty. This suggests that pov erty is to some extent an inherited disease. "8 Poverty perpetuates itself from 8 Robert J. Lampman, "Approaches to the Reduction of Poverty" (a paper pre pared for the American Economic Asso ciation meeting in Chicago, December 30, 1964). generation to generation by deny ing to those in its grip the essen tial means to escape-education, in formation, training,opportunity, moti vation, and even health and strength. The poor are more frequently ill than the average; they stay ill longer, and their illnesses tend to be more severe; they lose more time from work than the average; they suffer higher than average rates of infant and maternal mor tality, they are subject to more severe mental disease, and they die younger. 9 In severe cases, the poor are constantly wrapped up in sheer survival. When one must worry where .the next meal is coming from, one's potential····and aspira tions are sure to be stunted. There is no time to spare, no will to di versify interests, and no impulse to gain skills or training, or to embark on programs of self-im provement. In time, bitterness or apathy can consume the poor, and thereafter their chances to escape their plight are slim.

Where Next? Poverty exists and works its hardships, we may conclude, al though it is extremely difficult to know with exactitude its charac teristics and causes. And we pay 9 Michael Harrington," A Glib Fal lacy," The New Leader, March 30, 1964.

1966 THE ARMCHAIR. SKIRMISH~GAINST POVERTY 31 twice for poverty, it has been said; once in wasted· potential, again in diverting resources to··al leviate its hardships. Even as a warehouse fire in Hong Kong or tornado damage on the Great Plains eventually makes.itself felt, through the interdependence ·of market effects, in our own pocket books, so do we very literally pay for thEf existence of poverty whether we are taxed because of it or not. Thus, even those among us .who prefer not to .be their brothers' keepers have· an interest in invest ing in the eradication of poverty. The question ,is,of course, how shall we set about to achieve this end? "Weare going to try," said the President a year ago, "to take all of. the money that we think is un necessarily being spent and take it from the 'haves' and give it to the 'have nots~·. that need it so much." Of course Robin Hood and his merry men made a good thing out of it, but the approach isre~ pugnant. It is also self-defeating.

Good ends cannot be gained through bad. means, simple theft in this case. The notion of stealing for the good of the poor contains the massive •presumption that a third party, here the. government, c~n comprehend completely .the lives and goals of two· individuals, and adjudge with cosmic wisdom that both would ~be better off if one were forced to hand over some of hispropetty to the other. The human race.· in ·.general, and its governments in particular, are a Iittle· short of .. that· sort of cosmic wisdom. Consider ~he Job Corps Fora .typical· example of this, contained in the Economic Oppor tunity Act, consider the Job Corps. Authorized under Title I of the act, the Job Corps is the most.im portant, the most expensive, and the·mostballyhooed of the ·admin istration's antipoverty programs. It is for youth of either sex from sixteen to twenty-one who are out of school... and unemployed. The youngsters serve in conservation camps or training centers, and re ceiveroom, board, clothing and es sential services, .living and travel expenses, and· leave allowances.

The cost per capita works out to some $4,700 a year ,enough, some hostile editorialists· have .pointed out,to send a young man to Har vard and pay for his tuition, room, board, books, pocket money, and installments on a sports car. But it is not only the expense of the Job Corps that appalls;· it is the misdirection as well. The corps. maybe ·a yummy way· to deal with .dropouts .... and delin quents, but what has it to do with poverty? And what will· have been 32 THE FREEMAN April achieved when the youngsters de camp? - the art of planting trees is not, after all, a highly market able skill. Moreover, the young sters eligible for· the program are likely to be the least responsible of their afie groups - not so· much the deprived, but the drifters and troublemakers. Removing them from whatever disciplinary influ ence their parents still wield and turning them loose in the north woods may result in top-grade mayhem. 1o Such is the cosmic wisdom of two billion dollars' worth of War Against Poverty. The state of New Jersey has already witbdrawn from the Job Corps program be cause it was aggravating rather than solving the school dropout problem. It never occurred to the planners that offering attractive situa tions to school dropouts would attract students to drop out of school, but of course that's just what happened in New Jersey and is probably happening elsewhere.

Two billion dollars would buy a lot of bread for the hungry. Why not let the hungry keep it? We will never be able to say with certainty what income and what resources distinguish the poor from the nonpoor. Neither 10 Since written, this prediction has been borne out by numerous news paper accounts of Jof> Corps incidents including rape, dope-addiction, and all kinds of violence. will we ever be able to say with certainty what causes poverty. But we can observe that poverty is al ways, to a greater or lesser de gree, a matter of economic want. We may infer, therefore, that poverty is curable by alleviating want. That is simply a market problem. Mass Production through Private Enterprise '''e Best Hope The real war, the natural war, against poverty lies in the ability of the market to bring more and better goods and services to the poor more cheaply. It lies in im proving entrepreneurial ability to discern the special needs of the poor and satisfy them at prices the poor are willing to pay. It lies in increasing the mobility of the market by removing the fetters and regulations that bind it down, cutting away the tax burden that eats away its productive capacity, and investing our utmost energies into its functioning. It lies, ulti mately, in our resolve to be free.

Virtue is not at cross purposes. As we strive to improve our own values and our resources, we help rather than harm those whom we influence morally and economi cally. Under the contractual econ omy, one man's productivity is not another man's loss; everybody gains. In a very real sense, we render the poor great service by 1966 THE ARMCHAIR SKIRMISH AGAINST POVERTY 33 leading the best lives we can. True self-interest is profoundly charita ble. But the charity of selflessness has its place, too .. One of the most onerous by-products of state wel farism and the ideology that nour ishes it is the stultification of our impulse towards charity. Not only does the state seize our means to be charitable, it steals our will to be charitable. In short, the state takes a decent human instinct and converts it in to the dole. It should not be so. There are many ways we could ex tend a helping hand to the poor that would not attack their pride and initiative. It is not so much a matter of taking a basket of fruit to the slums over ·theholi days, but of tactfully sharing our experience, training, insights, as pirations, to impart to the poor the will and the knowledge of the way to escape their dilemma. • HANS F. SENNHOLZ NOT LONG AGO, a small Pennsyl vania corporation received the Presidential "E" award for its contribution to export trade and the nation's balance of payments.

In its fiscal year, 1965, the com pany sold more than $16 million of its products to foreign cus tomers. Since 1960, its sales abroad returned $55 million to the United States. Dr. Sennholz heads the Department of Eco nomics at Grove City College, Pennsylvania. It seems that some American policies are reverting to the prin ciples and doctrines of the seven teenth century_ Others are repeat ing the errors and follies of the dark Middle Ages. In 1628 the best known mercantilist writer, Thomas Mun, urged his country men always "to sell more to strangers yearly than we consume of theirs in value." In 1667 the most famous of German mercantil ist writers, Becher, advocated as 34 THE FREEMAN April a most important economic rule and axiom "that it is always better to sell goods toothers .than to buy goods from others, for the former brings a certain advantage •and the· latter inevitable damage." In 1712, Charles King in The British Merchant declared the export of finished products "in the highest degree beneficial," the export of natural products "so much clear gain," and the corresponding im port "so much real loss."

Napoleon Bonaparte applied this idea on a huge scale in his Continental System. He gave pub lic recognition, . bestowed .medals, and issued citations to Frenchmen who exported manufactured goods to England. In recent years our foreign trade policies gradually have fallen under the sway of seven teenth century economic thought. Our "unfavorable" balance of pay ments caused the Eisenhower Ad ministration to prohibit American ownership of gold in foreign coun tries. Since then, the United States government added a "voluntary" program that restricts bank and business investments abroad in order to keep money and gold in the United States. Furthermore, a punitive tax on American pur chases of foreign securities aims to curb our heavy losses of gold. Those are some of the steps al r~ady taken toward comprehensive government control over all our foreign trade and transactions. In England, comprehensive for eignexchange control dates back to the darkness of the Middle Ages. Until the reign of Charles I (1628) the office of Royal Ex changer handled. all exchange· op erations and all trade in precious metals. 1 Exportation of bullion and coin was. summarily outlawed until 1663 when the prohib,ition was narrowed to English coins only.

In France exportation of gold and silver was outlawed from the Middle Ages until the eighteenth century. Th~ usual penalty for taking coins out of the realm was death. In Spain and Portugal the export of bullion and coins went on undisturbed for more than 200 years as if no prohibitions existed, even though the penalty was death. The "Spending" Multiplier In recent months we have wit nessed a marked increase in gov ernment and private spending and a strong rise in economic activity. The demand for goods and serv ices has been stimulated by ex pansionary government and Fed eral Reserve actions. Spending; whether by governments or citi zens. is considered the powerful 1 Cf. Eli F. Heckscher, Mercantilism, Vol. II, p. 246.

1966 PROGRESS OR REGRESS? 35 engine of economic progress and prosperity. Spendthrifts of all ages have advanced similar economic doc trines. In 1686, for instance, the Austrian write,r, Wilhelm Schrot ... ter, Thomas Mun's· pupil, wrote: "The more a manufacturer causes money to pass ·from one hand to another, the more useful it is to the country, for so many people does it maintain." And at another place: "Through the exchange of money the sustenance of so many people is multiplied." Thrift was regarded as the cause of unemployment, for real income was thought to· diminish if money were withdrawn from circulation. For this reason Schrotter wrote a long discussion on "How a Prince Should Limit his Thrift." In 1695 the English writer, Cary, advo cated the same principle with even greater clarity. He stated that everybody's spending causes in come to rise. If everybody in creases his .spending, according to Cary, everybody "might •then live more plentifully."2 Export Embargoes On Jan. 21, 1966, the United States and British governments pl~ced curbs on exportation of 2An Essay on the State of England in relation to its. Trade, London, 1695: p. 148 if; cited in Heckscher.Vol II p.209. ., copper in order to protect their shares of dwindling world supplies of the· metal. The United States Commerce Department sharply ex panded its controls over exports of copper from the United States and clamped tight limits on a broad range of categories, includ ing shipments overseas of copper ores and refined copper.

In England,. this policy of "pro vision" dated back to the twelfth century and lasted until. the nine teenth. Export prohibitions on iron, copper, and bell metal were repealed in 1694. Other restric tions that were imposed by Henry II, in 1176 and 1177, lasted until 1822. The high-water mark was reached under Edward .III about the middle of the fourteenth cen tury. In· France, export restrictions were first imposed during thethir teenth and fourteenth centuries. They aimed at keeping essential materials, particularly foodstuffs, within the country. At the begin ning of the nineteenth century, Napoleon still conducted a "policy of provision" with regard to food stuffs. The first French law that' permitted their exportation was enacted in 1819.3 Early "Poor Laws" Even our war on pover.ty de clared by the present·. administra3 Ibid, p. 92.

36 THE FREEMAN April tion is not new at all. During the period of the Stuarts and of the Tudors, the English government endeavored to aid the low income classes of society. The avowed aim of an act of Parliament in 1603 was to raise the wage's of textile workers. Minimum wage rates were fixed, and manufacturers were fined one shilling for every penny of wages paid below the prescribed rates. Especially in the years 1629 to 1640, a wide "policy of welfare" was pursued. In order to prevent unemploy ment, businessmen were com pelled to continue their operations even when suffering losses. They had to keep wages high, and were imprisoned in case of disobedi ence. For the benefit of the poor, food prices were intensively con trolled. Grain was to be sold under cost price. Already in 1563, the Eliza bethan Statute of Artificers tried to regulate labor conditions in all details, and it remained on the books until 1814. In order to as sure "just" wages to the working population, wage rates were fixed anew each year by the Justices of the Peace according "to the plenty or scarcity of the time."

The Justices in turn had to con sider the cost of living by refer ring to "the prices of all kind of victuals, fuel, raiment and ap parel, both linen and woolen, and also house rent." Wage fixing in sixteenth-century London was similar in many respects to wage fixing in London today. Regulation 01 Business If you believe that government regulations of commerce and in dustry are new and progressive, you should study the twelfth cen tury English industrial regula tions. At least since 1197, the English state had tried to regulate the technique of manufacture. For the cloth industry, for instance, the English government pre scribed the various dimensions of cloth, technique of production, dye ing, stretching, finishing, the tools of trade, the packaging and label ing, and soon. Similar regula tions, more or less complete, were imposed on all other industries. In France, Louis XIV, the Sun King, appointed intendants and inspectors who were charged with the regulation of industry. From the handling of raw materials to all subsequent stages of produc tion, these servants of the king controlled the production process.

The system of control obviously necessitated a variety of penalties. Frequently, "defective" goods were confiscated or cut to pieces, money fines were imposed, or the right to practice the craft or con duct the business was withdrawn. According to a decree of 1670, the 1966 PROGRESS OR REGRESS? 37 name of the offending merchant was to be posted, and the offender himself could be placed in a pillory for public derision. In spite of countless regulations and limitations that aimed to achieve uniform standards, cor ruption and personal favoritism blunted the controls. The govern ment could make individual ex ceptions to any prescription. Per sonal influence. was as important as it is today. Mercanli'ismPersists For instance, the medical pro fession today labors under the professional discipline. of several regulatory agencies. Under the ancien regime, training and ex amination of physicians also was a serious government matter. Un der the watchful eyes of the gov ernment, ancient quackery was to be perpetuated. In some cases, per sons with no training whatsoever were practicing the business of healing and offering salves and medicaments because they curried favor with the inspectors, or suc ceeded in winning over the lack eys, valets, mistresses, and adven turesses of the Court. Royal char ters, permits from princes, and acquired titles of physicians of the king or queen, of surgeons of the navy, and the like, sanctioned all kinds of quackery.

The methods of favoritism, cur rying favors, obtaining fran chises, licenses, or. government or ders have not changed materially since the seventeenth century. Diamonds and minks, personal connections and right contacts, government positions and offices, seem to retain their significance for professional success and finan cial reward. How modern and progressive are our prevailing doctrines and official policies? A historian who attempts to dissect the so~called modern version of political econ omy may be surprised to· discover its true age. Despite claims of originality, many of the modern are of ancient origin. Some stem from the armory of Marxism and Fabian socialism as they were de veloped during the nineteenth cen tury. Others date back to the age of Mercantilism that prevailed in Western Europe from the six teenth to the eighteenth century. And still others have survived from the darkness of the .Middle Ages. Much that passes for prog ress today is but a regression into the follies of the past. • PAY TV %HE RIGHT TO COMPETE AND TO SPEAK ELIZABETH GILLETT ON NOVEMBER 4, 1964, it became illegal in California, by a two-to one vote of the people, for anyone to sell and broadcast original tele vision programs to you on your home set.

How the California viewer lost his option to pay at home for special TV shows without com mercials and not available on other channels is an amazing story in twentieth-century America. It could only happen in this nation's current "mixed economy" of swell ing government controls over business, endorsed or unchallenged by the businessmen themselves. Today, in this "land of the free," enough aroused citizens can still "execute" a business com petitor, and freedom of speech, simply by majority vote-even as the Athenians "democratically" voted the death of Socrates some Elizabeth Gillett is a freelance writer on busi ness, economic, and political matters, whose by-lined articles have appeared in Barron's, The Journal of Commerce, Saturday Review, and elsewhere. This article is condensed from an original research piece she is doing for another publication. 38 2,300 years ago. Fortunately, also in this country, the victim of such perversions of constitutional gov ernment can seek redress by exer cising his constitutional right to use the governmental function in a proper way - as the avenue of his self-defense and the agent of legitimate retaliatory force. Some times, however, the court costs in time and. money - of such re dress can be crippling.

The Battle The "gadfly" of the Golden State, its victim, is Subscription Television, Inc. (STV), run since October 1963 by Sylvester (Pat) Weaver, veteran of commercial television, former president of Na tional Broadcasting Company. STY was' formed in January 1963 with patents on a cable system from Skiatron Electronics and capital from Lear Siegler, Inc. (electron ics manufacturer) and Reuben H. Donnelley Corp. (sales promotion organization). In the next year and a half, STY got total public 1966 PAY TELEVISION 39 financing of around $20 .million. Broadcasting over STY's three simultaneous channels to 2,300 subscribers in Los Angeles began July 17, 1964; to 1,810 subscribers in· San Francisco, on August 14, 1964. In both sites, STY gathered fewer starting subscriptions on the movie industry's home-ground than anticipated. Mr. Weaver soon lined up five major film producers to make movies for STY, among other original programing he sought for subscribers each eve ning during "prime time," 7 to 11 p.m., in compatible color.

Meanwhile, the pay-Tv antagon ists, led by the Southern Cali fornia Theatre Owners ,Associa tion - backed. by what is now the National Association of TheatI'e Owners, Inc., were lining up strat egy, funds, and allies, including their former foes, commercial tele vision and even community-an tenna companies. All saw .a com petitive threat in STY. They feared that if pay television caught on and gained enough sub scriber-volume, audiences would not come to movie theaters and commercial TV might lose some of its top attractions to :pay-Tv. The antagonists persuaded many California residents that pay-Tv meant the end of "free" (ad vertiser-supported) television. They gathered a "war., chest" of $1.5 million or more from trade, union, and individual contributors. SCTOA recruited, the ,necessary 468,259 signatures togetProposi tion 15 .on,.,the' California "ballot, which would outlaw pay-TV in the home.

Despite protests from local Better Business Bureaus and Chambers· of Commerce, /Southern California print space and air time --were flooded with .warnings against the predatory menace, of pay-TV, which, it was alleged, would end the World Series _on "free T'V"- despite NBC's contract (recently renewed through 1968). However, STY had suffered far heavier expenses than planned, thanks to its elabora.te program ingand -time-consuming _cable -in stallations, even before _this for midable -campaign erupted. It did manage topour $180,000 and much energy into the fight, plus a few thousands contributed by various individuals -and unions. But the antagonists were toOl strong, their propaganda apparently over whelming. When Proposition 15 was voted into law in November 1964, Mr. Weaver's operation had reportedly been losing between $3,000 and $10,000 a day since its start· of opera tions. STY suspended broadcasting as of November 10,1964. It recov ered its-6,000 receiver-billing boxes, refunded installation charges, and shelved "orders for 40 THE FREEMAN April 40,000 more [installations]," ac cording to Lewis M. Marcy, STY vice-president. It also retrenched by selling most of its usable equip ment and moving a reduced staff to New York City. Its stock's $12 offering price soon reached a low of $1.50. In late March 1965, STV filed a Chapter 11 bankruptcy plea.

But this was not the end of STV (whose stock in mid-Febru ary 1966 had recovered to over $4) or of the resilient Mr. Weaver, who began plans for a new business of "network program service" in 1965, while directing STY's court battles on the Coast. The Turning Point On· May 20, 1965, Judge Irving H. Perluss of the Superior Court of Sacramento County overruled the California Secretary of State's rejection of Mr. Weaver's charter for a new subscription television company, submitted on December 9, 1964. Judge Perluss found the Free Television Act, established by favorable initiative vote on Proposition 15, unconstitutional because it "abridges freedom of speech." About the pay-TV opponents, Judge Perluss observed, the" 'evil' with which they are concerned is speculative and illusory .... [namely] that subscription tele vision may destroy free television operation" (emphasis his) . He also noted that "the charges here made could have been made by the radio industry when television was made available for the home.

. . . Invention and progress may not and should not be so re stricted .... " The defendant, California's Sec retary of State, with amicus cu riae, the theater-owners, soon ap pealed this decision.! (On March 2, the State Supreme Court in a 6-1 decision agreed with Judge Perluss that the, November 1964 Free Tele vision Act is unconstitutional.) Also outstanding is a decision on STV's conspiracy suit against sev eral California exhibitors' groups and others for $117 million in dam ages, the verdict on which may also cause an appeal. (STV, in addition, is suing the State of California for $14 million in dam ages sustained as a result of the Proposition 15 initiative.) For good measure, the theater owners will have to continue lobbying on the FCC's pending decision on the petition of Zenith Corporation, through Teeo, Inc., to establish the first nationwide pay-TVsystem (by air, not cable), submitted just be fore Judge Perluss' decision.

Significance What is to be learned from 1 Paramount's International Telemeter Corp. and the American Civil Liberties Union were amici curiae for STY.

1966 PAY TELEVISION 41 these facts and events? Some en during and fundamental truths underlie them, of economic, polit ical, and moral nature. Besides, this infant industry carries signifi cant implications for its entrepre neurs, its competitors, and its potential customers. We must begin by stressing that the quality of fare offered by the various screen media via different technical and marketing methods is not at issue here. Rather, the p1l'operty right of every business man to offer his own wares in a free market is the crucial concept denied by the voters of California in the 1964 election. Instead, they legalized the false concept that existing vested interests have the property "right" to rule a free market - a contradiction. As STY's Marcy puts it, "This could be compared to Western Union saying there should be no telephones. " What were STY's property rights? Did the company overstep them? STY sought to sell pro grams cheaply that it had created and paid for, sent out over cables it had bought and laid (attached to phone wires· for which it paid rent), to be received on a sub scriber's own TV set by means of a small control box owned and manufactured by STY, which it rented cheaply to the subscriber after a moderate installation fee.

STY never forced anyone to subscribe, but tried to win cus tomers on the appeal of its wares: absolutely no commercials, the novelty of paid performances seen in the home by residents and their guests, original··. programs not to be seen on freevee, limited but convenient viewing times, and low prices in comparison with most al ternatives. STY stressed its sup plemental nature in relation to commercial TV. It had no cancella tions during its few operating months. It made no attempt to crush its competition - except to survive. Since STY's form of business was a variation of an existing mass communications medium, freedom of speech was also violated when the Free Television Act forced STY to stop operating. Thus, when any individual property rights can be abolished overnight by majority vote, as happened in California; then all related, sub sidiary individual rights become legally vulnerable to the mob. In dividual rights are safe only if property rights - which include the right to sell or trade one's own goods - are legally inalienable, protected by government. Other wise, blondes and brunettes could vote the exile or extinction of red heads, since one's life is also one's property.

What "crime," then, did STY 42 THE FREEMAN April commit that persuaded California voters to outlaw it? The .' highly publicized "threat" that pay-TV would deprive the low income viewing masses of "free" TV· entertainment by bidding away top shows and talent for the exclu-. sive pleasure of "those willing and able to pay for it," in the words of RobertW. Sarnoff on June 3, 1964 in Beverly Hills, California. While Mr. Sarnoff, then NBC chairman, now RCA president, also deplored "seeking government pro tection against a pay system that does not use .public frequencies," movie exhibitors ignored this qual ification and echoed his basic charge in spades. This righteous-sounding objec tion is typical of today's muddled economic thinking: "Anything that hurts my business is immoral and ought to be illegal." It means that those who can pay for special entertainment should not be per mitted to buy it on television.

Does Sam, who can afford to buy a car, deprive Jack, who cannot, of anything that is rightfully Jack's? No. Nor does Sam owe a car to Jack simply because Sam has more money. Almost twenty years ago, in an antitrust decision, exhibitors lost their contractually exclusive right to first runs of new films produced by the movie companies - before television of any kind. Had film prod ucers retained (or regained) their ownership of movie theaters, there. would be no question today as to who gets new movies first. But since new films can be sold to the highest bidder, and· commercial TV now has the biggest audience and pocketbook, it now may be just a· matter of time. for exhibitors. 2 Now, they want their government destroyed property right reinstated in a new form by crying wolf at pay-TV. Conclusion The craven, despicable behavior of commercial TV and movie ex hibitors toward their· new com petitor springs from a common default by most twentieth-century U.S. businessmen. They have not troubled to see that consistent, proper restrictions were kept on government relative to business.

Instead, some have sought gov ernment favors. Many have stood by and watched while government, under varied pressures, took on more powers and usurped property rights of other businessmen. A few even sought these ends. Now, American communications leaders, in particular, have lost their own freedom of business ac tion. Since the 1920's, when the government confiscated perma2 The networks have already started to help finance a few new movies slated for first runs on television.

1966 PAY TELEVISION 43 nently the property rights to air waves (in the "public interest"), urged by men who should have known better,3 the mass communi cations field has· become an ever thickening jungle of intrigue and bureaucratic "pull." One must have the government on one's side ~ and off one's back - to gain business success in broadcasting. The actions of exhibitors and commercial TV toward pay-TV are only understandable if we see their roles as fellow creators of a Frankenstein monster: expanding, manipulative governmental power. It has turned on them, and they do not know where it will strike next; they seek to win safety from the tyrant by feeding it victims other than themselves. Having sacrificed their own property rights - to the air waves and to integrated pro duction and distribution of their product - they do not shrink at sacrificing the .property rights . of anyone else, especially a. competi tor for part of their lethargic market.

The twentieth-century United States has gained tremendous wealth and technological achieve ments, thanks. primarily to the precedent-setting, arduous efforts of its politically free men of the nineteenth century .who began 3 For a full discussion of these mat ters see "The Property Status of the Air~aves," by Ayn Rand, in The Objec tivist Newsletter of April 1964. with their own property - often slight at first - and competed with other men like themselves in a market almost entirely free of governmental restrictions. If the California theater owners and commercial TV can keep, their competition outlawed, this will mean a regression to the-medieval guild system. There, all innova tors were imprisoned and old ways of doing things were forcefully enshrined for centuries, to every one's loss. Poverty, ignorance, dec adence, and serfdom were the result. (Do Californians want this ?) Under free-enterprise capitalism government must protect· the in dividual's right to buy and sell as best he can, not guarantee him a captive market. Today's malicious stampede to manipulate govern ment for one's own benefit at the direct expense of some other citi zen or group or business enter prise must be halted. So must the evil of allowing anyone's property rights, and the derived rights like freedom of speech, to be voted away by the majority or stripped away by court decision.

If individual property and busi ness initiative do not receive their just, legal. protection, then all Americans risk losing present and future benefits from the riches that only free, independent men ever have produced-or ever will.

M'AllK£T 'llIC£Of BUll1l0S AL BELLERUE SEVERAL YEARS AGO, my wife and I purchased a string of four bur ros for our family. We built a stable and corral out of wood and a.ssigned each of our daughters a duty-day to perform the required chores for the animals. The sale price of the burros was $200 and the material for the stable cost $100. For a number of months we had great fun and the children wiil ingly did their chores. They did not even object too much, at first, Mr. Bellerue operates a cactus-growing busi ness in the high desert area of Southern Cali fornia. He was President of the Desert Elec tric Cooperative in Twentynine Palms, the members of which recently elected to sell the business to the Southern California Edison Company to avail themselves of the lower rates offered by private enterprise. This article is reprinted by permission from the February 6 issue of The (Santa Ana) Re4ister, a division of Freedom Newspapers, Inc.

44 to the forced hikes in the hot desert sun to fetch Daddy and the truck to tow a balking burro home. We never ceased to marvel at how anyone of the burros, in the midst of a twenty-mile-per-hour gallop, could spontaneously come to a dead stop. Unfortunately, none of the riders in our family could ever achieve this feat at the same time as the burro did. We were able to achieve the dead stop all right, but always at least twenty feet beyond the burro. Needless to say, interest in burro-riding was waning; and it was a good thing, because our time and efforts were now being consumed hunting the critters. Nearly every morning we would 1966 MARKET PRICE OF BURROS 45 find they had eaten their way out of the corral. What an appetite they had for wood! We thought they might need more exercise and that a larger area to romp in might solve the problem; so we fenced in the entire fifteen acres with barbed wire. Our total in vestment was now well over $600, and the price of feed was increas ing every month.

Do you think those burros ap preciated what we did for them? No siree! They spent every day on the family patio and their nights were spent trying to break into the house. The day after they ate. the wild bird feed, wooden feeder box and all, we sold the entire lot to a local horse trader for $100. Peace and tranquillity has returned to our Rancho. Even the horse trader is happy because he sold them the next day for a profit. This brings me to the subject of market price and value. The value of those burros to me was something less than $100 at the time of the sale. To be truthful, I might have paid someone to take them. The value of the burros to the horse trader was more than $100 or that amount for which he could sell them and still make a profit. Value, therefore, is com pletely subjective. Market price, however, was that figure mutually agreed upon, wherein we both coud benefit from the transaction, based upon our own subjective values at opposite ends of the cushion of· profit.

One. may mistakenly think that I did not gain when I first pur chased the burros. It must be re membered that their value to me at that time was higher than when I later sold them. In other words, at the time I purchased the bur ros, I wanted them more than I wanted the money I voluntarily paid for them. Therefore, I gained from the original purchase as well as from the sale, when I couldn't get rid of the ornery critters fast enough. The market price of. bur ros, as well as of everything else, can only be determined by the buy er and the seller and their respec tive value judgments at the time of the transaction. ~ Mutual Gain SO LONG as the basic right of ownership is preserved, a contem plated trade is never a conflict; it is an attempted act of coopera tion under which both parties, not merely one, stand to benefit. F. A. HARPER, A Just Price and Emergency Price Fixing WILL THE RsslPRICE ADMINISTRATOR plss~s ~tand Up!

IRVINH E. HOWARD AMERICANS saw a display of na ked arbitrary power in the recent roll-back of aluminum, copper,. and later, steel prices in response to government threats or "persua sion." It brought a warning com ment in The Wall Street Journal (January 5, 1966): "The struc tural steel price increase an nounced in the past few days threatens to usher in a new.era of informal but intensive Presiden tial price control." Government intervention in the pricing process is not new in American history. In fact, it has a long pedigree in antitrust legislaThe Reverend Mr. Howard is assistant editor of Christian Economics and is working toward a doctoral degree in economics at New York University. 46 tion, as recounted by former Fed eral Trade Commissioner, Lowell Mason: As an administrator of two anti trust laws diametrically opposed to each other, it was not difficult for me to accuse everybody at a trade convention with being some kind of a lawbreaker. Either they were all charging everyone the same prices, indicating a violation of the Sher man Act, or they were not charging everyone the same price, a circum stance indicating a violation of the Robinson-Patman Act.

Yet the purpose of the Sherman Antitrust Act was to protect com petition and keep the market free. While the Act was being debated in the Senate in 1890, Senator 1966 WILL THE REAL PRICE ADMINISTRATOR PLEASE STAND Up! 47 Hoar declared: "The great thing that this bill does, 'except afford~ ing a remedy, is to extend ,the common-law principles, which pro tected fair competition' in trade in old, times in England, to' inter national and, interstate commerce in the United States." The legislators sincerely thought that, they'were enlarging freedom again, in 1914 when they passed the, Federal Trade ' Commission A.ct and, the "Clayton Act. The Federal Trade Commission be came an investigative body of which Lowell Mason was an ad ministrator. By forbidding 'dis crimination in price between dif.;, ferent purchasers of commodities, the Clayton Act introduced the contradiction to which Mr. Mason referred.

Cosf-of.Prod,udion Theory of Pric;n,g In 1936, still bent on keeping the market free, the legislators passed the Robinson-Patman Act which, among other things, for bi~s price discrimination in the form of •discounts, rebates, or ad vertising allowances greater than available to competitors. The drafters of this Act reasoned that p~;,ices are discriminatory if they are not matched by like differences in costs. This kind of thinking r~aches back to Adam, Smith, David Ricardo, and to the labor theory of value. Is economic value determined, by the cost of labor involved 'in manufacture? ',Econ omists exploded this tiotiona cen tury ago, and'the gist, of their' re buttal is found in a simple ex ample: "Pearls are', not valuable because men dive' for them, but men dive for them' because they are, valuable." The'price of 'a good - its economic value -is measured by the satisfaction' the economic good brings to the consumer.

For example, what of a theater that charges a lower price for a matinee than for the evening per formance?It is the same show. The costs of producing it are prac tically" the same. Is the theater guilty of price' discrimination by charging·' a lower price in the afternoon? If differences in cost are to be the criterion, the·y are. If the satisfaction of the consumer (demand) is the criterion, they are not. The Robinson-Patman Act foundered upon this misunder standing of the nature of eco nomic value·. Moreover, the history of anti trust legislation in America illus trates another principle empha sized by Dr. Ludwig von Mises namely, that one government in tervention inevitably leads to an other, and that to another, until all freedom of movement is lost in a maze of government regula tions.

48 THE FREEMAN April Serle and Means It was against such a back ground that Adolphe A. Berle and Gardner C. Means set forth their theory of "administered prices." Means' book, Pri6ing Power and the Public Interest. A Study Based on Steel,l contains the most com plete statement of the theory. By an "administered price" these economists mean a price set by administrative action, rather than one resulting from market forces, and held constant over a period of time. They contend that large corporations in oligop olistic markets (few sellers and many buyers) have sufficient con trol of the market to do this. At first, Dr. Means thought he had found the cause of the Great Depression. Large corporations, he argued, held their prices firm and varied their production, laying off men, creating unemployment, and thus worsening the depres sion. In 1939, Dr. Jules Backman published "Price Flexibility and Changes in Production"2 in which he said: "Not so!" He concluded that he could find no clear-cut re1 Means, Gardner C., Pricing Power and the Public Interest. A Study Based on Steel (New York: Harper and Brothers, 1962).

2 Backman, Jules, "Price Flexibility and Changes in Production," The Con ference Board Bulletin, National Indus trial Conference Board, New York, Feb ruary 20, 1939, pp. 45, 51. lationship between specific com modity prices and production changes. hi 1942, Professor Alfred C. Neal joined Dr. Jules Backman in rejecting Means' thesis. In his study, Industrial Conc'entration and Price Flexibility, he com mented: . . . one must be excused for won dering why so much ink has been spilled in· debating these issues when there has been so little theoretical presumption in favor of the conclu sions under dispute. There is, per haps, much truth in Du Brul's re mark that if Mr. Means' thesis had not been useful as a tool of politics, it would have died an early death. 3 Political value it has had! The Berle-Means theory resulted in the Kefauver Committee making a three-year study of steel, automo bile, and drug prices beginning in 1957.

Out of the hearings of this Committee, Dr. Means drew much material for his book, Pricing Power and the Public Interest. In this book, published in 1962, Dr. Means reversed his earlier theory and argued that administered prices cause an inflation. In fact, he coined the phrase, "admin istered inflation," to. describe the inflation in 1955-1958. Professor 3 Neal, Alfred C., Industrial Concen tration and Price Inflexibility, American Council on Public Affairs, 1942, p. 37.

1966 WILL THE REAL PRICE ADMINISTRATOR PLEASE STAND Up! 49 Gottfried Haberler has thoroughly discredited Dr. Means' "adminis tered inflation" in his book, In flation - Its Cau,ses and Cures, 4· but the mere fact that "adminis tered prices" were supposed to have caused a deflation, and then also to have caused an inflation, should have been enough to raise a suspicion regarding the inherent consistence of Means' thesis. Price and Wage Guideposts However, the theory had polit ical value, and politicians were soon to make the most of it. In 1962, the EC'onomic Report to the President suggested wage and price guideposts as a ceiling for increases in wages and prices. In adopting this guidepost. concept, the Council of Economic Advisers were tacitly admitting that they had accepted the theory that prices and wages are administered and are not the result of market forces. Consequently, the conclu sion was soon reached that, since the prices of commodities manu factured by large corporations are determined by management rather than by the market, the govern ment should control the pricing policy. Wages have remained strangely immune to the applica tion of the guidepost standard.

-4I-I'aberler, Gottfried, Inflation. Its Causes and Cures (Washington, D. C.: American Enterprise Association, 1960), p. 40-45. The recent application of the guidepost to aluminum, copper, and steel prices has ignored the fact that the philosophy behind the guidepost concept, the busi ness-administered price theory, has never been proved. In fact, evidence has been accumulating that the relative inflexibility of the prices under discussion has been the result of inflexible wage rates which have been adminis tered by national labor unions, and also stems from other inflexi bilities introduced into the econ omy by government fixed rates, such as freight rates, public utility rates, postal rates, interest rates - to say nothing of agricultural support prices and a host of other government controlled prices. These are "administered prices" indeed! The so-called "administered prices" of pri vate ind ustry are very sensitive to foreign competi tion. Both steel and automobile prices, favorite whipping boys of the Kefauver Committee, have been driven down by foreign com petition since this debate started.

Moreover, metals all face competi tion from substitute materials. While prices in large corporations cannot be determined by an auc tion like securities on the stock exchange, nevertheless, manage ment cannot disregard all the dif ferent kinds of competition its 50 THE FREEMAN April product must face when setting its asking prices. There is much more to competi tion than Berle and Means and their followers are ,villing to ad mit. Not only is there competition between firms within an industry, and companies within a family, such as the General Motors fam ily, but there is competition be tween very different industries. There is also competition from all kinds of substitutes. There is nonprice competition in quality and services. In short, the real world is much more competitive than it is painted by some econ omists. The Magical "3.2" Not only is the "administered price" theory open to question, but the guidepost itself is of doubtful value as a measure of prices. The guidepost is the ratio between total output and total man-hour input. It was devised by economists interested in national economic growth as a rough measure of productivity. Politi cians have applied it to prices and wages.

In 1965, the government arrived at 3.2 per cent as its guidepost. Some statisticians thbught it should be 3.4 per cent and others chose another percentage, but is any percentage trustworthy as a measure of prices and wages? Total output and total man-hour input are only rough estimates and are not precise enough to de termine the specific .price of any thing. Moreover, at best, the guidepost ratio is a five-year mov ing average! How many individ uals or companies are average? The price and wage increases of some should be above and others below that five year average! Nevertheless, the guidepost ra tio was the yardstick the govern ment used in its recent assault upon aluminum, copper, and steel. A price resulting from such dic tation, is an "administered price." The guideposts are supposed to be "voluntary" standards, but as Mr. George Champion, chairman of the Chase Manhattan Bank, has observed, "Always in the back ground is the threat that failure to comply voluntarily with the guidelines would bring measures applied, for the most part, without debate in Congress or legal appeal in the courts."

The Limits of Tolerance The most disappointing aspect of this new development between government and business has been the sheeplike acceptance of gov ernment domination by the busi ness community. "This is no time to be timid of tone or fearful of economic re prisal," Mr. Champion warned. "If 1966 WILL THE REAL PRICE ADMINISTRATOR PLEASE STAND Up! 51 we have men afraid of standing up to the government, then we have the strongest indictment of 'big government' that could ever be imagined. When that happens, economic freedom in our country will be dead." The Berle-Means thesis that large corporations fix inflexible prices has been exploded by com petent economists. Nevertheless, bureaucrats have used the theory to justify government adminis tered prices. Now we see where the "administered price" theorists were going! Now the real price administrator has stood up and has been recognized! + WHAT the investigator saw re minded him of a list of cases on a court calendar: adultery, aliena tion of affections, bigamy, rape, incest, assault upon neighbors and within families.

These crimes were being com mitted, not in the slum district of a great city, but along a hedge of lilacs on the grounds of the Wil helmineriberg Biological Station in Vienna. And the perpetrators 52 THE FREEMAN April of these misbehaviors were male and female specimens of a group of cattle egrets, a bird about half the size of the stork, imported from Tunisia by the famed animal psychologist, Professor Otto Koenig. His hope in this experi ment was to discover what might be expected of human beings con demned to a sort of super-welfare state, so fully mechanized that men need spend hardly any energy to subsist, protected by the state against sickness and old age, freed from work and care for a life of leisure. Similarity to Human Community From earlier observations un der natural conditions along the grassy shores of Neusiedler Lake near Vienna, Koenig had found that certain types of herons which breed and nest in colonies develop compact social structures similar to the human family, tribe, and community. This is why he chose the colony of cattle egrets for his model welfare state, observing them over a period of six years in a large enclosure outside the win dow of his study, providing them with every necessity for life and comfort: food, water, bathing fa cilities, and nesting materials.

At the 1965 annual meeting of the German Ornithological Society in Constance, Professor Koenig first reported the results of his prolonged investigation of cattle egret response to the guaranteed life, stressing two points: 1. The social order of the colony completely collapsed. 2. The sexual activity of the feathered creatures became ab normal. Within the enclosure, food al ways was at hand in abundance, so there was no need to go off in search of it. All members of the colony remained continually in sight of one another, literally pressed together. More frequently than under normal conditions there was strife, often bitter fighting. And as the fighting in creased, so did the sexual activity. While a male was feeding, his mate might be raped by a neighbor, leav ing her young in the nest to be mo lested by others. During the breed ing season, the hackles of the females were torn and bloodied by the claws of the sex-crazed males.

Koenig also noted a sexual jeal ousy not found among wild egrets or herons. In their natural state, other herons of a colony are un concerned about the home life of a couple; but in the Viennese cage, the mating act often evoked inter ference from other males. Three or four couples of the ex perimental egrets frequently banded together. Nest-building among egrets usually is initiated by the male, who selects the site 1966 OF BIRDS AND MEN 53 and then lures his companion to it. But in Koenig's enclosure, two or three females often would an swer the call to the nest; nor was it uncommon to find a sister or daughter of the male in his harem. Such polygamy became critical during the brooding period, with other females sitting atop the chief brooder. Now and again, Koenig saw egrets piled three deep on the eggs. Such congestion dis turbed the normal p.attern of parents taking turns sitting, and many of the eggs were either brok en or kicked out of the nest. Thus, the negligence induced by welfar ism resulted in declining numbers of healthy young egrets in the colony.

The rearing of the young birds also became a problem. In· wild colonies, as soon as the young herons are able to leave the nest they gather among the reeds for games of "catch" by which they learn to capture insects. So strong is their urge for self-reliance that the fledglings often fail to return home and parents must seek them out to feed them. In the Viennese experimental cage, however, the young egrets were simply beggars, incessantly pestering their ever-present elders for food. And apparently in search of quiet, the parents obliged, stuf fing the young ones not only to excess, but far beyond the time when they should have been able to care for themselves. The younger birds would be found still begging, even after they had off spring of their own - the grand parents caring for them all. Because of similarities between these egrets and other bipeds, Professor Koenig believes that what happened to the birds in his yard under super-welfare-state conditions might similarly affect human beings exposed to effortless material abundance without need or incentive for self-responsi bility. • Against Nature "IN MOUNT RAINIER NATIONAL PARK, Washington, a ranger cautions visitors against feeding the animals. The ranger explains that deer grow accustomed to visitors' handouts and lose ability to fend for themselves. Bears, he says, come to believe that free food Chipmunks and squirrels congregate where handouts are supplied, is their due - and becomegrouchy and violent if they don't get it.

and thus upset the balance of nature." From an editorial in The Richmond N eWB Leader A REVIEWER1S NOTEBOOK JIMMY HOFFA is the current devil among labor leaders. But a close reading of Hoffa and the Tea,m sters: a Study of Union Power, by Ralph and Estelle James (Van Nostrand, $6.95), leaves you won dering whether he is any worse or better than other professional brokers of the workingman's "in teTests." The Jameses make you feel that Hoffa differs from others in the guild mainly by his con tempt for public relations. He has been ruthless in his drive for power, and he uses his pension fund to build influence, and he is cynical about the law (which he regards as something to be ma nipulated). But if you accept his premise that society is a battle ground of warring interests, ev erything that he does falls logi cally into place. His end, which is to get good contracts for his truckers, is the excuse for the means, which are elaborated in terms of Chinese-style "fight, 54 JOHN CHAMBERLAIN OF THE ROAD fight, talk, talk" military cam paigning.

The genesis of this book about Hoffa is curious, and explains a good deal about Jimmy's "take it or leave it" character. When Dr. J ames was teaching industrial re lations at the Massachusetts Insti tute of Technology in 1961, he in duced Hoffa to give a talk to his students. Hoffa accepted OIl. condi tion that he might quit after get ting two "unintelligent" questions in a row. He spoke for three hours, complaining that govern ment investigators, reporters, and academicians do not depict how the world really operates. Finally, after defending certain notorious figures involved in corruption cases, he challenged Dr. James to travel with him for six months, disguised as his assistant, to learn the "truth" about unionism. Dr. James took him up on the offer, insisting, however, that he pay his own travel bills. As he and 1966 KING OF THE ROAD 55 his wife dug deeper into the Teamsters' activities, Dr. James constantly expected Hoffa to call the deal off. But, possibly because he felt he had less to fear from two objective academicians than he had to fear from investigator Bobby Kennedy (whom he calls the "little monster"), Hoffa let the Jameses carry their project through. Hoffa registered some personal objections to the Jameses' characterization of him as "an ex tremelycompetent, complex, and ambiguous individual, subject to rapidly changing moods and sub stantial self-deception." But, other than to say "you make me look like a bum," he did nothing to get them to change a word in the man uscri pt.

Exploiting the Situation As a matter of fact, it is not Hoffa who "looks like a bum" in this book, it is the American peo ple. The truckers, whether they are local carters or long-distance delivery men, travel on roads that are the property of federal, state, and municipal governments, and "society," as the owner of the highways, could presumably make its own rules for road use. But the "owner," in this case,has stood aside. The "rules of the road" don't insist on an open road for anybody. In his campaign to control the use of the roads insofar as com mercial haulage is .concerned, Hoffa has been a great military strategist. Though he cut his eye teeth in the labor wars of Detroit, Hoffa really went to school under Farrell Dobbs and the three Dunne brothers of Minneapolis. Dobbs and the Dunne brothers were Trotskyite Marxists who thought of assailing the capitalist system at its crucial bottlenecks.

The road system of America, to Dobbs and the Dunnes, was of jugular importance. Anyone who could impose his will on the high ways could obviously dictate his terms to society as a whole. But where Dobbs and the Dunne brothers were ideologues, Jimmy Hoffa is a pragmatist. His idea is not to overthrow capitalism, but to milk it for all that it will yield for the teamsters. Instead of be ing a revolutionary, he is a twen tiethcentury robber baron, reach ing for control of the "narrows" in the interests of his own band of followers. Coming and Going Crucial to Hoffa's strategy is his notion of "leapfrogging." By or ganizing over-the-road truckers, he can dictate what goes into the towns to be picked up by local carters. Or, by organizing at the local end, he can impose his terms on long-distance carriers who need 56 THE FREEMAN April access to the town. There is "lev erage" in all this, for the right to "interline" - i.e., to transfer cargo from one carrier to another - is essential to most business survival.

All you have to do is to cut the cartage connections at a single point to get the whole circuit un der your control. Having picked up the "leapfrog ging" concept from Farrell Dobbs's first operations in the Middle West, Hoffa has applied it on a na tional scale. Nobody can stand out against it. If the businessmen of Omaha, say, resist dealing with Hoffa, they may wake up to dis cover that shipments into Ne braska have been cut off at Denver and Cheyenne, and that nothing is coming up from a strike-bound Kansas City. Open-end Grievances Since local unions are dependent on handling "interlined" goods from the outside world, Hoffa has the key to total union discipline in his hand. He has used the key to "level up" wages in depressed trucking areas, as in Philadelphia and Los Angeles, and to restrain union exuberance in the high wage San Francisco Bay region to the end of making his deals in Oregon and Idaho look better.

Much of Hoffa's power comes from his detailed economic knowledge of what employers will be able to bear. ("It's a lousy contract," he said in one instance, "but if we take any more he'll go broke.") This general concern with profita bility has led to charges of "sell ing out to management." But Hoffa lets his critics talk. The laws prohibiting secondary boycotts have not restrained Hoffa's application of "leapfrog ging" techniques. By insisting on his own patented "open-end griev ance procedures," Hoffa can al ways threaten a strike wherever one is necessary in order to affect a decision elsewhere. The "connec tion" between a strike in Okla homa City over the application of freight interchange rules and a campaign to adj ust wages some where else may not be admitted, but Hoffa works his "coincidences" with supreme contempt for gov ernment lawyers. If there is al ways an "open-end grievance" to take up, there can be nothing but a series of "legal primary dis putes."

The Jameses make it plain that Hoffa's organizing and bargaining strength derive from a canny man's ability to use the existing social codes to his own advantage. In doing this he does not differ from a Walter Reuther, or a George Meany, or a Mike Quill. The "law" may be circumvented, but if courts won't issue injunc tions and governors won't call out 1966 KING OF THE ROAD 57 national guards, then there is little use in putting new laws on the books. Changing the Climate But what are we to do about monopolistic union power? What if Jimmy Hoffa were to tie up the country? Hoffa himself derides the possibility of a "national strike." He has studied the tran sit systems of the United States, and has it figured out that he could substantially halt trucking all across the country by striking "six strategic terminal cities." The J ameses say that in case of a "six city" terminal strike, the main body of Teamsters, thrown out of work as "a consequence of inter rupted interlining, would collect unemployment compensation from the government instead of drain ing strike benefits from the IBT treasury." Thus the citizens of a nation would find legality used against them. They would be feed ing the union that was throttling their production.

The J ameses say that "Hoffa is unlikely to test this plan." But this is just another way of saying that Hoffa will get what he wants anyway. Even if he goes to jail it would hardly make any difference, for Hoffa, is the product of a way of thinking about unions, and someone would quickly move up to take his place. ~ ~ PUBLIC REGULATION OF THE RELIGIOUS USE OF LAND by James E. Curry (Charlottesville, Virginia: The Mitchie Company, 1964) , 429 pp. $12.50. ~ CHURCH WEALTH AND BUSI NESS INCOME by Martin A. Larson (New York: Philosophical Library, Inc., 1965), 120 pp. $3.95. Reviewed by Edmund A. Opitz NEW CHURCH construction is go ing on all over this land, at the rate of about a billion dollar's worth a year. Everyone of these new churches needs a suitable site for its buildings, parking lot, and grounds, so church committees go into the real estate market and dicker with potential sellers of land for the location of their choice. This is as it should be. But then they bump into the local zon ing board, an agency operating in just about every major commun ity in the nation except Houston.

The church building committee may have completed arrangements with the architect, the bankers, the builder, the real estate men, and then be told by the zoning board backed by the authority of the police power: "You can't build your church here!" At which point the famed partition between church and state erodes a bit. This is where Mr. Curry's unique book comes in. The author 58 THE FREEMAN April is a veteran of more than thirty years of law practice, specializing in the kind of cases treated in this book. Actually, this is several volumes in one, each aimed at a different category of reader. Seri ous students of the church-state relationships are familiar with po litical impairments of religious liberty, but lack knowledge of the kind of impairments that goon at the level of mere zoning. This book's careful legal analysis of one hundred court cases involving churches with location problems makes it an indispensable text for the lawyer, and a church group about to build might save itself a lot of grief by consulting this book.

Zoned for Worship Those concerned with the prob lem of zoning as such will find much meat here. And those who raise such philosophical questions as What is religion? and What is the Church? will note well the im propriety of dumping such ques tions into the lap of the courts. No branch of government, however well disposed, is equipped in the nature of the case, to tackle ques tions of this order. Small wonder, then, that the results are so gen erally unsatisfactory! We have reached the critical point in at least one state where the Court of Appeals has declared, in effect, that a community may actually ban churches by refusing a con gregation the right to buy land and build! Simple religious or an tireligious prej udice is always with us, and we can take it in stride - unless it joins forces with the police power. But this is some thing different. Zealots willing to invoke nonreligious means to further their one true faith were once the problem; but now the threat arises from the mindless, noiseless, impersonal processes of zoning laws, or appears in the wake of "urban renewal."

Raise our sights and it becomes evident that the denial of religious liberty by means of a zoning or dinance is but one instance of a growing disposition to turn all sorts of social problems over to government. Government is unique ly an agency for redressing injury. Confine it to this difficult job and the peaceful relationships of men in society are no longer its con cern; it merely acts to deter and punish acts of aggression, and men are free to administer their private affiairs. The public sector is small and well defined. In a so ciety so organized, power is dis persed and limited; there is no one big lever by which society is moved, and so the opportunities are minimized for evil men to seize control and do a lot of harm. Such an attitude toward govern ment - characteristic of the old 1966 OTHER BOOKS 59 Whig-Classical Liberal tradition - cannot but appear mean and niggardly among a people afflicted with ideas of grandeur.

The Man in Charge Modern Ihubris dictates that the politicar problem be conceived as the task of concentrating power in society into one gigantic lever capable of getting the whole show into operation, then putting virtu ous men in charge in order to achieve great good. Once such a political scheme gets going the people will be permitted one last decision; they will be allowed to decide who will, from now on, be given power to make their deci sions for them! This is Tocque ville's "democratic despotism," and it is a measure of our decline that we insist on calling it "freedom." The tumult and the shouting about Church and State goes on at the level of Bible reading and prayers in the classroom. Genera tion after generation of Ameri cans violated the First Amend ment, we are to believe, but virtu ally no one noticed it - until now. Then, all of a sudden, and with the help of some eminent jurists, we were made aware that the wall was not in place; and we joined forces to prop it back by banning religious exercises in the tax-sup ported schools.

But while our attention is engaged at this largely theoretical level we have been backed into a much more serious problem. Few, if any, local zoning boards are an imated by antireligious feelings; they simply accept the commonly held belief that most folks don't know how to use their property or plan their lives, and therefore somebody else should tell them. As the cartoon character, Peanuts, says: "The world is full of people who long to act in an advisory ca pacity." Better yet, in a manager ial capaci ty. The First Amendment to the Constitution places a restriction on Congress. Congress, it says, shall take no steps leading to an official religion. No national church may be established here, nor is any man to be' impeded in the exercise of his religious prefer ences. Heresy is not a crime. Jeff erson's phrase, "wall of separa tion," came later, and although it is repeated on every side today, it does not accurately reflect Amer ican mores or practices, nor the mind of the First Congress. These men, after passing the First Amendment, actually voted money to send four missionaries to the Indians;" for they believed that sound morals are necessary for the civil order, and that religious instruction is the indispensable basis for morality. It was in this context that religious, educational, 60 THE FREEMAN April and charitable institutions were granted certain exemptions from taxation.

Taxation then was a means of financing the operations of gov ernment; now, taxation is .largely an instrument for accomplishing social change. Political exactions employed for this purpose are nec essarily unfair, and in order for the governing class to secure the compliance of the educational and religious communities it must in troduce some "sweeteners" in the form of exemptions. At the same time, this iniquitous tax structure will provoke other sectors of so ciety to invent all sorts of ingen ious schemes for living with an impossible situation. If the present system of taxation were applied rigorously across the boards to all men and organizations alike it would not last a week, and if any one had thought it would be so applied it never would have been foisted upon us in the first place! The Growing Scope and Problem of Tax Exemption Mr. Larson, author of the sec ond book under review, does not see it this way at all, but rather regards the various loopholes in the tax laws as beating govern ment out of what rightfully be longs to it. Nevertheless, he has brought together a host of fasci nating and disquieting statistics, nearly all from unimpeachable sources.

Mr. Larson focuses on four cities, Buffalo, Baltimore, Washington and Denver, which collectively typ ify America, and then he argues convincingly that he has valid grounds for extrapolating to ar rive at a reliable estimate for the country at large. The figures are well nigh incredible, even as per tains to the market value of the plant owned by religious, educa tional, and charitable institutions used for'those particular purposes; but these enterprises also own and operate various businesses, and they have enormous holdings of stocks and bonds. These chunks of real estate and other property, and the income deriving from them, are largely tax exempt, and percentagewise they increase year by year. During the past genera tion in Buffalo, for instance, the ratio of exempt to taxable real estate rose from 19 per cent to 44 per cent; and more than half of this exempt property is held by churches and other religious institutions. The picture in every part of the country is Inuch the same, but there's no way of straightening out this mess short of confining government within its proper boundaries so that freedom might perform its remedial work in the economic, educational, and religious sectors of society. ~ 1966 OTHERBOOKS 61 ~ SCIENTIFIC MAN VERSUS POWER POLITICS by Hans J.

Morgenthau (Chicago: Phoenix Books, 1965), 245 pp. $1.95 (paper). Reviewed by Robert M. Thornton THE MEN who had most to do with launching this republic had no illusions about human nature. They viewed man as a flawed crea ture, and hence not to be trusted with power over his fellows; and they sensed the tragic dimension of human life. As John Jay put it in one of his Federalist papers: "I do not expect that mankind will, before the millennium, be what they ought to be; and there fore, in my opinion, every political theory which does not regard them as being what bhey a,re, will prove abortive." This realistic view of human nature, dominant in our tradition since the days of the Greeks, was already giving way to another out look even as Jay wrote. The opti mistic rationalism of the Enlight enment equated evil with igno rance. It held out the promise that a perfect human society was at tainable just as soon as the boun daries of knowledge were pushed back to the edge of things - in a generation or two at most.

Professor Morgenthau criticizes this philosophy in no uncertain terms: "Rationalism misunderstands the nature of the world, and the nature of reason itself. It sees the world dominated by reason throughout, an independent and self-sufficient force which can not fail, sooner or later, to elimi nate the still remaining vestiges of unreason. Evil, then, is a mere negative quality, the absence of something whose presence would be good. It can be conceived only as lack of reason and is incapable of positive determination based upon its own intrinsic qualities. "This philosophical and ethical monism, which is so characteristic of the rationalistic mode of thought, is a deviation from the tradition of Western thought. In this tradition God is challenged by the devil, who is conceived as a permanent and necessary ele ment in the order of the world. The sinfulness of man is likewise conceived, from Duns Scotus and Thomas Aquinas to Luther, not as an accidental disturbance of the order of the world sure to be over come by a gradual development toward the good, but as an in escapable necessity which gives meaning to the existence of man and which only an act of grace or salvation in another world is able to overcome."

Lacking this sober view of hu man nature, people think in ex uberant terms of Man taking charge of his destiny - which 62 THE FREEMAN April means in practice that some men will ride herd on their fellows. Pol itics will be regarded as a science of control, rather than an art. The social engineer, coming to the fore, will try to impose a rational order on society, and any problems which arise will be submitted to "fact finders," "neutral parties," or other "experts." People must never be allowed to work out and re solve their problems in freedom and by their own devices. Shep herded by those who know best, they will be protected from the consequences of their own folly. Some people are wiser than the rest of us, and many people are foolish indeed; but none are so foolish as those who think them selves wise enough to assume con trol of human affairs. ~ ~BURKE AND THE NATURE OF POLITICS by Carl B. Cone (Lexington: University of Ken tucky Press, Vol. 1,1957,415 pp.; Vol. II, 1964, 527 pp.), $15.00 the set.

Reviewed by Edmund A. Opitz EDMUND BURKE may have suffered from misinterpretation during his own lifetime as well as from com mentators since his death, but no one can say he has been neglected. Controversy swirled about him while he was alive, and has not ceased. The note on which he ended his public ca,reer, his fierce an tagonism to the revolution in France, still sounds above the tumult of modern politics. For there is a sense in which the French Revolution is the fountain head of the various social move ments which today claim men's allegiance and divide their loyal ties. The collectivist ideology appears in several guises today, but its parentage may be traced to the ideas -unleashed in eighteenth cen tury France. Likewise, there are several varieties of anticollectiv ism, but each owes something to Burke's response to the challenge to European civilization posed by the Philosophes. Stated differently, it may be said that there are, broadly speaking, two conflicting philosophies of man and social or ganization; today's neoliberalism, with its offshoots and extensions, and conservatism-libertarianism similarly developed. The former stems directly from the French Revolution; the latter's point of departure is Burke's mighty an swer to that revolution.

Differences Ignored Neoliberalism overlooks the "ac cidents" that divide human beings into male and female, English men and Frenchmen, Moslem and Hindu, and the like; it reduces every unique person to a mere unit 1966 OTHER BOOKS 63 of humanity. Its advanced think ers, struck by the evils which plague mankind and regarding society as a mere artifact, draw up a blueprint for a form of social organization in which every hu man unit has its place and awaits only the political command which will cause it to function properly in lock step with every other unit. There will, of course, be recalci trants who obstruct the march to ward utopia, so the Plan includes an active enforcement agency to take care of such. people! But one day, when all the lingering effects of ancient class antagonisms are beaten and bred out of the citi zenry, Man will have his utopia! The opponent of this nightmare, whatever he chooses to call the banner he serves under, takes ac count of the variety and complex ity of human beings, regarding them as imperfect and imperfect ible in this life. Of course, there are evils in human affairs and, of course, we should work to dimin ish tl~m by restoring justice. But the human situation at best will be only tolerable, never perfect.

Samuel Johnson says in the Preface to his English Dictionary that it "was written with little assistance of the learned, and without any patronage of the great; not in the soft obscurities of retirement, or under the shelter of academic bowers, but amidst inconvenience and distraction, in sickness and in sorrow." His distinguished contemporary and friend, Edmund Burke, made his noble contributions to politi cal philosophy under similar con ditions. Burke was no cloistered thinker, but quite the opposite; his philosophy was hammered out to meet the exigencies of an active and abrasive political career. It dealt with real people and not with bloodless abstractions; with Englishmen pursuing their ances tral ways amid institutions half as old as time, not with Man living up on cloud nine - the target of the Philosophes across the chan nel. Something for Everyone Burke in his natural political habitat is the subject matter of Professor Cone's two massive vol umes. They are obviously the fruits of prodigious research, and are addressed as much to the pro fessional historian of the period as to the interested amateur. They are detailed but readable, and the author respects Mr. Burke's pri vacy ; only his public career is dealt with, and we learn as much as anyone needs to know about that career.

Learning about a public figure is all we want to know of most of them, but this is not true of Edmund Burke, a master of rhet64 THE FREEMAN April oric as well as one of the great political philosophers. Whether he is read as literature, or philoso phy, or for the role he played in the history of his nation and ours, matters not at all so long as he is read. Go to Dr. Cone for the back ground, then pick up one or more of the several anthologies of Burke's writings now in print. Start with the fat Anchor paper back of selections edited by Peter Stanlis, well remembered for his book, Burke and the Natural Law. Or, if you wish to add a handsome volume from Knopf to your li brary shelf, look up the large selec tion of Burke's writings skillfully edited by Hoffman and Levack. These will do for a starter. + Pioneers CIVILIZATION PROGRESSES at about the rate at which mankind abandons superstition in favor of thinking.

It should follow that the greatest benefactors of mankind are those who teach others to abandon the ,blind fears of superstition and to seek natural causes of natural phenomena. When men realize that they are dealing with natural and not supernatural causes, they bestir themselves to improve their environment. As superstition is pushed back, human thinking and achieve ment get their chance. So long as the ocean was thought to be a fringe of black horrors around the land, men clung to the shore and let superstition have its way. When Columbus exploded the superstition and discovered that the ocean was just more water extending to more land, the men of the Old World became explorers, built ships, and settled a new hemisphere. WI L L I AM FE AT HER, from the William Feather Magazine, J anual'y 1~66 Also available in standard clothbound volume, $2.50 in a new, attractive, low-priced paperback: $ .95 2.00 6.00 45.00 Single copy 3 copies 10 copies 100 copies 9 .' ~~~ ~rst edition of MAINSPRING (279 pp., in dexed) was published in 1947. Since Mr. Weaver's passing, this great book has been the property of FEE. Previous to this new paperback edition, 350, 000 copies have been pri nted.

One large company's circulating library for em ployees required 150 volumes to meet the demand. Based on FEE's experience, MAl NSPR IN G tops all books as a starter for any aspiring student of liberty. Easy reading - indeed, exciting - the be ginner becomes so interested in freedom that he can hardly help pursuing the subject further. FEE's recommendation: Keep a good supply of the paperbacks on hand to present to any individual who shows a spark of interest in freedom. THE FOUNDATION FOR ECONOMIC EDUCATION, INC. IRVINGTON-ON-HUDSON, NEW YORK, 10533 THEY NEVER GET ALL THEY WANT • The reactions of people in some of the foreign nations who have been enriched by our foreign-aid gifts are like the house-party guest who was having a good time. "Oh, sure," he replied. "Fine food. I have a swell room, the host and hostess are marvelous, weather is great, and the enter tainment is all anyone could ask for. Actually, there's only one thing."

HOne thing you don't like?" asked his fellow guest. HAnd what might that be?" HProbably I shouldn't even mention it, but to be per fectly frank with you - they're not giving me any spending money." From THE CURTIS caURIER (February 1966) edited by Thomas Dreier William Henry Chamberlin 15 Ludwig von Mises 23 Paul L. Poirot 30 Clarence B. Carson 33 Kenneth B. Sollitt 48 Herbert S. Bird 54 Daniel K. Stewart 57 John Chamberlain 61 MAY 1966 Erosion of the Mind Freedom Through Education . "The State Swelled and the People Shrank" . Observations on the Russian Reform Movement . Insurance Problems . The Flight from Reality: 20. Meliorist Economics. Two Philosophies of Freedom "Am I My Brother's Keeper?" The Principle of Political Polarity . Books: "Education and the State" Harold O. J. Brown Robert K. Newell 3 11 ________ STATE _ COAST FEDERALSAVINGS& LOAN ASSOCIATION Department FM, 9th & Hill Sts., Los Angeles, California 90014 o Please send me a FREE copy of NAME(S) ~ _ President Crail's "Adam Smith vs. (please print) Karl Marx" speech.

D I enclose my check (or money order) for $ _ Please open a Coast Federal Savings account STREET D Individual D Joint in the name(s) of CITY h.l?JA_ ~ The new morality of relativism and conformity tends to destroy man's freedom and capacity for intelligent choice and action p. 3 Y"And, until the methods and too'is of education are retrieved from collec tive control, the authoritarian trend may be expected to continue. p. 11 "" William Henry Chamberlin finds the philosophy of the negative income tax contradicting the view that a man grows by overcoming obstacles. ............ p. 15 "" Doctor Mises questions the sincer ity of the current Russian moves to ward capitalism, on grounds that prices and profits are effective guides only if derived from strictly voluntary exchanges. .. p. 23 "" If one believes in compulsory Social Security, he cannot consistently be lieve in life insurance-and vice versa.

............ p.30 It'" Misconceptions about the nature of monopoly, and its causes and cures, account for many of the modern re forms attempted in economic affairs, believes Professor Carson. ......p. 33 II" Whether man is to be free for de cision-making, rather than from deci sion-making, is the crucial issue ex amined here by Dr. Sollitt ....... p. 48 It'" And, in much the same vein, the Reverend Mr. Bird re-examines the old question: "Am I My Brother's Keeper?" p. 54 It'" "The Principle of Political Polarity" works best when all the choices are known by the voters. . p. 57 Y' And this issue closes, as it began, on the matter of Education and the State, with John Chamberlain's review of the recent book by E. G. West. ............ p. 61 Anyone wishing to communicate with authors may send first-clas's mail irl care of THE FREEMAN for forwarding.

MAY 1966 LEONARD E. READ PAUL L. POIROT Vol. 16, No.5 Presldent, Foundation for Economic Education Managing Editor THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit educational champion of private property, the free market, the profit and loss system, and limited government, founded in 1946, with offices at Irvington-on-Hudson, New York. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, in cluding THE FREEMAN, are met through volun tary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are invited in any amount - $5.00 to $10,000 - as the means of maintaining and extending the Foundation's work. Copyright, 1966, The Foundation for Economic Education, Inc. Printed in in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00j 25 or more, 20 cents each.

Permission is hereby granted to anyone to reprint any article in whole or in part, providing customary credit is given, except liThe Flight from Reality." Any current article wfll be supplied in reprint form if there are enough inquiries to justify the cost of the printing.

I I HAROLD O. J. BROWN "THE QUESTION," writes Oxford philosopher, A. J. Ayer, "how a man ought to live is one to which there is no authoritative answer. It has to be decided by each man for himself." To this, Britain's sharp polemicist, Sir Arnold Lunn, makes the comment, "And if Himmler decides that his way of life involves massacring millions of Jews in gas chambers, there is no criterion by which we pro nounce this way of life to be in ferior to that of St. Francis."I We are all familiar with the way in which the monolithic So viet system exercises thought con trol - the February sentencing of writers Sinyavsky and Daniel to a total of twelve years' hard labor is the most recent example. We are less aware of the fact that in 1 Ayer's statement and Lunn's com ment in Sir Arnold Lunn, The Revolt Against Reason (London: Eyre and Spot tiswoode, 1950), p. 221. Mr. Brown, a doctoral candidate at Harvard University,· is spending this year in Vienna.

our own Western civilization there is also a growing monoli thic thought control, not enforced by a totalitarian dictatorship; nor in volving jail sentences, but gradu ally becoming almost as pervasive, and ultimately as destructive of freedom of thought. A. J. Ayer's contention, which sounds harmless enough, even commendable and in the good old American tradition of independent initiative ("to be decided by each man for himself") , is a good example of a stage in the process by which we, too, are losing freedom of the mind. If we ever reach the point which Lunn foresees,' when we can no longer distinguish between Heinrich Himmler and St. Francis of Assisi, then legal freedom of thought will mean nothing, be cause we will have lost the ability to think. In such a situation a constitutional guarantee will be as irrelevant as freedom of the seas for a nation without ships. 3 4 THE FREEMAN May Mental Equipment Freedom of thought is not guar anteed by the mere absence of legal sanctions against it. It de mands a certain amount of mental equipment, which cannot be legis lated, but which must be provided by education - both by education in the narrow sense of that for mally imparted in schools, and in the larger sense of the experience of living with people and institu tions in a society. There is no im mediate danger of governmental thought control in Western coun tries, but we in the United States, and elsewhere in the West, are nonetheless approaching a critical stage in the battle for the mind.

The famous German physicist, Werner Heisenberg, went through a rather· thorough grounding in classical languages. Far from con sidering this a waste of time for his career as a scientist, Heisen berg has written that he considers it most valuable. Having to deal with firm and unchanging reali ties, such as Latin declensions, sharpened his wits and gave him the mental equipment and disci pline so necessary to competent scientific research. Without the mental equipment provided and improved by the encounter with unyielding facts, Heisenberg's later accomplishments would have been unthinkable. In the moral and intellectual sphere, in which freedom of thought and expres sion is to operate, the necessary mental equipment includes a clar ity and toughness of thought which in turn depends on recog nizing that there is such a thing as truth and that there are values which are absolute. Few people would like to see themselves in the role of the Ro man governor, Pontius Pilate, as he is described in the pages of the Bible - vain, weak, willing to sac rifice a man whom he knew to be innocent in order to spare himself any unpleasantness with Tiberius Caesar. Yet how many ask the same question which Pilate asked, "What is truth?" and mean to say the same thing which he meant, "It all depends on how you look at it." This observation, like Ayer's, is plausible enough, and sometimes is appropriate. But it can also be deadly, and ulti mately destructive of human intel lectual freedom· and dignity. Free dom and dignity depend on the conviction, and on the fact, that there are some things which are unchanging, which do not "all de pend on how you look at them."

Brainwashing, "free Society" Style In addition to the compulsion which subjects of a totalitarian state suffer, it must be seen that even a free society has its own brand of conformism, which is 1966 EROSION OF THE MIND 5 not imposed by law but which can be almost equally effective. The unchallenged authority exercised among teenagers by certain fads (and a similar power shown among adults by certain fashions) offers a readily recognizable example of a control which is not· enforced by law, but which can be quite effective. Fads and fashions are often harmless, but we are begin ning to notice that their unchal lenged power can lead to tragedy - as, for example, when the em phasis on "having experiences" leads a person to take·. the first step on the road to drug addiction. Every society, every culture, every sub-culture (for example, teenagers or retired .people) has its own conventions, its consensus of values. Sometimes these are derived from clearly stated prin ciples or teachings, as the Ten Commandments, sometimes )rom traditions and habits which are harder to trace down. Conventions certainly can outlive their useful ness and become actually harmful; on the other hand, to discard them because they are "outworn" often turns out to mean the loss of values which cannot easily be re placed. ' In free society one variety of brainwashing is the repudiation, at the command of the intellectual climate or the "spirit of the age,"

of important intellectual traditions or axioms, without discussion and without due cause. There are fash ions in thinking as well as in clothes, and often one intellectual principle may be discarded and replaced by another with no more discussion or reason behind it than can be given for a change in the height of a hemline. In the realm of th.e intellect this is dan gerous: there is no way to coun teract it save by thoughtful anal ysis and criticism. It is important to note that va.luable intellectual traditions can be discarded just as thoroughly as last year's fashions, and with much more serious effects, by a process which· is so subtle that one does not notice it until it is too late. The repudiation is not done clearly and openly, because if so it would produce· discussion and perhaRs opposition; but it can be quite complete for all of its lack of clarity. An example is found in the molding effect exer cised by a type of introductory general education course found in many colleges, with a title such as "The Authoritarian Personal ity" or "The True Believer." Any one who has glanced at the books which bear those famous names will recognize that while tech nically they are studies of ex treme examples, they can carry the implication that authority per se, or committed belief per se, is 6 THE FREEMAN May dangerous and leads to mental imbalance.

The presentation which this type of material receives and the climate in which it is discussed, often have an effect which goes beyond the implications of a schol arly study. Even in the hands of a perfectly ethical and neutral teacher or discussion leader the current intellectual fashion can take a subject like "the true be liever," and give it an impact which seriously questions any and all genuine commitment. Intellectual Relativism The consequence of such brain washing by fashion and environ ment, rather than by force, is the establishment of intellectual and moral relativism. Advocates of this position have in their favor the fact that those who stand for absolute values often have tried to establish their intellectual prin ciples by physical force. Ma,rtin Luther once said that converts should be made only by the "sword of the word," and not by the sword of steel; but even Luther did not always follow his own ad vice, and others were. considerably worse.

Against any who would enforce religious or philosophical conform ity, it is necessary in the name of freedom to insist on the practical principle of tolerance. But in the name of that same freedom it is necessary to oppose the intellectual principle of relativism. Relativism, while it begins by promoting free dom, proceeds to the destruction of values, and ends by exacting a new kind of thought control which deprives men of their dignity as responsible beings. Relativism as an intellectual principle is becoming more and more dominant on the American scene, and can almost be taken for granted (as I have observed time and again, in discussions with students). Usually it is fostered by indirect but effective means, as in the polemics against the authoritarian personality and the true believer. Seldom does the relativization of all valu.es receive as unambiguous a statement, or one which so clearly reveals where it leads, as that which follows: First of all it [relativization of values] requires real maturity. It de mands that all men be drawn into the secularization process so that no one clings to the dangerous precritical illusion that his values are ultimate.

All idols and icons [by this is meant, every ultima te religious or moral commitment - H.O.J .B.] must be ex posed for the relative, conditional things they are. Tribal naivete must be laid to rest everywhere, and every~ one must be made a citizen of the land of broken symbols. In this way the process which has destrored the old 1966 EROSION OF THE·· MIND 7 basis for social solidarity now pro vides the basis for a new·one.2 (em phasis mine) This is a wonderfully illustra tive statement. It reveals, first of all, the totalitarian tendency of the relativistic climate: no one is allowed to think his values are absolute. In effect, no one is to be allowed to believe in God in the way in which historic Judaism and Christianity have done. This freedom of belief is guaranteed, in theory at least, even in Soviet Russia - but not by a modern relativist. Secondly, it illustrates the fact that values are dismissed without discussion and without due cause.

It is not clearly said that if one may not hold certain values to be ultimate, one may therefore not believe in God. To have said this would have been too plain, and might have provoked an argu ment, while the same effect can be more easily obtained· by the subtle but persistent influence of the innuendo. Such belief is re ferred to as an "illusion," .when th~ less derogatory word uconvic tion" would have served as well, and at least would have allowed for the possibility that a religious conviction might in fact· be true. This, however, is a possibility 2 Harvey E. Cox, The Secular City (New York: Macmillan, 1965), pp. 34-35. which the relativist is not even willing to discuss. The use of words like "precri t ical," "tribal naIvete," and "idols" further illustrates the tendency. The person who allows himself to enter a discussion on these terms is already at a tremendous disad vantage in trying to fight his way clear of relativism. Language used uncri ticaIIy becomes a tool in the hands· of the enemy.

Captured Words: "freedom" The communist technique of taking over certain words entirely for their own use is well known. "People's democracy" is the stock designation for a communist cou!l try, and the word "people" has been so successfully captured that it can hardly be used in some Eu ropean languages except to refer to a communist movement. In ad dition to plastering the opposition with certain opprobrious labels, of which "tribal naIvete" for "Chris tian faith" is a perfect example, the spirit of cultural brainwash ing captures certain words for its exclusive use, e.g., "freedom." Thus, relativism is good because it leads to freedom (except, of course, the freedom to believe that your beliefs are actually true in other words, except freedom to think). The ability to get along without ideals is paraphrased as "freedom" or "real maturity."

8 THE FREEMAN }.{ay Another age would have called it lack of character, and so would we, if the intellectual climate had not frightened us by its attacks on the "authoritarian personality" into equating strength of charac ter with mental illness. Relativism = freedom? To argue that relativism leads to freedom has at least three flaws. First, as in the passage quoted, the argument supposes that by destroying the old basis for social solidarity (in our case, the values and standards of Western civiliza tion) a basis will be provided for a new one. Even if this argument were true, which is open to ques tion, what defense would we have in the interim, while waiting for the new basis to come to us, against the determined efforts of people who are still "tribally naIve" enough to work and fight for their values (such as the com munists) ? Secondly, the theoretical ques tion must be asked: can one actu ally throwaway all ultimate val ues? Will one not simply discard a well-thought-out, relatively time honored set to accept, willy-nilly, a set of uncritical and unarticu lated but equally absolute assump tions? The contemporary Dutch jurist and philosopher, Herman Dooyeweerd, has argued that the very nature of thought itself requires that a person assume ab solute values: the only question is whether he will recognize this, and name them, as a rationally committed person does, or whether they will merely be unvoiced as sumptions. 3 In religious terms, it has always been put thus: man must worship, and if he is not willing to worship God, then he will find himself worshiping an idol. There is' no proof for this statement, but Dooyeweerd has shown that it is at least worth tak ing seriously.

Thirdly, there is the very seri ous question: can there be any meaningful freedom in the total absence of authority? We know that this is impossible in practical social living: every man requires that his government have at least enough authority to guarantee him a minimum of peace and se curity. Otherwise, to say that he is "free" can be true but pointless. The English archbishop, Thomas Cranmer, wrote that perfect free dom is found in the service of God. By this he meant, not least, that ultimately God will vindicate his servants despite· the presence of tyrants, such as the one who took Cranmer's life in 1556. Keep ing the phrase "under God" in the pledge of allegiance will not 3 Herman Dooyeweerd, In the Twilight of l'Vestern Thought (2nd ed.; Nutley, N. J.: Craig Press, 1965).

1966 EROSION OF THE MIND 9 do much for the religiousness of the children who recite it, but it just may keep the men who run and shape the government aware that finally they will not· be abso lute, but will have to answer to a higher Authority. Tyrannical au thority is destructive of freedom, but so is the absolute absence of authority. Authority to Criticize Freedom depends on authority and responsibility. As a Christian I do not insist that I have the only workable concept of authority and responsibility. I recognize and am glad that there are others, both in other religious traditions and out side of aU religious traditions, who also have a workable view of au thority and responsibility. But I contend tha t pure relativism, the totalitarian ·relativism of the kind exemplified above, is ultimately de structive of both, and, if allowed to spread unchecked and uncriti cized, will deprive people of the ability to think freely and to choose their own values and loyal ties, and will ultimately deliver them into the hands of a tyranny far more oppressive than the nar rowest kind of religious exclusive ness.

On the contrary, it is precisely from a position of well-informed commitment that mutual tolerance is possible. Much of the religious prejudice and persecution of past centuries resulted from the fact that people were· unsure of their own position, and afraid that it could not stand the challenge of a free clash of opinions. In the last few centuries, Christianity has again ·had to learn to stand on its own feet - as it did in its earliest centuries, unsupported by any government - and is stronger for the experience. No longer would any serious Christian demand that for his own sense of security all opposing views be broken down by force - yet that is precisely what the relativist does in the name of freedom. Freedom and Truth It is to obtain freedom that we are asked to become relativists. But ultimately freedom requires responsibility, which is just what relativism destroys. We live in a pluralistic society, and in a plural istic world;· we must recognize that it is neither right (nor prac tical) to attempt to impose any set of absolute values by force. But once we have given up the con viction that there are absolute values, then it is only a short step before we are unable to distin guish Heinrich Himmler from St. Francis. In a crowded world the only possibility for all to have freedom is for individuals to have integrity. The integrity of the in10 THE FREEMAN May dividual depends to a large extent on his commitment to truth. (Here and there a moral relativist can be found who nevertheless behaves with complete personal integrity.

But these are rare cases, what we might call happy inconsistencies.) The cry of the age, in America and throughout much of the world, is "Freedom Now!" Jesus said, ". . . the truth shall make you free." He spoke of himself, but also meant this: where there is no truth, ultimately there is no free dom. In the battle for the mind, we may safely dispute about what is true; but we must never cease to maintain that truth is, for with out it we cannot be free. A Countermeasure In opposition to this deadly drift, several things are neces sary: first it must be recognized that thereis a drift, a monolithic climate, which is slowly but relent lessly submerging intellectual and moral values without ever openly attacking them or proving them wrong. Second, one must be pre pared to criticize the assumptions of this intellectual climate, not ac cept them; by accepting them, the battle is lost before it is well be gun. Third, one must be prepared to have, in the words of Belloc, the courage of one's prejudices. It is without a doubt true that any firmly held position has elements of prejudice in it. However, as one noted Russian theologian says, "Anyone who says he is not preju diced is a liar." And that goes for "liberals" as well as for "conserva tives." Real freedom is possible when, and only when, men of dif ferent opinions can meet in mutu al respect - not when the motto is, "Let us all give up our convic tions, and build on a total absence of ideals." Quarreling about prin ciples may be unpleasant, but it is far healthier than having no prin ciples.

A Need to Re-examine Basic Principles and Premises In the continuing battle for the mind, which may be more crucial for America than the totalitarian threat from outside, we must rec ognize that the principles by which we think are being challenged. A nineteenth-century revolutionary song says, "Thoughts are free. No one can guess them." This is true in the twentieth century too but, if the present drift continues, we will be unable to think any thing but pale and lifeless thoughts which are not worth guessing. The only answer to this is to bring some basic principles out into the open again: Let the Prot estant and the Catholic challenge each other; the atheist, the be liever; and let each see for him1966 EROSION OF THE MIND 11 self - and let the other see whether he is a man of conviction, or merely a creature of habit. Such a course of action will pro duce some heat; it will produce some hurt feelings. It will produce some people who are shocked to learn that they really know nothSINCE FOUNDATIONS of human progress are laid in education, the future can be no more purposeful than the legacy of human values each generation leaves to the next.

Every generation is entrusted with the social and political hopes of future generations, just as hu man values now enjoyed w~re iden tified and p'reserved through ef forts of former generations. As responsible citizens apprehensively Mr. Newell operates a farm near Marcellus, Michigan, the "harvest" in this case being food for thought. ing about what they always thought that they believed. But it ought also to produce, or at least uncover, individuals who know what they stand for: men of in tegrity, "whole" men; and these are the building blocks of a free society. ~ ROBERT K. NEWELL ponder the wisest course for edu cation to follow, theirs is a moral obligation to avoid complacency in the popular delusion that the sole requisite for pedagogical progress is ever-increasing public expendi tures lavished on elaborate facili ties and intensified curriculum. For many years psychologists and educators have recognized the processes by which thought and behavioral patterns acquired in youth become the basis for adult motivation. In modern times aU thoughtful observers have become progressively aware that moral, social, and political concepts im planted in the· formative years of mental immaturity not only par tici pate in the conduct of later life, but, once acquired, such con12 THE FREEMAN May cepts become dominant and often unalterable in the adult. Thus, captive audiences of immature minds provide powerful and much prized forums for ideological in doctrination. Educational environ ments left unguarded can easily be captured by authoritarianism and in due course transformed into climates of unquestioning so cial and political opinion.

Individual Responsibility, or Totalitarian Control Freedom presupposes individual responsibility and, rather than de pending upon concentrations of invested political authority, de rives social continuity from the constant political evaluations of enlightened individuals. If educa tion is allowed to divert human intellect into stagnant pools of ideological conformity, and there by methodically arrest indi vid ual capacity for political contribution, the resulting social complex pro vides a fertile field in which to tali tarianists can sow and harvest propaganda at will and exercise unchallenged control over the col lectivized mind. Humanity can never socially advance where edu cation teaches mass conformity and what to think, rather than de veloping individual intellect to full potential by teaching how to think. Political freedom demands that in dividuality be sufficiently developed to successfully resist all at tempts at mass motivation.

If, rather than taking the proper educational aim of creating well springs of human thought, our generation articulately selects and presents educational data that seem to support the distortions of political dogma, the future will hold little promise. When despots enjoy unquestioning support of carefully nurtured climates of opinion, the collectivized citizen's only hope for an improved situa tion is that the current despot's successor might chance to be some what more benevolent than his predecessor. There is no possibility that mankind, under such condi tions, can ever become fully aware of true human potential while liv ing together in tolerant harmony. Until men in society regard each new individual as a personality with a vital intellectual potential to be developed, education can do little to advance civilization and social harmony. Those who place their present faith and future hope in the dead leveling mediocrity of political legalism to conduct humani ty to brighter times, ignore a funda mental psychological truth. Legal attempts to correct or alter human conduct resulting from improper education must all end in failure, even when such attempts are un relenting and are accompanied by 1966 FREEDOM THROUGH EDUCATION 13 intensive indoctrination programs.

It is impossible to superimpose an effective code of ethics on an en tire society and, through compul sion, expect social adherence to arbitrary legal standards of con duct. Political law, irrespective of ingenuity and tenacity of enforce ment, provides nothing more cor rective or permanently beneficial in the adult than temporary con trol of faulty behavior traceable to education's failure to create virtue and conceptions of individ ual responsibility in. the child. If humanity invested but a frac tionof the effort so willingly lav ished on legal, political, and mili tary antidotes, to analyze and cor rect educational faults at their source, mankind would make a firm advance toward domestic tranquillity and international peace. Proper education alone can teach men to live responsibly through reason, and to behave by choice in the orderly manner that legalists clumsily attempt ~o estab lish coercively through punitive reprisals.

A Chance to Reason The real enemy of social ad vancement and political freedom is collectivistic indoctrination that destroys mental self-sufficiency. New generations must be given mental freedom to follow reason wherever it presents itself; to build constructively upon social truths that can withstand the con stant scrutiny of progress; and, rather than constantly construct ing illusionary sanctuaries of col lective security, confidently to place trust in individual responsi bility. Education can then increase self -knowledge and cement concep tions of responsibility toward con temporary and future generations. Education being the prime source of human motivation, and faulty education the taproot of faulty human conduct and author itarhinism, it follows that educa tional environments must become the immediate concern of all re sponsiblepeople. If freedom is to displace authoritarianism and raise humanity to progressively higher spiritual and social pla teaus, the educational procedures that develop individual thought must be identified and cultivated.

Historically, education has run the gamut from private tutelage to the completely controlled curricu lar environments of government financed political indoctrination institutions. In our society, too, education has undergone continu ous change. The desirability of transferring educational authority from private to governmental jur isdiction is a matter of personal opinion in a constitutional society. But regardless of divergent opin ion on specific educational policy, 14 THE FREEMAN May proper education is still the only dependable safeguard of political freedom; and the grave dangers involved in governmental usurpa tion and centralization of educa tional authority should greatly concern all thoughtful citizens. Sound Public Policy Requires Well-Informed Citizens The basic advantage of consti tutional government is the in herent political ability of a free and informed citizenry to bring about desired changes in public policy. Such changes are constant and necessary, but the key element in purposeful social change is the well-informed citizen. Constant change without full understanding of future consequences, while al ways dangerous, is politically disastrous in the case of educational policy. Indifference in this vital area can, by default, turn human intellect and the hope of freedom over to the tyranny of collectivis tic thought control.

Rather than continually seeking financial aid for education from political sources that would gladly render such assistance in order to further control and collectivize public instruction, the informed citizen must act to arrest and re verse this relentless drive. It is the responsibility of each citizen in a constitutional society to pon der the plight of creative thought and related freedoms; and, having arrived at constructive conclu sions, do his utmost to ensure that freedom through education shall survive and flourish. ~ Extra "HUMAN NATURE," he began, "is so constructed that the vast majority of men can proceed only so far against obstacles. The limit of average endurance is a known quantity in every human activity. Success is achieved by those who beat this limit by ex tremely small margins. "What most of us cannot perceive is that an additional ounce of energy at the final breaking point will distinguish us from thousands or millions of ordinary human beings.

"This is the reason why sports are so important. In athletics young men learn that victory is usually achieved by an amazing ly slight advantage - by a yard in a mile race. We must under stand that life is competitive. Those who go in for sports become sensible of this. Those who live within the walls of study rooms are denied this knowledge." From The William Feather Magazine, February 1966 "iHE Si~iE S","ELLED RnO T~f PfOPLf S~RRnH\\ WILLIAM HENRY CHAMBERLIN THE GREAT Russian historian, V. O. Klyuchevsky, is a master of the epigram, of the telling phrase that says much in few words. The sev enteenth century in Russia was a period of consolidation of govern ment power and extension of the country's frontiers, at a cost to the people which, as Klyuchevsky says, could scarcely be counted. The chains of serfdom were riv eted more firmly on the peasants. Taxation increased to such un bearable heights that some nomi nally free Russians wanted to ac cept serfdom as a more bearable lot, where the master at least would have to settle the tax claims.

The people were actually enjoined from doing this by the penalty of being whipped with the dreaded knout. After remarking that freeMr. Chamberlin is a skilled observer and re porter of economic and political conditions at home and abroad. In addition to writing a number of books, he has lectured widely and is· a contributor to The Wall Street Journal and numerous magazines. dom which had to be maintained with the threat of the knout could not have been worth much, Klyu chevsky pronounced this eloquent judgment on that phase of Russian history: "The state swelled and the peo ple shrank." It may seem a far cry from af fluent, technically-advanced, twen tiethcentury America to the poor, barbarous, half-Asiatic Muscovite state of three centuries ago. But statism is a disease that recog nizes no boundaries of time and space. The United States, con ceived in liberty, as Abraham Lin coln said ~ and provided by its Founding Fathers with a splendid set of constitutional checks and balances against arbitrary govern ment power - is moving visibly and with alarming speed down the collectivist path at the end of which the government is every thing, the individual nothing. We 15 16 THE FREEMAN May are approaching that condition which the brilliant and prophetic French poli tical thinker and phi 10sopher' Alexis de Tocqueville, foresaw so clearly more than a century ago: Above this race of men stands an immense and tutelary power, which takes upon itself alone to secure their gratifications and to watch over their fate. That power is absolute, minute, regular, provident, and mild. It would be like the authority of a parent if its object were to prepare men for man hood; but it seeks, on the contrary, to keep them in perpetual childhood.

It is well content that the people should rejoice, provided they think of nothing but rejoicing. For their hap piness such a government willingly labors, but it chooses to be the sole agent and the only arbiter of that happiness. It provides for their se curity, foresees and supplies their necessities, facilitates their pleasures, directs their industry, regulates the descent of property, and subdivides their inheritances. What remains but to spare them all the care of thinking and aU the trouble of living? The will of man is not shattered, but softened, bent and guided; men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not de stroy, but it prevents existence. It does not tyrannize, but it compresses, enervates, extinguishes, and stupi ties a people, until each nation is re duced to be nothing better than a flock of timid and industrious animals of which the government is the shepherd.

I have always thought that servi tude of the regular, quiet, and gentle kind which I have just described might be combined more easily than is sometimes believed with some of the outward forms of freedom; and that it might even establish itself under the wing of the sovereignty of the people. (Italics supplied.) Managed Mediocrity It is toward this type of society that almost the entire world has been moving, at a slower pace after World War I, at an acceler ated pace after World War II. In the United States, in the memory of living men and women, there has been a tremendous shift, very much speeded up in the last years, from the traditional American conception of a society in which every member is responsible for looking after his own needs - ex pecting no help from the govern ment and not forced to give help outside his own family obligations, except as conscience, human sym pathy, and compassion may prompt him - to the kind of society which Tocqueville foresaw, with the gov ernment as the shepherd and the citizens as a "timid and industri ous flock."

Perhaps the greatest shift has been from the idea that what a man earned was his own, to be spent or saved at his pleasure and 1966 "THE STATE SWELLED AND THE PEOPLE SHRANK" 17 discretion. Now the individual no lon~er works for himself,' but for an increasing horde of tax collec tors - Federal, state, municipal, and whatnot - imposing an enor mous variety of direct and indirect levies. The explanation of this change is easy. Gone is the time when the individual, in return for keeping practically all he earned, was expected to pay his own rent and his own doctor's bills' and to make reasonable provision·, for his years of retirement. Here is just a partial and limited list of the ob ligations which the solvent tax payer is now required to meet: • Safeguarding the freedom of remote peoples who may or may not have much conception of what freedom is. • Making good the deficits which regularly appear' in the balance of payments figures of former colonial countries which have gone in for planning and socialism.

• Paying a share of the rent and medical bills which, in un sophisticated earlier times, were supposed to be settled by the people who' incurred them. • Supporting in· idleness large numbers of persons who, in the unregenerate "bad old days," would have been expected to work for a living, even at hard and low-paid jobs. • Paying all sorts of expenses of states and municipalities, large· and small, necessary and unnecessary, which are subsi dized from Federal funds. "Charge it to Uncle Sam" has become the favored easy way of obtaining acceptance for every scheme of real or supposed social benefit that costs money. Which might be fine if Uncle Sam were an inexhaustible source of self generating wealth. But this is not the case. Governments by them selves create no wealth whatever. What they payout must be taken from those on whom they levy taxes. Here is an example of the kind of charge on Federal revenues (which means on your income taxes, and mine and the next man's) that would have been, un til recently, quite unthinkable. A group in the Boston suburb of Brookline thought it would be de sirable to bus school children from the predominantly Negro area of Roxbury and distribute them among Brookline schools. How much popular support this idea attracts is not clear. But the spon sors anticipated no trouble about money. Uncle Sam would pay.

Negative Thinking There was a time, not much more than a generation ago, when it was considered a social disgrace to depend on state funds for a 18 THE FREEMAN May livelihood. Today, "collecting se curity" has become one of the major unlisted industries. And there is a concerted movement un der way to carry the process of pillaging the industrious and thrifty for the benefit of the thriftless and shiftless - which be gan with the imposition of the graduated personal income tax a long stride forward by intro ducing a so-called NIT, negative income tax. This would assure every family a minimum income, tentatively put at $3,000 a year, whether it was worked for and earned or not. The cost of such an arrangement could easily run as high as $11 bil lion. In one way or another, by higher taxation or inflation, this 'would come out of the pockets and savings of the productively em ployed. As one advocate of this system remarks: The NIT would eliminate the de grading kind of means test to which applicants for public assistance are subjected in most localities. Instead of being an applicant (often almost reduced to a beggar) the individual would be a claimant by right, as in the Social Security System .... With only the same kind of spot-checking that is now done within the income tax framework, the establishment of eligibility would be handled simply and with the same degree of dignity accorded to the taxpayer at present.

Some of the consequences of the nega tive income tax, should it be enacted into law, are almost breath-taking. Some 34 million people· would become permanent state pensioners, to be maintained at the cost of the solvent taxpay ers. The incentive to work at less skilled and lower paying jobs has already been gravely weakened by. the present system of social se curity and relief payments. Under NIT, this incentive would disap pear altogether. A permanent lob by would be created for raising the income level at which people would be eligible for NIT to $4,000, to $5,000 - the sky would be the limit. Individual responsi bility, a conspicuous casualty of fashionable modern social and eco nomic theories, would sustain what might well be a final fatal blow. So, Why Work? At both ends of the economic scale the question, "Why Work?" would be asked more often and insistently. The beneficiaries of this gigantic pension system granted without regard for real need, disability, or consideration of willingness to work - would see Iittle reason to take an unskilled job paying $3,000 a year or a lit tle more if they could sit instead watching television, with occa sional trips to the nearest bar, 1966 "THE STATE SWELLED AND THE PEOPLE SHRANK" 19 financed out of the regular gov ernment checks.

At the same time, the more am bitious and affiuent-the principal sufferers under the graduated in come taxes imposed by the Federal government and many states would see little incentive to work hRrd~r if whnt they earned would be largely siphoned off for such purposes as putting up some of the deserving poor at the Astor Hotel (a recent news item about this practice appeared in New York papers) or paid out under the provisions of NIT. A more effective disincentive to the hard work that is the key ele ment in national prosperity and well-being could hardly be imag ined. Yet NIT has enlisted the support, not only of some aca demic theorists, but of the Presi dent's Committee on Automation, which includes among its mem bers some prominent industrial ists. It sometimes seems as if pub lic opinion in America - the coun try of all others which offers a practical example of what can be achieved under a system of in dividual free enterprise - has be come quite bemused with the idea that, if and as the state becomes bigger and bigger and spends more and more, such social prob lems as health, education,unem ployment, and poverty will be elimina ted.

Opportunities Abound A book that appeared recently, David Sarnoff: A Biography, by Eugene Lyons (Harper and Row, $6.95) gives an excellent picture of how these problems could be and often were met long before the collectivist society was dreamed of. Coming to America as a ten-year-old immigrant with a poor family from an isola ted Jewish village in western Russia, young Sarnoff was as underprivi leged as they come. No big-brother government extended him a help ing hand. The illness and incapac itation of his father made the family largely dependent on David's earnings as a newsboy. No one paid the Sarnoffs a negative income tax or gave them state aid of any kind. But young David took to New York and its larger outlook and opportunities like a duck to water. He studied hard in school, and without asking whether the school was "integrated" or not. He read voraciously out of school as well as in school and took advantage of the lectures and courses at the Educational Alliance, an East Side settlement house. As a final Horatio Alger touch, he began at the bottom of the ladder as an of fice boy in the Marconi Company, parent of the huge Radio Corpora tion of America, of which David Sarnoff has long been president 20 THE FREEMAN May and which does business at the rate of billions of dollars a year.

Sarnoff came to America in im migrant steerage quarters; his return crossing of the Atlantic was in luxury quarters on a fa mous liner as a member of the American delegation to the con ference on German reparations in Paris in 1928. In both world wars his knowledge of electronics was of conspicuous service to his coun try and he came out of the Second with the rank of General, after having put the French radio busi ness on its feet after the expul sion of the Germans in 1944. Such a career as Sarnoff's is, of course, exceptional.· But the num ber of individuals who have risen from very humble backgrounds to the highest achievement in poli tics, business, science, and schol arship is unlimited. Most notable and famous of all is Sarnoff's boy hood hero, Abraham Lincoln, whose rise from frontier rail splitter to the highest office in the land during a period of supreme national crisis was achieved with out benefit of either Federal aid to education or an antipoverty op eration.

Inflationary Government Spending The United States seems to be succumbing to one of the oldest, most persistent, and most harmful of human delusions: that government may spend without regard for the rules of prudent finance and emerge from the experiment unscathed. Already, inflationary danger signals are flying in many sectors of the economy. Yet the country is being committed both to a war of uncertain duration and cost in Vietnam and to huge social welfare spending which, if past experience. is any guide, will grow steadily from year to year. In the name of overcoming pov erty through a vast proliferation of bureaucratic agencies the grave risk is being incurred of impover ishing everyone through an ac celerated depreciation in the pur chasing power of the dollar. The price tag is usually ignored in euphoric forecasts of growth and glowing estimates of what the government will do for almost everyone. Indeed, the biggest rate of growth is in nondefense gov ernment spending, up 60 per cent between 1961 and 1966, a far higher rate of increase than in dustrial output registered for the same period.

Education for What? United States education in the past was at most a state or local, if not altogether a personal and private, responsibility. Federal ex penditure in this field in 1945 was $291 million. But now the bars are down. This item of Federal 1966 "THE STATE SWELLED AND THE PEOPLE SHRANK" 21 spending was $6.3 billion in 1965 and will pass $8.7 billion in 1966. Apart from the pressure on the stability of the currency and the drain on the pockets of the tax payers, this orgy of spending has the markedly undesirable effect of enabling Federal bureaucrats to dictate to local schooJ boards how they must arrange the racial com position of their community schools, on pain of having Federal grants withheld. State educational bureaucrats, of course, can be just as tyrannical as Federal. Mount Vernon, Malverne, and other New York suburban communities have been split into hostile camps and generally disrupted by arbitrary orders from the state Commis sioner of Education in Albany that the neighborhood school con cept on which American education has always been based·· be sacri ficed to objectives that are not only unreasonable but, probably, in the long run, impracticable: "correcting racial imbala,nce" and eliminating "de facto segrega tion." This kind of forced integra tion is just as obnoxious, just as much of a blow to liberty, as the forced segregation which is now, happily, on the wane. This ten dency to use Federal grants as a club against local communities is another proof of the danger of vesting too much power in central authority.

The Great fiction of Paying Each Other's 8ills America, which grew great and prosperous on the principle of keeping government. off the backs of its .citizens, of leaving every individual free to go as far as his character and ability would war rant, now gives the impression of contracting what might be called Bastiat's disease. Frederic Bastiat was a brilliant French economist of the early nineteenth century whose definition of the welfare state could scarcely be improved on: "That great fiction, by means of which everyone hopes to live at the expense of everyone else." How else can one understand the apparently serious proposal in the report of the President's Coun cil of Economic Advisers that the Federal government "rebuild the cities"? As if this formula would relieve the taxpayers of the vari ous cities of the necessity of pay ing the bill for this operation! Two conspicuous factors in the decay and decline of such mighty political institutions as the Roman and Byzantine Empires were ex cessive multiplication of bureau cratic offices and overtaxation, car ried to such extremes that the peo ple were indifferent when the bar barians in the West and the 1\10 hammedans in the East broke through the frontiers. If the 22 THE FREEMAN May United States is to avoid a similar danger, there must be a swift, de cisive change of emphasis, from the government to the individual, from state help to self-help, from the society of the Big Brother state (which takes from some pockets everything it professes to put into others) to the historic American society of independent, self-reliant individuals.

One career like David Sarnoff's is worth a dozen antipoverty pro grams. ~ The Greatest Threat IN A SENSE, inflation is a moral as well as an economic issue. Inflation gets its impetus from human selfishness and greed. Deficit spending is in reality the transfer to future generations of the tax load for present-day spending. The depth of our na tional moral decay is portrayed by two common excuses, "If we don't spend it, someone else will" and "Why worry about the national debt, we owe it to ourselves." Is it any wonder that the Job Corps spends 10 to 15 times as much per student as the average public school; that the War on Poverty is degenerating into a gigantic boondoggle; that 8 to 10 million people find wel fare a more attractive way to live than working; that the air lines to Washington are jammed with local businessmen and civic leaders pleading for federal dams, swimming pools, and airports? Materialism holds sway in America today.

The ,greatest threat to the future of our nation-to our free dom - is not foreign military aggression or internal communistic subversion but the growing dependence of the people on a pater nalistic government. A nation is no stronger than its people and the best measure of their strength is how they accept responsi bility. There will never be a great society unless the materialism of the welfare state is replaced by individual initiative and re sponsibility. CHARLES B. SHUMAN, President's address to the American Farm Bureau Federation, December 13, 1965 LUDWIG VON MISES THE BOSSES of the Russian Com munist Administration are dis turbed by the fact that economic conditions in the countries which have not adopted the methods of the Communist International are by far more satisfactory than those in their own country. If they could succeed in keeping their "com rades" in complete ignorance of the achievements of Western cap italism, they would not mind the low efficiency of their own plants and farms. But as some scanty in formation about the "affluence"

in the West penetrates to Russia, its masters are upset by the fear of a procapitalist reaction in their own house. This fear impels them on the one hand to foment sedition Dr. Mises is Visiting Professor of Economics at New York University and part-time ad viser, consultant, and staff member of the Foundation for Economic Education. all over the "capitalist sector" of the earth, and on the other hand to ventilate projects aiming at some minor reforms in their own methods of management. Nobody is today more firmly convinced of the incomparable su periority of the capitalistic meth ods of production than the "pro duction tsars" of the countries behind the Iron Curtain. The pres ent-day strength of communism is entirely due to the mentality of the pseudo-intellectuals in the Western nations who still enjoy the products of free enterprise. Capitalism a Social System of Consumers' Supremacy The market economy-capitalism - is a social system of consumers' supremacy. There is in its frame only one method of earning a liv23 24 THE FREEMAN May ing and of acquiring property, namely, one must try to serve one's fellow men, the consumers, in the best possible way. A daily and hourly repeated plebiscite deter mines again and again every indi vidual's earnings and place in so ciety. By their buying and absten tion from buying the consumers allocate ownership of all the mate rial factors of production to those who have succeeded in satisfying the most urgent of their not yet satisfied wants in the best possible and cheapest way. Ownership of the material factors of production can be acquired and can be pre served only by serving the con sumers better than other people do. It is a revocable public man date as it were.

The supremacy of the consumers is no less complete with regard to labor, the human factor of pro duction. Wage rates are deter mined by the price the consumer, in buying the product, is prepared to refund to the employer for the worker's contribution to the proc ess of its production. Thus the consumers' valuation fixes the height of every worker's remuner ation.! And let us not forget: the immense majority of the con sumers are themselves earners of 1 This is to what the jargon of the Hollywood industry refers in using the term "box office account." But it is no less valid for all other fields of business. salaries and wages and, in this capacity, instrumental in the deter mination of their own compensa tion. The unique efficiency of the cap italistic system is due to the in centive it gives to everybody to exert his forces to the utmost in serving his fellow citizens. Not a vague altruism, but rightly un derstood selfishness impels a man to put forth all his strength in the service of his fellowmen. The sys tem of economic calculation in terms of money, the commonly used medium of exchange, makes it possible to compute precisely all projects in advance and the result of every action performed in retrospect; and, what is no less important, to ascribe to every f.ac tor the size of its contribution to the outcome.

Planning for People Control The characteristic feature of so cialism is precisely the fact that it substitutes for this market sys tem of consumers' supremacy a dictatorial system, the "plan." In the planned economy the individ uals are not driven by the desire to improve their own conditions but either by dutifulness or by the fear of punishment. It is im possible for the individual workers to improve their own material sit uation by working better and harder. If they intensify their 1966 THE RUSSIAN REFORM MOVEMENT 25 own exertion, they alone are bur dened by the implied •. sacrifices, but only an infinitesimal fra'ction of the product of their additional exertion will benefit themselves. On the other hand, they can enjoy in full the pleasures of carelessness and laziness in the performance of the tasks assigned to them while the resulting impairment of the total national product curtails their own share· only infini tes imally.

The economists always have pointed to this inherent deficiency of socialism. Today all people in the socialist countries know that this criticism was fully· justified. All their proJects for an improve ment of the quality and an in crease in the quantity of economic goods and services turn around this problem. They all aim - un fortunately, in vain - at discover ing a scheme that could. make the individual members of a socialist system self-interested in the effect of their own contribution to the collective's effort. That the socialists acknowledge this fact and are anxious to find 'a solution amounts in itself to a spectacular refutation of two of the most zealously advanced argu ments in favor of socialism. On the one hand, the socialists as serted. that in the market economy the wage earners are not inter ested in improving the output of their own work. They expected that socialism would bring about an unprecedented improvement of the individual worker's contribu tions because everybody will be inci ted by the knowledge that he does not labor for an exploiter but works for his own best interest.

On the other hand, the socialists vilified profit-seeking as the most pernicious and "socially" inj urious institution and indulged in rev eries about the blessings of what they called a substitution of "pro duction for use" for "production for profit." No less significant an admission of the viciousness of the socialist ideology is provided by the sys tem of allowing small plots of land to be exploited for the ac count of the individual rural work ers - falsely labeled for "private profit." This capitalistic loophole alone prevented famines in the country that includes a good deal of the world's most fertile arable soil. The urgency of the Soviet productivity problem is due to the fact that in the processing indus tries no analogous expedient is at hand. No fundamental Change The much discussed reform proj ects of Professor Liberman and other Russian authors do not refer to the essential characteristics of the Soviet system of central plan26 THE FREEMAN May ning of all activities commonly called economic. Neither do they deal in any way with the problem of economic calculation. (For present-day Russian planners this problem does not yet have primary importance; as long as they are operating within a world of the price system, they are in a posi tion to rely upon the prices deter mined on the markets of the West.) What the reformers want to at tain is improvement in the conduct of factories and workshops turn ing out consumers' goods by the adoption of new methods for the remuneration of directors, super visors, or foremen. The salaries of such people should henceforth be meted out in such a way that they should have a pecuniary interest in producing articles that are con sidered as satisfactory by the con sumers.

It is a serious blunder to em ploy, in dealing with this issue, any ref erence to the concept of "profit" or to declare that the sug gested method of payment would mean something like "profit-shar ing." There is within a socialist system no room for the establish ment and computation of a magni tude that could be called profit or loss. The task of production is to uti lize the available human and ma terial factors of production for the best possible satisfaction of future wants, concerning which there cannot be any certain knowledge today. The Entrepreneu~ial Function Technology indicates for what purposes the various factors of production could be employed; it thus shows goals that could be at tained provided this is considered as desirable. To choose from this bewildering multitude of possible ways of production those which most likely are fit to satisfy the most urgent of the future wants of the consumers is in the, market economy the specific task of the entrepreneur. If all entrepreneurs were right in their appreciation of the future state of the market, the prices of the various comple mentary factors of production would already have attained the height corresponding to this fu ture state. As, under these condi tions, no entrepreneurs would have acquired some or all of the complementary factors of produc tion at prices lower or higher than those which later events proved to be the correct ones, no profits or losses could emerge.

One profits by having expended less than one -later - receives from the buyers of the product, and one loses if one can sell only at prices that do not cover the costs expended in production.

1966 THE RUSSIAN REFORM MOVEMENT 27 What determines profit or loss is choosing the goal to be set for the entrepreneurial activities and choosing the methods for its at tainment. Thus, it is investment that re sults either in profit or in loss. In a socialist system, since only "society" invests, only society can profit or suffer losses. But in a socialist system the material fac tors of production are res extra commercium. That means: they can neither be bought nor sold and thus no prices for them are de termined. Therefore, it is impos,.. sible to find out whether a definite production activity resulted in profit or loss. The Process of Se/edion The eminence of capitalism con sists· precisely in the fact that it tends to put the direction of pro duction into the hands of those entrepreneurs who have best suc ceeded in providing for the de mands of the consumers. In the planned economy such a built-in process of selection is lacking.

There, it does not matter whether the planning authorities have erred or not. The consumers have to take what the authorities offer them. Errors committed by the planning authority do not become known because there is no method to discover them. In the market economy the emergence of profit demonstrates that in the eyes of the consumers one entrepreneur served them bet ter than others did. Profit and loss are thus the effect of comparing and gauging different suppliers' performance. In the socialist sys tem there is nothing a.vailable to make possible a comparison of the commodities fabricated and the services rendered by the "plan" and its executors with something originating from another side. The behavior of the people for whom the plan and its executors are sup posed to provide does not .indicate whether a better method of pro viding for their needs would have been feasible. If, in dealing with socialism, one speaks of profits, one merely creates confusion.

There are no profits outside the "profit and loss system." If the authorities promise to the director of a shoe factory .a bonus to be determined as a per centage of sales, they do not give him a share in "profits." Still less can this be called a return to the profit system. Profits can only be calculated if one deducts total costs from total receipts. Any such operation is unfeasible under the conditions of the case. The whole factory, fully equipped, was handed over by the authorities to the care of the director and with it all the material needed plus the order to produce, with the help of 28 THE FREEMAN May workers assigned to the outfit, a definite quantity of footwear for delivery to definite shops. There is no method available to find out the costs incurred by all the opera tions preceding the first interfer ence of the director. The bonus granted to him cannot have any relation to the numerical· differ ence between such total costs and the proceeds from the sale of the final product.

A Significant DiffereltCe In fact, the problem of reform as passionately discussed in the communist countries today does not deal with th.e profitability of the variQusplants and productive processes. It turns virtually around a different problem: Is it possible within a socialist system to remunerate a worker, and espe cially the supreme foreman of a plant, according to the value the consumers, the people, attach to his contributiop to the accomplish ment of the product or the serv ice? In the capitalistic or market economy the employer is bound to pay a hired. worker the price the consumers are prepared to. refund to him in buying the product. If he were to pay more, he would suf fer losses,. would forfeit his. funds, and would· be eliminated from the ranks of the entrepreneurs. If he tried to pay less,. the competition of other employers would make it impossible for him to find helpers.

Under socialism no such connec tion between the amounts ex pended in the production of a com modity and its appreciation by the consumers prevails. There cannot therefore, in general, be any ques tion of remunerating workers ac cording to their "productivity" as appreciated by the consumers. Only in exceptional cases is it pos sible to separate the contribution of one worker in such a way from those of all other contributors that its separate valuation by the con sumers and therefore its remun eration according to this valuation become feasible. For instance: all seats in the opera house can be sold at the regular price of m. But if a tenor of world fame sings the main part, the house is sold out even if the price of admission is raised to m +n. It is obvious that such cases are extremely rare and must not be referred to in dealing with the problem of wage rate de termination under socialism.

Of course, .. a socialist manage ment can determine for many kinds of work "normal" tasks to be performed by the laborer and, on the one hand, reward those who accomplish more· and, on the other hand, .. penalize those who fail to produce their quotas. But such a norm in no way depends on any market phenomena. It is the out1966 THE RUSSIAN REFORM MOVEMENT 29 come of a more or less arbitrary decision of the authorities. In the market economy the sala ries paid to people who turn out commodities or render services that cannot be sold on the market, and for which therefore no prices are available, are indirectly de termined by the structure of the market. The employer - in such cases, as a rule, the government must pay to such people enough to prevent them from preferring a job in the orbit of the market. Such indirect determination of the height of wage rates also is un feasible in a socialist system.

Of course, the government is al ways free to grant to any of the officials it employs a salary equal to the value the· supreme chief or planner attaches to this man's services. But this does not have any reference tp the socialprob lem around which the discussion turns. ~ Subsidies Wark Once upon a time, long, long ago, a small Chinese village was plagued by' an alarming growth in the number of its rats, who ate 'the crops and nibbled at the children's toes while they slept, and generally made life increasingly miserable. The elders of the village came together in council, and in their desperation and in their wisdom, they decided on strong measures to cut down the rat population - they would pay a bounty' of so many yen per head for each dead rat brought into the village pound. At first, this measure,' though costly, seemed very successful and there was, a gratifying decline in the rat population ; after several months, however, the Dispenser of the Public Funds noticed that there was a striking ihcrease in his disbursements for dead rats and he quietly started an investigation of where they were .com ing from. To his horror and to the dismay., of the Cquncil, he discovered that some of the more enterprising citizens had taken to raising rats,and had found it most profitable: LOUIS STONE. from the March 1966 Monthly Investment Letter of Hayden. Stone. Inc.

INSURANCE PROBLEMS PAUL L. POIROT "YOUR MONEY, or your life!" The tax collector seldom phrases his request exactly that way; and, though crime is increasing, not many Americans have been in vited to consider the proposition at gun point. Even fewer of us, I suspect, ever have volunteered much serious thought to the rela tionship between life and proper ty. Fortunately for us, however, we seem to tend by instinct to ac cum ulate private property in vari 0us forms and to defend our prop erty as though our .lives depended on it. Perhaps they do; in which case, it would seem wise to give the matter some further thought. And what better point of focus than the business of life insurance itself and the closely related field of old-age retirement insurance, sometimes referred to as social security! How does one go about insuring his life? 30 There is a traditional procedure. It involves saving-consuming less than one's earnings - for a time, so that a certain level of consump tion may be maintained later when earnings might have declined or ceased entirely. If several persons agree to cooperate in such a pro gram, the individual risks of dy ing sooner or later than normal may be shared or pooled.

The concept or idea of property is likely to be dormant or poorly developed among grasshopper-like creatures that consume everything just as fast as they appropriate or produce it. But the moment an individual thinks of saving some thing, that something and the sav ing reflect some purpose in his life - become a part of his life, so to speak. And at this point, he is in a position to think of the con nection between his life and his property. Thus it is that purpose, saving, life, and property become 1966 INSURANCE PROBLEMS 31 intimately related in the mind of the individual and blend into a single concept. A man's purpose, then, is what gives him an insur able interest in his life. And prop erty might be said to be the economic essence of insurance. That certainly is the basis upon which the life insurance industry has functioned, traditionally: sav ing and investing in productive enterprises likely to yield goods and services for later consumption and the fulfillment of one's pur pose in life.

Now, compare that traditional concept and method of life insur ance with the "social security" idea - the compulsory taxation of those who have a purpose in life for the benefit of those who lack such purpose. It hardly seems nec essary to observe that the mere will to live is not much of a pur pose; to live for what? Nor can a person's poverty or great need be logically classed as a purpose. Such a negative attainment is not a sufficient reason for one's want ing to live or to insure his life. And how can a person who has no use orpurpose for his own life be of any possible use or service to anyone else? This is the hopeless contradiction and inconsistency of the whole idea of compulsory So cial Security. The program com pels human beings to work and sacrifice for nothing worthwhile so it is entirely fitting and proper to refer to it as a something-for nothing arrangement. Destructive Nature of· Compulsion The compulsory processes of government are well adapted for the conversion of something into nothing. Nor should it surprise anyone that the compulsory Social Security program involves neither saving nor investment in produc tive property, which we have seen to be essential features of any realistic form of life insurance.

Lives without purpose can see no need for property of their own nor any reason to respect or de fend anyone else's private prop erty. So, it is entirely logical once the first false premise of the "social security" ideas has been embraced - to base the func tioning of the program, as it is based, upon the expropriation of the property of those who have earned and saved according to their respective purposes. This process of destroying the property and defeating the life purposes of those who have either is the very antithesis of life insurance. It· is antisocial in the extreme, for it discourages. the thrift and saving upon which increasing produc tivity depends. Without savings and produc tion, an individual can neither at tend to his own economic security 32 THE FREEMAN May nor practice chari ty toward any one less fortunate than himself. Perhaps "social security" of a sort may be found within a den of thieves; but stealing one another to death ought not to be confused with life insurance.

A Tragedy of Errors One of the great tragedies of our time is the extent to which compulsory Social Security is con fused with life insurance. Top ex ecutives of private life insurance companies may be found testify ing to the "actuarial soundness" of the compulsory Old Age, Sur vivors, and Disability Insuranc'e program. Insurance salesmen ad vise prospective clients to build their private insurance programs upon the "solid foundation" of their Social Security benefits. Nor does the typical willing customer for traditional insurance appear to see any inconsistency between such a saving and investment pro gram and the Social Security pro cedure of plundering property. Even college professors, including teachers of economics, have been known to volunteer themselves subject to the Social Security tax that destroys property and pur pose and thus provokes additional appeals for handouts. The individ ual, who voluntarily subordinates his own life's purpose to the pleasantries of collective living with out purpose, fully deserves what he'll get from that kind of "social security."

The great mystery of our cen tury must be why anyone who believes in compulsory Social Se curity would simultaneously try to save and invest in a private pension or retirement annuity or life insurance program. The suc cess of the one type of program is contingent upon the discredit ing and destruction of the other. To the extent that Social Security and related subsidy programs suc ceed in confiscating private prop erty - either openly and directly, or by the hidden processes of con tinuing inflation and erosion of savings - then private insurance programs and other claims pay able in fixed numbers of dollars must tend to become worthless. By the same token, if the sales men of private life insurance and other pension and retirement an nuity and savings programs hope to continue to find willing cus tomers for their wares, it behooves them to labor effectively now and forever to halt the processes of confiscation and death inherent in Social Security and similar dis eases of compulsory collectivism.

Otherwise, buying insurance will be just as bad a risk as paying Social Security taxes. ~ 20. Meliorist Economics CLARENCE B. CARSON THE FLIGHT from economics pre pared the way for government in tervention in what would other wise be economic matters. It in volved, primarily, claims that an abundance of goods and services existed, either actually or poten tially. If this were so, it would be possible for government to inter vene and redistribute these, for force can be used to confiscate and dispose of property. But such claims would not provide justifica tion for action. Even the exis tence of abundance does not indi cate that redistribution is in or der. However, along with the flight from economics has gone the de velopment of a pseudo-economics, Dr. Carson is Professor of American History at Grove City College, Pennsylvania. Among his earlier writings in THE FREEMAN were his series on The Fateful Turn and The American Tradition, both of which are now available as books.

an "economics" which purports to show that free economic activity leads to contradictions, that to re move these contradictions govern ment action is necessary, and that certain kinds of· actions can be taken which will have the desired effect. Such pseudo-economic the ories are here called meliorist economics. It should be noted, however, that the phrase, "meliorist eco nomics," is used for historical reasons and consistency, not be cause of its descriptive accuracy or aptness. Throughout this work, meliorism refers to the view that government intervention can im prove conditions for people. Me liorist economics is an "economics" which purports to justify govern ment intervention in an economy and show how it can be done so as to improve the material well38 34 THE FREEMAN May being of people generally. This latter usage of the term - to mod ify economics - is not commonly employed, if it has ever been used in this way before. It is, however, consistent with the practice in this work of referring to reform ism in general as meliorism.

... But It Wasn't Economics The term, "meliorism," was adopted by some reformers within the context of controversies of the latter part of the nineteenth cen tury. Most of the influential econ omists and social thinkers of the nineteenth century had held that government intervention would prod uce evils rather than cure them. Karl Marx, along with rev olutionary socialists in general, held roughly the same position, though for different reasons. In addition to these views about an ameliorative use of government, social Darwinists held that men could not alter the course of evolu tionary development, and that gov ernment intervention would fail in any attempt to tamper with evolu tion. Meliorism, running counter to all these views, insisted that government could be used to improve conditions. In this context it is quite cor rect to refer to proponents of gov ernment intervention as meliorists.

In like manner, it is proper to re fer to theories in an economic vein along these lines as meliorist eco nomics. It should be made clear, however, that in essence such eco nomics is not ameliorative, nor is it in essence economics. Instead, it consists of theoretical and ideo logical justifications for using the power of government to take from some and give to others. Under stood rightly, it consists of more or less subtle attempts to legalize theft. A little basic economics should make this clear. Economics has to do with increasing the supply of goods or services with the smallest expenditure of materials and energy. For an individual and economic action is, in the final analysis, the action of an individual or a group of individ uals - economics is of importance to him to the extent that he wishes to conserve his supply of materials and energy and increase his sup ply of goods and services.

There are two ways for an indi vidual to augment the goods and services at his disposal. (1) He can produce or provide therrl for himself. (2) He can acquire them from others. Again, there are two ways for an individual to acquire them from others. (a) He can acquire them by exchange (which would include gifts, though what is exchanged may be different in character from what is obtained). Or (b), he can take them from 1966 MELIORIST ECONOMICS 35 someone else who possesses them. This latter method is the one that is the chief concern of meliorist economists. Theft and Enslavement Inherent in Compulsory Exchange Everyone understands that when one individual uses force or fraud to take goods from another, theft is involved. When an indi vidual uses force to make another serve him, it is called slavery. But it is not generally understood or accepted that when meliorist eco nomics is applied in society, theft and slavery are entailed.

In the main, this lack of under standing can be attributed to the indirectness, the subtlety, and the sophistry of the-methods of meli orist economics. Men are led to be lieve that public approval somehow changes the character of an action, that confiscation of goods by pub licly elected officials is not theft, that the democratic process can be used to legitimize acts which are in themselves illegitimate. Men do not readily understand that the protective tariff is, in effect, the taking of wealth from the con sumer for the supposed benefit of the producer, that antitrust suits are subtle assaults upon property, that inflation is a surreptitious theft of money from those who have it or have it owed··to them, that compulsory unionization legalizes the taking of money from some by others, that minimum wages and maximum hours are at tempts to take from somewhat is rightfully theirs and give it to others, that to take wealth from some portion of the population and bestow it upon some other portion under the guise of welfare is not even a very subtle form of thievery.

The story thus far, in this work, has been an attempt mainly to ex plain how men's minds were pre pared to accept such things with out recQgnizing them. Men have been taught to take their eyes away from the nature of things and to focus upon the purported object or end for which an act has been performed. They have been taught that it is the motive that counts, not the consequences of the act. They have been taught that morals - and even the lan guage used to describe them -are relative to a given society. If this were so, only that which the gen erality of men understood to be theft would be theft; only that which was recognized as slavery would be slavery. If the majority voted for a measure, or for those who proposed a measure, this would be indicative of its con formity to morality. After all, one may argue from such premises, whatever the majority accepts as right is ipso facto right.

36 THE FREEMAN May Robbery Is Antisocial; One Man's Gain is Another's Loss Morality aside, and speaking strictly in terms of what may be economical for an individual, rob bery could be quite economical. By stealing, an individual can great ly augment the supply of goods and services available to him with only a very little expenditure of energy and materials. A bank rob ber may spend half an hour using a twenty-dollar gun and enrich himself, say, to the extent of $20, 000. Of course, such usage is an abuse and perversion of the con ventional term "economy." Eco nomics, as it comes to us from the classicists, is a social study, not an antisocial one. It has to do with what may be economical Dot only for an individual but f or all other men as well. The bank robber increases his supply of goods and services at the ex pense of those of other men. Moreover, he may actually re duce the general supply by the threat he poses to trade and the loss of incentive men have to pro duce when they are uncertain that they will be able to keep there wards-of their labor . For these reasons, theft has not been con sideredeconomical. Of course, in most societies such penalties have usually been attached to the prac tice .as '. to make it uneconomical.

The point is important, however, for understanding what hap pens when meliorist economics is applied within a society. Individ uals do not cease; so far as their understanding goes and as a rule, to behave economically in their own affairs. Indeed, a new pros pect for "economic" behavior is opened up, for certain kinds of theft are legalized. Men may bene fit at the expense of others with impunity in certain definite areas. That such behavior is uneconomic socially, plus being immoral, will not hinder a great many men in their conduct,for what they are doing may well be' socially ap proved. An example from the contem porary scene of behavior that is "economic" for the individual at the expense of others may clarify the point. Suppose one is a cotton farmer. The price of cotton is held higher than it would otherwise be by a subsidy. The subsidy is paid by tax" monies, at least tem porarily. There is a "surplus" that is, more than can be sold at this artificially high price - of cot ton. The farmer will likely make his decision as to whether to grow cotton or not in terms of its prof itability when the subsidy is add ed to the-market price. It would be economic for him to do so, al though socially the effect would be to add only to the "surplus" and the general tax burdell. His profit 1966 MELIORIST ECONOMICS 37 would be got at the expense of others.

Vying for the Spoils The system which results from the application of meliorist eco nomics is one in which men are pitted against men and groups against groups for the spoils made available by redistribution. There has been a concerted effort in the United States to move this con test into the political arena and to get men to' accept peacefully the decisions made there. The art of politics becomes the art of guess ing rightly about which group to appease at what moment in order to keep the uneasy peace and main tain political power. The portion of spoils to be handed out to. any given group must be continually adjusted to take into account both the temper of the group involved and its leverage in maintaining a majority for the politician and party in power. The story of such maneuvering is largely' the story of politics in America in the twen tieth century. Meliorist economics is the body of pseudo-economic· theory which purports to justify such a system and provides the politician with the methods for establishing and maintaining it. The true nature of these activities is largely con cealed behind a cover of words which' not only obscures what is going on but reduces discussion of economic matters to high-flown gibberish. The gibberish is then ascribed to the intricate complexi ties of our times. The general flight from reality prepared the way for the wide acceptance of such obfuscations, and socialists added confusion to nineteenth cen turyeconomic thought by turning the traditional economic concepts to their ends.

All Schemes Rest on Monopoly A casual examination of melio rist economics might lead to the conclusion that there are a great diversity of economic conceptions involved. Indeed, names have been given to a number of schools of economics: e. g., socialist, histori cal, revisionist, Marxist, institu tionalist, Keynesian, and so forth. But most, or all, of these schools have a common denominator; they have a common conception from which they start or with which they end. Of course, they share the conception that the "system" - 1. e., capitalism - has internal contradictions which lead to dire consequences. But back of this is a key conception which purport edly accounts for' these. contradic tions. The key conception is mo nopoly. In ·the later part of the nineteenth and in the early twen tiethcentury, reformers sawmo.;. nopoly under every bed, as it were.

38 THE FREEMAN Ma·y There were transportation mo nopolies, industrial monopolies, land monopolies, money monopo lies, and trade monopolies. The for mula tion of these conceptions ranged from Karl Marx's view that the private ownership of the means of production led inevitably to a class monopoly of production to John Maynard Keynes' subtle no tion that profit taking and saving led to shortages of investment money which, in turn, produced depression. However remote these ideas may appear to be from it, they are rooted in a conception of monopoly, and amelioration is to be achieved by breaking up the monopoly. An Exclusive Privilege Monopoly is· a very slippery word; therefore, it must be handled with care. It is derived from the· Greek, and means, ety mologically, the exclusive right of sale. However, it had a much narrower connotation than this in earlier conventional English usage. An article in the Encyclo paedia Britannica says, "The term monopoly, in its early usage, was applied to grants from the Crown, to a favourite or as a reward for good service, of the exclusive right to manufacture or sell particular classes of goods." One American College Dictionary indicates that this has now become its secondary meaning. In this sense, a mo nopoly is "an exclusive privilege to carryon a traffic or service, granted by a sovereign, state, etc."

An unabridged dictionary calls this an artificial monopoly, which it defines as "an exclusive right granted by a government for the exploitation of anything." Odium was first attached to this kind of monopoly. But even this development has a history. Initial ly, in the sixteenth and seven teenth centuries, odium was as signed mainly to the arbitrary grant of monopolies by the mon arch. There was an attempt to re move this by taking the power of granting monopolies away from the Crown and vesting it in Par liament. Americans and English men generally accepted the pro priety of legislatures granting mo nopolies in the seventeenth and for much of the eighteenth century. However, by the time of the War for Independence there was con siderable resistance to all such mo nopolies. The resistance continued to mount in America, and by the middle of the nineteenth century, monopolies were· among the most generally despised of all human inventions.

A Perverted Terminology It was at this j uncture that so cialists began to becloud the issue with their confusions. They ex1966 MELIORIST ECONOMICS 39 propriated the odium attached to government-granted monopolies and applied it to monopoly in gen eral, in the etymological sense of the word. It is easy to see how the term could be ambiguously used to bring all sorts of things under condemnation. By the original definition of monopoly - the exclu sive right of sale - all private property is a monopoly of its owner. In this sense, every man who owns anything, whether it be a factory, a house, a barn, land, an automobile, or a pocket knife, is a monopolist. Every free man is a monopolist, for he has the exclusive right to sell his service. Indeed, it is this right, and this monopolistic condition, which sep arates free men from slaves. Socialists have been bent, of course, upon breaking up monopo lies, or, more clearly, abolishing private property. But they were notoriously unsuccessful in selling this idea to the generality of men in their early attempts. Most men were not particularly taken with the notion of giving up their pri vate property; and when they had the opportunity to vote upon the matter, they turned down such schemes unceremoniously. Social ists generally found it advanta geous to narrow down their as saults upon property to certain kinds, to use "monopoly" in a more specialized sense, and thus to divide the populace on the question of property. At any rate, gradual ists have not usually attacked prop erty directly; they have, instead, attacked what they have called mo nopoly.

The Power to Fix Prices A new definition of monopoly was promulgated in the latter part of the nineteenth century. It has since become a part of our lan guage and serves as a lens through which most people see the matter. The Encyclopa,edia Britannic'a says, "In its modern usage the term monopoly is applied to the advan tage accruing to any undertaking or associated group of undertak ings which has the power, however acquired, of fixing the price of its goods or services in the knowledge that those who need them cannot get them in adequate measure else where." One dictionary gives the following as the first meaning of monopoly: "exclusive control of a commodi ty or service in a partic ular market, or a control that makes possible the manipulation of prices." By these definitions, the exist ence of a monopoly appears to hinge on two things: that there be but one effective seller of a com modity or service in a given mar ket, and that this will enable him to fix or mani pula te the price.

(For purposes of discussion, the 40 THE FREEMAN May vagueness of such phrases as "commodity or service," "partic ular market," and "manipulation of prices" in this context may be ignored.) If such a condition were to exist, it probably could be rec ognized. If it be considered repre hensible, if it pe a matter for le gal action, the most fruitful ap proach for dealing with it would be to seek out its sources. Two Types of Monopoly: Governmental or Private There are, in reality, only two sources of such monopolies: gov ernment grant or establishment, and private ownership. Other sources are sometimes named, but upon careful examination it can be shown that they do not meet the above requirements or do not exist. Some writers refer to an efficiency monopoly. This is a case where there is only one supplier of a good or service, so that it meets one half of the requirements for a monopoly. But it is a condi tion of its continued existence that it does not manipulate prices to any significant degree. If it raises prices appreciably, other suppliers can enter the market successfully.

The other type of monopoly fre quently referred to is a natural monopoly. The phrase itself is am biguous. One dictionary defines a natural monopoly as "a monopoly arising from the possession of a part of the earth's surface, having a natural resource or resources." But this is indistinct from a def initionof private property in land. More commonly, a natural monop oly is understood to be one in which by the nature of things there can be only one supplier of a good or service in a particular market. It is often alleged that the provision of telephone service in a particular locale is a natural mo nopoly. In the first place, however, "service" is ambiguous in this us age. Is the service the providing of a telephone or of communica tion? If it is communication, tele phone service has no monopoly. One may communicate by mail, by telegraph, by radio, or go in per son. But even if the uniqueness of the telephone as a means of com munication be taken to signify that it constitutes a separate ser vice, its actual monopoly status is not natural. It rests upon two foundations: government fran chise and private property. These are the twin sources of all monop oly.

It is not clear, however, that private property meets all the re quirements to be classed as mo nopoly by the contemporary usage of the word. Etymologically, pri vate property is a monopoly, for it is the essence of private prop erty that the owner has the exclu sive right to sell it. But in modern 1966 MELIORIST ECONOMICS 41 usage private property is not a monopoly. No man, or group of men, owns all of a commodity or service which can be sold in a particular area. No man or group of men does or can own all the means of communication, of transportation, of serving in a community unless all men are his slaves, and that could only exist by the exercise of government power. By the very nature of things, no man can own all of a particular commodity and manip ulate prices at the same time. Price is something that can only be determined after the sale of articles. Once an article has been sold, the original seller no longer has a monopoly. It is true that a man might have a monopoly of the sale of a commodity in that no one else would be permitted to sell it, but that would be a matter of law and government prescrip tion.

It follows, then, that the modern usage of monopoly only appears to differ from earlier usage. The reprehensible characteristics of monopoly - that is, the exclusive control of a commodity or service which enables one to fix or manip ulate prices - apply only to some thing that has been granted, es tablished, or prescribed by gov ernment. Anyone who doubts this should examine carefully into the sources of the ability of any seller of goods or services to fix their price. He should trace out the lines that lead from the seller to the government and find what it is that enables the seller to fix his price. The government action may be very subtle, as in the case of a protective tariff, or it may be very plain, as in the case of mini mum wages or rate regulation. But it is always there. An Assault upon Property Nonetheless, meliorist econo mists have quite often referred to what can happen when men use pri vate property to produce goods and from which to provide services as monopoly. Usually, only that seller who has garnered a substan tial portion of the market is re ferred to as a monopolist, or as being "monopolistic." To break up such "monopolies," the meliorist proposes that they be divested of some portion of their property, that the rights of property be cir cumscribed, and/or that the gov ernment regulate the use of the property. Thus, the attack upon monopoly becomes an assault upon property, though not all property immediately comes under the gun.

The amazing feature of this is that such action usually produces the substantive evil it is supposed to prevent. The evil of monopoly is the possibility it affords for fixing and mani pula ting prices so 42 THE FREEMAN May as to "charge what the traffic will bear." The regulation of "monop olies" eventuates in the fixing and manipulating of prices by govern ment. For example, in the latter part of the nineteenth century, railroads were pictured as giant monopolies gorging themselves on a defenseless public. In order to regulate them effectively, politi cians were finally convinced that they must establish rates. The government then began to fix and manipulate prices, that is, to im pose the conditions of monopoly upon both sellers and buyers. As to whether these rates were as high as the traffic would bear, the indications are that they have fre quently been more than much of railroad traffic would bear, for they have lost much of it. In recent years, railroad managers have fought an uphill battle to get at least some of their rates lowered.

Governments cannot intervene to prevent monopoly; when they intervene, they create monopoly, or the effects of it. It is the fail ure to understand, accept, or ad mit this that constitutes, in con siderable part, the .flight from reality of meliorist economists. The Face of Socialism Viewed as a school of socialism, and that is what it is, meliorism can be defined in yet another way. It is the view that the instruments of government which have been in herited in the political system can be turned to the purpose of wrest ing economic power from the hands of those who possess it (the monopolists) and placing it in the hands of the "people." Meliorism is the face that gradualist or evo lutionary socialism has worn in America, though it has usually been called liberalism in the twen tieth century. Its opposite in the socialist camp is Marxian (or revolutionary, or communist) socialism. Marx ap pears to have believed at the time of the promulgation of the Commu nist Manifesto (1848) that the regular instruments of govern ment, in the right hands, could be used to bring about socialism gradually. But after the abortive Revolutions of 1848 he turned to ward the view that the system must be destroyed first, that gov ernment was an instrument of capitalists, that they would never tolerate its use to undermine their system of exploitation (as he de scribed it).

On the other hand, meliorists have held that violent revolution is unnecessary, that the desired course of change will occur peace fully, gradually, and in an evolu tionary manner. Most have held that this process of change can be consciously directed; but they have generally insisted, too, that for it 1966 MELIORIST ECONOMICS 43 to work it must be in keeping with evolutionary trends. Meliorist economics has been concerned with how to use the instruments of government to bring the economy into line with the course of evolu tion and/or produce the desired changes. Some Leading Characters There is a huge body of litera ture that could be classified as meliorist economics. Undoubtedly, it would take a fair sized building to house the volumes that could be assembled to make a library of it. Even a list of the names of the more influential of such writers upon American thought is rather formidable in length. It would include Francis Amasa Walker, Simon N. Patten, Henry George, John R. Commons, E. R. A. Selig man, Richard T. Ely, Thorstein Veblen, John Maurice Clark, Paul H. Douglas, John Maynard Keynes, Stuart Chase, Adolph A.

Berle, Gardiner C. Means, Wesley C. Mitchell, Rexford G. Tugwell, Sumner H. Slichter, John K. Gal braith, Paul A. Samuelson, and Seymour E. Harris .. among others. These and other such writers have not always called what they were writing about monopoly. Some have, and some have not. They have called by a great variety of names the ill that is supposed to beset America : they have called it overproduction, underconsump tion, absentee ownership, techno logical unemployment, finance cap italism, oligopoly, maldistribution, economic royalism, underinvest ment, imperfect competition, in dustrial wastemaking, unearned increment, social surplus, indus trial depression, recession, the end of the frontier, a mature economy, corporate domination, and eco nomic disequilibrium. But when the tangle of rhetoric has been unwoven, when the tree of melio rism has been surveyed as a whole, when the branches have been traced back to the trunk, when the trunk has been followed to the root, it becomes clear that melio rist economics is rooted in the conception of monopoly.

The Land Monopoly This can be examined from sev eral angles. It can be shown by examining the thought of melio rist economics. The classic case of a thinker proceeding from the con cept of monopoly to a, meliorist position is that of Henry George, and he was also one of the first to have any considerable impact. George's thought proceeded along the following lines. In the first place, he believed that indus trial progress was resulting in in creasing poverty. The cause of this, he held, was that individuals were deriving profits which should 44 THE FREEMAN May accrue to society. These profits came as a result of the private ownership of land. Land, he rea soned, does not naturally belong to any of us; it was something that was here primevally, and here for all men to use. But some have acquired exclusive possession of it, by whatever means, and em ploy it to their advantage at the expense of the well-being of all.

They take away from society the return from the employment of land, and they keep lands out of use for speculative purposes, thus depriving men of the right to put the lands to economic use. (One of his underlying premises is that lands are not being economically exploited. ) He proposed that the problem could be solved by government in tervention, that the government be financed by a single tax, that the tax should take all that accrues to a man from the land itself, as opposed to that which is a prod uct of the labor of the landholder. Not only that, but the tax should fall on unused lands as well. He thought that this would result in the opening up of these lands to economic use and the amelioration of the material conditions of men generally. In short, George's diag nosis of the cause of the ill was land monopoly, his prescription was government intervention by way of the single tax, his prognosis was a general improvement in the well-being of the populace.

If we ignore the difficulty of calculating what part of a man's return can be attributed to his labor and what to his land, a diffi culty somewhat akin to the one faced by Jonathan Swift's scien tist who was attempting to ex tract sunbeams from cucumbers, and assume that the differential could be calculated, it still does not follow that economic results would be obtained. With the im position of the single tax, all ad vantage to holding title to land would disappear. Not only that, but it would be disadvantageous to hold title to unused land. It stands to reason that if the owner of unused lands could have employed them to his profit before the im position of the tax he would have done so. The tax would detract from, not add to, his incentives to use the lands productively. The chances are good that the lands would soon be offered at public auction to satisfy the tax claims against them. But that there would be buyers is most unlikely. The risks of holding title to land, even that which at the moment would be productive, would be consider able, and the advantage none. In consequence, all land might be ex pected to come eventually into the hands of the government. That governments can or will employ 1966 MELIORIST ECONOMICS 45 lands economically is something of which past experience offers no assurance. The method of melio rist economics ·is epitomized in the thought of Henry George: the lo cation of the flaw in the system, the proposal of government inter vention, the promise of ameliora tion, the assault upon property, the eventuation, if put into practice, of a giant overweening monopoly.

Veblen's Influence through the Institutionalist School Henry George showed the way. Many reformers read and were in fluenced by him. In general, though, they abandoned the spe cifics of his analysis and prescrip tion while keeping the abstract of the method. Thorstein Veblen was much more influential in specifics. In the main, his was an adaptation of the Marxian analysis into an evolutionary framework; he no longer perceived any necessity for violent revolution. He was the early leading exponent of the insti tutionalist school, which has been the most virulent branch of me liorism in America. To Veblen, economic activity takes place with in, can be understood in terms of, is a reflection of, and is driven by institutional arrangements. Insti tutions are a product of a. long, and largely unconscious, evolu tionary growth. They are under going continual change, and the task of men is to adj ust their prac tice to the course of historical de velopment. Veblen was the preco cious product of that view of re ality as consisting of change, so ciety, and psyche, a contemporary of Lester Frank Ward and John Dewey, and an applier of their shared notions to economics.

For a good many years, mainly in the first quarter of the twen tieth century, Veblen. turned all the acid contained in the English language, both received and in vented, to the task of satirizing the economic system. The system was a fit subject for satire, if Veblen' sanalysis was correct. It was shot through with anachro nisms. The major anachronism was the profit of capitalists. These got the profits of production and distribution but no longer contrib uted to it. The business of pro duction and distribution had been engrossed by corporations, almost exclusively. These, in turn, were managed by specialists who were technologists. The day had arrived when the capitalists could have been dis pensed with and the businesses run for the many rather than for the few, but capitalists continued to receive their ill-gotten gains as a result of the· outmoded institu tions which prevailed. To put it bluntly, the institutions of private property enabled capitalists to 46 THE FREEMAN May hang on to their "pecuniary gains"

which resulted from government protection of what amounted to a monopolistic position. Actually, the corporation was not private property at all; it was a public creation, which, if men were con sistent, would be used for the benefit of the public. This would happen, Veblen thought, when the technologists took over entirely and the stockholders were cut away. Veblen did not claim to know how this would come about; all that he could say for sure was that the course of economic evolu tion had just about reached the point where it would most cer tainly occur. Disciples and followers of Veb len were not slow to find means to advance the public takeover. Meliorist economics then branches out into the particular analyses of the assorted ills that are supposed to arise from an economy based upon private profit - of the· ex ploitation of workers, of sweat shops, of depression, of declining farm prices, of inevitable increases in farm tenancy, of wastefulness of natural resources, and so on and the numerous proposals for amelioration: the establishment of minimum wages, maximurn hours, stock market regulation, corporate tax, organized labor, and so forth.

In short, means are advanced for taking away from owners of property the control of it and a large portion of the profits from it. Cycles and Counter-Cycles One other such analysis may be given as an example. Wesley C. Mitchell was mainly influenced by Veblen. He turned his attention to business cycles, and wrote ex tensively about them from 1913 into the 1930's. He held that busi ness cycles, at least rnodern ones, were a phenomenon of an economy based upon profit. He analyzed the business cycle and described its various phases, starting at the depth of depression. What spurred the economy, he thought, was growth in population, depletion of products, and increasing demand, plus new investment. Investment led to profits, and the possibility of profits led to optimism and in creasing investment. Prosperity could not be maintained indefi nitely, however, because other things did not keep pace with in vestment and because technologi cal innovation produced disequi libri urn. Wages did not rise as fast as production; technology pro duced unemployment both directly and indirectly because some pro ducers would be stuck with old equipment. Profits would fall off; overproduction might result; dis tributors would have large inven tories; demand would decline; in vestment would decrease; depres1966 MELIORIST ECONOMICS 47 sion would come again. In the main, he proposed .that govern ment should intervene in such ways as manipulating the money supply so as to maintain pros perity.

While this analysis does not ap pear to hinge upon monopoly, a more careful statement of the the ory which would support it would indicate that profits are a corol lary of private property and that the basic flaw in the system is the uncoordinated management of the economy that results from the disr.~rsion of property. He pro posed (or predicted) increasing governmental planning to main tain an equilibrium. In short, he advocated the circumscription and regulation of private property so as to maintain prosperity. The Pattern of Legislation Aimed to Curb Monopoly Legislation over the years spawned by meliorist economics may demonstrate even more clearly that it was aimed at breaking up monopolies. The Interstate Com merce Act was designed to prevent the supposedly harm~ul effects of railroad monopoly of transporta tion. The various antitrust acts were attempts to circumscribe monopolistic activities. The Fed eral Reserve System was supposed to break up the Wall Street money monopoly. Minimum wages were supposed to circumvent the harm ful effects of the monopoly of em ployment activities which em ployers are supposed to have. Fed eral provision of electrical power was supposed to provide a yard stick for determining what proper competitive prices of electricity should be. Government supported loans at low interest rates are supposed to remove the harmful effects of private banking. So it has gone, from activity to activity and from industry to industry.

This supposed assault upon monopoly, though it was justified under many guises, has been, in fact, an assault upon private prop erty. It has taken away, or se verely circumscribed, the rights that belong to private ownership of property. It has brought more and more activities under the sur veillance and direction of govern ment. It has introduced the harm ful effects of monopoly into all areas of life. Government agencies now fix and manipulate prices of all sorts of things, from wages to rail rates. Theft has been legal ized, for the rights of property have been taken without compen sation, and monopoly pervades American society. ~ The next article in this series win discuss "The Bent to Destruction."

PHILOSOPHIES OF FREEDOM KENNETH W. SOLLITT THERE ARE in America today two diametrically opposite philosophies of freedom. The first is the philosophy that brought our forefathers to Amer ica. They sought freedom to wor shi p as they pleased, to speak and write-as they pleased, to work where they pleased at whatever work they found pleasant and prof itable, and freedom to enjoy the rewards of their labors. . They wanted the right of self-govern ment and social and economic self.;. determination. They asked for only such security as they could create for themselves and each other through the free exchange of goods and services augmented by such charities as were neces sary. And storms at sea, severe winters, poor crops, hostile In dians, impenetrable forests, vast prairies, unspanned rivers, or The Reverend Dr. Sollitt is Pastor of the First Baptist Church, Midland, Michigan. 48 burning deserts could not quench their thirst for this kind of free dom. Because of it, our forefathers hacked and blasted, molded and sculptured this country into the great nation that it is.

Ours is a philosophy of freedom that says a man ought to be free to do as he pleases up to the point where what he pleases to do in terferes with his neighbor's equal right. At that point he must halt or alter his course. If he pleases to do this of his own. free will, he remains a free man. If he doesn't, he has his freedom taken away from him by forces he himself has created to govern his society. This, very briefly, is our his toric American philosophy of free dom. It is based on the Judeo Christian belief in the sacredness of human personality, the convic tion that freedom of choice was bestowed upon man at the begin ning by God, and that no man has 1966 TWO PHILOSOPHIES OF FREEDOM 49 the right to rob another man of his integrity as an individual, or his God-given right of free choice, unless and until he becomes a menace to society. Freedom from Choice However, for some thirty-five years now another entirely differ ent philosophy of freedom has been evolving - the philosophy tha t freedom is no longer for something, like "life, liberty, and the pursuit of happiness," but freedom from almost everything, like "want, worry, and war," and work, too, if possible.

Richard LaPiere in his book, The Freudian Ethic, credits Sig mund Freud with having much to do with the development of this philosophy, and shows, rather con vincingly I think, how out of it has grown our tendency toward permissi veness in home and school, the coddling of criminals, and political maternalism in all its forms. This doctrine of "social ir responsibility and personal de spair," as he calls it, has, he be lieves, led us to cease to want free dom as we have always known it, and to seek instead freedom from responsibility and involvement. And there is much evidence that he is right. Perhaps this new philosophy of freedom is best expressed by one of the characters in Ayn Rand's novel, The Fountainhead. In this book a character says, "The basic trouble with the modern world is the intellectual fallacy that free dom and compulsion are oppo sites ... In essence, freedom and compulsion are one." To illustrate this her character points out how traffic lights restrict our freedom to drive as we please, but at the same time they protect us from being hit by a truck. So, he reasons, "if you were assigned a job and prohibited from leaving it, it would restrain the freedom of your ca reer. But it would give you free dom from the fear of unemploy ment." And he goes on to say that "whenever a new compulsion is imposed upon us, we automatically gain a new freedom."

So, he concludes that "only by accepting total compulsion can we achieve total freedom." Most of us would agree with Ayn Rand herself that this is not free dom in any realistic sense,. But more and more people every day are consciously or unconsciously absorbing this philosophy. Some times even patriotic Americans re turning from military service, after getting their first taste of having to make decisions for them selves in the business world, actu ally prefer freedom from decision making to freedom for decision making. In any case, we are fast losing 50 THE FREEMAN May our identity as individuals. We have grown to feel that the individ ual is no longer important and that to achieve anything we must join and run with the pack - that is, the labor union, or the ind us trial association, the freedom march, or the campus demonstra tion. As a consequence, our op portunities for responsible choice making are being reduced almost daily. Practically every law passed makes us more dependent upon government. And since the govern ment is dependent upon us as wage earners, our jobs become prayer rugs .on which we prostrate our selves with our faces toward Wash ington praying to those who have preyed upon us to take care of us who are now irresponsible wards of a welfare state.

And are not promises more pleasant than responsibilities, and dreaming a pleasanter pastime than decision-making? Send some one else into our fields. Bring us our tranquilizers and let us relax until the next hour of prayer. At last we are free! Free of respon sibility for ourselves (which breeds laziness), free of consider ation for others (which breeds lawlessness). We are free! Free of freedom itself! Security May Betray Us Forgive me for overdrawing the picture. Things aren't this bad ... yet. But are we not mov ing in this direction? And isn't the trend due in large measure to a reversal of our historic phi losophy of freedom? We have ceased to want "freedom for" so much as we have wanted "freedom from," so we have sacrificed the former to those who have prom ised us the latter. In reality we have not wanted freedom at all, but security. We have ceased to see freedom as freedom "from control" and have thought of it as freedom "by control," and usually we have thought of it as the control of somebody else for our benefit. We knew that if we did this with bul lets in a gun, it would be wrong but imagined that if it were done with ballots in an election, it would somehow be all right. So we asked, or at least allowed, our politicians to rob our children by indebtedness and our old folks by inflation on the promise that our children and old folks (and our selves) would be protected from (in fact prevented from) taking care of themselves. Thus, we be come more and more dependent upon government and in the proc ess have built up a government that is almost omnipotent - a gov ernment which, by destroying man's initiative while at the same time increasing his appetite for handouts, is in for an increasingly 1966 TWO PHILOSOPHIES OF FREEDOM 51 difficult time. It can never take from us enough to give us back all we think we ought to have. Drain ing off savings and drying up the wells of initiative is the exact op posite of capital formation on which productivity rests and on which relief from poverty de pends. There is nothing formative, productive, or creative about rob bing Peter to pay Paul.

But cheer up! We are on the road to "total freedom" which the character in Rand's novel assures us is to be found in accepting "total compulsion." Rising to the Challenge One thing bothers me though. Since human beings are no longer willing or able to make decisions for themselves, aren't we someday apt to run out of little gods ca pable of making all the decisions for everybody? And another thing bothers me, too. When everybody is living off the government and nobody is supporting it, what kind of a liv ing will it be? What has brought about this re versal in our philosophy? Prob ably not the argument from the analogy of the traffic light. This might influence some pseudo-intel lectual, but most Americans with intelligence enough to understand such sophistries see through them. Perhaps we can blame some of our predicament on Sigmund Freud. The free dissemination of com munist propaganda by all kinds of pinks and punks in high and low places may be responsible, as is often charged.

But I think the real reason goes deeper. For the most part, we humans do not exert ourselves beyond the demands of necessity. The neces sity to fight for freedom seemed to disappear when we appeared to have what we had fought for - a home on the range, a good living, a republican form of government, isolation from the problems of Europe and Asia, churches, schools, libraries, baseball dia monds, hot dogs, and service clubs. But then came the great depres sion.And our jobs, our homes, our fortunes· were no longer secure. And there were no new frontiers farther west. Our frustration was complete. Whatever was to be done would have to be done by and for the whole country at once. This required organization, lines of communication and powers only government could provide - and that only after the people granted government those powers. Roosevelt declared in 1938: "Government has the definite duty to use all its powers and resources to meet new social problems with new social controls." In our des peration we accepted this as a na52 THE FREEMAN May tion and have been elaborating on it ever since.

For the first time we had a gov ernment organized to "give to him that asketh," and we have found it easier to go on asking than to return to doing for ourselves. In this we were doubtless aided and abetted by Freud and characters like the one in Rand's novel, by communists, socialists, and the like, but the thing that has thrown our philosophy into re verse has not, in my opinion, been anyone thing, or anyone person, but a combination of many per sons and things. Principal among these things, however, was our feeling of help lessness when caught in a nation wide economic disaster, followed by an experience of being helped at points by a benevolent govern ment which got us "hooked" on political pablum. Politicians have found it profitable to take from those who have and give to those who have not. And the recipients have found it easy to vote for more of the same, until our whole philosophy of freedom has been reversed.

Second in importance is the fact that up until now it has worked pretty well. We have never had such affluence; hence, such apathy. We like to imagine this can go on forever. We haven't realized yet that to make a government strong enough to give us everything we want, we must make it strong enough to take from us everything we have, including freedom as we have always known it; and there are thousands who have never known the former kind of freedom and have no appetite for it. Thou sands are willing to give up this old-fashioned freedom which they cannot comprehend for the new freedom from responsibility which they find so comforting. Soon an irresponsible people may find it difficult to find among their numbers responsible leaders. Demagogues there will be aplenty. But an irresponsible society can hardly be expected to spawn re sponsible .leadership. Well, what can we do about it? By Precept and Example The last thing we want to do is to say there is nothing we can do; this is to join the irresponsibles.

So the first thing we ought to do is to resolve to be, insofar as possible, a part of the cure instead of a part of the disease, a part of the solution instead of a part of the problem. How can we become part of the solution? We can at least study our concepts of free dom from different points of view: social, economic, political, psycho logical, ethical, and so on. And we can still listen to those who are trying to sell America to Ameri1966 TWO PHILOSOPHIES OF FREEDOM 53 cans and join them in the sales promotion, for we have something unique here we have not yet en tirely lost. ·We can help people, including our children, to re-examine such things as the present popular myth of equality, pointing out that men are not equal merely be cause they are born by the same biological process~ They should be equal before the law because we respect the sacredness of person ality. They should have equality of opportunity. But beyond that, whether they are equal or not de pends on what they do with their opportunities.

We need to help shift the em phasis from equality to justice and to help people see that justice is utterly disregarded when the relationship between effort and re ward is obliterated, or reversed, as when under the banner of "equality" the man who works is robbed to pay the bills of another who won't. If he can't work, that is, of course, a different matter. Let us help people re-examine the "from -each - as-he -is -able -to each-as-he-has-need" approach to sociology and economics in the light of psychology and ethics, and the "grea test -good -to -the greatest-number" theory in the light of what it does to people as well as what it does for them. Let us help them get a new look at the theory that there are so called "human" rights that are greater than "property" rights, and ask them what human rights are enhanced when property rights are interfered with? And what human rights are safe where property rights have ceased to be respected?

Let us help people re-examine the morality of buying votes with social programs, and the ethics of going through every revolving door on somebody else's push. Above all, let us teach our chil dren by both precept and example one maxim about freedom. It is this: that no man is ever free to do that which - if everybody did it - would spoil society. For it is the disregard of this maxim by self-seekers of every kind and de scri ption that is spoiling our so ciety today. ~ James Russell Lowell Being forced to work, and forced to do your best, will breed in you tolerance, self-control, diligence, strength of will, content, and a hundred other virtues which the idle never know.

· .. . AID I Illy brother's keeper?" A Note on a Commonly Misunderstood Text HERBERT S. BIRD THE BOOK OF GENESIS informs us that Cain, Adam's first-born son, overcome by a delirium of jeal ousy, murdered his brother Abel. The account continues : "Then the Lord said to Cain, 'Where is Abel your brother l' He said, 'I do not know; am I my brother's keeper l' " The story, as it unfolds, indi cates that Cain soon became aw,are of some of the immediate, personal consequences. of his despevate act. And it iis likely that, as the years passed, he began to realize. that his treatment of Abel would in fluence, for the worse, the lives of many yet unborn. But it never occurred to him that one, almost minor, detail of the story of his crime and its punishment - his flippant alibi, "Am I my brother's The Reverend Mr. Bird has been a missionary of the Orthodox Presbyterian Church in Ethiopia since 1952.

54 keeper 1" - was destined for a prominent place in the socio-theo logical moralizing of an age far removed from his own. "Am I my brother's keeper?" The words, or some allusion to them, ,are high on the list of say ings most frequently employed from the pulpit or in the religious press. And, along with more than a few Biblical texts, they are ap plied in a sense they were never intended to have. Here the mis understanding arises from the easy assumption that the only pos sible answer to this query is "Yes." To suppose any reply ap propriate other than "Indeed, Cain, you are your brother's keep er" would be, to many, unthink able. Hence, the expression is used to promote a wide v,ariety of causes, many of them worthy, some of them, without question, 1966 "AM I MY BROTHER'S KEEPER?" 55 legitimate objects of religious or charitable interest. But a faulty exegesis never brings unmixed blessings. Thus, unfortunately, there is a use made of the words, "Am I my brother's keeper?" which is by no means innocuous. For many a speaker or wri ter employs them nowadays, not to promote causes which are the proper business of the church, but rather to enlist the Bible in support of any number of coer cive welfare schemes dear to the heart of the political liberal. A recent example of this very thing appears in a leading religious peri odical, in an article intended to demonstrate that an omnicom petent welfare state is not only agreeable to Christian theology but is required by it. The writer observes, "Justice means that all men shall be treated fairly and equally. In practice, justice means that the poor must be protected from the rich, the worker from the employer, the widow and or phan from those who would prey upon them, the minority from the majority."! (It may be of more th:ln p:lssing interest to note that this, for its one-sidedness, has nothing in common with the Bib lical idea of justice. Moses' words are: "You shall do no injustice in 1 Francis D. Breisch, Jr., "Why I Am a Political Liberal." Eternity, XVI, 10 (October, 1965), pp. 24 ff.

judgment; you shall not be partial to the poor or defer to the great, but in righteousness you shall judge your neighbor." - Leviticus 19 :15.) The same article then goes on to 'assert, "In the world in which we live today, we are all responsible for each other. More than ever, I am my brother's keeper. And to fulfill our corporate responsibility we need social leg islation which w,ill guarantee jus tice to all." Murder Being the Most Uncharitable Act of All Wherein lies the fallacy of such an application of Cain's question? Such a misuse fails to recognize what Abel's brother was really saying. This is not to seek to rehabilitate Cain's reputation: his attitude-was indefensible, and be cause he knew that even as he spoke, his brother - through his fault - lay lifeless, his insolent disavowal of guardianship over him was sheer hypocrisy. But this consideration should not ,blind us to the real state of affairs when the question of the responsibility of one human being for another is before us. For clearly Cain was not ,asking whether he should show proper consideration for a fellow man, or whether he should refrain from doing violence to him. He was asking whether he was supposed to ,be his constant 56 THE FREEMAN May guardian: whether Abel was an swerable to him for his actions, whether he was required to keep Gain informed as to his very whereabouts. This was the intent of his question, and the answer to it is "No." For the Bible does not say that Cain was, in fact, Abel's keeper. It suggests, rather, that his delinquency consisted in his repudiation of the demands of brotherly love.

It may seem that to press such a distinction is an instance of that hairsplitting in which theologians ,are alleged to delight. "Very well," someone will obj ect, "admitting that there is a difference between being my brother's keeper and loving my brother, what does it matter? Whatever the semantics, the practical results are the 8ame." But they ,are not. For to be one's brother's keeper im'plies just wha,t Cain insinuated that it does - to supervise, in greater or leisser measure, another's life; to take it upon .oneself to determine what is good for someone 'else; to over ride his liberty, and even his per sonaHty, in the interests of a so ciial theory. To be one's brother's keeper is to control him. But the Biblical idea of brotherly love is something else again. It is a love free of constraint. It is also a love which, far from being self-defin ing, is carefully delimited in the way in which it is to be expressed.

And this has as little to do with the coercive welfare state as it has to do with the "love is every thing" approach of the so-called new morality. For it is a love which works no ill to its neighbor, whatever that neighbor's position in life may be. Such a love may, indeed, be compelled to take to task the rich man who defrauds, butit cannot say to him, "In the interest of a just society, and in the name of the poor, whom I am protecting against you, I hereby confiscate such of your possessions as seem to me to be more than you need." Again, brotherly love will often require that the poor be helped in a material way. But it may also, at times, demand that some of the poor be told that if a man will not work, neither should he eat. The forcible redis tribution of wealth, however, is not brotherly love (we do not speak of Orwellian "Big-broth erly" love). And to wish to be one's brother's keeper is as mor ally wrong as the liberty of the individual peaceably to order his own affairs is morally right. ~ DANIEL K. STEWART THE TRUE NATURE of a given gov ernment might well he considered within the context of individual freedom. Human freedom is max imized only where there exist gen uine choices between differing ideas. Human freedom, of course, applies to areas of human interest other than political affairs - to art, to economics, to science, and so forth. But it applies to politics, too, with government providing the physical conditions within which the exercise of a choice be tween different political ideas can be made. Such political freedom is thought to yield good govern ment and human happiness.

But physical conditions with re spect to political affairs do not just come about on their own ac count. They begin as ideas in the minds. of men. And in those cases where "the citizens at large ad minister the state, as Aristotle remarks, the "government is called .... a constitution." But we note Dr. Stewart received his degree from Michi gan State University in 1959, and is a former member of its faculty. Now in private in dustry, he is responsible for research in the sciences and arts pertaining to communication. The Principle of Political Polarity that constitutions are composed of laws, that such laws do not just miraculously appear, they are the consequences of ideas, and they indirectly prescribe the physical conditions permissible among the citizens of such a state. Thus, while the laws of govern ment aim to symbolize the good state and human happiness, it is quite apparent in the twentieth century that greater consideration must be given to what individual freedom means in general, and to what it implies for the true nature of given governments in particular.

And this implication might fruit fully be pursued by considering the very opposite of individual freedom, namely, the negation of it - restriction. In this manner, human freedom and restriction would stand as op posing end points ona continuum of ideas. They would be polar op posites. On the one end would be a maximum of differing ideas about a given subject, thereby providing a maximum of choices (freedom), while on the other end would be a minimum of differing 57 58 THE FREEMAN May ideas about that same subject, thereby providing restricted choices. And where this continuum of ideas is about politics, it is reflective of what I would like to call the principle of poliUcal polarity. A Matter of Choice The principle of political polar ity deals with the extremes of maximum choices between political ideas and restricted choices. Re strictions are represented by the laws of a government and, ideally, they are to be enforced without prejudice. In this way, as deter mined by their laws, governments will vary from complete freedom (i.e., allowing maximum choice) of the citizen to complete subser vience (i.e., no choice) of the citizen.

As an illustration of this point, it is educational to observe a reso lution introduced in the Michigan Legislature on February 3, 1965. It proposed that .a "Section 10" be added to Article 2 of the state constitution. Section 10 reads: "Any elector who fails to vote in any state or national election in which he is qualified to vote, un less ill or excused as provided by law, is guilty of a misdemeanor and punished according to law." Instead of any elector being free to vote or not to vote 'at any st:1te or national election, this resolution would declare, under penalty of law, that an elector is not free not to vote. His range of choice would be restricted. If a given government is actu ally determined by the sharing of ideas by the voting citizens of what government should be, then the principle of political polarity refers to the quality and quantity of ideas on the nature of govern ment possessed by these citizens.

Political restriction, in this case, would refer to the voter not pos sessing certain ideas. This fact would prevent him from consider ing certain ideas together, and, in consequence, prevent him from forming certain judgments other wise possible. And to the extent that this situation prevails for other voters, such citizens will con stitute a voting block exercising restricted political judgment. The point is that a given voter's mind possesses a limited quantity of political ideas as compared to the totality, class, or universe of political ideas. But, if certain ideas are not there, they cannot possibly be considered in conjunction with other ideas which are. Presumably, all of us have had experiences wherein if we had only known additional facts, we would have made different judgments. What this condition implies for political freedom is this: to be free, man must have a truthful ex1966 THE PRINCIPLE OF POLITICAL POLARITY 59 posure to opposing ideas. Where there exists a restriction (Le., absence) of certain ideas, the pos sibility of forming certain idea tional relationships is prevented, and, in consequence, certain judg ments otherwise possible simply cannot occur. Freedom has been denied because the scope of man's reason has ,been restricted.

Maximizing the Alternatives The principle of political polar ity has immediate consequences, therefore, in understanding the nature of government and in pro viding a criterion by means of which given governments can be evaluated. It implies that the la bel any given· government happens to wear from time to time in his tory is not necessarily a truthful description of its actual operation. Whether the government is called a "republic," or, to use Aristotle's analysis,l a "royalty," "aristoc racy," "constitution," and their respective perversions, "tyranny," "oligarchy," "democracy" - these names bear no necessary relation ship to the reality of existent polit ical freedom. The test is whether the majority of laws are truly rep resentative of the ideas of individ ual freedom. In their restrictive role, do the laws maximize the ex ercise of genuine choice without prejudice? 1 Aristotle, Politica, 1279 a-1279 b • Moreover, in any country where the citizens elect their g·overnment officials, the principle of political polarity implies the extreme im portance of politically balanced mass communication media and educational institutions. And the far-reaching consequences of this implication cannot be over emphasized. Because it is primari ly over such media and in the classrooms that themaj ori ty of present and future voters obtain such ideas as they do possesls re garding political affairs. Political judgments can only be based on those ideas the citizens possess, and it is these judgments which determine the type of government a country exhibits.

It is for this very reason that totalitarians habitually strive to gain control of a nation's mass communication media and educa tional institutions. By controlling the kind and nature of ideas pre sented to present and future voters, they control their scope of judg ment. It is noteworthy, moreover, that the ideas which dominate the ·mass communication media are related to the ideals and beliefs (ideas) held by a society and taught with in its public institutions of higher education. In the United States, the governing boards of state uni versities are occupied by men who are nominated by political parties, 60 THE FREEMAN May and voted on 'at state-wide elec tions. An imbalance in the mass communication media of a given state will oftentimes be reflected in the political philosophy (ideas) held by the individuals on these governing boards. This fact, in turn, determines their type of ad ministration, their deans and de partment heads, and their faculty.

Balanced communication media, political freedom, and higher edu cation are very much rel'ated to each other. With respect to politi cal philosophy, each one of these can be evaluated in terms of the principle of political polarity: a maximum of political choice (freedom) vis it vis minimum of political choice (restriction). In conclusion, political freedom is here understood as the existent choices between different ideas re garding the nature of government. All ideas of this kind can be thought of as belonging to a class of ideas about political affairs. When some of the ideas of this class are not possessed by the vot ers, then their political freedom is restricted beeause their political judgments-and the resultant gov ernmen t - are based only on those ideas which they do possess. The Ideas Men Hold Governments will vary, there fore, according to the variety of political ideas held by their peopIes. Assuming that no one willing ly chooses serfdom, where the ideas about the nature of govern ment are generally widespread, the people will choose those ideas (and make those judgments) which will lead to the good state and corresponding happiness.

Where the ideas about the nature of government are not generally known, the available choices are thereby restricted. This condition has been described in this paper as representing a kind of political polarity. Some countries reflect a high degree of political sophistica tion, some do not. Corresponding ly, some reflect a high degree of civilizational order, and some do not. It depends on the kind of po litical ideas the majority of voters are acquainted with. One such political idea is that government, if it serves without prej udice, can provide freedom and happiness to its people only indirectly by fulfilling its negative function. Its polar opposite is the idea that government can provide freedom and happines,s directly. When the latter idea is widely dis"" seminated in the mass communi cation media and educational in stitutions to the general absence of its polar opposite, the political consequence is a government which attempts to legislate human free dom and happiness~ ~ A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN ~~Education and the State"

E. G. WEST'S Education and the State (London, the Institute of Economic Affairs, 40 shillings) is typical of the new "freedom" lit erature that is coming out of Eng land. The author is stuck with liv ing in a rather advanced welfare state in which compulsion is the order of the day in all too many fields. To write abstractly about libertarian principles seems to Dr. West rather futile in the circum stances. He is preoccupied not with the possibility of establishing total freedom of the individual, but with providing at least relatively liberal alternatives within the framework of the compulsory state welfare which all the political parties, La bor, Conservative, and Liberal, seem to have accepted as the per manent human condition. Dr. West's aim is depressingly modest. Before we in the United States look down our noses at Dr. West's cautious approach to the problem of freedom in education, however, we might consider that Americans accepted the principle of the "free"

compulsory school way back in the nineteenth century, when Horace Mann was still alive. We tied it to the municipalities and states, but this did not mitigate the compul sion on the taxpaying adult to sup port the school system, and on the child to attend the school up to a certain age. The system was "free" only to the extent that the poor who paid no property taxes got the presumed benefits of the compul sory courses. So, though the United States may still have a larger measure of general voluntarism than Britain, Dr. West's observations about the State's role in education are equal ly applicable on both sides of the Atlantic. Reviewing a hundred and fifty years of history, Dr. West reminds us that the classical economists, who are usually associated with the laissez-faire principle, were almost unanimous in their agreement that the State must compel families to educate their children. The classi cal economists justified this de parture from laissez faire on two grounds. First, they believed that it was a State duty to protect mi nors. Second, they were convinced 61 62 THE FREEMAN May that the "neighborhood effects" of illiteracy were damaging to a free political economy. They thought of illiterates becoming juvenile de linquents and criminals and im posing a huge social cost on soci ety. They also thought an unlet tered man made a poor prospective employee.

Dr. West, however, notes that most of the classical economists did not argue from their "protection principle" and their "neighbor hood effects" analysis that it was the necessary duty of the State to set up its own schools in order to compel the education of the citi zens. Shrewdly, he remarks that the British, long before the Forster Act of 1870 had established state board schools, were making an al most total voluntary approach to universal primary education. Pri vate education was a great and growing industry. The problem was a minimal one of dealing with "problem families" at the bottom of the economic scale and with a few of the more irresponsible rich. If the State had made a selective approach to handling its duty to "protect" minors, it could have avoided plunging governments into the· business of providing schools on "the rates." W. E. Forster's idea in 1870 was to set up School Boards to fill the "gaps" in the, private provision of schooling. But he went considerably beyond the idea of municipal subsidies to private and voluntary nonprofit schools, an idea which, in practice, was already filling the gap over most of England. Once State schools had been created, the tendency of the taxpayer was to send his children to them in order to escape double financial jeopardy.

He was paying for the schools un der compulsion anyway, so why shell out extra money to a church supported or a private nondenomi national school? To meet the necessity of provid ing education for poor families who couldn't afford to pay the school "rates," Forster hit upon the idea of "free tickets" for those who were in extreme poverty. This leads Dr. West to his constructive idea for getting away from de pendency on State schools in the welfarist England of 1966. "If free tickets could be given to poor fami lies for board schools," he asks, "why not for any school?" (Dr. West's own italics.) The idea of the free ticket, or educational voucher ,has been suggested in America by Dr. Milton Friedman. But it already existed in embryo in F'orster's thinking as of 1870. Forster simply failed to draw the proper conclusion from his "free ticket" provision. The voucher idea could indeed be used to provide free choice of educational mediums within the 1966 "EDUCATION AND THE STATE" 63 larger framework of legal compul sion to absorb a certain stipulated amount of schooling. Applied to America, it opens some interesting perspectives. Armed with an edu cational voucher representing his proportionate share of the' public funds available for schooling, the parent would be freed from most of the problems that have recently been bedeviling professional edu cators. The parent who insisted tha t his child be exposed to re ligious instruction in school could present his voucher to a private academy that opens the day with prayers. And the Negro family, oppressed by "de facto" seg"rega tion in its own particular neighbor hood public school, could take a voucher across town to an inte grated private school. Under reviv ing free market conditions made possible· by the voucher idea, the integrated private school would surely become one of the more heartening features of the' land scape.

Educational vouchers could, as Dr. West suggests, be offered on an across-the·-board basis, or on a selective "poor family" basis. The latter, under any new approach to freedom, of course would be pref erable. If all this business about vouchers seems temporizing with the true principle of laissez faire, let us reflect that beggars, in the contemporary political climate, can hardly be choosers. It would he a distinct advance over the present system if, within the compulsory framework of Federal "aid to edu cation," the individual choice of school and college were to be left absolutely free. The voucher idea is, of course, applicable to other fields which the twentieth century State has un fortunately marked out for its own. Just before he died at the ter ribly young age of twenty-seven, Robert Schuchman suggested that social security money might be re turned to the individual in the form of a voucher "cashable" at any insurance company that is in the business of writing annuity policies. Well, if we must have com pulsory social security, why not provide a choice that would enable people to take advantage of insur ance companies that know how to deploy their capital productively?

Dr. West says he is not "reveren tial" to the idea of the "organic State" or to theories of compelled "social harmony." In his Educ'Or tion and the State he is trying merely to make the best of the bad job of having to live in a Britain that has been subjected to ninety years of Fabian propagandizing. His book is the sort of thing we will be writing in America tomor ro~ • 64 THE FREEMAN May THE SCARCITY OF SILVER PAUL L. POIROT TODAY'S so-called scarcity and ris ing price of silver might remind us that all this has happened be fore in America. For instance, the price of an ounce of silver at Boston rose from 7 paper shillings in 1700, to 20 in 1730, to 60 in 1749.1 One might conclude that silver had grown scarce in Boston dur ing that period. But, scarce in terms of what? In terms of the paper money of the Colony of Massachusetts - which was any thing but scarce! The amount of paper money outstanding in the colony rose from 28,000 colonial pounds in 1705, to 311,000 in 1730, to 2,135,000 in 1748. More than a million pounds in bills of credit were issued to cover "war costs"

in the year 1745 alone. 2 Silver must have been "scarce" again during the years of the Revolutionary War when the in1 A. H. Cole, Wholesale Commodity Prices in the United States, 1700-1861, (CambridKC: Harvard University Press, 1938), p. 119. 2 B. V. Ratchford, American State Debts (Durham: Duke University Press, 1941), pp. 26-28. dex of wholesale prices, based on figures in the Philadelphia area, rose as follows. 3 1775... 100 1776... 133 1777... 423 1778. . . 769 1779 3,806 1780 13,518 The conclusion of merchants then was that government bonds are "not worth a continental" as money. The deficit financing of the war in Vietnam, the· war on poverty, and other Federal expenditures, resulting in a constant increase in the supply of paper money in the United States in our time, is bound to be reflected in a "scar city" of silver and gold - and ris ing prices. The scarcity involved in such situations, however, is not an absolute shortage of the pre cious metals but a lack of public faith in the paper promises issued by governments. ~ 3 Derived from U. S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1957 (Washington, D. C., 1960). Series Z 336, p.772.

Also available in standard clothbound volume, $2.50 io a new, attractive, low-priced paperback: $ .95 2.00 6.00 45.00 Single copy 3 copies 10 copies 100 copies t " . ~~~ ~::of MAINSPRING (279 pp., indexed) was published in 1947. Since Mr. Weaver's passing, this great book has been the property of FEE. Previous to this new paperback edition, 350, 000 copies have been pri nted. One large company's circulating library for em ployees required 150 volumes to meet the demand. Based on FEE's experience, MAl NSPR IN G tops all books as a starter for any aspiring student of liberty. Easy reading - indeed, exciting - the be ginner becomes so interested in freedom that he can hardly help pursuing the subject further. FEE's recommendation: Keep a good supply of the paperbacks on hand to present to any individual who shows a spark of interest in freedom. THE FOUNDATION FOR ECONOMIC EDUCATION, INC.

IRVINGTON-ON-HUDSON, NEW YORK, 10533 The dignity of man requires that he must act on his own judgment and responsibility-with freedom and not under coercion. JOHN COURTNEY MURRAY, S.l.

Private Enterprise in the Public Interest . 1965 Annual Report, United States Steel Corp. 37 George Charles Roche III 13 William Henry Chamberlin 17 3 26 42 56 61 23Ludwig von Mises Edmund A. Opitz George Sutherland Clarence B. Carson Leonard E. Read John Chamberlain JUNE 1966 Books: How Price Control Leads to Socialism . Private Rights and Government . Progress - the Flower of freedom . The Flight from Reality: 21. The Bent to Destruction IIPlease Step Aside . .." . Decline and Fall of Silver Coins • Some Thoughts on Censorship Socialism by Seduction COAST FEDERAL SAVINGS AND LOAN ASSOCIATION DepartmentFl, 9th & Hill Sts., Los Angeles, California90014 6-112Al ::::<»#1111••,,,, ..1 ________ ~ STATE _ STREET ---------CITY o Please send me a FREE copy of "What's Inflation?" o I enclose my check (or money order) for $ _ o Please open a Coast Federal Savings accounto Individual o Joint in the name(s) of NAME _ ~ ~ COAST FEDERAL SAVINGS *" AND LOAN ASSOCIATION ~>:; ~ The Gross National Product would be useful information for anyone buy ing or selling a nation; but those who deal peacefully in goods and services are better guided by market pricesand freedom p. 3 ~ Professor Roche reminds us that Diogenes knew, several hundred years ago, that the individual could not sur vive the blessings of the Great Society ....... p. 13 ~ The seductive lure of government intervention, however, continues to blind citizens to the inevitable accom panying controls, finds William Henry Chamberlin p. 17 "", And Professor Mises explains pre cisely the sequence to absolute con trol when the government starts tam pering with the market to help someone p. 23 ~ Almost half a century ago, and prior to his appointment to the Su preme Court, Justice George Suther land pointed out with prophetic in sight and clarity the vital role of government in defending - or destroying - private rights p. 26 .~ The 1965 Annual Report of the United States Steel Corporation points out clearly how the public interest is well served by private enterprise ........ p. 37 ~ In this chapter of The Flight from Reality, Professor Carson shows how the destructive tendencies of imma ture individuals are exhibited in their plans for society p. 42 ~ The Reverend Mr. Opitz suggests that, rather than a law to prevent the writing and reading of intellectual garbage, we need more freedom which will afford a better diet for the mind p. 56 ~ John Chamberlain finds that he had forgotten more than the Treasury experts seemed to know about Gresham's law, as he reviews Wooden Nickels by William Rickenbacker ........ p. 60 .~ P.S. Don't miss the message from Warner & Swasey on the inside back cover.

~nyone wishi,:,g. to communicate with authors may send first-class mall In care of THE FREEMAN for forwarding.

JUNE 1966 LEONARD E. READ PAUL L. POIROT Vol. 16, No.6 President, Foundation for Economic Education Managing Edito1· THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit educational champion of private property, the free market, the profit and loss system, and limited goYernment, founded in 1946, with offices at Irvington-on-Hudson, New York. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, in cluding THE FREEMAN, are met through volun tary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are invited in any amount - $5.00 to $10,000 - as the means of maintaining and extending the Foundation's work. Copyright, 1966, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each.

Permission is hereby granted to anyone to reprint any article in whole or in part, providing customary credit is given, except "How Price Control leads to Socialism," "Private Rights and Government," "Pri vate Enterprise in the Public Interest," and "Flight from Reality." Any current article will be supplied in reprint form If there are enough inquiries to justify the cost of the printing.

P th, A CORRESPONDENT from Pakistan asked: "How can one tell whether a nation is experiencing economic growth?" Really, a nation experi ences nothing; only individuals have experiences. So, if we would measure growth or progress, it must be with respect to the indi vidual human being, nota nation. I here lay myself open to an argument no less contentious than Galileo's when he affirmed that the solar system does not revolve around the earth. He was up against the established faith; I find myself up against Hegel, Comte, and others who have held that only society is real and that the individual is the abstraction. Today these philosophers have fol lowers by the millions - collectiv ists who have no inkling of the s m origin of their ideas - those who favor an intervening political ap paratus, the planned economy, the welfare state. Thus, the argument is between those on the one side who pose society, the nation, the overall economy as the prime unit and, on the other side, the small minority who insist that all meaningful com parisons in progress must be made in terms of the individual.

First, let us ask, how would a bureaucracy, with its numerous interventions in the market place, go about measuring economic progress? The task is greatly hampered by the fact that eco nomic calculation, which is founded on market data automat ically supplied in a system of free competitive pricing, is denied in 4 THE FREEMAN June socialism; it is impossible. 1 Lead ing communist "economists" con cede the point. 2 Yet, the inter ventionists are faced with deci sion-making. And in the absence of economic calculation, they have but one recourse: statistics! "Sta tistics are, in a crucial sense, criti cal to all interventionist and so cialistic acti vities of government. ... Only by statistics can the Federal government make even a fitful attempt to plan, regulate, control, or reform various indus tries - or impose central planning 1 Professor Ludwig von Mises is generally conceded to be the one who intellectually - though not politically demolished socialism. He did this by prov ing that economic calculation is utterly impossible under socialism. Were this not an elusive fact and extremely difficult to grasp, others would have discovered it be fore him. See pp. 131-142 in Socialism by Ludwig von Mises (New Haven: Yale University Press).

2 Aleksy Wakar and Janusz Zielinski, leading professors of the Central Plan ning School of Poland, astonishingly for socialists, say, "The best methods of pro ducing a given output cannot be chosen [by socialist methods of calculation] but are taken from outside the [socialist] system . . . i.e., methods of production used in the past, or so-called 'advanced' methods of production, usually taken from the practice of more advanced countries and used as data for plan-build ing by the [socialist] country under con sideration." (Italics mine). See The Jour nal of the American Economic Associa tion, March 1963. For a clear, brief, simple, and excellent explanation of economic calculation, see "Play Store Economics" by Dean Rus sell. THE FREEMAN, January 1964. and socialization on the entire economic system." 3 When Prices Are Established by Bureaucratic Edict When an economy is controlled by government, prices are not es tablished by competitive forces but by bureaucratic edict. Edicts are written, modified, repealed in accord with bureaucratic judg ments. Thus it is that they are compelled to form judgments from their readings of the statistical data they compile. While the ups and downs in e,mployment, stand ard of living, and many other data are contrived for their use, the usual statistic for measuring economic growth or progress is gross national product (GNP).

The GNP idea is subject to sev eral obvious flaws: • If I divorce my wife and hire her as a cook at $50 a week, the GNP will increase by $2,600 annually. How, pray tell, is there any economic growth or progress in that maneuver? • If the Defense Department spends $50 billion instead of $1 billion on war and its hardware, the GNP will rise by $49 billion. The larger ex penditure mayor may not in3 See "Statistics: Achilles' Heel of Government," by Murray N. Rothbard. THE FREEMAN, June 1961.

1966 PROGRESS - THE FLOWER OF FREEDOM 5 crease our security but, as suredly, it represents no eco nomic progress for you or me. We have a lower, not a higher, freedom of choice by reason of such outlays. To what economic use can a citi zen put a battleship, or a nu clear warhead, or a dead "enemy" ?4 • Were we to spend $40 billion to tear down New York City, the GNP would rise by that amount, the same as if we were to spend $40 billion to build a new city.5 • The dollars we pay farmers not to grow wheat, or peanuts or whatever, boost the GNP just as do the dollars paid farmers for things produced. • GNP - expressed in the mone tary unit - enlarges when ever the medium of exchange is diluted, that is, it gets big ger in an inflationary period. 6 4 This is not to deny that expenditures by government to keep the peace are use ful. Defense against destructive actions is to avoid losses; it is but a means to make progress possible; it is not in itself growth or progress or gain.

5 In Federal urban renewal, for in stance, expenditures for razing the old structures are as much included in GNP as are expenditures for constructing the new. 6 True, The Department of Commerce does publish a figure with a "deflator" (adjustment to a constant dollar) in its monthly Survey of Current Business. But this figure, far from flawless, is Contemplate what Germany's GNP would have been in 1923 when 30 million marks wouldn't buy a loaf of bread. What an inaccurate' device is GNP, the so-called measuring rod of economic progress employed by intervening governments and so heartily endorsed by many econ omists! No Better Guide Available Why, then, is GNP used at all? Probably there is no better statis tical guide available to an inter vening bureaucracy; that is, none more consistent with their gross economy - as distinguished from individualistic - assumptions. Further, they have come to be lieve that spending,· rather than productive effort, is the key to growth or progress. Were this true, then Germany achieved its peak of growth immediately prior to complete economic collapse. Were this true, we could experience enormous progress by the simple expedient of repealing all laws against counterfeiting! The fact is, exploding expenditures no more measure economic growth than does exploding population!

I repeat, GNP is purely an in vention and a device of an inter vening government and/or its innoted almost exclusively by professional economists and statisticians. It is the inflated figure that is "fed to the public."

6 THE FREEMAN June tellectual supporters. In an ideal free market society, with govern ment limited to invoking a com mon justice and keeping the peace, GNP is inconceivable. Try to find a GNP figure in Hong Kong, the nearest approach to a free economy in today's world. There simply is no use for a GNP figure by the voluntary partici pants in· a free market. Market data as related to one's goods or services, yes; but definitely not a generality like GNP related neither to specific markets. nor to individ ual progress. GNP is, of course, subject to manipulation, as explained above. Merely sp.end more, regardless of what for, and up it goes. Thus, the prevailing bureaucracy is en abled to "prove" that it is doing better each year, or better than the' Establishment it succeeded. Now, here is where the mis chief enters: If the majority of the citizenry can be sold on the merit of gov'ernment s'pending and made to believe that GNP is a reliable measuring rod, then w-e can easily be led by the nose into tihe total state - the free market wip,ed out completely.

Again, why is GNP used at all? Bureaucracies that intervene in the market will never use a valid definition of economic growth or progress for the simple reason that the real thing cannot be measured in mathematical or statisti cal terms and, thus, is utterly use less for bureaucratic procedure. No Objective Standards The real thing - individual economic progress - cannot be measured by objective standards. This is to say that the individual's economic progress cannot be reck 0ned by the number of chickens in the pot, by cars in the garage, by cash in the bank or statements of net worth, or by any or all other standard-of-living measure ments. 7 This is not to say that the in dividual can have no idea of his own economic growth; it is only to argue that'growth cannot be judged by any set of objective standards. For instance, I am aware of personal economic growth, which is to say, I can now obtain more of what I want in exchange for what I w'ant to do than was the case thirty years ago. Further, the Pilgrim, or an 18th-century Eng lishman, or my father had no where near the choices of employ7 u. • • true economic growth is theo retically unmeasurable. . . . Concern about economic growth could ... properly be shifted from pondering meaningless percentages to preserving and perfect ing the mechanisms and incentives through which growth is achieved."

United States Steel Corporation Annual Report, 1960.

PROGREgg-TRE FLOWER OF FREEDOM: ment I have, or what could be received in exchange for the fruits thereof. My choices abound com pared to theirs. But please note that what I want to do is forever changing, and that what I w'ant in exchange is in perpetual flux. L1ke a bird on the wing, I don't "stay put," as we say. Even more to the point, I have no carbon copy on this earth; we are all in flux reIative to each other. Perhaps one man's highest as piration is to write and lecture on behalf of freedom. He prefers this to other employments, even though the other jobs available to him p.ay twice or ten times as much. And in exchange he desires above all else a working acquaint ance with the best libertarian minds in the world, along with the economic means - food, trans portation, and the like - for reali zation. To him this is the ultimate in economic progress. Who, pray tell, has any right to set a stand ard for him other than these unusual but, nonetheless, self chosen goals?

But here's another fellow who, above all else, prefers to strum a guitar. And in exchange his heart's desire is "a Loaf of Bread ... a Flask of Wine, a Book of Verse - and Thou." To him this is the ultimate in economic prog ress. Where is the superman who has any logical, moral, or ethical basis for decreeing otherwise? The above gets at the crux of the matter: gain or economic progress is individual and sub jective; gain cannot be objectively measured, that is, neither I nor anyone else can devise a standard that can accurately assess what. is or isn't a gain to you.8 It's diffi cult enough to know one's own choice in such matters. What economic progress is to one individual may very well be regress to another. Examples: There are persons who would pre fer an audience with the Presi dent of the United States to $10, 000, and vice versa; a hoola hoop to $5, and vice versa; a can of imported snails to $2, and vice versa; a Ph.D. or a mink coat to $5,000, and vice versa; a Sammy Davis performance to one by Ro berta Peters, and vice versa; a Jeep to a Cadillac, and vice versa; and so on ad infinitum. Objective standards simply cannot be used to measure subjective judgments.

Measuring and determining the total value of these trillions of complex, ever-changing whims, 8 This is clear to anyone who under stands the marginal utility theory of value, one of the latest (1870) and as suredly one of the most important dis coveries in economic science. See Value and Price by Eugen von Bohm-Bawerk (South Holland, Illinois: Libertarian Press) .

8 THE FREEMAN June fancies, desires - subjectively re corded only in the minds of in dividuals mostly unknown to one another - is not humanly possible. 9 The individual can, if he so elects, generally assess his own economic progress, but he can no more express this growth statis tically or mathematically than he can his intellectual, moral, or spir itual gain. Indeed, in these latter categories, no one makes any at tempt at such measurement. Un like the single dimensions of height, weight, girth, bushels of wheat, population, these other forms of growth, including eco nomic, are multidimensional and - to top it off' - in never-ending flux. And suppose one had an accurate measure of his ovv.n eco nomic growth; what could he pos sibly do with the statistic that he could not do as well without it? A Freeing 0' Choices Far more important than fruit lessly trying to measure individ ual economic growth is under standing what it is that increases the possibilities for progress.

Were we searching for a single 9 This is not to say that the complete satisfaction of personal desires is neces sarily to one's advantage. It is only to argue that it is not my role to decide what someone else's advantage is. Is it to another's advantage that he be cast in my image, have my likes and dislikes im posed on him? Nonsense! phrase to express what has to be understood, we could well settle for a freeing of choices. This, however, is as big as "all out doors." Reflect on the enormity of what's involved: • First, freeing the choices increasing the alternatives and opportunities - for prof itably (subjective) employ ing one's abilities and prop erties. • Second, freeing the choices increasing the alternatives of the desirable (subjective) goods and services that can be obtained in willing ex change for the fruits of said employment. • Third, freeing the capacities of self in 'order to partake of the increasing alternatives.

To what advantage is a pro liferation of opportunities to an oyster, or to a human who can't get off dead center? All three of the above develop ments are founded on exchange--..; production as much as distribu tion. And this is true even of self development, for man grows by ex changing ideas with his contem poraries or drawing on his her itage ; he is incapable of going it alone. Thus, exchange is the key economic term. There are two kinds of ex change, broadly speaking: forced exchange as in state intervention1966 PROGRESS - THE FLOWER OF FREEDOM 9 ism (socialism) and willing ex change as in a free market econ omy. No society ever has had ex clusively one or the other; every society has more or less one or the other. To repeat what is already im plied, economic progress may be judged only by the extent to which an individual becomes capable of taking advantage of an increase in opportunities for productive acti vity and an increase in what he can obtain for his goods or services in willing exchange.

Such progress, let it be em phasized, originates only in will ing as distinguished from forced or coerced exchange. For example, when a robber takes $100 from you, there is no net gain; his gain is canceled out by your loss; this exchange is no more than a coercive swap. Precisely the same holds true when the government forcibly takes the fruits of your labors as a contribution toward any project which does not fall within the princi pled scope of government. 10 Parenthetically, an 10 Bastiat suggested the principled scope in simple terms: "See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen him self cannot do without committing a crime." See The Law by Frederic Bastiat (Foundation for Economic Education, Inc., Irvington-on-Hudson, N. Y.) intervening government, to be con sistent, should tabulate robberies and include the total figure in GNP!

It is clear that there is no gain or progress in forced or coerced exchange. But observe the gain in willing exchange: you, on your own motion - voluntarily - purchase a suit for $100. Both you and the clothier gain in the only way that the term gain makes sense. You want the suit more than the cash; he wants the cash more than the suit. Each of you, on your own terms - nobody else's - gains by the exchange. Were this not true in each case, you would not buy; he would not sell. Individual Economic Progress Let us now ask, why is indi vid ual economic progress so impor tant? What, really, is its deep significance? For, surely, it tran scends sensual pleasures and sat isfactions. Assume I am a Russian whose employment alternatives m.ay be limited to working in the sputiiik--- factory or on a collective farm and where the things that can be obtained in exchange approxiIDJJt~;L_ the contents of Mother Hubbard's cupboard. Or a Chinese who, em ployment-wise, has no choice be yond sloshing around a rice paddy, in exchange for which he gets rice and little else.

10 THE FREEMAN June Next, grant this: 1-the Russian or the Chinese, it matters not possess a potential talent, hidden, latent, untapped. Mine is distinc tively unique, unlike that of any other living being. I don't know what it is myself. I only know that it isn't making sputniks or transplanting rice. If I understand life's purpose, one aim must be to see how close I can come during my earthly days to realizing those creative potentialities uniquely mine. Under the conditions out lined above, I should go to my grave - in this respect unborn! Now, let the alternatives for employment greatly proliferate. They pop into existence every day, one might say. Undeniably, the greater the proliferation the greater is the probability that some one alternative will coin cide with that latent, undiscovered talent uniquely mine. In short, self-realization! Maximizing the Alternatives It is now appropriate to con sider what type of political econ omy is most conducive to a maxi mum of alternatives for the em ployment of abilities and prop erties and of opportunities for profitable exchange. In what socio economic climate is there the greatest freeing of choices?

I believe the first requirement to be a societal agency - government - devoted to keeping the peace, that is, to inhibiting and minimizing all violence, fraud, misrepresentation, predation. Though fully aware of the tend ency of governments to get out of hand - the policeman turned plun derer - I'm nonetheless convinced that society requires an organized agency of defensive force to keep the market free of coercion, to secure to each citizen his life and the fruits of his labor. Private property is the outcome of such security, this institution being a basic foundation for any growth in economic alternatives. Only when life and property are respected is capital formation pos sible, labor and capital being the tools of production. When the societal agency is lim ited to keeping the peace - as suming it does so - there remains no organized force standing against the freeing of creative human energy; a potential always seeking release to some extent in everyone~ When the societal agency keeps the peace, that is, when no one is permitted to lord it over others, there is free entry, free and will ing exchange; in short, the free market.

It is under these conditions never under authoritarian ar rangements - that alternatives proliferate, both as to opportuni1966 PROGRESS - THE FLOWER OF FREEDOM 11 ties' for the employment of one's abilities and properties and as to what one can obtain in willing ex change. ll The flower of freedom! The flower of freedom, I say. But how, many will ask, can this proliferation of alternatives be taking place coincidentally with a rapidly advancing state inter vention into the market? Isn't there a contradiction here? What Goes on Here? While no societal agency has ever been strictly limited in prac tice to keeping the peace,- invok ing a common justice, and secur ing the rights to life and liveli hood, and no market has ever been ideally free, the U.S.A. has afforded the nearest ap.proxima tion to these ideals. This practice of freedom brought an unprece dented outburst of creative activ ity, and through the persons of self-reliant individuals. What's go ing on today can partly be ac11 The alternatives (specializations) brought into existence by government, founded on forced rather than on free exchange - space hardware, and the like - must be excluded from the list that makes for individual economic progress.

When we become dependent on the ex change of our numerous specializations - as is now the case - exchanges must be by CDlnmOn consent if we are to avoid the Russian type of authoritarian state. For more explanation of this point, see Chap ter VI in my Anything That's Peaceful (Foundation for Economic Education, Inc., Irvington-on-Hudson, N. Y.) counted for as a momentum, a mighty thrust from decades when sound principles we-re generally practiced. The traditions, the ways of dealing with each other, the will to improve, the incentives, and numerous other virtues born in that era combined into a fabric too tough for easy destruction. But more than momentum: our impressions of what is happening are greatly colored and distorted because, to a marked extent, they derive from what we read in the press or hear over TV and radio. Public media - our eyes for seeing much of the world around. us=__.

highlight the news. And what's news? Not the commonplace never! But, rather, the exceptional events. A new intervention or con trol (restriction of the market) is always an exception; it is a break with tradition, with our ways of doing things and dealing with each other. So, it is the sub stitution of forced for willing ex change that is taken to be news nowadays. Let's reflect on the common place which mostly we overlook. For instance, the exchange of 30 cents for a. can of beans. We take no more note of this than wedO-~. the important air we hreathe. Yet these commonplace, unnoted ac tions occur daily in billions of unpublicized voluntary exchanges, with a constructive effect that 12 THE FREEMAN June tends to overcome many destruc tive, intervening forces. I repeat, we are keenly conscious of the exceptional destruc tive forces and only dimly aware of the commonplace constructive forces. This, of course, is very dangerous, for we tend to accept these glaring interventions as causes of the proliferation of eco nomic alternatives for the individ ual. This type of mistaken corre lation leads labor union officials to believe that their coercive tac tics raise the wage level,12 or bureaucrats to believe that their price controls curb inflation. The fact is that coercion is an inhibit ing force, never creative. It pre cludes crea ti ve acti vity by the per son doing the coercing as well as by the one being coerced.

Free and willing exchange, on the other hand, can be likened to a world-wide electric grid into which flows the infinitesimal and varied creativities of several bil lion individuals, resulting in a magnificent total available to all. As a bolt of lightning zigs and zags along the line of least resist ance, so has free action found its way through the porosity of governmental restraints. It is the ,12 See Why Wages Rise by Dr. F. A. Harper (Foundation for Economic Edu cation, Inc., Irvington-on-Hudson, N. Y.). free action, not the restraints, that accounts for all that's good in the economic situation. In short, free action is stronger than you think, and the interveners are weaker than they think. However, it is the weakness of the interveners-and ever so many citizens - that can spell our un doing. For when a false economic growth (GNP) can be adopted as a proper goal and when the ,vay to realization is believed to be exploding expenditures, inflation is inevitable.

Specialization of the free mar ket kind is all to the good. But the more specialized we become, the more is each of us dependent on the free, uninhibited exchanges of our specializations. Exchange in specialized societies cannot be achieved by barter; a medium of exchange - money - is required. Inflation, like counterfeiting, de stroys the integrity of the medium and, thus, threatens survival. Of one thing we can be certain: when a high proportion of the time and energy of individuals is devoted to the measurement and expansion of the Gross National Product, their progress as individ uals will be thwarted. Progress is the flower of freedom! ~ ONCE, long ago, the most power ful man in the world was Alex ander the Great. His dominions stretched across the entire civil ized world of his time and pene trated the East as far as India. Bureaucrats and politicians jumped at the slightest. expression of his whims. Cities were planned and built to his sp.ecifications. Even that most nebulous substance, "culture," was defined and elabo rated on the Alexandrian model.

The story is told that once, while Alexander and his entourage were journeying from one p.art of the empire to another, one of his advisers rushed up to the most powerful man on earth and an nounced breathlessly, "Sire, just Dr. Roche is Assistant Professor of History and Philosophy at the Colorado School of Mines. beyond the next hill is one of the greatest philosophers of your empire." "Quick, take me to this man," commanded Alexander, for "cul tural" attainment of all sorts was an interest upon which the ruler especially prided himself. Alex ander and his chief ministers hur· ried over the hill to discover the philosopher lying upon his back in the green, soft grass, gazing at the clouds, and basking in the sun while he apparently pondered some deep question. "I am Alexander , ruler of the world," the sovereign began. "Name your wish and it shall be granted, for I am a patron of cul ture and will gladly underwrite any project which you select."

As befitted a man of his calling, the philosopher thought a moment 13 14 THE FREEMAN June before replying to such a grand offer, then politely responded, "You may do one thing for me, your highness; p1ease step aside - you are standing between me and the sun." Alexander's reply is not recorded, but it can be as sumed that the ruler returned to affairs of state and the philosopher returned to sunning himself amid the consideration of his own thoughts. In an age when government promises "security" and the satis faction of every human want, with such assurance of its capacity for beneficence that its agents .freely use a growing amount of force to coerce the lucky citizenry into ac ceptance of this state of affairs, we might wonder what would have happened to the Alexandrian phi losopher had he refused the tender, loving care of the Great Society or the communist state in 1966 A.D. instead of refusing Alexander's offer in 326 B.C. In the more frank ly coercive, collective regime of the communist state, our philos opher friend probably would have been shot as an "enemy of the peo ple." In the Great Society, sharing many of the goals of other collec tivisms but ...... so far at least - be ing a little more reticent in the ap plication of force to achieve those goals, the philosopher merely would have been termed "reac tionary" and "antisocial." Had he persisted in his "selfish attitudes,"

he would have been branded with the ultimate crime, that of being "against progress," Le-., not agree ing with the dominant herd in stinct of the age. Whatever might have happened to our friend had he lived in our times, and however the bureau crat of collective welfare and co erced beneficence might view such heresy, we can rest assured that the philosopher would have agreed with Samuel Johnson. It is indeed "easier to be beneficent than to be just." In fact, the collectivist in the final analysis finds it impos sible to be either beneficent or just. The collective interference with the individual, institutional, private sector of society that char acterizes our age is a perfect ex ample of the misplaced, artificial, and coerced type of beneficence that renders justice unattainable within such a system. The Nature of Justice Justice in the practical, working sense, after all, is really society's guarantee to the individual that a definite set of rules and a definite right-and wrong are recognized as governing the conduct of that so ciety's membership. If justice is to prevail, the rules must be uni versally applicable, giving equal treatment and consistent treat ment to any citizen at any time.

1966 "PLEASE STEP ASIDE. • ••" 15 Justice for the individual exists only where 'a fixed value system of right and wrong exists and where the judgments made con cerning whether an act is right or wrong are consistent and there fore predic'table. The collective ethic cannot provide such condi tions. Collective morality is not fixed, but relative. Right and wrong are what the state says they are at the moment. The in dividual citizen has neither a fixed value system nor a predictable re action from his society by which to guide his actions. Lenin's "all tactics are' Bolshe vik tactics" expresses the com munist version of the collectivist standard of justice, quite clearly. Neither fixed standards nor pre, dictability stand in the way of whatever the state might wish to do. In the Western world's less co ercive version of collectivism, many of the same relative stand ards prevail. The Supreme Court of the United States is making very clear, indeed, its lack of con cern for precedent. What has been increasingly substituted is what might be called, "sociological juris prudence." Law, and therefore justice, are no longer to be deter mined according to fixed principle, but according to what the current membership of the court views as the proper "social" goals. For an other example drawn from contemporary American government, what defense does the individual citizen have against the dictates of various bureaus exercising ex ecutive power over his life? These bureaucrats are not elected by the people, not mentioned in the Con stitution, yet wield great influence in interpretation and enforcement of law. These men virtually make the law in the process of execu ting blank legislative checks from Congress. Surely such a system provides neither fixed values nor predictability. Justice for the in dividual in the collective ethic is indeed "far to seek."

Material Welfare The student of the free market might well also add that any genuine material bene,fit to society or to its individual members also goes out the window when justice departs. This is true because the man denied justice is in effect be ing denied a measure of his free dom. And much of the reason for the material failure of the collec tive ethic can be exposed in a short question: who produces more, the slave or the free man? It would be hard to imagine a more basic form of material wel fare than the food a society pro duces for itself. From the very beginning of its regime, the Soviet planned economy in Russia has placed great emphasis upon col16 THE FREEMAN June lective agriculture. Yet, although great amounts of power - virtu ally unlimited by morality or any humane considerations-have been brought to bear throughout a long and bloody chapter of the collec tive experiment, success has re mained beyond the reach of the planned economy. As one wag ex pressed it, 1966 can be predicted to produce the Soviet Union's forty-ninth annual crop failure since 1917, due, according to the Soviet news agency, to "natural causes."

Meanwhile, our planners in the United States have been devoting their efforts to the curtailment of the agricultural production stem ming from our relatively free market system. The planners have met with as little success on this side of the world. In fact, we find the American planners who would curtail production faced with such a surplus that they are able to help in feeding the Russian soci ety whose planning to increase production has resulted in starva tion conditions. Surely such a total disaster for "planning" would be at least an embarrassment if not a lesson to most men; but un willingness or inability to learn fronl experience would seem to be a basic character trait of the mod ern collectivist. In societies lacking freedom, neither material well-being nor justice has historically proven pos sible of attainment. The collective experiments of our age have made abundantly clear how hopelessly lost both prosperity and justice become when freedom is curtailed.

Lack of freedom, then, in the end makes both genuine beneficence and justice casualties of the planned society, no matter how "well-intended" the planners may be. The modern victim of such a double loss might well begin the process of reclaiming his freedom and well-being by following the example of the Alexandrian phi 10sopher.He knew very well what the state could do for him and what the state could do to him; and he told the all-powerful state that its self-proclaimed benefi cence was not required; that what was required was not more inter ference, but less; that it should stand aside and stop blocking the sun. Should· modern man follow this example, the warming rays of self-reliance and human dignity thus generated could easily again provide the greatest of boons to man, leaving the individual free to pursue his own well-being and his own moral growth. ~ WILLIAM HENRY CHAMBERLIN SAILING under its own colors, so cialism never got far in the United States. Native Americans, prag matic by disposition, were not at tracted by the dull and ponderous writings of Marx and Engels, with their underpinning of muddy He gelian metaphysics. They were not inclined to call each other comrade or to take much stock in letters signed "Yours for the rev olution." The availability until 1900 of free land, the absence of European class distinctions, the ease with which individuals could move up or down the economic ladder - all these characteristics of American life were against the so cialist conception of irreconcilable Mr. Chamberlain is a skilled observer and reporter of economic and political conditions at home and abroad. In addition to writing a number of books, he has lectured widely and is a contributor to The Wall Street Journal and numerous magazines.

antagonism between two classes, exploiters and exploited. So socialism in America was an inteUectual import; it was no ac cident that of the two socialists elected to Congress one came from New York's East Side, the other from a district in Wisconsin with a substantial population of Ger man origin. Both in Eastern Eu rope and in Germany socialism was a creed with a considerable following, and it was natural that immigrants from these areas in many cases joined the American Socialist Party. As the children and grandchil dren of these immigrants beca,me assimilated and lost touch with conditions in their parents' home lands, interest in socialism waned. The American Socialist Party reached its highest proportion of 17 18 THE FREEMAN June the popular vote (about 6 per cent) with one of its hardy peren nial candidates for President, Eu gene V. Debs, in 1912. Then its vote tapered off steadily, with only one upsurge, in 1932, for Debs's successor as regular candi date, scholarly and personally lik able Norman Thomas. Finally the vote became such an infinitesimal percentage that the party ceased to nominate candidates for nation al office and now carries on merely as an educational and propaganda organization.

Americanizing the Ideas Although socialism as a political movement for all practical pur poses has ceased to exist, socialist proposals and ideas, from the time of the New Deal, have been taken over and put into effect by politi cians of other parties. On many counts there is little difference to day between European socialists, who have become more moderate because of the secession of the communists, and the stronger American advocates of govern ment intervention and expanding social legislation. A prominent German Social Democrat once told the writer that his party was in substantial agreement with the "New Deal" and "New Frontier" Democrats, and the "Great So ciety" is the sort of blueprint for heightened government spending for supposed welfare aims that might be expected to win the hearty endorsement of a British or continental socialist. A proposal to give .the govern ment authority to take over and operate key industries in the United States, should it come to a vote, would be overwhelmingly de feated. But socialism by a mixture of seduction and pressure is a horse of another color. This proc ess is much farther advanced than most people realize and with re markably little visible awareness or resistance from the business men, large and small, who might be expected to offer opposition.

Benevolent Intervention An important element in the process of seduction is repeated affirmation by the highest govern ment officials of devotion to the principles of free enterprise. Then comes the alluring suggestion that government wants and intends to be a benevolent partner of busi ness. By this time resistance in the business community has been softened to a point where govern ment bureaucrats, with little ob j ection, take over some of the most important functions of the free market, such as the level of prices and the direction of invest ment. Price control and directed investment would have an ominous warning sound. So such expres1966 SOCIALISM BY SEDUCTION 19 SiODS as government guidelines and voluntary restraints are pre ferred. Professor Hayek once observed that, if any individual had in vented the free market, he could have been considered an outstand ing genius. But this system, like Topsy, "just growed" in response to the age-old needs for exchange of goods. Its service. as an impar tial regulator of prices is unique and unrivaled. In response to in creased demand, actual or poten tial, prices rise. The contrary sig nal of falling prices indicates that demand has declined or is likely to decline.

All sorts of rulers, from despot ic emperors of the past like Dio cletian to communist dictators and computer-equipped bureaucrats of the present, have tried to cheat the free market by employing decrees or artificial means to push prices up or hold them down. But the usual end result of such efforts is about as successful as King Canute's order to the waves and tides to stand still. (Perhaps Canute was rebuking some of the eager-beaver would-be planners in his entourage). The Reins 01 Control Slowly, gradually, almost imper ceptibly, "guidelines" have re placed the impersonal mechanism of the market in determining the level of prices. When a price in crease, however well justified by a rising trend in wages and other costs, draws a protesting whistle from the government official in charge of the guidelines, the cor poration almost invariably backs down. Stockholders in steel com panies, a.t a time when the general trend in profits and wages has been upward, are still looking for a restoration of the 40 per cent cut in earnings which they took some years ago when the larger steel companies reduced their div idends in this proportion. But government intervention has twice blocked steel price hikes. There has been the same experience in the aluminum and copper and tobacco industries. And against this growing interference of gov ernment with the verdict of the market place there have been re markably few audible protests.

When the president of the Chase Manhattan Bank, George Cham pion, last year urged businessmen to oppose wha t he called govern ment-by-guideline, his stand was taken as amazing, although there was a time when almost no banker or industrialist would have taken a different attitude. The threat of more open and direct controls has induced banks to accept sweeping limitations on their right to lend and invest abroad. Again, few voices have 20 THE FREEMAN June been raised in public protest, al though private comment on this subject has often been sulphurous. As Alan L. Otten summed up the subject in a thoughtful article in The Wall Street Journal of Janu ary 13: A threat of more direct controls on overseas investments has per suaded business to accept, with scarcely a murmur, a very complex system of very real "voluntary" con trols. For the sake of "civil rights" businessmen have put up practically no fight against deep government in tervention in their hiring practices.

The Federal Trade Commission points to a sharp increase in "volun tary compliance" by businessmen with FTC rules on permissible trade practices. The Justice Department looks for widespread industry ac ceptance of its forthcoming "advi sory guidelines" spelling out what will and won't violate the antitrust laws. Auto firms readily acceded to Senate prodding for more safety equipment in new cars. The Penalty of Resisting Why are businessmen submit ting to so much substitution of government judgment for their own with so little protest? The answer is partly in a process that may be called seduction. It is an old adage that the customer is always right and the government, thanks to expanded military and social welfare programs, is far and away the biggest single cus tomer. Few business representa tives look beyond the prospect of immediate profit, and the benefits to aircraft companies and engi neering and electronics firms from enlarged war spending are ob vious. Other types of firms stand to gain from "Great Society" ex penditures, hospital suppliers from medicare, textbook, school, and laboratory manufacturers from higher educational outlays.

]doreover, the government is a customer equipped with teeth and claws not available to the individ ual buyer. It is in a position to blacklist firms that incur its dis pleasure, to shift its buying to those which are cooperative in ac cepting dictation. Given the vast complexity of the personal and cor porate taxation system and of the antitrust laws and the large shadowy area between legality and illegality, the defiant head of a business firm faces the dreary pros pect of tax harassment, with simul taneous damage to his pocketbook and to his public relations image. It is an old familiar political trick to use patronage, appoint ments to public office, to help pass legislation on the-Federal and state levels. But this kind of pa tronage is peanuts compared with the financial power that has ac crued and is accruing to Big Brother in Washington as a result 1966 SOCIALISM BY SEDUCTION 21 of steady expansion of govern ment functions and the parallel growth of public spending. Abil ity to approve or withhold Federal grants in aid has given Federal agencies unprecedented power to control and overrule the judg ment of the local school boards which have hitherto been the back bone of the public educational sys tem. And the government's posi tion as the biggest single buyer lends a good deal of muscle to its demands that its guideline direc tions be obeyed.

Two Standards In theory, wages -like prices are subject to government influ ence and control. But in practice the government has proved less willing, perhaps less able, to em ploy sanctions against big concen trations of trade-union power than against business firms. A good example was the illegal tran sit strike that paralyzed transpor tation in New York City during the first weeks of January. The demands of the leader of the strike, the late Michael Quill, who tore up a court injunction against the strike with a degree of im, munity from consequences not shown to Southern governors who opposed educational integration, were wildly in excess of the sup posed wage increase limit of 3.2 per cent. But the White House was very gingerly in its handling of Mr. Quill; he was not subjected to any of the pressures brought against firms seeking much more modest price increases. And the New York state authorities were positively abject in their reaction.

The strike was in clear violation of the state Condon Wadlin Act, which forbids strikes by state em ployees and, among other penal ties, forbids wage increases to vio lators for a term of years. The strike was settled on terms of virtp.al unconditional surrender, involving a settlement amounting to about a 15 per cent wage and frin.ge benefits increase. When judgment was given that this in crease was illegal, the legislature hastily passed a law exempting transit workers from its opera tion. The problem of how to deal with stoppages of labor that hold up a large community to ransom, on pain of intolerable disruption of normal services, remains as far from settlement as ever. As in Britain There has been a parallel ex perience in Great Britain, where the Labor Government has been much more successful in holding down prices than in holding down wages, thereby storing up infla tion and balance-of-payments trou ..

bles for the future. Even jf it 22 THE FREEMAN June were desirable to substitute for the working of the free market a system of government fixing of prices and wages, with all the artificialities, inequities, and dis tortions which this involves, it would be almost impossible for a government to operate such a sys tem in an evenhanded manner. There are more votes represented in trade-unions than in manage ment; and it is the temptation of politicians to follow what seems to be the trail leading to the votes, regardless of the effect on the welfare and viability of the na tional economy. One reason why the business community, traditionally devoted to a free enterprise economy with a minimum of government inter ference, has accepted so meekly the growing incursions of govern ment bureaucracy into the sphere of business decisions is the argu ment that inflation is a·· serious danger in the wake of a prolonged boom and that the government should possess some latitude in try ing to forestall and avert this disaster.. On the harmfulness of inflation there can be no reason able difference of opinion. But it is contrary to all the teachings of experience and of sound economic theory to believe that inflation can be curbed by shadow boxing with its symptom,s, rising prices and wages.

Curb the Spending The only hopeful way of fight ing inflation is to get at the roots, to cut down the creation of new money through Federal Reserve open market operations, to tighten credit and, above all, to cut down government spending. It is fan tastic to be preparing the ground for a new raid on the harassed Federal income taxpayer when there are such promising targets for economy as the current $46 billion for welfare spending, over $3 billion for foreign aid, $3 bil lion for farm subsidies, $4 billion for an excessively expensive road building program, and $4 billion for the project of putting a man on the moon and bringing him back - a project without military, scientific, or any other justification commensurate with its cost. No doubt the war in Vietnam will be alleged as an excuse for levying supplementary taxes. But the true cause of a probable bud get deficit may be found in the spendthrift growth of nondefense taxation, much of it with no jus~ tification except the desire to at tract votes from groups that are "consumers," not "producers" of social security. In the last six years, nondefense spending has grown by the enormous total of $32 billion. If a sum of $5 billion or even $10 billion is needed to put the budget in balance, an Ad1966 SOCIALISM BY SEDUCTION 23 miniBtration or a Congress gen uinely bent on economy could easily find it in these swollen ex penditures.

It is high time for thoughtful businessmen, looking beyond the immediate balance sheet, to con sider what will .become of free private economy if government officials are to substitute their judgments more and more for the impartial verdict of the free mar ket. A few years of outward pros perity, with ever stronger infla tionary overtones, will be pur chased too dearly if the result is some· kind of government-run, so cialized economy derived from a mixture of seduction and stronger pressures. ~ HOW PRICE CONTROL LEADS TO &~ .....- - ..... - ..... -,. ..... Socialism LUDWIG VON MISES THE GOVERNMENT believes that the price of a definite commodity, e.g., milk, is too high. It wants to make it possible for the poor to give their children more milk. Thus it resorts to a price ceiiing and fixes the price of milk at a lower rate than that prevailing on the free market. The result is that the marginal producers of milk, those producing at the high est cost, now incur losses. As no individual farmer or businessman Excerpted by permission from Dr. Mises' lec ture, "Middle-of-the-Road Policy Leads to So cialism," published and available as a pamph let from Libertarian Press, 366 East 166th Street, South Holland, Illinois. Single copies, 25¢.

can go on producing at a loss, these marginal producers stop pro ducing and selling milk on the market. They will use their cows and their skill for other more profitable purposes. They will, for example, produce butte-r, cheese, or meat. There will be less milk available for the consumers, not more. This, of course, is contrary to the intentions of the government. It wanted to make-it easier for some people to buy more milk. But, as an outcome of its inter ference, the supply available drops. The measure proves abor24 THE FREEMAN June tive from the very point of view of the government and the groups it was eager to favor. It brings about a state of affairs, which again from the point of view of the government - is even less de sirable than the previous state of affairs which it was designed to improve. Now, the government is faced with an alternative. It can abro gate its decree and refrain from any further endeavors to control the price of milk. But if it insists upon its intention to keep the price of milk below the rate the unhampered market would have determined and wants nonetheless to avoid a drop in the supply of milk, it must try to eliminate the causes that render the marginal producers' business unremunera tive. It must add to the first de cree concerning only the price of milk a second decree fixing the prices of the factors of prod uc tion necessary for the production of milk at such a low rate that the marginal producers of milk will no longer suffer losses and will therefore abstain from re stricting output.

But then the same story repeats itself on a remoter plane. The sup ply of the factors of production required for the production of milk drops, and again the gov ernment is back where it started. If it does not want to admit defeat and to abstain from any meddling with prices, it must push further and fix the prices of those factors of production which are needed for the production of the factors necessary for the production of milk. Hopelessly Enmeshed Thus the government is forced to go further and further, fixing step by step the prices of all con sumers' goods and of all factors of production - both human, i.e., labor, and material-and to order every entrepreneur and every worker to continue work at these prices and wages. No branch of industry can be omitted from this all-round fixing of prices and wages and from this obligation to produce those quantities which the government wants to see pro duced. If some branches were to be left free out of regard for the fact that they produce only goods qualified as non-vital or even as luxuries, capital and labor would tend to flow into them and the result would be a drop in the supply of those goods, the prices of which the government has fixed precisely because it· considers them as indispensable for the sat isfaction of the needs of the mass es.

But when this state of all-round control of business is attained, there can no longer be any ques1966 HOW PRICE CONTROL LEADS TO SOCIALISM 25 tion of a market economy. No longer do the citizens by their buying and abstention from buying determine what should be pro duced and how. The power to decide these matters has developed upon the government. This is no longer capitalism; it is all-round planning by the government - it is socialism. It is, of course, true that this type of socialism preserves some of the labels and the outward ap pearance of capitalism. It main tains, seemingly and nominally, private ownership of the means of production, prices, wages, in terest rates, and profits. In fact, however, nothing counts but the government's unrestricted autoc racy. The government tells the entrepreneurs and capitalists what to produce and in what quantity and quality, at what prices to buy and from whom, at what prices to sell and to whom. It decrees at what wages and where the workers must work. Market exchange is but a sham. All the prices, wages, and interest rates are determined by the authority. They are prices, wages, and interest rates in ap pearance only; in fact they are merely quantity relations in the government's orders. The govern ment, not the consumers, directs production. The government de termines each citizen's income, it assigns to everybody the position in which he has to work. This is socialism in the outward guise of capitalism. • What Price Co·ntrol Meall8 WHEN ONE CONDEMNS the processes of a free market, as he is doing when he endorses any form or degree of price control, he is invalidating the rights of either buyer or seller. If the buyer and seller agree to trade the bushel of potatoes at $2 and a dictator sets a price limit of $1.80, he is economically disfranchising the seller in the market. He is doing exactly the same thing as the robber who takes the bushel of potatoes and then hands the poor victim a gratuity of what he wishes, in this case $1.80. This is not disfranchisement of the seller by 10% - it is complete dis franchisement, and the seller is completely at the mercy of the control instead of being able to pursue his rights in a free market.

F. A. HARPER, The Crisis of the Free Ma.rket GEORGE SUTHERLAND Justice Sutherland of the United States Supreme Court was born in England in 1862, admitted to the bar in 1883, U. S.Senator from Utah 1905-1917, appointed to the Supreme Court 1922, retired 1938, died 1942. The following article is from his address as the President of the American Bar Association at its annual meeting, Saratoga Springs, N. Y., September 4, 1917. FROM the foundation of civil so ciety, two desires, in a measure conflicting with one another, have been at work striving for su premacy: first, the desire of the individual to control and regulate his own activities in such a way as to promote what he conceives to be his own good, and, second, the desire of society to curtail the ac tivities of the individual in such a way as to promote what it con ceives to be the common good. The operation of the first of these we call liberty, and that of the second we call authority.

Throughout all history mankind has oscillated, like some huge pen26 dulum, between these two, some times swinging too far in one di rection and sometimes, in the re bound, too far in the opposite di rection. Liberty has degenerated into anarchy and authority has ended in despotism, and this has been repeated so often that some students of history have reached the pessimistic conclusion that the whole process was but the aimless pursuit of the unattainable. I do not, myself, share that view. In all probability we shall never succeed in getting rid of all the bad things which afflict the social organism - and perhaps it would not be a desirable result if 1966 PRIVATE RIGHTS AND GOVERNMENT 27 W~ should succeed, since out of the dead level of settled perfection there could not come that uplifting sense of moral regeneration which follows the successful fight against evil, and which is respon sible for so much of human ad vancement-but I am sure that in most ways, including some of the ways of government,we are better off today than we have ever been before. It is, however, apparently one of the corollaries of progres sive development that we get rid of old evils only to acquire' new ones. We move out of the wilder ness into the city and thereby es cape the tooth and claw of savage nature, which we see clearly, only to incur the sometimes· deadlier menace of the microbes of civiliza tion, of whose existence we learn only after suffering the mischief they do.

Today~ as always, eternal vigi lance is the price of liberty liberty whose form has changed but whose spirit is the same. In the old days it was the liberty of person, the liberty of speech, the freedom of religious worshi p, which were principally threatened. Today it is the liberty to order the detail of one's daily life for one self - the liberty to do honest and profitable business - the liberty to seek honest and remunerative in vestment that are in peril. In my own mind I feel sure that there never has been a time when the business of the country occupied a higher moral plane; never a time when the voluntary code which governs the conduct of the banker, the manufacturer, the merchant, the railway manager, has been finer in tone or more faithfully ob served than it is today; and yet never before have the business ac tivities of the people been so beset and bedeviled with vexatious stat utes, prying commissions, and governmental intermeddling of all sorts.

Pass a Law Under our form of government the will of the people is supreme. We seem to have become intoxi cated with the plenitude of our power, or fearful that it will dis appear if we do not constantly use it, and, inasmuch as our will can be exercised authoritatively only through some form of law, when ever we become dissatisfied with anything, we enact a statute on the subject. If, therefore, I were asked to name the characteristic which more than any other distinguishes our present-day political institu tions, I am not sure that I should not answer, "the passion for mak ing laws." There are 48 small or moderate-sized legislative bodies in the United States engaged a good deal of the time and one very 28 THE FREEMAN June large national legislature working overtime at this amiable occupa tion, their combined output being not far from 15,000 statutes each year. The prevailing obsession seems to be that statutes, like crops, enrich the country in pro portion to their volume. Unfortu nately for this notion, however, the average legislator does not al ways know what he is sowing, and the harvest which frequently re sults is made up of strange and unexpected plants whose appear ance is as astonishing to the legis lator as it is disconcerting to his constituents.

This situation, I am bound to say, is not wholly unrelated to a more or less prevalent superstition entertained by the electorate that previous training in legislative affairs is a superfluous adjunct of the legislative mind, which should enter upon its task with the sweet inexperience of a bride coming to the altar. As rotation in crops - if I may return to the agricultural figure - improves the soil, so ro tation in office is supposed to im prove the government. The com parison, however, is illusory, since the legislator resembles the farmer who cultivates the crops rather than the crops themselves, and previous experience, even of the most thorough character, on the part of the farmer has never hitherto been supposed to destroy his availability for continued serv ice. I think it was the late Mr. Carlyle, who is reported to have made the rather cynical observa tion that the only acts of Parlia ment which were entitled to com mendation were, those by which previous acts of Parliament were repealed. I am not prepared to go quite that far, though I am pre pared to say that in my judgment an extraordinarily large propor tion of the statutes which have been passed from time to time in our various legislative bodies might be repealed without the slightest detriment to the general welfare.

Throughout the country the business world has come to look upon the meeting of the legisla ture as a thing to be borne rather than desired, and to regard with grave suspicion pretty much every thing that happens, with the ex ception of the final adj ournment, a resolution to which end, unless history has been singularly unob servant, has never thus far been withheld by· general request. Good Intentions Only The trouble with much of our legislation is that the legislator has mistaken emotion for wisdom, impulse· for knowledge, and good intention for sound judgment. "He means well" is a sweet and whole·1966 PRIVATE RIGHTS AND GOVERNMENT 29 some thing in the field of ethics. It may be of small consequence, or of no consequence at all, in the domain of law. "He means well" may save the legislator from the afflictions of an accusing con science, but it does not protect the community from the affliction of mischievous and meddlesome statutes.

A diffused desire to do good an anxious· feeling about progress - are not to be derided, of course, but standing alone and regarded from the viewpoint of practical statesmanship, they leave some· thing to be desired in the way of complete equipment for discrimi nating legislative work. Progress, let me suggest, is not a state of mind. It is a fact, or set of facts, capable of observation and analy sis - a condition of affairs which may be cross-examined to ascer tain whether it is what it pretends to be. But you cannot cross-ex amine a mere longing for goodness - an indefinite, inarticulate yearn ing for reform and the uplift - or an uneasy, vague state of flabby sentimentalism about things in general. In matters of social convention ality we are still rigidly conserva. tive, but in the field of government there is a widespread demand for innovating legislation - a craze for change. A politician may ad vocate the complete repudiation of the Constitution and be regarded with complacency, if not with ap proval as an up-to-date reformer and friend of the people, but let him appear in public wearing a skirt instead of a pair. of trousers and the populace will be moved to riot and violence.

Impatience Undermines freedom The difficulty which confronts us in all the fields of human en deavor is that we are going ahead so fast - so many novel and per plexing problems are pressing upon us for solution - that we be come confused at their very multi plicity. Evils develop faster than remedies can be devised. Most of these evils, if left alone, would disappear under the powerful pressure of public sentiment, but we become impatient because the force of social organism is not sufficiently radical and the demand goes forth for a law which will instantly put an end to the matter. The view which prevailed a hun dred years ago was that the pri mary relation of the government to the conduct of the citizen was that of the policeman, to preserve the peace and regulate the activi ties of the individual only when necessary to prevent inj ury to other individuals or to safeguard the public; in short, to exercise ,,,hat is comprehended under the term "police power." It is true 30 THE FREEMAN June that the government was not rig idly confined to these limits, but whenever it undertook to go be yond them it assumed the burden of showing clearly the necessity for so doing. The whole philosophy found its extreme expression in the Jeffersonian aphorism - "That government is best which governs least," while Lord Macaulay's terse summary was, "The primary end of government is the protec tion of the persons and property of men."

Of course with the tremendous increase in the extent and com plexity of our social, economic, and political activities, alterations in the scope and additions to the ex tent of governmental operations become inevitable and necessary. To this no thoughtful person ob jects, but unfortunately the gov ernmental incursions into the new territory are being extended be yond the limits of necessity and even beyond the bounds of expedi ency into the domain of doubtful experiment. When Vices Become Crimes There is, to begin with, an in creasing disposition to give au thoritative direction to the course of personal behavior - an effort to mold the conduct of individuals irrespective of their differing views, habits, and tastes to the pattern, which for the time being has received the approval of the majority. Under this process we are losing our sense of perspective. Weare constarttly bringing the petty shortcomings of our neigh bors into the foreground so that the evil becomes overemphasized, while the noble proportions of the good are minimized by being rele gated to the background. We have developed a mania for regulating people. We forbid not only evil practices, but we are beginning to lay the restraining hand of law upon practices that are at the most of only doubtful character. We not infrequently fail to distinguish be tween crimes and vices, and we are beginning almost to put in the category along with vices and of fensive habits any behavior which happens to differ from our own.

I do not, for example, question the moral right of the majority to forbid the traffic in intoxicating liquor, nor its wisdom in doing so. No doubt the world would be better off if the trade were en..; tirely abolished, but some of the states have recently gone to lengths hitherto undreamed of in penalizing the mere possession of intoxicating liquor and - since no one can use liquor without having the possession of it - thereby penalizing its personal use no matter how moderate such use may be. To put the consumer of a glass of beer in the penitentiary 1966 PRIVATE RIGHTS AND GOVERNMENT 31 along with the burglar and the highwayman is to sacrifice all the wholesome distinctions which for centuries have separated debatable habit from indisputable crime. Such legislation, to say the least, constitutes a novel extension of the doctrines of penology. Hitherto, laws on the subject have taken the form of prohibiting and penalizing the traffic, but not the personal use, which seems to have been quite generally regarded as falling outside the scope of the criminal law. The use of intoxi cants or tobacco, however injuri ous to the user, has not generally been thought to involve the element of immorality. Hence the attempt to coerce an abandonment of such use by punitive legislation directed against the user, however desir able the result itself may be, will inevitably run counter to the senti ment, still rather widely enter tained, that the imposition of criminal penalties for any purely self-regarding conduct, can only be justified in cases involving some degree of moral turpitude.

Legislated "Goodness" It does not require a prophet to foresee that laws of this character exacting penalties so utterly dis proportionate to the offense, can never be generally enforced, and to write them into the statutes to be cunningly evaded or contemptuously ignored will have a strong tendency to bring just and wholesome laws dealing with the liquor question into disrepute. It is sometimes a matter of nice discrimination to determine, as be tween the liberty of the citizen and the supposed good of the com munity, which shall prevail. The liberty of the individual to control his own conduct is the most pre cious possession of a democracy and interference with it is seldom justified except where necessary to protect the liberties or rights of other individuals or to safe guard society. If widely indulged, such interference will not only fail to bring about the good results in tended to be produced, but will gravely threaten the stability and further development of that sturdy individualism, to which is due more than any other thing our present advanced civilization.

In passing legislation of this character, doubts should be re solved in favor of the liberty of the individual, and his power to freely determine and pursue his own course in his own way should rarely be interfered with,. unless the welfare of other individuals or of society clearly requires it. "Hu man nature," says Mill, "is not a machine to be built after a model, and set to do exactly the work pre scribed for it, but a tree which re quires to grow and develop itself 32 THE FREEMAN June on all sides, according to the tend ency of the inward forces which make it a living thing." Human nature is so constituted that we freely tolerate in ourselves what we condemn in others, and we are prone to condemn traits of character in others simply because we do not find the same traits in ourselves. Very often the evil is in the eye of the beholder rather than in the thing beheld, for he is a man of rare good sense who can always distinguish between an evil thing and his own prejudices.

Self-Discipline Outlawed One objection to governmental interference with the personal habits, or even the vices of the individual, is that it tends to weaken the effect of the self-con vincing moral standards and to put in their place fallible and chang ing conventions as the test of right conduct, with the· consequent loss of· the strengthening value to the individual of the free exercise of his rational choice of good rather than evil. Enforced discipline can never have the moral value of sel/ discipline, since it lacks the ele ment of cooperating effort on the part of the individual which is the very soul of all personal advance ment. We may, therefore, well pause to consider whether the benefits which will result to society from a given interference of this char acter are sufficiently important to compensate for the loss of that fine sense of personal independence, which more than any other quality has enabled the Anglo-Saxon race to throw off the yoke of monar chical absolutism and substitute democratic self-government.

It must not be forgotten that democracy is after an but a form of government whose justification must be established in the same way that the justification of any other form of government is estab lished; namely, by what it does rather than by what it claims to be. The errors of a democracy and the errors of an autocracy will be followed by similar consequences. A foolish law does not become a wise law because it is approved by a great many people. The success ful enforcement of the law in a democracy must always rest pri marily in the fact tha t on the whole it commends itself to a uni versal sense of justice, shared even by those who violate it. Any attempt, therefore, to cur tail the liberties of the citizen, which shocks the sense of personal independence of any considerable proportion of the community is likely to do more harm than good, not only because a strong feeling that a particular law is unj ust lessens in some degree the rever ence for law generally, but because 1966 PRIVATE RIGHTS AND GOVERNMENT 33 such a law cannot be successfully enforced, and a law that inspires neither respect for its justice nor fear for its enforcement is about as utterly contemptible a thing as can be imagined.

Burgeoning Bureaucracy Another thing which may well give concern to thoughtful men is the trenlendous increase during late years in the number and power of administrative boards, bureaus, commissions, and similar agencies, the insidious tendency of which is to undermine the funda mental principle upon which our form of government depends; ,namely, that it is "an empire of laws and not of men"; the mean ing of which is that the rights and duties of the individual as a member of society must be defined by pre-established laws and not left to be fixed by official edict as they may be called into question from time to time. The American people have heretofore enjoyed a greater freedom from vexatious official intermeddling and arbi trary governmental compulsion than perhaps any other people in the world. Despotism has found no place among us because we have been subject to no restraint save the impartial restraint of the law, which has thus far stood su perior to the will of any official, high or low.

It is not enough, however, that we should continue free from the despotism of a supreme autocrat. We must keep ourselves free from the petty despotism which may come from vesting final discretion to regulate individual conduct in the hands of lesser officials. To this end the things which organ ized society exacts from its mem bers must be particularized as far as practicable by definite and uni form rules. Liberty consists at last in the right to do whatever the law does not forbid, and this presupposes law made in advance - so that the individual may know before he acts, the standard of conduct to which his acts must conform - and interpreted and ap plied after the act by disinterested authority - so that the true rela tion to one another of the conduct and the law may be clearly ascer tained and declared. Itis, therefore, of the utmost importance that the authority which interprets and executes the law should not also be the author ity which makes it. The law must apply to all alike. The making of law is an exercise of the will of the state; the interpretation and application of the' law is an exer cise of the reason of the judge.

The legislator concerns himself with the question, Is the proposed law just in its gene'ral application? The official who administers the 34 THE FREEMAN June law has nothing to do with the abstract question of its justice; his function is to ascertain what it is and whether it has been violated. The two functions are so utterly different that the neces sity of vesting them in separate hands has been long recognized. To confer upon the same man, or body of men, the power to make the law and also to administer it would. inevitably result in despotic government by substituting the shifting frontiers of personal com mand for the definite boundaries of general, impersonal law. "The spirit of encroachment," said Washington· in the Farewell Ad dress, "tends to consolidate the powers of all the departments in one and thus to create, whatever the form of government, a real despotism." Regulation of Business The danger, therefore, which is threatened by the multiplication of bureaus and commissions con sists in the commingling of these powers. The authority conferred upon these administrative bodies is becoming ·less a:nd less limited.

The jurisdiction to deal with par ticular subjects involving the con duct of individuals is conferred in terms which tend to become in creasingly indefinite. . . . Not only are the business activ ities of the country being investigated, supervised, directed, and controlled in such a multitude of ways that the banker, the mer chant, and the men of industry generally are afloat upon a sea of uncertainty where if they succeed in avoiding the mines of dubious statutes by which they are sur rounded, they are in danger of being blown up by an administra tive torpedo, launched from one of the numerous submarine com missions by which the business waters are everywhere infested, but the government is invading and is threatening to more seri ously invade the market place it self, not as a regulator, but as a participant and competitor. We seem to be approaching more and more nearly the point where the old philosophy that whatever can be done by the individual should not be done by the government even though it may be well done, is to be abandoned for the new and dangerous doctrine that what ever can be done by the govern ment, even though it may be badly done, should not be permitted to the individual. ...

The regulation and control of merely self-regarding conduct, the multiplication of administrative boards and similar agencies and the invasion of the field of private business, which I have thus far particularized, illustrate rather than enumerate the various tend1966 PRIVATE RIGHTS AND .GOVERNMENT 35 encies of modern legislation and government to depart from those sound and wholesome principles which hitherto have been supposed to operate in the direction of pre serving the individual against un due restraint and oppression. Class legislation, the most odi ous form of legislative abuse, is by no means infrequent. In state and nation statutes are to be found which select for special privilege one' class of great voting strength or set apart for special burdens another class of small numerical power at the polls. Separation of Powers Next to the separation and dis tribution of the legislative, execu tive, and judicial powers, the most important feature of our plan of government is the division of the aggregate powers of government between the nation and the' sev eral states, to the one by enumera tion and to the other by reserva tion. I believe in the most liberal construction of the national pow ers actually granted, but I also be lieve in the rigid exclusion of the national government from those powers which have been actually reserved to the states. The local government is in immediate con tact with the local problems and should be able to deal with them more wisely and more effectively than the general government having its seat at a distance. The need of preserving the power and en forcing the duty of local self-gov ernment is imperative, and espe cially so in a country, such as ours, of vast population and extent, pos sessing almost every variety of soil and climate, of greatly diver sified interests and occupations, and having all sorts of differing conditions to deal with.

There is, unfortunately, how ever, a constantly growing tend ency on the part of the general government to intrude upon the powers of the state governments, more by way of relieving them from responsibilities they are will ing to shirk than by usurping powers they are anxious to retain. Especially does any inroad or sug gested inroad upon the federal treasury for state purposes meet with instant and hearty approval. The grave danger of all this is that the ability as well as the desire of the people of the several states to carry their own burdens and cor rect their own shortcomings will gradually lessen and finally disap pear, with the result that the states will become mere geographi cal subdivisions and the federal character of the nation will cease to exist save as a more or less dis credited tradition. These and many other matters afford temptation to further dis cussion to which I cannot yield 36 THE FREEMAN June without undue trespass upon your patience, which I feel has already been quite sufficiently taxed.

Human Dignity and Property Fifty years ago a great French writer-Laboulaye, I think it was - speaking through the lips of one of his American characters, ut tered these words of wisdom and of power, words which are as true today as they were when they were written: The more democratic a people is, the more it is necessary that the in dividual be strong and his property sacred. Weare a nation of sover eigns, and everything that weakens the individual tends toward dema gogy, that is, toward disorder and ruin; whereas everything that forti fies the individual tends toward democracy, that is, the reign of rea son and the Evangel. A free country is a country where each citizen is absolute master of his conscience, his person, and his goods. If the day ever comes when individual rights are swallowed up by those of the general interest, that day will see the end of Washington's handiwork; we will be a mob and we will have a master.

It is now as it has always been, that when the visionary or the demagogue advocates a new law or policy or scheme of government which tends to curtail the liberties of the individual, he loudly insists that he is acting for the general interest and thereby surrounds his propaganda with such a halo of sanctity that opposition or even candid criticism is looked upon as sacrilege. But the time has come when every true lover of his country must refuse to be misled or over awed by specious claims of this character. Individual liberty and the common good are not incom patible, but are entirely consistent with one another. Both are desir able and both may be had, but we must demand the substance of both and not accept the counter feit of either. Crimes, we are told, have been committed in the name of liberty. But either the thing that was called a crime was no crime or the name of liberty was profaned, as though one should become an anarchist in the name of order.

Liberty and order are the two most precious things beneath the stars. The duty which rests upon us of this generation is the same that has rested upon all the gen erations of the past; to be vigilant to see and absolute to repel every attempt, however insidious or in direct, to destroy liberty in the name of order, or order in the name of liberty, for the alterna tive of the one is despotism and of the other the n10b. ~ Private Enterprise in the Public Interest from the1965 Annual Report of the United States Steel Corporation. PRIVATE ENTERPRISE is freedom to produce and sell, and freedom to buy and consume; and the con sumer, as well as the producer, is an integral part of the private enterprise system - indeed, the consumer also is in a way a pri vate enterpriser. As an economic system, private enterprise is char acterized by competition, open markets, private ownership, and private initiative. Producers take production initiative on the basis of price and profit-and-loss signals essentially given by consumers.

Thus on the firing line of open competitive production is the busi ness firm - an indi vidual or a group of individuals. The firm pools the savings and plans of in vestors and the talents and ener gies of employees with the expect ancy of meeting some particular demand of the consumers and with the hope of earning a profit for the owners. To prosper - indeed to survive - the firm must serve the public, that is, the pub lic interest. But running a busi ness is a risky operation as the public is a hard taskmaster, quick to switch its life-or-death patron age from any firm it deems lack ing. Private enterprise is open to all comers. Anybody with an idea for enterprise and the requisite capital is free to start a business. Quite a few people, some even without any money of their own, have had such ideas. In fact, there are now some 11 million business es, including farms, in the United States. The overwhelming propor tion are sole proprietorships and partnerships and only about 11 per cent of the total are corpora tions .....

The Consumer's Interest The consumer's interest in pri vate enterprise is in getting more 37 38 THE FREEMAN June and more for less and less - with maximum freedom of choice. So naturally the consumer - Mr. Everybody, the entire American public - is keenly interested in private enterprise, because pri vate enterprise is the consumer's servant, and consumer choice is the heart of private enterprise. Thus through the cash register or company order book, through his power of purchase or nonpur chase, the customer speaks to and - in the sense that actions speak louder than words - for Ameri can business. Moreover, he pos sesses virtually an absolute veto over every maj or decision of a firm. He largely decides the pub lic interest in private enterprise because, collectively, he is the pub lic - as well as a key participant in the business system. His power is crucial. Every cost of doing business - every tax, wage, salary, fringe benefit, ma terial cost, interest payment, and so on - must be ultimately sought from one ang only one source, the cost-aware customer.

His purchase therefore sanc tions a firm's prices, makes pro duction and jobs possible, and sustains the very life of the busi ness. In effect he assigns profits to those firms he deems in his in terest - the public interest - and these firms prosper and expand. At the same time he assigns losses to those firms he deems not in his interest - the public inter est - and these firms, unless they mend their w.ays, weaken and eventually fail. Thus, under pri vate enterprise it is said, wisely, that the customer is king - the consumer is sovereign. To be sure, consumer sover eignty is not absolute; the pro ducer also has freedom of choice. He can choose his industry or field of endeavor, where and how he wishes to operate, the prices he would like to get, but in the long run he cannot sell below cost nor above competitive prices. Nev ertheless, it is the consum.er who ultimately decides in effect what and how much will be produced, by whom, and at what price it will be sold.

Another point on the consumer's interest: The marketplace is dem ocratic to an almost unimaginable degree in the political realm. Every day is Election Day in the market. Each purchase is a vote, and a company's sales is its tabu lation of consumers' ballots, the customers' dollar. For each com pany there is neither tenure nor a fixed term of office. A big busi ness can be voted small,. a small business can be voted big, and any business can be voted out of office. So through his dollar votes the consumer, who may also be an 1966 PRIVATE ENTERPRISE - IN THE PUBLIC INTEREST 39 employee or investor or both, ever adjusts supply - and suppliers - to demand, to the public interest. Tile Employee's Interest The employee's interest in pri vate enterprise is his job, for it is the source of his well-being. He too is keenly interested in maxi mum freedom of choice. He is born a free man in a country in which opportunity and equality of opportunity are unexcelled in the world. He can choose his ca reer from available opportunities, decide how hard he wishes to pursue it, select where to live and work. These are his personal de cisions.

Naturally, he is also interested in business growth, which means job opportunity growth and wage and salary growth. American wage and salary scales are far and away the highest in the world, and the job-sustaining and job creating ability of the private enterprise system, for all the talk of automation, has never been in greater evidence. He should likewise be interested in profits. Some assert that wages and profits are in opposition, that profits exist only at the expense of wages. Nothing could be further from the truth. Private enterprise is based on competition and coop eration -- not conflict. Labor and capital are in natural partnership - each is dependent upon the other. And from the employee's point of view, the more capital the better; and since profit at tracts capital, the more profit the better. For capital is the key to productivity, and out of improv ing productivity alone comes all continuing real wage and salary improvement as well as gains to consumers, governments, and in vestors.

Little wonder, then, that capital investment per employee in Amer ica clearly exceeds capital invest ment per employee in all other countries. It follows that Ameri can wages and employee benefits arise out of America's tremendous capital productivity which, in turn, arises out of the private en terprise system. Plainly, these wages and benefits - and job op~ portunities - are not bestowed by benevolent governments nor, for that matter, by aggressive union leaders or magnanimous business employers. The consumer in the final anal ysis is the real employer; his pur chase creates job opportunities. It is his dollar that meets the payroll. It is his nonpurchase which rejects uneconomic wage scales or. shoddy workmanship, and workers so re jected may well find little consola tion in being the highest-priced and most unemployed workers in the world. So, in a very real sense, 40 THE FREEMAN June the employee doesn't work for the employer; he works for the con sumer.

Thus job-creation will continue to go on, provided wage rates are responsive to the consumer's in terest; provided savers and in vestors' in their investment func tion of providing tools, have the incentive to go forward; and pro vided the intricate price mecha nism that governs the billions of daily transactions through innu merable continually changing prices in the American economy remains self-governing. The Government's Interest The government's interest in private enterprise should be in the vitality of business. Business can prosper, economic growth can con tinue, and tax revenues can be sustained only when essential gov ernmental duties are properly per formed. Such duties include main taining law and order, safeguard ing property and contracts, and securing the individual from vio lence from-within or without. But governments can overreach themselves and set back the cause of "Life, Liberty, and the, pursuit of Happiness." For the tendency of governments throughout his tory has been to assume supreme economic insight, to inflate the money supply, to introduce rigid ity ("stability") into economic affairs, to favor some groups at the expense of others, to fix "reason able" prices and "reasonable"

profits; in short, to intervene in normal everyday business deci sions and upset the entire competi tive mechanism, all too frequently in the name of "the public in terest." The Investor's Interest The investor's interest in pri vate enterprise, is in putting his money to work profitably. This is vital to him, to private enterprise, to government, and to the entire American society. He is one of millions of direct investors, in cluding 20 million shareholders, who have supplied job-ereating capital to business through risk ing their savings. In addition, he is one of more than 100 million in direct investors who, through their savings deposits, insurance poli cies, and pension fund participa tion, invest in American business. The investor's key problem: He must decide where and how to in vest. In this he is motivated by powerful, if quite different, drives - the hope of gain and the fear of loss. The investor readily recog nizes that management plays a crucial role, that enterprise and risk go hand in hand, that today's return on operations could turn into tomorrow's loss.

Importantly, however, the in1966 PRIVATE ENTERPRISE - IN THE PUBLIC INTEREST 41 vestor is not committed to his in vestments. He is also a free agent - most willing to hold or even in crease his investments when he deems their yields right and risks reasonable. But, at the· same time" whenever he thinks yields are un satisfactory or risks too great, he can switch his investments - sell his stocks, bonds, or properties and use the proceeds for other in vestments - or, if he lacks confi dence in the future, he may not invest at all. In any event, invest ing or disinvesting, he keeps a con stant watch on profitability which, as noted, is essentially a signal from consumers. Through the profit incentive, then, comes a mighty flow of in vested savings: the capital that makes modern private enterprise possible; that keeps it on its toes; that provides employees with tools - factories and machinery - which make job opportunities, high pro ductivity, and high wages a real ity; that enables producers to fur nish the goods and services which the consumer desires at prices he is willing to pay. Thus, three fac tors of overriding importance gov ern the investor's interest: sav ings, confidence in the future, and the prospect of profit.

Thus, private enterprise and the decisions of private enterprise decisions shared by all Americans - inherently and most democrat ically reflect the public's wishes, the public's interest. Interference with the decisions of private en terprise in the name of the public interest thus amounts, ironically, to interference with the public in terest. For the decisions of pri yate enterprise are the decisions of the people, by the people, for the people. • Political Decisions THE EXPANSION OF GOVERNMENT to its present scale has political ized virtually all economiclife. The wages being paid most work ers today are political wages, reft.ectingpolitical pressures rather than anything that might be considered the normal working of supply and demand. The prices farmers receive are political prices. The profits business is earning are political profits. The savings people hold have become political savings, since their real value is subject to abrupt depreciation by political decisions.

SAMUEL LUBELL, The Future of America.n Politic.

21. The Bent to Destruction CLARENCE B. CARSON THE LORELEI is a rock with an un usual echo, in the Rhine River near St. Goar. There is an old legend surrounding the sounds emitted from this rock: the Song of the Lorelei. The legend is to the effect that a maiden who had been betrayed by a faithless lover threw herself into the river. She was turned into a siren, and .her song has since that time lured fishermen to their destruction against the rock. There is a con nection between this tale and the myth of Holda, the queen of the elves. The man who beholds Holda loses sight of reason. If he listens to her, he is compelled to wander with her forever. This legend provides a kind of Dr. Carson is Professor of American History at Grove City College, Pennsylvania. Among his earlier writings in THE FREEMAN were his series on The Fateful Turn and The American Tradition, both of which are now available as books.

42 parable for our era. And it is ap propriate at this point in the ac count to turn to story, legend, and myth. Rational analysis of the data of history can provide us with a great deal of information and ex planation about how we came to be where we are at present. Yet, reason and evidence are inade quate to the task; at least, the facts which this writer has in hand and his reason are inade quate to the task of describing the movement toward the triumph of reformism in America. Much as has been told, there is more that has not, or has been touched upon only lightly. Many aspects of the development and spread of ideas and methods of reform have not been described. Yet,· the time has come to bring this aspect of the story to an end. This requires a summary that will hold the move1966 THE BENT TO DESTRUCTION 43 ment up whole and grasp its char acter. We still want to know why reformers have been so deter minedly attached to their effort, even in the face of the near obvi ous contradictions involved. For grasping things whole, reason is the wrong instrument. It proceeds by taking things apart, not by wholes. The nearest man comes to talking about things whole is by way of parable, story, poem, leg end, and myth. Men have ever had a penchant for these tools of sim plicity by which to see things whole, even though such accounts lack precision.

The Vision of Utopia The song of the siren, the lure which has led reformers on and the lure they have held out to others, has been the vision of the good society they would create for the future. It has been a vision of peace, plenty, and progress, 'of a time when all struggle and tension would be removed from, this world, when felicity and goodness would reign without end. The vision, lahricated hy utopians, embedded in an historical eschatology by ideologues, rendered into a kind of idealism by philosophers, de scribed in glowing terms for the vulgar by politicians, finally has become a mirage which men see just before their eyes. The vision has such powers of attraction that before it men do indeed lose sight of reason and wander hither and yon over the face of the earth seeking devices to fulfill it. The rock upon which the re formers are continually ship wrecked is, above all, human na ture and the nature of the uni verse. The projections from the rock may be described in many ways, however. They are the at tempts to apply force to the ac complishment of ends which can only be achieved by willing con sent. They are the tendencies to concentrate power and to leave it unchecked in the hands of men.

They ate the treatment of men as if they were things. But why, it may be asked, if the boats launched by reformers are one after another and time and again foundering upon the same rock, are markers not· placed around the rock and why do not pilots take care to avoid it? We know, of course, from earlier ex position that reformers have cut themselves off from, their experi ence; they have deactivated his tory. But the answer runs deeper than this. The answer will not be believed at first, for it appears in credible. The reformers will the destruction: part of it intentionally, part of it unintentionally through the methods that they employ. The reformist effort does found er upon the rock of human nature, 44 THE FREEMAN June but that is only part of the story. Reformism appeals to something deep and enduring in human na ture. Reformism appeals to the desire to destroy, the desire to build or reconstruct, and the will to power. (The latter - the will to power - will not be discussed at this point in the account.) Thus far, the story of the flight from reality has been told largely in terms of the vision of a recon structed society which has lured men on. Destruction, however, is what we encounter when we follow the trail left by reformers. In the wake of reformers we find customs and traditions trampled upon, sacred beliefs gutted and lifeless, institutions toppled, constitutions rifled, the wreck and ruin of econ omies, and the lives of peoples in disarray because of the dissolu tion of moral codes.

These things are justified in the ethos of the reformer, for the de struction is claimed to be the nec essary clearing away of the rubble that must precede the reconstruc tion. That they are destroying when they claim to be building also is not clear to them. My point here is that destruction is not simply a device for getting rid of the old, not merely an unintended consequence of the methods em ployed and the ends sought, but part and parcel of the appeal of the reformist effort. Civilizing Inhibitions and the Urge to Destroy I suspect that each of us has within his breast a desire to wreck, to plunder, to lay waste, to make havoc - in a word, to destroy. It may be tamed by civilization, be held in abeyance by the threat of punishment, be inactivated by the Grace of God, but it is nonetheless there. Some find innocuous ways for it to come out. They follow the fire trucks to the scene of the fire to watch the building burn.

They line the highway in the vi cinity of a collision of automobiles in order to view the wreckage. They stand on the sidewalks and peer up at the work of men who have been employed to wreck old buildings. Other men find more subtle ways to express their urge to destroy. They defame men, denigrate con ventions, make wisecracks, write satires, hold up to scorn, sneer at, and make fun of things held sa cred by others. When civilizing in hibitions are removed, the bent to destruction in men comes out ever more violently, as those who have participated in wars may testify. Reformism (and its more le thal companion, revolution) fo cuses attention upon and sanctions destruction in an area that is par ticularly rewarding for the release of the bent to destruction. It sanc tions as assault upon civilization itself. Every person of any spirit 1966 THE BENT TO DESTRUCTION 45 and initiative must have felt the galling burden of customs, of tra ditions, of rules, of regulations, of the mysterious imperatives of an adult world when he was grow ing up. Many surely have resented the restrictions that private prop erty represent, the limitations that the rights of others impose upon them, the hardness of the disci pline imposed upon them by hav ing to learn the structure of the language, the workings of mathe matics, and the lessons of history.

Any healthy child surely can think of more exciting things to do than sit in a chur~h or a schoolroom. The young child knows only the order that is exemplified and im posed upon him by adults. This order will seem arbitrary and capricious to him quite often; he would not be equipped to under stand it if it were explained to him, and the adults who accept the order often have not thought it out themselves. The child does not even know his own nature, much less that of the universe; in stead, he feels his impulses strong ly and hardly understands why he cannot follow their promptings. The resentment of and resis tance to the restraints of civiliza tion usually reaches its peak in adolescence when the youth is be ing pressed into the role of man hood. He must learn to subdue his impulses himself, must undergo the disciplinary rigors of learning to do some job, must prepare him self for the responsibilities that attend being an adult. Ahead of him looms the routine and order into which the lives of men must fall if they are to be effective.

Reformist Appeals to the Adolescent in Man The reformer (or revolutionary, as the case may be) offers a most attractive alternative to this pro saic ordering of one's life. He holds out the prospect of casting off the galling restrictions; leav ing behind the authority of the past, having done with that which hampers and restrains the full and fr'ee development of personal ity. He offers a license to the ad olescent - and some of the adoles cent remains in men - to lash out and destroy· the appurtenances of civilization which have so often set unwanted bounds to his activi ties. More, when he has destroyed the old, he can build a new so ciety in keeping with his wishes. Thus does the reformer conjure up a prospect that appeals both to the delinquent and the construc tive in us. We have been studying the development of a mental out look which, when accepted, per petuates this moment of adoles cence throughout life and within which the vision of the reformer appears attainable.

46 THE FREEMAN June Turgenev Points the Problem The bent to destruction of re formist intellectuals was pinned down and imaginatively portrayed by Russian novelists. in the latter part of the nineteenth century. It is ironic, in view of later develop ments, that it should have been Russians who saw with such lumi nous clarity the nature of the ill that was even then becoming epi demic among intellectuals. The bent to destruction reaches its in tellectual epitome in a nonphiloso phy called nihilism. Ivan Turge nev laid bare this particular view point in 1862 in the novel, Fathers and Children (also called, some times, Fathers and Sons). It is a novel of ideas, but it is not simply a novel of ideas. Turgenev tells an engrossing story with characters who come alive on the pages of the novel. The novelist takes for his theme a universal condition: the differ ences between the older and young er generations and the conflicts that arise from them. But it is particularized as to time, place, and people. The setting is in the provinces of Russia, and the time is past the mid-point of the nine teenth century. The parents are landlords and would-be liberals of the nineteenth century variety.

They would have their sons believe that they believe in and practice the new ways. Both fathers involved are eager to hold on to the affections of their sons, anxious to please them, and cautious about doing or saying anything that might alienate them. Yet they are men of tradition, also; their lib eralism has not cut them off from their past. It has only made them uncertain about taking a stand against any change or any new viewpoint. The sons are home for the sum mer from college. There are two families involved in the story, the Kirsanovs and Bazarovs. Young Kirsanov has just graduated from college. Bazarov is a young physi cian who has not yet completed his work at the university. Baza roy is the nihilist, and, when the s~ory begins, Kirsanov is his wor shipful disciple. Bazarov is a veri table bull in the delicate china shop of human relations. He proudly proclaims in the presence of the elder Kirsanovs that he is a nihilist, or rather young Kir sanov does for him.

"A nihilist," said Nikolai Petro vich [Kirsanov, the father]. "That comes from the Latin nihil, nothing, as far as I .can judge; the word must mean a man who ... recognizes noth ing?" "Say - who respects nothing," in terposed Pavel Petrovich [Kirsanov, an uncle] and lowered his knife with the butter on it. "Who regards everything from the 1966 THE BENT TO DESTRUCTION 47 critical point of view," said Arkady [young Kirsanov]. "Isn't tha t exactly the same thing?" asked Pavel Petrovich. "No, it's not the same thing. A ni hilist is a person who does not bow down to any authority, who does not accept any principle on faith, how ever much that principle may be re vered."! Bazarov takes up the delinea tion of his view a little farther on in the story. "A decent chemist is twenty times more useful than any poet," inter rupted Bazarov. "Oh, indeed I" remarked Pavel Petrovich .... "So you don't acknowl edge art?"

"The art of making mon~y or of advertising pills I" cried Bazarov, with a contemptuous laugh. "Ah, just so; you like joking, I see. So you reject all that. Very well. So you believe in science only?" "I have already explained to you that I don't believe in anything; and what is science - science in -the ab stract? There are sciences, as there are trades and professions, but ab stract science just doesn't exist."2 Elsewhere, Bazarov explains his position more fully. "We act by virtue of what we rec ognize as useful," went on Bazarov. "At present the most -useful thing is denial, so we deny -" 1 Ivan Turgenev, Fathers and Chil .dren, intro. Ernest J. Simmons (New York: Rinehart & Co., 1948),p. 24. 2 Ibid., p. 28. "Everything?" "Everything." "What? Not only art, poetry • but ... the thought is appalling ..." "Everything," repeated Bazarov with indescribable composure .... "But allow me," began Nikolai Petrovich. "You deny everything, or to put it more precisely, you destroy everything . . . But one must con struct, too, you know."

"That is not our business ... we must first clear the ground."3 The Object Is Reform We learn eventually, however, that nihilism does have a func tion; it is preparing the way for reform. This time the conversa tion is between Bazarov and a wo man. Bazarov has been maintain ing that all people are essentially alike, that significant. differences are the product of disease or pOOl· education. He continues: "... We know more or less what causes physical ailments; but moral diseases are caused by bad educa tion, by all the rubbish with which people's heads are stuffed from child hood onwards, in short, by the. dis ordered state of society. Reform so ciety, and there will be no diseases. " "And you suppose," said Anna Sergeyevna, "that when society is reformed there will be no longer any stupid-or wicked people?" "At any rate, in a properly or~ 3 Ibid., p. 56.

48 THE FREEMAN June ganized society it will make no dif ference whether a man is stupid or clever, bad or good." "Yes, I understand. They will all have the same spleen." "Exactly, madam."4 Bazarov's stance is that of a god. He views all beings as ob jects. Even human beings are ob jects to be studied and discerned just as all other objects. The dif ferences between men and frogs are unessential to him. He makes this clear in a conversation with peasants while he is hunting frogs for his experiments. "What do you want frogs for, sir?" asked one of the boys. "I'll tell you what for," answered Bazarov . . . ; "1 shall cut the frog open to see what goes on inside him, and then, as you and I are much the same as frogs except that we walk on legs, I shall learn what is going on inside us as well/'5 Bazarov makes it clear in other connections that this is to be tak en literally. What goes on inside people is either physical or it is of the nature of illusion. Faith is an illusion. Principles are only il lusions. Even the sentiment of love is an illusion; it is all a matter of sex, which is all a matter of physi ology. It follows from this that human beings are to be studied, 4 Ibid., p. 95.

5 Ibid., p. 21. manipulated, and made to con form to the correct pattern as are other things. Such are the prem ises from which melioristic re form (as well as revolution) must proceed. Sociology is the instru ment for studying the ills of so ciety and correcting them just as medicine is that for studying the body (though Bazarov does not say so). The god-like stance of Bazarov, the clinical attitude, the lack of emotion, the treating of all beings as objects, the absence of all values (except for the ulti mate one of a reconstructed so ciety), the use of nature in the existential sense as a model, are the appropriate tools for the so cial reformer. Mortal, After All But Bazarov was not a god, any more than other men are. Arkady Kirsanovassured Bazaroy's father that his son would be a great man some day. Not in medicine, most likely, but in some broader field where his talents would have full play. Perhaps in government ser vice, who knows? None of this was to be. Even before the end, there are many intimations that Baza rov is only a man, culture bound and limited, moved by those pas sions that spring from the deeper nature of man, living in a universe that is not. fundamentally altered by genius and talent. Although his 1966 THE BENT TO DESTRUCTION 49 ideas would place him above such things, Bazarov fought a duel with Arkady Kirsanov's uncle. Nor did he evade the fate of most hu mans; he fell in love, blindly, ir rationally, and passionately. Even in his relations with his parents, he showed more sensi tivity than his ideas would warrant. To the extent that he falls short of living up. to his ideas he becomes under standable and almost a character with whom we can sympathize.

Bazarov dies· at the end of the book. He dies young, even in that same fateful summer away from the university. The cause and man ner of his death are prosaic enough. He has assisted a physi cian in performing an autopsy on a typhus case. In so doing, he cut himself, and the medical instru ments were filthy enough if they had not been employed on the mat ter in hand. In consequence, he gets blood poisoning and dies. There is nothing out of the ordi nary in all this. After all, Bazarov was a physician, a man of medi cine, a student, and might be ex pected to avail himself of any op portunity to advance his skill. He had not, as he explains, had an oc casion to open up a man before. Yet all of these details are joined to the main theme and bring it to its appropriate conclusion. There is no civilized act that more aptly demonstrates the treatment of the human body as an object than the performing of an autop sy. There is no more common in stance nor better illustration of human weakness than of a man cutting himself with a sharp in strument. The god-like Bazarov had succumbed to this weakness in the very area of his specializa tion. Nature makes no exceptions even for a Bazarov; germs enter a cut in his flesh and blood poison ing follows its course in him as for other men.

The skill of physicians cannot aid him in the end. He does re ceive solace in his last waking moments from the one he has loved, for she has come to be with him. The concluding conversation leaves little doubt of the author's point. Bazarov is speaking: "Ah, Anna Sergeyevna, let's speak the truth. It's all over with me. I've fallen under the wheel.... " "... You see, what a hideous spec tacle, a worm, half-crushed, but writhing still. Of course I also thought, I'll break down so many things, I won't die, why should I? There are problems for me to solve, and I'm a giant! And now the only problem of this giant is how to die decently, though that too makes no difference to anyone.... " And, at last, "Good-by," he said with sudden force, and his eyes flashed with a parting gleam. "Good-by ... Listen 50 THE FREEMAN June . . . you know I never kissed you then.... Breathe on the dying lamp and let it go out."

Anna Sergeyevna touched his fore head with her lips. "Enough," he murmered, and fell back on the pillow. "And now . . . darkness ... "6 The giant had fallen; the god was dead. "Crime and Punishment" Fyodor Dostoevsky, another and more famous Russian novelist, il lustrated the destructiveness and futility of the reformer in another way. He probably wrote more nov els exploring the psyche of the re former and revolutionary than has any other writer. But the par ticular novel to which I would re fer is Crime and Punis'hment. The main character of the story is a student (or a former student, for he had dropped out of school) by the name of Raskolnikov. One of the main ideas which the novel ex plores is the possibility of doing good by first doing evil. (This is surely the central ethical problem for social reformers and revolu tionaries, however much it may be obscured by subtleties.) The story, of course, is about a murder and a murderer; the murderer is Ras kolnikov.

In the course of the novel, he murders an old woman, a pawn6 Ibid., pp. 225-26. broker. But before this occurs, while the idea is just taking shape in his mind, he overhears a stu dent and a young officer discus sing the justice of the murder of this old woman. They talk about how wealthy she is, how she gives her patrons only a small portion of the value of their articles, and how she sells them for many times what she has paid for them. Not only that but she has a half-sister, a much younger woman, who lives with her and whom she treats like a servant. Not only does the half sister work for the old pawnbroker but she cooks, washes, sews, and serves as a charwoman for her. The pawnbroker already has made a will; its contents are known to the half -sister, who virtually has been disinherited. The bulk of the woman's wealth is to go to a mon astery to pay the monks to pray for her. All of this prompts the student to remark that he "could kill that damned old woman and make off with her money, I as sure you, without the faintest con science-prick."

They then discuss the matter more seriously. "Listen, I want to ask you a seri ous question," the student said hotly. "I was joking of course, but look here; on one side we have a stupid, senseless, worthless, spiteful, ailing, horrid old woman, not simply useless but doing actual mischief, who has 1966 THE BENT TO DESTRUCTION 51 not an idea what she is living fO'r herself, and who will die in a day or two in any case .... "Well, listen then. On the other side, fresh yo-gng lives thrown away for want of help and by thousands, on every side! A hundred thousand good deeds could be done and helped, on that old woman's money which will be buried in a monastery! Hun dreds, thousands perhaps, might be set on the right path; dozens of fam ilies saved from destitution, from ruin, from vice, from the Lock hos pitals - and all with her money. Kill her, take her money and with the help of it devote oneself to the ser vice of humanity and the good of all.

What do you think, would not one tiny crime be wiped out by thousands of good deeds? For one life thou sands would be saved from corrup tion and decay. One death, and a hundred lives in exchange - it's sim ple arithmetic! Besides, what value has the life, of that sickly, stupid, ill natured old woman in the balance of existence! No more than the life of a louse, of a black beetle, less in fact because the old woman is doing harm. She is wearing out the lives of others ..... "7 The officer agrees that the wo man does not deserve to live, but, then, he announces, somewhat am biguously, that her living is a mat ter of nature, that, in effect, there is nothing to be done about it. The 7 Fydor Dostoevsky, Crime and Pun ishment, Constance Garnett, trans. (New York: Modern Library, no date), pp. 66 67. student will take no such answer. He says, HOh, well, brother, but we have to correct and direct nature, and, but for that, we should drown in an ocean of prej udice. . . ."

The officer has had enough of abstractions and so he puts the obvious question: "You are talking and speechifying away, but ten me, would you kill the old woman yourself?" "Of course not! I was only argu ing the justice of it.... "8 The student is the perfect ,ex ample of the reformist intellec tual. He would not personally steal and kill; he would not use terror and violence to effect his ends. But if it were done, he could see the justice of it. Raskolnikov, who had listened to this talk with mounting ex citement, lacked the intellectual's schizophrenic capacity to objectify a situation in such a way as to make evil appear good and then to deny that it is good and proper when applied to the private and personal level. Raskolnikov was on the verge of insanity, if not actu ally insane, but his was the insan ity of subjectivism. The student was talking about what has come to be called social justice. His was tha t particular moral obtuseness, endemic in our era, that cannot 8 Ibid., p. 67.

52 THE FREEMAN June or will not see that the moral character of an action is unaltered by raising it from an individual to a collective level. Raskolnikov, on the other hand, has the medi cally detectable variety of insan ity; he has drawn so deeply with in himself that the question posed can only be personal and individ ual. The student proposes that in dividual morality does not apply to social questions. Raskolnikov places himself outside morality, be yond good and evil, as Nietzsche phrased this position. The officer dismisses the question with the sane and common sense observa tion, "But I think, if you would not do it yourself, there's no jus tice about it." There is, in short, no essential difference between murder done by an individual act ing on his own and murder done in the name of society. From this point of view, Raskolnikov's case becomes a test case for the social question as well as the individual one.

Raskolnikov does not commit murder for some great social end. It is not quite clear why he does it. He is in straitened circum stances; he long since has ceased paying his rent; he eats only oc casionally; he has dropped out of school. His sister, as he sees it, is about to sacrifice herself for him by marrying a man who is well off. He could use the money that might be obtained by robbing the old pawnbroker. At any rate, he does the deed, not a nice, hygienic, technological ly proficient murder, but done in the most horrid manner imagin able, botched as might be expected of an amateur. The author spares the reader none of the gory de tails. Raskolnikov takes an axe to the old pawnbroker. He attempts to rob her, but while he is about the task the half-sister, Lizavetta, comes in, and he kills her, too, by splitting her head. He gets away with a few trinkets of little value, and these he does not use.

Raskolnikov has imagined that he will commit the perfect murder. He knows, as any reader of detec tive stories knows, that murderers are trapped by not attending to details. If they attended to details, he thinks, there is no reason why they should not get away with murder. He theorizes that they do not attend to these matters proper ly because their reason is eclipsed at the time they commit the crime. But Raskolnikov is com mitting no crime, or so he thinks. Therefore, he can be in full pos session of his faculties. It is not neglected details, how ever, that bring Raskolnikov to the bar of justice. He is agitated and careless enough. Probably Sherlock Holmes would have had more than enough trivia to solve 1966 THE BENT TO DESTRUCTION 53 the crime. But the policeman who finally gets Raskolnikov is no Sherlock Holmes. He is a student of the human heart and psyche. He knows that the penalties for crime are not just something arti ficially contrived society, that man has within his nature a need to pay these penalties. The criminal has by his act cut himself off from his humanity, from humanity, and from God. He cannot rest, at least Raskolnikov cannot, until he has confessed, repented, made retribu tion, and found atonement. Ra.s kolnikov had committed a crime.

He came to know that, and as he did he came to know the rightness of punishment also. No man is be yond good and evil; his very hu manity is to be found in a life bounded by these poles. If he were continuing the story, the author says at the end, it would be "the story of the gradual renewal of a man, the .story of his gradual re generation, of his passing from one world into another, of his ini tiation into a new unknown life." It would, we gather, be the story of a man living in the conscious ness of morality. There is further interpretation to be made of this story, however. We are led to believe that we are dealing not only with the question of whether crime pays for an in dividual but whether it pays for larger social units. Of course, Dostoevsky might have put in the conversation between the student and the officer only as a piece of motivation for the actions of his main character. Had this been the only novel ever written by Dos toevsky, such an explanation might be acceptable. The conversation did motivate Raskolnikov. But Dostoevsky wrote other novels. We can know from some of them, at least, that the casuistry of reform ist intellectuals was one of his main themes and a great concern of his work. It is much more plausible, then, as I have sug gested, that Raskolnikov's story was a test case for the social ques tion.

There seems to be a major flaw in the story, however, if it is to be taken as a test case. The stu dent had suggested that it would be a justified action to kill the old woman. But Lizavetta was por trayed as the innocent victim of the pawnbroker's grasping mean ness. It was her treatment of Liz avetta as much a.s or more than anything else that made her un worthy to live. Yet Raskolnikov killed the half-sister as well as the old woman. This act is plausible enough if we are dealing only with a murder by a man. If such a murder actually had taken place, it would have been quite possible for the innocent sister to have walked in and been slain also.

54 THE FREEMAN June But in the novel, Dostoevsky seems to have altered the happen ings so much that they can no longer be applicable to the social question. The student had pro posed no justification for killing Liza vetta. She was one of those who would, at least in theory, be aided by the murder. Why did not Dostoevsky so tell his story that it could be interpreted in such a way as to answer the social question? My point is that he did. How ever he arrived at the conclusion, the author must have felt or known that the sister had to be killed also. The· student had set forth only half of his proposition. He only held that the killing of the old pawnbroker could be justi fied. But the interior logic of his position leads to a question which few social reformers and revolu tionaries have been willing to face, for when they do the inherent des potism of their position is re vealed: namely, could the killing of those who are supposed' to be helped be justified?

The Remaking of Man Let us examine the inherent logic of the position of the social reconstructionist. The student in the novel said that nature must be changed and directed. This is the necessary .posi tion of both the meliorist and revolutionary. Tak ing men as they are and the situation as it is, the reforms cannot be made. Men must be remade; conditions must be changed. Choice must be taken away from men, for this leads to the condi tions that· are deplored, even to the existence of pawnbrokers. The initiative must be taken away from men. They must be deprived of their powers to do good and evil. The social planner must plan and direct things so that men will behave in the desired way to pro duce the desired ends. In brief, men as we know them must be destroyed; they must be deprived of their humanity. Men must be treated as objects or things, to be manipulated at the will of the planner. In a word, and speaking figuratively now, they must be killed.

The reformer no more divests men of their humanity, however, than Raskolnikov effecti vely rob bed the old pawnbroker. He does cut himself off from his ownhu manity. By treating men as things, he wounds himself deeply. Reformist intellectuals have dreamed, above all, of ending their own alienation, of building a world in which they would be at home. Yet their approach to this by way of social reconstruction only increases the alienation, whether they are aware of it or not. The. prophetic warnings of the 1966 THE BENT TO DESTRUCTION 55 Russian novelists were not heed ed. Much of history since· their time has been the enactment of the consequences of ideas which they foresaw. Their beloved Rus sia has been a principle theater for such a bloodbath. The point is that the reformist effort has a twofold impact: the old way must be destroyed - that is one; and the other is that even when they attempt to build, they destroy in stead.

Thus far, an account has been given of the development of ideas, their propagation, and the adop tion of methods for reform. The consequences that follow upon the application of the ideas must be examined in a like manner, that is, from an examination of the his torical record. The imaginings of novelists may not be believed. Redemption Through Love But before leaving the Russian novelists behind, there is some thing else we can learn from them. Neither Dostoevsky nor Turgenev wrote of reformers and revolution aries simply to hold them up to scorn, to turn them into objects of hatred. They are men, too, not things, as we can learn from the pages of the novels. The Song of the Lorelei leads men to their de struction, but those most surely destroyed are the reformers them selves. Their great need is to be reclaimed for humanity, and that can be done, if at all, only by love. Turgenev said this in unforget table language in the heart-rend ingfinal passage of Fathers and Children. Bazarov's old parents loved him dearly and could not forget him.

... Often from the near-by village two frail old people come to visit it [the tomb of Bazarov] - a husband and a wife. Supporting one another, they walk with heavy steps; they go up to the iron railing, fall on their knees and weep long and bitterly, and gaze intently at the silent stone under which their son lies buried; they exchange a few words, wipe away the dust from the stone or tidy up some branches of a fir tree, then start to pray again and cannot tear themselves away from that place where they seem to be nearer to their son, to their memories' of him ... Can it be that their prayers and their tears are fruitless? Can it be that love, sacred devoted love, is not all powerful? Oh, no! However pas sionate, sinful or rebellious the heart hidden in the tomb, the flowers grow ing over it peep at us serenely with their innocent eyes; they tell us not only of eternal peace, of that great peace of "indifferent" nature; they tell us also of eternal reconciliation and of life without end.9 ~ 9 Turgenev, op cit., pp. 232-33.

The next article in this series will discuss "Divide and Conquer."

Some Thoughts On CENSORSHI EDMUND A. OPITZ THE EFFORT to prevent people from obtaining certain kinds of reading matter on the grounds that its perusal may inflict dam age on the minds exposed to it, springs from a "father knows best" psychology. Men of this per suasion assume that they know what is bad for people - even if the people themselves do not-and, further, that they are called upon to invoke statutory safeguards to prevent these latter from injuring themselves unawares. Paternalism is not limited to a concern for the purity of literature, however; the "father knows best" attitude is rampant in every sector of our society, and it is the key to the "liberal" mentality. The liberal draws a clear dis tinction between himself and the average man. The average man, in his ignorance and innocence, is at The Reverend Mr. Opitz of the Foundation staff is active as a lecturer and seminar leader.

56 the mercy of his employer; he is gulled by the hucksters of the advertising profession; he is re garded as fair game by the patent medicine men, food faddists, hid den persuaders, and other such extremists. The liberal, therefore, attempts to regulate industry, fix wages, control profits, enforce so cial securi ty, and otherwise pro tect the consumer against the wily agents of Madison Avenue and the obscene lure of tail fins. Now, if the average man is as helpless and undiscerning as the liberal makes him out to be, why shouldn't the liberal protect aver age minds by screening out the garbage from the avalanche of reading matter and theater fare which engulfs the public? If it is important that we have building codes to insure safe dwellings because the occupant couldn't pos sibly tell whether his own house will withstand the next storm or 1966 SOME THOUGHTS ON CENSORSHIP 57 not; and if the food we eat must have the government stamp of ap proval, and the clothes we wear conform to regulations, then why is it not more important to au thenticate the purity of that which goes into the mind? Is not that which forms our ideas and opin ions more important than the ex ternals wherewith we are clothed and housed, and even more im portant than the meat-cereal ra tio of a hot dog? It is, of course, infinitely more important. Then why provide political guarantees of the amount of beef in a frank furter and ignore what enters a man's mind and soul via his eyes and ears?

Arguments in this vein are as old as time, and it took centuries for the idea of liberty to make headway against them. Despotism does not merely seek to control the external conduct of men; it knows that men may conform ex ternally even while swallowing the revulsion that seethes beneath the surface. D.espotism, therefore, must seek to control men's ideas and their thoughts. Once this is accomplished, then each inner-di rected man will control his own conduct willy-nilly in accord with the planner's blueprint. More like ly than not, this blueprint will in clude an overall plan for the econ omy - perhaps in the form of guilds or castes or enforced occupational and professional group ings; and it will contain a long list of the citizen's political duties. One thing it will not contain, and that is a guaranteed private sphere of individual immunity from governmental invasions - an immunity which belongs to per sons as a matter of inherent right.

This is the hallmark of the free society. From Eith$r Direction Obviously, then, paternalism, and the disposition to regulate the lives of other people which stems from it, tends toward total regula tion, no matter whether it starts with externals or internals. The inner and outer aspects of the person do not exist in watertight compartments; start with thought control and the regulation of ex ternal actions follows inevitably, given time. Begin to regulate con duct and, because actions follow ideas, propaganda and the selec tion of reading matter are not far behind. The paternalistic liberal is all for protecting the average man against the consequences of his follies in all external matters; but, paradoxically, when it comes to literature he is all for laissez faire. He poses as the champion of free speech, freedom of the press, academic freedom, and liberties of the mind. To make this situation 58 THE FREEMAN June doubly paradoxical, the lower case conservative who favors freedom in general, while opposing various governmental interventions which hamstring commerce, nevertheless may sometimes respond favorably when someone whips up a move to ban a questionable book or play.

The case for economic and politi cal liberty is an old one, and it is better today than it ever was, philosophically. But it is incom plete if it does not stand four square for every liberty of the mind. Freedom is all of a piece, and so is its opposite, regulation. Start with Self-Control Freedom is a remedial thing in human affairs, which means that the answers liberty would give to the problems which arise in society grow from the inside outward. Liberty does not have a ready-made set of solutions which can be plastered onto the surface of things. If the believer in free dom possessed a magic wand, one wave of which would impose libertarian solutions for all sorts of problems that now bedevil men while leaving everything else in tact - including that which created the problems - he would not wave the wand, not if he understands freedom. The problem of censor ship is only one among many, and there are no "instant solutions"

to any problem which grows out of human nature itself. What we can do, however, is to sort out the elements of the problem, discard what does not properly belong, and get the rest into proper focus. -If people were· to cease direct ing their censorship efforts at lit erary masterpieces like Tom Jones and The Merchant of Venice, a maj or part of the battle of the books would be over. But how do we recognize a piece of literature when we encounter it; and once we do have a piece of literature in our hands, how do· we handle the salty passages which are to be found in Rabelais, Shakespeare, and even the Bible? John Jay Chapman once re marked that Italian opera has this superiority over the essays of Em erson, that from the operas you'd at least learn that the human race consists of two sexes! The clash of this battle never echoes within an essay by Emerson, but the love story is at the heart of great lit erature, from the Book of Ruth to Romeo and Juliet, right down to Aldous Huxley's last novel. Mere ribaldry does not test the novel ist's powers, nor does mere senti mentality; real artistry consists in maintaining in fiction the right relation of tension between ribal dry and reverence which genuine love exhibits in life. Great works of literature do this, as a recent book somewhat ironically titled, 1966 SOME THOUGHTS ON CENSORSHIP 59 tries to demonstrate-. (How to Read a Dirty Book, Irving and Cornelia SUssman. Chicago: Fran ciscan Herald Press, 1966. 139 pp., $3.95.) The bookstore browser who walks out with this book merely because the title intrigues him will be disappointed. This brief essay is a serious defense of literary val ues· and a criticism of attempts to bowdlerize or censor great works of literature. This husband and wife team base their case on Christian premises and direct their fire especially against the misguided efforts of those people who seek to protect their neigh bors from certain reading matter for presumed religious reasons.

Religion is a celebration of life, and the artistic recreation of life demonstrates how every facet con tributes to the whole. To try to sweep some aspect of life under the rug is an insult to the Creator. It is just as bad as idolizing some part at the expense of the whole. If the authors' case were accepted, we'd no longer witness the-spec tacle of well-meaning people try ing to ban· Lolita or The End of the Affair. Obviously, this little book does not cover much of the field. It presupposes, for instance, that. we already have some feel for literary values. Most of us don't, as a mat ter of fact, despite - or perhaps because of - exposure to litera ture courses in college and literary magazines thereafter. Montgom ery Belgion's book, Reading for Profit, is for the likes of us. This book had its inception in a series of lectures Mr. Belgion prepared for his fellow prisoners of war in 1941. Mr. Belgion expanded these into a book published in England in 1945. Its success was astonish ing, selling upwards of 100,000 copies in the major European languages. The Henry Regnery Company was the American pub lisher, but unfortunately this re markable book is now out· of print.

There is no better book for awak ening our own appreciation of lit... erature, by alerting us to the ear marks of literary merit. Know the Difference It was Goethe who observed that literature may be divided into the sickly and the healthy; but it is only after we have educated our selves into an awareness of where in the greatness of a literary mas terpiece consists that we can make the distinction. "The final pur pose of all great art," wrote Al bert Jay Nock, "is that of elevat ing and sustaining the human spirit through the communication of joy, of felicity." Lesser art may also perform this function; there are many second-and third-rate novels that may be read with prof60 THE FREEMAN June it, and the same may be said for drama and poetry. The problem of censorship wears a somewhat different aspect once we have familiarized our selves with the values that are em bodied in great literature and which we encounter nowhere else.

Life is impoverished by every at tempt to tamper with these values, and an acknowledgment of this fact takes literature out of the censorship hassle. Furthermore, an appreciation of genuine litera ture depreciates the attractiveness of fraudulent literature - which is what pornography is. It is sometimes argued that no one can say what is pornographic and what is not. Well, some men cannot distinguish between a good cigar and a piece of rope. The ex pert testimony of D. H. Lawrence may be cited on this point; ex pert because Lawrence's own nov els came under the censor's fire and copies were burned by the hangman. But Lawrence knew lit erary values and he knew wherein pornography differed: "In the first place," he wrote, "genuine pornography is almost always un derworld; it doesn't come out in to the open. In the second, you can recognize it by the insult it offers, invariably, to sex, and to the human spirit. Pornography is the attempt to insult sex, to do dirt on it.... The insult to the hu man body, the insult to a vital hu man relationship! Ugly and cheap they make human nudity, ugly and degraded they make the sexual act, trivial, cheap, and nasty ....

This furtive, sneaking, cunning rubbing of an inflamed spot in the imagination is the very quick of modern pornography, and it is a beastly and very dangerous thing. You can't so easily expose it, because of its very furtiveness and its sneaking cunning .... " When the literary marketplace is free and when the society con tains a large number of people who are keen on good literature, will there still be pornography? Yes, but it will not constitute a problem. We don't need a law to prevent healthy, well-fed people from sampling garbage! + A Good Book MANY A MAN lives a burden to the earth; but a good book is the precious life-blood of a master spirit, embalmed and treasured up on purpose to a life beyond life. JOHN MILTON, Areopagitica A REVIEWER'S NOTEBOOK THE FIRST THING to be said about William F. Rickenbacker is that the "decline and fall. of silver coins" which is the subject of his Wooden Nickels (Arlington House, $3.95) hardly keeps him awake 0' nights. Not in itself, that is. Our silver dollars, half dollars, quarters, and dimes form such a small part of our total money supply that their disappear ance into the hoarders' socks isn't going to make much difference.

The real subject of Mr. Ricken backer's worry is something differ ent. What he is profoundly con cerned about is the inability of the modern breed of politician to realize that Gresham,'s Law, which says that bad money always drives out good money, is just as true and just as inexorable in its workings in our neo-Keynesian days as it was in the time of Good Queen Bess. The reason why Mr. RickenJOHN CHAMBERLAIN p<,/ <L OF SIL VER COINS backer undertook a study of what has happened over a period of two decades to our silver currency is that it offers a classic example of Gresham's Law in operation. This is a witty book about the bungling of so-called statesmen and self styled Treasury experts who tried to go on coining silver for mone tary use at unrealistic ratios while the hoarders were snapping it up. It is the story of how three Ad ministrations, those of Dwight Eisenhower, John F. Kennedy, and Lyndon Johnson, presided over the collapse of our subsidiary coinage without betraying even the most elementary acquaintance with the law of supply and demand. Silver coins started to vanish in the nine teen fifties. Yet even as late as 1965 an Assistant Secretary of the Treasury was still protesting that "our chicken-feed problems," mean ing our troubles in' keeping silver in circulation, would soon be over.

62 THE FREEMAN June The whole fantastic record is summarized by Mr. Rickenbacker in a pithy paragraph that says the Treasury "had to lose three quarters of its free reserves (of silver) before it awoke to the ex istence of an abnormality. Its im mediate action was based on a faulty interpretation of the cir cumstances (first the numisma tists were guilty; then the vend ing machines; then economic growth). Its subsequent actions were inadequate and delayed. It failed to anticipate the price rise in silver after it withdrew from supplying half of domestic indus trial demand. . . . Every official forecast was wrong. Douglas Dil lon's famous prophecy that we have enough silver to last into the 1980's, and almost any statement by poor Mr. (Robert) Wallace, will serve as samples of the unin formed, haphazard, or deliberately deceptive pronouncements that have characterized the Treasury in recent years."

Ample Warning, No Response The real joke on the U.S. Trea sury is that this reviewer, who is the veriest neophyte in coinage rnatters, is hailed as a prophet of the collapse of our silver coinage by Mr. Rickenbacker. Away back in 1955 I undertook to do an arti cle on silver for Barron's Finan cial Weekly. I discovered, by talking with some real experts in the smelting business, that the indus trial uses of silver were increas ing every year. Steadily increas ing supplies of silver were needed for photographic work, for elec trical uses, for brazing and solder ing, for batteries, and for vessels that were corrosion-resistant. Fur thermore, I learned what every mining authority has known for years, that the production of silver is mainly a by-product of the min ing of other metals. The circum stances of its new industrial uses and its limited supply could mean only one thing : that in a short time there wouldn't be enough to go around for coinage purposes at the existing relationships between silver, gold, and the paper dollar.

So I set it down in Barron's more than ten years ago that silver was on the way toward being demonetized. Mr. Ricken backer is good enough to quote me at several points in his book. But I was only a second-hand prophet; I was merely reporting, as an eco nomic journalist, what at least ten knowledgeable metal experts within a stone's throw of Wall Street were saying about silver. Incredibly, the U.S. Treasury peo ple were to let a full decade go by without listening to the metal experts for themselves. Mean while, I had completely forgotten that I ever wrote the article for 1[J(j(j DECLINE AND FALL OF SILVER COINS 63 Barron's. It was with quite a start that I rediscovered my own words in Mr. Rickenbacker's book. The Vital Message Well, the incompetence of gov ernment need never surprise any body. Luckily, as Mr. Ricken backer points out, precious metals are not needed in a subsidiary coinage. We do need, however, a Treasury Department that knows something about Gresham's Law.

The behavior of the Treasury in the prolonged farce of the vanish ing silver dollars and half·dollars is rather terrifying proof that no body in Washington has any savvy about the proclivity of people for hoarding valuable items when adulterated money is flooding the market. Says Mr. Rickenbacker: "We cannot bid farewell to silver with out profound foreboding." For, in its "minor fashion," the disap pearance of silver coins has meas ured "the speed of our monetary debauch." Now that the silver quarter has been replaced by the cupro-nickel quarter, which looks like "a salami sandwich made with moldy bread," the United States is on what amounts to "a com pletely fiat basis." For the "first time since 1792," so Mr. Ricken backer says, "we are on a money ba.cked.by nothing better than the politician's pledge. The stage is set for the final inflationary blow off if that is what our money man agers desire . . . Our leaders have not learned from history." (Mr.

Rickenbacker chooses to ignore what he describes as "the trivial connection between gold and that 20 per cent of our money supply that is composed of Federal Re serve notes.") Rampant Inflation Mr. Rickenbacker is fun to read because of the wit and elegance of his sentences, which are always exquisitely tailored. But the fun becomes macabre when one real izes that Mr. Rickenbacker is in tensely serious in his warning to his readers. He is striving, by playing up the symbolism· of the silver story, to tell us that infla tion itself is nothing more nor less than a dramatic unfolding of Gresham's Law as it is applied to values in general. What happens, in an inflationary blow-off, is that bad money tends to drive every thing of value into hiding along with any remaining supply of good money. As fast as bad money comes into the hands of people, they trade it for anything at all that will serve as a "store of value" while the inflationary blitz continues.

The inexorable working of Gre sham's Law applied to values-as-a whole causes people to hoard land, 64 THE FREEMAN June food, clothing, hardware, common stocks, or anything else they can get their hands on. Gresham's Law, in short, applies to every thing of value in the world. For, in a time of inflation, anything of value is potential money. (See the use of cigarettes as money in de feated and occupied· nations as an example.) Wooden Nickels is Mr. Ricken backer's first book. He has a great talent for economic clarification and for the orderly marshalling of pertinent evidence. Now that he has paid his respects to the story of silver, one wishes he would go on to tell us what is happening to gold, which is a more important matter. ~ THE FREEMAN on Microfilm. An agreement has been entered with University Microfilms to make available to libraries and others who may be interested current as well as back issues of The Freeman since January 1956. Inquiries should be directed to University Microfilms, 313 N. First Street, Ann Arbor, Michigan 48107.

When we all take in each other's washing Utopia will have arrived YET'S tax the whole country so New Yorkers L won't have to pay as much as the true cost of their train rides. Let's all pay more for our break fast coffee so the rich planters of South America will stay rich and won't have to pay the taxes you pay. Let's continue to forgive France the 4 billion dollars we lent them almost 50 years ago (plus the billions we have given them since) so they can drain away our gold. Let's all continue to pay more for gasoline taxes to build super highways for states who refuse to build their own. Let's all keep on paying more for food than it costs to raise it, so some farmers can be paid billions they don't earn. Let's continue to pay billions to "veterans" who never saw a battle. Let's keep on paying more for our homes so building trades unionists can continue to get as much as $30 for a 6 hour day.

Who's kidding whom? If we all did our own work, paid our own bills instead of insisting others pay them, we'd get mote done, and save the billions of dollars every year in handling charges - charges that have so boosted our debt that interest alone is more than 11 billion dollars a year. Sharing the wealth (i.e., socialism) is nothing but sharing the poverty, and don't let any poli tician steal your vote by telling you differently. Cut-off and grooving tools manufactured by Manchester Tools, a Division of Warner & Swasey, solve many difficult metal-cutting problems. YOU CAN PRODUCE IT lETTER, FASTER, FOR LESS WITH WARNER & SWASEY MACHINE TOOlS, TEXTILE MACHINERY, CONSTRUCTION EQUIPMENT SELF-HELP • It has been often said that power corrupts. But it perhaps is equally importantto realize that weakness, too, corrupts. Power corruptsthe few, while weaknesscorrupts the many. Hatred, malice, rudeness, intolerance, and suspicion are the fruits of weakness. The resentmentof the weak does not spring from any injustice done to them but from the sense of their inadequacy and impotence.... Our healing gift to the weak is the capacity for self-help. We must learn how to impart to them the technical,social, and polit ical skills which would enable them to get bread, human dignity, freedom, and strength by their own efforts.

ERIC HOFFER, The Ordeal of Change William Henry Chamberlin 3 Leonard E. Read 9 Willard M. Fox 12 Learned Hand 18 Henry Hazlitt 20 Donald Walter Shorock 36 Clarence B. Carson 38 John F. Gummere 50 William E. Peterson 52 JULY 1966 Constitutions Shou Id Say No . "Creative Federalism" . How to Finance a War . The Spirit of Liberty Income Without Work . An Admission of Failure . The Flight from Reality: 22. Divide and Conquer The Independent School The Businessman - Hero or Villain? Books: Of Men and Not of Law Other Books . John Chamberlain 60 63 Your savings earn 4.970/0 when held one year at current rate of 4.85% I paid semi-annually. To: George Ross, Department FM, Coast Federal Savings and Loan Association 9th & Hill Streets, Los Angeles, California 90014 D Please send me the free brochures Name(s) --on "Law and Order." (Please Print) o Yes, I'd like to open a savings ac count. Enclosed is my check (or money order) for $ _ D Individual Account Street _ D Joint Account D Please transfer my account. City State Zip _ THE FREEMAN JULY 1966 Vol. 16, No. 7 I'" The vital function. of a Constitution is to place limits on the power of gov ernment, says William Henry Chamber lin, and the function of citizens is to know why p. 3 VI Behind the label of "Creative Fed eralism," Leonard Read sees a great deal of coercion p. 9 I'" It's almost impossible to win a war if the fighting men and materials are to be supplied by the next generation, suggests Willard Fox p. 12 VI The times commend repeating and remembering what Judge Learned Hand had to say about the "Spirit of Liberty" in the hearts of men ....p. 18 ,y; Henry Hazlitt explores and deplores the "new" idea of guaranteeing every one an income, whether or not he has tried to earn it p. 20 ", "Isn't an idea a failure if it has to be 'sold' to others by force?" asks this young man p. 36 ", And in this chapter of The Flight from Reality, Professor Carson ex amines the reformist tactic of "divide and conquer." p. 38 II"" The advantages of the independent school are explained by a man who "owns" one - or, at least, puts his trust there p. 50 II"" Dr. William Peterson, business econ omist, suggests that the businessman does a job, for himself, and for his cus tomers, that makes him neither a hero nor a villain p. 52 VI Lyman Garber's Of Men and Not of Law, ~ study of Supreme Court rulings since 1930, affords reviewer Chamber lain an opportunity to revert to the Constitution , , p. 60 VI The Reverend Norman S. Ream commends the several authors who would buck the socialistic trend in Your Church - Their Target ........ p. 63 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

JULY 1966 LEONARD E. READ PAUL L. POIROT Vol. 16, No.7 President, Foundation for Economic Education Managing Editor THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit educational champion of private property, the free market, the profit and loss system, and limited goYernment, founded in 1946, with offices at Irvington-on-Hudson, New York. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, in cluding THE FREEMAN, are met through volun tary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are invited in any amount - $5.00 to $10,000 - as the means of maintaining and extending the Foundation's work. Copyright, 1966, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each.

Permission is hereby granted to anyone to reprint any article in whole or in part, providing customary credit is given, except liThe Flight from Reality" and liThe Businessman-Hero or Villain?" Any current article will be supplied in reprint form if there are enough inquiries to justify the cost of the printing.

WILLIAM HENRY CHAMBERLIN CONSTITUTIONS SHOULD SAY NO A timely reminder of some profound political truths by a long-time observer, student, and analyst of men and their government,s. Two THOUSANDYEARS and more of recorded history, confirmed most emphatically by the experience of our own time, prove that tyranni cal government, without check, balance, or limitation, is the great est evil to which humanity is liable. The Greek city-state of Athens and the Roman Republic, on a larger scale', worked out elaborate constitutional safe guards against the emergence of a dictator, tyrant, or king. Athens went so far as to institute ostra cism, or banishment, by vote of the people, for any citizen who seemed to endanger the republi can constitution. Rome instituted a complicated system of checks and balances. Ex ecutive' power was vested for a year at a. time in the hands of two consuls, each a potential watch dog on the other. While important functions were entrusted to the aristocratic Senate, the populace was given a voice and a share in the government through the elected tribunes of the people, whose veto could check any pro posed legislation. The Roman con stitution could not have been easy to operate. Yet it worked well enough to permit Rome to become the dominant power in the ancient Mediterranean world. Then, for various rea.sons, not the· least being the absence of external challenge and the development of a socially unhealthy system based on slave labor, internal dissensions began to place an intolerable strain on the old constitutional fabric.

The old rules and restraints were 3 4 THE FREEMAN July more and more disregarded and gave way to sheer tests of fac tional violence, fought out with all the cruelty and bloodshed char acteristic of revolutions and coun terrevolutions of the present time. With the checks a.nd balances discarded, the stage was set for the emergence of the "strong man" who would subdue the whole state to his own will; and. this figure appeared in Julius Caesar. Caesar possessed rare energy and genius as soldier and statesman, writer and administrator. But he left behind him a legacy of absolute power which carried within it the seeds of the decline and fall, so brilliantly described in Gibbon's mighty historical work. The Century of Totalitarianism It is no accident that the big gest and most shocking crimes against human beings have-always been perpetrated by dictatorial governments, operating without any restraint of law or constitu tion. This century has witnessed more than its share of such crimes: the liquidation of the kulaks and mass starvation of peasants who did not wish to give up their individual farms, the mass arrests, executions, deporta tions, and slave labor system in the Soviet Union; the horrible sla ughter of the Jews and vast cruelties inflicted both on dissenters at home and people in oc cupied countries by the Nazis; the similar acts of terrorism in Red China.

All these measures claimed far more victims than acts of tyranny that shocked the more tender con science of the nineteenth century, and for an obvious reason. The twentieth century is the century of totalitarianism. And totalitar ian terror stifles the voice of pro test and takes away from those who live under it any means of denouncing or resisting, because the slightest move in opposition is calculated to bring fearful re prisals not only on the individual, but on members of his family. This is why one of the most im portant functions of an effective constitution is that of saying "No" to the-invariable temptation of agents of government to stretch and abuse the powers with which they are entrusted. One of many reasons why it is worth while to reread the Constitution of the United States is to note how many prohibitions it contains. To quote a few examples: The privilege of the writ of habeas corpu~ shall not be suspended unless when in cases of rebellion or invasion the public safety may require it.

Nobill of attainder or ex post facto law shall be passed. No capitation or other direct tax shall be laid, unless in proportion to 1966 CONSTITUTIONS SHOULD SAY NO 5 the census or enumeration herein before directed to be taken. (This prevented the levy of a graduated in come tax until the Sixteenth Amend ment, of unhappy memory, was passed.) Congress shall make no law ,re specting an establishment of religion, or prohibiting the free exercise there of; or abridging the freedom of speech, or of the press; or the right ot the people peaceably to assemble and to petition the Government for a redress of grievances. The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures shall not be violated and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describ ing the place to be searched, and the persons or things to be seized.

Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted. The enumeration in the Constitu tion of certain rights shall not be construed to deny -or disparage others retained by the people. The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people. (Italics supplied) No Positive Action Promised Along with this multitude of "Don'ts" to governing power, some of them now diluted or eliminated by amendments or recent decisions of the Supreme Court, there is conspicuous absence of the prom ises of affirmative state action which are now the stock-in-trade of every up-and-coming politician and may also be found in the con stitutions of totalitarian states. The framers of the Constitution a process admirably described in Clinton Rossiter's recently pub lished work, The Grand Conven tion (Macmillan, 443 pp., $7.95) were not in the vote-buying busi ness. They did not promise the American people to make them healthy, wealthy, and wise. They shared the negative view of the proper role of the state voiced by their great contemporary political thinker, Edmund Burke: To provide for us in our necessi ties is not in the power of govern ment. It would be a vain presumption in statesmen to think they can do it.

. .. It is in the power of government to prevent much evil; it can do very little positive good in this, or perhaps in anything else. And the long string of "Don'ts," directed to the address of govern ment, and of Congress itself, in the Constitution reflects Burke's well-turned warning against legis lative tyranny: It would be hard to point out any error more truly subversive of all the order and beauty, of all the peace and happiness of human society than the position that any body of men may make what laws they choose.

6 THE FREEMAN July Burke Opposed Tyranny Burke still is regarded in some' circles as a reactionary. This is because ofa rather lazy intellec tual view that, by and large, the French Revolution turned out for the best and that Burke, in his celebrated indictment of this movement, was merely pleading the lost cause of monarchy and aristocracy. What Burke opposed was not constitutional democracy, of the type established under the Constitution of the United States. He spoke strongly for the Ameri can cause during the War of the Revolution, on the ground that the colonists were merely asserting the proper rights of freeborn Eng lishmen. What Burke denounced, and with good reason, was Jacobin democracy, as preached and prac ticed by Robespierre and other ex tremist ideologues of the French Revolution. This, as Burke cor rectly foresaw, led not to ordered liberty but to a kind of preview of communism, with a small group of dedicated fanatics ruling the masses of the people, supposedly for their own good, with the guil lotine as the final sanction. It is interesting to recall that John Adams, who was not one of the framers of the Constitution, but who wrote a long vindication of it, was just as negative as Burke in his reaction to the French Revolution in its extreme terrorist phase. Skeptical of the teachings of Rousseau, the Marx of the Jacobins, Adams called the French Encyclopedists "totally destitute of common sense." His verdict on the Revolution and its intellectual precursors was expressed in lan guage as tart as aNew England apple: Helvetius and Rousseau preached to the French nation liberty, till they made them the most mechanical slaves; equality, until they destroyed all equity; humanity, until they be came weasels and African panthers; and fraternity, till they cut one an other's throats like Roman gladiators.

And, in a letter to the well known surgeon, Benjamin Rush, Adams explained his difference of opinion on this subject with Thomas Jefferson: He thought it wise and good and that it would end in the establish ment of a free republic. I saw through it, to the end of it, before it broke out, and was sure it could end only in a restoration of the Bourbons, or a military despotism, after deluging France and Europe in blood. In his Defense of the Constitu tion Adams wrestled hard with the many perplexing issues that con fronted the founders of a new na tion. After the British rule had been overthrown, it was necessary to create on new foundations a re publican government that would 1966 CONSTITUTIONS SHOULD SAY NO 7 steer a middle course between the twin threats of despotism on one side and chaotic anarchy on the other. With his stern Calvinist background, and the practical knowledge of human foibles which he had experienced as, one of the political leaders of the American Revolution, Adams placed little re liance in the natural goodness of human nature. As he put it: Though we allow benevolence and generous affections to exist in the human breast, yet every moral theo rist will admit the selfish passions in the generality of men to be the strongest. . . . Self-interest, private avidity, ambition, and avarice will exist in every state of society and under every form of government ....

To expect self-denial from men, when they have a majority in their favor and consequently power to gratify themselves, is to disbelieve all history and universal experience. A Balance of Power What then is a safe formula for entrusting the powers of govern ment to fallible human beings who are apt to be selfish and ambi tious? Adams comes up with a solution that may not be perfect, but is preferable, on the basis of experience, to any other. He starts from the p.roposition that "simple unchecked government," whether exercised by a king, by an aristoc racy, or by the mass of the peo ple, is equally intolerant, bloody, cruel, oppressive, and tyrannical. And he reaches the conclusion that the only sound and durable form of government is one so nicely balanced that ambition will check ambition and power will check power. The international balance of power, abused as it is by advo cates of world government and other utopian schemes, has proved as effective as any device for keeping peace among nations. By the same token, the most tolerable formula for stable, free, and or derly government, in the opinion of Adams, the most distinguished political thinker of the Revolu tion, is a carefully adjusted bal ance of power between social groups and agencies of govern ment. He regards respect for pri vate property as an indispensable condition for the maintenance of liberty. And his prescription for the type of government with the best assurance of preserving lib erty, property, order, and stability is as follows: The essence of a free government consists in an effectual control of rivalries. The executive and legisla tive powers are natural rivals; and if each has not an effective control over the other, the weaker will ever be the lamb in the paws of the wolf. The na tion which will not adopt an equilib rium of power must adopt a des potism. There is no other alternative.

8 THE FREEMAN July Rivalries must be controlled, or they will throw all things into confusion; and there is nothing but despotism or a balance of power that can control them. Even a superficial study of the United States Constitution shows that the Founding Fathers shared John Adams' distrust of un checked, unlimited power, whether vested in a single man, an oli garchy, or a legislative majority. One need only recall the distribu tion of power between co-equal branches of government, legisla. tive, executive, and judicial, no one of which is supposed to domi nate or disregard the other two. Or the great compromise which made the Constitution possible, the pro vision of population as the basis for the choice of members of the House of Representatives, while two seats in the Senate were as signed to each state. Or the many prohibitions, bas'ed on natural law and the inherent rights of citizens, imposed on action by the three branches of the government. Or the forbidding, in the original version of the Constitution, of the graduated income tax which may well be considered a form of cruel and unusual punishment.

The Founding Fathers were not setting up an egalitarian democ racy, which would have horrified most of them. They were laying the foundations of a republic under a government of limited and divided powers, and with as many safeguards as might be devised against any man or body acquiring excessive power, and also with checks and balances against over hasty actions by the sovereign people themselves. One American statesman, who was also a first-rate political thinker, John C. Calhoun, sug gested an additional check and bal ance in the shape of what he called the concurrent majority. Accord ing to this theory, no law should be passed without the approval of all important regional and eco nomic interest groups. This, of course, might create difficulties for the easy functioning of govern ment. However, there are many examples of the inadvisability of using a majority to jam through legislation which is very obnoxious to an important minority or sec tion of the country.

A written constitution is, after all, only a scrap of paper. The real guarantee of preserving a limited government of checks and balances with respect for the rights of mi norities must lie in the hearts and minds of the people. Yet, there are advantages in having an instrument plentifully supplied with negatives that offers assur ance that there are some things that government may not legally do. + LEONARD E. READ EVERY PROMOTER wants an attrac tive label regardless of what goods or services or ideas his package contains. So, we sometimes find pronounced discrepancies between the label and the content. The word liberal, for instance, once fairly labeled those who stood for the liberation of the in dividual from government domina tion. But this attractive and de sirable label has since been ex propriated by those favoring what the original liberals opposed - un til it now means nothing more than a liberality with other peo ple's money.

Creative federalism is one of the newer masterpieces of label ing. Creative conjures up man's highest aspiration; federalism, in the American tradition, calls to mind the separation of powers, the checks and balances against unlimited political authority, al ways with a view toward maximizing the freedom of choice of the creative individual.! Taken to gether, the two words constitute a semantic tour de force. Each word, however, has been lifted from its traditional setting and made to adorn a concept of opposite content. Yet, a certain rationalization supports the use of both creative and federalism in the current context. To see the substance beyond the label, we must examine the rationalizations. Federalism here, of course, denies the historical concept. In stead of the Federal establishment having only those powers specifi cally ceded by the people and the the states - really their agency and nothing more - the new feder alism aims at the states having such powers and monies as are 1 See Gottfried Dietze's The Federal ist: A Classic on Federalism and Free Government (Baltimore: Johns Hopkins Press, 1960) ,especially pp. 255-285.

9 10 THE FREEMAN July ceded by the central government, a reversal of roles, with citizens as mere wards of the government. This proposed new relation be tween national and local govern ments still may be deemed a type of federalism, but lost entirely is the original emphasis on the dig nity of the individual. But just how can the word cre ative be rationalized in this new strengthening of the government al monopoly at the national level? The Erosion of Capital The states and municipalities, as well as the Federal government, have the power to impose direct tax levies. But political expediency limits the percentage of the peo ple's wealth that can be obtained in this manner. Beyond a certain point - usually when the total take exceeds the 20-25 per cent level the voters revolt; they'll have no more of it. Thus this method serves to put a crimp in spending and to keep governments within bounds, more or less.

But the Federal government alone among the more than two hundred thousand units of gov ernment in the U.S.A.- has a way of creating funds beyond what can be collected by direct tax levies, out of thin air, seemingly! Not only is it now creating all of the funds it wants for ever-expanding ",Federal activities, but it urges the use of these Federally created funds upon the lesser govern ments. Indeed, foreign govern ments are urged to feed at its cornucopia. Because the desires of governI;nents are insatiable, the program is not difficult to sell. More than anything else, this "creativity" accounts for the shift in political sovereignty from the states to the central govern ment. When we observe a magician at his trade, we ask, "Where, really, does that rabbit come from?" And, in this case, we are warranted in wondering from where these count less billions come. We know, in our saner moments, that real wealth can no more be created from, thin air than from direct tax levies.

These "created" monies come from an indirect tax on savers and lenders, in short, a confisca tion of capital. The effect, unlike a local tax or a bill from the IRS, is not immediate but, instead, is indirect and delayed or, as the Spanish put it, manana. The meth od takes advantage of, and at the same time fosters, the prevalent urge to spend and live it up today with no concern for the morrow. Too technical for a brief ex planation, the Federal "creativity" is achieved, in a word, by the monetization of debt; that is, the Federal government's IOU's are turned into money. The more the 1966 "CREATIVE FEDERALISM" 11 government spends, the more it goes in debt; the greater the debt, the more IOU's; the more IOU's, the more money. But not at all technical is a demonstration of how this manana byplay works in large-scale prac tice: Only 26 years ago, two Ar gentine pesos were exchangeable for a 1940 American dollar. That dollar, in the meantime, has de clined 60 per cent in purchasing power. Related to the 1940 dollar, it is now worth 40 cents. Today, 240 pesos-not two-are exchange able for our cheapened dollar.

The Power to Create Money Now observe how this type of "creativity" taxes capital: In 1940, let us say ,you stashed 240 pesos under the mattress. What in 1966 remains to you in terms of 1940 purchasing value? Exactly 40 cen tavos! In brief, the Argentine pol icy of diluting the medium of ex change (inflation) as a means of financing governmental activities -precisely what we are doing, al though on a lesser scale, as yet has taxed away 239.60 of your 240 pesos! Unlike a direct tax levy which garnishees your income and /or capital right now, this "creativ ity" takes the form of slow cap ital erosion. For the most part, [ erosion goes unnoticed: one rarely feels older today than yesterday; one senses no less capital today than the day before, particularly if one has more dollars; yet ero sion, though rarely perceived, leads to the point where finally nothing remains to erode. 2 To conclude our look beyond the label and at the substance, social ism is the state ownership and control of the means of production (the planned economy) and/or the state ownership and control of the results of production (the welfare state). The new federalism quali fies as socialism pure and simple.

Socialism - all of it - is founded on coercion. Were coercion absent, then it would not be socialism. Thus, if creative and·federalisrn were to be defined in their tradi tional sense, creative federalism is the same contradiction in terms as creative socialism or creative coercion. The label can only be come popular among those who do not know or care what the sub stance is. ~ 2 A government resorts to inflation because the process garners billions in revenue with very little protest from the owner sources. The reason for the lack of protest is an unnoticed erosion of the medium of exchange. For instance, the dollar that has lost 60 per cent of its purchasing value in the past 26 years has eroded at the rate of 1/158th of a cent per day. Who can notice that? Re~rints .available, 2 cents each.

DESPITE General MacArthur's warning that there is no substitute for victory, the United States is once again bogged down in an Asian war that it apparently wants neither to win nor to lose. Having learned nothing about how to finance wars from its experi ences in two World Wars and Korea, it is again relying on a thinly disguised running of the printing presses. Barron's for May 16, 1966, in its 'listing of U.S. Treasury issues, does not show even one offered as high as par, including the May'66 33A,s. Yields, varying with coupon rate and ma turity, range from a low of 4.01 to a high of 4.99 per cent. Such high yields reflect bond specialists' doubts about the future of the dollar, which in terms of 1939 val ues is worth about· 43 1A, cents. Mr. Fox is a market research executive now residing in Costa Rica. 12 HOW TO FINANCE A WAR WILLARD M. Fox War is clearly waste - waste of the lives of the killed; waste of the physical well-being of the maimed; waste of the time of the men who are fortunate enough to come home safe and sound, des pite their loss of productive years; and it is waste of munitions con sumed and stockpiled unused as well as the capital goods worn out in producing them. It is a waste ful activity from an economic point of view, no matter how suc cessful it may be politically, nor how quick the victory. I am neither a pacifist nor a peace-at any-price man. I happen to believe that, given the world in which we live, force does change things and that the purpose of waging war is to win decisively at the least pos sible cost in order to impose one's will upon the vanquished. But I deplore war as waste of human and material resources.

1966 HOW TO FINANCE A WAR 13 The Present Burden Since we are engaged in war, we have to face the question of how to finance its cost. If we look behind the veil of money, it is plain to see that the true cost can be met only out of a combination of past savings and current pro duction. It is as impossible to shift the material costs to the taxpayers of 1996 as it is to shift the burden of combat to the youngsters who will be of military age in 1996. Only men now living and only capital goods and materials now in being can be employed to wage war in Vietnam in 1966. There is no way to borrow them from the future. Moreover, it is plain that there is no possible way to use the same bit of steel today both in a mortar and a motor. Every ton of steel, every pound of copper, every ounce of silver that goes into war ma teriel and is consumed or de stroyed is lost at least for the present and probably irreyocably.

Hence, it follows that every day each man devotes to military serv ice and each machine and each pound of material that are used up for military purposes are com pletely lost to the civilian economy and to the satisfaction of the wants and needs of the civilian population as consumers. Since, economically, war is waste, and it wastes existing -not future - manpower, capital goods, and raw materials, it is clear that the real cost of waging war is borne by the living who are de prived of things that in the ab sence of war could be produced and consumed in ordinary peace time life. No amount of fiscal ho cus pocus can change that reality. This being the case, it is futile to try to shift the cost of the war in Vietnam to future generations of taxpayers. They will be poorer because of it than they would otherwise have been, if only be cause they will fail to inherit the capital goods that might other wise have been produced with the labor, existing capital goods, and materials devoted to Vietnam. In cidentally, this is equally true of all "foreign aid" that consists of outright gifts and loans made on terms that do not cover in full the debt service and repayment of principal in money equal in pur chasing power to the sums lent. It is also true of all domestic malin vestments by governments in proj ect~ that cannot recover an their open and hidden costs.

Both Methods Tried The method the United States has used to finance its wars in this century has been mixed. To a limited degree, it has taken pur chasing power from the citizenry by taxation and by the noninfla14 THE FREEMAN July tionary sale of bonds paid for by genuine saving of funds that otherwise would have been spent on consumers' goods or invested directly or indirectly in capital goods. This source, however, has been a mere drop in the bucket. The maj or source has been a thinly disguised printing of mon ey. There has been nothing as blatant - or as naive - as the printing of Continentals or Green backs. There are more subtle ways, especially since the United States abandoned commodity money. When citizens cannot freely ex change bank notes for gold, they can do nothing effective to prevent the Treasury and the "Fed" from forcing the commercial banks to "buy" engraved pieces of paper for which theyl'pay" with a cred it against which the government can write checks. Then, since the "Fed" by law accepts these pieces of paper as collateral for loans, they can create additional "re serves" by depositing them and thus prepare themselves to create more deposits.

Artificial Prosperity Meanwhile, the civilian popula tion, and particularly the portion engaged in the "war effort," en joys prosperity. This prosperity, in fact, amounts to little but the possession of a lot of unspendable dollars, or dollars that can only be spent for certain available items -mostly luxuries. In World War I, bricklayers and foundry workers labored in pure silk shirts, since they were about the only consum ers' good not in short supply. In World War II the "real" money was ration points, and dollars were not good for much except un known brands of cigarettes, for which people stood in line for hours, plus whatever they could promote in the black market. The real cost of wars· is paid for cur rently as they are fought by go ing without the normal civilian goods that cannot be produced at all, or at least not in the quanti ties wanted. Not even .General Motors executives could get 1944 Cadillacs or Buicks nor Chrysler employees 1943 Plymouths, no matter the size of their paper dol lar pay checks.

The legacy of this mode of fi nancing a war we all know. It is our 43tA: cent current dollar. Granted, war financing is not the sole. cause of the loss of pur chasing power of the dollar. Other nonproductive, deficit-financed government expenditures have contributed to the erosion; to what extent is uncertain. But if that had been all, and had we not spent more than $110 billion-in "foreign aid" since 1945, we might today have a 90 cent or a 75 cent dollar.

1966 HOW TO FINANCE A WAR 15 Inequalities Abound This illusory "war prosperity" is popular. It enables politicians and union officials to tell their followers, "You never had it so good," when the clear fact is that they are not able to buy unre stricted quantities of coffee, beef, shoes, and automobiles and other consumers' durables. All they have -and only the savers have that much-is a claim on a problematic supply of goods when those goods are actually produced in the fu ture and sold against diluted dol lars. Unfortunately, not every body shares equally and simul taneously in this "war prosper ity." Those who live on fixed or virtually fixed incomes are hurt at once and forever after. Those whose skills are little wanted, and who share a trickle of the newly created money only after it has passed through many other hands, certainly lose relatively and usu ally absolutely, since their in comes lag while prices both offi cially and on the black market soar. Debtors, who nowadays are mostly the rich who are smart enough to get as much leverage as they can for their own equity by working as much as they can with borrowed funds, and those whose skills .make them eagerly sought and highly paid by firms engaged in war production do gain relatively and perhaps absolutely.

Economically, the financing of war by inflation is as unfair as the process by which John Brown is assigned to combat duty and gets killed or maimed and James Smith spends his service time running a computer in the Pentagon; though, of course, the outcome is much more serious for the families of the killed and the individuals who are maimed and their de pendents. Facing the Problem Enough has been said to indi cate the politically courageous and morally correct way to finance wars. That is to impose, insofar as possible and that is quite far, the money costs where the real costs fall anyhow. That is to tax away substantially all the incre mental earnings of the civilian population as these earnings ac crue. To write an equitable tax law that would accomplish this would tax the ingenuity of econ omists and tax lawyers; but with sufficient ingenuity and intelli gence it might be done. Rightly or wrongly, people are accustomed to and accept progressive taxation.

Business has accepted an 82 per cent combined income and excess profits tax. While entrepreneural executives have no monopoly of patriotism, they are at least as patriotic as the general popula tion. Hence, they could be expected 16 THE FREEMAN July to go along with seeing practically all their increased profits taxed away, provided other individuals also were deprived of their in come gains by a tax that took substantially all the increase in earned incomes. Additional Money Causes Prices to Rise Obviously, no businessman in his right mind prefers war orders to normal orders from his regular customers, for he knows that they are temporary and largely illu sory and that reconversion to peacetime activities is time con suming and expensive and carries the risk of losing position in the market. Yet, by a combination of persuasion, appeals to patriotism, veiled threats of coercion, and bidding a high enough price, gov ernment can get what it wants in the market. Furthermore, many businessmen (and many other peo ple) are careless or sloppy think ers. Many executives think of x per cent being a "fair return" on sales or y per cent as a "fair re turn" on invested capital. If they know that neither themselves and their competitors nor their em ployees and the general popula tion are going to be allowed to keep much, if any, of their in creased cash flow, they are under no unusual pressure to raise prices.

True, there may be some die hards who will not take or at least not seek war orders; but they can be handled. Since they would be forewarned that their normal customers are going to be taxed to pay for the current cost of the war out of current income, they would see that their normal mar ket would shrink and their nor mal production would be partly unsold, for lack of customers with money to spend for normal use of the goods in question. Hence, they could not afford to bid for strate gic commodities against firms tak ing war orders since their cus tomers would lack the means to pay even customary prices, let alone increased prices; nor could they match wa.ge increases (even though virtually all the increases be taxed awa.y). Hence, to avoid idle plant, they would be obliged to fall in line. If· substantially as much money would be taken out of the economy by the tax collector as is put in by the purchasing agent of the Defense Department, then regard less of the money prices paid for the goods consumed in the war, there need be no war-induced in crease in the money supply or rise in prices generally. This is not to say that the war would be with out effect. It would affect every body to some extent and it would involve waste of capital goods and 1966 HOW TO FINANCE A WAR 17 war materiel. Everybody would be poorer because of the waste ful dem,ands of war. However, the postwar hangover of a lot of newly created money chasing after a reduced stock of goods would be largely or entirely avoided. The money cost and the real cost would both be met during the period of hostilities.

It now appears that the Viet namese war may be prolonged, since the United States does not seek victory and, presumably, does not want defeat. There is also a possibility that a miscalculation in Hanoi, Peking, Moscow, or Washington might bring China and possibly Russia into the war. Should such a disaster occur, the costs would multiply enormously; and the real costs would still have to come out of savings plus current production. It would be naive, in deed, to suppose that any govern ment, particularly a government strongly influenced by union lead ership and economists sympathetic to the welfare state, would have the moral courage and intellectual integrity to tell its people that war, however necessary politically, is economic waste that must be paid for out of current produc tion and that it would be wise and fair to collect the money cost at the same time that men are being sent to death or permanent in jury. Individuals have to discover these harsh facts for themselves.

~ Pay Cash WHEN BONAPARTE took the consulship, the condition of fiscal affairs was appalling. The government was bankrupt; an im mense debt was unpaid. The further collection of taxes seemed impossible; the assessments were in hopeless confusion .... At the first cabinet council Bonaparte was asked what he in tended to do. He replied, "I will pay cash or pay nothing." From this time he conducted all his operations on this basis .... When the first great European coalition was formed against the Empire, Napoleon was hard pressed financially, and it was proposed to resort to paper money; but he wrote to his minister, "While I live, I will never resort to irredeemable paper." He never did, and France, under this determination, commanded all the gold she needed. When Waterloo came, with the invasion of the Allies, with· war on her own soil, with a change of dynasty, and with heavy expenses for war and indemnities, France, on a specie basis, experienced no severe financial distress.

ANDREW DICKSON WHITE, Fiat Money Inflation in France 18 The Spirit of Liberty LEARNED HAND WE HAVE GATHERED HERE to affirm a faith, a faith in a common pur pose, a common conviction, a com mon devotion. Some of us have chosen America as the land of our adoption; the rest have come from those who did the same. For this reason we have some right to con sider ourselves a picked group, a group of those who had the courage to break from the past and brave the dangers and the loneliness of a strange land. What was the object that nerved us, or those who went before us, to this choice? We sought liberty; freedom from op pression, freedom from want, free dom to be ourselves. This we then sought; this we now believe that we are by way of winning. What do we mean when we say that first of all we seek liberty? I often wonder whether we do not rest our hopes too much upon con stitutions, upon laws, and upon courts. These are false hopes; beThese remarks by the late Judge Learned Hand seem as timely today as when delivered on May 31, 1944, at "I Am an American Day"

ceremonies in Central Park, New York City.

lieve me, these are false hopes. Lib erty lies in the hearts of men and women; when it dies there, no con stitution, no law, no court can save it; no constitution, no law, no court can even do much to help it. While it lies there, it needs no constitution, no law, no court to save it. And what is this liberty which must lie in the hearts of men and women? It is not the ruthless, the unbridled will; it is not freedom to do as one likes. That is the denial of liberty, and leads straight to its overthrow. A society in which men recognize no check upon their freedom soon becomes a society where freedom is the possession of only a savage few; as we have learned to our sorrow. What then is the spirit of lib erty? I cannot define it; I can only tell you my own faith. The spirit of liberty is the spirit which is not too sure that it is right; the spirit of liberty is the spirit which seeks to understand the minds of other men and women; the spirit of liberty is the spirit which weighs their interests alongside its own without bias; the spirit of liberty remembers that not even a sparrow falls to earth unheeded; the spirit of lib erty is the spirit of Him who, near two thousand years ago, taught mankind that lesson it has never learned, but has never quite forgotten; that there may be a kingdom where the least shall be heard and considered side by side with the greatest.

And now in that spirit, that spirit of an America which has never been, and which may never be; nay, which never will be ex cept as the conscience and courage of Americans create it; yet in the spirit of that America which lies hidden in some form in the aspira tions of us all; in the spirit of that America for which our young men are at this moment fighting and dying; in the spirit of liberty and of America I ask you to rise and with me pledge our faith in the glorious destiny of our beloved country. • 19 lDcomE WlTHOtJT WORK HENRY HAZLITT A GROUP of social reformers, im patient with the present "rag bag" of measures to combat poverty, propose to wipe it out in a sin gle swoop. The government would simply guarantee to everybody, re gardless of whether or not he worked, could work, or was will ing to work, a minimum income. This guaranteed income would be sufficient for his needs, "enough to enable him to live with dig nity."

The reformers estimate that the guaranteed income ought to range somewhere between $3,000 and $6,000. a year for a family of four. This is not merely the proposal of a few starry-eyed private in dividuals. The National CommisMr. Hazlitt is the well-known economic and financial analyst, columnist, lecturer, and au thor of numerous books. 20 sion on Technology, Automation, and Economic Progress, estab lished by Congress in 1964, brought in a l15-page report to the President on February 4 of this year recommending guaran teed incomes for all. And in Janu ary the President's Council of Economic Advisers indicated ap proval of "uniformly determined payments to families based only on the amount by which their in comes fall short of minimum sub sistence levels." This plan, they declared, "could be administered on a universal basis for all the poor and would be the most direct approach to reducing poverty."

The plan is spelled out and ar gued in detail in a book caned The Guaranteed Inc'ome, a sym posium of articles by ten contrib utors, edited by Robert Theobald, 1966 INCOME WITHOUT WORK 21 who calls himself a "socio-econo mist." Mr. Theobald has contribu ted three of the articles, including his preface. Of the following three para graphs, Mr. Theobald prints the first two entirely in italics: "This book proposes tlhe estab lishment of new principles spe cificallydesigned to break the link between jobs and income. Imple mentation of these principles must necessarily be carried out by the government . ... "We will need to adopt the con cept of an absolu,te constitutional right to an income. This would guarantee to every citizen of the United States, and to every per son who has resided within the United States for a period of five consecutive years, the right to an income from the. federal gov'ern ment to enable him to live with dignity. No government agency, judicial body, or other organiza tion whatsoever should have the power to suspend or limit any pay ments assured' by these guaran tees . ...

"If the right to these incomes should be withdrawn under any circumstances, government would have the power to deprive the in dividual not only of the pursuit of happiness, but also of liberty and even, in effect, of life itself. This absolute right to a due-in come would be essentially a new principle of jurisprudence." The contributors to this volume have arrived at these extraordin ary conclusions not only because they share a number of strange ideas of jurisprudence, of "rights," of government, and of the true meaning of liberty and tyranny, but because they share a number of major' economic mis conceptions. Nearly all of them seem to share the belief,for example, that the growth of automation and "cyber nation" is eliminating jobs so fast (or soon will be) that there soon just won't be jobs for even the most industrious. "The continu ing impact of technical change will make it impossible to provide jobs for all who seek them." The goal of "jobs for all" is "no longer valid." And so on.

Ancient Fears of Automation The fears of permanent unem ployment as a result of technolog ical progress are as old as the In dustrial Revolution in the late eighteenth and early nineteenth century. They have been constant ly reiterated in the last thirty five years and as often completely refuted. It is sufficient to point out here that not only has the average unemployment of slightly less than 5 per cent in the last twenty years not been growing, and that two ..thirds of the jobless have usually remained so for pe22 THE FREEMAN July riods of not more than ten weeks, but that the total volume of em ployment in the United States has reached a new high record in near ly everyone of these years. Even if it were true, as the authors of the guaranteed income proposal contend, that the Ameri can free enterprise system will soon become so prod ucti ve tha t more than anybody really wants can be produced in half the time as now, why would that mean the disappearance of jobs? And how could that justify half the popu lation's, say, being forced to work forty hours a week to support the other half in complete idleness?

Why couldn't everybody work only in the mornings? Or half in the mornings and the: other half in the afternoons 'at the same ma chines? Or why could not some people come in on Mondays, others on Tuesdays, and so on? It is dif ficult to understand the logic or the sense of fairness of, those who contend that as soon as there is less to be done some people must be supported in idleness by all the rest. "An Absolute Right" But that is precisely the conten tion of the advocates of the guar anteed annual income. These hand out incomes are to be given as "an absolute constitutional right," and not to be withheld "under any circumstances." (Theobald's ital ics.) This means that the recipi ents are to continue to get this in come not only if they absolutely re fuse to seek or take a job, but if they throw the handout money away at the races, or spend it on prostitutes, on whiskey, cigarettes, marijuana, heroin, or what not.

They are to be given "sufficient to live in. dignity," and it is appar ently to be no business of the tax payers if a recipient chooses none the less to live without dignity, and to devote his guaranteed leisure to gambling, dissipation, drunken ness, debauchery, dope addiction, or a life of crime. "No government agency, judicial body, or other organization whatsoever should have the power to suspend or limit any payments assured by the:se guarantees." This is surely a "new principle of jurisprudence." Unrealistic Cost Estimates How much income do the guar anteed-income advocates propose to guarantee? They differ regard ing this, but practically all of them think the government should guarantee at least what they and government officials call the "min imum maintenance level" or the "poverty-income line." The Social Security Administration calculat ed that the 1964 poverty-income line for nonfarm individuals was $1,540 a year. A nonfarm family 1966 INCOME WITHOUT WORK 23 of four was defined as poor if its money income was below $3,130.

The Council of Economic Advisers has calculated that by this stand ard 34 million out of our 190 mil lion 1964 population, or 18 per cent, were living in poverty. This is in spite of the $40 biliion total spent in welfare payments, of which it estimated that $20 billion (in the fiscal year 1965) went to persons who were, or would other wise have been, below the poverty income line. How much would a guaranteed income program cost the taxpay ers? This would depend, of course, on how big an income was being guaranteed. Many of the income guarantee advocates think that a guarantee merely of the poverty line income would be totally in adequate. They appeal to other "minimum" budgets put together by the Social Security Administra tion or the Bureau of Labor Sta tistics, some of which run up to nearly $6,000 for a family of four. One of the contributors to the Theobald symposium makes the following estimates of the cost to the taxpayers of different guar antees: For a "minimum maintenance"

level of $3,000 a year: total cost, $11 billion a year. For an "economy" level of $4,000: $23 billion a year. For a "modest-but-adequate" level of $5,000: $38 billion a, year. These figures are huge, yet they are clearly an underestimate. For the calculations take it for granted that those who could get govern ment checks of $3,000 to $5,000 a year, as an absolute guarantee, without conditions, would con tin ue to go on earning just as much as before. But as even one of the contributors to the Theo bald symposium, William Vogt, remarks: "Those who believe that men will want to work whether they have to or not seem to have lived sheltered lives." Who Would Do the Work? He goes on to point out, with refreshing realism, how hard it is even today, before any guaran teed income, to get people to shine shoes, wash cars, cut brush, mow lawns, act as porters at railroad or bus stations, or do any number of other necessary jobs. "Millions of service jobs are unfilled in the United States, and it is obvious that men and women will often prefer to exist on small welfare payments rather than take the jobs .... If this situation exists before the guaranteed income is made available, who is going to take care of services when every one can live without working-as a right?"

Who is, in fact, going to take the smelly jobs, or any low-paid 24 THE FREEMAN July job, once the guaranteed income progra.m is in effect? Suppose, as a married man with two children, your present income. from some nasty and irregular work is $2,500 a yea.r. Comes the income guaran tee, and you get a check in the mail from the· government for $630. This is accompanied by a letter telling you that you are en titled as a matter of uncondition al right to the poverty-line income of $3,130, and this $630 is for the difference between that and your earned income of $2,500. You are happy - for just a day. Then it occurs to you that you are a fool to go on working at your nasty job or series of odd jobs for $2, 500 when you can stop work en tirely and get the full $3,130 from the government. So the government would, in fact, have to pay put a tremendous sum. In addition, it would create idleness on a huge· scale. To pre dict this result is not to take a cynical view, but merely to rec ognize realities. The beneficiaries of the guaranteed income would merely be acting sensibly from their own point of view. But the result would be that the fifth of the population now judged to be below the poverty line would stop producing even most of the neces sary goods and services it is pro ducing now. The unpleasant jobs would not get done. There would be less total production, or total real income, to be shared by every body.

The Shifting "Poverty Line" But so far we have been talking only about the effect of the guar anteed income on the recipients whose previous incomes have been below the poverty line. Wha t about the other four-fifths of the population, whose incomes have previously been above it? What would be the effect on their incen tives and actions? Suppose a married man with two children found at the end of a year that he had earned $3,500? And suppose he found that his neighbor, with the same-sized fam ily, had simply watched television, hung around a bar, or gone fishing during the year and had got a guaranteed income from the gov ernment of $3,130? Wouldn't the worker begin to think that he had been something of a sap to work so. hard for a mere $370 ·net, and that it would be much better to lead a pleasantly idle life for just that much less? And wouldn't the same thing occur to all others whose earned incomes were only slightly above the guarantee?

It is not easy to say how far above the guarantee any man's in come would have to be for this consideration not to occur to him. But we would do well to remem1966 INCOME WITHOUT WORK 25 ber the following figures: The median or "middle" income for all families· in 1964 was $6,569. The median income for "unrelated" in dividuals was $1,983. People with these incomes or less - Le., half the population - would be near enough to the guarantee to won der why they weren't getting any of it. Someone Must Pay If "everybody should receive a guaranteed income as a matter of right" (and the italics are Mr. Theobald's), who is to pay him that income? On this point the advocates of the guaranteed in come are either beautifully vague or completely silent. The money, they tell us, will be paid by the "governm~nt" or by the "State." "The State would acknowledge the duty to maintain the individual." The state is a shadowy entity that apparently gets its money out of some fourth dimension. The truth is, of course, that the gov ernment has nothing to give to anybody that it doesn't first take from someone else. The whole guaranteed-income proposal is a perfect modern example of the shrewd observation of the French economist, Bastiat, more thana century ago: "The State is the great fiction by which everybody tries to live at the expense of everybody else."

Rights ys. Obligations None of the guaranteed-income advocates explicitly recognizes that real "income" is not paper money that can be printed at will but goods and services, and that some body has to produce these goods and services by hard work. The proposition of the guaranteed-in come advocates, in plain words, is that the people who work must be taxed to support not only the peo ple who can't work but the people who won't work. The workers are to be forced to give up part of the goods and services they have cre ated and turn them over to the people who haven't created them or flatly refuse to create them. Once this proposition is stated bluntly, the spuriousness in all the rhetoric about "the absolute con stitutional .'right' to an income" becomes clear. A true legal or moral right of one man always im plies an obligation on the part of others to do something or refrain from doing something to ensure that right. If a creditor has a right to a· sum of money owed to him on a certain day, the debtor has an obligation to pay it. If I have a right to freedom of speech, to privacy, or to the ownership of a house, everyone else has an obligation to respect it. But when I claim a "right" to "an in come sufficient to live in dignity,"

whether I am willing to work for 26 THE FREEMAN July it or not, what I am really claim ing is a right to part of somebody else's earned income. What I am asserting is that he has a duty to earn more than he needs or wants to live on so that the surplus may be seized from him and turned over to me to Iive on. What the guaranteed-income advocates are really saying, be hind all their high-sounding phrases and humanitarian rhet oric, is something like this: "Look, we find ourselves with this wonder ful apparatus of coercion, the gov ernment and its police forces. Why not use it to force the workers to pay part of their earnings over to the nonworkers?" Lack of Understanding We can still believe in the sin cerity and good intentions of these people, but only by assuming an appalling lack of understanding on their part of the most elementary economic principles. "This book," writes Robert Theobald, "proposes the establishment of new princi ples specifically designed to break the link between jobs and income."

But we cannot break the link be tween jobs and income. True in come is not money, but the goods and services that a money will buy. These goods and services have to be produced. They can only be produced by work, by jobs .. We may, of course, break the link between the job and the income of a particular person, say Paul, by giving him an income whether he consents to take a job or not. But we can do this only by seizing part of the income of some other· per son, say Peter, from his job. To believe we can break the link between jobs and income is to be lieve we can break the link be tween production and consump tion. Goods have to be produced by somebody before they can be con sumed by anybody. Claimants to 8e Trusted, Taxpayers to 8e Examined One reason for the agitation for an unconditionally guaranteed income is the dislike of some so cial reformers for the "means test." The means test is disliked on two grounds - that it is "humil iating" or "degrading," and that it is administratively troublesome - "a comprehensive .examination of means and resources, applicant by applicant." The guaranteed income advocates think' they can do away with all this by using the "simple" mechanism of having everybody fill out an income tax blank, whereupon the government would send a check to everybody for the amount that his income, so reported, fell below the govern ment's set "poverty-line" mini mum.

The belief that this income-tax 1966 INCOME WITHOUT WORK 27 mechanism would be administra tively simple is a delusion. Before the introduction of the withhold ing· mechanism, before the report ing requirements for payments made to individuals in excess of $600 in any year, and the still more recent requirements for the reporting of even the smallest in terest and dividend payments, the income tax was in large part a self imposed tax. The government de pended heavily on the taxpayer's conscientiousness and honesty. To a substantial extent it still does. The government can check the honesty of individual returns only by a random or arbitrary sam pling process. It is altogether prob able that more evasion and cheat ing go on in the low income-tax returns .than in the high ones not because the big-income earn ers are more honest, but simply because their chances of being ex amined and caught are higher.

The amount of concealment and falsification that would be prac ticed by persons trying to get as high a guaranteed income as pos sible would probably be enormous. To minimize the swindling, the· government would have to resort to the same case-by-case and ap plicant-by-applicant process as it does to administer current relief, unemployment insurance, and so cial security programs. Is a means test for relief necessarBy any more humiliating than the ordeal that the taxpayer must go through when his income tax is being examined, and when every question he is asked and record he is required to provide implies that he is a potential crook? If the reply is that. this inquisition is necessary to protect the govern ment from fraud, then the same reply is valid as applied to appli cants for relief or a guaranteed income. It would be a strange double standard to insist that those who were being forced to pay the· guaranteed income to others should be subject to an in vestigation from which those who applied for the guaranteed income would be exempt.

Finally, the income-tax mechan ism would be irrelevant to the real problem with which the guaran teed-income advocates profess to be concerned. For the applicants would presumably be reporting last year's income, which would have no necessary relation to their present need. An applicant's in come in the previous year or other previous period might be either much higher or much lower than it is today. The process would not meet present emergencies, such as illness or temporary loss of em ployment. The guaranteed-income payment might either come too late or prove unneeded or exces sive.

28 THE FREEMAN July Old Subsidies Never Die One of the main selling argu ments of the guaranteed-income advocates is that its net cost to the taxpayers would not be as great as might appear at first sight because it would be a substi tute for the present "mosaic" or "rag bag" of measures designed to meet the same goal - social s~cur ity, unemployment compensation, medicare, direct relief, free school lunches, stamp plans, farm subsi dies, housing subsidies, rent sub sidies, and all the rest. Neither the record of the past nor a knowledge of political reali ties supports such an expectation. One of the main selling arguments in the middle 1930's, first for un employment insurance and later for social security, was that these programs would take the place and eliminate the need for the various relief programs and pay ments then in existence. But in the last thirty years these pro grams have continued to grow year by year with only minor in terruptions. The result is that public assistance payments (in cluding old age assistance, aid to dependent children, general assist ance, etc.) have risen from a total of $657 million in 1936 to $4,736 million in 1963, an increase of 620 per cent. And this cost is in addi tion to the present $30 billion or more that the Federal government now spends annually on social security and other welfare pro grams.

So not only may we expect that the guaranteed-income would be thrown on top of all existing wel fare payments (we can expect a tremendous outcry against dis continuing any of them), but that demands would arise for constant enlargement of the guaranteed amount. If the average payment were merely the difference be tween an assumed "poverty-line" income of, say, $3,000 and what the family had earned itself, all heads of families earning less than $3,000 would either quit work or threaten to do so unless they were given the full $3,000, and so allowed to "keep" whatever they earned themselves. And once this demand was granted (in an effort to avoid the wholesale idle ness and pauperization that would otherwise occur), the people whose earnings were just above the gov ernment minimum, or less than twice as much, would point out how unj ustly they were being treated. And the only "logical"

and "fair" stopping place, it would be argued, would be to give every body the full minimum of $3,000 no matter how much he was earn ing or getting from other sources. Anyone who thinks such a pre diction farfetched need merely re call how we got into the present 1966 INCOME WITHOUT WORK 29 system of paying everybody over 72 social security benefits regard less of his current earnings from other sources, and paying benefits to every retired person over 65 re gardless of the size of his un earned income from other sources. By the same logic, the British government pays comprehensive unemployment, sickness, matern ity, widowhood, funeral and other benefits, and retirement pensions, regardless of need or the size of the recipient's income. Incentives Undermined We have seen how the guaran teed-income plan, if adopted in the form that its advocates propose, would lead to wholesale idleness and pauperization among nearly all those earning less than the minimum guarantee, and among many earning just a little more.

But it would also undermine the incentives of those much further up in the income scale. For they would not only 'be deprived of the benefits that they saw millions of others getting. It is they who would be expected to pay these benefit.s, through the imposition upon them of far more burden some income taxes than they were already paying. If these taxes were steeply progressive in pro portion to income, as is probable, they would discourage long hours and unusual effort. It is difficult to make any pre cise estimate of the effect of a given income-tax rate in discour aging or reducing work and pro duction. Different individuals will, of course, be differently affected. The activities of a man whose whole income comes in the form of a single salary from a single job will be differently affected than those of a surgeon, a doctor, a wri ter, an actor, an architect, or anyone whose income varies with the number of assignments he is willing to undertake or clients he is willing to serve.

What we do know is that the higher income-tax rates, contrary to popular belief, just don't raise revenue. In the current 1966 fiscal year, individual income taxes are estimated to be raising $51.4 bil lion (out of total revenues of $128 billion). Yet the tax rates in ex cess of 50 per cent have been bringing in only about $250 mil lion a year --less than 1 per cent of total income tax revenues and not enough to run even the present government for a full day. (In other words, if all the personal income-tax rates above 50 per cent were reduced to that level, the loss in revenue would be only about $250 million.) If these rates ,above 50 per cent were raised fur ther, it is more probable that they would raise less revenue than more. Therefore, it is the income30 THE FREEMAN July tax rates on the lower and middle incomes that would have to be raised most, for the simple reason that 75 per cent of the personal income of the country is earned by people with less than $15,000 gross incomes.

Poverty for All It is certain that high income tax rates discourage and reduce the earning of income, and there fore the total production of wealth, to some extent. Suppose, for illustration, we begin with the extreme proposal that we equalize everybody's income by taxing away all income in excess of the average in order to pay it over to those with incomes below the average. (The guaranteed income proposal isn't too far away from that !) Let us say that the present per capita average yearly income is about $2,800. Then everybody who was getting less than that (and would get just that whether he worked or not) would, of course, as with the guaranteed-income proposal, not need to work produc tively at all. And no one who was earning more than $2,800 would find it worth while to continue to earn the excess, because it would be seized from him in any case. More, it would soon occur to him that it wasn't worth while earning even the $2,800, for it would be given to him in any case; and his income would be that whether he worked or not. So if everybody acted under an income equalization program merely in the way that seemed most rational in his own isolated interest, none of us would work and all of us would starve.

We might each get $2,800 cash (if someone could be found to con tinue to run the printing machines just for the fun of it), but there would be nothing to buy with it. A less extreme equalization pro gram would, of course, have less extreme results. If only 90 per cent of all incomes over $2,800 were seized and people could keep 10 cents of every "excess" dollar they earned, there would of course still be a little incentive to earn a little more. And if everyone could keep 25 cents out of every dollar he earned above the $2,800, the in centive would he slightly higher. But every tax or expropriation must reduce incentives to a cer tain extent. The effect of the guar anteed-income proposal would be practically to wipe out incentives for those earning (or even want ing) no more than the guarantee, and greatly to reduce incentives for all those earning or capable of earning more than the guaran tee. Therefore the guaranteed income would reduce effort and earning and production. It would violently reduce the national in1966 INCOME WITHOUT WORK 31 come (measured in real terms).

And it would reduce the standard of living for four-fifths of the population. The government might be able to payout the specified amount of guaranteed dollar "in come," but the purchasing power of the dollars would appallingly shrink. The Negative Income Tax Recognizing the calamitous ero sion of incentives that would be brought about by a straight guar anteed income plan, other reform ers have advocated what they can a "negative income tax." This pro posal was put forward by the prominent economist, Professor Milton Friedman of the Univer sity of Chicago, in his book Capi talism and Freedom, which ap peared in 1962. The system he pro posed would be administered along with the current income tax system. Suppose that th.e poverty-line income were set at $3,000 per "consumer unit" (families or in dividuals), and suppose that the negative income tax (which is really a subsidy), were a flat rate of 50 per cent. Then every "con sumer unit" (this is the statisti cians' technical term) whose in come fell below $3,000 would be paid a subsidy of, say, 50 per cent of the difference. If its earned in come were $2,000, for example, it would receive $500; if its earned income were $1,000 it would re ceive $1,000; if its earned income were zero it would receive $1,500.

Professor Friedman freely concedes that his proposal, "like any other measure to relieve poverty ... reduces the incentives of those helped to help themselves." But he argues that "it does not eliminate that incentive entirely, as a sys tem of supplementing incomes up to some fixed minimum would. An extra· dollar earned always means more money available for expend iture." It is true that the "negative in come tax" would not have quite the destructive effect on incentives that the guaranteed income would. Nevertheless, once the principle of the negative income tax were accepted, the demand would im mediately arise that the· minimum subsidy to be paid should be at least "adequate" to provide a min imum income to support a family "in decency and dignity." So we would be back to the minimum guaranteed .income, plus supple mental subsidies for those who al ready had some earned or private income of their own. If this mini mum were set at $3,130 for a married man with two children (to return to the Social Security Administration's "poverty-line"

figure), this subsidy would be re duced, say, by 50 cents for every 32 THE FREEMAN July dollar earned, and therefore would not stop entirely until the family's own earned income had reached $6,240. Not Enough Rich to Soak How many billions of dollars in subsidies this would involve, and what rate of income tax would be required on all families with in comes above $6,240 to raise the revenue necessary to pay these. subsidies, if a~yrate could, I leave to the professional statisti cians to calculate. But it is obvious that this pro gram could not be paid for by "the rich." If we were to subsi dize all family incomes below $6,240 it would be hardly consis tent to tax them. Yet net incomes below $6,000 (after exemptions and deductions) are now taxed at rates up to 22 per cent, beginning with 14 per cent even on the first $500 of net income. In fact, all personal net income of $6,000 or less is now the source of nearly 80 per cent of all personal income tax revenue. Yet, as I have al ready pointed out, the Census Bureau calculates that the median income for all families in 1964 was only $6,569; and taxpayers with adjusted gross incomes of $15,000 or less receive three-quarters of the total personal income there is to be taxed.

Neither a "negative income tax" nor a guaranteed income plan of the dimensions being suggested could possibly be put into effect with dollars of present purchas ing power. It may be added that the nega tive income tax would have all the administrative problems that would afflict the guaranteed in come proposal - fraud, corruption, necessary applicant -by -applicant investigation, and irrelevance of payment to present need. And once the main principle of either proposal were accepted, the minimum subsidy or guarantee de manded would be bound constant ly .to increase. Anyone who doubts this need merely consult the his tory of unemployment insurance and social security benefits since the plans were initiated in the 1930's. It is significant that sev eral of the advocates of the guar anteed income acknowledge that their idea originated with the more modest negative income tax proposal of Milton Friedman.

They just expanded it. So knowing what we do of polit ical pressures, and of the past history of relief, "social insur ance," and other "antipoverty" measures, we are forced to con clude that once the principle of either the negative income tax or the guaranteed income were ac cepted, it would be made. an addi tion to and not a substitute for 1966 INCOME WITHOUT WORK 33 the present conglomeration of re lief and "antipoverty" programs. And even alone it would drastical ly reduce the productive incentives of those earning less than the guaranteed amount and seriously reduce the incentives of those earning more, because of the op pressive taxation it would neces sarily involve. Its overall effect would be to level real incomes down, not up. Even at present our large and overlapping assortment of relief and antipoverty measures is seri ously reducing incentives to the production that would otherwise be possible. Our social reformers have been everywhere overlooking the two-sided nature of the prob lem of reducing poverty. The ob stinate two-sided problem we face is this: How can we mitigate the penalties of misfortune and fail ure without undermining the in centives to effort and success?

The Poor Laws of England Our social reformers - who sometimes talk as if no govern ment ever did anything to relieve the plight of the jobless and the poor until the New Deal came along in 1933 - are constantly de ploring the alleged indifference, callousness, or niggardliness of our forefathers in dealing with the poor. But wholly apart from pri vate charity, previous generations in their governmental capacity were sharply aware of the prob lem of poverty and made some effort to alleviate it almost as far back as the records go. There were "poor laws" in England even before the days of Queen Eliza beth. A statute of 1536 provided for the collection of voluntary funds for the relief of those un able to work. Eleven years later the City of L.ondon decided that these voluntary collections were insufficient, and imposed a com pulsory tax to support the poor. In 1572 a compulsory tax for this purpose was imposed on a national scale.

But the problem soon proved a very serious one for the people of that age. The upp.er class was very small numerically and pro portionately. The middle class it self was always very close to what we would today call the poverty line. The workhouse and other conditions imposed on those on relief seem very cruel to us to day. But our ancestors were in constant fear that if they in creased relief or relaxed the stern conditions for it they would pau perize increasing numbers of the population and create an insoluble problem. At the beginning of the nine teenth century, indeed, the cost of poor relief began to get out of hand. The total cost of the poor 34 THE FREEMAN July law administration increased four fold in the thirty-two years be tween 1785 and 1817, and reached a sixth of the total public expen diture. One Buckinghamshire vil lage reported in 1832 that its ex penditure on poor relief was eight times what it had been in 1795, and more than the rental of the whole parish had been in that year.

In face of statistics of this kind, England's Whig government decided to intervene. It appointed a royal commission, and in 1834 a new and more severe poor law was passed in accordance with the commission's recommenda tions. The guiding principle of the new law was that poor relief should be granted to able-bodied poor and their dependents only in well-regulated workhouses under conditions inferior to those of the humblest laborers outside. This seemed harsh, but the com missioners had argued that "every penny bestowed that tends to rend er the condition of the pauper more eligible than that of the in dependent laborer is a bounty on indolence and vice." If the pendulum swung too far in the direction of severity and niggardliness in the middle nine teenth century, it may be swing ing too far in the direction of lax ity and prodigality today. A sweeping subsidization of idleness, such as is proposed by the-guar anteed income, would only weaken or destroy all incentive to effort, not only on the part of those who were subsidized and supported, but on the part of those who would be forced to support them out of their own earnings. There could be no faster way to" impoverish the nation.

The Cure Is Production One of the worst features of all the plans for sharing the wealth and equalizing or guaran teeing incomes is that they lose sight of the conditions and insti tutions that are necessary to cre ate wealth and income in the first place. They take for granted the existing size of the economic pie; and in their impatient effort to see that it is sliced more equally they overlook the forces that have not only created the pie in the first place but have been baking a larger one yearby year. Eco nomic progress and justice do not consist in beautifully equalized destitution, but in the constant creation of more and more goods and services, of more and more wealth and income to be shared. The only real cure for poverty is production. The way to maximize production is to maximize the incentives to production. And the way to do 1966 INCOME WITHOUT WORK 35 that, as the modern world has dis covered, is through the system known as capitalism - the system of private property, free markets, and free enterprise. This system maximizes production because it allows a man freedom in the choice of his occupation, freedom in his choice of those for whom he works or who work for him, freedom in the choice of those with whom he associates and cooperates, and, above all, freedom to earn and to keep the fruits of his labor. In the capitalist system each of us, with whatever exceptions, tends in the long run to get what he creates or helps to create. When each of us recognizes that his reward de pends on his own efforts and out put, and tends to be proportionate to his output, then each has the maximum incentive to maximize his effort and output.

No Effe(tive Poverty Programs for Underdeveloped Countries Capitalism brought the Indus trial Revolution, and the enormous increase in productivity which this has made possible. Capitalism has enormously raised the economic level of the masses. It has wiped out whole areas of poverty, and continues to wipe out more. The so-called "pockets of poverty" con stantly get smaller and fewer. The condition of poverty, more over, is relative rather than absolute. What we call poverty in the United States would be re garded as affluence in most parts of Africa, Asia, or Latin Amer ica. If an income sufficient to en able a man "to live with dignity" ought to be "guaranteed" as a matter of "absolute right," why don't the advocates of a guaran teed income insist that this right be enforced first of all in the poor countries, such as India and China, where the need is most widespread and glaring? The rea son is simply that even the better off groups in these nations have not produced enough wealth and income to be expropriated and distributed to others.

One of the guaranteed-income advocates, in a footnote, admits naively: "We must also recognize that we still have no strategy for the elimination of poverty in the underdeveloped countries." Of course they haven't. The "strat egy" would be the introduction of free enterprise, and of incentives to work, to save, to accumulate capital, better tools, and equip ment, and to produce. But would-be income guarantors ignore or despise the capitalistic system that makes their dreams dreamable and gives their red is tribute-the-income proposals what ever plausibility they have. The capitalist system has made this country the most productive and 36 THE FREEMAN July richest in the world. It has con tinued to achieve its miracles even in the last generation, and to increase them year by year. It has raised the average weekly factory wage from less than $17 in 1933 to $110 today. Even after the rise in prices is allowed for, it has more than doubled our real per capita disposable income - from $893 in 1933 to $2,200 in 1965.

Allowed to continue to operate with even the relative freedom that it has enjoyed in recent years, the capitalist system will continue to produce these miracles. It will continue to make progress against poverty by a general increase in income and wealth. But short sighted and impatient efforts to wipe out poverty by severing the connection between effort and re ward can only lead to the growth of a totalitarian state, and destroy the economic progress that this country has so dearly bought. ~ DONALD WALTER SHOROCK THE "TRUE BELIEVER" of our day seems marked by a willingness to force others to act according to his beliefs. Too civilized to resort to direct open force, he advocates government action instead. Much may be said for a person who is generous with his own re sources, but a "true believer" wants everyone to be generous. Not that he would play the role of Robin Hood; his is the more Mr. Shorock is a senior majoring in Speech, with a minor in Economics, at Ottawa Uni versity in Kansas.

civilized approach of asking gov ernment to do the job. Thus, the primitive "justice" of waylaying the tax collector and dividing his purse among harassed taxpayers becomes the "true believer's" ra tionale for seizure and redistribu tion of property that men have earned and are using in service to willing customers. Those persons greatly concerned about the use of alcohol often fol low similar tactics. It is not enough for them to understand that drinking can lead to loss of 1966· AN ADMISSION OF FAILURE 37 judgment and injury to one's health. Nor is it enough, they say, to make these facts available so that others might come to the same conclusions. The "true be liever" concerning the evils of drinking would not allow anyone to drink - would force him not to. The person who advocates gov ernmental redistribution of wealth is often heralded as the great hu manitarian. And only the Prohibi tionist is presumed to be deeply concerned about the drinking prob lem. Thus, those who have the least faith in their own ideas are judged to be the true believers.

If a person has faith enough in his own ideas, he feels no need to force others to accept his moral judgments and conclusions. If his premises and facts are sound and his logic valid, others should have no problem agreeing with his conelusions; and in case they do not, the failure may be his rather than theirs. Those who would force others into agreement would seem to be admitting failure. Any idea which inspires so little confidence among its advocates is hardly worthy of becoming a law to govern every one. As a reminder of the foolishness of trying to force others to my standards of morali ty, I ref er frequently to a small card at my desk: May I have ideas in which I have enough trust that I never feel. a need to force others to live by them. And may I have ideas worthy of this trust. Princes and Paupers FOR A MAN who can command another man's labor and self denial for the support of his own existence is a privileged person of the highest species conceivable on earth. Princes and paupers meet on this plane, and no other men are on it at all.

On the other hand, a man whose labor and self-denial may be diverted from his maintenance to that of some other man is not a free man, and approaches more or less toward the position of a slave. WILLIAM GRAHAM SUMNER, What Social Classes Owe to Each Other IDEAS HAVE CONSEQUENCES, said Richard Weaver. He wrote a book on the subject, mainly to demon strate that ideas which entered the stream of thought centuries ago have continued to inform our thought and unfold in the direc tions implicit in them. (Perhaps he also demonstrated in yet anoth er way, how the sins of the fathers are visited upon the chil dren to the seventh generation, or beyond.) Ideas have conse quences in two realms. Ideas which serve as basic assumptions (often unconsciously held and un examined) have consequences in the realm of ordinary beliefs and thoughts. When applied, ideas also result in acts, which have conDr. Carson is Professor of American History at Grove City College, Pennsylvania. Among his earlier writings in THE FREEMAN were his series on The Fateful Turn and The Ameri can Tradition, both of which are now avail able as books.

38 22. Divide and Conquer CLARENCE B. CARSON sequences. This can be stated as a proposition: Ideas lead to acts which have consequences. This latter formulation facili tates a most important distinc tion. Our ideas may become more or less determinative in the area of thought and belief, and thus determine our actions. But ideas do not determine the consequences of acts. The consequences of acts follow, of necessity, from the na ture of the acts. This is so be cause the universe is ordered in a certain way; it is so ordered that the consequences appropriate to the act follow from it. Ideas may be inaccurate, invalid, or bear no relation to reality. It is possible to act on the basis of such ideas. But action, any action, brings the one who acts into the orbit of reality. What follows is governed neither by his will, his 1966 DIVIDE AND CONQUER 39 beliefs, nor his claims about it. A man may, for example,. believe that he is on the first floor of a building when he is actually on the twelfth floor. If a fire breaks out and he attempts to jump to safety from the window, he will fall twelve stories, probably to his death, j ustas surely as if he had known he was on the twelfth floor.

It is a measure of the extent of the general confusion of our age that so obvious a truth would need spelling out. It is generally ac cepted, at least among intellec tuals, that ideas have consequences; but it is not usually admitted that acts have consequences which bear no· necessary relation to the ideas and beliefs or motives which prompted them. If this were well known and admitted, there prob ably would have been no occa sion for undertaking the work in hand; for this work is an account of men under the sway of an illu sion, who are on a flight from reality. The flight, however, has been in the realm of ideas. Once the ideas have been applied, a fateful junction with reality has been made; the consequences that have followed have been quite real, and they have been those that follow from such actions. The matter is more complicated than this sounds, however. There is a sense, also, in which the consequences have fol lowed from the ideas - not from the claims about them, the hopes for them, or the illusions about them, but trom the nature of the ideas themselves. Ideas, too, have the consequences appropriate to them when they are applied.

The misunderstanding of re formist intellectuals extends not only to the nature of the universe but also to the nature of ideas. Ideas must be about reality, else, when applied, they will produce not what is claimed and hoped for them but what must folloW from their character. The inner contra dictions of meliorism have borne their bitter fruit in actuality. Ideas which result in acts have consequences appropriate both to the ideas and to the acts. Applying the Ideas This work, thus far, has dealt mainly with the development of reformist ideas and their propaga tion. That is only part of the story. The ideas have been applied, and this application has had con sequences. In many ways, the story of the application and conse quences is more important than an account of the development of ideas. At any rate, intellectual history by itself is incomplete and misleading; it needs to be joined to actuality by an account of what happens when ideas are brought 40 THE FREEMAN July to bear on reality. To do this, the first step is to deal with the ap plication, and the second is to treat of the consequences.

Meliorism is the gradualist way to utopia. To accomplish utopia, society must be transformed. Me liorism is the method for gradu ally transforming society by the use of government power and force. It has been the perennial claim of meliorists that they be lieved in and were using demo cratic methods for transforming society. There were tremendous obsta cles in the way of translating me liorist ideas into action and none more formidable than those in volved in attempting to justify the use of force to transform so ciety in the name of democracy. The democratic use of force to transform society is such a basic contradiction that it should be rejected prima facie as preposter ous. It has all the logic of a man's holding a gun to his head to force himself to do something. If those who make up a society want to change their ways of doing things, what is to keep them from it? They can only be prevented by force from making the changes they desire; and if government has a monopoly of force, the only obstacle to such changes would be government. But, in this case, all that would be needed would be to remove the governmentally en forced rigidity. There would be no call for the use of force to ac complish the transformation. For a society to be .transformed dem ocratically by the use of force would have to mean that the mem bers of a society would be using or sanctioning the use of force on themselves to transform them selves. This is so unlikely that it will hardly be believed until the matter has been carefully ex amined.

The 8eg;nn;ng5 01 Society The examination should begin by getting clearly in mind what society is and by making a careful distinction between society and government. "Society is produced by our wants," Thomas Paine said, Hand government by our wicked ness; the former promotes our happiness positively by uniting our affections, the latter negatively by restraining our vices." To make clear the natural origin and felicitousness of society, Paine imagined what might happen to people newly arrived in some land, under no compulsion but that of their own needs: In this state of natural liberty, so ciety will be their first thought. A thousand motives will excite them thereto, the strength of one man is so unequal to his wants, and his mind so unfitted for perpetual soli1966 DIVIDE AND CONQUER 41 tude, that he is soon obliged to seek assistance and relief of another, who in his turn· requires the. same. 1 John C. Calhoun made a similar observation a few years later: In considering this, I assume as an incontestable fact that man is so con stituted as to be a· social being. His inclinations and wants, physical and moral, irresistibly impel him to as sociate with his kind; and he has, accordingly, never been found, in any age or country,in any state other than the social. In no other, indeed, could he exist, and in no other - were· it .possible for him to exist - could he attain to a· full de velopment of his moral and intellec tual faculties or raise himself, in the scale of being, much above the level of brute creation. 2 Society, then, is that which re sults from the needs of men to commune, to exchange, to special ize, to be nurtured, to learn, to ex press, to be solaced, to associate in commop undertakings, to work, to play, to give, and to receive. A so ciety is any community of men who share a· preponderance of means language, customs, habits, tradi tions, procedures, and beliefs which facilitate such interchange and communion .. Certain practices are anathema to society as well as 1 Gerald N. Grob and Robert N. Beck, eds., American Ideas, I (New York: Free Press of Glencoe, 1963), 190-91.

2 Ibid.; p. 431. being harmful to individuals, such as fraud, deception, violence, and thievery. Government is. that agency of a community.which has a monopoly of the use of force for the legiti mate purpose of keeping the peace by administering justice and deter ring or punishing those who woul<i do harm to individuals and disrupt the harmonious relations necessary to society (that is, to the peaceful association of men). As. Calhoun said, "It follows, then, that man is so constituted that government is necessary to the'· existence of so ciety, and society to his existence and the perfection of his facul ties."3 Communications Changed Those who speak of transform ing society· must mean the chang ing of the means generally em ployed in a society to facilitate in terchange and communion. That is, they must mean to change the lan guage, customs, habits, traditions, procedures, and/or beliefs, for there is nothing else to he changed.

Now these things do change, usually very slowly and over a long period of time. For example, lan guage does change; new words are added and old words dropped, pro nunciation subtly altered, and even the modes of expression varied. In the absence of force, it may be as3 Ibid., p. 432.

42 THE FREEMAN July sumed that changes in language oc cur in accord with other changes in the ways of people in a society and in keeping with what is acceptable to the generality of people or those who are looked to for standards. In like manner, changes may oc cur in habits, customs, traditions, find procedures. It should be noted, however, that any drastic change in any or all of these will disrupt rather than facilitate social rela tions, will produce confusion and disorder rather than harmony. For example, if words are suddenly em ployed in unconventional ways, by decree, as it were, communication will be crippled, and uncertainty will prevail. If the generality of people want to change their ways of doing things, there is nothing to prevent their doing so. There can be no oc casion for the use of force (i.e., government) to produce the change on the grounds that it is what the people want. If they wanted it, they would have only to make the change. Actually, such evidence as I am familiar with would indicate that people do not ordinarily seek change, at least not most people. They may want to change others, but in their own affairs they cling tenaciously to the ways with which they are fa miliar. This is as it should be, for it means that such changes as are made will be limited, be accepted piece by piece, and will not be dis..

ruptive of human relations which make for society. Generally, only such changes will be accepted as can be fitted into the familiar pat tern of one's life and social rela tions. The Iniedion of force Force, aimed at transforming so ciety, does, in fact, tend to destroy society. It introduces violence into the delicate framework of human relations; it produces ·resentment and resistance, and, at best, reluc tant compliance. Men cannot be made to commune with one an other; they can be forced to go through the motions of doing .so. Society flees compulsion; it is formed once again in the inter s.tices of the areas of the applica tion of force. As these are closed up, society moves into the black market. Examples of these developments are numerous in the contemporary world. Compulsory efforts at racial integration have resulted in the movement of people into the sub urbs. Compulsory integration of rec~eational establishments have resulted in burgeoning private clubs. If a language is proscribed, people will speak it surreptitiously.

If the sale of alcoholic beverages is prohibited, people will turn to boot leggers. If men cannot exchange goods on mutually acceptable 1966 DIVIDE AND CONQUER 43 terms, because the law forbids it, they will do so illegally in black markets. It is doubtful that society ever has been or can be destroyed, so long as men exist. So deep is the need for meaningful and fruitful relationships, for those that arise willingly out of men's desire to participate in them, that· when so ciety is driven from the public do main it will be formed once again in the byways and closets which men seek out and find. Change by Conquest It is unlikely that a people would invite such hardship upon them selves. So unlikely is it· that at tempts to transform society by force prior to the twentieth cen tury have been made in two ways: by conquest and by revolution. There have been a number of in stances in history of conquerors at tempting some degree of transfor mation in society. Before the Mod ern Era these usually had as their object the consolidation of rule and control by the conqueror. An ex ample of this would be the changes made in England after the Norman Conquest. After William, Duke of Normandy, defeated Harold God win at the Battle of Hastings in 1066, he imposed his own system of feudalism upon England. He parceled out the lands to his war riors, making his lieutenants the great tenants-in-chief of the realm. He provided that in cases of subinfeudina.tion the primary alle giance of all vassals would be to him and only secondarily to their particular overlord. Castles, the impregnable fortresses of the Mid dle Ages, could only be built when he licensed them. The Church was brought securely under William's control.

It is doubtful that William "transformed society" in England; rather, he changed the political or ganization so that the main lines of power led to and came from him. In general, local custom and tradi tion continued to hold sway, hardly altered by his innovations. He did authorize a census of the land, the results of which were compiled in the Domesday Book, but even this was met with a great deal of com plaint and grumbling. A somewhat more thorough ef fort at social transformation, after conquest, was made in the United States after the Civil War. Crusty Thaddeus Stevens proclaimed, from his pinnacle of power in the Congress, "The future conditions of the conquered power depends on the will of the conqueror." Con gress proceeded with a right good will to attempt to reconstruct the South. By constitutional amend ments slavery was abolished, pro hibitions made against payment for slaves and the payment of the 44 THE FREEMAN July Confederate war debt, and restric tions placed on state activity. The South was occupied by military forces, part of the population dis franchised, others enfranchised, and local governmental power fell into the hands of Carpetbaggers, Scalawags, and newly freed Ne groes. These attempted to use the force of law, assisted and enforced by Federal troops, to transform the South. The South was changed, too, but not in accord with the vision of reconstructionists. The whites re gained political power in the course of time, effectively disfranchised the Negroes, and new laws and practices were adopted in the light of altered conditions. Society lived on in the interstices of political power and, as force receded, re gained sway in the lives of men.

Revolution is only a more subtle form of conquest, not an entirely different approach to social trans formation. It differs from the con ventional idea of conquest in that those who would reconstruct the society are not foreigners but come from among those whose lives they would change. (Even this distinc tion has begun to break down in the communist revolution of World War II and after.) Nonetheless, it is a kind of conquest, as all histori cal instances indicate. Initially, there may be an at tempt to make the changes by leg islatures, though the members of these shortly cease to stand for election, if they ever did. Military forces are employed in subduing the population. In short order, an power gravitates into the hands of a single man - to Oliver Cromwell, to Napoleon Bonaparte, to Nicolai Lenin, to Mao tse Tung, and so forth - and he uses it to impose his will upon the populace. The differences between William of Normandy and Joseph Stalin are the differences made possible by technology and in aims. They were both conquerors.

By Vote of the People A new phenomenon has occurred in the twentieth century: the con certed effort to transform society by force with popular consent. The truly amazing feature of this is that it apparently is being done. Elections are still held,· devices for divining the popular will em ployed, and social reconstruction proceeding apace. Certainly, a great deal of ingenuity has gone into bringing about this state of affairs. As I have said, the use of the government to transform so ciety by popular consent means that the populace must sanction the use of force upon itself to make it change its ways. It means, too, that men must support measures which decrease the control of their own affairs, that they must give their approval to the reduction of their 1966 DIVIDE AND CONQUER 45 libBrti8S. They mU8t a8Bent to the reduction of the avenues open to their voluntary endeavor. They nlust sanction the use o££oree in ever larger areas (for the trans formation is to be achieved grad ually) of their lives and the shov ing of society into such corners as remain.

An example of how efforts at social transformation by force lead to just such consequences can be given from contemporary develop ments. One of the bonds that linked most Americans together in society has been religion. More specifically, almost all Americans have a Judeo-Christian back ground, and for most of them it is Christian. This bond was strengthened by the fact that force was removed from religion early in the history of the Re public, and men were able to live in peace with those of different sects, denominations, and churches while sharing many religious con cernsand beliefs with one another. Communities frequently were suf ficientlyhomogeneous in religious background to observe religious rituals in public affairs without giving offense to members of the community. Eventually, though, the passion for social transformation was in troduced· into the schools. Attend ance at schools was compelled,and schools were financed by tax monies. So long as this was done locally, conflicts about religious observance were minimal. But American society could not be transformed to the ideological prescription if local variation were permitted. Eventually, the gov ernmental unit with power over all America must take over the direction and control of the public schools.

At this level, religious differ ences are magnified, and are a potential source of perpetual con flictas well as an obstacle to uni form social transformation. Re ligion must be driven from the schools; even voluntary practices cannot survive the uniform appli cation of force in an area. There is a logic to recent Supreme Court decisions, however illogical they may appear from a strict construc tion of the Constitution. Men have not knowingly con sented to the use of force upon themselves to have their ways of life changed and their liberties circumscribed and reduced. It is conceivable that men, somewhere at some time, may have done or will do so. In some few instances, regarding particulars, they have probably done so in America. But as to an overall effort at social transformation, which has been going on, Americans have not given their approval to it. Before any .such undertaking occurred, 46 THE FREEMAN July the government of America was taken from popular control. More precisely, the control of the United States government has been and is being taken bit by bit from the American people. There has been a rough correlation between the extent of social transformation and the decline of popular control.

The Democratic Way The greatest irony of all, per haps, is that this has gone on in the name of democracy, that is, in the name of government by the people. This development has been advanced subtly, and it must be described in detail before it can be understood or should be ac cepted. Certain developments in ideas prepared the way for this flight from "democracy." They have al ready been presented and need only to be summarized here. De mocracy was changed from a means to an end. As an end, it could serve as the object for doing things that could not be done in a "democratic" manner. A most subtle intellectual device for taking attention away from the choice to be made has been for reformers to proclaim that whatever they wanted done had become inevitable as a result of trends and developments in his tory. Obviously, if it is inevitable there is no choice to be made, though one may go through the silly motion of ratifying the "in evitable" trend at the polls by voting for it. (Of course, there have been "die-hards" who have had the temerity to oppose the "inevitable.") At least, one will have voted; and that is, after all, all that matters! More subtly, men were prepared for the turning over of their affairs to supposed experts and authorities by scien tism. There was yet another idea - the theory of classes and class struggle - which played a large part in the flight from popular government, but it can be brought up again in connection with the first major step in cutting society apart.

There should be no doubt, how ever, that majorities frequently have voted for the advocates of melioristic programs. At a casual glance, it looks as if the changes have been made with popular ap proval. When I say that they have not, I mean that men have not generally known what they were voting for. They have listened to the claims of politicians, not ex amined the nature of the actions proposed nor the substance of acts passed by legislatures. Probably, not one person in ten thousand has read any consider able portion of the maj or acts passed by Congress in the last fifty years. Of those who have, 1966 DIVIDE."AND CONQUER 47 a much smaller number can have understood much about them. As to the consequences of these acts, no man could, in a lifetime of study, perceive more than the out lines of them. It has been beyond the abilities of the electorate to give their approval to, what has been done. At best, men .have voted in favor of those who made cer tain claims, not for what was act ually done.

Even so, electoral approval has meant more than this would sug gest. The claims often reveal a part of the truth about the nature of what is to be done. It is un likely that men will vote to have their ways of life changed, but they will vote for changing others. They will vote for those who promise to shackle railroad mo nopolies, break up the Wall Street money monopoly, make business men follow fair trade practices, curb the economic royalists, and handcuff predatory activity. Northerners will vote to make Southerners toe the line on the racial issue. Negroes will vote. to make white men behave more con genially toward them. Farmers will vote for forcing industrialists to give them their "fair share" of the national wealth. The aged will vote to have the young taxed to support them. Parents can be at tracted by the notion. of having those without children assist in educating theirs. There is some thing irresistibly attractive to most people about others being penalized and oneself benefited.

Class Legislation Divide and Conquer - that has been the method employed to bring about social transformation. Di vide the population into classes: into capitalist and laborer, into farmer and ind ustrialist, into white collar and blue collar, into urban and rural, into Negro and white, into old-and young, into Protestant and Catholic. Sow seeds of discord throughout so ciety. Tell the laborer he is being exploited by the capitalist. Tell the westerner he is being taken advantage of by the easterner. Tell the farmer he is the backbone of the nation but is having the marrow sucked out of the bone by miserly advocates of the gold standard. Tell Negroes they are being exploited by landlords turned slumlords. Promise to change all this by forthcoming legislation: by the free coinage of silver, by anti-' trust acts, by creating a super banking system, by providing low interest long-term loans, by reg ulating the .stock exchange, and so on. When the old demons - Wall Street, capitalists, millionaires have been controlled or subdued, forge the classes into electoral 48 THE FREEMAN July majorities by making war on ab stractions, such as depressions and poverty. Such has been the history of gaining the semblance of pop ular approval for the effort at political transformation of society in recent decades.

The conquest has been much more subtle. There are many facets to it; for all those actions taken in the supposed interest of some group or class have had conse quences. Some of these conse quences will be explored at other points in the story. Here, how ever, the conquest will be examined only for its impact upon men as individualS and upon society, and the import of these developments upon popular government. Individualism Denied First, to the extent that a man has become class conscious, to the extent that he assumes the role that is imputed to him, to that same extent he has ceased to be a whole man. A man may bea worker, any sort of worker, and also be in favor of giving an hon est day's work. He cannot, how ever, belong to the "laboring class" and insist upon giving a quid pro quo for his wages. As a "laborer," he must realize that management is out to do him in, overwork him, replace him, cheat him, in a word, exploit him. He must, therefore, insist upon doing as little as possible, resist additional duties, op pose the introduction of machin ery, cling tenaciously to every prerogative and position ever cre ated, though there may no longer be any purpose for it. If he be longs to the managerial class, he must see himself in opposition to the "laborers/' though he· may mute this because it may be ad vantageous to pose as the friend of labor. A man may be a Negro and oppose switchblade knives, but he cannot be a "Negro," a member of that newly arrived class, and openly oppose switchblade knives, because these are supposed to be symbolically associated with Ne groes by white men.

Numerous other examples could be given, but perhaps it is un necessary. Those who think in terms of class in the contempo rary class struggle framework cannot act as whole men. Theirs is not the full-throated voice of man; it is a pipsqueak because part of him is cut off from the rest of him. A man cannot vote the interests of "labor" and vote his whole interests as a man. A man may be not only a worker in a factory but also a husband, a father, a son, a deacon in his church, a Mason, a golfer, a prop erty owner, a debtor, a creditor, a consumer, a seller, a hunter, an army veteran, plus all those tan gibles and intangibles which make 1966 DIVIDE AND CONQUER 49 him the unique individual that he is. His interests are too much those of all other men to be ex pressed by any single facet of them called "labor." No majority of votes, however large, made up of those who have supposedly voted their class interests can in dicate popular approval. It can only mean that a large number of people have voted some small portion of themselves, misled into thinking that they were voting for that which was in their in terest.

Dissecting Society The impact upon society is equally devastating. Those who have divided the American people into classes have not only set each man who accepts this against him self but also set men against men and groups against groups. They have broken down the lines of communication which link men to gether in society. Political force that was supposed to transform society has, instead, cut society apart. The politicalizing of life tends to make all groups into pres sure groups, absorb the energy that is put into them into seeking favors from government. Those who seek meaningful social life must do so increasingly outside the ambit of organizations. Yet society is transformed; it is rendered impotent. That is, those who would defend the lan guage, customs, traditions pro cedures, and beliefs which make society possible, who would speak in the name of virtue and moral ity, are drowned out in the ca cophony of voices defending one special interest or another. The conquest is of men and society. Of the conquerors, it may be said here that they have great power for their reward. But this was ever the object of conquerors!

Of course, there were other ob stacles in the way of those who would use the power of govern ment to transform society. The United States Constitution was probably the most important one. It was so drawn, according to James Madison, as to make ex ceedingly difficult the concert of special interests which might crowd out the general welfare. We will examine next the flight from the Constitution which made it possible to divide and conquer the American people. ~ The next article in this series will pertain to "The l?light from the Constitution," Part I.

the Independent School JOHN F. GUMMERE THE INDEPENDENT SCHOOL pro vides an excellent example of free enterprise. In a field in which the product (or a legalized fac simile thereof) is available to everyone at no charge, thanks to taxes, independent schools must offer something which the general public thinks worth buying. Tax-supported government pro grams go on and on, even when inefficiently and wastefully man aged. This is not to say that pub lic education is thus managed, but it is to say that the lifespan of a private enterprise depends very much upon how it is managed. It operates efficiently, or it goes out of business. The rules of tenure for teachers were established to protect pro ... fessionals against politics, ignorMr. Gummere is Headmaster of the William Penn Charter School in Philadelphia. 50 ance, and other sins of boards of public education whose mem bers were sometimes incapable of intelligent management of schools.

Teachers were also protected against spite, malice, prejudice, and similar evils. But everybody who knows anything about tenure also knows that it serves to pro tect the mediocre. Tenure is not granted in inde pendent schools (there are very few exceptions). It is hopefully (and for the most part rightly) assumed that the managing boards of such schools will not be a prey to the ills referred to above. Moreover, the feeling is that no employer should be compelled to continue the employment of peo ple who do not measure up. Thus, the free market again asserts it self. The teacher's protection is not that of legislation but of the 1966 THE INDEPENDENT SCHOOL 51 knowledge that he is doing a proper job. Independent schools serve the interesting and vital function of providing services, ideas, innova tions with which state-supported schools are not free to experiment. In the free market, consumers determine which goods and serv ices will be bought. Producers of goods and services are thus com pelled to make them at least as good as, if not better than, com peting suppliers do, or go out of existence.

Independent schools offer such services; and upon their manage ment lies the heavy responsibility for making good. The teachers do not have tenure; therefore, upon them lies the necessity of doing their jobs well. Those associated with independ ent schools, be they trustees, ad ministra tors, teachers, staff, know all this perfectly well. All are free to work where they are for the kind of education in which they believe, or to go somewhere else. Thus, management, teachers, and staff must produce and co operate conscientiously and satis factorily. Meantime, the public evaluates what is offered, and is free to buy or not. The fact that the public is buying, more and more, and con tributing generously in campaigns for funds proves the capacity of independent schools to survive and grow in a market much of which has been pre-empted by govern ment. ~ Individuals Know Best THE TRUTH is that many different things are most important, each of us having his own idea of their relative importance, depending upon the time and circumstances. Each of us tends to do what seems most important to him at the moment, and this accounts for all human creativity and production. With our creative and productive specialties we come to be important to one another, often in ways which could not be foreseen and which many of us may never clearly understand. This variability in the subjective judgments of the importance of things is the basis of all trade and voluntary cooperation, enabling each pro ductive individual to gain peaceful possession and use of vastly more than he could ever hope to attain strictly on his own.

VICTOR ~ AcoasoN, "Most Important," from E __ on Libert., Volume IV WILLIAM H. PETERSON The Businessman - Hero or Villain? • Dr. William H. Peterson was Professor of Economics at New York University's Graduate SchoDl of Business before joining the staff of United States Steel Corpora tion in 1964. This article is reprinted by permission from tlhe February 12, 1966 special 75th anniversary edition of Farmand, oldest business journal in Scandinavia, pub lished in Oslo. Dr. Trygve J. B. Hoff, 70 last November and editor of Farmand since 1935, has won friends around the world with his staunch and undeviating stand for a society characterized by law and order, freedom, and respect for the individual and the dignity of man. Dr. Peterson is one of the several members of the Mont Pelerin Society c'ontributing articles on various aspects of business and economics to thi,scommemorative issue of Farmand.

Copies of the 240-page anniversary edition, in English, at $1.50 each, may be ordered direct from Farmand, Roald Amundsensgt. 1, Oslo 1, Norw'ay. 52 • ITEM: "The hero," said Thom as Carlyle to a L.ondon audience in 1840, "can be poet, prophet, king, priest, or what you will, according to the kind of world he finds him self born into."l Significantly, in the midst of the Industrial Revo lution, in the midst of probably the greatest single - and still on going - surge of material well-be ing for the ordinary citizen, Car lyle did not mention the business man among his possible heroes. • ITEM: In the 1880's social. phi losophers Herbert Spencer in Eng land and William Graham Sum ner in America viewed the busi nessman as a most creative and vital member of society. In the same period Horatio Alger's rags to-riches novels, largely on success ful businessman heroes, reached their zenith in popularity.

• ITEM : Each of the 450 freshmen at Antioch College in 1964 was asked to name his personal hero i. e., any twentieth century person whom he most admired. The top ten he-roes of 104 named were Mo handas Gandhi, John F. Kennedy, Winston Churchill, Franklin D. Roosevelt, Martin Luther King, Albert Schweitzer, Bertrand Rus sell, Eleanor Roosevelt, Albert Ein stein, and Woodrow Wilson. Yet 1 On Heroes, Hero-Worship and the Heroic in History (London, 1871), p. 78. not a single one of the 104 turned out to be a Carnegie, Ford, Mc Cormick, Nobel, Rothschild, Rocke feller, Morgan, or any other indus trialist or financier. In other words, no Antioch freshman viewed any businessman as his hero although, probably, many fathers of the freshmen are businessmen. So, even though the business man has had his ups as well as downs in public esteem since 1840, his image at this hour of history still appears less than wholesome and constructive. For example, Amherst College reports 48 per cent of its alumni are business men, but fewer than 20 per cent of recent graduates have been en tering business. Again, Harvard University reports only 14 per cent of its class of 1964 planned business careers, down from 39 per cent five years earlier, al though part of this decline may be attributed to the growing popu larity of working for advanced de grees. Said, in a typical vein, Arth ur Lyon Dahl, a June 1964 graduate of Stanford University, of his classmates: "I know of al most no one who even considered a business career."2 This situation seems to betray an ambivalent business image and does not bode well for the prospects of freedom 2 The Wall Street Journal, November 10, 1964.

53 54 THE FREEMAN July and free enterprise. Images are important; they reveal our think ing, our creeds, our inner con flicts; they influence our actions. Now, if the word on the campus is that business is for the birds, if the word elsewhere is that the businessman is to be regarded as a suspicious creature who must be publicly controlled if he is to be privately tolerated, it follows that the climate for business will hardly be conducive to the full flowering of trade and investment or, more importantly, of individual values and human liberty. Hence, saint or sinner, oracle or ogre, hero or hellion; what is the proper image of the businessman in a free society? The inquiry is fraught with some complication. The Anticapitalistic Si'as Among Intellectuals For one, I think his image varies with the era, its values, and especially its intellectuals. Intel lectuals are crucial in the art of image-making. And as a rule the intellectual, from Plato and Aris totle on, has rarely turned a kindly eye on the businessman, as may be inferred, for example, from the ancient and medieval·castigations against usury and trade. In a typi cal vein, Cicero wrote in his De Officiis: "Those who buy to sell again as soon as they can are to be accounted as vulgar; for they can make no profit except by a certain amount of falsehood, and nothing is meaner than falsehood."3 Similarly, from that durable milieu of what von Mises calls "the anticapitalistic mentality,"

one should note the introduction to the Modern .Library edition (1937) of Adam Smith's Wealth of Nations. For in this most popu lar edition in the United States and Canada, an edition read by countless college students, the in trod uction is made by Max Lerner, who does not hide his dis-sympathy with the business system, notwith· standing the fact that the Adam Smith work is a classic in defense of capitalism. Lerner labels Smith as "an unconscious mercenary in the service of the rising capitalist class," holds that Smith gave "a new dignity to greed and a new sanctification to the predatory im pulses," maintains that the father of modern economics developed his essentially labor theory of value awkwardly and hence, "it remained for Marx to refine it, convert it into an instrument of analysis, and extract from it the revolutionary implications that were inherent in it from the start."4 Keynes, giant of economic 3 Quoted by Lewis H. Haney, History of Economic Thought, 4th edition (New York, 1949), p. 79.

4 p. x.

1966 THE BUSINESSMAN - HERO OR VILLAIN? 55 theory in this century and image maker extraordinary, also seemed to have had little love for the businessman. Free private invest ment, he held, swings on "the nerves and hysteria and even the digestions" of private investors, on "whim or sentiment or chance"; and "enterprise only pretends to itself to be mainly actuated by the statements in its own prospectus." Well, if businessmen are so whim sical, nervous, hysterical, preten tious, and untrustworthy to invest for the general welfare, what then? Keynes gives his prophetic answer: "I expect to see the State, which is in a position to calculate the marginal efficiency of capital goods on long views and on the basis of the general social advan tage, taking an ever greater re sponsibility for directly organiz ing investment."5 Plainly, then, to many thinking people, especially intellectuals and college and university students, business does not come across as a preferred institution among other social institutions in a free so ciety. Plainly the businessman is not always regarded as a construc tive, forward-looking member of the community. Apparently the typical college student prefers to enter teaching, social work, scien5 The General Theory of Employme.nt, Interest and Money (London, 1936) p.

164. tific research, government work, the Peace Corps, or the profes sions of medicine, law, architec ture, etc. Apparently many a stu dent - and professor -looks upon business as little more than a dog eat-dog world, dominated by the law of the jungle, corrupted by the drive for profit, and blind to almost every decent human value; and many other students and pro fessors view business as a world of superficiality and conformity, a treadmill on which the individ ual gets nowhere and says noth ing. Productivity, Purpose, and Incentive to Save Yet a big rub with such views of business and, indeed, with the whole problem of the image of the businessman, boils down to this: Precisely, what is a businessman? For business is an extre·mely pro tean and equivocal term and what people commonly assume to be a "businessman" may be altogether \ too arbitrary and too narrow a view. So much so that perhaps with a clearer understanding of just what a businessman is and what he is trying to do, the pub lic may, hopefully, adopt a better image of him. But realistic, mean ingful, and-broadly applicable; defi~-nitions of business - a word de rived from "busy" - are hard to come by (as are, by the way, 56 THE FREEMAN July definitions for work and labor. 6 ) For example, the editors of the four-volume World of Business (1962)-editor Edward C. Bursk of the Harvard Business Review, librarian Donald T. Clark, and business professor Ralph W. Hidy, all members of the Harvard fac ulty - concede that business is not easy to define and· wind up not defining it. Similarly, Beard sley Ruml in his Tomorrow"s Busi ness (1945) also admits that de fining business raises problems.

Fot example, he is not sure whether farmers and professional people can be properly classed as businessmen. Still, his definition appears broad enough to include them, viz: "This is the business of business: first, to get things ready for use; second, to provide people with purposeful activity; and third, to give people a way to save productively a part of what they earn."7 In my judgment, the only work able definition of a businessman is necessarily a broad one, in that it should cover executives and entre preneurs, bankers and sole pro prietors, merchants and indus trialists, professional men and 6 For a searching analysis of this problem, see Roger M. Blough, "Work and the Individual in the Modern World," in The One and the Many by John Brooks and others (New York, 1962) pp. 173-208. 1 p. 32. newspapermen. Indeed, who in this advanced age of division of labor doesn't "profess" some spe cialization, some marketable skill?

Hence, a more satisfactory defini tion of a businessman would ap pear to be simply that of a person who is continuously engaged in voluntary trade or exchange of goods or services, including his own, for profit. The two key words here are "voluntary" and "prof it." Voluntary involves choice for both the buyer and the seller, and means free, without coercion, and would be inapplicable to individual economic action under socialism. Profit - the term derives from the Latin profectus, me,aning an im provemen t or ad vance - means benefit or gain, not necessarily pecuniary gain, and as a goal rec ognizes that human action is mo tivated directly or indirectly by profit, including psychic profit, or conversely, by the' avoidance of loss, including psychic loss. So cially, profit is a means of con trol and a measure of usefulness. The successful corporation is a demonstration of social worthi ness; the unsuccessful corporation is a demonstration of social un worthiness. So through profit-and loss signals the public rewards success, penalizes inefficiency and controls investment-and business men-providing them with strong incentives to adjust to society's 1966 THE BUSINESSMAN - HERO OR VILLAIN? 57 wishes. Thus do private incentives and business policy strongly tend to reflect the public interest.

To Each His Own Business Under a broad definition of bus i nessman, then, everyone from the street vendor to the head of Gen eral Motors or American Tele phone and Telegraph is a business man. And so, at least in some de gree, is the accountant, actor, architect, artist, carpenter, doctor, engineer, musician, newspaper man, plumber, and, ironically, the intellectual-the writer, scientist, professor, playwright, etc. Each of these craftsmen sells his labor in the open market and buys goods and services on his own account. Frequently the motivation in these buying and selling activities is pecuniary. But even if not - and money, it must be remembered, is not an end in itself - it is still profit-oriented. The professor seeks gain in the form of the ad vancement of knowledge and the spread of education; the musician profits from musical enjoyment by himself and others; the phy sician derives psychic income from making sick people well; and so on.

Thus, as businessman Donald C. Cook of the American Electric Power Company observed in his "Intellect and Business: the Dia logue and the Challenge," the seventh annual Business Leadership Lecture at the University of Mich igan in 1964,8 every intellectual is in some degree a profit-oriented businessman and lives in a world shaped by business. Equally, every businessman worthy of his calling is in part an intellectual and is moved by the great ideas of his time. Each-intellectual and busi nessman - helps to create condi tions to which the other responds; each is the customer of the other, giving and taking, buying and selling, and sharing generally. At any rate, under a broad def inition of the businessman, many in a free economy who do not consider themselves businessmen are actually already very much in business. Perhaps recognition of this broader definition could bring about an updated version of Mo liere's gentleman who discovered that he had been talking in prose all of his life. In other words, the public, hopefully, could come to the realization that practically everyone, male and female, young and old, rich and poor, is in busi ness in one way or another, that in the words of Shakespeare, "every man has business and de sire, such as it is." Even the housewife is in business for, when you think about it, the average American family currently earns and largely spends some $8,000 8 Michigan Business Review, July 1964.

58 THE FREEMAN July annually which, if multiplied by 45 years of employment, comes to better than one-third of a million dollars - and that's· quite a busi ness. Thus, every "worker," through his labor and the power of his purse, is at once a producer and consumer, a buyer and seller, an employee and employe·r, a cus tomer and supplier. Consumer Sovereignty The point is that if everybody is to some significant extent in business, is a part of business and must carry out business functions in his daily life, it follows that he is part businessman, that a widely-held negative image of the businessman is incongruous and not a little masochistic. Can one logically find fault with a seg ment of society for doing what the whole of society is at least in part already doing and, indeed, must do? Too, the easy identification of the businessman as the boss does not seem to be overly logical with far-reaching division of labor and social cooperation. For, in the final analysis, every free agent from office boy to chairman of the board works for the same boss the consumer. To be sure, the office boy may report to the office manager and the chairman of the board to the board of directors and the stockholders, but all - ineluding the "independent" busi nessman, the man who says he is his own boss - take their ulti mate orders from the customer, the quite sovereign consumer.

The customer, as merchant John Wanamaker noted, is always right, ever the final court of appeal. It was Grandfather who, in effect, put the buggy whip manufacturer out of business when he bought a Model T. It was the consumer who made Henry Ford big, who did in the Stanley Steamer and the Stutz Bearcat. It was Mother who did in, economically, the ice man when she bought a refrig erator. It is today's consumer who makes board rooms quake through his purchases and non purchases. It is through this power of purchase and nonpurchase that democratically the consumer in effect directs business, hires and fires people, and generally puts the nation's resources to work. Of course, consumer sovereignty as a concept has not been widely accepted by the intellectual who, for that matter, frequently does not also seem to be especially aware of the highly pervasive' na ture of business. Still the intel lectual's criticism of business and businessmen has served at times to correct abuses, to redress needful balances and to maintain human istic and esthetic values. Unfor tunately, the criticism has, on 1966 THE BUSINESSMAN - HERO OR VILLAIN? 59 occasion, also induced so-called "reforms" which have been harm ful to the business syste-m - and to the consumer. To take an ex treme example, intellectual Karl Marx, who regarded businessmen a.s inhuman exploiters in the nine teenth century, helped to bring about the Communist Revolution in the twentieth century. On the othe'r hand, in the eighteenth cen tury, intellectual Adam Smith saw the businessman as a creative and vitally necessary member of so ciety, and helped to establish the Industrial Revolution and the capitalistic order which still pre vails in the Western world today.

A Businessman Serves Self by Serving Others I agree with the Smith view and hold the correct image of the businessman is neither that of he-ro nor villain. Businessmen can be good; they can be bad. They run the gamut of the moral spectrum. Businessmen have founded muse ums, universities, hospitals, chari ties, foundations, etc., while serv ing in their main social function of promoting, organizing, and manag ing production to cre-ate goods and jobs. Some black sheep busi nessmen, to be sure, have indeed engaged in coercion, theft, and misrepresen tation. So a generalized hero or villain image of the businessman is not, in my judgment, tenable. A good image is tenable, however, because in the construct of the business system it is clearly in the interest of the businessman to give his best to his customers - i. e., to society - or else his competitors will, or his profits will fall. As Adam Smith pointed out, we do not speak to the butcher and the brewer of our need but rather of their advantage.

In any event, I belie've the proper image of the businessman is neither that of knave nor knight, villain nor hero. He has a job to do - directly for himself, indirectly for society - and he does it. He is under the social discipline of profit and loss, under the iron rule of the consumer. And he should think well of his calling. For as Alfred North Whitehead spoke of the Great So ciety before that phrase became fashionable: "A great society is a society in which its men of busi ness think greatly of their func tions."9 It follows, then, that with a better understanding of the businessman, everybody should have a better image of him - and of business. ~ 9 Adventures of Ideas (New York, 1933) p. 124.

A REVIEWER'S NOTEBOOK Of Men and Not of Law JOHN CHAMBERLAIN THE MAIN BURDEN of Lyman A. Garber's Of Men and Not of Law (Devin-Adair, $3.95) is that our courts, led by the Supreme Court of the United States, are setting themselves up as super-legisla tures and thus fracturing the tri partite "separation of the powers" that they have been sworn to up hold. The thesis is maintained with some wordiness, but in the semantic jungle in which we have all been scrabbling for certainty since 1933 maybe a lot of words are inevitable. The essential point is that Mr. Garber sustains his ease. Historically, the Supreme Court's usurpations divide themselves into two well-demarcated periods. In the nineteen thirties, when the New Deal was riding high, the Court laid down a number of tor tured economic decisions. In the nineteen fifties and sixties, the questionable majority rulings were sociological in nature. Taken to gether, the two sets of rulings have virtually nullified the Ninth and Tenth Amendments to the Constitution. Amendment Nine, it may be dimly remembered, reads: "The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people." Amendment Ten reads: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respec tively, or to the people."

These amendments have been rendered meaningless by the Su preme Court's construction of the Interstate Commeree clause, the General Welfare clause, and the equal rights guarantee of the Fourteenth Amendment. By read ing into the Constitution ideas that were never contemplated by the Founding Fathers, the judges 1966 OF MEN AND NOT OF LAW 61 have effectively destroyed the old balance between the states and the Federal government in Washing ton. That they have done this in the name of morality is no excuse, for to change the law to conform to new canons of morality is the prerogative of the voters, who can always avail themselves of the amending process to accomplish ends that were not originally sanc tioned in the Constitution of 1787. "Nine Old Men" In 1930, when he was Governor of New York, Franklin Delano Roosevelt said: "Washington must not be encouraged to interfere ... in the matter of a great number of . . . vital problems of government, such as the conduct of public utili ties, of banks, of insurance, of business, of agriculture, of educa tion, of social welfare, and of a dozen other important features."

But this was Roosevelt before he had listened to Rexford Tugwell and hired a brains trust. The brains trust consisted of chronic centralizers, and they spawned the Agricultural Adjustment Act of 1933 and the National Recovery Act. Both of these acts were called unconstitutional by the Supreme Court of the "nine old men," who held that Congress does not have the authority to manage business or to delegate the powers of man agement under the transparent guise of regulating interstate com merce. Obstructed in the 1933-36 years by a majority of justices who were well acquainted with the delibera tions of Madison, Jefferson, and other Founding Fathers, the New Deal later recreated the AAA by getting a new interpretation that raised the "General Welfare" clause of the Constitution to the rank of a specific power of Con gress. The fact that Madison and Jefferson had repeatedly assured the electorate in the thirteen orig inal states that the two words "general welfare" did not override specific provisions of the Consti tution was conveniently over looked by the new Supreme Court justices who had been appointed by 1937.

The words of the Constitution say that "Congress shall have the power to lay and collect taxes . . . to pay the debts and provide for the defense and general welfare of the United States." But never before 1937 had it been seriously held that "general welfare" might be any sum total of particular wel fares that an Administration might choose to back in response to the lobbying of pressure groups. The new definition of "general welfare" meant that any "inter est" could get anything if it could develop the political muscle to force its attention on Congress as 62 THE FREEMAN July a deserving body of citizens. It did not matter that the particular wel fare of particular groups would have to be paid for by tax levies on citizens who might be seriously injured by the semantic torturing of the General Welfare clause. "Due Process" With a new Supreme Court working its verbal magic to define any arbitrarily chosen particular welfare as "general welfare," the decks were cleared for practically anything at all. And once the no tion of spending Federal money to subsidize the farmer had been jus tified under the Welfare clause, the Court followed by ruling in the Wickard v. Filburn case that "it is hardly lack of due proc,ess for the government to regulate that which it subsidizes." Accordingly, a farmer was penalized for raising wheat beyond a quota set by the Department of Agriculture.

Mr. Garber says that the argu ment that the wheat was for the sole consumption of the farmer's family and livestock was turned down on the unprovable ground that "if farmer Filburn had not raised his own wheat for his own use, he might conceivably have purchased it from the channels of interstate commerce,." Since no body could possibly know what the farmer might have done in a pure ly hypothetical case, the Supreme Court was venturing forth into mind reading, which is something that courts are forbidden under the law of evidence to do. It would have been just as rational for the Supreme Court to decide that a man standing before it might be a murderer because he had been en dowed by nature with two hands that were capable of choking someone. In the fifties and sixties the Su preme Court has taken to reading books on sociology, such as Myr dal's An American Dilemma. And, to enforce its sociological predilec tions, the Court has decided that the states cannot be trusted to run their own affairs in such matters as education and the control of their local election laws. It does not matter that the Federal gov ernment itself, with its Senate that gives equal representation to each state, was set up on the analogy of the colonial government of Con necticut, which allowed for geo graphical unit representation in one of its legislative chambers. In sheer defiance of the historical truth that the states had never contemplated delegating the power to apportion their local legislative districts to the Federal govern ment, the Supreme Court has stepped in to tell the states what they mayor may not do about local representation.

This is an absolutely clear case 1966 OF MEN AND NOT OF LAW 63 of judicial usurpation of the legis lative power, but the usurpation has been accepted rather apatheti cally. Senator Dirksen has been trying to rectify matters, but he can't seem to gather enough votes for an amendment that would do nothing more than restore the Constitution to what it was before the Court arbitrarily changed it. Harmony by Compulsion Mr. Garber talks about many other cases that involve judicial "legislating." The integration of our school systems may be socially desirable, but Mr. Garber doesn't think the Supreme Court had the right to command it. Whether he is on sound ground here· depends on one's feeling about the possibil ity of maintaining "separate but equal" schools under the old prin ciple of segregation. The trouble, in any case, is that integration of the schools becomes impossible wherever Caucasians, voting with their feet, move out of our big cities. Mr. Garber remarks that "the main cause of segre gated living areas was not the in ability of Negroes to move into areas occupied by Caucasians, but the Caucasians moving out ...

many square miles of Northern cities would become-integrated every year if just half the Cauca sians would stay where they had been living!" ~ ~ YOUR CHURCH - THEIR TAR GET, Edited by Kenneth W. Ing walson, Better Books (Box 2096, Arlington, Va. 22202), 1966, 275 pp., $4.50 cloth, $3.00 paper. Reviewed by Norman S. Ream THE GENERAL DRIFT toward social ism in our society has tinged many clergymen with what Ludwig von Mises, doyen of classical econo mists, calls the "anticapitalistic mentality." But not all, as this book - a symposium by thirteen authors - attests. During the years of the Great Depression, delegates to the na tional convention of one major denomination voted a resolution favoring the abolition of the cap italistic system and all the forms which sustain it. Year after year since that time other ecclesiastical bodies have consistently attacked free enterprise, the profit motive, individualism, and private owner ship of property. Today, these same voices are almost. always found with secular "liberals" urg ing increased governmental inter vention, world government, ad mission of Red China to the United Nations, a negotiated peace in Vietnam, peaceful co-ex istence with communism, and so on.

One must not bring a blanket indictment against clergymen and churches, lest he harm the reli64 THE FREEMAN July gious forces which are friendly to economic and political liberty. These constitute the majority of churchmen, who have not, how ever, been able to make their weight felt. This book is a ve hicle for "the other side," and Mr. Ingwalson has done us a great service in bringing together these essays and delineating for us, as his subtitle suggests, "What's Go ing on in the Protestant Church es." Perhaps of more interest and concern than the situation as it exists today is the illuminating insight one derives from the authors as to how we got where we are. This historical material, it seems to me, is particularly valuable; and very few men have a greater insight and understand ing of this process than do Irving Howard, Howard Kershner, and Edmund Opitz - to name but a few of the contributors.

This book should be especially helpful to laymen who find it difficult to understand how and why the churches have become so involved in the political left, and to young theological students and ministers who need to know how the churches have been subverted and used by the socialists and communists. I would quibble with one or two contributors who identify po litical liberalism with theological liberalism. The two are not logi cally joined, and, as a matter of fact, some of the best essays in the book are by men who are theologically liberal. But as the editor says in his Introduction, "These men may not always a.gree with each other on details. Neither will you agree with all they say. But the problem and challenge for laymen and clergymen has been made crystal clear." Amen! ~ THE FREEMAN on Microfil:m An agreement has been entered with University Microfilms to make available to libraries and others who may be interested current as well as back issues of The Freeman since January 1956. Inquiries should be directed to University Microfilms, 313 N. First Street, Ann Arbor, Michigan 48107.

--ESSAYS ON LIBERTY---This latest volume of the series (448 pages, indexed) contains selected writings from THE FREEMAN and NOTES FROM FEE beginning with May 1964 through April 1965. Volume XII 49 Essays - 31 Authors Cloth, $3.00 Paper, $2.00 The Set-all 12 volumes Cloth, $28.80 per set Paper, $19.20 per set ALSO, NOW AVAILABLE: Comprehensive cumulative subject-matter, author, and title IN DEX-covering all 12 volumes in the ESSAYSON LIBERTY series. $1.00 THE PROPERTY BASE • The market, which is the characteristic institution of capitalism,expressesa relationshipof buyer and seller. It is, in effect,what results when free choice is appliedto the dis position of property-or of what is made with the use of property, by "mixing" labor with it. The comparisonswhich the market permits lead to the creation of value, which is a compromise of individual judgments. The seller seeks to cover the labor and energy he has expended, plus a profit; the buyer seeks to save himself labor and energy by making an exchange. Two subjectivitiesmeet in an objective price.

But behind the creation of value there must be ownership the right to dispose of a good or a service. So we come back to propertyas the base for liberty. JOHN CHAMBERLAIN, The Roots of Capitalism Paul L. Poirot 3 Robert M. Thornton 12 Henry Hazlitt 16 Norman S. Ream 26 Leonard E. Read 32 Institute of Directors 41 AUGUST 1966 Weakness Corrupts . On Heroes, History, and Our Heritage . The Case for International Investment • A Clergyman Looks at Free Enterprise • Some Reflections on Robots • The Assault on Free Enterprise • The Flight from Reality: 23. The Flight from the Constitution, I Books: Adenauer's Memoirs Other Books • Clarence B. Carson John Chamberlain 45 60 63 5 '12 % 5 3/4 0/0 systematic savings-on 3 year accounts and on 3 year accounts of $10,000 or more of $5,000 to $9,000 in in multiples multiples of $1,000 of $1,000 CURRENT RATE .•• 5 lf4 0/0 minimum on regular savings accounts .·.·...·..LJmjHMHMl@iilmlM~·.~······· COAST FEDERAL SAVINGS & LOAN ASSOCIATION Department FM, 9th & Hill Sts., Los Angeles, California 90014 ______ STATE _ 6-121A o Please send me a FREE copy of NAME(S)_~~_~~ _ President Crail's uAdam Smith vs. (please print) Karl Marx" speech.

o I enclose my check (or money order) for $,_~__ Please open a Coast Federal Savings account STREET _ o Individual 0 Joint in the name(s) of CITY THE FREEMAN AUGUST 1966 Vol. 16, No.8 II'" Indiscriminate bombing with Fed eral Aid in the War on Poverty vic timizes those who most need to know how to help themselves p. 3 II'" The heroic stand of stalwart men pervades our history and constitutes our heritage - lest we forget ....p. 12 yt' Henry Hazlitt rests his case for in ternational investment on the forces of the market rather than the vagaries of intergovernmental alliances and political chance p. 16 J;I" The Reverend Norman S. Ream spells out his faith in free enterprise, among free men, under God ..... p. 26 II'" Those robots of automation, so widely held as causing unemployment, can be a boon to those who understand and use them wisely, contends Leonard Read . p. 32 yt' From Britain's Institute of Directors comes a timely warning of the dangers of government interference in business matters p. 41 yt' Getti ng back to the Constitution, as Professor Carson suggests in this chap ter, calls for a renewed understanding of the reasons for limiting governmental powers.... . p. 45 yt' In Konrad Adenauer's Memoirs 1945-53, John Chamberlain finds the spiritual, economic, and political foun dations for the "German miracle"

............ p. 60 ~ And Robert Thornton delights in Russell Kirk's commentaries on The Intemperate Professor and Other Culttural Splenetics p. 63 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

AUGUST 1966 LEONARD E. READ PAUL L. POIROT Vol. 16, No.8 President, Foundation for Economic Education 1l1anag'ing Edito1· THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit educational champion of private property, the free market, the profit and loss system, and limited government, founded in 1946, with offices at Irvington-on-Hudson, New York. Tel.: (914) 591 7230. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in vited in any amount....;.$5.00 to $10,OOO-as the means of maintaining and extending the Foundation's work. Copyright, 1966, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each.

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PAUL L. POIROT THE CURRENT CAMPAIGN in the war on poverty might be waged more successfully had Lord Acton devoted less attention to the cor rupting influence of power and recognized that weakness also tends to corrupt and absolute weakness corrupts absolutely. Is that not the lesson of the parable of the talents? The wicked and slothful servant did nothing constructive with the property entrusted to his care; whereupon, the property was transferred to the good and faith ful servant whose capacity for stewardshi p had been proven. There is war on poverty - with a vengeance! But many· will doubt the justice and humanity of trans ferring property from the least ef ficient to the more efficient users of it. Instead, they would propose a negative income tax, for the more equitable distribution of wealth. In their zeal for equality of material possessions, they stumble over the basic flaw of the communist idea - the destruction of the incentive for anyone to die velop and use his talents more constructively. They cater to man's weakness rather than his strength, failing to see that hatred, greed, envy, and similar weaknesses are the most corrupting vices of all.

Individuals are not equally en dowed nor do they develop their talents at the same pace - each is an individual, with his own scale of values, wants, satisfactions. Es sentially, there are but two ways in which a person may implement his choices. One is through pro duction and willing exchange, earning power converted to pur chasing power in the open com petition of a marketplace policed 3 4 THE FREEMAN August to the extent necessary to protect life and property and keep the peace. The alterna ti ve method of implementing choices is through the physical or political power of coercing others to obey and serve, with government perverted into an instrument of plunder. Reliance on the Market Most of us are fully aware that it is morally wrong to murder, rob, cheat, and lie to one another to get what we want. When we seek employment, we instinctively look first to the most successful business managers, savers, cre ators of job opportunities. L.ike wise, in our shopping for bar gains, we tend to buy from the most efficient, most successful sup pliers, rewarding with handsome profits those who best serve our wants. The market measures a man by what he does with his own resources. Each man more or less chooses and is responsible for his market position, relative to that of other self-choosing and self responsible individuals. Day after day we depend upon our purchas ing power and the method of will ing exchange to implement our choices; and we ought to be aware that this market method serves us well.

But the market is not the sole determinant of each man's econ omic status, there also being "peopIe control" through political ac tion. To the extent that govern men t ne gates the indi vid ual' s choice, it also renders him irre sponsible. True, the protective services of government may be de signed and may indeed help to curb irresponsible actions of cer tain individuals, with a resultant net gain in the total voluntary ac tivity of all persons in the market place. This is man's hope and ex pectation of a government con fined to keeping the peace. Nevertheless, nearly every per son of restricted means, low in come, limited purchasing power can be tempted to see an advan tage to himself of redistributing all incomes higher than his own. The idea of Federal aid, the nega tive-income-tax proposal of taking from the rich to help the poor, finds popular support. Without thought for the consequences, we turn over the power of taxation to those who lack purchasing power. Thus, the market is wrecked and abandoned, and coer cion substituted as a new way of life, when we allow our weak nesses to corrupt us.

The simplest application of logic ought to tell us that a weak person cannot force a stronger person to help him. So, it should be self-evident that turning from the voluntary method to the coer cive method of fulfilling wants can 1966 WEAKNESS CORRUPTS 5 only work to the disadvantage of the weak and poor among us. Subsidy and Taxation Government control, aside from its defensive role of keeping the peace, may be summarized under two general headings: subsidy and taxation. Tha t "the power to tax is the power to destroy" seems so clear and obvious, one hesitates to dis cuss the matter further. Yet, it must be recognized that a govern ment without the power to collect taxes is also powerless to do any thing else. If government is to preserve the peace, it must be able to collect taxes enough to pay for that service. If government is to protect life and property, it must have sufficient claim upon lives and property to give the necessary protection. But, the fact that any government does involve claims upon the lives and the property of the citizenry is the all-important reason why the scope of govern ment should be limited. An un limited power to destroy those under its influence is more "protec tion" than anyone can afford. To be defended to the end of one's re sources, and then to death, is of no avail. The power to tax is indeed the power to destroy.

While most of us can see the harmful or dangerous aspects of the power of taxation, we may see less clearly the nature and impact of the governmental power to sub sidize. Yet, the power to subsidize also is the power to destroy. Nor is the destructive effect confined to those whose lives and property are taxed away to obtain the means for subsidies to others. The recipient of unearned goods or services may sadly discover the truth of the expression that "one man's meat is another's poison," for there· is no surer way to de stroy a man than to assume the responsibility for his well-being. Even the most altruistic volun tary act of charity is capable of lasting harm to the intended bene ficiary if it in the smallest degree diminishes his will or capacity to help himself. Rare indeed is the individual with sufficient strength of character to accept unearned assistance and not be tempted to ask for more. And strength of character is not a notable quality among those most likely to be found on the receiving line for a handout.

Specific Programs Examined A more careful examination of some specific governmental wel fare programs may help expose the futility of such coercive meas ures to alleviate poverty. Unemployment compensation, for example, supposedly is in6 THE FREEMAN August tended to help overcome the lack of employment opportunities for persons whose livelihood depends upon the sale of their services. The problem of the unemployed is that their services are not worth the price they are asking in the current market; no employer can see a chance for profit at such wage rates; his resources may better be used to obtain labor saving equipment or devoted to s'ome other purpose: he has in mind. But, to make matters worse, the unemployment compensation program constitutes a coercive drain upon an employer's resources. All other taxes upon his business or his earnings similarly reduce his incentive and capacity to provide job opportunities at at tractive wage rates and to produce goods and services at prices at tractive to consumers. The heavier the tax load upon the most effi cient and successful business en trepreneurs, the less chance there will be for the le·ast skilled work ers to find jobs or to purchase food, shelter, clothing, and other necessities at prices they can afford. The poor, rather than the wealthy, are the ones with most to lose when coercion displaces willing exchange.

Social security, medicare, and variou8 other welfare programs are closely related to the unemployment compensation idea and similarly disrupt the free flow of goods and services between sup pliers and consumers. The· com bined old age, disability, and medicare tax is supposed to level off in due course at 11.3 per cent of a person's wages up· to $6,600, which comes to a tidy $746 a year. That would be the equivalent of a 5 per cent return on a capital in vestment of about $15,000. If a person began investing $746 a year at age 21, with earnings of 5 per cent compounded annually, he would have accumulated $15,000 before age 36, $30,000 by age 44, $115,000 by age 65. A 5 per cent return on $115,000 would yield $5,750 a year - without eating into the principal. It is recognized, of course, that some wage earners will accumu late private savings and invest in productive enterprises in spite of the heavy burden of social secur ityand other taxes, whereas others would save nothing even if relieved of all tax liabilities. Some individuals tend to be more thrifty and self-responsible than others. Be that as it may, the fact remains that the presently sched uled social security tax dep·rives the individual of the opportunity to save and invest up to 11.3 per cent of his earnings, which could accumulate to as much as $115, 000, and possibly more, by the 1966 WEAKNESS CORRUPTS 7 time he had reached age· 65. This compulsory seizure of potential savings, for current redistribution among consumers, deprives indi viduals and the economy generally of the capital that could create more and better job opportunities for all working men and women.

And the greatest disservice of this entire procedure is to the poorest and the least productive members of society who so need additional tools and equipment and other fa cilities to improve their produc tivity. True social security may be ap proached when individuals gen erally, and voters especially, begin to understand that savings and in vestment and the prerogatives of ownership are best left in the hands of those whom consumers have rewarded and designated as the most efficient and generous suppliers of the goods and services people want. To tax and confiscate property and savings is to frus trate the choices of consumers; and the first and sharpest cutback in productivity is of those very items that had been most abund antly mass produced - for the masses. Tax-supported education has been promulgated and widely ac cepted in theory as a great equal izer, not only at the elementary and secondary school levels, but more and more at the college level, and even for graduate studies.

When a high proportion of the population of a nation is able to read and write, it may be argued convincingly that illiteracy is a handicap and that everyone should have the opportunity to learn these skills in order that he may become a better citizen and a self responsible, contributing member of society rather than a hopeless burden to himself and to others. At least, some such rationale lay behind the first steps toward gov ernment schools in the United States - elementary schools, oper ating at the community level. People can be helped, even com pelled, to learn to read and write. But not all who can will read or write; not every opportunity ex tended is accepted; not everyone relieved of self-responsibility seizes upon the situation as an op portunity to grow in ability and responsibility. Indeed, nothing but the precise opposite may be in ferred from the sorry record of the consequences of government education in the United States.

Never before in the history of civilization have so many literate citizens deemed and decreed them selves incapable of self-support as in the United States of America in 1966. There is no evidence whatsoever that compelling a per son to learn to read and write will 8 THE FREEMAN August sharpen the sense of self-responsi bility within him. Furthermore, when all have learned to read and write, some will read and write more wisely than others and develop talents that others neglect. And eventu ally, high school diplomas and col lege degrees will be required - are being required - of applicants for jobs of the type formerly fulfilled respectably by illiterates. This may be one of the reasons why major universities in the United States now look to Washington for 40 and 50 per cent and more of their total budgets. And those who are obliged to pay the costs of education, from the community grade schools of country-club at mosphere to the tax-supported centers for graduate study, are the poor taxpayers presumed capable of and willing to educate every body's children but their own.

After tiny tots have been jogged about town in yellow buses, through red and green lights until they no longer are able to distin guish black from white, they may proceed to express themselves con cerning national and international problems until free lunch is served; .and some eventually may learn to read and write - with reading machines and automatic typewriters. Whether the student dropout from such a curriculum is intellectually inferior to the one who carries on and graduates is a nice question that cannot be re solved by any of the theories and practices of the system of com pulsory schooling. Is the one any better trained than the other to demonstrate his animal nature in the streets or otherwise express the civil disobedience that passes for maturity according to the for mula of personal irresponsibility? Nor should anyone be surprised that the heaviest current govern mental expenditures for higher education are devoted to research and development for occupation of the moon!

Urban Renewal plans and prac tices may afford the best illustra tion of all the misguided cam paigns in the war on poverty. If anyone can be found living in sub standard housing or other slum conditions, no matter that he is conscientiously doing his best to live within his means while-striv ing to help himself toward some thing better. Root him out, and force him to find a home he cannot afford in a community with public services and tax rates tailored for those in high-income brackets. Government is organized in tolerance; and there is nothing wrong with such intolerance leveled against those criminal acts by individuals who disturb the peace and· jeopardize the life and 1966 WEAKNESS CORRUPTS 9 property of others who are mind ing their own business. The most deplorable kind of intolerance is that evidenced by the "humani tarian with the guillotine," the well-intended reformer armed with the power of eminent domain and the full force of government to simply wipe out all signs of poverty and suffering, including the individuals so afflicted.

The free market economy is tol erant of differences in human wants and capacities, leaving the individual free to fill his needs ac cording to his abilities - to draw supplies from the market in pro portion to his own offer-and-de livery of goods and services. It affords each person the maximum incentive and opportunity to help himself, which, in the final analy sis, is the only kind of help that does not carry the prospect of greater harm than good to the in tended beneficiary. A strong case can be made,. and has been made on numerous occa sions by countless individuals, concerning the immorali ty of forcefully taking the property of the more provident and thrifty citizenry for redistribution in one form or another among the. poor. But far too little attention has been paid by anyone to the im morality and injustice of thus de priving those poor persons of the opportunity to experience the reality of cause and consequence, effort and reward, method and re sults. To feed and clothe and house and surround a man's body with other physical comforts be yond the capacity of his mind to appreciate and earn and cope with these material blessings is to de prive him of the opportunity of ever rising above the level of a domesticated animal. No greater inj ury can be inflicted on any man than to "save" him from earning his own way. The benevolent gov ernment that taxes the rich also robs the poor at the same time, taking from one his property, from the other his human dignity.

When it is recognized that the im portant part of urban renewal must take place within the minds and souls of human beings, it may be seen that the coercive force of government can play no construc tive role in this do-it-yourself project of mental and moral achievement. Transport subsidies, ranging from below-cost subway and com muter fares to the underwriting of luxury liners and plush air travel, generally tend to transfer property by force to those who can afford to travel from those who can't. There are economic as well as other reasons why the poorer members of a community tend to 10 THE FREEMAN August congregate and crowd together in what seem to be the rundown tenements and slums near the heart of an urban industrial area. There is the inexpensive, second hand housing they can afford near to their places of work, with older and unadorned but nonetheless adequate schools and other service and shopping facilities within their reach and means. Those per sons with ambition always have managed to help themselves out of such crowded areas if they really wanted to leave, thus making room for others on th,eir way up the economic ladder. The market, comprised of individuals each minding his own business, is toler ant of such arrangements.

There are persons, however, especially among the new rich re cently moved to Suburbia, who have failed to understand the ma.r ket method of progress and who see no further need for those less elegant and lower rungs in the economic structure. By taxation, subsidy, and force, they would abolish slums, displace with or derly empty space what once were homes and shops and service cen ters and sources of livelihood for emergent, self-reliant human beings. Then in the name of the displaced poor, but more obviously in their own interest, the new sub urbanites clamor for subsidized subway fares, subsidized commuter services, subsidized free ways and parking space, subsidized correctives for the destruction they have promulgated in the name of renewal and progress. And the inevitable workings of the process of taxation, however steeply grad uated to soak the rich, are such that each dollar of return on in vestment capital thus withdrawn from the market place of produc tive enterprise means something like six dollars of wages never earned and never paid. 1 The ones who finally pay, and pay dearly, for every dollar politically di verted to the "war on poverty" are the poor workers who so need the freedom of the market place in order to help themselves.

Foreign aid to undeveloped countries will be our final example here of the miscarriage of justice in the political war on poverty. Bad enough that every item as sembled for give-away by the donor government, whether it be food and other necessities or the most elaborate kind of capital equipment, is ultimately at the expense of those of our own citi1 In the highly industrialized United States over recent years, about 85 per cent of personal income has been in the form of pay for work done currently and 15 per cent as pay to savers who provide tools and job opportunities. See F. A. Harper, Why Wages Rise (Irvington, N. Y.: Foundation for Economic Educa tion) pp. 19-27.

1966 WEAKNESS CORRUPTS 11 zens most in· need of cheap food, clothing, and shelter and most in· need of the additional capital that makes for improved job opportuni ties and working conditions. It al ways is the poor who pay most dearly for goods and services their government withdraws from the domestic market in which they are trying to earn their livelihood. Persons of· means, by bidding enough, can always obtain por tions of what remains for sale after government has forcibly taken "its share" of scarce re sources. But worse than these domestic inj ustices of intergovernmental give-away programs is the impact of such measures upon the indi viduals supposed to be helped in the recipient countries. Theirs is primarily a problem of too much regulation and control by their own government, too little free dom and incentive to assume per sonal responsibility for additional production, saving, and invest ment. Yet, there is no recor<J.ynor even the slightest hint of any at tempt to put foreign-aid funds anywhere except at the disposition of the government of the recipient nation. Thus are these already au thoritarian and dictatorial govern ments sustained and bolstered in their power to regulate and con trol the lives of their citizen sub jects.

Nor does it customarily make very much difference in what form the foreign-aid goods and services are originally transmitted from one government to the other. Let us say that boatloads· of food grains are intended to stave off starvation among the teeming mil lions of India - a million dollars worth of food. The immediate con sequence is that the power of the interventionist government of In dia is bolstered by that amount. It has an additional million dollars worth of patronage to distribute among its lackeys and favorites. And the probability that a starv ing Indian may receive some of the foreign-aid food will depend upon how much of it he can afford to buy in the black market. Many persons, of course, will be quick to condemn the marketeers who would thus profit from traffic in the necessities of life. On the contrary, the role of the black marketeers is the most construc tive of any played in the entire foreign-aid procedure. The great injustice is done by those govern mental enthusiasts who would deny the functioning of the mar ket in the allocation of scarce re sources.

A More Hopeful Approach In questioning and criticizing the conduct of the current cam paign against poverty I have tried 12 THE FREEMAN August to suggest what seems to me a more hopeful strategy. Two things, I believe, are necessary to make of any community the most prosperous economic and cultural garden spot of the world: First, and most essential, is to populate it with individuals in whom flows the spirit and under standing and practice of liberty. Due respect for life, liberty, and property under the rules of peace ful exchange among self-reliant, self-responsible, self-respecting human beings would seem to rest upon a faith that this is God's world, a humility that we are creatures, and a tolerance toward fellow men peacefully participat ing as we ourselves aspire to do in the infinite process of the Crea tion. Second, though supplemental to the first, is to relieve that com munity of every form of govern ment aid and subsidy and at the same time relieve it of all tax bur dens, regulations, interventions, and controls other than those nec essary and strictly limited to its own internal policing and its de fense against foreign attack.

And the mottoes above the open gates of such a free society would read: and ON HEROES, HISTORY, AND OUR HERITAGE ROBERT M. THORNTON "IN TIMES of insecurity when the foundations of life are severely shaken," says Bernhard W. Ander son, "men often turn to the past to gain perspective. In our time, for instance, the world crisis has stimulated an intensive study of Mr. Thornton is a businessman in Covington, Kentucky. the past and the tradition in which we stand." Our age surely qualifies as a time of insecurity so it is likely that more and more thoughtful people will, as Anderson says, turn to the past to examine their heritage. Thus, the renElwed interest in the most important of the Founding 1966 ON HEROES, HISTORY, AND OUR HERITAGE 13 Fathers: Washington, Franklin, John Adams, Jefferson, Madison, and Hamilton. All have their critics, to be sure, but they have not been forgotten in the nearly two hundred years that have passed since this nation was founded. We may wish to discover what makes them great, what sets them apart from others who lived in their time.

But while we want to know what made the Founding Fathers great, few of us are interested in reading anything that treats them as plaster saints. We need to know each one's personality with all its shortcomings, that is to say, we need to treat them as human beings, for only in that way may we appreciate their greatness, only so can they serve as inspira tion and challenge to us. To pro claim perfection for these men is, as Douglas Southall Freeman has explained, to deny growth. Paul Wilstach speaks of a need to "bal ance their noble qualities as great characters with their ami abilities as fellow human beings." We can best understand persons of the past, suggested Albert Jay Nock, if we think of them as men and women much like ourselves with twenty-four hours a day to get through as best they could. The need, in brief, is to humanize the Founding Fathers without de meaning them. But, it might be asked, are there really persons who may fairly be called heroes - for in stance, persons who overcome their fear and risk their lives for others or persons who stick by their beliefs in the face of strong opposition or temptations? Some "intellectuals" go so far as to say there are no heroes since aU of us are mere products of determining forces - biological, psychological, and environmental-over which we have no control; hence, we are little more than robots doing, not what we choose to do, but what these forces make us do. Granted, if the nature of man is such that he can not make free choices and can not act from disinterested mo tives and can not do what he knows he ought to do regardless of what he Iwants to do, it is futile to argue whether at certain times, say, during the period when America became an independent nation, particular men risked "their lives, their fortunes, and their sacred honor" out of love of principles. If, on the other hand, man is not a helpless pawn and can act disinterestedly, then we can investigate to learn if, for instance, the Founding Fathers were guided by principles and ideals or only by selfish motives disguised as a love of liberty. How the acts of the Founding Fathers will be interpreted depends, then, 14 THE FREEMAN August not only on historical knowledge and understanding, but also on the view of the nature of man that is implicit in any work of history.

It is not unexpected that a mass society derogates the value and relevance of individual action; hence the "debunking" and dis regard of our national heroes. But in diminishing our forebears we diminish rather than exalt our selves. In demeaning the motives of the great Founding Fathers we compromise our own character as free and responsible men. And it is hardly right to live off the fruits of their commitments while insisting they were either un aware of what they were doing or were moved by motives different from those they professed. It is fruitless, anyway, for "in tellectuals" to say there are no heroes because most persons, espe cially youngsters, will have their heroes -like it or not. The real question is who will be the heroes to look up to and emulate. Daniel Boorstin has observed the mod ern-day worship, not of heroes but of celebrities. "The hero was dis tinguished by his achievement; the celebrity by his image or trademark. The hero created him self; the celebrity is created by the media. The hero was a big man; the celebrity isa big name."

These new-model "heroes" are no longer "external sources which fill us with purpose" but "receptacles into which we pour our own pur poselessness." "The hero," he goes on to say, "is made by folklore, sacred texts, and history books, but the celebrity is the creature of gossip, of public opinion, of magazines, newspapers, and the ephemeral images of movie and television screen. The passage of time, which creates and estab lishes the hero, destroys the celeb rity." Perhaps, remarks Boorstin wisely, "our ancestors were right in connecting the very idea of hu man greatness with belief in God. Perhaps man cannot make him self. Perhaps heroes are born and not made." Our generation, in its worship of the present, scoffs at history as dull and unimportant; a cocky bunch, we fail to appreciate that only if we know where the road we travel came from can we know where it will take us. We fail, too, to understand that all of us, even the greatest, stand on the shoul ders of those who came before.

Man, Renan has said, does not im provise himself. Likewise, Amer ican society in the middle of the twentieth century did not sud denly spring into existence, and the spiritual and material bless ings enjoyed by Americans today would not be ours if those who preceded us had shirked their re sponsibilities to future genera1966 ON HEROES, HISTORY, AND OUR HERITAGE 15 tions as we are guilty of doing to day. A true community, after all, is much more than just a group of people living at a particular moment; it is, if you will, a spir itual body including those who have gone before and those yet to be born. Written history, explains Page Smith, is Uthe effort to pass on to the sons the wisdom of the fa thers, and thus to preserve, rather than destroy, the continuity be tween generations." History thus defined will help the individual to discover his identity, for an es sential part of that identity is found in the story of his past - his "collective autobiography."

To destroy the links with the past and live simply in the present, he continues, is to leave oneself at the mercy of neuroses, so common in the present day. Great history, writes Smith, is "the history that has commanded men's minds and hearts, [history] with a story to tell that illuminates the truth of the human situation, that lifts spirits and projects new poten tialities." For the historian him self the important thing is not to seek a cold objectivity but rather "to conceive of his task as one of sympathetic understanding of his subject, a matter of attachment rather than detachment, of love rather than aloofness." History, Maritain has said, "is not a problem to be solved, but a mystery to be looked at.... " Many readers will recognize the above-mentioned ideas on history as conservative, not radical or "liberal," for the underlying pre mise of this concept of American history is that there is something to conserve, a heritage to treasure and to pass on to our ,posterity.

There is, indeed; and our tradi tion, to put it briefly, is liberty. As Clarence Carson has demon strated, ours is not a revolution ary tradition but a "tradition of individualism, voluntarism, con stitutionalism, representative gov ernment, government by law, equality before the law, recogni tion of moral order in the uni verse, natural rights, and personal independence." ~ Authors cited: B. W. Anderson, Understanding the Old Testament. Englewood Cliffs, New Jer sey: Prentice-Hall, 1957, p. 288. Paul Wilstach, Patriots Off Their Pedes tals. Indianapolis: Bobbs-Merrill Co., 1927, p. 15. Daniel Boorstin, The Image: A Guide to Pseudo-Events in America. New York: Harper Colophon Books, 1964, pp. 61, 63, 76. Page Smith, The Historian and History. New York: Knopf, 1964, pp. 130, 142, 155, 206, 245, 248. Jacques Maritain, University Bookman, Winter, 1966, p. 32. Clarence B. Carson, The American Tra dition. Irvington, New York: Foundation for Economic Education, 1964, pp. 26, 27.

HENRY HAZLITT 16 The Case for International Investment • This article by the well-known economic journalist and author is reprinted by permission from the February 12, 1966 special 75th anniversary edition of Farmand, oldest business jout'nal in Scandinavia, published in Oslo. Dr. Trygve J. B. Hoff, 70 last November and editor of Farmand since 1935, has won friends around the w'orld with his staunch and undev·iating stand for a society characterized by la10 and order, freedom, and respect for the individual and the dignity of man. Henry Hazlitt is one of the several members of the Mont Pelerin Society contributing articles on various aspects of business and economics to this commemorative issue of Farmand. Copies of the 24,O-pageanniversary edition, in English, at $1.50 each, may be ordered direct from Farmand, Roald Amundsensgt. 1, Oslo 1, Norway.

THE CASE for American invest ment in Europe is simply part of the case for international invest ment. The case for international investment, in turn, is simply part of the case for all investment, international or domestic. And the case for freedom of investment is simply the case for free trade, for free enterprise, for economic liberty - and for world-wide eco nomic cooperation. Lending and investment, when wisely made, benefit both the lender and the borrower. Let us look at domestic investment first, where fewer prejudices are likely to be involved. Investment benefits the lender, of course, by giving him a return on his capital in the form of either interest or profit .. He tries to get the highest return on his investment conso nant with safety. Investment bene fits the borrower as well. If it is a fixed-rate investment, in the form of a loan, a mortgage, or bonds, it gives the borrowing en trepreneur the capital he needs for his venture. If his venture is successful, he can payoff the amount borrowed and expand his operations with his own capital accumulated from his profits.

If the investor and the entre preneur are different people, both share in the gain. If the investor and the entrepreneur is the same person, and he is competent and successful, he provides consumers with some product they want that they have not previously been get ting; or he provides them with a better quality of it; or he pro vides them with more of it,and probably at a lower price. So he benefits consumers. In addition, he either provides more employ ment or, if there has already been full employment in the locality of his plant, he tend·s to raise the level of wages there. And this mutual benefit applies, of course, to international invest ment. A new foreign venture (like a new domestic venture in a given locality), particularly if it is suc cessful, may hurt less efficient do mestic (or foreign) producers al ready in the field. But it will do so only because it is producing a better quality product or selling it· at a lower price. In other words, it will do so only because it is more effectively meeting the needs or wants of consumers in the country in which the investment is made.

Moreover, however regrettable its short-run effects may be on a particular domestic industry, the long-run effects of the new foreign venture are bound to be beneficial. For it will either force the do,;, 18 THE FREEMAN August me~tic industry to become more efficient (and so to serve domestic consumers better), or it will force entrepreneurs in that industry, and new entrepreneurs coming along, to turn to products in which they are at least as efficient as, or even more efficient than, the foreign entrepreneur. In short, the case for freedom of international investment, the case for the free flow of funds, is the same as the case for free dom of international trade, for the free flow of goods. The country that permits the free flow of funds and goods will have more goods and services. It will become more efficient and productive. In brief, it will become wealthier and stronger. Those who wish to put barriers in the way of international invest ment are confused by the same fallacies as those who wish to put barriers in the way of interna tional trade.

It seems pretty late in the day to have to refute these fallacies. They have already been refuted hundreds of times, brilliantly and completely, by the classical econo mists and their successors. Why fear the Supplier? I will digress at this point only to mention one .of these fallacies, because it leads to a false fear that still has a strong popular hold. This is that if a foreign country, say the United States, is allowed to "invade" the markets of other countries with its capital as well as its final products, it will be able to produce everything more efficiently than its European competition, and so destroy Euro pean industry. (I'd like to call attention here to the use of such war terms as "invade," or such natural disaster terms as "flood" or "inundate," to which protec tionists habitually resort.) All such fears are, of course, entirely groundless. They have not only been refuted by the whole course of history; they are not only refuted afresh every month by the most casual study of the statistics of imports and exports; but they are refuted a priori by elementary deductive reasoning.

Ricardo refuted them once for all when he enunciated his law of comparative costs. But it should be obvious to the most backward mind that in the long run a coun try can only pay for its imports with its exports, and that the ex tent of the one both makes pos sible and limits the extent of the other. In the long run a nation cannot expand exports without ex panding imports; and it cannot discourage and restrict imports without correspondingly discour aging and restricting its exports. Trade always balances, when 1966 THE CASE FOR INTERNATIONAL INVESTMENT 19 governments let it alone, for the simple reason that exporters in sist on getting paid for what they sell. In the last few years all of us have been chattering learnedly about deficits in the balance of payments. But such deficits, when persistent, are always the result of unsound monetary and fiscal policies and interventions on the part of governments. Typically, a government inflates its currency faster than its neighbors, and then artificially supports its currency quotation in the foreign exchange market. But we'll return to this later.

Americans in Europe To my short exposition of the two-sided advantages of interna tional investment in general I should like to say a word about the particular two-sided advan tages at this time of American in vestment in Europe. The advantage to American in vestors and American firms is obvious. American investors ex pect to get a higher return on their investment than they could get at home. American firms open up new markets for their prod ucts, and at least at the beginning realize a higher rate of profit on them than they would by trying to achieve a further saturation of their markets at home. But the advantages to Europe are enor mous. The world today is in the midst of a great technological revolu tion, which will probably trans form the face of the world even more than did the Industrial. Rev olution of the late eighteenth and early nineteenth centuries. This technological revolution, of course, typified by electronics, computers, automation, is merely an acceler ating continuance of the Industrial Revolution.

From the producer's point of view, an enormous amount of money will be made in this tech nological revolution. To exploit it effectively requires know-how, big markets, and huge amounts of cap ital. Now America has these huge amounts of capital, and it has the know-how largely because it has the capital. It is, in fact, the chief source of capital creation today. It has been spending huge amounts of capital on research and development, far beyond what European countries have spent or are able to spend. An idea of the contrast was given by the French weekly L'Economie in an estimate early last year that whereas France spends less than 6 billion francs a year on scientific re search, the United States spends 100 billion - an amount, it adds, three times as great as that of all European countries together. The 20 THE FREEMAN August estimate given in L'Economie for the United States agrees fairly well with the best American esti mates, derived from figures pub lished by the National Science Foundation. These estimates place United States expenditure for re search and development last year at $22.1 billion, of which $15.5 billion represents government ex penditure and $6.1 billion private expendi ture.

Europe, prosperous though it now is, and expanding economi cally as rapidly as it now is, just hasn't got the comparable capital to spend on research and develop ment. Nor is it producing it at a rate fast enough to finance the technological revolution to take full advantage of it. It needs capi tal from the United States; and it needs to import the advanced plants, equipment, and productive methods that have been developed by this research. Yet the irony of the present situation is that though private American investment in Europe benefits both Americans and Eu ropeans, both the American gov ernment and some European gov ernments fear and distrust it, and both are busy putting obstacles in its way. European Government Objections Let us disregard why the U. S. authorities fear and dislike the outflow of American capital and turn to the reasons why some Eu ropean authorities fear or dislike its inflow. It is in France, by the de Gaulle government, that the reasons for this distrust have been most clearly expressed.

At a press conference on Febru ary 4, 1965, President de Gaulle complained that the United States, in effect, was buying up European firms with Europe's own money. This accusation is so peculiar that I prefer to quote de Gaulle's exact words (that is, in English, in the official translation) : He began by pointing out that, be cause of the gold exchange standard, the United States is not required to settle its payments deficits in gold. He then went on: "In other words, capital was cre ated in America, by means of what must be called inflation, which in the form of dollar loans granted to States or to individuals, is exported outside. "As, even in the United States, the increase in fiduciary currency which results as a side effect makes invest ments at home less profitable, there is a growing tendency in the United States to invest abroad. The result for certain countries is a sort of expropriation of some of their busi ness firms."

Some Americans have been tempted to reply that this sounds ungrateful coming from a country 1966 THE CASE FOR INTERNATIONAL INVESTMENT .21 into which we .have poured some $10 billion or $11 billion of aid. But this is beside the point. We must admit in all candor that de Gaulle is right in attributing part of the amount of our recent capi tal export to our own inflation and artificially low interest rates. At first glance, also, his charge that U. S. firms have been in effect buying out European firms with the deficit·in the American balance of payments looks like a serious one. Yet there is no· "expropria tion" involved. Where European firms have been bought up they have been paid for with real dol lars, with real money. And when European firms accept these dol lars, and European central banks buy them and hold on to them for their reserves, these are (for the most part) voluntary decisions.

European central banks always have the legal right to demand gold for their dollars, whether or not the American monetary man agers would be happy about their decision. I come next to the charges of President de Gaulle and others that the United States is export ing part of its inflation to Europe. It may be so; but I should like to point out that Europe is not forced to import it. Even if it takes and holds dollars, and even if these end up as additional reserves in its central banks, no country is under any obligation to issue a new pyramid of its own credit or currency against these paper dol lars. It can simply use them to strengthen its reserves and in crease its reserve ratio. When Europe imports dollars from the United States it is not importing inflation; it is merely importing temptation. It is up to the monetary authorities of each country to decide what to do with the dollars.

Domination I come to the next charge against American investment in Europe, a charge that is again mainly heard in France. This is that· the "invasion" of American corporations in Europe carries with it the threat of "domination" of the European economy. How real is this threat? An ar ticle in the French weekly L'E c'On omie of February 12 of last year pointed out that American invest mentsin ·France represent barely 2 per cent of that country's gross national product. Yet what has caused concern, the article con tinued, is that this investment is concentrated in certain key-sec tors of the French economy. And it went on to describe the situa tion in the petroleum and chemi cal industries, in mechanical and electrical engineering, and in elec tronics.

22 THE FREEMAN August But the charge of "domination" may mean either of two things. It may mean merely that a foreign company enjoys an uncomfortably large proportion of the market for a specific product. This may not be satisfactory to the French producers; but it indicates that a large number of French consum ers prefer it to the product of their domestic companies. And this competition is a stimulus to the French manufacturers to im prove their product. But the charge of "domination" may imply something more seri ous - that the American-owned companies would have too much to say about the economic decisions of the government of the countries in which they were located. I can only say that I regard this out come as wholly improbable. The government of any country, not riddled by corruption, seldom has~ difficulty in exercising its· sover eignty over any foreign-owned corporation. The real danger is the other way round. The foreign owned company puts itself at the mercy of the government of the host country. Its capital in the form of buildings, equipment, and even bank deposits may be trapped. In the last twenty-five years, as American oil companies and others in Asia and South America have found to their sor row, the dangers of discriminatory labor legislation, or discrimi natory taxation, or even expro priation, are very real.

Americanization I come to one last reason for opposition to American invest ment in Europe - the fear of "Americanization." This is a little more difficult to deal with than some of those I have just re viewed. But "Americanization," it seems to me, may refer to several rather distinct things. It may re fer to an increase in some of the conveniences, comforts, and luxu ries of life - more and better bath tubs, lavatories, showers, and toilets, more supermarkets and drugstores, more radios, television sets, and automobiles. Few people - whether Americans, Europeans, Asians, or Africans - who are in a position to get these things for themselves have any objection to them. The real objection to some of them - like automobiles - is that with advancing prosperity too many oth.er people are also in po sition to get hold of them, and then their mere multiplication re sults in traffic jams that make each individual car less useful to its owner. I am willing to confess that I have no solution to offer to this problem.

The word "Americanization," however, may be used to refer to 1966 THE CASE FOR INTERNATIONAL INVESTMENT 23 certain spiritual and cultural changes - or, rather, I suppose I should say, to certain antispiri tual and anticultural changes to the increasing pursuit of mere ly material ends, to a restless in crease in the pace of both business and pleasure-seeking, to the vul garization typified by advertising billboards, jukeboxes, and the commercialization of every phase of life. I should be the last to want to defend all this. But I should like to point out that this is a develop ment well within the control of Europeans themselves. It is per haps temporarily inevitable when the income of the masses grows faster than opportunities for their education and the cultivation of their tastes. But increased pros perity does not necessarily lead to increased vulgarization and mate rialism. I have been impressed in the last ten years by the remark able growth in the United States in the appreciation of serious mu sic, the reading of serious litera ture, and the interest in science and in the fine arts as reflected -in the sales of good records and good paperback books and the attend ance at art galleries.

Why U. S. Corporations Invest I come finally to the question: What reasons induce American corporations to invest abroad and what reasons deter them from do ing so? Of course the primary reason that an American corporation in vests abroad is to make a profit. This consideration is not absolute but relative. It depends upon the alternatives. The corporation goes where it expects to make a great er profit (in relation to the risks) than it can by expanding at home or by investing or .expanding further in some other country. Of course a multiplicity of con siderations affect this expectation. The corporation must decide whether it is better to build a new plant from the ground up or begin by acquiring some existing Euro pean concern. It must decide whether it wants its subsidiary to be wholly owned or whether to make its investment a joint ven ture with nationals of the host country. The wisdom of all such decisions depends on the special circumstances in each case. Given the opportunity for profit,the most common moving forces for overseas investment are the desire to maintain or expand sales by en tering a new market, or the hope of preserving an established mar ket in the face of tariff, exchange, or unofficial barriers. American corporations have invested in the Common Market area or even in the European Free Trade Area be cause these areas are protectionist 24 THE FREEMAN August against outsiders. Another reason Americans may invest in a for eign market is because it may be possible or easier from there to export to a third market area which otherwise could not be reached because of discriminating protectionism or for political rea sons. If an American company sets up a plant in West Germany, for example, it may be able to ship in to East Germany. Or it m.ay set up a plant in some other Euro pean country to take advantage of bilateral arrangements that do not exist in countries where it al ready is.

Once a decision has been made to invest abroad, a number of other considerations dictate the choice of which country shall re ceive the investment. These can be grouped into governmental fac tors and nongovernmental fac tors. With respect to the first group, American investors seek out a country that has political, financial, and economic stability, a favorable official attitude toward private enterprise and the profit motive, and little or no corruption within the government. Turning to nongovernmental factors influ encing the choice of country, American investors will consider the availability of skilled and un skilled labor, managerial person nel, banking facilities; road, rail, and harbor facilities; ancillary or supporting industries; power fa cHities; and labor costs. The question of labor costs is more complicated than is com monly supposed. It is not simply a question whether wage rates are low in a given country, but whether they are low or high in relation to the skill and produc tivity of the labor available there.

Another reason for direct in vestment in a given country is that the material is there. This of course is the reason in the case of the extractive industries - oil, copper, bauxi te, etc. Deterrents to Investors The reasons why American cor porations may not make invest ments abroad are mainly that some or all of these favorable con ditions do not exist. Let me give a brief list of some reasons that will deter private in vestment in a country: (1) lack of government cooperation or enthu siasm; (2) lack of local financing facilities; (3) lack of guarantees on repatriation of capital and profits; (4) restrictions on fields of investment; (5) limitations on ownership by nonnationals; (6) burdensome taxes; (7) unstable currency; (8) currency exchange restrictions; (9) import license difficulties on essential materials, machinery, or know-how; (10) burdensome social security legis1966 THE CASE FOR INTERNATIONAL INVESTMENT 25 lation; (11) price controls; (12) discriminatory laws; (13) gov ernment-owned competition; and (14) the possibility of expropria tion.

I may have seemed to be arguing here that American investment is an unmixed blessing for Europe, and that all opposition to it is the result of misunderstanding or un reasoning prejudice. I do not wish to give that impression. I have thrown my emphasis in this direc tion mainly because I am writing in a European periodical. If I were writing on this same subject at home my emphasis would be different. I would devote at least part of my discussion to deploring and warning against some of the mistakes that Americans make abroad, both in actions and atti tude - condescension, brashness, disregard of local customs and methods, refusal even to try to learn the local language, failure to employ nationals of the host country to the greatest possible extent, and so on. Such actions and attitudes breed a perfectly justifiable resentment. But the faults I have been de scribing are in the main the faults of the more recent arrivals in Europe among American compa nies. An official of the Parker Pen Company tells about a conversa tion he fell into with a London taxi driver. "Are you over here for pleasure, sir?" asked the taxi driver. "No," replied the Ameri can, "on business." "What's your business?" asked the driver. "I'm with the Parker Pen Company,"

replied the American. "Oh," asked the taxi driver, "does America have a Parker Pen Company, too?" Well, that's the impression that every foreign corporation ought to give in the country in which it has a subsidiary. ~ CliRlate for Progress IN A NATION without a thriving business community, private wealth is generally stored in vaults, or used in conspicuous con sumption, or invested in real estate, or placed with business com munities abroad. But where a country's private business is not subject to Procrustean measures of control, this private wealth is less likely to be shipped abroad, buried, or otherwise diverted into circuits of low economic potential. It is likely to come out of hiding, or to be brought home from abroad, particularly since the prospects of profit are normally higher in a poor country if the political environment is good. HAROLD FLEMING, States, Contracts and Progress A Clergyman Lool~s at Free Enterprise NORMAN S. REAM I BELIEVE that a great number of clergymen in this country despise socialism in all of its forms, whether it be called the New Deal, the Fair Deal, the New Frontier, or the Great Society. But they are not in the majority, and they are not quoted continually in the news papers and magazines. They are certainly not the executives of na tional church groups which are constantly issuing, or causing to be issued, statements proposing an ever greater expansion of the wel fare state. You will perhaps have noted that most of the ultraliberal spokesmen for religion are in ex ecutive positions or in theological seminaries. Very few of them are parish ministers and parish priests. Unfortunately, however, The Reverend Mr. Ream is pastor of the First Congregational Church of Wauwatosa, Wis consin.

26 great numbers of clergymen on the parish level are strongly in fluenced by the voices which ema nate from church councils and seminary campuses. Let me tell you what I think the typical clergyman is like when it comes to economic and political matters. First we must go back into history a bit. Back in the early thirties, a great many peo ple in this country - clergymen in cluded - developed what Ludwig von Mises calls an anticapitalistic mentality. Several religious de nominations adopted resolutions which condemned capitalism equal ly with communism. One group voted a resolution conde:mning cap italism and advocating its elim ination, along with the elimination of the legal forms and moral ideals which sustain it. Because church1966 A CLERGYMAN LOOKS AT FREE ENTERPRISE 27 men, for the most part, were woe fully ignorant of economics and the causes of depressions, they blamed all of the suffering and economic malfunctioning which existed in our country at that time on what they mistakenly referred to as laissez-faire capitalism. Al though this mentality has mod erated generally during the last thirty years, it is still prevalent in ofl5cial circles.

Economically Uninformed The clergy, like most of the pop ulation, is, as I have already ob served, woefully ignorant of eco nomics. There is one difference, however: the clergy are leaders in the community and have therefore a greater responsibility for being informed, especially if they are going to issue pronouncements and pass resolutions. But time after time I have sat in meetings where clergymen argued the pros and cons of certain political matters concerning which they were abys mally ignorant. I well remember on one occasion sitting in a meet ing where a group wanted to pass a resolution favoring the adoption of the United Nations Declaration of Human Rights. They were al most unanimously in favor of it but when I asked them how many had read it, not a single person present had read the document through. It had a nice title, it sounded good, prominent persons were· pushing it, so they were for it.

Most clergymen have been so trained as to develop_ a sensitive conscience. When they see injus tice and need in human society, they want to do something about it. They do not always stop to consider what is the best thing to do, over the long run and for all concerned. Over and over again in talking with politically liberal ministers, when I have challenged the socialistic method of meeting the problem, I have been asked, "Well, don't you care about these people who are suffering or under going hardship?" And of course I do care, as all of you care, but one has to be cautious in his care. He has to care enough to see the problem as a whole and not par tially. What Are the Consequences? This leads me to another strong conviction shared by Dr. Mises. I had the privilege of studying un der him, the dean of classical economists, in two summerses sions. Over and over again, when confronted with a difficult eco nomic problem, he would insist that we have to consider the long run and not just the short run. To solve an economic problem by meeting an immediate need but ignoring the long run conse28 THE FREEMAN August quences, is not to solve it at all.

Such a method often raises greater and more difficult problems. May I suggest a very simple analogy. If a panhandler accosts me on the street and is obviously hungry, ragged, and in great need, I can give him a couple of dollars which will solve all his immediate problems. It will get him some thing to eat and a bed. But have I really solved his problem? Of course not. His problem is much more deep-seated than that, and although this is a simple analogy, it is a pertinent one. Many min isters think the solution of our complicated and difficult economic problems are likewise simple: just get the government to tax those who have and give to those who have not. That, they suppose, will create a just and equitable society. Well, we have been doing that with increasing intensity over the past thirty years. We have, to be sure, met some of the immediate needs of men and women who per haps didn't have enough to eat and enough to wear and proper housing. But let us look at some of the consequences during those thirty years. We have a greatly enlarged national debt, we have greatly increased taxes, we have inflation, we have a greater crime rate, divorce rate, alcholism rate, narcotics rate; and in spite of our affluent society, there is a strong undercurrent of feeling in our country that not all is well. Now, would you reply that all of these consequences I have enumerated are not necessarily the results of a socialistic economic policy? I think there is a relationship, and we need a lot more study to deter mine just what that relationship is; for those statistics apply not only to our own country, but to every country which has gone in creasingly socialistic.

A Common Failing Now, this condemnation of eco nomic ignorance should not be reserved for clergymen. There are also businessmen who are econom ically ignorant. It is not an occu pational hazard or professional disease reserved for one segment of the population. When Milton Friedman of the University of Chicago says that the two worst enemies of freedom are liberal professors and businessmen, this is part of what he is talking about. It is economic ignorance that tempts a businessman to seek a quick profit at the expense of a long-range economic gain. It is moral ignorance that lets a busi nessman break the law or pull a fast deal to the detriment of all business and businessmen in the future. I am no economic expert myself, but I know a fake when I see one; and lots of business-.

1966 A CLERGYMAN LOOKS AT FREE ENTERPRISE 29 men I have known are fakes in this area. In a really laissez-faire economy they couldn't exist. It is the protection of government which often saves them from fail ure. Not only are most clergymen, like so many Americans, ignorant concerning the fundamentals of economics; they are also ignorant, like so many Americans, of our rich heritage, and of what it is that has made this country so great and wonderful. Typical of this national ignorance is that poll which recently revealed that 85 per cent of our young people did not think patriotism. was vital or played any important part in life; 61 per cent did not think the profit motive necessary to the sur vival of free enterprise; and well over 50 per cent were in favor of close government regulation of all business. Spoiled Children of History I must confess that I am not optimistic about the future of our Western civilization and our tra ditional free institutions. Our civ ilization and the institutions of our Western culture depend upon understanding and awareness, and they often demand sacrifice. The American people today are in no mood to sacrifice. Weare the spoiled children of history.

What it all comes down to is that, among others, the religious leaders of our Western civilization are disillusioned because the free enterprise system has not brought about a national and international utopia. Their reasoning seems to be somewhat as follows: The tra ditional American system has not transformed all men into saints and solved all the problems of hu man nature; therefore, there must be something wrong with the sys tem. There being something wrong with the system, the obvious an swer is to do away with it and try some other system. Such reason ing does not properly assess what this system has done over the past 200 years. It does not under stand and appreciate its benefits to mankind around the world. Free enterprise,on the other hand, has not sold itself to the recipients of its own benefactions. Those whom it has blessed most do not appreciate it or understand it. They seem blind to the fact that socialism has produced, when com pared to free enterprise, practi cally nothing; and the little it has prod uced has been at the cost of human dignity and self-respect.

Did you see those figures pub lished by the director of the census a while ago: According to our government, if you make under $4,000 a year you are in poverty. Yet, three-fourths of the families making less than $4,000 a year 30 THE FREEMAN August have their own washing machines. Almost 93 per cent of them have television sets; 60 per cent of them have automobiles available. The average Negro youth in the South in the United States has a better opportunity to get a college edu cation than the average white young person in England. Why, in light of all of this, are there men and women in America - and especially clergymen - who don't like the system that has made it all possible? Is it perhaps an un derlying feeling that man does not live by bread alone, that we don't have all we need in order to really live happy, useful, mean ingful lives? There's something missing, and clergymen are apt to see this more quickly, more sharply, than others.

The Role of the Church Here, clergymen come face to face with their own failures and that of the church. It is the busi ness of the church to purify men's moti ves, to enrich their spirits, to inspire them with lofty aims and purposes. This is not the function of a manufacturing concern or a bank. When the clergyman sees business meeting man's material needs, but the church failing to meet his spiritual needs, he gets a guilt complex which sends him to Selma, Alabama, and out onto the picket line. It is the business of the clergyman and of the church to build religiously oriented indi viduals with strong moral char acter and send them out into the world to transform that world in to something more akin to the Kingdom of God. Because that Kingdom is so slow in coming, be cause the church is so ineffective and weak in its task, there are those who now want to go out and take the Kingdom by violence, as Jesus warned they would. Busi ness, free enterprise, capitalism, the profit motive - all of this be comes the scapegoat for every evil that exists in society. The clergy man, I sincerely believe, is uncon sciously passing the buck for his own professional failure. But it is not his failure alone. It is the church's failure as well; and most of us are a part of the church. It is, therefore, our failure, too.

Each individual within the cap italistic system has a responsibil ity to be a moral man, and any time anyone of us acts without integrity, it reflects on the sys tem. When one business breaks the law, all business comes under condemnation. When one execu tive is immoral, all executives tend to be branded. Do you remember what Albert Schweitzer said when somebody asked him what was the greatest force and power in the whole world? He answered, "Reason, 1966 A CLERGYMAN LOOKS AT FREE ENTERPRISE 31 persuasion, and example, but the greatest by far is example." We have had too many examples of immoral businessmen or improper business activities which are not due to the system under which we operate, but due to immorality within individ uals. All of these things, in the mind of the average man, reflect on the system, on business, on our free way of life. Albert Jay Nock insisted, in the title of one of his books, that the state - not government, not poli ticians, but the state - was man's enemy. By its very nature it tends to grow and intrude upon man's personal freedom. It was for this reason the Founding Fathers sought to set up strong safeguards against the state's arbitrary use of power.

Nock and the Founding Fathers were alert to the warning issued centuries earlier by Confucius. Traveling with some companions along a lonely· mountain road he came upon an old woman weeping. Questioned by the disciples, she replied, "0, sirs, some time ago my brother was killed at this spot by a ferocious tiger. Last month my husband was killed in this same spot by the same tiger. Yesterday my son was likewise killed." "But, old woman," asked the disciples, "if the tiger was so dangerous why did you not leave this spot?" "Because, sirs," she replied, "because there is no oppressive government here." Con fucius then spoke and said, "Re member this, my sons, oppressive government is more to be feared than a ferocious tiger!" Civilized man has always felt himself to be a creature with a divine origin. As such, he has be lieved he ought to be free from the domination of other men. For this conviction he has often been willing to give his life.

The time will come, I believe, when men will once more cherish freedom as did our fathers; and it will be because they have learned anew that man does not live by bread alone, even that bread provided by a benevolent, but omnipotent government. ~ Samuel de PuDendorf HE IS JUSTLY ESTEEM'D the more excellent Citizen of the World, and the more generous Benefactor to his Fellows . . . the more diligent he hath been in advancing his own Perfection.

SOME REFLECTIONS ON ROBOTS LEONARD E. READ MEANS are often confused with ends. Thus, when we focus on the employment-unemployment pic ture, as I do in this essay, the tendency is to overlook the fact that job holding by itself is, as a rule, but a means to the satisfac tion of wants. The growth of any individual's physical and mental faculties does, of course, demand exercise, but having a "job" isn't always necessary for that; these faculties can be and often are more exercised by the jobless coupon clippers, for instance than by job holders. So, we're not seeking employ ment merely for the exercise. Hu man labor for its own sake is sel dom our aim; we labor in order to enjoy its fruits in the form of food, clothing, and shelter, or to satisfy other physical and spir itual hungers. And one of the most essential qualities of being 32 human is the urge to be relieved of burdensome effort and freed to pursue more desirable objectives.

It is this urge, when men are free, that causes the invention of me chanical slaves - our tools and machines; they free us for some thing hopefully better. This is al so why we specialize and trade. In a world which has an infinite amount of work to be done, in voluntary unemployment is incon ceivable - provided the market is free. Unemployment is always the result of price (wage) and other coercive controls. Automation, as I shall attempt to demonstrate, has nothing whatsoever to do with it. Our mechanical slaves -labor saving devices of all kinds - stem from the recognition and pursuit of higher wants than mere sur vival; they are the means toward such ends. Let us therefore try to clear away some of the confusion 1966 SOME REFLECTIONS ON ROBOTS 33 that attends the employment-un employment problem as related to automation. Whenever we come into posses sion of a source of mechanical energy equivalent to one man's energy, we have added to the work force a mechanical slave, an au tomaton, a robot.

No question about it, the robots, at first blush, appear to cause un employment. Take the automobile, for instance. It disemployed buggy and wagon workers, whip and harness makers, stable hands, and a host of others. True, some went to work for the auto makers but, nonetheless, the automobile - auto mated travel, the product of au tomation - made for unemploy ment. So goes the chant. The facts Deny the Theory Regardless of that first impres sion, we know that robots do not, in fact, cause unemployment. For instance, we have experienced an enormous outburst of automation, yet a high percentage of the popu lation - about 80,000,000 - is on the work force; today's many areas of acute labor shortage re fute the notion that automation causes unemployment. Quite possibly we could settle the whole question in our own minds by merely reflecting on primitive automation : the wheel and a domesticated animal. The ox-drawn cart, instead of putting the owner out of work, gave him higher level work and multiplied what he could· produce and thus consume.

Or, consider the story of two men who were watching a huge steam shovel removing earth in preparation for the building of Hoover Dam. Said one, "Think of all the men that shovel is putting out of work!" Replied the better economist .of the two, "There wouldn't be a .single person work ing on this project if all that earth had to be removed by men with their hands." Yes, the automobile disem ployed buggy workers, but in the same sense that the ox-drawn cart relieved primitive man from doing everything by hand. Failure to see this point leads many peo ple to believe that automation causes unemployment. If robots are the cause of un employment, then the telephone automated communication - must have wrought havoc. The fact? The operating companies employ over 700,000 people, and several hundred thousand are employed by the suppliers. But surely, some will contend, automatic dialing disemployed a great number of switchboard operators. The fact?

There are nearly 50 per cent more operators today than in 1940. Why? Because automatic dialin~ 34 THE FREEMAN August made possible so much more use of the telephone than before. If the present volume of conversa tions had to be connected manu ally, at least 1,000,000 switchboard operators would be required. Of course, this is a fictitious "if." The manual operation would be so inefficient relative to automatic dialing that the volume would re quire no such number. If automation caused unemploy ment, then it would follow that an addition to the work force of any mechanical energy equivalent to one man's energy - one robot would disemploy one man. How ever, this is contrary to observed fact. Today in the U.S.A., each worker has perhaps 135 mechani cal slaves - helpers or robots working for him, each contribut ing energy equivalent to. the energy of one human worker. 1 If each robot displaced one worker, the unemployment figure would be 1 The figure of 135 mechanical slaves per worker is believed to be conservative, though there are too many variables to afford proof positive. The electrical in dustry estimates that 67 KWH's is equiv alent to the energy of a man working an 8-hour shift for a year. More than a trillion KWH's were generated in 1965, which would mean nearly 200 electrical robots for each person in the work force, assuming that there were no energy losses in transmission and use. Some ma chines convert energy more efficiently than others; some humans are more en ergetic than others; so the figure is a guess, at best.

135 times the present work force - 10,800,000,000 - an utter ab surdity. If these robots do not displace workers, then where does all this extra energy gO? Should we dis cover the right answer, we will know whether they are the work ers' friends or foes and, as well, whether we should try to encour age or discourage their prolifera tion. Let's try to find the answer. In Grandfather's Day My grandfather, recalling the 1850's, used to repeat, "Many times have I walked thirty miles in a day." His boast recently came to mind as I flew from New York City to Kansas City (1,100 miles) in two hours. It would have taken grandfather about 280 hours of walking to negotiate that distance. He would have been on his way to Kansas City for thirty seven days. Only 365 round trips would have taken every day of his long life. Grandfather, in his early days, had only his own energy at his disposal-just one manpower.

Now assume that he had walked to Kansas City, taking 280. hours. I made it in two hours by jet. Isn't it clear that something has to ac count for that 278 hours miracu lously, one might say, put at my disposal? What made this possi ble? It was, among other factors, 1966 SOME REFLECTIONS ON ROBOTS 35 the billions upon billions of robot days that assisted in the construc tion and the operation of that jet 12 But these robots did more than give me 278 hours unavailable to grandfather. There were 100 pas sengers on that flight, a freeing for other use of 27,800 hours. Further, that very same jet may be good for 25,000 such flights or a total freeing of 695,000,000 hours. And that jet is only one of hundreds of commercial jets. Add all the commercial prop jobs and all the private planes, and the liberated hours become astronomi cal. Anyway, that's where some of the robots' energy went, without putting anyone out of work.

The Chance fo Grow We must, of course, keep in mind that the energy of robots going into airplanes is but some very small fraction of all auto mated energy. But the statistics do not matter; what is important is that we understand what these robots do for us and, also, to us. For one thing, they multiply our 2 I must not leave the impression that added mechanical energy alone accounts for all material progress. There is gain, for instance, in every voluntary ex change. An idea, a flash of insight, an improved concept of freedom, the aban donment of a coercive practice, an in centive, a spirit of entrepreneurship, the practice of integrity, in short, .spiritual activities, add incalculably to material as well as to other forms of progress. opportunities for unique, enrich ing experiences. When taking the family for a drive at 60 miles per hour, speculate on why the trip is possible and what is propelling you at this speed! Think of the situation were only shank's mare available. Or why you can read a book instead of washing the dishes, or write a poem instead of foraging for food. You will, per haps, stand in awe of and give some credit to the robots for re lieving you of the necessity of sloshing around in the rice pad dies or scrounging for rabbits so you won't starve or, yes, from making buggy whips.

Or even more: perhaps these robots have something to do with your very existence. Less than 400 years ago this land we call the U.S.A. had a population variously estimated at 250,000 to 1,000,000. Why so small? It was not because of the Indians' inability to breed, nor because of unfriendly climate or infertile soils, nor for any lack of natural resources. It was be cause a foraging economy would not support more than then ex isted. Assuming no improvement over that type of economy - no robots except some horses - the chances are at least 200 to 1 that you would never have known adult life. But back to grandfather: he never saw Kansas City; indeed, 36 THE FREEMAN August through his teen years, he never went beyond his walking orbit. I, on the other hand, have visited Hong Kong, as far from home as I can get; my air mileage alone is now equal to eighty loops around the world. Grandfather didn't have time enough to do very many things. I have the time to do a thousand times as many things, and by reason of your and my me chanical helpers, the robots. This, of course, explains why timesav ers multiply busy-ness - there are so many more things we can do.

For good or ill, we are far busier than our ancestors ever were. Grandfather never talked over a telephone in his life. I reach my son - 2,600 miles away - in 10 sec onds ; I have talked across the Pacific, to Buenos Aires, Gander, London, Mexico, and to every nook and cranny of the U.S.A. If the robots have disemployedme, it is from the limited opportunities grandfather experienced. There is a better way to put it: the robots have liberated, not disemployed, humans. Robots Are a Response Robots put people out of work? On the contrary, robots become economically feasible and appear in our lives only as the result of a scarcity of human labor to accom plish all the tasks we want done. It doesn't pay to do by machine what can be done more cheaply by hand. Businessmen tend to mech anize or automate after, rather than before, laborers have moved away from a particular job. For example, our operation at FEE calls for three large mailings every two months, requiring 20 workers for two days on each oc casion. When we began two dec ades ago, we trained local house wives for this part-time work and paid the hourly minimum wage of 80 cents. Afterward, the minimum was raised to $1.00 and later to $1.25. Now assume that FEE was on the brink of bankruptcy, that is, at that critical point where a few hundred dollars would tip the scales toward institutional sur vival or closing, and that the latest minimum wage raised our costs to that point. What to do?

We bought some robots in the form of a machine: press a button and it automatically collates, stuffs, seals, and stamps, doing the work of the women, quicker and at lower cost. True, the part time women lost their "pin money" jobs but the rest of us were saved from losing ours. Most people will say that the robots disemployed the women, a grave error. The culprit was none other than the minimum wage law - governmental interference with the free market. It was bad law that sent our women back to 1966 SOME REFLECTIONS ON ROBOTS 37 housework. As these costs of gov ernmental intervention rise year after year, more and more em ployers are faced with failure. The robots have performed a remark able and incalculable rescue mis sion. Men to Match Machines There isn't anything wrong with automation per see The seri ous problems cropping up are not because of the robots but because of the people who are blessed with them. These problems, as. near as I can fathom them, have their origin in an imbalance .between technological know-how and econ omic, political, and moral wisdom.

The former is remindful of an ex plosion; the decline of the latter amounts to apostasy. This is dan gerous, for an increase in the robots we command calls for a commensurate increase in under standing and virtue. It isn't at all promising to put a chimp at the wheel of a truck, a truck driver at the controls of a jet, or a people in command of a powerful system of robots the interworkings of which they but dimly understand. If we aren't to be done in by our own creations, what then is it we must understand? The kind of automation that proliferates opportunities as to varieties of employment and, at the same time, multiplies the kinds of goods and services that may be obtained in exchange for the fruits of one's labor, is exclu sivelya free market phenomenon.3 Such automation cannot, as is so often demonstrated, be trans planted into or copied by authori tarian societies. Robots that serve the masses are first the outcrop pings of freedom and then of capi tal formation, and cannot exist where these two absolute essen tials are absent. For instance, steel mills have been built in Rus sia, India, and other socialist countries, the effect on the masses of people being further impover ishment. Automobiles are not be ing produced for the masses in Russia; only the Commissars can have them. And so it goes. The point of all this is that if we sub stitute the governmentally planned economy for the free market, the mass-serving robots will tend to disappear until they become as scarce and useless here as they are in the USSR! This is only 3 I am omitting any discussion of the robotry that does not originate with free market processes, the kind that can be and is made possible by the coercive col lection of funds, the type used to make sputniks and to put men on the moon.

Robots originating with socialist proc esses impoverish rather than enrich the masses of people. For an explanation, see the chapter, "How Socialism Harms the Economy" in my Anything That'8 Peaceful (Irvington, N. Y.: The Foun dation for Economic Education, Inc., 1964).

38 THE FREEMAN August a part of the understanding that must accompany our increase in technological know-how. There is much more. Specialists Are Dependent As only casual observation re veals, automation spells specializa tion - in our own case, to a fan tastic degree. This, in turn, in creases interdependence. Is it not self-evident that all of us - no ex ceptions - are dependent on the free, uninhibited exchanges of our numerous specializations?4 In short, we are at a level in inter dependence that can only be sus tained by a highly intelligent, per ceptive, and moral people. For support of this contention, reflect on what's involved. These exchanges, it is plain, are essential to survival. Nor can they, in a specialized society, be achieved by barter; they cannot take place without an economic circulatory system, that is, the medium of exchange - money. And 4 Automation makes for specialization which, in turn, increases our interdepend ence on the high quality behavior of each other. But a new and awesome depend ence also develops: our dependence on the robots! They become necessities, that is, sources of energy we must have in order to survive. Example: man-contrived electrical energy. A century ago its elimi nation would have had no perceptible effect. Were it suddenly eliminated today all of us, except the few who could exist by foraging, would perish. See "These Our Gifts," THE FREEMAN, October 1958.

any act, private or public, which lessens the integrity of the circu latory medium correspondingly imperils the complex exchange processes. Inflation, brought on entirely by governmental excesses, and encouraged by a people who do not understand the simple econ omics of the matter, is the culprit tha t .erodes the integrity of the medium. Thus, a people who ex travagantly automate and who do not at the same time know more about, and practice with increas ing scrupulosity, the economic and moral facts of life are headed for a disaster greater than inflation has ever brought on in other countries. 5 To fully appreciate this danger, one need but recognize how far each American is re moved from self-subsistence, or to recognize how impossible survival would be were each individual to exist only on what he alone pro duces. For reasons not easy to explain, understanding appears to be decreasing as robots are in creasing.

One can hardly imag~ne a so cietal situation more chaotic than one with specialization on the in crease as freedom in transactions 5 Students of liberty will find it profit able to read and reread Andrew Dickson White's classic, Fiat Money Inflation in France (Irvington, N. Y.: Foundation for Economic Education, Inc., $1.25 pa per, $2.00 cloth, 125 pp.).

1966 SOME REFLECTIONS ON ROBOTS 39 is on the wane. As robots increase and augment our specialization, so must there be an increase in free and willing exchange, freedom of choice, the free market. As robots appear, coercion - governmental control and rigging of the market, for instance - must correspond ingly disappear. Simple reasoning as well as all the evidence attest to this fact. Yet, an alarming number of people - teachers, clergy, politicians, even entrepre neurs - are blind to it. Can Progress Occur in the Absence of Obstacles? I have suggested that it isn't easy to explain why understand ing seems to shrink as automation expands. Is there, perhaps, a cor relation between struggle and sound thinking and, conversely, between easy affluence and intel lectual~""tdecadence ? Of one thing we are certain: our robots confer more and more material satisfac tions with less and less effort on our part.

The present trend is toward in creasing material affluence in re turn for decreasing effort. Liter ally millions of individuals are ap proaching a something-for-noth ing way of life. Obviously, it is difficult to keep mentally rigorous when the robots are doing one's work. Indeed, mental rigor may be impossible unless the individual experiences a cultural growth commensurate with growth in af fluence. This is to say that the in dividual may vegetate unless he realizes that the purpose of wealth is to release him from drudgery so that he may more vigorously pursue those potentialities and ap titudes uniquely his own. If the robots are to induce our getting out of life - vegetating - rather than getting ever deeper into life - growing - then the late Dean Inge's observation is indeed pro phetic, "Nothing fails like suc cess." The struggle to overcome is the genesis of becoming. It is the law of polarity, the tension of the op posites, that spells growth, devel opment, progress; at least this ap pears to be Nature's dictum. Men need new frontiers to explore and occupy and· transcend, not in the form of politically contrived ob stacles - heaven forbid! - but in the form of challenges worthy of the mind of the individual human being striving toward his poten tial. When the struggle for exist ence is eased, higher level strug gles must be substituted: expand ing awareness, perception, con sciousness, in a word, difficult, hard-to-overcome intellectu aI, moral, and spiritual goals. This is by way of saying that disaster cannot be avoided unless a growth in wisdom be up to and on a 40 THE FREEMAN August parity with a growth in techno logical know-how.

Elevating Our Ideals But here is the rub: material hardship, once overcome, does not and cannot serve as the obstacle, the tension, the springboard for this required growth in wisdom, this flexing and expansion of the intellectual and spiritual faculties. Material hardship is an obstacle supplied by Nature or, if you pre fer, by the environment. But once overcome, man is on his own; he has to make his own obstacles in the form of rationally con structed goals. As the French sci entist, Lecomte du NOllY, phrased it, "To re.ally participate in the divine task, man must place his ideals as high as possible, out of reach if necessary." And is not this creating of our own obstacles, perhaps, the profound lesson we should learn from the rohot ex plosion? The rohots presuppose our knowing how to live with them. They, as an auto, TNT, sulphuric acid, a jet plane, are dangerous in the hands of those who do not know their properties, of those who are unaware of automation's deeply significant meaning. The rohot army, in its present dimen sions, requires, at a minimum, an understanding of private property, free market, limited government principles - economic and political enlightenment - far superior to any such understa.nding ever achieved up to this period in his tory. ~ Labor Saver WHEN A MACHINE is invented that does the work of twenty men at the wage cost of one, we are all beneficiaries. When a merchan dising plan is invented that clips 5 per cent from the cost of dis tribution, every consumer is a little better off. When electronics brings first-class entertainment and instruction into our homes at negligible expense, we all live a little more abundantly.

We make progress in two ways: first, by individual effort, and second, by the efforts of others. In the last thirty years the dullest and least enterprising among us have been lifted to a standard of living and comfort that could not be achieved by any, except a very few, two hundred years ago. WILLIAM FEATHER, The William Feather Magazine, January 1966 The recent Finance Bill of lUr• .James Callaghan, Britain's Chancellor of the Exchequer, is perhaps the most dangerous of a long and continued series of assaults upon the free enterprise system in that nAtion. The fact that freedom is· similarly threatened in the United States and elsewhere gives universAl importance to the alarm sounded from London by the Institute of Directors representing more tho" 40,000 British businessmen. TDEASSAIJLT ON FREE ENTERPRISE BRITAIN LIVES by free enterprise. It is the whole basis of our way of life. Even those who openly abuse and deride free enterprise admit that four-fifths of the nation's business should stay outside the net of nationalisation.

Now there are ominous signs of the free enterprise system being eaten away without the country's citizens being .aware of it. Indeed the most alarming thing about the latest and most dangerous assault on free enterprise is that so many people are not· really alarmed. They seem not to have noticed the cracks in the ice, the plume of smoke from the volcano, the shift ing of the landslide; or if they have seen it, they dismiss what's happening as something remote. "It doesn't affect me personally, so why should I worry?" By the time you have finished reading this booklet, we believe that we will have shown how it does affect everyone personally, why it's not just the concern of the nation's businessmen, but is in truth everyone's business. Mr. Callaghan's Finance Bill is the sharpest and most open warn42 THE FREEMAN August ing yet. It will cut deep and has shocked a lot of people, ordinary people who saw themselves a mile away from this sort of issue. But, make no mistake: the subtle proc ess had already been going on for some time before Mr. Callaghan got to his feeton Budget Day. He made no secret of the fac't that his measures were not a "once for all'"

burst of radicalism. Far from it. They are meant as the first in a long ,series of anti-business restric tions. Capital,says the Chancellor in effect, is the enemy. Let us beat it to its knees. And in doing just that,he cuts off industry's raw material. For without capital, the free enterprise system must wither. The wall is breached. The State walks in. An assault on capital is an as sault on the means whereby busi nesses grow. It is an assault on the reasons why businesses grow. The assault on capital takes shape for all to see if they have a mind to do so. Look at the facts. Hard to Raise Capital The government makes it in creasingly tough for the business man to get new capital. It's not only practically difficult. It's al most socially indecent. Savage and steeply progressi ve tax rates on individuals and on companies-and a political bias which favours the spenders rather than the savers - make it impossible to build up reserves. Robbed of reserves, the market dies. The businessman may recall from his school days the task of Sisyphus, one of the Titans who was condemned to roll up a hill a stone of ever-increas ing weight; the businessman has this dubious advantage over Si syphus-he knows he can't win.

But the assault doesn't stop there. It's almost as difficult today to keep capital in a business as it is to ac'cumulate it. Compared with the new Capital Gains Tax, death duties were a mild imposition, a feather touch compared with a full-blooded lash. The Capital Gains Tax makes no allowance for inflation. It is thus a recurrent capital levy, that once-for-all tax Sir Stafford Cripps, the spiritual forebear of Mr. Callaghan, im posed in 1948. Of course, it will mean the end of the small busi ness during the owner's working lifetime. (When Mr. Heath made this point in the Commons debate on the Finance Bill a voice from the Labour benches called, "And a very good thing, too.") What is the ultimate source of new capital? The answer is-prof its. And now, deliberately, profits are being buffeted from every di recti on: by taxes piled on taxes, by compulsory contributions, by forced levies, by any amount of 1966 THE ASSAULT ON FREE ENTERPRISE 43 cost increases coming directly from government decision. Knock the profits, and you knock the system by which they are made.

It's all very simple. Investors, too, find themselves in the front line. The government institutes a vindictive tax policy "unearned income" is an attrac tive catchword for those with neither the wits nor the thrift to acquire it. This shrinks the pos sible return on the investment stake and has now dimmed even the hope of capital gains. Inves tors are rebuffed no less by the Corporation Tax whose clear pur pose is to cripple their chances of a share in profits. How Long? What's the total of this dismal arithmetic? At every stage suc cess is penalised, ambitif)'fl,curbed, and enterprise stillborn. The re markable thing is that business activity and investment should, so far, have withstood this brutal as sault as well as they have. But there is a limit to the punishment they can take. From now on, the effects will increasingly be felt. New businesses, new investment, new enterprises will dwindle.

They must. For the seed-corn is being eaten. Does all this matter ? Well, of course it matters to the business community. But in fact, it matters very much to all those who abhor the prospect of an omnipotent state, all those who want to live their own lives. Let's get the record straight here-it's unlikely that anyone else will. What we call the free enter prise system is not just another economic theory, an "ism" in the same breath as Marxism or so cialism: it is freedom. Without economic freedom, without the freedom to save and spend, to ac cumulate and invest and inherit, without the freedom to mis-spend (for we need no-one to tell us whether we are spending our own money wisely or not), personal freedom disappears. Destroy free enterprise and we will forfeit tlhe right to make up our oum minds: the final sacrifice. If nobody has any capital, if no body can launch an enterprise wit,hout the state's approval, then the rape of free enterprise is com plete. This means the death war rant for any man with the enter prise and guts to start his own business.

No businessman is stupid enough to believe that in a period of rapid technological change and huge capital requirements there aren't problems to be solved: big problems, social and structural. They demand consideration. They can be solved. But the last people to solve them are governments 44 THE FREEMAN August and their economic advisers who either because they just don't un derstand the problems, or are swayed by political doctrines, are out to sabotage the whole system. That's the situation. It's ex tremely dangerous. If the social ists have their way, Britain will get less and less investment, less and less accumulation of capital, fewer rewards for efficiency, a rapidly dwindling number of pione,ers and merchant adventur ers. There'll be no more Nuffields. Least of all can the business com munity afford to ignore what is happening or dismiss it as "mere politics." But the peril goes deep er - it strikes at us all. The peril, make no m,istake about it, threatens our way of life, it threatens our future prosperity, it threatens our freedom - yours and mine. ~ The Misfortunes of Intervention ALL THE MISFORTUNES that our beautiful France has been experi encing have to be ascribed to "ideology," to that cloudy meta physics which goes ingeniously seeking first causes and would ground legislation of the peoples upon them instead of adapting laws to what we know of the human heart and the lessons of history. Such errors could only lead to a regime of men of blood and have in fact done so. Who cajoled the people by thrusting upon it a sov ereignty it was unable to exercise? Who destroyed the sacredness of the laws and respect for the laws by basing them not on the sacred principles of justice, on the nature of things and the nature of civil justice, but simply on the will of an assembly made up of individuals who are strangers to any knowledge of law, whether civil, administrative, political, or military? When a man is called upon to reorganize a state, he must follow principles that are forever in conflict. The advantages and disadvantages of the dif ferent systems of legislation have to be sought in history.

From Napoleon's reply to the Council of State at its session of December 20, 1812.

23. The Flight from the Constitution PART I CLARENCE B. CARSON THE CONSTITUTION of the United States was the major obstacle to the use of the government to re construct American society. Social reconstruction by government,. if it could be done, would require the concentration of power in·a single government, the central direction of the exercise of that power, and a concerted effort over an extended period of time. The latter would be a requirement if it were to be done gradually, and it should be clear that this was the method generally approved by American reformers. Ushering in utopia by government action would require not only an initial control over the lives of Americans but also a con tinuing control such as to make Dr. Carson is Professor of American History at Grove City College, Pennsylvania. Among his earlier writings in THE FREEMAN were his series on The Fateful Turn and The Ameri can Tradition, both of which are now avail able as books.

continuing popular decisions im practical, undesirable, and disrup tive of the whole course of devel opment. The Constitution was carefully drawn so as to make such uses of the government which it author ized exceedingly difficult, if not im possible. The Founders did not have in mind preventing melior ism (or socialism), of course, for they had never heard of it, though they· were familiar with mercan tilistic approaches to amelioration. They were concerned with protect ing the liberty of individuals and preventing the government from becoming tyrannical. Any provi sions that tend to accomplish this object will, at the same time, place obstacles in the way of using the government for social reconstruc tion. Tyranny is made possible by concentrated and unchecked pow45 46 THE FREEMAN August er, by the very conditions which are necessary for social recon struction. Beware of Factions The Founders were not familiar with meliorism but they were ac quainted with factions, interest groups, and parties. They were aware, by way of history, of the damage done to republics, to popu lar governments, and to liberty by men joined together in factions and using political power to achieve their aims. In short, they were conscious of the dangers of faction and party. James Madison provided an acute analysis of the sources and dangers of factions in the Federalist number 10. He first defined the term: By a faction I understand a num ber of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens, or to the perma nent and aggregate interests of the community.1 He explained that this tendency of men to group as factions arises from human fallibility and liberty.

The partiality of men's vision coupled with self-love inclines 1 James Madison, Alexander Hamil ton, and John Jay,The Federalist Papers (New Rochelle, N. Y.: Arlington House), p.78. them to pursue what they think is for their own well-being, though it be at the expense of others. The latent causes of faction are thus sown in the nature of man; and we see them everywhere brought into different degrees of activity, ac cording to the different circumstances of civil society. . . . So strong is this propensity of mankind to fall into mutual animosities that where no substantial occasion presents it self the most frivolous and fanciful distinctions have been sufficient to kindle their unfriendly passions and excite their most violent conflicts .... Those who hold and those who are without property have ever formed distinct interests in society. Those who are creditors, and those who are debtors, fall under a like discrimina tion. A landed interest, a manufac turing interest, a mercantile interest, a moneyed interest, with many lesser interests, grow up of necessity in civilized nations .... 2 The main purpose of Madison's essay was to refute those who held that a confederated (or federal) republic was inappropriate as a form of government for America, since the population was dispersed over a vast area. On the contrary, he held, this was the most propi tious situation for such a govern ment. Factions had destroyed small republics in the course of history. Pure (or direct) democ2 Ibid., p. 79.

1966 THE FLIGHT FROM THE CONSTITUTION, I 47 racy had given too great an op portunity for. the majority to tyr annize over .the minority, whereas in America, the indirectness of representation and the dispersion of the population would make it most difficult for factions to use the government for partisan pur poses. Pressure Groups Discouraged Indeed, the United States Con stitution did place formidable ob stacles in the way of any interest group which wanted to use gov ernment for its ends. Not only is the population dispersed over a country of broad extent but also any potential faction or interest group may be expected to be spread throughout the country. The manner of election of repre sentatives established by the orig inal Constitution made it difficult for any faction to bring its weight to bear in concert upon the gov ernment. Only one body of the Federal government - the House of Representatives - was origin ally chosen directly by the elec torate. Provisions were made for Representatives to be selected by voters within states, usually by districts. The electors of the Sen ate came from within even smaller districts, for the Senate was to be chosen by state legislatures. The electors of the President were chosen by states, and could be selected by whatever electorate the states might decide upon.

The difficulties of factions were compounded by dispersing the powers of government between the general (Federal) government and states, and by separating the Federal government into three branches. For action to be taken by the Federal government both houses of the Congress must act by majorities, the President give his assent, and the courts enforce it. If any bill fails to get a ma jority in either house, it does not become a law. That is to say, either house may prevent legisla tion from being passed. If the President vetoes a measure, it has to be passed by two-thirds of those present and voting of both houses. If the courts will not en force an act, it is of no effect at law. In short, it takes the concur rence of both houses of Congress and to considerable degree all branches of government for gov ernment to act, but it requires only one house to prevent legisla tion and any branch of govern ment has considerable power to forestall it.

Constitutional Curbs The Constitution limits the gov ernment both substantively and in the procedures it requires for changing it. The powers which the Federal government may ex48 THE FREEMAN August ercise are specifically granted in the Constitution. It is prohibited to exercise certain powers, i. e., the passing of ex post facto laws, the restriction of free speech, the taking of property without just compensation, and so forth. All powers not granted to the Federal government by the Constitution are reserved to the states or to' the people. To make the limitation upon the government as plain as possible, the Ninth Amendment says, "The enumeration in the Constitution of certain rights shall not be construed to deny or dis parage others retained by the peo ple." The Tenth Amendment says, "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respec tively, or to the people." Moreover, the procedures prescribed for amendment are such as to require overwhelming approval throughout the country for changes to be made in the basic instrument of government. The ordinary route of amendment is for both houses of Congress to pass a proposed change by majorities of two-thirds or more. The measure is then sub mitted to state legislatures, or conventions within states. When three-fourths of the states indi cate their approval, the measure becomes a part of the Constitu tion.

Protection, the Objective The purpose of these complex checks upon the Federal govern ment (along generally, with sim ilar checks upon state govern ments) should be abundantly clear. They were aimed to prevent the use of the government by fac tion or party for the special ends of interest groups, to protect mi norities from abuse by majorities, to keep government action to that which would be in the general in terest, and to assure that such action as was taken would have behind it a broad consensus. To make this emphatic, the original Constitution requires that all taxes, duties, imposts, and excises be levied "for the common defense and general welfare of the United States. . . ." In short, moneys should only be appropriated for the well-being of everyone. These provisions were, of course, only writings on pieces of paper in 1789. They had no force of their own, no power to make anyone adhere to them, no inher ent strength to make anyone ob serve them. They might have be come dead letters in short order, as so many constitutions have in later times. Instead, they were given vitality and life by men who found in their attachment to the Constitution means of achiev ing goals which they sought and retaining the fruits of victories 1966 THE FLIGHT FROM THE CONSTITUTION, I 49 they had won. For those who sought to forge a Union from distinct and disparate states, the Constitution offered them their best hope. For those who valued protection from an overweening and arbitrary government, the Constitution was their shelter.

Nor were these disparate ends; union and liberty were reconciled for many men by the Constitution. The Constitution was the primal contract of the American peoples - the union of peoples by states established by it, the powers of the general government stemming from it, the protections against arbitrary government provided in it. The Constitution did more than this: it provided a symbol and source of continuity to a people who had dispensed with monar chy, who had cast off the heredi tary means of continuity, who sought government by law not by men. At the hands of great jurists - John Marshall, Roger Taney, and others - it became the funda mental law by which all other law must be tested, the body of law to which all must submit when they operated within its jurisdiction. It was no longer a mere piece of paper; it was that to which judges deferred when they applied the law, that to which Congress and the President looked for authority, that in terms of which the power of government could be brought to bear upon individuals.

The point is this. The Constitu tion provided diverse modes of election for those who should hold office under it, separated powers within the government, limited the powers to certain specified objects, and provided protections for the rights of individuals. It provided protections for minorities and made it most difficult for factions to gain control of the government. These provisions gained great force by the sanctity men came to attach to the Constitution. The words became flesh, as it were, as courts deferred to them, as legis lators heeded them, as executives based their actions upon them. Coalitions Formed Yet, for a good many years now, the government of these United States has been embarked on a program of social transformation on and off, but more and more. The assent to these efforts at social re construction has been obtained mainly by appeals to factions and interest groups. The art of politics has become largely the art of achieving majorities by gaining support from a sufficient number of factions. The reverse of what Madison predicted has occurred; he held that the mode of election of representatives and of the exercise of power would make it extremely 50 THE FREEMAN August difficult, if not impossible, for the government to fall into the hands of factions. The electorate was so dispersed that factions would be prevented from bringing their weight to bear as a unit upon the government. Instead, the country is today divided into factions and interest groups which wield great influence upon the government and promote the concentration of pow er in government. This concentrat ed power is then used in programs of experimentation at social recon struction.

There has been a flight from the Constitution. It has not been by constitutional amendment, though one or two amendments have fa cilitated the flight; for there are constitutional means for amending the Constitution. In any case, the Constitution has been IittIechanged from the original, with one excep tion, in regard to the selection of representatives. The flight from the Constitution has been accom plished without altering the verbal content of the document generally: it has been done by extraconstitu tional developments, by interpreta tion, by the assumption of powers not granted, by the gaining of pow ers by one branch at the expense of another, and by allowing some safeguards to atrophy or be al tered. Some early extraconstitutional developments set the stage for the flight from the Constitution, though in themselves they may have been innocent enough. The Constitution provides that the President shall be chosen by an electoral college. Each state has as many electors as it has Senators and Representatives in the Con gress. They are chosen in the man ner directed by state legislatures.

The assumption was that electors would be chosen because of their eminence within their states and that they would select a President without reference to anything other than their own choice. The original Constitution provided that each elector should vote for two persons. The person receiving the highest number of these votes, pro vided it constituted a majority, would become President; the one recei ving the next highest would be Vice-President. In case no can didate got a majority, the election would revert to the House of Rep resentatives, where each state would have one vote. Initially, state legislatures often chose elec tors. Party Politics One extraconstitutional devel opment was the growth of political parties. Some of the early leaders, notably George Washington, hoped that political parties would not de velop in America. It was a vain hope. The outlines of parties be1966 THE FLIGHT FROM THE CONSTITUTION, I 51 gan to form over the very question of the ratification of the Constitu tion. Within a few years they had taken definite· shape under the leadership of Alexander Hamilton and Thomas Jefferson. The Con stitution has no reference to such organizations; they are given no role to play. But Alexander· Hamil ton was a man with a vision, a vi sion of a unified people in a nation made great by the vitality and ex tent of its commerce and manu facturing. He proposed to attain these objects by an energetic use of the Federal government. J effer son welded together a party to op pose much of this governmental activity and intervention, and in defense of a strict construction of the Constitution. By 1800, political parties had assumed much of the extraconstitutional role they have.

continued to play in our history. It has been a fateful role, for it enables factions to determine pol icy, insofar as political parties de termine policy, across the lines of electoral districts. Parties early gained sway in the electoral college, i. e., electors were chosen on a party basis. But the constitutional mode for the voting of electors tended to thwart this. If all of a party's electors voted for the same men for Presi dent and Vice-President, there would be a tie between these two men, and the election would revert to the House of Representatives. Indeed, this happened in 1800 and might have been expected to hap pen regularly thereafter. Instead, the Twelfth Amendment was rati fied in 1804; it provided that each elector should have one vote for President and one vote for Vice President. Thus, the way was pre pared for party determination of candidates and for electors to be come mere figureheads for their parties.

Additionally, states decided for a whole slate of electors. When, as happened shortly, the electors were popularly chosen, all the votes of a state were cast for the party's electors receiving a majority of the votes of the citizenry. Most of the electors might have been chosen in congressional districts, the remaining two in state-wide elections, thus dispersing the vote. This was not done. By having all of them chosen by a state-wide majority the way was opened to the forging of majorities by ap peal to state-wide factions or in terest groups. Political parties provided the instrument for fac tional use at the national level. Early Abuses Insignificant It would be a mistake, however, to make much of these early de velopments. They provided a po tentiality for the factional use of government and for the concen52 THE FREEMAN August tration of power. The Federal gov ernment was used for interest groups in the nineteenth century on occasion, most notably in the case of the protective tariff. But there were still many obstacles to concerted party efforts to carry out programs. Most of these de velopments had to do with the choice of a President. Members of Congress were still chosen in the way originally prescribed.

Nominally, congressmen adopted some party label, but there were few effective devices for enforcing party discipline. A congressman could vote for a program advanced by his party or not, as he chose, and only those within his district could discipline him. Even if one who had voted against most of the planks of his party's platform should be defeated in his district, it would be by no means clear that his failure to serve as a party man had led to his defeat. The Presi dent had little authority over con gressmen; the Founders had tried, with considerable success, to make it so. Each branch was to be inde pendent of the others. Moreover, the Constitution, as it was ob served, placed great substantive limits upon what could be done by government, in any case. Many other changes had to be made be fore the government could be used for a sustained effort at social transformation. Reform by Amendment Three other constitutional amendments deserve mention. The Fourteenth Amendment, declared ratified in 1868, made all those born within the United States cit izens of the United States. Also, it extended in other ways the au thority of the Federal government.

It prohibited the states to take life, liberty, or property without due process of law. Moreover, the amendment was rather vaguely worded, and this ambiguity has been exploited and amplified by the Supreme Court as it has used it as a basis for the extension of the sway of the general govern ment. The Sixteenth Amendment, which authorizes direct taxes without reference to population, enabled the Federal government to enact an income tax, thus greatly increasing the revenue available to it. But for the empowerment of factions, the Seventeenth Amend ment was probably the most im portant of all. It was ratified in 1913, in the same year as the Six teenth, and it provided for the di rect election of Senators. There after, Senators were to be elected by state-wide popular votes. Fac tions and interest groups could play roles in these elections now that had formerly been denied to them. A pivotal minority could provide the necessary votes for a 1966 THE FLIGHT FROM THE CONSTITUTION, I 53 majority. An interest group with large numbers in it could virtually dictate the choice of a party candi date in an election. This result has been most noticeable in states which have several important minority groups, such as organ ized labor and racial minorities.

IIlndependent ll Agencies Most of the changes and ac cretions of power, however, have been accomplished without benefit of constitutional amendment. One of the most effective devices for evading the constitutional separa tion of powers and enabling the Federal government to exercise greatly expanded powers has been the so-ealled independent commis sion, e. g., the Interstate Com merce Commission, National Labor Relations Board, and Federal Com munications Commission. Since these organizations will be treated in greater detail elsewhere, they need only be alluded to here. They have played a very impor tant role in the attempts at social transformation, however. The in tricate regulation which reform ers have sought could hardly be encompassed in general legisla tion.The separation of powers made it very difficult to take ac tion. The executive branch might apply legislation in ways not con templated; the courts could, as they did frequently for many years, nullify the action as a viola tion of due process, or some other constitutional protection. The in dependent commissions, however, frequently combined all these functions -legislative, executive, and judicial. Though their powers derive' from Congress, they are nonetheless real.

The change in the role of the President, particularly as regards legislation, too, has been done without formal constitutional al teration. The President's formal legislative powers are mainly neg ative. He may veto bills that come before him. Except in foreign affairs, this is the extent of the grant of powers over legislation to him. (He is, of course, charged with faithfully executing the laws.) Strong Presidents in the nineteenth century were frequent ly men distinguished for their vetoes. Andrew Jackson and Grover Cleveland come readily to mind. But by the early twentieth cen tury, as some Presidents bee,ame enthusiastic about meliorism, they began to perceive possibilities for the chief executive to take over much more of the leadership and initiative in legislation. Theodore Roosevelt showed the way to such leadership, but it was Woodrow Wilson who formulated the theory of presidential predominance in the government.

In his early writings,Wilson 54 THE FREEMAN AugU8t indicated his regret that the Pres ident was "merely an administra tor." On one occasion, he wrote: If you would have the present er ror of our system in a word, it is this, that Congress is the motive power in the government and yet has in it nowhere any representative of the nation as a whole. Our Execu tive, on the other hand, is national: at any rate may be made so, and yet has no longer any place of guid ance in our system. It represents no constituency, but the whole people, and yet, though it alone is national, it has no originative voice in do mestic national policy.s By the early twentieth century, Wilson had seen the way to change this situation. Since the President is the leader of his party, he may become the leader of. the nation, or at least he . . . has it in his choice to be. . . . His is the only national voice in affairs. Let him once win the ad miration and confidence of the coun try, and no other single force can withstand him, no combination of forces will easily overpower him ....

If he rightly interpret the national thought and boldly insist upon it, he is irresistible; and the country never feels the zest of action so much as 3 Quoted in A. J. Wann, "The Devel opment of Woodrow Wilson's Theory of the Presidency: Continuity and Change," The Philosophy and Policies of Wood row Wilson, Earl Latham, ed. (Chicago: University of Chicago Press, 1958), p. 58. when its President is of such insight and calibre. Its instinct is for unified action, and it craves a single leader. 4 Some of the devices by which the President's powers were ex panded were inherent in the office, or so the proponents of presiden tial power have argued. The Pres ident is charged by the Constitu tion with notifying each Congress of the State of the Union. He is also authorized to recommend to them "such Measures as he shall judge necessary and expedient .... " He is commander-in-chief of the armed forces. He can make trea ties, by and with the advice and consent of the Senate. His· role in foreign affairs is, by the nature of these provisions, an eminent one.

Wilson noted that when foreign affairs are foremost in national concern, the President's stature is apt to increase and his role ex pand. As commander-in-chief, the President is in a position of lead ership in making war. foreign Entanglement It is worth noting that the same Presidents who have been most determinedly devoted to melioris tic reform have also been those who have gotten us most deeply embroiled in foreign affairs which usually led to war, that is, Presi deI!ts Theodore Roosevelt, Wood row Wilson, Franklin Roosevelt, 4 Quoted in ibid., p. 61.

1966 THE FLIGHT FROM THE CONSTITUTION, I 55 Harry Truman, John Kennedy, and Lyndon Johnson. Nor is the con nection entirely accidental. Em broilment in foreign affairs not only increases the role of the President in decision-making but it is more than likely to involve the United States in such wars as occur. Moreover, twentieth cen tury wars have been leading occa sions for the introduction of re formist innovations, regulations, and restrictions, and these can, and have been, blamed upon the exigencies of war. This is not to say that Presi dents have involved the United States in war in order to advance reform programs. If such a thing had occurred, it would probably be forever beyond the reach of his torical proof. 5 Since we lack such proof, the matter can be suffi ciently explained in this way. Presidents with a penchant for intervention can most readily ex ercise it in foreign affairs, for the bulk of their interventionist powers lie in that realm. Inter vention is likely to lead to war.

Once the country is involved in 5 Witness, for example, the spate of books during and after World War II attempting to prove that Roosevelt de liberately provoked the attack on Pearl Harbor. Yet, they prove only that he might have done so, that the policies he followed did little to inhibit a sneak at tack. The chances are good that nothing more than this will ever be proved, for hidden motives are involved. war, the President can use it as an occasion and opportunity for domestic intervention. The pen chant to intervene, which is prob ably rooted in human nature in the will to power, is, of course, nurtured and provided with in tellectualist justifications in me liorist ideologies. The President as Lawmaker The President's powers have been increased in a number of other ways. The incidental au thorization in the Constitution for the President to recommend measures to Congress has served as a base for Presidents to take the initiative in legislation. Pres idents in the nineteenth century did not utilize this much for pro moting particular acts of legisla tion.

There were many reasons for this. The main one is that nine teenth century Presidents were not committed to extensive re forms. They did not conceive it to be their mission to transform American society. Had they thought otherwise, however, there were good and sufficient reasons for them to abstain from legisla tive leadership. The President's primary task is administrative, the execution of the laws. If he becomes involved in the making of particular laws, he may take· po sitions which will unfit him for 56 THE FREEMAN August executing them, particularly if he has vigorously opposed measures that are subsequently passed over his veto. Congress might well re sent presidential tampering with its prerogatives. The President's prestige would be at stake in the measures he promoted. 6 Moreover, he does not have sufficient leverage over Congress to get his measures enacted. Its members are chosen independently of him.

Most of these objections and difficulties have, of course, been overcome or shunted aside in the twentieth century, for Presidents have taken over legislative leader ship. Woodrow Wilson was the first to do so on a large scale, though Theodore Roosevelt had pointed the way. Wilson ran on the basis of a program called the New Freedom, and, once, inaugu rated, he proceeded to get the pro gram through Congress. Since that time, Presidents have gone much farther in assuming leg islative responsibilities. This reached a peak in two years: 1933 and 1965. In 1933 many of the bills which were passed by Con gress were actually drawn by men in the executive department, sent to Congress, and, in the case of 6 In parliamentary systems, of course, the Prime Minister does take such lead ership. But if he is defeated on an issue he considers crucial, he may resign or be forced to do so. No such alternative exists for a President.

some of them, passed without benefit of committee examination. By 1965, Congress had come to accept the presidential initiative as standard procedure. The tradi tional roles of the two branches had been reversed; Congress could exercise what amounted to a veto on bills proposed by the executive, but the initiative had passed to the President. Platlorms lor Change The difficulties of doing this were overcome in various ways. In the firs't place, Presidents did become reformers. It became cus tomary for presidential candidates, at least Democratic ones, to set forth a program of changes which they expected to institute if elected. These programs have often been given names, as New Free dom, New Deal, Great Society, and so forth. Not only have presi dential candidates run on these, but congressional candidates as well. Once elected, a President is then assumed to be committed to rendering these into bills which he is to push through Congress.

Secondly, the prestige of the of flce of President has been built up, particularly in wartime. That of Congress has suffered by com parison. When Congress has failed to pass presidential bills, it has been labeled obstructionist, and has suffered from both subtle' and not 1966 THE FLIGHT FROM THE CONSTITUTION, I 57 so subtle vilifications by colum nists and assorted publicists. In short, Presidents-with assistance from their numerous helpers in the media of communication-have found ways to advance particular proposals without losing face if they fail. Instead, Congress is supposed to lose face by failing to pass them. Third, Presidents have found ways to bring sufficient congress men to heel to forge majorities for much of their legislation. In the main, these consist of patron age, spoils, and pork barrel. Con gressmen are brought around by promises of government projects to be located in their districts, getting their men appointed to office, a new dam, a new post of fice building, a new Federal office building, a defense plant, a gov ernment contra.ct, and so on, ad nauseam.

On the face of it, it is difficult to imagine a more ironic develop ment than this latter one. To Con gress belongs the power of appro priation, as well as the initiation of acts. Yet, congressmen truckle to the President to get a portion of the largess they have voted to distribute. There is an explanation for this, however, and it will get us to the nub of the matter. A congressman is one man among many men. Theoretically, his vote counts for no more than any other, and in the course of a few years of legislating, his district should come out on a par with all other districts in getting Federal larg ess. Of course, not all men are equally influential in Congress, some have important seats on crucial committees, others not. Such a congressman can parlay his influence in Congress into size able gains for his district by also serving the President faithfully. Presidential discretion in handing out benefits greatly augments what a congressman could get on his own.

Budgetary Difficulties These are but accommodations, however, by which some congress men get their quid pro quo for yielding up their legislative pre rogatives. The prerogatives had to be yielded up as Congress gave its assent to the building of an ever vaster Federal establishment. The fact is that it is no longer prac ticable for Congress to devise a budget, or, what amounts to the same thing, initiate appropria tions. Congress cannot oversee the vast Federal establishment effec tively; it cannot devise the intri cate regulations and restrictions which now govern the Iives of Americans. It cannot do the work which a huge Federal bureaucracy now performs, nor could any other legislative body.

58 THE FREEMAN August The flight from the Constitution does not consist simply of the power which factions can now ex ercise, of the concentration of power, or of shifts in the relative weight of the branches of govern ment. It stems from the overrid ing of the substantive limitations upon the powers of the Federal government. In short, much of the huge Federal establishment has been built by the exercise of powers that were not granted in the Constitution. Most of the reg ulations, restrictions, expenditures (excepting for defense) and far flung activities were not author ized by the Constitution. Nor have they been authorized by amend ments. Instead, they have been acquired by reading into the Con stitution what is not there, and pro mulgating mystifications about what is there. A Word for the Court Those seeking a scapegoat to blame for the flight from the Con stitution may find it convenient to place the burden of responsibility upon the Supreme Court. Yet such an historical interpretation would be a gross inj ustice to many· of the men who have made up that au gust body. It is true· that the· ma jority of the Court have now joined the flight from the Consti tution, may even be in the fore front of it, but this is a recent development. The members of all branches of the government are charged with observing the Con stitution, the members of Con gress and the President no less than the courts. A majority of either house of the Congress can just as surely nullify a bill on the grounds of its unconstitutionality - by refusing to pass it - as the Supreme Court can nullify an act of Congress - by refusing to en force it. The President can veto a bill on the grounds of its uncon stitutionality. It could still be passed over his veto, but this would be no reason for a Presi dent to fail to do his duty by the Constitution. It is true that the Supreme Court has the last say, but to the extent that the flight from the Constitution has been by the regular legislative route, the courts have only concurred in flights already made by other branches.

Moreover, the Supreme Court held out much longer against the general flight from the Constitu tion than did any other branch. Initially, it greatly circumscribed the activities of the Interstate Commerce Commission, made of limited effect for a number of years that strange piece of legis lation known as the Sherman An titrust Act, only very reluctantly accepted the privileged status of organized labor. It did not readily 1966 THE FLIGHT FROM THE CONSTITUTION, I 59 concur in the piecemeal absorption of property rights by government in regulatory measures. The Fed eral courts held out for four years or more against· the drastic meas ures' of the New Deal after the Congress had become a rubber stamp for executive measures. It nullified the central acts-of the early New Deal when it invali dated the N.R.A. and A.A.A. But there are limits to what can be expected of men, and those limits apply to justices of the Su preme Court as well as other men.

For years before 1937, a literary assault upon the Constitution had been going on. Writers had proclaimed that the Constitution was itself a class document, that it had been drawn by well-to-do mer chants and planters to serve their interests. It was outmoded, others said, perhaps well enough suited to an agrarian society but hardly fit for an industrial one. New times require new measures, other men proclaimed. A new outlook had been developed; in terms of it government was supposed to act in accord with the needs of the moment, not in accord with some "ossified" eighteenth cen tury "piece of paper." In theory, the Court's position is secure; in practice, it is not certain how long it can hold out against the combined Congress and Pre,sident. The men who make up these branches are popularly elected. They are the voice of the people, so the argument ran. Could nine men withstand the wrath of a nation, prevented from going in the direction it wanted to go? The Court might have held out with impunity. At any rate, it did not.

After 1937, it capitulated, for whatever reasons following Roose velt's illfated Court Reorgani zation Bill (popularly known as his "Court Packing Scheme"). Since that time it has only rarely called a halt to some particular reconstructionist acti vity. The above is to set the record straight. The role of the-Court in defense of the Constitution when the other branches were irrespon sibly evading its limitations has gone unsung. The point needed to be made, too, that, legends to the contrary notwithstanding, the Court is not the sole keeper of the Constitution. This is a solemn re sponsibility enjoined upon those who serve in all branches of the government. The courts have, however, played an increasing role in the flight from the Constitu tion, and that story needs to be told also. ~ The next article in this series 'Will further describe "The Flight from the Constitution-II."

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN KONRAD ADENAUER'S Memoirs 1945-53 (Regnery, $10) is a work that is best described by such ad jectives as "dogged" and "slog ging." But if there is no genius in the telling of this story, there was genius in the way Adenauer, as the postwar leader of West Ger many's Christian Democratic Union, lived it. A seventy-year-old ex-Mayor of Cologne when the war was nearing its end, he was the figure on whom the history of West Germany - and therefore the entire West -was to pivot. His life since 1945, both as party lead er and as his country's Chancellor, may be taken as a virtually com plete refutation of the materialist, or economic determinist, theory of history. If it hadn't been for his pres ence on the scene, West Germany would surely have returned to the 60 so-called comity of nations as a Marxist state, or group of states, complete with nationalized indus tries, planning boards, directed labor, and all the rest of it. This is what Dr. Schumacher's Social Democratic PaTty was proposing, and this is what the British, who were in charge of Adenauer's state of North Rhine-Westphalia, were disposed to accept. After all, there was a labor government in London after Churchill's dismissal in 1945, and "planning" was what Clement Attlee, Ernie Bevin, and Herbert Morrison, the British socialists, thought they understood.

As a pa.rty with a long German tradition, the Social Democrats should have walked away with the crucial election in 1949 that sig naled the rebirth of a German na tion. But Adenauer, the Rhine lander who had been thrown out 1966 ADENAUER'S MEMOIRS 61 of his job as Mayor of Cologne by the Nazis, tapped spiritual re sources that had been dormant in Germany for well over a decade. He was not an economist himself, but, as a Christian philosopher, he believed in the, primacy of the freely-choosing individual. He went up and down West Germany preaching that the· sort of cen tralized economic control that was advocated by Dr. Schumacher's so cialists would not differ, in es sence, from what the Germans had known under Hitler. It was his genius as a politician to recognize the. voltage in the phrase, "the social market economy." Erhard, the present Chancellor of West Germany, had brought this to him as a disciple of the Roepke school of neoliberal economics, and it was semantically right for the times.

For, in its implicit assertion that the market creates social values out of individual and group com petition, the new phrase chal lenged the Marxist shibboleths on a ground that could appeal to the Christian conscience. The Marlcet Economy As Erhard, who was to become Adenauer's Minister of Econom ics, put it, the social market econ omy would produce a maximum of well-being and social justice by letting free individuals make an efficient contribution to an order that embodies a social conscience. Where state welfare was neces sary to sustain war cripples in their hospitals, and to provide for the stream of refugees and dis placed persons from the Commu nist East, the affluence created by the market economy could be taxed. A government committed to social market competition would see to it that taxes were not levied in a way to discourage incentive, and it would also insist on an in dependent control of monopolies to safeguard genuine competition.

No doubt the coupling of the adjective "social" with the noun "market" could be utilized to justi fy the wildest aberrations of state welfarism. We in America are well aware of what can be done by canny manipulation of the "gen eral welfare" clause of the Consti tution. But the Christian Demo cratic Union governments of West Germany have not been sophistical in their application of the Roepke Erhard theories. They have pro vided incentives to invest, they have steered cle,ar of inflation, and they have done more than their part in the attempt to create a wide free-trade area in western Europe. A Touchy Situation Looking back on the history of 1945-53 which is covered in this most impersonal of autobiogra62 THE FREEMAN August phies, the whole story may seem inevitable. The Soviet Russians, by their aggressive post-1945 be havior, forced the nations of the West to regard West Germany as their own particular buffer against communism. It would have been silly to pulverize a buffer by ap plying the Morgenthau plan for turning West Germany into a re gion without industry; this would have created such chaos that the Communists would have been able to take over from within. So the decision to rebuild the British, American, and French zones as a viable modern economic unit was made. The Marshall Plan took hold at the end of 1948, raw m,aterials poured in, individuals were per mitted to start their own busi nesses, and to support everything else there was a currency reform.

Yet it was actually touch and go when it came to creating a form for the first new national govern ment in West Germany in 1949. After the Christian Democrats had won their surprising victory, many in Adenauer's own party wished to form a coalition with the Social Democrats. The Social Democrats were willing, but they demanded the Ministry of Eco nomics as their price for collabo ration. After all, they held 131 seats in the new Bundestag as against the Christian Democrats' 139. Potentially, this made them an extremely powerful opposition, and in a parliament in which ten separate parties were represented there was always a possibility that they might have their way. So they felt justified in wishing to have the power to create the indus trial shape of the new nation. Principle Prevailed Adenauer, however, was con vinced that the election consti tuted a mandate for a generally free economy. The Social Demo crats and the Communists had polled eight million votes, which, presumably, had been cast for so cialism of one kind or another.

But thirteen million votes had been cast for the antisocialist parties. The CDU's Minister Pres ident Altmeier of the Rhineland Palatinate spoke plausibly for a coalition with the Social Demo crats, and his words were greeted with applause. He raised the fear that a strong Social Democratic opposition in the Bundestag would use nationalist arguments to at tack every effort at understanding with the occupying powers. But Adenauer insisted that a coalition would be taken as a breach of faith by a vast majority of the voters if the Social Demo crats were to get the Ministry of Economics as their share of the bargain. "There is a great dif ference," he said, "between our1966 ADENAUER'S MEMOIRS 63 selves and the Social Democrats regarding the principles of Chris tian conviction. Moreover, there is an unbridge,able gap between our selves and the Social Democrats in the matter of economic structure.

There can only be either a planned economy or a social market econ omy. The two will not mix. In view of these differences it would not even be possible to have a Christian Democrat as Minister of Economics and a Social Democrat as Under-secretary of State. We could never get things moving." The words of Der Alte Ade nauer were convincing, and a coali tion of anti-Marxist parties fol lowed. So it was Erhard, and not the Social Democrats' Professor Nolting, who took charge of West Germany's economic future. The German "miracle" followed. And when relative stagnation and in flation continued to dog the efforts at recovery in "Keynesian" nations such as Britain, the Erhard-sup ported economies of Roepke-and, incidentally, the Mt. Pelerin So ciety - began to take on a luster which nobody save a few FEE die hards would have deemed possible. Adenauer's reconstitution of far-off things and battles long ago lack Churchillian sparkle. But the events create their own drama.

This is a document for FEE-ers to read with pride. • .. THE INTEMPERATE PROFES SOR AND OTHER CULTURAL SPLENETICS by Russell Kirk. (Baton Rouge: Louisiana State University Press, 1965. 163 pp. $5.00.) Reviewed by Robert M. Thornton RUSSELL KIRK'S credentials as a critic of higher education are im peccable. A well-educated, widely traveled man of letters, he has ob served at first hand teachers and students and administrators on the 200 or more campuses where he has lectured in the past dozen years. He does not like what he sees. Many professors are more in terested in indoctrinating' those sitting under them than in de veloping a disinterested love of truth. Embracing relativism and/ or nihilism, some teachers are eager to upset whatever ideals and convictions their students bring with them from home. Students should learn to think for them selves, but our institutions of learning were founded to conserve and extend the nation's heritage, not to destroy it.

Dr. Kirk, unlike many today who write on the subject,under stands education to be, not the pouring of facts or techniques into a young person's head, but a spirit ual process, if you will - a certain relation between teacher and pupil 64 THE FREEMAN August and the object of their studies. This being the case, the remedy for the ills of education is not more money, bigger plants, or more classroom gimmicks; and definitely not more funds from Washington which will be fol lowed, quite naturally, by Federal controls. The most provocative essay in this collection of fourteen is, in my opinion, "The Rarity of the God-Fearing Man." We like to be told that God is love, a "Chum, never to be dreaded because He is indiscriminately affectionate." This notion would have scandal ized the tough-fibered Calvinist who settled our land and developed its institutions. Such a man, "knowing that divine love and di vine wrath are but different aspeets of a unity, is sustained against the worst this world can do to him; while the good-natured unambitious man, lacking religion, fearing no ultimate judgment, denying that he is made for eter nity, has inhimno iron tomainta.in order and justice and freedom.

. . . If the fear of God is ob scured," Kirk continues, "then ob sessive fear of suffering, poverty, and sickness will come to the front; or if a well-cushioned state keeps most of these worries at bay, then the tormenting neuroses of modern man, under the labels of 'insecurity' and 'anxiety' and 'con stitutional inferiority,' will be the dominant mode of fear." This is spiritual bondage, and once it set tles in, political and economic en slavement are not far behind. ~ HANDSOME BLUE LEATHERLEX FREEMAN BINDERS Binders with Issues inserted for Calendar Years 1963 and 1964: $ 5.00 10.00 Either year Both Binder only, $2.50 each Also available in standard clothbound volume, $2.50 in a new, attractive, low~priced paperback: $ .95 2.00 6.00 45.00 Single copy 3 copies 10 copies 100 copies Cj •••••• '" ' ~~:I~O=--J ~of MAINSPRING (279 pp., in dexed) was published in 1947. Since Mr. Weaver's passing, this great book has been the property of FEE. Previous to this new paperback edition, 350, 000 copies have been pri nted.

One large company's circulating library for em ployees required 150 volumes to meet the demand. Based on FEE's experience, MAl NSPRING tops all books as a starter for any aspiring student of liberty. Easy reading - indeed, exciting - the be ginner becomes so interested in freedom that he can hardly help pursuing the subject further. FEE's recommendation: Keep a good supply of the paperbacks on hand to present to any individual who shows a spark of interest in freedom. THE FOUNDATION FOR ECONOMIC EDUCATION, INC. IRVINGTON-ON-HUDSON,NEW YORK, 10533 TO ESTABLISH A DESPOTISM • A general State education is a mere contrivance for moulding people to be exactly like one another: and the mould in which it casts them is that which pleases the predominantpower in the government,whether this be a monarch, a priesthood,an aristocracy,or the majorityof the existinggeneration;in proportionas it is efficientand successful, it establishes a despotism over the mind, leadingby natural tendencyto one over the body.

J. S. MIL L, On Liberty The Vital Secret • Paul L. Poirot 23 The Voice of a Brother's Blood Kenneth W. SoWtt 14 Socialism, U. S. Style Henry Hazlitt 33 62 59John Chamberlain Books: Too Much Secrecy Other Books • SEPTEMBER 1966 Freedom to Sift and Winnow • Loyal Meek 50 Values, Exchange, and Profits: The Bedrock of Economic Science. Frederick B. Jennings, Jr. 52 Dr. Johnson's Defense of Property • Stephen R. Vallance 16 The Flight from Reality: 24. The Flight from the Constitution, II. Clarence 8. Carson 35 The Case for Willing Exchange Leonard E. Read 25 The Safety of the People • Ben MoreeU 3 COAST FEDERAL SAVINGS AND LOAN ASSOCIATION Department Fl, 9th & Hill Sts., Los Angeles,California90014 o Please send me a FREE copy of "What's Inflation?" o I enclose my check (or money order) for $ _ o Please open a Coast Federal Savings accountD Individual o Joint in the name(s) of NAME _ STREET --------CITY STATE _ 6-112A2 ":\:}}tn_ ~ ~ COAST FEDERAL SAVINGS ~< ANO LOAN ASSOCIATION .'~ -3 "'~ THE FREEMAN SEPTEMBER 1966 Vol. 16, No.9 '" Admiral Ben Moreell reminds us of Cicero's observation that the safety of the people depends upon their knowing and observing the Higher Law p. 3 '" From the Biblical account of Cain and Abel, Dr. Sollitt draws a lesson: that we start living for the ideals for which young Americans are asked to die on far-flung battlefields ........ p. 14 yI More than two centuries ago, Dr.

Samuel Johnson offered arguments in defense of property that are well worth reviewing today p. 16 )II' And with a better understanding of private property and respect for life and human dignity, perhaps we may then explain to others the vital secret of American progress p.23 )II' Leonard Read suggests that the great differences among world powers may be more clearly understood in terms of willing exchange versus coercion p. 25 )II' In the subsidized traffic snarls of Metropole, Henry Hazlitt finds work ing examples of the failure of socialism in the United States p. 33 ~ In this chapter, Professor Carson explores in further detail the depar tures from the Constitution by way of numerous Court decisions in recent years p. 35 ", How those most concerned about academic freedom can generally ig nore or even deny the freedom of the market is the puzzle pondered by a Milwaukee editor p. 50 )II' And a Harvard student takes time off from the macro-economic whirl of the campus to review the basic mar ginal utility concepts of values, exchange, and profits p. 52 ~ Donald I. Rogers' The End of Free Enterprise: A Manifesto for Capitalists affords fellow columnist John Cham berlain grist for the Reviewer's Notebook p. 59 )II' The Most of Malcolm Muggeridge and Faulkner in the University are the latest choices by reviewer Thornton ............ p. 62 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

SEPTEMBER 1966 LEONARD E. READ PAUL L. POIROT Vol. 16, No.9 President, Foundation for Economic Education Managing Edito1· THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit educational champion of private property, the free market, the profit and loss system, and limited go\"ernment, founded in 1946, with offices at Irvington-on-Hudson, New York. Tel.: (914) 591 7230. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in vited in any amount-$5.00 to $10,000-as the means of maintaining and extending the Foundation's work. Copyright, 1966, The Foundation for Economic Education, Inc. Printed In U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each.

Permission is hereby granted to anyone to reprint any article in whole or in part, providing customary credit is given, except "Socialism, U. S. Style," and "The Flight from Reality." Any current article will be supplied in reprint form If there are enough Inquiries to justify the cost of the printing.

BEN MOREELL THE SAFETY OF THE PEOPLE IN LIGHT of the turmoil and chaos which now enmesh our nation, at home and abroad, and the conse quent bewilderment of our people, it is important to review our poli cies and practices over the past half century to determine, if we can, the causes of the current con fusion. Starting practically "from scratch," we became, in little over a century, the greatest nation in recorded history in terms of spir itual stature, individual freedom, Admiral Moreell, Civil Engineer Corps, United States Navy ( retired), was organizer of the famed Seabees of World War II, and served as Chairman of the Board of Jones and Laugh lin Steel Corporation from 1947 to 1958. This is a slight condensation of his June 4, 1966, address to the graduating class at Grove City College in Pennsylvania, of which he is a Trustee. material productivity, cultural progress, biblical charity, and the security of our citizens and their property.

But, as we prospered, we lost sight of the fact that the blessings we enjoyed are not self-perpetua ting, that they are premised on certain spiritual and cultural con ditions which this generation did not create, which we inherited, and which we are losing! We are consuming our capital! That is the surest road to bankruptcy in business. And I am just as sure that our national well-being can not outlast the current exhaustion of our spiritual and cultural cap ital! In his classic work, De Legibus, Cicero, greatest of Rome's jurists 4 THE FREEMAN September and philosophers in the law, set forth this proposition: "The safety of the people shall be the Highest Law." That dictum stemmed from the concept that there is a Higher or Natural Law which transcends all man-made law. The idea originated with the ancient Greeks, was elab orated by Aristotle, and later adopted by the Stoics from whom it was taken over by Cicero and incorporated into the Roman law.

It was accepted by our Found ing Fathers for inclusion in the Declaration of Independence, as evidenced by their avowed reliance on "the laws of Nature and of Nature's God" as sanction for their claim to that "separate and equal station - among the powers of the earth" to which a people is entitled when it becomes neces sary - "to dissolve the political bands which have connected them with another." Professor Edward S. Corwin, noted scholar and teacher of j uris prudence, in his essay, "The 'High er Law' Background of American Constitutional Law," wrote: There are ... certain principles of right and justice which are entitled to prevail of their own intrinsic ex cellence, altogether regardless of the attitude of those who wield the phy sical resources of the community. Such principles were made by no hu man hands. . . . They are external to all will as such and interpenetrate all reason as such. They are eternal and immutable. In relation to such principles, human laws are...

merely a record or transcript, and their enactment an act not of will or power but one of discovery and declaration. Later, with respect to the Ninth Amendment of the Constitution, which validates those rights of the people which are not specific ally enumerated, he wrote: Such rights ... owe nothing to their recognition in the Constitution. Such recognition was necessary if the Constitution was to be regarded as complete. Thus the legality of the Constitu tion, its supremacy, and its claim to be worshipped, alike find common standing ground on the belief in a law superior to human governors. That concept was endorsed by the late President Hoover in his address to the 1956 Republican National Convention. He said: Those great documents of 180 years ago from our Founding Fathers must still be the foundation of our American way of life .... I have faith that there are prin ciples which neither communism, nor socialism, nor neutralism, nor other evil ideas, nor even the march of time, can defeat. Those truths came into the world along with the shoot ing stars of which worlds are made.

They are as inevitable as the exist1966 THE SAFETY OF THE PEOPLE 5 ence of the Supreme Being, the forces of gravity, and the ceaseless struggle of mankind to be free. Limits for Man-Made Law Those "principles of right and justice" fix the limits within which man-made law must function if we are to avoid doing violence to the higher law of Nature. The Declaration defined those limits as follows: We hold these truths to be self evident: That all men are created equal; that they are endowed by their Creator with certain unalien able rights; that among these are life, liberty, and the pursuit of hap piness; that to secure those rights, governments are instituted among men, deriving their just powers from the consent of the governed; that whenever any form of government becomes destructive of these ends, it is the right of the people to alter or abolish it and to institute new gov ernment ....

The preliminary drafts of the Declaration and contemporary doc uments make clear that the phrase "all men are created equal" was intended to denote equality before God and before the law, not an impossible equality of natural tal ents and consequent equality of material possessions. Similarly, it was intended that all men should be free to pursue happiness, the responsibility for catching up with it remaining with the pursuer. Happiness, per se, is not a natural right but something to be earned by individual effort, a concept which differs material}y from that of "The Great Society" zealots who now steer our Ship of State. Those basic principles were to establish the .framework for a "government of laws and not of men." Our Central Government was to be one of strictly limited powers, specified in a written con stitution. Furthermore, those pow ers were to be augmented, ex tended, eliminated, reduced, or re distributed only by the procedures prescribed in the Constitution it self, not by judicial interpretation, legislative mandate, executive de cree, nor by arbitrary seizure which has no legislative sanction but is based on the theory that certain undefined powers inhere naturally in the presidency. All of these devices have been used in recent years by power-hungry and impatient government officials to rationalize their violations of con stitutional prohibitions and limita tion on their authority.

The texts of the Declaration and the Constitution, the debates in the Constitutional Convention, in the Congress and in the state legislatures, as well as contempo rary records, notably the sermons of the colonial clergy, indicate 6 THE FREEMAN September general agreement that, broadly speaking, the functions of the Central Government should be lim ited to the following: 1. Protection of the citizens' lives, limbs, liberties, and livelihoods, that is, their honestly acquired property, against aggression from without and internal dis order; 2. Dispensation of equal justice under law; and 3. Keeping the records incident thereto. Other than these, the people were to be free to pursue their own interests, provided this did not lead them to trespass on the rights of others. It was held that such limitations on government powers could be effective only in a social order where there is a generally prevail ing concept of the nature of the universe and how it is ordered, and the nature of man and his place in that universe; that con cept being defined as follows: 1. Man has inherent and inalien able rights, bestowed on him by God, which are in conform ity with universally valid and eternal moral laws ; 2. All just government powers are derived from the citizens by voluntary delegation; 3. To avoid trespassing on the in dividual's rights, there must be a free market for goods, serv ices, and ideas, into which gov ernment must not intrude ex cept to protect those rights; and 4. For every natural right there are collateral responsibilities and moral duties, imposed on the individual, to make his con duct conform to the code set forth in such stern admonitions as The Ten Commandments, The Sermon on the Mount, and The Golden Rule.

On this foundation, our people erected the structure of a great social order which, until recent decades, stood as a beacon of hope for the future of all mankind. Squandering Our Legacy How well have we managed this heritage? I believe my generation has squandered its legacy. We have permitted the superstructure of this citadel of freedom to be rav aged and its foundations eroded to the point where there is dan ger of total collapse. Our intense pursuit of profit and pleasure left little time or in clination to reflect on the dismal records of some great civilizations of the past, best exemplified by the tragic decline and fall of the Roman Empire. This debacle re sulted when "the safety of the people" was no longer vested in obedience to "the Highest Law" but had given way to ruthless 1966 THE SAFETY OF THE PEOPLE 7 competition for political or eco nomic power, an essential feature of which was corruption of the people by ever-increasing govern ment largesse in the form of food, clothing, shelter, entertainment, "bread and circuses." These were the prototypes of our present-day multifaceted "war on poverty,"

publicly-financed stadiums, play grounds, recreation areas, thea ters, cultural centers, and a myr iad of other "Great Society" sub ventions. All of us must share the blame for this betrayal of our trust. Several years ago in a public ad dress I reproached our national legislators for their seduction of the people by government "hand outs." I received a letter from a prominent Senator, a friend of long standing, in which he said, "Don't be too hard on us. We give you the kind of government you demand - or will tolerate." Over the past fifty years we have propagated a child-like faith in the competence of government to achieve any kind of material, economic, social, or moral pur pose. Implementing this faith we have stood by, meekly, while gov ernment seized authority at an ever-increasing pace, centralizing it in Washington, where it would be shielded from the scrutiny of those from whom it had been taken; and this is always done under the pretext that it is solely for the good of the people!

But even more destructive is the fact that, as government functions today, decisions on matters of vital import to the security and well being of our nation are most frequently taken in light of their probable political effects, rather than being based on purely eco nomic, social, or national security considerations. It has been said that the people never give up their liberties except under some delusion. In this case the delusion is that government which, after all, is operated by ordinary mortals like you and me, not by gods or supermen, has some superior competence in the realm of economics, some mysteri ous magic multiplier of wealth, some power to open the doors to a vast store of economic goods which can be had without working for them, merely by voting for them! Few of us are completely im mune to such delusions, or to the human passions which they arouse: apathy, fear, greed, and violence. But those who see the terminus of this "devil's highway"

are duty bound to sound the alarm. Let us look briefly at some areas where we have departed from our time-tested principles, and thus jeopardized "the safety of the people."

8 THE FREEMAN S ep,tember The Evils 01 Inllation Perhaps most obvious is the debauchery of our currency. Largely as the result of profligate spending and shiftless fiscal and monetary policies, at home and abroad, our gold reserve, intended to insure national solvency and to promote dynamic economic equi librium, has been depleted to the point where our government re sorts to frantic maneuvers in the international money marts to avoid devaluation of the dollar. Our maudlin foreign aid pro grams have served principally to buttress unstable authoritarian and socialist governments, to line the pockets of dictators and their henchmen, and to subsidize cut throat foreign competition with our own industries. Our public debt is at an all-time high and increases each year. In addition, there are hidden obliga tions accumulated under the social security and government retire ment systems, and as guarantees of mortgages and other indebted ness, which amount to hundreds of billions, the total of Central Gov ernment liabilities alone having been estimated recently at 1lh trillion dollars, that is, $1,500 bil lions, or $7,500.00 for every man, woman, and child in the nation!

The debts of states, subordinate units of government, and public "authorities," as well as private indebtedness have kept pace with that of the Central Government. Our nation is mortgaged to the hilt! And the process continues. Unbalanced national budgets have become a way of life. During the past five years the National Bud get has averaged an annual deficit of $6.3 billions. Since 1939 infla tion has reduced the purchasing power of our dollar to about 43 cents, with commensurate de creases in purchasing power of the peoples' savings accounts, pen sions, insurance policies, annuities, and other fixed income invest ments. Increases in the costs of replac ing obsolete industrial equipment and for new equipment to expand production reflect the current in flation. These, together with our subsidization of foreign indus tries, have impaired our ability to compete in the world's markets, including even those .of our own country, and thus to provide de cent jobs for a rapidly growing working population.

The culprit that creates dollars out of thin air and pumps them into our economic blood-stream is our own out-of-bounds govern ment. During the past five years our purchasing media (currency and checking accounts) have in creased at an annual rate of more than 6 per cent, the highest for any such period since World War 1966 THE SAFETY OF THE PEOPLE 9 II. And the rate is increasing, the rate during the past year being 8.9 per cent. But the harsh realities of pol itics will not permit government to admit its guilt. So government looks for a scapegoat, preferably one who will be a politically profit able whipping boy. In this case it is private industry, whose man agers have tried earnestly to pro tect their owners' properties against inflationary erosions by proposing modest increases in the prices of their products. The government propaganda machine is then turned on full force in an effort to delude our people into believing that private industry is not the unfortunate victim of inflation but is the greedy villain who caused it!

Initially inflation weighs most heavily on the thrifty citizens who, largely through fixed income in vestments, have tried to provide a competence for their old age or security for their loved ones. But, eventually, it involves the entire nation. The resultant chaos can be ended only by dictatorship and ruthless suppression of the rights of the people. A dictator has been defined as the receiver for a na tion gone bankrupt! I have dwelt at some length on this subject because debauchery of the currency is so pervasive that, ultimately, no one can entirelyescape its destructive effects. Our government, whose fiscal and monetary policies and practices in duce inflation, stands guilty of flagrant violation of the Highest Law - thus jeopardizing the safe ty of the people! The Crisis of Morals Not unrelated to the debauchery of our currency is the national crisis of morals and moral courage.

Our national crime rates, not ably crimes of violence, are sky rocketing, as are the rates of di vorce, juvenile delinquency, ille gitimate births, and family deser tions. There are all-too-frequent evidences of corruption in high places in public and private life. We are demoralized by an apa thetic acceptance of low standards of conduct of prominent persons and of the general public; an in creasing tolerance of openly flaunt ed pornography in the theater, books, periodicals, recordings, movies, and television; the deteri oration of family life; derision of religion and spiritual values; and downgrading of the individual as a responsible creature of God, sovereign in his natural Tights, having personal worth and dignity, deserving of respect because he is self-respecting and respectable. Our situation is more precarious because we do not receive support from those to whom we look for 10 THE FREEMAN September help. We urge people to go back to church; but there they fre quently find that the forces which have undermined our traditional beliefs have infected the very source of those beliefs, the church itself 1 Many of our prominent and ar ticulate churchmen and some of our most influential church bodies favor socialization of our national life and urge that more power be placed in the hands of govern ment. Others have sought to make the churches over into a political force to put pressure on legis lators. Many to whom we look for guidance out of the morass of ma terialism and state-imposed hu manism appear to have "made a deal" for a partnership between God and Caesar, with God cast in the role of a very junior partner.

Others assert with the assur ance born of ignorance that "God is dead, and man has inherited his throne" .... weak, witless, sin ful man, frequently unable to re solve the problems of his own small household, but supremely confident of his competence to plan and direct the orderly func tioning of the Cosmos! Effective Leadership Stems from The Power of Example I have long believed that per sonal example is the most power ful element of effective leadership, for good or for evil. A fair read ing of the record leads to the con clusion that, in its role of Robin Hood, our giant government has provided the worst kind of moral leadership for our people. Robin Hood may have been impelled by the most altruistic of motives but he was still a thief! Today the "powers that be" neatly gloss over the fact that when people vote for legislators who promise them "goodies" at the expense of those who worked to produce them, they become partners with gov ernment in thievery! More's the pity that such legalized larceny has the sanction of many high government officials who urge the voters to "come and get it 1"

Many politicians now run for office on the platform, "I can get more from the government for you." But they do not mention what government must first take from you and others who produced the wealth. President Johnson had at least the virtue of frankness when he stated, "We are going to take from those who have and give it to the have-nots." In a recent detailed study of socialist Sweden, commenting on public housing, the author wrote: "Here, as well as in other spheres, personal corruption and indiffer ence to laws are the results of state intervention in the function ing of the free market economy."

1966 THE SAFETY OF THE PEOPLE 11 Civil Rights and Moral Wrongs Our social order is subjected to massive stress as government seeks to impose legal curbs on freedom to use or dispose of one's property and the right to choose one's associates. Justifying the means they propose by the ends they seek, public officials and prom inent private citizens, including many of our clergy, encourage violation of those laws which one does not like, as well as civil dis obedience merely for its nuisance value, and illegal seizures of pri vate property. All such acts con stitute trespass on the rights of others and are "civil wrongs"! They point the way to anarchy and, ultimately, to dictatorship! Our judiciary frequently shows excessive concern for the civillih erties of hardened criminals at the expense of the moral and legal rights of their innocent victims. Similar tolerance is displayed to ward union officials who order or condone acts of violence on per sons and property by their subor dinates.

We appear to have reached the point where the only license we need for the perpetration of civil wrongs on a law-abiding and peaceful citizenry or for the ob struction of lawful commerce is willingness to join a picket line and carry a placard with a legend which heaps abuse on those who have incurred our displeasure! Giant Government in Washing ton grows at the expense of state sovereignty and individual rights. The Central Government now owns more than 34 per cent of the land area within the boundaries of the fifty states, it owns and operates more than 3,000 tax-free commercial activities in competi tion with its own citizens, it dis penses more than 25 per cent of the national income, and it grows apace! Such massive intrusions into the affairs of the once sov ereign states and of the people, many Clearly in violation of the Constitution, impair economic freedom, discourage prudent ven ture capital, impede development of private enterprise, and com promise the safety of the people.

We appear to be suffering a paralysis of will which saps our courage, moral and physical. We are being transmuted from a God fearing, energetic, self-reliant, confident, and venturesome peo ple, free and independent, into a nation of timid dependents, inse cure, apprehensive, fearful of in curring the displeasure and repri sals of our political masters to whom we are told to look for food, clothing, shelter, medical care, ed ucation, entertainment, and se curi ty from the cradle to the grave. And to receive those boun ties, we need only surrender con12 THE FREEMAN September trol of our lives, our fortunes, and our sacred honor! Our Foreign Policy The emotions which paralyze our wills in domestic affairs have infected our courage and integrity when dealing with other nations. On the international scene, com promise of principle, appeasement of blustering bullies, support of cruel oppressors, intervention in the internal affairs of friendly nations, and surrender to black mail, mark our conduct. Moral principle is sacrificed on the altar of expediency to achieve the prom ise of a dubious security. Any dictator who wishes to rub our nose in the dirt for political profit or personal pleasure does so with impunity, secure in the knowledge that when he is ready to trade we will buy him off with generous allocations of foreign aid.

Little wonder, then, that Khru shchev was quoted as having re marked on his return from his trip to America, "You spit in their faces and they smilingly wipe it away and say, 'The dew is very heavy today.'" In the Vietnam war it appears that we are exerting every effort to avoid achieving a clear"'-cut vic tory in order to induce the com munists to come to the bargaining table where the first installment of a generous payoff, budgeted at one billion dollars, awaits them! While the arrogant aggressor is leisurely making up his mind, we continue pouring men and ma terial into the venture! Here one must ask, "What's wrong with victory, since victory is the only sure way to end both the aggres sion and the drain on our human and material resources? And if victory is politically inexpedient why not withdraw and end the blood-letting and the waste?" We are not respected by our enemies, by the so-called neutrals, nor by our professed friends. In spite of generous concessions in all areas, "Yankee Go Home" has becorne an international slogan.

Unruly mobs, unrestricted by po lice or other public authorities, attack our embassies, legations, consulates, libraries, and other in stallations and menace the safety of our representatives. To show our complete confidence in the honor of dictators who have repeatedly repudiated their treaty obligations, our government has proposed a long-range program for total disarmament of all na tions, in which we are now taking the lead, unilaterally. I am under no illusion. I know that a Jeremiah is without honor, especially in his own country, when the people become servile and in sensitive to moral wrongs under the narcotic effects of a false pros1966 THE SAFETY OF THE PEOPLE 13 perity, buttressed by massive gov ernment seductions and propa ganda. But those who feel, as I do, that the safety of the people is in jeopardy are morally bound to say so. The Way Ahead Is there a way ahead which will take us out of this morass? Is there a way to recover the sanity and balance which once marked our life? I am sure there is, if we are willing to pay the price. But it is not by resort to political legerdemain. It is by beating our way upstream, against the swift running current, to those moral and spiritual values upon· which this nation was built. We must be born again of the spirit!

I do not mean to imply that there are no problems peculiar to the economic and political levels of our national life. But if men are not right at the deeper level, in their understanding of the na ture of the universe and man's position therein, they can tinker with economic and political prob lems from now until doomsday and still come up with the wrong answers. It is a case of putting first things first and the very first thing is a rehabilitation of our basic moral principles. Such an effort on our part will call forth the support of cosmic sanction, for God intended men to be free. "The God who gave us life gave us liberty at the same time," Jeffer son observed. But we will need conviction, courage, tenacity, un derstanding, humility, compassion and, above all, faith, to set in mo tion what William James called "those tiny invisible, molecular moral forces which work from in dividual to individual, creeping in through the crannies of the world like so many soft rootlets, or like the capillary oozing of water, but which, if you give them time, will rend the hardest monu ments of man's pride."

That is the way! May our Father in Heaven endow us with wisdom, strength, and courage to follow it! Our forebears did so under more oppressive conditions than those we face. We can do it, too, provided only that we have the will ! That is your challenge and your opportunity! I pray you will make this your post-graduate mis sion and, if this be your resolve, that you will translate it into ac tion that counts. St. James said: "Whoso looketh into the perfect law of liberty, and continueth therein, he being not a forgetful hearer, but a doer of the work, this man shall be blessed in his deed." ~ the V6iet df 4 ~'f4tber ,s KENNETH W. SOLLITT CAIN had slain his brother Abel. When asked by God where Abel was, Cain replied with an evasive question: "Am I my brother's keeper?" But God was not fooled as to Cain's guilt: "What have you done? The voice of your brother's blood is crying to me from the ground."

When we pause to remember those who have died in the service of their country - and are even now dying - what does the blood of our departed brothers cry out to us, whom war has thus far spared? Surely their blood must say something to us, but what is it? Does it say, "The country for which we died is still worth fight ing for"? or does it say, "We were wrong; no war is worth the cost" ? To be specific, should we have This article is condensed from Dr. Sollitt's 1966 Memorial Day sermon at the First Bap tist Church in Midland, Michigan. 14 gone into Vietnam, or shouldn't we have done so ?And now that we are there, is it our moral obliga tion to remain or to withdraw? I honestly don't know the answer, and the uncertainty is so disturb ing that I almost envy those who can adopt one prejudice or an other, then read or listen to only their side of the story and refuse to believe anything that conflicts with their opinions.

But of one thing I am certain. There is a cry I can hear dis tinctly. It is the voice of a broth er's blood saying, "Our America and her way of life are worth LIVING for." Our salvation lies, not so much in dying for our ideals as in living for them. Per haps if there were more people who would live for the things for which our sons and brothers are periodically asked to die, there would be less call for their sacri fice. Living for America and her way of life may be an even greater 1966 THE VOICE OF A BROTHER'S BLOOD 15 act of patriotism than dying for them. It is because we will not live for our ideals that we are re peatedly called upon to die for them. We fight abroad for the right of self-determination, while at home we avoid doing for our selves, or deciding for ourselves, everything we can get someone else to do or decide for us. We fight abroa<;l for the right of free elections and then at home we offer our votes to the highest bidder in the election. We sacrifice our sons in battle to provide and to protect religious freedom while letting our religion deteriorate to the point where it isn't worth pro tecting. And when will we learn as a nation that we cannot worship in the sanctuary of Mammon with out eventually sacrificing more sons and brothers on the altars of Mars? Surely if our ideas are worth dying for, they are worth living for.

Susan Coolidge said it best: He serves his country best Who lives pure life and doeth righteous deed And walks straight paths however others stray And leaves his sons, as uttermost bequest, A stainless record which all men shall read; This is the better way. No drop but serves the slowly lifting tide; No dew but has some errand to some flower; No smallest star but sheds some helpful ray, And man by man, each helping all the rest, Make the firm bulwark of the country's power; There is no better way. So let us start living for the things for which we ask them to die, such things as free enterprise and genuine self-government, hon est work for honest wages, so briety, integrity, morality, filled churches and empty jails, homes where men and women are faith ful and children are taught by precept and example to reverence God and live pure lives. "The voice of your brother's blood is crying to me from the ground" condemning us and say ing, "You asked me to die for that for which you were unwill ing to live!"

And back of the voice of our brothers' blood I hear the deep rumbling of the voice of God him self asking, "What have you done?" Happy is the man who can reply, "I, too, aspire to be a pa triot, to live the life for which my brother so nobly gave his. May his ideals be perpetuated in me and translated into life." ~ Dr. Johnson's Defense of Property STEPHEN R. VALLANCE THE EIGHTEENTH century's Dr. Samuel Johnson lived at a time when the economic doctrine of common property (later developed intensively by Karl Marx) ex tended itself into the discussions of thinking men and into the teaching of children. "You teach them," Johnson told a friend, "the community of goods; for which there are as many plausible arguments as for most erroneous doctrines. You teach them that all things at first Mr. Vallance was recently awarded a Joseph Medill Patterson scholarship in journalism at Fordham University.

The quotations in this article are from Bos well's Life of Samuel ]oh'nson and from Rambler articles by Johnson dated April 17 and October 6, 1750. Portrait of Samuel Johnson by John Opie. The Bettmann Archive. 16 were in common, and that no man had a right to any thing but as he laid his hands upon it; and that this still is, or ought to be, the rule amongst mankind. Here, Sir, you sap a great principle of society, - property." It was from principle, not vested interest, that the author of the first English Dic,tionary defended property. Samuel Johnson had come to London in his early years accompanied by a former pupil of his, David Garrick, and between them they had only fourpence to start with in perhaps the only English city where one could raise his station. Both would strongly apply themselves: Johnson as a "drudge" with his dictionary and various other writings, Garrick 1966 DR. JOHNSON'S DEFENSE OF PROPERTY 17 upon the stage where he would gain fame in the city's dramatic circles.

The fact, therefore, that J ohn son achieved a degree of wealth both little and late testifies to his integrity when he dealt with the subject of property. What led Johnson to defend personal posses sion was his basic view of life. The brilliant lexicographer took life as he saw it around him (there was no question here of guessing at man's antediluvian condition), and he viewed it as no easy journey. In a 1762 letter to a friend immigrating to America there is a notion that he would keep all his life: "It is a melancholy considera tion," he wrote, "that so much of our time is necessarily to be spent upon the care of living, and that we seldom can obtain ease in one respect but by resigning it in an other; yet I suppose we are by this dispensation not less happy in the whole, than if the spontaneous bounty of Nature poured all that we want into our hands." But, however much he might see the activity of living as a dreary task with little comfort even in bounty, poverty was no state to praise. The next year, when Johnson was 54 years old, he recalled in conversation his early years in London: "When I was running about this town a very poor fellow, I was a great arguer for the advantages of poverty; but I was, at the same time, very sorry to be poor. Sir, all the arguments which are brought to represent poverty as no evil, show it to be evidently a great evil. You never find people labouring to convince you that you may live very happily upon a plen tiful fortune.- So you hear people talking how miserable a king must be; and yet all wish to be in his place."

Wealth Not Everything Here, Johnson was not proclaim ing any great benefits to be de rived from wealth but merely say ing that man wishes to be happy and finds the possession of prop erty a suitable prerequisite. How ever, Johnson would warn against too fervid a desire for riches, not so much because of a probable des pair in not attaining them but more because even their attain ment proved to be unsatisfactory. Johnson wrote about this desire in a semiweekly London magazine called The Rambler to which he regularly contributed: "When therefore the desire of wealth is taking hold of the heart, let us look round and see how it operates upon those whose indus try or fortune has obtained it. When we find them oppressed with their own abundance, luxurious 18 THE FREEMAN without pleasure, idle without ease, impatient and querulous in themselves, and despised or hated by the rest of mankind, we shall soon be convinced that if thereal wants of our condition are satis fied, there remains little to be fought with solicitude, or desired with eagerness."

So, Johnson was not one who saw in wealth or property a solu tion to man's pursuit of happiness. He, like his friend and fellow club member, Edmund Burke, felt the presence of an "unbought grace of life" and, besides, viewed the wealth he defended as a moral means (if not an always success ful one) to a moral end. Because this end, though moral, could not ensure happiness, Dr. Johnson tried to show to those who bewailed the unequal distri bution of property that their cries were 1ittle justified. In the same article in The Ram bler he asked them to consider "that the inequality of distribu tion, at which we murmur, is for the most part less than it seems, and that the greatness, which we admire at a distance, has much fewer advantages, and much less splendour, when we are suffered to approach it." This view, though it dismissed the argument that wealth made one man so much greater than an other and therefore was not to be allowed, did not preclude a man's rising in the world or mean that he should be "kept in his place."

In another issue of The Rambler Johnson without qualification agreed that a man's ability to rise should not be hindered: "Every man ought to endeavour at eminence, not by pulling others down, but by raising himself, and enjoy the pleasure of his own su periority, whether imaginary or real, without interrupting others in the same felicity." So this was Dr. Johnson's basic view of life: the necessity of meet ing one's needs; the desire for wealth; the unsatisfactory nature of both wealth and poverty and the questionable argument for reduc ing their differences; finally, the ability to rise in life without hin drance. What of his defense of property against erroneous doc trines? A preamble can be seen above, and it can now be presented within the context of these other views. Ownership in Common It was in The Rambler again that Johnson questioned the soundness of common property as an idea and there reached a most simple conclusion - the idea just doesn't work out in the world as we know it: "Community of possession must include spontaneity of production; 1966 DR. JOHNSON'S DEFENSE OF PROPERTY 19 for what is obtained by labour will be of right the property of him by whose labour it is gained.

And while a rightful claim to pleasure or to affluence must be procured either by slow industry or uncertain hazard, there will al ways be multitudes whom coward ice or impatience incite to more safe and more speedy methods, who strive to pluck the fruit with out cultivating the tree, and to share the advantages of victory without partaking the danger of the battle." Johnson has to find something that does work and so he relies on a. great principle of society-prop erty - as a basis for argument. The scope of his intelligence and the fund of knowledge which he constantly added to by reading and conversation prepared him to meet most fallacious reasonings and nonsensical propositions. The latter he considered Rousseau's speculation on the origin of in equality. Johnson's excellent bio grapher, James Boswell, recorded his subject's opinion of this kind of speculation: "Knowledge of all things is good. Conjecture, as to things use ful, is good; but conjecture as to what it would be useless to know, such as whether man went upon all four, is very idle."

Where· Roussea u has deduced a system, guessed at an unknown condition, and finds himself griev ing over the state into which no ble, primitive man has descended, Johnson has looked to experience, examined known conditions, and grieves only that, as he had writ ten to his emigrant friend, "so much of our time is necessarily to be spent upon the care of living." Grounded in Reality The reason why Johnson always seems to be in a. defensive position may be added here. Anyone could imagine a utopian state and by comparison with the unimagined hardship and injustice of real life show the system that produces these to be evil in its operation. Johnson acknowledged that evil but could not abandon such a sys tem as the necessity of living de mands in favor of a utopia where that necessity, because it is un considered, makes nonsense of that ideal state. He spoke of a real world, not of an easily fabri cated one: "Sir, there is nothing for which you may not muster up more plausible arguments, than those which are urged against wealth and other external advantages.

Why, now, there is stealing; why should it be thought a crime? When we consider by what unjust methods property has been often acquired, and that what was un justly got it must be unjust to 20 THE FREEMAN September keep, where is the harm in one man's taking the property of an other from him? Besides, Sir, when we consider the bad use which many· people make of their property, arid how much better use the thief may make of it, it may be defended as a very allowable practice. Yet, Sir, the experience of mankind has discovered steal ing to be so very bad a thing, that they make no scruple to hang a man for it." The Uncertainty of Giving While defending wealth, J ohn son tried to resolve the problem of just concern for the poor. If the real world was not a vale of tears to him, it was at least no easy traveling. It was also nothing to capriciously tamper with as some would do who, after a pitying view of the poor, would distribute the Iuxury of the wealthy among them. Here is how Johnson rea soned against this: "A man gives half a guinea for a dish of green peas. How much gardening does this occasion? How many labourers must the competi tion, to have such things early in the market, keep in employment?

You will hear it said, very grave ly, Why has not the half-guinea, thus spent in luxury, been given to the poor? To how many might it have afforded a good meal? Alas! has it not gone to the industrious poor, whom it is better to support than the idle poor?" The industrious poor would not be harmed by luxury spread in this manner because "luxury, so far as it reaches the poor, will do good to the race of people; it will strengthen and multiply them. Sir, no nation was ever hurt by luxury; for, as I said be,fore, it can reach but to a very few." And it was with these "very few" and the use they made of their riches that Johnson was often concerned. His defense of property is strengthened by his opinion of its proper use. It is really an element of the defense. A man of wealth to Johnson's mind has a prime obligation. He is obliged to spread that wealth for the benefit of society. Johnson rules out giving wealth away: "A man cannot make a bad use of his money, so far as regards Society, if he does not hoard it; for if he either spends it or lends it out, Society has the benefit. It is in general better to spend money than to give it away; for industry is more promoted by spending money than by giving it away. A man who spends his money is sure he is doing good with it: he is not so sure when he gives it away. A man who spends ten thousand a year will do more good than a man who spends two thousand and gives away eight."

1966 DR. JOHNSON'S DEFENSE OF PROPERTY 21 Thus, the artificial dole is dis missed. "Earning your pay" is far better than receiving it outright. This opinion finds a possible justi fication in our own time in two areas; in foreign aid, where the position of the receiver is discom forting and gives rise to ill-feel ing, and in programs for the poor, where government administrators have learned the importance of the poor's own involvement and action in return for the helping hand. For Johnson proper use of riches can also refute the notion (held by Rousseau among others) that there is some better quality in poverty which sets it above wealth as a state to be desired. This is a silly notion because "he who is rich in a civilized society must be happier than he who is poor, as riches, if properly used (and it is a man's own fault if they are not), must be productive of the highest advantage."

Indebtedness Frowned Upon Surely, Dr. Johnson is concerned with how well property is managed and to illustrate just how much he is concerned about the matter we may look into the 1782 cor respondence Johnson had with biographer Boswell, then at his estate in Scotland. In three separ ate letters he enjoins Boswell to avoid debt. Once, he warns: "Poverty, my dear friend, is 80 great an evil, and pregnant with so much temptation, and so much misery, that I cannot but earnest ly enjoin you to avoid it. Live on what you have; live if you can on less; do not borrow either for vanity or pleasure; the vanity will end in shame, and the pleas ure in regret .... " In another, he advises: "Let it be your first care not to be in any man's debt. When the thoughts are extended to a future state, the present life seems hard ly worthy of all those principles of conduct, and maxims of prudence, which one generation of men has transmitted to another; but upon a closer view, when it is perceived how much evil is produced, and how much good is impeded by em barrassment and distress, and how little room the expedients of pov erty leave for the exercise of vir tue, it grows manifest that the boundless importance of the next life enforces some attention to the interests of this."

In a third, his tone is again admonishing: "Do not accustom yourself to consider debt only as an incon venience; you will find it a calam ity. Poverty takes away so many means of doing good, and pro duces so much inability to resist evil, both natural and moral, that it is by all virtuous means to be avoided."

22 THE FREEMAN September So much for the proper use of property which Johnson has seen as so positive in its effects that he defends wealth against its en emies, moral and doctrinal. His life shows that the integrity of his defense cannot be questioned and, although social and political cir cumstances change, the soundness of his reasoning remains along with the necessity of man's meet ing the demands of life. Wealth is as good or better an answer to these demands as any other thing and private possession ensures wealth's good use. After all, one has to at least recognize Dr. Sam uel Johnson's common sense and preserve the resulting wisdom. "Of riches it is not necessary to write the praise. Let it, however, be remembered, that he who has money to spare, has it always in his power to benefit others; and of such power a good man must always be desirous." ~ A Question of Property IF, as M. Proudhon asserts, "all property is robbery"-if no one can equitably become the exclusive possessor of any article, or, as we say, obtain a right to it-then, among other consequences, it follows that a man can have no right to the things he consumes for food. And if these are not his before eating them, how can they become his at all? As Locke asks, "When do they begin to be his? when he digests? or when he eats? or when he boils? or when he brings them home?" If no previous acts can make them his property, neither can any process of assimilation do it: not even absorption of them into the tissues. Wherefore, pursuing the idea, we arrive at the curious conclusion, that as the whole of his bones, muscles, skin, and so forth, have been thus built up from nutriment not belonging to him, a man has no property in his own flesh and blood-has no more claim to his own limbs than he has to the limbs of another; and has as good a right to his neighbour's body as his own! Did we exist after the same fashion as those compound polyps, in which a number of individ uals are based upon a living trunk common to them all, such a theory would be rational enough. But until Communism can be carried to that extent, it will be best to stand by the old doctrine.

HERBERT SPENCER, Social Statics (Rev. ed., 1892) the 'Vital Secret PAUL L. POIROT NOT ONLY foreign visitors, but many who have lived all their lives in the United States, observe the comparatively higher level of liv ing here than in other countries and seek a reason why. Some attribute the American advantage to such governmental interventions as the Tennessee Valley Authority, or the Federal Reserve Banking System, or the Social Securi ty program, or the Rural Electrification Administra tion, or the farm price support program, or the patent laws, or the public schools, or the Federal state highways, or immigration or tariff policies, or the merchant marine, or the space program, or the antitrust laws, or the Federal Power or Federal Communica tions Commissions, or any of hundreds of other compulsory prac tices. Others dig somewhat deeper to see that American workers have access to larger amounts of cap ital, machinery, tools, electrical energy, and other labor-saving de vices which afford increased pro ductivity for each man-hour of effort. And this would seem to come nearer to an explanation than does the amount of governmental intervention. Yet, when the magic formula is tried elsewhere, by building a high dam to provide electrical energy in Nasser's Egypt, or building costly steel mills and oil refineries in starving India, or confiscating all available capital in Castro's Cuba, the re sult is not the American level of living, but the same bare sub23 24 THE FREEMAN September sistence that has so long plagued those unfortunate people. So, there must be more than meets the eye to account for the high level of living in the United States.

It is true that we have more capital invested per worker, more kilowatt hours of electricity avail able per worker, more and better machinery and tools per worker. Yet, these are but part of the fruits of industrial progress; these are effects of progress, just as our high level of living is an effect. And the cause of these con sequences must lie deeper still. Those who will see clearly enough may discover that freedom lies behind these material accom plishments, this high level of liv ing. Freedom means release from governmental regulations and con trols, or from any form of coer cion or compulsion, the release of human energy, where each man is free to try, to succeed or fail with his own property and his own effort, according to his own choice, with the full right to the fruits of his success and the full liability for his failure. And perhaps underlying the practice of freedom are the con cepts of respect for private prop erty, respect for the life and the dignity and the rights of each and every human being, the self-respect that is becoming to a man as a creature of God.

So, if we would share our ma terial achievements and our in dustrial progress with those less fortunate than ourselves, either within the United States in so ca.lled pockets of poverty, or in other countries, let us try to bet ter understand the nature of self respect, learn to practice it more faithfully and fruitfully, in due humility, so that others may choose to do the same. From true and humble self-respect stems re spect for the property and the lives of others. Once a people un derstand the importance of life and property, and come to respect another's as they respect their own, then they are in a position to organize a government of lim ited powers, knowing full well the limitations of coercive methods. And then, but not before, they are ready to practice freedom and en joy such blessings of freedom as tools, machinery, electrification, automation, and a high and ris ing level of living.

Perhaps, if this were the secret of American progress that we un dertook to share with the rest of the world, we might come to un derstand it well enough to pre serve our own freedom. ~ LEONARD E. REAl} THERE IS NO RESPECT in which any two persons are identical-physi ologically, psychologically, philo sophically, ideologically. Nature decrees variation in everything-no exceptions. In the animal world it seems. that the more advanced the species, the greater the differences. As to man, this rule also holds true: the more advanced the individuals, the more distinctive are their dis similarities. Yet, regardless of this fact, we do generalize about our fellow hu mans; we attempt to categorize each other, to lump men and wom en under neat little labels: bril liant, muddled, idealistic, cussed, black, white, religious, inventive, and so on. All generalizations are oversimplifications; nonetheless, we couldn't get along without them. Communicating one with the other would be out of the question were minute particulari zation a requirement. Categories are tools of thought and are es sential to communicable writing, talking, even to thinking for our selves.

We cannot dispense with classi fications without doing away with communication; we couldn't even think without them. But we can aid and abet our own thinking as well as our powers to communicate by dropping loose, sloppy classifi cations in favor of more refined ones. In short, we can try to say more precisely what it is we really mean. For instance, in the politico-eco nomic area, we carry oversimplifi cation to an absurd extreme by putting all of humanity into two categories: (1) those we roughly think of as on "our side," and (2) those we regard as ideological ad versaries. Such, of course, is the ultima te in erroneous classifica tion. And to continue the error is to promote suspicion, misunder26 THE FREEMAN September standing, dissension, hate - yes, even wars. We should, insofar as possible, be done with this non sense! The Confusing Labels We Use for One Another The sloppy labels employed de pend on which of the two imagi nary sides is doing the classifying.

Those on one side will call the others collectivists, lefties, stat ists, communists, interventionists, state planners, welfare staters, Fabians, traitors, nazis - each term used derisi vely. There is another label - the favorable one these "collectivists" call them selves: "liberals." But those who call themselves "liberals" will, with no less self righteousness, refer to their so called adversaries as extremists, reactionaries, rightists, profiteers, enemies of the poor, and even fas cists. One also hears muttered epithets such as dog-eat-dog, law of the jungle, and the like. These are some of the ways the "lefties" label the "rightists." Observe, now, how the "right ists" label themselves: conserva tives, patriots, libertarians, indi vidualists, constitutionalists; some will say they stand for capitalism, many for private enterprise. There are other favored labels - terms to indicate where they stand: the rule of law, free enterprise, free competitive enterprise, the market economy, the exchange economy, voluntarism, the profit and loss system, the incentive system, limit ed government.

What a babel of nondefinitive classifications from both imagin ary camps! And who among us is exempt from this looseness? Most - not all-of these labels are mean ingless and utterly confusing un less one is aware of the author's thinking, motivations, prejudices, predilections; they're no aid to clarity. Reflect, for instance, on "capi talism" as used by Karl Marx, a term of opprobrium and, then, by Ludwig von Mises, a term. of ap probation. We do, of course, de rive some idea of what is meant when "capitalism" is employed by such well-known authors, but most people who use the term are total strangers and, thus, we haven't the slightest idea as to what is implied. "Capitalism," on its own, is nondefini tivee We are at the mercy of the define'rs, few of whom agree. Or, to further illustrate, take "private enterprise." To some minds this conjures up privately owned businesses honestly compet ing for consumer favor, an eco nomic ideal. To others, everything from embezzlement to piracy is suggested, both of these enter prises being quite private.

1966 THE CASE FOR .WILLING EXCHANGE 27 A Fundamental Difference All politico-economic classifica tions in current usage have their faults. Nor is it possible to con struct a term that is precisely de finitive. However, there is one that seems to be an improvement over the others: willing exchange. I have used this term for some years as a means of identifying my own position, and, while little if any adoption by others has been noted, it is significant that no one has taken issue with me for using it. Perhaps if the implications of "willing exchange" were high lighted, it might be more widely employed. If clarity can be served, it's worth trying to make the case for its inclusion in our vocabulary. The first step is to recognize how deeply exchange extends into human affairs. It goes to the very roots of and is fundamental to earthly existence. This is more or less apparent, as related to goods and services, in a division-of-Iabor society. Specialists exchange - or perish! But more: man, individ ualistic as he is, remains a social being. Even were an individual in comparative isolation, he can exist only by reason of his heritage an exchange process in knowledge and ideas extending back to the harnessing of fire, even to the dawn of human consciousness.

So far, so good - no argument. In a word, we can declare ourselves in favor of exchange and arouse no more controversy than announcing a favoritism for life. And for good reason: exchange, without any modifiers, isn't mean ingfully definitive. It's at the next step - when modifiers are introduced - that controversy has its genesis. Shall it be willing or unwilling exchange? Free or Forced I wish to suggest that standing for willing exchange, on the one hand, or for unwilling exchange, on the other, more nearly accents our ideological differences than does the employment of the terms in common usage. It is when using these terms to distinguish our selves that we can openly, honest ly, logically part company, and with considerable clarity. Willing or unwilling exchange makes sub terfuge not impossible but diffi cult; to side with one or the other is to declare one's meaningful po sition more or less unequivocally and unmasked; there is a mini mum of verbal fa~ade to hide be hind.

Willing exchange, uncommon and thus not in the trite or cliche category, immediately provokes reflection, a big mark in its favor. The term has not yet been saddled with emotional connotations, such as those built around free trade, 28 THE FREEMAN September for instance. Further, its antithe sis, unwilling exchange, comes to mind, and no one, not even a pro tagonist, proudly acknowledges he favors that; it does offense to his idealism. Unw'illing exchange, at the very least, is a semantic jolter; it suggests to any sensitive spon sor that he take another look at his position.! While I use w'ilMng exchange and the free market synonymously, the word market, to most people, conjures up no more than a swap ping place for produce or the little understood and much maligned stock market; they see in market only crass materialism, no spirit ual or cultural qualities, none whatsoever. 2 Frederic Bastiat used the term, Ziberte des transactiDns, 1 The forcible collection of income (taxes) to defray the costs of govern mental activities must, when the activi ties are beyond the principled scope of government, classify as unwilling ex change. But taxes to defray the costs of activities that fall within the principled scope of government are in neither the willing nor unwilling category; they are the payment of an obligation as, for in stance, a just debt. See my Government: An Ideal Concept (The Foundation for Economic Education, Inc., Irvington-on Hudson, N. Y.) pp. 11-49.

2 I insist that the free market is a spiritual phenomenon and that its ap prehension is a greater cultural achieve ment than are poetry, music, or what ever. See the chapter, "The Miraculous Market," in my The Free Market and Its Enemy (The Foundation for Eco nomic Education, Irvington-on-Hudson, N. Y.) pp.6-21. a good-image phrase but, to my way of thinking, not quite as thought-provoking as willing ex change. The full antithesis of w'illing exchange encompasses more than forced or coercive exchange which unwilling so clearly implies. No exchange at all-the absolute pro hibition of exchanges - must also be included as the antithesis of willing exchange. One of many ex amples: the prohibition of ex changing dollars for gold. Instances of Coercion If we cut through all the ver biage used to report and analyze political and economic controversy over the centuries, we find that much of it boils down to a denial of willing and the insistence upon unw'ilZing exchange. What were the Crusades but an attempt for cibly to substitute the "true faith"

for the beliefs of the "infidels"! Napoleon attempted to substitute his authoritarianism for someone else's rule, armies and guns being his method of persuasion. The looting, of neighboring nations was only a coercive exchange of some people's property for the invaders' satisfactions. Robbery, an ex change device, was the first labor saving scheme. Feudalism was a coercive exchange of the serfs' labor for the serfs' and lord of the manor's protection. Mercantilism 1966 THE CASE FOR WILLING EXCHANGE 29 forcibly controlled and/ or pro hibited exchange. However, it is not necessary to draw on ancient history for ex amples of unwilling exchange. To day, the fruits of one's labor are forcibly exchanged to put men on the moon, to pay farmers not to grow numerous crops, to rebuild deserted downtowns. The list of coercive activities that go beyond the principled scope of government runs into the thousands. 3 Nor does one have to be much of a po litical economist to see that mini mum wage laws, labor union com pulsions, social security, medicare, free lunches, foreign aid, and a host of other governmental activi ties are the antithesis of willing exchange.

Unwilling exchange has its gen esis in an objective theory of val ue, that is, in the forcible imposi tion on the individual of a value standard not of his choice but of someone else's making. It's Na poleon's, or a labor union's, or a bureaucracy's value judgment not the individual's value judg ment - that determines how the individual shall employ himself, what his hours and wages shall be, what and with whom he shall ex change, and what shall be the dis3 See Encyclopedia of u.s. Govern ment Benefits. (Doubleday Book Shop, 724 Fifth Avenue, New York, N. Y.) 1,000 pp. position of his income. Through out the ages, right up to the pres ent moment, unwilling exchange has been conspicuous, and for a simple reason: most people haven't known any better! The Subjective Theory of Value It wasn't until a few years ago - 1870 - not long enough to be widely apprehended, that Austria's Menger, England's Jevons, and Switzerland's Walras, almost si multaneously, made the greatest discovery in economic science: the subjective theory of value, some times called the "marginal utility theory of value." Until this time, no one had ever formulated a valid theory of value. Then these econo mists, by merely observing how ordinary people exchange when unrestrained, discovered that the value of anything was what others would give for it in wilUng ex change. The value of a painting, for instance, is whatever others will forego in order to obtain it.

That's marginal utility, pure and simple, which can be only subjec tively determined. In short, no one else but you can determine the relative <>r marginal utility of anything to you. Here, for the first time in his tory, the concept of willing ex change unseats Napoleonic be havior - all forms of authoritar ianism - and enthrones the indi30 THE FREEMAN September vidual. The consumer becomes king. Individual freedom of choice rules economic affairs. Whether I plow the fields or pilot a plane, or whether I exchange the fruits of my labor for some corporation's stock or for a bungalow by the seashore is for me, and a willing seller, to decide; it is no one else's business! In good theory this is true; in practice it faces opposi tion. Most individuals favor subjec tive evaluations as applied to self but will, at the same time, insist on objective evalutions as applied to the millions who "don't know what's good for them." In a word, very few will accord that liberty to others which they so much cherish personally. These inconsistent peo ple are the victims of a historical momentum - the darkened millen nia of mankind's past - and thus have not apprehended the newest politico-economic fact on the face of the earth: individual liberty.

This slowness to apprehend may, in turn, deri ve from our poor choice of descriptive terms. Positive Identification Admittedly, making the case for the use of willing exchange as a means of identifying one's posi tion, is going to raise the question, "Well, if I am not to single out as descriptive of myself such terms as conservative, patriot, capitalist, libertarian, free enterpriser, or some other loosely definitive label, what then? Are you suggesting that I call myself 'a willing ex changer'?" Indeed not! The best answer to "What are you?" is your own name. If one be a Marx or a Mises, whose repu tations precede them, the name alone suffices. If one be neither in famous nor famous, and another is interested in the details, let him inquire and listen. A personal ex perience will help with my point: 1 4 was invited to lecture at a clergymen's seminar in Texas. Just before the affair got under way, a gentleman 'proffered his hand, announcing, "I am Charles Hemphill from Cisco."

My response, "I am Leonard Read." "Where are you from, Mr. Read ?" "The Foundation for Economic Education at Irvington-on-Hud son, New York." "Oh! You're Leonard Read. My ideological position was un known until identified with FEE. Immediately, Mr. Hemphill knew of my beliefs, and in considerable detail. Now, suppose my answer to the question, "Where are you from?" had been, "Right here in Mineral Wells." That would have given him no tip-off as to my position. This new friend, an inquiring 1966 THE CASE FOR WILLING EXCHANGE 31 spirit, would have wanted to know how to classify me. My capsule answer, today, would go some thing like this: No man can contrive or blue print a good society any more than any individual can make such a simple thing as a wooden lead pencil. 4 'The pencil, or any other artifact, for that matter, is a man ifestation of infinitesimal and var ied creativities flowing through the minds of men in complex in terchange since well before the harnessing of fire. Once the pencil comes into existence, we can, to some extent, observe and write about what took place, the most significant deduction being the un obstructed flow of creativities, that is, creativities in free and willing exchange.

Similarly, the good society is a manifestation, not of a prede signed blueprint - not of a mass blindly following some person's scheme of organization - but, rather, the natural out-cropping of the efforts of a goodly number of people in pursuit of Truth. In a word, a good society, like a pen cil, is a configuration of the tiny wisdoms men come upon when seeking, above all else, what is right and righteous. 4 See the chapter, "Only God Can Make a Tree - Or a Pencil" in my Any thing That's Peaceful (Foundation for Economic Education, Inc., Irvington-on Hudson, N. Y.) pp. 136-143. Whenever a good society shows forth, we can, to some extent, ob serve and write about what took place, the most significant deduc tion being the unobstructed flow of millions of individually ac quired wisdoms, that is, flashes of enlightenment in free and willing exchange. The Truth Will Out No man set about inventing willing exchange. Instead, some men were in pursuit of Truth.

Their numerous findings and in sights combined to make of them the kind of men who understood the advantages of willing or free exchange. But whenever the pur suit of Truth has not been upper most among the aims of a consid erable number of people, the un derstanding recedes to the point where unwilling exchange is be lieved in and practiced. No man preconceived and set about designing and writing the Declaration of Independence, the Constitution, and the Bill of Rights as a "means of erecting a good society. These political docu ments were really a configuration of beliefs that achieved dominance through a pursuit of Truth quite extraordinary in its intensity. The seeking of Truth was the seed; a good society, perhaps the best that has existed, was the bloom; these documents were but a re32 THE FREEMAN Sevptember cording of the beliefs. To confirm this, merely note that when the beliefs changed, the documents be came commensurately meaning less.

When we entertain the idea that political documents and laws cause a good society, we are wont, in adversity, to repair and revise the documents and laws. This is not only useless but seriously di verting. For nothing counts but Truth, and Truth comes to us only when we are seeking what is right and righteous. This, to my way of thinking, is the most im portant and practical of all politi cal· facts. Reflecting on what the pursuit of Truth has divulged, I believe that no person, or any combination of persons, regardless of numbers, or any agency they may contrive be it a labor union, trade associa tion, or government - has any right of control over any other person that does not exist or in here as a moral right in each in dividual. The only moral right of control by one indi vid ual over another or others is a defensive right, that is, the right to fend off aggressive or destructive actions. Governments, therefore, should go no further in controlling people than the indi vid uals who organize it have a moral right to go. For, if government does not obtain its power of control from those who establish it, from where then does its power derive? In short, limit governmental power to codifying the do-nots consonant with the defense of life and liveli hood, to the protection of all citi zens equally. No special privilege for anyone!

This is by way of saying that, ideally, government should be lim ited to inhibiting and penalizing all violence, fraud, predation, mis representation, that is, to keeping the peace. Insist that it tolerate no unwilling exchange and that it never indulge in what it is or ganized to prohibit. Let govern ment do only this; leave all else, including welfare and prosperity, to willing exchange. I believe we are fully agreed as to the quality of liberty we cherish for ourselves. The question is, are we agreed to allow this same qual ity of liberty to all others? If so, the spirit of liberty may be on the move again. ~ SOCIALISM IJ. ~. STYLE HENRY HAZLITT NEW YORK CITY'S first subway opened in 1904. The fare was 5 cents. The subways remained un der private ownership until 1940. The fare was still 5 cents. But meanwhile wholesale prices had gone up 32 per cent; wage rates had tripled; the lines were granted tax exemption by the city. They petitioned for higher fares. But the 5-cent fare was sacred. The city fathers decided that the only way to keep it was to eliminate private profit and run the trains themselves.

So the subways were bought by the city in June 1940. On July 1, 1948, the fare was doubled to 10 cents. On July 25, 1953, it was tripled to 15 cents. Between 1940 and 1953 other consumer prices went up 91 per cent, but New York subway fares went up 200 per cent. The lines were still run at heavy loss. Even by its own meth od of accounting, the Transit AuCopyright Newsweek, Inc., July 18, 1966, and Henry Hazlitt. thority has lost money in seven out of the last ten fiscal years. If even one of its several subsidies from the city is deducted, it has lost money heavily in everyone of those years. The Transit Authority, which runs the subways for the city, is required by law to operate within revenues received from operations. This is a rather technical require ment. In the first place, capital funds (such as for subway con struction, subway cars, and buses) are provided by the City of New York. There is a subsidy for car rying school children, and a sub sidy for Transit Police.

In the fiscal year ended on June 30 last, the Transit Authority re ported an operating deficit of $62 million. This deficit was achieved in spite of a tax subsidy of $166 million to Transit for the fiscal year. The subsidy was made up of New York City's outlays for all debt service, construction, and new equipment of $116 million; 33 34 THE FREEMAN September the subsidy for student fares of $20 million, and the subsidy for Transit Police of $30 million. And . now the fare has been raised to 20 cents - a 300 per cent increase since 1940. The extra 5 cents is expected to bring in some thing in excess of $60 million, but probably will not be enough to cover the operating deficit even when all the subsidies are in cluded. A 25-cent fare may be less than a year away. As the charge for the service has been going up, the quality has been going down. The trains run less frequently; they don't meet sched ules; they get older and dirt ier, and so do the stations.

The Wall Street Journal recent ly complained in an editorial: "The change-makers in the municipally operated subway system refuse, usually with great rudeness, to ac cept a $5 bill or anything higher ... A person finding himself with nothing under $5 has no choice but to trudge back up the stairs and find a store willing to make change. Nine times out of ten the shopkeeper will do so in perfectly friendly fashion. The contrast is illuminating. The salesman in the store knows his livelihood depends on courtesy and service. To many a minion of bureaucracy, however, people are nuisances at best and to be treated as such." This is "public" ownership. This is how socialism, U.S. style, works. A theory has developed that municipal transportation ought not even be expected to pay its way. This theory is merely the out growth of government ownership. When cities own and operate the subways, the fare must be sub sidized. When governments own the railways, the railway fare must be subsidized. When govern ments own the telephone and tele graph lines, the lines are subsi dized. When governments own the power and the light companies, power and light are subsidized.

When governments own the air lines, the airlines are subsidized. Governments run the mail serv ice, and the mail is carried at a loss. Nothing is expected to pay its own way. A subsidy on bread would be more defensible than any of these, but the government doesn't yet own and run the bakeries. The socialist argument begins by saying that fares are too high because private industry is under the necessity to make a profit. What is overlooked is that it is precisely the need to make a profit, or to avoid a loss, that leads to economy, efficiency, and good serv ice. Government ownership re moves the incentive to all three. ~ IT IS HARDLY conceivable that a people would grant the power to a government of their own making to make over their lives. Only confu sion could produce the notion that it would be desirable or necessary to grant such powers to govern ment. If a people wish to alter the character of their Iives and their ways of doing things, there is no need for government to ef fect the changes; the people can make them on their own. Of course, a majority might grant powers to its government to make a minority conform to its will.

But any thoughtful majority would wish to circumscribe these powers, for majorities change in their constituency, and a man who is Dr. Carson is Professor of American History at Grove City College, Pennsylvania. Among his earlier writings in THE FREEMAN were his series on The Fateful Turn and The Ameri can Tradition, both of which are now avail able as books. 24. The Flight from the Constitution PART II CLARENCE B. CARSON today the member of a majority may tomorrow find himself in a minority. At any rate, the Constitution of these United States did not authorize the government it pro vided for to engage in social re construction. Moreover, many pro tections were written for minori ties against their subjection to some temporary majority. Yet, for a good many years now, the gov ernment of these United States has been engaged in various proj ects of social reconstruction. Each of these is a flight from the Con stitution. But before detailing these flights and explaining how they have been made, let us ex amine a single instance.

On May 31, 1955, there went out a decree from the Supreme Court at Washington in the Dis trict of Columbia based upon a 35 36 THE FREEMAN September prior declaration by that body of "the fundamental principle that racial discrimination in public ed ucation is unconstitutional. ..-All provisions of federal, state or local law requiring or permitting such discrimination must yield to this principle .... " This decree ordered subordinate courts to comply in these words: - The Courts will require - a prompt and reasonable start toward full compliance - and enter such or ders and decrees - as are necessary and proper to admit to public schools on a socially nondiscriminating basis with all deliberate speed the parties to these cases. . .. This decree had the purpose of implementing the ruling of the Supreme Court in Brown vs. Board of Education of Topeka, et al, which had declared segregated schools unconstitutional in 1954.

A great concert of spokesmen in the media of communication proclaimed that the decision and the subsequent decree was the Law of the Land. Many vocal ele ments in the United States sub scribed to the notion, or presump tion, that those who did not rush to comply with the Court's procla mation were defying the law. The import of what they were saying was this: Those who continued to maintain segregated schools sup ported by taxes were outlaws. Such was not the case (and is not the case). Nothing is more firmly established in the Ameri can system of jurisprudence than that courts apply the law to par ticular cases. If this decision was law for anyone, it was law only for the defendants in the case (i. e., the Board of Education of Topeka, and so forth). It would become law for others only when rulings had been made upon cases brought before courts. Critics of the decision have charged that the Court was legis lating. Defenders of the decision have, by implication, claimed that the Court has legislated. When they say that the decision is the L.aw of the Land, they must be saying that the court legislated, for they do not charge that it was the Law of the Land before 1954.

The words of the decision suggest that the Court was trying to legis late, or, at the least, give this character to its pronouncements, for it did speak to the general sit uation, though its order did and could apply only to those defend ants before it. Reconstruction, the Aim The Brown case is of particular interest because it is a dramatic illustration of two intertwined trends involved in the flight from the Constitution. In the first place, it was an attempt to make over or reconstruct society. One writer 1966 THE FLIGHT FROM THE CONSTITUTION, II 37 focuses upon this character of the decision as well as emphasizing the departure from earlier prac tice in these words: The Segregation decisions had a social consequence of a vastly differ ent order. They called for a rewrit ing of state and federal legislation relating to public education. When to the Segrega tion decisions are added the later judicial acts extend ing the new constitutional regime to other places of public assembly, one must acknowledge that judicial or ders have required a basic revision of social structure and a root change in human relationships. The Su preme Court did not order Alabama and Mississippi and South Carolina to forget about an innovation in public policy and continue life as they had lived it before the promul gation of that innovation; the Court ordered people in those and other states to fashion legislation of a kind that they had never had on their statute books and to institute some social relationships that had never prevailed in those places.!

Second, the Court used estab lished judicial procedures to carry out unjudicial action. This gave the act its semblance of legality and claim to be obeyed. But it did not alter the fundamental innova tion involved nor departure from judicial functions. 1 Charles S. Hyneman, The Supreme Court on Trial (New York: Atherton Press, 1963), p. 199. The Method of Judicial Review The two judicial instruments used were judicial review and the court order. The so-called power of judicial review is based upon the view that in applying the law the courts must decide which law applies to a particular case. If there are two laws in conflict, the court IT1Ust choose which one is applicable, and in so doing it makes of the other a n ulli ty. Two sorts of conflict have arisen: one, a con flict between an act of the legis lature and a provision of the Con sti tution; the other, a conflict be tween Federal legislation and that of the states.

Since Marbury vs. Madison, the rule has held that an act of legis lature in conflict with the Con stitution will not be applied by the courts. Such an act is usually said to be unconstitutional. It is also held that a state act in conflict with a Federal act, when the Con gress was acting within its con stitutional powers, will not be ap plied. Claims have arisen over the years that the courts were actually making law when they interpreted the Constitution and the laws. But in the above examples, at least, the courts would not be making laws, they would only be deciding between laws as to which to apply. The Brown decision was pecu liar in many ways. The usual route to the testing of a law is to 38 THE FREEMAN September violate it, be found guilty by the appropriate court, and appeal the decision on the grounds of the unconstitutionality of the law. The Brown decision did not arise in this way, though it could have.

Two ways to test the segregation laws come to mind. One would be for the parents of a child to re fuse to send him to a segregated school. If the state in which this occurred had compulsory attend ance laws, the parents might then be prosecuted for failing to re quire the child to attend. The par ticular law being challenged would be the compulsory attendance law, but perhaps the courts might de cide upon the constitutionality of segregation in connection with it. The other way to test the con stitutionality of segregation would be for a school official to enroll, say, a Negro child in a white school, or vice versa. If he were then brought to court for his act, a perfect test case would be avail able for the constitutionality of the laws requiring segregation. Change by Order of the Court In both imaginary cases, the court could have ruled the acts unconstitutional. That is, the court could have held that an act com pelling students to attend segre gated schools was in violation of the Constitution (or even, that compulsory school attendance was). And, it could have held, in the second case, that the require ment that schools be segregated was unconstitutional. In either case, the decision of the court would have been negative, and the initiative for taking action would have remained with the states and communities. In these cases, the Court would not have been making law, though it would have reversed its former position as to what was law.

But the approach to the courts was not made in the usual way. Plaintiffs in these cases asked for court orders requiring the ad mission of the pupils in question to all-white schools. That is, they asked for orders compelling inte gration. The court order is a well established instrument of the courts. There are a considerable array of instances in which they may be issued. Roughly, though, they are of two kinds: those is sued prior to adjudication, and those issued to effect a judgment arrived at in regular court pro ceedings. The first usually is of the nature of an injunction, pro hibiting or estopping some action which, if it is as alleged, will re sult in irreparable damage if al lowed to continue until a case can be decided in court. Decisions themselves may result in court orders; if so, they would be of the second kind.

1966 THE FLIGHT FROM THE CONSTITUTION, II 39 Remaking the Law It is remarkable that these cases should ever have come before the Supreme Court. There was no al leged conflict between Federal and state statutes. There was no stand ing law (that is, legislative enact ment) compelling integration upon which a court order might issue. Moreover, courts (including the Supreme Court) had held on many occasions that segregation, per se, did not violate the "equal protec tion of the law" clause of the Fourteenth Amendment. The rul ing principle in such a case might be expected to be stare decisis (to let the decision stand). In short, there was no law, either statute or constitutional, upon which a court order might be issued. Before the Supreme Court could issue the orders that it did and remand the cases to the lower courts for particular orders, it found it necessary to establish at least the semblance of such law by constitutional reinterpretation.

That is, it reversed earlier deci sions. Theoretically, it might have done so by declaring that it would not enforce laws requiring segre gation in the schools, though it had no case directly challenging these before it. If it had done so, however, its ruling on the cases be fore it would, of necessity, have been to deny the suits. The Court was asked to rule not that segregation was unconstitutional but that for the plaintiffs to receive equal protection of the laws integra tion must be required in public schools. Desegregation Does Not Require Compulsory Integration Compulsory integration is the key phrase for understanding the import of the Brown decision. The distinction between declaring seg regation to be unconstitutional in the public schools and the compel ling of integration may appear to be a distinction without a differ ence. It is not; it makes all the difference in the world. If the Court had ruled that segregation was unconstitutional, the decision would undoubtedly have been sub ject to much controversy. It would, nonetheless, have been, in the common parlance, the Law of the Land. That is, the courts would not enforce segregation laws by assessing penalties against vio lators. In the normal course of events, no such cases would come before the courts. Everyone might know that such laws were of no effect. Ruling in this way, the Su preme Court has an inherent pow er to say what is the law in these United States. It is a negative power; it nullifies but does not create.

Compulsory integration is another matter altogether. It is not 40 THE FREEMAN September law at all. It lacks the predictabil ity which is an essential require ment of law, about which more anon. There are no minimum nor maximum penalties fixed for vio lators. There is no provision for trial by jury of offenders, which, if the decisions were law, would be in conflict with the Sixth Amendment to the Constitution. There is no description of the circumstances under which inte gration must occur, no exclusion of those in which it is not re quired. The effecting of the deci sions is to be done in such a man ner as to evade the requirements that due process of law be ob served. "Due process of law" is often treated as if it were a mystery, to be divined, if at all, by those deeply immured in the intricacies of the law. For some of the finer points, this may be so. But much of the outline of the requirements of due process of law is spelled out unmistakably in the Fourth through the Eighth Amendments to the Constitution. For example, the Fifth Amendment says, "No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury .... "

The Sixth says, "In all criminal prosecutions, the accused shall en joy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been com mitted. . . ." The Seventh says, "In Suits at common law, where the value in controversy shall ex ceed twenty dollars, the right of trial by jury shall be preserved .... " Any law which did not allow or provide for these processes would, itself, be in violation of the Con stitution. The Brown decision, and those subsequent to it, allowed for no such processes; contempt pro ceedings before a judge only were to be the methods of enforcement. Nothing Settled More needs to be said under the heading of predictability. The Brown decision, for all its firm ness of tone, did not settle the question as to what is the law. It only raised a host of questions. Let us note some of them. Must a school admit a child of the Ne gro race when he applies without regard to where he resides? Does the ruling apply with equal valid ity to Indians, for instance?

Must a school district integrate its schools in the absence of the desire for such integration from any of its constituency? May a pupil be compelled to attend an integrated school? When is a school integrated? Must a school have some kind of balance among the races in its pupil make-up? Must Negroes be imported or 1966 THE FLIGHT FROM THE CONSTITUTION, II 41 white people exported in order to achieve integration? Any court worth its salt confronted with the Brown decison under the guise of law would, of necessity, rule that it was no law. The Brown decision, and those subsequent to it, was not judicial legislation; it was judicial compul sion. There was, and is, no law requiring integrated schools. There have been a large number of court orders compelling inte gration in particular instances. They are compulsions, however, without the sanction of law-in the absence of standing law. They are assertions of the will of the courts, or of the Supreme Court, hence, arbitrary, violative of con stitutional rights, and putative usurpations of powers belonging to legislatures or to the people.

Those who believe that the Brown decison was nonetheless proper may defend their position by holding that the integration of the schools could not otherwise have been obtained, that there would have been insufficient states to approve a constitutional amend ment for it to be adopted, that Congressional action would have been forestalled by a filibuster, that grand juries in some parts of the country would not indict offenders, that trial juries would not convict. All of this is another way of saying that the Constitution does not contemplate the use of the government to make over the lives of Americans, tha tit provides for a government answer able to the people, that the taking of life, liberty, and property are powers residing finally in juries selected from among those in the communities where the act is done. In short, Americans did not contract away the power to alter and determine what their lives would be. Such attempts can be made only by flights from the Constitution.

Other Unconstitutional Actions The above is, of course, only one among many flights from the Constitution in the last eighty years. It is particularly significant beca use it shows how a nonelec tive branch of the government claims power for itself to alter society. But all branches of the United States government may and have taken part in action un authorized by the Constitution. The following are some examples of such actions: 1. Passage of antitrust acts 2. Authorizing the Interstate Commerce Commission to set rates 3. Establishing of the Federal Reserve System 4. The passage of a graduated income tax 5. The construction of steam gen42 THE FREEMAN September erators by the Tennessee Valley Authority 6. The subsidizing of agricultural prices 7. The restricting of crop acre ages 8. The subsidizing of interest rates 9. The establishing of minimum wages and maximum hours 10. The operating of Social Secur ity 11. The sponsoring of coopera tives 12. The giving of Federal aid to education 13. The providing of low rent housing 14. The making of loans to other nations 15. The forbidding of child labor 16. The arbitration of labor dis putes 17. The controlling of prices These and many other actions have been done by the govern ment of the United States. They are nowhere authorized in the Constitution. The legislative pow ers are enumerated in Article I, and not one of the above is men tioned nor, for that matter, clear ly implied in the powers granted.

Some will imagine, for example, that a graduated income tax is authorized by the Sixteenth Amendment. It is not. The Amend ment reads, "The Congress shall have power to lay and collect taxes on incomes from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration." True, a graduated tax is not forbidden; but, then, neither is it authorized. Moreover, since the prevailing practice in America was for taxes to be uniform, no presumption existed that this au thorized graduation. On the con trary, the supposition would be tha t income tax rates would be uniform. 2 Any court eager to in sure the equal protection of the laws to the citizenry might refuse to enforce the graduated feature of the income tax on the grounds that by its workings Americans are not equally protected from the confiscation of their property. Getting Around the Limitations My point, however, is that the Constitution does not authorize a graduated income tax. Nor does it authorize a host of other actions taken with the purpose of making over American society. The Con stitution posed both formal and substantive obstacles to the parti san use of government for such unlimited ends. Some account has been made of how the formal ob2 See Thomas J. Norton, Undermining the Constitution (New York: Devin Adair, 1951), pp. 60-63.

1966 THE FLIGHT FROM THE CONSTITUTION, II 43 stacles have been largely over come. The formal obstacles were the separation of powers within the Federal government, the dis persion of powers among the Fed eral and state governments, the differing composition of the elec torate for various elective offices, and the division of the country into relatively small electoral dis tricts. The major devices by which these have been overcome have been the development of political parties, the direct election of Sen ators, the establishment of "inde pendent" boards and commissions which tend to combine powers otherwise separate, the taking of initiative for legislation by the President, and the engaging of the Supreme Court in pseudo-legis lative pronouncements. The substantive obstacles in the Constitution consist mainly of the enumeration of powers granted and reservation of those not granted to the states or to the people, procedural restrictions, and enumerated prohibitions against certain actions. Many of these have been evaded, recon strued, or ignored, so as to allow the Federal government to act in ways not authorized.

The Commerce Clause Probably the one prOVISIon of the Constitution that has been stretched to the grea test extent to empower the Federal govern ment to act upon Americans has been the interstate commerce clause. Article I, Section 8, gives Congress the power "to regulate Commerce . . . among the several States .... " Of this power, along with that of regulating commerce with foreign nations and with the Indians, one writer says: "This grant of authority is in the sim plest of words, yet these words have unfolded into a body of prop ositions and explanations that con stitute at least one half of the constitutional doctrine pronounced by the Supreme Court."3 The first thing to be noted about this power is that it is a general and exclusive grant of it to the Federal government, and that the power so granted is vague and imprecise. Chief Justice John Marshall set forth in outline (in Gibbons vs. Ogden, 1824) the broad expanse of this power. He said, in part, "Commerce, un doubtedly, is traffic, but it is some thing more, - it is intercourse. It describes the commercial inter course between nations, and parts of nations, in all its branches, and is regulated by prescribing rules for carrying on that intercourse."

Of the power granted, he said: "This power, like all others vested in congress, is complete in itself, may be exercised to its utmost 3 Hyneman, op. cit., p. 141.

44 THE FREEMAN September extent, and acknowledges no lim itations other than are prescribed in the constitution."4 Production and Sale For about one hundred years, from some time after 1824 through 1936, the courts occupied them selves with delimiting and pre scribing the extent of these pow ers. The Supreme Court distin guished between interstate and intrastate commerce, between trade and manufacturing, between that which has a direct effect on commerce and that which does not. Typical of such decisions was that of United States vs. E. C. Knight Company (1895). This case tested the constitutionality of the Sher man Antitrust Act, involved the question of whether or not the power over commerce gave Con gress the power to control monop olies in manufacturing. While the court did not hold the Sherman Act unconstitutional, it did hold that it did not extend to monop olies in manufacturing. Chief Jus tice Fuller reasoned in the follow ing way: ... Doubtless the power to control the manufacture of a given thing in volves in a certain sense the control of its disposition, but this is a sec4 Henry S. Commager, ed., Documents of American History I (New York: Ap pleton-Century-Crofts, 1962, 7th ed.), 239-40.

ondary and not the primary sense ; and although the exercise of that power may result in bringing the operation of commerce into play, it does not control it, and affects it only incidentally and indirectly .... The power to regulate commerce is the power to prescribe the rule by which commerce shall be governed, and is a power independent of the power to suppress monopoly .... 5 One of the last decisions to at tempt to maintain such distinc tions and limitations on the Fed eral power was Schechter Poultry Corp. vs. United States (1935). The tendency of this decision was to in validate the National Recovery Act (1933). It was also one of the last decisions to affirm that the Constitution imposes limits upon the Federal government regard less of the conditions which may prevail. Chief Justice Hughes said, in part: . . . Extraordinary conditions do not create or enlarge constitutional power. The Constitution established a national government with powers deemed to be adequate, as they have proved to be both in war and peace, but these powers of the national gov ernment are limited by the constitu tional grants. Those who act under these grants are not at liberty to transcend the imposed limits because they believe that more or different power is necessary. Such assertions 5 Ibid., I, 618-19.

1966 THE FLIGHT FROM THE CONSTITUTION, II 45 of extraconstitutional authority were anticipated and precluded by the explicit terms of the Tenth Amendment .... 6 He then concluded for the ma jority of the Court: We are of the opinion that the at tempt through the provisions of the Code to fix the hours and wages of employees of defendants in their in trastate business was not a valid exercise of federal power. On both the grounds we have dis cussed, the attempted delegation of legislative power, and the attempted regulation of intrastate transactions which affect interstate commerce only indirectly, we hold the code pro visions here in question to be in valid .... 7 A Turning Point in 7937 From this point on, though, the obstacles to the use of power over interstate commerce to regulate a multitude of business activities began to be removed. The Federal courts had never exercised much restraint over state regulation of industry and commerce (about which, more later), but now they began to reduce the restraints on congressional power. A turning point can be seen in NLRB vs.

Jones & Laughlin Steel Corp. (1937). Chief Justice Hughes came as close as a judge is apt 6 Ibid., II, 280. 7 Ibid., 283. to do to reversing his earlier opinion in this one. He said, We do not find it necessary to de termine whether these features of defendant's business dispose of the asserted analogy to the "stream of commerce" cases. The instances in which that metaphor has been used are but particular, and not exclu sive. . . . The congressional author ity to protect interstate commerce from burdens and obstructions is not limited to transactions which can be deemed to be an essential part ofa "flow" of interstate or foreign com merce. s Thereafter, all sorts of legislation has been validated under this clause, as, for example, child labor laws, social security, minimum wages, maximum hours, and so forth. By 1953, a student of con stitutional interpretation, William W. Crosskey, could conclude that the whole panoply of distinctions and restrictions upon the Federal government in the regulation of economic affairs had been in error.

Correctly construed, he said, the powers granted are plenary: "The national government shall have power to regulate the gainful busi ness, commerce, and industry of the American people."9 The Con gress, the President, and the s Charles Fairman, American Consti tutional Decisions (New York: Holt, 1952, rev. ed.), p. 220. 9 Quoted in Hyneman, Ope cit., p. 149.

46 THE FREEMAN September courts have increasingly operated upon such a premise. Liberties Infringed But let us examine some of the implications of this doctrine. Such an examination will lead us to other flights from the Constitu tion. If Congress may regulate all gainful business, what is to keep it, for example, from regulating newspapers? Might it not enact legislation to the effect that no newspa per may be sold in any state other than the one in which it is published? Might it not pro hibit the dissemination of reli gious information? But, it may be objected, these acts would be in violation of free dom of the press and of religion. So they would; Congress is pro hibited from making such legisla tion by the First Amendment. The power of regulating interstate commerce is limited by the Consti tution. One writer notes that there are four limitations upon this reg ulatory power in the original Con stitution, relating to "importation of slaves and migrations of other persons into a state, imposition of taxes on imports and exports, and discrimination against one state in favor of another in ocean ship ping. 10 Much more to the point, how ever, are the limitations in amend10 Ibid., p. 141.

ments. Not only are religion and the press protected by amendment, but life, liberty, and property are as well. The Fifth .Amendment prescribes that "no person ... shall be deprived of life, liberty, or property, without due process of law. . . ." The courts assumed that this restriction did not apply to state governments, but the Fourteenth Amendment made such an extension explicit: "nor shall any State deprive any person of life, liberty, or property, without due process of law.... " Ownership Undermined Life, liberty, and property are in a slightly different category from speech, the press, and re ligion. The Constitution contem plates occasions where the former may be taken away; whereas the latter are absolutely protected from congressional intervention. But life, liberty, and property are only taken by due process of law. It should be clear that these pro visions have the purpose of limit ing government action. It should be clear, also, that the regulation of interstate commerce may affect property. (It may also atfect Iib erty, and perhaps life, but let the consideration be restricted here to property.) The Constitution provides for two occasions for the taking of property: by taxation and (by implication) by the right 1966 THE FLIGHT FROM THE CONSTITUTION, II 47 of eminent domain. The taxing power is limited by the require ment that taxes be for the common defense and general welfare, and that they be uniform throughout the United States. The power of eminent domain may only be ex ercised when pri vate property is taken for public use and just com pensation is paid.

Any taking of property other than by taxation or eminent do main by the Federal government would be unauthorized. Any regu lation which had the effect of tak ing property, or some portion of it, would have to follow estab lished procedures, namely, those for levying and collecting taxes or those for condemning property. Otherwise, it would be unconsti tutional because it did not observe due process of law. My point is that the power to regulate commerce among the states has been used so as to take property. Take a simple case, the establishment of minimum wages. Whatever wages an employer paid, under this enactment, above what he otherwise would have paid would be property taken from him by the working of the law. It would be property taken not as taxes nor for which he had re ceived compensation. Such con fiscation would be unauthorized and in violation of the due process clauses of the Constitution. This would appear to apply as well to state action as to that of the Federal government.

Regulation Involves the Taking of Property Sit by Sit A nice distinction occurs at this point. The regulation of interstate commerce does not usually result in taking all of the property in question. It only takes some por tion of it or some traditional (or natural) right to its use. It limits the right to buy and sell, to trans port goods, to hire and fire, to contract, and so forth. It is an eminently effective device for tak ing property bit by bit and piece by piece. The gradual thrust to socialism has no more appropriate Fabian method in its arsenal. While Congress and Presidents have been employing these meth ods ever more effectively, the courts have been weaving a fabric of opinions which enable them to evade responsibility for negating such action. The courts never did much, though they did some, to protect property from states under the Fourteenth Amendment. Early and late, they reduced this protec tion by declaring that states had an inherent power, which they had never yielded up, to exercise the police power to protect the health, safety, and morals of their citizenry. No mention is made of this in the United States Consti48 THE FREEMAN September tution, and no exceptions for it are to be found in the Fourteenth Amendment.

Changing I/Due Process" As far as "due process" is con cerned, the Supreme Court has, as regards property, reduced this to something that the courts can determine without reference to any objective standard. For ex ample, Justice Roberts ruled for a majority of the Court in N ebbia vs. New York (1934) that "the guaranty of due process, as has often been held, demands only that the law shall not be unreason able, arbitrary or capricious, and that the means selected shall have a real and substantial relation to the object sought to be attained .... The reports of our decisions abound with cases in which the citizens, individual or corporate, has vainly invoked the Fourteenth Amendment in resistance to neces sary and appropriate exertion of the police power .... "11 There is in none of this language any refer ence to anything objective to which the courts must bow in mak ing their decisions.

Other lines than these have been followed to override the constitu tional limitations on the use of governmental power. The general welfare cIause has been inter preted as if it were a grant of 11 Commager, Ope cit., II, 300. power. 12 Courts have ruled, in ef fect, that there is a presumption in favor of the constitutionality of an act of Congress, thus tacitly placing the burden of proof on anyone who claims that it is not constitutional. Courts have turned limitations upon governments in to requirements that governments provide some service. Examples of this can be found in such rulings as that states must provide coun sel for those criminally charged and who are unable to afford it, that "civil rights" demonstrators must be permitted to use the high ways of a state, and so on. In ef fect' the courts create "rights" (more precisely, privileges) by their decisions while they take away constitutional rights.

Advanced Decay Whatever evidence and analysis should be summoned to support the judgment, there should be no doubt that a general flight from the Constitution has taken place. The obstacles in the way of using government to make over Ameri cans have been, to a large extent, overcome, so far as the Constitu tion is concerned. The Presidents have taken over much, or most, of the initiative for legislation. The courts have made decrees that 12 See, for example, Justice Cardozo's opinion in H elvering et. ale vs. Davis (1937).

1966 THE FLIGHT FROM THE CONSTITUTION, II 49 have no basis other than their wills. Many of those in Congress -think of th.~ gupreme Court as the only limitation on their ac tions, and the Court, as has been shown, is in disposed to limit. The formal limitations upon the politi cal activities of factions have been mainly overcome. The balance of powers within the government has been upset, as Presidents and courts have gained power. Much of the power of the Federal government now resides in the least representative branches. The courts are not popu 1arly elected, and the members can be removed from office only by difficult impeachment proceedings. This was not to be feared so long as courts applied the standing law, but as they have begun to inno vate, the matter has changed. They are usurping powers that belong to the people. The dispersion of powers among the Federal and state governments has been great ly altered as more and more power has been centralized in the Fed eral government. Departures from the basic and fundamental law of the land - the Constitution - sig nal lawlessness in high places. If the Supreme Court may interpret at will, what is to keep each man from doing so?

There is an answer to the last question. The answer is that he is kept from doing so by superior force. Force is being introduced into every area of life, but not by regular means. It is done increas ingly pursuant to decrees and proclamations. In short, the power of government is being used to make over Americans, not by con sent for that would hardly be given, but arbitrarily and capri ciously. We are on a flight from the reality of our political founda tions which evinces itself in a flight from the Constitution. + The next article in this series will concern "Political Experimentation: The Four Year Plans."

LOYAL MEEK How can today's liberals be de voted to a free market for ideas and, at the same time, be opposed to the idea of a free market for goods and services? One would think that a man who has an appreciation of the importance of academic freedom in the search for truth and knowl edge would perceive the equal im portance of economic freedom in achieving a better standard of living for all. Strange to say, however, many of today's professors of the new sciences and the new humanities, while fervently defending their academic freedom, are engaged with equal fervency in destroying the concept of economic freedom in favor of some sort of politically managed economy. Mr. Meek is chief editorial writer of the Milwaukee Sentinel. 50 One of the better exp,ressions of the concept of academic freedom is this: "... Whatever may be the lim itations which trammel inquiry elsewhere, we believe that the great state University of Wiscon sin should ever encoura.ge that continual and fearless sifting and winnowing by which alone the truth can be found."

That may be paraphrased to give an equally good expression of the concept of economic freedom, thusly: "... Whatever may be the lim itations which trammel economics elsewhere, we believe that the great society of the United States should ever encourage that con tinual and fearless sifting and winnowing process of a free mar ket by which alone prosperity can be found."

1966 FREEDOM TO SIFT AND WINNOW 51 Teachers and students would ob ject strenuously, and with justifi cation, if the president of their university were to dictate what they had to think. Yet some teachers and students do not ob ject - nay, some even vigorously advocate - that the president of the nation be given the power to decide what people can buy or sell, and for how much, rather than to let people make these de cisions for themselves. Why do so many who worship academic freedom scorn economic freedom? The answer seems to be that they lack the faith, the cour age, and the wisdom to under stand that the sifting and winnow ing process is as efficacious in the market place of goods and services as it is in the market place of ideas, teaching, and research. In state after state down through history - Red China be ing the current glaring example where there has been no economic freedom there has been no aca demic freedom. The two go hand in-hand. Those who want to pre serve their academic freedom would do well to support and pro mote economic freedom. For, if the day ever comes when a ruling elite controls the economy down to the smallest detail, tha twill also be the day when a few men holding a monopoly of political power will control the academic community, down to the smallest detail.

The person who believes in aca demic freedom should, with equal fervor, believe in the free market system. ~ Separation of Powers THE ACCUMULATION of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elec tive, may justly be pronounced the very definition of tyranny. ~AMES MADISON, The Federalist, No. 4.7 Values, Exchange, & Profits: THE BEDROCK OF ECONOMIC SCIENCE FREDERIC BEACH JENNINGS,JR. THE MOST BASIC questions in eco nomic theory are those concerning value. What determines value? What are those factors that make a mere item have a value? A com mon error is that of speaking about values out of context. For example, if someone were to ask: "Does that rock have a value?," one's immediate. reaction should be, "A value to whom for what pur pose?" If that rock cannot be used (a) by someone (b) to achieve some goal, it has no worth.

Thus, the very employment of the term value presupposes the question, "Of value to whom?"; the concept "value" must be used in context. A given individual has a certain hierarchy of values, Mr. Jennings, a student at Harvard University, felt impelled by various classroom and campus discussions to try to clarify his principles of economics. 52 whether explicitly or implicitly held in his own mind. However, these values are ultimately referable to the purposes set by that person for himself. A fisherman may consider fishhooks and fishing-line as quite valuable, since they have a high degree of importance relevant to his purpose of fishing. A writer will not find fishhooks of much use at all; he: will want writing instru ments; their worth to him is de rived directly from the goals he has chosen. Thus, an individual's hierarchy of values is based on two things: (a) his hierarchy of pur poses and (b) the degree of rele vance to those purposes of the ob jects to be valued.

But then what is the relation of prices to value? It must be kept in mind that the existence of prices presupposes the existence of ex1966 VALUES, EXCHANGE, AND PROFITS 53 change. Without the latter the former would be unnecessary. Thus, in order to understand ex actly how prices relate to ex change, the nature of an exchange relationship must be closely ex amined. Once again we must ulti mately refer to individual values, always remembering that these only reflect that person's goals which he has chosen for himself. Each Trader Gains A voluntary exchange, by its own nature, always results in the mutual advantage of both parties, at least in their eyes. In terms of an individual's hierarchy of val ues, he will not tend to be willing to accept a lower value in ex change for a higher one. He will only be willing to act if he will be better off as a result of that ac tion, i.e., if he will profit by it. In a barter economy, exchange will only take place if each party con siders himself better off in terms of his value-preferences as a re sult of the trade. If I have a po tato and a friend has a pear, it would only be to our mutual ad vantage to trade if he wanted the potato more than the pear and I the pear more than the potato.

Both of us would consider our selves to be better off after the trade. When a medium of ex change is introduced, longer-range and more complex exchanges are made possible (thus enabling men to plan long-range and hence to expand their potentialities), but the principle remains the same. Voluntary exchange still works to mutual profit, by its very nature. A common error is that which views exchange as involving two commodities of equal value, thus dropping the context of what a value is. This notion forms the basis for the conclusion that one man's profit must be at another's expense. However, one man cannot gain at another's expense by free exchange. Only when exchange is coerced may one party to the trade incur a loss. Note that coercion is only nec essary if the exchange wouldn't have taken place otherwise, Le., if the exchange was not to mutual benefit. Thus, coercion is being used to create conflicts of interest rather than to resolve them, by using force to enable one person to profit at the expense of another.

If each stands to gain by the trade, it will most likely take place of its own accord. But how do prices fit into this framework of free exchange ? The use of a medi urn of exchange in the economy facilitates trade relation shi ps· between men - this is the source of the value of money; it is good for the purpose of trade. However, money is only of worth to an individual consumer in that 54 THE FREEMAN September it can be exchanged for values; the degree of its value is only meaningful in the full context of the worth of the many commodi ties it can be traded for. But what is the relation of prices to the consumer's values and goals? The price of an item is not its value; they are related but not identical. As previously observed, the item acquires value only in relation to the consumers' goals, and money gains its value from the worth to the purchaser of the things he can buy with it. Then the price only affects the relative gain to each party from the exchange.

Choosing among Alternatives However, the individual con sumer runs into many problems in deciding what specific ex changes to make. One of these is that of cralculating a value pre vious to use, i.e., previous to ex changing another value for it. One person may buy a book for 95¢ which changes his life, gives him a whole new approach and outlook, and ultimately shows him the way to achieve happiness. An other may buy the same book and after reading it decide that he was gypped. The first person prof .. ited immeasurably from the ex change, and the second person's action resulted in what he con sidered a loss. However, at the time of purchase both bought the book because they felt that they would be better off from the ex change. This is a difficulty that many socialist planner-theorists seem to overlook. In a market based on free exchange, at least, a con sumer occasions a loss only from his own miscalculations, and may even learn from them and apply that knowledge to future choices, so as to avoid repetition of error.

The chances are, however, that the consumer will gain from ex changes, unless he is completely irrational in his choices, because of the way the market operates on producers' profits. We saw that both parties gain from a volun tary exchange; the price merely determines the relative degree that each profits. But in a com petitive economy producers' profit rates tend toward an average minimum. From this observation it could be argued that the largest profits in the free market are those that accrue to people as con sumers! Thus, it is my contention that the conventional view of profits as only accruing to the businessman's end of the exchange relationship is too narrow; that it gives a false picture of the true nature of vol untary trade. There is no conflict of interests inherent in trade rela tionships. Mutual profit provides the incentive for people to produce and trade; it is the all-important 1966 VALUES, EXCHANGE, AND PROFITS 55 fuel which keeps the economic en gine progressing through human action toward the betterment of everyone.

Satisfy the Customer In the light of my approach to values and demand, then, what is the source of producers' profits? If the use of coercive measures is not open to him (Le., if the gov ernment acts to protect free ex change between individuals rather than to inhibit it, and does not en gage in policies of protectionism, etc.), he has only one means by which he is able to m.ake money. He must seek out and identify un satisfied demand and attempt to fulfill it. This he can do by creat ing a new product which people will value in that it aids them in achieving their goals (thus mak ing them better off); or he can raise his own efficiency in prod uc ing commodities already being produced and undersell the other producers, thus giving the con sumer a better deal in the trade than his competitors have; or he can devise a new invention which will raise the efficiency of others' production and lower their costs and thus their prices and thus ul timately helping the consumer in that way· There are many ways of making profits as a producer in a iree exchange economy, but all of them have one thing in common. They all ultimately rnust aim at improv ing the w'ell-being of the consumer.

Through the legal protection of property and of uncoerced ex change, producers are rewarded by the free market commensurate with their ability to and success in satisfying consumer prefer ences. However, I have been very care ful about qualifying my conclu sions relative to free exchange: what happens if these voluntary exchange relationships are in hibited by governmental coercion? What happens in a socialist or even a mixed economy in the light of my conclusions? It would ap pear that, at least in the consum ers' own eyes, they would be not better but worse off than under a free-enterprise system, because if an exchange is to be mutually profitable it must be uncoerced. And goods must be produced to be consumed, so producers' profits are as important economically as con sumers' profits. Who's to Judge? But here we run into the moral question: are individual consumers competent to decide what is in their own best interests, i.e., what will improve their conditions of existence? Are they competent to decide their own purposes for their own Iives? Or, will the planning of 56 THE FREEMAN September prod uction by someone else more nearly reflect the best interests of "society," i.e., of all individual members?

This question has been argued and will continue to be; it remains one of the more basic issues in the conflict between free enterprise and socialism. But if economics as a. science is concerned with setting up conditions under which every one will be better off, in their own estimations, then we can examine the effects of governmental inhibi tion of free exchange, whether it take the form of interventionism, fascism, socialism, communism, or any of the many variants of each. ,Exactly how is this harm done? For exa.mple, what are the effects on business decisions of govern ment price-fixing? Consequences of Price-Fixing One consequence is that the price is no longer a direct indicator of the dynamic balance between changing consumer value-prefer ences and evolving production con ditions. The price thus is no longer meaningful in the context of mar ket conditions. Thus, the scope of business decisions is considerably narrowed. Business managers no longer must view the price as an indicator of a great many other changing factors; they need only focus on the price itself, relative to their own production costs. Whereas beforehand they based their de cisions ultimately on varying con sumers' preferences and attempt ed to anticipate new wants and ful fill them (thus producing directly for the consumer), once prices are planned, the scope of the factors upon which decisions are based is constricted and altered.

As for a mixed economy, the de gree of interference will determine the extent of the change. Business decisions weigh heavily on price predictions, which in turn under socialism depend on the vagaries of economic planners with near-arbi trary control. Thus, as a result of this redirection in emphasis, in or der to better his position the busi nessman may aim more at gaining political influence so the price can be adjusted to his advantage (at consumers' expense) rather than aiming solely at improving the lot of the consumer by more efficient production of values. Granted, price controls are a means of di recting economic production, but let us not rationalize it by saying that it is "in the best interests of the consumer." Once again we get back to the same basic question. If values are ultimately referable to individuals' purposes, then they cannot be quan tified, calculated, and planned by anyone except that individual, and especially not by any central body.

Prod uction of values is best done 1966 VALUES, EXCHANGE, AND PROFITS 57 by letting producers aim solely at satisfying consumer demand, in an uninhibited market economy. The final issue remains one of whether a central planner can better decide what is in people's interests than they themselves can; i.e., whether businessmen should act according to the dictates of the consumer or of the planner. The More Complex the Society, the More Need for freedom If values are ultimately referable to indi vidual purposes, they are not calculable or quantifiable in a de veloped economy. Possibly in an un developed, subsistence-level econ omy, values are to some degree pre dictable in that, by the very nature of life, survival requires certain actions of men. But when choices and alternatives become more com plex, and men are not living a hand-to-mouth existence, men de velop longer-range, more diversi fied purposes. Thus their value hierarchies become more compli cated and varied, and unless one aims at directing the very pur poses of people's lives, it is best to le,ave it all to them. Since we are living in a highly integrated, complex society, we must direct our focus onto the problems of so cialist planning in that context, in order to cover two final points.

First, since attempts at "plan ning" do get so complicated, and require so much gathering of in formation, many man-hours must be dedicated to this task. Would not these planners do more good for consumer well-being if they, too, directed their efforts toward the production of values? Furthermore, a highly-devel oped and specialized economy is one in which many lives are cru cially and intricately dependent upon exchange relationships and their fluidity. Men's professional purposes are so specialized that the fruits of their work may only be of value to a small number of others. The fluidity and sensi tivity of a market economy en ables these men to seek each other out - thus, men are free (to a cer tain extent) to specialize and ex change their productive work for other values, always to the mutual benefit of both parties. But it might be quite difficult to con vince a "disinterested" planner that this highly specialized work was useful (he might not see things in the same light as the person to whose purposes this man's work had value). In such an instance, who is blocking "prog ress" ? This problem might be intensified all the more in that socialism is partly based on the idea of intrinsic values, which, in the planner's eyes, this work might lack.

The practical problems of so58 THE FREEMAN September cialist planning seem to be with out limit in their number and complexity. My purpose in this essay has not been primarily to enumerate those difficulties, how ever, but rather to present my own claim that much socialist and interventionist theory is ulti mately based (a) on an erroneous theory of the nature of value and (b) on a subsequent misunder standing of the nature of ex c'hange and profit. My analysis of the nature of prices and the value of money merely follows from my other conclusions, as well as my espousal of a free exchange econ omy as the most efficient creator and protector of "social wel fare." ~ Profit-Seeking Business THE ENTREPRENEURIALFUNCTION, the striving of entrepreneurs after profits, is the driving power in the market economy. Profit and loss are the devices by means of which the consumers exer cise their supremacy on the market. The behavior of the con sumers makes profits and losses appear and thereby shifts ownership of the means of production from the hands of the less efficient into those of the more efficient. It makes a man the more influential in the direction of business activities the better he succeeds in serving the consumers. In the absence of profit and loss the entrepreneurs would not know what the most urgent needs of the consumers are. If some entrepreneurs were to guess it, they would lack the means to adjust production accordingly.

Profit-seeking business is subject to the sovereignty of the consumers, while nonprofit institutions are sovereign unto them selves and not responsible to the public. Production for profit is necessarily production for use, as profits can only be earned by providing the consumers with those things they most urgently want to use. LUDWIG VON MISES. Human Action A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN TOO MUCH DONALD ROGERS, who used to be the financial editor of the New York Herald-Tribune, would like to be the leader of a crusade. But unfortunately only a few strag gling platoons have formed behind him. There is a promise in the air of a bigger army, but it is only a promise, and we should not de lude ourselves into thinking the crusade is about to burst into full swing. In a fighting book, The End of Free Enterprise (Doubleday, $3.95), Mr. Rogers explains the nature of his crusade. It is to persuade American business to take a vastly augmented respon sibility for recreating a climate of opinion in the United States that will be favorable to the reten tion and expansion of a volun taristic enterprise system. Having stated his desires and his hopes, Mr. Rogers then turns to and lets American capitalists have it right in the solar plexus for what he considers is their failure to under stand the philosophical bases of the system which they profess to support.

Mr. Rogers' troubles began when he made a supposedly ofT-the-rec ord speech to a group of business executives at a Washington, D.C., "round table." Part of his speech was devoted to criticizing those executives for failure to throw at least some of their advertising to publishing media, that still con tinued to fight socialistic and Big Government trends. As he tried to tell the executives, business has a responsibility to m.aintain a healthy competitive social climate as well as a responsibility to its sales departments and its divi dend-hungry stockholders. He wasn't asking the business men to boycott "liberal" news papers and magazines of large circulation which are admittedly the best advertising media when it comes to marketing widgets, 59 60 THE FREEMAN September gadgets, and buy-now-pay-Iater trips around the world. But he did think it shortsighted of the executives to let struggling pro business journals go down the drain for lack of "institutional"

advertising nourishment. Without a thriving pro-business press, the institution of the free market is in danger of being enfeebled, and with its enfeeblement the sales of widgets, gadgets, and trips around the world would automatically shrink. The Secret Is Out Mr. Rogers' "secret" speech didn't remain secret for very long. A memorandum designed for ex ecutives who couldn't attend the meeting fell into the hands of Barry Goldwater, who was so im pressed with it that he had it printed in the Congressional Rec ord. Next, Human Event,s printed it and offered reprints. Then it appeared in Vital Speec'hes.Alto gether, two million copies of it have been made and distributed. The "left," of course, yelled that Mr. Rogers was trying to inter fere with the editorial integrity of great newspapers by advocating that "advertising pressures" be brought to bear on them. Mr. Rogers retorted that people have the right to use their money as they see fit, and that a business man owes it to his stockholders to try to buy a healthy business cli mate just as much as he owes it to them to sell goods. But the re tort was drowned out by the chorus from the "left." His own paper disclaimed responsibility for his views, and the business com munity remained silent when he was forced to quit his job.

Mr. Rogers is not a bitter man, but all of this has left him a bit piqued, to say the least. In The End of Free Enterprise he accuses the business community of tim idity and of failing to understand its own predicament. He wonders why businessmen subsidize com mittees which underwrite the dis tribution of textbooks that advo cate Marxian tax policies and su per-Keynesian spending programs. He criticizes businessmen for giv ing big donations and bequests to universities whose economic and political "science" departments are against the free enterprise system. He wonders why the money spent on "public relations" by business buys so little in terms of fostering a salubrious competitive climate. Discussing the efforts of the Gen eral Electric Company to defend its right under the First Amend ment to explain its wage policies to union members, Mr. Rogers wonders where the· other big cor porations were when the National Labor Relations Board attempted to silence GE. The GE fight was 1966 TOO MUCH SECRECY 61 their fight, too, he says, but only the Chrysler Corporation seemed to realize it.

Above all, Mr. Rogers criticizes business for failure to anticipate the government in attempting to solve problems of unemployment, "technological illiteracy," and so on. He says the "public relations" of business "does not relate." NANI Program Provides Help for DropOuts Much of what Mr. Rogers says about business timidity is all too true. But some things have been changing recently. The National Association of Manufacturers, which Mr. Rogers criticizes for following bland policies calculated to offend nobody, has recently de cided to run its own pilot programs designed to make high school drop outs employable. The NAM has been picking delinquent kids off the streets of Harlem, giving them intensive schooling, and getting them jobs when they prove them selves capable of handling them. The NAM cannot wipe out the problem of the "unemployables" all by itself, but it hopes to "sell" its dropout education program to business organizations in Chicago, Indianapolis, and Peoria. At last reports the NAM idea had been taken up by some Chicago indus trialists. There is no reason why business should not train its own personnel, and many of our drop outs are good material.

Mr. Rogers thinks the members of the American Medical Associa tion had Federal Medicare thrust upon them because they were on the freight train when it came to proposing practical voluntary al ternatives to Medicare. He notes that the doctors did come up with an "eleventh-hour" alternative, but by this time Congress had decided to act for itself. "The lesson," says Mr. Rogers, "is this: If you don't meet all of the needs as they develop, the government will." Thus he serves notice on the AMA to forestall a Federal adventure in providing "kiddie care" by coming up with a volun tary kiddiecare plan that will make Congressional action unnecessary. The Independent Sedor Finally, Mr. Rogers criticizes business for not being more nim, ble in telling its own great story. Businessmen, as he points out, have created and conducted United Funds all over the country, which "have kept the Federal govern ment and even the local govern ments out of much of the welfare business." Business has donated millions to the private colleges and universities. Its support of the arts has actually been prodi gious. It has provided "medical insurance for employees to such 62 THE FREEMAN September !

an extent that the government has never even considered medical aid for the workingman." All of this has been part and parcel of preserving an atmos phere of voluntarism that enables free enterprise to flourish. But the professional public relations experts whom business employs to tell its story haven't dramatized the actual accomplishments of what Richard Cornuelle calls the "independent sector" in meeting social needs. Mr. Rogers' criticisms of the business community are offered in a constructive mood. The man is a friend of business. He is tired of seeing businessmen blush and stammer when they are called "buccaneers." Frankly, Mr. Rogers likes buccaneers; he only wishes we had a few more of them around. ~ ~ THE MOST OF MALCOLM MUGGERIDGE (New York: Simon and Schuster, 1966, 367 pp., $5.95) Reviewed by Robert M. Thornton THE SUBJECTS of this sparkling collection of short pieces by the British critic run the gamut from Kennedyism, pornography, and the Christian churches to credulity, Shakespeare, and the BBe; and from the pen of this free-swing ing journalist they make for de lightful reading.

Just where MM stands in the political spectrum is not clear from the book under review; consider ing the swipes at Mr. Goldwater and the late Sena tor Joe Mc Carthy, he is certainly not a mem ber of what is called in our coun try the "radical right." But then he turns his guns on Lord Snow, the Fabians, and the admirers of Joe Stalin and the Russian Revo lution. The value of a fellow like Muggeridge is his willingness to speak out disinterestedly against any and all men whenever, in his opinion, they err grievously. He has not sold himself to a party or to an ideology; like H. L. Menck en, he spares no one. What will endear Muggeridge to all enemies of modern "liberal" orthodoxy is his unceasing assault on its underlying premise: the idea that man is really a good sort, you know, nothing wrong with him that a better environment and all that won't take care of nicely. Muggeridge - on the side of the angels here, if not elsewhere comes out strongly for the good Christian doctrine that man is a flawed creature who falls far short of perfection. "To proclaim a king dom of heaven on earth," writes Muggeridge, "is both deceptive and intrinsically absurd. The main tenance of such a notion requires mental gymnastics so extreme and so strenuous that they usually pro duce dementia."

1966 OTHER BOOKS 63 Since all men and all human in stitutions are imperfect, none is beyond criticism: "In a healthy, civilized society everyone and everything should be open to ridi cule. Indeed, I would go further and contend that the degree of health and civilization in any given society bears a direct relation to the degree to which this principle operates. Taboos, where humor is concerned, are an admission of doubt, and derive from a sense of weakness and insecurity. The truly religious take no offense when at tention is drawn to the absurdity necessarily inherent in the dogmas to which they subscribe and the ceremonies in which they partici pate. Protests invariably come from the conventionally religious, from the formalists for whom, the dogmas and the ceremonies con stitute the whole content of their faith. It is the same with politi cians. Those who most object to being ridiculed have least confi dence in the policies they advo cate. It is the same with moralists.

If they complain that some cher ished principle is blasphemed by the humorous treatment of its application, then it is certain that in their hearts they doubt the principle's ultimate validity." "Worldliness," Muggeridge writes elsewhere, "is by its nature, a highly romantic attitude; only mystics know how to be skeptical." And a "skeptical turn of mind . . . is induced only by holding fast to truth." At a time when so many intel lectuals are trying to outdo each other in describing the sartorial splendor of the emperor, it is a great pleasure to read one who with fine humor tells the awful truth. "There is," declares Mug geridge, "nothing serious under the sun except love of fellow mortals and of God." ~ ~ FAULKNER IN THE UNIVER SITY edited by F. L. Gwynn and J. L. Blotner, New York: Vintage Books, 1965, 294 pp., $1.65. Reviewed by Robert M. Thornton WILLIAM FAULKNER served as writer-in-residence at the Univer sityof Virginia from February to June in 1957 and 1958; and this book contains his lectures together with a transcript of the ensuing discussions. "The first attraction of such materials," Edmund Fuller has written, "is immediacy. We feel a direct communication, the presence of the Iiving person through the spoken word in spon taneous talk. Also we get an in sight into the creative process not the blueprint of a process that would fit anybody else, of course, but the disclosure of how one skilled man worked at his craft."

Early in his career Faulkner be64 THE FREEMAN September came an idol of ava,nt-garde writers and political "liberals," but these turned away as they per ceived "the essential conservatism latent in his work and specific in his statements." His stand on the Negro situation, for instance, put him in the doghouse not only with Southern segregationists, but also with Northern radicals who would bring about integration at the point of a gun. Faulkner sympa thized with the plight of the Negro, but he was not so senti mental as to think that mere legis lation would provide the solution. Rather than force, Faulkner saw persuasion and education as the means to the desired end. He re minded Negroes and their friends that responsibility goes hand in hand with rights, and he reminded his fellow Southerners of their duty to bring an end to the in justices suffered by Negroes in their communities.

Faulkner was strongly opposed to "the mythology that one single individual man is nothing, and can have weight and substance only when organized into the an onymity of· a group where he will have surrendered his individual soul for a number." One best com bats collectivism, he said, by re sisting the pressures to relinquish individuality. He believed that the "individual is more important than any mass or group' he belongs to. That the individual is always more important than any state he belongs to. That the state must never be the master of the indi vidual, it is the servant of the in dividual. That ... to retain that superiority over the state, the in dividual must be independent of the state, he mustn't accept gra tuity from the state. He mustn't let the state buy him by pensions or relief or dole or grant of any sort." Faulkner, unlike many of his fellow writers, perceived the tragic element in the human situa tion. Men are often treated pretty roughly by fate, but this is no reason to regard man as a mere pawn in the hands of forces be yond his control. For man does have freedom of choice; he is thus a responsible creature and as such can find meaning in his existence.

Man, Faulkner affirmed, will not merely endure; he will prevail. ~ BOUND VOLUMES OF Thefreeman-J9GS Attractively sewn in a single volume with hard cover, the 12 issues from January through December, fully in dexed-768 pages, for handy reference to the latest literature on freedom. Dolt /5.00 These bound volumes of THE FREEMAN match in appearance and otherwise continue the 12-volume series of Essays on Liberty containing selections from THE FREEMAN and other Foundation releases back to 1946. (A separate cumulative subject matter, author, and title index is available for the 12 volumes of Essays on Liberty. $1.00.) Bound volumes of THE FREEMAN for 1966 will be available shortly after the end of the year. ORDER YOUR BOUND VOLUMES NOW! THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, N. Y. 10533 Please send me: THE FREEMAN for 1965 $ 5.00 0 THE FREEMAN for 1965 and 1966 (The 1966 volume to be shipped when ready) $ 9.00 0 ESSAYS ON LIBERTY (Set of 12, with cumulative index) Cloth $30.00 0 Paper $20.00 0 o CHECK ENCLOSED 0 SEND INVOICE NAME _ STREET _ CITY _ STATE ZIP CODE. _ THE GOOD LIFE • For no one would say that a man was happy who had no fortitude, no temperance, no justice, no prudence, but was afraid of the flies that flew around him; nor would abstain from the meanesttheft if he was either hungryor dry, or would murder his dearest friend for a farthing; and also was in every particularas wanting in his understandingas an infant or an idiot.These truthsare so evidentthat all must agreeto them....

let us thereforebe well assured that everyoneenjoys as much happinessas he possessesvirtue and wisdom, and acts accord ing to their dictates.... It is evidentthat governmentmust be the best which is so established that everyone therein may have it in his power to act virtuouslyand live happily. A R1ST 0 T L E, Polities OCTOBER 1966 Set My People Free The Cost of Living The Case of the Free Rider The Supremacy of the Market. Men of Prey Punch Decries IINo Compromise" The Flight from Reality: 25. Political Experimentation, The Four-Year Plans Canute and the Counting of Noses Visit with a Headmaster The First Liberty Library • Books: For Want of Something Better Edward Y. Breese Paul L. Poirof Peter Farrell Ludwig von Mises Leonard E. Read Punch Clarence B. Carson Willard M. Fox Timothy J. Wheeler Murray N. Rothbard John Chamberlain 3 8 12 17 21 28 30 44 49 56 60 COAST FEDERAL SAVINGS AND LOAN ASSOCIATION DepartmentFl, 9th &Hill Sts., Los Angeles, California90014 o Please send me a FREE copy of "What's Inflation?"

o I enclose my check (or money order) for $ _ o Please open a Coast Federal Savings accountD Individual D Joint in the name(s) of NAME _ STREET ---------CITY STATE _ 6·112A2 ·······:::••·))t~ Q ~ COAST FEDERAL SAVINGS ~" AND LDAN ASSOCIATION ~l:.> THE FREEMAN OCTOBER 1966 Vol. 16, No. 10 ", One's practice of freedom may be hindered by others, but there isn't any way to be free without doing it yourself , p. 3 ", The cost of living tends to rise in proportion to the extent that we let government lead our lives .......... p. 8 Y' Peter Farrell finds occasion, in the rash of strikes among transport work ers, to re-examine the case of the "free rider" p. 12 ", Dr. Mises offers some further thoughts on the wages of union vio lence in a timely selection from an earlier study p. 17 ", And Leonard Read follows with his own interpretation of the causes and consequences of the predatory actions of some persons against others .......... p. 21 ", A cartoon from Punch calls for a contrary view of the uses and abuses of compromise p. 28 ", In approaching the conclusion of his series on The Flight from Reality, Dr. Carson finds in Presidential 4-year plans some startling departures from the American tradition p. 30 ", A market research specialist points up some of the pitfalls of basing po litical action on the results of opinion polls p. 44 ", Timothy Wheeler finds something new in educational procedures and re sults when he visits the Academy of Basic Education, near Milwaukee .......... p.49 ", Who was Thomas Hollis? Murray Rothbard reminds us of the important role Hollis played in establishing liberty in America p. 56 ", Robert Lekachman's The Age of Keynes seems to John Chamberlain to be the same old story, however well written p. 60 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

OCTOBER 1966 LEONARD E. READ PAUL L. POIROT Vol. 16, No. 10 President, Foundation for Economic Education Managing Editor THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit educational champion of private property, the free market, the profit and loss system, and limited goYernment, founded in 1946, with offices at Irvington-on-Hudson, New York. Tel.: (914) 591 7230. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in vited in any amount-$5.00 to $10,OOO-as the means of maintaining and extending the Foundation's work. Copyright, 1966, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each.

Permission is hereby granted to anyone to reprint any article in whole or in part, providing customary credit is given, except the cartoon from ~ PUNCH, lithe Flight from Reality," and IIVisit with a Headmaster." Any current article will be supplied in reprint form if there are enough inquiries to justify the cost of the printing.

Unless a man ,is already free within himself, any atte1npt to give him "freedom" by law may only succeed in enslaving everyone concerned. EDWARD Y. BREESE IN THE DECADE to come we are go ing to have the chance to see whether, in fact, "freedom" can be "given" to a large segment of our population by laws carefully designed for that express purpose and backed by the full authority of Federal power. I refer, of course, to the so-called Civil Rights legislation and the people it is planned to assist. Certainly the laws already passed, and those projected for the near future, remove former barriers and open the legal doors to the free exercise of various and sundry "rights" for all citizens. The question then becomes one Mr. Breese is former chairman of the Depart ment of Humanities, School of Engineering, at Embry-Riddle Aeronautical Institute in Florida. of whether the new legal status of these people does actually consti tute freedom. Is freedom really a matter of legal status? Does it depend upon laws and courts? Is it something that can be conferred or granted? Or is this only an il lusion held by the civil rights peo ple and their supporters?

The dictionary (Webster's New World Dictionary of the American Language) is not much help here. It defines a freeman as (1) a per son not in slavery and (2) a citi zen. If the first definition offered could stand alone, then there would be little doubt as to what is taking place. Laws are being passed which specifically spell out a status "not in slavery" for all classes of our 4 THE FREEMAN October population. Freedom to move le gally within the framework of so ciety is being offered to all. The Qualities of Citizenship But how about the second defi nition of the freeman? Is it pos sible to make a citizen or does the individual have to possess or earn the innate capacity for true cit izenship? If it is argued that freedom is entirely a matter of legal status, then it must further be assumed that all men are born equal in all respects except for legal position. This is a manifest absurdity and is only professed today by those who feel they have no other claim to the respect of their fellows.

Quite the contrary. A freeman must be, in the fullest sense, a citizen of his society. He must be psychologically as well as legally free. He must be able and willing to assume responsibility, to make intelligent decisions, to earn and hold his place as an equal among his peers. Men and women who are free in this sense do not depend upon legal status for their freedom. In deed it is impossible to make them anything else but free by even the , most stringent of laws and the most efficient of police states. His tory is full of examples which bear out this point from the rebel fol lowers of Spartacus to the black Marroons of Jamaica to the "Un derground" fighters of World War II. The very presence of black slaves in the New World was pri marily due to the fact that the na tive Indians, already on the ground and militarily helpless be fore Spaniard and Englishman, either could not or would not be enslaved in any numbers. In those areas where the Indians could be brought to labor on an estancia or hacienda system there was never any major importation of blacks, but even here the native was held in peonage rather than cha ttel slavery.

Freedom Lies Within Through the whole record of mankind it is the freemen in the sense of the second definition, "those who are free within," who have been responsible for the growth of democratic institutions and of free enterprise and free dom of intellectual activity. These were the people who wrote the American Constitution and who sought to create legal freedom of opportunity for all. But they did not at any time fall into the delusion that a man could be made free by law unless he had within himself the inher ent capacity to think and act as a free man. History is also filled with ex1966 SET MY PEOPLE FREE 5 amples of individuals and groups who have voluntarily surrendered the rights and privileges of a legally free status in return for other values which seemed more important to them at the time. Chief among these values has al ways been "security." The ancient world is full of ex amples, perhaps the most spec tacular being the tendency of small freeholders to attach them selves to the latifundia at the time of the decline of the West Roman Empire. Even in their day this sort of movement was not new.

There must have been much the same urge which consolidated a formerly village and nomad popu lation under the absolute rule of priest and priest-king when Dr of the Chaldees was still a new foun dation. In our own day the millions who flocked to don black or brown shirts or to wave the red flag in the name of monolithic European states were psychologically and emotionally motivated to follow a similar path. This is also true, to only a slightly lesser degree, of our friends who enter governmental or corporate civil service hierar chies because of what they feel to be a benevolent security factor or who place their emotional de pendence upon an authoritarian based "great society." The Fallacy of Social Security The fallacy needs no exposition to the intelligent reader, yet is far more widespread than many may realize. When the innate con servatism of thinking of the or dinary man is understood, the prevalence of the attitude is more easily grasped.

After all, the iron shield to which the security seeker turned in A.D. 450 - 650 was reasonably ef fective in securing him protection, just as the mud brick walls of the citadel at Babylon had been. The price for protection was higher than a psychologically free man would want to pay, but at least it bought a considerable measure of the desired commodity. The serf and the master were both human and recognized a mu tual obligation. A law, on the other hand, is only a legal entity which neither feels nor acts of itself. The price of liberty, under law, must still include eternal vigilance. There are, then, two kinds of freemen, just as the dictionary recognizes. There are those who are legally not slaves, and there are those others who are free in mind and spirit and in the willing ness to act in all ways as free men. It is the latter group to which humanity has always had to look for true leadership.

Freedom is within the individ ual and a free society must be 6 THE FREEMAN October composed of men who are psycho logically free. One of the greatest questions of our day, then, must be the ex tent to which the masses of peo ple (in the world as well as the American society) who have re cently been "given" a status of le gal, or nonslave, freedom are ca pable of assuming the rights of tru ly free citizens and the obligations which accompany these rights. If a majority of these newly freed citizens can stand up as genuinely free men, or if they can be inspired, trained, or en couraged to do so, then there is little cause for concern. If they cannot or will not do so (and the second is the greater danger) then there are, indeed, dark and stormy days to come. Should our society choose to place its dependence upon a vague ly legalized "freedom," it will tend more and more to the creation of the ultimate in monolithic state Authority. Neither the virtues nor the abilities of the free man will be wanted, no matter how much they will be needed.

In this case to what extent will the dependent prove unable or un willing to tolerate the presence of the free spirit and the independent mind? To what extent will the flight to security tend to hold back what should otherwise have been the rising tide of the future? A Qualified Electorate It is not enough, or even of any particular value, to insure free exercise of the ballot to all resi dents within a given state or na tion. The really important thing is the creation of qualified voters rather than just voters per see This is the true responsibility which rests today upon the should ers of our American civil rights people and their friends and upon the shoulders of the "one man one vote" advocates throughout the world. If they are to really help their people, it must be by leading them to "citizenship" in the fullest and best sense of the word. The real revolution must be within the new freemen rather than in the laws of the land. They must learn to seek responsibility instead of license; service instead of privilege. They must learn be fore it is too late that a ballot carelessly or passionately cast can destroy them as well as the society of which they are a part.

This is a truth which applies equally to the new nations of Africa and Asia and the old coun ... ties in the black belt of our own South. Unfortunately, many of the "leaders" currently riding the crest of the tide of change show little observable sign of realization of the tremendous responsibility 1966 SET MY PEOPLE FREE 7 which rests upon their shoulders. As in all "revolutions," the voices of moderation and of liberalism are already being drowned out by the increasingly passionate cries of extremists. The voices cry for political organization, for demands upon the people and the public purse, and for more and more ex treme legislation. A few are al ready beginning to cry for blood. If this trend is allowed to con tinue, history teaches that it can only result in reaction, counter revolution, and repression. What little has been gained will be lost to all. Neither do the people in au thority at the Federal level show any present indication of provid ing constructive leadership and needed counseling to the "new freemen." Schools are forcibly de segregated, but where are the courses in true citizenship? Fed eral marshals, attorneys, regis trars, and even troops are sent in to the troubled areas, but these cannot make citizens; they can only create voters.

If the job of assisting these people to attain true citizenship is to be done at all, it will have to be as a result of the efforts of individuals who recognize the need and take personal action to en courage and promote a solution. A Job for Individuals The emergency - for it is a na tional emergency - should be· brought to the attention of edu cators and job counselors at the local and state level. Civic groups and citizens associations should be alerted by their members. A con certed effort should be made to demand constructive leadership from political authority at all levels. The situation calls for action as well as consideration by the present freemen of our nation and our society. This will, as it always must, get results. There is no grea ter power than the power of the aroused and vocal indi vidual. Above all, we must have faith in the long-run power and triumph of freedom and of the free man.

We must have faith in the capacity of large numbers of the "new freemen" to become new citizens, and we must actively seek to aid in this growth. It cannot be left to chance or to the leadership of the political opportunist or the economic exploiter. ~ THE HIGH and rising cost of liv ing is of such grave concern to so many people that further govern ment action is being considered to alleviate the situation. Scarcely a day passes without some mayor or governor denouncing the latest ad vance in the price of bread or milk or a city council or state legisla ture launching an investigation of marketing practices, rental rates, commuter fares, or other com plaints of consumers. But the problem obviously is national in scope, and increasingly the call is for Federal intervention and re lief. Nor has Washington been hesitant in answering that call. There is a lo;ng history of Fed eral regulation and control of busi ness practices through such offices as the Federal Trade Commission, Interstate Commerce Commission, Federal Communications Commis sion, Federal Power Commission, 8 Civil Aeronautics Board, Pure Food and Drug Administration, Department of Agriculture, De partment of Health, Education, and Welfare, Department of Hous ing and Urban Renewal, and many others. Congressmen and their committees are continuously prob ing for unethical business prac tices that might prove detrimental to consumers. The President has a Committee on Consumer Inter ests, and there is a National Com mission on Food Marketing, among others.

With so much governmental ac- ' tivity for their protection, Ameri can consumers might be expected to be grateful and let it go at that. But, not so. Housewives continue to complain about the soaring cost of living and their inability to make ends meet when meat is priced at more than a dollar a pound. Meanwhile, Department of 1966 THE COST OF LIVING 9 Agriculture statistics show that "the farmer's share of the con sumer's dollar" persists in its long downward trend, despite the bil lions of Federal aid pumped an nually into various compartments of the farm price support pro gram. Since food processors, pack agers, and distributors stand be tween producers and consumers, they are bound to be prime sus pects in this situation. And the government is determined to dis cover and discourage all business practices that may be accountable for the high cost of living. Under such intensive search and scrutiny, some sharp opera tors and some unethical practices doubtless will be found. Even the most ardent advocates of com petitive private enterprise would expect some participants to fool ishly try to pursue their supposed self-interest to the detriment of others. But the Federal govern ment never will find the real cul prit behind rising living costs. In deed, no power structure should be expected to recognize and cor rect its own abuse of power. The Federal government probably can not see, and certainly could never admit, that its own actions are causing the high prices consum ers deplore. If such a situation is to be corrected, it must be done by individual citizens, one by one, as . each comes to realize that governmental compulsion is not an effec tive substitute for the market price system of bringing supply and demand into balance in the real world of scarce resources and insatiable human wants.

The Government as Consumer In the market economy, the con sumer is the ultimate decision maker. His purchases determine what may be profitably produced and sold. The market, as such, is neutral; market prices may serve to guide but never to compel a consumer to choose one commod ity or service above any other. Nor does the market distinguish among consumers or discriminate against one as compared to an other. As far as the market is con cerned, the government is just an other consumer bidding for the available supplies of scarce goods and services. The government, of course, would be expected to police the market to see that honesty pre vails among buyers and sellers and that fraud and violence are curbed. A supplier's package ought to con tain what his label says it does. And a buyer's money, or whatever he brings in exchange, ought not to be counterfeit. The apprehen sion and punishment of counter feiters presumably is a govern mental duty.

In the customary market trans10 THE FREEMAN October' action, each party offers some thing the other party wants. A buyer also is a seller, and vice versa. That a buyer offers money customarily signifies that he has earned it and saved it from a prior market transaction. Sellers accept money in faith that it may be used to purchase some other useful item in turn. But a counterfeiter cre ates money fraudulently without bringing any useful goods or serv ices to the market. If he can pass the counterfeit money undetected, he withdraws from the market useful goods and services but leaves in the market an extra sup ply of money. This means that more money is chasing fewer goods and services. The level of prices may be expected to rise in such a situation. Fluctuations and Trends Now, a crop failure or disaster of one kind or another may result in the temporary scarcity and higher prices of certain market able items. Or, more or less sud den changes in consumer pref erences may cause some prices to fall, or perhaps to rise, for a time. Prices of individual items may be expected to fluctua te to re flect changing supply and demand in an open market. But if the cost of living soars across the board for nearly all items, and continues to rise month after month and year after year, the great prob ability is that a master money maker (inflater) has entered the market on a major scale. And this is precisely what has happened to the cost of living in the United States in our time.

So, it is important that counter feiters be apprehended and kept out of the market; and this task ordinarily is delegated to govern ment. But the rub is that the Fed eral government itself can be and has been the great inflater, with drawing scarce goods and services from the marketplace in exchange for irresponsible promises to pay. This is not to say that all gov ernment purchases are inflation ary. To the extent that the govern ment withdraws money from tax payers or bond buyers who have earned it in the market, the gov ernment has more money to spend, other buyers have less, and the total quantity of money in the market remains substantially the same as before the taxes were col lected or the money borrowed from bondholders. But the Federal government al so obtains purchase orders on the market by issuing bonds and sell ing them through the Federal Re serve banking system, the banks in turn using those bonds as legal reserves and thereby adding enor mously to the total supply of money in the market. And this 1966 THE COST OF LIVING 11 deficit financing through a frac tional reserve central banking sys tem is the process by which the Federal government acts as the national inflater of the currency.

The prices of pork and beef and red meat generally are high in the United States today, not because farmers are deliberately withhold ing supplies or packers taking extra margins or distributors and retailers gouging consumers, but because the government as the leading consumer has been buying not only meat but all kinds of other goods and services, with drawing them from the market and pumping into the economy billions upon billions of fiat money which the market has no way of distinguishing from the dollars of its honest customers. Fiat Money Inflation Everything the Federal govern ment spends in the so-called "pub lic sector" - public housing and urban renewal, Federal aid to edu cation, farm support programs, special privilege handouts to strik ing unioneers, foreign aid, mili tary expenditures, moon shots, and on ad infinitum - every dollar government spends in excess of what it currently collects from tax payers and bondholders other than banks comprises fiat money the presence of which is reflected in the so-called "private sector,"

showing in the family budget as high priced bread and meat and a rising cost of living VVhen the government buys guns with fiat money, that money flows through the market and eventually into the hands of house wives who use it to bid up the prices of butter and of other con sumer goods that go to make up the cost of living. If the housewives of Podunk want the price of food in local grocery stores to decline, then they'll have to vote down Podunk's proposed new Post Office, Podunk's Federal Urban Renewal and Pub lic Housing projects, Podunk's share of Federal aid for education, and every other VVashington prom ise of something for nothing. The Federal government has nothing stored away from which these handouts may be painlessly plucked. They can only be handed out insofar as they are currently withdrawn from the market. And every such withdrawal by infla tion - by consumers who put back nothing useful in returnis bound to show up in the rising price of bread and other necessities, in the higher cost of living. ~ PETER A. FARRELL THOSE among us who persistently support economic arrangements of a compulsory nature and who, ironically enough, are called liber als, have rallied stoutly to the proposition that no worker should be allowed to withhold support from a union favored by the majority.

The worker who resists such a union exposes himself to heavy at tack. One clergyman, for instance, refers to the activities of the "free rider" (the nonunion man on a unionized job, in case you haven't heard) as being "inequit able, unj ust, and immoral"l (em phasis added). A college ethics text describes 2 the nonunion man 1 Jerome L. Toner, a.S.B. in Right to-Work Laws and the Common Good, a pamphlet by the United Steelworkers of America, p. 10. 2 Herbert Johnson, Business Ethics (New York: Pitman Publishing Corp., 1956) pp. 262-63. Mr. Farrell is Instructor of business and eco nomics at Marist College in Poughkeepsie, New York. 12 on a union job as "a parasite" who "share (s ) in the common good without contributing to that good." According to this learned view it would seem that a worker earns his way in society not by actually working but rather by paying his union dues. The argument by which the in dependent worker has been trans formed into a social leech has been exposed and refuted time and again but, like the "machines throw men out of work" fallacy, it refuses to die.

In the first place, union dues are used for many purposes other than the support of collective bar gaining which allegedly makes possible the good things which workers receive. They are used to support political candidates and programs, and, as has been abun dantly documented by various of ficial inquiries, they are sometimes tapped by unscrupulous union 1966 THE CASE OF THE FREE RIDER 13 leaders for their own personal use. That a worker should be forced to contribute funds to political causes which he actually opposes seems illiberal and undemocratic to say the least. Nor can union participation in American politics be written off as insignificant. It is indeed a crucial factor in many elections. That a worker impairs the common good when he refuses to subsidize the various undesir ables who have gained power in the labor union movement is ri diculous on the face of it. It is well to recall in this regard that the Teamsters Union with 1.5 million members is the largest single union in the United States.

Those favoring the union line in the compulsory union contro versy usually imply that the union is forced to "service" nonunion workers by representing them at the bargaining table. But as one critic of compulsory unionism has aptly replied: What is not told is that "exclu sive representation" (by which a union bargains for all employees in the bargaining unit and not just its own members) was fought for strenuously by the unions on the grounds that if they did not bar gain for nonunion workers, the em ployer could use favoritism toward the nonunion workers as a means of destroying the union . . . there fore it should be pointed out that nonunion workers in an open shop today are not free riders but forced riders since under the Taft-Hart ley Act they lose their right to bar gain with their employer and are forced to bargain through the union. 3 The issue is thus in clearer fo cus. The union chieftains fought for the elimination of the right of nonunion workers to contract for their own wages. Having achieved this, they and their in tellectual champions have pro ceeded to castigate the nonunion men for not supporting the very organizations which have caused them to lose an important right.

The last thing the unions would want would be a situation where they no longer had the extraordi nary power to bargain for all workers within the bargaining unit. Limits to Union Achievements As decisive as these points are in deflating the free rider indict ment, more basic factors deserve consideration. The free rider charge, after all, is based on the assumption that unions do in fact produce higher wages for work ers. Now, economic theorists are in general agreement that through concerted action (refusing to work 3 Edward A. Keller, The Case for Right-to-Work Laws. (Chicago: The Heritage Foundation, 1956), p. 42.

14 THE FREEMAN October at less than a prescribed wage), resource suppliers (workers) can force the price (wage) that they receive for their resource (an hour's labor), above the level that would otherwise prevail. All of this, of course, is exactly what a union attempts to accomplish. However, the higher price for labor bears with it unpleasant side effects. Most notably, the substitu tion effect would set in at two pos sible levels. The employer, for one, would substitute those alternative resources (automated machines, for example) which under the new conditions are cheaper than man power. Consumers of the finished prod uct, on the other hand, would be encouraged to substitute what ever finished products the market provided at a now cheaper price. The greater the possibility of sub stitution at the two levels, the more drastic would be the red uc tion in the use of the resource following an increase in its price, or in our case, the greater would be the number of workers laid off.

With this analysis in mind it is not surprising to learn that widely noted statistical studies have shown that a great many unions are ineffective in raising wages. 4 4 Albert E. Rees of the University of Chicago estimates that one-third of U.S. unions have had no effect on wages. See Wage Inflation (National Industrial Conference Board, New York, 1957) pp. 27-28. The union leaders in question rec ognize that higher wages would result in widespread and immedi ate unemployment. They are forced, therefore, to accept what is offered. Such unions seldom make the headlines and their pres ence, therefore, is likely to go un noticed. Clearly, the free rider charge is meaningless in this situ ation based as it is on the assump tion that the union does produce results. Sometimes, however, substitu tion of other resources by the em ployer or other finished goods by the consumer is unfeasible in the immediate future. Here, the union leader is likely to make bold de mands for wage increases. If the demands are not met, a strike will be called and efforts made to in sure that operations are sus pended for the duration of the strike. If the company voluntarily shuts down, the strike likely will proceed on an uneventful note; but if it attempts to continue opera tions (which, of course, it has every right to do) union-incited violence becomes a likely result.

Mass picket lines will be set up to isolate the plant from raw mate rials and willing workers. Cars entering the plant will be over turned, while workers attempting to enter by foot will be punched and shoved and subjected to the rawest kind of verbal abuse. Acts, 1966 THE CASE OF THE FREE RIDER 15 which in any other circumstance would result in prompt arrest, will curiously enough be overlooked by local authorities. In May of this year when a taxi strike developed in New York City, eight drivers who defied the union by continuing to operate had their windshields smashed. 5 Another had sugar placed in the gas tank of his cab. The mayor of the city reportedly considered this situation "... normal as can be with a taxi strike."6 No arrests were reported. In a 1965 taxi strike, several uncooperative drivers found their cabs gutted by fire and numerous others were terror ized by roving goon squads. 7 These episodes, unfortunately, are only recent examples of a pattern that continually repeats itself wher ever unions are powerful. 8 If, as often happens, the com pany capitulates to these tactics and grants the higher wage de manded, the union will appear to have won a smashing victory for the workingman. The nonunion man will be ridiculed more than 5 New York Daily News, May 13, 1966, p. 3.

6 Ibid. 7 New York Herald Tribune, July 1, 1965, p. l. 8 For a comprehensive analysis of union tactics see Professor Sylvester Petro's Power Unlimited': The Corrup tion of Union Leadership (New York: The Ronald Press). ever for receiving benefits at the hands of the union without paying his share of the cost of maintain ing the union. No Lack of Substitutes However, one can think of nu merous reasons why the free rider charge is still lacking in validity. For one thing, substitution is still likely to occur after market par ticipants have had time to adjust to the new situation. New substi tute resources will be developed by producers. Substitute products previously considered too expen sive will be marketed by competi tors. Importation of foreign goods will be increased, and at the same time, research and development may bring forth entirely new dis coveries making the original prod uct obsolete (just as government price supports have stimulated the development of synthetic fab rics inj uring the cotton and wool industries which the price sup ports were intended to help). In all these ways and more, a free market can adjust to an increase in the cost of labor induced by a union.

A worker lacking seniority might well realize that he-would be among the first to be laid off. In resisting the union, therefore, rather than taking a "free ride," he would be protecting his very livelihood. If he is obliged to sup16 THE FREEMAN October port the union, he would be forced to subsidize the very organization that is doing him in.9 Among so cialists generally there is a pre sumption that the interests of all workers are identical, but, as this instance shows, that presump tion is wrong. For another thing, the worker may justifiably abhor the violent and coercive tactics that the union threatens or actually invokes. The end, most people would agree, does not justify immoral means. Finally, the nonunion man may realize that any wage increase he actually recei ves through the union will be paid for: (1) by a decrease in the real income of con sumers, who, for the most part, are workers themselves, and (2) by a loss of e'arnings by those workers who are forced into less desirable jobs. His gain will be their loss. It is just possible that he may prefer not to join in the exploitation of other workers.

That a union, rather than the greedy capitalist of socialist lore, is the real exploiter of the work ing man is, of course, a substantial irony in itself. The union may hurt the employer in the short run but not indefinitely. This is true because any plant may be closed 9 For an excellent analysis of this situation see Professor Philip D. Brad ley's study, Involuntary Participation in Unionism (Washington: The Ameri can Enterprise Association, 1958). down when profit margins shrink below acceptable levels. Capital may then be reinvested where more profitable opportunities are thought to exist. All of this points to the con clusion which numerous statisti cal studies have substantiated, that unions have not actually en hanced the workingman's overall share of national income. 1O Rather, through their monopolizing tac tics, they have increased the wages of a relatively small group of workers while causing many more workers to suffer a reduction in real wages. If anyone emerges from this situation as a "free rider," it is the union itself and those who support it rather than the worker who resists it.

We are now in a position to ap preciate David McCord Wright's advice: ... that we deflate our absurdly over-expanded idea of the net bene ficence of unions . . . and see them for what they are - often reaction ary agencies of personal privilege. l1 10 In Philip D. Bradley's study noted in the above footnote, the conclusions of, seventeen relevant studies are sum marized as follows: 1. Unions have not raised the general level of real wages in the United States. 2. Unions have not increased labor's share in the national income. 11 David McCord Wright, "The Cana dian Compulsory Conciliation Laws and the General Problem of Union Power," Notre Dame Lawyer, XXV, No. 5 (1960), 651.

The Supremacy of the Market LUDWIG VON MISES IN THE MARKET ECONOMY the con sumers are supreme. Their buying and their abstention from buying ultimately determines what the en trepreneurs produce and in what quantity and quality. It determines directly the prices of the con sumers' goods and indirectly the prices of all producers' goods, viz., labor and material factors of pro duction. It determines the emer gence of profits and losses and the formation of the rate of interest. It determines every individual's income. The focal point of the market economy is the market, Le., the process of the formation of commodity prices, wage rates and interest rates and their deri vatives, profits and losses. It This article is from Planned Ch'aos, written as an Epilogue for a Spanish edition of Social ism, and first published as a book in English by the Foundation for Economic Education in 1947.

makes all men in their capacity as producers responsible to the con sumers. This dependence is direct with entrepreneurs, capitalists, farmers and professional men, and indirect with people working for salaries and wages. The mar ket adj usts the efforts of all those engaged in supplying the needs· of the consumers to the wishes of those for whom they produce, the consumers. It subjects production to consumption. The market is a democracy in which every penny gives a right to vote. It is true that the various individuals have not the same power to vote. The richer man casts more ballots than the poorer fellow. But to be rich and to earn a higher income is, in the market economy, already the outcome of a previous election. The only means to acquire wealth and to preserve 17 18 THE FREEMAN October it, in a market economy not adult erated by government-made priv ileges and restrictions, is to serve the consumers in the best and cheapest way. Capitalists and land owners who fail in this regard suffer losses. If they do not change their procedure, they lose their wealth and become poor . It is the consumers who make poor people rich and rich people poor . It is the consumers who fix the wages of a movie star and an opera singer at a higher level than those of a welder or an accountant.

Every individual is free to dis agree with the outcome of an elec tion campaign or of the market process. But ina democracy he has no other means to alter things than persuasion. If a man were to say: "I do not like the mayor elected by majority vote; therefore I ask the government to replace him by the man I prefer," one would hardly call him a democrat. But if the same claims are raised with regard to the market, most people are too dull to discover the dictatorial aspirations involved. SeconJ-Guessing ,the Customer The consumers have made their choices and determined the income of the shoe manufacturer, the movie star and the welder. Who is Professor X to arrogate to himself the privilege of overthrowing their decision? If he were not a potential dictator, he would not ask the government to interfere. He would try to persuade his fel low-citizens to increase their de- , mand for the products of the welders and to reduce their de mand for shoes and pictures.

The consumers are not prepared to pay for cotton prices which would render the marginal farms, Le., those producing under the least favorable conditions, profit able. This is very unfortunate in deed for the farmers concerned; they must discontinue growing cotton and try to integrate them selves in another way into the \ whole of production. But what shall we think of the statesman who interferes by com pulsion in order to raise the' price of cotton above the level it would reach on the free market? What the interventionist aims at is the substitution of police pressure for the choice of the consumers. All this talk: the state should do this or that, ultimately means: the police should force consumers to beha ve otherwise than they would behave spontaneously. In such proposals as: let us raise farm prices, let us raise wage rates, let us lower profits, let us curtail the salaries of executives, the us ulti mately refers to the police. Yet, the authors of these projects pro test that they are planning for freedom and industrial democracy.

1966 THE SUPREMACY OF THE MARKET 19 Privileged Labor Unions In most non-socialist countries the labor unions are granted spe cial rights. They are permitted to prevent non-members from work ing. They are allowed to call a strike and, when on strike, are virtually free to employ violence against all those who are prepared to continue working, viz., the strikebreakers. This system as signs an unlimited privilege to those engaged in vital branches of industry. Those workers whose strike cuts off the supply of water, light, food and other necessities are in a position to obtain all they want at the expense of the rest of the population. It is true that in the United States their unions have up to now exercised some moderation in taking advantage of this opportunity. Other Ameri can unions and the European unions have been less cautious. They are intent upon enforcing wage increases without bothering about the disaster inevitably re sulting.

The interventionists are not shrewd enough to realize that la bor union pressure and compulsion are absolutely incompatible with any system of social organization. The union problem has no refer ence whatsoever to the right of citizens to associate with one an other in assemblies and associa tions; no democratic country denies its citizens this right. Neither does anybody dispute a man's right to stop work and to go on strike. The only question is whether or not the unions should be granted the privilege of resort ing with impunity to violence. This privilege is no less incom patible with socialism than with capitalism. No social cooperation under the division of labor is pos sible when some people or unions of people are granted the right to prevent by violence and the threat of violence other people from working. When enforced by vio lence, a strike in vital branches of production or a general strike are tantamount to a revolutionary de struction of society.

20 THE FREEMAN October A government abdicates if it tol erates any nongovernmental agen cy's use of violence. If the govern ment forsakes its monopoly of coercion and compulsion, anarchic conditions result. If it were true that a democratic system of gov ernment is unfit to protect uncon ditionally every individual's right to work in defiance of the orders of a union, democracy would be doomed. Then dictatorship would be the only means to preserve the division of labor and to avoid an archy . What genera ted dicta tor ship in Russia and Germany was precisely the fact that the mental ity of these nations made suppres sion of union violence unfeasible under democratic conditions. The dictators abolished strikes and thus broke the spine of labor unionism. There is no question of strikes in the Soviet empire. Arbitration No Solution It is illusory to believe that ar bitration of labor disputes could bring the unions into the frame work of the market economy and make their functioning compatible with the preservation of domestic peace. Judicial settlement of con troversies is feasible if there is a set of rules available, according to which individual cases can be judged. But if such a code is valid and its provisions are applied to the determination of the height of wage rates, it is no longer the market which fixes them, but the code and those who legislate with regard to it. Then the government is supreme and no longer the con sumers buying and selling on the market. If no such code exists, a standard according to which a con troversy between employers and employees could be decided is lack ing. It is vain to speak of "fair"

wages in the absence of such a code. The notion of fairness is non sensical if not related to an estab lished standard. In practice, if the employers do not yield to the threats of the unions, arbitration is tantamount to the determina tion of wage rates by the govern ment-appointed arbitrator. Per emptory authoritarian decision is substituted for the market price. The issue is always the same: the government or the market. There is no third solution. . . . Men must choose between the market economy and socialism. The state can preserve the market economy in protecting life, health and private property against vio lent or fraudulent aggression; or it can itself control the conduct of all prod uction acti vities. Some agency must determine what should be produced. If it is not the consumers by means of de mand and supply on the market, it must be the government by compulsion. ~ LEONARD E. READ THE NEWEST and the most radical idea in political history has as its premise, "that all men ... are en dowed by their Creator with cer tain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness." And then the idea's implementation: "that to secure these rights, Gov ernments are instituted among men. ... "

Government's purpose, in other words, is to curb the oppression, the plundering - exploitation in the sense of being preyed upon of man by man. These actions which are abusive of man's rights are to be codified and then posted for all to see (the law) ; these are the forbidden acts which govern ment must restrain, inhibit, penal ize. Let government stand guard against oppression, that is, against violence and/or fraud, and otherwise leave all citizens free to act creatively as they please. This is the American ideal expressed in the Declaration of Independ ence. But this inspired ideal has come a cropper. Oppression occurs on an enormous scale, and grows apace. And, contrary to most ex pectations, the greatest oppressor of all turns out to be the very agency designed to curb oppres .. sion! Among the reasons for so ciety's protector turning predator is a faulty understanding of gov ernment's essential nature.

Woodrow Wilson put his finger on the nature of gove,rnment: "The essential characteristic of all government, whatever its form, is authority .... Government, in its last analysis, is organized force."l (Italics mine.) Observe the distinction between 1 See The State: Elements of Histori cal and Practical Politics by Woodrow Wilson. D. C. Heath & Co., 1898, revised ed., p. 572.

22 THE FREEMAN October you as an agent of government and you as a private citizen. As an agent of government you have the backing of a constabulary; you issue an edict and I obey or take the consequences. Remove the backing of the constabulary and you are restored to private citi zenshi p; your edict has no more compulsive power than a chamber of commerce resolution. I do as I please. Clearly, the constabulary organized police force - is govern ment's distinctive feature. True, individuals in government service are also private citizens; but, acting in the role of gover nors, they are set apart from the rest of us by having coercive force at their disposal. A governor is one of us - plus armament. What is it that armament can and cannot do? It can restrain, in hibit, destroy, penalize. It cannot, by any stretch of the imagination, serve as a creative force. All crea tivity - no exception - is volitional in origin and is characterized by such spiritual phenomena as in vention, discovery, intuition, in sight.

What Should Be Restrained? The above poses the next ques tion: What, in good conscience, should be restrained, inhibited, de stroyed, penalized? The answer, in a word, is the oppression of man by men of prey. The moral codes, extending over the millen nia, long before Christianity, cau tion us not to kill and not to steal - that is, not to use violence or fraud. The Bhagavad-Gita is quite explicit: "Sin ... is the assertion of the independence of the ego which seeks its own private gain at the expense of others." Orga nized police force - government can be properly invoked to curb oppression; that is at once its po tentiality and its limitation, morally and ethically speaking. Another re,ason for society's protector turning predator is a generally accepted definition of prey too broad for government to cope with. The only part of the definition fit for governmental at tention is "... an animal [human] hunted or killed for food [or what ever] by another animal [hu man] . . . to plunder; pillage; rob."

Perhaps one can feather his own nest at the expense of others with out the use of fraud or violence. I leave that point to the intellectual hair-splitters. Further, I'll grant that oppression, however achieved, is not to be sanctioned, and that defenses should be erected against it in all of its nefarious forms. But there are defenses and de fenses. My point is that organized police force - government - can effectively serve as a defense only against that brand of oppression 1966 MEN OF PREY 23 which is founded on fraud and violence; that when government force is used for any other pur pose, then government itself will become an oppressor. For instance, armament cannot put down stu pidity or cupidity or avarice or laziness or conjured-up fears or covetousness or evil thoughts.Y et, more and more we turn to the police force - fruitlessly - as a substitute for our own alertness, moral rectitude, and wisdom; thus we make of government the grand oppressor - collectivized men of prey!

Robbery, pillage, embezzlement, plunder, marauding, misrepresen tation, violence or the threat there of - whether to keep another from accepting a job one has vacated or from a market one has pre-empted - are instances of a,ggressive force. This type of force, at least in our present state of understand ing, can be met only by defens'ive force - the principled role of gov ernment. But the only defense against ignorance is wisdom, not author ity, not police force. Governm,ent is limited in what it can appro priately do by its nature. Physical force can only counter physical force. For example, a great deal of what we think of as "preying upon" is possible only because so many people are gullible. The shell-game artists, who formerly infested the midways of county and state fairs, ·were attracted there by an abundance of yokels or suckers. The existence of a con man presupposes a sufficient num ber of people who can be conned, that is, people bent on something for nothing and so lacking in skepticism that they can be "taken to the cleaners." Shell games need not be outlawed, but will disappear as soon as people awaken to the obvious chicanery involved.

Yes, the reason why so many people can be conned is that they are gullible. The only defense against gullibility is to come awake. And precisely the same de fense -- enlightenment - must ap ply to conjured-up fears of oppres sion, the kind that turns our hoped-for protector - government - into a predator. Of the numer ous examples that might be used, let's pick one at random: the mini mum wage law. Take the Minimum Wage Law Time and again I hear it said, "Why, if we didn't have a mini mum wage law, workers would be exploited!" Such statements have their origin in fear and ignorance - fear of imagined evils, and ig norance of how the market, if free, tends to give every man his due. In the market, each -person is rewarded by his peers accord ing to their assessment of the 24 THE FREEMAN October value of his services to them. This is truly the "just price" for his labor. The very persons, in and out of government, who advocate a mini mum wage law are themselves guilty of the "dreadful" practice they fear in others. Their fear is that some employers, if not legally restrained, will hire workers at as low a wage as possible. And they will, indeed! But observe that these fearful ones do precisely the same: they themselves shop around for bargain pric'es.

No housewife - not even a union official's wife - will pay 70 cents for the same quality eggs that she can buy next door for 60 cents. She will no more indulge herself in such economic nonsense than the maker of cans will pay an above market price for sheet steel. What are eggs or sheet steel but the products of human energy! What matters whether one's wage is paid in dollars per hour or as a price for the thing one produces? No difference, whatsoever! When the housewife buys her groceries or shoes or hats or whatever at the bargain counter she is, in the final analysis, paying the lowest possible price for labor. When she fears that some employer will do what she does day in and day out, and when she advocates a mini mum wage law to keep others from doing likewise, she displays not only an ungrounded fear but an ignorance of economic abc's. Whoever advocates the mini mum wage law not only makes an oppressor of government but of himself as well. If this seems con trary to fact, it is only because we are accustomed to think of the oppressor - he who preys upon as one who harms others strictly for his own advantage. Clearly, many of those who advocate mini mum wage laws get nothing in re turn for their advocacy. But the fact that an advocate gets no loot for himself from the oppression he promotes in no way diminishes the oppressive force of the mini mum wage law or absolves the ad vocate.

Who Gets Hurt? Who is oppressed by a minimum wage law? The number, of course, is determined by how high the rate is.2 But it is the multitude of marginal workers who prefer working for less than the mini mum to not working at all, plus another multitude of marginal producers who prefer to hire be2 Were the minimum wage law set at 10 cents an hour, probably there would be no robbery, no oppression, no distur bance of the market; if at $1.25, as pres ently, a considerable unemployment; if at $1.65, as proposed, a greater unem ployment; and if, shall we say, at $15, then, perhaps everyone would be unem ployed, for the economy would disinte grate; it could not function.

1966 MEN OF PREY 25 low the minimum to not hiring at all. These people, all of them, are robbed of employment, and of all the gains. to each that might have been.3 Conceding that no gain accrues to most advocates of a minimum wage law, how can its advocacy be classified as oppression? The answer would be easy were our thought of oppression or preying upon not limited to the forcible transfer from the robbed to the robber of material things such as cash, or an auto, or whatever. But, in this instance, the forcible trans fer is, initially, not of goods but of a right. The right to earn one's own living is a precious posses sion. This is forcibly taken from people and turned over to govern ment. What was once a person's economic right to make his own way now becomes the right of gov ernment to make his way for him. He is removed from the market, featured by self-responsibility and self-determination, and put at the disposal of the political apparatus.

In a word, the minimum wage law is an oppressive abuse of human rights and it is brought about by organized police fore-e. Clearly, most advocates of the 3 I use the term, unemployment, in its broadest sense: the employer employs employees, as all agree, but the employee should remember that he employs an em ployer. mInImum wage law do not gain any rights over the persons who fall below the minimum because the advocates are not a part of the political apparatus. But, they are accessories to the immoral act, and primarily because (1) they fear that others will not act more magnanimously than they do, and (2) because they have no understanding of how the free' market constantly exerts its forces in the direction of economic upgrading for all. From Protection to Predation However, the minimum wage law, like strikes and all other in terference with the market, finally gets into the cash drawer. Em ployers do not pay wages beyond a worker's worth to them. Thus, those workers who cannot produce and earn that minimum wa.ge are disemployed -legally and compul sively thrown out of work. The right to look after themselves has been taken away and given to the government, so the governm.ent must provide their living. But, having nothing of its own, how can government do this? Simple: government forcibly takes cash from those remaining on the work force, and from accumulated capi tal, and uses the cash to finance such make-work projects as Fed eral urban renewal, or to provide unemployment insurance, or any 26 THE FREEMAN October one of countless devices. 4 It is in this manner that government, de signed as our agency of defense, becomes the great oppressor. And partly because so many persons include in their definition of "preying upon" the common and ethical practice of shopping around for bargain prices. It is self-evident that there is no fraud or violence in a willing exchange of your cash for my labor, regard less of how little your cash or how relatively inefficient my labor.

The minimum wage law has been used· only to illustrate how government is turned from pro tector to predator, how the agency for minimizing oppression has it self become the great oppressor. And the big question is: What de fense do we have against our erst while defender, now one of the greatest and most powerful op pressors ever known? Certainly, our defense cannot be organized force, for this oppressor has a monopoly of that. Whether we like it or can see any hope in it or not, only one avenue remains open to us: enlightenment, understanding, overcoming our nai vete, coming awake. Is not this oppression 4 See Encyclopedia of U. S. Govern ment Benefits, 1,000 pages and listing over 10,000 so-called benefits. Obtainable from Doubleday Book Shop, 724 Fifth Ave. at 57th St., Customer Service, New York, N. Y. Reg. Ed., $7.75; De Luxe Executive Ed., $9.95. pretty much of our own making?

And isn't it possible that our ap plied intelligence, eventually, might correct these mistakes we have made? Steps Toward Correction An awakening to the nature of organized police force is step num ber one. We shall never know where force should not be em ployed unless we are sharply aware of its limitations. And the only problem is to figure out what can and cannot be accomplished with a billy club. Were this widely understood, our oppressor would wilt away in the face of the re sulting skepticism. Yet, given our present state of understanding, even this would leave· most people with the feeling of a hollow vic tory. With the All-Promising de throned, to what do we look now? The Myth has vanished; who or what is to perform our miracles? An empty promise is better than no promise; all appears to be void! It takes a second step to fill that void: an awareness of the poten tialities of individual liberty personal insight and understand ing of the wonder-working mira cle of cooperation via the free market process. This is much more difficult than· understanding what a billy club can and cannot do. The fact that nearly everyone pro1966 MEN OF PREY 27 claims for liberty - authoritarians and interventionists by the mil lions - suggests that those who have not experienced this insight are oblivious of their nonexperi ence. And what can one who is aware of liberty's potentialities do about inducing a similar in sight in another who doesn't know he hasn't experienced it?

Liberation I asked of an inquiring spirit, "How long have you been inter ested in this nonoppressive philos ophy?" She replied, "I have now been liberated for six months!" What brought on this "liberation," this insight? It was quite by chance, a skillful explanation by a friend concerning self-responsibil ity. Immediately, there was a free ing of the spirit of inquiry, an in telligent curiosity, a state of "wanting-to-know-it-ness." Paren thetically, no person is as much as educable on the free market, pri vate property, limited government philosophy until his "liberation." And we know, from years of ob servation, that there is no master key to inducing such insight in another; the aforementioned self responsibility explanation might not trigger more than one in a thousand. Thus, it is plain that what you or I can do to afford others an enhanced grasp of liberty and its enormous, unbelieva ble potentialities is limited to how extensive a repertoire of explana tions we can encase in our own intellectual portfolio. If one ex planation has no triggering effect on an unliberated person, it is pos sible that one of several hundred other explanations will.

Yet, this limitation on what we can accomplish with others may be a blessing in disguise. It has a profound message for those of us who have a glimmering of light: Wake wp! Come even more alive to the meaning of individual lib erty,. it is one of the great chal lenges this moment in human evo lution p"resents.Meet the challenge by knowing more of liberty's promise, or face the consequences. Bear in mind that scarcely any one - even you - is very far out of the slumber stage. And, for this reason, do not be taken in by the cliche, "Weare only talking to our selves." Search for bhe "liber ated"; they are to be found among "ourselves." If you can discover who they are, you can learn from them and, hopefully, they may learn from you. Therei.s no other way to put down men of prey. That's how the message comes through to me; it doesn't flatter my ego but it makes sense. ~ PUNCH Decries "No Compromise"

Reproduced by permission of Punch, London. 28 THE FREEMAN AsI~s, " WHY Compromise?" THE SEAMEN'S STRIKE in England was disastrously prolonged, sug gests Punch, because of an un bending, uncompromising attitude . by all parties to the controversy. The American Machinists' Strike which grounded five air lines was disastrously prolonged, in many minds, for the same rea son. What goes on here? It seems that justice can be served only as everybody bends to the whims and desires of those who hold power. To what a low estate has justice descended: what's right is the outc'ome of bending to ambi tions for power! Who likes to compromise? Em ployees are as averse to backing down as are employers. Yet, there is no other recourse than com promise in managed or socialistic economies - as in England and the u. S. A. When coercive powers rule the economy, adjustments of the numerous powers must be ceded by the warring factions. With fail ure to compromise, the economy comes to a halt. Further, compro mised or dictated adjustments are no more than temporary expe dients, for no one has the knowl edge or the ability to accurately predict the future.

Noone likes to compromise, nor should anyone be expected to do so. Be done with the planned econ omy and its inevitable compro mises and failures. Give no more coercive power to a labor union than to a chamber of commerce. Free the market! L.et government protect all willing exchange and inhibit all unwilling exchange and not indulge in the forbidden exchange itself! In the free market, humiliating compromise gives way to a gratify ing freedom of choice by every one, be he employee or employer, consumer or producer. If one sup plier's price for a can of beans or his system of management doesn't suit, you have the freedom to shop around. And, if he doesn't like your bid for beans or your serv ices on your terms, he has the freedom to look around. Why compromise when we could be free to choose? ~ 29 25. Political Experimentation: THE FOUR-YEAR PLANS CLARENCE B. CARSON WOODROW WILSON, 1912 HARRY TRUMAN, 1949 JOHN F. KENNEDY, 1961 I stand for the square deal. But when I say that I am for the square deal, I mean not merely that I stand for fair play under the present rules of the game, but that I stand for having those rules changed so as to work for a more sub stantial equality. . . . THEODORE ROOSEVELT, 1910 And the day is at hand when it shall be realized on this consecrated soil, - a New Freedom, - a Liberty widened and deepened to match the broadened life of man in modern America ....

I pledge you, I pledge myself, to a new deal for the American people. FRANKLIN D. ROOSEVELT, 1932 I hope for cooperation from farmers, from labor, and from business. Every segment of our population and every individual has a right to expect from our Government a fair deal. ... So that, although the United States is an old country - at least its Government is old as governments now go today - nevertheless I thought we were moving into a new period, and the new frontier phrase expressed that hope. Building the Great Society will require a major effort on the part of every Federal agency in two directions: - First, formulating imaginative new ideas and programs; and - Second, carrying out hard-hitting, tough-minded reforms in existing programs. LYNDON B. JOHNSON, 1964 30 1966 THE FOUR-YEAR PLANS 31 THE FUNPAMENTAL SHIFTS, changes, and direction of Ameri can government in the twentieth century have not been generally clearly outlined in historical ac counts. The shift of the office of President from primary concern with execution of the laws to leg islative innovation, the yielding up of legislative initiative by Con gress, the subtle intellectual im petus to shift the American re spect for the Constitution to adula tion of the decisions (or at least acceptance of them) of the Su preme Court, the change of gov ernment from protector of rights to granter of privileges, have not been much emphasized by those charged with keeping the record straight. Superficial continuities have been allowed to obscure fun damental changes.

Of course, historians have noted the appearance of the Square Deal, New Nationalism, New Freedom, New Deal(s), Fair Deal, New Frontier, and Great Society. These names have often been used as convenient pegs from which to hang the assorted infor mation and developments associ ated with presidential administra tions. But the phenomenon itself and what it may signify that a line of Presidents should get up a program, name it, attempt to embody it in legislation, and have it associated with them - has not been much attended to. There is in these things a new form of presidential acti vity, something tha t had not occurred in the nine teenth century. As a form, its ap pearance symbolizes the taking over of leadership in the Federal government by Presidents; but much more than this is involved. No one, to my knowledge, has pointed to the analogy between the Square Deal, New Freedom, New Deal (s), Fair Deal, New Frontier, and Great Society on the one hand and the five-year plans of the Soviet Union on the other. Yet, there is an analogy that warrants examination, and the reference to the American programs as four (or eight-) year plans is used to call attention to it. Such an ex amination will be useful in reveal ing the character of much that has been happening in America.

Different in All Details There are many differences of detail between the· Soviet five-year plans and the American four- (or eight-) year plans. The five-year plans are not coterminous with some electoral period. They are not identified with the whole ad ministration of some Soviet . pre mier. The leaders of the Soviet Union are openly committed to the achievement of socialism, those of the United States are not. Moreover, the Communists 32 THE FREEMAN October avow the revolutionary character of their way to socialism, and Americans have adopted no such way. The five-year plans are broad and comprehensive blueprints for social and economic reconstruc tion. Joseph Stalin said of the first five-year plan, begun in 1928: The fundamental task of the Five Year Plan was, in converting the U.S.S.R. into an industrial country, fully to eliminate the capitalist ele ments, to widen the front of Social ist forms of economy, and to create the economic base for the .abolition of classes in the U.S.S.R., for the construction of Socialist society ....

The fundamental task of the Five Year Plan was to transfer small and scattered agriculture to the lines of large-scale collective farming, so as to ensure the economic base for So cialism in the rural districts and thus to eliminate the possibility of the restoration of capitalism in the U.S.S.R.l By comparison with such bold ness, the American four-year plans appear timid and pale. Moreover, the American four-year plans be gan before the Russian ones, though the point is of no impor tance as to any fundamental sim ilarities. There are many other dif ferences, but let them all be 1 Richard Powers, ed., Readings in European Civilization since 1500 (Bos ton: Houghton Mifflin, 1961), pp. 632 33. summed up by this observation: In detail, the Soviet plans differ in every respect from American ones. The Same in Essence But analogy deals with essences, not with differences of detail. There is an essential difference be tween the Soviet way to socialism and the American one. It has been alluded to above. The Russian Communists have pursued a direct revolutionary approach to social ism. American meliorists have pursued an indirect evolutionary approach to socialism. Commu nists have proceeded by destroy ing the old order as completely as they could and erecting a new one in its stead. Meliorists have at tempted to operate within the framework of the old order, to keep as much of its superficies and forms as possible, and to turn the received instruments of power to the task of gradual social and economic reconstruction. The five year plans are Soviet programs in the revolutionary road to social ism; the four-year plans are American programs in the gradu alist route to socialism. They are both instruments of national plan ning by central authority; they employ a quite different assort ment of paraphernalia; they dif fer as to methods; they have the same goal in view.

The four-year plans are really 1966 THE FOUR-YEAR PLANS 33 devices for using the Presidency for social reconstruction. The kind of planning which will move a country toward the goal of social ism must be centrally directed. Policy making, legislating, and ex ecution must be coordinated. Con gress can pass laws, but it cannot execute them. Moreover, left to their own devices the members of Congress are not apt to thrust the country in any consistent di recti on. Power is dispersed among the many members. They repre sent a great diversity of interests throughout the country. Legisla tion that originates in Congress is usually subjected to numerous compromises before it is enacted, compromises that turn it to ends not originally conceived or that vitiate its impact. The very divi sion of Congress into two houses makes it virtually impossible for any leadership that arises in one of the houses to have any influence or control over the other. The Presidency is the only office estab lished by the Constitution that could provide such central direc tion. The four-year plans are means for giving Presidents ap parent electoral authorization for taking over in legislative innova tion.

Presidents did not concoct such programs in the nineteenth cen tury. They usually were satisfied to restrict their endeavors to the more modest activities of admin istering the laws. Presidents did sometimes emerge as strong lead ers, but this leadership was either exercised in war and foreign af fairs, where the President has great constitutional authority, or in the form of a restraining hand upon Congress. Excepting for Lincoln, the man who stood out as the most vigorous leader in the nineteenth century was Andrew Jackson. He summed up his policy in this way: "The Federal Con stitution must be obeyed, state rights preserved, our national debt must be paid, direct taxes and loans avoided, and the Federal Union preserved. These are the objects I have in view, and re gardless of all consequences, will carry them into effect."2 Presidents did, of course, sometimes press for some innovation and some par ticular line of legislation in the nineteenth century, but none of them advanced any four-year plans.

Theodore Roosevelt The twentieth century was hardly under way, however, before a man came to power who would give shape and form to the new method. The four-year plan does 2 Quoted in Samuel E. Morison and Henry S. Commager, The Growth of the American Republic, I (New York: Oxford University Press, 1942, 3rd ed.), 472.

34 THE FREEMAN October not appear to have come by way of any advance calculation. Theo dore Roosevelt forged its outlines during nearly eight years in the Presidency. But Roosevelt did not come to the Presidency, initially, on his own. Lore has it that "Boss" Tom Platt got him nominated to the Vice-Presidency in 1900 to get him out of New York. 3 President McKinley was assassinated in 1901, however, and Roosevelt suc ceeded to the Presidency. The phrase, "square deal," was used by Roosevelt in the campaign of 1904 to describe his actions in the coal strike of 1902. He wanted both labor and capital to get a square deal, he said. 4 The phrase caught on and has since been used by his torians as a vague label for Roose velt's administration. The phrase, "square deal," did not fall into a historical vacuum, nor was it uttered by a nonentity. The stage had been set by the development of ideas for the phras-e to connote and evoke a par ticular vision. If the view had been accepted that Americans were gen erally getting a square deal, the phrase could hardly have meant anything more than that in a par ticular instance the President had sought to see that justice was 3 George E. Mowry, The Era of Theo dore Roosevelt -1900-1912 (New York: Harper, 1958), pp. 108-09.

4 Ibid., p. 139. done. Once it was done in this case, there would have been no occasion for the phrase to have any con tinued vitality. But it was uttered at a time when a great clamor was arising against conditions as they were, and the cry was for changes that would bring about social justice. Time for a IISquare Deal" The Progressive Movement was underway. Back of it lay more than a quarter-century of writing and agitation by social theorists, reformers, utopians, and social re constructers. These ideas and vi sions were moving from the pe riphery of American society, where they had been uttered by men and women outside the pale of respectability, toward the center where they would be taken up by more respectable and restrained spokesmen. Muckrakers, novelists, social analysts, professed socialists, and others were presenting a most un pleasant picture of America. Things were not as they should be, they said. Great concentra tions of wealth threatened the Republic with rule by a plutocracy.

The influence of John D. Rocke feller, Marcus A. Hanna, and J. P. Morgan, among others, resulted in .the use of political power to strange ends. At any rate, eco nomic "power" was outmatching 1966 THE FOUR-YEAR PLANS 35 and overawing political power, so the story went. A beef trust gouged consumers with high prices and fed them unclean meat. City governments were corrupt, the cities themselves gorged with immigrants from a swelling tide living in slums, and alcohol addic tion and prostitution growing apace. Behind all this criticism of ex ternals lay a call for fundamental social reconstruction. Social gos pelers were preaching the coming of the Kingdom, progressive edu cationists working for the trans formation of the school, and as sorted intellectuals delineating the transmuted shape of things to come. Talk of a square deal in this intellectual setting evoked vi sions of a crusade to remake America; the seeds of reform con~ tained in a simple phrase fell upon fertile ground.

A Man of Action The phrase picked up meaning and gained currency, too, from the vitality and zeal of the man who uttered it. Theodore Roose velt was a man of action. Before coming to the Presidency, he had engaged in a great variety of ac tivities. By turn, he was state legislator, member of the Civil Service Commission, head of a police board, Assistant Secretary of the Navy, governor of New York, rancher, historian, bio grapher, Rough Rider, and hunts man. As President, he was soon in the thick of all manner of af fairs, domestic and foreign: ar bitrating a labor dispute, trust busting, settling international dis putes, intervening in Caribbean countries, and conserving natural resources. Roosevelt's conception of the role of the Presidency was a lofty and extensive one. "He believed that, acting in the public interest, he could do whatever was not expressly prohibited by the Constitution or the laws."5 His views of the duties of the office were comprehensive ~ The President did not confine him self to political matters. He saw nothing incongruous in using his great prestige to urge the reform of English spelling, or to pillory the "nature fakers" who wrote stories humanizing animals. He delivered exhortations on the necessity for women in the upper classes to bear more children and for everyone to live strenuously according to his creed of "Muscular Christianity."6 Along with being a man of ac tion he was also a superb pub licist. He had that quality known as charisma, an attractiveness and charm which helped him to sur5 Dumas Malone and Basil Rauch, Empire for Liberty, II (New York: Appleton-Century-Crofts, 1960), 217.

6 Ibid., p. 218.

36 THE FREEMAN October round his actions with an aura of rightness-even righteousness, for he was a moralist. The place of his administration in history needed a unique phrase to identify it. That it was the Square Deal may have been an accident, but the times and the man united in such a way as to make it virtually necessary. . . . and a Reformer Theodore Roosevelt was a re former, a meliorist. He was the first man to occupy the Presidency who could be so identified. Some historians question how deeply he was committed to reform, or, at any rate, to social transformation. Perhaps he was only an oppor tunist, they say, and in this they are echoing the sentiments of some of his contemporaries. He has even been called a conserva tivee7 This latter claim stems, in part, from the fact that he steered a course between calling for re form and making complimentary remarks about businessmen. 8 Whatever the motives may have 7 See, for example, Daniel Aaron, Men of Good Hope (New York: Oxford University Press, 1951), pp. 246-52.

8 There is also a tendency among "liberal" historians to classify meliorist politicians generally as conservatives, presumably because they do not press for violent revolution. Also, these his torians have created, or perpetuated, a myth that if reforms had not been made, a revolution would have occurred. been behind his straddling of the fence on occasion, they served the practical political object of mak ing reform respectable by dissoci ating it from out-and-out radical ism. At any rate, ~rheodore Roose velt was a reformer. Of that, there should be no doubt. He had been a reformer, of sorts, as governor of New York. He had no sooner succeeded to the Presidency be fore this vein began to be exposed at that level. Roosevelt pressed to extend the powers of the Inter state Commerce Commission, had his attorney general begin a rig orous enforcement of the Sherman Antitrust Act, and in general be gan to adopt a reformist tone.

After his election to the Presiden cy in 1904, when he could hold the office in his own right, he became more strident in his reformism. As one historian says: . . . His message to Congress in December, 1904, was significantly without most of the equivocations of the past. Over half the document was given over to proposals for new economic and social legislation. 9 He called for the Federal gov ernment to pass an employer's lia bility act for its employees and those of contractors employed by the government. There were re quests for such things as requir9 Mowry, Ope cit., p. 197.

1966 THE FOUR-YEAR PLANS 37 ing the use of safety devices on railroads, regulation of hours of labor of railroad workers, giving the Interstate Commerce Commis sion power to establish rail rates, establishing a Bureau of Corpora tions to license interstate busi ness, the instituting of numerous reforms in the District of Colum bia, and so forth. Some of these were made into law, and other reforms were instigated during his second administration. By 1908, most of the ingredients of the four-year plan had been ex emplified by Roosevelt. It re mained now only for them to be used by others and made into a regular way of doing things. In 1912, the four-year plan as a cam paign device was taken up by two candidates: Theodore Roosevelt and Woodrow Wilson. They called their plans the New Nationalism and the New Freedom. Significant ly, these were alternative plans to the revolutionary proposals of the Socialist party, led by Eugene Debs. The Socialists had been gaining a following rapidly in re cent elections. The four-year plan began its career of draining away the appeal from those who called themselves socialists.

Main Features of the Plans Before recounting the story of the four-year plans, however, it will be useful to describe their main features. First of all, it is worth noting that they were taken up by the Democrats and have, since the time of Theodore Roose velt, been exclusively employed by tha t party. There was a consider able contingent of reformers in the Republican party between the Civil War and World War 1. In the early twentieth century, there was a lively meliorist wing of the party, called the Progressives. But Theodore Roosevelt drew many of these away in 1912 when he ran on the Bull Moose ticket. Since that time, meliorists have never dominated the Republican party, if they ever did. By contrast, the Democratic party had stuck fairly close to its J efferson-J ackson her itage in the nineteenth century. It began its turn toward meliorism with the campaign of William J en nings Bryan in 1896. Woodrow Wilson and Franklin D. Roosevelt fixed it on this path in the twen tieth century. Much of the impulse for the gradualist movement to ward socialism has come from the Democratic, party, and the partic ular infusions of energy toward this end have come from a suc cession of four-year plans.

Several features of the four year plan can be described by showing its relation to the politi cal party. A political party may be the lengthened shadow of a man, of Thomas Jefferson or of Abra38 THE FREEMAN October ham Lincoln, for instance. At its inception, a political party may even be the political instrument of an individual, as the Jeffer sonian Republican party was for its founder. But political parties quickly have become institutions themselves in our history. They are organizations, having contin uing existence (beyond the life or time of those who founded them), are devices for winning elections at various levels, have a wide spread membership which partici pates in the choice of candidates, and are labels with which a suc cession of politicians can identify and be identified. In an important sense, political parties are imper sonal and nonideological. A great variety of individuals find politi cal shelter within their folds. Is sues come and go, but parties con tinue as they shift from this posi tion to that.

Sid for Presidential Power By contrast, a four-year plan is not the lengthened shadow of a man; it is the shadow cast by a particular man who has come to the Presidency. It is the personal instrument of a President. Politi cal parties may be said to be dem ocratic, or at least federal, in char acter. Their widespread member ship plays a part in determining their stand on issues. Platforms are drawn by committees. A Senator or Representative may, so far as his district goes, have as much to say about what the party stands for as does the President. With four-year plans, it is not so. They are centristic and auto cratic. They are devices which can be and have been used to bridge the gap, politically, of the separa tion of powers. Through a four year plan, a President can identi fy the whole governmental pro gram with himself. He can make the other branches of the govern ment more or less adj uncts to his administration. To the extent that a President can bring off the coup that is implicit in the four-year plan, he can centralize power and use the whole government as if it were an extension of himself. That concentrated power which is nec essary to governmentally directed social transformation is made available by the four-year plan.

Four-year plans appear, also, to have subsumed much of the role which third parties played in the meliorist movement at its outset. No new maj or political party has emerged in America since 1860. It would have been logical for a socialist party, by whatever name, to have come to majority status in the United States in the twen tieth century, in view of the course of developments, as the Labour party did in England. The origi nal impetus to socialism came 1966 THE FOUR-YEAR PLANS 39 from third parties in America in the late nineteenth and early twen tieth centuries, from the Green back-Labor party, Populist party, and Bull Moose (or Progressive) party. But since the 1920's, third parties have either been ephemer al or have had little appeal. Two things happened. Such so cialism as appealed to any consid erable portion of the electorate was advanced by one or both of the major parties. And the im pulse for a new surge toward so cialization was embodied in the four-year plans. Third parties with a penchant for socialism had their issues taken away from them as soon as the issues attained popularity and were much more at tracti vely packaged by the regular organizations and presidential can didates for them.

Appeals to Americanism The names given to the four year plans are interesting and revealing in themselves. Rhetori cally, they evoke American values and even American experience. Three of them - Square Deal, New Deal, and Fair Deal - call up an image of sporting behavior and appear to derive from card-play ing terminology. Perhaps the ref erences to games of chance are unintended - though the pragmat ic stance is that all human action is a kind of chance taking, and the proponents of these programs are often called pragmatists. But the appeals to fair play are surely intentional. Americans are much addicted to sports and, in that con nection, are committed to the vir tue of fair play. (It was the Beards, Charles and Mary, I think, who observed that the one thing Americans would not tolerate in the twentieth century was crooked officials in their athletic contests.) The New Freedom called up one of the basic values for Americans, for they have understood that one of the distinctive features of the American system· has been the ex tent of freedom it provided. The New Frontier evoked memories of an earlier American experience.

The only phrase that appears not to have any American context is the Great Society. Perhaps the utopian vision is now sufficiently a part of the mental baggage of Americans that it is politically feasible to appeal to it directly. At any rate, those terms which do rely on American values for their appeal place them in a new framework. The call was for a new freedom, a new deal, and a new frontier, for a square deal and a fair deal. The phrases take established values and use them as the basis for the building of a new order. The battle cries of so cialist rhetoric - class struggle, vanguard of the elite, the rise of 40 THE FREEMAN October the masses, the dictatorship of the proletariat - are foreign and re pulsive to the American ear. By contrast, the rhetoric of the four year plans is familiar, nonradical in sound, and brings to mind pleas ing associations. The territory in to which Fabian methods take us is strange, but the markers along the way are familiar.

Programs for Translating Ideas into Political Action Finally, the four-year plans are means for translating meliorist ideology into political action. They are devices for linking ideas (or visions) to power. The connection is made by a single man, the Presi dent of the United States. His personal historian has said of John F. Kennedy that "he was in tensely committed to a vision of America and the world, and com mitted with equal intensity to the use of reason and power to achieve that vision." He desired "to bring the world of power and the world of ideas together in alliance .... "10 If so, his outlook and aims were perfectly suited to the role of be ing President by the requirements of the four-year plan. Another way of saying the above is that the four-year plans have been the creations of intel10 Arthur M. Schlesinger, Jr., A Thou sand Days (Boston: Houghton Mifflin, 1965), pp. 108-09.

lectuals under the sway of ideol ogies. This accounts for the in creasing role played by intellectu als in twentieth century govern mental undertakings. A President may be both an intellectual and a man of action. Theodore Roosevelt was, and just as he may be cred ited with founding the four-year plan so may he be described as the prototype for the kind of man it ideally requires. Theodore Roose velt was probably more the man of action than the intellectual, though he had ideas enough, while Wood row Wilson was more the intellec tual than the man of action. Both of them, however, combined both traits in sufficient degree to trans late ideology into action with only a minimum of help from special ists so far as the formulation of programs was concerned. Their successors in the line of four-year planning were not so adequately equipped. The tendency from Franklin D. Roosevelt on has been for Presidents to gather about them a corps of intellectuals - a brain trust - to provide the ideas and render them into programs. ll 11 The prototype for the "brain trust" may have been provided by An drew Jackson who had an assortment of budding intellectuals in his "Kitchen Cabinet." There was an important dif ference, however, for his advisers were liberals of the nineteenth century va riety who did not go in much for gov ernment intervention.

1966 THE FOUR-YEAR PLANS 41 Men Behind Presidents There were premonitions of things to come, however, in the planning of the first Roosevelt and Wilson. One writer holds that Brooks Adams was the f ormula tor of the basic ideas which Roose velt advanced. "Had Roosevelt fol lowed his counsels," he says, "(as he sometimes did, for Roosevelt instinctively agreed with Adams on some issues even though he prudently rejected Adam's [sic] suggestions when the times called for compromise), he might have become an even greater and per haps more sinister figure."12 There has been considerable debate among historians as to the extent of the influence of Herbert Croly's Promise of Ameri,can Life upon Roosevelt's New Nationalism idea. 13 Be that as it may, Roose velt was undoubtedly influenced by the intellectual currents of his day. His programs were his, how ever, not those of some coterie of intellectuals.

Wilson was, if anything, more the intellectual than Roosevelt. Despite, or perhaps because of, this, he appears to have relied more extensively upon intellec12 Aaron, Ope cit., p. 252. 13 For contrasting assessments, see Eric F. Goldman, Rendezvous with Des tiny (New York: Vintage Books, 1956), p. 159, and Charles Forcey, The Cross roads of Liberalism (New York: Oxford University Press, 1961), pp. 127-30. tuals than did Roosevelt. The man closest to Wilson was Colonel Ed ward M. House. He was most in fluential upon Wilson. One writer says, "Nearly all accounts agree that Colonel House dominated the decisions on appointments. Wilson frankly didn't want to be both ered."14 Colonel House's creden tials as an intellectual may not be particularly impressive, but they are sufficient to show that he 'was under the sway of a vision that was the fruit of ideas. Bef ore he rose to the eminence of presidential adviser, he wrote and caused to be published a utopian novel, Philip Dru, Ad ministrator. It is about a man who establishes a dictatorship in America and brings about sweep ing reforms. Among these reforms were a graduated income tax, com pulsory incorporation act, flexible currency system, an old age pen sion and labor insurance, a coop erative marketing system, Federal employment bureau, and so forth.

As one account of this utopian novel observes: "This fantasy could be laughed off as the curious dream of Colonel House were it not that so many of these reforms strikingly resemble what the Wil son, and later the New Deal, ad ministrations either accomplished 14 Horace Coon, Triumph of the Egg heads (New York: Random House, 1955), p. 87.

42 THE FREEMAN October or proposed."15 The ideas are not original, but this advocate of them had the ear of a President. Louis D. Brandeis was another intellec tual who had a great deal of in fluence on Wilson.l 6 There were others, such as George L. Record, George Creel, and Bernard Baruch. The Brain Trust of F.D.R. But the practice of assembling a host of intellectuals around the President to provide the ideas and programs to translate four-year plans into action was really estab lished by Franklin D. Roosevelt. Harry Hopkins played Colonel House to Roosevelt, and Felix Frankfurter was his Brandeis. But helow these in the hierarchy of influence came a horde of others: AvereB Harriman, Fran cis Biddle, George Peek, Henry Wallace, Samuel Rosenman, Harry Dexter White, Robert E. Sher wood, and so on. Of those who came, a historian has said that "the common bond which held them together . . . was that they were at home in the world of ideas. They were accustomed to analysis and dialectic. . . . They were . . . generalists, capable of bringing logic to bear on any so15 Ibid., p. 86.

16 See ibid., pp. 14-15, 90; Charles A. Madison, Leaders and Liberals in the Twentieth Century (New York: Fred erick Ungar, 1961), pp. 200-01. cial problem."17 In short, they were intellectuals with visions of a transformed America and ideas about how to bring it about. Each administration since has had its complement of intellectuals serving as ghost writers, special assistants, economic advisers, board members, and memhers of the middling rank of division heads within established depart ments. The assembling of intel lectuals in Washington reached a new peak during the Kennedy Ad ministration, when the President bade fair to take a goodly portion of the prestigious men from some major universities. Among the more famous gathered were Theo dore Sorensen, McGeorge Bundy, Arthur Schlesinger, Jr., Walt W. Rostow, David Bell, and Walter Heller. ls Truman, Eisenhower, and Johnson were less at home with university men, but they, too, had or have their intellectuals.

These intellectuals are the American equivalent, in socialist terminology, of the "vanguard of the elite." They have moved into the centers of power by providing the ideas and programs of melior ism. They bring ideology into the political market place, help to make 17 Arthur M. Schlesinger, Jr., The Coming of the New Deal (Boston: Houghton Mifflin, 1958), p. 18. 18 Lester Tanzer, ed., The Kennedy Circle (Washington: Luce, 1961), pas sim.

1966 THE FOUR-YEAR PLANS 43 it attractive, and thrust political action in the direction implicit in their assumptions. The fateful connection between utopian vi sions, the new reality, the new creativity, and meliorist economics on the one hand and political ac tion on the other is made by the intellectuals in the four-year plans. This connection needs to be demonstrated, however, by an ex amination of the four-year plans. Such an examination will show both the connection between ideo logy and action and that there is a direction to these plans, that each one of them moves the United States farther and farther along the road to socialism. An account of this development will follow next. ~ The next, and concluding, article of this series will pertain to "The Pen and the Sword." Majority Rule THERE IS NO MAXIM in my opinion which is more liable to be misapplied, and which therefore more needs elucidation than the current one that the interest of the majority is the political standard of right and wrong. Taking the word "interest" as synonymous with "ultimate happiness," in which sense it is qualified with every necessary moral ingredient, the proposition is no doubt true. But taking it in the popular sense, as referring to immediate augmentation of property and wealth nothing can be more false. In the latter sense it would be the interest of the majority in every community to despoil & enslave the minority of individuals; and in a federal community to make a similar sacrifice of the minority of the component States. In fact it is only re-establishing under another name and a more specious form, force as the measure of right. . ..

JAMES MADISON, from a letter of October 5, 1786, to James Monroe.

Canute ~~~ countlnq OF noses WILLARD M. Fox 1966 CANUTE AND THE COUNTING OF NOSES 45 As FREQUENTLY TOLD, the story of how King Canute tried to sweep back the rising tide and got soaked for his pains makes him appear at best not quite bright and at worst an utter fool. The man who gave Denmark its first national coinage and first written legal code and England a code based on established Saxon law was a strong and able ruler of two realms; and he was endowed with a keen and clear understanding of the limitations of human power, even that of absolute monarchs. His attempted sweeping back of the sea was his dramatic demon stration that government cannot do everything its subjects may want done. In the advanced stages of the transformation of the United States from a representative fed eral republic of limited power to a centralized democracy in which individuals and the several states count for little, Canute's wisdom is largely forgotten. Citizens and officeholders alike behave as though the counting of noses were the highest wisdom, and the Will of the Majority in no way distin guishable from the Voice of God.

The proposition is absurd. There is no possible way for those elected to know the real views and motives of the majority that elected them. Mr. Fox is a market research executive now residing in Costa Rica. There is the mail from constitu ents, of course; but only those persons who are more or less ar ticulate and who hold pronounced views on a subject under active political consideration will take the time and trouble to write elect ed or appointed officials. There is no persuasive reason for believing that the division of letters from these people accurately reflects the division of opinion among the silent population. Polls Untrustworthy Public opinion polls also are un trustworthy guides, not so much because of the design and drawing of samples, but primarily because of weaknesses in the questionnaire and secondarily in the behavior of interviewers and respondents. When respondents are asked about a question of policy, the sur vey method becomes useless. Put yourself in the position of a re spondent who knows nothing of economics, confronted by an inter viewer who puts to him such a hy pothetical question as this: The United States balance of pay 1nents is "unfavorable" and there is a net export of gold. Among the remedies that have been or may be suggested are the following: (1) raise the rediscount rate; (2) impose an Uinterest equalization" tax on purchasers of foreign securities; (3) reduce the amount of duty-free mer46 THE FREEMAN October chandise returning tourists may bring into the United States (or pro hibit duty-free imports entirely); (4) prohibit, restrict, or .discourage di 'rect foreign investment by United States based firms and their foreign subsidiaries,. (5) impose import re strictions (quotas, tariffs, etc.) on foreign goods that can be produced within the United States and its possessions,. (6) other actions you consider des'irable?"

Just how would you answer? Just how much confidence would you place in the answers of 3,000 or any other reasonable number of respondents who happened to fall into either a probability or acci dental survey sample? While I have my own pet an swers, the fact is that what I hap pen to think is not based on expert knowledge of the problem, and so my views are-worthless. Multiply ing my incompetent answer by 3,000 or any other number of like answers from respondents who as a group are as ignorant as I am may provide an impressive statis tical report; but it is certainly not going to provide a sound basis for a policy. What to Do, and How Asking a sample of the electorate what it wants done is useless. The fact is that a count of noses can not be used as a means of choosing appropriate courses of public action. I suspect that such a count of noses would establish that people favor wealth, comfort, health, se curity, and a color television set in every room and they oppose death, taxes, poverty, ill health, and the neighbor's radio turned on to full volume.

Involuntary poverty is never sought consciously, since it in volves a contradiction in terms. Those who seek poverty voluntar ily need not concern us. If they profess a faith that does not in clude vows of poverty, they can al ways choose an ill-paid career or take up beach-combing in the tropics. Voluntary poverty seekers get their compensating psychic in come from their poverty and that makes up for other choices fore gone. Most people want to avoid pov erty for themselves and do not want other people to suffer from hunger, disease, and other effects of poverty. So, they would agree that poverty should be abolished. The question that divides them is how to do it. This is a question not of ends but of means, assuming that the end is attainable. It is the business of economics to prescribe the ways that people can use to achieve that end. Politics can con tribute nothing useful as a means to abolish poverty, except to pre vent the private use of force and fraud.

1966 CANUTE AND THE COUNTING OF NOSES 47 Endless Promises Canute was astute enough to know this. Yet, modern political leaders throughout most of the world profess to believe that by politically directed measures, which they advocate and stand ready to implement, poverty can be eliminated. Whether they be lieve this or merely trade on the knowledge that most people want poverty abolished, they know that the way to get the highest count of noses for themselves is to prom ise such miracles, if elected. They are persuading people that whatever is wished for can be had. In this, they have a lot going for them. People born around the turn of the century have witnessed the birth of the airplane, television, plastics, antibiotics, frozen foods, nuclear fission, orbiting satellites, the practical development of the automobile and radio, and count less other discoveries, inventions, and innovations. Some of these things were inspired and paid for by government and taxation. Pri vate industry might have devel oped the jet plane and it might conceivably have put satellites into orbit, but probably not as soon as they were actually developed. It might eventually have developed nuclear power for peaceful pur poses, but not the bomb.

Since government can claim the atomic bomb as its own creation and plausibly assert that it is the agent responsible for the develop ment of jet planes, radar and other devices that aid air and sea navi gation, and orbiting satellites, poli ticians can point to these things as tangible evidence that govern ment (in their hands) can and does find solutions to complex technical problems. Lack of Performance They can also point out the un deniable fact that the American system of profit-and-loss can and does produce and market an enor mous range of products and serv ices. They go on to say quite cor rectly that the technology exists to permit turning out not only more of what is now being pro duced but also other new products that have been developed but not yet marketed. Moreover, they as sert correctly that laboratories are constantly developing new prod ucts and refinements and improve ments on existing products.

Hence, they conclude in a mag nificent non sequitur, it is obvious that it is only the greed of stock holders for dividends and of entre preneurs for profits that limits what is produced to what the mar ket will absorb. Just let us count your noses in our favor, say they, and we shall produce abundance so that you may never know want or discomfort, from the delivery 48 THE FREEMAN October room of the government hospital to the packing of your ashes into an urn in the crema tori um. They completely ignore the fact of scarcity. In their eyes, or in their pretenses, all goods are as abundant and as readily available as the air. The only thing needed to supply them in unlimited quan tities to everybody is money and management, both of which they'll gladly provide if given control of the apparatus of government! Where is the money to come from? That's easy. Taxes will provide part. The rest, the government can create by such devices as loading more and more government bonds into the commercial banks. If that process creates some inflation, why worry? Inflation breeds optimism which breeds spending, both by consumers and by industry, which breeds prosperi ty. Should any slackening occur, just a little more of the "hair of the dog" will cure matters. Thus, the road to never ending prosperity is open and will remain so just as long as the count of noses comes out right.

Of course, this is nonsense. Goods are not free as air. They are scarce and they must be econ omized and used as wisely as entrepreneurial ingenuity permits to take care of people's most immediate needs and wants. Gov ernment has no magic costless way to transform "thin air" into silver which is increasingly in short sup ply. A bank deposit to the credit of the United States Treasury, created by a book entry in return for some Treasury bonds or notes, is not "capital." True, it can be spent with some maker of machine tools who will eventually deliver milling machines or automatic lathes or whatever, which are capi tal items. This, however, merely takes them away from some manu facturer who would have used them, had he been able to get them, to make something that con sumers would have freely chosen to buy at the going market price. Living as he did in the eleventh century when freebooting was a way of life, King Canute knew that government is not omnipo tent. It has the power to rob Peter and give to Paul from time to time and as often and as long as Peter will consent to being robbed. How ever, it cannot create economic goods out of thin air, no matter how urgently people want it to do so.

King Canute knew that royal power has its limits. Those who believe that a government has power without limit and the abil ity to create something from noth ing, as long as a count of noses favors it, are doomed to a sad discovery. ~ WILLIAMS. SMEETH My PRESET NOTIONS of how it would be did not even last long enough to accompany me into the school building. When I arrived at the Academy of Basic Education, on a sun-swept hilltop west of Mil waukee, I was greeted outdoors by Headmaster and founder William B. Smeeth. There was nobody nearby; judging from the mug of coffee in his hand, I supposed I had found him taking a break. Not at all. This was, he ex plained after we had exchanged amenities, his composition class, Upper Form. Smeeth pointed to a Mr. Wheeler is publisher of RaIly, a new monthly journal of libertarian and conservative opinion geared for the young. This article is reprinted by permission from the July 1966 issue of Rally.

Visit with a Headmaster TIMOTHY J. WHEELER thick grove that shades the rear area of the school: "One of my students." I could see a young man wedged comfortably in the fork of a tree, apparently staring at nothing in particular, doing noth ing at all. One in a class of nine. The others were nowhere in sight. Such as I knew of the Academy until that moment was public scut .. tlebutt, and it was all wrong. Ac.. cording to the legend, the Acad emy is a showpiece of the nine .. teenth century, featuring a rever sion to instruction by rote. If this misconception is widespread, then there is need of some image polishing: a boy, more or less un supervised, preparing his composi tion in a treefork, is hardly the 49 50 THE FREEMAN October object of mechanical teaching pro ced ures ; nor was he, I was to learn, producing the sort of un disciplined free expression that is urged by progressive doctrine. On one point, all observers agree: the Academy gets startlingly good re sults. Its students graduate one to three years ahead of their public school counterparts. Learning why was the reason for my visit.

Graduates Unprepared to Cope with Massed Propaganda In 1948, the late Dorothy Sayers delivered a stunning address at Oxford, in which she expressed concern that - we let our young men and women go out unarmed in a day when armor was never so necessary. By teaching them all to read, we have left them at the mercy of the printed word. By the invention of the film and the radio, we have made cer tain that no aversion to reading shall secure them from the incessant bat tery of words, words, words. They do not know what the words mean; they do not know how to ward them off or blunt their edge or fling them back; they are a prey to words in their emotions instead of being the masters of them in their intellects. We who were scandalized in 1940 when men were sent to fight ar mored tanks with rifles, are not scan dalized when young men and women are sent into the world to fight massed propaganda with a smattering of "subjects"; and when whole classes and whole nations become hypnotized by the arts of the spell binder, we have the impudence to be astonished. We dole out lip-service to the importance of education - lip service and, just occasionally, a little grant of money; we postpone the school leaving-age, and plan to build bigger and better schools; the teachers slave conscientiously in and out of school-hours; and yet, as I believe, all this devoted effort is largely frustrated, because we have lost the tools of learning, and in their absence can only make a botched and piecemeal job of it.

Her answer - which seems to me, if anything, more relevant to education in this country than in England - was to teach children how to learn before giving them subject material. She proposed res toration of the medieval Trivium, consisting of Grammar, Logic, and Rhetoric: the lost tools of learning. To what avail, she asked, do we teach an array of subjects if the student is not also instructed how to learn? How can he learn efficiehtly in school; how can he learn at all after graduation? These are cogent arguments, but they are only arguments, perhaps untranslatable into practice. Miss Sayers thought so: "It is in the highest degree improbable that the reforms I propose will ever be carried into effect."

1966 VISIT WITH A HEADMASTER 51 Learning How to Learn She did not reckon on William Smeeth. The reforms are not only functioning at the Academy; they are proving their merit. From the first day there, Smeeth puts his students to learning how to learn. This is an abrupt departure in method from what one would find in other schools, and it must ac count for a good share of his success. Even more at odds with public education, but more difficult to pin down on paper, is an attitude one finds at the Academy, that might best be described as a carefully nourished emphasis on the indi vidual. This attitude soaks into the most humdrum facets of the daily routine; it is a working premise. These elements seem to combine into a flawless pattern for success, yet I soon began to feel there was a missing intangible, something to glue them together. I found what I was looking for in the person ality of the headmaster. William Smeeth is more than a teacher, more than an administrator: he is a man with a dream. It is a part of him no one will ever really know, although he does not always conceal it.

After I had been put at ease in the school and introd uced to sever al of the teachers, I was turned loose to amble through the classrooms as I pleased. "The pupils are used to it," I was as sured. "You won't disturb them." The building is not exceptional. It resembles a large ranch house, and may indeed be a former dwell ing converted to school use by the addition of a classroom wing. I didn't inquire. Classrooms seem to be almost randomly placed, but are conventionally and comfortably equipped. One striking difference is the books - they are everywhere, in huge cases, sometimes in disor derly piles; always in great num ber, even in the Lower Forms. The Academy does not use regu lar textbooks to any extent, but relies on a variety of reading and reference books for its purposes. Among the encyclopedias, and in the children's lockers, I was de lighted to see such as Pinocchio, The Hobbit, and the Chronicles 01 N arnia. Older students, I learned, are awarded bonuses for outside reading.

The present student body of 129 is grouped into classes by ability rather than age. Since abilities vary in differing areas of study, there is something of a shuffle after each period. The students have no difficulty adjusting to this. It is theoretically possible for the youngest student in the school to be in the most advanced class, if his ability is up to it. In practice, 52 THE FREEMAN October it never works out that way. Abil ity groupings can be overruled when age differences are too pro nounced, but the need seldom arises. Basic Subjects, Rigorous Grading, Composition, and Recitation The curriculum is unusual rela tive to public education, but not astonishing. For instance, the Lower Form is taught Phonetics, Spelling, Vocabulary, Penmanship, Reading,Grammar, Composition, Memorization, Arithmetic, Geog raphy, and Music (a very fine ap plication of the first portion of the Trivium, Grammar). Even Lower Form students are rigorously graded on all their work. Honor Rolls are prominently displayed, including one for students who have improved their work mark edly. Later on, the student will re ceive English, Mathematics, Latin, French, Geography, and History.

Because Smeeth believes it in valuable for structuring the mind, composition is stressed from the beginning. Composition and reci tation: students read what they have written before the class. I saw no shyness about reciting. On the contrary, the students clamored for their chance. As I watched this time and again, I was struck by the contrast to a public school class, where a few of the children raise their hands every time while the rest remain dog gedly silent. At the Academy all were eager to recite, to share with their classmates, I thought, what they were proud to have learned. It was striking. What sort of in struction could impart a love of knowledge in children so young? I wondered. It occurred to me that we might be dealing with exceptional chil dren. Plainly they were not "dis advantaged," as the educators say of the products of poor or broken homes. The tuition ruled that out.

I asked Smeeth about it: were his students selected especially for their brains? No. In fact, many are remedial cases from public schools. They are perfectly normal children. "However," he added, "we have to get them early, before their educational experience else where dulls their appetite for learning. " I could concede the point with out reservation on seeing a ten year-old, apparently a banana-a day addict, carrying a notebook pasted solid with Chiquita-brand stickers: utterly normal. I watched the same young man give a most able presentation on the culture of India, which he had researched on his own at length. After his reci tation, he was questioned closely by his classmates for details. It was an impressive performance all the way around.

1966 VISIT WITH A HEADMASTER 53 Entrance Qualifications When could a child start? I wanted to know. Smeeth referred me to a qualification test. "The ap plicant will be expected to (1) re cite the alphabet and recognize the separate printed letters; (2) write or print his name; (3) count and recognize the printed numbers up to at least 20; (4) state his full address (street number and name, city, state, and country); (5) re cite at least two nursery rhymes; (6) divide small numbers of sticks or blocks into equal piles; and (7) listen to a story and answer ques tions." Fair enough. There is an explanatory afternote, to parents, worth mention: "Your child will begin to show interest in reading or numbers some time between age 5 and 6. When this miraculous change takes place in the young tot, he/she is usually ready to be gin formal academics: reading, writing, and soon arithmetic. The requirements for entrance into the Academy simply recognize this fact in the youngster's growth pattern." "Miraculous change" - a pretty sentiment, and an indicator of the Academy's regard for the individ uaI.

It is this regard, above all, that makes the school distinct; yet it is extremely difficult to articulate, much less explain in terms of pro gram. In our several long talks, even Smeeth, who makes it work, struggled on occasion in translat ing his view of the individual for me. Personal Attention On the other hand, there is a part of its programmatic applica tion that is readily explained teachers. Smeeth handpicks them, and there is no want of applicants. Selection is a matter of judging character. In the four years of the Academy's existence, Smeeth has had plenty of experience at it, but still misses once in a while. There is no advantage, he ex plains, for the applicant to present himself as savvy in the right school of economics or politics. Neither is it a demerit. The de cisive point is that the applicant must share Smeeth's own intense regard for the individual. Given that attitude, the teacher will have little difficulty adjusting to the Academy's ways, and need learn little about its form of instruction.

It is thereafter simply a matter of highly personal attention to every student. One way the teaching applicant can disqualify himself is to ask how far he is supposed to take his students during the term - Smeeth will have explained the curriculum as a whole. To one who shares Smeeth's outlook, the answer is self-evident: "as far as the indi vidual students will go." A teacher 54 THE FREEMAN October accustomed to giving his charges measured doses of subject ma terial will not fit in. Helping the Student "Plug Himself In" Smeeth referred to a concept his teachers had developed, to elabo rate. "They have a catch-phrase, getting someone to 'plug himself in,' coming from the idea that the indi vid ual' s personali ty is some thing like a switchboard. The per sonality is complex, like the wiring in the cabinet, but you can see potentials, the plugs on the board. The teacher looks for ways to help the student realize his built-in potential. To make all the lights go on. To plug himself in."

"There is a similar concept they find useful," Smeeth continued, "'probing the periphery.' What they mean is the periphery bound ing the student's capabilities, which they probe from every angle, trying to get him to broaden out, better himself, ex pand his periphery." The similes seem laborious, but one gets the idea, and it is not an easy idea to put across. For the teachers, of course, these are con venient shorthand for the ex change of ideas on how to evoke the best from this or that student. The right stress, "plugging him self in," makes it clearer to the outsider what Smeeth is driving at. The critical recognition by the Academy is that development is from within. The teacher is pres ent as a coach, or (possibly) a goad; never as one to machine-gun information into the undifferen tiated class-group. If such a dis tinction is permissible, I would say the Academy concentrates on learning instead of teaching. "The responsibility to learn lies entirely with the student. Our role is sim ply to help the individual become all he can be," Smeeth says.

"You know," he adds, "it is a joy to be present as the child un folds into the adult." The remark was a relatively rare interj ection of self into the discussion. For all that, the visitor is almost immediately aware of Smeeth's intense personal involve ment with his ideas, and his satis faction at putting them to work every day. In a word, he is dedi cated. It accents his comments; it shows in his face. "By any chance" - by then I was sure I knew the answer to my question - "are you acquainted with Dorothy Sayers' essay, 'The Lost Tools of Learning'?" But to my surprise, he replied in the negative. Then, "Yes!" - "I didn't catch the name right for a mo ment." He shuffled through a stack of papers and produced a battered, dog-eared copy of it. Constant use had worn it to a frazzle.

1966 VISIT WITH A HEADMASTER 55 How It All Began The school-day was drawing to a close as we talked, and there was time for few more questions. How did he come to found the Acad emy? It is a long story and not particularly pertinent here, except as it exemplifies any man who gives up an established career to start from scratch in a more ideal istic field. Smeeth had been a highly successful businessman (he is proud that he runs the Academy in a business-like way), active in local politics, a member of the martini circuit, and all the et ceteras. The day came when he'd had his fill of it, and got out. He spent the next months seeking out superior ideas about education, although with no conscious idea of establishing a school - that devel oped naturally as a product of cir cumstances, and of his researches attracting the interest of the right people. I got the impression that not until he was engrossed in the Academy did he fully understand how right it was for him.

One incidential point. Could he tell me what his morning composi tion class had been assigned? "I told them," Smeeth replied, "to wander through the school's woods, select a secluded spot, and set up shop. 'Tune in your an tenna; listen; focus on the sounds, wherever they lead you. Observe. Feel. Seek out the secret.' They were to describe what they heard, saw, felt, and smelled. And then they were to be aware of what thoughts came to them from the stirn uli of their senses. Their re sults made me ashamed of my own college efforts." It would be hard to get any far ther than this from the public mythology that surrounds the Academy. I decided that on my next visit I would like to read what they had composed. ~ We Cannot Escape Ourselves RESOURCES of the spirit are like savings: They must be accumu lated before they are needed. When they are needed, there is no substitute for them. Sooner or later, the individual faces the world alone, and that moment may overwhelm him if he has no resources within himself.

Distraction helps but little and betrays us when we least expect it. We can escape our physical environment and our neighbors, but we cannot escape ourselves. Everyone with any maturity of experience and self-knowledge knows that the loneliest moments are sometimes experienced in the midst of the greatest crowds and the most elaborate entertainments. MARTEN TEN HOOR, Education for Privacy the First Lt'berty Library MURRAY N. ROTHBARD 56 THE LONE individual is seldom given credit as a shaper and mover of great historical events; and this is particularly true when that in dividual is no famous statesman or military hero, nor leader of a mass movement, but simply a little-known person pursuing his own idea in his own way. Yet such a person, scarcely known in his day and totally forgotten by his torians until the last few years, played an important role in one of the most significant events in mod ern history: the American Revo lution. In all the welter of writing on the economic, social, political, and military factors in the Revo lution, the role of this one obscure man, who directed no great events nor even wrote an influential book, had been completely forgotten; and yet now we know the great in fluence of this man and his simple idea in forming an event that has shaped all of our lives.

Thomas Hollis of Lincoln's Inn (1720-1774) was an independently wealthy Englishman of the eigh teenth century, who came from a long line of leading merchants and Dissenters (non-Anglican Protes tants). From early in life, Hollis developed two passions that were to guide and consume his life: books and individual liberty. The Dr. Rothbard is a professor of economics at the Polytechnic Institute of Brooklyn. Among his works are the comprehensive two-volume treatise, Man, Economy, and State (1962) and America's Great Depression (1963).

1966 THE FIRST LIBERTY LIBRARY 57 devotion to liberty was not sur prising, for the Hollis family had long been steeped in the libertar ian "Commonwealthman" or "Real Whig" tradition, a tradition de rived from the English republi canism of the seventeenth century. What was unique about Thomas Hollis was his fusion of an in tense devotion to books and to liberty, a fusion which led to his particular idea, to the cherished "Plan" to which he would dedicate his life. This was a plan to dis seminate the writings of liberty (his affectionately named "liberty books") as widely as possible to kindle the spirit and the knowl edge of liberty throughout the world. His Own Kind 01 Public Service Offered a chance, in his mid thirties, to enter Parliament, Hol lis refused to join what he con sidered the inevitable corruption of the political life; instead he de cided to devote himself to his Plan to distribute libertarian books.

Hollis thus came to spend the bulk of his life ·coIIecting and dissemi nating books and pamphlets and mementoes of liberty where he be~ lieved they would do the most good; when books could not be obtained, he financed the repub lishing of them himself. Every phase of their publication and distribution was shepherded through by Hollis as a labor of love. The typography, the condi tion of the prints, the luxurious binding and stamping, all were en hanced by his efforts. When send ing a book as a gift to a library, person, or institution, which he usually did anonymously, Hollis took the trouble to inscribe the title page with mottoes and quota tions appropriate to the book it self. Even "liberty coins," medals, and prints were collected by Hollis and sent to where they might best be used. At first, Thomas Hollis sent the benefits of his largesse far and wide, throughout Europe and Asia as well as England and Scotland.

But after the Stamp Act troubles in 1765, Hollis concentrated almost all his efforts on the American colonies, in which he and his fam ily had always been interested. The family had often contributed to Harvard College, and now a fire at Harvard, coinciding with the eruption of the Stamp Act turmoil between America and England, gave Hollis the opportunity to s€nd a host of libertarian books and· pamphlets to restock the Har vard library, to which he sent no less than 1,300 books! For Hollis was particularly aware of the im portance of diffusing the principles of liberty among youth, and espe cially among university students. Harvard was particular ly recep58 THE FREEMAN October tive soil, for it was at the center of the growing revolutionary spirit in the American colonies, a spirit that could only be fueled by the writings of the English revo lutionaries of the previous cen tury and their spiritual heirs: men such as the martyred Alger non Sidney, John Locke, John Milton, John Toland, Henry Neville, John Trenchard, and Mar cha.mont Nedham.

Hollis supplemented these a.cti vities by sparing no effort on be half of the American colonists, in cluding writing letters, public and private, wherever he could and re printing and distributing writings favorable to the Americans. These works included tracts by American and English authors, as well as letters by Hollis' friends written to the London press, usually after being prodded into writing them by the indefatigable Hollis. Samuel Johnson Pays Tribute While far from famous in his own day, Thomas Hollis and his Plan were well known in English intellectual circles, where that crusty old Tory, Dr. Samuel J ohn son, angrily pinned upon Hollis the responsibility for the Ameri can Revolution. Ironically, J ohn son had at first brusquely dis missed the unprepossessing Hollis as a harmless "dull poor creature." Professor Caroline Robbins, who has done yeoman work in rescuing Hollis from total obscurity, elo quently concludes that Dr. John son's final assessment was not so very wrong: When his gifts to Americans of his "liberty books" and his propa ganda for them are considered, Dr.

Johnson's attribution to Hollis of some share at least in the American Revolution seems hardly exag gerated .... The famous plan of Thomas Hollis of Lincoln's Inn was itself a micro cosm of the activities of all his lib eral contemporaries. Those books, pictures, medals, and manuscripts he began to collect as a young man in the reign of George II represented to him and to his friends the great tradition of English liberty. He wanted to spread knowledge of this sacred canon around the world. As he saw in the policies of George III and his ministers a threat ·to all he most valued in his dear, native land, he concentrated his efforts to send overseas American friends as much of the heritage as could be confined in print and portrait. The New World would provide an asylum for the freedom his ancestors had fought for in the old. Hollis was right. In America the academic ideas of the Whigs of the British Isles were fruitful and found practical expression. Americans op posing English policies made claims which could be contradicted from past experience and practice, but in using the natural rights doctrines 1966 THE FIRST LIBERTY LIBRARY 59 they were appealing to tradition still lively among their English sympa thizers .... 1 Influence in America Thomas Hollis' most direct in fluence in America fell upon its most eminent libertarian minister, the Congregationalist divine from Boston, the Rev. Jonathan May hew. Having discovered Mayhew as a fervent champion of religious freedom and disseminated May hew's work in England, Hollis be gan an ardent lifelong friendship by correspondence with Mayhew which rapidly expanded the hori zons of the New England minister from religious to political liberty.

Mayhew's biographer testifies to the enormous influence wielded by Hollis' correspondence and by his periodic shipments of boxes filled with libertarian books, manu1 Caroline Robbins, The Eighteenth Century Commonwealthman (Cambridge, Mass.: Harvard University Press, 1959), pp. 268, 384-85. Miss Robbins first resur rected the role of Hollis in her "The Strenuous Whig, Thomas Hollis of Lin coln's Inn," The William and Mary Quar terly (July, 1950), pp. 406-53, and in her "Library of Liberty-Assembled for Har vard College by Thomas Hollis of Lin coln's Inn," Harvard Library Bulletin (Winter and Spring, 1951), pp. 5-23, 181 96. scripts, pamphlets, and assorted memorabilia. 2 Thomas Hollis was not destined to see the fruit of his beloved Plan in the American Revolution. But though this lone man of learning was quickly forgotten, recent his torians, in the wake of the re searches of Caroline Robbins, have begun to recognize the tremendous influence upon the American Revo lution, not only of Hollis himself, but of the entire English liber tarian tradition which Hollis did so much to revive and disseminate.

The recent works of Charles W. Akers, David L. Jacobson, and particularly Bernard Bailyn have demonstrated how much the birth of America owed to the English libertarian tradition carried on and transmitted hy a few stalwart Commonwealthmen of the eight eenth century. 3 ~ 2 Charles W. Akers, Called Unto Lib erty: A Life of Jonathan Mayhew, 1720 1766 (Cambridge, Mass.: Harvard Uni versity Press, 1964), pp. 139-48 and pas sim. 3 See Bernard Bailyn, "General Intro duction," Pamphlets of the American Rev olution, Vol. I (Cambridge, Mass.: Belk nap Press of the Harvard University Press, 1965); David L. Jacobson, ed., The English Libertarian Heritage (Indianap olis: Bobbs-Merrill, 1966).

A REVIEWER'S NOTEBOOK FOR Wtud JOHN CHAMBERLAIN OF SOMETHING BETTER ROBERT LEKACHMAN'S The Age of Keynes (Random House, $6) is aptly titled. As Professor Milton Friedman puts it, "We are all Keynesians now." At least we all have had to make adaptation to the realities of Keynesian political manipulation. But, since John Maynard Keynes said so many things at so many different times in his life (he ended by expressing his worries about the future of individualism to Professor Hay ek), professions of loyalty to the Master don't really get us very far. Marx said in his old age that he was not a Marxist, and Keynes, if he had lived, might have fol lowed suit. Keynesianism, as Professor Le kachman demonstrates, hegan as a special response to the economic condition of Britain in the nine teen twenties and thirties. Those were the days of stagnation and the dole. As Keynes said, Winston Churchill, who held the uncon genial post of Chancellor of the Exchequer in the mid-twenties, had committed himself "to force 60 down money wages and all money values, without any idea of how it was to be done." The attempt to return to the gold standard at a dollar valuation of the pound which made British costs and prices too high for competition in world markets was highly unreal istic. For better or worse, the strength of union organization in the twentieth century is such that no democratic government dares make the attempt to restore profit ability by forcing money wages down. Thus, an inflationary bias is built into the system of twen tieth century capitalism. Realist that he was, Keynes recognized the power of the labor unions. His proposals for "government invest ment" were pitched to building up "aggregate demand" to the point where capitalists could make money and still pay union wages to a lot more people. For want of something better, he offered a spe cial formula for getting off a sticky wicket.

It is easy to understand how Keynesianism got its hold on the 1966 FOR WANT OF SOMETHING BETTER 61 "VVor1J. {n. {he n.{n.~{~~n thirti~g. The trouble is that it created a new breed of economists, of whom Professor Lekachman is at least tentatively one, that sees the whole future history of the human race as a continuation of the special situation that existed between the two world wars. This breed con tinues to think of government "investment" of one sort or anoth er as the only sure guarantee of enough "aggregate demand" to keep the enterprise system going without falling prey to the social ists. The "massive spending" theory seems to have been justified by what happened in World War II, when government purchases of war material put all our factories to work and wiped out the unem ployment which had defied the most earnest cogitations of Frank lin Roosevelt's brain trusters. But it did this by breaking the dollar in two. At the same time it de stroyed the currencies and the economic plant of two big con tinents. When the war was over, a new "special situation" existed.

As Will Clayton said, the "world was naked." It had to do business with and in U.S. fifty-cent dollars. And reconstruction had to be carried forward. Psychologically, the age of stagnation had come to an end. What picked things up to create such phenomena as the "German miracle," the Japanese revival, and the long U.S. booms? If the play on words .may be pardoned, we don't find the key in Keynes, who was hipped on the monetary as pects of economics. Schumpeter, who kept his eye on technological change, is a better guide to post World War II history. Pushers vs. Pullers Economists seem to fall into two loose categories. There are the "pull" theoreticians who think that "aggregate demand" is a function of the money and credit supply. And there are the "push" theoreticians, beginning with the Say of Say's Law of Markets, who think that the creation of goods and services makes for an exchange situation that automat ically builds up "aggregate de mand." Whether one is a "pull"

theoretician or a "push" advocate may very well be a matter of glan dular endowment. The "pull" phi losophy proceeds from a pessimis tic view of the possibilities in herent in human ingenuity and human energy. The "push" view is inseparable from an optimistic trust in what inventive men are capable of. doing. During· the thirties, I spent the first half of the decade reading books about the plight of the world. Though I am congenitally an opti62 THE F~EEMAN October mist, I forced myself into the negative mold that was then all the rage in the intellectual circles that fed the New Deal. During the second half of the decade I worked for Fortune Magazine, do ing corporation stories. The latter experience was worth far more than the earlier dalliance among the pessimists. For what was happening in the thirties at the laboratory and factory level was proof to a neo phyte's wondering eyes that the tides of economics move in response to the tinkerer, the laboratory man, the inventor, the ingenious rearranger, even more than they move in response to the fiscal and monetary priests. Economists should spend more time visiting factories! In the decade of the thirties the seeds were planted that led, after 1945, to the daz zling efflorescence of the syn thetics market. The Du Pont com pany owed far more to professors of chemistry than to professors of economics.

The Keynesians, trying to raise aggregate farm income by acreage restrictions, thought they had the agricultural situation well in hand. But the new fertilizers and in secticides and genetic discoveries, coming out of the laboratories of the thirties, made a mock of re strictionism, and the modern farm revolution, which forced many an inefficient producer off the land, happened anyway. The jet plane came with the war, and is only now coming into its own com mercially, to the point where it yields higher wages to machinists who have succeeded in flouting Keynesian wage-price guideposts. The TV market, held back by gov ernmental busybodies in the thir ties, finally got off dead center. And the whole world of electron ics, pushed along by the war-born need for such things as radar, boomed along with TV. So, is it Keynesian wisdom that has kept us going since 1945, or is it the older wisdom that puts its trust in the constant emergence of so-called "ladder industries"?

The "pull" theoretician will take Professor Lekachman's word for it that Keynesian government servants have kept us prosperous. The "push" advocate will look back to older economists such as the forgotten Garet Garrett, or to Pro fessor Schumpeter, or to the Aus trians who think that if the money tinkerers desist, the inventors will have a better chance of getting their innovations to the buying public. A Way with Words Having posed my glandular bias against that of Professor Lekach man, it remains to be said that The Age of Keynes is a delight1966 FOR WANT OF SOMETHING BETTER 63 fully written book. Keynes him self was a literary man of high ability, and his way with words has rubbed off on many of his mod ern disciples. Indeed, the influence of the neo-Keynesians may be due more to their gift for phrases than their economic logic. Professor Lekachman's history is mainly correct as to the facts he uses to support his theory. But there are some' telling omissions.

It is at least slightly unhistorical to give Professor Alvin Hansen the credit - or the obloquy - for evolving the theory of permanent American secular stagnation; Rex ford Tugwell came before him, and, what is most important, it was Tugwell who sold the idea of the overbuilt economy to President Roosevelt. Again, it is a little strange to find Keynesians in gen eral, and Professor Walter Heller in particular, reaping all the high praise for the 1965 income tax cut. Conservatives have been shouting for 10, these many years that high taxes are a drag on pro ducti vity. When Keynesians re turn to common sense, it should be treated as a conversion, not a daz zling discovery. ~ Binders with Issues inserted for Calendar Years 1963 and 1964: HANDSOME BLUE LEATHERLEX FREEMAN BINDERS Either year Both $ 5.00 10.00 Binder only, $2.25 each Have You Seen RALLY Yet? You should. In fact, we are so sure you will like RALLY, we will send you a free copy ...

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BOUND VOLUMES OF TheJ1reemilo-19G5 Attractively sewn in a single volume with hard cover, the 12 issues from January through December, fully in dexed-768 pages, for handy reference to the latest literature on freedom. Onlf 15.00 These bound volumes of THE FREEMAN match in appearance and otherwise continue the 12-volume series of Essays on Liberty containing selections from THE FREEMAN and other Foundation releases back to 1946. (A separate cumulative subject matter, author, and title index is available for the 12 volumes of Essays on Liberty. $1.00.) Bound volumes of THE FREEMAN for 1966 will be available shortly after the end of the year. ORDER YOUR BOUND VOLUMES NOW! THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, N. Y. 10533 Please send me: THE FREEMAN for 1965 $ 5.00 0 THE FREEMAN for 1965 and 1966 (The 1966 volume to be shipped when ready) $ 9.00 0 ESSAYS ON LIBERTY (Set of 12, with cumulative index) Cloth $30.00 0 Paper $20.00 D D CHECK ENCLOSED D SEND INVOICE NAME, _ STREET _ CITY _ STATE ZIP CODE _ THE LAW • No society can exist unless the laws are respected to a certain degree. The safest way to make laws respectedis to make them respectable. When law and morality contradict each other, the citizen has the cruel alternative of either losing his moral sense or losing his respect for the law.

In order to make plunderappear just and sacred to many consciences, it is only necessary for the law to decree and sanction it. Slavery, restrictions, and monopoly find de fenders not only among those who profit from them but also among those who suffer from them. FREDERIC BASTIAT (1850) NOVEMBER 1966 The Freedom Nobody Wants . The Government Veto System In' Case of Difference . The Roots of War The Law of Liberty . The Flight from Reality: 26. Conclusion: The Pen AND the Sword . Protective Taxes and Wages • Books: Shedding Friendships . Other Books . Edmund A. Opitz Lawrence Fertig Edward A. Lewis Ayn Rand Kenneth W. SoWtt Clarence 8. Carson William G. Sumner John Chamberlain 3 17 22 24 33 36 56 60 63 COAST FEDERAL SAVINGS AND LOAN ASSOCIATION Department F2 , 9th &Hill Sts., Los Angeles,California90014 o Please send me a FREE copy of "Tight Money" o I enclose my check (or money order) for $ _ o Please open a Coast Federal Savings accountD Individual D Joint in the name(s) of NAME _ STREET ---------CITY STATE _ THE FRE MAN NOVEMBER 1966 Vol. 16, ~o. 11 y# Our other cherished freedoms, sug gests Edmund Opitz, may be of little worth to us if we continue to neglect and deny the freedom of the market ........ p. 3 Y# Just how the market is prevented from functioning is spelled out in further detail as Lawrence Fertig de scribes "The Government Veto System" p. 17 Y# If the other fellow is "always right,"

there may be a need to strengthen one's own convictions p. 22 Y# Ayn Rand sees the roots of war in the excessive statism and unwarranted use of force in domestic affairs ........ p. 24 ", True liberty is found only by doing what we ought because we want to and not because we have to p. 33 ", Dr. Carson concludes his series on The Flight from Reality with a timely warning to those reformist dreamers who imagine they can combine pen and sword to have their cake and eat it, too ........ p. 36 ~ Had he written it today instead of in 1883, William Graham Sumner could not have commented more ap propriately on the disastrous conse quences of union political practices ........ p. 56 ~John Chamberlain makes the most of the literary travelogue through The Best Times of John Dos Passos ........ p. 60 ", The Generosity of Americans by Arnaud C. Marts is reviewed by Richard Christenson p. 63 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

NOVEMBER 1966 LEONARD E. READ PAUL L. POIROT Vol. 16, No. 11 President, Foundation for Economic Education Managfing Edit01' THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit educational champion of private property, the free market, the profit and loss system, and limited goYernment, founded in 1946, with offices at Irvington-on-Hudson, New York. Tel.: (914) 591 7230. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in vited in any amount-$5.00 to $10,OOO-as the means of maintaining and extending the Foundation's work. Copyright, 1966, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each.

Permission is hereby granted to anyone to reprint any article in whole or in part, providing customary credit is given, except liThe Roots of War," liThe Law of Liberty," and liThe Flight from Reality." Any current article will be supplied in reprint form jf there are enough inquiries to justify the cost of the printing.

the ;'ccdom rJIIooodl/f/l}ontJ· EDMUNDA. OPITZ • • FREEDOM TODAY has what might be called a good press; everyone speaks well of freedom. It is in the same category as motherhood, Sandy Koufax, and pure water. Nobody will admit that he is "agin" freedom. In modern times there has been a booming market for the Four Freedoms, and for Freedom Now. There is a vocal Free Speech Movement on college campuses. We celebrate freedom of the press and condemn censor ship; we cherish religious .liberty and hail academic freedom. The mood of our time is favorably dis posed toward every freedom ex cept one, and that outcast freedom is Freedom of Economic Enter prise. Economic freedom suffers attri tion from within and attacks from This article is one of the seminar lectures de livered by the Reverend Mr. Opitz as a mem ber of the staff of the Foundation for Economic Education. without. Individual businessmen often seek to evade market man dates, and intellectuals do not want people to have complete lati tude for their peaceful economic transactions. This is how Profes sor Milton Friedman views the problem: "It has often seemed to me that the two greatest enemies of the free market are business men and intellectuals, for opposite reasons. The businessman is al ways in favor of free enterprise for everybody else; he is always opposed to it for himself. The in tellectual is quite different; he is always in favor of free enterprise for himself, always opposed to it for everybody else. The business man wants his special tariff or his special governmental commission to interfere with free enterprise, in the name, of course, of free enterprise. The intellectual, too, wants such commissions to con4 THE FREEMAN November trol the rapacious man. But he is against the idea of any interfer ence with his academic freedom, or his freedom to teach what he wants and direct his research as he wants - which is simply free enterprise as applied to him."l I wish to focus first on economic freedom and demonstrate that maintaining the integrity of the free market is essential to the preservation of -every other lib erty. Later I shall deal with some of the things on which the free market depends.

Freedom to Think Liberties of the mind are self evidently valuable to most intel lectuals. No man whose business it is to think and write, no man who deals in ideas, wants his efforts along these lines to be hamstrung. He wants to be free to think dar ing thoughts and come up with novel ideas that challenge the pre vailing orthodoxy. And he is right. Mankind has no way of ad vancing en masse,. every step for ward out of primitivism has been accomplished first by some inno vator who moved out beyond the herd and then drew the rest of us painfully forward. There is a sort of gravitational pull that operates on the human enterprise, which makes our normal condition one of stagnation. We get on dead center 1 Farmand 11/12, 1966, page 51. and most of us are content to stay there. Then, along comes some in ventor with a new idea which counteracts the pull of gravity, and we move off dead center. Thus, over the millennia, have people climbed the stiff ascent of civiliza tion - only to slide down over the other side when they neglect the intellectual and spiritual heritage which spurred their climb.

Liberties of the mind are not under serious attack today. Nearly everyone favors the freedom to think, write, teach, preach, and publish. But it seems to many scholars and intellectuals that the grubby concerns of the market place are beneath them. They have Iittle concern with what takes place in factories, stores, and banks because, after all, this is the material side of life and the intellectuals are concerned with higher things, with things of the mind. And so it happens that many believers in freedom in gen eral attack economic freedom in particular. In this they are· not only wrong, they are disastrously wrong; there is an economic base supporting everyone of the intellectual and spiritual freedoms these people cherish. And if this economic base is not free, if authoritarian con trols are wrapped around this eco.., nomic base, the controls will in evitably and eventually extend to 1966 THE FREEDOM NOBODY WANTS 5 the superstructure. Liberties of the mind and spirit do not and cannot exist in a vacuum; they form, in connection with economic liberty, a package, and this pack age cannot be picked apart with out being destroyed.

The Etonom;t Fountlaf;ons The arguments which support the right of a man to spend his energies in any peaceful way he chooses in the editorial office, the classroom, or the pulpit, likewise support his· right to the free exer cise of those energies in his store or factory. Or, to put it the other way. round, every argument for controlling the peaceful exercise of a man's energy in his workshop is an equally valid argument for controlling him in his study or classroom. Freedom is all of a piece; philosophizing is not the same as digging a ditch, but so cialize the ditchdigger and the philosopher begins to lose some of his freedom. Freedom in the mar ket place and liberties of the mind go together. George Santayana reflected sadly that the things that matter most in life are at the mercy of the things that matter least. A bullet, a tiny fragment of common lead, can snuff out the life of a great man; a few grains of thy roxin one way or the other can upset the endocrine balance and alter the personality, and so on.

But the more we think about this situation and the more instances of this sort we cite,· the more ob vious it becomes that the things Santayana declared matter least, actually matter a great deal. They are tied in with the things which matter most and the things which matter most depend on them! In precisely the same way, economic liberty matters a great deal be cause every liberty of the mind is connected with freedom of the market, economic freedom. There's an old proverb to the effect that whoever controls a man's subsist ence has acquired a leverage over the man himself, which impairs his freedom of thought, speech, and worship. F. A. Hayek put it this way: "Economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends."2 The government of a totalitar ian country like Russia or China acts as a planning board to direct the production and distribution of goods. In practice, there is bound to be a lot of leakage - as witness the inevitable black market. But to whatever extent the state does control the economic life of a people, it directs every other as pect of life as well.

2 The Road to Serfdom, page 92.

6 THE FREEMAN November No Room for Rebels The masses of people every where and at all times are con tent to drift along with the trend; they pose no problem for the plan ner. But what happens to the reb els in a planned economy? A man who wants to publish an opposi tion newspaper in a place like Rus sia or China would have to obtain presses, paper, and a building from the state - to attack the state! He would have to find work men willing to risk their necks to work for him; ditto, people to dis tribute; ditto, people willing to be caught buying or reading the pa per. Or take the orator who wants to protest. Where could he find a platform in a country in which the state owns every stump, street corner, and soap box - not to men tion every building. Suppose you didn't like your job, where could you go and what could you do? Your job is pretty bad, but it is one notch better than Siberia or starvation, and these are the al ternatives. Strike? This is treason against the state, and you'll be shot. Listen to George Bernard Shaw, defining socialism, writing in Labor Monthly, October, 1921: "Compulsory labor, with death as the final penalty, is the keystone of socialism."

Under primitive economic con ditions a man has to be a jack-of all-trades, able to turn his hand to a variety of occupations. If a pioneer family wants shelter, it builds a sod house or a log cabin; if it wants clothing, it weaves the cloth and fashions the garment; if it wants potatoes, it raises them; if it wants meat, it shoots a deer; and so on. But we live in a division of labor society where individuals specialize in produc tion and then exchange their sur pluses for the surpluses of other people until each person gets what he wants. Most of us work for wages; we produce our specialty, and in return we acquire a pocket ful of dollar bills. The dollars are neutral, and thus we can use them to achieve a variety of purposes. We use some of them to satisfy our needs for food, clothing, and shelter; we give some to charity; we take a trip; we pay taxes; we go to the theater; and so on. Our money is a means we use to sat isfy our various ends.

A Science of Means Economic action by itself does not generate a world view, al though Marx believed it does. Economics has often been called a science of means. The economist, speaking as an economist, does not try to instruct people as to the nature and destiny of man, nor does he try to guide them toward the proper human goals. The ends or goals people strive 1966 THE FREEDOM NOBODY WANTS 7 for are, for the economist, part of his given data, and his business is merely to set forth the means by which people may attain their preferences most efficiently and economically. Let me buttress this point by a quotation from Ludwig von Mises: "It is true that eco nomics is a theoretical science and as such abstains from any judgment of value. It is not its task to tell people what ends they should aim at. It is a science of the means to be applied for the attainment of ends chosen, not, to be sure, a science of the choosing of ends. Ultimate decisions, the valuations and the choosing of ends, are beyond the scope of any science. Science never tells a man how he should act; it merely shows how a man must act if he wants to attain definite ends."3 When people are free to spend their money as they please they will often spend it foolishly. As consumers, they will demand-and producers will obediently supply goods that glitter but are shoddy; styles that are tasteless; enter tainment that bores; and music that drives us nutty. Nobody ever went broke, H. L. Mencken used to say, by underestimating the taste of the American public. But this, of course, is only half the story. The quality product is avail able in every line for those who 3 Human Action, page 10.

seek it out, and many do. The choices men make in the economic sector will be based upon their scales of values; the market is simply a faithful mirror of our selves and our choices. The Realm of Ends Now, man does not live by bread alone, and no matter how much we increase the quantity of available rnaterial goods, near ly everyone will acknowledge that there is more to life than this. Individual human life has a meaning and purpose which transcends the so cial order; man is a creature of destiny. As soon as we begin talking in these terms, of human nature and destiny, we move into the field of religion - the realm of ends. And a science of means, like economics, needs to be hitched up with a sci ence of ends. The more abundant life is not to be had in terms of more automobiles, more bathtubs, more telephones, and the like. The truly human life operates in a di mension other than the realm of things and means; this other di mension is the domain of religion - using the term in its generic sense.

If we as a people are squared away in this sector of life, we'll be able to take economic and politi cal problems in our stride. On the other hand, if there is widespread 8 THE FREEMAN November confusion about what it means to be a human being, so that people are at sixes and sevens in .this matter of the proper end of hu man life --' some seeking power, others wealth, fame, publicity, or pleasure - then our economic and political problems overwhelm us. If economics is a science of means, that is, a tool, we need some dis cipline to help us decide how to use that tool. The ancient promise is that if we put first things first, by giving top priority to the search for the Kingdom of God, our ac tions will then conform to the law of our being, and we'll get the other things we want as a sort of bonus. You may rephrase this idea, if you wish, to put it into a con temporary idiom; but the truth of it is hardly contestable.

The Rules for Prosperity I have spoken of economics as a science of means. What is the distinguishing feature of a science, and in what sense is economics a science? Adam Smith entitled his great work, The Wealth of Na tions; one of Mises' books is en titled, The Free and Prosperous Commonwealth. It is clearly evi dent that these works deal with national pros.perity, with the over all well-being of a society, with upgrading the general welfare. These are works of economic sci ence, insofar as they lay down the general rules which a society must follow if it would be pros perous. The distinguishing feature of a science, any science, is that it deals with the general laws governing the behavior of particular things, often reducing these laws to math ematical relationships. Science is not concerned with particular things, except insofar as some particular thing exemplifies a gen eral principle. When we concen tra te on a particular flower, like Tennyson's "flower in the cran nied wall," we move into the realm of art and poetry. Should we want the laws of growth for this species of flower, we consult the science of botany. These books by Smith and Mises lay down the rules a society wishing to be prosperous must follow. They do not tell you as an individual how to make a million in real. estate, or a killing in the stock market. This is another subject.

The question before the house in economic inquiry is: "How shall we organize the prod ucti ve acti vi ties of men so that society shall attain maximum prosperity?" And the answer given by economic sci ence is: "Remove every impedi ment that hampers the market and all the obstructions which prevent it from functioning freely. Turn the market loose and the nation's wealth will be maximized." The 1966 THE FREEDOM NOBODY WANTS 9 economist, in short, establishes the rules which must be followed if we want society to he prosperous; but no conceivable elaboration of these rules tells J ohnDoe that he ought to follow them. A Guide for Personal Conduct There's a big IF here. If John Doe wants to know how to maxi mize the general well-being, the economist can tell him which rules to follow. But this might not be the only question we are asking. What John Doe may want to know is, "How can I make a million with no sweat?" Of course he has a stake in a prosperous society be cause he knows that it will be easier for him to make a million in a rich society than in a poor one, but his interest in the rules for national prosperity are sec ondary to his interest in lining his own pocket. He may under stand the case for the free mar ket, but nevertheless decide that he can do better for himself by getting in on a racket.

Economic science can prescribe for general prosperity, but it can not tell John Doe that he ought to obey that prescription. That job can be performed, if at all, by the moralist. The problem here is to bridge the gap between the economist's prescription for na tional prosperity and John Doe's adoption of that prescription as a guide for his personal conduct. Only a sense of moral obligation - and not additional economic argu ments - can persuade John to close this gap. Enter the moralist. Economics is a science of means. It abstains from judgments of value and does not tell John Doe what ends he should aim at. If you want to persuade John Doe to follow the rules of economics for maximizing prosperity you must argue that he has a moral obligation to conform his actions to certain norms al ready established in his society by the traditional ethical code. He should deal justly and fairly with his fellows, he should injure no man, he should not steal, and so on. Practice the ethical code and the rules for national prosperity can be taken in stride; but in the absence of an ethical code which John Doe tries to live up to, there's no reason for any of us to feel any moral obligation for national pros perity when our own enrichment is a much more immediate con cern.

Ethical Considerations If we want a free market and a free society, we need a genuine ethic. This genuine ethic is avail able to us in the traditional moral code of our culture, which extols justice, forbids murder, theft, and covetousness, and culminates in 10 THE FREEMAN November love for God and neighbor. This is old stuff, you say; true, but it's good stuff! The market is not something which comes out of nothing. It emerges naturally whenever the conditions are right, and those right conditions provide a frame work for the market to keep it functioning smoothly. In other words, there is a realm of life out side the realm of economic calcula tion, on which the market depends. Let me cite Ludwig Mises again, when he speaks of beauty, health, and honor, calling them moral goods. He writes: "For all such moral goods are goods of the first order. We can value them directly; and therefore have no difficulty in taking them into account, even though they lie outside the: sphere of monetary computation."4 In other words, the market is gener ated and sustained within a. larger framework consisting of, among other things, the proper ethical ingredients. There are also politi cal and legal elements in this framework, and a theological di mension as well.

Scarcity of Resources As well as being a science of means, economics is also a science of scarcity. Goods which are not scarce, such as air, are not eco nomic goods. Economics deals with 4 Socialism, page 116. things which are in short supply, relative to human demands for them. Our situation on this planet is an unbalanced equation with man and his wants on one side, and the world of raw materials on the other. The human being is a creature of insatiable wants, needs, and desires; but he is placed in an environment where the means of satisfying those wants, needs, and desires are scarce. Un limited wants on one side of the equation; limited means for satis fying them on the other. Now, of course, it is true that no man, nor the human race it self, has an unlimited capacity for food, clothing, shelter, or any other item singly or in combina tion. But human nature is such that if one want is satisfied, the ground is prepared for two others to come forward with their de mands. A condition of wantless ness is inconcei vable, short of death itself. Even if a condition of repletion and satiety can be imagined, this condition itself be gets a want - the desire to be left alone for rest and relaxation. Rest and leisure, however, are breeding grounds for a renewed set of wants and demands.

This creature who demands more, whose wants are insatiable, is placed in an environment where there is not, and can never be, enough. Almost everything is 1966 THE FREEDOM NOBODY WANTS 11 scarce. In· the first place, the planet is crowded; there is not enough elbow room in the pleasant places of the earth to accommo date everyone with as much Lebens raum as he would like. Second, resources, the raw material which we must by our labor transform into consumable goods, are limited in _-luantity. Third, our individual supply of energy is limited; we get tired, and so we have to econ omize our strength with labor saving devices. Fourth, time is al ways running out on us, and time is valuable. Finally, the planet's physical energy is scarce, nor will the common use of atomic power alter this fact; not even an atomic reactor is a perpetual motion ma chine. An Eternal Problem What does this all mean? The upshot of all this is that the eco nomic equation will never come out right. It's insoluble. There's no way of taking a creature with unlimited wants and satisfying him by any organization or reor ganization of limited resources.

Something's got to give. Economics is the science of scarcity, but the scarcity we are talking about in this context is a relative thing. Whenever we drive in city traffic, or look vainly for a place to park, we are hardly in a mood to accept the economic truism that automobiles are scarce. But of course they are, relative to our wants. Who would not want to replace his present car or cars with a Rolls Royce for Sundays and holidays, plus an Aston Martin for running around? These simple facts make hash of the oft-repeated remark that "we have solved the problem of production, and now if we could just distribute our abundance more equitably - which of course is a problem that only government can solve ... ," and so on. Economic production does involve engineer ing and technology, in that men, money, and machines are linked to turn out airplanes, or automo biles, or tractors, or typewriters, or what not. But resources are limited, and the men, money, and machines we employ to turn out airplanes are not available for the production of automobiles, or trac tors, or anything else. The dollar you spend for a package of cigars is no longer available to buy a movie ticket. With the resources available to us we might produce a number of different commodities, but obviously we could not produce as much of every commodity as everyone would want. The prob lem of deciding to use our re sources to produce the gizmo rather than the thing-a-ma-jig is an entrepreneurial decision, but no matter who makes the decision, 12 THE FREEMAN November something has to be sacrificed when we commit our resources to one thing rather than to the other possibilities.

Similarly with John Kenneth Galbraith and his Affluent Society. We do have an economic abundance that would astonish Adam Smith, but this merely confirms the free market economics that Smith ex pounded. There is not, as Galbraith claims, a new economics of abun dance which outmodes the old eco nomics of scarcity, for however abundant commodities become they will still be scarce relative to human wants and desires. No Short-Cut Solutions The economic equation can never be solved; to the end of time there will be scarce goods and unfulfilled wants. There will never be a mo ment when everyone will have all he wants. "Economics," in the words of Wilhelm Roepke, "should be an anti-ideological, anti-utopian, disillusioning science,"5 and indeed it is. The candid economist is a man who comes before his fellows with the bad news that the human race will never have enough. Or ganize and reorganize society from now till doomsday and we'll still be trying to cope with scarcity.

But the modern mind takes the dogma of inevitable progress for granted. Most of our contempo5 The Humane Economy, page 150. raries assume that day by day, in every way, we are getting better and better, until some day the hu man race will achieve perfection. The modern mind is passionately utopian, confident that some piece of social machinery, some ideologi cal gadgetry, is about to solve the human equation. Minds fixed in such a cast of thought, minds with this outlook on life, are ut terly immune to the truths of economics. The conclusions of eco nomics, in their full significance, are incompatible with the facile notions of automatic human prog ress which are part of the mental baggage of modern man. There is genuine progress in certain limited areas of our ex perience. This year's color tele vision set certainly gives a better picture than the first set you bought in, say, 1950. The jet planes of today deliver you more rapidly and in better shape than did the old prop jobs. Automobiles have improved, we have more conven iences around the house, we are better equipped against illness.

There has been true progress in certain branches of science, tech nology, and mechanics. But are the television programs improving year by year? Are the novels of this year so much better than the novels of last year, and last cen tury? Are the playwrights whose offerings we have seen on Broad1966 THE FREEDOM NOBODY WANTS 13 way this season that much better than Shakespeare? Has the con temporary outpouring of poetry rendered Homer, Dante, Keats, and Browning obsolete? Is the lat est book on the "new morality" superior to Aristotle's Ethics? Are the prevailing economic doctrines of 1966, reflecting the Samuelson text, sounder than those of a gen eration ago, nourished on Fair child, Furness, and Buck? Are to day's prevailing political doctrines sounder than those which elected a Grover Cleveland? Henry Adams in his Edu,cation remarked that the succession of presidents from Washington, Adams, and J effer son down to Ulysses Grant was enough to disprove the theory of progressive evolution! What would he say if he were able to observe the recent past?

The dogma of inevitable prog ress does not hold water. Perfect anthills and beehives are within the realm of possibility; but a perfect human society, never! Man is the kind of a creature for whom complete fulfillment is not pos sible within history; unlike other organisms, he has a destiny in eternity which takes him beyond biological and social life. This is the world outlook of serious re ligion, and the conclusions of eco nomicsare just what a person of this cast of mind would expect. Economic truths are as acceptable to this world view as they are unacceptable to the world view premised on automatic progress into an earthly paradise. If there is another dimension of being which transcends the natural or der - which is comprised of the things we can see and touch, weigh and measure - and if man is truly a creature of both orders and at home in both, then he has an ex cellent chance of establishing his priorities in the right sequence.

He will not put impossible de mands on the economic order, nor will he strive for perfection in the political order. He'll leave heaven where it belongs, beyond the grave! Let us strive for a more moderate goal, a tolerable society, and we may make it! The Need for Government Man is· the kind of a creature who seeks to economize scarce goods, and so he invents labor saving devices. The primordial la bor-saving device is the market, which enables men to freely ex change the results of their spe cialization for items they prefer. In a typical economic transaction you walk into a bookstore and stumble upon a volume which you need to complete a set; it is in good condition and the price of $2.00 is right, so you buy it. You are delighted to exchange your two dollars for the book, and the pro14 THE FREEMAN November prietor who had been anxious to sell it is happy to have your money. Satisfactions on both sides of this exchange have been en hanced.

But there are other kinds of action in society where goods and services are not exchanged for goods and services to the benefit of both parties; there is theft, and predation, and violence. The same human drives which issue in eco nomic' action, namely, the need to economize on scarce means, might drive a man into theft for, as has been observed: robbery is the first labor-saving device. There is only one way by which wealth comes into being, and that is by production; but there are two ways by which wealth may be ac quired: first, by producing it, and second, by helping yourself to the fruits of someone else's produc tion. Contingencies of this sort in society create a demand for the protection of the peaceful and pro ductive activities of men, that is to say, for government. The mar ket is simply a name for the peace ful and voluntary exchanges of goods and services occurring con stantly between people who trade the ·results of their specializations.

It is the organization of peaceful means. Policing, by contrast, is the regulated use of force against peacebreakers for the protection of peaceful people; it is the orga nization of coercive means. When a policeman overtakes a thief and forces him to disgorge the items he has stolen, he may use some thing stronger than persuasion; he may use a club or a gun. In any event, the policing transaction, in contrast to an economic exchange, does not enhance the general level of well-being of both parties to the exchange. Policing, in other words, cannot be organized as a market transaction; although po licing costs money, it is not within the domain of economics. Carry the argument through one more stage: Two men differ in wealth today because their market place offerings of goods and services yesterday and the day before met with varying re ceptions. Because the buying pub lic appreciates the man who sings like a BeatIe more than the man who philosophizes like a Socrates, the former is rich, the latter poor - relatively speaking. The former buys three Cadillacs while the latter must content himself with a 1958 Chevrolet. When we under stand the reasons for wealth dif ferentials of this sort, we realize that such disparities are in the nature of things. Our sense of justice and fair play is not of fended, however much our good taste may suffer.

But if the singer commits a 1966 THE FREEDOM NOBODY WANTS 15 crime and, because of his wealth, is able to buy himself out of ieOClflrdv. we know in our bones that an additional evil has com pounded the original crime. Legal justice is not a marketable com modity; justice which becomes an item of merchandise ceases to be justice. Justice is not for sale, and the market cannot allocate things which - by their very nature - are not salable. It is right that people acting voluntarily in the market place should decide that one man be given three times as many cars as another; but any voluntary ac tion which metes out to one man only a third as much justice as it accords· to another is. on the order of mob rule, lynch law, violence, and moral evil. Earmarks of Good Law Things human tend to get out of hand, and government is the prime example of this tendency. Time and again throughout his tory, government has become a cancer-like growth detrimental to social health and individual well being. Seeking to curb this ten dency, those in the old-fashioned Whig and Classical Liberal tradi tion laid down the earmarks of good law. They may be briefly sum marized. In the first place, a good law makes no pretensions to per fection. No human laws are, in fact,perfect, and the attempts of some to apply their "perfect" laws to imperfect human beings have been disastrous. A good law will take human shortcomings into ac count; it will reflect our limited understanding and sinful nature.

In the second place, a good law will be written so as to correspond to what the eighteenth century re ferred to as the Higher Law. A good law, in other words, will not violate our ethical code; it will not supplant morality with mere le gality. Generalityis a feature of a good law. Everyone should be equal be fore the bar of justice, and so a good law is one which applies to all men alike and without exception. Men are different in several impor tant ways; some are bright and some dull; some are rich, others are poor. There are differences of na tionality, color, and religion; there are employers and employees, and so on. These are important distinc tions and classifications - but not to the law! The law should be blind to such differences, and any law which is general, applying to one man as to all, cannot have much wrong with it. Besides being imperfect, moral, and general, a good law is condi tional; it has an "iffy" quality about it. It says, if you steal, or if you defraud, or if you drive on the left· side of the road, you will be punished. A good law takes the 16 THE FREEMAN November side of the negative, saying "Don't," or "Thou shalt not.." This means that it is theoretically pos sible for a man to negotiate life without encountering the law, pro vided he sticks to the positive. The fifth and final point in this abbrevi ated list is something like the first; a good law reflects the customs and habits of a people - otherwise it is an attempt to reform them by law, and reformist law is bad law.

Economics is a discipline in its own right but, as I have tried to show, it has some larger meanings and implications. Its nature de mands a political and social frame work, comprising religious, ethical, and legal ingredients. Establish these necessary conditions and, within this framework, the eco nomic acti vities of men are self starting, self-operating, and self regulating. Given the proper framework, the economy does not have to be made to work; it works itself, and it pays dividends in the form of a good society. ~ Consumerism vs. Communism FROM THE STANDPOINT of resource allocation, the decisions about what to produce and how to produce in the communist countries are made by the dictators at the top. In our economy, the con sumers, through the market mechanism, effectively decide how society's resources are to be used and direct their use in the desired directions. Because our economic system is consumer-directed, clergymen and other religious, moral, and intellectual leaders have an ex tremely important role in our society. They assist the consumer in reaching judgments about basic standards and values-and these judgments can guide him in the exercise of his economic and political freedom.

Under communism, the influence of religious and moral leaders on the way society uses its resources is severely limited, because only the top planners determine how society's resources are to be used. The average man is forced to serve the state and is not free to make effective judgments about either his work or the goods and services he consumes. DR. HAROLD C. PASSER, economist for Eastman Kodak, from an address before the Clergy Professional Association of Schenectady, N. Y., January 17, 1966.

THE GOVERNMENT SYSTEM LAWRENCE FERTIG JUST WHEN the Soviets admit the virtues of the free market econ omy by trying to imitate some phases of it, our drive in the United States is perceptibly in the other direction-toward more gov ernment intervention in the mar ket. Just when the Soviet leaders are making sheep's eyes at the market economy because they can see that direction by bureaucracy is no substitute for the flexibility of the free market - the United States substitutes government fiat for market forces in a number of vital areas. This basic change has been tak ing place in the American free enterprise system practically un opposed by the American public Mr. Fertig, syndicated newspaper columnist on economic affairs, is author of the book, Prosperity Throu~h Freedom (Regnery, 1961), available from the Foundation for Economic Education, Irvington, N. Y. $3.95. or by important business interests.

The new system cannot be called government control because it has not gone quite that far. A fair characterization of this new ar rangement would be to call it the Government Veto System. The basis of the Government Veto System is direct action by the Administration to veto prices which it does not like in major markets in the economy. To be sure, this veto has been employed to date only in the case of "key" prices, but it has been proven time and again in the history of various countries that controls tend to breed still more controls. The objective which the control lers hope to achieve always proves elusive, whether it be in the con trol of commodity prices or of money. When the controllers .are disappointed, their tendency is to 18 THE FREEMAN November blame lack of success on an in sufficiency of power. So they ask for more controls and more power. The Veto Power in Practice There are five main areas where the United States government has used extra-legal pressure in an at tempt to control the economy by the veto system.

First, there is an attempt to control prices for major products - especially steel. At various times. the prices of steel, copper, molybdenum, and other products were rolled back after the govern ment exerted pressure on the pro ducing companies. In regard to steel, President Johnson so far has officially not employed the strong-arm methods adopted by President Kennedy. He has not openly berated the steel companies, nor sent repre sentatives of the Attorney Gen eral's office to the heads of steel companies before dawn to inter rogate them. Nevertheless,his in fluence on steel prices has been powerful. It was only in August this year, after the wage price guidelines had been flouted re peatedly by various unions - es pecially by the airline mechanics - that the steel companies were able to achieve a slight increase in price for about a third of their production. This long delay oc curred despite the fact that the government's own index of steel prices, prepared by the Federal Bureau of Labor Statistics, showed no increase from the end of 1958 to July this year. (The Index stood at approximately 102.3 in both periods.) The veto system also operates against American corporations in their dealing with foreign coun tries. Pressure is brought against corporations to limit their invest ments in overseas operations. This is called "voluntary" control, al though it is obvious «that govern ment coercion is behind it. Ad ministration officials look over the shoulders of officers of major cor porations and make the decision as to how much they shall invest abroad.

The veto system also applies to banks. They are restrained in the total which they can lend to bor rowers in foreign countries. The declared purpose of this curtail ment of dollar out.flowis to aid t.he U.S. in retaining its gold stock and to improve the deficit in the U.S. balance-of-payments to foreign countries. But the gold outflow and the balance-of-payments defi cit are due to entirely different causes. They are due to the gov ernment's monetary and fiscal policy. Nevertheless, in seeking to correct the problem, govern ment officials clamp down on banks and corporations.

1966 THE GOVERNMENTVETO SYSTEM 19 The price of borrowing money (interest rates) is another area where the Federal government veto system tries to operate. For a time it was successful in pre venting privately-owned banks from assessing the grass roots market and raising prime interest rates. But inflation, caused by government deficits and easy credit policies, was so strong that interest rates continued to rise un til they reached the highest level in a generation. Month by month, Treasury officials exerted pressure on the banks to prevent a free market price for hiring of money. Thus there exists a very effec tive veto, although it is completely extra-legal and is effective only be cause of the coerci ve power of government. The Strike ..Sack Congress has passed no law giv ing the President power to control any of these prices or policies. Nevertheless the' power of the Ex ecutive Office is so great that no industry and no business can .flout the government without fear of reprisal. Every businessman knows what this reprisal means.

The Attorney General's office can use its power on antitrust matters. The Federal Bureau of Investiga tion can make special investiga tions. The Defense Department can withhold contracts. There are many, many ways in which the government can act to bring recal citrants into line. In the area of wages, as well as prices, the Federal government has tried to exercise veto power. The President's economic advisers laid down "guideposts" for wage rises. Until the airline mechanics strike the rule was that no wage rise should exceed 3.2 per cent. This figure is reported to be the average annual productivity gain of American industry in the last five years. Everyone knows that control over wages has been hon ored more in the breach than in the observance. In the case of major industries (automobile, con struction, electrical, dock workers, and others) government officials have collaborated in violating their own guideposts.

After settlement of the airline mechanics strike, P. L. Siemiller, President of the International As sociation of Machinists, proudly said the settlement "destroys all existing wage and price guidelines now in existence." Government veto on wage rises has been far less effective than on prices. But it continues to be a stated govern ment policy. Why has the government moved in the direction of intervention in the·market instead of letting sup ply and demand set prices? Why has it· substituted decisions by 20 THE FREEMAN November some· economists or some· bureau crats· for the free forces of the market which have operated so successfully in the American economy? Embarrassing Inflation The answer is quite plain. Gov ernment inflationary monetary policy plus Federal deficits have so vastly increased potential demand that the Administration is embar rassed to let the law of supply and· demand work naturally.

As a result of government poli cies, the money supply (demand deposits plus currency ) increased at a phenomenal rate in the last two years. This increase in the quantity of newly-created money sought. to express itself in every way possible. This unprecedented increase in bank deposits and cur rencyexerted upward pressure on prices in one market or another. When the effects of this infla tionary policy became evident to the public and prices began to rise steeply, officials became alarmed and decided to step in. Thus the government tries to substitute its command (veto over prices) for the answers which would be given by the operation of the free mar ket. The result of such a policy is an unhealthy repressed inflation. In trying to replace the price system even partially by govern ment fiat, appeals are always made to "social responsibility." Every businessman and every labor union leader is supposed to wear two hats. In deciding what is in the best interests of his company or his group he wears one hat. When he goes· into a deep study to de cide, if he can, what is in the pub lic interest, he must wear another hat. But how to determine pre cisely what is in "the public in terest" and where "social respon sibility" lies is impossible for any one to judge. Every individual knows precisely what is in his own interest, and the competi tive free market economy decides for him. whether he can gain his objective. But how can he become a seer and judge whether his ac tion is in the interest of 190 mil lion people every time he makes a decision? The attempt to force people to act "in the public inter est" instead of their own is merely an attempt by bureaucrats in gov ernment to impose their own judg ments on the economy.

"Social Responsibility" At this point I would like to bor row from Professor Milton Fried man, who has made so many solid contributions to the free market philosophy. In a talk he .made to the Institute for Religious and Social Studies he discussed the subject of social responsibility and made some acute observations.

1966 THE GOVERNMENT VETO SYSTEM 21 Here is what he said: Almost without exception, appeals to "social responsibility" arise be cause of an unwillingness to let the price system work. They constitute an attempt to replace the price sys tem by some alternative device. But no one has yet invented or dis covered a device that can do the job which the price system does: of co ordinating the activities of countless millions of people impersonally and without any need for central con trol; of providing a mechanism that simultaneously transmits information about changing demand and avail abilities, gives economic agents ail incentive to act appropriately in re sponse to the information trans mitted, and adjusts consumption to available supplies in the short run of rationing the supplies while simul taneously providing for adjusting production to consumption in the long run. The attempts to use alter native devices have been numerous and often on a very large scale witness legal price control in the United States during wartime or central economic planning in Russia.

In all cases, they have been largely unsuccessful, and the price system, albeit with large scale distortions introduced into the signals on which it operates, has remained a major means for organizing economic ac tivity. Because the price system works impersonally, automatically, and quietly, because it has no press agents, there is a tendency when it works well to take it for granted and for the non-economist hardly to recognize that it is performing a function. It is natural for him to think he can manipulate prices with out any serious consequences; but he invariably finds when he does so that he has mounted the tiger, and he is driven to an ever-widening range of measures because of the difficulty of dismounting. Our agri cultural price support program, no less than legal price-control and the voluntary restraint programs, are all striking examples. Our Image Abroad In pursuing this policy of Fed eral vetoes on important prices, the United States government has unfortunately had to turn its back on its own international policies and preachments. The U.S. State Department has advised foreign nations repeatedly against ex change controls, against impedi ments to the free flow of goods and money across national bound ary lines. It has admonished many countries - in South America par ticularly - to avoid inflationary policies which would inevitably lead to restrictive price-wage poli cies and exchange controls. But it is now evident that when the United States faced inflationary pressures due to its own policies, it did not subscribe to the advice it gave other nations. Instead of relying upon moneta.ry discipline, 22 THE FREEMAN November balanced budgets, and the free market, the United States adopted a policy of controls in many vital areas.

For the sake of achieving doubt ful, ephemeral benefits, the U.S. government seriously wea.kened its economic and financial leader ship of the noncommunist world, which is essential for the defense of the West against totalitarian ism. Only by a return to the prin ciples of the free market can this country re-assert that leadership. ~ EDWARD A. LEWIS I'VE NEVER HAD a sudden burst of illumination which revealed The Truth to me completely, once and for all. But after consulting many contributions made to the world's store of knowledge and wisdom by more gifted minds than mine, I have tried to figure out some funMr. Lewis is a retired minister living in Dur ham, New Hampshire. damental and correlative truths in certain areas, with the result that I have embraced a set of con victions which I call my own. I have sought to eliminate error, insofar as possible, by ironing the inconsistencies out of my beliefs and squaring them with the facts.

For I conceive that truthfulness consists in two sorts of relation1966 IN CASE OF DIFFERENCE 23 ships: internally, my beliefs should harmonize one with the other; and externally, my beliefs shollid harmonize with the relevant por tions of reality. Any bundle of propositions which meets these tests may join the set of convic tions which I have made mine, and this is equivalent to saying that I reject as error whatever I regard as contrary to my convic tions. All of which seems simple and self-evident. Every so often I get into a dis cussion on various matters and naturally I advance arguments on behalf of my convictions. The crit ical rejoinder is sometimes made, "You think that everybody who disagrees with you is wrong." But, of course! Why shouldn't I? This is a gross and innocuous ad homi nem. If I thought that adverse views were. right, I would endorse them! But if I believe that the earth is round, how can I hold to my belief without deeming to be in error "everybody" who con tends that it is flat?

In argument, I expect any sin cere opponent, initially, to think that I am wrong. With respect to issues upon which one has no firm conviction, he may say, "I feel this way about the matter; but those who have views to the contrary, may be right." _But when one has reached a careful and considered judgment in a matter, it is only logical that he should think conclusions to the contrary to be wrong. I believe that 2 and 2 make 4. If anyone would say that 2 and 2 make 3, or 7, he would be in disagreement with me, and I would think that he is wrong. There are certain other matters about which, after careful thought and study, I have come to hold equally strong convictions. Should I be considered some kind of miscreant or malefactor for thinking those who disagree with me are wrong? A person who thinks that those who disagree with him upon a certain matter are wrong, is a person of strong convictions. In his conclusions, he may be right or he may be wrong. If I can show that his conclusions are based upon false premises or result from faulty reasoning, I may undertake to do so. But I shall not condemn or censure him for holding to his honest convictions. And I shall not criticize him for thinking that everybody who disagrees with him is wrong. • TheROOTS of WAR... AYN RAND IT IS SAID that nuclear weapons have made wars too horrible to contemplate. Yet every nation on earth feels, in helpless terror, that such a war might come.

The overwhelming majority of mankind - the people who die on the battlefields or starve and per ish among the ruins - do not want war. They never wanted it. Yet wars have kept erupting through out the centuries, like a long trail of blood underscoring mankind's history. Men are afraid that war might come because they know, con sciously or subconsciously, that they have never rejected the doc trine which causes wars, which has caused the wars of the past and can do it again - the doctrine that it is right or practical or nec essary for men to achieve their goals by means of physieal force (by initiating the use of force Reprinted by permission from the June 1966 issue of The Objectivist. Copyright 1966 by The Objectivist, Inc. against other men) and that some sort of "good" can justify it. It is the doctrine that force is a proper or unavoidable part of human existence and human societies.

Observe one of the ugliest char acteristics of today's world: the mixture of frantic war prepara tions with hysterical peace prop aganda, and the fact that both come from the same source - from the same political philosophy. The bankrupt, yet still dominant, po litical philosophy of our age is statism. Observe the nature of today's alleged peace movements. Profes-i sing love and concern for the sur vival of mankind, they keep screaming that the nuclear-weap- ~ ons race should be stopped, that armed force should be abolished as a means of settling disputes among nations, and that war should be outlawed in the name of humanity. Yet these same peace movements do not oppose dictator ships; the political views of their 1966 THE ROOTS OF WAR 25 members range through all shades of the sta tist spectrum, from welfare statism to socialism to fascism to communism. This means that they are opposed to the use of coercion by one nation against another, but not by the government of a nation against its own citizens; it means that they are opposed to the use of force against armed adversaries, but not against the disarmed.

Consider the plunder, the de struction, the starvation, the bru tality, the slave-labor camps, the torture chambers, the wholesale slaughter perpetrated by dictator ships. Yet this, is what today's alleged peace-lovers are willing to advocate or tolerate-in the name of love for humanity. It is obvious that the ideological root of statism (or collectivism) is the tribal premise of primordial savages who, unable to conceive of individual rights, believed that the tribe is a supreme, omnipotent ruler, that it owns the lives of its members and may sacrifice them whenever it pleases to whateve't. it deems to be its own "good." Un able to conceive of any social prin ciples, save the rule of brute force, they believed that the tribe's wishes are limited only by its physical power and that other tribes are its natural prey, to be conquered, looted, enslaved or an nihilated. The history of all primitive peoples in a succession of trib al wars and· intertribal slaughter.

That this savage ideology now rules nations armed with nuclear weapons, should give pause to any one concerned with mankind's sur vival. Statism is a system of institu tionalized violence and perpetual civil war. It leaves men no choice but to fight to seize political pow er - to rob or be robbed, to kill or be killed. When brute force is the only criterion of social conduct, and unresisting surrender to de struction is the only alternative, even the lowest of men, even an animal-even a cornered rat will fight. There can be no peace within an enslaved nation. The bloodiest conflicts of his tory were not wars between na tions, but civil wars between men of the same nation, who could find no peaceful recourse to law, prin ciple or justice. ,Observe that the history of all absolute states is punctuated by bloody uprisingsby violent eruptions of blind des pair, without ideology, program or goals - which were usually put down by ruthless extermination.

In a full dictatorship, statism's chronic "cold" civil war takes the form of bloody purges, when one gang deposes another - as in Nazi Germany or Soviet Russia. In a mixed economy, it takes the form 26 THE FREEMAN November of pressure-group warfare, each group fighting for legislation to extort its own advantages by force from all other groups. The degree of statism in a country's political system, is the degree to which it breaks up the country into· rival gangs and sets men against one another. When individual rights are abrogated, there is no way to determine who is entitled to what; there is no way to determine. the justice of anyone's claims, desires or inter ests. The criterion, therefore, re verts .to the tribal concept of: one's wishes are limited only by the power of one's gang; In order to survive under such a system, men have no choice but to fear, hate and destroy one another; it is a system of underground plot ting, of secret conspiracies, of deals, favors, betrayals and sud den,bloody coups.

It is not a system conducive to brotherhood, security, cooperation and peace. Statism - in fact and in prin ciple - is nothing more than gang rule. A dictatorship is a gang de voted to looting the effort of the productive citizens of its own country. When a statist ruler ex hausts his own country's economy, he attacks his neighbors. It is his only means of postponing internal collapse and prolonging·· his rule. A country that violates the rights of its own citizens,will not re spect the rights of its neighbors. Those who do not recognize indi vidual rights, will not recognize the rights of nations: a nation is only a number of individuals. Statism needs war; a free coun try does not. Statism survives by looting; a free country survives by production. Observe that the major wars of history were started by the more controlled economies of the time against the freer ones. For in stance, World War I was started by monarchist Germany and Czar ist Russia, who dragged in their freer allies. World War II was .started by the alliance of Nazi Germany with Soviet Russia and their joint attack on Poland.

Observe that in World War II, both Germany and Russia seized and· dismantled entire factories in conquered countries, to ship them home - while the freest of the mixed economies, the semi capitalistic United States, sent billions worth of lend-lease equip ment, including entire factories, to its allies. (For a detailed, doc umented account of the full extent of Russia's looting, see East Minus West == Zero by Werner Keller, New York: G. P. Putnam's Sons, 1962.) Germany and Russia needed war; the United States did not 1966 THE ROOTS OF WAR 27 and gained nothing. (In fact, the United States lost, economically, even though it won the war: it was left with an enormous na tional debt, augmented by the gro tesquely futile policy .of supporting former allies and enemies to this day.) Yet it is capitalism that to day's peace-lovers oppose and stat ism that they advocate - in the name of peace.

Laissez-faire capitalism is the only social system based on the recognition of individual rights and, therefore, the only system that bans force from social rela tionships. By the nature of its basic principles and interests, it is the only system fundamentally· op posed to war. Men who are free to produce, have no incentive to loot; they have nothing to gain from war and a great. deal to lose. Ideologi cally, the principle of individual rights does not permit a man to seek his own livelihood at the point of a gun, inside or outside his country. Economically, wars cost money; in a free economy, where wealth is privately owned, the costs of war come out of the income of private citizens - there is no overblown public treasury to hide that fact - and a citizen can not hope to recoup his own finan cial losses (such as taxes or busi ness dislocations or property de.,; struction) by winning the war.

Thus his own economic interests are on the side of peace. In a statist economy, where wealth is "publicly owned," a citi zen has no economic interests to protect by preserving peace - he is only a drop in the common buck et -while war gives him the (fal lacious) hope of larger handouts from his masters. Ideologically, he is trained to regard men as sacrificial animals; he is one him self; he can have no concept .of why foreigners should not be sac rificed on the same public altar for the benefit of the same state. The trader and the warrior have been fundamental antagonists throughout history. Trade does not flourish on battlefields, factories do not produce under bombard ments, profits do not grow on rub ble. Capitalism is a society of traders - for which it has been de nounced by every would-be gun man who regards trade as "self ish" and conquest as "noble." Let those who are actually con cerned with peace observe that c'apitalism gave mankind the long est period of peace in history..;.-a period during which there were no wafS) involving the entire civ ilized world - from the end of the Napoleonic wars in 1815 .to. the outbreak of World War I in 1914.

It must be remembered that the political systems of the 19th cen28 THE FREEMAN November tury were not pure capitalism, but mixed economies. The element of freedom, however, was dominant; it was as close to a century of capitalism as mankind has come. But the element of statism kept growing throughout· the 19th cen tury, and by the time it blasted the world in 1914, the govern mentsinvolved were dominated by statist policies. Just as, in domestic affairs, all the evils caused by statism and government controls were blamed on capitalism and the free market - so, in foreign affairs, all the evils of statist policies were blamed on and ascribed to capitalism. Such myths as "capitalistic imperial ism," "war profiteering" or the no tion that capitalism has to win "markets" by military conquest are examples of the superficiality or the unscrupulousness of statist commentators and historians.

The essence of capitalism's for eign policy is free trade - i.e., the abolition of trade barriers,of pro tective tariffs, of special privileges ~ the opening of the world's trade routes to free international ex change and competition among the private citizens of all countries dealing directly with one another. During the 19th century, it was free trade that liberated the world, undercutting and wrecking the remnants of feudalism and the statist tyranny of absolute mon archies. ' "As with Rome, the world ac cepted the British empire because it opened world channels of energy for commerce in general. Though repressive (status) government was still imposed to a considerable degree on Ireland with very bad results, on the whole England's invisible exports were law and free trade. Practically speaking, while England. ruled the seas any man of any nation could go any where, taking his goods and money with him, in safety." (The God of the Machine, by Isabel Paterson, Caldwell, Idaho: Caxton Printers, 1964, p. 121. Originally published by G. P. Putnam's Sons, New York, 1943.) As in the case of Rome, when the repressive element of Eng land's mixed economy grew to be come her dominant policy and turned her to statism, her empire fell apart. It was not military force that had held it together.

Capitalism wins and holds its markets by free competition, at home and abroad. A market con quered by war can be of value (temporarily) only to those advo cates of a mixed economy who seek to close it to international competition, impose restrictive regulations and thus acquire spe cial privileges by. force. The same 1966 THE ROOTS OF WAR 29 type of businessmen who sought special advantages by government action in their own countries, sought special markets by govern .. ment action abroad .. At whose ex pense? At the expense .of the over whelming majority of businessmen who paid the taxes for such ven tures, but gained· nothing ~Who j tlstified such policies and . sold them to the public? The statist intellectuals who manufactured such doctrines as ,"the public~ in terest" or "national prestige" or "manifest destiny." The actual· war profiteers of all mixed economies were and' are of that type: men with political pull who acquire fortunes by govern ment favor, during or after a war -fortunes .wh,ich they could not have acquired ona free market.

Remember that private citizens - whether rich or poor, whether businessmen or workers - have··no power to start a war. That power is the exclusive prerogative of a government. Which type of gov ernment is more likely to plunge a country into war: a government of limited powers,bound by con stitutional restriction - or an un limited government, open to the pressure of any group with war like interests or ideologies, a gov ernment· able to command armies to march at the whim of a single chief executive? Yet it is not a limited government that· today's peace-lovers are advocating~ (Needless to say, unilateral pac ifism is merely an invitation to aggression. Just as an individual has the right of self-defense, so has·a free country if attacked. But this does not give its government the right to draft men into mili tary service - which is the most blatantly statist violation of a man's right to his own life. There is no contradiction between the moral and the practical: a volun teer army is the most efficient army, as many military authori ties have testified. A free country has never lacked volunteers when attacked by a foreign aggressor.

But not many men would volun teer for such ventures as Korea or Vietnam. Without drafted armies, the foreign policies of statist or mixed economies would not be possible.) So long as 'a country is even semi-free, its mixed-economy prof iteers· are not the source of its warlike influences or policies, and are not the primary cause of its involvement in war. They are merely political scavengers cash ing-in on a publictrend. The pri mary cause of that trend is the mixed-economy intellectuals. Observe the· link between stat ism and militarism in the intel lectual history of· the· 19th and 30 THE FREEMAN November 20th centuries. Just as the de struction of capitalism and the rise of the totalitarian state were not caused by business or labor or any economic interests, but by the dominant statist ideology of the intellectuals - so the resurgence of the doctrine of military con quest and armed crusades for po litical "ideals" were the product of the same intellectuals' belief that "the good" is to be achieved by force.

The rise of· a spirit of national istic imperialism in the United States did not come from the right, but from the left, not from big-business interests, but from the collectivist reformers who in fluenced the policies of Theodore Roosevelt and Woodrow Wilson. For a history of these influences, see The Decline of American Lib eralism by Arthur A. Ekirch, Jr. (New York: Longmans, Green, 1955.) "In such instances," writes Pro fessor Ekirch, "as the progres sives' increasing acceptance of compulsory military training and of the white man's burden, there were obvious reminders of the paternalism of much of their eco nomic reform legislation. Imperi alism, according to a recent study of American foreign ·policy,· was a revolt against many of the values of traditional liberalism. 'The spir it of imperialism was ··an exaltation of duty above rights, of collec- '-0 tive welfare above individual self interest, the heroic values as op posed to materialism, action in- ~ stead of logic, the natural impulse rather than the pallid intellect.'"

(p. 189. Quoted from R. E. Osgood, Ideals and Self-Interest in Americ'a's Foreign Relations, Chi cago: University of Chicago Press, 1953,p. 47.) In regard to Woodrow Wilson, Professor Ekirch writes: "Wilson f no doubt would have preferred the growth of United States foreign trade to come about as a result of " free international competition, but he found it easy with his ideas of moralism and duty to rationalize direct American intervention as a means of safeguarding the na- , tional interest." .(p. 199.) And: "He seemed to feel that the United States had a mission to spread its institutions - which he conceived as liberal and democratic - to the more benighted areas of the world." (p. 199.) It was not the r advocates of capitalism who helped Wilson to whip up a reluctant, peace-loving nation into the hys teria of a military crusade-it was the "liberal" magazine The New Republic. Its editor, Herbert Croly, used such arguments as: "The American nation needs the tonic of a serious moral adven ture."

1966 THE ROOTS OF WAR 31 Just as Wilson, a "liberal" re former, led the United States in to World War I, "to make the world safe for democracy" - so Franklin D~ Roosevelt, another "liberal" reformer, led it into World War II, in the name of the "Four Freedoms." In both cases, the "conservatives"- and the big business interests - were over whelmingly opposed to war, hut were silenced. In the case of World War II, they were smeared as "isolationists," "reactionaries" and" America-First'ers." World War I led, not to "democ racy," but to the creation of three dictatorships: Soviet Russia, Fascist Italy, Nazi Germany. World War II led, not to "Four Freedoms," but to the surrender of one-third of the world's popu lation into communist slavery. If peace were the goal of today's intellectuals, a failure of that magnitude - and the evidence of unspeakable suffering on so large a scale -would make them pause and check their statist premises.

Instead, blind to everything but their hatred for capitalism, they are now asserting that "poverty breeds wars" (and justifying war by sympathizing with a "material greed" of that kind) . But the question is: what breeds poverty? If you look at the world of today and if you look back at history, you will see the answer: the de gree ofa country's freedom is the degree of its prosperity. Another current catch phrase is the complaint that the nations of the world are divided into the "haves" .and the "have-nots." Ob serve that the "haves" are those who have freedom, and that it is freedom that the "have-nots" have not. If men want to oppose war, it is statism that they must oppose. So long as they hold the tribal notion that the individual is sacrificial fodder for the collective, that some men have the right to rule others byforce, and that some (any) alleged "good" can justify it there can be no peace wit'hin a na tion and no peace among nation~.

It is true that nuclear weapons have made wars too horrible to contemplate. But it makes no dif ference to a man whether he is killed by a nuclear bomb or a dynamite bomb or an old-fash ioned club. Nor does the number of other victims or the scale of the destruction make any difference to him. And there is something ob scene in the attitude of· those who regard horror as a matter of num bers, who are willing to send a small group of youths to die for the tribe, . but scream against the danger to the tribe itself - and more: who are willing to condone the slaughter of defenseless vic.32 THE FREEMAN November tims, but march in protest against wars between the well-armed. So long as men are subjugated by force, they will fight back and use any weapons available. If a man is led to a Nazi gas· chamber or a Soviet firing squad, with no voices raised to defend him, would he feel any love or concern for the survival of mankind? Or. would he be more justified in feeling that a cannibalistic mankind, which tolerates· dictatorships, does not deserve to survive?

If nuclear weapons are a dread ful threat and mankind cannot afford war any longer, then man kind cannot at!ord statism any longer. Let no man of good will take it upon his conscience to ad vocate the rule of force - outside or inside his own country. Let all those who are actually concerned with peace - those who do love man and do care about his survival - realize that if war is ever to be outlawed, it is the use of force that has to be outlawed. ~ Reprints of this article are available from Nathaniel Branden Institute, 120 East 34th Street, New York, New York 10016. Single copy 50 cents; 10 copies, 35 cents each; 25 copies. 25 cents each; 100 copies, 20 cents each. The Politics of Peace WHAT DISTINGUISHES man from animals is the insight into the advantages that can be derived from cooperation under the division of labor. Man curbs his innate instinct of aggression in order to cooperate with other human beings. The more he wants to improve his material well-being, the more he must expand the system of the division of labor. Concomitantly he must more and more restrict the sphere in which he resorts to military action. The emergence of the international division of labor requires the total abolition of war. Such is the essence of the laissez~faire philosophy of Manchester.

This philosophy is, of course, incompatible with statolatry. In its context the state, the social apparatus of violent oppression, is entrusted with the protection of the smooth operation of the market economy against the onslaughts of antisocial individuals and gangs. Its function is indispensable and beneficial, but it is an ancillary function only.. There is .no reason to idolize the police power and ascribe to it omnipotence and omniscience. There are things which it can certainly not accomplish. It cannot conjure· away the scarcity of the factors of production, it cannot make people more prosperous, it cannot raise the productivity of labor .. All it can achieve is to prevent gangsters from frus trating the efforts of those people who are intent upon promoting material well-being. LUDWIG VON MISES, Human Action THE DIFFERENCE between. freedom and servitude is the difference be tween doing what we ought be cause we choose to and doing what we must because another chooses for us.

Words of wisdom were spoken by the poet who wrote in Psalm 119: H •••and I shall walk at liberty, for I have sought thy precepts." (Ps. 119 :45). This pathway to liberty seems strange to many people, for we are fond of the illusion that being bound by prec~ts, commandThe Reverend Dr. Sollitt is Pastor of the First Baptist Church, Midland, Michigan. ments, laws, is the opposite of freedom. But freedom is not ab sence of rules; it is action under a higher law. The Wright .Brothers did not violate the law of gravity when they produced the beginnings of the heavier-than-air flying ma chine. They simply discovered. and used the now familiar laws of aerodynamics. Similarly, lawlessness is not the route to liberty. Liberty in society depends upon the discovery and practice of those higher laws which produce it. For freedom is not mere whim; it is the opportunity to do as one ought without compulsion.

We have other illusions about liberty, too, among them the idea that liberty somehow means alack of responsibility for our acts. But, as in the natural world, so in the spiritual, we do not. break higher laws; we break ourselves upon them. We a,re responsible for our acts - and for our inactivity when we ought to act. We may entertain the illusion that freedom means relief from the responsibility of making de cisions for ourselves,. leaving this to somebody in Washington, or the Commanding Officer, or the union bosses, or the industrial associa tion management. But God has created man with a free will. He not only may but must make de~ cisions for himself. And one of 33 34 THE FREEMAN November his first decisions ought to be that of the Psalmist, to seek the pre cepts of God that he may walk in liberty. Certain forces are at work in the United States to propagate the illusion that liberty means free dom to demand what you want at the expense of others. I think of this when I remember that today the taxpayer's bill for welfare amounts to $52.00 for every man, woman, and child in the United States, and Leon Keyserling has recommended that the figure be increased to $103 by 1970 and $124 by 1975. To do less, he said, would be "immoral."

But after thirty years of public spending on welfare there are still 34,000,000 "impoverished Ameri cans." Commenting on this, the editor of the Dallas, Texas, News asks: "Is it moral to keep these millions dependent on a govern ment handout? Is it moral to rear new generations thinking that someone else will take care of them? Is it moral to ask one man to work and pay taxes so that three others can get relief checks and go fishing?" We are confused as to the mean ing of liberty because we are con fused as to what is moral. In short,we have entertained the illusion that freedom means the right to push other people around, or to elect public officials who will do it for us. But the right to push people around carries with it the certainty that we ourselves will be pushed around. For it· is one of God's laws, as operative in the spiritual, the economic, and the political realms as in the phys ical, that "for every action there is an equal and opposite reaction."

The ball hits the bat with the same force that the bat hits the ball. The striking union assures· itself when it strikes that it will be met by a similar force of resistance. This is the reason wars escalate. The use of force creates the op position that more force is re quired to overcome. One hundred and ninety years ago our forefathers sought free dom, not to push anybody around, but freedom to discover and obey the higher law in their own way. The result has been the creation of the greatest nation on earth the nation whose people have the greatest amount of freedom. America is proof that those who seek the precepts of God's higher law shall walk at liberty. Unfortunately, she is also proof that a nation or a people gets it self into trouble at every point where it tries to amend the all embracing higher law to favor the majority, or any minority strong enough to enforce its will upon the rest. We are in trouble wherever the coercion of one 1966 THE LAW OF LIBERTY 35 group by another has been al lowed, whether the coercion has been racial, economic, social, polit ical, or religious.

The obvious lesson is that in the freest country in the world in dividuals and groups can still court servitude by resorting to compulsion to attain selfish ends. For force begets an opposing force and conflict is inevitable. And we become imprisoned in the conflict. There are two ways to think of freedom. A common way is to think of it as the right NOT to do anything unless and until you have to. But this is an illusion of liberty. The surest way to destroy your liberty along with that of those about you is to refuse to. do what you know you ought until you are forced to do so. The student says to the teacher, "I'll be good only if you can make me." The law breaker says to the policeman, "I'll obey the law if you can make me." There is no true liberty to be found in shutting oneself inside a prison of necessity and beating one's head against a wan of re sistance to doing what one ought.

True liberty is found only by doing what we ought because we ~vant to and not because we have to. This is the road on which our forefathers started us about two centuries ago - the road from which we have departed time and time again by the imposition of restricti ve laws on some and the granting of special privileges to others. Both of these things tend to discourage us from doing what we ought until the law requires it. Then we lose our freedom to do it simply because we want to do the right thing. So, Americans, if you want to lose still more of your freedoms, just keep on demanding special favors at someone else's expense, and electing politicians who prom ise them to you. Joe Louis, when asked why he had not been more active in the Civil Rights movement, said re cently, "Some people do it by shooting, some march, some give a lot of money. I do it my way -be having. All ways help."

We might not all agree that all ways help, but we must agree that beha ving is one of the better ways. In doing this he is helping, not only the Civil Rights movement, but every worthy cause. The former heavyweight champion is doing what he should because he wants to and this is following the law of liberty. Can we learn this way as a people before the Amer ica for which our forefathers· sac rificed so much has gone the way of the republics of Greece and ~me? • CLARENCE B. CARSON The Pen AND The Sword 26. CONCLUSION IT· HAS BEEN SAID that the pen is mightier than the sword. The phrase is poetic; it calls attention to a paradox. Taken literally, the statement is not true, of course. A swordsman pitted against a·· pen man might be expected to make quick work of him. Obviously, the phrase is not meant to evoke the vision of any such contest when it is employed. It is meant, instead, to call attention to the sway of ideas in the affairs of the world, a sway more complete and determi native even than that of the sword.

However this may be, there should be no doubt that the pen and the sword together. are invin cible.. That is the situation which confronts us· today. . The flight from reality has culminated in the Dr. Carson is Professor of American History at Grove City College,· Pennsylvania. Among his earlier writings in THE FREEMAN were his series on The Fateful Turn and The American Tradition, both of which are now available as books. 36 linking of the pen and the sword. The commander-in-chief of the armed forces of the United States with his brain trust signalizes the union. The direction in 'which we are impelled by the combined force of pen and sword should not be in doubt. Earl Browder, former head of the Communist Party of the United States - but unrepentant socialist - has lately described the tendency felicitously: America is getting socialism on the installment plan through the pro grams of the welfare state. There is more real socialism in the United States today than there is in the Soviet Union.

Americans may not be willing to vote for a program under the name of "socialism," but put it under another party label-whether liberal Republican or Democrat-and· they're by and large in favor of the idea ....

1966 THE PEN AND THE SWORD 37 We have no real socialist partY,no socialist ideology, but we have a large - and growing - degree of what 50 years ago would have been recognized as socialism.! Some of Browder's points may be debatable, such as that there is more socialism in America. than in the Soviet Union, or that we have no socialist ideology; but his main contention-that the United States has been moving gradually toward socialism - should be beyond dis pute. The evidence for this is mountainous. It can be seen in the spreadlng government. interven tion in the economy, in the in creasing control of the economy, in the numerous welfare pro grams, and in the amazing array of governmental activities and programs. The question for the historian should be not whether we have been moving toward what was once billed as socialism but rather how has this development come· about. In the absence of a victorious Socialist Party, without political. leaders who profess the socialist ideology, in a situation in which .most of the .populace has never consciously accepted social ism, how has "America proceeded to. the point that an. old Commu nist can proclaim we are achieving socialism?

1 Quoted in Pittsburgh Press (June 19, 1966), sec. I,p. 11. To Meet Changed Circumstances Though few American histori answould be as blunt as Earl Browder, there is a. conventional explanation of the phenomena. to which he refers. Indeed, in the in terview cited above, Browder re ferred· .to .and used theconven tional explanation. He said, "We got it ... merely in the piling up if [sic] single decisions under the pressures of need and crisis."2 In greater detail, the explanation would go something like this: In consequence of industrialization, the mechanization of agriculture, urbanization, and the transporta tion revolution came depressions, concentrations of wealth, the de pendency of the worker, declining opportunity, "monopolies," and spreading poverty. Government had to intervene to bring justice to the people in view of these changing circumstances. Politi cians, operating pragmatically, have tried first this, then that, to come up· with programs which would work. They have been moved not by ideology but by the pres sure of circumstances.

The generality of men do not question familiar explanations; they do not even analyze them. In order for an explanation to be come familiar it need. only have been repeated enough times. This has occurred .regarding the justi2 Ibid.

88 THE FREEMAN November fication of reform. on the grounds of changing circumstances. It has been drummed into our ears for decades now. It sounds right to us. The rhetoric by which it is ex pressed has etched grooves in our minds which allow each additional statement of it to be taken in without causing pain. The point approaches where it is hardly more apt to be challenged than was the view that the earth was flat seven hundred years ago. Yet, it is an explanation that does not explain when put to the test. Some of the reformist surges have come at times of general prosperity. The Progressive move ment, in the early twentieth cen tury, came at a time of the great est prosperity America had known. The Kennedy and Johnson pro grams were introduced at times billed as ones of unprecedented prosperity. The rationale changes with the times, not the programs or direction. If it is a period of de pression, the programs are de scribed as remedies for depression.

If it is a period of prosperity, they may be justified on the grounds that poverty is inexcus able in a land of plenty. Disappointing Results Nor does the pragmatic claim stand up under analysis. If the re formers were pragmatists, they should be concerned with whether their programs work or not. On the contrary, they cling to them,. once established, and press for the en actment of others of like nature. If workability were the test, the farm programs should have been scrapped long ago. They were sup posed to rescue the small farmer and benefit agriculture generally. On the contrary, the number of farmers has decreased from 1930 to the present, and the brunt of , this has been borne by small farm ers. Large farmers generally have become more wealthy; and we have all paid for this continuing experiment with higher prices for certain products. Various programs, such as hous ing projects, were supposed to re duce delinquency, yet crime mounts in America. Americans were supposed to be helped by gov ernment programs to become in dependent, but dependency on gov ernment increases apace. Anti trust legislation was supposed to prevent the fixing of prices, yet prices in numerous instances are set by government decree and union monopolies. Far from work ing as intended, the programs often have produced results the op posite of those desired. If their proponents were pragmatists, they long since should have abandoned many of the programs which they still cherish.

Though a much more thorough 1966 THE PEN AND THE SWORD 39 analysis of the explanation by cir cumstances and comparison of it with the evidence would be valu able, it is not necessary. An ex planation is satisfactory to the ex tent that it accounts for all· of the relevant phenomena. This one does not, and it must be discarded as inadequate. There not only are too many loose ends, but it does not even come to grips with the proc ess of historical change. The Conspiracy. Theory Another explanation has gained some following, though not gen erally in academic circles. It is tha t the trend to socialism is a prod uct of a conspiracy, or of conspiracies. Such an explanation is particularly appealing because, if true, it would account for the fact that we have moved toward socialism without those respon sible for it ever announcing it as the goal. The plausibility of this explanation is increased· by the existence of a communist conspir acy, by a magnetic field surround ing it into which sympathizers are drawn, and by the affinity which many reformers have had for Communists. Its attraction is probably greatly enhanced by the obvious solution it offers: expose the conspiracy or conspiracies, .im prison the malefactors, throw the scoundrels out, and get on with the business at hand.

The expose occupies a position today in the Conservative move ment similar to the place it had for Progressives at the beginning of the century. Books gain consider able currency that deal with Red spies· at the United Nations, that rehash the story of the fall of Na tionalist China, that tell again the story of Pearl Harbor, and so on. Much of their appeal is but testi mony to the frailty of human na ture, to the preference of men for reading something that will make their blood boil rather than help to make their minds work. Even so, if the present Conservative· movement should emerge victori ous politically, some part of its rise probably could be attributed to the exposes. Moreover, some of these have made valuable contri butions to our understanding of what has happened. Nonetheless, the exposes are largely offshoots of the conspiracy theory, so far as they offer any general explanation of what has happened. They deal with events which are only· the flotsam and jetsam of the major developments of our time. They are of the sur face of the waters on which we ride, not of the undertow which pulls us in the particular direc tion. The conspiracy theory may account fora particular coupd' etat, for this or that hidden ma nipulation, for some particular bit 40 THE FREEMAN November of espionage, for the introduction of some unfortunate phrase in a document, and so on. But it does not tell us what made the con spirators become what they are.

Moreover, it does not account for the millions, perhaps billions, of people in the world who are drawn to support what is being done, or what they think is being done. Victims of Illusion We are the victims, not of con spiracy, but of illusion. Even the conspiracies are largely sustained by the illusion. The illusion is that men are, or can be, gods, that they can by taking thought reconstruct human nature, that they can create a world of their own devising, that decision-mak ing can be separated from power, that tension and stress can be removed from the world, that re ward can be separated from ef fort, that all-embracing govern ments can bring peace, that peo ple can be treated as things and retain their dignity, that men will cease to pursue their own interests when the social system is changed, that evil is the prod uct of circumstances and not of men, that .consequences are de termined by motives rather than by the nature of the actts, that the nature of acts is altered by the number of people who. participate in them, that the nature of man is plastic, and that the universe is malleable.

The heart of the illusion is in the view that the .meaning of life is to be found in participation in the political process through which utopia is .to be achieved by con~ tinuing. social reconstruction. Ac cording to this view, men find their fulfillment in voting, in col lective activity, in group projects, in civic undertakings, and in ex tending these methods as widely and universally as possible. This ethos goes by the name of democ racy. It provides the rationale for the progressive politicalizing of life, for the interpenetration of all human .activity with force. The transcendant rituals of this pseudo-religion are group discus sion and voting. Its end is a heav en-on-earth ·utopia which is to be achieved by social transformation. Its chief virtue is action,. social action, action to produce the de sired changes according to the modes of. the rituals. Anything that is not politicalized is an af front to the adherents of this ethos. They talk continually of peace, but they foment strife be cause they continually intrude in the affairs of other men. They arouse the vague and restless dis contents which are a part of the human condition and attempt to harness these for the purposes of social reconstruction.

1966 THE PEN AND THE SWORD 41 The Philosophical Break The burden of this work has been to show that men have suc cumbed to illusion by a flight from reality. This flight from reality has had a long and checkered ca reer. It began at a level remote from the lives of most people, on the philosophical plane. Philoso phers began to break the connec tion between cause and effect, be tween the evidence of the senses and logic, between the metaphysi cal and the physical realms, be tween ideas and reality. After Immanuel Kant, if there was a duality to reality - if there was body and soul, heaven and earth, physical and metaphysical, tem poral and eternal, and so forth the two realms were so disjoined from one another as to make them distinct and unrela ted orders of being. The pure reason cannot ar rive at validatable propositions; the practical reason can establish facts, but these fall far short of the truth for which man yearns.

Kant had, in effect, demolished the connections which enabled philosophers to provide a unified account of all the levels of reality. Philosophy gave way to ideology, and "isms" multiplied as thinkers attempted to account for all of reality by some piece from the wreckage of philosophy. Perhaps no better description can be given of ideology than that it is an attempt to account for the whole of reality ·by some abstraction of a fragment of it. Many ideologies emerged in the nineteenth century, but two of them were basic to the particular direction of the flight from, real ity: idealism and materialism. Dualism did not disappear; it tended to survive in the more or less independent development of idealism and materialism. Idea and matter remained, and thinkers labored to bring them together into some kind of synthesis. The work of G. W. F. Hegel was cen tral to the development of thought.

He held that idea became actuality in the historical process. All of reality was reduced to the his torical plane where its being con sists of its becoming. The purpose of life becomes the rendering of the ideal into the actual. Here is the tap root of the meliorist and revolutionary roads to socialism. There was no longer any fixed and enduring reality for most thinkers, only an historical process of change. Some followed Hegel in·holding that ideas can be used to shape actuality from matter (though Hegel did not think much of matter) ; others followed Marx in holding that there is a dialectic of matter and that ideas are really a product of this. To the material ists, all things are determined by the fluctuations of matter; to the 42 THE FREEMAN November idealists, all things are a product of ideas. Both of these notions went into the stream of thought picked up by American meliorists, have been strangely combined and eclectically used.

At any rate, idealism provided the mental framework for the construction of· utopias, while ma terialism gave substance. For many, the utopian vision served as the idea which they would make an actuality. The utopian idea was not new to the nineteenth cen tury; it had been around for some time. But men had treated such ideas largely as playthings of the imagination, ridiculous because unattainable, undesirable even if attainable because they do not take into account the character of life on this earth. A fragment of Truth; Ideas Have Consequences The atmosphere began to change in the nineteenth century. Not only were more utopian novels written but also they began to get a wider acceptance. For some at least, utopia began to· seem both possible and desirable. Many had lost their certainty of a meta physical and enduring order which would make them impossible. The declining vitality of belief in life after death opened up the possi bility that Heaven would have to be. on this earth.

Even so, most men have not consciously accepted the. notion that utopia actually could be achieved. Any man of common sense can find numerous fiaw~ in any particular version of utopia. Probably, most men will never accept the notion that utopia act ually can be attained. They can, however, be convinced that con ditions can be improved. This has been the method of the meliorists in America. Behind the thrust of meliorist effort lies the utopian vision, which is itself the impel ling dream of socialism, but the programs which are supposed to lead to it are billed neither as socialism nor utopianism in Amer ica. They are only called improve ments. Not all of them would pro duce utopia, but each of them might result in some improve ment, so men have been led to believe. There is a fragment of truth in the conception of translating ideas into actuality, a most inter esting and important fragment of truth. Men do translate ideas into actualities, not perfectly but suf ficientlJ" well for us to recognize that it happens. A boy has a dream, a vision, an idea of what he will become when he is a man.

If he plans well, if his idea is viable,' if he works hard at it, the man he will become will bear some relationship to his dream.

1966 THE PEN AND THE SWORD 43 Ideals, too, have played an in valuable role in the lives of men. The world would be immeasurably poorer, indeed an intolerable place, if individuals did not seek truth, stri ve to act justly, and yearn for the good. The Revelation by Jesus Christ of what is good in the sight of God contains the highest ideals for Christians. Each man who labors to order his ac tions to accord with ideals is, in a sense, translating idea into actu ality. In many ways, both mundane and sublime, men labor to trans late ideas into actuality. Th.e farmer who raises a crop trans lates his ideas about the employ ment of his land, labor, and capi tal into the actuality of produce. The man who builds a factory starts with a conception of it, even a dream, just as does the builder of a house. An artist who paints a picture begins with an idea; so does a novelist, a com poser, an architect, and a cook.

The inventor begins with a con ception of a device that does not exist but which he believes can be produced by combining certain materials and principles. If his idea is valid, and if he knows how to apply it, an invention can re sult. Indeed, translating ideas in to actuality plays a most impor tant part in our lives. That this can be done is such an important fragment of truth that men might be expected to want to apply it universally. Let us return to the process of invention. Inventors have supplied us with an amazing array of con veniences and technology in the last hundred years. In no other area of human activity has the process of translating ideas into actuality been so dramatically demonstrated. We have come to associate this process of techno logical development with progress, and the word "progress" has for us the attraction derived from the association. Meliorists were· able to capitalize on this association and claim that th.ey were using the method in a new area. Both Lester Frank Ward and John Dewey talked of "social invention."

The pseudo philosophy of prag matism, with its emphasis upon experimentation, is largely built upon an abstraction from the process of invention. Reformists were going to produce the mar vels in society that mechanical in vention had done for technology. Their innovations would consti tute progress in the social realm just as invention does in the realm of technology. Hence, those who were opposed to the political inno vation and· intervention which re sulted would be described as anti progressive and reactionary. There is a major difference"

44 THE FREEMAN November however, between mechanical in vention and "social invention." The mechanic works with things. He shapes them in such ways that they do his bidding. He becomes master of them. By contrast, the "social inventor" deals with peo ple. They have hopes, plans, and wills of their own. Otherwise, the analogy with mechanical invention holds. The "social inventor" at tempts to shape people so that they will do his bidding (though this is supposed to be for their own good) . He becomes their master to the extent that he gains political power over them. That is, to the extent that the "social inventor" (or social planner as he has come more commonly to be called) succeeds in his efforts, men lose control of their own af fairs. The association with what men have thought of as progress is a bogus one, though it does be come progressively tyrannical. The Path to Tyranny The flight from reality has had many facets. Some of them have been described in earlier chapters.

My point, however, is that the flight from reality took place in the realm of ideas and was a product of what are called intel lectuals. Many ideologies have pro vided grist for the mills of Amer ican reformers or meliorists, but the central idea is the translation of a vision, a VISIon of utopia, into actuality by the use of po litical power. It is a perversion of idealism, an extension of it into unwarranted areas. For an individual to have an ideal which he wishes to translate into the actuality .of himself is healthy on the whole. But for a man to have an ideal for what others should become is likely to make .him a n uisance at the best and a tyrant at the worst. When he uses force to make others over, he certainly becomes a tyrant. The idea of transformed men and society was projected as uto pia. It was taken up by American thinkers, read into an evolutionary framework, and methods were de vised for a gradual movement to ward its fulfillment. The ideologies were subsumed into mythologies which bent those who accepted them toward programs of amelio ration and reform. These reform ist ideas were intermingled with religion by the social' gospelers and injected into educational the ory and practice by progressive educationists. They were propa gated in the media of communica tion. Earl Browder would have been correct if he had said that most Americans have no conscious socialist ideology; they have, in stead, a mythology which carries in it an implicit socialist ideology.

The method of translating these 1966 THE PEN AND THE SWORD 45 ideas into actuality is epitomized and concentrated in the presiden tial four-y~ar plans - the Square Deal, New Freedom, New Deal, Fair Deal, New Frontier, . and Great Society. The pen has been linked with the sword in these plans. As was. shown above, intel lectuals provided the ideas. It· will be enough now to indicate briefly that Presidents put them into effect. Most of these Presidents have not frankly avowed their aim to reconstruct society. However, oc casionally it has come out, as in the following declaration by Wood row Wilson: We stand in the presence of a rev olution, -not a bloody revolution; America is not given to the spilling of blood, - but a silent revolution .... We are upon the eve of a great reconstruction. It calls for creative statesmanship as no age has done since that great age in which we set up the government under which we live, that government which was the admiration of the world until it suf fered wrongs to grow up under it which have made many of our com patriots question the freedom of our institutions and preach revolution against them. I do not fear revolu tion. . .. Revolution will come in peaceful guise. . . . Some radical changes we must make in our law and practice. Some reconstructions we must push forward, for which a new age and new circumstances impose upon us. But we can do it allin calm and sober fashion, like states men and patriots. 3 In milder language, Franklin D.

Roosevelt made a similar· procla mation: At the same time we have· recog nized the necessity of reform and re construction - reform because much of our trouble today and in the past few years has been due to a lack of understanding of the elementary principles of justice and fairness by those in whom leadership in business and finance was placed - reconstruc tion because new conditions in our economic life as well as old but ne glected conditions had to be corrected. 4 As a general rule, however, Presidents with four-year plans have not emphasized the revolu tionary character of what they were proposing. On the contrary, they have made as little of the in novation as possible and have tried to maintain that what they were doing was somehow pro foundly in keeping with true American tradition and purpose. For example, when Theodore Roosevelt called for out-and-out regulation and supervision of 3 Woodrow Wilson, The New Freedom, William E. Leuchtenberg, intro. (Engle wood Cliffs, N. J.: Prentice-Hall, 1961), p.32.

4 Franklin D. Roosevelt, Nothing to Fear, Ben D. Zevin, ed. (New York: Popular Library, 1961), p. 50.

46 THE FREEMAN November American corporations in 1905, he described the program as in keep ing with the American past. He said, in part: This is only in form an innovation. In substance it is merely a restora tion; for from the earliest time such regulation of industrial activities has been recognized in the action of the law-making bodies; and all that I propose is to meet the changed con ditions in such a manner as will pre vent the commonwealth abdicating the power it has always possessed not only in this country but also in Eng land before and since this country became a separate nation. 5 The second Roosevelt was even more masterful in describing his alterations as if they were entirely constructive in character. On one occasion, he likened them to the wayan architect can renovate a building, joining the new to the old so felicitously that the whole will retain its integrity. The fol lowing references were to a reno vation of the White House that was going on: If I were to listen to the arguments of some prophets of calamity who are talking these days, I should hesitate to make these alterations. I should fear that while I am away for a few weeks the architects might build some strange new Gothic tower or a factory 5 Marvin E. Meyers, et. al., eds., Sources of the American Republic II (Chicago: Scott, Foresman, 1961), l05.

building or perhaps a replica of the Kremlin or of the Postdam Palace. But I have no such fears. The archi tects and builders are men of com mon sense and of artistic American tastes. They know that the principles of harmony and of necessity itself require that the building of the new structure shall blend with the es sentiallines of the old. It is this com bination of the old and the new that marks orderly peaceful progress, not only in building buildings but in building government itself. 6 Emphasis on Gradualism The above is, of course, the rhetoric of gradualism. It is the beguiling language which has con cealed the thrust of the sword into virtually every area of Amer ican life. The sword is an apt symbol for the use of government power. The first penetration of the flesh by a sharp sword will hardly be noticed. It is a mark of the ingenuity of American gradu alists that they are able to appeal to the fact of the lack of pain caused by their programs at first as an argument for extending them. The argument goes some thing like this, figuratively: the sword is already in; the first thrust did not hurt much; there can, therefore, be no objection to driving it further in. It is not even much of an innovation to drive the sword deeper once it 6 Roosevelt, Ope cit., pp. 53-54.

1966 THE PEN AND THE SWORD 47 has been introduced into the body. Rhetoric aside, however, this is how the application of meliorism has resulted in extending force into more and more of American life. Step by step the control, reg ulation, and intervention has mounted. It began mildly enough in the early twentieth century. At first, it involved only such things as regulating interstate transportation, a pure food and drug law, a meat inspection act, the establishment of a postal sav ings system, the interstate trans portation of females for immoral purposes, and the bringing of telephones and pipelines under government regulation. It pro ceeded to the passage of a mini mal graduated income tax, to the setting up of the Federal Reserve System, to the establishment of rules. for dealing with railroad la bor, to the exemption of organized labor from antitrust legislation, and to special rules for the di rectors of large corporations.

Leaving out of account the war years of World War I, the speed of intervention mounted precipi tately in the 1930's. Farm prices were subsidized, crops restricted, the stock exchange regulated, la bor unions empowered, a govern ment arbitration board created, the income and inheritance tax raised, minimum wages and maxi mum hours established, loans to farmers provided, Federal aid for slum clearance authorized, vast relief programs undertaken, and so on. Since World War II, the pace of intervention has been main tained. Social security has been extended to ever larger portions of the population, labor unions regulated in new ways, Federal aid to education extended, con scription extended into peacetime, relief programs of various sorts continued, disaster relief inau gurated, vast programs of urban renewal started, world-wide em broilment by foreign aid begun, and so on. The above only scratches the surface of the total regulation, control, and intervention by gov ernments in America. There are, in addition to the above, many Federal laws not alluded to, the rules and regulations propounded by boards .and commissions, and the fantastic variety of state and local laws, rules, and decrees. To these should be added an increas ing number of judicial decrees which are given the force of law.

Depending upon the circum stances and locale, in some in stances, an American cannot de cide how much he will plant, how he will build, what interest he will charge, what he will buy, to whom he will sell, whom he will serve, what price he will charge, 48 THE FREEMAN Novembe1' how much education his children will have, what school they will attend, what he shall say (on radio and television), what causes he will support, what size container he shall use, what medication his family shall receive, what busi ness he will enter (since there are government monopolies in certain enterprises), whom he will hire, whom he will fire, with whom he will negotiate, whether he will go out of or remain in business, whether he will contribute to funds for his old age or not, what kind of records he will keep, what he will pay to those he employs, what books his children will be exposed to, and much more besides. The amount determined by the exer cise of political power increases and those things left to indi vidual choice decline.

A Fatal Dosage The sword is now deep in the body. However slowly it has en tered and however gradual the thrusts, it must eventually reach the vital organs. That this has already occurred and is occurring is indicated by the loss of liberty, the destruction of money by infla tion, a mounting and unpaid na tional debt, rising costs, increas ing relief rolls, inflexibilities and rigidities, and spreading lawless ness. It is not illusion alone that sustains the movement· toward social ism, however. Some men may have succumbed to the illusion that the politicalizing of life is desirable. There may be those, even a great number, who believe that the meli oristic programs of politicians are advanced for altruistic reasons. Some portion of the populace may believe· that the meaning of life is to be found in democratic partici pation. Certainly, there are ideo logues who are committed to so cialism and are utterly blind to the consequences of the efforts in that direction. But behind the fa ~ade of altruism, beyond the cloud cover of rhetoric, there is a solid reality which sustains even the flight from reality. It is the reality of government favors and the en ticements of political power and prestige.

Men do not readily succumb to illusion in matters close to them with which they are familiar. They follow their own interests, narrowly or broadly conceived or misconceived. Pen and sword are linked together in a web of self interest that extends outward from the centers of power in America to embrace almost everyone who has some special prerogative, franchise, benefit, exemption, con cession, or office derived from gov ernment. These are too numerous even to summarize here, but they include such diverse favors as 1966 THE PEN AND .THE SWORD 49 welfare checks, government con tracts, radio and television fran chises, oil depletion allowances, F. H.A. requirements for escrow balances, loans, subsidies, build ing projects hoped for, military establishments in the vicinity, and so on through an almost endless array of special privileges. Almost All Are Involved Virtually every American has been drawn into the orbit of de pendency upon government, will ingly or not, and to a greater or lesser extent. It may be an illu sion to believe that each of us can benefit from the largess taken from all of us, but it becomes in creasingly difficult, if not impos sible, for an individual to calcu late whether his benefits exceed his costs or not. Since they do not know the answer to this sixty-four (or 104) billion dollar question, men fear to disturb the status quo of benefits.

At the apex of this structure of power and privilege is an elite of politicians, intellectuals, labor leaders, scientists, military men, and assorted leaders .of specially privileged minority groups. At the pinnacle is the President and those who enjoy his favor. Here, the benefits are such as would dazzle and tempt a saint. There are the obvious perquisites of office, of course: the black limousines, the jet planes, the helicopters, the Marine band, the medical care at Walter Reed Hospital, the admir ing crowds, and the fawning as sistants. Some of these might be found, even if there were no wel fare state, no movement toward socialism, and no spreading asser tion of government power. But the pushers of the pen have provided the wielders of the s\vord with a rationale and justi fication of their position that places them above mere mortals. They have set forth an ethos sup porting the conc'entration and ex ercise of power which makes of those who wield it virtual gods.

As more and more of American life is politicalized, the stock of the politician rises in direct ratio. As more and more of our actions are politically directed, the im portance o'f the politician in creases. As decisions over their lives are taken from individuals and made political, the politician who makes the decision rises in his own estimation and that of his fellows. As the political mode of doing things - that is, voting, de bating, legislating, negotiating is made the ideal for all activity (such procedures being called democratic in the contemporary argot), the man who has politics as his profession can believe that his is the most meaningful of lives. My point is that meliorist in50 THE FREEMAN November tellectuals have shown politicians the way to enhance their prestige and increase their power. They have led them to believe that they can control the economy, increase purchasing power, rehabilitate cities, rescue farmers, promote learning and the arts, integrate the races, abolish poverty, pro duce plenty, develop undeveloped nations, remove fear and want, provide medical care, and give se curity to a whole people. Politi cians have not been slow to claim the credit for anything desirable that is accomplished. If the "na tional income" increases, it must surely be the result of political effort. If unemployment decreases, the party in power must have pro vided the jobs. The following pro nouncement by President Johnson is typical of such claims: We have come far in the past few years. Since January 1961 [the date of inauguration of John F. Kennedy, by which we are to understand that what has been done can be credited to the Democrats] our gross national product has risen 22 percent, indus trial production is up 25 percent, the unemployment rate is down 24 per cent, disposable personal income is up 18 percent, wages and salaries are up 19 percent, and corporate profits are up 45 percent. 7 7 Public Papers of the Presidents of the United States, Lyndon B. Johnson, 1963-64, I (Washington: Government Printing Office, 1965), 777.

Presidents have claimed credit for virtually everything now but the weather, and they are work ing on controlling that. There has been an attempt to give the electorate a sense of par ticipation in the heady experience of exercising power. The instru ment by which this is supposed to be accomplished is voting. Accord ing to the lore of our time, when a man votes, he is making the ul timate decisions, is causing the whole paraphernalia of govern ment to dance to his tune. What ever action government takes is his action; whatever good is ac complished is done by him; what ever power is exercised is his power. Through the mystique of the ballot box, the mighty are sup posed to be brought low and made to answer to the will of the voter. Voting is important; it can be used to hold politicians in check, to control, to some extent, the ex ercise of power, and to short-cir cuit the surge to power of govern ment agents. But voting does not work this way when it becomes an instrument in the gradual move ment toward socialism. The voter does not increase his power by voting for more government in tervention; he decreases it. It is an illusion that an increase in gov ernment power over the lives of the citizenry is an increase of the power of the individual voter. The 1966 THE PEN AND THE SWORD 51 man who votes for more govern ment intervention is voting for diminishing his control of his own affairs. It is a sorry swap to trade the very real control which a man may have over his life for the illu sory control this is supposed to give him over the lives of others.

He who does this is exchanging his heritage for a mess of pottage. He exalts the politician and de bases himself. A Vested Interest in Promoting Socialism Politicians have acquired a vested interest in moving the United States toward socialism. Not only does it provide them with prestige and power, but it helps them get elected to office. Politi cians run for office on the basis of benefits, favors, subsidies, exemp tions, grants, and so forth which they did or will provide for the electorate. Notice how this impels us toward more and morei govern mental activity, for the man who would continue to be elected should promise ever greater benefits to his constituency. Most men have long since forgotten how to run for office without buying votes with money to be taken directly from the taxpayers, or indirectly by way of inflation. There is a sense in which meliorist politicians may be de scribed as pragmatists, though not in the way we. have been led to be lieve. The workability or success of a plan or undertaking is rela tive to the goal for which it has been adopted. The stated goal of the various meliorist programs is the improvement of the lot of the people. If this had been the goal of the farm program, for instance, it has not "worked." Instead, farmers have left the farms in ever larger numbers; the marginal farmers were progressively im poverished and those with large holdings and considerable capital enriched. The generality of the population have paid for this by taxation and higher prices for farm products.

If, however, the objects of the farm program (and other such programs) were socialization and/ or political power, it has worked. More and more of the decisions about the utilization of farm land are politically ("socially") deter mined, and those who have sup ported the farm programs have quite often been elected and re elected to office. The same is true for many other interventionist programs. In short, the programs do "work" in moving Americ'a toward socialism and in maintain ing or increasing the political power of those who advance them. In this sense, they are pragmatic, and those who advocate them are pragma tists.

52 THE FREEMAN November The Pleasures of Power Those who provide the justifica tion for Leviathan have their re ward, too. A select few are able to move into the circle of the President himself. One intellec tual who did - Arthur M. Schles inger, Jr. -:.. has described the re wards dramatically: "One could not· deny a sense of New Frontier autointoxication ; one felt it one self. The pleasures of power, so long untasted, were now being happily devoured - the chauffeur driven limousines, the special tele phones, the top secret documents, the personal aides, .the meetings in the Cabinet Room, the calls from the President."s There are other rewards of a more tangible nature. Schlesinger wrote a best-selling book which was an account· of the Kennedy days when he was close to the President. It won a Pulitzer prize. Nor did the rewards end with the period of residence in the White House. Since leaving Washington, Schlesinger has "signed a contract for the $100,000 Albert Schweitz er chair in humanities at City University of New York."9 The rewards are not so great for the generality of intellectuals, of 8 A Thousand Days (Boston: Hough ton Mifflin, 1965 j, p. 213.

9 Geoffrey Gould, "College Profs Earn ing Better Pay Every Year," Pittsburgh Post-Gazette (July 4, 1966), sec. II, p. 32. course, but those who support Lev iathan are more apt to find their talents rewarded than those who do not. Yet the reality of power and privilege is based on illusion, too. It is an illusion that the wielding of the sword can produce prosper ity. The actions of Presidents Ken nedy and Johnson did not really increase the gross national prod uct by 22 per cent, or industrial production by 25 per cent, or re duce unemployment by 24 per cent, and so on. They could, of course, have used political power to inflate the currency to the extent that these statistics would be accurate in monetary terms, and that un employment could have been re duced because workers formerly priced out of the market could now be afforded. But any solid gains that occurred would have been the result of the efforts of those who actually produced the goods or hired the workers. If this were not true, we could all quit work and let Presidents provide for us by waving the magic wand.

Facing the Consequences The most profound illusion of all is that men can escape the con sequences of their acts. Jesus said that "all who take the sword will perish by the sword." There are different levels upon which Scrip ture should be interpreted, but 1966 THE PEN AND THE SWORD 53 this one seems to apply, too, to what actually happens in history. From 1865 to the present, four Presidents have been assassinated, and attempts have been made on the lives of others. In the twen tieth century, Presidents have been placed under heavier and heavier guard. They are now pre ceded by a host of government agents on their visits anywhere, agents who strive to make sure no dangerous characters shall get a vantage point from which to at tack the President. There is an obvious explanation for this in creasing danger of assassination. It is the increasing power of the President. To the extent that the President symbolizes the govern ment, to the extent that he is responsible for government action, to that same extent does. his posi tion become more perilous for him.

In short, the increasing power and prestige of his office exposes him the more to an assassin's bullet. When he becomes the wielder of the sword, he becomes subject to perishing by the sword. The nation that takes the sword may be expected to perish by it also. This can occur in numerous ways, or combinations of them. Most obviously, a nation may be defeated by some foreign power. But this is most apt to occur after death has already begun. It may perish by the corruption that attends reliance upon the loot brought in by wielding the sword. It may succumb by the route of the runaway inflation which fol lows prolonged political manipula tion of the money supply. It may be weakened gradually by the loss of incentive to produce that at tends the ever larger amounts taken from producers by taxation. It may fall finally as a result of the inflexibilities and rigidities in troduced by government interven tion which eventually make it im possible to adjust to changed con ditions. Any or all of these, or others unnamed, may cause a na tion to perish.

Fate of the Intellectuals? But let us return to the par ticular once more to exemplify the destination of those on the flight from reality. What of the intel lectuals who have engineered the journey? What is their fate? What are the ineluctable conse quences of their act? They have moved the pen into the orbit of the sword; in a sense, they, too, have taken the sword. The pen is only mightier than the sword so long as it is independent of the sword. Once it comes into the orbit of the sword, it comes under its sway. Those who push the pen must serve those who wield the sword. They must become the adj uncts of those who have political power, or 54 THE FREEMAN November give up their influence. It depends upon the circumstances whether they will literally perish or not. For those interested, there is an object lesson in what happened to com munist intellectuals in the Soviet Union. They either knuckled down to the political power or were si lenced. What is going on in the United States is much more sub tle today. More and more research and teaching are becoming depen dent upon government bounty.AI ready the path to preferment - to research grants, to positions in great universities, to book publi cation, and so forth - is virtually closed to those who will not pay their tribute to Caesar in the form of fulsome praise for Leviathan.

The pen is mightier than the sword when it is moved to express truth; it is but an adjunct of the sword when it can only be effec tively used in praise of the state. Free speech and press may never be forbidden in America, but the time approaches swiftly when there will be no organizations which are independent of govern ment support and whose leaders will dare to risk the consequences of biting the hand that feeds them by succoring those who dissent from official positions. When this occurs, tyranny may have come, but there will be no effective voices to say it nay. Those who take the sword perish by it. Recheck. the Premises In conclusion, it may be appro priate to say something about the return to reality. Much could be said under this heading. Since the flight occurred initially in the realm of ideas, it might. be apt to suggest the rethinking of prem ises. Much might be accomplished by a return in humility to the dis-, cipline of philosophy, by learning again both the limits and possi bilities of thought, by recovering the breadth of philosophy and sub stituting it for the narrowness and exorbitant claims of ideology. But most of us are not philosophers, and, if we were, there is not space here to explore the topic.

It will be better to conclude, in stead, with something that is rele vant to everyone. There is a clue to the return to reality in certain passages in the Bible which have to do with swords. The following is from Micah (RSV) : For out of Zion shall go forth the law, and the word of the Lord from Jerusalem. He shall judge between many peoples, and shall decide for strong nations afar off; and they shall beat their swords into plowshares, and their spears into pruning hooks; nation shall not lift up sword against nation, neither shall they learn war any more. That much is familiar and has 1966 THE PEN AND THE SWORD 55 served as texts and the basis of song on many occasions. What immediately follows may not be so well known: but they shall sit every man under his vine and under his fig tree, and none shall make them afraid .... To say that every man shall sit under his vine and under his fig tree, to couple this with plow shares -and pruning hooks, is a way of saying, I think, that every man should tend to his own plot of land. Or, we shall have peace when each man tends his own plot.

There is great wisdom for us in this. The flight from reality has taken us into a way of thinking which justifies every man trying to tend every other man's plot of land. The sword has been taken to force people to do what others think they should. Meddlesome ness, busybodiness, do-goodism have been linked with the sword to produce the turmoil of our times. There is guidance, too, as to the meaning of life in these passages. It is not in restless efforts to make the world over, not in political ad ventures to solve problems, not in the making of collective decisions about all that concerns us, not in embroilment in the affairs of others, not in living the lives of others, that we can find meaning and fulfillment. The restless quest for power is not assuaged by the acquisition of power; the appetite is only whetted for more. Trying to manage other people's affairs does not bring peace and concord; it only arouses resentment and leads to conflict. The meaning of life is not to be found in the use of force to translate ideas into ac tualities. It is not in the assertion of our wills over others that we grow and attain maturity.

Such meaning as there is to life on this earth is found in tending our own plot of ground, in tasting the fruits of our own labors, in developing our own skills and per ceptions, in sharing with others freely, in doing that which is ap propriate to our talents, in striv ing to fulfill our ideals for our selves, in the pleasure of a job well done, in the company of friends who have chosen us and whom we have chosen, in bringing up our own children, in short, in sitting under our own vine and fig tree. It is so, says the Prophet, "for the mouth of the Lord of hosts has spoken." Each of us makes his own return to reality when he con cludes with the poet: In His will is our peac'e. ~ -THE ENDPROTECTIVE lAXES AND WAGES WILLIAM GRAHAM SUMNER THE DISCUSSION of protectionism in the United States constantly turns upon questions of wages. The question has two forms. The em ployed argue that protective taxes will make their wages high. The employers argue that protection is necessary for them, because they have to pay high wages ....

Protective taxes aim to keep for eign products out of the country, in order to secure the home mar ket to the home producers. These taxes, therefore, make commodities dear, scarce, and hard to get. But the commodities in the country are what constitute the wages of la borers. If the amount of these commodities is rendered smaller than it might be, how can that raise wages, looking of course not at money wages, but at real wages, From an essay in the North American Review, January, 1883, pp. 270-76. 56 or the comfort attainable by the laborer? There is no real propriety in discussing wages apart from other elements in the comfort of the population. Protective taxes lessen the' available comfort In the reach of all members of society; they curtail the enjoyment which each citizen might get out of each hun dred dollars of income. If I dis cuss wages as a separate question, I do so only because the question has been so raised, not because I concede that the laborers have any separate interest which can be, or ought to be, discussed by itself. It is pure demagogism to represent it as one of the functions of the Government to make wages high, or in any way to pet the laboring class. The protective taxes press upon all, even upon the protected, who mutually plunder each other.

1966 PROTECTIVE TAXES AND WAGES 57 The lowering of real wages, by making commodities scarcer and dearer, is the way in which the wages-class are subjected to their share of the effects of protective taxes .... Why Wages Are High The fallacy in the notion that protective taxes make wages high is the same as the fallacy in the notion that trades-unionism makes wages high. Protection and trades unionism act on the same princi ple. Trades-unionism inculcates negligence, slackness, and shirk ing . It teaches the men not to take pains, not to try to excel, not to do good work, and the philosophy of it is that the men should not try to produce, but should try not to produce, on the theory that if things are made scarce and dear , and hard to get, that makes "work," and so makes wages high. If that philosophy were sound, all the classes which consume but pro duce nothing - like soldiers, pau pers, idle women, idle rich, gam blers, criminals, and convicts would be all the time raising wages, and they would lower wages if they should go to work, and not only consume but also produce. On the same philosophy, the Pitts burg rioters were sound econo mists when they let the city burn down, thinking that it would make work and raise wages.

The protectionist and the trades unionist both think that wages are increased when things are made scarce and hard to get. First they confuse wages with work, and then they confuse work with toil, and they think that they have increased wages, that is, good things to en joy, when they have only increased the toil by which things are ob tained.The truth is that wages are raised only by industry, thrift, temperance, prudence, and econ omy, producing abundance and in creasing capital, not by any dark and crafty devices for producing scarcity and bad work. We may now look at the other notion, - that high wages make protective taxes necessary. People who believe this must have a queer idea of the economic laws of so ciety. They must think that a blessing and a calamity are not to be distinguished from each other. The wages paid in any industry are only one of the conditions of production ....

Inefficient Management If a capitalist says that he can not pay the current rate of wages, the first answer that should be made to him is to tell him not to do it then, for he must be misap plying his capital in some way or other. The market rate of wages is set by the supply and demand of labor, and there must be some in58 THE FREEMAN November dustries which are able to win profits while paying that rate. But when our petitioners appear before committees of Congress to ask for protection, and allege that they need it because wages are high, when has anyone of them ever been subjected to an examina tion to learn whether he under stands the business he has en gaged in, or has an adequate cap ital, or has faithfully devoted him self to business, or has judiciously located his establishment, or has bought his raw materials wisely, or has adopted new machinery rap idly enough, and yet not too rap idly, or has organized his industry with good judgment, and so on in definitely? Surely these inquiries would be to the point, when a man pleads for power to tax his fellow citizens to make up the losses of his business.

Wages are one of the essential expenses of any business. If it cannot pay wages at the market rate, it is not a "business"; it is either a play or a swindle. If it is said, as it constantly is, that Amer ican industry in general should be protected because American wages are high, the decision is made to turn on a single point when there are a score of conditions of indus try which would need to be taken into account. What are the facts as regards cost and convenience of raw materials, facilities of transportation, cost and quality of ma chinery, climate as affecting indus try, character of the people for in dustry, intelligence, and sobriety, security of property and order un der the Government, excellence or otherwise of the tax system? These are the conditions of industry as between nations, not comparative rates of wages. . . . Who Pays the Tax? It is said that we cannot com pete with those who pay less wages than we. There are two classes of persons with whom one cannot compete,-his inferiors and his superiors. A physician might find that he could not compete with a laborer in digging a ditch, or with a great financier in man aging a hank. Could any tax en able him to compete with the hanker; that is, to compete with his superior? On the contrary, if he should complain that he could not compete with the laborer be cause he could not afford to em ploy his time in an occupation which is less remunerative than his own, everyone would ask him why then he desired to compete?

Now, could a tax enable him to compete with the laborer? Indeed, it could. It could intervene to de prive him of the services of the laborer, and force him to dig his own ditch, abandoning a profes sion in which he could earn ten 1966 PROTECTIVE TAXES AND WAGES 59 dollars a day to spend his time in an occupation worth only a dollar. This last is the only way in which protective taxes enable us to com pete. They put us in a position such that we abandon occupa.tions in which we might earn the high American rates, in order to do things which other people would do for us at half the price. Lower wages abroad, therefore, are not a reason for protective taxes, but just exa.ctly the con trary. Our high wages a.re a proof that we can better occupy our time. They are a proof that we have means of employing our cap ital and labor, which are highly remunerative; and to make them an argument for protection is like arguing that a rich man needs charity, or a strong man help. ~ Comparative Advantages SUPPOSE a physician earning $10,000 a year buys his vegetables from a local farmer whose income is around $3,000. Does that mean that the doctor's income will decline toward that of the farmer? On the contrary! Both are specialists. By having some one else raise his vegetables, the doctor can specialize and be come even more proficient in his job. If he were forced to raise his own vegetables and if the farmer were forced to doctor himself, neither would be as well off. Specialization and free trade im prove the conditions of all participants. This is as true for foreign trade as for domestic trade.

Tariffs encourage the production of some things in which the country is less efficient and discourage the production of other things in which the country has a comparative advantage. The total value of production, so far as consumers are concerned, is less than it would otherwise be - and this means that real wages are held down by reason of tariffs. So, rather than protect ing domestic wages generally, tariffs lower real wages in all countries affected. W. 'M. CURTISS, The Tariff Idea A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN Shedding Friendships JOHN Dos PASSOS is one of those persons who learned the hard way. But he learned. His book about his younger years, The Best Times (New American Library, $5.00), is a record of his travels and friendships up to the mid-nineteen thirties, and they were the "best" years only in the sense that the author was young and adventurous and the "times" were not yet sul lied by the worst of wars. From the standpoint of philosophical and political understanding they were not-good years at all, for during the whole long interwar period John Dos Passos was still under many illusions. He had to outgrow many places and friends in order to discover that freedom was right where he had left it as a boy, in the America of his father's time, which was before the lures of so cialism had captivated the genera tion that came of age around 1917.

The book begins with Dos Pas sos' effort to make his father's "figure stand up out of the shades." 60 Old John Dos Passos Senior comes ali ve because his son has letters to quote from in building up the portrait. Under the intensity of the prose one senses the love-hate attitude that governed young Jack's relations with his father. It must have been a most difficult childhood, for John Dos Pass os was born late in both his mother's and father's lives, and his parents, as Dos Passos delicately puts it, were not able to "regularize" their son's "civil status" (Le., legitima tize him by getting married) until he was in his teens. The sad thing about the parents' marriage, which followed a long love affair, was that Dos Passos' mother, who had looked forward to a few years of peaceful family life, succumbed to a mortal illness in which she had to be cared for like a child. When he was sixteen and living through the stale heat of a Washington, D.C., summer, Dos Passos was left alone for a period with his mother.

He had to do the marketing and 1966 SHEDDING FRIENDSHIPS 61 pay the household bills, and clean up after a drunken cook. In the earlier years of his youth Dos Pass os was tucked away in Eng lish schools before prevailing upon his father to let him come home to America, where he went to Choate and Harvard. A Stern Father The conditions of Dos Passos' childhood made him a curious but somewhat aloof spectator of life. He admired his father's individual istic character, but the old man was obviously a bit overpowering. The father was a Gold Democrat, a corporation lawyer, and a hater of Theodore Roosevelt. His fee for legal advice to the Havemeyer in terests on forming the "sugar trust" was reputedly the largest on record. Dos Pass os pictures himself as coming home from school and of fering "some ill-founded opinion." His father would forthwith irri tate the boy's "budding ego" by taking off his glasses and asking: "Is that remark the result of ex perience or observation?"

So the son fought a hidden duel with his father until the old man died. Years later Dos Passos came to appreciate his father for hav ing dared to be himself. Dos Pas sos Senior was actually a man of great foresight. "Suppose the Al lies do destroy German militarism?" he asked. His answer to his own question was that "another power or syndicate of nations stronger than the Germans will be born from the ashes of Prus sia." Probably John Dos Passos was luckier than he knew in having lived through a very special child hood. He read prodigiously in the long, lonely stretches. His sense of being "different" made him reflec tive. The periods he spent abroad gave him a taste for travel. And the recollections of his father's "eighteenth century" mind eventu ally drew Dos Passos back to the Jeffersonian years of the Ameri can Republic, with the result that he could reject the socialism of his twenties without too much spiritual travail.

Searching for a Cause It was a long time, however, be fore John Dos Passos was willing to admit· to himself that "politics in our day is more destructive than fifteenth century religion." He could only sense this on the occasions when the orthodox Left ists, following the "party line," tried to provoke him into making an unqualified declaration in favor of communism. As an ambulance driver in France Dos Passos was against "imperialist" war. But he couldn't follow the Frenchman Louis Aragon and become an out62 THE FREEMAN November and-out Marxist. Working with collectivist theater groups in New York City, Dos Passos couldn't quite bring himself to toe the line in his own plays. His novels, though sociological in their scope, were most vivid when individual istic heroes were on stage. Dos Passos couldn't even give himself to Bohemia. He stood a little apart from the roisterers of the Left Bank cafes. He went to the Near East, to Iran, to the Bedouin deserts, and to Soviet Russia, but, though he reveled in the colors, the sounds, and the scents of exotic places, he never quite "identified" with any of the movements he wrote about in his "painter's eye" prose. In Russia he was impressed by the ironists, such as the man who considered "Peter the Great, who brought order out of chaos, the first Bol shevik." Dos Passos admired and liked the Russian people, but when an actress friend asked "Are you with us or against us," he jumped on the Warsaw train in the steamy Moscow station without answer ing. And he says that when he crossed the Polish border-Poland was not communist then - "it was like being let out of jail."

Signs of Maturity Dos Passos' friendships with E. E. Cummings and Ernest Hemingway took different courses. He never broke with Cummings, whom he considered to be the "last of the great New Englanders." But Ernest Hemingway and Dos Passos began to have their differ ences at the time of the Spanish Civil War. True to his tempera .. ment, Dos Pass os sided with the anarchists against the Stalinist regulars who wanted to win in Spain only to turn the republic over to communism. Hemingway, less probing in his politics, did not fight the Stalinists. Speaking of the rift with Hem ingway, Dos Passos says that "when the meaning of political slogans turns topsy-turvy every few years, anyone who tries to keep a questioning mind, match ing each slogan with its real-life application, each label with the thing itself, has to put up with having old friends turn into un friends and even into enemies."

Maturity, to Dos Passos, meant the inevitable "shedding of friend ships." "In an age like ours," so he expands the point, "when politi cal creeds drive men to massacre and immolation, political opinions become a matter of life and death. Differences which, when men and women are still in their twenties, were the subject of cheerful and affectionate argument brew re crimination and bitterness when they reach their thirties." What Dos Pass os doesn't say is 1966 SHEDDING FRIENDSHIPS 63 that he kept on growing intellec tually where Hemingway did not. But we can say it for him. ~ ~ THE GENEROSITY OF AMER ICANS by Arnaud C. Marts (En glewood Cliffs, New Jersey: Pren tice-Hall, Inc., 1966. 240 pp., $5.00) Reviewed by Richard Christenson DEFENDERS of the welfare state often base their case on the as sumption that few Americans would be inclined to support the necessary educational and welfare needs of our nation, or would lack the means if they had the inclina tion; government, therefore, has had to step in. Mr. Marts, a pro fessional fund raiser, explodes this assumption. He shows that the helping hand has always been ex tended in America, that the gen erosity of individuals worked out solutions to all sorts of problems long before government inter vened. His historical research traces our tradition of volunta rism, for carrying out good works by personal giving and pri vate philanthropy.

Although many of his examples are lengthy and of only passing interest to the average reader, the author gives an intriguing ac count of how effective private phi lanthropy has been and is even now. The American people gave more than $11 billion last year to finance everything from local uni versities to national arts and sci ence projects; the generosity of Americans is beyond question. Mr. Marts shows that in contrast to Europe and Asia, where philan thropy is practiced by only a few, American generosi ty is wide spread. Last year over 40 million Americans, individuals and fam ilies representing all economic lev els, made contributions to various causes. This national character istic is not something new but was in such obvious contrast to Con tinental practice that Alexis de Tocqueville praised it in his writ ings over a century ago. How much would people give if the progressi ve income tax were abolished? This is an interesting question. An answer is suggested in the data provided by the author concerning the acceleration of pri vate giving in England during the reigns of King Henry VIII and Queen Elizabeth when the Tudor Charitable Laws were first en acted. It was from this beginning tha t the generous men and women of England started so many proj ects to help the underprivileged and poor of the nation that it makes our present war on poverty pale by comparison.

Private philanthropy satisfies something deep in the nature of the giver, Mr. Marts points out. "For some reasons, unseen and 64 THE FREEMAN November even not fully comprehended (like most spiritual motivations), many generous givers develop giving as a habit; a pleasing and satisfying refinement; a meaningful expres sion of their personality ... nu merous examples provide eloquent arguments for the critics and seem to show that if anything, giving tends to increase the capacity of individuals to share." Private philanthropy has also proved to be the most creative and imaginative way of introducing new solutions to social needs: "Private generosity for the public good does [the] pioneering." The late A. M. Schlesinger, Sr., writes: "In contrast to Europe, America has practically no misers and the consequence of the win ning of Independence was the abo lition of primogeniture and entail.

Harriet Martineau was among those who concluded that 'the eager pursuit of wealth does not necessarily indicate a love of wealth for its own sake.' The fact is, that for a people who recalled how hungry and ill-clad their an cestors had been through the cen turies in the Old World, the chance to make money was like the sun light at the end of a tunnel. It was the means of living a life of hu man dignity. In other words, for the majority of Americans it was a symbolism of idealism rather than materialism. Hence, this 'new man' had, an instinctive sympathy for the underdog, and even per sons of moderate wealth grate fully shared it with the less for tunate, helping to endow charities, schools, hospitals, and art galleries and providing the wherewithal to nourish movements for humani tarian reform which might other wise have died a-borning." But now government is deep into fields once the domain of pri vate philanthropy. It seems some what contradictory that we would go to so much effort to breathe life into something and get it started privately and then allow govern ment with its historic inefficiency to adopt and support the newborn creature. What would happen to day if the government's role were reduced, permitting people to keep the dollars now taxed away? In such an unhampered atmosphere of freedom the private sector could once again assume its responsi bility for generous giving on even a more massive scale than now.. ~ BOUND VOLUMES OF flJeFreemaD-J9GS Attractively sewn in a single volume with hard cover, the 12 issues from January through December, fully in dexed-768 pages, for handy reference to the latest literature on freedom.

Oolf /5.00 These bound volumes of THE FREEMAN match in appearance and otherwise continue the 12-volume series of Essays on Liberty containing selections from THE FREEMAN and other Foundation releases back to 1946. (A separate cumulative subject matter, author, and title index is available for the 12 volumes of Essays on Liberty. $1.00.) Bound volumes of THE FREEMAN for 1966 will be available shortly after the end of the year. ORDER YOUR BOUND VOLUMES NOW! THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, N. Y. 10533 Please send me: THE FREEMAN for 1965 $ 5.00 0 THE FREEMAN for 1965 and 1966 (The 1966 volume to be shipped when ready) $ 9.00 0 ESSAYS ON LIBERTY (Set of 12, with cumulative index) Cloth $30.00 0 Paper $20.00 0 o CHECK ENCLOSED 0 SEND INVOICE NAME _ STREET _ CITY _ STATE ZIP CODE. _ CIVIL DISOBEDIENCE • Whereas certain violent and unwarrantableproceedings have lately taken place tending to obstructthe operationof laws of the United States... which proceedings are sub versive of good order, contraryto the duty that every citizen owes to his countryand to the laws, and of a nature danger ous to the very being of a government;... the permanent interests and happiness of the people require that every legal and necessary step should be pursued as well to pre vent such violent and unwarrantableproceedingsas to bring to justice the infractors of the laws and secure obedience thereto.

GEORGE WASHINGTON Presidential Proclamation, September 15, 1792 Interest Rates Are Rising . Hans F. Sennholz 13 American Federalism: Origins George Charles Roche III 3 Fiat Money Inflation in France . Andrew Dickson White 23 57 53John Chamberlain DECEMBER 1966 Foreign Aid: An Instrument for Progress? Peter T. Bauer 25 The Coming Serfdom in India Sudha R. Shenoy 35 Welfare without the Welfare State. Yale Brozen 40 Books: Black and Conservative Index for 1966 . STATE _ tfTIGHT MONEY _II "hut it meUM to you". Send for your free copy of this timely and informative article by President Joe Crail. nd, Conservative Management Savings Accounts 5.39% 5.25% OED DAILY, your savings earn 5.39 % when one year at current rate of 5.25 %, paid semi-annually, effective July 1, 1966. Save-by-Mail pays AIR MAIL postage both ways COAST FEDERAL SAVINGS AND LOAN ASSOCIATION Department F2 , 9th &Hill Sts., Los Angeles, California 90014 D Please send me a FREE copy of "Tight Money"

D I enclose my check (or money order) for $ _ D Please open a Coast Federal Savings accountD Individual D Joint in the name(s) of NAME _ STREET ---------CITY I THE FREEMAN DECEMBER 1966 Vol. 16, No. 12 ~ Dr. George Roche may be a new comer to FEE's staff, but he discusses the origins of American Federalism as though he might have sat in the ses sions of the Founding Fathers themselves p. 3 ~ For a knowing commentary on the rising trend of prices generally, and interest rates particularly, see Dr. Hans Sennholz p. 13 }II" Nor can we go far wrong in these perilous times to carefully review once more the classic analysis of Fiat Money Inflation in France by Cornell's first president, Andrew Dickson White ... p. 23 ~ Dr. Peter Bauer, London scholar, offers a provocative analysis of the failures of intergovernmental foreign aid to promote the progress promised p. 25 ~ And a more recent graduate from the London School, now returned to her native India, lends credence to Dr.

Bauer's conclusions p. 35 ~ Professor Yale Brozen looks to the private practice of freedom and charity as a more hopeful path toward the pre tended goals of the welfare state . p.40 ", George Schuyler's autobiographical Black and Conservative seems to fit well into reviewer Chamberlain's way of thinking p. 53 ~ This year's Annual Index is spe cially constructed and expanded to tie the Freeman bound volumes in with the earlier Foundation series of Essays on Liberty, as explained on the inside back cover p. 57 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

DECEMBER 1966 LEONARD E. READ PAUL L. POIROT Vol. 16, No. 12 President, Foundation for Economic Education Manag'ing Edito1' THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit educational champion of private property, the free market, the profit and loss system, and limited government, founded in 1946, with offices at Irvington-on-Hudson, New York. Tel.: (914) 591 7230. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in vited in any amount-$5.00 to $10,000-as the means of maintaining and extending the Foundation's work. Copyright, 1966, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each.

Permission is hereby granted to anyone to reprint any article in whole or in part, providing customary credit is given, except "Foreign Aid: an Instrument for Progress?" and "Welfare without the Welfare State." Any current article will be supplied in reprint form if there are enough inquiries to justify the cost of the printing.

AMERICANFEDERALISM:ORIGINS GEORGE CHARLES ROCHE III A DISCIPLE of Confucius once asked the ancient Chinese sage what his first act would be should he become emperor. Confucius re plied that he would begin by fixing the meaning of words. What he was suggesting, of course, was that labels with consistent mean ing are essential for effective com munication. The label to be defined in this case is "federalism," more specifically, "American federal ism." In its narrower sense, federal ism refers to the division of au thority and function between and among the national government and the various state governments. But it has come to possess a wider meaning in American political his tory. The idea of constitutional limitations of power, of both horiDr. Roche, who has taught history and· philos ophy at the Colorado School of Mines, now is a member of the staff of the Foundation for Economic Education.

zontal and vertical divisions of power, of the representative na ture of republican institutions, and of a national government strong enough to perform certain neces sary tasks and yet not so· strong as to become a threat to liberty, is perhaps better epitomized in its unique American historical setting by the word federalism than by any other single term. Above all, federalism in its American context conveys something of our high re gard for regional, local, and indi vidual diversity, widely varied yet capable of. achieving a simultane ous national unity. Such concepts as republican gov ernment or limited, constitutional government have come to be re garded as implying only restric tion of power and seem to too many people to be entirely nega tive in character. The limitation of power in our republican, con4 THE FREEMAN December stitutional framework is vitally important, but such concepts may be more warmly received if they are approached not only in terms of what we can't do politically, but also in terms of what we can do politically. For these reasons, and with all due apology fQr expecting so much from the word, let us as sume this broadened meaning of the word federalism for purposes of this discussion.

In fact, American political forms are unique, partially be cause of the great opportunities which America has enjoyed on this continent and partially from what Daniel Boorstin has described as "a peculiar and unrepeatable com bination of historical circum stances."l To fail to consider these unique circumstances would be, to paraphrase Edmund Burke, a fail ure to consider our liberties as an inheritance. That inheritance is indeed the source of our liberty and we can ignore it only at great peril. This is precisely the failing of so many among us in this pres ent-minded, antitraditional age of the collective mentality. Americans are not given to polit ical abstraction. In the modern era since the French Revolution, the planners - Rousseau, Marx, and the rest - have increasingly 1 Daniel Boorstin, The Genius of Amer ican Politics (Chicago: University of Chicago Press, 1953), p. 1.

sought to remake society in their own image. In the face of this challenge, whether or not our pres ent-minded, antitraditional intel lectuals care to admit it, America has increasingly provided the mod ern world's best example not only of historical continuity but also of the benefits which stem from molding political institutions with one eye on the past. Again and again the world has learned to its sorrow that constitutions are easi ly written, but meaningless unless they are the product of a nation's historical experience. Reconciliatio..n of Freedom and Order a Continuing Problem Man's political problem remains forever the same: the reconcilia tion of freedom and order. The uniquely American solution to this tension between freedom and or der has been federalism, blending as it does these two contradictory elements, both so necessary for a creative society. Both the individ ual and his society profit when these creative forces are released by freedom and protected by or der ..This is another way of saying that man's creativity is enhanced by an equality of opportunity, an opportunity to be free to achieve and yet safe in his achievements.

The next problem of govern ment centers on how to achieve this equality of opportunity 1966 AMERICAN FEDERALISM: ORIGINS 5 through (or in spite of) our polit ical processes. Alexis de Tocque ville long ago saw clearly that there are only two ways of estab lishing political equality: "rights must be given to every citizen, or none at all· to anyone .... it is, therefore, very difficult to discover a medium between the sovereignty of all and the absolute power of one man .... The Anglo-Americans are the first nation who, having been exposed to this formidable alternative, have been happy enough to escape the dominion of absolute power. They have been allowed by their circumstances, their origin, their intelligence, and especially by their morals to estab lish and maintain the sovereignty of the people."2 Wha t, then, limi ts the sover eignty of the people? The Ameri can answer was a written constitu tion. The point of a constitution is to lay down fundamental princi ples limiting everyone, majorities as well as minorities, to playing the game by a fixed set of rules.

As F. A. Hayek has phrased it: "A group of men can form a so ciety capable of making laws be cause they already share common beliefs which make discussion and persuasion possible and to which the articulated rules must conform 2 Alexis de Tocqueville, Democ'~'acy in America (New York: Vintage Books, 1958), Vol. I, pp. 55-56. in order to be accepted as legiti mate."3 What are these rules by which Americans have traditionally chosen to play the game? What concepts did the Founding Fathers espouse? How have these concepts been applied throughout American history? These are the questions we must answer if we are to un derstand and apply the American tradition of federalism. The Roots of the American Political Tradition "A government of laws, not of men." Such was the popular slogan of the generation of Americans that produced the American Revo lution. By the second half of the eighteenth century, most American colonists were convinced that the men who ran the government should be limited by law in their exercise of power. One of the leaders of the North Carolina Reg ulators, writing shortly before the American Revolution, made the colonial feeling quite clear: "If we are all rogues, there must be Law, and all we want is to be Governed by Law, and not by the will of Officers, which to us is perfectly despotic and arbitrary."4 3 F. A. Hayek, The Constitution of Liberty (Chicago: University of Chicago Press, 1960), p. 18l.

4 Clinton Rossiter, The First American Revolution (New York: Harcourt, Brace and Co., 1953), p. 130.

6 THE FREEMAN December The two institutions through which the colonists hoped to achieve "a government of laws, not of men" were written constitu tions and standing law. Though the American doctrine of consti tutionalism owed a great deal to English precedents, the colonists had done much to broaden and ex tend the concept still further. A number of state constitutions were put into effect between 1776 and 1780 that clearly foreshadowed the Federal Constitution of 1787. At tempts at defining the specific area of governmental authority were already an old concept in America dating from the Mayflower Com pact and the Fundamental Orders of Connecticut, both already on the books fully 150 years before our Federal Constitution. Most of these numerous American efforts in constitution-making also usu ally included specific acknowledg ment of individual liberties and immunities, a concept that would eventually produce our Bill of Rights.

If Americans emphasized writ ten constitutions, they also empha sized standing law, usually drawn from the English Common Law. This legalistic heritage simultane ously emphasized two concepts: the traditional liberties of the English subject and a strong em phasis upon· the rights of prop erty. American colonial history is filled with the discussion and im plementation of these concepts. If Americans early displayed a strong interest in laws and insti tutions limiting the exercise of political authority, they also pio neered in the development of self sustaining institutions for local government. Since colonial govern ment was so local, it is natural that it varied widely from colony to colony and region to region. But with all the variations in form that were present within the colo nies, one fact remains clear: the colonists were to a very large ex tent running their own affairs.

As Charles M. Andrews, dean of American colonial historians, has concluded: "In the develop ment of American political ideas and social practices the influence of the popular assembly ... is the most potent single factor underly ing our American system of gov ernment."5 What impact did this local self-government have? In the words of Clinton Rossiter, "these institutions taught the colonists one more sturdy lesson in freedom from pomp and arbitrary power."6 Limited and Local Power The colonists, then, were achiev ing their "government of laws, not of men," first by strict legal limitation of governmental power 5 Ibid., p. 119. 6 Ibid., p. 124.

1966 AMERICAN FEDERALISM: ORIGINS 7 and second by keeping the exercise of that power close to home. As England made its mid-eighteenth century attempt to tighten control over the colonies, the mother coun try violated both the ideals of limited governmental authority and local self-government, by in creasing the arbitrary power of government while moving the ex ercise of that power further from the colonies. The colonists thought of themselves as good Englishmen, and many of them worked to main tain their political tradition while still remaining Englishmen. This is the basis of the federal system operating within the British em pire that Franklin advocated in his Albany Plan of Union in 1756. There need be no doubt of the vitality of the American tradition of federalism in colonial times. We need only compare the liberties of the individual and the strength of self-government in the English colonies of the seventeenth and eighteenth centuries with the cen tralization and arbitrary exercise of governmental power present at the same time in the French and Spanish colonies of the New World. Tocqueville grasped the es sence of the political heritage that gave strength and validity to the American experiment: "The gen eral principles which are the groundwork of modern constitu tions, principles which, in the seventeenth century, were imper fectly known in Europe and not completely triumphant even in Great Britain; were all recognized and established by the laws of New England: the intervention of the people in public affairs, the free voting of taxes, the responsibility of the agents of power, personal liberty, and trial by jury were all positively established without dis cussion. [Thus occurred] ... the germ and gradual development of that township independence which is the light and mainspring of American liberty at the present day. . . . In America . . . it may be said that the township was or ganized before the county, the county before the state, the state before the union."7 A Revolution Prevented When the British failed to see the colonial position, the Ameri can Revolution finally occurred.

Yet in a very real sense Burke was right when he described the Amer ican War for Independence as "a revolution not made, but pre vented." The radical change of the late eighteenth century was less in American self-government than in the Johnny-come-lately attempted British interference with that self-government. From the begin ning of the War for Independence the colonists presented a most pe7 Tocqueville, Vol. I, p. 41.

8 THE FREEMAN December culiar aspect for revolutionaries. They appealed to tradition, the common law, British custom, colo nial practice, and property rights; hardly a collection of radical ideals! The antitraditional, present mindedness of many modern schol ars has produced a view of the American Revolution that over looks the colonial American herit age of limited, constitutional gov ernment. Those who suggest that the American Revolution was only another egalitarian leveling proc ess similar to the French Revolu tion must overlook the middle class and aristocratic leadership of the American Revolution, its re spect for law and property rights, and its concern for maintaining a 150-year-old heritage of local self government. The attempt to make the Decla ration of Independence into a Dec laration of the Rights of Man amounts to little more than an at tempt to misread a bill of indict ment against the king, written in the language of British constitu tionalism, until it is twisted into some sort of manifesto for the overthrow of the old order. It was precisely the preservation of the old order for which the colonists were striving. One of the pamph leteers of the Revolution, James Otis, epitomized this colonial stance in his The Rights of the British Colonies (1764) when he advocated what might be called "revolution by due process of law."

The Declaration of Independence itself attacks usurpation and cen tralization of authority, calling it tyranny: "He has erected a mul titude of new offices and sent hither swarms of officers to harass our people and eat out their substance. He has combined with others to subject us to a jurisdiction foreign to our constitution and unacknowl edged by our laws." "Endowed by Their Creator" Even though the colonists were drawing on 150 years of historical experience in asserting their posi tion, they were also building upon that heritage to produce a very dif ferent sort of nation than the world had previously seen. This was the real American Revolution. For the first time in history, no authoritarian control would be tolera ted in this new political or der. "Men are endowed by their Creator with certain inalienable rights," the Declaration of Inde pendence announced to the world. If men are endowed "by their Creator" with these rights, it fol lows that God and not government is sovereign, and therefore that government must be without au thority to interfere with "certain inalienable rights," such as self government and sustenance; that 1966 AMERICAN FEDERALISM: ORIGINS 9 is, the right to freedom, and the right to property as a means of making that freedom meaningful.

What the Declaration of Independ ence outlined was made specific in the Constitution's Bill of Rights which placed restrictions not upon the citizen but upon the govern ment, limiting the role of govern mental power over the individual citizen in some 46 specific in stances. The interim between the Decla ration of Independence and the Constitution clearly foreshadowed the coming federal constitution in the development of state con stitutions and the various bills of rights attached to them. The Founding Fathers derived their principles of limiting government and protecting individual rights from a belief in natural law; that is, a belief that God had ordained a framework of individual dignity and responsibility that was to serve as the basis for all human law and as the root assumption behind a written constitution. Conforming Man's Laws to the Natural Order Professor Edward S. Corwin's The HHighe1' Law" Background 0/ A merican Constitutional Law has examined this basic American as sumption in considerable detail.

Such an assumption is quite dif ferent from the "consent of the governed" theories that motivated the French Revolution and its aftermath. The difference, quite simply, is that Americans were assuming certain fixed principles that limited anyone, majorities in cluded, in the exercise of their power. The Declaration of Inde pendence has spoken of "the Laws of Nature and of Nature's God" and of a "firm reliance on the pro tection of Divine Providence." A few years later, the Preamble to the new Constitution was to be gin, "This nation under God.... " Thus, the liberties of the individ ual were felt to be inseparable from a belief in an authority above man. Viewing America several decades later, Tocqueville agreed with the American experiment when he suggested that "liberty cannot be established without mo rality nor morality without faith."8 This deeply abiding faith in God as the ultimate source of hu man dignity presupposed that man was insufficient unto himself, that some abstract blueprint for a per fect society might ultimately prove disastrous even if advocated by a majority of men. So, unlike the documents of the ph'ilosophes and their French Revolution, the Dec laration of Independence and the Constitution were firmly grounded in specific historical instances and carefully avoided the vast egotism 8 Ibid., Vol. I, p. 12.

10 THE FREEMAN December always evidenced by men who would remake the world. The distinguished group of men who came together at Philadelphia in 1787 were up against the same old political problem: freedom and order. As James Wilson expressed it, "Bad governments are of two sorts - first, that which does too little; secondly, that which does too much; that which fails through weakness, and that which destroys through oppression."9 The Confederation period had shown the new union of states that a central government was necessary, that power was required to run a nation effectively. The Founding Fathers provided that power to establish a system which has survived repeated internal and external crises in the last 180 years. People are fond of pointing out how much America has changed. In terms of historical continuity, it is more remarkable how much America has remained the same through two centuries of exist ence in a world torn with violent political upheaval. We still have a President, a Congress, a Su preme Court, and Electoral Col lege, a network of separate state and local governments, and most of the forms passed on to us by 9 James Burnham, Congress and the American Tradition (Chicago: Henry Regnery Co., 1965), p. 64.

the Constitution. Surely, despite all our problems and despite the changes which have occurred with in our system, great strength must be embodied within such a lasting framework. The Diffusion of Power The key to that constitutional vitality, the answer to the dilemma that all power was to be distrusted and yet had to be exercised some where for the nation to survive, lies in the familiar concept of "di vided powers" and "checks and balances." This diffusion of power made our system a representative republic rather than a democracy. The Founding Fathers are, of course, scrupulously clear on this point, and a statement of such an assumption occurs repeatedly in both the debates of the Constitu tional Convention and the later public statements of the partici pants. Felix Morley has originated a valuable distinction to clarify the word "democracy." He divides the concept into political democracy and social democracy. Viewed in this light, it is clear that the in numerable roadblocks thrown up in the path of the majority by the Founding Fathers in their writing of the Federal Constitution and their creation of American fed eralism were not intended to set up a political democracy. Yet 1966 AMERICAN FEDERALISM: ORIGINS 11 America has traditionally been the land of great social mobility and individual opportunity, that is to say, a social democracy. Thus, the American tradition of federal ism has deliberately limited the exercise of political power, not to suppress individual liberty, but to enhance it. Put another way, the very real success story of America has hinged upon the limitation of political power rather than its ex ercise.

This nation has been consist ently hostile to monopoly power, whether social, religious, or politi cal. The Constitution outlawed titles of nobility (social monopoly) and an established church (reli gious monopoly), and made a par ticular point of outlawing exces sive centralization of political power, as for example in the Ninth and Tenth Amendments to the Constitution: Ninth: "The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people." Tenth: "The powers not delegated to· the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively or to the people." The American federal system was already quite well developed by the time of the Constitutional Convention. The thirteen colonies were separately established and by the time of the War for Inde pendence had developed widely differing political and social cus toms. Only a system of federalism that recognized and protected these diversities could hope to unite the various factions and units. But that unifying effort was only one of the reasons for the American federal system. As Felix Morley explains it: "But behind the determination to keep the rights of the several states inviolate, was the even deeper de termination to' protect the citizens of these states from centralized governmental oppression. That is why the Republic was established not only as a federation of semi sovereign states, but also as one of balanced authority in which it would be extremely difficult to es tablish a nationwide monopoly power of any kind."lo "Inefficiency" by Design On the whole, the system has worked. The tendency of one branch of government to gather all power unto itself has usually been slowed by the inertia of the other centers of power. Critics of the system call this inefficiency, but it is an inefficiency which has 10 Felix Morley, Freedom and Fede'fal iS1n (Chicago: Henry Regnery Co., 1959, Gateway ed.), p. 9.

12 THE FREEMAN December produced and preserved a greater productive capacity for the satis faction of human wants and a greater area of individual free dom than any other system in the history of the world. The key to this system of American federal ism has been the recognition that government is not the source of rights for the individual and that extension of governmental author ity is therefore a potential menace to human rights. To accept the modern statist position that the government is the source. and protector of human rights is ultimately to reduce the individual to the level of a mass man, simply because it removes all qualitative distinctions between and among individual citizens. When this happens, human per sonality and the institutions built upon widely differing human per sonalities are swept away in a nameless, faceless, pointless whirl. It is just such a tragedy that the American system of federalism was designed to prevent.

In fact, American federalism has gone a good deal further than the mere structure of federalism itself requires; for example, in the horizontal as well as vertical separation of political authority. The obvious advantage of federalism has rested in its ability to avoid dangers inherent in gov ernment by remote control. So long as local affairs are reserved to the greatest possible extent for the localities themselves and so long as the people are both inter ested in and capable of under standing and handling their own problems, then the philosopher's stone has indeed been discovered and a large measure of both free dom and order are possible. The weakness in federalism, its susceptibility to centralization in time of crisis, is also very much in evidence. Yet in the face of this weakness, American federalism has remained tremendously suc cessful. Again in the words of Felix Morley: "The reason lies in a simple paradox. By the adoption of arrangements strongly nega tive toward the power of govern ment, the Republic has so far per mitted and encouraged its citizens to act affirma tively in their own interest. Many Americans do not realize that when first attempted this political plan was extraordi nary .... " 11 One might add that all too many Americans still do not understand how truly extraordinary such a system actually is. ~ 11 Ibid., p. 1.

An article to follow next month will deal with the history of American Federalism.

HANS F. SENNHOLZ "INTEREST RAT~S are too high," complained J .iL"',~ewey Daane, a member of the ,/ Federal Reserve Board. But he atlded, high interest rates are "inevitable" if monetary policy is going to have to carryall the burden of fighting inflation. In agreement with remarks made by Senator Douglas, Mr. Daane pointed out that "interest rates are high historically." Some are at the highest levels in 40 years. But Senator Douglas, vice chairman of the Congressional Joint Economic Committee, which has recom mended guidelines for monetary policy and reform, warned that ris ing interest rates may precipitate a depression. To counter a foreign run on U.S. gold in 1931, the Senator said, the Federal Reserve twice raised interest rates "and deepened the depression. I cer tainly hope you don't again raise Dr. Sennholz heads the Department of Eco nomics at Grove City College, Pennsylvania.

interest rates to keep European hot money in the U.S." President Tru man was reported having expressed similar fears. These are some of the arguments that are filling the air in the po litical war over interest rates. What are the economic principles, if any, that affect and determine the rates? And what is the proper role of government in this impor tant aspect of economic activity? It is true, today's interest rates are higher than those of the recent past. Bankers acceptance rates are now quoted between 5% and 6 per cent, Federal funds rates between 51j2 and 6 per cent, call money lent to brokers on Stock Exchange collateral at 6 to 61h per cent, commercial paper 5'18 to 63/ 8 per cent, certificates of deposit 51A, to 51h per cent. The Treasury's sale of one-year bills recently brought investors an average yield of 5.844 per cent, the highest ever recorded 13 14 THE FREEMAN December on any Treasury bills. Corporate debentures now yield 5% to 6% per cent, first mortgages 6 to 7 per cent.

All these rates are gross market composite rates consisting of three different parts. An economist who analyzes interest rates invariably finds the following components: (1) originary or pure rate, (2) debtor's risk premium, (3) inflationary risk premium. All market rates, whether accept ance or mortgage rates, certificate of-deposit rates or debenture rates, have these components, which evidence different charac teristics and flow from different sources. Originary Rate The originary rate or basic component flows from a psycholog ical factor which economists call "time preference." Suppose you inherited $1,000 and were given the choice between payment now or 10 years from now. Which of the alternatives would you choose? Or suppose you have a choice be tween a certain amount of cash on hand or a one-year promissory note absolutely guaranteed by the Bankers' Trust. Which is .more valuable to you? In both cases you and everyone else would prefer the present good over the future good because we all discount the latter as against the former.

This difference in valuation is the source of interest. He who exchanges a present good for a future good commands a premium, called interest, because the present good is more valuable than the same good available or accessible only in the future. In the words of Bohm-Bawerk, the Austrian economist who first elaborated the causes of interest, "We system atically undervalue our future wants and also the means which serve to satisfy them. That is a sad fact-of that· there can be no doubt. Admittedly, it is so to a degree varying between extremely wide limits in particular peoples, or at different stages in life or in individual men and women. We en counter it in markedly fla.grant form in children and savages. In their eyes the most trifling pleas ure, provided only it can be seized at the moment, counterbalances the greatest and most lasting fu ture advantages. How many an Indian tribe, in its foolish eager ness for pleasure, has sold to the palefaces the land of its fathers, the reservoir of its means of sus tenance, in return for a few bar rels of 'firewater'! The same sort of action, unfortunately, can be observed in the very midst of our own highly civilized countries. The laborer who goes out on Saturday night and pours his week's wages down his gullet, only to spend the 1966 INTEREST RATES ARE RISING 15 remainder of the week starving with wife and child is, sad to say, the blood brother of those Indians!

But the same phenomenon in less er measure and in refined form is, I venture to say, something not unrepresented in the experience of any of us, not even men of the greatest prudence, the highest principles and the maturest de liberation."1 This observation reveals that spendthrifts, who prefer present enjoyment over future provision and income, display relatively high interest rates. But even the frugal saver who is making provisions for the future is discounting the future. Considerations of the brev ity and uncertainty of human life cause him to make a deduction from the value of future goods in ac cordance with the degree of un certainty. Only God who lives in eternity can ignore time prefer ence and interest. Differing Circumstances A related factor that gives rise to a difference in value between present and future goods is the difference between the relation of supply to demand as it exists at different points in time. If a per son suffers in the present from a real or assumed lack of certain 1 Capital and Interest, Vol. II. (South Holland, Illinois: Libertarian Press, 1959), pp. 268,269.

goods, he will place a higher value on immediately available goods than on the same quantity of fu ture goods. In cases of temporary distress or of the incidence of calamity, a farmer's crop failure or a bad fire, heavy expenses be cause of a death or sickness in the family, or the loss of employment, we all will place a lower value on future dollars than on ready cash which will keep us out of the worst of troubles. This particular psychological factor explains why prosperous in dividuals generally manifest lower interest rates than people in want and poverty. Poor people generally display a greater willingness to borrow money for present con sumption, to purchase wanted goods "on installment," than the thrifty individual who refuses to burden his future with present consumption. It also explains why American interest rates tend to be much lower than the rates in other coun tries, especially in the undeveloped areas of the world. Where people are dying from want and starva tion, as in Asia and Africa, pres ent consumers goods are selling at a great premium over future goods, saving for the future is painfully difficult, and little capital is formed. If their central banks, or sometimes even commercial banks, nevertheless post rates in 16 THE FREEMAN December line with American and European rates, they are deceiving the pub lic. At the present the central bank of India is quoting 5 per cent, Burma 4 per cent, Ceylon 4 per cent, Tunisia 4 per cent, Egypt 5 per cent, EI Salvador 4 per cent, Honduras 3 per cent, and so on.

But the going rates of time pref erence in these poor countries probably lie between 20 and 50 per cent, which makes the stated rates fictitious and meaningless. No capital other than V.S. foreign aid, which the beneficiary govern ments usually appropriate to them selves, can possibly be offered at posted rates so far below the gen eral time preference rates. Debtor's Risk Premium Another component part of the gross market rate quoted in credit transactions flows from the risks involved in every loan. In every act of lending there is an element of entrepreneurial venture. A cred it transaction is always an entre preneurial speculation which can possibly result in failure. The lender may lose a part or the total amount lent. This is why every interest stipulated and paid in loans includes not only originary interest but also a risk premium which is entrepreneurial profit. There is a broad structure of interest rates for loans of different types and of varying maturities.

V.S. government securities usually yield the lowest return because they are believed to carry the lowest risk to the lender. The high degree of safety and marketability and the short maturity make the 90-day Treasury Bill desirable as a reserve for banks and for tem porary employment of surplus funds by corporations. Federal funds probably rank next in the degree of safety. Broadly defined, they are sight claims on the Fed eral Reserve Banks consisting of balances maintained with the Re serve Banks by member banks. Bankers acceptances also enj oy a high degree of safety, and con sequently carry a low entrepre neurial risk premium in their gross market rates of interest. They are drafts drawn by individ uals or business firms on a bank which "accepts" the drafts and thereby becomes the princi pal debtor. Also cOnlmercial paper, which consists of generally un secured one-name promissory notes of well-known business concerns with strong credit ratings, enjoys a similar reputation of safety and marketability.

And finally, near the bottom of the list of loans of diff'erent types and of varying maturities, entail ing the greatest entrepreneurial risk and potential profit or loss, are various consumer loans to debtors without assets or known 1966 INTEREST RATES ARE RISING 17 credit ratings. This is why such dQbtOl'g muy DUY gl'Ogg intQrQgt rates of 12 per cent or more on installment loans for the purchase of new automobiles, television sets, refrigerators, and the like. In every loan there is anele ment of entrepreneurial venture which acts upon the gross market rate of interest. The differences in the degree of loan risk explain not only the broad structure of interest rates in the United States, I)ut also the much higher rates that prevail abroad. In addition to the higher originary rates men tioned above, the risk in other countries with less favorable busi ness climates greatly exceeds ours.

Where business honesty is rare, or private property is in constant jeopardy, where socialistic gov ernments seize and confiscate pri vate wealth or freeze it in blocked accounts, the entrepreneurial risk is very great and gross rates of interest are very high. This is why few American money lenders would accommoda te a borrower in China, Russia, Cuba, Egypt, India, or the Congo at a loan rate of even 50 per cent. Inflationary Risk. Premium In recent decades the gross mar ket rate of interest has acquired yet another component: an infla tionary risk premium. Professor Misescalls it "the price premium" (Human Action, p. 538 et seq.). Federal Reserve Governor Daane unwittingly referred to this pre mi urn, which has been rising steadily in recent decades, when he observed that "interest rates are high historically." Whenever the monetary authori ties resort to inflation and credit expansion and consequently goods prices start to rise, the gross rate of interest tends to adj ust to the monetary depreciation. That is to say, whoever expects a rise in prices is ready to allow a higher compensatory gross rate than he who expects no increase in prices.

On the other hand, the lender who expects inflation will grant no loan unless he is compensated for the loss in the purchasing power of his capital. The expectation of ris ing prices thus makes the gross rate of interest rise, while an ex pectation of falling prices would make it drop. The inflation pre mium comes into existence when many people begin to buy in order to take advantage of the inflation ary trend. The rate of premium is deter mined by the expected rate of monetary depreciation. If this rate is assumed to be 2 per cent, the gross market rate of interest will rise by 2 per cent. If prices are expected to double because o£ monetary depreciation, the infla tionary risk premium will amount 18 THE FREEMAN December to 100 per cent, and the gross market rate oi intere~t wi\\ ~()ar even higher. Government Intervention This characteristic of the price premium makes the gross rate of interest highly volatile and er ratic, which has given rise to con siderable confusion. Some writers on economics even deny the va lidity of any logical interdepend ence, believing that the interest rate directly springs from govern ment policies and manipulations.

Still others blame bankers and money lenders for any upward move of the market rate. Serious students of economics are convinced that the chief rea son for the upward surge of American interest rates in recent years has been the rampant 1961 1966 inflation which caused most prices to rise and the price pre mium to emerge. Central bank credit was expanded from $29.1 billion on December 31, 1960, to $43.9 billion at the end of 1965. At the present (September 5) it stands at $45.2 billion. Except for the World War II inflation, this has been the most phenomenal ex pansion of our currency since the Civil War. Consequently, goods prices have been rising sharply. The consumer price index has been hitting high after high in practically every month. Managed Currency ~tab\e m\)l\~taT~ e~l\~\\\~\\% ~t~ of the ar~a.tQ~d: il'nnori-.n~~.n ~....... +'l.-.c~ steady development of business and banking. When currency and credit begin to fluctuate, an ele ment of uncertainty is injected in to both domestic and international business with disruptive effects on all phases of economic life. The erratic movements of the gross market rates of interest create a great degree of uncertainty and often signal the coming of a busi ness recession.

Managed currency aims at in fluencing business conditions by means of the monetary powers of the Federal government. Money and credit become instruments for execu ting economic, fiscal, and so cial policies of the government, which usually aim at creating and prolonging a feverish boom. The monetary policies of the Great So ciety Administration were very successful in kindling a long and boiling boom through accelerated currency and credit expansion. The price we all must pay now for this popular policy is monetary depreciation and rising interest rates. The discount rate is one of the instruments of currency manage ment. It is the rate of interest charged by the central bank - the Federal Reserve System - on loans to member banks. At the present 1966 INTEREST RATES ARE RISING 19 this rate stands at 4.5 per cent on advances secured by government obligations and discounts of, and advances secured by, eligible paper.

Realistic Rates, or Not? It makes no sense to speak of "high" or "low" discount rates. We can conceive only of rates that are below the market rate, or con cur with this rate, or are above the rate established by the capital market. If the Federal Reserve sets its discount rate below the unhampered market rate the de mand for its accommodation will rise, which will cause the Federal Reserve to inflate its volume of discounts and advances. That is to say, if the gross market rate stands at 5 per cent and the· Fed eral Reserve discount rate at 41j2 per cent, the latter will be infla tionary as it induces member banks to borrow newly created central bank funds. If, in a run away inflation, the gross market rate of interest should rise, to let us say 100 per cent, any discount rate below 100 will be inflationary. During the 1923 runaway infla tion of the German Mark the Reichsbank charged 95 per cent and yet rapidly inflated the Ger man currency through its discount instrument.

If the central bank establishes a discount rate that concurs with the market rate, no demand for its funds can possibly develop as the market funds offered will equal the· market demand. In fact, such a discount rate forces the central bank into inactivity, which may conflict with its avowed goal of currency management and boom policy. If, finally, the central bank should set a discount rate that lies above the market rate, the situation will be similar to the one just described. But in case the member banks were indebted to the central bank because of prior discount expansion, a reflux of funds to the central bank will de velop, which is tantamount to de flation. After long periods of in flation central banks have occa sionally conducted deflationary policies through discount rates that lay above the market rates. There is no indication that the 41j2 per cent discount rate pres ently in effect lies above the mar ket rate. In fact, the volume of Federal Reserve discounts and ad vances to member banks swelled from $490 million at the end of 1965 to $719 million at the end of August, 1966. This expansion of Federal Reserve credit through the discount instrument proves the 4112 per cent discount rate to be inflationary. Although it is ad mittedly higher than at any time during the last 35 years, it nev20 THE FREEMAN December ertheless lies below the market rate.

Moreover, the present discount rate is probably much more infla tionary than the modest expansion of Federal Reserve discounts seems to indicate. Instead of rais ing its rate to the market equi librium rate, e.g., 6 or 7 per cent 'which would .be very unpopular and conducive to political reper cussions, the Federal Reserve Sys tem now relies on "moral suasion" to manage the credit demand. That is to say, the central bank dis count rate has lost its former significance to "moral suasion" which constitutes "qualitative" credit control. Our monetary au thorities prefer an inflationary discount rate; but when credit de mand swells to embarrassing pro portions, they regulate and allo cate their own inflationary funds through "moral suasion," that is, distribute them to favored bor rowers. In the words of William McChesney Martin, Jr., Chairman of the Board of Governors of the Federal Reserve System: "As a tool of credit regulation, moral suasion in its narrowest meaning can be taken to refer to purpose ful influence on credit extensions by the banking and monetary au thorities through oral or written statements, appeals, or warnings to all or special groups of lenders.

Generally speaking, such influence is exercised through policy state- ~ ments released through the press >- and other publications, corres pondence, speeches, and testimony before Congressional Committees. Moral suasion, however, can also be said to embrace what is some times called direct action and di rect contacts with individual banks or other financial institutions."2 The "Federal Funds" Rate Because of the discount rate's loss of significance, we now look on the Federal funds rate as a re vealing indicator of actual mone tary policy. The term "Federal funds" refers to the amount of re serve balances the individual mem ber banks have in excess of legal requirements and are willing to lend to banks deficient in reserves. Deals in Federal funds are day-to day loans between banks made through the transfer of reserve balances on the books of the Fed eral Reserve banks. The Federal funds rate is the rate paid by banks for the use of such reserves.

It is published daily by such news papers as the Wall Street Journal under the heading "Money Rates." In recent weeks this Federal funds rate has fluctuated wildly between 1 and 6 3A, per cent, indi2 Marcus Nadler, Sipa Heller, and Samuel S. Shipman, The Money Market (New York: The Ronald Press Co., 1955), p. 166.

1966 INTEREST RATES ARE RISING 21 cating a nervous and erratic mone tary policy. But mostly the rate has hovered around 6 per cent, pointing at a money market similar to that of 1929, prior to the in famous stock market crash. Interest Rates in Boom and Bust We need not here emphasize that the rapid inflation of money and credit during the last six years has initiated the trade cycle with all its phases from boom to bust. We have enjoyed a long and pleasant boom. In the terminology of our central planners, the an nual rate of gross national prod uct gained 10 to 20 billion dollars every quarter. The increase is ex pected to bring GNP soon to an an nual rate of more than $700 bil lion. This gain, according to the Commerce Department, indicates a business expansion which in its sixth year "has already become the longest expansion of the post war period." A mere glance at some mone tary reports immediately reveals the secret of the Great Society boom. Total commercial bank credit (loans and investments) has risen at an 11.5 per cent annual rate. Loans have risen at a 17.3 per cent rate. Since the beginning of the Kennedy-Johnson era, the American money supply plus time deposits has risen 8.8 per cent an nually, and the supply of Federal Reserve currency approximately 10 per cent annually. It is obvious that the boom was built on infla tion and credit expansion.

The boom causes economic mal investments and maladjustments. The money and credit expansion artificially lowers interest rates, falsely indicating growing sup plies of savings and genuine capi tal. This falsification of interest rates causes many a businessman to embark upon expansion and modernization projects. The boom is born from illusion and lives on more illusion through ever-in creasing supplies of money and credit. When goods prices begin to rise on account of this inflation, the gross market rate of interest must adjust upwards to allow for the price premium. But in addi tion, the feverish boom activity at rising prices and costs augments the demand for working capital of nearly every enterprise. Interest rates soar unless the central bank feeds the boom with ever larger injections of money and credit. In this case the boom accelerates, goods prices soar, and the price premium in the gross market rate of interest continues to climb.

If the currency is not to be destroyed completely, the inflation must come to an end. But when the monetary authorities finally refrain from further currency ex pansion, the readjustment, Le., re22 THE FREEMAN December cession, necessarily sets in. Also, in this case, interest rates ascend because of spreading uncertainty and fear. In periods of crisis and crash the gross market rate may no longer embody an inflationary risk premium, but usually is mag nified by the entrepreneurial com ponent here called "debtor's risk premium." Only when the econ omy has completed its readjust ment to market data, and the disastrous effects of previous in flation have been alleviated through new capital formation, does the gross market rate of interest re turn to "normal." Other Controls the Government May Try It seems improbable that pres ent monetary authorities would deliberately invite readjustment or recession rather than return to full-speed inflation. Without infla tion, the Great Society would im mediately sink into deep depres sion under the growing burden of government. It is true, the present rate of inflation of approximately 10 per cent annual currency and credit expansion may not suffice to sustain a boiling boom, which may cause it to falter occasionally. But accelerated inflation might restore it again temporarily. Of course, if the Great Society Administration should decide to repeat the dreadful blunders of the Roosevelt New Deal, if it shouldc()fitinually raise business taxes and deliver Ameri can business into the lethal grip of hungry labor unions, anything may happen.

Accelerated inflation may be ac companied by new government controls that aim at fighting the inevitable inflation symptoms. Be sides a "price stop" one might ex pect various credit controls de signed to prevent the flow of infla tion funds to certain individuals and direct it at others, especially the government and its favored groups. Toward this end the Fed eral government may resort to the following credit control instru ments: (1) further restrictions of security loans, (2) further in creases in margin requirements, (3) suspension of the borrowing privilege of individual banks from their respective Reserve banks, (4) further limitation of eligible paper, (5) stringent control of consumer credit, (6) control of real estate construction credit, and (7) more moral suasion. Under such controls the interest rates, which are manifestations of the market order, are replaced by official credit allocation and rationing. Of course, the interest phenomenon, which flows from the very nature of man, cannot be suppressed. ~ Editor's Note: The course of current financial affairs in the United States, as in most of the world in 1966, calls for reviewing once again Andrew Dickson White's classic analysis of fiat money inflation in France at the time of the French Revolution.

The noted historian and diplomat was serving as the founder and first president of Cornell University when he first delivered the paper as a lec ture in 1876. He revised and en larged it in 1912. In an introduction to a 1959 edi tion of White's essay, Henry Hazlitt notes that "what chiefly strikes to day's reader is the astonishing simi larity of the arguments put forward by our own contemporary inflation ists to those of the infla tionists of eighteenth-century France. Not less striking, of course, is the similarity in the actual consequences of paper money inflation in revolutionary France and inflation everywhere in the modern world .... "But just as the French of 1790 had failed to learn the lessons of the inflation of seventy years before, in John Law's time, so the present-day wor ld has failed to learn the lesson of the assigna ts." The following excerpts from Fiat Money Inflation in France are but samplings. The full story is avail able in the 124-page booklet from the Foundation for Economic Education, Irvington-on-Hudson, New York, 10533. $1.25 paper; $2.00 cloth.

23 FIAT MONEY INFLATION IN FRANCE ANDREW DICKSON WHITE WHENEVER any nation intrusts to its legislators the issue of a currency not based on the idea of redemption in standard coin rec ognized in the commerce of civil ized nations, it intrusts to them the power to raise or depress the value of every article in the pos session of every citizen .... The question will naturally be asked: On whom did this vast de preciation mainly fall at last? When this currency had sunk to about one three-hundredth part of its nominal value and, after that, to nothing, in whose hands was the bulk of it? The answer is sim ple. I shall give it in the exact words of that thoughtful historian from whom I have already quoted: "Before the end of the year 1795, the paper money was almost exclu sively in the hands of the working classes, employees and men of small means, whose property was not large enough to invest in stores 24 THE FREEMAN Decembe1' of goods or national lands. Finan ciers and men of large means were shrewd enough to put as much of their property as possible into ob jects of permanent value. The working classes had no such fore sight or skill or means. On them finally came the great crushing weight of the loss. After the first collapse came up the cries of the starving. Roads and bridges were neglected; many manufactures were given up in utter helpless ness." To continue, in the words of the historian already cited: "None felt any confidence in the future in any respect; few dared to make a business investment for any length of time, and it was ac counted a folly to curtail the pleas ures of the moment, to accumulate or save for so uncertain a future."

(Von Sybel, History of the F1'ench Revolution, vol. iv, pp. 222-338) .... Just as dependent on the law of cause and effect was the moral de velopment.Out of the inflation of prices grew a speculating class; and, in the complete uncertainty as to the future, all business be came a game of chance, and all businessmen, gamblers. In city centers came a quick growth of stockjobbers and speculators; and these set a debasing fashion in business which spread to the re motest parts of the country. In stead of satisfaction with legiti mate profits, came a passion for in,/ ordinate gains. Then, too, as values became more and more un certain, there was no longer any motive for care or economy, but every motive for immediate ex penditure and present enjoyment. So came upon the nation the oblit eration of th1'ift. In this mania for yielding to present enjoyment rather than providing for future comfort were the seeds of new growths of wretchedness: luxury, senseless and extravagant, set in.

This, too, spread as a fashion. To feed it, there came cheatery in the nation at large and corruption among officials and persons hold ing trusts. While men set such fashions in private and official business, women set fashions of extravagance in dress and living that added to the incentives to cor ruption .... Thus was the history of France logically developed in obedience to natural laws; such has, to a grea ter or less degree, always been the result of irredeemable paper, created according to the whim or interest of legislative assemblies rather than based upon standards of value permanent in their nature and agreed upon throughout the entire world. Such, we may fairly expect, will always be the result of them until the fiat of the Al mighty shall evolve laws in the universe radically different from those which at present obtain. ~ FoR.eiCN AiD AN INSTRUMENT FOR PETER T. BAUER PROGRESS?

FOREIGN AID is clearly not a neces sary condition of economic devel opment. This fact is obvious from the history of the developed coun tries, all of which began poor and have invariably progressed with out government-to-government aid. It is clear also from the his tory of many underdeveloped coun tries - Hong Kong, Japan, Malaya - which have advanced in recent decades without foreign aid. N or is foreign aid a sufficient condition of economic advance or even a generally effective force in its promotion. Indeed, its failure to advance living standards in poor countries after more than a decade Peter T. Bauer is Professor of Economics (with special reference to Underdeveloped Countries and Economic Development) in the University of London at the London School of Economics. This article is condensed and reprinted by permission from Two Views on Aid to De veloping Countries, by Barbara Ward and Professor Bauer, published as Occasional Paper 9 by The Institute of Economic Affairs, Ltd., Eaton House, 66AEaton Square, Lon don SW1, 1966 (Seven shillings and six pence) .

of its operation is recognized in current discussions which empha size the continued low living stand ards in the recipient countries and insist on the need for indefinite continuation of aid at present or higher levels. India is perhaps the most fa miliar example. Thirteen years after the beginning of Western aid and the inception of the five year plans, the country experienced in 1964-65 the most acute of its recurrent, almost annual, food and foreign exchange crises. For a long time advocates of foreign aid to India, Professor Walt W. Ros tow among many others, insisted that the turning point was just around the corner, and that after only an additional limited injec tion of aid the country would reach "self-sustaining growth" -to use the popular, though largely meaningless, catch phrase. For years now India has been depend26 THE FREEMAN December ent on large-scale foreign aid and gifts of food, without which there would have been mass starvation in 1964-65. External dependence has now come to be taken for granted. Algeria, Burma, Ceylon, Indonesia, and the United Arab Re public are among other countries with acute domestic economic dif ficulties after prolonged foreign aid.

Analogy with Marshall Aid Marshall aid to Western Europe is often instanced in support of the potential value of foreign aid to poor countries. Its experience suggests the exact reverse. The economies of Western Europe had to be restored while those of pres ent recipients have to be developed. Europe after 1945 was demon strably short of capital resources, especially stocks of food and raw materials, but not in the necessary human resources and market op portunities. Its peoples had the attitudes, motivations, and institu tions favorable to development, as was clear from the performance of Western Europe for centuries be fore the Second World War. This distinction explains the rapid re turn of prosperity to Western Eu rope (in spite of the inflow of millions of refugees into West Germany and the continued dis mantling of plants for reparations superimposed on wartime destruction), and the termination of the Marshall aid program in four years. Almost all the aid repre sented the cost of food and raw materials and was essentially an emergency program. The contrast with the economic plight of India, and of many other recipients of aid after a much longer period, is clear.

The difference in effectiveness between Marshall aid to Western Europe and foreign aid to poor countries-is also recognized by the widely-held assumption that aid to poor countries must be continued for many years to come. The large-scale expenditure by the United States government on the surviving Navajo Indian popu lation (a large group with a terri tory of its own) may appear more relevant to the assessment of for eign aid than is the Marshall plan. Very large sums, amounting to thousands of dollars a head, have been spent in an unsuccessful at tempt, extending over decades, to improve the material position of these Indians. This experience re inforces the conclusion suggested by more than a decade of foreign aid to poor countries: foreign aid is not a sufficient condition of de velopment, and is indeed unlikely to promote it substantially. If a poor country has failed to develop without aid, its provision alone is unlikely to lead to development.

1966 FOREIGN AID: AN INSTRUMENT FOR PROGRESS? 27 Poverty and Pauperization The flow of sustained indefinite aid implies an obvious. and yet widely ignored danger-the pau perization of the recipients. A pauper is one who relies on un earned public assistance, and "pau perization" accordingly denotes the promotion and acceptance of the idea that unearned doles are a main ingredient in the livelihood of nations. This danger of foreign aid is reinforced by the practice of linking it to the balance-of-pay ments difficulties of the recipients. Foreign aid and its relation to these payments crises clearly un dermine the status and prestige of the self-reliance required for ma terial progress. This danger of pauperization which derives from the advocacy and flow of aid is enhanced by the prevalence in many underdevel oped countries of certain attitudes and customs, notably the recog nized status of beggary and the absence of social stigma in the ac ceptance of indiscriminate charity which is conspicuous in South Asia. Indeed by now the pauperi zation of some major recipients of aid is a reality rather than a dan ger. The recent economic history of India can be summed up as pro gression from poverty to pauper ism.

The likelihood of the pauperiza tion of the recipients is increased when the gifts are indiscriminate or unconditional on efforts by the recipients to improve their posi tion. This applies to the operation of foreign aid. The advocates, ad ministrators, and recipients of aid insist that it should be given with out strings on the policies of the governments or the economic· con duct of the population. The only significant exceptions are the pref erential treatment· of countries in balance of payments difficulties or governments engaged in compre hensive development planning. As I shall argue, these conditions will not improve the prospects of re cipients becoming independent of external assistance. External Grants and the Growth of Resources The contrasting experience of the rapid success of Marshall aid and the ineffectiveness of pro longed aid to poor countries is ul timately related to differences be tween the impact of resources pro vided in the form of aid and that of resources produced locally or obtained in exchange for the cur rent or expected proceeds of local production. When resources are both generated and used locally, the required conditions for further economic development are likely to be present in the form of suitable .

human qualities, social institu tions, and economic opportunities.

28 THE FREEMAN December Building up resources (in which formal education mayor may not playa part) both requires and ad vances social and economic proc esses that serve to develop quali ties, attitudes, arrangements, and institutions, the presence of which promotes the effective use of the resources generated. When, how ever, the increase in the resources takes the form of the inflow of free or subsidized aid from abroad, the essential process of generating them is lost. Here, as in many other spheres of human life, time, experience, and perhaps other qualifications and requirements of achieve ment, cannot be bought. A social process cannot be telescoped without affecting both its nature and the outcome of the process. And we are not discussing ma chines, pieces of equipment, but human society or, more often, collections of societies. Develop ment is indisputably a social process requiring much more than the provision of money from abroad.

The Impact 01 Aid When foreign aid is given by one country to another, it is re ceived not by the people, but by the government: it does not go to individuals or firms in the pri vate sector, but to the central government. This necessarily increases the weight of the govern ment in the economy, which in turn must increase the concen tration of power, even if the re cipient government does not in tend this result. And if, as often happens, the government does wish to extend its power, the in crease in its resources helps it to do so, chiefly but not only by ex tending the public sector and by enabling the government to con trol the economy more closely. These effects are enhanced by the influential support or even pressure in the donor countries for comprehensive development planning and compulsory saving by the recipient countries, i.e., for government determination of the direction of economic activity outside subsistence agriculture and for special taxation to finance government expenditure. These policies have come to be regarded in the donor countries as a condi tion of economic development in poor countries, and their adoption by recipient countries is accord ingly considered as an earnest of their intention to promote it. This belief is unfounded. The historical evidence both of developed coun tries and of underdeveloped coun tries suggests more nearly the re verse. Development planning was not used in the early history of the now developed countries of the West. Nor was it employed in 1966 FOREIGN AID: AN INSTRUMENT FOR PROGRESS? 29 the many underdeveloped coun tries which progressed rapidly in recent decades, such as Japan, Hong Kong, Malaya, Thailand, and a number of African and Latin American countries. Only in the Soviet economies is it an essential element of economic or ganization, and the texture of these societies reflects its perva sive effects.

However, comprehensive devel opment planning has been specified as a criterion or even as a condi tion for the receipt of aid by some of the most influential advocates and administrators of American aid, including Professors Max F. Millikan, Walt W. Rostow, and John P. Lewis. It was also speci fied as a condition of aid in Presi dent Kennedy's special message on this subject in 1961. In various aid programs, including those of American aid to India and Turkey, the flow of aid is closely linked to comprehensive development plan ning. Moreover, the amount of aid is often geared to the shortfall of re sources required for the plan, par ticularly as reflected in the bal ance-of-payments difficulties of the country. This criterion not only encourages, or even forces, the governments to engage in com prehensive development planning but also encourages them to make their plans as ambitious as possible. The governments are thus induced to pursue, or at least not discouraged from pursuing, an in flationary policy which eventually brings aboutbalance-of-payments difficulties (under the prevailing system of fixed exchange rates).

Balance-of-payments crises in turn serve as an effective basis for an appeal for aid. Thus we have a situation in which aid depends on a means test, and the absence of means is regarded as a result of laudable endeavor. The link between for eign aid and payments difficulties is an important specific influence in the direction of the pauperiza tion of the recipients of aid which I have already noted as a general danger of foreign aid. It is hard to think of a more effective way of discouraging self-reliance. These are among the reasons why foreign aid promotes and in tensifies the control of recipient governments over the economic and social life of their countries. The Instruments of Control The principal elements of com prehensive economic control in un derdeveloped countries are famil iar. They include: a large public sector and heavy taxation; the establishing of trading monopolies, including state trading monopolies in agricultural exports; extensive licensing of industrial and com30 THE FREEMAN December mercial activities; and the estab lishment of many government owned and operated enterprises, including state sponsored, orga nized, and run cooperatives.

These measures are often accom panied by substantial expropria tion of private property in many underdeveloped countries of Asia, Africa, and the Middle East, nota blyAlgeria, Burma, Ceylon, Indo nesia, Syria, 'and the United Arab Republic (and to some extent India). And compulsory collectivi zation of much of agriculture is a common feature in countries as different as Algeria and Indonesia. In addition, economic controls extend to close surveillance of out side economic contacts. External trade, capital movements, and im migration are closely controlled and restricted by most if not all recipients of aid. These flows usu ally serve as vehicles not only of physical commodities and financial transactions, but also of new ideas, crops, methods of produc tion, wants, and attitudes. Perhaps most important, they can engender a new outlook toward material progress. Some Economic Repercussions of the Flow of Aid Some advocates of aid may not like the kind of society which emerges from their recommenda tion, but they nevertheless accept it as the price of rapid develop ment. They might, so to speak, be ready to trade some or even much freedom and security of person and property for an increase in the flow of goods and services.

They might support the policies outlined above in the belief that they promote economic progress. But do they? The drastic policies often pur sued in the name of comprehensive development planning, and pro moted by foreign aid, do not aug ment resources: they only central ize power. Nor do they· promote or strengthen the human qualities, attitudes, and social institutions conducive to progress. Indeed, as I have already suggested, for a number of reasons they are much more likely. to obstruct than to promote the emergence and growth of such attitudes and institutions. The enlargement of the re sources and power of the govern ment does, of course, enable it to expand some industries and sec tors by a transfer of resources from other uses, perhaps even quickly and on a large scale. But this power does not in the least ensure development in the sense of an increase in the total flow of goods and services, let alone in those which make up general liv ing standards, as is amply clear from the experience of centrally planned economies over the last 1966 FOREIGN AID: AN INSTRUMENT FOR PROGRESS? 31 few decades. Only too often in creased activity and expanded in dustries are treated somehow as a net gain, a net addition to out put, irrespective of the level of demand for the product and with out regard to costs in terms of al ternative uses of resources.

The government can also easily enough restrict consumption and increase investment expenditure. However, this objective could be achieved without close control of the economy by such means as a budget surplus or the encourage ment of private saving and invest ment. Moreover, an increase in in vestment expenditure, especially in public expenditure made pos sible by high taxation or the im position of direct controls, does not guarantee economic progress. It only ensures reduced living standards now without ensuring higher living standards later. In this effect it is somewhat similar to foreign aid, which certainly im poverishes the donors without nec essarily enriching the peoples of the recipient countries. Investment Expenditure and Economic Development Government policies and public discussions· on this subject are pervaded by the widely prevalent investment fetish, the belief that economic development depends es sentially on investment, which is assumed to be highly productive.

But a piece of expenditure does not become productive by being termed investment, in the sense of any expenditure other than on current consumption. There is no assurance that it will increase the total flow of goods and services compared with alternative uses of the resources, let alone that it will improve living standards. And in considering the net result of an in crease in investment, it is neces sary to examine the various reper cussions of the collection of the funds and of other measures in troduced to increase investment, especially government investment. For instance, the additional taxa tion or the restriction on the pro duction or import of consumer goods required by the increase in investment often discourages or even prevents subsistence farmers from producing for sale. And in vestment can be productive only if it is embodied in physical capi tal combined with complementary human resources operating in an appropriate institutional setting and producing output for which there is an effective demand. In many different ways investible funds supplied by foreign aid are not complementary to local re sources in the promotion of econ omic development in the sense of increasing their productivity.

It is by no means certain that 32 THE FREEMAN December foreign aid does increase invest ment in the recipient countries. The various repercussions which I have already noted, particularly the imposition of extensive con trols and higher taxation and the pursuit of inflationary policies which bring about payments dif ficulties, may serve to reduce pri vate investment, notably direct in vestment in agriculture. More over, both the flow of aid and its method of operation encourage and enable the recipient govern ments to discourage the inflow of private capital. foreign Aid and Private Capital Foreign aid is likely to discour age the recipient governments from securing capital on market terms, which from their point of view may be both unprofitable and politically unwise if foreign aid is available, Le., if investible funds are available gratis. And indeed, almost all recipients of foreign aid restrict the inflow and deployment of private foreign capital. During the last decade or so these restric tions have increasingly developed into expropriation of foreign capi tal, often accompanied by the ex pulsion of the owners and their employees. Examples abound in Africa and Asia. Governments which clamor for foreign aid be cause of lack of capital neverthe less severely restrict and circumscribe the inflow and operation of private capital.

Certain aspects of foreign aid, especially the criteria of alloca tion, have even encouraged the flight of private capital from the recipient countries. The donors en courage the recipient countries to impose extensive controls in the name of development planning. And as we have seen, they are also encouraged to pursue inflationary policies, since the amount of aid often depends on the payments dif ficulties of these countries. These policies engender a widespread feeling of insecurity, which in turn discourages the local popula tion from saving and investing, and encourages the export of capital. Although capital exports are banned throughout practically the whole of the underdeveloped wor ld, they are difficult to prevent. As a result, the inflow of foreign aid is matched by an outflow of both domestic and foreign private capital. And the outflow is of cap ital likely to be more productive than foreign aid funds, because its deployment is geared much more closely to local conditions, espe cially to consumer demand and to the supply of co-operant factors.

The Performance of Governmental functions I have just noted that the pre occupation with aid, investment, 1966 FOREIGN AID: AN INSTRUMENT FOR PROGRESS? 33 and development planning has served to divert attention from more important factors in devel opment which are influenced by government policy. This same pre occupation has also served some what paradoxically to bring about a serious neglect of essential tasks of government. Governments seem anxious to plan but unable to govern. The neglect extends to such familiar and essential tasks as the maintenance of law and order, the effective management of the monetary and fiscal system, and the provision of basic trans port and educational facilities. Indonesia is only one of the sev eral poor countries where the gov ernment cannot maintain ·law and order but tries to control the econ omy closely. The proliferation is familiar of heavily subsidized state airlines, steel mills, and industrial plants in African and Asian countries with illiterate populations whose activities are restricted by cus toms and institutions adverse to material progress. In India, with a huge illiterate and caste-bound population, the development ex penditure on elementary education under the second five-year plan was less than one-half the cost of each of the three steel plants in the public sector under that plan.

The administration of Hong Kong is one of the exceptions to the inclination of governments of under developed countries to neglect es sential functions (including the maintenance of law and order) while attempting closely to con trol social and economic life. This emphasis on government functions partly accounts for the rapid prog ress of that country. Indeed, Hong Kong is being gradually omitted from the category of underde veloped countries in much the same way as Japan. Framework of Law and Order The promotion of a suitable in- . stitutional framework for the ac tivities of individuals conducive to economic development is a task which few governments of under developed countries have at tempted to solve. In this sphere the activities of the recipients of foreign aid are largely confined to the expropriation of politically weak and unpopular classes (such as landowners, ethnic minorities, or successful traders) in the name of land reform, social justice, or the removal of exploi tation, re gardless of the repercussions of these measures on economic de velopment or general living stand ards. Institutional changes favor ably affecting the determinants of economic progress and thus pro moting material advance are gen erally neglected.

Altogether the policies, atti34 THE FREEMAN December tudes, and outlays encouraged by foreign aid tend to lead to expend itures more likely to retard than to promote material advance. This applies both to foreign aid funds and to domestic resources whose deployment is diverted from uses more likely to lead to material progress. Human Progress In conclusion, I return to my main theme. Material progress de pends primarily on the develop ment of suitable human qualities, attitudes, and social institutions, and not on the inflow of external grants of money. Foreign aid does not affect the major factors be hind the material backwardness of underdeveloped countries; the con tinued poverty of the recipient countries is therefore not surpris ing. The policies of the recipient countries have on the whole served to retard or obstruct possible advance. And while many of them would probably have been pursued even without foreign aid, its op eration has encouraged and rein forced them, generally by the sup ply of funds and personnel and more specifically by the criteria of allocation. The suggestion that the peoples of the recipient countries are likely to be damaged by large scale gifts to their governments is paradoxical and requires drastic readjustment of ideas. But I be lieve it is true, and that such a re adjustment is accordingly neces sary. The longer this readj ustment is delayed the more difficult it be comes, both because of the en trenchment of vested political, ad ministrative, financial, and intellec tual interests, and because of the magnitude of the costs already in curred. The greater the sacrifices, the more difficult it is to question the principles in the name of which they have been imposed. ~ 7:}7' c~""i"lj ~e~f~~~ , '"

SUDHA R. SHENOY THE MAJOR issue that divides lib erals (advocates of liberty) from "liberals" (statists) is the ques tion of the importance of eco nomic freedom. As the statist sees it, economic freedom is the "free dom" of the few to exploit the many. The right to vote, on the other hand, is common to all men. Hence, for statists, the dividing line between democracies and dic tatorships is drawn in answer to the question: Are elections free or not? But it will be noticed that totalitarianism is the implicit cri terion here: any situation which is not yet totalitarian would be described as "free" by the statist. As the true liberal sees it, free dom is indivisible. Hence, meas ures ostensibly aimed at the weak political minority of businessmen will in fact only prevent the mar ket process from functioning as Miss Shenoy, recently graduated .from the London School of Economics, B.Sc. (Eco nomics), hopes to enter university teaching in India.

well as it might have done, and will confer on some people - Le., politicians and administrators a power over their fellow men oth erwise exercised by no one; a power deriving from this group's ability to determine, de facto though not de lure, the uses to which resources may be put. This power, the liberal affirms, is of en tirely another nature from the "power" alleged to be exercised by businessmen operating in a market context. Control over re sources by businessmen is not only scattered among a much larg er group of individuals; these businessmen themselves are in ef fect simply the agents of their fellow men in determining the use of these resources, via the market process of profit and loss. But where economic power is concen trated in the hands of a politically selected group, the chances for the emergence and establishment of a political opposition are precarious, 35 36 THE FREEMAN December to say the least. The statist over looks the necessity for independent sources of mat.erial support for a political opposition; even though some opposition may seem to be present, the real criterion is the range of different views that would have emerged if economic power had not been so concen trated. In other words, freedom is more than one value among others; it is rather the foundation for a whole social order. Intervention embodies a principle that is dia metrically opposed and must lead to the destruction of this social order (where it exists) and the establishment of an order founded on the principle of political exploi tation: the politically strong ex ploiting the politically weak. In short, intervention leads to the suppression of potential political opposition and thus ends in totali tarianism.

India as an Oligarchy This abstract and theoretical argument is vividly illustrated by the experience of India. Most stat ists regard· India as an excellent example of economic planning combined with democracy. It would perhaps be more accurate to de scribe India as an oligarchy - in the Aristotelian sense of govern ment of, for, and by the rich. These rich, however, unlike those who earn high incomes in a free market by supplying their fellow men's needs, have obtained their wealth via the very instruments of planning - permits, licenses, quotas, concessions, and contracts. In the first place, virtually all in vestible resources - Le., savings and foreign aid - are forcibly drawn (via capital controls and taxation) into the preferred "in dustrial" sectors, both private and public. The industrial output thus artificially produced adds nothing to the flow of goods and services for the starving, ill-clothed, and unsheltered Indian masses - but those businessmen, civil servants, and others sharing in this forced expansion obtain high incomes (legal and illegal). Hence, we see that the output of coarse cotton bought by the masses has ex panded the least, while the output of rayon - a luxury in India - has multiplied by twenty-one times over the last 15 years and three five-year plans. 1 In the second place, even this private industrial sector is very closely controlled by a minutely 1 The growth of the agricultural sector (from which 50 per cent of the national income is derived and which provides 70 per cent of total employment) is held down by yet another piece of interven tionism: moneylenders' legislation. This forbids the pledging of land, though this is virtually the only pledgeable asset of the farmer. sets ceiling'S on the interest rates legally chargeable, and otherwise circumscribes rural moneylending.

1966 THE COMING SERFDOM IN INDIA 37 detailed network of regulations: government sanction is required to start, expand, or close down an undertaking; permits are required for virtually all raw materials and certainly all imported machinery and components. Government reg ulations extend to such points as the manner of conducting board meetings and the width of sari borders in the case of mill-made saris. In effect all these controls and regulations have created and protected private monopolies in virtually all fields of nonagricul tural production. Thirdly, there is import and ex change control. No imports of any kind are permitted without a li cense, and imports of a wide range of commodities are banned altogether. Prohibitive tariffs ~ have been imposed on a large number of other goods. All this means that Indian producers of import substitutes have a highly protected sellers' market. To rein force import control, all exchange earnings have to be surrendered to the Reserve Bank at the official price - which is well below the true market price. It is, of course, forbidden to send exchange or ru pees out of the country in any form.

Fourthly, the government sector has continually expanded over the last 15 years - even though this sector provides the least ernployment and adds nothing to the real national income. The driving force here is public contracts; the larger the public sector, the larger are its contracts, and the larger, therefore, the rake-offs for the contractors and civil servants in volved. (Where 100 rupees are ac counted to be spent on a project, they never are. Some say 60 ru pees are spent and 40 distributed; others would reverse the prop or tions - but no Indian would agree that the full amount was spent.) Fifthly, there are innumerable other controls over the internal economic life of the country, rang ing from controls over the move ment of food grains between states, to those over the establish ment of bus routes. All of these serve to increase the powers of officials over their fellow men.2 A Limited Private Sector From all this, it will be clear how small is the sector of the In dian economy from which a politi cal opposition can draw material 2 As if all this were not enough, after the Chinese incursion of October 1962, the government passed the Defence of India Regulations (DIR) empowering it to arrest and detain without trial per sons suspected of being dangerous to the public safety. Significantly, the DIR have been used virtually against persons known to be associated with the opposi tion: see Swarajya (Madras), passim., for 1963, 1964, 1965. Although four years have passed, the DIR continue to be in force.

38 THE FREEMAN December support, and how minute a por tion of even this sector is inde pendent of the government. 3 The industrial sector in India owes its establishment and continued ex istence to the government. In the absence of the forced draft of re sources into it, and of exchange and import controls and tariffs, this sector's artificiality and unvi ability would be quickly and un mistakably revealed. It follows that though Indian businessmen tech nically may be independent of gov ernment and even complain of some types of intervention, in fact they must be included as part of the government sector. It is, therefore, hardly surpris ing that the opposition in India should be so small and that oppo sition parties should complain of a dearth of funds while the ruling party has no complaint in this re gard. Naturally, virtually all busi nessmen are ardent supporters of the government. Again, a lead ing South Indian newspaper charged that government had used Journalists' Wages Boards and newsprint controls to penalize 3 The Fourth Five-Year Plan (1966 71) proposes, in effect, to reduce even further this minute independent sector: the government will extend its trading activities, especially in food grains; and taxes on income and wealth-already the highest in the world (see N. A. Palkhi vala, The Highest Taxed Nation in the World (Bombay, 1965) - will be raised even further.

papers consistently opposing it; charges have also been heard that government departments have threatened to withhold valuable advertising from the opposition press. 4 And more recently, opposi tion M.P.'s have protested in Par liament against Criminal Investi gation Department harassment their telephones, they say, are tapped, their letter's (even letters from their wives) are censored, and they are shadowed by C.LD. plain-clothesmen. 5 When M.P.'s are treated thus, the ordinary citi zen can hardly feel aggrieved when he finds that letters abroad - even registered letters - are opened in order to ferret out vio4 See the editorial in The Hindu (Ma dras) 10 October 1959: "There are also certain considerations that the Prime Minister might have remembered while calling the Press to account, such as the power the State has deemed fit to take to restrict the supply of newsprint, to control imports of machinery, to fix wages and salaries and working condi tions in newspaper offices. These are cal culated to make it extremely difficult for newspapers to be as free from extraneous influence as the Prime Minister would presumably want them to be. If there is any single strong inducement for news papers to adopt a particular line on any matter, it comes from the Government.

1£, in spite of this, a number of news papers look with a critical eye on the formulation and implementation of va rious policies by the Governments at the Centre and in the States, the reason must be found in the policies themselves and not in any extraneous considerations. ... " (italics added). 5 See the report in The Times of India (Bombay) 6 September 1966.

1966 THE COMING SERFDOM IN INDIA 39 lations of the Exchange Control Regulations. Finally, the Essential Commodi ties (Amendment) Bill of 1966 is yet another straw showing the di rection in which the political wind in India is blowing .As mentioned, food grains movement is con trolled. Hitherto, the government could only impound food grains suspected of being moved illegally. But now the government can summarily confiscate both food grains and vehicles suspected of being involved in illegal move ments; it is up to the poor mer chant to prove his innocence. 6 Perhaps the most ironic element in this whole situation is the role of foreign aid. Given in order to "feed starving orphans in Orissa" (as Milton Mayer would have it) or to "keep India from going com munist" (as many Americans be lieve), it is in fact one major cause why orphans in Orissa are starving and why India is now so firmly set down the road to serf dom. This is because in India for eign aid provides the major por tion of the finance for the Plans: for every rupee of internal re sources, almost 2 rupees worth of resources comes from foreign aid.

If aid is calculated at the official exchange rate for the rupee, its 6 Public speech by Mr. Minoo Masani, M.P., at Ahmedabad on 21 August 1966. true economic value is understated - even allowing for the recent de valuation. It is only if aid is cal culated at the free market ex change rate that its true signifi cance emerges. Planning in India, as has already been pointed out, involves essentially a forced trans fer of resources out of the uses where they would benefit the masses - i.e., the agricultural sec tor - into an artificially created and propped up "industrial" sec tor. It follows that agricultural outpu t has lagged far behind all industrial outputs; consequently, the Indian people are hungrier after three Plans than they were before. Per capita availability of food grains has fluctuated down ward over the last 15 years, and stands today at about 14 ounces per day. Meanwhile, since plan ning implies the concentration of economic and political power in the hands of the ruling clique, it has effectively smothered a wide range of potential political opposi tion. It would not be too much to describe India as a one-party state.

Democratic forms in themselves are meaningless. The right to vote can be effective only in the context of a whole network of other free doms. Elections can be free only in the framework of a free market and the Rule of Law. ~ YALE BRaZEN Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of society which he has in view. But the study of his own advan tage naturally, or rather necessarily leads him to prefer that employment which is most advantageous to the society .... By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it. ADAM SMITH, The Wealth of Nations ECONOMICS has been characterized as the dismal science. However, the two main questions occupying economists belie that description. Classical economists concerned themselves with the means for en larging income - with the causes of the wealth of nations - and with the determinants of the dis tribution of income. Neoclassical economists focus somewhat more narrowly within these larger ques tions on the causes of waste and how to improve welfare by elimi nating waste.

The classical group did not neg lect the analysis of causes of This is (rom a paper which Professor Brozen of the Graduate School of Business, University of Chicago, delivered before the Mont Pelerin Society, Tokyo, Japan, September 9, 1966. 40 waste. They dealt with the welfare consequences of state intervention in international trade - the effects of the imposition of tariffs and of trade and navigation acts. They also pointed to the welfare conse quences of state intervention in the internal economy - interven tions such as the creation, by royal grant, of monopolies of soap, play ing cards, salt, and so forth. The fact that classical and neo classical economists thought prog gress possible - that the lot of man could be improved by enlarg ing resources and by better utiliz ing the available resources-makes economics an optimistic science. It was the discussion of Malthusian demographic propositions that led WITHOUT THE WELFARE to the characterization of econom ics as a dismal science.

Malthus, and footnotes to Mal thus added by Marx, the Webbs, the Fabian socialists, and others such as the IWoponents of the iron law of wages, created the notion of a permanently depressed class doomed to a subsistence level of life. This was a major excuse for proposals for intervention by the state, although it is hard to see how believers in Malthus and in the iron law of wages could con clude that redistribution of income would cure poverty. All it could do, if the logic of this view is ac cepted, would be to doom everyone to poverty instead of the laboring classes alone. Many modern interventionists, such as the members of the Ad Hoc Committee on the Triple Rev olution, use the same stale excuse for state action as nineteenth cen tury Marxists and the Fabian so cialists, with some change in the supposed reasons for expecting a permanently depressed class growing ever larger. 1 The modern ver sion propounded by these dismal scientists argues that automation is dispensing with the need for labor services and that cybernation is leading to the development of "a permanently depressed class . . . in the United States."2 Old cliches apparently never die nor do they fade away.

The Goals of the Welfare Statists Welfare statists are as diverse a group as any other. It is, there fore, difficult to ascribe to them any creed on which there is mono lithic agreement. There are some 1 " •••over 20 per cent of the American population is exiled from the abundant economy and this percentage will grow . .. in coming years." R. Theobald, Free Men and Free Markets (New York, C. N. Potter, 1963), p. 20. 2 R. Theobald, "The Threat and Prom ise of Cybernation," Main Currents, Sep tember-October 1964, p. 5. See Y. Brozen, Automation and Jobs (Chicago: Gradu ate School of Business, University of Chicago, 1965), p. 22, for an empirical refutation. Also, R. D. Friedman, Poverty: Definition and Perspective (Washington: American Enterprise In. stitute, 1965). 41 42 THE FREEMAN December goals, however, which apparently have a high priority with most. The most recent, and the oldest, around which they coalesce is the elimination of poverty and of tem porary distress by state action. A few poetic souls among the social ists, such as George Bernard Shaw, have suggested that poverty be eliminated by shooting the poor.

Although the elimination of poverty is a goal which the wel fare statists have appropriated as if it were their own discovery, economists of a liberal persuasion (in the European sense of liberal) have long held this same goal.s It is the means for accomplishment on which liberals and intervention ists (welfare statists) differ rather than the goal. The modern welfare sta tist, at least in the United States, even appears to subscribe to the state ment that "the common man or average family has a far greater stake in the size of our aggregate income than in any possible redis tribution of income." This is cer tainly the opposite of the-refrain of the English welfare statists of the late 1940's who thought that the economic problem was not one 3 (c •••the chief motive of their [the Physiocrats] study was ... to diminish the suffering and degradation caused by extreme poverty. They thus gave to eco nomics its modern aim ..." Alfred Mar shall, Principles of Economics (London: Macmillan and Co., Ltd., 1930, 8th ed.), p.757.

of increasing production but only one of redistributing the available output. Growthmanship and the urge to direct the economy in paths which maximize the rate of economic growth have become com mon to the welfare statists. Eco nomic growth is now an important goal among the welfare statists as well as the elimination of poverty and the achievement of greater equality in the distribution of in come. Consuming What We Should In addition to these goals, there is a very large group among the welfare statists who are also in terested in seeing to it that we consume the right things. Cars with tail fins, heroin and other narcotics, useless (however the term may be defined) drugs, the sight of ugly (however that term may be defined) or ramshackle buildings and j unkyards, books which are improperly advertised, inartistic television programs, and abstract paintings are proscribed. Orchestral and dance perform ances, provided they are of the proper variety, representational paintings, statuary, visits to state owned parks (unless they are out side the national boundaries), and the consumption of educational and medical services are promoted.

The most influential groups pro moting the interventionist or wel1966 WELFARE WITHOUT THE WELFARE STATE 43 fare state are not those who be lieve in the welfare state because of any ideals relating to the im provement of the lot of the poor and the distressed or the promo tion of the brother hood of man by . compressing the differences among them into a semblance of economic equality. They are a dispa.rate set of groups, each interested in en hancing its own material status, even at great expense to others provided some drop of material gain emerges for it. Ta.xicab owners, in the name of improving the condition of taxicab drivers, persuade city councils to limit en try into the taxicab business. Northern textile mill operators and unions, in the name of helping the poverty-stricken employee and with the aid of the welfare stat ists, bludgeon Congress into pass ing minimum wage legislation.

Real estate operators, contractors, and building trade unions, in their passion to improve the housing and condition of slum dwellers, eagerly promote governmental ap propriations for urban renewal. Railroad, trucking, and barge line interests, in the name of providing essential transportation services for small businessmen and farmers on a nondiscriminatory basis, sup port transportation regulation with indefatigable zeal. The special in terests, from sheep rancher to stockbroker, find the interventionists to be handy, if unwitting, allies. These allies serve as front men and as a smoke screen to ob scure their intent and the damage they do to the general welfare when they use the state to serve their special welfares. More Harm than Help in Welfare State Programs This melange of specific meas ures is certainly recognizable to most economists as damaging to the general welfare. A minority recognizes that these measures cause some of the poverty which concerns us. We need not tarry long over the fact that these meas ures damage the general welfare, on net balance, although they may enhance a host of welfares. Of course, when I say that the general welfare is damaged, I include in the general welfare the welfare of the benefited groups. The damage to others is greater than the gain to those benefited.

I should add that abolition of a large group of these measures simultaneously could produce a net benefit for anyone of the groups which would lose from the abolition of the specific measure directed to its welfare and benefit. The producer of price supported cl!eese and milk could find himself selling in an even higher priced market or producing at a lower cost if transportation regulation, 44 THE FREEMAN December minimum wage laws, union-sup porting legislation, tariffs, and so on were abolished along with agri cultural price support programs. Some of these measures, which may have produced short-run benefits in the past, may now dam age the very people they once bene fited. Textile workers may have had a rise in wage rates relative to what they otherwise would have been paid after the passage of tariff legislation imposing import duties on textiles. However, wage rates earned by textile workers in the United States today are prob ably lower than they would be without tariffs. Our export indus tries today are high-wage indus tries. To the extent that tariffs limit the dollar earnings of those who could otherwise sell more to the United States, they have lim ited the demand for U.S. exports and the number of jobs at high rates in the export industries. As a result, U.S. export industries are not recruiting textile workers as aggressively as they would with out the tariffs, textile workers are not shifting as rapidly as they otherwise would to high-wage jobs in export industries, and their wage in textile work is lower than it would be if export industries were bidding more aggressively for their services.

Although we know that mini mum wage laws hurt the poor by costing them jobs, that agricul tural price support programs hurt the poor by raising the prices of their food, that transportation regulation hurts the poor by pre venting industry from moving to disadvantaged regions where the poor live and increases the cost to the poor of migrating to the regions where better paying jobs can be found, that union support ing legislation hurts the poor by permitting union power to grow to the point where it can be and is used to restrict the entrance of the poor into higher paying occu pations, that urban renewal ap propriations hurt the poor by forc ing the slum dweller out of low priced housing into higher priced housing, that regulation of the field price of natural gas increases its price and the price paid by the poor for cooking and heating fuel, that usury laws make it more dif ficult and expensive for the poor to obtain loans, that subsidizing subway fares benefits property owners in mid-town locations rather than the poor who ride the subways,4 where is the welfare statist who opposes these meas ures and calls for their abolition?

4 A discussion of the damage done by these various measures and references to several studies of their net effect can be found in Y. Brozen, "The Revival of Traditional Liberalism," The New Indi vidualist Review, Spring 1965 (Vol. 3, No.4).

1966 WELFARE WITHOUT THE WELFARE STATE 45 Instead, the welfare statist simply argues more urgently for more poverty programs, more job-train ing facilities and support, more generous relief programs, still more subsidies for the items he re gards as important in the budgets of the poor, more grants to educa tional institutions and more edu cational establishments operated by the state, longer periods of compulsory school attendance, and the like. The welfare statist could do much for the poor by working to abolish the measures that add up to a state-of-many-welfares and lowered general welfare. Here, then, is an important. dif ference in the means of the inter ventionist and the means sug gested by liberals for assisting the poor to greater affluence. The in terventionist proposes specific as sistance measures for the poor. These essentially aim at trying to offset the damage he has unknow ingly created with his melange of state measures benefiting special interests. Job-training programs, unemployment insurance, old-age assistance, aid to dependent chil dren, public aid, the Job Corps, volunteers in service to America, area redevelopment programs, to name a few items from the menu of the welfare state in America, serve primarily to partially offset, for some groups, the damage done by earlier interventionist measures. 5 The liberal, on the other hand, proposes to release each man's drive for self-improvement and each man's willingness to con tribute to the welfare of others when his activity also contributes to his own welfare. He proposes to remove the barriers to self improvement and to private con tributions to welfare. He proposes the provision of opportunity for self-development and the develop ment of independence where the welfare statist proposes measures which not only are less efficient but which contribute to an increase in dependency and a decline in the rate of growth and the level of national income.

Welfare Generation by Non-State Activity Activities which improve the lot of the poor undertaken for self interested reasons apparently are suspect to the welfare statists. The motive is wrong; therefore, the results are unacceptable. Those furnishing cheaper provisions for the poor or job training and better paying jobs because they hope to profit by doing so are not accept able. Presumably, a Peace Corps volunteer who teaches an illiterate 5 Estelle James points out that "a major rationale for future government activity is past government activity." Re view of The Economics of Vocational Re habilitation, American Economic Review, June 1966 (Vol. LVI, No.3), PP. 640-42.

46 THE FREEMAN December Brazilian to read without hope of profit is d.oing more for the illiter ate Brazilian than General Elec tric do Brasil when it hires teach ers to teach the illiterate members of its work force to read in the hope that it can reduce its super visory costs and increase its profits. The end result is the same. Illiterate Brazilians learn' to read. But the motive is different. Some how that means that the Peace Corps volunteer has contributed to the welfare of poor Brazilians and G.E. has not. The Peace Corps volunteer was not motivated by self-interest (except to the extent that he desires travel and adven ture and instant status at mini mum cost) while G.E. was moti vated by a lust for profit. Many of the proposals of the welfare statist simply result in the substitution of state activity for private activity without any net gain in the welfare generated. The welfare statist proposes job-train ing programs for the unskilled poor with the purest of motives-to uplift the downtrodden. He pro poses the expenditure of tax funds to train taxi drivers, which re duces the outlay by taxi companies to train drivers. He proposes the expenditure of tax funds to train filling-station attendants, which reduces the outlay by refiners to train attendants.

Does the expenditure of tax monies do more for the newly trained drivers and attendants than that of private funds? The answer to this question must be come embarrassing to the welfare statists when tax funds are de voted to training ship stewards who then find no jobs available even for many with long experi ence. At least, company funds are used for such training only if some use will be made of the in vestment in job training. But the welfare statist seems to think no contribution to welfare occurs when profit motivated expendi tures are made, while a great con tribution occurs if the funds are taken by the state and then ex pended under state aegis. 6 Yet the net improvement in welfare even if we consider only the welfare of the poor is, in many cases, greater if the funds are left in private hands. No Faith in the Directions Offered by the Open Marlcet The welfare statist apparently wants to produce economic growth, increased equality, and improve ment of the lot of the poor by di rect intervention and governmen6 The Department of Interior, in its suit attempting to block 'the construc tion of a dam by the Virginia Electric Power Company for which it had received a license from the Federal Power Com mission, argued it would be better if the dam were never built than to have it erected by a private group.

1966 WELFARE WITHOUT THE WELFARE STATE 47 tal direction rather than. by using or permi tting impersonal social forces to produce these same re"suIts. Some of them obviously do not understand how normal mar ket forces and normal .evolution can produce the desired results. Others, particularly the political types, may understand •this but either wish to use direct measures in order to obtain credit for the results or in order to build their power. If economic growth is desirable, and that is the excuse for much interventionist activity and for many discriminatory or non-neu tral tax laws, it is likely that as much or more will be generated (by the private economy) with fewer interventions and a more neutral tax structure than is the case in most countries which have inaugurated interventions and dis torted their tax structure for the avowed purpose of stimulating growth. 7 Usually, these measures have a double purpo~e 'of achieving both more growth and more equal ity. Yet, they frequently negate both purposes.

The passion for equality, which appears to be the basis for impos ing both property taxes and cor porate earnings taxes on property 7 E. S. Phelps, Fiscal Neutrality Toward Economic Growth - Analysis of a Taxation Principle (New York: Mc Graw-Hill Book Co., 1965). income in addition to the personal income tax while only the personal income tax is imposed on wage in come, would be better served by a neutral tax structure than the present non-neutral structure in use in most countries. With less attempt to use state power to com press the inequality in the distri bution of income, inequality would diminish more rapidly. Low wage rates would rise more rapidly with a higher rate of saving and capi tal formation,and inequality would diminish with the rise in income of wage earners. Instead, the welfare statists are attempting to diminish inequality by slicing down the top with some redistri bution to the bottom. Inequality has been diminished by the tax and transfer structure, but by less than it would be diminished in a short time by the evolution which would occur under a neutral tax structure with less intervention by direct means.

The Nonaddifions to Welfare Produced by tlte Welfare State Inasmuch as a very large por tion of welfare expenditures in the United States is for the benefit of those who are taxed to provide the funds, the tax structure is impos ing a very large burden with very little redistribution. Elimination of state use of funds to provide people with what they could and 48 THE FREEMAN December in most instances would buy for themselves if their funds were not taxed away would contribute to more rapid economic growth, a more rapid rise in the incomes of those who receive less than $3,000 per year - the official poverty line for families of four in the United States - and an increase in the equality of income distribution through the forces of normal eco nomic progress in free markets. As Professor Lampman has re marked, with $100 billion of trans ferred income in the United States, $81 billion of which is financed by taxes, "how can we explain the f act that there is any poverty left in the United States ?"8 The expla nation lies in the fact that a major part of the transferred income does not go to the poor. It goes to people in the form of services which they are quite capable of buying for themselves and money grants which have been described as "poverty programs for the well to-do." The agricultural program (a poverty program for rich farm ers) is an example of the latter.

Free services provided by publicly maintained educational institu tions are an example of the form er. In 1964, of the $28 billion of tax money spent on publicly oper ated educational institutions, only 8 R. J. Lampman, "The American Sys tem of Transfers: How Does It Benefit the Poor ?" (mimeographed, no date). 18 per cent of the services were provided for the 28 per cent of the population who are classed as poor on a pre-transfer income basis (only 18 per cent of the pop ulation were classed as poor on a post-transfer income basis). In my own state, estimates have been made which indicate that the pub licly operated universities take more from the poor in taxes than they provide to them in services. Charging for the services of these universities and removing their tax support would increase the in comes of the poorest part of the population relative to the incomes of those who are relatively well off.

Relief for the Affluent A number of other government enterprises presumably devoted to the task of redistributing income by providing subsidized or free services for the poor perform in much the same way as the pub licly operated educational institu tions. They provide a very large portion of their services to the well-to-do who are capable of pur chasing these services with their own means. Electricity and tele phone service for well-to-do farm ers and suburbanites are subsi dized by the Rural Electrification Administration. Electricity for poverty-stricken corporations such as the Aluminum Corporation of 1966 WELFARE WITHOUT THE WELFARE STATE 49 America and the Du Pont Com pany is subsidized by the tax free status of the Tennessee Valley Au thority (27 per cent of the price of electricity goes to pay the taxes imposed on privately operated utilities) . Irrigation water for well-to-do farmers is subsidized by the Bureau of Reclamation and by the city poor who are overcharged for water to pay some of the losses on water furnished for agri cultural purposes. Subsidized loans to home owners, to farmers, to small businesses, to maritime operators, to railroads, and so forth are subsidies for the well-to do. We are even proposing to sub sidize middle income apartment renters-where a middle income is defined as $8,000 to $11,000 per year.

A very large portion of the wel fare provided by the welfare state simply provides a substitute for what those who receive the serv ices were buying for themselves or would buy in their present cir cumstances. To this extent, the welfare state has not increased the welfare available in our soci ety. To the extent that the state provided substitutes are inferior to what people were providing or would provide for themselves, there is a welfare loss. Inasmuch as state-provided services tend to be uniform and are not adapted to the desires of those receiving the services, a very large portion of these services are inferior to what people would purchase in a free market in which firms must com pete for customers. The Welfare Losses Generated by the Welfare State As indicated above, much of the officially defined poverty found in the United States is a consequence of attempts to increase by state intervention the share of the na tional income pie received by vari ous groups. These interventions have taken such forms as control ling relative prices to make them different from what would be found in a free market or by changing relative private costs by such means as differential tax rates. To produce some of the hoped-for changes, the state has limited entry in some markets or delegated the power to private groups to limit entry. It has pro vided goods below cost, and in creased the prices of other goods to above their social cost.

The deleterious effects on the size of the national pie of inter ventions which change relative prices and costs has led some lib eral economists to suggest that it is preferable to increase the size of the slice received by various groups by direct income transfers. This, presumably, would have a less harmful effect on the size of 50 THE FREEMAN December the national income pie available for slicing. Such transfers are pre sumed to avoid shrinking the pie which has the result of shrinking the size of the slice received even when it turns out to be a bigger share of the shrunken pie. What is too often forgotten is that even income transfers may shrink the pie by as much or more than the amount of income trans ferred. Income transfers condi tioned on the recipient falling be low some designated income level also effect relative prices - the price of leisure relative to other goods. There is evidence that many of the poor in the United States are poor in pre-transfer income because they are paid to be poor.

As Pigou once remarked, "If . . . it is understood that everybody's income will ... be brought up by State aid to, say £ 3 a week, it will, generally and roughly, be to the interest of everybody capable of earning by work any sum less than £ 3 a week to be idle and earn nothing. This must damage the national dividend."9 When It Pays Not to Work A study of the effect of the level of public aid payments on the number of persons requesting and receiving such payments in the United States in the 1950's indi9 The Economic8of Welfare (London, 1952, 4th ed.), pp. 731-32. cates that a very substantial pro portion of those on the welfare rolls are "not on assistance due to zero wage alternatives." The high er the level of public aid to each recipient, the larger the number of people who choose not to work. The proportion on public aid rolls in the 1950's who were "not on as sistance due to zero wage alterna tives" averaged nearly 50 per cent over the decade. The level of as sistance payments may have ac counted for as much as 87 per cent of those on public welfare rolls in one year. 10 A study of experience with un emploYlnent compensation in six states reached a similar conclu sion. The higher the level of un employment compensation relative to take-home pay from his last job, the .longer an unemployed worker remained unemployed.

Still another example of the de cline in self-support and national income resulting from income transfers is provided by a study of the economics of vocational re habilitation. Vocational rehabilita tion investment returns $10 to $17 in present value of enhanced fu ture earnings for everyone dollar invested. However, the net private return to the disabled is very 10 c. T. Brehm and T. R. Saving, "The Demand for General Assistance Pay ments," American Economic Review, Dec. 1964 (Vol. LIV, No.6), p.l017.

1966 WELFARE WITHOUT THE WELFARE STATE 51 much less. As a consequence, most of the disabled choose not to in vest in rehabilitation. Earning an income would mean the sacrifice of their social security disability payments, their public assistance receipts, or their workmen's com pensation. ll Here, then, is a second element in the answer to Lampman's query, "How can we explain the fact that there is any poverty left in the United States ?" despite $100 billion of transferred income. The more income that is trans ferred to the poor, the larger the number of people who will choose to be poor. A program to alleviate poverty such as direct grants to the poor creates more poverty to be alleviated. A reduction in the level of welfare payments will also reduce the amount of poverty. Conclusion Our sovereigns in the United .States have been so intent on ex tending state benefits to each peti tioner and have paid so little heed to costs, to the nonrevenue yield ing burden of taxation, and to the consequences for general welfare that the welfare state as it is op erating is reducing the general welfare. General welfare has been reduced by an amount such that the larger slice obtained by some is of such a shrunken pie that 11 Estelle James, op. cit., p. 642.

most of the successful petitioners are worse off. In addition, the goals of the avowed welfare stat ists have been poorly served by our welfare state. Admittedly, there has been a net redistribution of current income in favor of the poor as a result of public assist ance payments and the tran;sfers within the social security system. However, even these measures have had undesirable conse quences. They have produced a state of dependency which is being handed on within families from generation to generation. They have f orced early retirement for many who would prefer to go on working, but choose not to do so since benefits would be sacrificed under the rules enforced. They have created the poor, measured by pre-transfer income, since it pays to be poor. The small measure of redistrib utive success accomplished by our welfare state has been accompa nied by great inequities, by a fail ure to stimulate growth (a debat able goal for a state, however ac ceptable as a matter of individual choice), and by a great waste of resources in attempting to force the consumption of items judged superior by the welfare statists.

Even the recent medicare act seems to be resulting largely in the substitution of payments by the state for medical services for 52 THE FREEMAN December those over 65 which were formerly paid for privately. The redistribu tive effect has been small while the illusion of state benefit has been large. The welfare statists have suc ceeded in injecting the state into a multitude of activities ranging from city-operated trash collection services to patronage of the per forming arts, but it appears that at best they have substituted pub lic activity for private. 12 More likely, they have diminished the speed of movement toward the goals they profess to serve. At the very time when more symphonic performances under private sup port were occurring than ever be fore, more students were in college than ever before, more people over 65 were receiving medical serv ices and were insured against med ical disaster than ever before, more effort was being expended on gardening, landscaping, and other forms of beautification than ever before, the welfare statist found that not enough was being done and forced an enlargement of the state role in such activities. At the 12 One of the results of the poverty program in the U.S. is that many private philanthropic organizations have been stripped of skilled personnel who have been hired away to administer public programs.

very time when inequality has lessened and poverty has moved closest to disappearance, the wel fare statists suppress the means which brought about this happy state of affairs and inject the state, the device whose iniquitous effect on the wealth of nations was discovered two centuries ago and with whose declining role in eco nomic affairs was associated the greatest flowering of affluence for the masses. It is the free market which so cialized the genius of Edison and Steinmetz and a multitude of oth ers. The state has typically been a device for producing affluence for a few at the expense of many. The market has produced affluence for many with little cost even to a few. The state has not changed its ways since Roman days of bread and circuses for the masses, even though it now pretends to provide education and medicine as well as free milk and performing arts. It still is the source of monopoly privilege and power for the few behind its fa<;ade of providing welfare for the many - welfare which would be more abundant if politicians would not expropriate the means they use to provide the illusion that they care about their constituents. ~ A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN BLACK and Conservative THE WORD has gone out in advanced "liberal" circles that George S.

Schuyler, whose autobiography, Blac'kand Conserva,tive (Arlington House, $5.95), makes delightful reading, is just another "Uncle Tom" Negro. The reason for put ting Mr. Schuyler in this category is that he has always taken a dim view of the "pied pipers" who lead "the lunatic fringe astray" by such tactics as disrupting traffic, toss ing garbage on streets and lawns, and "sprawling on courthouse steps yammering spirituals and the slogan 'We Shall Overcome,' first popularized by the Castro forces." Three years ago Mr. Schuyler said this sort of thing, which easily edge'S into violence, would lead to the emergence of uncompromising "black power" leaders such as Stokely Carmichael and Floyd Me-Kissick who, in turn, would pro voke a dangerous backlash that might undo all the patient ad vances made by the Negro race since World War II. Mr. Sch uyIer, of course, is get ting no thanks today for his gift of accurate prophecy, but it is note worthy that such old favorites of the "liberals" as the Rev. Martin Luther King are now warning their followers to avoid the provoc ativeness of extreme "black power"

statements. What Dr. King is say ing in 1966 is what George Schuy ler was saying in 1964 - or, indeed, in 1934. '¥hen the Stokely Carmichaels talk about "black power," their phraseology creates the impression tha t they mean political power that is unshared by whites. George Schuyler has all along advocated a diffeTent sort of "black power," the power of individual Negro econom ic ownership based on self-help. He has observed, correctly, that other minority groups in the nation the Jews, the Italians, the Irish achieved political and cultural free dom by putting individualist eco nomics first. As long as a minority remains a beggar-caste, depending 53 54 THE FREEMAN December on handouts from a political source, it will possess no strength beyond its power of numbers as a pressure group. Pressure groups with economic power behind them can sometimes do something of lasting value for themselves: they can force other groups to get off their necks. But when a group has only numbers to support it, it must deal away most of its real power to political brok ers who are mainly interested in advancing their own fortunes. The pressure group that depends solely on its vote becomes the pawn of demagogues whose careers are best advanced by keeping their support ers in an abject state of living on political charity. This is the rule that has created the phenomenon of families that have been living on relief for three generations. If persisted in, it mea.ns that the central cores of our big cities will be just as badly off a generation hence as they are now.

Examples of Progress In his Black and Conservative George Schuyler tells of his many southern tours. Sometimes they were made for his newspaper, The Pittsburgh Courier, sometimes they were in behalf of such organi zations as the National Associa tion for the Advancement of Col ored People. Mr. Schuyler was properly outraged when he couldn't find a good lodging for the night, and he hated the demagoguery of the so-called Red Necks who kept their power by denying Negroes the elemental civil liberties that are supposedly guaranteed by the American Constitution. But he also ran up against the communists when they were pushing their pol icy of "self-determination for the black belt." With his sociologist's eye Mr. Schuyler saw that the com munist tactic provoked a blind fear among whites. His researches in North Carolina brought him to conclude that "most of the Negro's difficulties and problems could be greatly ameliorated through his own efforts in cooperation with willing whites who recognized that such would be mutually advanta geous."

In a notable passage in the mid dle of his autobiography, Mr. Schuyler says: "I had seen where this had been done on many occa sions in real estate, insurance com panies, and banks. There was no lack of 'communication' between members of the two 'races' who had anything to communicate .... Durham was an outstanding ex ample of what Negroes could ac complish for themselves. It was headquarters of the North Carolina Mutual Life Insurance Company, the largest Negro-owned business in the country. There was also a flourishing bank, a fire insurance 1966 BLACK AND CONSERVATIVE 55 company, many successful smaller businesses, and the impressive North Carolina College for Ne groes. There were numerous Ne gro-owned tobacco farms in the vicinity." I t has all along been George Schuyler's contention that if this sort of progress could be had in North Carolina, which is below the Mason-Dixon line, it could also be achieved in the cities of the North.

He points out that the so-called "talented tenth" among the Ne groes are great generators of capi tal funds. The earnings of ball players like Jackie Robinson and Willie Mays, singers like Leontyne Price and Marian Anderson, pian ~sts like Mr. Schuyler's own talent ed daughter, Philippa, and enter tainers like Sammy Davis, could, if deployed through Negro finan cial institutions, create new busi nesses and solve some acute real estate problems. Mr. Schuyler's ideas have been picked up by a few Negro leaders, but the diversion of the "Negro revolution" into polit ical channels has had a depressing effect on the sort of thing that Mr. Schuyler saw flourishing in Dur ham, North Carolina, a generation and more ago. Through His Own Efforts The really encouraging thing about Mr. Schuyler's book is the proof it offers that a good man can rise, and have his effect on the American world, in spite of the most terrifying obstacles. Mr.

Schuyler seized his opportunities where he found them. He spent a long time in the U.S. Army, serv ing at Schofield Barracks in Ha waii and training recruits at Camp Meade and other places during World War 1. He found plenty of prejudices in the Army, and he fought actively against them when he could. But, with his happy and sardonic temperament, Mr. Schuy ler refused to develop a martyr complex. He used the Army as a means of getting an education in realities. When he moved into the Negroes' world of Harlem, in New York City, by way of a temporary civil service job on Governor's Is land in New York harbor, he was ready for the breaks. The immediate future wasn't promising: Mr. Schuyler lost his job just when the short post-WorId War I depression was beginning, and he had to return to his child hood home in Syracuse for a time. He used the Syracuse interlude to read Marx, Engels, Plechanov, Kautsky, Hyndman, Edward Bel lamy, and H. G. Wells, but a tenta tive association with the socialists in active political work soon dis illusioned him. Returning to New York City, he ran into the Marcus Garvey Back-to-Africa movement.

This seemed nonsensical to him, for 56 THE FREEMAN December the Negroes he knew had no desire to go to Africa when the "old coun try," to them, meant Virginia, the Carolinas, and the Deep South. In deciding to fight for Negro rights at home, George Schuyler found his way to the office of A. Philip Randolph, a co-editor of an impecunious magazine called The Messenger. Randolph hired Mr. Schuyler to sweep the floor, open the mail, read proofs, handle sub scriptions, run over to the Brook lyn Eagle job press, and distribute magazines to the newsstands. With a foot in the door, Mr. Schuyler was soon writing satirical articles for Mr. Randolph. The career that is so engagingly summed up in Black and Conservative was launched. ~ Binders with Issues inserted for Calendar Years 1963 and 1964: HANDSOME BLUE LEATHERLEX FREEMAN BINDERS Either year Both $ 5.00 10.00 Binder only, $2.50 each THE FREEMAN - Volume 16, January-December1966 Prepared by BETTINA BIEN of the Foundation staff NOTE: In page references, the number preceding the colon designates the month, the number following the colon refers to pages. The letter "n" following a number refers to a footnote.

All articles have at least three entries - author, subject, and title, except in a few cases when title entries seemed repetitive. Complete title, author's name, and paging are included in the author entry; otherwise entries are abbreviated. Book reviews and fillers are listed by author in separate sections on page 64. ACADEMIC freedom Freedom to sift and winnow (Meek) 9:50 Freedom nobody wants (Opitz) 11:4 ACADEMY of Basic Education Visit with a headmaster (Wheeler) 10:49 "ADMINISTERED prices" Will the real price administrator please stand up! (Howard) 4:46 ADMINISTRA TIVE law Flight from reality, 23, 24 (Carson) 8:53; 9:41 Private rights and government (Suther land) 6:33 ADMISSION of failure (Shorock) 7: 36 ADVERTISING, private Too much secrecy (Chamberlain - Book review) 9: 59 Six misconceptions about consumer wel fare (Dean) 1:22 AGGRESSION, aggressive force Macro malady (Read) 2:52 Men of prey (Read) 10:21 AM I my brother's keeper? (Bird) 5:54 AMERICAN federalism . . . (Roche) 12: 3 ANDERSON, Martin Fiasco of urban renewal, The. 3: 46-59 ANIMALS Market price of burros (Bellerue) 4: 44 Of birds and men (Spiegel) 4:51 ARMCHAIR skirmish against poverty (Wheeler) 4: 23 ASIA Coming serfdom in India (Shenoy) 12: 35 Crafty communists (Hong Kong) 1: 26 State economic planning ... (Chamberlin) 1 :30 ASSAULT on free enterprise (Institute of Directors) 8: 41 AUTHOR of liberty (Opitz) 1:3 AUTOMATION Income without work (Hazlitt) 7:20 Some reflections on robots (Read) 8: 32 BALANCE of payments Case for international investment (Hazlitt) 8:19 Progress or regress? (Sennholz) 4:33 BANKING and credit Interest rates are rising (Sennholz) 12: 13 BAUER, Peter T.

Foreign aid: an instrument for progress? 12:25-34 BELLE RUE, Al Market price of burros. 4: 44-45 BIRD, Herbert S. Am I my brother's keeper? 5: 54-56 BIRDS and men, Of (Spiegel) 4:51 BOHM-BA WERK, Eugen - ideas of Interest rates are rising (Sennholz) 12: 14 BRADFORD, M. E. Sacrilege and cupidity: a plea for perspec tive. 2: 38-40 BREESE, Edward Y. Human desire for freedom, The. 1 :56-58 Set my people free. 10:3-7 BROWN, Harold O. J. Erosion of the mind. 5:3-11 BROZEN, Yale Welfare without the welfare state. 12: 40-52 BURROS, Market price of (Bellerue) 4: 44 BUSINESS, regulation of Flight from reality, 23, 24 (Carson) 8:53; 9:43 Private rights and government (Sutherland) 6:34 Progress or regress? (Sennholz) 4: 33 Socialism by seduction (Chamberlin) 6: 17 BUSINESSMAN -hero or villain? (Peterson) 7:52 CALHOUN, John C. - ideas of Cure for poverty. . . (Chamberlin) 2: 7 CANUTE and the counting of noses (Fox) 10:44 CAPITALISM Income without work (Hazlitt) 7:35 Observations on the Russian reform move ment (Mises) 5: 23 Roots of war (Rand) 11:27 57 58 THE FREEMAN December CARSON, Clarence B.

Flight from reality, The. ( 16) From ideology to mythology, I. 1: 34-45 (17) From ideology to mythology, II. 2 :24-37 (18) Origins of reform methods, The. 3: 8-22 (19) Flight from economics, The. 4: 3-18 (20) Meliorist economics. 5: 33-47 (21) Bent to destruction, The. 6: 42-55 (22) Divide and conquer. 7:38-49 (23) Flight from the Constitution, The. I. 8 :45-59 (24) Flight from the Constitution, The. II. 9: 35-49 (25) Political experimentation: the four year plans. 10: 30-43 (26) Pen and the sword, The. 11: 36-55 CASE for international investment (Hazlitt) 8: 16 CASE for willing exchange (Read) 9: 25 CASE of the free rider (Farrell) 10: 12 CENSORSHIP /thought control. Coming serfdom in India (Shenoy) 12: 36, 37n,38 Erosion of the mind (Brown) 5: 3 Flight from reality, 26 (Carson) 11:53 Some thoughts on censorship (Opitz) 6: 56 CHAMBERLAIN , John. See Book reviews CHAMBERLIN, William Henry Constitutions should say no. 7: 3-8 Cure for poverty: individual effort, The.

2:3-9 Socialism by seduction. 6: 17-23 State economic planning: tragedy 01' fu tility. 1: 27·33 State swelled and the people shrank, The. 5: 15-22 CHRISTENSON, Richard. See Book reviews CHURCHES and economic issues Clergyman looks at free enterprise (Ream) 8:26 Sacrilege and cupidity ... (Bradford) 2: 38 Safety of the people (Moreell) 9: 10 Your church-their target, Ingwalson (Ream - Book review) 7: 63 CIVIL rights Individualism vs. racism (Wortham) 1: 13 Set my people free (Breese) 10:3 CLERGYMAN looks at free enterprise (Ream) 8:26 COMING serfdom in India (Shenoy) 12:35 COMMUNISM. See Marx; Russia; Socialism COMPETITION Human desire for freedom (Breese) 1:56 Six misconceptions about consumer welfare (Dean) 1 :22 COMPROMISE Punch decries "No compromise." 10:28 CONSPIRACY /plot Flight from reality, 26 (Carson) 11:39 CONSTITUTIONS should say no (Chamber lin) 7:3 CONSUMER sovereignty Businessman - hero or villain? (Peterson) 7:58 Observations on the Russian reform move ment (Mises) 5: 23 Private enterprise in the public interest (U.S. Steel Corp.) 6:37 Supremacy of the market (Mises) 10:17 CONSUMER welfare, Six misconceptions about (Dean) 1: 22 COST of living ( Poirot) 10:8 "CREATIVE federalism" (Read) 7:9 CURE for poverty. . . (Chamberlin) 2: 3 DEAN, Joel Six misconceptions about consumer wel fare. 1: 22-26 DEMOCRACY /majority rule Canute and the counting of no~es ( Fox) 10:44 Flight from reality, 22 (Carson) 7: 46 Private rights and government (Sutherland) 6:32 DISASTER area, U.S.A. (Paton) 2:16 ECONOMIC development/progress Fallacy oJ foreign aid (Hazlitt) 2: 41 Foreign aid ... (Bauer) 12:25 Money and free markets ... (Watts) 1:48 Vital secret (Poirot) 9:23 ECONOMIC doctrines, various Flight from reality, 17, 19, 20 (Carson) 2:24; 4:3; 5:33 ECONOMIC freedom Coming serfdom in India (Shenoy) 12: 35 Freedom nobody wants (Opitz) 11: 3 Freedom to sift and winnow (Meek) 9: 50 EDUCATION, ideal - theory of Freedom through education ( Newell) 5: 11 Relativity of relativity (Upton) 1:6 Visit with a headmaster (Wheeler) 10:49 EMINENT domain Fiasco of urban renewal (Anderson) 3: 54, 59 Flight from reality, 18 (Carson) 3:16 EROSION of the mind (Brown) 5:3 EUROPE Adenauer's Memoirs (Chamberlain - Book review) 8: 60 Case for international investment (Hazlitt) 8:16 Fiat money inflation in France (White) 12:23 Sweden's great society (Husbands) 1: 18 See also Great Britain; Russia FALLACY of foreign aid (Hazlitt) 2:41 FARRELL, Peter A.

Case of the free rider, The. 10:12-16 FERTIG, Lawrence Government veto system, The. 11: 17-22 FIASCO of urban renewal (Anderson) 3:46 FIAT money inflation in France (White) 12:23 FIRST liberty library (Rothbard) 10:56 FLIGHT from reality. See Carson FOREIGN aid Coming serfdom in India (Shenoy) 12:39 Fallacy of foreign aid (Hazlitt) 2:41 Foreign aid ... (Bauer) 12:25 FOX, Willard M. Canute and the counting of noses. 10:44-48 How to finance a war. 7:12-17 FREE enterprise/free market Assault on free enterprise (Institute of Directors) 8: 41 Clergyman looks at free enterprise (Ream) 8:26 Supremacy of the market (Mises) 10: 17 FREE rider, Case of the (Farrell) 10:12 FREE/voluntary exchange Case for willing exchange (Read) 9: 25 Values, exchange, and profits . • . (Jen nings) 9:52 FREEDOM/liberty Author of liberty (Opitz) 1: 3 Law of liberty (So1litt) 11:33 Moral foundation of freedom (Husted) 3:23 Private rights and government (Sutherland) 6:26,33 Spirit of liberty (Hand) 7: 18 Two philosophies of freedom (Sollitt) 5:48 FREEDOM nobody wants (Opitz) 11:3 FREEDOM of speech Pay TV (Gillett) 4:38 FREEDOM through education (Newell) 5: 11 FREEDOM to sift and winnow (Meek) 9:50 FRIEDMAN, Milton - ideas of Freedom nobody wants (Opitz) 11: 3 Governmen t veto system (Fertig) 11: 21 See also Negative income tax GALBRAITH, John K. - ideas of Flight from reality, 19 (Carson) 4:3,9 GEORGE, Henry - ideas of Flight from reality, 17, 20 (Carson) 2:24; 5:43 GIFFORD'S legacy, Lord (Opitz) 3:36 GILLETT, Elizabeth Pay TV: the right to compete - and to speak. 4: 38-43 GOVERNMENT, role of Flight from reality, 22 (Carson) 7:40 Men of prey (Read) 10:2i Private rights and government (Sutherland) 6:~ IJ 59 GOVERNMENT veto system (Fertig) 11 :17 GREAT BRITAIN Assault on free enterprise (Institute of Directors) 8: 41 Income without work (Hazlitt) 7: 33 Progress or regress? (Sennholz) 4: 33 GROSS national product (GNP) Progress . . . (Read) 6: 3 GUIDELINES, price and wage Government veto system (Fertig) 11:17 Socialism by seduction (Chamberlin) 6: 19 To the gallows (Royster) 3:33 Will the real price administrator please stand up! (Howard) 4:46 GUMMERE, John F.

Independent school, The. 7: 50-51 HAND, Learned Spirit of liberty, The. 7: 18-19 HARVARD and Thomas Hollis First liberty library (Rothbard) 10:56 HAZLITT, Henry Case for international investment, The. 8: 16-25 Fallacy of foreign aid, The. 2:41-51 Income without work. 7: 20-36 Socialism, U. S. style. 9: 33-34 HISTORY, ancient Constitutions should say no (Chamberlin) 7:3 Please step aside (Roche) 6: 13 HISTORY, interpretation/writing of Flight from reality, 16, 17 (Carson) 1:34; 2:24 On heroes, history, and our heritage (Thornton) 8:12 HOW price control leads to socialism (Mises) 6:23 HOW to finance a war (Fox) 7: 12 HOWARD, Irving E. Will the real price administrator please stand up! 4:46-51 HUMAN desire for freedom (Breese) 1: 56 HUMANS must be free, Why (Watts) 3:3 HUSBANDS, Sam H., Jr. Sweden's great society. 1: 18-22 HUSTED, Ralph W. Moral foundation of freedom, The. 3: 23-33 IDEAS/ideals/ideologies - importance of Admission of failure (Shorock) 7: 36 Flight from reality, 16, 17, 22, 26 (Carson) 1:34; 2:24; 7:38; 11:36 Moral foundation of freedom (Husted) 3:23 On heroes, history, and our heritage (Thornton) 8: 12 Principle of political polarity (Stewart) 5:57 Voice of a brother's blood (Sollitt) 9: 14 IN case of difference (Lewis) 11: 22 60 THE FREEMAN December INCENTIVE Cure for poverty ..• (Chamberlin) 2:3 Human desire for freedom (Breese) 1: 56 Property and poverty (Poirot) 2: 10 INCOM.E without work (Hazlitt) 7: 20 INDEPENDENT school (Gummere) 7:50 INDIVIDUAL action/choice Am I my brother's keeper? (Bird) 5:54 Men of prey (Read) 10:27 Money and free markets ... (Watts) 1 :48 Some reflections on robots (Read) 8:32 Why humans must be free (Watts) 3:3 INDIVIDUALISM vs. racism (Wortham) 1: 13 INFLATION Cost of living (Poirot) 10:8 "Creative federalism" (Read) 7:9 Fiat money inflation in France (White) 12:23 How to finance a war (Fox) 7: 12 Interest rates are rising (Sennholz) 12: 17 INSTITUTE of Directors (London) Assault on free enterprise, The. 8: 41-44 INSURANCE problems (Poirot) 5: 30 INTEREST RATES Coming serfdom in India (Shenoy) 12:36n Interest rates are rising (Sennholz) 12: 13 INVESTMENT, private Case for international investment (Hazlitt) 8:16 Private enterprise •.. (U.S. Steel Corp.) 6:37 JENNINGS, Frederic Beach, Jr.

Values, exchange, and profits: the bedrock of economic science. 9: 52-58 JOHNSON'S defense of property, Dr. (Val lance) 9:16 JOURNAL of Commerce Serpentine gauntlet, The. 1: 45-47 JUSTICE Please step aside (Roche) 6: 13 KENNEDY, John F. - ideas of Flight from reality, 25 (Carson) 10:42 KEYNES, John Maynard - ideas of For want of something better (Chamber lain - Book review) 10:60 LABOR/wages/unions Case of the free rider (Farrell) 10: 12 Protective taxes and wages (Sumner) 11: 56 Supremacy of the market (Mises) 10:19 LAND reform Fallacy of foreign aid (Hazlitt) 2: 46 LAW of liberty (Sollitt) 11: 33 LEWIS, Edward A. In case of difference. 11: 22-23 LIBERTY. See Freedom LITERA TURE/books/reading First liberty library (Rothbard) 10:56 Flight from reality, 17, 21 (Carson) 2:29; 6:42 Lord Gifford's legacy (Opitz) 3: 36 Some thoughts on censorship (Opitz) 6: 56 MACRO malady (Read) 2:52 MARKET price of burros (Bellerue) 4:44 MARX, Karl - ideas of Flight from reality, 17, 20 (Carson) 2:29; 5:42 MEEK, Loyal Freedom to sift and winnow. 9:50-51 MELIORISM Flight from reality, 17, 20, 22, 25 (Carson) 2:24; 5:33; 7:40; 10:30 MEN of prey (Read ) 10: 21 MERCANTILISM Flight from reality, 18 (Carson) 3:16 Progress or regress? (Sennholz) 4: 33 MISES, Ludwig von How price control leads to socialism. 6:23 25 Observations on the Russian reform move ment. 5:23-29 Supremacy of the market, The. 10: 17-20 MONEY and free markets ... (Watts) 1:48 MONOPOLY, defined Flight from reality, 20 (Carson) 5: 38 MONT Pelerin Society Adenauer's Memoirs (Chamberlain - Book review) 8: 63 Businessman - hero or villain? (Peterson) 7:52 Case for international investment (Hazlitt) 8:16 Welfare without the welfare state (Brozen) 12:40n MORAL foundation of freedom (Husted) 3:23 MOREELL, Ben Safety of the people, The. 9: 3-13 NATURAL law/order Author of liberty (Opitz) 1:3 Law of liberty (Sollitt) 11:33 Lord Gifford's legacy (Opitz) 3: 36 Safety of the people (Moreell) 9: 3 NEGATIVE income tax Income without work (Hazlitt) 7: 31 State swelled and the people shrank (Chamberlin) 5: 18 NEWELL, Robert K.

Freedom through education. 5: 11-14 OBSERVATIONS on the Russian reform movement (Mises) 5:23 OF birds and men (Spiegel) 4:51 ON heroes, history, and our heritage (Thorn ton) 8:12 ON the redistribution of incomes (Shenoy) 4:18 OPITZ, Edmund A. Author of liberty. 1:3-5 Freedom nobody wants, The. 11:3-16 Lord Gifford's legacy. 3: 36-42 Rats are chasing the cats, The. 2: 21-23 Some thoughts on censorship. 6: 56-60 See also Book reviews PATON, W. A. U.S.A.: disaster area. 2: 16-20 PAY TV ... (Gillett) 4:38 PETERSON, William H. Businessman - hero or villain? The. 7: 52-59 PLANNING, governmental Coming serfdom in India (Shenoy) 12: 35 Flight from reality, 18, 25 (Carson) 3:8; 10:33 Foreign aid ... (Bauer) 12:28 Macro malady (Read) 2: 52 State economic planning ... (Chamberlin) 1:27 Two philosophies of freedom (SolIitt) 5:48 Why humans must be free (Watts) 3:5 PLEASE step aside (Roche) 6: 13 POIROT, Paul L.

Cost of living, The. 10: 8-11 Insurance problems. 5: 30-32 Property and poverty. 2: 10-15 Scarcity of silver, The. 5:64 Vital secret, The. 9: 23-24 Weakness corrupts. 8:3-12 POLITICAL action Canute and the counting of noses (Fox) 10:44 Flight from reality, 23, 26 (Carson) 8:49; 11:40,50 Principle of political polarity (Stewart) 5:57 Serpentine gauntlet (Journal of Commerce) 1:45 POLITICAL privileges/interests/pressure groups Flight from reality, 23, 26 (Carson) 8:49; 8:46 Welfare without the welfare state (Brozen) 12:43 "POVERTY" and government action Armchair skirmish against poverty (Wheeler) 4: 23 Cure for poverty. . . (Chamberlin) 2: 3 Income without work (Hazlitt) 7: 20 Property and poverty (Poirot) 2: 10 Welfare without the welfare state (Brozen) 12:40 61 PRICES, control and regulation of Government veto system (Fertig) 11: 17 How price control leads to socialism (Mises) 6:23 Serpentine gauntlet (Journal of Commerce) 1:45 Will the real price administrator please stand up! (Howard) 4:46 PRICES/pricing Cost of living (Poirot) 10: 8 Values, exchange, and profits ... (Jennings) 9:52 PRINCIPLE of political polarity (Stewart) 5:57 PRIVATE enterprise in the public interest (U.S. Steel Corp.) 6:37 PRIV ATE rights and government (Suther land) 6:26 PROFIT-and-loss system Six misconceptions about consumer welfare (Dean) 1:22 Values, exchange, and profits ... (Jennings) 9:52 PROGRESS - the flower of freedom (Read) 6:3 PROGRESS or regress'? (Sennholz) 4:33 PROP AGANDA, governmental Flight from reality, 26 (Carson) 11: 48,50, 53 PROPERTY, Dr. Johnson's defense of (Val lance) 9:16 PROPERTY and poverty (Poirot) 2:10 PROTECTIVE taxes and wages (Sumner) 11:56 PUNCH (London) - cartoon Decries "No compromise." 10:28-29 RACIAL minorities Black and conservative (Chamberlain Book review) 12: 53 Fiasco of urban renewal (Anderson) 3: 56 Flight from reality, 24 (Carson) 9: 36 Individualism vs. racism (Wortham) 1: 13 RAILROADS Flight from reality, 17 (Carson) 2:35 Today's robber barons (Schumacher) 3:42 RAND, Ayn Roots of war, The. 11: 24-32 RATS are chasing the cats (Opitz) 2:21 READ, Leonard E.

Case for willing exchange, The. 9: 25-32 "Creative federalism." 7: 9-11 Macro malady, The. 2:52-59 Men of prey. 10:21-27 Progress - the :trOWel' of freedom. 6: 3-12 Some reflections on robots. 8: 32-40 REALITY, flight from. See Carson 62 THE FREEMAN December REAM, Norman S. Clergyman looks at free enterprise, A. 8: 26-31 See also Book reviews REDISTRIBUTION of incomes, On the (Shenoy) 4:18 RELA TIVISM/relativity, moral and intellec tual Erosion of the mind (Brown) 5: 3 Relativity of relativity (Upton) 1:6 RELIGION /morality /ethics Am 1 my brother's keeper? (Bird) 5:54 Relativity of relativity (Upton) 1:6 Safety of the people (Moreell) 9: 9 ROBOTS, Some reflections on (Read) 8:32 ROCHE, George Charles, III American federalism: origins. 12: 3-12 Please step aside. 6: 13-16 ROOSEVELT, Franklin D. - ideas of Flight from reality, 25, 26 (Carson) 10:42; 11:45,46 Two philosophies of freedom (Sollitt) 5: 51 ROOSEVELT, Theodore - ideas of Flight from reality, 25, 26 (parson) 10:33; 11:46 ROOTS of war (Rand) 11: 24 ROTHBARD, Murray N.

First liberty library, The. 10: 56-59 ROYSTER, Vermont To the gallows. 3: 33-35 RUSSIA and Iron Curtain countries Observations on the Russian reform move ment (Mises) 5:23 State economic planning ... (Chamberlin) 1 :27 Why humans must be free (Watts) 3:5 SACRILEGE and cupidity ... (Bradford) 2:38 SAFETY of the people (Moreell) 9:3 SARNOFF, David State swelled and the people shrank (Chamberlin) 5:19 SCARCITY of silver (Poirot) 5:64 SCHOOLS, private Independent school (Gummere) 7: 50 Visit with a headmaster (Wheeler) 10:49 SCHOOLS, public Flight from reality, 22, 24 (Carson) 7:45; 9:35 Weakness corrupts (Poi rot) 8: 7 SCHUMACHER, K. Fritz Today's robber barons. 3: 42-45 SEMANTICS/language/terminology Case for willing exchange (Read) 9: 25 "Creative federalism" (Read) 7:9 Erosion of the mind (Brown) 5: 3 SENNHOLZ, Hans F. Interest rates are rising. 12: 13-22 Progress or regress? 4: 33-37 SERPENTINE gauntlet (Journal of Com merce) 1:45 SE,T my people free (Breese) 10: 3 SHENOY, Sudha R.

Coming serfdom in India, The. 12: 35-39 On the redistribution of incomes. 4: 18-22 SHOROCK, Donald Walter Admission of failure, An. 7: 36-37 SILVER Decline and Fall . . . (Chamberlain - Book review) 6:61 Scarcity of silver (Poirot) 5:64 SIX misconceptions about consumer welfare (Dean) 1:22 SMEETH, William B. Visit with a headmaster .(Wheeler) 10:49 SOCIAL reform Admission of failure (Shorock) 7: 36 Flight from reality, 16, 18, 19, 21, 24, 25, 26 (Carson) 1:34; 3:8; 4:3; 6:42; 9:35; 10:30; 11:36 SOCIAL security Insurance problems (Poi rot) 5: 30 SOCIALISM Flight from reality, 26 (Carson) 11: 36 How price control leads to socialism (Mises) 6:23 Observations on the Russian reform movement (Mises) 5:23 SOCIALISM by seduction (Chamberlin) 6: 17 SOCIALISM, U. S. style (Hazlitt) 9:33 SOLLITT, Kenneth W. Law of liberty, The. 11: 33-35 Two philosophies of freedom. 5: 48-53 Voice of a brother's blood, The. 9: 14-15 SOME reflections on robots (Read) 8:32 SOME thoughts on censorship (Opitz) 6: 56 SPIEGEL, Der Of birds and men. 4:51-53 SPIRIT of liberty (Hand) 7: 18 STATE economic planning ... (Chamberlin) 1:27 STATE swelled and the people shl'ank (Chamberlin )5:15 STEWART, Daniel K.

Principle of political polarity, The. 5: 57-60 SUBSIDIES, effects of Income without work (Hazlitt) 7:31 U.S.A.: disaster area (Paton) 2:16 Weakness corrupts (Poirot) 8: 3 Welfare without the welfare state (Brozen) 12:50 SUBWAYS Socialism, U. S. style (Hazlitt) 9:33 SUGAR Serpentine gauntlet (Journal of Commerce) 1:45 SUMNER, William Graham Protective taxes and wages. 11: 56-59 SUPREMACY of the market (Mises) 10:17 SUTHERLAND, George Private rights and government. 6 :26-36 SWEDEN'S great society (Husbands ) 1: 18 TAXATION, effects of Income without work (Hazlitt) 7:29 Today's robber barons (Schumacher) 3:42 TELEVISION Pay TV • , • (Gillett) 4:38 THORNTON, Robert M. On heroes, history, and our heritage. 8: 12 15 See also Book reviews TO the gallows (Royster) 3: 33 TOCQUEVILLE, Alexis de - ideas of State swelled and the people shrank (Chamberlin) 5:16 TODAY'S robber barons (Schumacher) 3:42 TRADE, international Case for international investment (Hazlitt) 8:16 Protective taxes and wages (Sumner) 11: 56 TRANSPORTATION subsidies Weakness corrupts (Poi rot) 8: 9 See also Railroads: Subways TRUTH/principles In case of difference (Lewis) 11:22 Rats are chasing the cats (Opitz) 2:21 TWO philosophies of freedom (Sollitt) 5:48 UNDEVELOPED countries Foreign aid . . . (Bauer) 12: 25 On the redistribution of incomes (Shenoy) 4:18 U.S.A.: disaster area (Paton) 2:16 U. S. CONSTITUTION, basic principles Flight from reality, 23, 24 (Carson) 8:45: 9:35 Moral foundation of freedom (Husted) 3:23 Safety of the people (Moreell) 9: 3 U. S. CONSTITUTION, checks and balances American federalism ... (Roche) 12: 3 Constitutions should say no (Chamberlin) 7:8 U. S. STEEL Corporation Private enterprise in the public interest (from 1965 Report) 6:37-41 U. S. SUPREME Court Flight from reality, 23, 24 (Carson) 8:58; 9:35 UPTON, Miller Relativity of relativity, The. 1: 6-12· URBAN renewal, Fiasco of (Anderson) 3: 46 63 VALLANCE, Stephen R.

Dr. Johnson's defense of property. 9: 16-22 VAL UE theory Market price of burros (Bellerue) 4:44 Values, exchange, and profits ... ( Jennings) 9:52 VISIT with a headmaster (Wheeler) 10:49 VITAL secret (Poirot) 9: 23 VOICE of a brother's blood (Sollitt) 9:14 WAR Flight from reality, 18 (Carson) 3:17 How to finance a war (Fox) 7: 12 Roots of war (Rand) 11: 24 Voice of a brother's blood (SolIitt) 9: 14 WATTS, V. Orval Money and free markets: a summary. 1 :48-55 Why humans must be free. 3: 3-7 WEAKNESS corrupts (Poirot) 8: 3 WEALTH/income, equality/inequality Cure for poverty ... (Chamberlin) 2:5 Dr. Johnson's defense of property (Val lance) 9:16 On the redistribution of incomes ( Shenoy) 4:18 Welfare without the welfare state (Brozen) 12:40 WEATHER U.S.A.: disaster area (Paton) 2:16 WELFARE state Of birds and men (Spiegel) 4:51 State swelled and the people shrank (Chamberlin) 5: 15 Sweden's great society (Husbands) 1:18 WELFARE .without the welfare state ( Brozen) 12: 40 WHEELER, Timothy J.

Armchair skirmish against poverty, The. 4: 23-33 Visit with a headmaster. 10:49-55 WHITE, Andrew Dickson Fiat money inflation in France. 12: 23-24 WHY humans must be free (Watts) 3:3 WILL the real price administrator please stand up! (Howard) 4:46 WILLING exchange, Case for (Read) 9:25 WILSON, Woodrow - ideas of Flight from reality, 23, 25, 26 (Carson) 8:54; 10:41; 11:45 Men of prey (Read) 10:21 WORTHAM, Anne Individualism versus racism. 1: 13-17 Book reviews and fillers are listed on page 64.

64 THE FREEMAN December BOOK REVIEWS (Reviewer's name in parentheses) Memoirs, 1945-53 LARSON, Martin A. Church wealth and business income (Opitz) 4:57 LEKACHMAN, Robert. The age of Keynes (Chamberlain) 10:60 MARTS, Arnaud C. The generosity of Amer icans (Christenson) 11: 63 MOLLENHOFF, Clark R. Despoilers of democracy (Chamberlain) 3: 60 MORGENTHAU, Hans. J. Scienti.fic man versus power politics (Thornton) 4:61 MUGGERIDGE, Malcolm. The most of Mal:" colm Muggerridge (Thornton) 9:62 RICKENBACKER, William F. Wooden nick els (Chamberlain) 6:61 ROGERS, Donald. The end of free enterprise (Chamberlain) 9: 59 RUSHDOONY, Rousas J. This independent republic (Chamberlain) 1:59 SCHUYLER, George S. Black and conservative: autobiography (Chamberlain) 12:53 STRA USS, Leo and CROPSEY, Joseph, eds. History of political philosophy (Opitz) 2:63 WEA VER, Richard. Life without prejudice (Thornton) 3: 63 WEST, E. G. Education and the state (Chamberlain) 5:61 ADENAUER, Konrad.

(Chamberlain) 8: 60 BOORSTIN, Daniel J. The image: a guide to pseudo-events in America (Thornton) 1:63 CONE, Carl B. Burke and the nature of politics (Opitz) 4: 62 CURRY, James E. Public regulation of the religious use of land (Opitz) 4: 57 DOS P ASSOS, John. The best times (Cham berlain) 11: 60 GARBER, Lyman A. Of men and not of law (Chamberlain) 7:60 GWYNN, F. L. and BLOTNER, J. L., eds. Faulkner in the university (Thornton) 9:63 HERMANN, Mogens V. Contribution and re ward (Chamberlain) 2: 60 IBELE, Oscar H. Introduction to political science (Opitz) 2:63 INGWALSON, Kenneth W., ed. Your church - their target (Ream) 7:63 JAMES, Ralph and Estelle. Hoffa and the teamsters: a study of union power (Cham berlain) 4: 54 KIRK, Russell. The intemperate professor and other cultural splenetics (Thornton) 8:63 KRUTCH, Joseph Wood. Henry David Tho reau (Thornton) 1: 62 FILLERS MILTON, John. A good book, 6:60 MISES, Ludwig von. The politics of peace, 11:32 Profit-seeking business, 9: 58 NAPOLEON. The misfortunes of interven tion, 8:44 PASSER, Harold C. Consumerism vs. com munism, 11: 16 PLATO. First principles, 2:51 PTAH-HOTE·P. Ancient advice, 1:5 PUFFENDORF, Samuel de. Benefactor to his fellows, 8: 31 RICHMOND NEWS LEADER. Against na ture, 4:53 RUSSELL, Dean. Persons and groups, 2:20 SHUMAN, Charles B. The greatest threat, 5:22 SPENCER, Herbert. A question of property, 9:22 STONE, Louis. Subsidies work, 5: 29 SUMNER, William Graham. Princes and paupers, 7:37 TEN HOOR, Marten. We cannot escape our selves, 10: 55 WHITE, Andrew Dickson, Pay cash, 7: 17 AMIEL, Henri. Order, 1:47 ANDERSON, Maxwell. Treason to freedom, 1:64 CURTISS, W. M. Comparative advantages, 11:59 EMERSON, Ralph Waldo. Self-reliance, 1: 12 FEATHER, William. Extra, 5: 14 Labor saver, 8:40 Opportunities to "do good," 1: 55 Pioneers, 4: 64 FISHER, Paul. Lincoln, today, 3:45 FLEMING, Harold. Climate for progress, 8:25 HARPER, F. A. Mutual gain, 4:45 What price control means, 6: 25 HAZLITT, Henry. Marxism in one minute, 2:9 HONG KONG Peninsula Hotel. The crafty Communists, 1: 26 JACOBSON, Victor. Individuals know best, 7:51 LOWELL, James Russell. Work and appli cation, 5: 53 LUBELL, Samuel. Political decisions, 6: 41 MADISON, James, Majority rule, 10:43 Separation of powers, 9 :51 BOUND VOLUMES OF fheFreemilo-19G5 Attractively sewn in a single volume with hard cover, the 12 issues from January through December, fully in dexed-768 pages, for handy reference to the latest literature on freedom.

Onlt $5.00 These bound volumes of THE FREEMAN match in appearance and otherwise continue the 12-volume series of Essays on Liberty containing selections from THE FREEMAN and other Foundation releases back to 1946. (A separate cumulative subject matter, author, and title index is available for the 12 volumes of Essays on Liberty. $1.00.) Bound volumes of THE FREEMAN for 1966 will be available shortly after the end of the year. ORDER YOUR BOUND VOLUMES NOW! THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, N. Y. 10533 Please send me: THE FREEMAN for 1965 $ 5.00 0 THE FREEMAN for 1965 and 1966 (The 1966 volume to be shipped when ready) $ 9.00 0 ESSAYS ON LIBERTY (Set of 12, with cumulative index) Cloth $30.00 0 Paper $20.00 0 o CHECK ENCLOSED 0 SEND INVOICE NAME _ STREET _ CITY _ STATE ZIP CODE, _ PEACE ON EARTH• There has never been nor will there ever be a time when all men are equal in their capacities and conditions here on earth.

The nature of the individual as well as the nature and continuity of human society, demands these unfailing differences. Without the wide diversificationof talents, taste, abilities, and ambitions that now and always exist among men, society could neither feed nor clothe itself. It is consequently a wise provision of Providence that causes the perpetuation of endless variety in the desires and capabilities of human beings. Sparked with personal liberty and the natural personal incentive to own property and advance economically, this conglomeration of in equality synchronizes into a great engine for the sustenance and progress of mankind. C L ARE NeE MAN ION , The Key to Peace

About this edition

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Title: The Freeman 1966

Author: Foundation for Economic Education

First published: 1950

Series: The Freeman, volume 16

Source file: The Freeman 1966.pdf

Source page: https://freecapitalists.org/books/the-freeman-1966/

Converted: 2026-08-09 by The Liberty Archive (freecapitalists.org), converter v6

Table of Contents

The Freeman 1966

Cont

- Author of Liberty; E. Opitz
- The Relativity of Relativity;M. Upton
- Indivitualism versus Racism; A. Wortham
- Sweden's Great Society; S. Husbands, Jr.

- 6 Misconceptinos about Consumer Welfare; J. Dean

- State Economic Planning; W. H. Chamberlin

- The Flight from Reality 16: From Ideology to Myth I; C. Carson

- The Serpentine Gauntlet
- Money
- And Free Markets A Summary; V. O. Watts
- The Human Desire for Freedom; E. Y. Breese
- Book Reviews

February

- The Cure for Poverty; W. H. Chamberlin
- Property and Poverty; P.L. Poirot
- USA Disaster Area; W.A. Paton
- The Rats are Casing the Cats; E. A. Opitz

- The Flight From Freedom 17: From Ideology to Mythology II; C. Carson

- Sacrilege and Cupidity; M. E. Bradford
- The Fallacy of Foreign Aid; H. Hazlitt
- The Macro Malady; L.E. Read
- Book Reviews

March

- Why Humans must be Free; V. O. Watts

- The Flight from Reality 18: The Origins of Reform Methods; C. Carson

- The Moral Foundation of Freedom; R. Husted
- To the Gallows; V. Royster
- Lord Gifford's Legacy; E. Opitz
- Today's Robber Barons; K. F. Schumacher
- The Fiasco of Urban Renewal; M. Anderson
- Book Reviews

April

- The Flight from Reality 19: The Flight from Economics; C. Carson

- On the Redistribution of Incomes; Sudha Shenoy

- The Armchair Skirmish against Poverty; R. J. Wheeler

- Progress to Regress; H. Sennholz

- Pay TV: The Right to Complete - and to Speak; E. Gillett

- Market Price of Burros; A. Bellerue

- Will the Real Price Adminstrator Please Stand Up! I. E. Howard

- Of Birds and Men

- Book Reviews

May

- Erosion of the Mind; H. Brown

- Freedom Through Education; R. K. Newell

- The State Swelled and the People Shrank; W. H. Chamberlin

- Observations on the Russian Reform Movement; L. von Mises

- Insurance Problems; P.L. Poirot

- The Flight from Reality 20: Meliorist Economics; C. Carson

- 2 Philophies of Freedom; K. Sollitt
- Am I my brother's keeper? H. S. Bird
- Book Reviews

June

- Progress: the Flower of Freedom; L.E. Read
- Please Step Aside; G.C. Roche III
- Socialism by Seduction; W. H. Chamberlin

- How Price Control Leads to Socialism; L. von Mises

- Private Rights and Government; G. Sutherland

- Private Enterprise in the Public Interest

- The Flight From Reality 21: The Bent to Destruction; C. Carson

- Some Thoughts on Censorship; E. Opitz

- Book Reviews

July

- Constitutions Sould Say No; W. H. Chamberlin

- Creative Federalism; L.E. Read
- How to Finance a War; W. Fox
- The Spirit of Liberty; L. Hand
- Income Without Work; H. Hazlitt
- An Admission of Failure; D. W. Shorock

- The Flight from Reality 22: Divide and Conquer; C. Carson

- The Independent School; J. Gummere

- The Businessman - Hero or Villain? W. Peterson

- Book Reviews

August

- Weakness Corrupts; P.L. Poirot

- On Heroes, History, and Our Heritage; R. M. Thornton

- The Case for International Investment; Henry Hazlitt

- A Clergy Looks at Free Enterprise; N. S. Ream

- Some Reflections on Robots; L.E. Read

- An Assault on Free Enterprise

- The Flight from Reality 23: The Flight fomr the Constitution, Part I; C. Carson

- Book Reviews

- The Safety of the People; B. Morrell

- The Voice of the Brother's Blood; K. Sollitt

- Dr. Johnon's Defense of Property; S. Vallance

- The Vital Secret; P. L. Poirot
- The Case for Willing Exchange; L.E. Read
- Socialims US Style; H. Hazlitt

- The Flight from Reality 24: The Flight form the Contitution Part II; C. Carson

- Freedom to Sift and Winnow; Loyal Merk

- Values, Exchange, and Profits; F. B. Jennings, Jr.

- Book Reviews

October

- The Cost of Living; P.L. Poirot
- The Case of the Free Rider; P.A. Farrell
- The Supremecy of the Market; L. von Mises
- Men of Prey; L.R. Read
- The Freeman asks: Why Compromise?

- The Flight From Reality 25: Political Experimentaion: The Four Year Plans; C. Carson

- The Canute and the Counting of Noses; W. Fox

- Visit with a Headmaster; T. J. Wheeler
- The First Liberty Library; M. N. Rothbard
- Book Reviews

November

- The Freedom Nobody Wants; E. Opitz
- The Government Veto System; L. Fertig
- In Case of Difference; E. Lewis
- The Roots of War; A. Rand
- The Law of Liberty; K. Sollitt

- The Flight from Reality 26: Conclusion: The Pen AND the Sword; C. Carson

- Protective Taxes and Wages; W. G. Sumner

- Book Reviews

December

- American Federalism; G. C. Roche III
- Interest Rates are Rising; H. Sennholz
- Fiat Money Inflation in France; A. White
- Foreign Aid; P. Bauer
- The Coming Serfdom in India; Sudha Shenoy
- Welfare; Y. Brozen
- Without the Welfare State
- Book Reviews

Index
Book Reviews
About this edition