Date: 1950-01-01T07:00:00+00:00
Keywords: liberty
Description: The Foundation for Economic Education The Freeman 1972

The Freeman 1972

Foundation for Economic Education
the Freeman VOL. 22, NO.1. JANUARY 1972 In Search of a New Monetary Order Hans F. Sennholz 3 Monetary alchemists have yet to find an internationally acceptable substitute for gold. Legal Tender: Sellers,Beware Paul L. Poirot 12 Why national socialist monetary policy breaks down in international trade. Why Some Are Poorer Henry Hazlitt 15 Concerning cases of personal poverty in industrial societies and possible ways to help. Economics:ABranch of Moral Philosophy Right and wrong ways to cope with the problem of scarcity. Leonard E. Read 22 Moralityand Controls Milton Friedman 28 By making actions illegal that are in the pUblic interest, controls undermine individual morality. Can We Sustain Prosperity? W. A. Paton 33 Have Americans so softened, in their affluence, that they can no longer negotiate the free man's path to progress? The Foundingof the AmericanRepublic: 6. The MercantileImpasse Clarence B. Carson 42 How British mercantile policies interfered with business and trade in the colonies and led to war.

Book Reviews: 55 "The Genius of the West" by Louis Rougier "Politically Impossible ... ?" by W. H. Hutt "Financial Policy in a Changing Economy" by Enders M. Voorhees "The Little House Books - A· Pioneer Chronicle" by Laura Ingalls Wilder Any~me wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

the Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON-HUDSON. N. Y. 10533 TEL: (914) 591·7230 LEONARD E. READ PAUL L. POIROT p1resident, Foundation for Economic Education Managing Editor THE F R E E MAN 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. 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, 1972, 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; 10 for $2.50; 25 or more, 20 cents each.

Articles from this journal are abstracted and indexed in Historical Abstracts and/or America: History and Life. THE FREEMAN also is available on microfilm, Xerox University Microfilms, Ann Arbor, Mich· igan 48106. Permission granted to reprint any article from this issue, with appropriate credit, except "Why Some Are Poorer" and "Morality and Controls."

ij~ ~I\~©~ @~ ~ ~m ~@~~~~W @~[ID~~ HANS F. SENNHOLZ EVER SINCE President Nixon sus pended gold payments, on August 15, 1971, the question of realistic par values of the world's currencies has become a vexing international pclitical issue. Governments and CEntral banks are searching for new rules that permit "more flex ible" currency fluctuations. Some thing beyond dollars and gold is needed, they believe, to provide a solid base for a new monetary or der. Return to the old system spawned at Bretton Woods, N. H., in 1944, is out of the question. It was a gold and dollar standard, with the U.S. dollar payable in gold ,at $35 an ounce while other countries pegged their moneys to the dollar, holding them within a range of 1 per cent up or down Dr. Sennholz heads the Department of Eco nomics at Grove City College and is a noted writer and lecturer on monetary and economic principles and practices.

from the parity registered with the lIB-country International Monetary Fund. Now, since the suspension of gold payments, the world has been waiting for monetary authorities to find a new monetary system. .The process must necessarily be slow, as a political solution is sought to economic problems that were generated by various polit ical considerations. After all, the depreciation of the U.S. dollar, which finally led to the gold pay ment suspension, was a political act by the monetary authorities of several Federal administrations. The decision to "float" the dollar rather than face the humiliation of a formal devaluation was also a political act. Similarly, the other governments are motivated polit ically in their attempts at mone tary management. 3 4 THE FREEMAN January While most "experts" make the government, its powers and objec tives, their point of departure for monetary deliberation, a few schol ars continue to base their inqui ries on the fundamental principles that flow from individual choice and action. In their judgment, the factors that affect the exchange relations between various national currencies rest on the economic principles that determine the pur chasing power of each and every type of medi um of exchange, whether it is a precious metal or government fiat money.

As they see it, the purchasing power of any monetary unit de pends on the relation between the demand for and the quantity of money in individual cash holdings. The demand for money is purely individual, although a great many extraneous factors may influence this demand. There is, for' in stance, the expectation of future changes in the exchange value of money. An expected fall tends to reduce the demand for money and thus its purchasing power; an ex pected rise brings about the oppo site. Also, the availability of goods affects the demand for money. In an expanding economy when more and better goods are offered on the market, the demand for money tends to rise; in a declining econ omy, where capital is consumed and the division of labor breaks down, the demand for money tends to decline.! The Stock of Money The supply of money is the stock of money available for ex change. During the ,age of the gold standard it consisted of gold bullion, gold coins and their vari ous substitutes, such as bank notes, tokens, and demand de posits. In this age of government currency, it consists of fiat money and its substitutes, such as tokens and demand deposits. The substi tutes may either be fully backed by money proper or else they are fiduciary, Le., uncovered. Thus, an expansion or contraction of fidu ciary media directly a,ffects the total quantity of money available for exchange.

A change in the money relation through changes in either the de mand for money or the stock of money affects changes in the pur chasing power of money. As one factor of demand or supply can not perfectly offset changes in the other factors, money can never be neutral. Now, if there a.re two or more media of exchange, such as gold or silver, or va.rious fiat cur rencies, what determines the ex change ratio between the various' 1 Ludwig von Mises, The Theory of Money and Credit (Irvington-on-Hudson, N. Y.: The Foundation for Economic Ed ucation, Inc., 1971), p. 97 et seq.

1972 IN SEARCH OF A NEW MONETARY ORDER 5 media? Their purchasing powers! That is to say, exchange ratios correspond to the ratio of each one's purchasing power in terms of all other goods. Market forces tend to establish the parity be tween the purchasing powers and thus their exchange ratios. The equilibrium exchange rate is called the purchasing power parity. Gold and Silver as Money For more than 2,500 years the civilized world used gold and silver as money. These metals became valuable media of exchange be cause they were not only desirable for nonmonetary uses, but also suited so well for economic ex changes as they were durable, portable, and divisible. Silver was generally used for small transac tions and gold in aU larger ex changes. And throughout the ages their exchange ratios were deter mined by their purchasing power parities.. If one ounce of gold bought a horse that also could be bought for 10 ounces of silver, the parity between gold and silver was 1: 10. If for any reason the ex change rate differed from this parity, arbitrage would soon re store the exchange ratio to its purchasing power parity. If, in our example, the exchange ratio should be 11: 1 and the purchas ing power 10:1 it would be very profitable to exchange gold for silver and then buy commodities.

But such money exchanges would soon drive the ratio back to its parity. In all countries where gold was the standard money, the exchange ratios betweein gold coins of dif ferent weight and fineness were determined simply by this differ ence. If one coin weighed one ounce and another coin of equal fineness 'only one-third of an ounce, the exchange ratio obviously was 1 :3. Under the gold-coin standard, commonly called the orthodox or classical gold· standard, gold coins were the standard money. Nation al currencies represented a certain quantity of gold of a certain fine ness. The U.S. dollar, for example, consisted of 25.8 grains of gold, nine-tenths fine, before the 1934 devaluation, and 15 5/21 grains thereafter, or' in troy ounces 1/20.67 and 1/35 respectively. The U.S. $20 gold coin (Double Eagle) contained 30.09312 grams of fine gold, the $10 coin (Eagle) 15.04656 grams, and the $5 coin (Half Eagle) 7.52328 grams. The British Sovereign contained 7.322 grams, the Mexican 50 Peso coin 37.5 grams, the French 20 Francs coin, also called Napoleon, 5.8 grams, and the Swiss 20 Francs coin 5.8 grams. 2 Exchange ratios 2 Cf. Franz Pick, Currency Yearbook (New York: Pick Publishing Corp., 1970) , pp. 13-15.

6 THE FREEMAN January between the various currency units consisting of gold thus were determined by their relative meas ures of gold. International Acceptability The world had an international currency while on the classical gold standard. It evolved without international treaties, conventions or institutions. Noone had to make the gold standard work as an international system. When the leading countries had adopted gold as their standard money the world had an international cur rency without problems of con vertibility or even parity. The fact that the coins bore different names and had different weights hardly mattered. As long as they consisted of gold, the national stamp or brand did not negate their function as an international medium of exchange. The purchasing power of gold, tended to be the same the world over. Once it was mined, it ren dered exchange services through out the world market, moving back and forth and thereby equalizing its purchasing power except for the costs of transport. It is true, the composition of this purchas ing power differed from place to place. A gram of gold would buy more labor in Mexico than in the U.S. But as long as some goods were traded, gold, like any other economic good, would move to seek its highest purchasing power and thereby equalize its value through out thenworld market. As an coins and bullion were traded in terms of weight of gold, there were no "exchange rates" such as those between gold and silver, or vari ous fiat monies.

The Exchange-Rate Dilemma The departure from the gold coin standard, set the stage for the present exchange-rate dilem ma. At first, governments began to restrict the actual circulation of gold. They gradually estab lished the gold-bullion standard in which government or its central bank was managing the country's bullion supply. Gold coins ,vere withdrawn from individual cash holdings and national currency was no longer redeemable in gold coins, but only in large, expensive gold bars. This standard then gave way to the gold-exchange stand ard in which the gold reserves were replaced by trusted foreign currency that was redeemable in gold bullion at a given rate. The world's monetary gold was held by a few central banks, such as the Bank of England and the Federal Reserve System, that served as the reserve banks of the world. 3 But 3 Cf. Leland B. Yeager, International Monetary Relations (New York: Harper & Row, Publishers, 1966), p. 251 et seq.

1972 IN SEARCH OF A NEW MONETARY ORDER 7 after World War II, the Bank of England which was holding the gold reserves for more than 60 countries, commonly called the pound sterling area, gradually lost its eminent position. It began to hold most of its reserves in U.S. dol lar claims to gold, which made the Federal Reserve System the ulti mate reserve bank of the world; thus the gold-exchange standard became a de facto gold and dollar standard. Finally, during the ac celerating inflation and credit ex pansion of the 1960's in the U.S., the dollar gradually fell from its respected position. Several mone tary crises which triggered world wide demands for dollar redemp tion greatly depleted the Ameri can stock of gold, and created precarious payment situations. Altogether, in less than four years, we experienced seven cur rency crises that foretold the end of the international monetary sys tem. In November, 1967, Great Britain devalued the pound and a number of other countries im mediately followed suit. In March of 1968, under the pressure of massive pound sterling liquida tion, the nine-nation gold pool was abandoned and the two-tier sys tem adopted. The third crisis oc curred in France in May, 1969, when political riots, followed by rapid currency expansion, greatly weakened the franc which was later devalued. The fourth crisis erupted in September, 1969, when massive dollar conversions to West German marks forced the German central bank to "float" the mark and then revalue it upward by 9.3 per cent. The·.fifth crisis occurred in March and early April, 1971, when a new flight from the dollar threatened to inundate several European central hanks. In a con certed effort, the U.S. Treasury and the Export-Import Bank en deavored to "sop up" the dollar flood. The sixth crisis began in May, 1971, when a new flow of dollars into German marks, Swiss francs, and several other curren cies caused the mark to float anew, the Swiss franc to be revalued up ward by 7.07 per cent, and several other currencies to be allowed to float or be revalued. The seventh and last crisis was of such mas sive proportions that President Nixon was forced to announce the collapse of the· old monetary order.

Why the Breakdown of International Monetary Relations? What had caused this gradual deterioration of international mon etary relations? An understanding of the causes may provide an an swer to the dilemma, prevent further deterioration, and hope fully find a cure to all its somber consequences. The popular. explanation usually 8 THE FREEMAN January runs as follows: The rapid 'worsen ing of the U.S. international bal ance-of-payment deficit was the proverbial straw that broke the system's back. From a small sur plus of $2.7 billion in 1969, achieved mainly through various government manipulations that amounted to window dressing, the 1970 payments deficit soared to an all-time record deficit of some $10.7 billion, on official settlement basis, i.e., official settlements be tween governments only. Then, in May, 1971, the U.S. Commerce De partment announced that the first quarter 1971 deficit had grown to a record $5.4 billion. 4 And finally, private sources estimated that in 1971, up through mid-August, some $22 billion more dollars flowed out of the country than came in.

These new payment deficits were added to the accumulated un paid deficits of the U.S. for many years. U.S. dollars and short-term claims to dollars in foreign hands amounted to $43 billion at the end of 1970. After deducting U.S. short-term claims on foreigners our net obligations exceeded $32 billion, plus the current deficits mentioned above. And while the U.S. gold stock stood at $11 billion, the lowest level since World War II, it became obvious that the U.S. 4 Federal Reserve Bulletin, Sept., 1971, p. A75. could not meet its foreign obliga tions in gold.5 Dr. Arthur F. Burns, Chairman of the Federal Reserve Board, probably reflected the official posi tion of the U.S. government when, on May 20, 1971, he blamed for eign governments for the precari ous situation. He urged them to release their restraints on imports and American investments, and to help us with our foreign military operating expenses. Raising our interest rates, he asserted, was not the right way to improve the ail ing dollar. He advocated more U.S.

borrowing from the Eurodollar market through Treasury certifi cates and, in order to become more competitive in world markets, an "incomes policy" that would re strain the cost-push momentum of American labor. 6 Less than three months later President Nixon an nounced a 90-day price and wage freeze, to be followed by some gov ernment control thereafter, and a 10 per cent surtax on imports to stem the flood of cheap foreign goods. IINafional Balance of Payment ll Academic theories basically con curred with Dr. Burns' explana tion although some offered differ ent solutions, such as a crawling 5 Ibid., p. 94. 6 The Commercial and Financial Chronicle, June 9, 1971, p. 16.

1972 IN SEARCH OF A NEW MONETARY ORDER 9 peg, a wider bank, flexible ex change rates, or the creation of new reserve assets, such as Spe cial Drawing Rights by the Inter national Monetary Fund. 7 But no matter what solution they proffer, their point of departure is. the col lectivist concept of the "national" balance of payment. Without any reference to individual actions and balances, they build ambiguous structures that ignore the causes. Balance of payments of a country is that very small segment of the combined balances of millions of individuals, the segment that is 7 Cf. William Fellner "On Limited Ex change Rate Flexibility," Chapter 5 of Maintaining and Restoring Balance in International Payments, Princeton Uni versity Press, 1966; George N. Halm, "The Bank Proposal: The Limit of Per missible Exchange Rate Variations," Princeton Special Papers in International Economics, No.6; John H. Williamson: "The Crawling Peg," Princeton Essays in International Finance, l'fo.50; Francis Cassell, International Adjustment and the Dollar, 9th District Economic Infor mation Series, Federal Reserve Bank of Minneapolis, June, 1970; Walter S. Sa lant, "International Reserves and Pay ments Adjustment;" Banca Nazionale del Lavoro, Quarterly Review, Sept., 1969; Thomas D. Willet and Francesco Forte, "Interest Rate Policy and External Bal ance," Quarterly Journal of Economics, May, 1969; Friedrich A. Lutz, "Money Rates of Interest, Real Rates of Interest, and Capital Movements," Chapter 11 of Maintaining and Restoring Balance in International Payments, Princeton Uni versity Press, 1966; Milton Gilbert, "The Gold-Dollar System: Conditions of Equi librium and the Price of Gold," Princeton Essays in International Finance, No. 70.

based on personal exchanges across national boundaries. As an individual may choose to increase or decrease his cash holdings, so may the millions of residents of a given country. But when they in crease their holdings, that is called "favorable" in balance of payments terminology. And when they choose to reduce their cash holdings, that is called "unfavor able." The fact is that drains of gold are not mysterious forces that must be managed by wise governments, but are the result of deliberate choices by people eager to reduce their cash holdings. Wherever governments resort to inflation, people tend to reduce their cash holdings through pur chases of goods and services. When domestic prices begin to rise while foreign prices continue to be stable or rise at lower rates, individuals like to buy more foreign goods at bargain prices. They ship some of their money ab!oad in exchange for cheaper foreign products or property. Thus, an outflow of for eign exchange and gold sets in. It is the inevitable result of a rate of domestic inflation that exceeds that of the rest of the world and sets into operation "Gresham's Law."

During the 1960's, the decade of the "Great Society," and again during 1970 and 1971, money and credit were created at unprece10 THE FREEMAN January dented rates prompted by record breaking government deficits. Pri vate demand deposits, bank credit at commercial banks, and Federal Reserve credit, which is fueling the credit expansion, often rose at rates of 10 per cent or more a year. Therefore, in spite of countless promises and reassurances by the President and his advisers, the U.S. dollar suffered inevitable de preciation at horne and abroad. And the August 15, 1971, default of payment was the result of this depreciation. Blaming the Creditor Refusal to make gold payments by the United States, the richest and most powerful country on earth, casts serious doubt on fu ture monetary cooperation. The immediate prospect for world wide monetary reform is not too bright. The U.S., as the default ing debtor, is taking· the position that it is up to the countries with huge surpluses in their interna tional payments to adj ust their currencies upward against the dol lar. It is Washington's basic prem ise that the U.S. was unfairly treated in international commerce and that it is time for correction.

Convinced of the indispensability of the U.S. dollar as a world re serve currency, the U.S. is defi antly waiting for the others to act. Bad debtors, when called upon to make payment, often make such charges against their creditors. It is shocking, however, that the U.S. government should prove to be such a poor debtor. Even its basic assumption, the indispensability of the dollar, no longer goes unchal lenged. Sterling balances ,look more attractive today than dollar holdings. In fact, the holdings of deutsche marks by central banks and treasuries probably exceed $3 billion. Foreign airlines and ship pers have ceased to accept U.S. currency. And Eurodollar bonds are all but unsaleable in European capital markets, while mark, guil der, and Swiss franc securities re main in demand. The foreign posi tion generally rejects the Wash ington charge of unfair treatment. If the U.S. had adopted appropri ate domestic policies, foreign of ficials argue, it would not have accrued its huge international pay ments deficits. Therefore, they want the U.S. to share the burden of realignment. They are seeking a devaluation of the dollar along with realignment of their curren cies. And above all, no one is sug gesting that the U.S. dollar con tinue to serve as an international reserve currency.

After all, managed currencies are the products of political manip ulations by parties and pressure groups, and all are destined to be destroyed gradually by. weak ad1972 IN SEARCH OF A NEW MONETARY ORDER 11 ministrations yielding to popular pressures for government largess and economic redistribution. No such currency can serve for long as the international reserve cur rency to which all others can re pair. The U.S. dollar is no excep tion. In the chaotic conditions of late 1971, the world may still have the following options: (1) It may continue on its pres ent road of fiat money and infla tion, government manipulation of exchange rates, trade restrictions, and exchange controls. The goal is "national autonomy" in monetary and fiscal policies, an essential ob jective for all forms of central eco nomic planning. On this road we are bound to suffer not only more inflation and depreciation, but also a gradual disintegration of the world economy and its division of Freedom is the Answer labor. Our ultimate destination is a worldwide depression.

(2) Or the world may choose to turn off this road of self -destruc tion and seek stability in sound money. The very monetary au thorities that have created the chaos and are now sitting in judg ment over the, international mone tary order must relinquish their rights and powers over the peo ple's money. This road leads to the various forms of gold standard, from the gold-exchange to the gold-bullion, and finally the gold coin standard. For gold is the only international money the quantity of which is limited by high costs of mining and the value of which is independent of political aspira tions and policies. Only the gold standard can afford monetary sta bility and peaceful international cooperation. ~ IDEAS ON LIBERTY THERE IS NOTHING wrong with money that freedom will not cure. This is another way of saying that the Good Society which many reformers have sought by way of monetary reform' cannot be achieved that way; if it is ever to be achieved, it will be done by freedom. So, then, the fight for sound money, to have meaning, must be related to the broader fight for freedom. It is only one of the several battles that must be fought.

F RAN K C HOD 0 R 0 v, from "Shackles of Gold"

PAUL L. POIROT A PLEASANT premise underlying socialism is that everyone should be able and willing to pay prices high enough to cover costs. Then, no one ever would be obliged to work for less than "a living wage." Such is the foolish dream of per sons who do not understand the process and the advantages of free trade. True, oue trades in order to gain something of greater value to him than what he gives up in exchange, and so does every other trader. Each strives to satisfy his wants with the least effort or ex penditure; but the trader differs from socialists for he does not ex pect anyone else to give up some thing for nothing. A second significant difference between a trader and a socialist '10 SellersBeware concerns their respecti ve views about money. To a trader, money is that particular item of com merce so much more universally acceptable in trade than other scarce and valuable items that it serves as a useful medium of ex change. It opens up a far wider range of market opportunities than could possibly be reached through direct barter. It is useful as money because the overwhelm ing maj ori ty of traders are willing and anxious to accept it in pay ment for their wares.

An entirely different concept of money is implied in the language and philosophy of socialism. Those who speak of "a living wage" and of "prices high enough to cover costs" are not thinking about will ing customers, or of a money that 1972 LEGAL TENDER: SELLERS· BEWARE 13 arises naturally out of willing ex changes in the open market. What they seem to have in mind, in stead, is a purchasing power to be created out of thin air - that an cient dream of alchemists and counterfeiters. Counterfeiters Need ilLegal Tender ll Now, it's easy enough to take a base metal and color it "gold," or to print a slip of paper and call it "money." The trick is to make others believe it. Counterfeiters and confidence men are indeed a nuisance to producers, traders, savers, especially to those who are willing to venture into shady deals. But with a bit of experience and wariness, an honest •trader can readily spot such risks and di rect his business toward men and money he trusts.

So, what is the poor counter feiter to do? He will do his best to have his "money" declared legal tender, which means that the gov ernment would force creditors to accept it when offered in payment of any debt. Any debt? Including taxes? The government that levies and col lects taxes is expected to grant to someone a note-printing monop oly? It takes no political genius to rise to the conclusion that if anyone is to print notes to be en forced as legal tender, surely that monopoly had best be exercised by the government itself! And that is socialist monetary policy in a nut shell: the government in full con trol of the "money machine." If government expenditures rise, just print additional bogus money. Soon enough,. this bogus-money declared-legal-tender will have driven into hoarding or hiding any more substantial or trust worthy medium of exchange. As Sir Thomas Gresham observed: "Bad money drives out good."

This is the monetary manifesta tion of the more general law that people always. will use the cheap est and easiest means available to obtain their various ends. In other words, if the government decrees that a piece of paper or an alloyed coin is equal in purchasing power to the precious metal that the market had chosen as money, then customers will do their best to make sellers take the bad money. And even the most honest and scrupulous of men will gladly use the bad money to meet his tax payments. However, a small problem looms for a national government: its taxing power and legal tender monopoly end at the border. It may be able to fool or to browbeat foreign suppliers for a time into accepting printed p~per to cover trade deficits ; but eventually, in ternational trade balances are pay able in goods of value, such as 14 THE FREEMAN January gold. Even an international mone tary cartel such as the Bretton Woods a.greement breaks down as soon as the gold runs out - a breakdown which President Nixon declared official on August 15, 1971.

It Stops at the Border At this point, let us pick up the thread of the labor theory of value with which we began this discus sion of inflation: the socialistic presumption that everyone is en titled to "a living wage," whether or not he earns it. The late Lord Keynes translated this fallacy in to the language of politics, saying in effect:. the way to stay in office is to woo organized labor; if the unions demand higher wages, meet their demands through use of the money machine. Some witnesses, seeing that the "money" button is now being pushed by organized labor, have come to the remarkable conclusion that this is a new kind of "cost push" inflation, unlike the old "de mand-pull" type; the union wage demands are pushing prices up, so the money-machine isn't the culprit after all. Therefore, let's freeze wages and let the machine run until the economy has re gained its health! That, too, was implicit in the official declaration of August 15, 1971.

Despite all the International Brotherhoods of this and that, the new "cost-push" inflation has no greater power over foreigners than has any other name for the game. In the markets of the world, it's' still the same: put up, or shut up; if you want our goods and services, give us your goods or your gold; worthless paper not ac cepted here; the exorbitant wage demands of American labor unions are not legal tender in Japan, so sorry! So, in the final analysis, what a nation can do is to inflate itself out of the world market and prac tice its splendid isolationism to the very brink of its own disaster - if not further. And a citizenry that will thus demand and tolerate socialism fully deserves it. Nor is it an eff~ctive cure for inflation to demand that the government more stringently regulate the monopoly powers granted to organized labor; of course those powers are used and abused to everyone's detri ment and ought to be withdrawn.

So should numerous other special privileges and government-sanc tioned interventions that disrupt peaceful production and trade. However, as long as the govern ment has power to declare that paper is legal tender, there is little prospect that the economy may be free of inflation and socialism. I) Why Some Are Po - er HENRY HAZLITT THROUGHOUT HISTORY, until about the middle of the eighteenth cen tury, mass poverty was nearly everywhere the normal condition of man. Then capital accumula tion and a series of major inven tions ushered in the Industrial Revolution. In spite of occasional setbacks, economic progress be came accelerative. Today, in the United States, in Canada, in nearI ly all of Europe, in Australia, New Zealand, and Japan, mass poverty has been pra.ctically elim inated. It has either been con quered or is in process of being conquered by a progressive capi talism. Mass poverty is still found in most of Latin America, most of Asia, and most of Africa.

Yet even the United States, the Henry Hazlitt is well known to FREEMAN readers as author, columnist, editor, lecturer, and practitioner of freedom. This article will appear as a chapter in a forthcoming book, The Conquest of Poverty, to· be published by Arl ington House. most affluent of all countries, con tinues to be plagued by "pockets" of poverty and, by individual pov erty. Temporary pockets of poverty, or of distress, are an almost neces sary result ofa free competitive enterprise system. In such a sys tem some firms and industries are growing or being born, others are shrinking or dying; and many en trepreneurs and workers in the dying industries are unwilling or unable to change their residence or their occupation. Pockets of poverty may be the result of a failure to meet domestic or for eign competition, of a shrinkage or disappearance of demand for some product, of mines or wells that have been exhausted, of land that has become a dust bowl, and of droughts, floods, earthquakes, and other natural disasters. There is no way of preventing most of 15 16 THE FREEMAN January these contingencies, and no all-en compassing cure for them. Each is likely to call for its own special measures of alleviation or adjust ment. Whatever general measures may be advisable can best be con sidered as part of the broader problem of individual poverty.

This problem is nearly always referred to by socialists as "the paradox of poverty in the midst of plenty." The implication of the phrase is not only that such pov erty is inexcusable, but that its existence must be the fault of those who have the "plenty." We are most likely to see the problem clearly, however, if we stop blam ing "society" in advance and seek an unemotional analysis. Diverse and International When we start seriously to item ize the causes of individual pov erty, absolute or relative, they seem too diverse and numerous even to classify . Yet in most dis cussion we do find the causes of individual poverty tacitly divided into two distinct groups - those that are the fault of the individ ual pauper and those that are not. Historically, many so-called "con servatives" have tended to blame poverty entirely on the poor: they are shiftless, or drunks or bums: "Let them go to work." Most so called "liberals," on the other hand, have tended to blame poverty on everybody but the poor: they are at best the "unfortunate,"

the "underprivileged," if not ac tually the "exploited," the "vic tims" of the "maldistribution of wealth," or of "heartless laissez faire." The truth, of course, is not that simple, either way. We may, oc casionally, come upon an individ ual who seems to be poor through no fault whatever of his own (or rich through no merit of his own). And we may occasionally find one who seems to be poor entirely through his own fault (or rich en tirely through his own merit). But most often we find an inex tricable mixture of causes for any given person's relative poverty or wealth. And any quantitative esti mate of fault versus misfortune seems purely arbitrary. Are we entitled to say, for example, that any given individual's poverty is only 1 per cent his own fault, or 99 per cent his own fault - or fix any definite percentage whatever? Can we make any reasonably ac curate quantitative estimate of the percentage even of those who are poor mainly through their own fault, as compared with those whose poverty is mainly the result of circumstances beyond their con trol? Do we, in fact, .have any ob jective standards for making the separation?

A good idea of some of the older 1972 WHY SOME ARE POORER 17 ways of approaching the problem can be obtained from the article on "Poverty" in The Encycloped'ia of Social Reform, published in 1897.1 This refers to a table com piled by a Professor A. G. Warner in his book, Ameri,can Charities. This table brought together the results of investigations in 1890 to 1892 by the charity organiza tion societies of Baltimore, Buf falo, and New York City, the asso ciated charities of Boston and Cin cinnati; the studies of Charles Booth in Stepney and St. Pancras parishes in London, and the state ments of Bohmert for 76 German cities published in 1886. Each of these studies tried to determine the "chief cause" of poverty for each of the paupers or poor fam ilies it listed. Twenty such "chief causes" were listed altogether. Professor Warner converted the number of cases listed under each cause in each study into percent ages,wherever this had not al ready been done; then took an un weighted average of the results obtained in the fifteen studies for each of these "Causes of Poverty as Determined by Case Count ing," and came up with the fol lowing percentages. First came six "Causes Indicating Misconduct": Drink 11.0 per cent, Immorality 4.7, Laziness 6.2, Inefficiency and 1 Ed. by Wm. D. P. Bliss (New York: Funk & Wagnalls).

Shiftlessness 7.4, Crime and Dis honesty 1.2, and Roving Disposi tion 2.2 - making a total of causes due to misconduct of 32.7 per cent. Professor Warner next item ized fourteen "Causes Indicating Misfortune" : Imprisonment of Bread Winner 1.5 per cent, Or phans and Abandoned 1.4, Neglect by Relatives 1.0, No Male Support 8.0, Lack of Employment 17.4, In sufficient Employment 6.7, Poorly Paid Employment 4.4, Unhealthy or Dangerous Employment 0.4, Ig norance of English 0.6, Accident 3.5, Sickness or Death in Family 23.6, Physical Defect 4.1, Insan ity 1.2, and Old Age 9.6 - making a total of causes indicating mis fortune of 84.4 per cent. No Objective Standards Let me say at once that as a statistical exercise this table is close to worthless, full of more confusions and discrepancies than it seems worth analyzing here. Weighted and unweighted ave rages are hopelessly mixed. And certainly it seems strange, for ex ample, to list all cases of unem ployment or poorly paid employ ment under "misfortune" and none under personal shortcomings.

Even Professor Warner points out how arbitrary most of the figures are: "A man has been shiftless all his life, and is now old; is the cause of poverty shift18 THE FREEMAN January less ness or old age? . . . Perhaps there is hardly a single case in the whole 7,000 where destitution has resulted from a single cause." But though the table has little value as an effort in quantification, any attempt to name and classify the causes of poverty does call at tention to how many and varied such causes there can be, and to the difficulty of separating those that are an individual's own fault from those that are not. An effort to apply objective standards is now made by the So cial Security Administration and other Federal agencies by classify ing poor families under "condi tions associated with poverty." Thus we get comparative tabula tions of incomes of farm and non farm families, of white and Negro families, families classified by age of "head," male head or female head, size of family, number of members under 18, educational at tainment of head (years in ele mentary schools, high school, or college) , employment status of head, work experience of head (how many weeks worked or idle), "main reason for not working: ill or disabled, keeping house, going to school, unable to find work, other, 65 years and over"; occu pation of longest job of head, number of earners in family; and so on.

These classifications, and their relative numbers and comparative incomes, do throw objective light on the problem, but much still de pends on how the results are in terpreted. Oriented Toward the future A provocative thesis has been put forward by Professor Ed ward C. Banfield of Harvard in his book, The Unheavenly' City.2 He divides American society into four "class cultures": upper, mid dle, working, and lower classes. These "subcultures," he warns, are not necessarily determined by present economic status, but by the distinctive psychological ori entation of each toward providing for a more or less distant future. At the most future-oriented end of this scale, the upper-class in dividual expects long life, looks forward to the future of his chil dren, grandchildren, even great grandchildren, and is concerned also for the future of such ab stract entities as the community, nation, or mankind. He is confident that within rather wide limits he can, if he exerts himself to do so, shape the future to accord with his purposes. He therefore has strong incentives to "invest" in the improvement of the future situation - i. e., to sacrifice some present satisfaction in the expec tation of enabling someone (him2 Boston: Little Brown, 1970.

1972 WHY SOME ARE POORER 19 self, his children, mankind, etc.) to enjoy greater satisfactions at some future time. As contrasted with this: "The lower-class individual lives from moment to moment. If he has any awareness of a future, it is of something fixed, fated, be yond his control: things happen to him, he does not make them hap pen. Impulse governs his behavior, either because he cannot discipline himself to sacrifice a present for a future satisfaction or because he has no sense of the future. He is therefore radically improvi dent: whatever he cannot con sume immediately he considers valueless. His bodily needs (espe cially for sex) and his taste for 'action' take precedence over ev erything else - and certainly over any work routine. He works only as he must to stay alive, and drifts from one unskilled job to another, taking no interest in the work."3 Professor Banfield does not at tempt to offer precise estimates of the number of such lower-class in dividuals, though he does tell us at one point that "such ['multiprob lem'] families constitute a small proportion both of all families in the city (perhaps 5 per cent at most) and of those with incomes below the poverty line (perhaps 10 to 20 per cent) . The problems that they present are out of proportion 3 Ibid., p. 53.

to their numbers, however; in St. Paul, Minnesota, for example, a survey showed that 6 per cent of the city's families absorbed 77 per cent of its public assistance, 51 per cent of its health services, and 56 per cent of its mental health and correction casework services."4 Obviously if the "lower class cul ture" in our cities is as persistent and intractable as Professor Ban field contends (and no one can doubt the fidelity of his portrait of a sizable group), it sets a lim it on what government policy mak ers can accomplish. By Merit, or by Luck In judging. any program of re lief, our forefathers usually thought it necessary to distin guish sharply between the "de serving" and the "undeserving" poor. But this, as we have seen, is extremely difficult to do in prac tice. And .it raises troublesome philosophic problems. We common ly think of two main factors as determining any particular indi vidual's state of poverty or wealth - personal merit, and "luck."

"Luck" we tacitly define as any thing that causes a person's eco nomic (or other) status to be bet ter or worse than his personal mer its or efforts would have earned for him. Few of us are objective in 4 Ibid., p. 127.

20 THE FREEMAN January measuring this in our own case. If we are relatively successful, most of us tend to attribute our success wholly to our own intellec tual gifts or hard work; if we have fallen short in our worldly expectations, we attribute the out come to some stroke of hard luck, perhaps even chronic hard luck. If our enemies (or even some of our friends) have done better than we have, our temptation is to attribute their superior success mainly to good luck. But even if we could be strictly objective in both cases, is it al ways possible to distinguish be tween the results of "merit" and "luck"? Isn't it luck to have been born of rich parents rather than poor ones? Or to have received good nurture in childhood and a good education rather than to have been brought up in deprivation and ignorance? How wide shall we make the concept of luck? Isn't it merely a man's bad luck if he is born with bodily defects - crip pled, blind, deaf, or susceptible to some special disease? Isn't it also merely bad luck if he is born with a poor intellectual inheritance stupid, feeble-minded, an imbe cile? But then, by the same logic, isn't it merely a matter of good luck if a man is born talented, brilliant, or a genius? And if so, is he to be denied any credit or merit for being brilliant?

We commonly praise people for being energetic or hard-working, and blame them for being lazy or shiftless. But may not these quaH ties themselves, these differences in degrees of energy, be just as much inborn as differences in phy sical or mental strength or weak ness? In that case, are we justi fied in praising industriousness or censuring laziness? However difficult such questions may be to answer philosophically, we do give definite answers to them in practice. We do not criti cize people for bodily defects (though some of us are not above deriding them) , nor do we (except when we are irritated) blame them for being hopelessly stupid. But we do blame them for laziness or shiftlessness, or penalize them for it, because we have found in prac tice that people· do usually respond to blame and punishment, or praise and reward, by putting forth more effort than otherwise. This is really what we have in mind when we try to distinguish between· the "deserving" and the "undeserving" poor.

What Happens to Incentive The important question always is the effect of outside aid on in centives. We must remember, on the one hand, that extreme weak ness or despair is not conducive to incentive. If we feed a man who 1972 WHY SOME ARE POORER 21 has actually been starving, we for the time being probably increase rather than decrea.se his incen tives. But as soon as we give an idle able-bodied man more than enough to maintain reasonable health and strength, and espe cially if we continue to do this over a prolonged period, we risk undermining his incentive to work and support himself. There are unfortunately many people who prefer near-destitution to taking a steady job. The higher we make any guaranteed floor under in comes the larger the number of people who will see no reason either to work or to save. The cost to even a wealthy community could ultimately become ruinous. An "ideal" assistance program, whether private or governmental, would (1) supply everyone in dire need, through no fault of his own, enough to maintain him in rea sonable health; (2) would give nothing to anybody not in such need; and (3) would not diminish or undermine anybody's incentive to work or save or improve his skills and earning power, but would hopefully even increase such incentives.

But these' three aims are ex tremely difficult to reconcile. The nearer we come to achieving any one of them. fully, the less likely we are to achieve one of the others. Society has found no perfect solu tion of this problem in the past, and seems unlikely to find one in the future. The best we can look forward to, I suspect, is some nev er-quite-satisfactory compromise. Fortunately, in the United States the problem of relief is now merely. a residual problem, likely to be of constantly diminish ing importance as, under free en terprise, we 'constantly increase total production. The real problem of poverty is not a problem of "dis tribution" but of production. The poor are poor not because some thing is being withheld from them, but because, for whatever reason, they are not producing enough. The only permanent way to cure their poverty is to increase their earning power. ~ IDEAS ON LIBERTY Self-Help THE SPIRIT of self-help is the root of all genuine growth in the individual; and, exhibited in the lives of many, it constitutes the true source of national vigor and strength.

SAMUEL SMILES ECONOMICS: A Branch of Moral Philosophy THE AUTHOR of The Wealth of Nati,ons (1776) is frequently classed as an eighteenth century economist. 'But Adam Smith was primarily a professor of moral philosophy, the discipline which I believe is the appropriate one for the study of human action and such subdivisions of it as may be involved in political economy. Moral philosophy is the study of right and wrong, good and evil, better and worse. These polarities cannot be translated into quantita tive and measurable terms and, for that reason, moral philosophy is sometimes discredited as lack ing scientific objectivity. And it is not, in fact, a science in the sense that mathematics, chemistry, and physics are sciences. The effort of many economists to make the study of political economy a natu ral science draws the subject out of its broader discipline of moral 22 LEONARD E. READ philosophy, which leads in turn to social mischief.

Carl Snyder, longtime statisti cian of the Federal Reserve Board, exemplifies an economic "scien tist." He wrote an impressive book, Capitalism the Creator.l I agree with this author that capitalism is, indeed, a creator, providing untold wealth and ma terial benefits to countless millions of people. But, in spite of all the learned views to the contrary, I believe that capitalism, in its sig nificant sense, is more than Snyder and many other statisticians and economists make it out to be - far more. If so, then to teach that capitalism is fully explained in mathematical terms is to settle for something less than it really is. This leaves unexplained and vul1 Carl Snyder, Capitalism the Creator (New York: The Macmillan Company, 1940; Arno Press, 1972), 492 pp.

1972 ECONOMICS: A BRANCH OF MORAL PHILOSOPHY 23 nerable the real case for capital ism. Snyder equates capitalism with "capital savings." He explains what he means in his Preface: "The thesis here presented is simple, and unequivocal; in its general outline, not new. What is new, I would fain believe, is the proof; clear, statistical, and fac tual evidence. That thesis is that there is one way, and only one way, that ,any people, in all his tory, have ever risen from barbar ism and poverty to affluence and culture; and that is by that con centrated and highly organized system of production and exchange which we call Capitalistic: one w,ay, and one alone. Further, that it is solely by the accumulation (and concentration) of this Capi tal, and directly proportional to the amount of this accumulation, that the modern industrial nations have arisen: perhaps the sole way throughout the whole of eight or ten thousand years of economic history."

No argument - none whatsoever - as to the accomplishments of capitalism, or that it has to do with "capital savings." But what is capital? The Ideas Behind Capital The first answer that comes to mind is that capital means the tools of production: brick and mortar in the form of plants, elec tric and water and other kinds of power, machines of all kinds in cluding computers and other auto mated things, ships at sea and trains and trucks and planes - you name it! These things are indeed capital, but is capital in the sense of material wealth sufficient to tell the whole story of capitalism and its creative accomplishments or poten tiali ties'? Merely bear in mind that all of this fantastic gadgetry on which rests a high standard of living has its origin in ideas, inventions, dis coveries, insights, intuition, think of-thats, and such other unmeas urable qualities as the will to im prove, the entrepreneural spirit, intelligent self-interest, honesty, respect for the rights of others, and the like. These are spiritual as distinguished from material or physical assets, and always the former precedes and is respon sible for the latter. This is capital in its fundamental, originating sense; this accumulated wisdom of the ages - an overall luminosity - is the basic aspect of "capital savings."

It is possible to become aware of this spiritual capital, but not to measure, let. alone to fully under stand it - so enormous is its ac cumulation over the ages. Aware ness? Sit in a jet plane and ask what part you had in its m,aking.

24 THE FREEMAN January Very little, if any, even though you might be on the production line at Boeing. At most, you presssed a button that turned on forces about which you know next to nothing. Why, no man even knows how to make the pencil you used to sign a requisition. These "capital sav ings" put at your disposal an en ergy perhaps several hundred times your own. This accumulated energy - the workings of human minds over the ages - is capital! "Truly Scientific ll With this concept of capital in mind, reflect on how unrealistic are the ambitions of the "scien tific" economists. Carl Snyder phrases their intentions well in the concluding paragraph of his Pref ace: "It was inevitable, perhaps, that anything like a "social science" should be the last to develop. Its bases are so largely statistical that it was only with the development of an enormous body of new knowl edge that anything resembling a firmly grounded and truly scien tific system could be established.

It is coming ; already the most fundamental elements of this knowledge are now available, as the pages to follow will endeavor to set forth." (Italics added) Snyder is, indeed, statistical. He displays 44 charts. Nearly all of these show the ups and downsmostly ups - of physical assets in dollar terms. This, in his view, is a "truly scientific system." But how scientific can a measurement be if the units cannot be quanti fied and the measuring rod is as imprecise in value as is the dollar or any other monetary unit? And what is truly scientific about showing the growth in coal production, for instance, if there be a shift in demand favoring some other fuel? This would be only a pseudo-measurement with no more scientific relevance than a century-old chart showing the dol lar growth in buggy whip produc tion. Professor F. A. Hayek enlight ens us: "All the physical laws of produc tion" which we meet, e.g., in eco nomics, are not physical laws in the sense of the physical sciences but people's beliefs about what they can do.... That the objects of economic acti vity cannot be de fined in objective terms but only with reference to a, human pur pose goes without saying. Neither a 'commodity' or an 'economic good,' nor 'foods' or 'money,' can be defined in physical terms but only in terms of views people hold about things."2 2 See The Counter-Revolution of Sci ence by F. A. Hayek (New York: The Free Press of Glencoe, The Crowell-Col lier Publishing Co., 1964), p. 31.

1972 ECONOMICS: A BRANCH OF MORAL PHILOSOPHY 25 National Accounting Economic growth for a nation cannot be mathematically or sta tistically measured. Efforts to do so are highly misleading. They lead people to believe that a mere increase in the measured output of goods and services is, in and of it self, economic growth. This fallacy has led to the forced savings pro grams of centrally administered economic systems - programs which decrease the range of vol untary choice among individuals. This is the heart of the· failure of the socialistic policies of the un derdeveloped nations of Asia,Af rica, and Latin America. As Prof. P. T. Bauer has written so elo quently: "I regard the extension of the range of choice, that is, an increase in the range of effective alternatives open to people, as the principal objective and criterion of economic development; and I judge a measure principally by its probable effects on the range of alternatives open to individuals."3 Indeed, even an individual's eco nomic growth can no more be measured, exclusively, in terms of historical statistics than can his intellectual, moral,and spiritual growth. These ups and downs can not be defined in physical terms 3 P. T. Bauer, Economic Analysis and Policy in Underdeveloped Countries (Duke University Press and Cambridge University Press, 1957), p. 113.

but only in terms of views people hold about things. These views highly personal - are in constant fl ux ; you may care nothing to morrow for that which you high ly prize today. Once we grasp the point that the value of any good or service is whatever others will give in will ing exchange) and that the j udg ments of all parties to all ex changes are constantly and for ever changing, it should be plain that even physical assets - money, food, or whatever - do not lend themselves to measurements in the scientific sense. And when we further reflect on the fundamental nature of "capi tal savings,"- that they emerge out of ideas, inventions, insights, and the Iike-the idea of scien tific measurement becom~s pat ently absurd. In any event, it is this penchant to make a science of political econ omy, to reduce capitalistic be havior to charts, st.atistics, theo rems, arbitrary sysmbols, that leads to such nonsense as the Gross National Product (GNP), "national goals" and "social gains."4 The more pronounced this 4 For more on the GNP fallacy and how economic growth cannot be "factu ally" reported, see "A Measure of Growth" in my Deeper Than You Think (Irvington-on-Hudson, N. Y.: The Foun dation for Economic Education, Inc., 1967), pp. 70-84.

26 THE FREEMAN January trend, the less will the economics of capitalism and the free society be understood - "a dismal sci ence," for certain. Indeed, could the ambitions of the "scientific economists" be realized, dicta tor ship would be a viable political sys tem. At the dictator's disposal would be all the formulae, all the answers; disregarding personal views and choices, he would simply run his information through com puters and thus meet production schedules. When we grasp the point that no man who ever lived has been able to foresee his own future choices, let alone those of others, economic scientism, as it might be called, makes no sense. Man' 5 Arrogance How did we ever get off on this untenable course? Perhaps we can only speculate. A flagrant display: At one point in a recent Seminar discussion I repeated, "Only God can make a tree." And then this exclamation by a graduate student, "Up until now!" This, it appears to me, is the reflection of a notion, so prevalent in the eighteenth and nineteenth centuries, that every facet of Creation, even life itself, lies within the powers of man.

Merely a matter of time! To tear human action asunder and then to assign symbols or labels to the pieces, as the scientists properly do with the chem ical elements, is no service to eco nomic understanding. This meth od makes understanding impos sible for the simple reason that it presupposes numerous phases of human action that can be mathe matically or scientifically distin guished one from the other when such is not the case. Why am I moti vated to write this or you to read it? Doubtless, each of us can render a judgment of sorts but it will not be, cannot be, in the lan guage of science. Political economy is as easy or, perhaps, as difficult to understand and practice as the Golden Rule or the Ten Commandments. Econom ics is no more than a study of how scarcity is best overcome, and the first thing we need to realize is that this is accomplished by the continued application of human action to natural resources.

Natural resources are what they are, no more, no less - the ulti mate given! The variable is hu man action. Political economy, then, re solves itself into the study of what is and what is not intelligent human action. It should attempt to answer such questions as:. Is creative energy more effi ciently released among free or co erced men? Is freedom to choose as much a right of one as another?

1972 ECONOMICS: A BRANCH OF MORAL PHILOSOPHY 27 Who has the right to the fruits of labor - the producer or nonpro ducer? How is value determined - by political authority, cost of produc tion, or by what others will give in willing exchange? What actions of men should be restrained - creative actions or only destructive actions? How dependent is overcoming scarcity on honesty, respect of each for the rights of others, the entrepreneurial spirit, intelligent intepretation of self-interest? Viewed in this manner, politiFreedom, an Illusion cal economy is not a natural sci ence like chemistry or physics but, rather, a division of moral phi losophy - a study of what is right and what is wrong in overcoming scarcity and maximizing pros perity - the problem to which it addresses itself. Once we drop the "scientific" jargon and begin to study politi cal economy for what it really is, then its mastery becomes no more difficult than understanding that one should never do to others that which he would not have· them do unto him. II IDEAS ON LIBERTY FREEDOM is an illusion, though an important one; in any society, restraints and restrictions, obligations and compulsions are the realities.

"Free as the wind" is such an illusion. Consider the restraints and restrictions and obligations and compulsions. For wind is nothing but air being pushed from areas of high pressure to low, cold and heavy air displacing warmer and lighter air, its course modified by solid objects of nature and man in its path, subject to all the laws of gases, gravity, mass, matter, and so on. The illusion of freedom has been broad indeed in America with its unique government of limited and specific powers - limiting the restraints and restrictions, the obligations and compulsions to which Americans might be subjected. No such illusions of freedom persist in totalitarian societies, be they Communist, Fascist, So cialist or whatever. For it is made abundantly clear that the people subject to these regimes are free only to support and serve the state, with ample restraints and restrictions to shatter any other illusions of freedom.

Why is this illusion of freedom so vitally important? Because the more free men feel to serve. themselves, their fellows, and their Creator, the better they do in fact serve all. J. KESNER KAHN, Chicago, Illinois MORALITY and CONTROLS MOST DISCUSSION of the wage price freeze and the coming Phase II controls has been strictly eco nomic and operational: were they needed, will they work, how will they operate. I have recorded my own opposition to them in three columns-in N eW8week. There has been essentially no discussion of a much more funda mental issue. The controls are deeply and inherently immoral. By substituting the rule of men for the rule of law and for voluntary cooperation in the marketplace, the controls threaten the very foundations of a free society. By encouraging men to spy and re port on one another, by making it Dr. Friedman, Professor of Economics, Uni versity of Chicago, needs no introduction to FREEMAN readers.

This article was first published in two parts in The New York Times on October 28 and 29, 1971. © 1971 by The New York Times Com pany. Reprinted by permission. 28 MILTON FRIEDMAN in the private interest of large numbers of citizens to evade the controls, and by making actions illegal that are in. the public in terest, the controls undermine in dividual morality. One of the proudest achieve ments of Western civilization was the substitution of the rule of law for the rule of men. The ideal is that government restrictions on our behavior shall take the form of impersonal rules, applicable to all alike, and' interpreted and ad judicated by an independent judi ciary rather than of specific orders by a government official to named individuals. In principle, under the rule of law, each of us can know what he mayor may not do by consulting the law and determ ining how it applies to his own circumstances.

The rule of law does not guaran1972 MORALITY AND· CONTROLS 29 tee freedom, since general laws as well as personal edicts can be ty rannical. But increasing reliance on the rule of law clearly played a major role in transforming West ern society from a world in which the ordinary citizen was literally . subject to the arbitrary will of his master to a world in which the ordinary citizen could regard him self as his own master. Contract or Status? The ideal· was, of course, never fully attained. More important, we have been eroding the rule of law slowly and steadily for decades, as government has become more and more a participant in economic affairs rather than primarily a rule-maker, referee, and enforcer of private contracts. It was, after all, the development of the private market that made possible the original movement from a world of status to a world of voluntary contract. As government has. tried to replace the market in one area after another, it has inevitably been driven to restore a world of status.

The freeze and even more the pay board and· price board of the Phase II controls are clearly an other massive step away from the rule of law and back toward· the rule of men. True, the rule of men will be under law but that is a far cry from the rule of law - Stalin, Hitler, Mussolini, and now Kosy gin, Mao, and Franco all rule un der law. The price that you and I may charge for our goods or our labor or that we may pay others for their goods or their labor will now be determined, not by any set of legislated •standards applying to all alike, but by specific orders by a small number of men appointed by the President. And jf govern mental edict is to replace market contract, there is no alternative. There are millions of prices, mil lions of wage rates arrived at by voluntary agreements among mil lions of people. The collectivistic countries have been unable in dec ades to find simple rules enabling prices and. wages to be established by any alternative impersonal mechanism.

Politics and Patriotism We are not likely to succeed. And we are not trying. Instead, the appeal is to the patriotism, civic responsibility, and judgment of political appointees, must of whom represent vested interests. How do patriotism and judgment determine that the price of a widget may rise 2.8 per cent but the price of a wadget, only 0.3 per cent; the wage of a widgeteer by 2 per cent but of a wadgeteer, by 10 per cent? Clearly they do not.

30 THE FREEMAN January Arbitrary judgment, political pow er, visibility - these are what will matter. The tendency for such an ap proach to violate human freedom is even more clearly exemplified by the present situation with re spect to dividends. The President has requested firms not to raise dividends - he has no legal power to do more. The request has been accompanied by surveillance, a calling down to Washington and public lambasting of the handful of corporations that did not con form, and a clear, implied threat to use extralegal powers. These measures have no legal basis at all. Yet I know of only one small company that has had the courage to refuse to cooperate ·on grounds of principle. The full logic of the system will not work itself out this time. Our strong tradition of freedom, the ineffectiveness of the controls, the ingen uity of the people in finding ways around them - these will lead to the collapse of the controls rather than to their hardening into a fullfledged straitjacket. But nonetheless, it is disheartening to see us take this further long step on the road to tyranny so light heartedly, so utterly unaware that we are doing something funda mentally in conflict with the basic principles on which this country is founded. The first time, we may venture only a small way. But the next time, and the next time?

A Nation ollnlormers Enforcement of the price and wage controls, as of the freeze, must depend heavily on encourag ing ordinary citizens to be inform ers - to report "violations" to government officials. When you and I make a private deal, both of us benefit - otherwise we do not have to make it. We are partners, cooperating voluntarily with one another. The terms, so long as they are mutually agree able, should be our business. But not any longer. Big Brother is looking over our shoulders. And if the terms do not correspond with what he says is O.K., one of us is encouraged to turn in the other. And to turn him in for do ing something few people have ever regarded and do not now re gard as .in any sense morally wrong; on the contrary, for doing something that each of us regards, when it affects us, as our basic right. Am I not entitled to sell my goods or my labor for what I con sider them worth as long as I do not coerce anyone to buy? Is it morally wrong for Chile to ex propriate the property of Ana conda Copper - Le., to force it to sell its copper mines for a price less than its value; but morally right for the U.S. government to 1972 MORALITY AND CONTROLS 31 force the worker to sell his labor for less than its value to him and to his employer?

By any standards, the edicts of the pay board and the price board, like the initial freeze, will be full of inequities and will be judged to be by ever increasing numbers of people. You believe that you are entitled to a pay raise, your em ployer agrees and wishes to give you one, yet the pay board says no. Will there not be a great tempta tion to find a way around the ruling? By a promotion unac companied by any change in du ties but to a job title carrying a higher permitted pay. Or by your employer providing you with amenities you formerly paid for. Or by one or another of the in numerable stratagems - legal, quasi-legal, or illegal - that ingen ious men devise to protect them selves from snooping bureaucrats. Two W fongs = Two W fongs In general, I have little sympa thy with trade unions. They have done immense harm by restricting access to jobs, denying excluded workers the opportunity to make the most of their abilities, and forcing them to take less satis factory jobs. Yet surely in the present instance they are right that it is inequitable for the gov ernment retroactively to void con tracts freely arrived at. The way to reduce the monopoly power of unions is to remove the special legal immunities they are now granted, not to replace one con centrated pOWE1!" by another.

When men do not regard gov ernmental .measures as just and right they will find a way around them. The. effects extend beyond the original source, generate wide spread disrespect for the law, and promote corruption and violence. We found this out to our cost in the 1920's. with Prohibition; in World War II with price control and rationing; today with drug laws. We shall experience it yet again with price and wage con trols if they are ever more than a paper fa<;ade. One feature of price and wage controls makes their effect on in dividual morality especially vi cious. Because these controls dis tort the use of resources, the evader benefits not only himself but society. The more rigorously 32 THE FREEMAN January the controls are enforced, the more harm they do. They render be havior which is immoral from one point of view socially beneficial. They thus introduce the kind of fundamental moral conflict that is utterly destructive of social co hesion.

Our markets are far from com pletely free. Monopoly power of labor and business means that prices and wages are not wholly a product of voluntary contract. Yet these blemishes, real and im portant though they are, are minor compared to replacing market agreements by government edict, compared to giving arbitrary pow er to a small number of appointed officials, compared to inculcating in the public contempt for the law. The excuse for the destruction of liberty is always the plea of necessity - that there is no al ternative. If indeed, the economy were in a state of crisis, of a life and-death emergency, and if con trols promised a sure way out, all their evil social and moral effects might be a price that would have to be paid for survival. But not even the gloomiest observer of the economic scene would describe it in any such terms. Prices rising at 4 per cent a year, unemploy ment at a level of 6 per cent these are higher than we would like to have or than we need to have, but they are very far indeed from crisis levels. On the contrary, they are rather moderate by his torical standard. And· there is far from uniform agreement that wage and price controls will im prove matters. I happen to believe that they will make matters worse after an ini tial decepti ve period of apparent success. Others disa gree. But even their warmest de fenders recognize that they impose costs, produce distortions in the use of resources, and may fail to reduce inflation. Under such cir cumstances, the moral case surely deserves at least some attention.

IDEAS ON * LIBERTY The Abolition of Private Property A GOVERNMENT that sets out to abolish market prices is inevitably driven towards the abolition of private property; it has to rec ognize that there is no middle way between the system of private property in the means of production combined with free contract, and the system of common ownership of the means of production, or Socialism. It is gradually forced towards compulsory produc tion, universal obligation to labor, rationing of consumption, and, finally, official regulation of the whole of production and consumption. L U D WIG VON MIS E s, The Theory of Money and Credit Can we sustain PROSPERITY W. A. PATON THOUGHTFUL contemplation of the current scene, supplemented with some scanning of the historical record, is likely to set the observer to wondering if any nation is ca pable of achieving and maintain ing a broadly affluent society. Toil ing up the slope, overcoming ob stacles and adversity, human be ings often display courage, re sourcefulness, endurance, tenacity, ability to cope and continue climb ing, but when they reach the top of the hill, have it made, many seem to have a tendency to shed their heroic trappings and become confused, disorderly, unenterpris ing, and - in some cases-down right shiftless and dependent.

The cycle of great progress folDr. Paton is Professor Emeritus of Account ing and of Economics, University of Michigan, and is known throughout the world for his outstanding work in these fields. His current comments on American attitudes and behavior are worthy of everyone's attention. lowed by decline seems to be in the process of striking illustration here in America. As to the fact of an astonishing advance there can be no question. In two centuries, roughly, the United States has moved from a scattering of settle ments, loosely affiliated, along our eastern seaboard to a country stretching across a continent, and recognized as a major world power. In this period, too, a primi tive technology has been transformed into a productive mechanism plac ing us in a forefront industrial po sition, with a· per-capita. standard of living that is unmatched, any where. In this· process hardships and difficulties were encountered by our forefathers that looked in surmountable at times, and that were mastered only by an amazing display of determination and forti tude on the part of many individ uals and families. The commitment 33 34 THE FREEMAN January of the founders of the nation to a republican form of government, as expressed in our constitution, and the accompanying atmosphere of faith in individual initiative and a free, competitive market economy, undoubtedly played a great, and perhaps decisive, role in making possible the tremendous gains that have been chalked up in such a short span of years.

But now that we've arrived, so to speak, there are ominous signs of decay and collapse. When one looks squarely at the prevailing tendencies and conditions it is hard to be optimistic about the future. With the widespread slackening of the willingness to work, and work diligently and well, exemplified right and left in absenteeism, care less performance on the job, de mands for ridiculously short week ly working hours, to mention a few of the evidences, a decline in pro ducti vity per person can hardly be avoided, even if the momentum of the technical march is maintained for a time and there is persistent abatement in the rate of population growth. Still more serious is the apparent waxing,among many, of the spirit of dependency; there seem to be few signs of reluctance to accept a place on the relief rolls and no widespread urge to get off the list of those who are living at the expense of the taxpaying group. The fearful increase in the level of serious crime, including destruction of both private and public property, the growing can cer of drug abuse, the outrageous irresponsibility and disorder on the educational front, the carnage on the highways, are examples of other factors that are rampant and that surely are having a nega tive impact on the quality of living as well as the quantity of com modities and services available for consumers.

Before going on I should point out that it would be difficult to demonstrate that mar ked material progress is inherently bound to generate a general downhill slide; but it does seem clear that we Americans have suffered a severe attack of softening-up, particu larly evident among the coddled and unruly young folks but found in varying degrees among all ages and classes. And it also seems clear that some of the serious problems with which we are con fronted could hardly germinate, to say nothing of growing like bad weeds, in the absence of a high level of economic output and pros perity. There is a chain of evi dence, too, of cyclical patterns of behavior among both individuals and groups, historically as well as currently, although there is room for argument as to underlying causes of rise and fall in particu lar situations.

1972 CAN WE SUSTAIN PROSPERITY? 35 Striding into Socialism The problems and difficulties re ferred to above are by no means the whole story of what ails us. During the past forty to fifty years the freedom of ini tia ti ve and choice that we have enjoyed, and that is so substantially responsible for the progress made, has been rapidly eroded. Government inter ference and control have been growing like the psalmist's green bay tree. Fostered by war and postwar problems', the depression of the early thirties, and the poli cies promoted during the Roose velt era, we have seen the hand of the state, at all levels, bearing down more and more heavily on the mechanism of the market, throughout the economic pipeline. Business men and politicians are still giving persistent lip service to "our system of free enterprise," but the continuing reiteration of this phrase is becoming a bit ab surd in the light of the actual state of affairs. The most discour aging aspect of the situation, for those with genuine allegiance to the view that the free competitive market is the effective means of stimulating and directing the eco nomic apparatus, is the extent of general acquiescence in the march toward a completely socialistic so ciety.

Indeed, there seems to be an in creasing tide of clamor for more and more government intervention and dictation in the process of pro duction and distribution, ranging from such fields as specifications for motor vehicle manufacture to the details of cereal packaging. This clamor gives evidence of both gross ignorance and a form of mysticism. Many act as if they were unaware of what the free market has accomplished for this country, and are equally lacking in the ability to distinguish between the essence of a· free economy and the nature of statism. And a host of people appear to believe that the ordinary humans who operate a government agency somehow be come supermen, wizards, when they put on the official cloak. Ac tually there is abundant evidence that government employment is still not regarded with great fa vor by many. of the exceptionally talented and' ambitious and that those entering the service of the state tend to become' insulated by civil service and other factors from the kind of pressures that still prevail in private business, with resulting impairment of any urge in the direction of topflight performance .•Belief in the superi ority of government operation over that of typical private organi zations is surely one of the most unjustified of all the familiar de lusions from which we are suffer ing. Experience with the mail 36 THE FREEMAN January service alone should be sufficient to cure anybody - even .the most gullible - of such a conviction.

The Poverty Bugaboo The activists in the drive against private business undertak ings and an economy depending on the market for guidance generally start their attack by questioning the position that by these means we have achieved a genuinely pros perous status. They can hardly deny the fact of an astonishing advance in technical devices and methods and an accompanying surge in the level of economic out put, but they contend that the ma-jor benefit of the improvement goes to the few rather than the many, and that the injustices in herent in the way the pie is cut and distributed are so serious as to warrant the indictment of the system rather than its support. That the mechanism of the mar ket will not work out perfectly in practice, even if not harassed or hamstrung by interventions, must be acknowledged. The American experience, .although extraordi nary, has certainly not been free from difficulties and inequities; the results, even from a neutral point of view, fall short of achiev ing an ideal state of affairs. The frailties of men have not been ov ercome; unfairness and predatory conduct have not been eliminated.

But any careful examination of the available data will show that the radical detractors, the people determined to substitute complete collectivism for a still partially free market economy, are way off base. In the first place they make the old Marxian mistake of assum ing that you can have mass pro duction without mass consump tion. If millions of bathtubs are made there must be millions of users; they can't all be crowded into the homes of the very wealthy. The truth is that capitalism has been the great leveler. In the in dustrial countries generally, and especially in the United States, the most striking feature of the trek up the hill has been the great im provement in the lot of the ordi nary, mine-run individual. With the development of machine meth ods, broad markets, and repre sentative government, it became no longer possible for a small rul ing class to skim off all the cream, leaving the masses at or near the subsistence level - the condition prevailing through most of human history.

The willingness of those work ing to destroy private enterprise and enthrone government to close their eyes to the actual situation is somewhat puzzling, and at times makes one question the sincerity of their accusations and protesta tions. It is true, of course, that 1972 CAN WE SUSTAIN PROSPERITY? 37 some people have larger incomes, better housing, and more property than others, and such a .condition may arouse envy and even hate, as well as provide powerful motiva tion for greater effort and produc tivity. But it is simply not a fact that America is a land of large scale poverty and economic dis tress. The air is full of baloney at this point. The attitudes of many remind one of the tale of the goose and the golden eggs. Present-day Americans are affluent, amazingly, when their condition is compared with the lot of their grandparents and great-grandparents, to go back no further. Let the complainers try to find examples of families at the bare subsistence level; they'll have trouble in locating a single case. When· the writer was a youngster, in contrast, .there were households in many neighborhoods where at times perhaps the only available foodstuff was corn-meal - and not much of that. And the people suffering real privation in those days were often still too proud and ambitious to expect to be taken care of by either the neighbors or any branch of gov ernment. Abject poverty - where keeping body and soul together is a problem - has almost disap peared in this country, and today we are arguing about the frills, not the necessities.

I recall flying across Appalachia one beautiful evening during the period when the hue and cry about the pathetic state of the miners and their families was at its height. It was just at dusk, but following the valleys at less than a mile up I. had a good view of hundreds of cabins and small houses, both scattered and in the villages along our route. And I was struck by the fact that there was a television tower on almost every home, including the shan ties, and one or two cars standing in nearly every driveway (and they didn't all look like jalopies). I realize that the presence of a television set and a· car doesn't demonstrate affluence, but neither does it suggest a state of acute misfortune and misery. With the campaign to abolish "poverty" now in full swing, main ly through the means of coerced transfers from those with to those without (by political definition) there is grave danger that there will shortly be an accelerating re luctance on the part of those pro viding the wherewithal to con tinue to carryon for the benefit of the idle and nonproductive, and that the resulting decline in out put will produce a crisis that will finally lead to a tyrannical dicta torship. Indeed, there is already some evidence of slackening effort, on the part of those still working and. paying taxes, in the face of 38 THE FREEMAN January the mounting burden of the "wel fare" program.

The Importance of Pressures The question propounded in the heading for these comments, how ever, should not be answered by a blunt negative. It leads into the broad problem of motivation, a subject worthy of serious study. In attempting to examine this problem very briefly, and to take note of some of the limitations of the pessimistic position outlined here, some further attention should be given, first, to the im pact of hardships and rough sled ding on the development of char acterand striving for improve ment. That pressure of some kind is required to induce man to bestir himself, vigorously and resource fully, to spur him to effort and ac complishment, seems quite clear. As somebody has put it, "when the going gets tough the tough get going." The basic, universal pres sure is the urge to survive. Among our remote, primitive ancestors this pressure was undoubtedly most urgently felt in the need to find food adequate to maintain life, and in .many parts of the planet today this need is still par amount. In the Western World, and particularly here in America, this primary pressure has receded, at least for the time being, into the background. As a result of great technical progress and other factors we are now concerned with a high rather than a bare living level, as already pointed out.

In the matter of food we have meat, dairy products, fruit, vege tables, and a great array of proc essed and packaged foodstuffs, and it would be difficult for most Americans even to imagine them selves restricted to a diet - for ex ample - of unpolished rice with an occasional dab of fish. In clothing it is style that counts, not the need to keep from freezing. In housing almost everyone has elec...; tric lights, and central heating and airconditioning are so widespread as to be commonplace. Improved streets and highways are crowded with more than 100,000,000 mo tor vehicles. Tra.vel, entertain ment, educational facilities, a flood of printed matter, are generally available. And so on. As I said before we a,re affluent, and sus tenance is not our immediate prob lem. It is difficult to judge what is the overall ~ffect of the present day release, on a substantial scale, from the threat of starva tion, and the general slackening of the struggle for the other "neces sities". That the absence of these fundamental pr'essures has a bear ing on current conditions may reasonably be concluded. One evi1972 CAN WE SUSTAIN PROSPERITY? 39 dence of the effect of the "good times", often pointed out, is found in the many cases where the sons and daughters of those who have made the grade show little of the urge to work hard, to hustle, to strive, as did their parents and grandparents. And in view of the extent to which some of the young sters are indulged this should not be surprising. Another evidence is supplied by artificial, built-in bar riers to pressure. Civil service and professorial tenure are examples of shelters that often contribute to sluggishness and poor perform ance. If the boss has no power to fire anybody why should an em ployee go all out to improve his productivity? Why should he not slow down in the traces? I once joshingly suggested to a. univer sity president that the board of regents should fire at least one full professor annually, even if he were picked by lot, as a means of keeping the teaching staff on their toes. (Of course there are cases where conscience, a developed work habit, and native ambition to ex cel, will offset the tendency to take it easy under the protection af forded by tenure.) Relieve Unnecessary Pressures Supporters of tenure, union power, and other policies, aimed at preventing dismissals, may con tend that the resulting freedom from fear, increased sense of se curity, will serve to promote rath er than check the inclination to pitch in hard at the work in hand, and this point is not utterly with out merit. Acute and continuing fear, at any rate, may not be con ducive to top performance. Thus the constant dread of' finding the pink slip of dismissal in the pay envelope, and anxiety as to arbi trary and unj ust treatment, are not favorable conditions for the stimulation of first-class effort.

But such conditions are a far cry from those. in which dismissal for serious cause - persistent absen teeism, drunkenness, sloppy work manship, sabotage, and so on - is impossible because of tenure or other restraints on management. On the market place there is broad evidence of the pressure re quirement .. Without the push pro vided by competition the market can not be expected to furnish price structures and movements that will .act as sound thermo static guides in production and dis tribution. It is beyond the scope of this piece to consider the mean ingand impact of competition, but it is not inappropriate here to in sist that the very essence of a· con dition of active competition is C'ort tinui,ng pressure in the direction of better products and services to the consumer, a.t the lowest pos sible cost.

40 THE FREEMAN January The Need for Lures Before concluding these com ments notice should also be taken of the importance of the carrot in front as well as the stick behind as a stimulant. Opportunity, en couragement, inducement, as well as hardship and difficulty, can prod men to action and increased ef fort. Thus it can be argued that the opportunity presented to early American settlers by a rela tively open continent, blessed with abundant natural resources, rath er than the obstacles and difficul ties as such, is the factor that ex plains the great forward surge in technology and productivity. Op portunity beckons, without doubt, and a hopeless outlook, with no sign of a silver lining in view, is not conducive to great endeavor. This is very evident in the areas of capital formation and invest ment; without the lure of earnings the incentive to save and invest is surely impared if not largely de stroyed.

In climbing the hill, to consider the possible effect of opportunity a bit further, every step success fully taken may provide encour agement for attempting another stride, and as the momentum of progress increases the glimpses of the possibilities lying ahead may become even more potent than the sight of the obstacles yet in the way. It is hardly practicable, and not necessary, to pass judgment on the relative weights of the im pacts of lure and pressure, but we can all agree that the presence of openings, prospects, of doors at least ajar, may well be of crucial significance in any society, at any stage of its development. Will the Upward Climb Be Resumed? Are there chinks in the clouds that have been gathering over our heads in America, and have been becoming blacker and blacker for some time? Do our current troubles constitute the early stages of a long decline into some kind of "dark ages"? As I've al ready indicated, grounds for op timism are rather hard to find.

But a turnabout - perhaps in a generation or two - shouldn't be ruled out. It is conceivable that present destructive trends will be checked, by some juncture of cir cumstances, and even reversed in due course. Many Americans still have a lot of latent spunk left, that comes to light occasionally in the heroic efforts - for example - to rescue trapped miners, children in peril, or even the cat or dog lost in a sewer. In the field of sport, too, we see the survival of a strong competitive spirit and de votion to the ideal of top perform ance. And there are other and still more impressive evidences of cour age, sacrifice, and dedication.

1972 CAN WE SUSTAIN PROSPERITY? 41 Especially needed is recognition of the plain fact that our society has done no more than climb the foothills; the mountain top is a long way off. On the technological front, .certainly, there are still challenges galore. Perhaps atten tion should be shifted from outer space to the Earth's crust. Thus far the deepest we have dug is not much more than a mile. Under ground housing has been experi mented with here and there, but there is room for a. tremendous development in this field -- as any visitor to the underground home at the last world's fair in New York will attest.! It would not be out of the question to put a whole city underground. As our reserves of basic metals and other resour ces, that we don't know how to re place in kind, become exhausted there will be increasing need for the production of substitutes from the sand and other substances that are available in inexhaustible amounts. It's unlikely, but scarce ly inconceivable, that the problem of transmutation may be solved the dream of the ancient alche mist. Our great railroad system is almost prostrate, but it could be 1 For the first outline of the possibili ties of underground construction see the author's "On Going Underground," Mich igan Quarterly Review, January, 1962, and a discussion of this article in the Sun day edition of the Detroit Free Press, March 31, 1963.

restored and greatly advanced. Why not have tubes crossing the continent through which both pas senger .and· freight trains could move at speeds of two or three hundred miles per hour? These few suggestions are only a sma.ll sample of major possibilities. And minor improvements - of the zipper class - are possible by the thousand. We still don't have a pitcher from which we can pour our cream or syrup without drip ping! Or even ·a, cereal dish with a slanting bottom, so that we can cream our corn flakes, by stages, without soaking the whole dish ful. And when is somebody going to come along with a good trans parent plastic storm window, to be hung inside on a roller, so the householder can put it on or off in a twinkling? In conclusion I feel obliged to return to the point that we can't put our feet back on the path that may lead, eventually, to the high est peak, unless we abandon the downhill track on which we are now chugging along toward the mistaken goal of complete govern ment control and operation - the socialist state. Here is the crucial _~ifficulty that must be overcome if an upward course is to be resumed.

And daydreaming, disorder, and destruction. won't help us to make the shift. I CLARENCE B. CARSON THE FOUNDING OF THE AMERICAN REPUBLIC 6 The Mercantile Impasse 42 WHAT PROVOKED the American col onists to resist British acts, to rebel against restrictions placed upon them, and eventually to de clare and effect their independ ence? To put the· matter in more conventional terms: What caused the American· revolution? Men who have spent years study ing the questions propound dif ferent answers. Some hold that the British mercantile system pro vided the provocation to revolt. Others have held that the Amer ican colonists benefited from mer cantilism and that, this being so, mercantilism was hardly at the root of the difficulty. Another thesis that has been argued, most persuasively by Lawrence Henry Gipson, is that the American col onies had attained a level of ma turity that made them no longer dependent upon Britain and no longer desirous of the connection.

Some historians have gone so far as to charge that American debt ors with the desire to rid them selves of pressing British credi tors stirred up resistance and brought off a revolution. Those looking for a class struggle expla nation of the conflict have tried to make the revolt against Britain a part of an internal struggle beDr. Carson lives in Florida. He is a noted lec turer and author, his latest book entitled Throttling the Railroads.

1972 THE MERCANTILE IMPASSE 43 tween the haves and have-nots. In short, almost every interpretation that could be imagined has been offered, and many of these have been buttressed by impressive arguments and such evidence as fitted them. One thing· is about as clear as such things can ever be: mercan tilist acts did not provoke the ini tial resistance in the mid-1760's. The Stamp Act of 1765 was not a mercantilist act, nor was the Sugar Act of 1764 primarily mer cantilistic. Indeed, the Sugar Act altered some of the original mer cantilist features of the Molasses Act of an earlier date. Moreover, there had been mercantilist re strictions on the American colo... nists for more than a century, and none of these had provoked violent resistance. There can be no doubt that colonists were long since used to mercantilist restrictions, and peoples are unlikely to revolt against that to which they have become accustomed. The fact is that when representatives of the coloni~ts gathered at the Stamp Act Congress to air their griev ances, they announced that what they fundamentally opposed was "taxation without representation"

a, thing contrary to the British constitution. They readily granted - at first - that Britain had the right to regulate their commerce. It follows, then, that the immediate provocation to resistance was not mercantilist measures. But this is only to look at things from the surface and to wrench them out of a much broader his torical context where they belong. Suppose that instead of asking why and what the colonists re sisted we ask why the British per sisted in passing measures which provoked the colonists. More di rectly, why did Parliament at tempt to raise revenues from the colonies in ways that departed from custom and long established policy? Why did they lay direct and indirect taxes on the colonies? For Revenue Only The answers to these questions are not far to seek. The British government was in dire need of new sources of revenue. The wa.rs of the eighteenth century had been highly expensive, and the indebt edness of the government was mounting. The debt in 1755 - just prior to the Seven Year's War (or French and Indian War as it was known in America) - stood at about £ 75,000,000. By 1766 it had mounted to £ 133,000,000.1 The British people were heavily taxed, and new taxes were being added. The reaction in the mother country to an added tax on do1 Lawrence H. Gipson, The Coming of the Revolution (New York: Harper Torch books, 1962), pp. 55-56.

44 THE FREEMAN January mestic cider is instructive. "The news of the passing of the cider act was the signal for 'tumults and riots' in the apple-growing countries of England, and many producers of cider threatened to cut down their orchards if the ex cise were collected."2 In short, the heavily-taxed British were in no mood to accept additional burdens. By contrast, American colonists were generally lightly taxed, and several colonies had no govern ment debt to speak of. For ex ample, one historian describes the situation in Pennsylvania in this way: "Not only were the inhabit ants relieved of all ordinary charges of government during the years 1760-63 but, aside from a revived excise tax on liquors, they also enjoyed such relief during the remainder of the period down to the Revolution. Moreover, the personal and estate taxes ... rep resented a per capita levy of less than one shilling ..." by 1775.3 A report from Maryland in 1767 in dicated that "all levies for the support of the provincial govern ment - in contrast to those for the support of the clergy, the schools, and other county and parish charges - amounted to less than £ 5,500, an annual per capita tax of about a shilling."4 Though not 2 Ibid., p. 58.

3 Ibid., p. 136. 4 Ibid., p. 138. all the colonies had such a pleasant tax situation, neither was it gen erally unpleasant. On top of this, colonial governments had been re imbursed for their military out lays during the French and In dian War. If these conditions be accepted at face value, if there be no look ing behind them, it would appear that the case for Britain's taxing the colonists would· certainly ·be understandable and probably justi fiable. But the situation does war rant an examination of the back ground. British taxation of the colonists broke a long-term con tract with them - so the colonists said - and heralded a major policy turn. Back of this policy shift were the mercantilistic policies and practices which had produced a domestic crisis for the British which their government tried to relieve by bringing pressure on the colonies. Bitter Fruits of a Long History of Mercantilism The contradictions of mercan tilism had produced a long harvest of bitter fruit, some of which the British government and people were no longer willing to accept.

No more, in justice, could the American colonists be expected to accept them. It is true that the debates of the 1760's and 1770's were not usually conducted in 1972 THE MERCANTILE IMPASSE 45 terms of mercantile policy. The contradictions were there, and policy changes should be viewed in the light of them. During this time; Adam Smith was putting to gether his monumental work, The Wealth of Nations, which laid bare the fallacies and contradic tions of mercantilism. It may be accounted appropriate, too, that this work appeared in print in 1776, the same year as the Dec laration of Independence. A little exa,mination into British mercan tilism will show its role in pro ducing an impasse between Britain and America. Mercantilism was a composite of ideas and practices which had grown helter-skelter over a couple of centuries before the revolt in the American colonies. Most of the ideas were formulated in the seventeenth and eighteenth cen turies, but some of the practices associated with it are much· older.

The theory of mercantilism was the first faltering effort at devis ing a general theory of economics in the modern era. As some think ers cut loose from a Christian framework and attempted to look at things naturally, they devised a crude economics to fit new pre conceptions. The theory was weighted down with two assump tions, however, which were cul tural in origin rather than natu ral. Measured in Gold The first of these assumptions was made up largeiy of what is commonly called the bullion theory. Bullionism is· the notion that wealth consists of precious metals, particularly gold, and that the value of everything else derives from the fact that precious metals will be exchanged for it. It is un derstandable that men should ha:ve come to think. in this way. Gold was the most universally accept able medium of exchange in both East and West. It hardly deterio rates; it weighs little in propor tion to its exchange value for other things; it has many practi cal uses; and it is malleable. Men ever and again mistake money, because it can be exchanged for goods, for the source of the value which their demand gives to the goods. Small wonder, then, they should make this confusion about gold when gold is valued as a com modity as well as a medium of exchange.

The second major assumption of mercantilism was nationalistic. That is, mercantilists thought ex clusively about how a single na tion might enhance its wealth by increasing its supply of gold. One nation's wealth, as they saw it, was usually gained at the expense of another nation. Ordinarily, one nation gains gold from another nation which is losing its supply.

46 THE FREEMAN January (It is interesting to speculate that mercantilistic theory and practice may well have been born out of the intense desire of many coun tries to separate the Spanish from the great hordes of gold they had found in the Americas.) Accord ing to the bullion theory, then, one nation's wealth is increased by diminishing that of another. Intergovernmental Affairs The thrust of mercantilism was to make trade into a contest among the governments of na tions. This was so because trade was now conceived of as a poten tial means for increasing the bul lion holdings of a nation. This. would be accomplished, according to mercantilists, by way of a fa vorable balance of trade. A favor able balance of trade is said to ex ist when the goods and services which one nation sold to another exceeded those bought from the other. In brief, a nation had a fa vorable balance of trade when ex ports exceeded imports. This was thought to be "favorable" because the difference would be made up in gold and the "wealth" of the nation thus favored would be aug mented.A nation which imported more than it exported would, of course, have an unfavorable bal ance of trade.

Numerous practices which might help a nation to get a fa:vorable balance of trade were con trived or justified by this theory. The practices were usually aimed at increasing exports and decreas ing imports. Imports could be de creased if more of the goods con sumed in a country were produced there. To that end governments encouraged manufacturing by spe cial charters and encouraged the growing of certain crops by sub sidies and bounties. Of course, im ports were more directly discour aged by tariffs, quotas, and dis criminatory charges levied against foreign suppliers. Similar prac tices also might help a country to increase its exports. Colonies were conceived of as being particularly valuable in en hancing the wea1th of a nation. Frequently wanted were raw ma terials for manufacturing as well as produce which could not be grown economically at home. If such exotic products could be ac quired from colonies they need not be imported from some other country. In addition to this, a colony might have an unfavorable balance of trade with the mother country and thus be a source of the precious metals it would send to make up the trade deficit.

The American continental colo nies were part of a British empire which had been shaped in the seventeenth and eighteenth cen turies as a result of the mercan1972 THE MERCANTILE IMPASSE 47 tile policies of England. Initially, the kings of England had at tempted to plant and benefit from colonies by granting them as mo nopolies to private companies and proprietors. These companies and indi viduals were empowered to regulate the activities of those who came over so that the undertak ings would benefit the owners and, perchance, enhance the wealth and power of England. Things did not work out that way very consist ently. Colonists frequently cared little enough about whether they benefited the original charter hold ers or not; instead, they concen trated their efforts on doing what was to their own benefit. Moreover, as colonists gained some measure of control over their governments, they often enacted their own mer cantile policies with the intent of making a colony self-sufficient. 5 Such action ran counter to British aims, of course.

Acts of Intervention By the mid-seventeenth century, then, Britain was ready to begin to impose a general system of mer cantile restrictions on the colo nists. The most general of the mercan tile acts are those known as the 5 See E. A. J. Johnson, American Eco nomic Thought in the Seventeenth Cen tury (New York: Russell and Russell, 1961), pp. 8-29. Navigation Acts. A series of these acts was passed over the years from 1651 through 1663. The num ber of acts passed was increased beca use legislation passed in the 1650's was considered invalid after the restoration of monarchy in 1660. This being the case, the later a.cts are the only ones that need concern us here. The Navigation Act of 1660 - re-enacted in 1661 - required that all trade with the colonies be carried in English built ships which were manned predominantly by Englishmen. "English" was defined for this purpose to include the inhabitants of the colonies. All foreign mer chants were excluded from the commerce of the English colonies, and certain enumerated articles, e. g., tobacco, could only be ex ported from the colonies to Britain or British possessions. The Staple Act of 1663 provided that goods to be exported from European countries to English colonies must first be shipped to England.

"These acts intended to give England a monopoly of the trade of· her colonies," one historian notes: - not a monopoly to particular per sons, but a national monopoly .in which all English merchants should share. The Staple Act meant not only that English merchants would get the business of selling to the colonies but also that English manufacturers 48 THE FREEMAN January might dispose of their wares at an advantage in that the foreign goods which had to pass through England en route to the colonies might be taxed, therehy raising their prices and enahling English goods to under sell them. Similarly, the enumerated article principle assured that most of the colonial staples important to England would he exported hy Eng lish merchants, who were also guar anteed employment for their vessels through the exclusion of foreign ves sels from the English colonies. 6 Parliament passed another Nav igation Act in 1696, but it was only an effort to tighten the ad ministration of existing law rather than to add new features. 7 British legislation also at tempted to prevent certain kinds of manufacturing and trade from developing in the colonies. The Woolens Act of 1699 prohibIted the export of wool or woolen goods from a colony either to other colo nies or to other countries. The Hat Act of 1732 prohibited the expor tation of hats from the colony in which they were made and lim ited the number of apprentices a hatmaker might have. The Mo lasses Act of 1733 placed high duties on molasses, sugar, and rum imported into the colonies from any source other than Brit6 Curtis P. Nettels, The Roots of Amer ican Civilization (New York: Appleton Century-Crofts, 1963, 2nd ed.), p. 283.

7 Ibid., p. 375. ish colonies. This was an attempt to give the British West Indies a virtual monopoly of the trade. It may also have been intended to increase income from the tariff or to reduce the shipping activities of New Englanders. The Iron Act of 1750 permitted pig iron to be exported from the colonies to Eng land duty free but prohibited the erection of new iron mills for the finishing of products in the col onies. There were other types of mer cantile regulations than those above. Over the years, it was us ually illegal for specie (gold coins) to be exported from England to the colonies. The British tried to encourage production of wanted goods in the colonies by paying bounties. For example, the British government paid these premiums to importers of colonial naval stores: "£4 a ton for pitch and tar; £3 a ton for resin and tur pentine; £6 a ton for hemp; and £1 a ton for masts, yards, and bowsprits."s The purpose of all these regula tions and restrictions was to make the colonies profitable to Britain of course. To that end, the col~ onists were encouraged to produce goods which could not be compet itively produced in England, dis couraged to compete with the mother country, encouraged to 8 Ibid., p. 434.

1972 THE MERCANTILE IMPASSE 49 send specie to England, discour aged from receiving specie from that country, and discouraged from developing markets in Amer ica which could serve either Eng land or other countries. There were, however, many unwanted side effects of these policies. They are commonly referred to as the inner contradictions of mercan tilism. The Road to War The most dire result of mer cantilism was war. Indeed, some believe that mercantilism did not so much lead to war as war led to mercantilism. One writer says that the "needs of constant war fare, especially its costs, had en couraged every power to develop and marshall its resources, at tempting to become self-sufficient, especially in the sinews of war. . . . This economic nationalism, generally described as m,ercan tilism, is less a theory than a weapon - the use of economic means to serve political ends."9 There is no doubt that mercantil ist methods were used sometimes in warfare, but the usual causal relation is the other way around.

Mercantilism ranges government power behind the commercial ac tivities of a nation, uses govern9 Engen Weber, A Modern History of Europe (New York: Norton, 1971), pp. 145-46. ment power to support the mer chants of a nation against those of other nations, prohibits trade activities of '. foreigners in order to give advantages to native trades men. In order to support or pro tect their tradesmen, other nations .retalia ted with similar restrictions and sought colonies which would be protected trade areas for their people. If tr~de is free, competi tion is peaceful, but mercantilism shifts the contest into the-, realm of governmental power. When gov ernments contest for advantage in this way they are moving in the direction of the ultimate recourse -war. Such were the results of mer cantilism in the seventeenth and eighteenth centuries. War followed upon war with monotonous regu larity as naval and colonial pow ers contested with one another for dominance and advantages.

The wars between the British and Dutch in the, mid-seventeenth cen tury were clear ly mercantile in origin' and character. Nettels notes that the Navigation Act of 1651 "precipitated the First Anglo Dutch War of 1652-54."10 Further, 4e says that the "acts of 1660-63 threatened to exclude the Dutch completely from the English col onies and consequently new fuel was added to the old rivalry. In 1664 occurred the Second Anglo10 Nettels, Ope cit., p. 281.

50 THE FREEMAN January Dutch Wa.r.... "11 It was not sim ply incidental, either, that during this conflict the English gained control of the Middle Colonies in America. A third war br0ke out in 1672. "Although a Dutch fleet recaptured New Amsterdam in August 1673 the treaty of peace in 1674 once more restored it to Eng land - an act which marked the passing of the Dutch menace to England's North American trade."12 Impact on the Colonies Unfortunately, it did not end the rivalry in North America nor the train of mercantilistic wars. France was now emerging in the latter part of the seventeenth cen tury as a major power under the aggressive leadership of Louis XIV. Louis courted English mon archs so that they would allow him room to operate to fulfill his am bitions on the continent of Europe. The courtship may have been the undoing of Charles II and James II ; at any rate, it came to an end with the Glorious Revolution in 1688.

A Dutchman, William of Orange, became William III of England and joint ruler with his wife Mary during the rest of her lifetime. In very short order, Britain went to war with France (King William's War) and by so doing began a se11 Ibid., p. 283. 12 Ibid., p. 284. ries of conflicts with that nation which did not finally end until the Congress of Vienna in 1815. Since other nations and their posses sions were usually involved in these conflicts between England and France, these wars may well be called world wars. While King William's War of the 1690's was ostensibly fought to maintain a balance of power in Europe, the colonies were at stake, also, at least potentially. One his tory indicates that in issuing his declaration of war "William took cognizance of the offenses of Louis' subjects in America against the English colonies there - in New foundland, in Hudson Bay, in the West Indies, in New York, and in Nova Scotia."13 Though there was considerable fighting in America, there were no significant territo rial changes as a result of that war.

Maps of North America show ing territorial possessions of Eu ropean powers and changes in them from 1700-1763 indicate something of the bearing of the colonial situation on the great wars of this period. In 1700, the English held only a relatively nar row strip of the eastern coast of North America from New Eng13 Max Savelle and Robert Middle kauff, A History of Colonial America (New York: Holt, Rinehart and Winston, 1964, rev. ed.), p. 261.

1972 THE'MERCANTILE IMPASSE 51 land to Georgia, with claims run,ning back to the Appalachian mountain chain generally. Most of the territory which is now Canada was then claimed by France, along with the vast hinterland region drained by the Mississippi River. South and west of these were the extensive Spanish possessions. The English hold on the continent was still precarious, and the colonies were surrounded except on the side of the Atlantic Ocean. by ter ritory claimed by other European powers. This situation would be drama tically altered by 1763 as a result of the wars. A Struggle for Control The War of the Spanish Succes sion (1702-13, known in England as Queen Anne's War) was fought over issues which were tied to the question of who would dominate the Americas. Louis XIV was de termined that his grandson should become king of Spain immediately and should eventually succeed him to the throne of France. This would not only bring under one person two great powers in Eu rope but would also link two mas sive empires in America. This was an intolerable prospect for Eng land. As one history puts the mat ter: "For Holland and England, it was a war over colonies and trade.

These two countries were deter mined to prevent a union of the French and Spanish crowns; but they were above all determined to prevent France from getting into a position to block their own com mercial and territorial ambitions in America."14 At the conclusion of the war, provisions were made for perpetual separation of the French and Spanish crowns, and Britain gained new territory in America: Newfoundland, Acadia, and the Hudson Bay territory. England got involved in war with Spain in 1739, known as the War of Jenkin's Ear, and a part of the struggle was over possession of Georgia. There was some fighting in America, but it was very lim ited, for the conflict shifted to Europe and the more general con vulsion known as the War of the Austrian Succession (1740-48) . This war did not result in any ter ritorial changes, though there were changes in alliances on the continent of Europe which af fected future events.

The peace that followed this second of world wars in the eight eenth century was unusually brief. The French and Indian War broke out in America, 1754; it involved most· basically a contest over terri tory in what is now western Penn sylvania between the French and Indians on the one hand and the British and English Am'ericans on the other. As an extension of this 14 Ibid., p. 265.

52 THE FllEEMAN January conflict, a general war broke out in Europe in 1756, known as the Seven Year's War. A major con flict continued in America, reach ing its climax with the Battle of Quebec in 1759. There the British forces decisively defeated the French. By the Treaty of Paris of 1763, the British got all the French Canadian holdings and French and Spanish territory east of the Mississippi. Triumphant, and Broke The British had apparently emerged triumphant in these wars against France. The American col onies now had an extensive do main to be opened up and exploit ed; it was a long way to the frontiers of any other European colonial power. A vast British em pire had been acquired and was ready for the shaping. So it may have looked to an im perialist, but the British Parlia ment and people were confronted with grave difficulties in the wake of the apparent triumph. There was, as earlier told, a huge debt in England in 1763 as a result of the wars. It was a debt of a size that would most likely dwarf all the profits gained thus far from mer cantilist policies. But even if the balance books had stood otherwise, the contradictions of mercantil ism would still, most likely, have produced an impasse.

One of the fallacies of mercan tilism is that the wealth within a nation constitutes the wealth of a nation. Wealth in Britain was not distributed among the inhabitants equally but individually possessed. Undoubtedly, some merchants, manufacturers, shippers, and tradesmen extracted great wealth as a result of special favors within the mercantile system. But this need not have increased the wealth of the populace in general. Indeed, when it is understood that mer cantile policies restricted the en try of goods from other lands and raised their prices, it becomes clear that the populace in general frequently suffered rather than benefited from mercantilism. When the burden of taxes to pay for mercantile wars was added to this - taxes levied on the populace in generalit is easy to understand why there was widespread dissat isfaction in Britain. Of course, the British govern ment did not proclaim mercantil ism a failure. Even if this had been clearly understood at the time, it is doubtful that those in power would have reversed their policies. At any rate, they did not do so. Instead, they laid the blame for difficulties on American eva sion of mercantile restrictions, de termined to enforce them more vigorously, and declared that the Americans must be taxed to help 1972 THE MERCANTILE IMPASSE 53 pay for the wars, a portion of which had been fought in their defense.

This course of action seemed eminently fair to many English men. After all, the colonists had been prime beneficiaries of British protection. Moreover, many Amer icans were reported to be living well if not luxuriously. Not only that, but to make matters· worse, these colonists paid very little by ,way of taxes. Such expenses as they had incurred in the recent French and Indian War had been reimbursed from the British treas ury. Surely, there could be no rea sonable objection to mild taxation of the colonists. As a matter of fact, there could and would be, but we have not yet come to that part of the story. Victims or Beneficiaries? What is most relevant here is the impact of mercantilism on the American colonies. The question has been raised by some histori ans as to whether the colonists were not really the beneficiaries of British mercantilism rather than the victims. The fact that many Americans prospered under the system is submitted as evidence that they benefited from the sys tem. There is also negative evi dence that Americans had rough going economically after the· break from England. The reasoning underlying this argument confuses because of with in spite of. The thrust of mercantilism is not such that it would produce prosperity in general for those on whom' it is imposed. Its ·thrust is to siphon resources from the colonies (and other countries) into the mother country. To restrict manufactur ing, to deny the development of local markets, to constrict interco lonial trade, and to make the mother country the port of entry for many goods could hardly bene fit the colonists generally.

Perhaps the most fundamental flaw of mercantilism is the view that a nation's wealth can be in creased by •exporting more in goods and services than is import ed. This policy was quite harmful to colonies without providing cor responding benefits to Britain. The British succeeded in a "favorable" balance of trade with the Ameri can mainland colonies. The most immediate effect was the gold drain from the colonies to Britain. This tendency was augmented by prohibiting the export of gold from Britain. Moreover, many of the ways by which the colonists might have made up the difference were denied to them by mercan tile restrictions. In consequence, the colonists suffered a shortage of specie. The practical effect was that colonists paid higher prices for goods com54 THE FREEMAN Janua'fY forts of colonists to find ways to deal with the situation were pro hibited before they were well es tablished.

ing from England than they would have had to do if a free market in gold had existed, because gold was more plentiful in Britain than in America. It is even doubtful that British merchants benefited In sum, the break from England from this situation as much as was preceded by an impasse at might be supposed, for they usu-tributable to mercantilism. More ally made loans. to Americans to than a century of wars had been enable them to buy their goods. fought in the pursuit of mercan Americans also had their credit in tile aims by Britain. These had England augmented by such pay-left a heavy burden of debt which ments as reimbursement for par-the British people found hard to ticipation in wars (an augmenta-bear. Thus, the government turned tion at the expense of British tax-to the colonies as a new source of payers) . revenue. But the colonies were Much of the economic activity hardly in a position to take on the within the colonies was an uphill burden. They were already drained effort to overcome the ill effects of of specie, and many colonists were mercantile policies. Probably, the deeply and perpetually in debt to fixing of slavery so extensively can British merchants. To say that be ascribed in the main to mercan-they were lightly taxed at home tilism. (British policy was opposed answers nothing as t~ what the to the emancipation of slaves be-effect of British taxation would be.

cause slaves were frequently col-Mercantile restrictions imposed lateral for loans.) Planters were barriers between Britain and the driven to expand their production colonies. An imbalance of trade al - to the acquisition of more and ready existed, with the colonies on more slaves - in the often vain the "unfavorable" end of that. Tax hope of balancing their trade. The payments to Britain could only be Triangular Trade by New Eng-made by reducing imports or going landers, which included the slave deeper in debt to British lenders. trade, was an extended effort to When the time came for resisting, get specie. The paper money· emis-colonists made their justifications sions which became so common to-along different lines than those ward the close of the period were above, but what they were resist efforts to deal with the monetary ing had been brought on by the crisis. Of course, many of the ef-mercantile impasse. I) Next: The First American C1'"~sis: 1763-66 A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN TheGeniusoftheWest WE, in the West, are supposed to hang our heads in shame these days. The bill of complaints brought against us is long. We are "im perialists." We are "materialists."

We have used the "Third World" as a quarrying ground for raw ma terials without giving adequate compensation for what we have taken. We indulge ourselves in race prej udice. Weare enemies of free dom, and we oppose the revolution of the masses. Our sons and daugh ters, listening to the vindictive chorus, begin to go over to the side of our detractors. Susan Sontag, a young literary critic, even goes so far as to say that the white race (meaning the nations of the West) is the cancer of humani ty. The whole bill of alleged particu lars is, of course, the sheerest moonshine. So it is good to come upon Louis Rougier's The Gen.ius of the West (Nash, $8.50), with its discerning introduction by F. A. Hayek. As one in a series of pub lications issued by the Principles of Freedom Committee this book turns to the historic record of three millennia to prove that Western civilization, alone among twenty two distinctive civilizations recog nized by Arnold Toynbee, has man aged to avoid the quagmires of fa talism. It is the only civilization that has been moved by a belief that man can improve his condition by understanding and mastering the forces of nature. And, far from "oppressing" the "Third World"

and the "colored races" by its "im perialistic" urges, it is the West that has brought the hope of prog ress to many a land that now joins in thoughtless excoriation of the very spirit that has created all the things that are now claimed as a uni versal birthright. 55 56 THE FREEMAN January Lucky Accidents In one sense the "West" is the result of a happy concatenation. It could have gone down the drain at numerous points if lucky accident had not intervened. The Greeks, who demythologized nature and demonstrated the logical necessity of abstract relationships, thus giv ing substance to "reason," gave us the beginnings of theoretical sci ence. With the rise of the city-state, they developed the idea of the rule of law as something better than capricious government by men. Greek rationalism created free men, and free men, using geomet ric hypotheses, physical instru ments and mathematical devices, learned how to conquer space and time. Their maps made them better voyagers, better traders. And, with a mastery of the sea extending their reaches all over the Mediter ranean, they hit upon the virtues of money and the market economy.

Rome superimposed order on Greek liberty without killing it. But Rome, with its conquests, took more slaves than the Greeks had ever taken. In Louis Rougier's opinion it was the institution of slavery that brought about the col lapse of the ancient world. With slaves to do the work, the inven tions of Archimedes - the lever, the wedge, the pulley, the worm screw, the winch - were regarded not as labor-saving necessities but as mere intellectual playthings. The prej udice against any practical ap plication of the mechanical arts was so strong that Archimedes, so Plutarch tells us, never bothered to leave any written treatise on his accomplishments. And when Heron invented a device involving the principle of the steam engine in ancient Alexandria, it was used only for childish amusements such as making marionettes dance and toy trumpets blow. It apparently never occurred to Heron that he might have lightened that most ex hausting task of women, the grind ing of grain.

With more and more slaves at their disposal, the Romans had even less reason to develop the "mechanic arts" than the Greeks. Conquest after conquest brought more captives to till the extensive acreage of the Roman latifundia. The small peasant landholder, un able to meet slave competition, drifted into Rome to join the plebs who clamored for bread and cir cuses and got what they wanted from corrupt politicians. Thus Rome decayed, and 40,000 slaves eventually joined Alaric in the sack of the city that liked to think of itself as eternal. The Christian Contribution The Christian church, which rose on the ruins of the ancient world, had no particular interest in the 1972 THE GENIUS OF THE WEST 57 things of this world. But it con demned the enslavement of prison ers as an infringement of God given human dignity. And, since Jesus had been a carpenter and St. Paul a tent-maker and St. Peter a fisherman, it saw no reason to ob ject when the monks in the first monasteries made a virtue of work.

In time the Middle Ages developed an entirely different attitude to ward labor-saving devices than was prevalent in Greek and Roman times. Louis Rougier makes a fas cinating story of the linkage be tween the "social revolution of Christianity" and the development of the water mill, the wind mill, the hydraulic hammer, and 'the various lifting tools that were needed to cover Europe "with a white robe of cathedrals." Without intending it as such, the church unleashed some thing of a medieval technological revolution. Slaves became serfs, cities grew, and the stage was set for the "new humanism" of the Renaissance. The Christian attitude toward work was the first lucky break of the West in the time of Rome's collapse. But work, with its pre mium on practical inventions such as the lifting jack, would not have flowered in a scientific revival if the church itself had not changed sufficiently to permit a seculariza tion of life during much of the working week. By a second lucky accident the elders of the City of Florence happened to entertain a Byzantine scholar, Manuel Chryso loras, who was traveling in Italy on a diplomatic mission. The Floren tine elite flocked to hear Chryso loras tell about Homer, Plato, Thu cydides, and Xenophon, and soon there was a horde of Florentines descending on Byzantium, buying forgotten Greek texts. If it hadn't been for the rediscovery of the Greek and Latin writers whose works had somehow survived the great burning of pagan documents that marked the advent of Chris tianity, the modern scientific, eco nomic, and political revolutions would never have come to pass.

Inquiry Halted in Orient During the so-called Dark Ages, Arab civilization seemed to prom ise much more than anything that was happening in western Europe. And the Chinese were way ahead of the West is such things as the use of coal, gunpowder, and print ing with movable letters. But the Turks, as Louis Rougier puts it, "imposed their· heavy yoke on Is lam; and Islam, returning to its sources, paralyzed inquiry with a formula which brooked no answer: Allah aalam, God knows best what is." As for the Chinese, instead of trying to dominate nature they sought an adjustment that·stressed finding contentment in the midst 58 THE FREEMAN Janu.ary of poverty and adversity. The Hin dus, with their caste system, per mitted no invigorating circulation of elites. So it was the West, with its legend of Prometheus, who stole fire from the gods, that was left to push the idea of progress. Now, even as they revile us, the Islamic, Confucian and Hindu wor Ids are clamoring for all the benefiits that the West has devel oped through three millennia of the activist attitude. We need not begrudge them their desires. But the notion that the West need apologize for its history is too ri diculous for words.

~ POLITICALLY IMPOSSIBLE ... ? by W. H. Hutt (London: The Insti tute of Economic Affairs, 1971), 100 pp. ($1.80). Reviewed by Henry Hazlitt W. H. HUTT is one of the outstand ing economists of our age. Born in London, professor and later dean of the Faculty of Commerce at the University of Cape Town, and re cently visiting professor at a num ber of American universities, he has published half-a-dozen books of which the two most influential have been his short Theory of Col lective Barga.ining in 1930 and the 446-page Keynesianism - Retro spect and Prospect in 1963. His work has been distinguished not only for remarkable acumen but for no less remarkable inde pendence and courage. The present paperback is devoted to trying to instill some of his own candor and courage into ~is professional col leagues. For what Professor Hutt finds is that most 'of these colleagues, particularly in the last forty years, have become increasingly poor economists in the effort to become "realistic" politicians. Whenever an honest economist has come up with a recommendation, based on principle, for the outright repeal of some entrenched bad law or dis continuance of some other disrup tive government policy, not only the political demagogues but his own colleagues have dismissed his recommendation as "politically im possible." As a result, more and more economists have abandoned candor, refrained from even sug gesting the "politically impossi ble" proposal, and instead have' put forward compromise proposals that they think have a political chance of being adopted. Or they have sought a reputation for in fluence by recommending what they thought was going to be done anyway. Or they have resorted to outright demagogy in calling for some new form' of inflation, con trol, soch'llism, or seizure. The re sult has been a deplorable degen eration in economic thought.

1972 OTHER BOOKS 59 Hutt illustrates his thesis in four separate - fields - moneta.ry policy, income transfers, Keynes ianism, and the strike-threat system. His comments on particu lar economists are candid and sometimes unspa.ring. Keynes, for example, he points out, gained his great reputation among his colleagues as well as with the general public by pre tending that he had found an easy way out of unemployment and de pression. This consisted of cheap money, government deficits, and inflation. The word "inflation" it self was suspect. "But an inspired insight enabled the Keynesians to perceive that, if called something else, 'the maintenance of effective demand,' for instance, it can be come respecbible." Under no conditions did Keynes want to risk offending the unions by suggesting that they were even partly responsible for creating the mass unemployment of the 1930's by pushing up and keeping up wage rates to unworkable levels.

So he invented the untenable "un employment· equilibrium" theory: "Keynes, perceiving that it would be politically suicidal to mention the unmentionable, saw a way out through the most suc cessful conj uring trick in history which, deceiving an audience that wished to be deceived, led to its being hailed as a great discovery, as revolutionary and important as Einstein's theory of relativity. I am not accusing Keynes of intel lectual dishonesty. He deceived himself with his 'conjuring trick.' That is how I have come to regard his 'unemployment equilibrium' no tion, together with the subsidiary theories with which it was bol stered." What is now commonly dis missed as "politically impossible" usually turns out on closer exami nation to be merely the politically difficult or politically unlikely. It is only made more difficult and more unlikely when economists lose the courage even to propose it.

Hutt's book is essentially a plea to his professional colleagues for more honesty and candor: "N0 policy which is for the ad vantage of the people is incapable of being effectively explained to them. It will of course take time and persistence to convince a ma jority. In the meantime compro mise will be needed whenever ur gent steps are required. But com promise, while it is the politician's privilege and necessity, is the scholar's deadly sin - unless it is presented clearly and unmistak ably as compromise and is always accompanied (a) by the noncom promising proposal and (b) an ex plicit explanation of the vote-pro curement reasons for the com promising proposal."

60 THE FREEMAN January This "dual form of exposition," as Hutt calls it, would certainly be a great advance compared with the present typical ambiguity and dis ingenuousness. Yet, while there is only. one ideal course, there are usually an indefinite number of possible compromises. If each economist plumps for one of these, in accordance with his own ama teur notions of its political feasi bility, the conflict among their recommendations may only end by confusing public opinion. In the long run it seems better for the economist to point to the path of principle, and leave the compro mises to the politicians. ;. FINANCIAL POLICY IN A CHANGING ECONOMY by Enders M. Voorhees (Lebanon, Penna.: Sowers Printing Company, 1970), 232 pp., $5.00 (Plus tax, where applicable.) Reviewed by Melvin D. Barger By PRESENT standards, the econom ic changes of the 1943-1955 period appear to have been modest. In flation was in motion, but not gal loping. There was social upheaval, but not open rebellion. Business was under attack, but the attacks were not wildly out of control.

The stage was being set for further trouble, however, and many thoughtful persons knew it. One astute business executive who smelled the future was Enders M. Voorhees, chief financial officer as well as articulate spokesman for U.S. Steel Corporation until his retirement several years ago. Mr. Voorhees' speeches and writings during that 12-year period have been preserved in book form in Financial Policy itn a Chang'ing Economy, a privately published vol ume which should serve as a valu able source book for business his torians and economists. Mr. Voorhees' views are impor tant for several rea.sons. One, he was in a key position as the chief financial officer of the steel com pany long known as the industry "pacesetter." Secondly, he is a. vig orous champion of the free market, and uses a substantial stock of facts to document many of his argu ments. Third, he was a. tough fight er who took his arguments to Con gressional committees and other influential groups in an effort to steer a safe financial course for his company under greatly changing conditions.

You catch the tone of Mr. Voor hees' thinking in the very first chapter, a commencement address entitled "The Uncommon Man." This is a. term which harks back to other libertarian thinkers, and Mr. Voorhees leaves little doubt that he favors giving the individ ual considerable elbowroom for 1972 OTHER BOOKS 61 creative accomplishment. He is also suspicious of special interest groups. He remarks, "Fancied wrongs seem real if you talk only to those of a similar fancy and soon you are likely to find. your selves organized into monopolies or pressure groups to get some thing for nothing from the other fellow who is assumed to be get ting too much for too little." Pro phetic words, particularly for a 1948 speech. His other chapters tend to be come more specific, but he fre quently returns to this question of establishing genuine equity in business and economic relation ships. In a brilliant chapter on specia1ized occupations (actually, a 1943 speech), he w,arns that the process of specialization may have "built up opposing rather than complementing groups whose strife for exploitative power can break up and disintegr,ate us, even as happened in France before the invasion." He warned of revolu tionary theories that "boil down not only to eliminating the tithe of the miller but insisting that he furnish flour without wheat being brought to him." Now that such theories seem to be popping out of the very woodwork, it is· inter esting to note that Mr. Voorhees made this comment 28 years ago.

Since most of his speeches fo cused on corporate financial problems, Mr. Voorhees' book is an other reminder of the delicate balancing act that financial officers must perform to keep a large-scale enterprise alive and functioning. Many critics,. in the 1940's and 1950's, saw U.S. Steel as the dom inant partner. in an "oligopoly" that could administer prices at will and manipulate its business environment as it pleased. But it didn't look that way to Mr. Voor hees. He s,aw U.S. Steel as an ex tremely vulnerable organization that could virtually be wiped out by a few years of unfair taxation practices or shortsighted financial controls. His. frequent warnings against the dangers of insufficient depreciation charges and exorbi tant wage settlement seem more timely today, with American steel companies steadily losing ground to more efficient foreign competi tors. At the same time, the recent Penn Central and Lockheed crises are grim proof that even giant corporations do not have unlim ited resources and must work un der the iron disciplines of the mar ket if they are to survive.

Many of Mr. Voorhees' talks be fore Congressional committees came when historic issues were being fought out in labor-manage ment relations and other areas. In some cases, of course, the battle was lost and the struggle has moved on to new fronts. As a rule, 62 THE FREEMAN January however, the present troubles in volve principles that do not grow obsolete and cannot be repealed by compulsions and legislation. Cur rently, for example, reformers warn that business must solve so ciety's many problems "or else" the government will step in and do it for them. "The 'or else' con notes that the perfect state lies ready and willing to take over," Mr. Voorhees said in 1943. "If that were the case and if only the cupidity of private owners stood between us and perfect material happiness, I am sure we should all stampede to the arms of the per fect state." There are many other such gems in Mr. Voorhees' writ ings. "If we want ample tools of production and the jobs their pres ence creates, we had best set up in America a social .atmosphere en dorsing rather than condemning ample dividends and the profits which make them possible," he said in 1949. And in an earlier talk: "We shall not forget that at the end of every tax plan is a hu man being. And I need not remind you that human beings are not abstractions." And, "Management has no weapon to point at custom ers' heads to match the strike weapon that labor leaders flour ish."

But if there's any chapter in the book that should be carved on stone tablets for all time, it's probably one entitled, "Needed - De pendable Dollars." Written 21 years ago (when inflation was supposedly mild), it deals with the endless problems that arise simply bec.ause the currency is be ing manipulated and diluted. "Al most every business calculation and estimate is bedeviled by the absence of dollar· dependability," Mr. Voorhees said to students at Dartmouth College. Perhaps think ing of the West Germans who had only recently put their currency on a new basis, he added, "It seems to be those peopl_e who have had bitter personal experience of liv ing under bad currencies who most appreciate good currencies and are willing to make some sac rifices to secure and maintain them." His rundown of the problems caused by inflated currency al most appears to be a synopsis of the next 20 years' troubles: over stated profits, concealed confisca tion of savings and other assets, increased labor-management con flicts, accounting problems, in creased demands for subsidies, and wage and price fixing. It is as if Mr. Voorhees had been able to review the chaos of 1971 while preparing this 1950 speech.

Though written by a business man of great distinction in his own industry, this book is not likely to be widely circulated or 1972 OTHER BOOKS 63 quoted. Some of it is hard re,ad ing, challenging the reader to sort through charts, tables, and other lists of figures. There is also the fact that financial m,atters and terms can often be dryas dust. But the most likely reason it would be ignored is that the world still hotly pursues the disastrous poli cies that Mr. Voorhees deplored during the seemingly calm period of 1943-1955. That's all the more reason why it's well that his in sights have been published in book form. It may turn out to be useful medicine when the popular nos trums have failed. .. THE LITTLE HOUSE BOOKS A PIONEER CHRONICLE by Laura Ingalls Wilder (New York: Harper & .Row Trophy Books, 8 V ols. 95¢ each) Reviewed by Robert M. Thornton THESE BOOKS were first published nearly forty yea.rs ago when Laura Ingalls Wilder was in her sixties.

The eighteenth printing in cloth was run in 1970, and now we have the first paperback edition. Laura (I just can't bring myself to c~ll her Mrs. Wilder) wrote the first book in the series without any plans to continue, but the enthusiastic response of young readers prompted her to keep going until the stor ies reached the time of her mar riage to Almanzo Wilder on August 23, 1885 - eight volumes from a woman who asa young girl told her Pa that she could never write a book! Laura was born in 1867, and lived for ninety years, most of that time with her husband on their farm near Mansfield, Missouri. Their daughter, Rose Wilder Lane, who died in 1968, is well-known to libertarians as the author of The Discovery of Freedom, a book which inspired Henry Grady Weav er's The Mainspring of Hu,man Progress. Rose displayed her sturdy pioneer stock when at the age of 78 she was sent to Vietnam as a cor respondent!

What is so. fine and enjoyable about these "Little House" books? First, they take the reader out of his own world and into different places and earlier times, into the Iives of the pioneers on the prairie in the 1870's and 1880's. What thrill is there reading about the milkman or the neighborhood gro cer? Second, they make the re flective reader thankful for all the blessings we enjoy in the United States today. Laura writes of the fun she had asa girl on the prairie and the happy times with her fam ily, but she does not romanticize her exeriences. Life was hard in those days in an untamed land.

64 THE FREEMAN January There were empty stomachs when crops were destroyed by fire, drought, locusts or storm. Sickness might mean death because doctors and medicine were scarce on the frontier. Everyone except the very old and very young had to work. The pleasures were simple - no radios, automobiles, televisions and the like. There was little money on hand, so Christmas presents for the children might be a penny and a stick of candy! There were happy times and terrible times, each a part of living. Third, and most important, these books can help us recapture the spirit of the pilgrims,patriots, and pioneers who founded this nation and made it great. Part of that spirit is the taste for independence and a sense of individual responsi bility. Laura's family didn't expect anyone else to take care of them. They took care of themselves and recognized that having freedom means the freedom to fail as well as to succeed. Another part of this great spirit is not to bemoan one's fate or complain about not getting one's "fair share" of the world's goods. Another, is a sense of com munity where so much is accom plished on a voluntary basis, every one pitching in to contribute what ever he can in time, talent and money.

In answer to inquiries about her self and her books Laura wrote: "The Little House Books are stories of long ago. Today our way of living and our schools are much different; so many things have made living and learning easier. But the real things haven't changed. It is still best to be honest and truthful; to make the most of what we have; to be happy with simple pleasures and to be cheer ful and have courage when things go wrong. Great improvements in living have been made because ev ery American has always been free to pursue his happiness, and so long as Americans are free they will continue to make our country ever more wonderful." It is no easy matter for today's children to learn these truths, but so long as these books are read the lessons will not be lost. t) the Freeman VOL. 22, NO.2. FEBRUARY 1972 Why Can't We Have Both? Jean Hockman 67 Reasons why the rejection of Capitalism in America ought to be reconsidered.

Rights and Pseudo-Rights John D. Lindl 73 A genuine right applies equaUy to all, at the expense of no one in particular. On Re-readingTHE LAW A book worth reading is worth reading again. Ra,y L. Colvard 76 From Price Control to Valley Forge: 1777-78 Percy L. Greaves, Jr. 81 A timely reminder of the sorry consequencesof closing the market. We and the Third World Erik von Kuehnelt-Leddihn 85 A realistic appraisal of the prospects of helping the developing nations. The Modern VolunteerArmy David J. Kramer 95 Concerning various aspects of the draft-army mentality that are inconsistent with a voluntary organization. Should We Divide the Wea,lth? Henry HazliU 100 To concentrate on the division of wealth is to neglect the production upon which all else depends. Free.Givingvs.the Welfare State Charles R. LaDow 109 Personal giving is the only kind; and it is best done voluntarily. The Foundingof the American Republic: 7. The First American Crisis: 1763-66 Clarence B. Carson 112 How George III and Parliament set the stage for colonial resistance.

Book Reviews: 125 "Toward Liberty" by various authors on 90th birthday of Ludwig von Mises. "First Things, Last Things" by Eric Hoffer Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

tt1e Freeman A ·MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON·HUDSON. N. Y. 10533 TEL.: (914) 591·7230 LEONARD E. READ PAUL L. POIROT P1'esident, Foundation for Economic Education Managing Editor THE F R E E MAN 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. 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, 1972, 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; 10 for $2.50; 25 or more, 20 cents each.

Articles from this journal are abstracted and indexed in Historical Abstracts and/or America: History and Life. THE FREEMAN also Is available on microfilm, Xerox University Microfilms, Ann Arbor, Mich igan 48106. Permiss'ion granted to reprint any article from this issue, with appropriate credit, except "Why Can't We Have Both?", "From Price Control to Valley Forge: 1777·78" and "Should We Divide the Wealth?"

Why cant we have both? JEAN HOCKMAN THE CURRENT political discussion in the United States centers on how to control the economy. Not should the government control the economy but how! The propriety of government intervention into the private financial affairs of the people is a question long overdue. For years America has been try ing to "solve the problem" of how to have her cake and eat it too. Expert and layman alike struggle to understand why the government can't spend money it doesn't have and still remain solvent; why we can't have government handouts without raising taxes; and why every American can't be financial ly secure, with enough left over to support the poor on a· global scale. Just what miracle do Amer icans believe will be forthcoming? Mrs. Hockman of Tacoma, Washington, is a housewife and freelance author with a bias toward freedom. Let us leave aside opInIons of economic experts who insist that a government-managed economic system is necessary, or superior to, or consistent with freedom. (This last, despite .the fact that the historical record of all such at tempts reveals that the people are required to live in a state of forced subjugation to the leadership, in behalf of the nation and/or the "common good.") Instead, let us apply an ingredient that has all but vanished from the American scene - common sense.

Federal bureaucracy is spread ing (unchecked) over our land like a fungus. And like fungus, it feeds off the main crop, i.e., the earnings of the people. A fungus is a para site that attaches itself to healthy growth, gradually weakening and ultimately destroying it. If the fungus is caught and destroyed, the main crop will be free to re67 68 THE FREEMAN Februa.ry cover and continue its healthy growth at its own speed. If the fungus is allowed to spread, it gathers momentum, perpetuating itself until there is nothing left to feed on. So it is with bureaucracy. It feeds and perpetuates itself first. Bureaucracy Has First Claim One needn't be an expert to figure out how it works; and fur ther, that it can work no other way. In any society, some people prod uce more than others - and some produce nothing at all. But, the bureaucracy has first claim on all production, and siphons profits off the top. What seeps back to the people is considerably less than they have produced, thereby limit ing their capacity for economic ex pansion and tending to lower their level of living.

We have been told repeatedly that "some" economic controls are necessary because men in private life are either unable or unwilling to successfully and honestly man.. age their own affairs. If this were true (of course, it isn't), one might logically ask the following question. By what magical means do men, hired by the government, suddenly acquire the wisdom and honesty to manage the economic affairs of the entire population? Apparently, we are expected to be lieve that people aren't capable of "handling" freedom, but that the government is. The first order of private busi .. ness is to make a profit. It should go without saying that an unprofit able business is scarcely in a posi tion to survive (much less ex pand) and is' of no use to anyone. Government a Profit Taker But government is a profit tak ing operation. It is not econom ically productive, but economically dependent upon the earnings gen erated by the private enterprise of the people. If a government pro gram is ineffective or inefficient (and which ones aren't?), the gov ernment does not account for the loss; it simply draws against the people's private earnings and busi ness profits and perpetuates the loss.

Observe the rising clamor against American business for making profits, the demand that "excess" profits be penalized. Yet the biggest profit taking organiza tion in this country, the Federal government, is being encouraged to expand its operations and cre ate new agencies of economic con trol. To what end? If the goal is to eliminate pov erty and unemployment through economic prosperity, the expansion of business must be encouraged, not restricted; and the role of gov ernment reduced - not expanded.

1972 WHY CAN'T WE HAVE BOTH? 69 Economic control does not lead to growth, progress, and prosperity. It never has and it never will. Economic control is the means by which government maintains total political control over the people, a fact which the American people will have to face sooner or later one way or another. Government intervention is al ways restrictive, and for this rea son it is impossible for govern ment to "manage" or "control" a free economy. It is a contradiction in terms - and in reality. Communism Controls Through Force and Subjugation If proof is needed,. communism has proven for all to see that economic control can only be fully achieved and maintained through sheer force and total human sub jugation. Socialism (the supposed ly benign version of communism) is failing miserably in every coun try that has tried it. Under social ism the people are taxed unmerci fully, and end up bickering among themselves and clamoring to their bureaucratic "benefactors" for a greater "share." In short, eco nomic control is a, vicious, static, dead,:,endcycle that can only result in the ultimate loss of all human liberty and dignity, and a lowered level of living. (Note that fascism "permits" private ownership, but denies property rights and is merely a variation of the same theme.) This leads toa question which I ask now, and future historians may well ponder. Why did America.

abandon the free enterprise sys tem, .or more precisely - capital ism? Do Americans really believe the communist propaganda that was deliberately designed to destroy the most successful economic sys tem in the history of mankind? I am 35 years old, and I can't recall hearing a single American politi cian stand up and defend capital ism on the righteous grounds that it is entirely consistent with the CQnstitutionalprinciples of in dividual liberty by which we are supposedly· bound. In fact, one rarely hears capitalism mentioned at all, except in negative terms. "Private enterprise" is referred. to and grudgingly accepted (pri marily as a source of government spending power). But a fully con sistent system ·of capitalism (lais sez faire) does not exist anywhere in the world - and never has. It certainly doesn't exist in America. Nor is it being seriously consid ered. Why not? Efficient and Profitable Capitalism is the most efficient, progressive, and profitable econ omic system ever devised. People seek their livelihood on their own 70 THE FREEMAN terms, according to their own ability, for and with their own money. They deal directly with one another, not through the gov ernment - thereby saving the ex pense of useless bureaucracy.

(Properly, government should en ter the picture only upon request, i.e., in the event of a legal dispute or a criminal offense, to determine the legality of a given situation in terms of the natural rights of the individuals involved. Needless to say, no government, including ours, has yet confined itself to this role. This doesn't mean it isn't possible or desirable.) Capitalism also contains its own built-in checks and balances. Peo ple are required to exercise sound judgment, or suffer the conse quences of their own folly. It doesn't carry any guarantees. One risks failure along with the pros pect of success. And if we are hon est, we know that there are no real guarantees possible in life - not in theory, or in reality. Life is a process of change and risk, growth and setback, and ultimately what one can realistically hope for is to achieve a just measure of success commensurate with one's own ability. This is what capitalism is, and does. It puts the responsibility where it belongs - on the individ ual - which is, after all, the mean ing of independence. One is not in dependent if he is not responsible for his own needs. Nor can one become independently responsible if the government intervenes to make it impossible.

Economic Disaster Follows Monetary Manipulation The greatest economic disaster in America's history came after the Federal Reserve Act had re lieved people of the responsibility and the means of making an ac curate judgment. The subsequent frantic efforts of government to "create" a sound economic balance through legislative force have brought us to our present state of chronic insecurity and collective dependency. Yet government is rarely blamed for our economic difficulties. After all, hasn't it been. trying to cure them for over 40 years? Capital ism is blamed. The accusation that capitalism exploits the worker has been re peated so often that it is generally accepted as true with no further thought. Let it be stated here for the record that capitalism is the system for the working man. It does not reward the idle - only the man who is willing to work for his wages. Consider the present situa tion in our "mixed" economy. Are we to believe that the working man is not exploited when a portion of the money he earns is forcibly ex tracted from his wages to support 1972 WHY CAN'T WE HAVE BOTH? 71 government programs which harm rather than benefit him?

Another supposedly unpleasant facet of capitalism is that it ap peals to one's selfish nature. This is absolutely true. Selfishness means to be primarily concerned with one's own self-interest. Any body who claims to be otherwise is either a fool or a liar (to borrow an old phrase). Self-preservation is primary to all living things. If man were not selfish by nature, he would be extinct. Yes, capitalism serves the self-interest of each and every individual. Which sim ply means that capitalism serves the individual, as an individual. Which is why it should be the eco nomic system of the only nation ever founded in behalf of the in dividual-America. It is also said that capitalism promotes greed. Does it? Who is greedy: the man who wishes to earn his keep, and keep what he earns? Or the man who wants a legislative advantage, who wishes special privilege so he can com pete "fairly" in the "free" mar ket?

Observe the present clamor at the doors of Congress for straight financial handouts to accommodate every conceivable whim. The quest for the product of what another man has earned constitutes greed in my estimation. Every dollar the government gives away was earned by a citizen of this country. It makes no difference if the citizen can afford it or not. It is a matter of principle; and the principle in volved is the right of the individ ual to own what he earns, choose how his earnings are spent, and the right not to be forced to sup port a "spending," "subsidy," or "charitable" program of which he personally disapproves. If, for example, I were to ask you for a voluntary contribution to support a farmer too stupid to stop growing crops for which there is no market, you would undoubt edly refuse. Who would voluntarily support such a; program? It might work the first time around, but it would surely die of its own ac cord if it were pursued; and in a court of law it might even be con strued as fraudulent.

This is but one example of a "program" which would neither be tolerated nor sustained on a voluntary basis. The list of self defeating, useless, inefficient, and downright wasteful undertakings of government is endless,and well known to many of us. The Inevitable Trend It is not my purpose-here to prove that government "manages" economic affairs in the least effi cient manner possible. The situa tion here, and throughout the worId, speaks for itself.

72 THE FREEMAN February My point is that such is the in evitable result of government in tervention in the financial affairs of its citizens. When government assumes the "right'" to manipulate economic matters, where does it draw the line? Thus far, in Amer ica, it has not seen fit to draw any line at all. And herein lies the dan ger. Anything goes, if enough pressure is applied in the "right places." It is a, shameful abuse of a political system designed to limit the powers of government in order that the people might be free of government compulsion. If it were otherwise, (i.e., consistent with our fundamental principles), why is such effort made to hide the truth? The attempt to conceal the trend toward statism in America, is evi denced by the increasing use of evasive semantics. The economic policies outlined in the Communist Manifesto are written into law in the United States of America un der the heading of "social legis lation." Individual liberty is grad ually replaced by "the needs of a changing society," i.e., collectivism.

And our "mixed" economy is mov ing steadily toward a "new" ver sion of fullfledged fascism under the heading of "responsive gov ernment." Economic control lis the key to political dictatorship. And con versely, capitalism is the key to political freedom. Observe that capitalism has been the primary target of communism from the outset. Communism, as an econ omic system, can't hold a candle to capitalism. But. it is the most ef fective system of political dicta torship ever devised, precisely be cause the individual has no prop erty rights. Cause and Effect When are we going to see the connection? Why don't we see it now? We can't have our cake and eat it too. America is no more im mune to the natural law of cause and effect than any other nation, past or present. The strength of any nation lies in its consistent devotion to its own stated princi ples. Communism isn't spreading because it's a better system. It spreads because communists are steadfastly committed to every facet of communism; and no simi lar commitment to capitalism stands in its way.

Americans have been apolo gizing for and compromising capi talism, at first slowly, but with in creasing rapidity throughout most of this century. Where once we had a, simple government structure based on a solid foundation, we now have a gigantic superstruc ture resting on a mish-mash of contradictory inconsistencies. Where once we had a· thriving, 1972 WHY CAN'T WE HAVE BOTH? 73 progressi ve economy, we now have imminent disaster. By our own hand we are divided, weakened, a.nd vulnerable - fair game for anyone and anything. Figuratively and literally, the middle of the road is a dangerous place to stand. It indicates irra tional behavior at best, and sui cidal tendencies at worst. There are only two fully consistent and separate views of life. Two sides of the road. It's an either/or proposi tion. One side is collective dependency JOHN D. LINDL RIGHTS& CONGRESS has been working on a welfare reform bill,The Family Assistance Plan, for two years now. What is the nature of this bill? If it is approved, Congress will have declared its intention to Mr. Lindt is a graduate student at Princeton University.

with full political ownership and economic control, i.e., total human slavery. This view is exemplified to its fullest extent by commu nism, but has preva.iled in varying degrees throughout the entire his tory of mankind. The other (and only) alterna tive is individual liberty with pri vate ownership rights, economic freedom, and political protection of the individual as an independ ent agent, exemplified briefly (im perfectly, but significantly) by capitalism in American history. f) RIGHTS guarantee to every American. the "right" to a minimum yearly in come. As such it merely represents a logical extension of recent trends of the sixties which has seen a proliferation Qf "rights" - rights to health care, education, housing, jobs, and fooo .•The only difference 74 THE FREEMAN February between this and other measures that have been enacted is its scope and potential for expansion. But bills enacted in the late sixties were more expensive than those of the early sixties, and so forth. As such, this is just a continuing trend, too. All of these bills are of a single nature and must be ana lyzed as such.

Their common denominator is the "rights" they declare, a strange set of rights, indeed. De spite the rhetoric of proponents who claim these are rights guar anteed to every American, they quite obviously are not. If every American quit working, there would be no goods to satisfy their claims for these rights. So these bills in effect provide goods and services to those who have not pro vided for themselves, at the ex pense of those who have. A "right" of one person that can only be satisfied at the expense of another is obviously no right at all. It is a decree that sets up two classes of people, those served, and those re quired to serve. The proliferation of such laws is one of the most dangerous developments in recent U.S. political history. A primary right must always be a right to action, not ,to goods as such. All goods must be produced by prior actions and hence are al ready someone's rightful property.

The right to act implicitly ineludes the responsibility for the consequences of one's action and the right to the use and disposal of the products of one's action. The rights of the American Con stitution are all proper rights to action. But the very principle of these rights has been undermined by the growth of belief in various pseudo-rights. The Nature of Rights Rights reside in individuals. There is no such thing as group rights except as they' are an ex tension of individual rights. A political right which is not pos sessed by every individual, regard less of his membership in a group, is merely a license for a particular group to exploit others not in the group. For example, consider "Welfare Rights." This is gen erally ta.ken to mean the right to the means for a certain level of ex istence. Is this a right, universally applicable to all? Could we guar antee to everyone the right to a minimum subsistence without im posing on some group the respon sibility of providing that sub sistence? Clearly not. This is the test to distinguish between a genuine and a bogus right. If it applies equally to all, at the ex pense of no one in particular, it is a genuine right~ If some one group benefits while another foots the bill, it is a counterfeit.

1972 RIGHTS AND PSEUDO-RIGHTS 75 A common response to these ar guments is that a majority of the. people have elected the representa tives who have passed the laws; so they really have chosen freely where their money and effort should go. But even on the face of it, this is not true. A member of Congress can be elected by 51 per cent of the vote. But even that 51 per cent is surely going to dis agree with their representative a fair fraction of the time. So, be fore a candidate ever records a vote, he probably has fewer than 50 per cent of the voters behind him. And then, legislation can be passed with the assent of a mere 51 per cent of the legislators, further reducing the likelihood tha t even a maj ori ty of persons agree with the decision. So the best one can say of a representa tive democratic process is that the largest fraction wins. Democracy Justified in Maintaining The Rule of Law The only justification for a sys tem where the largest fraction im poses its will on everyone else is that such a system has historically been the most effective in curbing and limiting the police power of the state. This police power is a necessary protection against those members of every society who would try to impose their will by force or fraud on other human beings. A government whose po lice power is used solely for this purpose is no threat to any peace ful citizen, since it may never ini tiate the use of force. It only acts to prevent the use of force. His torically, no people has ever achieved a society whose govern ment strictly adhered to this func tion. But the democracies of the world have come closest; and of them, the United States of the nineteenth century came closest of all. This achievement of democ racy is its only justification. If it fails in this function, a democ racy has no justification at all.

Majority tyranny is no less a tyr ranny because it is a majority. The argument that democracy justifies the various pseudo-rights is pernicious. It perverts the func tion of democracy and further ob scures the meaning of rights. In the end it serves to destroy democ racy by giving rise to pressure group warfare. Until these facts are recognized and acted upon, the present trend in domestic legislation will con tinue with undiminished vigor. ~ ON RE-READING RAY L. COLVARD THE STORY, perhaps apocryphal, is told of ~ young man who had a long, earnest conversation with his father on the eve of the son's departure for the university. When he was graduated, he talked with his father again. As the youth de scribed it: It was amazing how much the old man had learned in four years. A few years ago, when I re ceived a copy of The Law from Dr. George C. Roche III, then Di rector of Seminars for the Foun dation for Economic Education, I was not immediately impressed.

The ideas appeared logically sound to me, but with application limited to places and times other than modern America. Robert L. Heil broner in The Worldly Philoso phers placed Frederic Bastiat, the author of The Law, in "the under world of economics." Mr. Colvard teaches at Clairemont High School in San Diego. 76 The Law is a disturbing book, however. I read it again. Before the fall of the old regime, Voltaire had made an acid observation that "in general, the art of government consists in taking as much money as possible from one class of citi zen to give to the other." Bastiat called this exchange "legal plun der." He pointed out: The plun derers are within the law, acting benignly, with the best of motives, under the glow of "false philan thropy." It made-sense - but. In this matter of education, the law has only two alternatives: It can per mit this transaction of teaching-and learning to operate freely and with out the use of force, or it can force human wills in this matter by taking from some of them enough to pay the teachers who are appointed by gov ernment to instruct others, without charge. But in this second case the law commits legal plunder by violat ing liberty and property.

1972 ON RE-READING THE LAW 77 Now that was just too much. Back in the foothills of rural North Carolina during the first half of this century the tradition of the summer "protracted meet ing" was firmly fixed in funda mentalist congregations. Visiting revivalists of a fire-and-brimstone bent attempted to electrify hot, sleepy listeners by cataloguing the alleged sins of erring neighbors. Over in the "amen corner" Deacon Jones munched his seasoned bolus of Sta.r Plug tobacco and •accom panied the preacher by nodding his placid agreement. ". . . the sin 01 young men drink1ing . . ." "A-men!" ". . . the sin 01 young women smoking . .." "A-men!" ". . . the sin 01, old,men chew i.ng .' .." At this point ·Deacon Jones rose out of his seat, sputtering. "Now just a. minute, Reverend," he ob jected angrily. "Now you've quit preaching and started meddling." This portion of' The Law seemed absurd: public education being linked with legal plunder. Just what do economists think teachers do? Don't they know we loose the glorious, exuberant spirits· of stu dents ?We encourage discovery.

We produce scientists, entrepre neurs and statesmen who maintain the nation's economic and political stability. We prepare citizens to become contributing, rather than dependent,members of a complex, competitive industrial democracy. Somewhere from the dusty past I seemed to hear a soft chortle and low whisper: "false philanthropy." This was ridiculous, I thought. It's my ox that's being gored now. It's all right to question the pro priety of industrial monopolies, protective tariffs, and agricultural subsidies. Leave education to edu cators. The :National Education Associa tion'scampaign for a ·Na tionalDepartment of Education is in full swing. With the right Sec retary in the Presidential Cabinet, public education could be run ef ficiently, like the post office. With enough power educational leaders could enforce academic freedom for all teachers, defend martyrs like Peter Abelard and Socrates. I tried not to remember at this point that Abelard got himself in to trouble playing around with a nubile teen-ager and Socrates really had been "corrupting the youth."

A Skeptical Student During the week of the' FE E seminar that. summer I remained skeptical of Bastiat's freedom philosophy, at least that part about public education, though he was quoted respectfully by the 78 THE FREEMAN February 3-R's of the seminar: Read, Rus sell, and Roche. (For clarification and lest I appear lacking in re spect, may I amend this remark to: Mr. Leonard Read, Dr. Dean Russell, and Dr. George C. Roche III.) I listened to them, but I was not fully convinced. I re-read The Law more carefully, however, when I returned home. "Look at the madhouse of a world," Frederic Bastiat had sug gested in an early work. The world "goes to enormous efforts to tun nel underneath a mountain to con nect two countries and then it sets duties and custom guards at each entrance to make passage as diffi cult as possible." Interesting. The latest, fourteenth edition of Encyclopaedia Britannica allows Frederic Claude Bastiat two dozen tepid lines. However, going back to the eleventh edition, published in 1910, I found this magnificent tribute: He alone fought socialism hand to hand, body to body, as it were, not caricaturing it, not denouncing it, not criticizing under its name some mere ly abstract theory, but taking it as actually presented by its most popu lar representatives, considering pa tiently their proposals and argu ments, and proving conclusively that they proceeded on false principles, reasoned badly and sought to realize generous aims by foolish and harmful means.

I was beginning to discover that Bastiat was, indeed, quite a man. A Very Good Yearl The year 1776 was a vintage one for freedom. It brought forth the master work of Thomas Jeffer son and Adam Smith. In the ver nacular of today's bright youth, "Groovy! Everybody has rights and everybody should do his own thing." The concept of liberty which came out of the enlightened eighteenth century and achieved wide popularity in the nineteenth has lost ground in the twentieth. The political term, "liberal," has shifted in meaning from those who would break government's hold on its citizens to those who advocate greater government con trols be placed on individuals. The great utopian appeal of collectiv ism, even in the modern extremes of fascism and communism, is the fond hope of equality. Collectivism proclaims high ideals and prom ises reforms. Literacy and public enlightenment are laudable goals for us to undertake in public edu cation. Can this be "legal plun der"? One might as well imagine Santa Claus an "enemy agent."

There is profound danger in cultivating the cult of equality. Tocqueville, the great admirer of American democracy, warned of the danger during his travels in the United States in the Jackson 1972 ON RE-READING THE LAW 79 era. Democracy would, he foresaw, pose an irreconcilable dilemma to Americans. They who treasured both freedom and equality would eventually choose to give up the former· to gain the latter. The Need for Rules Man must live by rules, but they should be rules of his own· choos ing. Ludwig von Mises stated this concept beautifully in his Human Action: Liberty and freedom are the con ditions of man within a contractual society .... As far as he gives and serves other people, he does so of his own accord in order to be rewarded and served by the receivers. He ex changes goods and services, he does not do compulsory labor and does not pay tribute. He is certainly not inde pendent. He depends on the other members of society. But this depend ence is mutual.

The late jurist, Learned Hand, wrote about the benevolent "beast in us" which leads us to destroy liberty for others. "Liberty," he noted, "is an essence so volatile that it will escape any vial how ever corked." The logic of Bastiat, von Mises, and Hand at this point seems virtually irrefutable. The public school system is an institutionalized cork restraining human freedom. It makes use (benevolently, of course) of the worst elements of socialism and protectionism. In truth, we teach ers are in the jail business. Edu cators, like a majority of the adult population, defend compulsory at tendance laws which are in fact nothing more than bills of at tainder against our young. We illogically uphold these ex tra-judicial canons despite their expressed ban by Sections 9 and 10 of Article I of the Constitution of the United States. This basic constitutional injunction has been blandly ignored. In Brown vs.

Board of Education the Supreme Court appeared to actively favor compulsion. In the words of the Court, "Compulsory school attend ance laws and the .great expendi tures both demonstrate our recog nition of the importance of educa tion to our democratic society." We are wildly inconsistent in de fining "liberty." First we confront youth with our terrible dictum: You have no inalienable rights. Then we expect him to become law-abiding while he is, himself, outside the law. We expect him to achieve a mature autonomous level in personal growth without exer cising the right of free choice. We expect him to develop value judg ment stripped of a compulsion for responsibility. A frenetic reality exists in compulsory education. We guard students possessively as they attempt to escape our bu reaucracy. They are not allowed to 80 THE FREEMAN February become nonconsumers in our edu cational monopoly. We employ "Keystone" cops called "truant of ficers" or more euphemistically, "attendance coordinators," to chase them when they attempt to decline our services.

Twentieth century school sys tems have come to be blatant ex amples of nineteenth century en terprise. Writing about anachro nous industries, Henry Hazlitt noted: "It is just as necessary to the health of a dynamic economy that dying industries be allowed to die as that growing industries be allowed to grow." A like case could be made for abandoning out moded compulsory institutional ized education. Cand/emaker's Petition Bastiat's masterpiece of eco nomic satire was the tongue-in cheek petition to the Chamber of Deputies requesting that owners of houses be made to do without doors and windows. He berated sunlight as a foreign, low-cost, unfair source of illumination and asked that it be shut out to create a demand for artificial light which would benefit French manufactur ers of lamps, tallow, and candles. Weed ucators today are logical targets for the Bastiat philosophy as we defend our right to a monop oly of artificial enlightenment.

It is. my belief that the services rendered by teachers in public schools are a. primary economic good. Our professional expertise is of such value that it need not be forced on anyone. In learning's free market, demand exceeds sup ply. Young people need not be compelled by legal entails to come to school. It's a compulsion they have reason to hate. They have a valid case in history. Tea-loving Colonists refused to drink tea when it was forcibly pressed on them by a benevolent England. The Boston Tea Party made Amer ica a nation of coffee drinkers. Public education as it exists to day is economically unsound and patently unfair. Schools offer con tracts for services to youths, but students have no legal way of en forcing the obligation. In even the relatively modest school districts, teachers report to principals who report to area directors who re port to assistant superintendents who report to associate superin tendents who eventually report to the superintendents who are solely responsible to the boards ofedu cation. Each level above the pedes trian classroom teacher is insu lated from students. Every educa tor position above the teacher level in the system is politicaL Public relations know-how is the criteria for successful ·performance. Qual ity of the product that reaches the consumer is of· small concern 1972 ON RE-READINGTHE LAW 81 to middle management in educa tional enterprises. Managers are never partners in concerns vvhich are without entrepreneurs. Edu cators are men of means, not of ends, and the means at their dis posal are collectivism, centraliza,;.

tion, and compulsion. Bastiat made a vvild and vvon derful suggestion to us: "Let us now try liberty." Away with the whims of govern mental administrators, their social ized projects, their centralization, their tariffs, their government schools, their state religions, their free credit, their bank monopolies, their regulations, their restrictions, their equalization by taxation, and their pious moralizations! In my latest reading of The Lww there. emerges a classic framework of freedom: the belief in a har mony in human nature, the knowl edge that individual aspiration if left unfettered contributes to the general good, the sober under standing that man is not God. The story is told that at the moment of Fredric Bastiat's pass ing he whispered something. The sound vvas virtually inaudible, but the listening. priest thought the vvhisper vvas,. "Truth, truth. " What else could it have been! ~ From PRICECONTROL PERCY L. GREAVES, JR.

PRICE control has been often tried. It has been strongly enforced. Yet, it has consistently failed to pro duce the desired results. Our anProfessor Greaves is now a freelance economist and lecturer. This article first appeared in Christian Economics, May 20, 1952. cestors learned the follies of paper money and price control the hard vvay. They learned a lesson vvhich many present-day Americans seem to have forgotten. Price controls almost vviped out our independence in the first years of our existence.

82 THE FREEMAN Februa,ry Our Continental Congress first authorized the printing of Con tinental notes in 1775. The Con gress was warned against printing more and more of them. In a 1776 pamphlet, Pelatiah Webster, America's first economist, told his fellow men that Continental cur rency might soon become worth less unless something was done to curb the further printing and is suance of this paper money. The people and the Congress refused to listen to his wise ad vice. With more and more paper money in circulation, consumers kept bidding up prices. Pork rose from 4·¢ to 8¢ a pound. Beef soared from about 4¢ to 10¢ a pound. As one historian tells us, "By Novem ber, 1777, commodity prices were 480% above the prewar average." The sittllation became so bad· in Pennsylvania that the people and legislature of this state decided to try "a period of price control, limited to domestic commodities essential for the use of the army."

It was thought that this would re duce the cost of feeding and sup plying our Continental Army . It was expected to reduce the burden of war. The prices of uncontrolled, im ported goods then went sky high, and it was almost impossible to buy any of the domestic commodi ties needed for the Army. The con trols were quite arbitrary. Many farmers refused to sell their goods at the prescribed prices. Few would take the paper Continentals. Some, with large families to feed and clothe, sold their farm prod ucts stealthily to the British in return for gold. For it was only with gold that they could buy the necessities of life which they could not produce for themselves. On December 5, 1777, the Army's Quartermaster-General, refusing to pay more than the gov ernment-set prices, issued a state ment from his Reading, Pennsyl vania headquarters saying, "If the farmers do not like the prices allowed them for this produce let them choose men of more learning and understanding the next elec tion."

This was the winter of Valley Forge, the very nadir of American history. On December 23, 1777, George Washington wrote to the President of the Congress, "that, notwithstanding it is a standing order, and often repeated, that the troops shall always have two days' provisions by them, that they might be ready at any sudden call; yet an opportunity has scarcely ever offered, of taking an ad vantage of the enemy, that has not been either totally obstructed, or grea tly impeded, on this ac count. . . . we have no less than two thousand eight hundred and ninety-eight men now in camp 1972 PRICE CONTROL AND VALLEY FORGE 83 unfit for duty, because they are barefoot and otherwise naked ..... I am now convinced beyond a doubt, that, unless some great and capital change suddenly takes place, this army must inevitably be reduced to one or other of these three things: starve, dissolve, or disperse in order to obtain sub sistence in the best manner they can."

Lesson Learned The severity of the situation in creased. Our ragged regimentals were dispersing. In February, 1778, the Pennsylvania Assembly "passed a law appointing commis sioners in every city of the state with full power to purchase or to seize, at stated prices, all provi sions necessary for the army." But, appeals to patriotism, accom panied by force and threats of more force, failed to bring out the necessary provisions. The farmers just would not trade the fruit of their hard labors for paper money which bought less and less as the weeks passed by. On April 21, 1778, George Washington wrote a delegate in Congress, "Men may speculate as they will; they may talk of patri otism; they may draw a few ex amples from ancient history, of great achievements performed by its influence; but whoever builds upon them, as a sufficient basis for conducting a long and bloody war, will find themselves deceived in the end. We must take the pas sions of men as nature has given them, and those principles as a guide, which are generally the rule of action. 1 do not mean to exclude altogether the idea of patriotism. I know it exists, and I know it has done much in the present contest. But I will venture to assert, that a great and lasting war can never be supported on this principle alone. It must be aided by a prospect of interest, or some reward. For a time it may, of itself, push men to action, to bear much, to encounter difficul ties; but it will not. endure un assisted by interest."

Valley Forge taught George Washington and the Pennsylvania advocates of price control a very costly lesson. They had hoped for plenty at low prices. Instead they got scarcity and indescribable misery. Anne Bezanson's valuable book, Prices and Inflation during the Americam Revolution, tells us, "By June 1, 1778, the act of regu lating the several articles on the price lists was wholly suspended." Price control· had failed. Army Better fed This same book informs us that after this date the commissary agents were instructed, "to give the current price ... let it be what 84 THE FREEMAN February it may, rather than the army should suffer which you have to supply and the intended expedi tion be retarded for want of it." As a result the Army was better provided for in the fall of 1778, than had previously been the case. In· the words of Miss Bezanson, "the flexibility in offering prices and successful purchasing in the country in 1778 procured needed winter supplies wanting in the previous year."

In January, 1780, Pelatiah Web ster wrote, "As experiment is the surest proof of the natural effects of all speculations of this kind ... it is strange, it is marvelous to me, that any person of common dis cernment, who has been acquaint ed with all the above-mentioned trials and effects, should entertain any idea of the expediency of try ing any such methods again. . .. Trade, if let alone, will ever make its own way best, and like an irresistible river, will ever run safest, do least mischief and most good, suffered to run without ob struction in its own natural chan nel." Price control is an attempt to alter God's law of supply and de mand. Those who endorse it fre quently believe that the supply of goods and human satisfactions can be maintained at prices which are legally sef below the free market price. They are ever doomed to disappointment. When a price is set below the free market price, marginal producers will always cease to produce. The available supply is thus reduced. On the other hand, prices held below the free market rates always attract more prospective buyers than the higher market prices. The result will ever be, other things being equal, a decreased supply and an increased demand.

Free prices allocate scarce goods to the highest bidder. In consum ers goods, the highest bidder is the person who has best served soci ety. In producers goods, the high est bidder is usually the person who can make the best use of the scarce labor and materials avail able. He can pay the highest price beca use he expects society to pay him more for his final product than it will pay for the product of any lower bidder. When the state, or some bureaucratic agent of the state, sets prices, he must also de cide who shall have and who shall have not. The power of allocating the ne cessities of life is the power of life and death. Under price control that power is given to the political powers that be. Consumers are entirely at their mercy. Price con trol is, therefore, the very antith esis of freedom. Price control is economic slavery. ~ WEandthe ERIK VON. KUEHNELT-LEDDIHN THIRD ANoteofChristianDissent "Truth alone offends."

- French proverb As A WORLD TRAVELER more or less permanently on the move, I must confess to the odious crime of thor ough disagreement with current conceptions in regard to the West ern world's relationship with, and duties toward, the so-called devel oping nations. My disagreement concerns not only the secular views on the subject but .also those pre vailing increasingly in the majority of the Christian Churches. Travels and intensive studies over a period of fifteen years have convinced me that our general Western notions in regard to this delicate subject must be thoroughly revised. Obvi ously, an exhaustive argument can not be expected within a short article, nor elaborate statistics pre sented. All that can be done here Dr. Kuehnelt-Leddihn is a European scholar, linguist, world traveler, and lecturer. Of his many published works, perhaps the best known in America are Liberty or Equality? and The Timeless Christian.

is to tabulate various of the cur rent - largely erroneous - views, followed by a few critical remarks. "Colonialism Was a Crime, Its Record Entirely Negative" Let us begin with the widespread assumption that "colonialism" was a crime and its record entirely negati vee Many Americans espe cially, I would say, are "dedicated" to this notion, forgetting that the United States still has colonies (in the Pacific) and that without the British colonial effort the glorious American nation would not exist. A patriotic American "anticolonial ist" can be likened to a man in his prime, proud of his record and achievements but fulminating against fatherhood-without which he would not exist - an attitude reminding one of the Oedipus Com plex and worthy of medical. atten tion. 85 86 THE FREEMAN February Without British colonialism there would be no Nigeria, Ghana, or Australia, no India liberated from the Moslem yoke, and so forth. Without the Roman colonial drive neither the French nor the Spanish language would exist, nor English as we know it, and pre sumably not even our modern, civ ilization. And let me add that without Bavarian colonizing my own country, Austria, would not exist either. A furious Brazilian anticolonialist would seem very funny to me. Several years ago, when I was asked in Irkutsk what I thought of that capital of East ern Siberia, I replied that it testi fied to the vigor of Russian coloni alism. Thereupon, I was earnestly exhorted not to say "kolonialism"

but "osvoyeniye," which means "in corporation." Keeping a straight face, I wrote this word down in my notebook while, out of the cor ner of my eye, I watched the broad grins all around me. "Colonialism" is a neologism not to be found in older dictionaries. It is not an "ism," but expresses a mere law of history and politics. No power vacuum can exist for any length of time; it invites penetration and occupation. In this respect, geography does not differ from physics. Point two is the charge that Europe and the United States continue to take brutal advantage of the former colonies and other "developing countries" through investments there. However, "emerging nations" are in need of capital - foreign capital, if they have none of their own and refuse to practice the harsh policy of low wages and high investments. This harsh policy characterized our European economy and industry more than a hundred years ago and laid the foundations for our present high living standards.

Until the end of 1958, Franco desperately and foolishly strug gled against foreign investments in his then truly "underdeveloped" country whose living standards were well below those of Chile. Fortunately, he was finally pre vailed upon to give up this sterile attitude; as a result, not only for eign capital and local investors, but the Spanish masses, too, be gan to prosper. On the other hand, many "capitalists" until recently still invested considerable sums in politically unstable overseas na tions and lost them through revo lutions, riots, guerilla warfare and confiscations, or simply because of the unavailability of efficient man power. And as for foreign aid, the French - to cite only one example - still pay more per capita than the Americans do, and they pay more to their colonies than they did in the colonial period. If the Italians do not shell it out in simi1972 WE AND THE THIRD WORLD 87 Jar fashion, the reason may be that living standards in parts of Nigeria are higher than they are in Italy's deep south, in the Mez zogiorno.

IIDeco/onization a Boon ll Thirdly, there is the prevalent view that "decolonization" has been a real boon for the liberated masses, giving them a chance to develop their own cultural herit age. Yet, in most cases .only a thin layer of westernized "na tives" benefited from a premature decolonization - for which they have to thank the Cold War and the invisible Washington-Moscow Axis of "anticolonialists" outbid ding each other under the motto: "I can be more anticolonialist than you are." But the rule of the new men, whether politicians, mob masters, or dictators, has not been marked by greater efficiency, greater justice and magnanimity, more peace, or (least of all) less corruption. Nobody would have dared to slip a hundred rupee note into the hand of a British judge in India; among the little people there one finds today the greatest admirers of colonial rule, which to many of them now appears as a Golden Age. (Did you ever talk to the montwgnards in Vietnam? Or to simple Cambodian farmers? You will find the same attitude there.) Let us also remember our own Germanic ancestors, real savages who destroyed the already Chris tianized Roman Empire. How long did it take them to gain standards comparable to those of the Roman culture they destroyed? Six hun dred years? Eight hundred years?

Still, many are those who in sist that the undeniable "back wardness" of the emerging na tions is due to our past oppression and/ or to our refusal to educate them. But what would have hap pened, let us say, had we thrown a cordon sanita.irre around tropical Africa and never set foot on that part of the Dark Continent? Do we not have the admission of Mr. Tubman of Liberia and of Em peror Haile Selassie that their countries, unfortunately, are lack ing the hard but salutary experi ence of colonialism ? Have the Portuguese been really so amiss in educating the Angolans? (What is the illiteracy rate in Portugal proper?) Or what of the Belgians in the Congo? Did not Lovanium University have an atomic reactor before the University of Vienna? How many Ph.D.s and M.D.s were there in the ancient Kingdom of the Congo before the white man arrived? And as for wicked west ernization: is not the Third World desperately trying to continue this process? Is not Marxism more western than Confucianism, Tao88 THE FREEMAN February ism, or Buddhism, or modern tech nology and medicine more so than ancestor worship, magic, and sor cery?

"Old World Domination" Fairy tales about the Third World abound in America as well as in Europe. Thus, we hear that, in Latin America especially, the hangovers from Old World domi nation are responsible for the big so·cial differences and the contin ued internal exploitation. Now, whence does the poverty of the Latin American masses come? How great is the expectation of raising disciplined, skilled, labori ous men in the sometimes nearly polyandric and matriarchal "fam ilies" with up to 80 per cent ille gitimate births, characteristic of the Caribbean and other· more southern areas? In addition, one has to remem ber that only three areas in the entire world have "modern" work ethics or what the Spaniards call la gana de trabajar: Europe (with the center of gravity in theN orth west) , North America, and East Asia (including perhaps Vietnam, but certainly excluding Laos and Cambodia) . We must bear in mind that in the Middle Ages the year, according to regional customs, had between 90 and 130 holy days of obligation besides the 52 Sundays.

Systematic and rationalized work became an ideal only with the Reformation. In a generally easy going country, if a small minority (often of alien origin) works real ly hard, it will, for want of competition, become rich almost over night. Hence the "social problem," hence the rapid rise of fervently envied minorities all over the globe - the Parsees in India, the Japanese in Brazil and Peru, the Spaniards (los zopilotes!) in Mex ico, the Chinese in Southeast Asia, the Lebanese in Africa, the Jews in Central and Eastern Europe, the Ibos in Nigeria, and so on. They will always serve as scape goats for mankind's most deep seated vice: envy, murderous, fur ious envy. Naturally, these unpop ular minorities rarely feel safe; demagoguery agitates against them, and they tend to seek secur ity for their savings. Related to the myth of the Old World's culpability is another one: given the "deplorable sins of the past" in these areas, the only rea sonable economic development can be one along socialist lines. "Let us help them to follow Marx!"

True, individualism and a com petitive spirit are essentially Western characteristics, but be sides Spain we have the cases of Japan, Formosa, Singapore, the Ivory Coast, and Lebanon where free enterprise has, after all, proved to be the goose that lays 1972 WE AND THE .THIRD WORLD 89 the golden eggs. Russian living standards (we are not speaking of the GNP) are barely above the levels of 1914. Then there are those who insist that weare "bound in justice" to help the emerging nations econom ically, financially, materially. Well, in more than 150 years we managed with blood, sweat, and tears and with endless patience to buildup an industrial civilization which only in the last· two or three dec adeshas yielded a "life of plenty" for any sizable numbers among us. Due to the big capital invest ments required in the beginning, only few branches· of production in a young industrial economy can afford to pay "liberal" ("living") wages. In some cases it takes gen erations. Our wealth, too,:did not come swiftly. or smoothly. Out of voluntary charity we ought to help theothe~s to catch up with us ma terially, but they have no demands on. us "in justice."

In this connection the. "ideal ists" among us might reply that our wealth does not stem from our efforts, but from the past and present exploitation of "colored" peoples .. and their raw materials. The alleged immense benefits from our· colonial .period, however, are yet another myth. Decolonization, in spite of large-scale confisca tions, ushered .in our European prosperity. (The most prosperous European nations, such as Switz erland or Sweden, never had col onies.) Even the Belgian Congo was profitable only between 1940 and 1957; of. the German colonies only little Togo paid off. Adam Smith, in the face of American Independence, declared that busi ness with colonies is no more profitable than with foreign coun tries. Actually, trade with the former Thirteen Colonies rose from 15 to 61 million dollars in the period 1775-1806. In 1852 Dis raeli, referring to Britain's for eign possessions, spoke about "those miserable colonies" and Cobden asked· ironically: "Who· is the enemy who will do us the pleasure to steal our possessions 1"

Colonies appealed to patriots, mis sionaries, na,valofficers, and ad venturous entrepreneurs(a~d speculators) who rarely saw their dreams come true. The necessary initial investment - roads, rail roads, hospitals, military estab lishments, canals, drainages, pest control, schools, training centers, ports, telegraph lines, sanitation was so enormous that decoloniza tion frequently came before ·real profits began to make themselves felt. Nevertheless, the· steady lament about our European (and even American) mistreatment of the formerly colonized nations con tinues. Europeans, especially if 90 THE FREEMAN February they broke with the Christian faith and fell for neo-pagan ide ologies, have always been far more cruel toward each other (remem ber Auschwitz, Dresden, Katyn) than toward any "natives"; and as for the "natives" among them selves, we need only open a news paper almost any day to hear what they do to each other. (Imagine the reactions if the BangIa Desh movement had been suppressed in the way it was by a British gen eral! And the same applies to the extermination of the Ibos, to men tion only two especially stark cases.) Brutal treatment? Prob ably two-thirds of the populations of the "emerging nations" would not exist were it not for Western medicine. Sleeping sickness, bu bonic plague, yellow fever, bil harzia, filhosis, cholera, dysentery, and leprosy would still decimate entire regions. Horrors like Zen anyana, Dahomey's "Evil Night,"

the antics of the Kings of Benin, Suttee (burning of widows) in India, "eating long pig" (canni balism) in Polynesia, not to men tion the bestial slaughters on Mexico's Teocalli, would still go on were it not for "colonialism." However, we are constantly ex horted: "The world cannot be· per mitted to go on being one quarter rich and three quarters poor." To this we have to reply that the dif ference in living standards be~ tween Europe-America-J apan and the rest of the world will continue to exist as long as the human element - skill, management, econ omy, intelligence, determination to work hard - differs so significant ly. (In the Congo the Belgians imported highly paid bricklayers from the homeland because each one did more than three times the work of a native.) Of course, this might change in time. Today Ger man manufacturers prefer Span iards and Balkanites to "native" workers.

A Framework of Technology The dream of European-Amer ican-J apanese living standards on the basis of "Protestant work ethics" can only be fulfilled within the framework of a high order of technology. Scientifically speaking, there is no answer to the question whether we are normal and the others lazy, or the others normal and we neurotic. (Climate has hardly anything to do with the issue which depends upon a vol untary choice between leisure and spending and poverty, or hard work and saving and wealth.) Three years ago Dr. J. S. Kamwar of the Indian Council for Agrarian Research stated that if only two of the larger Indian states were to till the soil intensively and with modern methods, all of India could be fed properly; and if all the 1972 WE AND THE THIRD WORLD 91 farmers in all 14 states were to toil scientifically and ,diligently, two-thirds of the produce could be exported. To all this I would like' to add four supplementary remarks: 1) The democratic republic, sometimes a failure even in highly civilized nations (vide the case of Germany), becomes swiftly bank rupt outside of "Euramerica."

When monarchy is ruled out as obsolete - and the Third World always craves for what it con siders the most "modern" institu tions - the father image is soon replaced by that of Big Brother. Yet, tyrannies tend toward a bu reaucratic and centralized collec tivism ("socialism") and thus the economy is "politicized." Confisca tions ("nationalizations") always contribute to the reluctance of foreign investors. In fact, the in dustrial entrepreneur or land owner who, under such circum stances, does not salt away at least some of his profits to foreign banks, must be a super-patriot, a saint, or a soft-brained simpleton. 2) Almost everywhere in the Third World there is the failure to recognize that Western culture and civilization represent a pack age deal. One cannot arbitrarily pick some items and leave the rest. He who wants to own, keep and repair a car has to accept - consciously or unconsciously - Aris totelian and Cartesian notions.

N either modern wars nor modern agriculture are possible without an industrial background. No indus try can be based on animistic, Buddist, or Vedantic foundations. The engineer has been born in the shadow of the Cross. Scientific thinking is "exclusive," not syn cretistic or relativistic. Whether Western, civilization is superior or inferior to others is beside the point. The fact remains that all nations on this globe want to be westernized. But with an unerring instinct they usually choose the worst the West has to offer, for example the obsolete nineteenth century ideas embraced by Max ism. 3) "Social engineering" will not alleviate poverty. This is even more' true if (as it happens in the Third World) the social pyramid has a very broad basis, shrinks rapidly toward the middle and ends in a long, thin needle. The needle may be conspicuous, but its cubic con tent is very small. "Redistribu tion" will not cure the misery of the masses, only the baking of a bigger cake will have this effect, which presupposes wise leader ship and motivation among the many.

4) Humanity, according to the scientists, is at least half a million 92 THE F'REEMAN February years old. If we equate this period to 12 hours we can say that what we today arbitrarily call "decent human living standards" have been the privilege of a very few only during the last five minutes before twelve - and available for more or less entire nations only within the past thirty seconds. Up to then ~there was only hunger, cold, vermin, fear, disease, de spair, brutishness, and boredom. The average life-span for those who survived infancy in the neo lithic age was 28 years for men and 22 for women. Even Louis XIV could never get rid of his lice, and in the summer Versailles emitted :an unbearable stench. The living standards of His Excel lency, Herr Johann Wolfgang von Goethe, would be rejected by any German skilled worker today. His torically and geographically speak ing, "a decent life" (or family wages) has always been something of a "unique situation" in this world.

Christian Aspects of the Problem As for specific Christian aspects of this whole problem, let us add a few more points: The masochism, the cringing self-accusation of good Christians in regard -to the Third World is not so surprising if we bear in mind that Christianity always feared a Pharisaical, holier-than thou attitude. To beat one's breast over one's shortcomings is very Christian, but this should never be an automatic, thoughtless ges ture. A feeling of guilt must be based on real guilt, otherwise it becomes a purely medical problem - and ceases to be of any spiritual value. Racism exists undeniably and it has been tradi tionally much stronger in countries belonging to the Reformed Churches than in the Catholic orbit. (Toynbee has some pertinent passages on that subject.) In the World Council of Churches (with its seat in Ge neva) Christian masochism has led to a policy which reminds one of all those benighted spirits who started out as blinded do-gooders and ended up as criminals if not murderous terrorists. To finance the Chinese-trained and Chinese led terrorists in Southern Africa, who have committed abysmal atroci ties (mostly toward other Africans) is the height of con fusion. "We have been racists, now we must do something against racism and not only preach against it," are the words of Dr.

Eugene Carson Blake. An "Anglo Saxon" telling the Portuguese not to practice racism - this is the zenith of impudence! The Catholic world, on the other hand, has 'always been lack1972 WE AND THE THIRD. WORLD 93 ing in first-rate economists and financial experts. For this there are good reasons; one need only read St.· Thomas on commerce in De Regimine Princ'ipum. I can think of only two living· contem poraries who are Catholics and economists of world renown. To talk about global, especially "Third World" problems without clear economic and financial concepts is just as futile, silly, and criminal as to talk about economics without ethical considerations. It is diffi cult to say whether today Catholic or communistpolitical-economic social thinking is more divorced from the deeper realities of life and from truly global perspectives. Another thing we can observe is the· evil inherent in the transfer of monastic ideals to secular life, a tendency which is at the bottom of Catholic leftism, insofar as it is not inspired by purely worldly notions. (The fact that there are today Episcopalian, Presbyterian, and Lutheran monasteries and convents indicates that one should not underrate the all-round fas cination of monasticism.) It is interesting that in many· Catholic quarters the envious hatred for the rich-for the Jewish banker, the Calvinist manufacturer, the Anglican landowner, depending on the. country in question - is connected with an ecstatic love and admiration for the poor whom, paradoxically, one wants to render wealthy (and thus less likely to enter the Kingdom of Heaven?), preferably by expropriating the rich rather than by teaching the natural virtues: a. Third World problem of the first order.

Social Romanticism There exists, moreover, not only a Western but also an ecclesi.astic masochism which fosters Social Romanticism and Third World reveries, according to which the Church has always sided with the rich and is. also in possession of "great riches." Actually, most priests, monks, and nuns come from the poorer classes and are today often the victims of leftist political trends fostering (after so many excesses in the opposite direction) a. startling disloyality toward the Catholic past. The seIf accusing lament that the Catholic Church has, through its mission aries, westernized other nations and races and thus weakened, if not destroyed, local cultures in the Third World can frequently be heard. Of course, in the Christian faith the ·European past is as in eradicable as the Hebrew, Greek, and Roman background, whether we take the religion of a Catholic Irishman, a Methodist American, a Christian .Japanese or Angolan - an undeniable phenomenon.

The bleeding-heart approach to 94 THE FREEMAN February the Third World - caused by real sympathy - is perfectly in order, but Catholics especially should bear in mind that among the na tions invited to dig deep into their pockets there are only two pre dominantly Catholic ones: France and Belgium. Catholic sentimen talists are actually asking coun tries belonging to the Reformed Church to shell it out, countries that worked hard while the Cath olic nations (to whom I myself belong) enjoyed a dolce vita. of leisure, reverie, and artistic pleas ures (even if in relative poverty.) How loudly can Catholics ask their separated brethren to be the main providers? If, on the other hand, the entire Christian world decides to help the "emergers," we have to reflect most carefully on how this is best to be done. Obviously, not by distributing bank bills on street corners, nor by giving money to certain governments one would not like to touch with a barge pole. Under no condition would I like to see my tax money squan dered on socialist experiments which have empirically shown such a poor record. Realistic aid is given by Misereor, Oxfam, and other charitable organizations.

And there are also our courageous entrepreneurs who have gone out to teach skills and disciplines, to provide for jobs, salaries and tax moneys. All in all, I think that we ought to make concerted efforts to rein vestigate all these issues, cease to be lachrymose cry-babies, calcu late with paper and pencil, travel, read the necessary source books, learn languages, study the many facets of human nature. Only then will we put an end to making fools of ourselves and begin to help the developing nations - firmly, scien tifically, without yielding to black mail, impudence or guilt com plexes, helping them in all charity, as we would help our children, to grow up and to achieve what we have achieved. I) IDEAS ON $ LIBERTY The Tyrant As Slave HE WHO IS THE REAL TYRANT, whatever men may think, is the real slave, and is obliged to practice the greatest adulation and servility, and to be the flatterer of the vilest of mankind. He has desires which he is utterly unable to satisfy, and has,more wants than anyone, and is truly poor, if you know how to inspect the whole soul of him: all his life long he is beset with fear and is full of convulsions, and distractions, even as the State which he resembles: and surely the resemblance holds? PLATO, The Republic TI-IEModERN VOlUNTEERARMy DAVID J. KRAMER THE MODERN VOLUNTEER· ARMY is a term heard more and more fre quently in both military and civil ian circles. Newspapers and maga zines cite "drastic changes," such as new regulations on hair length, pay raises, and the like,. as giant steps toward a bright future for the military.

Despite the new regulations and publicized changes, the trickle of men into the MVA is at the rate of $2,585 spent on advertising for each recruit. 1 Dissatisfaction runs high among enlisted men, and the April antiwar demonstrations saw 1 The Castle, July 21, 1971 (The news paper of Ft. Belvoir, Va.). SP4 David J. Kramer was born in Joliet, Illi nois in 1946. He received a master"s degree in geology from Northern Illinois University in 1970, a few weeks before he was inducted into the service. Specialist Kramer received basic training at Ft. Polk, La., and has since been stationed at Ft. Belvoir. He is currently working in the Fuels Handling Equipment Division at USAMERDC. This article does not represent any official Army viewpoint. many of them throwing away their decorations in utter disgust. Some thing obviously is wrong with the system . .High-ranking officers and civil ian policy makers are unable to explain the difficulties except to say that the youth of today are somehow different from "their"

youth. If they were able to view the situation from the bottom of the heap instead of the top, they might discover that they are try ing to cure an illness by treating only its symptoms. Over the years that the military draft has existed, procedures have evolved ,vhich are entirely appropriate to an agency employing coercion to obtain its needed manpower. But the proce dures, the multitude of petty rules and regulations, are merely mani festations of the underlying coer cion. And minor easing of the rules is simply not sufficient to 95 96 THE FREEMAN February induce young men to enter the ser vice of their own free will. Just as the proper role of the police force is to protect citizens and property from internal ag gressors (i.e., criminals), the job of the armed forces is to protect the nation from foreign aggres sors. Needless to say, every civil ized society must have some such protection in order to survive; the duties of the policeman and soldier are just as important as those of the farmer, educator, and indus trialist.

A Sacred Duty The Army, however, sees its role as not only necessary but sacred (for an example of this, chat with any senior officer). A young man thinking of the military as a ca reer will find highly unsavory this notion of "sacred duty" - com plete with a fantastic aversion to constructive criticism and whole companies whose' sole (though not official) purpose is to parade on Sundays. The defense of this na tion is not a sacrosanct honor but a demanding and often thankless task which must be approached realistically. The view that the Army's' job is sacred is. often used to· justify the mili tary .draft in the, eyes of the public. If defense were considered to be no more vital to the country than food production, the draft would appear strange and unfair. (We don't draft farmers, so why draft soldiers?) But so long as national defense is believed to be an activity worthy of "special consideration," this system of coercion seems necessary and just -the government has a right to draft a man into the service. This notion stands in contradiction to the central concept of an all-volun teer force which, in effect, de clares that the wishes of the in dividual come before those of the government. In a broader sense, the idea that it is proper for a citizen to sacrifice the whole or part of his life to some "higher order" has been the cornerstone of every dictatorship which has ever existed.

We are not saying here that persons should never come to the aid of their country in time of trouble. A government which up holds and protects the rights of the people will never have to worry about a lack of support. But his tory tells clearly what happens when the "rights" of the state come. before those of the individ ual. "Government must be the ser vant, never the master," cries the record, and the youth of today are listening. A second part of the problem is the attitude of Army officialdom toward those in the lower. ranks: "personnel," to be used in any way 1972 THE MODERN VOLUNTEER ARMY 97 seen fit. Once the premise is ac cepted that the· government has the "right" to take two years of a man's life, the conclusion follows that the Army in effect "owns" the individual for those years. There are no drivers with whips or toil .. ing masses building a Colosseum, but the att,itude is there despite talk about enlisted men's councils and the airing of grievances. 2 Discipline is necessary, of course, for the success of any ven ture and is of· vital importance when the agency involved, such as the armed forces or the police, possesses the capability of mas sive destruction. True discipline, however, is a product .of respect.

If .a man respects the laws he obeys, the superior he follows, and the power of the weapons he con trols, there is no problem of dis cipline. Inferc:hangeabilify The attitude of "ownership" of the rank-and-file soldier gives rise to .other problems: the notion of the "interchangeability" ... of en listed men, and the separate sys tem of justice for the military. The· old tales about master me chanics and· holders of advanced degrees serving as cooks and in fantrymen for two years are true 2 The nickname "GI" stands for Gov. ernment Issue, a term applied to govern· ment property. even today. 3 •. The idea behind these misallocations is that, since the Army. "owns" the soldier, he can perform efficiently any job that he is programmed to perform, and his own thoughts about the task he is given may simply be ignored. The results are plain to see: men held in positions below their ability become despondent and negligent once their efforts at attaining other positions have failed, while men held in jobs above their ability become anxious and insecure. A perpetual waste of individual talent· occurs.

The Army does make some effort to allocate jobs according to ability when a group of men are inducted. However, this attitude of draftee interchangeability - as well as the fact that the draft is geared to numbers, not skills does much to negate the effort. Few soldiers relish the thought that they can be shuttled into dif ferent positions and. duty stations by superiors who may not even ask the soldier's opinion on the matter. Also, the enthusiasm of a potential volunteer will not be in creased if his friends in .the mili3 "A glaring example is the job assign ments of men trained as soil scientists. In fiscal 1969 the Army needed 103 soil scientists. In calendar 1969, 244 enlisted men entered· the army with such training but only 6, or 2.5 per cent of those avail. able were assigned to their college spe· cialty." Chemical & Engineering News, June 29, 1970.

98 THE FREEMAN February tary declare, "Sure, the MVA is a nice idea, but they can still do whatever they want with you." No private business would ever tr.eat its employees in such a cavalier manner; yet, a soldier in a volun teer army is an employee, much the same as a policeman. A more serious obstacle is the idea behind military justice, the idea that a separate system of justice is needed for military m~n because, as "property" of the gov ernment, they are different from other citizens. The result is a double standard, sometimes unbe lievable. For example, a recent amendment in Army regulations has allowed military men to read any literature they wanted, even when the literature was critical of the government. This went into effect 180 years after the Bill of Rights was adopted! Five years ago, a man at Ft. Knox, Kentucky, was refused an accelerated promo tion simply because he had a copy of an "underground" military newspaper in his locker. 4 In discussing military justice, we are not talking about those laws which are derived from gen eral principles and which apply 4 The Castle, July 14, 1971. It is not true that military justice is mostly biased against the enlisted man. In some in stances he has more legal rights than the civilian. The important thing to remem ber is that the two systems are separate.

specifically to soldiers. All occupa tions have complementary sets of rules and ethics. What concerns us here is the idea that a system for creating and administering the law may be set up apart from the general system of justice in the United States. This attitude has no place in any plan for a truly effective vol unteer army. The life of the sol dier should be tied in as closely as possible with that of the rest of the society, not cut off and isolated within a separate sphere. This in tegration of systems will be no easy task, and the man who finds a way of solving the special needs of military justice through the system of civil jurisprudence will certainly be considered one of the founders of the MVA. Summation and Conclusion Here, in summary, are the vari ous points we have discussed: • A major problem facing any attempt to create a volunteer army is the "draft-army" mentality, a set of attitudes and ideas belong ing to an agency which has long been using coercion to supply its manpower requirements, but ideas that are incompatible with the principles behind an all-volunteer defense force.

• The outward aspect of this mentality consists of the notion that a citizen "owes" two years of 1972 THE MODERN VOLUNTEERARMY 99 his life to the country and that the government may determine how those two years shall be used. Jus tifica tion of this notion lies in the Army's view of itself as a super sacred agency whose role in the society is far above all others. • The inward aspect is mainly the idea of ownership - the Army is owner and the soldier the tem porary property. This has fostered the notion of the interchange ability of the rank-and-file in the various occupations and the atti tude that a separate system of justice for the military man is a proper institution. At this moment the draft-army mentality may not appear to be a cause for alarm. But posters have been put up throughout military installations announcing this or that new program to help impleDaniel Webster ment the MVA, and the advertis ing campaigns continue in full force. 5 Sooner or later the Army, called upon to fulfill its "campaign promises," will run aground on its own rules. Now is the time for those who set policy to evaluate in a sober manner the whole Army philosophy. If they succeed in breaking through this stifling col lection of attitudes, they will not only make their branch of the ser vice more efficient and responsive, but will prove that coercion is not necessary for the defense of the nation. If they fail, the proponents of state omnipotence will gloat over another failure of the prin ciple of voluntarism to achieve the desired goal - in an area where voluntarism never had a chance. f) 5 General Westmoreland has set July 1, 1973, as the target date for an all volun teer army.

IDEAS ON LIBERTY A MILITARY FORCE CANNOT BE RAISED, in this manner, but by the means of a military force. If administration has found that it can not form an army without conscription, it will find, if it venture on these experiments, that it can not enforce conscription without an army. The Government was not constituted for such purposes. Framed in the spirit of liberty, & in the love of peace, it has no powers which render it able to enforce such laws. The attempt, if we rashly make it, will fail; & having already thrown away our peace, we may thereby throwaway our Government. -From a speech in the House of Representatives, December 19, 1814.

)WE-kL-T-H ?• HENRY HAZLITT FROM TIME IMMEMORIAL there have been reformers who demand ed that wealth and income should be "divided equally" - or at least divided with less glaring inequal ities than the reformers saw around them. These demands have never been more insistent than they are toda.y. Yet most of them are based, in the first place, on a completely erro neous idea of the extent to which present wealth or income in the United States is "maldistributed." An American socialist, Daniel De Leon, announced in a celebrated speech in 1905 that, on the aver age,. the owners of American in dustry grabbed off 80 per cent of the wealth produced in their fac tories, while the workers got· only Henry Hazlitt is well known to FREEMAN readers as author, columnist, editor, lecturer, and practitioner of freedom. This article will appear as a chapter in a forthcoming book, The Conquest of Poverty, to be published by Arlington House.

100 20 per cent.! His contention wa.s widely accepted and· exerted great influence. Yet the truth, as we have seen in the article on "The Distribu tion of Income" (the Freeman, October, 1971), is exactly the· op posite. Labor in America is get ting the lion's share of the na. tion's output. In recent years the employees of the country's cor porations have been getting more than seven-eighths of the corpo rate income available for division, and the shareowners less than an eighth. More than 70 per cent of the personal income in the nation in 1970 was received in the form of wages and salaries. Business and professional income totaled less than 7 per cent, interest pay ments only 8 per cent, and divi dends only 3 per cent. The truth seems to be that per1 See Howard E. Kershner, Dividing the Wealth (Devin-Adair, 1971), pp. 17-24.

1972 SHOULD WE DIVIDE THE WEALTH? 101 sonal income in this country· is al ready distributed roughly in pro portion to each person's current contribution to output as meas ured by its market value. Some people, of course, inherit more wealth than others, and this af fects their total personal income. How large a role this plays is statistically·. difficult to determine, but the income distribution figures just cited would indicate that the role is. minor. As a -percentage of the total population, there are to day very few "idle rich," however conspicuous a few playboys may make themselves at the night clubs and gaudy playgrounds of the world. Moreover, the "surplus" money simply doesn't exist to raise mass incomes very much. In 1968, out of a total of 61 million income taxpayers, 383,000, or six-tenths of 1 per cent, paid taxes on in comes of $50,000 or more. Their total adj usted gross income came to some $37 billion, or 6.6 per cent of total gross incomes •reported.

Out of this amount they paid a little more than $13 billion, or 36 per cent of their income,. in taxes. This left them with about $24 bil lion. for themselves. Suppose the government had seized the whole of this and dis tributed it among the 200 million total population. This would have come to $120,· or $10 more a month~ .per person. As the dispos able personal per capita income in 1968 was $2,939, this expropria tion would have raised the aver age income of the recipients by 4 per cent to $3,059. (Per capita in come actually rose anyway to $3,108 in 1969 and to $3,333 in 1970.) Of course if the govern ment resorted to any such violent expropriation, it could not repeat it after the first year, for the simple reason that people would cease earning incomes of· $50,000 a year or more to be seized. A Destructive Process Any attempt to equalize wealth and income by forced redistribu tion· must destroy wealth .and in come. We can recognize this most clearly if we begin with the ex treme case .• If the median income per family has been $10,000 a year, and we decide that every family must be guaranteed ex actly that and no family can be allowed to retain more than that, then we will destroy· all economic incentives to work, earn, improve one's skills, or save. Those who had been getting less than that would no longer need to work for it; those who had been getting more would no longer see the point in working for the surplus to be seized, or even in working at all, since their income would be "guar anteed" in any case. People could 102 . THE FREEMAN February be got to work only by coercion; most labor would be forced labor, and very little of it would be skilled or efficient.

The so-called "instinct of work manship," without economic re wards, would have nothing to guide it into one channel rather than another, and nothing to hold it beyond the point of fatigue. Dseful and profitable work would be blackmarket work. Those who survived would do so at a near subsistence level. But the same kind of results, less extreme in degree, would fol low from less extreme redistribu tion measures. The most fashion able of these at the moment is the Guaranteed Annual Income. I have already analyzed this at length, together with its most popular variant, the Negative Income Tax, in my book, Man vs. the Welfare State,2 and will only briefly indi cate the objections to it here. A guaranteed minimum income would not have quite the universal destructive effect on incentives as would an attempt to impose a com pulsorily equal income, with the ceiling made identical with the floor. At least people earning in comes above the minimum guar antee, though they would beop pressively taxed, would still have some incentive to continue earn2 (New Rochelle, N. Y.: Arlington House, 1969), pp. 62-100, ing whatever surplus they were al lowed to retain. But all those guaranteed a minimum income, whether they worked or not, would have no incentive to work at all if the guaranteed minimum were above what they had previously been earning for their work; and they would have very little incen tive to work even if they had pre viously been earning, or were ca pable of earning, only a. moderate amount above the guarantee.

It is clearly wrong in principle to allow the government forcibly to seize money from the people who work and to give it uncondi tionally to other able-bodied peo ple whether they accept work or not. It is wrong in principle to give money to people solely be cause they say they haven't any and especially to support such peo ple on a permanent and not merely on a temporary emergency basis. It is wrong in principle to force the workers and earners indefi nitely to support the nonworkers and nonearners. This must undermine the incen tives of both the workers and the nonworkers. It puts a premium.on idleness. It is an elementary re quirement of economic incentive as well as justice that the man who works for a living should al ways be better off because of that, other things equal, than the man who refuses to work for a .living.

1972 SHOULD WE DIVIDE THE WEALTH? 103 VVe have to face the fact that there are a substantial number of people who would rather live in near-destitution without working than to live comfortably at the cost of accepting the disciplines of a steady job. The higher we raise the income guarantee (and once we adopted it, the political pres sures would be for raising it con stantly), the greater the number of people who would see no reason to work. Nor would a so-called ~'Negative Income Tax" do much to solve the problem. The Negative Income Tax is merely a misleading eu phemism for a tapered-off guar anteed minimum income. The pro posal is that for every dollar that a man earns for himself, his gov ernment income subsidy would be reduced, say, only 50 cents, in stead of being reduced by the whole amount that he earns. In this way, it is argued, his incen tive for self-support would not be entirely destroyed: for every dollar he earned for himself he would be able to retain at least half.

This proposal has a certain sur face plausibility; in fact, the pres ent writer put it forward himself more than thirty years· ago,3 but abandoned it shortly thereafter when its flaws became evident. Let us look at some of these: 3 In The Annalist (published by The New York Times), Jan. 4, 1939. • 1. The NIT (negative income tax), by neglecting the careful ap plicant-by-applicant investigation of needs and resources made by the traditional relief system, would, like a flat guaranteed in come, open the government to mas sive fraud. It would also, like the flat guaranteed income, force the government to support a family whether or not it was making any effort to support itself. • 2. It is true that the NIT would not destroy incentives quite as completely as the flat guaran teed income, but it would seriously undermine them nonetheless. It would still give millions of people a guaranteed income whether they worked or not. Once more we must keep in mind that there are a sub stantial number of people who pre fer near-destitution in idleness to a comfortable living at the cost of working. It is true that under the NIT scheme they would be al lowed to keep half of anything they earned for themselves up to nearly twice the amount of the basic NIT benefit, but they would tend to look upon this as the equivalent of a tax of 50 percent on these earnings, and many would not think such earnings worth the trouble.

• 3. The NIT might prove even more expensive for the taxpayers than the flat guaranteed income. The sponsors of NIT, in their 104 THE FREEMAN February original monetary illustrations, proposed that the "break-off point" of their scheme. would be some thing like the official "poverty threshold" income - which. is now (1972) about $4,320 for a non farm family of four. At this point no NIT benefits would be paid. If the family's income was only $3,320, falling short of the pov erty-line income by $1,000, then a $500 NIT benefit would be paid. And if the family's earned income was zero, then a benefit of $2,160 would be paid. But, of course, if no other gov ernment subsidy were paid to the family (and the original NIT sponsors proposed that their plan be a complete substitute for all other welfare payments) then the government would be paying the poorest families only half of what its own administrators officially declared to be the minimum on which such families could reason ably be expected to live. How could such a program be politically de fended?

As soon as the NIT program gets into practical politics, there fore, the pressure will be irresist ible to make the payment to a family with zero income at least equal to the official poverty-line income. If this means $4,320 for a family of four, say, then some NIT payment must be made to each family until its income reaches twice the official poverty line income, or $8,640 for every family of four. And this means that even if a family were already earning much more than the offi cial poverty-line income - say, $8,000 a year - it would still have to be subsidized by the govern ment. "Everybody must be treated alike." • 4. This would be ruinously ex pensive, but it is still not the end. The subsidized families would ob j ect to paying a 50 per cent income tax (as their spokesmen would put it) on everything they earned for themselves. So they would be al lowed to earn a certain amount entirely exempted from such a de duction. (Such an exemption has already been granted on self-earn ings of Social Security recipients, and it is proposed in a. pending Congressional bill to enact an NIT.) This would make the NIT still more crushingly expensive for the remaining taxpayers.

• 5. There would be political pressures every year for increas ing the amount of these· exempted earnings. In fact, a 50 per cent "income. tax on the poor" would be denounced as an outrage. In time the proposal would be certain to be made that all theself-earn ings of the NIT subsidy recipients be exempted from any offsetting deductions whatever. But this would mean that once a family had 1972 SHOULD WE DIVIDE THE WEALTH ? 105 been granted the initial minimum income guarantee of, say, $4,320 a year, it would still be getting that full sum in addition to what ever it earned for itself. But "ev erybody must be· treated alike." Therefore there would be no break.off point, or even any tapering off. Every family -'- including the Rockefellers, the Fords, the Gettys, and all the other million aires - would get the full guaran teed income. This end-result cannot be dis missed as mere fantasy. The prin ciple of a government subsidy to any family, no matter how rich, is already accepted in our own So cial Security scheme and in Great Britain under the name of "family allowances." It is merely that the amounts are smaller. So the Nega tive Income Tax, as a social meas ure, turns out to be only a half way house. Carried to its logical conclusion, it becomes a uniform guaranteed handout to industrious and idle, thrifty and improvident, poor and rich alike.

• 6. It is an anticlimax to point out, but it needs to be done, that there is no political possibility that a flat guaranteed income or a "negative income tax" would be enacted as a complete subsbitute for the existing mosaic of welfare and relief measures. Can· we seri ously imagine that the specific pressure groups now getting veterans' allowances, farm subsidies, rent subsidies, relief payments, Social Security benefits, .food stamps, ~edicare, ~edicaid, old age assistance, unemployment in surance, and so on and so on, would quietly give them up, with out protests, demonstrations, or riots? The. overwhelming prob ability is that a guaranteed in come or NIT. program would sim ply be thrown on top of the whole present rag-bag of welfare meas sures piled up over the last thirty to forty years. We may put it down as a politi cal law that all State handout schemes tend to grow and grow until they bring on a hyperinfla tion and finally bankrupt the State.

Land Reform Perhaps I should devote at least one or two paragraphs here to so called "land reform." This appears to be the most ancient of schemes for forcibly dividing the wealth. In 133 B. C., for example, Tiberius Gracchus succeeded in getting a law passed in Rome severely limi t ing the number of acres that any one person could possess. The typi cal "land reform" since his day, repeatedly adopted in backward agricultural countries, has con sisted in confiscating the big es tates and •either "collectivizing" them or breaking them up into 106 THE FREEMAN February small plots and redistributing these among the peasants. Because there are always fewer such work able parcels than families, and be cause, though each parcel of land may be of the same nominal acre age, each has a different nature, fertility, location, and degree of development (with or without clearance, grading, irrigation, roads, buildings, and the like), each must have a different market value. The· distribution of land can never be universal and can never be "fair"; it must necessarily fa vor a selected group, and some more than others within that group.

But apart from all this, such a measure always reduces efficiency and production. From the moment it is proposed that property be seized, its owners "mine" its fer tility and refuse to invest another dollar in it, and some may not even raise another crop. It does not pay to use modern equipment on small farms, and in any case the owners are unlikely to have the necessary capital. "Land re form" of this type is an impover ishment measure. The Henry George scheme of a 100 per cent "single tax" on ground rent would also discourage the most productive utilization of land and sites, and adversely af fect general economic develop ment. But to explain adequately why this is so would require so lengthy an exposition that I must refer the interested reader to the excellent analyses that have al ready been made by Rothbard, Knight, and others. 4 Progressive Taxation Among the' "advanced" nations of the West, however, the most frequent contemporary method of redistributing income and wealth is through progressive income and inheritance taxes. These now com monly rise to near-confiscatory levels. A recent compilation 5 com paring the highest marginal in come-tax rates in fifteen countries yielded the following results: Switzerland 8 per cent, Norway 50, Denmark 53, West Germany 55, Sweden 65, Belgium 66, Aus tralia 68, Austria 69, Netherlands 71, Japan 75, France 76, United States 77, Canada 82, United Kingdom 91, and Italy 95 per cent.

Two main points may be made about these hyper-rates: (1) they are counter-productive even in raising revenues, and (2) they do hurt not only the rich but the poor, and tend to make them poorer. 4 Murray C. Rothbard, Power and Mar ket: Government and the Economy (Men lo Park: Institute for Humane Studies, Inc., 1970), pp. 91-100. Frank H. Knight, "The Fallacies in the 'Single Tax'," The Freeman, Aug. 10, 1953. 5 First National City Bank of New York.

1972 SHOULD WE DIVIDE THE WEALTH? 107 376 292 88% 654 1942 $122,000 $ $ National Income .. $77,000 Incomes over $300,000: Total amount $ 1,669 Taxes paid $ 281 Top tax rate 25% No. of returns...... 2,276 In other words, during the same period in which the total national income irncreased58 per cent, total incomes over $300,000 fell 77 per cent. If the aggregate of such $300,000 incomes had risen pro portionately to the whole national income, the total would have reached $2,644 million - seven times greater than it actually was. A great deal more statistical analysis of this sort could in structi vely be undertaken not only from U. S. but many foreign in come-tax returns. It is not merely the effect of personal and corporate income taxes in reducing the incentives to bring high earnings into exist ence that needs to be considered, but their total effect in soaking up the sources of capital funds. Most of the funds that the present tax comparing actualities merely with might-be's and might-have-been's.

In March, 1947, the National City Bank, based on reports of the Bu reau of Internal Revenue, pre sented the illuminating table be low. (The dollar figures stand for millions of dollars.) 1926-28 average All the revenues yielded by the u. S. personal income tax of 1968, with its rates ranging from 14 to 70 per cent, plus a 10 per cent surcharge, would have been yielded, with the same exemptions and deductions, by a flat income tax of 21.8 per cent. If all the tax rates above 50 per cent had been reduced to that level, the loss would not have been as much as it took to run the government for a full day. In Great Britain, in the fiscal year 1964-65, the revenue from all the surtax rates (rang ing above the standard rate of 4114 per cent up to 9614 per cent) yielded less than q per cent of all the revenue from the income tax, and barely more than 2 per cent of Britain's total revenues. In Sweden, in 1963, the rates be tween 45 and 65 per cent brought in only 1 per cent of the total na tional income-tax revenue. And so it goes. The great masses of the people are accepting far higher rates of income tax than they would tolerate if it were not for their illusion that the very rich -are footing the greater part of the bill.

One effect of seizing so high a percentage of high earnings is to diminish or remove the incentive to bring such earnings into exist ence in the first place. It is very difficult to estimate this effect in quantitative terms, because we are 108 THE FREEMAN February structure now seizes for current government expenditures are pre cisely those that would have gone principally into investment - i. e., into improved machines and new plants to provide the increased per capita productivity which is the only permanent and continuous means of increasing wages and total national wealth and income. In the long run, the high rates of personal and corporate income taxes hurt the poor more than the rich. Equality, Once for All A socialist proposal that used to be aired frequently a genera tion or two ago, but is not much heard now (when the emphasis is on trying to legislate permanent equalization of incomes), is that the wealth of the country ought to be distributed equally "once for all," so as to give everybody an even start. But Irving Fisher pointed out in answer that this equality could not long endure. 6 It is not merely that everybody would continue to earn different incomes as the result of differ ences in ability, industry, and 6 Elementary Principles of Economics (New York: Macmillan, 1921), pp. 478 483.

luck, but differences in thrift alone would soon reestablish inequality. Society would still be divided into "spenders" and "savers." One man would quickly go into debt to spend his money on luxuries and immediate pleasures; another would save and invest present in come for the sake of future in come. "It requires only a very small degree of saving or spend ing to lead to comparative wealth or poverty, even in one genera tion." Even communists have now learned that wealth and income cannot be created merely by al luring slogans and utopian dreams. As no less a figure than Leonid I. Brezhnev, First Secretary of the Soviet Communist party, recently put it at a party congress in Mos cow: "One can only distribute and consume what has been produced, this is an elementary truth."7 What the communists· have still to learn, however, is that the insti tution of capitalism, of private property and free markets, tends to maximize production, while eco nomic dictatorship and forced re distribution only discourage, re duce and disrupt it. ~ 7 The New York Times, May 29, 1971.

CHARLES R. LA Dow DESPITE the ever-burgeoning tax burden of our welfare state, vol untary giving by the American people goes on apace, as the num ber of philanthropic appeals stead ily increases. Without recourse to statistics, the average person's daily mail, plus reiterations in the media, assure him of the persist ent success of privately supported causes. Furthermore, the buildings and equipment of privately funded philanthropic institutions are vis ual proof of their vitality. Tax de ductibility only partially eases the cost of giving, a cost assumed by persons of every class. The maj or motive for giving is clear; in this private sector, the individual is allowed to give to causes which he truly wants to support. Also, he is assured of the effectiveness of his donations by the knowledge that Mr. La Dow, of San Diego, recently retired as a teacher of social studies in high school.

he can withdraw support whenever he believes an organization is no longer worthy and the certainty that such organizations are aware of his option. The "public philanthropy" of the welfare state possesses no such motivation and no such safeguard. Based, of necessity, on class legis lation, it appeals to the greed of the individ ua.!, as a member of some arbitrary, abstract group. (Private philanthropy would be in the same condition if its benefici aries were empowered to vote upon, and lobby for, the nature and amounts of their benefits. Who would contribute to such institu tions?) Since all classes of citi zens, directly and indirectly, are now dependent on public largesse, it is understandable that each in dividual is motivated to vote so that his class, hence himself, will get the largest possible share of 109 110 THE FREEMAN February , public funds. (The person is rare, indeed, who asks for a cut in wages or benefits!) Hence, we are faced with the odd spectacle of a million aire allowing Medicare to pay for his operation, while a recipient of relief goes to the doctor every time he has a sore thumb. People of ev ery class and political persuasion are aware of the shortcomings of governmental welfare programs; but the very nature of the process impels them to demand more of the same. There is also the haunt ing, long-held, fear that, if we should scrap these programs and turn to a free market, we would have a ghastly depression.

Reality suggests otherwise. Should we continue as we are do ing, a terrible awakening is certain to come. The truism of economics is inescapable: "Wants are un limited, while resources are in lim ited supply." We haye been squan dering our resources for decades, having attempted to repeal the law of supply and demand and the natural restraints it imposes. The continuing vitality of Hong Kong, surrounded by totalitarianism; the astounding recovery of war-dev astated Germany and Japan; these are examples of the effectiveness of open competition. Our welfare state is even threatened, econom ically and militarily, by the totali tarian powers. We must awaken from our long holiday. Are the American people too effete to an swer a challenge of "blood, sweat, toil, and tears?" Their record of voluntary giving and ability to rise quickly to real emergency in dicates otherwise. No Lack of Philanthropy As to any fear that dismantling of the welfare state would dry up philanthropy in this nation and see people dying for lack of food or medical care, one need only read the daily paper to see the im probability of such happenings.

Even with the load of tax-support ed welfare, the people's response to ,individual troubles is amazing. Appeals for help for the unfor tunate are usually oversubscribed; nor is such help given, or taken, in a demeaning way. As always, it is public welfare, not private char ity, which is truly demeaning. Generosity and gratitude are beautiful emotions which draw persons together as no public larg esse can do. Think of the good which could be done voluntarily if the funds extracted for public wel fare measures were left in the hands of individuals! The foregoing suggestion may not justly be called Brahministic or devoid of concern for the com mon man. The tax load of the wel fare state falls most heavily on the common man, who is in no posi tion to claim capital losses or tax 1972 FREE GIVING VS. THE WELFARE STATE 111 shelters, or to pass along his tax costs in the form of higher prices.

The easy road to great fortunes and the tax-free status of many of our wealthiest persons are hall marks of the welfare state. At the other extreme, the poor man, spending most of his income for necessities, is locked into the cruel bind of tax and inflation. Who pays for the government's farm programs? The only honest reply: "The poor people in the cities." On the other hand, farmers are im poverished by rising costs of ma chinery and supplies due to gov ernment pampering of organized labor, plus the exorbitant taxes and interest which stem from the profligate policies of a welfare state. The true charge of Brahm inism fits best those welfare poli cies which are designed to fasten the individual to a place in an ar bitrary caste system of "benefits" while taxing away his chances of social mobility. Failure of the current adminis tration to even begin to dismantle the bureaucracy as promised indi cates a need for major surgery.

When government officials, in so many cases, seem no more aware of fundamental economic law than are their constituents, it is diffi cult to see how correction can come. It usually takes a great shock to shake a nation. into a grand decision. The blitz-bombing did it to England. Catastrophic de feat . accomplished it in West Germany and Japan. Such feats, as in England, are often ephem eral. The magic of Germany and Japan may well end in reaction. However, the debacle of 1929, which introduced our welfare state and started a movement continu ing to this day, is some proof of our persistence, however perverse. Nevertheless, a steady growth of conservative opposition, both in quantity and quality, has been ap parent. Those who are rebuffed are obliged to pursue education and improve their talents, while those in power grow slack. It may well be that when the next shock comes, as it surely must, voters will be ready to listen to the call to turn philanthropy back to the people. ~ IDEAS ON trlh\ W~D.

LIBERTY William Feather WHICH TOWN is better off, one which organizes a new uplift movement every three months, or one which opens a new factory? The William Feather Magazine, December 1971 CLARENCE B. CARSON THE FOUNDING OF THE AMERICAN REPUBLIC 7 The First American Crisis: 1763-66 112 IT MAY WELL BE that the pivotal event for the onset of American resistance was the coming to the throne of the United Kingdom in 1760, of George III. He was the third of the Hanoverian monarchs of England, the grandson of George II who immediately pre ceded him, and the great grand son of George I. He was the first of this line of British rulers to be native-born, a fact he thought worth emphasizing. When George III came to the throne, he was in the first blush of manhood, and this promising young man should have been a welcome relief from the rule of his grandfather, who had no high regard for his own abilities. Indeed, the powers of the monarch had declined greatly in the unsure hands of both George I and George II . It was commonly said that ministers were kings during this earlier period, and there can be no doubt that the Whigs had dominated so long that the government was run by factions within a party rather than by political parties.

It became clear rather quickly that George III intended to change much of this. He meant to bring the executive authority into his hands and to direct the course of Dr. Carson lives in Florida. He is a noted lec turer and author, his latest book entitled Throttling the Railroads.

1972 THE FIRST AMERICAN CRISIS: 1763-1766 113 Parliament as well. George III was a man of strong will - un bendably stubborn when he had set his mind on a course-much courage, and already in grasp of some of the principles of power when he was crowned. One of his first acts was to dis place William Pitt, the Elder, from leadership of the government. Be yond that, he acted to break up the dominance of the Whig party, pro fessing to want members of the cabinet who were the ablest in stead of those who belonged to a particular party, but probably moved also to this as a means of loosening Whig rule. His method of dominating Parliament was not particularly subtle: he bought the necessary numbers by handing out sinecures to those who would do his will. He visualized himself as a patriot king who would not only restore some of the glory of mon archy but also instill pride and greatness in the people over whom he ruled. Instead, it was his lot to see the dismemberment of his empire and the British people de termined to limit the power once again of a briefly resurgent mon archy.

Harsh Rule and Additional Appointments This new king's determination to rule as well as to reign affected the colonial situation in two ways particularly. Whig ministers had generally ruled with an eye to ward accommodating the Amer icans rather than using undue force. For example, Pitt arranged to reimburse the colonies for their effort during. the French and In dian War rather than insist that they should honor requisitions without hope of return. Over the years, Parliament had permitted the colonies to legislate for them selves - subject to having their acts vetoed, of course - rather than imposing legislation upon them for their internal arrange ments. As the new monarch broke up this Whig rule, he appointed officers more concerned with im posing British rule and less con cerned with maintaining good trade relations which would ben efit British merchants. Secondly, the new monarch aug mented his power by increasing the number of appointive posi tions. By appointments he re warded his friends in Parliament and increased the number of peo ple who owed their positions to him. This fact of political life gave George III incentive to main tain larger armies and navies as well as more civilian agents in the colonies. That such actions did not endear the monarch to his colonial subjects did not. greatly trouble him during the early years of his rule.

114 THE FREEMAN February Writs of Assistance, 1761 It is difficult to decide exactly when the train of events got un der way which led to open re sistance in the colonies. The Brit ish government adopted a more rigorous enforcement of the navi gation laws during the French and Indian War. As already noted, George III came to the throne in 1760. Convention has it that the train of events began in earnest in 1763. But there was one bell wether event which occurred in the colonies· before that time. It involved a court case which was argued in 1761 in Massachusetts over the issuance of writs of as sistance in that colony. A writ of assistance was a kind of general search warrant without a fixed date of termination which would enable officers to search for mer chandise illegally brought into the colonies. Unlike a search warrant, it did not require the naming of the place to be searched or what goods were to be located. Such writs had been issued in 1755, and there were applications for new ones after George III came to the throne.

James Otis took the leadership in opposing the issuance of new writs before the court in the old townhouse in Boston. If Otis had contented himself to argue against the issuance of the writs on the grounds simply that there were few precedents for them in more recent times, the occasion might not have been remembered. But he went much further than this: he proclaimed such writs to be con trary to reason and denounced them as arbitrary and tyrannical by nature. According to John Ad ams' reconstruction of his speech, he said: "Everyone with this writ may be a tyrant; if this commis sion be legal, a tyrant in a legal manner also may control, im prison, or murder anyone within the realm. . . . Every man may reign secure in his petty tyranny, and spread terror and desolation around him."I He declared his op position to them in emotionally charged language: "I will to my dying day oppose with all the pow ers and faculties God has given me, all such instruments of slavery on the one hand, and· villany on the other, as this writ of assistance is."2 J ames Otis lost this particular case before the court, but he emerged from it as the man who would take the earliest leadership in presenting and arguing the American cause. His local popu larity was vouchsafed in the-en suing .election when he became representative for Boston in the 1 John Braeman, The Road to Inde pendence (New York: Capricorn Books, 1963), p. 14.

2 Ibid., p. 13.

1972 THE FIRST AMERICAN CRISIS: 1763-1766 115 Massachusetts legislature. For the next three or four years he used his pen as well as his forensic abilities to formulate and expound the rights of Americans and the limits of British rule. Whether he would have continued his early leadership role in the later stages of resistance will never be known, for he was inactivated by bouts with insanity after 1769. Turning Point in 1763 A cluster of events in 1763 does mark a turning point in British and American relations, as has been commonly held. Up to that point, there is no evidence of re sistance to British rule, though, of course, there were objections to particular actions. To all outward appearances, Americans generally accepted British rule if it could not be said that they were always contented with it. In retrospect, historians are apt to see' that the stage was already set for independence. Trends were well on their way to fruition which prepared the way for Amer ican separation. Americans were very nearly cut loose already from the Church of England which was the religious basis of being En glish. Colonists had much experi ence in politics which prepared them for governing themselves.

There was widespread sensitivity to any dangers to liberty in actions by the British government. The natural law philosophy was familiar to thinkers, and was at hand to serve as a basis both for breaking from England and erect ing new governments. Feudal, mercantile, and religious restric tions were very nearly anachron isms in America already. Even so, Americans were a long way from being ready for inde pendence in 1763. The above were conditions which might well have continued to exist for a long while without leading to independence. Americans still professed their allegiance to the king, as they would continue to do for more than a decade. Their rights and privileges they still traced to Eng land, and the claims to their prop erty to royal grants. There was as yet neither a sense of unity among the continental colonies nor any factual unity, except for a com mon allegiance to the British mon arch.The conference at Albany in 1754 had shown how little desire there was for common action by the colonists.

Resistance to Britain, then, was provoked by changes in British policies, and these began most notably with a cluster of actions in 1763. Most of what happened in 1763 was not so much the pro vocation of resistance as the pre lude to it. One of the most momen tous of the developments of that 116 THE FREEMAN February year was not provocative at all. It was the Treaty of Paris which brought to a conclusion the Seven Year's War. By its terms, Britain got all French territory in Canada and all territory east of the Mis sissippi river, except New Orleans, belonging to both France and Spain. No longer were the Amer ican colonies threatened by Euro pean powers with immediately ad jacent territories. It was now much easier to think in terms of independence from Britain. Restrictions on opening up this new terri tory did provoke many colonists. Pontiac's Rebellion broke out as Indians feared and resisted encroachment by. the white man in the interior. The British government attemped to prevent settlement beyond the mountains by the Proclamation of 1763. The crucial part of the Proclamation is found in this pro hibition: "that no governor or commander in chief of our other colonies or plantations in America, do presume for the present, and until our further pleasure be known, to grant warrant of sur vey, or pass patents for any lands beyond the heads or sources of any of the rivers which fall into the Atlantic Ocean from the west or north west .... "3 The effect of 3 Jack P. Greene, ed., Colonies to Na tion (New York: McGraw-Hill, 1967), pp.

17-18. this on colonists has been de scribed in this way: "The estab lishment of the boundary line of 1763 blocked at once the plans of land companies such as the Ohio Company of Virginia which had a grant west of the line, and the schemes of new companies which planned to take up land in the Ohio and Mississippi valleys. The whole region on which men had fastened such high hopes was now reserved to the despised Indians."4 These restrictions were particu larly galling in view of the fact that taxes were shortly to be levied on the colonists to help pay for their defense. The "Parson's Cause" Another symptomatic event oc curred in 1763. It is known as the "Parson's Cause." It was a symp tom both of the potential for re sistance to British impositions and of the limits to that resistance at this time. The "Parson's Cause" was a court case arising out of the payment of the Angli can clergy in Virginia. A Virginia Act of 1748 provided that each such clergyman should have an annual salary of sixteen thousand pounds of tobacco. Confronted with a crop failure in 1758, the Virginia legislature authorized 4 Merrill Jensen, The Founding of a Nation (New York: Oxford University Press, 1968), PP. 58-59.

1972 THE FIRST AMERICAN CRISIS: 1763-1766 117 that all debts and taxes payable in tobacco could be paid at the rate of two pence per pound of tobacco, a rate of about one-third the price that tobacco was bring ing. The Privy Council in England disallowed the law, and some cler gymen sued for damages. The most famous suit was brought by the Reverend James Maury. The court found the law invalid and remanded the case to trial before a jury to determine the amount of damages to be paid. The case attained its fame be cause of the efforts of Patrick Henry, who was one of the lawyers opposing Maury. Patrick Henry's arena was politics, and the en deavor in which he excelled was oratory. It took him a while to discover this. He was an undis tinguished student. He tried his hand twice at storekeeping, and was a failure both times. His ef forts at becoming a farmer met with a like reward. He then studied law briefly, and was ad mitted to practice at the age of 24. He rapidly acquired a sizable practice, and emerged as a popu lar political leader and a much sought after lawyer following the "Parson's Cause." His fiery ora tory in defense of colonial rights eventually earned him a special niche in history books and a unique position among American heroes.

Enter Patrick Henry According to the Reverend Mr. Maury, who was, of course, a biased witness, Patrick Henry 'harrangued .the jury for nea.r an hour" toward the close of the case known as "Parson's Cause." He argued that the Virginia Act of 1758 met all the qualifications of good law, and "that a King, by disallowing Acts of this salutary nature, from being the father of his people, degenerated into a Ty rant and forfeits all right to his subjects' obedience." Moreover, he declared that it was the duty of the clergy of an established church to support law, and not to be going into the courts to challenge it. The jury upheld Mr. Maury's claim, as it was informed by the court it must, and awarded him one pen ny's damage for his losses. British rule had been technically vindi cated, but everyone perceived that Henry had, in fact, won the case. His remarks about the king's be coming a tyrant were greeted with murmurs of "treason,"5 but nei ther judge nor jury reproved him.

Virginians were used to maneuv ers by which the will of British rulers was thwarted. There was nothing new in this. Henry's rhe toric was audacious, however, and the reward he received in public admiration suggests that senti ment was shifting away from 5 See Braeman, Ope cit., pp. 17-19.

118 THE FREEMAN February ancient loyalties toward new vi sions. Occasions for expressing these changing sentiments were not long in coming. In fact, a change in ministries in Britain had oc curred before some of the above events which set the stage for pro vocative action. In April of 1763, George Grenville became Chancel lor of the Exchequer and formed around him a new government. Grenville should have been able to deal with Britain's financial problems, if anyone could, for he had long experience in finance. He had served earlier as a lord of the treasury and as treasurer of the navy. Moreover, "Grenville's chief concern was revenue and economy; they were his passion, which he pursued relentlessly .... He could not endure the sight of red ink, an unbalanced budget, or waste and extravagance .... "6 King George found him to be a bore with his interminable talk of money, but Grenville was the man given the task of doing something, and do something he did from 1763 to 1765.

George Grenville's ministry was responsible for two major Jines of action on the American colonies. One was the tightening of admin istration and enforcement of the 6 John C. Miller, Origins of the Ameri can Revolution (Boston: Little, Brown and Co., 1943), p. 83. laws. The other was the passage of laws which were aimed at rais ing revenue from the colonies. An apparently casual action by Par liament in 1763 set the stage for much that followed. In March of that year funds were voted for maintaining a standing army in America. This was handled with out much ado, since there was already an army in America in connection with the war. Gren ville had a more direct hand in stationing naval vessels in Amer ica. He was First Lord of the Admiralty, and had much to do with getting the la.w passed which effected this. "The law gave naval officers power to act as customs officials.... By the autumn of 1763, naval vessels were cruising in American waters from New foundland to the West Indies, with their officers and crews on the alert for the profits to be gained from the capture and successful prosecution of illegal traders."7 A profound change was occurring between Britain and her colonies; the decision to have military force available was a prelude to in creased exercise of authority by Britain. This change could be made with little fanfare because it did not differ on the surface from what had just been done during the French and Indian War.

1 Jensen, Ope cit., p. 45.

1972 THE FIRST AMERICAN CRISIS: 1763-1766 119 That Grenville meant business should have been clear from his orders to customs officials in 1763. Appointments to major customs posts in the colonies had long been sinecures for Englishmen. Quite often they drew their pay while continuing to reside in Britain. Grenville decreed that henceforth they must reside in America. Many who held such positions re signed rather than to go to Iive in the colonies, and new officers were appointed in their stead. Grenville took the lead in get ting much new legislation for the colonies in 1764. The key· piece of legislation is the one usually re ferred to as the Sugar Act, though it dealt with a great deal more than sugar. The act lowered the duties on molasses coming into the colonies, prohibited the importa tion of rum, added items to the enumerated lists, and provided strenuous regulations on shipping for its enforcement. The greatest departure from precedent in it was that it was designed to raise rev enue. The preamble reads, in part: "Whereas it is expedient that new provisions and regulations should be established for improving the revenue of this kingdom ... : and whereas it is just and necessary, that a revenue be raised, in your Majesty's said dominions in Amer ica, for defraying the expences of defending, protecting, and securing the same; we ... have resolved to give and grant unto your Majes ty the several rates and duties herein after mentioned."8 Regulations on Shipping Even more galling to many peo ple involved may have been the onerous regulations on shipping from the British West Indies. Cap tains of vessels had to haveaffi davits, certificates, definitive list ings of goods, and had to post bond. Moreover, the burden of proof that he had in every way complied with the law was placed on the shipper in order to reclaim a vessel after it had been seized by the authorities. The Act read, in part: "... if any ship or goods shall be seized for any cause of forfeiture, and any dispute shall arise whether the customs and du ties for such goods have been paid, or the same have been lawfully imported or exported, or concern ing the growth, product, or manu facture, of such goods ... , the proof thereof shall lie upon the owner or claimer .... "9 In addi tion, the act provided mandatory decisions for juries, partially, at least, taking discretion from them.

"The result of these provisions was to free· customs officers from virtually all responsibility for their actions.· . . . Small wonder 8 Greene, op. cit., p. 19. 9 Ibid., p. 24.

120 THE FREEMAN February that the Americans fought back."lo The Currency Act of 1764 was yet another attempt of the British government to impose its author ity. This act forbade the colonies south of New England to make any further issues of paper money which would be legal tender in any sense. They were now to be at the mercy of a money situation which was artificially tipped in favor of Britain. The colonists had hardly had time to take in the implications of the Sugar Act when Parliament passed the Stamp Act. It was passed in March of 1765. The Stamp Act required that after N0 vember 1, 1765, stamps be used on all legal papers, commercial pa pers, liquor licenses, land instru ments, indentures, cards, dice, pamphlets, newspapers, advertise ments,. almanacs, academic de grees, and appointments to office. The money collected from the sale of stamps was to go to the British treasury to be used for expenses inc.urred in America. This act was the most clear-cut departure from tradition yet made by the British government, for it placed a direct tax on the Americans, something that had not been done before.

It was followed in very short or der by an indirect taxing measure, an act known as the Quartering Act, passed in May of 1765. The 10 Jensen, OPt cit., p. 51. act provided for the quartering of troops in the facilities of colonial governments, in alehouses and inns, and in ~noccupied dwellings. So far, so good, but the act also provided that "all such officers and soldiers, so put and placed in such barracks ... be furnished and sup plied there by the persons to be authorized or appointed for that purpose . . . with fire, candles, vinegar, and salt, bedding, uten sils for dressing their victuals . . . without paying any thing for the same. That the respective prov inces shall pay unto such person or persons all such sum or sums of money so by them paid .... "11 In short, the colonies were to be indirectly taxed for the maintain ing of troops in quarters; they might levy such taxes themselves, but they were to be. compelled to do so.

However, the fat was already in the fire well before news of the Quartering Act had reached Amer ica. Resistance was mounting in America even before the Stamp Act was passed. Some were alarmed by the revenue aims of the Sugar Act, perceiving in it a violation of the principle of taxa tion without representation. "When it was learned in Boston that the British government in tended to collect duties on foreign molasses, the merchants appointed 11 Greene, OPt cit., p. 44.

1972 THE FIRST AMERICAN CRISIS: 1763-1766 121 a corresponding committee to con solidate the opposition of the Northern merchants to the Sugar Act and to 'promote a. union and coalition' of their councils.' "12 The New York legislature denied the justice of duties placed on the trade of New Yorkers, and de clared that it was their right to be free of involuntary taxes. 13 But it was resistance to the Stamp Act that drew the colonies together in a unity of opposition. Opposition was shaping up even before the act was passed. Nor was Parliament wanting in oppo nents of the taxing idea. VVhen Charles Townshend asked: "VVill these Americans, children planted by our care, nourished up by our indulgence ... ,will they grudge to contribute their mite ... ?" He was answered in resounding terms in a speech by Sir Isaac Barre: They planted by your care? No! Your oppressions planted 'em in America. They fled from your op pression ....

They nourished by your indul gence? They grew up by your neglect of 'em. As soon as you began to care about 'em, that care was exercised in sending persons to rule over 'em.... They protected by your .arms? They have nobly taken up. arms in your defence. . . .14 12 Miller, Ope cit., p. 10l. 13 Jensen, Ope cit., pp. 94-95. 14 Ibid., pp. 63-64. This was the famous "Sons of Lib erty" speech, for Barre used the phrase in describing the Ameri cans, and it came· to be used as the basis of organizations in America. Befort the Stamp Act was passed, several colonial legislatures went on record as opposing it. All this was to no avail, the die had been cast in 1764, and Parliament pro ceeded to the enactment of a direct tax. American Sentiment Misread Not only was Parliament misin formed as to the probable recep tion of the act in America, but even colonial agents representing colonies in England had misj udged American sentiment· and determi nation. Several agents accepted commissions as stamp agents, ac tions which they were to regret.

Even the usually prudent Benja min Franklin caused friends to be appointed stamp agents and ex pressed himself of the opinion that the wise course would be to abide by the law. 15 Whether it would have been wise to do so or not, obedience was not the course followed in Amer ica. On the contrary, Americans moved from opposition to resis tance to outright defiance. Colo nial legislatures adopted resolu15 See Lawrence H. Gipson, The Coming of the Revolution (New York: Harper Torchbooks, 1962),p.83.

122 THE FREEMAN February tions against the tax. Virginia led the way under the prodding of Patrick Henry. He charged that the Stamp Act was an act of tyr anny and was reported to have de clared ': "Tarquin and Caesar had each his Brutus, Charles the First his Cromwell, and George the Third -" The Speaker of the House interrupted him to declare that he had spoken "Treason!" With only a brief pause, Henry continued: "- may profit by their example! If this be treason, make the most of it."16 Not all of Hen ry's resolutions were adopted by the House of Burgesses (though they were all published in news papers elsewhere), but, of those that were, the following gives the crux of the argument: Resolved. That the taxation of the people by themselves, or by persons chosen by themselves to represent them, who can only know what taxes the people are able to bear, or the easiest method of raising them, and must themselves be affected by every tax laid on the people, is the only security against a burthensome tax ation, and the distinguishing charac teristick of' British freedom, without which the ancient constitution cannot exist.l 1 Massachusetts sought to go be yond the action of separate reso 16 Ibid., p. 87.

17 Richard B. Morris, The American Revolution (Princeton: D. Van Nostrand, 1955), P. 90. lutions by colonial legislatures to some sort of common action. The assembly of that colony, therefore, sent out a call for a congress. It was fulfilled, at least partia.lly, by the meeting of the Stamp Act Congress in New York in October ,of 1765. Six legislatures sent dele gates, and three other colonies were represented by delegates not so formally chosen. The delegates in Congress assembled affirmed their allegiance to the king and their willing subordination to Parliament when it acted proper ly. But they resolved that there were limits to this authority, some of which they spelled out: That it is inseparably essential to the freedom of a people, and the un doubted right of Englishmen, that no taxes be imposed on them but with their own consent, given personally or by their representatives ....

That the only representatives of the people of these colonies are per sons chosen therein by themselves, and that no taxes ever have been or can be constitutionally imposed on them, but by their respective legisla tures. IS The most dramatic action, of course, was direct action. The groundwork was laid for direct action by the Committees of Cor respondence, and much of it was done by the Sons of Liberty. The first effort was to secure the res18 Ibid., p. 91.

1972 THE FIRST AMERICAN CRISIS: 1763-1766 123 ignation of stamp agents, without whom the stamps could not readily be distributed. In some colonies, stamp agents resigned when they perceived the temper of the peo ple. In others they held out for awhile, and were subject to threats, abuse, and humiliation. The case of Jared Ingersoll of Connecticut who had accepted an appointment as stamp agent while in England as colonial representative shows the lengths to which crowds went sometimes to secure a resignation. "They caught Ingersoll at Weth ersfield and silently and pointedly led him under a large tree. They parlayed for hours ... , with In gersoll squirming, arguing and re fusing to resign. The crowds ... grew so large and threatening that finally Ingersoll read his resigna tion to the mob and yielded to the demand that he throw his hat in the air and cheer for 'Liberty and Property.' "19 No Stamps Available So successful was this direct ef fort that on the day that the Stamp Act was to go in effect there were no stamps available in the mainland colonies. The ques tion became now whether business would go on as usual in defiance of the law. If the law were ob served, ships would not sail, courts would not hold sessions, newspa19 Jensen, op. cit., p. 113.

pers would not be published, and much of life would come to a standstill. Many newspapers con tinued to be published; ships sailed, and some courts carried on business. In short, the colonists operated in defiance of the law. Parliament was confronted with a crisis in America, one of its own making, when it convened in De cember of 1765. However, the king's speech opening the session acknowledged only that "matters of importance have lately occurred in some of my colonies in America. ••."20 Even so, Parliament had to take some kind of action. It had to take Draconian measures to achieve enforcement, or it had to back down. Grenville's ministry had already fallen,' and a new gov, ernment was organized under the leadership of Rockingham. With the matchless orator, William Pitt, Earl of Chatham, taking the lead in the debate for repeal, the House voted 275 to 167 for repeal on February 22, 1766. The bill was signed into law on March 18. How ever, Parliament refused to yield on the principle, for it insisted on passing the Declaratory Act, which went into effect on the same day that the Stamp Act was re pealed. 'The Declaratory Act tried to make up in unyielding language for what had, in fact, been yielded.

It declared, in part: "that the 20 Gipson, op. cit., p. 105.

124 THE FREEMAN February King's maj esty, by and with the advice and consent of the lords spiritual and temporal, and com mons of Great Britain, in parlia ment assembled, had, hath, and of right ought to have, full power and authority to make laws and statutes of sufficient force and validity to bind the colonies in all cases whatsoever."21 The theoretical issue was joined, but the crisis had passed - for the moment. This was the first American crisis. It was the first because for the first time all the colonies were drawn together in action and re sistance to Britain. Heretofore, they had been separate, linked only by their common allegiance to Britain; now, they had been linked without that tie in common senti ment and for a common cause. Not only that, but they had seen Brit ain falter before their resolution and back down. Several other points need to be made about· this crisis. One is that it was provoked by British action.

Parliament was the innovator abandoning precedent to tax th~ colonies, extending itself to direct taxation, which hardly anyone in America would admit was its right. The colonists were defend21 Greene, Ope cit., p. 85. ing; in an important sense, they were conservative, for they were attempting to preserve the rights and privileges they had enj oyed. Another point is that the course on which Parliament was bent was potentially tyrannical. Force was being assembled in America; Parliament was moving to take colonial control of their domestic affairs from them. Thirdly, the colonists based their arguments on the rights of Englishmen and the British constitution. They were not rebelling; they were resisting what they perceived as unconsti tutional action. The colonists drew a line be yond which they said Parliament was not to go. They denounced di rect taxes imposed from without, and distinguished between inter nal and external taxation, the lat ter some theorists held to be ac ceptable. Parliamentary leaders learned from this debacle. Never again would they act so directly on America. They would now try by less direct means to accomplish their object. But the Americans had been aroused; henceforth, ev ery act of Parliament would be ex amined with great care to see if there was in it a potentiality for oppression. Such acts were not long in coming. IJ Next: British Acts become Intolerable.

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN THE STORY is told that whenever Professor Ludwig von Mises en countered a gleam of originality in a paper submitted by a student, he would urge that student to de velop the perception or insight in a systematic way. The sixty-six authors who have contributed to the two volumes of Toward Lib erty, a collection of essays offered by the Institute for Humane Stud ies ($10.00) in honor of Mises on the occasion of his ninetieth birth day, are all, in one sense or an other, grad ua tes of the Mises "praxeological" school, students of "human purposive activity" (the quotation is from Murray Roth bard). What we have here, then, is originality as sparked by the most fecund economic teacher of our times, a vast expansion of per ceptions that could not have been developed by one man alone. Yet, as surely has been the case with Mises' own seminar students, the sixty-six contributors to Toward Liberty would certainly admit that they stand on the shoulders of one man alone, which gives Mises something of the stature of an Atlas. (Need we add that his par ticular Atlas,. unlike the flawed figure in the title of Ayn Rand's novel, has never "shrugged?") The unifying thread in these two volumes is provided by a com mon devotion to the principle of peaceful voluntarism, which en ables "human action" to prolifer ate in thousands of fructifying ways that are strangled in the crib in any interventionist atmosphere.

Within the basic unity, however, the diversity of the sixty-six essays presents an insuperable ob stacle to the reviewer. Many of the essays concentrate on the dire effects of state intervention in the economic processes of relatively 125 126 THE FREEMAN February free societies. Other papers focus on the impossibility of calculation in societies that have gone most of the way to communism. A few au thors pay their specific disrespects to the late Lord Keynes. Since the contributors come from seventeen different countries, it is interest ing to observe what local condi tions have done to affect specific approaches to voluntarism. Then there are the essays which seem to depart from the Misesian line but which really do not when one considers that in the wider Mises ian market "all human values are offered for option," even the values that affect economics only by in direction. The richness of the books is evi dent in the multiplication of stray observations that defy current orthodoxies. Picking at random, we have Paul Poi rot's observa tion that the most polluted prop erties are those not clearly sub ject to private ownership - rivers, streets, parks, schools and the body politic, to mention a few.

Hans Sennholz notes an irony in Milton Friedman's efforts to get away from the orthodox gold standard - "monetary freedom," says Sennholz, "would soon give birth to a 'parallel standard'" that would permit individuals to make "gold contracts," and so we would be back on a gold standard despite Friedman's efforts to do away with something that he regards as tyranny. Results of Intervention Looking at thirty years of rent control in Sweden, Sven Rydenfelt notes that the rich seem to wind up with the most desirable hous ing, while young families have frequently to wait for years for decent space. In' Yugoslavia, ac cording to Lj ubo ~irc, the attempt to superimpose an "as if" com petitive system on State enterprise can't get off the ground because the founding of new enterprises remains in the hands of political bodies. The English contributors , to TOlward Liberty struggle to find scope for free choice in an ad vanced welfare state. Ralph Harris sees some hope in the movement toward "selectivity in welfare,"

but he laments that right-wing paternalists gang up with left wing traditionalists to prevent a significantly large return to "pri vate welfare suppliers" in insur ance, medicine and education. Writing about the struggle of Latin American countries to achieve "take-off," Ulysses R. Dent of Guatemala remarks on the strange irony that the foreign aid ponied up by taxpayers in the capitalistic U.S.A. has provided the funds for socialistic takeovers.

1972 TOWARD LIBERTY 127 , Thus we export what we profess to hate. A Mexican contributor, Alberto Salceda, speculates that it was "Essene" corruption of Bibli cal texts that has made Jesus seem anticapitalist. In the non-Essene parts of the gospels Jesus fre quently endorsed the· Command ment that says "Thou shalt not covet," which means that he was no supporter of the envy that is at the root of modern efforts to spread "social justice" by force. The topic of GNP - gross na tional product - begets a sapient observation from Giuseppe Ugo Papi of Italy that a preoccupation with macroeconomics keeps us from seeing that augmentations of the GNP st~rt from below, in the potential of the individual. When governments try to expand the GNP by planning, they .. really lead to its diminution in real terms. An Irish contributor, George Alexander Duncan, thinks it odd that the governments of the United States, the United King dom and the French Republic have destroyed the economic basis of their Caribbean dependencies by susidizing extravagant beet sugar production at home - and then compound the idiocy by send ing "aid" to the cane-sugar coun tries to be wasted by politicos who neither toil nor spin.

Publishers and the Market Henry Regnery, the dean of our conservative publishers, obviously hopes he will not be condemned for lese maj esty when he points out that Mises' great work, Hu man AcUon, was originally pub lished by a university press that was "neither subject to the disci plines of the market nor to the restrictions that purely market considerations impose." Actually, despite Mr.· Regnery's trepidation, there was no doctrinal contradic tion involved in the fact that it was a noncommercial publisher, the Yale University Press's Eu gene Davidson, who accepted Hu man Action back in 1948 without the change of a single word. The Yale Press in Davidson's time (and maybe now, for all I know) was the recipient of support that was voluntarily donated by non governmental .benefactors, which brings it within the purview of Leonard Read's "anything that's peaceful" test. A voluntarily sub sidized university press is part of that wider market in which "all human values are offered for op tion." The voluntary subsidizers in the case of Human Action were getting what they paid for, which happened to be the circulation of a work which their chosen editor had rightly approved. So let Henry Regnery stop worrying; he has 128 THE FREEMAN February not had to make any exception from Misesian principle in writing his essay on "The Book in the Market Place."

I have merely scratched the sur face in this attempt to indicate some of the riches of the two volumed Toward Liberty. Sixty six essays are too much for one review. Fortunately they are not too much for a single reader, though he will need a command of four languages to read every word that is offered "for option" by the books' editors. ~ FIRST THINGS, LAST THINGS by Eric Hoffer (New York: Harper & Row, 1971, 132 pp., $4.95) Reviewed by Robert M. Thornton THE ICONOCLASTIC ex-longshore man is in rare form in his new book. Hoffer fits none of the con temporary pigeonholes but directs his shafts of idiocy and sham wher ever he finds them. Today's hunt ing is best on the left, and Hoffer's deadly aim picks off a number of cows held sacred by today's intel lectuals. What a pleasure to read a man who nonchalantly heaves dead cats into the stuffy sanctuaries of "liberalism." Consider his treatment of ecol ogy. The cry is "back to nature,"

but Hoffer reminds us that the great achievements of civilization have come from cities and that na ture has always been, in a sense, man's antagonist, something he must live with but also overcome or be destroyed. In Africa, for in stance, the real battle is not against colonialism but nature. Even in the great cities of our nation, he writes, the problem is still nature our inner natures which are turn ing many into primitive savages as self-discipline and outside controls are cast aside. Hoffer denies that mere expenditures of money will help the cities. The task, he writes, is to lure out the chronically poor and induce exiled suburbanites to return. One way to achieve the former is to end the welfare sys tem, and the latter will be accom plished when city governments per form their rightful functions well and relieve taxpayers of the burden of unnecessary expenditures. This is a book to stir up the mind, for despite his scorn for the pseudo-intellectual, Hoffer is the real thing, a man of ideas who has not gone "a'whoring after false gods." And he is an example of the best that America can produce in common men. Without family con nections, social position or inher ited wealth and with very little formal education, Hoffer neverthe less has been able to make his mark in the world of ideas. One hopes this won't be his last slim volume of hard thinking and clear writing.

~ the Freeman VOL. 22, NO.3-MARCH 1972 Utopia: Dream into Nightmare Alexander Winston 131 A historical review o'f utopian ventures, culminating In the twentieth-century welfare statism; prospects for a revival of freedom. . Digging Ditches A job worth doin'g is worth doing well. Robert W. Demers 140 On Appeasing Envy Henry Hazlitt 142 The very measures taken to appease envy often tend to aggravate it. The Foundingof the American Republic: 8. British Acts Become Intolerable Clarence B. Carson 147 Parliamentary pressures after 1766 lead eventually to open warfare. Who Is the Marginal Producer? W. A.Paton 160 The first to withdraw unless conditions improve is not necessarily foretold by the. firm's balance sheet. American Competitivism:Cause or Result? Ron Heiner 164 How can. we revive a competitive spirit if we reject· the condition of freedom that spawned it? Fixed Exchange Rates and MonetaryCrises Gary North 168 Price control, whether of goods and services or of money, interferes with the peaceful processes of trade.

Book Reviews:186 IICruising Speed: A Documentary" by William F. Buckley, Jr. "Libertarianism: a Political Philosophy for Tomorrow" by John Hospers liThe Regulated Consumer" by Mary Bennett Peterson Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

tile Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230 LEONARD E. READ PAUL L. POI ROT President, Foundation for Economic Education Managing Editor THE F R E E MAN 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. 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, 1972, 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; 10 for $2.50; 25 or more, 20 cents each.

Articles from this journal are abstracted and indexed in Historical Abstracts and/or America: History and Life. THE FREEMAN also Is available on microfilm, Xerox University Microfilms, Ann Arbor, Mich igan 48106. Permission granted to reprint any article from this Issue, with appropriate credit, except liOn Appeasing Envy."

UTOPIA drBaminton ALEXANDER WINSTON PLATO FATHERED the first blue print of a planned society, and his descendants still clasp us in a sticky embrace while they rifle our freedoms. His Republic mapped out a spartan state run by benevolent philosophers, de fended by a secondary caste of warriors, and supplied with the necessities of life by a mass of farmer-artisans whose only polit ical role was to obey. He did away with two obstacles to the ordered sta te : pri vate property and the family. In the Republic each citi zen performs that task for which he is fitted; the lowly toiler's ignorance is his bliss; and all parts of the body politic function together in well-oiled harmony. Thomas More's Utopia (Greek for "no-place") in 1516 gave the A former lecturer in philosophy at Tufts Col lege, Dr. Winston has written extensively in the field of history. His most recent book is No Man Knows My Grave: Privateers and Pirates, 1665-1715.

name to this whole type of litera ture. A spate of others followed: Andreae's Christianopolis (1619), Campanella's City of the Sun (1623); Bacon's New Atlantis (1627), to cite a few; then a growing flood rising from the French Revolution and spreading amidst the industrial turmoil of the nineteenth century (Edward Bellamy's Looking Backward, 1888, being the most popular); and on to our own day in such projections of the future as H.G. Wells' Modern Utopia (1905) and B.F. Skinner's Walden Two (1948). They number by the score, and their variety in detail is as great. The majority rely on rule by an aristocracy of merit, a few try to preserve a modicum of democracy; most are communistic, but one at least (Hertzka's Freelands, 1890) recognizes self-interest as basic and aims to save capitalism by restraint on overproduction. They 131 132 THE FREEMAN March may be secular or religious, agri cultural or industrial, favorable to education or distrustful of it, resolutely egalitarian or frankly hierarchical.

Common Assumptions However, certain elements of these multiform visions emerge with such frequency that they de serve our attention. The utopian pictures a static society in which careful planning solves every ma jor problem of human life .. Faith is placed in a collectivity that owns or controls all property. Competi tion for markets or jobs vanishes. Family ties diminish, and the rearing of children by the state is taken for granted. Everything is· rationally ordered by those most capable of doing so: Plato's guardians, More's king and his advisers, Bacon's Solomon's House scientists, Bellamy's indus trial council, Wells' austere samu rai, Saint-Simon's Council of Newton, Campanella's quartet of superior men, Skinner's panel of psychologists. In utopia everyone works, the women on equal terms with the men. Hours are short - four to six daily-and retirement as early as age fifty, but the wants of the people have a stoic simplicity, and all enjoy a decent living. There is little to quarrel over, the atmos phere is uniformly brotherly, crime is almost unknown and disease rare - a perfect whole of perfect parts, all supremely con tent. "U-topia," the no-place, is plainly "eu-topia" the happy place.

But how to get there? Utopians had no answer to that, and avoid ed the question. They sprang their flawless states full-armed from the ink-pot, always somewhere else - a distant island, an obscure wilderness, another planet - or· at a dim future time. The transition from a callous, exploitive society, its people already deformed by prevalent evil, to one of affection and universal sharing, struck the utopians dumb. Their residue' of hope rested in a double view of human nature. They mixed these two elements at will, for each one favored a regeneration of man's sorry existence. In one they saw man fundamentally good (but per verted by a debasing environ ment) ; in the other they saw man quite plastic, molded. to the' last detail by his surroundings. Either way, the right society would very quickly set men right. A combination of circumstances after 1800 convinced social ideal ists that the time was ripe for bringing heaven to earth. The French Revolution had produced a new crop of theorists, the long hours and short pay of .the early factory system .promised to grind down the poor, and overseas the 1972 UTOPIA: DREAM INTO NIGHTMARE 133 American republic offered a haven for all who wanted to try some thing better than mankind had ever known. "Our fathers have not seen it," said Saint-Simon; u our children will arrive there one day, and it is for us to clear the way for them."

American Experiments The result was more than 130 attempts to establish utopian so cieties in the United States during the nineteenth· century. A ferment of change filled the air, even in staid New England. "Weare an a little wild here with numerous projects, of social reform," Emer son wrote to Carlyle. "Not a read ing man but has a draft of a new community in his waistcoat pocket." Many of the settlements were European in origin as well as theory; some seeking . escape from -religious persecution, others imbued with recent secular plans for utopia; but all drawn by the cheap land of the American fron tier and the easy tolerance of the young republic that had thrown off the shackles of old Europe and considered itself the vehicle of the new age. At last the utopians had before them something very like the fabulous island of the old dreamers. In America they could found minuscule states, as self sufficient as possible, based on common ownership of property, filled with the brotherly spirit, and isolated from contamination by the outside world. "Our ulte rior aim," said young Charles Dana of Brook Farm, "is nothing less than heaven on earth."

As might be expected, some of these starry-eyed experiments were simply preposterous. At Fruitlands that "tedius archan gel" Bronson Alcott would not harness work-horses to the plow (unnatural), nor allow sugar (reaped by slaves), nor wear woolen cloth (robbed from sheep), nor spread manure on the fields (filthy stuff) ,nor burn whale-oil lamps (from slaughtered whales). Shakers led by an illiterate fac tory girI hailed as "Ann the Word" were strictly celibate, and regulated the lives of the faithful down to such details as what shoe to put on first in dressing, and which trouser-leg to step into. An irresistible little fellow in Michi gan got himself proclaimed James I of Zion by 2,000 adherents and five wives; "King Benjamin" of the House of David announced that he was the younger brother of Jesus Christ; the· final verdict in the early days of the Amana settlement rested with an oracular Werkzeug whose utterances came straight from God ; the ruler of a Florida colony taught that we all live inside the earth, our feet on its inner surface. The Lake Erie 134 THE FREEMAN March Brotherhood of the New Life gave major attention to the sisterhood, in the belief that: "Soul-life and sex-life are at one, In the Divine their pulses run."

Robert Owen and Charles Fourier Founders of other perfectionist settlements were more sincere and a bit less silly. Robert Owen, a successful English textile manu facturer, believed community of property essential to the good life, and was sure that the indi vidual is totally shaped by his environment. In 1825 he bought up the extensive holdings of a religious community that was moving from Harmony, Indiana. The 900 who flocked in at his open invitation seemed to Owen's son a "heterogeneous collection of radicals, enthusiastic devotees to principle, honest latitudinarians and lazy theorists, with a sprin kling of unprincipled sharpers thrown in." Owen's communal system gave full vent to their shabby ways. They couldn't run anything properly-flour mill, saw mill, tannery or smithy -and their only solution to problems of pro duction was to write another con stitution or make another speech.

The industrious soon tired· of sup porting the idle. From the Na shoba, Tennessee Owenite settle ment, leader Frances Wright in formed Owen that "cooperation has nigh killed us all," and de parted. Within two years every Owenite venture, fourteen in all, disintegrated. Disciples of the unsmiling Frenchman Charles Fourier set up no less than twenty-seven American experiments. Fourier based his utopian ideal less on man's malleability than on his fundamental goodness. The twelve passions, which he carefully listed and classified, would act in perfect harmony with each other and with society as a whole if given a chance. Let people gather into "phalanxes" of some 2,000 mem bers, housed communally in one huge "phalanstery" lying in a spread of 1,600 acres owned in common. Let each choose the work he wished to do. Pay the highest wage for disagreeable butneces sary labor, less for the' more: at tractive, and least for work that was downright pleasurable. Bring all goods produced to a single warehouse, where they could be purchased with work-tickets. In Fourier's ample vision all man kind would finally be gathered into three million phalanxes, coordi nated by an Omniarch in Con stantinople.

Fourier-inspired communes quickly died of dissension, inepti tude, and sheer tomfoolery. An attempt to use some Fourier prin ciples dealt the final blow to the 1972 UTOPIA: DREAM INTO NIGHTMARE 135 most charming and humane of all the utopi~n experiments, Brook Farm. The Farm was owned in shares; it intended to support it self by voluntary labor at an equal wage for all (ten cents an hour), and have plenty of time leftover for culture. Some choice souls sought refuge there: The Rev. George Ripley, founder; Nathaniel Hawthorne, who soon discovered that forking manure ten hours a day was not conducive to litera ture; George Curtis, later to edit Harper's; and Isaac Hecker, a humble German who became a priest and instituted the Paulist Fathers. Good families sent their· boys down to be prepared for Har vard at the Farm school. Into this idyllic but financially precarious community of like minds swept a voluble enthusiast for Fourier, Albert Brisbane. He convinced them that their happy anarchy wouldn't work. They must organize. Tasks were spe cialized on Fourier principles; a Sacred Legion took on the dirtier jobs; unequal wages replaced equal pay; work became compul sory; uned ucated artisans came in with their ignorant and sharp tongued wives; and before long the genial spirit that had held Brook Farm together evaporated.

Six years after its beginning in 1841 the Farm was sold to West Roxbury (Mass.) for an almshouse, thus passing, in the words of one observer, from "the highest ideal" to "the lowest actual." Two That Remain Two utopian communes have the distinction of remaining, though much altered, to the pres ent day. In 1848 John Humphrey Noyes settled fifty-one Perfection ists along Oneida Creek near Utica, New York, an area so filled with fiery religious fanatics that wits called it "the burned over district." A slab-chinned fel low with a scraggly beard and bleating voice, Noyes was never theless personally impressive, and a canny manager of people.· He quipped that too many agricul tural communes had "run aground," and set out to make Oneida industrial. The growing membership (an average of 250) canned farm produce for the mar ket, made traveling bags and a special type of steel trap, spun silk, silver-plated dinnerware, and prospered.

Noyes' word was law. He rested it on divine inspiration, and ex erted pressure so gently that no one thought him despotic. The in dividual at Oneida had no life apart from the community - prop erty in common, personal acts un der common·scrutiny, sexual shar ing on the theory that monogamy was unChristian "claiming." The 136 THE FREEMAN March women said that they belonged to God first and Noyes next, an order of precedence tha t they in fact reversed. A system of selective breeding called "stirpiculture" admitted only the most fit to parenthood. Children lived apart, rarely seen by their parents. For thirty years Oneida ad hered to the original plan. By 1880 Noyes had aged; the reli giousspirit that he had evoked flickered; the young revolted at the idea of sharing spouses and surrendering their children. The commune converted to a joint stock company in an effort to avoid collapse, but its old habits were too ingrained. In 1890 P.B.

Noyes, one of the founder's "stir piculture" sons (he sired ten) saved the community by trans forming it into a typical well-run American business. He concen trated on silverware, cut costs, emphasized teamwork, hustled, advertised, and competed. Today Oneida differs in no essential from any other enlightened man ufacturing firm. Where Oneida, chose industry, the Amana community of Iowa re mained rural, and even more per vasively religious. Eight hundred Germans of the "True Inspira tion" sect established it in 1854 on 26,000 choice acres, seven vil lages spread in a circle around the central one. Every member surrendered all his capital to the common fund (if he left, he got it back with interest) and in re turn was guaranteed his necessi ties for life. Under the rule of church elders the maxim, "obey, without reasoning, God, and through God your superiors," kept members in line. Amana supplied its own needs - weavers, cobblers, tailors, watchmakers, pharmacies, printshop - and exported only high-grade woolen cloth. As much as possible the members ignored the world around them, even hir ing outsiders to serve in the hotel lest their own girls be corrupted.

By 1900 Amana's piety had waned. Without the invigorating spur of competition the economy lagged badly. In 1932 it became' a joint-stock company intent on profit. A business manager brought in from the outside trimmed the labor force of its hired hands, closed shops that had run at a loss for years, eliminated fifty-two inefficient dining halls, sold businesses into private hands and houses to their occupants. Still quaint and quiet today, Amana is a producing and marketing co operative, without a vestige of its former communism. American experiments that went under in two years, as many did, had too large a proportion of misfits whose record outside was one of .steady failure. Intimacy 1972 UTOPIA: DREAM INTO NIGHTMARE 137 bred discord, as people living ·too close together bumped each other at every turn. The absence of competition resulted in lethargy. None of these eccentrics had any business sense; the purchase of a 300-acre tract in Pennsylvania, for example, was made in mid winter snows by an artist, a doc tor and· a cooper, and turned out to be rock-and-sand that had to be abandoned in a year. The Ruskin colony in Tennessee (1894) was ruined by an agent who took such pleasure in making a sale that he sold regularly at a loss. Occasion ally plain chicanery was too much for the innocent: the Rev. Adin Ballou lost his "miniature Chris tian republic" at Hopedale-when one of his Christians bought up enough shares to force everyone else out. Worse, the· utopians mis read human nature. "If men were angels," remark the Federalist Papers, "no government would be necessary." The utopians discov ered to their sorrow that men are not angels now, nor can be so shaped.

Displaced by the Welfare State While these sad little failures gathered dust, Americans awoke to the fact that in the welfare state of the western democracies, and more explicitly in communist Russia, utopia had already arrived on a massive scale. The results in this country stirred up a general unease. Every. step that added to the individual's security detracted from his liberty; every move toward the better life exacted its toll. The United States govern ment assumed vast new powers to tax, spend - and regulate the af fairs of its citizens. Mass produc tion and the communications media created a bland uniformity, with the flesh-and-blood bread winner converted into a Social Security number. Welfare pro grams that averted gross poverty also robbed the -individual of his initiative. Women's equality did much to skyrocket divorce. The same technological advance that increased abundance polluted the landscape. Nuclear energy was more bomb than blessing. Parents did all they could to make a heaven on earth, and their children kicked them in the stomach for the effort.

The West edged piecemeal toward the planned· society; Rus sia made it in a leap. Marx had revived the utopian dream and promised its fulfillment: abun dance of consumer goods, uni versal happiness, absolute equal ity, peace at home and abroad, government that would .hardly need to .govern - a perfect whole of perfect parts. Liberals who had been beguiled by this splendid vision shuddered at the actuality. In Russia the·government clamped 138 THE FREEMAN March an iron grip on the people and showed no inclination to let go. Everything was in short supply except armaments. The mildest critic of the regime was branded a traitor, and shipped off to Si beria. Art and science became tools of the Party; news media spewed nothing but the official line; and the calculated lie became a. habit. The planned society, dreamed of through the a.ges, turned out to be the police state. Americans who had believed in a steady march to the promised land now quailed at the prospect.

Once they had yearned for utopia.; now they asked themselves, "What can we do to prevent it?" Anti-utopian novels clanged like warning bells in the night. Eugene Zamiatin's We (1920) was among the first, and dozens followed (if we include science fiction) , no tably Aldous Huxley's Brave New World (1932), Vladimir Na bokov's Bend Sinister (1947) and George Orwell's 198J" in 1949. They draw a frightening picture of the planned society: its ruth less manipulation by the rulers of the ruled, its grey-faced homoge neity, its stifling of creative change, its reduction of man to a producing and consuming animal, its hideous distortion of truth. Once the masters of this. night mare society are in the saddle, few can escape or even want to. Human nature, in these anti utopias, is infinitely malleable; men can be taught to kiss their chains. Are we all doomed to this? There is reason to doubt it. The anti-utopian sounds a needed alarm, but he badly overplays his hand. He regards the individual as an empty sack into which any rubbish can be poured. Even the lonely rebels of anti-utopian nov els are spineless, stupid, or both.

D-503 of We can build a cosmic machine, but is otherwise a bum bling idiot; Bernard in Brave New World is a sni veling coward; Smith in 198J" is a perverter of truth by vocation and a. love':sick ninny on the side; the renowned philosopher Kruger inB end Sin ister has a backbone of rope. In anti-utopia western man has thrown away every vestige of his hard-won rights, to gain a bovine placidity. All the world is content to chew its cud. Common Sense .May Prevail Such a view undoes history. Western man has shown himself far too stubborn, restless and plain cussed for any such fate. Once the common man has had a full taste of speaking his mind, no one can shut him up for long. Once he is used to the ballot, and the exhilarating experience of throwing the rascals out, he can 1972 UTOPIA: DREAM INTO NIGHTMARE 139 be deprived of it only under the most extraordinary conditions. Once real power is firmly estab lished at the base of the political pyramid (as it never was in Rus sia or China), tyranny from the top becomes an outside chance.

This may be faith, but it is a faith worth having. A man's es sence is his hazardous freedom. It is built-in, inexpungeable. For it he has fought wars, rioted, hid den in catacombs, gone to the stake, killed kings, languished in prison, and he does not forget. Freedom disrupts old orders, and sometimes gives the impression that everything nailed down is coming loose, but as long as Americans demand it as their right, the horrors of the police state will stay beyond our borders. ~ IDEAS ON LIBERTY Umpire IN GENERAL, nothing happens except a change in the weather, unless somebody makes it happen. Under a free economic system, the man who makes things happen is called an enterpriser. With his own savings ·or savings. borrowed from others, he goes into farming, manufacturing, mining, or banking, and begins pro ducing goods or moving them around. That much is basic. Thomas Nixon Carver, the economist, said the reason many countries are backward is that there was nobody who cared to invest in them. Either the government itself was predatory, or thieves and robbers roamed unmolested. In such countries the rich keep their wealth in the form of unproductive goods - gold and jewels - which they can hide and easily transport when things get too tough.

If a nation wants production and prosperity,the persons to encourage are the enterprisers. Not only· should they be encour aged to build and produce, but they should be assured that their property and a decent part of their gains are protected against confiscation. If they lose part or all of their savings in the com petitive game, they must take the loss and shut up. Government's main job is to see that the rules are fair and are enforced. FROM The William Feather Magazine, November, 1971 DIGGING ROBERT W. DEMERS I FIRST MET Joe when I was about ten. My dad was foreman on a sewer job in our town and they were digging a long ditch for the pipe ·on the street where we lived. I was watching the men dig - no machines in those days. About mid-morning a horse-drawn vege table wagon pulled up where sev eral of the men were on the bank taking a "break." I noticed Joe because he bought a large cab. bage, cut it in half with his jack knife, and proceeded to munch on it, raw. I was watching him, wide eyed, when he smiled, cut off a slice of the cabbage, and offered it to me. I bit into it,hesitantly, and soon found that I liked it' very much. That was the first good thing I learned from Joe, the first of many things I would learn from him over a period of several years.

Joe was a short, squat man, barrel chested, short legs, and a long, powerful torso. He was al ready past 40 when I first met him, with a thick thatch of grey ing hair and a catching little ac cent in his voice. His father came Mr, Demers is a vocational . counselor in Veneta, Oregon, 140 DITCHES to this country from Italy, but Joe was born in New York City and had migrated to the mountains with his wife and family. That's when he began working for my granddad, digging ditches. Whenever I could, through the years, I would "visit" with Joe wherever he was working. He had many interesting stories to tell a young boy, and a great pride in his work. He taught me the proper way to use a round-nosed shovel, a square nosed shovel, a long-handled and a short-handled shovel. It was im;. portant tq keep the sides of the ditch perpendicular, to keep the banks clean, to throw the dirt in a certain place and a certain dis tance from the edge of the ditch.

The ditches varied in width, and the angles of the sides varied de pending upon the condition of the soil. No facet of Joe's digging was too insignificant to command his full interest and attention. He loved to talk about his job and to show others how to do the job "properly." I recall my sadness on hearing that Joe no longer dug ditches for 1972 DIGGING DITCHES 141 the city. One of his daughters, in my class at school, told me her father had gone into .business for himself, digging ditches. Before long, he was the most sought after ditch digger in town. Mechanical contrivances were now available, but there were still a hundred and one places where a ditch could only be dug by hand; there you'd find J oe.Most of the plumbers in town were "waiting in line" for Joe's skills, even holding off on certain jobs until he could dig their ditch, or their hole, or whatever digging they needed. Through the lean Depression years, Joe was one of the very, very few who found full employ ment. Somewhere Joe kept "dig ging." His pay sometimes· was a sack of beans, a chicken, or a dozen eggs, but his children, all seven of them, remained well, strong, and in school.

Few, indeed were the· people in town who didn't know Joe, who didn't know and who didn't tell everybody that he was "the best ditch digger ever," and that he also built the "best stone walls and fences," and grew the "most beautiful roses." Years later, on a fall day when the cabbages were ripe, I sought out Joe, where he was digging a ditch. along a side hill. I was on leave for a few weeks and had learned that Joe's son, one of my classmates, had died on the beaches at Normandy. As I walked up the hill, Joe greeted me with the same big smile. His hair was snowy white now, his back a little more hunched, his stance a bit more squat, but his arms were still sinewy, muscular and powerful, as he cupped one· hand over the end of the hickory handle of his be loved shovel and extended the other warmly and affectionately in my direction. We talked long in the warmth of the autumn sun. I learned that a job worth doing is a job that ought to be extremely well done. I learned something of the distance I must travel toward such a. worthy goal. Joe was sure that most of the trouble in the world stemmed from the refusal of people to exer cise to their fullest potential the talents with which they were blessed. I wish that everyone might hear the tone, the richness, the wisdom in Joe's voice as he said: "A man ought to find out, as soon as possible, what it is that he can do, then learn and study, and do it as best he can all of his life. If a man really did this he'd have no time to drift to the right or the left, or to stumble up or down because he'd' be too busy do ing well what he knew best, best for himself and for all th.ose about him; and he'd be happy and rich, both here and beyond."

ON APPEASING ANY ATTEMPT to equalize wealth or income by forced redistribution must only tend to destroy wealth and income. Historically the best the would-be equalizers have ever succeeded in doing is to equalize downward. This has even been caustically described as their in tention. "Your levellers," said Samuel Johnson in the mid eighteenth century,. "wish to level down as far as themselves; but they cannot bear levelling up to themselves." And in our own day we find even an eminent liberal like the late Mr. Justice Holmes writing: "I have no respect for the passion for equality, which seems to me merely idealizing envy."! Henry Hazlitt is well known to FREEMAN readers as author, columnist, editor, lecturer, and practitioner of freedom. This article will appear as a chapter in a forthcoming book, The Conquest of Poverty, to be published by Arlington House. 142 HENRY HAZLITT At least a handful of writers have begun to recognize explicitly the all-pervasive role played by envy or the fear of envy in life and in contemporary political thought. In 1966, Helmut Schoeck, professor of sociology at the Uni versity of Mainz, devoted. a pene trating book to the subject. 2 There can be little doubt that many egalitarians are motivated at least partly by envy, while still others are motivated, not so much by any envy of their own, as by the fear of it in others, and the wish to appease or satisfy it.

But the latter effort is bound to 1 The Correspondence of Mr. Justice Holmes and Harold J. Laski Cede M. De Wolfe Howe, 2 vol. Cambridge, Mass., 1953). From Holmes to Laski, May 12, 1927, p. 942. 2 Helmut Schoeck, Envy (English translation, Harcourt, Brace & World, 1969) .

1972 ON APPEASING ENVY 143 be futile. Almost no one is com pletely satisfied with his status in relation to his fellows. In the envi ous the thirst for social advance ment is insatiable. As soon as they have risen one rung in the social or economic ladder, their eyes are fixed upon the next. They envy those who are higher up, no matter by how little. In fact, they are more likely to envy their im mediate friends or neighbors, who are just a little bit better off, than celebrities or millionaires who are incomparably better off. The posi tion of the latter seems unattain able, but of the neighbor who has .i ust a minimal advantage they are tempted to think: "I might almost be in his place." The Urge to Deprive Others Moreover, the envious are· more likely· to be mollified by seeing others dep~ived of some advantage than by gaining it for themselves. It is not what they lack that chief ly troubles them, but what others have. The envious are not satis fied with equality; they secretly yearn for superiority and revenge.

In the French revolution of 1848, a woman coal-heaver is reported to have remarked to a richly dressed lady: "Yes, madam, every thing's going to be equal now; I shall go in silks and you'll carry coal." Envy is implacable. Concessions merely whet its appetite for more concessions. As Schoeck writes: "Man's envy is at its most intense where all are almost equal; his calls for redistribution are loud est when there is virtually nothing to redistribute."3 (We should, of course, always distinguish· that merely negative envy which begrudges others their advantage from the positive ambi tion that leads men to active emu lation, competition, and creative effort of their own.) But the accusation of envy, or even of the fear of others' envy, as the dominant moti ve for any redistribution proposal, is a seri ous one to make and a difficult if not impossible one to prove. More over, the motives for making a proposal, even if ascertainable, are irrelevant to its inherent merits.

We can, nonetheless, apply cer tain objective tests. Sometimes the motive of appeasing other peo ple's envy is openly avowed. Social ists will often talk as if some form of superbly equalized destitution were preferable to "maldistrib uted" plenty. A national income that is rapidly growing in abso lute terms for practically every one will be deplored because it is making the rich richer. An implied and sometimes avowed principle of the British Labor Party leaders 3 Ibid., p. 303.

144 THE FREEMAN March after World War II was that "No body should have what everybody can't have." Equality, Yes; Abundance, No! But the main objective test of a social proposal is not merely whether .it emphasizes equality more than abundance, but whether it goes further and attempts to promote equality at the expense of abundance. Is the proposed meas ure intended primarily to help the poor, or to penalize the rich? And would it in fact punish the rich at the cost of also hurting everyone else? This is the actual effect, as we saw earlier,4 of steeply progressive income taxes and confiscatory in heritance taxes. These a.re not only counter-productive fiscally (bringing in less revenue from the higher brackets than lower rates would have brought), but· they discourage or confiscate the capi tal accumulation and investment that would have increased national productivity and real wages. Most of the confiscated funds are then dissipated by the government in current consumption expenditures.

The long-run effect of such tax rates, of course, is to leave the working poor worse off than they would otherwise have been. There are economists who will 4 "Should We Divide the Wealth 1" in THE FREEMAN, February, 1972, p. 100. admit all this, but will answer that it is nonetheless politically neces sary to impose such near-confisca tory taxes, or to enact similar redistributive measures, in order to placate the dissatisfied and the envious - in order, even, to pre vent actual revolution. Appeasement Provokes Envy This argument is the reverse of the truth. The effect of trying to appease envy is to provoke more of it. The most popular theory of the French Revolution is that it came about because the economic con dition of the masses was becoming worse and worse, while the king and the aristocracy remained com pletely blind to it. But Tocqueville, one of the most penetrating social observers and historians of his or any time, put forward an exactly opposite explanation. Let me state it first as summarized by an emin ent French commentator in 1899: Here is the theory invented by Tocqueville .... The lighter a yoke, the more it seems insupportable; what exasperates is not the crushing burden but the impediment; what inspires. to revolt is not oppression but humiliation. The French of 1789 were incensed against the nobles be cause they were almost the equals of the nobles; it is the slight difference that can be appreciated, and what can be appreciated that counts. The 1972 ON APPEASING ENVY 145 eighteenth-century middle class was rich, in. a position to fill almost any employment, almost as powerful as the nobility. It was exasperated by this "almost" and stimulated by the proximity of its goal; impatience is always provoked by the final strides. 5 I have quoted this passage be cause I do not find the theory stated in quite this condensed form by Tocqueville himself. Yet this. is essentially the theme of his L'Ancien Regime et la Revolution, and he presented impressive fac tual documentation to support it.

As the prosperity which I have just described began to extend in France, the community nevertheless became more unsettled and uneasy; public discontent grew fierce; hatred against all established institutions increased. The nation was visibly ad vancing toward a revolution. . . . It might be said that the French found their position the more in tolerable precisely where it had be come better. Surprising as this fact is, history is full of such contradic tions. It is not always by going from bad to worse that a country falls into revolution. It happens most frequent ly that a people, which had sup ported the most crushing laws with out complaint, and apparently as if they were unfelt, throws them off with violence as· soon as the burden 5 Emile Faguet, Politicians and M oral ists of the Nineteenth Century (Boston: Little, Brown; 1928), p. 93. begins to be diminished. The state of things destroyed by a revolution is almost always somewhat better than that which immediately preceded it; and experience has shown that the most dangerous moment for a bad government is usually that when it enters upon the work of reform.

Nothing short of great political gen ius can save a sovereign who under takes to relieve his subj ects after a long period of oppression. The evils which were endured with patience so long as they were inevitable seem intolerable as soon as a hope can be entertained of escaping from them. The abuses which are removed seem to lay bare those which remain, and to render the sense of them more acute; the evil has decreased, it is true, but the perception of the evil is more keen. . . . No one any longer contended in 1780 that France was in a state of decline; there seemed, on the con trary, to be just then no bounds to her progress. Then it was that the theory of the continual and indefinite perfectibility. of man took its origin. Twenty years before nothing was to be hoped of the future: then nothing was to be feared. The imagination, grasping at this near, and unheard of felicity, caused men to overlook the advantages they already pos sessed, and hurried them forward to something new. 6 6 Alexis de Tocqueville, On the State of Society in France before the Revolu tion of 1789. (London : John Murray, 1856) pp. 321-324. Also' available as The Old Regime and. the French Revolution in a Doubleday paperback.

146 THE FREEMAN March Aggravated by Sympathy The expressions of sympathy that came from the privileged class itself only aggravated the situation: The very men who had most to fear from the fury of the people de claimed loudly in their presence on the cruel injustice under which the people had always suffered. They pointed out to each other the mon strous vices of those institutions which had weighed most heavily upon the lower orders: they em ployed all their powers of rhetoric in depicting the miseries of the com mon people and their ill-paid labor; and thus they infuriated while they endeavored to relieve them. 7 Tocqueville went on to quote at length from the mutual recrimi7 Ibid., pp. 329-330. nations of the king, the nobles, and the parliament in blaming each other for the wrongs of the people. To read them now is to get .the uncanny feeling that they are plagiarizing the rhetoric of the limousine liberals of our own day.

All this does not mean that we should refrain from taking any measure truly calculated to relieve hardship and reduce poverty. What it does mean is that we should never take governmental measures merely for the purpose of trying to assuage the envious or appease the agitators, or to buy off a revolution. Such measures, betraying weakness and a guilty conscience, only lead to more far reaching and even ruinous de mands. A government that pays social blackmail will precipitate the very consequences that it fears. ~ IDEAS ON LIBERTY The "Law of Sympathy" BUT AID and sympathy must operate in the field of private and personal relationships under the regulation of reason and con science. If men trust to the State to supply "reason and con science," they so deaden themselves that the "law of sympathy" ceases to operate anywhere. Men who shrug off their personal obligations become hard and unfeeling, and it is small wonder then that they are entirely willing to go along with hard and unfeeling politics. It is when he decides to "let the State do it" that the humanitarian ends up by condoning the use of the guillotine for the "betterment" of man.

FROM JOHN CHAMBERLAIN'S REVIEW OF SUMNER'S What Social Classes Owe to Each Other, September 1955 issue of Ideas on Liberty.

CLARENCE B. CARSON THE FOUNDING OF THE AMERICAN REPUBLIC 8 British Acts Become Intolerable THE REPEAL of the Stamp Act in early 1766 did not put an end to resistance in America. It did lower the level of the contest be tween Britain and America from its crisis proportions by removing the most conspicuous irritant. But repeal of the Stamp Act only whet ted the appetite of some Ameri cans for much more thoroughgo ing removal -of British imposi tions. As early as April the New York Sons of Liberty were de manding that "Americans should also insist on the removal of all restrictions on trade, the abolition of post offices and admiralty courts, and they should do so 'while the colonies are unanimous.' "1 After all, most of the parliamen tary acts against which the colo nists objected were still on the books, and executive action re mained unaltered. Troops were still stationed in America, and na val ships of war were stationed along the coast. The Sugar Act was still in effect. New York mer chants sent a petition to Parlia ment in 1766 complaining bitterly about the effects of trade restric tions upon their commerce. Re1 Merrill Jensen, The Founding of a Nation (New York: Oxford University Press, 1968), p. 186.

Dr. Carson lives. in Florida. He is a noted lecturer and author, his latest book entitled ThrottlinA the Railroads. 147 148 THE FREEMAN March straints upon imports and exports of sugar were particularly galling, and their· trade was hurt badly by limitations on how wood products could be sold.2 The Quartering Act still placed requirements on the colonies involved which some of them refused to comply with. The Currency Act restricted the issu ance of paper money both upon colonies which had responsibly re..; tired theirs in the past as well as those which had not. And there was the Declaratory Act with its strident claims about the unlimited powers of Parliament. The'Strategy of Resistance The colonists employed a va riety of tactics in their resistance to British impositions during the decade or so after 1763: some le gal, some extralegal, and others illegal. These tactics ranged from resolutions of legislatures, to peti tions to the government in Eng land, to unauthorized conventions and congresses, to boycotts, to demonstrations, all the way to rioting and the intimidation of of ficials by mobs. The use of some of these latter tactics in recent years has been justified on the grounds that they were employed by our venerated forebears - an excuse whose merits would be dependent upon analogous conditions. It may be of some use to examine the con2 Ibid., pp. 207-08.

ditions of the resort to violence by some Americans of that earlier time, both for the light it will shed on their situation as well as what it may tell us about the appropri ateness of this justification for contemporary violence. By such an examination, too, the issues be tween the colonists and the British can be sorted out. What tactics are appropriate is surely dependent on the options .available. To understand what op tions were available to the colo nists, one needs to review the po litical situation. The colonists did not fully con trol their governments. Far from it, in most cases. Usually, the gov ernor was appointed from England (the charter colonies of Connecti cut and Rhode Island were excep tions) , and he quite often received instructions from officials there. No more did the colonists ordi narily choose the members of the governor's council. The assembly was popularly elected, but its ac tions could be severely circum scribed. It met on call from the gov ernor, could have its acts vetoed by him, and was subject to being dismissed or dissolved by the ex ecutive. There were even efforts to control assemblies from England.

For· example, the New York legis lature was suspended for its fail ure to provide supplies for the troops under the Quartering Act.

1972 BRITISH ACTS BECOME INTOLERABLE 149 Therefore, legislatures were great ly hampered when it came to pre venting impositions on the colon ies. No direct action was open to them ordinarily because. of the power of governor and council to negate such action. Nor was there any established m.eans for intercolonial action; none had ever been set up, and the British were not about to allow any to be legally established dur ing the decade under considera tion. At best, only extralegal means were available for concerted action across the lines of colonies. The means for legal action by the colonists were limited then, not, as is the case usually, the means for some minority to express itself, but for the colonies as a people. This distinction is quite germane both for the justifications of revo lution which would be offered in the 1770's and for such justifica tion as there could be for illegal action prior to the revolt.

A Balance of Powers Now the elected legislatures had gained considerable power during the colonial period, as was shown in an earlier chapter. That power derived mainly from their author ity to originate taxes and appro priations. Governors even depend ed upon the elected legislature for their salaries in most colonies, and all actions requiring moneys awaited legislative action. Gov ernors and other crown officials were dependent upon or subject to the local populace in other ways as well. The force that had ordinarily been at their disposal before the period· under discussion had to be exercised by militia and other lo cal persons. Crown officials had to act through courts whose judges might be appointed by governors but whose most basic decisions were made by juries; and they could, themselves, be brought be fore the courts for mistreating colonists. In short, a precarious balance of powers had grown up over the years in most colonies. Colonial legislatures were counterbalanced by governors and councils, and the governor's power was limited by the necessity of his relying upon elected legislatures. Action depend ed upon a considerable measure of cooperation among the branch es of government. If they would not act together, many kinds of action could not be taken.

Massive resentment was aroused in the 1760's, then, when Parlia ment moved to alter these arrange ments: by taxing colonists, by making appropriations, by· sending standing armies, by setting up ad miralty courts without juries, and so on. The thrust of parliamentary action was to eviscerate the inde pendence of elected legislatures.

150 THE FREEMAN March The Quartering Act points this up, for the act required that colonies appropria te supplies for troops within the colony. If a legislature had to act in this fashion, it was hardly independent of Parliament. If Parliament could tax the colo nists, it could appropriate moneys to free officials within the colonies from dependence on the legisla tures. The fear of this was no phantom, for Parliament wasmov ing in this direction on governor's salaries. Of course, taxation by Parliament raised another basic issue. The Connecticut legislature put the matter in this fashion in 1765: That, in the opinion of this House, an act for raising money by duties or taxes differs from other acts of legislation, in that it is always con sidered as a free gift of the people made by their legal and elected rep,resentatives; and that we cannot conceive that the people of Great Britain, or their representatives, have right to dispose of our prop erty.3 In fact, Parliament was moving to unbalance the powers within colonies and make the colonies sub ject to itself. The colonists raised the question from the outset whether Parliament had the au3 Quoted in Edmund S. Morgan, "Co lonial Ideas of Parliamentary Power,: The Reinterpretation of the American Revolution, Jack P. Greene, ed. (New York: Harper and Row, 1968), p.166.

thority to do this. This question, in turn, led to an even more basic one: What was the extent of par liamentary authority over Amer ica? This was a question for which no definitive answers had ever been given. As Richard Bland of Virginia said in 1766: "It is in vain to search into the civil con stitution of England for directions in fixing the proper connection be tween the colonies and the mother kingdom .... The planting colonies from Britain is but of recent date, and nothing relative to such plan tation can be collected from the ancient laws of the kingdom .... " He argued that "As then we can receive no light from the laws of the kingdom, or from ancient his tory to direct us in our enquiry, we must have recourse to the law of nature, and those rights of man kind which flow from it."4 Others sought to base the argument, how ever, on charter rights. Colonial spokesmen generally maintained that Parliament could proper ly regulate relations among the parts of the empire and with other nations. They accepted the sovereignty of the British govern ment over them and did not ques tion - during the early years that Parliament played a role in changes in the actions of the sov4 Jack P. Greene, ed., Colonies to Na tion (New York: McGraw-Hill, 1967), pp. 88-89.

1972 BRITISH ACTS BECOME INTOLERABLE 151 ereign. Beyond these general func tions, Parliament should not go. The position of Parliament re garding its powers over the colo nies was set forth in the Declara tory Act: it could legislate for the colonies in all matters whatsoever. Who was right? The answer to that question depends on what is right. The majority in both houses of Parliament never proposed to consider the question. They did not doubt that they had the authority to take what actions they would (Where were the limits upon them?), and they did not appear to .doubt that when called upon they would have the necessary power to enforce their acts. It was not a matter of what was right (a minority in Parliament disagreed about this), it was only a matter of what was expedient. The colonial opposition, from the beginning, did tackle the ques tion from the angle of what was right. They believed that Parlia ment, by right, was limited in what it could do. They believed that the original charters, the British constitution, and, in the final analysis, the laws of nature, set bounds to the authority of Parliament. The colonists should be adjudged to have been right, then. Since Parliament chose to act on the grounds of expediency, it is only fair that they should be judged, in part, on those grounds.

It turned out not to have been an expedient course, for by it the American empire, except for Canada, was lost. Since Parlia ment did not choose to stand on right, the colonist's position as to right can be accepted without dif ficulty, because it was not con tested. 5 In any case, Parliament and the colonies were on a collision course each time they acted fro~ their opposite premises. Parliament might, and did, find it expedient to back down on particular issues, though not on the general princi ple. The colonists, on the other hand, since they did not suppose themselves to be acting from ex pediency, did not back down. Once Parliament no longer found it ex pedient to back down, the die was cast. The Townshend Acts Parliament plunged ahead with new legislation aimed at the colo nies in 1767. The leader in formu lating this legislation was Charles Townshend, and it became known 5 This does not mean that colonists were right in everything they did in op position to British action, nor that others at some later time would be justi fied in imitating their every action, even if they found themselves in analogous conditions. The rightness of a cause does does not absolve people from moral and just behavior. That a cause is just is reason for working for its triumph, not for the engaging in wrongful acts.

152 THE FREEMAN March as the Townshend Acts. For a while after the repeal of the Stamp Act, things began to look better for the colonies. William Pitt formed a cabinet, and he had been quite outspoken on the side of the colonies during the debates over the Stamp Act. In fact, Pitt was far and away the most popu lar Englishman in America at this time, though truth to tell he had little competition. But Pitt was made the Earl of Chatham, moved into the House of Lords, and was debilitated by illness. The legisla tive leadership passed to Charles Townshend, chancellor of the ex chequer, in 1767. Taxes and Intervention The act which has drawn the most attention was the one levy ing import duties on glass, lead, painter's colors, paper, and tea. During the debates over the stamp tax the distinction between inter nal and external was talked about considerably. Some got the impres sion that Americans accepted ex ternal taxes, but not internal ones.

Operating from this premise, Townshend argued that Ameri cans should accept these new du ties, since they were levied on im ports and would be considered external taxes. The act indicated that it was for the purpose of raising a revenue, that such mon eys as were raised would go first to defray costs of governing in America, that what was left would go to the British treasury, and that the. duties must be paid in silver. It also authorized the use of writs of assistance to be used in searching for goods on which duties had not been. paid and specifically empowered "his Maj esty's customs to enter and go into any house, warehouse, shop, cellar, or other place, in the British colo nies or plantations in America, to search for and seize prohibited or uncustomed goods" with writs which courts in America were di rected to issue. Another act, passed at the same time, was the American Board of Customs Act. This established a board of customs for America, to be composed of five commissioners, and to be located at Boston. A little later in the year, an act was passed suspending the New York legislature for not providing troop supplies. In a similar vein, an act in September of 1767 curtailed the power of colonial elected legis latures. Finally, an act passed in July of 1768 extended and spelled out the jurisdictions of vice-ad miralty courts in the colonies and increased the number of courts in America from one to four.

Resistance to the Townshend duties, as to the other British ac tions, was preceded or accom panied by theoretical formulations, 1972 BRITISH ACTS BECOME INTOLERABLE 153 formulations which held that Brit ish action was in violation of im memorial rights. These theoretical formulations frequently appeared first as' a series of anonymous let ters in newspapers and then as pamphlets, though the order might be reversed. America had quite a number of men ready to enter the lists with such writings at criti cal junctures. James Otis, Samuel Adams, Daniel Dulany, and Rich ard Bland provided some of the early grist for the mills of opposi tion. John'Dickinson's "Letters" The man who came forward to do duty against the Townshend Acts was John Dickinson, a Mary lander born, who was sometimes from Pennsylvania but most regu larly from Delaware. He belongs in tha t select circle of men en titled to. be called Founding Fath ers. From 1767 to 1775 he was the theoretician of colonia.l resistance.

Though he opposed declaring in dependence, he headed the commit tee which produced the Articles of Confederation. He served in the army for a time during the War for Independence and was a dele gate to the constitutional. conven tion from Delaware, though leader ship in such matters was now in other hands. Dickinson's position on the Townshend duties was published as a series of letters published 'weekly in the Pennsylvania Chronicle and Universal Adver tiser beginning November 30, 1767. These collected letters were called Letters from a Farmer in Pennsylvania. New England news papers began publishing them in December, and before it was over all colonial neswpapers except four published them. They were pub lished as a pamphlet in 1768, went through seven American editions, one in Dublin, two in London, and 3. French translation. 6 A historian sums up their impact in this way: "Immediately, everyone took Dick inson's argument into account: Americans in assemblies, town meetings, and mass meetings adopted resolutions of thanks; British ministers wrung their hands; all the British press com mented, and a portion of it ap plauded; Irish malcontents read avidly; even the dilettantes of Paris salons discussed the Penn sylvania farmer."7 For one thing, the tone of the Letters was right .. Dickinson not only claimed a formal loyalty to the king and the empire but actually cast. his argument in terms of the well being of the empire. Though the natural law philosophy. under6 See Jensen, op. cit., pp.241-42.

1 Forrest McDonald, intro., Empire and Nation (Englewood Cliffs: Prentice Hall, 1962), p. xiii.

154 THE FREEMAN March lay much of what he wrote, he did not· emphasize natural laws and natural rights so as to distinguish them in a divisive manner from the rights of Britons under the Constitution, as some writers had rushed to do prematurely. His ap peal was to tradition, precedent, prudence, self-interest, the desire of liberty, and continuity with the past. And though he bade Ameri cans to resist the Townshend du ties, he proposed that they do so in an orderly fashion. First, they should send petitions; if these did not get results, turn to something like a boycott of goods; only when all peaceful means had failed, should other approaches be con sidered. But he pled with Ameri cans not to give in to a spirit. of riotousness. "The cause of liberty is a cause of too much dignity to be sullied by turbulence and tu mult. It ought to be maintained in a manner suitable to her nature.

Those who engage in it, should breathe a sedate, yet fervent spirit, animating them to actions of prudence, justice, modesty, bravery, humanity and magna nimity."8 The Argument Against Taxes The great appeal of his work stemmed, of course, from the fact that he shredded the argument for the Townshend duties, showed it 8 Ibid., p. 17. to be grounded in sophistry - no better than the case for the Stamp Act, only more subtle - and found the duties violative of the rights of British subjects and potentially confiscatory. As for these duties being acceptable because they were external taxes, he thought the case hardly worth considering. The objection to taxation by Par liament did not hinge upon the distinction between internal and external; it was to taxation as such. Americans accepted, he pointed out, as they had accepted, duties that were for the purpose of regulating trade, but not those levied for the raising of revenue.

·The latter were clearly taxes, and they involved the taking of prop erty without the consent of the owners. True, incidental revenues might arise from the regulation of trade, but they were a conse quence, not the cause of it. No such case could be made for the Townshend duties; they were laid on items which must be obtained from England. Certainly, it was not the aim of the British to in hibit trade in them nor to re strain it. In fact, it was simply a tax, for the colonists were not permitted to obtain the goods else where, and might, if the British chose, be prohibited from manu facturing them. There was ample precedent for this. Property was no longer· secure, 1972 BRITISH ACTS BECOME INTOLERABLE 155 Dickinson said, if the principle of parlia.mentary taxation of the col onies be· once accepted. "If the parliament have a right to lay a duty of Four Shillings and Eight pence on a hundred weight of glass, or a. ream of paper, they have a right to lay a duty of any other sum on either .... If they have any right to tax us - then, whether our own money shall con tinue in our own pockets or not, depends no longer on us, but on them. 'There is nothing which' we 'can call our own; or, to use the words of Mr. Locke - WHAT PROP ERTY HAVE' WE 'IN THAT, WHICH ANOTHER MAY, BY RIGHT, TAKE, WHEN HE PLEASES, TO HIMSELF?'''9 Massachusetts' Circular Letter Colonial elected legislatures be gan to act in 1768. Massachusetts took the lead in February by drawing up a Circular Letter which it sent around to the other colonies. This letter was subse quently endorsed by New Hamp shire, Virginia, Maryland, Connec ticut, Rhode Island, Georgia, and South Carolina, sometimes by as semblies~ and, if they were not sitting, by the Speaker. 10 The British reply came from the Earl of Hillsborough in April; it was 9 Ibid., pp. 43-44.

10 See Lawrence H. Gipson, The Com ing of the American Revolution (New York: Harper Torchbooks, 1962), pp. 185-87. sent as a. circular letter to the governors of all the colonies. He had already written to Governor Bernard of Massachusetts that at the next session of the House of Representatives he "must 're quire' " them "to rescind the Circular Letter and declare" their "'disapprobation of and dissent to that rash and hasty proceed ing.'''l1 To the other governors, he declared that his expectation was that their assemblies would not participate in this new effort to arouse resentment to British rule. "But if notwithstanding these expectations and your most earnest endeavors, there should appear in the Assembly of your Province a disposition to receive or give any Countenance 'to this Seditious Paper [the Massachu setts Circular Letter], it will be your duty to prevent any proceed ing upon it, by an immediate Prorogation or Dissolution .... "12 In June, Hillsborough ordered troops to Boston.

Non-Importation Agreement It was obvious from these and other instances - the harassment of shippers by customs agents, the increasing of military forces in the colonies, the rej ection of petitions - that petitions and res olutions alone would not produce 11 Jensen, Ope cit., p~ 253. 12 Greene, Colonies to Nation, p. 143. , 156 THE FREEMAN March a change in British policy. The colonists, then, moved toward at tempting to hit Britain where it would hurt - in trade. Boston took the lead in adopting a non-im portation agreement in August of 1768. What they proposed to do, among other things, was to cease almost all imports from Britain. The movement to do this spread through the colonies, though it was rough going. Understandably, importers and shippers were not overly enthusiastic about this, especially those for whom this was a major source of income. More over, it needed to be a concerted effort throughout the colonies. If it were not, ports which· remained open could put the efforts of the others to nought. Colonists did succeed in closing down the major port cities in America to most British imports in the course of 1769. The best weapon against ports which did not cooperate was to cut off commercial relations with them. ~ This usually brought them into line.

Though non-importation was far from absolute, it did succeed. Imports from Great Britain into the colonies fell from £2,157,218 in 1768 to £ 1,336,122 in 1769.13 Some ports did much better than this average. For example, Phil13 Richard B. Morris, ed., Encyclopedia of American History (New York: Har per, 1953), p. 78. adelphia's imports from Britain dropped from £432,000 in 1768 to £ 200,000 in 1769 to £ 135,000 in 1770.14 More importantly, since the object of non-importation was not simply to reduce imports from Britain, the British began to back down once again in the face of determined colonial opposition. In 1769, Parliament moderated its position on the Quartering Act to allow colonies to supply troops on their own initiative. Reduced Tensions under Lord North More success for the colonies was to follow with the coming of a new ministry. Lord North be came, in effect, Prime Minister in early 1770, a position which he was to hold until 1782. During these years he served George III as best he could, doing his will during a time when a man of lesser loyalty and fortitude would have sought a less demanding job.

Re served his king first by acting to reduce tensions in America. In April, the Townshend duties were repealed, except for the tax on tea. Some concessions were also made in the application of the Currency Act. I t was not long before the non importation agreements began to be abandoned. There was consider able sentiment for continuing them - after all, the tax on tea 14 Jensen, op. cit., p. 357.

1972 BRITISH ACTS .BECOME INTOLERABLE 157 had not been repealed, nor had other sources of tension been re moved - but many of the mer chants had had ~nough of such self-denial. By various maneuvers, they opened up the ports to Brit ish goods once again. This course was the more attractive generally because the hasty efforts at in creasing domestie manufactures to replace British imports had produced few tangibl~ results. Calm Before Storm The colonies were comparatively calm during 1771. Although there had been clashes between British troops and colonists at New York and Boston (the latter leading to the "Boston Massacre") in 1770, these did not expand into any general conflict. Such as remained of the British threat to the colo nies was difficult to dramatize; there can hardly be said to be a trend toward oppression if the op pressive measures are being re duced. At any rate, no major fig ure ventured forth to attempt any dramatization. Even though tea continued to be taxed, the amount of tea imported into the colonies from England increased from the low point for the past several years of 110,000 pounds in 1770 to 362,000 pounds in 1771.15 15 See Donald B. Cole, Handbook of American History (New York: Harcourt, Brace and World, 1968), p. 51.

It was, however, the calm before the storm, the clouds for which began to gather in 1772. The first of these was the burning of the revenue ship, the Gaspee, by Rhode Islanders in June. The Gaspee had been harassing ship ping coming into Rhode Island for some time; the captain was particularly obnoxious in his treatment of those on ships stopped for searches. The Gaspee ran aground, and while she was in that disabled condition, a party boarded her, drove the crew off and burned the ship. An investi gating committee turned up no useful information but its appoint ment from England stirred resent ment. A little later in the year, the British Exchequer took over the payment of the salaries of the governor and judges in Massachu setts. Here the move that had been long feared: to remove crown of ficials from reliance on the elected legislature. In November, Boston formed a committee of correspon dence which sent statements to other towns in Massachusetts and to all colonial assemblies. Early the next year, the House of Bur gesses in Virginia established a committee of correspondence, and most· other colonies followed suit.

Tea Act 01 May, 1773 What stirred the colonists to open resistance once again, how158 THE FREEMAN March ever, was the Tea Act in May of 1773. The purported intent of this act was to rescue the East India Company. That company was in dire straits, on the verge of bank ruptcy, and sorely in need of a market for its tea. Though im ports had picked up in the Amer ican market, it is generally be lieved that most of the tea con sumed in America came from the Dutch; by buying such tea the the colonists unlawfully evaded the tax on it. The Tea Act was devised to make tea from the East India Company almost irresisti ble. It enabled that company to sell tea directly in America, re lieving it of the necessity of sell ing it first at auction to merchants in England. "By eliminating the middleman . . . the company was able to sell tea in the colonies cheaper than in England," even though it was still taxed in the col onies. "More significantly, its tea now undersold that of the Dutch smugglers."16 A Monopoly, plus Taxes The British were about to suc ceed in doing what John Dickin son indica ted to be the danger.

They were going to establish a monopoly for a taxed item, some thing which could not be compet16 John C. Miller, Origins of the Amer ican Revolution (Boston: Little, Brown and Co., 1943), p. 339. itively produced in America, but was very popular. It is likely that had Parliament contented itself with establishing a monopoly it might have got away with it. But the fact that tea was taxed entan gled the monopoly question with taxation-without-representation. The objections which had been raised before had now a fresh exemplar; but now Americans were to be seduced into compli ance by a lower price. It did not happen. True, the East India. Company caused chests of tea to be loaded on many ships for America, and these put into port at Boston, Philadelphia, New York, and Charleston. The colon ists were ready for them; they would not buy or consume the tea, nor would they allow it to be landed if they could help it. The most dramatic opposition occurred at Boston, where Bostonians dressed as Indians boarded the ships and heaved the chests into the water. Patriots prevented tea from being landed in Philadelphia.

It was landed and transferred to the customs house at Charleston; there it stayed until war came. The Intolerable Ads This time Parliament did not back down when confronted by colonial resistance. The majority determined, instead, on a policy of coercion, a policy backed by four 1972 BRITISH ACTS BECOME INTOLERABLE 159 acts passed between March 31st and June 2nd of 1774. They are known formally as the Coercive Acts. The force was to be con centrated on Boston and Massa chusetts. The Boston Port Act closed the port of Boston to com mercial shipping until such time as the East India Company had been compensated for the tea. The Massachusetts Government Act provided that the governor's coun cil would be appointed by the king, not elected as had been the case, that the governor and king would appoint judges, that juries would be chosen by the sheriff, and that town meetings could not be held without the consent of the gover nor, except for annual election meetings. The Administration of Justice Act was of general effect and provided for the trying of certain officials from the colonies in England, if the governor thought it necessary. The Quar tering Act applied generally to the colonies, also; it authorized the quartering of troops in occupied· dwellings.

The colonists dubbed them the Intolerable Acts. (I Next: The Prelude to Independence. A Policeman's Lot IDEAS ON LIBERTY A GOVERNMENT'S proper function in a free society· is to act as a policeman, not as a regulator over people's actions Ot" choices. The more regulations or restrictions, the more corruption. Why? Because we have reached a time when honest business men must get the right to produce or engage in a business from men who do not produce. A dozen permits are needed by busi nessmen before they can engage in activity which is their right. More often than not, they must grease the palm of every para site issuing these permits or suffer deliberate and disastrous delays. In addition the city has the "right" to take away these permits, in the event some asinine regulation is not complied with. JACK MORANO, A MEMBER OF THE TACTICAL PATROL FORCE OF NEW YORK CITY, FROM A LETTER TO The Wall Street Journal, December 28, 1960.

Whois the MARC! LR ODUCER? w. A. PATON CONCEPTIONS of the marginal en tity ranging from the fuzzy to the downright indefensible are frequently encountered in current discussions of business manage ment and finance and pe:t;haps this justifies some comments aimed at clarification and sharper defini tion. Marginal firm Defined In making use of the term "marginal" in this connection there is a need, to begin with, to have clearly in view the quality or characteristics we are looking for when .attempting to define the marginal enterprise. In this search our concern, presumably, is with the price-making process, and we are focusing attention on Dr. W. A. Paton is Professor Emeritus of Ac counting and of Economics at the University of Michigan. This article is adapted from one section of a paper prepared for the "Mises 90th Birthday Collection," copyright by The Insti tute for Human~ Studies.

160 the business firm that occupies the crucial position in this proc ess, for a special field or market area, at a particular point or period in time. The· definition I consider ap propriate may be stated as fol lows: The marg·inal producer is the one who is just barely induced to remain in operation by the exist ing state of affairs and who is so situated with respect to volume of output that his dropping out will exert sufficient pressure on the array of price-itnftuencing forces, throug h the supply side of the market, as to bring about a rec ognizable change in product price. This was the description of the marginal man or firm, as I recall it, stressed by my revered mentor, Fred Manville Taylor, when I was in his graduate courses sixty years ago. A slightly different version that is acceptable is: The 1972 WHO IS THE MARGINAL PRODUCER? 161 marginal producer is the·.one who will be the first to withdraw un less conditions improve.

The Break-Even Approach The most common conception of the marginal producer nowadays, so it seems, is that of the entity that is precisely at the break even, zero-earnings stage. The textbooks in the courses in man agement and other subjects in the schools of business administration are full of charts which identify the break-even position as of crit ical importance. I am one of those who are getting very tired of this preoccupation with break-even "analysis." In my judgment no convincing case has ever been made for the view that the zero earning level is a decisively sig nificant spot in connection with business decision-making. And when the "analysis" includes the designation, of the firm at the break-even point as "marginal" those who know anything about either economic theory or actual business operation can feel their hackles rising. The notion that the marginal position is occupied by the break even producer finds no solid sup port in business experience.· Even firms operating at .a loss often hang on for years. This is par ticularly true in the case of the small or medium-sized firms with ownership and control residing in a family or small local group, but the condi tion is not unknown among relatively large enter prises. As long as revenues cover current expenditures, including attractive salaries for executives, immediate management has a strong urge to continue opera tions, even if the outlook is un promising to the point of being downright gloomy. This accounts for the phenomenon of corpora tions that are worth more dead than alive. Examples. are not rare of substantial concerns whose shares have been quoted for months or even years at less than net liquidation value (that is, at less than could be realized if the entity disposed of all assets for what they would bring, paid all liabilities, and distributed the bal ance to shareholders).

In some. of these cases the an nouncement, finally, that the di rectors had decided on a, program of liquidation has caused a sharp advance in the price of the stock. I recall one example, a mining company, with shares listed on a major exchange, where the market price of .the stock - which had been hovering under $2 per share for some time - promptly moved up to $16 when the plan to go out of business was formally decided upon at a board meeting. The low price preceding the announcement 162 THE FREEMAN March was of course based on the as sumption - by those trading in the company's shares - that the management would continue to fritter away the liquid resources in unprofitable operation and ex ploration. (By these observations I am not intending to deny that there have been many cases where tenacity in the face of a poor showirig over a considerable time has finally paid off.) It may be safely concluded that in a given situation neither the firm at the zero-earning point nor the concern suffering persistent losses is necessarily the vulner able, marginal entity, the enter prise just barely hanging on, and that will be the first to drop out if conditions become less favor able. And it may also be concluded that even the most badly situated firm, the one at the very bottom of the stairway of earning power (or that shows the greatest level of loss) need not be in the mar ginal position in the sense defined above. (Of course, the term might be used to designate the worst-off enterprise - and some seem to employ it for this purpose.) Profit Maker May Be Marginal Indeed the marginal producer, soundly defined, may be an enter prise that has an established ea.rn ing power. Assume, for example, a producer operating in a highrisk field for some time has been achieving an earning rate· of 4 per cent on the stockholder capital employed (computed in terms of the current value of resources less liabilities). Assume, further, that a 10 per cent annual return is regarded as the necessary lure for risk capital in this field, as evidenced by the data of the in vestment market. With these con ditions the management may well decide to curtail production - or stop operations altogether as soon as practicable - and thus step into the marginal-entity role. Remem ber, it's the producer just on the verge of dropping out, and whose decision will have an effect on product price, who may be re garded as marginal.

In practice, it must be con ceded, the identification of the marginal producer in a given in dustry and time period may be difficult if not impossible. This is especially true when we think of such producers as poised on the brink of withdrawal, but not yet having taken decisive action. The difficulty in the way of spe cific identification, however, is no warrant for adoption of sloppy or unsound concepts and definitions. A good guess would be that sel dom does reaching the precise position of a zero level of earn ings signal or trigger a cease production decision.

1972 WHO IS THE MARGINAL PRODUCER? 163 The Cost of Capital-Furnishing In conclusion I wish to return to the fashionable break-even charts and discussions for a mo ment to register an objection somewhat outside the question of the definition of the marginal firm. From the standpoint of good market-economy theory the basic difficulty with an this rubbish lies in an improper conception of what it means to "break even." If cap'i tal-furnishing is a primary, essen tial factor in the productive proc ess - and that this is the case has been brilliantly demonstrated by economists over and over again it shouldn't be ignored in the com:putation of total cost in the broad sense of price-influencing cost. And if, in a given situation, this cost is omitted from the reckon ing, and revenues just match the recognized costs, the producer is not truly breaking even. Instead, he is operating at a loss (even if this is not the way the account ants look at it). Here is a crucial point in the case for the free market economy as opposed to so cialism, and certainly those who strongly prefer control by the market to authoritarian directives (including "freezes") shouldn't use concepts and terms that play into the enemy's hands. t) IDEAS ON LIBERTY How to Attract Capital THERE IS NO REAL SHORTAGE of capital in the world, and I do not know of any major project which has been held up solely because of the lack of money. Capital is plentiful wherever it is "wanted and well treated." The real bottleneck in the development of the world is the shortage of human capital: people with the skill, training, and education intelligently to employ the world's resources.

The facts are that when political freedom and free enterprise spread, markets increase, and that the expansion of markets is only prevented through political motivation. The interest of American business in the expansion of a free enterprise system around the world as part of a free political system is based not only upon moral considerations, but on the hard fact that there is no market for consumer goods among slaves. WALTER B. WRISTON RON HEINER FROM TIME IMMEMORIAL, thinkers and philosophers have attributed to that which has been called the "character" or "spirit" of the peo ple all of those noteworthy accom.;,; plishments achieved by various civilizations. Rome was the prod uct of a great spirit of discipline and a genius of organizational ability; the European Renaissance was the product of a rebirth of energy and creativity; and the American rise to world eminence was due to the unheralded rugged competitive spirit of its people.

The preeminence of this view is seen by its implicit reflection in most ethnic jokes (Le., the impli cation· being in certain jokes that the Polish are stupid, the Italians are lazy, the Germans are mili taristic' and so on) . Mr. Heiner is a third-year undergraduate in economics at the University of Washington. 164 Concomitant with this view is the belief that if order and civili zation are on the decline, if "times are bad," what is needed is a re commitment, a rededication, a re newed spirit of sacrifice on the part of the citizens and then all will be well again. In the last two centuries, how ever, a select group of thinkers has fundamentally challenged the correctness of these views con cerning civilization and social life. Beginning most recognizably with the writings of Adam Smith, The Wealth of Nations, there emerged an essentially new discipline later to be called economics, and with it sprang a different view of human civilization which was to revolu tionize subsequent thought. Two paragraphs from the opening pages of Ludwig von Mises' Hu man Action serve as a striking 1972 AMERICAN COMPETITIVISM: CAUSE OR RESULT? 165 introduction to this view and its significance: "Other philosophers . . . looked at human things from the view point of government. They were intent on establishing rules of political action, a technique, as it were, of· government and state manship. Speculative minds drew ambitious plans for a thorough reform and reconstruction of so ciety. The more modest were satis fied with a collection and systema tization of the data of historical experience. But all were fully con vinced that there was in the course of social events no such regularity and invariance of phenomena as had already been found in the op eration of human reasoning and in the sequence of natural phe nomena. They did not search for the· laws of social cooperation be cause they thought that man could organize society as he pleased. If social conditions did not fulfill the wishes of the reformers, if their utopias proved unrealizable, the fault was seen in the moral failure of man. Social problems were con sidered ethical problems. What was needed in order to construct the ideal society, they thought, were good princes and virtuous citizens. With righteous ·men any utopia might be realized.

"The discovery of the inescapa ble interdependence of market phenomena overthrew this opinion. Bewildered, .people had to face a new view of society. They learned with· stupefaction that there is an other aspect from which human action might .be viewed than that of good and bad, of fair and un fair, of just and unjust. In the course of social events there pre vails a regularity of phenomena to which man must adjust his ac tions if he wishes to succeed. It is futile to approach social facts with the attitude of a censor who approves or disapproves from the point of view of quite arbitrary standards and subjective judg ments of value. One must study the laws of human action and so cial cooperation as the physicist studies the laws of nature. Human action and social cooperation seen as the object of a science of given relations, no longer as a norma tive discipline of things that ought to be - this was a revolution of tremendous consequences for knowledge and philosophy as well as for social action."l In other words,· the belief in the sole primacy of ethics in social matters was fundamentally chal lenged: society. could not be or ganized according to any set of ethical norms; and further, there prevailed certain inescapable ef fects of. various social structures which could not be nullified re1 Ludwig von Mises, Human Action (3rd ed., Chicago. Regnery, 1966), p. 2.

166 THE FREEMAN March gardless of the sincerity and dili gence of those individuals attempt ing to reform the social system in terms of various desired ethical qualities (such as equality in all aspects of social life). Indeed, the view now developed that many of these qualities (viz., character, spirit, dedication, and so forth of the people) could more correctly be regarded as effects or results of certain patterns of social col laboration, rather than the cause of the specific social structure and the achievements of the people therein. Ethics Plus Organization Thus, one of the significant revelations derived through the development of economics is that the necessary conditions for the progression and "flowering" of a civilization include not only a sys tem of workable ethical values but also the appropriate system of BO cial organization, and that neither is sufficient without the other.

Moreover, if there prevails a set of ethical norms, the practice of which precludes the development of an appropriate system of social organization (for example, beliefs which consider merchants and lenders of money who demand in terest as people engaged in activi ties of low moral character), there can be no general advancement for that civilization; or, if the appIication of a set of political and economic doctrines also precludes the establishment and continuance of an appropriate system of social organization, then appeals and ef forts to revitalize the dedication and moral spirits of the populace cannot succeed in bringing about advancement (or preventing down fall) for that civilization. It could be argued, therefore, that the oft-cited American "com petitive spirit" and "rugged in dividualism" are consequences of that system of social collaboration characterized by the unhampered market economy, and that this competitive drive could not have developed without this system of social collaboration.

Very much related to the above discussion is a remarkable and significant series of events in re cent months most dramatically represented by the current "wage price freeze." In one of the state ments made by President Nixon shortly after the initiation of the "freeze," it was emphasized that, in the long run, what is needed to revitalize America (in addition to wage-price controls) is a rededica tion by Americans to that spirit of competitivism which made Amer ica great. In light of the preceding devel opment, however, this plea for a recommitment of the American "rugged individualist spirit" is 1972 AMERICAN COMPETITIVISM : CAUSE OR RESULT? 167 seen to be completely illusory. In fact, what has been done is to implement the most drastic form of restriction (general scale price controls) on that· system of social organization (viz., the un hampered market economy) which is the cause or necessary co-con dition which permitted the emer gence of the very spirit of com petitive individualism which the President deems as necessary for America's continued greatness.

This means that the President has embarked on a policy which, if continued and enlarged, will eliminate what is left of this com petitive spirit and render its re emergence impossible. Compounding Error All of this testifies to the words of Ludwig von Mises in the clos ing pages of Human Action 2 : "the study of economics is almost outlawed today. The public discus sion of economic problems ignores almost entirely all. that has been said by economists in the last two hundred years. Prices, wage rates, interest rates, and profits are dealt with as if their determination were not subject to any law. Gov ernments try to decree and to en force maximum commodity prices 2 Ibid., pp. 879-880. and minimum wage rates. States men exhort businessmen to cut down profits, to lower prices, and to raise wage rates as if these matters were dependent on the laudable intentions of individuals." In order to attain any end, ap propriate means must be used in order to effect the true causes of that which is sought. The ironic .aspect of the solely ethical inter pretation of economic affairs is that it fundamentally miscon ceives the operation of the social system in such a manner as to sup press and obscure the real work ings and true causes of the prob lems it seeks to remedy. In so do ing, the measures which are thus implemented themselves become causes of systematic distortions in the economic system; which are then interpreted as proof of the necessity for even more drastic extensions of those original poli cies - thus compounding and mul tiplying the distortions in a self justifying cycle.

All of these. considerations would be academic but for the reality that these measures and their. e~~ tensions adversely affect millions of lives in an essentially irrepara ble fashion, the ill effects possibly enduring for centuries. t) ;LUDWIG VON l\USES of ~bney and Credit, P. 249 Mr. North is a member of the staff of the Foundation for Economic Education. ntity of ato . An un Sta~ interven tenq~r. All th~t GARY NORTH PEOPLE ADVOCA?r~'''''''"id~ntical eco-intelinational monetary nomic policies for V~;Y"''di~tfe!~,,~~ transac Ions l~oUld set the prices reasons. The recent interest, bot'h"',Q{",various/ currencies, include practical and theoretical, in the ~'~Ii'et~,l:,!~Y~ - who would have subject of international monetary each goverhment manage its own exchange rates is a point in ques-nation's money supply - as well as tion. Advocates of flexible' ex-those who believe in a full gold change rates, in which a free mar-coin standard to preclude govern ment control. Opponents of flexi ble international exchange rates, 168 1972 FIXED EXCHANGE RATES AND MONETARY CRISES 169 on the other hand, include not only the creators of the Bretton Woods agreement that established the In ternational Monetary Fund but also a number of conservative economists.! How is it possible that the camps could be. divided in this fashion?

To answer this, one has to ex amine the contexts. Ludwig von Mises, for instance, believes in total freedom in the monetary sphere: the government should be limited to the enforcement of con tracts, whatever the exchange medium might be in any particular contractual ,obligation. Milton Friedman also wants to see all citizens free to own gold and to make contracts in gold, but he thinks the central bank should guarantee a constant increase in the supply of money each year. Mises would reject such a proposal as inflationary, unless the legal tender provision of Federal Re serve Notes were abolished and people were thereby free to avoid doing business in fiat money. But neither man wants to see any in fringement on the right of men and women on either side of the border or ocean to make bargains with each other, even if those bargains involve the exchange of national monetary units, present or future.

The Keynesians, who would pre fer Friedman's views on monetary management to Mises' full gold coin standard, find themselves working together with conserva tive economists who support agold standard and are anti-inflationary in perspective. Both the Keyne sians and these conservatives favor the esbiblishment of govern ment-enforced limits on the range' of prices that can legally exist be tween one currency unit and any other. Unfortunately, no economist seems to be able to agree with any of his colleagues as to the precise acceptable range of price flexibil ity orthe legal mechanism used to enforce such a range; this indi cates the nature of the problem. Year after year, the publications of the International Finance Sec tion of the Department of Eco nomics of Princeton Uni versi ty pour out Essa,ysin International Finance. We read of crawling pegs and running pegs, of parities and currency swaps, of paper gold and international trust. What does it all mean? .80 far, no one has even been able to define a Eurodollar, let alone explain how it works; or if someone can, no colleague agrees with him. 2 No Faith in Freedom The Keynesian economist simply does not trust the free market's unhampered price mechanism to clear itself of supplies of scarce economic resources. Thus, we need 170 THE FREEMAN March fiscal policY,fine tuning of the econ omy, econometric models, data gathering on .a massive scale, and controls over the money supply.

Especially controls over the money supply. Naturally, certain flaws appear from time to time: a $1.5 billion predicted surplus for fiscal 1970 became a $23.3 billion deficit, but what's a few billion dollars among friends? We owe it to our selves, right? A private firm, un~ less it has a cost-plus government contract, would not long survive in terms of such a woefully in efficient economic model, but what do businessmen know about eco nomics, a faithful econometrician may ask? If reality does not con form to the model, scrap reality, by law. So reality is scrapped, and the Keynesian finds it necessary to abandon one more area of market freedom, namely the freedom· of private, voluntary international exchanges of money at prices es tablished by the market. Such a voluntary system of international exchange would reduce the pre dictability of the government's econometric model. That would al low a "bleeder" in the overall con trol device. That would allow men to measure the extent of the depre ciation of their own and other's domestic currencies, thus calling attention to the policies of infla tion and confiscation being enforced by their governments and other governments. As for the United States, floating exchange rates on a free international mar ket for currencies would end, over night, the exported inflation of our continual budgetary deficits. 3 That is why government bureaucrats do not generally approve of float ing exchange rates.

Flexible Exchange Rates: A Counsel of Despair? This does not explain why various conservative economists also oppose the extension of the market into the realm of international monetary exchange. The late William Roepke called the idea "a counsel of de spair ."4 His argument against flex ible exchange rates: "Without stability of exchange rates any in ternational monetary system would be flawed at an important point, be cause it would lack a major condi tion of international economic in tegration." This sounds plausible enough, until one reads his next sentence: "Just how important this condition is will be seen if we reflect that national economic in tegration (among the separate re gions of one country) is unimag inable with fluctuating rates of exchange between, say, regional currencies."5 The government's answer to this "unimaginable" process of regional currencies is to establish a central monopoly of 1972 FIXED EXCHANGE RATES AND MONETARY CRISES 171 money creation coupled with a legal tender law. And this is pre cisely the goal of international so cialist planners: a single world bank with a legal tender law to en force its control over the entire face of the earth. 6 The planners want a "rational" world economy, but their faith is in bureaucratic rationalization - a bureaucratic' hierarchical chain of economic command - and not the rational ization that is provided by a vol untary free market and its so phisticated computer, the free market price mechanism. 7 As yet, they have not achieved such "ra tionalization" simply because all the nations want their own domes tic, inflationary, autonomous "ra tionalizations." Fixed exchange rates are as close as they can come to centralized world planning, so they tried it, by means of the In ternational Monetary Fund, from 1947 until August 15, 1971. On December 19 they returned to the familiar policy of fixed exchange rates. Four months of international monetary freedom were all they could take.

Let the State Control Itsel', Some Conservatives Argue Why do conservative economists lend support to fixed exchange rates? Because they think that this is a form of statist interven tion into the world market which can impose restraints on the state's own policies of domestic· inflation. The state, the argument goes, will control itself by law. To some ex tent, this may be true, tempora.r ily. The fear of an international run on the dollar may have re strained the Federal Reserve Sys tern's expansion of the domestic money supply from December, 1968 through the spring of 1970. Officials may have feared the ac tion of foreign central bankers in demanding gold at the promised price fixed by 1934 law of $35 per ounce. But this slowing in the money supply created an inevitable reaction: the stock market fell by one third, and the government could no longer finance its debt through sales of bonds to individ uals or private corporations.

Therefore, the Federal Reserve stepped in once again to purchase the available government· bonds at the preferred low interest rate. A new wave of inflation began in the spring of 1970. The pressures on the American gold stock rose once again, and the President finally escaped on August 15, 1971 - or hoped that he had. He cut the dollar's official tie to gold in inter national payments and left it free to float on' the international mar kets. Of course, this act was a vio lation of International Monetary Fund rules, to which the United States is a party (or was). As 172 THE FREEMAN March Lenin said, treaties are made to be broken. For a time, fixed exchange rates seem to restrain policies of domes tic monetary inflation. But for how long? Franz Pick's report lists de valuations every year, and there are a lot of them. They are inter national violations of contract violations that call into question the whole structure of interna tional trade. The honoring of con tracts is the very foundation of free exchange. Apart from this, economic prediction becomes ex ceedingly difficult and productivity suffers. Thus writes Alfred Mala bre: International currency exchanges can transpire in various ways. One is through a system where Currency A can indefinitely be exchanged at a fixed rate for Currency B. This is the system that allegedly prevailed through most of the post-World War II era and to which most Western leaders now wish to return. Ideally, it's a magnificent system, because. it promises to eliminate uncertainty from international financial dealings.

The widget maker knows, when he gets an order from abroad, that the money he will receive will be worth as much to him in the future as at present. In practice, however, fixed-rate ar rangements provide anything but certainty. Between 1944, when the present fixed-rate system was con ceived at Bretton Woods, N.H., and mid-August [1971], when the system finally collapsed, 45 countries changed the international rates for their cur rencies. In some instances, changes were repeated many times, so that in all 74 currency-rate changes oc curred. 8 The problem with such devalua tions, as Mises has shown, is that they create incentives for retalia tory devaluations on the part of other governments. "At the end of this competition is the complete destruction of all nations' mone tary systems."9 If there were no fixed exchange rates in the first place, there would be no need for these governmentally imposed eco nomic discontinuities.

International Stability, a Myth The myth of international mone tary stability is just that, a myth. Stability can only be approached, like economic equilibrium, and then only by the free price mech anism. Exchange rates cannot be fixed without increasing the pres sures for the radical discontinui ties of revaluation and devalua tion. That is why the IMF rules allowed for a 1 per cent band, up ward or downward, of flexibility in exchange rates. That is why rules imposed since December 19 allow a currency a plus or minus 2.25 per cent band. But fiat ex change rates cannot supply, stabil1972 FIXED EXCHANGE RATES AND MONETARY CRISES 173 ity in a world of fiat currencies; they can only mask the extent of mutual inflation through an illu sion, the illusion of fiat stability. And inevitably, the illusion will be broken, sooner or later, as on August 15. Fixed exchange rates create an enormous temptation among men whose professional careers are, in a planned economy, dependent upon deception. Fixed exchange rates, themselves a practical ab surdity in a world of fiat currency, create a premium on lying. When Sir Stafford Cripps promised that the pound would not be devalued throughout the first nine months of 1949, he led the people to be lieve that no devaluation was go ing to take place. And yet it did on September 18, 1949. John Con nally had to admit his own part in a similar deception in his August 16 press conference. What else could we do, he pleaded. What else indeed? Once you start the big lie - that exchange rates can be fixed by law without serious economic consequences - you just cannot stop.

Polylogism! Any economist, of whatever school of thought, can tell you why bimetallism failed in the late nine teenth century. The legal parity between gold and silver,. unless changed continually, could not match the· true conditions of the forces of supply and demand be tween the two metals. Thus, one or the other precious metal was al ways in short supply at the fixed price..The attempt to enforce such a fixed ratio led to monetary dis equilibrium - Gresham's Law - in which the artificially overvalued currency drove the artificially un dervalued currency out of circula,;. tion and into either hoards or for eign countries. Thus it is with every attempt of government at any kind of price control. Thus it is with fixed exchange rates. Ask the economist who has just demonstrated to his own satisfac tion that bimetallism is impossi ble, since the state cannot success fully set a fixed exchange rate be tween gold money and silver money, to extend his analysis to dollars and pounds or francs· and marks. Then watch him squirm.

Logic, when applied to the case of gold and silver, somehow becomes inoperable when applied to dollars and pounds. Mises has an expres sion for this: polylogism. It is his most contemptuous expression. Mises, of course, subsumes ex change rate fixing under the gen eral theory of exchange, thus fol lowing the logic of bimetallism through to the logic of the impos sibility of permanent fixed ex change rates in international monetary transactions. 10 174 THE FREEMAN March Professor Mises long ago had demonstrated the utter bankruptcy theoretically of fixed exchange rates and their tendency to lead to national bankruptcy in practice. He did so in his 1912 classic, The Theory of Money and Credit, and in Human Action. The general theory of monetary exchange starts from a premise: For the exchange-ratio between two or more kinds of money, whether they are employed side by side in the same country (the Parallel Standard) or constitute what is popularly called foreign money and domestic money, it is the exchange-ratio between in dividual economic goods and the in dividual kinds of money that is decisive. The different kinds of money are exchanged in a ratio correspond ing to the exchange-ratios existing between each of them and the other economic goods. l1 In other words, if 1 ounce of gold is exchanged for 10 pounds of an other commodity and 1 ounce of silver is exchanged for 1 pound of that same commodity, then the exchange-ratio of gold to silver should be 1 :10. Fifty years later, Mises was still saying the same thing: The final prices of the various com modities, as expressed in each of the two or several kinds of money, are in proportion to each other. The final exchange ratio between the various kinds of money reflects their purchasing power with regard to the com modities. If any discrepancy appears, opportunity for profitable transac tions presents itself and the endeav ors of businessmen eager to take advantage of this opportunity tend to make it disappear again. The pur chasing-power parity theory of for eign exchange is merely the applica tion of the general theorems concern ing the determination of prices to the special case of the-. coexistence of various kinds of money.l2 That last sentence is crucial. Ex change rate theory is simply a subordinate application of the more general theory of price.

Mises continues: Let us consider again the practi cally very important instance of an inflation in one country only. The increase in the quantity of do mestic credit money or fiat money affects at first only the prices of some commodities and services. The prices of the other commodities remain for some time still at their previous stand. The exchange ratio between the domestic currency and the foreign currencies is determined on the bourse, a market organized and man aged according to the pattern and the commercial customs of the stock ex change. The dealers on this special market are quicker than the rest of the people in anticipating future changes. Consequently the price structure of the market for foreign exchange reflects the new money re lation sooner than the prices of many 1972 FIXED EXCHANGE RATES AND MONETARY CRISES 175 commodities and services. As soon as the domestic inflation begins to affect the prices of some commodities, at any rate long before it has exhausted all its effects upon the greater part of the prices of commodities and serv ices, the price of foreign exchange tends to rise to the point correspond ing to the final state of domestic prices and wage rates.

This fact has been entirely misin terpreted. People failed to realize that the rise in foreign exchange rates merely anticipates the movement of domestic commodity prices. They ex plained the boom in foreign exchange as an outcome of an unfavorable bal ance of payments. The demand for foreign exchange, they maintained, has been increased by a deterioration of the balance of trade or of other items of the balance' of payments, or simply by sinister machinations on the part of unpatriotic speculators. 13 The Speculator's Role The speculators perform a cru cial set of services, contrary to popular opinion. They help bal ance the supply of and demand for future moneys. In doing so, they help to reduce the zone of uncer tainty about the future. Second, they also alert citizens of any given country to the monetary policies of their own central bank. If the policies of monetary expan sion are being pursued by the cen tral bank, the speculators will re veal this fact, ~aily, to anyone wishing to consult a financial news paper. The citizen receives infor mation from an impartial source concerning the latest opinions of skilled, competitive and domestic monetary experts concerning the stability or lack of stability of his own country's money. Because of this, the freedom of the interna tional monetary speculator is as crucial to the defense of free in stitutions as one might imagine.

Hamper his activities, and you have taken a sinister step away from freedom. .The bureaucrats know this: What those; governments who com plain about a scarcity of foreign ex change have in mind is, however, something different. It is the unavoid able outcome of their policy of price fixing. It means that at the price arbitrarily fixed by the government demand exceeds supply. If the gov ernment, having by means of inflation reduced the purchasing power of the domestic monetary unit against gold, foreign exchange, and commodities and services, abstains from any at tempt at controlling foreign exchange rates, there cannot be any question of a scarcity in the sense in which the government uses this term. He who is ready to pay the market price would be in a position to buy as much foreign exchange as he wants. But the government is resolved not to tolerate any rise in foreign ex change rates (in terms of the in flated domestic currency). Relying 176 THE FREEMAN March upon its magistrates and constables, it prohibits any dealings in foreign exchange on terms different from the ordained maximum price. 14 Radical economic discontinuities are difficult to predict-far harder than economic countinuities. The steady movement of international exchange transactions in terms of an unhampered free market is basic to economic continuity. Im pose fiat exchange rates, and you create the "stability plus devalu ations" program which the Bret ton Woods agreement imposed on the world. You create the "hot money" effect, as currency specu lators are forced to anticipate rad ical jumps in the fiat exchange rates, thereby encouraging them to transfer billions of dollars or marks or pounds or francs from one country to another, trying to beat the imposition of September 18ths or August 15ths. 15 It is a huge game of musical chairs, ex cept that people's lives - econom ically, politically, and physically are at stake. In the 1949 edition of Hu,man Action, Mises wrote, con cerning "hot money": "All this refers to European conditions.

American conditions differ only technically, but not economically. However, the hot-money problem is not an American problem, as there is, under the present state 'of affairs, no country which a capitalist could deem a safer refuge than the United States."16 It is a testimony to the monetary infla tion of the past twenty years in this country that Mises saw fit to drop that footnote from the 1963 and 1966 editions of his book. Instability? Wouldn't the establishment of a totally free market for interna tional monetary transactions add elements of instability into inter national economic affairs? Em pha tic ally no ! What it would do is to present a highly accurate reflec tion of the economically irrational policies of fiat money creation that are being pursued with a venge ance by almost every government on earth. It would serve as an eco nomic mirror which would answer truthfully the question, "Mirror, mirror on the wall, who has the most honest currency of them all ?" Daily, the international mon ey mirror would answer the truth and it would also give its guess as to the answer at any point in the future concerning any given cur rency. Like the wicked witch of Snow White, domestic magicians of fiat money resent that inescap;,.

able answer. So they buy them selves a new mirror - fixed ex change rates. Unfortunately, these fiat mirrors break periodically, causing great confusion, conster nation, and windfall profits and losses to speculators. And, need we 1972 FIXED EXCHANGE RATES AND MONETARY CRISES 177 be reminded, everyone involved in foreign trade - prospective buyers of Volkswagens and Hong Kong toys included - is an international speculator. Instability is the charge that is always made against the market by statist interventionists. Marx and Engels leveled precisely this criticism of the theory of capi talistic economics. Capitalitstic distribution, they argued, is an archistic. 17 Such a view of capi talist processes stems from a fundamental misconception: sup posedly, there are no laws of eco nomics regulating the voluntary exchanges· which take place in the free market, and therefore fiat state rules must be imposed on the "disorder" of market affairs. Ev erywhere these critics look, the free market tends toward insta bility - an instability defined as anything deviating from thatmod el which a central planning board would impose on the economy.

"Pass a law! Make it stable!" Not quite. "Pass a law! Make it rigid! Watch it break!" That's it ex actly; the breaks, in international monetary affairs, are caned deval uations and revaluations. They happen all the time. The Subsidy to Business If .you do not impose fixed ex change rates, we are told by vari ous conservative economists as well. as by neo-Keynesians, you will see the destruction of inter national trade. Businessmen ap parently cannot afford to bear. the terrible uncertainties associated with forward currency specula tion. How do we know this? Be cause businessmen, who have be come used to international price controls on money - fixed ex change rates - and who have learned how to make profits under such interventionist measures, constantly tell us so. Like the farmer who wants his subsidy (fixed parity prices guaranteed to him by the state for his goods), like the domestic producers of steel who want tariff subsidies, like. the airlines that want price floors for their .flights (whether interna tional or domestic), like the labor union leader who wants compul sory bargaining legislation, the foreign trade entrepreneur wants his contract guaranteed by fixed exchange rates. He just cannot bear the uncertainties of future prediction, in spite of the fact that all entrepreneurial profit is a re sidualaccruing to· successful pre dictors. 1s Instead, the state is sup posed to bear the uncertainties of prediction. The state is supposed to worry about· the rate of ex change of its currency with any other currency, at any time. The bureaucrat in a state office is sup posed to take the responsibility 178 THE FREEMAN March that at a particular point in the future the currencies of the world will trade at certain fixed parities.

Let the violent intervention of the state compel men on both sides of any border to accept each other's currencies at a legal rate, and you have turned the economic affairs associated with international trade over to the bureaucrats. The en trepreneurs, by allowing state of ficials to bear the responsibility for certain aspects of interna tional trade, thereby.give to the state a great power over their businesses. Thus, citizens in every country lose their personal free dom to that extent. Why is it that private entrepre neurs involved in international trade want the government to take over the responsibility for organ izing the terms of the monetary exchanges which govern the oper ation of their businesses? This is a familiar tale. It is the old re spected argument of the vast ma jority of people: let my suppliers c0Ill:pete, keep my competitors out of the market. Let others bear the burden of predicting the future.

Subsidize me. I'm the important one. And governments do it. They take profits away from one group - international currency specula tors - and guarantee the price of foreign exchange - almost. Unless there is a devaluation, of course. And then it is every man for himself and any port in a storm. (The port is usually Switzerland.) Counting the Costs of Intervention A key rule was' laid down by Jesus to his disciples: count the cost (Luke 14 :27-30). He was speaking of spiritual matters, but as he so often did, he explained them in terms of familiar eco nomic affairs. That principle has been the economic foundation of Western civilization, and especially of capitalism. It is, specifically, the inability of socialist economies to count the costs of anything that constitutes the most patent eco nomic failure of socialism. 19 It is the genius of the free market that it allows voluntary, flexible pric ing of scarce economic resources.

Apart from this free pricing mechanism, there can be no free market economy, by definition, and no economic calculation. When a state inflates itsmonop olistically controlled domestic cur rency - which it could not do if it did not hold the monopoly - it creates many problems for the economy. It makes forecasting more difficult. This leads to the demand for more controls over the economy - to mitigate the effects produced by the very policies of monetary inflation. These controls are an attempt by bureaucrats to disguise these effects. The effects are called rising prices. The con1972 FIXED EXCHANGE RATES AND MONETARY CRISES 179 troIs are called price and wage controls. On August 15, 1971, the Presi dent of the United States an nounced the unmitigated failure of the IMF agreements of 1944. The gold-exchange standard no longer operated, as it had for 25 years, to shield this country from the effects of its own· policies of monetary inflation. So it was scrapped. Bretton Woods is dead, Arthur Okun announced a few hours later. Conservative econo mists - a few of them at least had been saying that since 1945.

The President announced that the cure for this unparalleled economic failure of international finance would be the complete abandon ment of fixed exchange rates in ternationally. International price controls over the free exchange of money, we were told, were clearly leading to economic disaster. In deed, that was exactly where such controls were leading, as all inter ference with prices will invariably lead. Domestically, however, volun tary pricing had led to another disaster: higher prices. The Pres ident failed to mention that Fed eral deficits financed through Fed eral Reserve fiat money creation had caused prices to rise. So to "cure" domestic economic affairs, the President imposed price and wage controls. There is a peculiar sort of irony here. In order to cure an international economic disaster which had been caused by price controls, the President allowed the dollar to float. In order to cure the domestic economic disaster, the President imposed domestic price controls.

Controls in internationa.l mone tary affairs are specifically de signed by bureaucrats to hide the effects of policies of domestic mon etary inflation. Similarly, controls on domestic prices are designed to hide the effects of those same poli cies of domestic monetary infla tion. If the purpose of controls is to hide effects rather than to re move causes, then they involve the use of fraud. What the advocates of a free market should desire is that the price system be left completely un controlled, in order that it might register the subtle and unsubtle shifts in economic external con ditions. Only then can entrepre neurs predict the future with any degree of success. Only then will those who wish to buy at the best possible price be served. Everyone should count the cost of his ac tions. Price controls interfere with such cost accounting. Exposing Inflation Advocates of floating exchange rates may be advocates of domestic monetary inflation. But so can ad180 THE FREEMAN March vocates of fixed exchange rates, as Keynes would seem to demon strate. The issue is not whether floating exchange rates will make it easier for domestic governments to inflate. The issue is whether price controls are legitimate tools of government economic policy. If .

they are, then we can begin to ex amine the specifics of the argu ments for fixed exchange rates. If they are not, then the debate .is ended. For fixed exchange rates are,· by definition, price controls. Good economic theory results in good economic practice, as Mises and Hayek have explained repeat edly. We do not apply sound eco nomic theory and produce eco nomic disaster. Thus, it is possible to argue that free pricing in inter national monetary affairs will be beneficial to all citizens who wish to enter the market in order to make voluntary exchanges. Free pricing among the various na tional currencies will help to ex pose the policies of monetary inflation in any given nation, thereby adding incentives to citi zens of that country to challenge their government's policies. This, of course, assumes that citizens generally are economically rational and prefer good consequences to bad ones. It is easier for a man to count the costs of· socialism in the monetary sphere if he can witness, daily, the statistics that chronicle the deterioration of the purchas ing power of his money.

Let Citizens Own Gold If a citizen can own gold, so much the better. If a free market in gold is allowed to operate, so much the better, for the price of gold, in relation to the citizen's paper currency, will rise as a con sequence of the continuing mone tary inflation. This gives a citizen the opportunity to make a profit by taking his paper money to the local branch of the national Treas ury and buying gold at the fixed, legal rate of exchange (which has become a legal fiction as a result of· the monetary inflation). Let citizens, rather than the state, profit from the higher price of gold. Let their desire to make a profit act as a barrier that helps to retard state officials in their in flationary policies, as the Treas ury's supply of gold decreases. A fixed rate of exchange be tween gold and a currency is not the same thing as fixed rates of exchange between currencies. A fixed ratio between gold and any particular currency is definitional: a. unit of paper money is said, by definition, to represent so much gold at a specific fineness. Free convertibility of a currency into gold requires a legalized fixed ra tio of exchange; ·free convertibil ityof one national currency with 1972 FIXED EXCHANGE RATES AND MONETARY CRISES 181 any other requires a flexible rate of exchange set by the market. The former is a definitional relation ship; the latter cannot be.

Obviously, the best possible world would be one in which no government has any monopoly of credit or money creation, where all citizens all over the globe have the right to own gold and make contracts in gold. But just because utopia has not arrived, there is no reason to abandon the theory of voluntary exchange at unhamp ered prices. The argument we hear so often today is this: "Given the government's monopoly over money, given policies of •deficit financing through monetary infla tion, given domestic legal tender laws, we therefore need price con trols over international monetary exchange." Polylogism! The fact that we find ourselves in an in creasingly socialistic economy in no way .disproves the theoretical validity of free pricing - any time, any place, under any circumstance. If the theoretical (and therefore the practical) validity of free pric ing is undercut in any way simply because of all the socialistic "givens" that we operate under, then Marx was right, Hegel was .right, the German historical school of economics was right, institu tional economics is right, histor icism is right, and economic theory is wrong.

Multiple Interventions There is a tendency, argues Mises, for one intervention by the state into the economy to lead to another intervention. The disrup tions caused by the first interven tion lead to cries for further polit ical intervention to solve them. The state takes control of .money, to "reduce the irrationality of the domestic money markets." (And to arrogate unto itself ultimate sov ereignty.) Then it inflates the cur rency in order to increase its own influence in the affairs of men by gaining access to scarce economic resoures with the inflated cur,:" rency. Then citizens refuse to ac cept the debased money. So the state's officials pass legal tender laws. The money, now artificially overvalued, drives out both gold and silver. People prefer to trade in the· artificially overvalued money and either hoard the gold and silver or send it abroad where it can purchase foreign goods cheaper than the domestic inflated currency can purchase them. As domestic goods climb in price due to the inflated paper currency, im ports increase and dollars flow out; foreign central banks then raise the price of their currencies in re lation to dollars. The United States government realizes that this ex poses its policies of domestic mone tary inflation and therefore presses for fixed exchange rates.

182 THE FREEMAN March Then foreign governments, buried in dollars (at the artificially low price), begin to demand gold (held by our government at an artifi cially low 1934 price). One inter vention leads to another, usually. But not always. The exception came on August 15. Basically, the President had three choices. First, balance the budget and stop the monetary in flation - maybe even use the sur plus of revenue over expenditures to reduce the national debt. Un fortunately for political purposes, such an action would have risked depression and high unemploy ment (given the previous policies of monetary expansion and the downwardly inflexible wage rates that prevailed in a unionized econ omy) .20 Second, continuing the deficits, he could let all of our gold (their gold, really, given our prom ise to pay on demand) flow out. Third, the President could have established floating exchange rates and cut the redeemability of the dollar in terms of gold. This is ex actly what he did. It involved a return to free market pricing of international monetary exchanges.

He believed that it was preferable to do this than to take either of the first two steps. In this sense, pressures internationally on the dollar forced the President to re turn to a policy which was closer to the free market than the policy of fixed exchange rates which. had been established by the IMF in 1947. Naturally, to make the oper ation truly conservative, he should have maintained the free conver tibility of gold provision and re established it domestically with American citizens. This did not detract from the basic move which he made ; namely, to reestablish free floating exchange rates in which voluntary transactions of money internationally can prevail. By returning to fixed exchange rates on December 19, the Presi dent thereby abandoned the ad vance made on August 15, re establishing the rigidities that lead toward economic discontinu ities. Yet what did we find between August 15 and December 19?

Many advocates of free market economics were howling bloody murder! "Free pricing is fine, and all that, but, given prior interven tions by the government. . . ." Leonard Read is right : "We are sinking in a sea of butS."21 Return to Gold What is the proper position with respect to valid international money? Clearly, a money system which is the product of free men, voluntarily exchanging scarce eco nomic resources. Professor Murray Rothbard has given us a picture of what such a system might be: 1972 FIXED EXCHANGE RATES AND MONETARY CRISES 183 Why not freely fluctuating' ex change rates? Fine, let us have freely fluctuating exchange rates on our completely free market; let the Roth bards and Browns and GMs fluctuate at whatever rate they will exchange for gold or for each other. The tI~ouble is that they would never reach this exalted state because they would never gain acceptance in exchange moneys at all, and therefore the prob lem of exchange rates would never arise.

On a really free market, then, there would be freely fluctuating exchange rates, but only between genuine com modity moneys, since the paper-name moneys could never gain enough ac ceptance to enter the field. Specifi cally,. since gold and silver have his torically been the leading commodity moneys, gold and silver would prob ably both be moneys, and would ex change at freely fluctuating rates. Different groups and communities of people would pick one or the other money as their unit of accounting. 22 Floating exchange rates reflect what the prevailing external eco nomic conditions really are. The rule governing the operation of floating exchange rates is identi cal to the rule operating in all computer affairs: "Garbage in, garbage out." If prevailing eco nomic conditions on the interna tional markets are inflationary, then floating exchange rates will respond appropriately, making' the best of a very bad situation. If a full gold coin standard exists in ternationally, then floating ex change rates will make the best of a very good situation. Floating exchange rates are nothing more and nothing less than freely fluc tuating voluntary prices, on inter national markets (even if the pri mary participants are national central banks). Like all other forms of free pricing, floating ex change rates make things better than .things would be under coer cive price controls. Floating ex change rates should not be re garded as some kind of economic panacea for the world's inflation ary conditions, except insofar as free pricing is always a panacea in relationship to the conditions which exist under government imposed prices. No matter what other external conditions may be inflationary, deflationary, rela tive ly stable, gold standard, fiat stand ard, electric money standard, or any other standard conceivable to the mind of man - free pricing is alwa,ys preferable to fiat pri,ce con trols. Always.

There is no doubt that domestic monetary inflation, especially if carried on by a majority of na tional governments, produces great uncertainties in international trade. There is also little doubt that floating exchange rates impose the burden of dealing with these eco nomic uncertainties on the shoul184 THE FREEMAN March ders of those who wish to par ticipate in international trade and who expect to profit from such voluntary exchanges. These people are precisely the ones who should bear the burdens associated with economic forecasting. They are all entrepreneurs. If they resent the uncertainties associated with in ternational trade in a world of fiat money, then they should put pres sure on their respective govern ments to restore a full gold coin standard domestically. They should not be lured by the siren call of statist price controls to reduce the visible effects of statist policies of domestic monetary in flation.

If we want stable exchange rates, then -there is one way, and only one way to get them: each government must impose upori. it self the restraint of the full gold coin standard, give up its mone: tary monopoly, return the right of gold ownership to its citizens, and spend only that money which is raised directly through taxation. That is the way to achieve the goal of international monetary sta bility - not rigidity, but calcul able, predictable, moderate stabil ity.23 The rule of gold alone has proven itself to be a producer of international monetary stability. That rule, and not the rule of government bureaucrats, is the foundation of monetary stability.24 The conclusion should be obvi ous: all advocates of free markets should call for solutions that pro mote economic freedom. If the pro posed solutions do not promote free pricing on free markets, they are fallacious solutions. Fixed ex change rates limit the voluntary economic exchange of goods among free men. Therefore, fixed ex change rates are the wrong so lution.

- FOOTNOTES1 Paul Einzig, The Case Against Float ing Exchanges (New York: Macmillan, 1970). Einzig's weekly column in The Commercial and Financial Chronicle in cludes an attack on floating exchange rates at least once a month. Cf. Brochure, Committee on Monetary Research and Education, Inc. (1971), pp. 9-10. 2 Business Week (September 25, 1971), pp. 91 ff. g On exported inflation, see Wilhelm Roepke, "The Dollar as Seen from Ge-_ neva," National Review (March 8, 1966) ; Against the Tide (Chicago: Regnery, 1969), ch. 13: "The Dilemma of Imported Inflation." 4 Against the Tide, p. 229. 5 Ibid., p. 230. 6 Ludwig von Mises, Human Action (3rd rev. ed.; Chicago: Regnery, 1966), pp.476-78. 7 Cf. Gary North, "Statist Bureaucracy in the Modern Economy," THE FREE MAN (January, 1970); Mises, Bureauc racy (New Rochelle, New York: Arling ton House, [1944] 1969); North, "The Mythology of Spaceship Earth," THE FREEMAN (November, 1969). On the nature of knowledge and the market's division of labor, see F. A. Hayek, I ndi vidualism and Economic Order (Univer sity of Chicago Press, 1948), ch. 2.

1972 FIXED EXCHANGE RATES AND MONETARY CRISES 185 8 Alfred L. Malabre, Jr., "Is It Really Time for Monetary Cheer?" Wall Street Journal (December 2,1971). Malabre's estimate of the number of devaluations is far too low. Franz Pick, in the introduc tion to the second edition of All the Monies of the World (1971), reports that at least 418 partial or full devaluations took place in 108 countries between 1954 and the end of 1970. 1971 saw an addi tional 99 devaluations: Barron's (Jan uary 3, 1972), p. 9. This, in spite of the so-called stabilizing influences of the In ternational Monetary· Fund, the organi zation drawn up at the Bretton Woods Conference in July, 1944, officially estab lished on December 27, 1945, and put into operation on March 1, 1947. 9 Mises, Human Action, p. 791. 10 Ibid., p~ 800. n The Theory of Money and Credit (Foundation for Economic Education, 1971), PP. 180-81.

12 Human Action, p. 455. 13 Ibid., pp. 455-56. 14 Ibid., p. 801. 15 Ibid., pp. 464-66. 16 Ibid. (1949 ed.), p. 462n. 17 Karl Marx, Capital (New York: Modern Library), p. 391. This is the first volume of Capital. He continued this same argumen t in VoL 3 (Chicago: Charles H. Kerr, 1909), pp. 673, 1027. Frederich Engels, Herr Eugen Duering's Revolution in Science [Anti-Duering] (London: Lawrence & Wishart, [1877] 1934), pp. 296-301. For a critique of this concept of capitalist contradiction, see Gary North, Marx's Religion of Revolution (Nutley, New Jersey: Craig Press, 1968), p. 154. 18 Mises, Human Action, pp. 289 ff. Cf. Frank H. Knight, Risk, Uncertainty and Profit (New York: Harper Torchbook, [1921] 1965), pt. 3. 19 Mises, "Economic Calculation in the Socialist Commonwealth," (1920), in F. A. Hayek (ed.), Collectivist Economic Planning (London: Routledge & Kegan Paul, [1935] 1963). Cf. Mises, Socialism (New Haven, Conn.: Yale University Press, [1922] 1962), pp. 119-62; T. J. B.

Hoff, Economic Calculation in the Social ist Society (London: Hodge, 1949). For an able refutation of the myth that Oskar Lange in some way "refuted" Mises on this point, see Paul Craig Roberts, "Oskar Lange's Theory of Socialist Plan ning," The Journal of Political Economy, LXXIX (1971), pp. 562-77. Roberts is not really happy with Mises' original formu lation of his critique, however. 20 Mises, Human Action, ch. 20. Cf. Gary North, "Repressed Depression," THE FREEMAN (April, 1969) ; North, "Downward Price Flexibility and Eco nomic Growth," THE FREEMAN (May, 1971) . 21 Leonard E. Read, Talking to Myself (Foundation for Economic Education, 1970), ch. 6. 22 Murray N. Rothbard, "The Case for a 100 Per Cent Gold Dollar," in Leland B. Yeager (ed.), In Search of a Monetary Constitution (Cambridge, Mass.: Har vard University Press, 1962), PP. 100-01. 23 Mises, Theory of Money and Credit, p. 240. Cf. North,"Donward Price Flexi bility," pp. 312-13.

24 I must admit that the passage in Mises' Theory of Money and Credit, "Cur rency Reform in Ruritania," does not seem to conform to every other statement written by Mises with regard to the polit ical control of prices, including rates of exchange. He calls for a state agency to set a legal parity and "to make this legal parity an effective real market rate, ... " (p. 445). The 'meaning of this obscure passage is best understood in terms of his attack on statist foreign-exchange policy which appears on pp. 18-19. The whole corpus of Mises' writings is op posed to price controls; a single deviation - if, indeed, it is a deviation - should not be used to compromise the impact of his overall defense of the free market.

A REVIEWER'S NOTEBOOK Cruising Speed JOHN CHAMBERLAIN WILLIAM F. BUCKLEY, JR.'S Cruis ing Speed: A Documentary (Put nam, $6.95) begins as a chronicle of a week in the life of America's most engaging publicist. But time, with Bill Buckley, has a Proustian dimension, so the form becomes an excuse for unlocking years as well as days. A telephone call to Bill Buckley takes 'us in one direction, a "Dear Sir, You cur" letter in quite another, an encounter with a friend or colleague in still a 186 third, until after darting down a hundred avenues one has the illu sion that one is peeling off one of those Chinese eggs which contain egg within egg, almost to the vanishing point. But then, one re flects, the Chinese egg image won't do at all, for the average Buckley egg is so bursting with its own meat that it could contain nothing else. Since the form is immaterial, it scarcely matters that the docu1972 CRUISING SPEED 187 mented Buckley week began at Bill's Stamford, Connecticut,sea side home at ten o'clock on a Mon day morning after a. newspaper column had been written and some routine correspondence handled.

The important thing is that one thing provokes another even as Bill is riding into Manhattan to tape-record a couple of TV shows. Memories crowd until the book becomes as complex as the Buckley character, which deceives many who come upon it merely one as pect at a time. Yes, Bill Buckley can be offensive to modern-day liberals, as when he. sets down in his list of accomplishments in Who's Who in America the fact that he founded the National Com mittee to Horsewhip Drew Pear son in 1967. Like any man of wit, Buckley outrages those who have no wit at all. But witty outrage, with Buckley, procedes from a gor geous sense of unmalicious fun. As Critics See Him Unlike a few polemicists whom I could mention, Buckley stays in the kitchen not only because he likes to cook but also because he can stand the heat. His sense of editorial honor does not permit him to hide anything, so he prints a long diatribe about his character wri tten by one Hank Levine, the chairman of the Party of the Left of the Yale Political Union. Mr.

Levine sees Buckley in terms of a "kind of silent leer-wince," which, whatever this may say about the Levine eyesight, indicates that Leftist undergraduates at Yale can be as tone-deaf as a mummy. What seems to Mr. Levine to be a superiority complex is, in a way, Mr. Buckley's way of overcoming his environment. He grew up with "liberals" to the left of him, to say nothing of .those who kicked him from behind and gouged him from in front. (I recall defending Bill Buckley years ago against a charge, made by an editor of a well-known "liberal" monthly, that Buckley's National Review lacked humor, which is about as idiotic a criticism as could be made.) Bill had to rehabilitate wit among the witless, to reestablish elegance and finish in the arena of contro versy, to bring tone and savor and cutting edge to our polemics. He could not have done this without having had some theatrical sense.

Underneath the showmanship is the overmastering urge to instruct. A Becoming Modesty It may seem strange to Hank Levine, but Bill Buckley actually comes through in Cruising Speed as a person of most becoming mod esty. He cail kid J. Kenneth ·Gal braith, who is his friend, but when Galbraith tries, on the way to the ski slope at the Rinderberg in 188 THE FREEMAN March Switzerland, to persuade Bill to focus his energies on books, the bantering tone disappears from the Buckleyian text. Give it up, says Galbraith, give up the whole thing, National Review, journal ism, television, radio, lecturing. I did it, says Galbraith, I left For tune and went to Harvard. Come to the academy and write books. It is only books that count in giv ing theoretical depth to ideologi cal positions. Now, if Bill Buckley were truly arrogant, he would have turned on Galbraith and said something to the effect that books can mislead as well as lead. Instead of indulg ing in a flip retort, however, Bill was provoked only to some dispas sionate self-appraisal. He told him self that others had already pro vided the theoretical depth for conservatism. Wasn't it his mis sion, therefore, to advertise the profundity of the foundations al ready provided by others? How, he asked, could he hope to "do better against positivism than Voegelin has done?" How could he improve on "Oakeshott's analysis of rationalism?" How could he "rediscover orthodoxy more en grossingly than Chest~rton?"

W hat of the Reserves? To feel satisfied, so Bill Buckley told himself while musing on Galbraith's challenge, one must have a sense of social usefulness. But what, he asked himself, were his reserves? .What would he have to satisfy those who listened to him tomorrow? Turning back to "cruising speed," which involved getting to Washington in Frank Stanton's Columbia Broadcasting System jet plane and writing next day's col umn, Bill inevitably had to let the question of his reserves drop. But he needn't worry; the reserves will be there. Since Bill himself has tossed the name of Chesterton, a. superlative journalist, into the discussion, it should be said that journalism it self often has a theoretical depth that is missing in books. Gal braith's .view of the superiority of the academy is all too simple. H. L. Mencken, no .academician, wrote journalistic· essays and criticism that have stood the transplanting between book covers. But who re members W. C. Brownell, or Henry Beers, or other academic critics of Mencken's heyday? Who knows, Buckley's "journalism" may prove more enduring than, let us say, Galbraith's The New Industrial State? (Not wishing to be invidi ous, I hasten to add that I grant a permanent literary value to Gal braith's Affluent Society,. its phrasing is always first-rate, even 1972 CRUISING SPEED 189 when the logic leaves something to be desired.) Government's Limited Role Just how good Bill Buckley can be is proved by his little essay written in defense of the National Review position (see page 92, where he passes along his musings while driving to Bridgeport to de bate with Dick Gregory.) "It was fourteen years after NR began,"

says Bill, "that .Peter Drucker would write in The Age of Discon ti.nuity that the only thing govern ment cando effectively is wage war and inflate the currency ... individuation is what happens when the state ceases to be taken for granted as the necessary in strument for human progress. The conservative who spoke to little audiences fifteen years ago about the necessity for arresting the growth of government was saying then what the followers of Reich (author of The Greening of Amer ica) have come upon, except that they are now condemning Ameri ca, while what they ought to be condemning is what I once called the special effronteries of the twentieth century. . . ." For fifteen years Bill Buckley has been. trying to tell people that nobody can "lead happy or full lives by buying one share each of com mon stock in - The State." This position was not new when Chesterton. espoused it in England, nor when Albert Jay Nock taking off from the German Franz Oppen heimer, gave "theoretical depth"

to it in Our Enemy, The Sta,te. Readers of The Freeman know better than most, however, that the theme was never in such need of refurbishing as now, when prices are being "controlled" in a time of peace. Bill Buckley's re furbishing is elegant, precise, and engaging, whether it appears as journalism - or in a book. • LIBERTARIANISM: A POLITI CAL PHILOSOPHY FOR TO MORROW by John Hospers. (Los Angeles: Nash Publishing Co., $10) Reviewed by: Allan Malz THIS simply and lucidly written introduction to the free market philosophy summarizes the argu ments of the finest libertarian literature. In the first ten chapters, the au thor - a University of Southern California philosopher - discusses a broad range of topics. He defines the proper scope of government action, and analyzes the various 190 THE FREEMAN March types of State intervention whose disastrous results are so often blamed on capitalism. A persua sive justification of profit, on both moral and economic grounds, is presented. In an especially incisive chapter, Professor Hospers ex amines the welfare state, describ ing how, after each antipoverty program, the poor somehow end up even poorer, and demonstrat ing that only a truly free market can effectively reduce poverty.

This leads him into a discussion of taxation and its corrosive effects on enterprise. The author's most important arguments, however, are reserved for the final chapter, in which he presents the case against anarch ism. The no-government philos ophy speaks for itself through lengthy quotations from its parti sans, after which Professor Hos pers analyzes it from a limited government point of view. He shows that anarchy would mean open season on minority groups and nonconformists. In the ab sence of government, there could be no Rule of Law, and certainly not the "objective law" of which the anarchists claim to be the champions. Even an anarchist must admit that some services cannot be supplied by the market, the author concludes, and it is pre cisely these that is the task of government to provide. A society in which any man can call himself a "defense agency" and take the law into his own hands would surely be an unstable one in which peaceful cooperation could not last; a "no-government society is always trembling on the verge of chaos," he observes. And there is no reason to believe that any gov ernment emerging out of chaos would be a limited one.

The weakest section is Hosper's discussion of natural rights. Too much of what Bentham would have called "sentiment" is brought into the explication. The reader is given no firm reason to believe that natural rights really exist, and it is not explained why they are' "inalienable." Rousing prose about the beauty of liberty is sometimes substituted for rea soned explanation of its practical benefits. Fortunately, the flaws are limited to the opening chap ters, and do not detract much from the value of the book. All in all, a useful book, both as an introduction for the beginner and as a sort of memory-refresher for the advanced student.

1972 OTHER BOOKS 191 ~ THE REGULATED CONSUMER by Mary Bennett Peterson (Los Angeles: Nash Publishing, 1971~ 271 pp., $7.95) Reviewer: Tommy W. Rogers CONSUMERISM has spawned a mul titude of regulations and a host of federal agencies to enforce them, but has it helped the con sumer? It is the author's conten tion, well documented and illus trated, that consumerism is in herently uneconomic - and, iron ically, anticonsumer; it adversely affects individual choice and di minishes efficiency in the use of our resources. Americans pay car tel prices for the coffee they drink and the sugar they eat, and in the process injure efficient interna tional producers and world compe tition. Unions, as well as the gov ernment controlled farm sector, have the makings of giant cartels as government induced and pro tected monopolies. Government farm programs continue to widen the gap between rich agricultural ist-businessmen and poor farmers, and compulsory unionism not only limits freedom but breeds corrup tion.

The author contends that "com~ binations and conspiracies against trade may appeal to the monopo listic mentality, but in practice, unless enforced by government, they tend to evaporate." Regula tory agencies which supposedly "protect" the consumer become buffer agencies which act as ac commodative bodies of the busi nesses they. are supposed to regu late, at the expense of the public, as classically illustrated by the· In terstate Commerce Commission. A determined ICC seeking to give the image of zealously pro tecting the public interest has forced higher costs· on the shipper, carrier, and, most important of all, the consumer. The activities of the Civil Aeronautics Board similarly illustrate that regulation can mean anything but security for those who are regulated, or economy for the consumers who are the sup posed benefactors. The CAB, an opponent of competition between airlines, has constantly reflected a basic anticonsumer, pro-producer bias. Because of CAB regulation "commercial aviation has been treated as a giant subsidized pub lic utility, managerial decision making has been impeded, con sumer sovereignty frustrated, economies of scale blunted, inno vations and technological efficiency in airlines operations hampered."

"Interventionistic regulation," as Mrs. Peterson thoroughly dem onstrates, leaves much to be de sired. It is structured against the interests of the consumer whom 192 THE FREEMAN March its rhetoric claims it seeks to de fend ..Illustration after illustration is used to nail down the truism that quotas, minimum prices, sub sidies, decrees, and regulations op erate to the detriment of the For gotten Man. There· is a remedy: an enlight ened government and citizenry should progressively deregulate our regulated society and reen throne the consumer in the mar ketplace. Only so may we provide justice, preserve freedom. ~ HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each ORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 tile Freeman VOL. 22, NO.4. APRIL 1972 Objectivityand Accountability:A One-Way Street C. Howard Hardesty, Jr. 195 An appeal to public opinion for a better appreciation of the role of business.

The Nature of Modern Warfare David Osterfeld 205 A study of the path to war via domestic welfare programs and departure from the market. The Economic-PowerSyndrome Sylvester Petro 212 Exploding the popular myth that business has a coercive power to impose its will upon consumers. The'BallooningWelfare State The higher the subsidy rate, the greater the number of claimants. Henry Hazlitt 226 The Foundingof the American Republic: 9. Prelude to Independence Clarence B. Carson 232 A study in slow motion of the final aggravations that brought separation. The Federal Reserve System Ha.ns f. Sennholz 245 A descriptive analysis of "the most important tool in the armory of economic interventionism. " Book Review: 254 IIWilimoore Kendall Contra Mundum" edited by Nellie D. Kendall Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

tile Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230 LEONARD E. READ PAUL L. POI ROT President, Ji"oundation for Economic Education ~1 anaging Editor THE F R E E MAN 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. 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, 1972, 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; 10 for $2.50; 25 or more, 20 cents each.

Articles from this journal are abstracted and indexed in Historical Abstracts and/or America: History and Life. THE FREEMAN also Is available on microfilm, Xerox University Microfilms, Ann Arbor, Mich igan 48106. Permission granted to reprint any article from this issue, with appropriate credit, except "The Ballooning Welfare State."

Ob- -~-~ .. ~ and Accoun THE TITLE for these remarks in dicates that I have a bone to pick - and indeed I do. It may be stick ing in your throat as well as mine and, if so, it's time to stop chok ing and do something. As background, permit me to quote the first paragraph of the publisher's summary to a recent best selling book: This well documented expose. reveals the incorporated rulers of the United States and, indeed, much of the world. It shows them to be private governments which, as effectively as legitimate public governments, de cide whether large numbers of us live and die. They levy taxes in the From remarks by Mr. Hardesty, senior vice president of Continental Oil Company, before the annual meeting of the American Mining Congress in Washington, D. C., January 17, 1972. c. HOWARD HARDESTY, JR. form of price increases, unrestrained by competition. They manipulate legitimate governments, turning na tions into welfare states for corpora tions. And they are generally respon sible only to themselves.

This book, America, Inc., was on the best seller list for 17 weeks and Time magazine in its review described it: "in the best muck raking tradition it is thoroughly documented to present a look at the seamy side of business." As it happens, in a recent speech I used the term "muck raker" and to be sure we under stand what is meant by it, let me quote from the .term's political originator, Theodore Roosevelt: The men with muckrakes are often indispensable to the well-being of so195 196 THE FREEMAN April ciety, but only if they know when to stop raking the muck and to look up ward to the celestial vision above them, to the crown of worthy en deavor. There are beautiful things above and around them and. if they gradually grow to feel that the whole world is nothing but muck their power of use fulness is gone. It would be naive to suggest that inaccurate criticism is unique to the last half of the twentieth century. It is as old as speech, but perhaps T. H. Huxley put it best when he said: "There are men to whom the satisfaction. of throw ing down a triumphant fallacy is as great as that which attends the discovery of a new truth."

Lack of objectivity and non accountability seem these days to be the fashion. Too many people are "throwing down a triumphant fallacy" and others are treating it as "a new truth." To compound the felony, no one is held account able. The Antipreneurs I also have a new name for the muckraker of the 1970's. If you accept "entrepreneur" as the ge neric term for "businessman" , perhaps we can refer to these single-minded, persistent and to tally myopic critics of business men as "antipreneurs." The nega tive prefix in "antipreneurs" is quite appropriate since those who hammer away at the business com munity are for the most part a negati ve lot. They rej ect, and they rebuke, and they reproach, and they frequently view with alarm, but hardly ever do they come up with .anything constructive. The enemies of private industry are active today as never before, they are influential today as never before and - most discon certing of all - they are succeed ing today as never before.

In what ways are they succeed ing ? Well, for one thing, they are changing some basic attitudes in this country. They are converting the United States of America from a nation that once respected initia tive and economic achievement, that honored the rags-to-riches hero, to a nation that imputes to its businessmen the most venal motives and most despicable con duct, that is coming to idolize the reverse-twist, riches-to-rags anti hero. Think I'm exaggerating? Then consider for a moment a few statistics. In 1966, Social Research, Incor porated, conducted a study on pub lic attitudes toward businessmen. Twenty-eight per cent of all Americans polled agreed to the statement that "big business is dangerous to our way of life." Twenty-eight per cent. A sizeable 1972 OBJECTIVITY AND ACCOUNTABILITY 197 fraction, but not nearly so size able as it was to become. Five years later, in 1971, the same or ganization asked the same ques tion and this time the "yes" vote was forty-six per cent. In other words, nearly half of all Ameri cans now regard you, the nation's businessmen, as a threat to their existence.

Dr. Burleigh Gardner, President of Social Research, interpreted the results of his survey as evi dence that "the public· will no longer rise to the defense of busi ness against extremists or protest groups." And I would say that this was a reasonable assumption. Another set of studies, this one conducted by Opinion Research Corporation, showed a similar pat tern. Four years ago, 55 per cent of all Atnericans questioned by Opinion Research felt that new laws were needed to protect the consumer from unscrupulous busi nessmen. Two years later, a fol low-up poll found that 68 per cent - or more than .two-thirds - of the nation favored additional con sumer protection laws. The in crease in just two years was sub stantial - and significant. Regardless of how much has been done to transfer control of American industry from private hands to government hands, the antipreneurs cry out for more.

Could it be that our antipreneurs will be satisfied with nothing less than de. facto nationalization .. of industry through a system of com prehensive rules disassociating all phases of production and distribu tion? The recent suggestion calling for the Federal chartering of all corporations with the government empowered to control not only hir ing and firing but also the estab lishment of production standards and marketing procedures is no longer deemed extreme by its pro ponents. What makes this pelt·mell rush toward government control of in dustry all the more tragic is the fact that its public support stems from the widespread acceptance of slanted investigations, blatant falsehoods and political prejudg ments. But I don't have to give you sec ond-hand reports on the activities of the antipreneurs. Let me pro vide you with some personal, first hand experiences. The Energy Gap Perhaps I should start by pro viding some background informa tion. The United States today faces an energy gap. This is the growing disparity between the amount of energy-source materials produced in our country and the total consumed.

This energy gap was the focal 198 THE FREEMAN April point of an unprecedented mes sage by President Nixon to Con gress last June and also of a re port issued several months ago by a special committee of the Na tional Petroleum Council, an in dustry board established under government guide lines to help ad vise the Secretary of the Interior. The report was the result of thousands of hours of research by 200 experts in their fields, the best qualified staff people, finance spe cialists, government officials, and by teams of scientists and tech nologists. The American Mining Congress accurately summarized the conclu sions reached in the NPC Report: 1. The current natural gas shortage will increase in severity. 2. We will become increasingly de pendent on imports of foreign crude oil from the eastern hemi sphere. 3. The energy industries will find it difficult to raise the estimated $374 billion in capital by 1985 to "provide for our burgeoning en ergy requirements."

On October 28th in Houston, Ralph Nader breezily dismissed any such situation and described the energy gap as "a promotion" of the fuel companies' advertising departments. Actually, said this self-designated authority on natu ral resources, there is no shortage of fuel in this country. They are finding resources, he assured ev eryone, faster than the public can consume them. Mr. Nader's headline news that there is no shortage of fuel is at complete odds with the unanimous findings of government and indus try and can only serve to confuse the public. Do we or don't we have a shortage? I rely on the experts who say we do, and I charge that incomplete and inaccurate data were used as a base to demon strate we don't. Bias Also Showing in Halls 01 Congress But it is not the consumer lobby ists alone whose bias is showing. The Halls of Congress are no less overrun today with antipreneurs - whose zeal, if nothing else can only be admired. But I despair over their lack of accuracy, their lack of objectivity and their lack of accountability.

I cite as an irrefutable example of thi~ situation the 1971 report of the House Subcommittee on Special Small Business Problems. The transcript of the Subcom mittee Hearings and its final re port reflect the mounting and highly biased attack upon the as sociation of oil companies with coal companies. That this bias is not based on fact is apparent from a reading of the transcript and report in which wholly unsubstan..; 1972 OBJECTIVITY AND ACCOUNTABILITY 199 tiated innuendoes of monopoly and collusion abound. A good example· of .the totally unsupported charges of unlawful conduct found in the report ·is the allegation that coal-related re search is being stifled by the oil companies. All the· factual evidence submit ted to the subcommittee showed that the oil companies entering the coal industry have accelerated and expanded research· efforts and projects related to synthetic con version of coal and new and safer methods of mining. There is no factual evidence to the contrary, yet the report recommends a re assessment of research and de velopment of the liquefaction and gasification of coal in order to eliminate conflicting priorities in the attainment of economically feasible synthetic fuel processes.

The suggestion that priority con flicts exist is nothing more than gratuitous fiction. Who's Dominating Whom? The report repeatedly refers to the domination of the coal indus try by oil companies, yet the facts show that all oil-associated coal companies together produce only about 20 per cent of the nation's coal and that Continental and Hum ble Oil combined own less than 2 per cent jointly of this nation's re coverable reserves of coal. Almost 65 per cent of this country's more economic deposits of coal are neither presently owned nor under lease to any coal company. "Domi nation" by oil companies is, again, fiction. Finally, the report does not set forth any of the advantages increased production, accelerated capital investments, expanded re search - which have resulted from participation by natural resource companies in the coal industry. Since the natural resource in dustries appear unable to obtain fair treatment from self-styled consumer protection groups, and from self-dealing politicos, it has but the executive branch of gov ernment or regula tory agencies to look to for objective evaluation of the described groundless charges.

Can help be expected? I am afraid not - and let me tell you why. Recently, Continental announced that it was voluntarily respond ing to an inquiry from the Fed eral Trade Commission regarding the FTC's desire to review Con tinental's acquisitions of Consoli dation Coal Company. This request was made notwithsanding the fact that prior to the association of these two companies in 1966, the entire transaction was reviewed in depth by the Justice Department, and they indicated no intention to contest it.. However, the fact that at this late date the Federal Trade 200 THE FREEMAN April Commission chose to reevaluate 1966 determinations by the De partment of Justice did not con cern Continental nearly as much as certain recent public statements voiced by several members of the Commission's staff. Note these dates: Due to the mass of documentation requested, Conoco did· not file the requested information with the FTC until January 7, 1972. Yet, on October 28, 1971, in the course of appear ing before the House Special Sub'committee on Small Business Prob lems in Nashville, Tennessee - Mr.

Lawrence G. Meyer, Director of Policy Planning for the FTC stated to the press assembled: "The Federal Trade Commission will file the first of three or four antitrust actions against oil com panies invading the coal industry within six months." It's shocking to learn that three months in advance of voluntary filing relating to a review of a pre viously approved transaction, a high official representing the pros pective prosecutor, judge and jury -the FTC-pronounces judgment. Is this objectivity? Is this im partiality? Or is this prejudgment and public pandering in the worst sense? From Whence the Evidence? One might inquire: Where did Mr. Meyer and his staff obtain the evidence which they relied on to prejudge a matter of such im portance to the future of the en ergy industries and this Nation? Not from the ;~nergy industries! Not from Continental',s submis sion. The answer may be found in the record of the House Subcommit tee Hearings. On Page 61 of the transcript of the Hearings, Worth Rowley, an attorney representing the American Public Power Asso ciation, an association dedicated to fragmenting the coal industry, and Mr. Rayburn, Counsel to the Subcommittee, engaged in the fol lowing exchange: Mr. Rayburn to Mr. Rowley: What did your association have to do to get theJ ustice Department to trans fer the Consolidation Coal/Contin ental Oil case to the Federal Trade Commission? You make that state ment on page 6.

Mr. Rowley: When we met with Assistant Attorney General McLaren in March, just to start the proceed ings, I asked him if he would release it - release the matter to the Com mission for. investigation, and he said he would. We did not have to go to very great lengths. We just had to assemble our committee members and pop the question. Then there was a delay of about 6 weeks and a little more pressure from us, and that which had been promised came to pass. Mr. Rayburn: What can your as1972 OBJECTIVITY AND ACCOUNTABILITY 201 sociation do to aid the Federal Trade Commission's investigation in this energy field? What do you envisage? Mr. Rowley: Well, one thing we did, ofcollrse, was to turn over what infor'mation,economic insights, and legal, insights we Wad to them, and made available certain of our mem bers for purposes of consultation. From then on, the initiative rests with the Commission. Anything they want which we can produce we are producing.

Doesn't this exchange tell you something about the source of Mr. Meyer's evidence? It is clear from the record that a special interest group has ex erted 'a powerful and effective in fluence on the supposedly impar tial activities, of the Federal'Trade Commission. And it is not surpris ing to also note that the previously mentioned best seller, A merica, Inc., while devoting a great deal of attention to corporate influence, mentions not one word about the vast - wholly unregula:ted - power of the liberally oriented pressure groups which constantly seek to influence government. Help From the Media? Well, now if not consumer pro tection groups, the legislative branch or the regulatory agencies - who can we look to to present the real facts? The media? I think not; omissions as well as errors provide a yeasty breeding ground for compounded error among some of the media representatives who cite unsupported allegations as truths.

For example, in a recent issue of The New Republic an article contains this serious charge: "High and steady ,profits have lured' the oil companies into the field and they now control a ma jority of the 50 largest coal firms." As for the fact of controlling a majority of the 50 largest coal firms, it is nothing better than a figure plucked out of the air - to tally false. As for the suggestion that "high and steady profits" have attracted oil companies into the coal busi ness, according to information from the National Coal Associa tion, the net income of all coal companies that had an income, less the deficit of those showing a loss, was $105 million in 1965. In 1966, it was $96 million. In 1969, it was $14 million. Is that a case of "high and steady profits?" No! Steady decline? Yes! Corporate Hurdles If I must also exclude the media as a source of' unbiased and in formed reporting - what is left? I think only the industry - suspect as it maybe. But even this source is limited, and that is why I charge that objectivity and ac202 THE FREEMAN April countability is a one-way street.

Consider the hurdles a corporate executive must scramble over when he chooses - all too infrequently - to address himself to a maj or public issue! The economics division reviews the text to make sure that all the facts are correct. The legal division examines every word to make sure that all rules and regulations of the SEC, FTC, Justice Department and a multitude of other government agencies are complied. with. The public relations function reads every word for hidden im plications or possible backlash, and makes sure that it accurately represents the situation and is consistent with company policy. The finance group reviews the text to make sure that the inter ests of bankers and analysts are considered. And finally, the pulse of the Chief Executive Officer must be taken to protect your job in the probability that non-business ori ented media headlines will quote your statements out of context.

Can anything be done to im prove the restrained posture of the business community vis-a-vis wholly unrestrained critics? I'm a perennial optimist and be lieve that over the long haul we can reverse the current trend. Walter Lippmann recently summed it up this way: "I've never known a time when people had so little confidence in the future. They're afraid they're not sure they are equal to it and there is a great dif~ fidence about the future. But I don't think that is irremediable. I think even with all our size and complications and so on, if there comes a group of leaders - and there may well be - and they can strike the right note, the country will respond." Changing the Trend, a Matter of Leadership Personally, I believe he is right and that people will respond if leaders - and I suggest the leaders of enterprise - intensify their ac tivities to provide truth in a mas sive dose. Truth is the only anti dote to the exaggerations of 'the antipreneur. If you are to conclude pessimistically that the job can't be done, then let's fold up our tents, go home and join the op position.

So let me close with these few thoughts. The natural resource industries of this nation are faced today with challenges which, if not re solved, endanger their continued existence. These challenges have the potential of destroying the economic ability of free enterprise to respond to society's needs. I believe that these predictions are 1972 OBJECTIVITY AND ACCOUNTABILITY 203 objective and I am willing to be held· accountable for their ultimate accuracy. My belief arises not from a fear that the business community is in capable of meeting our nation's demands for energy and other basic natural resources. Rather, it stems from a recognition that our critics, if not questioned and held accountable for false or. mislead ing criticism, will divert business, government and the public from the pursuit of a common purpose. Now what can we do about this state of affairs? Come Out Fighting First: Come out fighting for a cause you believe to be just and fair. Recently, I attended a trade association meeting to consider the response to charges of a promi nent member of Congress which bore no relationship to uncontro verted facts. I was astounded that not one of many outstanding busi ness leaders present would risk an open fight. When top level manage ment is so afraid to stand on a platform of truth, how can you ex pect one of your juniors to risk a black eye?

This whole philosophy of low profile must be discarded and the business community must stand up, fight back ltnd lead. Conditions won't turn around overnight. There will be some stitches and sutures applied, but your critic will begin to think twice before he plays loosely with the facts once he gets nailed to the cross. Second: Mr. Roalman, Vice President of CNA Financial Cor poration, in a recent article on "Why Business Is Losing Its Case" said that, "management needs to go more often into the arena. Too often, top management confines itself to talking to its boards of directors, its peers and trade-related people. Its efforts miss, grossly, most Congressmen, legitimate consumerist-critics, young people and the bulk of the educational community." Of course it's important to communicate with our boards and industry people, but such talk alone will not wrestle with and resolve criticism being leveled in classrooms, on the streets and in the press. That's where the action is and we can no longer ignore it.

See the Reporter Third: I'll never cease to be amazed why most business execu tives feel that a friendly luncheon with the publisher of a newspaper or president of a T. V. network will solve our problems. A story is created and subjective feelings ex pressed at the typewriter level the reporter. Industry must open up its doors, its knowledge, its ex perience and facts to this young 204 THE FREEMAN April group of Americans who are gath ering and reporting news. Most of them are products of a very liber ally oriented undergraduate school - an area deserving much greater time and attention - and are to tally inexperienced in business af fairs. Until they know more about the business community, why shouldn't they accept the preach ings of America, Inc.? It's our job to give them a true insight into what goes on and the good things the muckraker ignores. I consider characteristic the observation of a fairly radical conservationist we hired. After observing our opera tions and the extent of our efforts to eliminate pollution he com mented, "I would never have be lieved it."

Coordinate the Efforts 01 Business and Government Fourth : We could spend hours talking about the social responsi bility of business as it faces the future. One fact is clear - the world is changing and society has the right to expect us to lead and not follow.. We must provide the catalytic tool to coordinate the ef forts of business and government as we approach tomorrow. We should not wait until a muckraker, a Federal· agency or a committee of Congress prods us into defen sive action. We have the ability to plan, organize and coordinate an effective means of goal attainment, whether it be social or economic. At this moment, such an effort has not been given a sufficiently high priority. Those four suggestions .are aimed at actions the business com munity· itself can take. But per haps the biggest turnaround in this area of objectivity and ac countability would be achieved if the regulatory agencies and the Congressional committees would require. our critics to operate un der .the same ground rules and laws of disclosure and accuracy to which we in industry are sub jected. Until that goal is. miracu lously achieved, we must continue to make those critics accountable to the final regulatory body: pub lic opinion. And this can only be accomplished by continuous vigi lance on our part and a d~termina tion to participate rather than merely to decry. • IDEAS ON $ LIBERTY Value "THE VALUE of anything is not what you paid for it, not what it cost to produce, but what you can get for itat an auction."

WILLIAM LYON PHELPS The Nature of DAVID OSTERFELD IN REFLECTING upon the intensity of the sentiment and the methods utilized in contemporary antiwar protests, it seems manifest that the preference is always for peace; that nobody wants war. So, one must ask why, if no one wants war, do wars continue to occur? Perhaps wars result, not from the direct intentions of· "war mongering capitalists" or any oth er group for that matter, but as Edmund Opitz observed, they are the "unexpected by-product," the inevitable culmination, of particu lar political or economic policies not intended to be aggressive and, in fact, even humanitarianly moti vated. What one must, therefore, attempt to discern is the generic nature of these particular policies whose underlying elements propel Mr.Osterfeld is a political science n~ajor, work.,. ing toward a Master's degree in International Relations at the University of Cincinnati.

us toward war. Only if we are cognizant of the processes that cause wars can we ever hope to obviate these warlike tendencies. The crux of this thesis, how ever, is nearly diametrically op posed to today's prevailing ethos which attempts to explain war, more often than not, as the result of the insidious machinations of the industrial magnates or the "warmongering capitalists," or· in sists that by its nature the capi talist system must culminate in violent conflicts and, ultimately, its own catastrophic demise. The position here is to equate classical liberalism and capitalism with peace rather than war. Conver sely, it considers the factors be getting war as endemic, not in socialism per se, but in any type of government economic interven tion of which socialism is merely one form. 205 206 THE FREEMAN April Aggressive Nationalism follows Intervention While everyone is agreed that the cause of war is aggressive na tionalism, the position here is that aggressive nationalism is the nec essary outcome of government in tervention. In other words, statism fosters nationalism. An in-depth study of nearly 1000 wars fought in the West from 500 B. C. to A. D. 1925 was conducted by the sociologist, Pitirim Sorokin. In contrasting the size of the casu alty list to the corresponding pop ulation, he determined that the war magnitude of the first quarter of the twentieth century stood at 52 per 1,000,000 (compared with 17 for the nineteenth century) leading Sorokin to conclude that "the twentieth century will un questionably prove to be the blood iest and most belligerent of all the twenty-five centuries under consideration. "1 - These figures are in accord with the two salient contentions of this article. If a general date can be given for the beginning of the abandonment of the principles of laissez-faire for those of govern ment intervention and control, it would be the 1870's, highlighted by events such as Germany's ap pointment of Bismarck as Chan1 As quoted by Edmund Opitz, Religion and Capitalism (New Rochelle: Arlington House, 1970), p. 268.

cellor and the emergence of the first effects of Britain's Reform Bill of 1867. Since that time, the trend has been conspicuously away from limi ted democracy and lais sez-faire and toward government economic interference. We can say, generally, that the age of classical-liberalism was the nine teenth century and that the age of statism extends from the latter part of that century to the present. In applying Dr. Sorokin's find ings to that of our historical sketch, two things we have noted become manifest. On the one hand is the relative peace and tranquil ity enjoyed by a world embracing largely laissez-faire principles. On the other we see, with the substi tution of the deification of the state and rise of the controlled economy for the principles of clas sical liberalism, the concomitant rise of war and international con flict. The question to be considered now is why government interven tion - whether it be socialism or a "mixed" or welfare economy, and whether for humanitarian or in sidious purposes - engenders in ternational conflicts and war.

Domestic Ramifications of Statism The free market is perpetually heading toward equilibrium. Wages and prices are always heading toward a point at which 1972 THE NATURE OF MODERN WARFARE 207 the supply of laborers and of com modities equals the demand for them. Any attempt to interfere with the natural operation of mar ket pricing is destined to engen der economic imbalance, begetting in turn, international conflict. To illustrate how this occurs, we will follow the linkage of events in any government· inter ference. We will assume, moreover, that the intervention occurs under the most propitious circumstances; that it is, in other words, humani tarianly motivated. We will say, for example, that the government has intervened in an endeavor to raise the wages of the hard pressed or to set a. minimum stand ard for the lowest strata of the working force. Surely, most would exclaim, this is a generous act; surely there could be nothing sin ister or pernicious about such a policy; surely this would ease, not aggravate, tension. However, let's examine it more closely.

If wages are forced up, prices also may rise. Either they will rise nearly simultaneously, or the in creased wages will reduce the in come of the entrepreneurs, thus driving the marginal producers out of business and discouraging additional investment in those fields. This diminution in the' amount of capital investment will entail a reduction in the quantity of commodities produced, thus causing prices to rise. And the same thing is true of endeavors to hold prices down. At the lower prices, more is bought. But the reduced price discourages invest ment and once again forces the marginal producers out of busi ness, thereby engendering short ages that can only be corrected by either (1) removing the controls and permitting prices to rise or (2) carrying on production through means of subsidies, which requires higher prices in other fields. Any government interven tion, therefore, must inevitably create imbalances in the economy; these, in turn, tend to bring a rise in production costs and therefore in prices.

This rise in prices, moreover, must have catastrophic interna tional ramifications. Since domes tic wages and prices are artificial ly held above the level set by the free market, the lower prices of fered by imported goods will en courage the buying of the import ed commodities in preference to domestically produced goods. As long as prices domestically are maintained at bloated levels, .this foreign underselling ultimately will force the domestic firms out of business. Moreover, maintain ing wages domestically above their respecti ve equilibrium levels will attract immigrants from abroad. The influx of new laborers will 208 THE FREEMAN April either force the bloated wage level down or engender institutional mass unemployment. The apparent solution for such problems is a policy of autarchy, viz., economic isolation, as best manifested by recource to tariff and migration barriers, exchange controls, and the· like.

International Ramifications: War It should now be evident that a country intent upon controlling wages and prices cannot permit either imports .or immigration. Such penetration would easily and obviously frustrate the planners. Statism, therefore, becomes sy nonomous with autarchy. With the possible exceptions of the U.S. and .U.S.S.R., hardly any nation is ade quately blessed with the means of self-sufficiency; statism and au tarchy, . therefore, .must manifest themselves as a policy of aggres sive nationalism. As Lionel Rob bins observed: "It is really ridicu lous to suppose that such a policy is possible for the majority .... To recommend autarchy as a gen eral policy is to recommend war as an instrument for making au tarchypossible." It may be well to consider this passage further. In the. long run, exports must always equal im ports. The only reason one gives up an obj ect in trade is to acquire that which he does not possess but values more than· what he is giv ing up; similarly, the only need for exports is to pay for the re quired imports. Thus, the greater the imports demanded for sub sistence, the greater the exports required to pay for them.

A nation, in endeavoring to preserve domestic wage and price increases through recourse to tar iff and migration barriers, there by eliminates the possibility of exporting its surplus co~modities and thus acquiring the foreign exchange necessary to purchase imports. There are only three ways to procure the necessities of life: (1) to produce them at home, (2) .to trade for them, or (3) to go to war and take them. If a nation does not possess the kind or the necessary quantities of nat ural resources, and if it does not possess enough fertile agricultural land to provide for its population, then it must trade for these ne cessities. If it erects tariff bar riers and prohibits imports - or if other nations erect tariffs that prohibit exports - a nation is then unable to trade for its necessities. Unless one subscribes to the un likely proposition that the people of one nation will passi vely ac quiesce in permitting either star vation .or a substantial reduction in their standard of living, there is .only one recource left: war.

World Wars I ·and II are replete 1972 THE NATURE OF MODERN WARFARE 209 with support for this hypothesis. 2 It is important to note that be tween the wars, for example, all European nations resorted to very strict anti-immigration laws, in most cases prohibiting immigra tion altogether. Every nation was eager to protect its wage level against enchroachment from na tions with still .lower wage levels. Such policies were bound to en gender serious international fric tion. Moreover, like the "Sozialpoli tik" of pre-1914 Germany, Hitler's Germany endeavored to raise the wage rates of its workers. In do ing so, prices were forced up. Since this would have encouraged imports and thus thwarted the statist schemes, tariff barriers were established. However, the German ban on imports meant that no nation could acquire the necessary German exchange to purchase German exports. Ger many, an industrial nation, was largely dependent upon foreign foodstuffs. It had· to export its industrial commodities in order to obtain much of the needed food.

By eliminating imports, it elim inated, in a like degree, the only means by which it could peaceably attain these necessary agricultural 2 Easily the most lucid and cogent de lineation of this position is to be found in Ludwig von Mises' Omnipotent Gov ernment (New Rochelle: Arlington House, 1969). and other products. So, Germany had but one alternative; it had to go to war and take them. Rise of Aggressive Nationalism The nineteenth century was gov erned largely by classical liberal principles. It was, for the most part, a peaceful century. The on slaught of war accompanied the abandonment of these principles. The question to be considered, therefore, is precisely why these policies were discarded. The an swercan be perceived if one real izes that an integral element of this liberalism was democratic rule. It is imperative, however, to appreciate that this was the de mocracy of Tocqueville; that is, a limited democracy. Under the clas sical liberal ideal, the power of the state - the apparatus of com pulsion and control - was severely circumscribed. The crux of this concept was the recognition of individual rights; the sole func tion of the state was simply the suppression of attempts by indi viduals to suppress -other individ uals, that is, to provide a secure and peaceful framework to facil itate social cooperation. While the means for determining who held the reins of government was to be decided democratically, the power and functions of government were significantly curtailed; the de mocracy of the classical liberal 210 THE FREEMAN April tradition was a strictly limited concept.

Before this ideal could be fully implemented, it began, like most ideals, to be abused. As suffrage was extended - which was not nec essarily inimical in itself - this democr~cy became ever less limi t ed. In exchange for votes, the pol iticians began to promise more and more. The function of the state, accordingly, could no longer be restricted to the protection of the life, liberty, and property of its citizens. The interventionist state thus began to supplant the laissez-faire state, even before the latter had been fully established. These statist measures were, in many cases, humanitarianly mo tivated, that is, aiding the poor, as sistance for the jobless, and so on. Nevertheless, the inevitable corol lary of this proliferation of gov ernment intervention was the pre cipitation of aggressive national ism. It was the inevitable result of an ethos that sanctioned the ex tension of government into all phases of life. It was, in short, the emergence of the total state.

Whether it came as autocracy or as the "despotism of the majority" was irrelevant. Significance of National Boundaries In a planned, autarchic econ omy, territorial boundaries are of supreme importance. An isolated nation must possess all of its re quired natural resources. The larger the area under control, the better it can provide for its wants and needs. Yet, no country is blessed with a position of com plete economic self-sufficiency. Au tarchy, accordingly, must manifest itself in aggressive nationalism, in the desire of every country for the control of ever larger areas. What is required to make peace viable, therefore, is a lessening of the significance of boundaries. This could only be attained, however, if the governments of the world were confined in their activ ities to protecting the life, liberty, and property of their citizens. Only then would international boundaries lose their significance.

It would then make no difference whether a nation were large or small; its citizens could derive no benefit or sustain any damage from the extension or loss of ter ritory. Under a laissez-faire sys tem, where all transactions would take place between individuals un impeded by government, the size of a nation would not matter. No one would be aided or hurt by a transfer of territorial jurisdiction, since all property would be held by individuals and all transactions would take place between individ uals. If the primacy of private prop erty and free trade were the rule, 1972 THE NATURE OF MODERN WARFARE 211 at least one of the major causes of war would be all but eliminated. Noone would be artificially or forcibly excluded, by tariff or im migration barriers, from acquir ing any needed goods or natural resources. Noone would be penal ized for having been born a for eigner or of a different race or in a country of limited natural re sources. Under these terms, then, at least one of the causes of war would be effectively ameliorated, if not eliminated entirely.

Conclusion Statism, in so far as it begets autarchy, engenders international antagonisms for which no peaceful solution can be found within the context of our contemporary polit ico-economic ethos. These antag onisms can be relieved only by a change in ideologies. What is need ed to make peace viable is the ac ceptance of the prinicples of lim ited democracy and its economic corollary, the free market. Only by such an advance can we ever hope to surmount at least one of the un derlying factors precipitating in ternational conflicts and war. If this analysis possesses any cogency at all, then at least one thing is surely manifest: all the antiwar marches, protests, dem onstrations, and peace songs from here to China cannot improve the situation one iota. While they may be fun, they are nevertheless fu tile. They are futile because they are premised upon a misunder standing of war. Yet, wars con tinue to occur. Accordingly, war will not be ameliorated, much less abolished, by the mere utterance of platitudes or by shock tactics designed to scare us into peace.

Only the elimination of its root cause can greatly diminish the threat of war. Such a policy, to re peat, entails a change in attitude, a policy impossible until the lead ers and the people of the world are prepared to accept it. ~ IDEAS ON $ LIBERTY To Discipline a Nation WHILE AN INDIVIDUAL peacebreaker can easily be punished and isolated in a penitentiary, a collectivist nation conducting policies of economic nationalism can be disciplined and subjugated only through a full-scale war and subsequent occupation of its terri tory. To discipline a nation that refuses to embrace the doctrines of freedom and free enterprise is an endless and hopeless task. HANS F. SENNHOLZ, "Welfare States at War"

SYLVESTER PETRO SYNDROME NATURE goes its own way, follow ing laws of its own, shaped by forces in which human action passion, will, thought - is irrele vant. Man's laws and man's socie ties are something else. The works of Ludwig von Mises,summed up in the monumental Human Action, demonstrate more powerfully' than those of any other writer the role played by human will and human thought in the universe which af fects and is affected by human ac tion. Not everything is possible to human action. Nature goes its own way. In the generous realm of the possible, however, man's laws, his rationally directed values, make a difference; perhaps the difference. As a part of nature we Dr. Petro is Professor of Law, New York Uni versity. This article is reprinted by permission from the two-volume Toward Liberty series of essays in honor of Dr. Ludwig von Mise&' on his 90th birthday, September 29, 1971, published by the Institute for Humane Studies.

212 share the universal conatus, the striving to be. But our conatus is generic and undefined; we are more than the birds and the bees, or perhaps less, but different, any way. And our intelligence is cor respondingly different. We can kill ourselves, and we can err. More strangely still, we are ca pable through intellectual error of killing ourselves by policies which we believe necessary to our sur vival. I believe that what I call here the "economic-power syn drome" constitutes one of the most destructive combinations of moral and intellectual error that man kind has ever suffered, and I pro pose to disperse this dark syn drome with the aid of one of Pro fessor Mises' most brilliant con tributions to the formulation of sound social policy: his insistence upon a central role for the concept of consumer sovereignty.

1972 THE ECONOMIC-POWER SYNDROME 213 Anti-Business Bias in the u.s. For a hundred years, more or less, the policies of the United States have had a characteristi cally anti-business thrust, some times compelled, sometimes ·con doned, by dominant voices of popu lar opinion. For public opinion in this country has always been in fected to a degree by dread, dis trust, even hatred· of "big busi ness." Thus Mr. Nader and his raiders, J. K. Galbraith, Vance Packard, even Marcuse, are far from representing a new attitude. They express the same fear, the same suspicion, that brought about the Interstate Commerce Act and the Sherman Act in the nineteenth century and the mountain of re strictive legislation and court deci sions of this century. In a word, what they fear and suspect is eco nomic power. The populist . antipathy toeco nomic power in general and to big business in particular has not swept all before it. Ambivalence among the. populists themselves, the achievements of American big business, and a persistent minority in favor of liberty and its political corollary, laissez-faire, have also influenced· our public policies. Poli ticians and bureaucrats have known, too, that they could have $300 .billion to spend each year only if the economy produced $700 billion to $1 trillion a year - an unattainable result without large scale economic activity. Hence they have been astute over the years to balance the Sherman Act and other anti-business laws with appropriations small enough to guard against absolute frustra tion of the need of businessmen for flexibility and freedom. Like wise they have been careful .to mitigate populist insistence upon confiscatory income taxation with many loopholes, and with taxes upon capital gains modest enough to guarantee the continued growth of capital. and the survival of the capital markets· upon which the progress .and well-being of the American economy rest.

However, the dominant trend in the public policies of this country has nevertheless been toward ever increasing regulation of business. Congress and the state legisla tures year by year add to the bur den of restrictive legislation. The courts, especially .the Supreme Court of the United States, zest fully enforce far beyond its letter and spirit all legislation limiting the freedom of businessmen; at the same time, they read virtually out of existence laws, doctrines, and principles which would tend to preserve to businessmen the rights and the freedom recognized in the classic common law. In so deciding, the courts leave little room for doubt of the phil214 THE FREEMAN April osophy underlying their decisions. Whether we speak of antitrust or labor-law decisions, or even of private-law decisions in which the common-law courts take sides against business, the same theme prevails: Economic Power - it is as much to be dreaded, and there fore to be confined, apparently, as the threat of conquest by enemies from abroad or of chaos by crimi nals from within.

Such views and policies, the works of Ludwig von Mises dem onstrate, are full of disastrous fal lacies. The person who follows Mises' argument emerges, on the contrary, with the conclusions that, far from being an object properly of fear and doom, econ omic power is in all ways good and wholesome; that there are few, if any, capabilities at once so in nocent of social harm and so pro ductive of social benefit; and that the fear of economic power which now threatens to tie up the econ omy in knots is the product of ig norance, confusion, and supersti-' tion. The Nature of Power Much of the confusion traces to conceptual complexity in the term "power" itself. The word "power," integrally associated with the prob lem of causation, refers basically to the capability of affecting re ality, of bringing about effects, changes, results. Some results are brought about by strictly indi vidual action, as when primitive man fells a tree with his bare hands or with a tool fashioned by himself. His will, his act, his power is the only human one in volved there. In society, things are different. In society, all power, whether of the economic or politi cal variety, rests upon cooperation.

This is true of the capacity of a criminal to compel a change in the location of money, from his vic tim's pocket to his own. Without the cooperation of all those sectors of society which feed, clothe, and arm him, the criminal is helpless to bring about the result he seeks - unless of course he does it with no aids other than those available to the bushman, in which case his power analyzes out as the same, equally modest and precarious. In society, and especially in re spect of operations of a certain scale, power of all kinds, to repeat, rests upon cooperative activity; and, more than that, cooperative activity resulting from a coinci dence of opinion. Although he was referring to only governmental or political power, David Hume was correct generally in relating power to opinion. One way or another, di rectly or indirectly, both economic and political power are founded in opinion.

Ortega y Gasset thought it nec19'72 THE ECONOMIC-POWER SYNDROME 215 essary, in The Revolt of the Masses, to distinguish in his dis cussion of governmental power be tween political aggression and po litical rule. Observing the plain fact that Napoleon's conquest of Spain obviously did not accord with the opinion of the Spanish people, he said: "It is necessary to distinguish between a process of aggression and a state of rule." The distinction, however, is both unnecessary and misleading; Napoleon could subjugate Spain only because its whole people, rela tive to the people of France from whom Napoleon derived his power, amounted to a minority. The same situation prevails between the peo ple of Russia and the people of Czechoslovakia today. The power of Russia to quell the Czech revolt was founded in the opinion of the Russian people, or at any rate of the .ruling maj ori ty of Russians, that it was better to support their government in its domination of the Czechs than to withhold such support. I dare say that the same phenomena of maj ority rule de termined the events in this coun try in the period 1861-65. The opinion of Northerners prevailed over the opinion of Southerners because there were more of them and they had more hardware. · It is important to observe the comprehensiveness and uniformity of the relationship between opinion and power. Within Spain dur ing the Napoleonic wars, or Czech oslovakia today, or the Southern States during the War between the States, the situation was not different in kind from the situa tion between those countries and the aggressors who subjugated them. Within each, the govern ment, resting upon the opinion of the majority, similarly subjugated nonconsenting internal minorities.

The government of Napoleon had to deal with recalcitrants not only in Spain but also in France; and the same was true within the Northern States in 1861-65 and is true today within Russia. The internal government of any state, in brief, while resting as long as it lasts upon the opinion of the consenting majority, im poses its will by force upon a non consenting minority. That is the specific nature of government power. I have had to emphasize, the point because it is common in our time to overlook this feature of political power, and because, in overlooking this obvious feature, much of the confusion relating to economic power rests. The sharp difference between economic power and political power does not reside in their respective foundations; both kinds of power rest in opinion. The significant dif ference between economic and po216 THE FREEMAN April litical power rests in the purely consensual .character of economic power as contrasted to the only partly consensual character of po litical power. For no businessman, qua businessman, can ever compel a nonconsenting minority to deal with him. It is the very essence of government, however, to impose the will of the majority upon the nonconsenting minority. The dif ference, then, lies not in the foun dations of economic power and po litical power but in their respec tive effects and modes of operation.

The productive power of any business has its beginning in the man or men who found it and who are able to convince others to in vest their capital and their talents in it. However, the business suc ceeds only if the consumers ap prove its production. In a market economy there is no way for a firm to compel anyone to deal with it or to purchase its goods and services. As Ludwig von Mises has said so often, the consumers daily vote for and against the products of American business. Those firms which gain the patronage of the consumers prosper; those which do not, lose ground. In rewarding those who best serve the consum ers, the profit system constantly insures that current allocation of resources which best suits the cur rent wishes of the community. It expands the assets of those firms endorsed by public opinion; it en hances their capacity to bid in the market for other factors of pro duction and thus to increase their economic power - by which I mean their power to produce.

The secret of the so-called am bivalence of American public pol icy toward big business resides in the phenomena just described. On the one side, mainly from "intel lectuals," we hear much about the abuses, the evils, the dark powers of big business to destroy small business, to exploit workers, .and to impose its will upon consumers. But these charges, however often made, and however well publicized, have only a limited effect, fre quently no more than the crackling of thorns under a. pot. They re sound hollowly against the pro digious fact that business grows big only because and to the extent that public opinion favors it with its voluntary purchases. More than that, if the polls are correct, Amer icans favor and admire big busi ness in "greater numbers than they do any other institution, including the government. However, since the anti-business opinion has an effect also, we emerge with fra.g mentary, inconsistent, and am15iva lent policies.

It is impossible to understand properly either the meaning of economic power or the real stand':' ing of business in the community 1972 THE ECONOMIC-POWER SYNDROME 217 without a full and accurate grasp of this fact of consumer sover eignty in the market economy. The late Mr. Adolph A. Berle, in many ways a learned man and a. keen observer of contemporary society, illustrated in his well-known writ ings a characteristic error, trac ing to inadequate grasp of con sumer sovereignty. Although year by year he grew more moderate in his criticisms of big business, yet, even in his latest book, Power (1969) he continued to hold to a confused view of economic power. He attributed to that power a species of capability, a capacity for decision and action which it simply does not possess. He spoke as though big business had un limited power in the disposition of resources, the direction of in vestment, choice of product, amount of production, and level of price. From others, such as J. K.

Galbraith, such a blunder might be expected. But Mr. Berle was a different case: he frequently dis played a genuine understanding of consumer sovereignty. For ex ample, in his latest book, he had this to say: In economic life, every decision made affects, in some way, every life in the modern world. This is the peculiar quality of economics. The im pact of economic-power decisions may be imperceptible or great, but it is al ways there. The· woman who chose nylon stockings instead of silk (a choice she still has, though nylon has clearly Yvon the campaign) affected the lives of silk growers in Japan, China, and Southeast Asia. Consumer Power Once one grasps the significance of the female preference for nylon hosiery, it is no longer possible to mistake the locus of ultimate power. The Dupont Company has power, of course, but it is only the same kind of power to propose, to offer, that everyone else has, in business and out. Business pro poses, the· consumer disposes. If she disposes favorably the busi ness prospers and may expand. If not, the business must mend its ways or retire from the field.

The business must do more than propose an attractive product. It must have the capability to de liver that product at an attractive price which still exceeds produc tion costs. When it demonstrates that capability, it demonstrates at the same time its social qualifica tion~ Profitability and social utility are two names for the same thing. The business that makes losses has abused the society in which it operates; the business that makes profits has served it; and, remark. able as it may seem, it follows tha t the higher the profit, the greater the service. Much current literature views the word "profit" and· its referent 218 THE FREEMAN April in reality _as downright obscene. Nevertheless, the facts are what they are. The firm that must sell below cost and which, therefore, experiences losses rather than profits, has done society in, and deserves to be penalized rather than praised. It has directed fac tors of production improperly, from the point of view of con sumers and society as a whole. It has engaged in a course of pro duction the full costs of which the consumers are unwilling to pay.

In refusing to pay those full costs and thus imposing losses upon the incompetent producer, the sover eign consumers redirect produc tion in a manner more to their liking. Literature of the "New Left" Current "new-left" -literature faithful to its mentors, Messrs. Galbraith, Packard, Marx, and Marcuse - rejects the foregoing analysis. It insists that economic power involves a form of compul sion even more obj ectionable than the physical compulsion exerted by gangsters or by the armed forces of the state. Professor Mises' prin ciple of consumer sovereignty, they say, is a pure myth; the fact is that the concentrations of eco nomic power in big business com pel the consumers by way of ad vertising to want _certain things and to fulfill those wants in ways which serve the interests of big business, not of the people. No conscious human being-with normal sensory equipment can fairly dismiss these charges out of hand. All media of communication bombard us constantly with com mercial exhortations, appealing to every aspect of human nature, from the most elemental to the most sophisticated, from the sub~ liminal to the most obvious and coarse. There -can be no doubt about it. Advertising has us all in siege. And its objectives are among others to expand, shape, and direct our desires.

The question, however, is whether, in what circumstances, and to what extent advertising succeeds. It will not do, in seeking an answer, to confine our attention to the claims of advertising agen cies and Messrs. Galbraith, et al. They beg the question; they do not resolve it. Condensed to its meaningful point, the charge is that, by adver tising, big business substitutes its will for that of the consumers, thus making the principle of con sumer sovereignty a mere myth. The fundamental weakness in the Galbraithian thesis is its dis regard of certain evident aspects of human nature. For better or for worse, mankind is so consti tuted as to preclude thesubstitu tion of one man's will for an1972 THE ECONOMIC-POWER SYNDROME 219 other's, except fragmentarily and temporarily, and then only by brute force, not by any other means. No matter how often per sons may be bombarded by an ap peal to buy Pepsodent, or. Colgate, or Crest, the actual decisions when they stand at the counter as to whether to buy toothpaste at all and, if so, which brand, must be made inside each person's mind. In all but the autonomous functions of the body, human beings must act, must choose, as Mises says, and their choices, their actions, proceed necessarily from within.

Our limbs and organs are all in ner-directed. Some weight might justly be ac corded the Galbraithian thesis in a socialist society, where control of all production and all media of communication were concentrated in the same men who controlled also· the physical power of society. In such a society the faculty of choice would still remain, but it would, so to speak, lack traction. It would have nowhere to go, like an automobile with bald tires on slick ice. The government control of all media, from the schools to television, would come close to brainwashing the public, and the lack of variety in··consumer goods would carry forward the demoli tion of practical choice. Consum ers would still retain their in destructible humanity; notwithstanding the brainwashing at tempts, they would still have wants and still have to make their own choices; but they would have little scope to exercise their power or fa«ulty of choice.

Even sO,however, traces of the sovereignty which is fully theirs in market economies would remain also in socialist societies,· for so long as man is man, he must choose if he is to live. So, in Rus sia today, there are shortages in some lines of consumer goods and surpluses in others. To that ex tent, the consumer remains king, even in Russia, though only in rags. In a market economy, the Gal braithian thesis makes no sense at all. The characteristic features of a market economy all tend toward providing traction for the faculty of subjective choice. Au thority to use physical force is confined to the state. The media of communication are free. The con sumer is encouraged on all sides to choose from a vast array of competing goods and services. American Motors, Chrysler, Ford, and General Motors must not only compete with each other; they have also to contend with Volks wagen, Mercedes-Benz, Toyota, and Fiat. And all the motor com panies must compete with the air lines, the bus lines, the railroads, the subway systems, as well as the 220 THE FREEMAN April firms which encourage consumers to stay at home or enjoy them selves in their gardens. Even American Telephone and Tele graph competes. It urges us to call, not write. The much maligned soap manufacturers have only one thing to say: "Buy our product."

Ultimately, when one thinks things through, that is the basic message of all commercial adver tising. Advertising agencies claim, quite rightly, I believe (on the whole at any rate), a special ability to bring products and serv ices to the attention of consumers. Their job is to acquaint the public with the fact that such and such a product exists and to urge that it be given a try. From there on, the consumer and the product must fend for themselves. The product must make good on the claim made for it. Thus under stood, the specific function of ad vertising is to promote competi tion. Any other claim for it, whethey made by advertising men or Messrs. Galbraith et al., is mere puffing. If big business and its adver tising had the power attributed to it by Messrs. Galbraith et al., the avidity of men and women for ma terial goods would be a new phe nomenon, observable in human history for the first time only in the last fifty years or so. After all, big business is a new ,phe nomenon in the world, and adver tising agencies are still newer.

But is it true that men and women have grown remarkably desirous only in the last fifty or hundred years? The question answers it self. ,On the first page of'the first his tory book ever written, The His tory of Herodotus, recounting the wars between the Greeks and the Persians, the author reports that "according to Persians best in formed in history, the Phoenicians began the quarrel." How was that? Herodotus continues: They ianded at many places on the coast, and among the rest at Argos .... Here they exposed their merchan dise, and traded with the natives for five or six days; at the end of which time ... there came down to the beach a number of women, and among them the daughter of the king .... The women were standing by the stern of the ship intent upon their purchases, when the Phoenicians, with a general shout, rushed upon them. The greater part made their escape, but some were seized and carried off....

Anyone who has ever had the mis fortune to be in Macy's on a sales day will know that, whatever Galbraith says about it, big busi ness and advertising have not changed women very much in the intervening two thousand four hundred years.

1972 THE ECONOMIC-POWER SYNDROME 221 Nor men, either. Aristotle wrote only for men, it seems, in the Nichomache,an Ethics. In discuss ing and urging the virtue· of tem perance, he admonished against the development of voluptuary habits. More to the point, he fo cused upon the inner sources of luxurious desires. "It is absurd," he said, "to make external circum stances responsible, and not one self, as being easily caught by such attractions." There was hard ly any business around at all in Ancient Greece, let alone big business, and B.B.D. & O. were still in the far off future. Such too was the case in 17th century England, when John Locke took . note of the insatiable desires of mankind for material goods and services. He said: We are seldom at ease, and free enough from the solicitation of our natural or adopted desires, but a con stant succession of uneasiness out of that stock which natural wants or ac quired habits have heaped up, take the will in their turns; and no sooner is one action dispatched, which by such a determination of the will we are set upon, but another uneasiness is ready to set us on work.

The Galbraithian-SDS thesis is out of touch, not only with the most profound and persistent re alities of human nature, but also with the available statistical evi dence concerning the use of commercial advertising. Far from es tablishing the contention that big, concentrated business to some marked extent uses advertising to warp consumer desires, recent re searchers reveal: (1 ) that there is no significant correlation between industrial concentration and ad vertising; and (2) that there is in deed a contrary tendency, with ad vertising expenditures tending to rise as industrial concentration decreases. Sources of Misunderstanding I must deal more briefly with the two remaining major sources of. misunderstanding which make up the "economic-power" syndrome - (1) the belief that economic power can buy political power or that, at any rate, (2) economic power can shape the political opin ions of the community more or less at will.

The first of these can be dis patched fairly readily. Certainly it is true that public servants at every level of government are "for sale," as every person is, for that matter. The question is, however, in what medium of exchange do they do business? In contemporary repres.entative government, the medi urn of exchange is votes. While the wealthy and the big businessmen could and do bid vig orously in the medium of exchange which they are well supplied with, 222 THE FREEMAN April namely, money, the sad fact from their point of view is that they are not very extensively supplied with votes - and votes are what count. If Tocqueville was correct, this situation has prevailed throughout American history. Writing in 1840 or so about Amer ica, he said: "At the present day the more affluent classes of so ciety have no influence in political affairs; and wealth far from con ferring a right, is rather a cause of unpopularity than a means of attaining power."

One may argue that while dol lars are not convertible into gold, they are convertible into votes, and this is to some extent correct. But only to about the same extent as it would be correct to point out that dollars can buy officials di rectly. In both cases dollar con vertibility is only marginal: a drunken Bowery derelict will sell his vote for a bottle of whiskey; a faithless official will take a bribe here and there. But the wealthy and the big businessmen are unable to! buy public policies with their dollars. If they seek tariffs, exclusive franchises, import quotas, and other such measures, they do not succeed· unless the measures they seek coincide with public opinion. Only public opinion to the effect that such policies are good· for the country on the whole will secure their adoption. And when the pub lic is convinced of the merits· of a particular policy, dollars are in capable of affecting the result one way or another.

Subsidies for the poor, for com muters, for farmers, for the mari time industry, and pretty soon for everybody else in the country all these are traded by politicians in return for votes, not in return for dollars. When industry repre sentatives go to Washington for tariffs and import quotas, they are told to return only when they can show some political currency. If they return with trade-union rep resentatives, men who are thought to command votes, and if the union men join in seeking protectionist policies, the tariffs and quotas are forthcoming; otherwise not. The current situation with re spect to tax exemption for interest on municipal bonds makes the point rather well. By and large such bonds are purchased by more or less wealthy people. But if their interest were to be consulted ex clusively, there is no doubt that the tax exemption would be re moved. The exemption continues because the citizens in lo~al com munities, desiring local govern mental services, such as public schools, insist upon it. And they insist upon it because, in their (ultimately incorrect) opinion, tax1972 THE ECONOMIC-POWER SYNDROME 223 exempt municipal bonds reduce for the taxpayers the costs of the services in question.

For the disinterested observer, his reason unimpaired by passion and prej udice, there is no need to go on at length with this point. It is sufficient to notice that over the past hundred years in this country, the steady trend of legis lation has been against the wealthy and the successful businesses. David Hume was correct in stating as the first principle of govern ment that all public policies are founded in opinion. On the other hand, in declaring that govern ment in capitalist countries serves exclusively the interests of the wealthy, Karl Marx was as wrong as he was when he said that prof its come exclusively from the ex ploitation of labor and that in creasing poverty for the masses is the inevitable consequence under capitalism. An Argument Omitted Strangely· enough, the victims of the economic-power syndrome have left almost completely unde veloped an argument which, if they could sustain it, would carry the day for them. They could be arguing that, while it is true that all government rests upon opinion - on political votes rather than dollars - the wealthy and· the big businessmen control .government by controlling the political and so cial ideas of the citizenry. Why is this argument so rarely made?

I offer as a possible answer the fact that the argument is so pat ently at odds with reality. If we confine ourselves to reality we cannot help observing a tremen dous disproportion in all the areas of intellectual communication and opinion-forming. A vast majority of instructional personnel from grade-school through graduate school roams somewhere left of center. Most newspaper colum nists, moreover, consider them selves leftist-liberals and spend little time vaunting the virtues of capitalism. For every best-selling author on the right, there are at least ten on the left. Foundations established by the wealthy spend infinitely greater sums promoting the welfare state than they do in defending capitalism. Professor Paul Samuelson has become a wealthy man as author of an eco nomic text sympathetic with the welfare' state, if not with social ism. Galbraith's books become au tomatic best sellers. The works of Ludwig von Mises, the most pow erful protagonist of capitalism in print, do not sell in sufficient quantities to feed him.

Let us now approach the prob lem more systematically. The con tention that economic power trans lates into political power by way 224 THE FREEMAN April of political indoctrination of the masses would have to establish, in the first place, that the wealthy and the big businessmen are them selves uniform exponents of a par ticular policy or set of policies, for the first requirement in any indoctrination is a doctrine. But the argument then stumbles at the threshold. The one outstand ing and apparent fact about the wealthy and the big businessmen and the institutions they found and support is ideological diver sity. If we place H. L. Hunt on the right, as is customary these days, where shall we place the Rocke fellers, the Kennedys, the Fords? And should we place all the· Rocke fellers in the same category? Where exactly would you place the Kennedys, father and sons? There is no common ideology among the wealthy and the big businessmen, just as there is no common ideology among the mas ses. There are only vague, half formed, often contradictory opin ions, which veer one way now and 'another way again. They spend their money accordingly. The foundations and institutions at tacking capitalism and free enter prise and the profit system seem to have plenty of money. As far as I havebeen able to tell, the few foundations and colleges which promote free enterprise rarely, if ever, are wealthy.

Recapitulation I have tried to make three points: 1. Economic power, like political power, rests upon favorable opin ion, the sovereign opinion of con sumers; unlike political power, however, it produces wealth in the form of goods and services and has no compulsory capabilities. The consumers reward with profits those firms which serve the com munity and penalize with losses those firms which do not. 2. There is no way at all in a mar ket economy for business. to sub stitute its will for that of the con sumers in respect of demand for goods and services; it. proposes, the consumer disposes; the con tention that advertising can sup plant the will or implant desires in consumers conflicts with every thing we know about human na ture as well as with the external facts of life in the market econ omy. 3. Economic power is not convert ibleinto political power. The medium of exchange owned by the possessors of economic power is money; the medium of. exchange in politics is the vote. Dollars are produced by economic capability; votes flow in accordance with po litical opinion. Unless the holders of dollars represent interests which coincide with the independ ently derived opinions of the voters, the interests of the wealthy are doomed.

1972 THE ECONOMIC-POWER SYNDROME 225 I have in this brief paper failed to deal with a number of features of the economic-power syndrome: the relations between big business and small business, the relations between business and employees, the Jeffersonian ideal of a society composed of farmers and small tradesmen, the notion that the managerial revolution heralded by Berle and Means and by Burnham has somehow incapacitated big business for the service of the community. With respect to these I can say only that there was not space. My silence on these points is not to be taken as an admission of their strength. On the contrary, I believe it a simple matter, on the basis of the points which I have dealt with, to demonstrate equal weaknesses in those which I have not had the opportunity to discuss here. I wish to say but one thing more, and to quote a statement which sums up what I have had to say here. First, I would not have my remarks interpreted' as an apologia for the wealthy or for big .business as such. My main in terest has been to clarify thought on the subject of economic power.

Secondarily, my interest is in con sumer sovereignty and its princi pal servant: the system of free competition emerging from those two common-law institutions, private property and freedornof con tract. Ludwig von Mises has sum med up a large part of what I have been trying to say. As he puts it: The rich, the owners of the already operating plants have no particular class interest in the maintenance of free competition. They are opposed to confiscation and expropriation of their fortunes, but their vested in terests are rather in favor of meas ures preventing newcomers from challenging their position. Those fighting for free enterprise and free competition do not defend the inter ests of those rich today. They want a free hand left to unknown men who will be the entrepreneurs of tomorrow and whose ingenuity will make the life of coming generations more agreeable. They want the way left open to further economic improve ments. They are the spokesmen of progress ....

It is manifestly contrary to the in terest of the consumers to prevent the most efficient entrepreneurs from ex panding the sphere of their activities up to the limit to which the public ap proves of their conduct of business by buying their products. Here again, the issue is who should be supreme, the consumers or the government? In the unhampered market the be havior of consumers, their buying or abstention from buying, ultimately determines each individual's income and wealth. Should one vest in the government the power to overrule the consumer's choices? t) MOST of the self-styled liberals of the present day would be aston ished to learn that the father of the welfare state that they so much admire was none other than the fervent antiliberal and advo cate of "blood and iron", Otto von Bismarck. "He was the first statesman in Europe to devise a comprehensive scheme of social security, offering the worker insurance against ac cident, sickness, and old age. This Bismarckian 'socialism' later be came a model for every other coun try in Europe. It represented in part the paternalistic function of the state which Bismarck, as a con servative, had always held."1 Bismarck's scheme of compul sory insurance went into effect in Henry Hazlitt is well 19town to Freeman readers as author, columnist, editor, lecturer, and practitioner of freedom. This article will appear as a chapter in a forthcoming book, The Conquest of Poverty, to be published by Arlington House.

226 The ~allooning WelfareState HENRY HAZLITT 1883, and was soon even baptized by German journalists as der Wohlfahrtsstaat. The example of Germany was followed by Austria in 1888 and by Hungary in 1891. It was not till 1912 that com pulsory health insurance was in troduced in Great Britain, under Lloyd George's National Insurance Act of 1911. In 1925 came con tributory old-age, widows' and or phans' pensions. Unemployment in surance was put on a fresh basis in the Unemployment Act of 1934, which set up at the same time a national system of unemployment assistance. In 1945 the Family Al lowance Act was passed. It pro vided for payment to every family, rich or poor, of an allowance for each child, other than the eldest. In 1946 came the National Health Service Act, offering free medical services and medicines to every one.

1972 THE BALLOONING WELFARE STATE 227 Then, in 1948, as a result of the report of Sir William Beveridge, the whole system of compulsory contributions for social insurance was immensely extended, with wider unemployment benefits, sick ness benefits, maternity benefits, widows' benefits, guardians' allow ances, retirement pensions, and death grants. The continuous expansion of "social security" and welfare serv ices in Great Britain is typical of what has happened in most other countries in the Western world over the last half century. The broad pattern has been remarkably similar: a multitude of "insur ance" programs, supported in part by compulsory contributions and in part by general tax funds, ostensibly protecting everyone against the hazards of poverty, unemployment, accident, sickness, old age, malnutrition, "substan dard" housing, or almost any other imaginable lack; programs ex panding year by year in the num ber of contingencies covered, in the number of beneficiaries under each program, in the size of in dividual benefits paid, and of course in the total financial burden imposed.

So, year by year, the tendency has been for every working person to pay a higher percentage of his earned income either for his own compulsory "insurance" or for the support of others. Year by year, also, the total burden of taxes tends to go up, both absolutely and proportionately. But direct and acknowledged taxes have tended to go up less than total expendi tures. This has led to chronic deficits that are met by printing more irredeemable paper money, and so to the almost uni versal chronic inflation that marks the present age. Growth 01 Welfare Programs in the u.s. since J935 Let us look at the ballooning welfare state in detail as it has developed in our own country. We may begin with President Franklin D. Roosevelt's 1935 mes sage to Congress in, which he de clared: "The Federal Government must and shall quit this business of relief .... Continued dependence upon relief induces a spiritual and moral disintegration, fundamen tally destructive to the national fiber."

The contention was then made that, if unemployment and old age "insurance" were put into ef fect, poverty and distress would be relieved by contributory pro grams that did not destroy the in centives and self-respect of the re cipients. Thus relief could gradu ally be tapered off to negligible levels.

228 THE FREEMAN April The Social Security Act became law on August 4, 1935. Let us see first of all what hap pened to the old-age provisions of that act. There have been constant additions and expansions of bene fits. The act was overhauled as early as 1939. Coverage was broad ened substantially in 1950. In 1952, 1954, 1956, 1958 and 1960 (note the correspondence with years of Congressional elections) there were further liberalizations of coverage or benefits. The 1965 amendments added Medicare for some 20 million beneficiaries. The 1967 amendments, among other liberalizations, increased payments to the 24 million beneficiaries by an average of 13 per cent and raised minimum benefits 25 per cent. In 1969, retirement and sur vivors benefits were raised again by about 15 per cent, effective January 1, 1970. (It is sometimes argued that these benefit increases from 1950 to 1970 were necessary to keep pace with increases in living costs.

Actually, the increases in individ ual monthly benefits totaled 83 per cent, compared with a 51.3 per cent increase in consumer prices over the same period.) from $60 to $936 From 1937 to 1950, Social Se curity was financed by a combined tax rate of only 2 per cent on both employer and employee (1 per cent each) on wages up to $3,000 a year. Since then both the rates and the maximum wage base have been increased every few years. In 1972 the combined tax rate is 10.4 per cent (5.2 per cent on each the employer and the employee) on a maximum wage base that has been raised to $9,000. The result is that whereas the maximum annual payment up to 1950 was only $60, it has risen to $936. In 1947, payroll tax collections for old age and survivors insur ance amounted to $1.6 billion; by 1970, these taxes had increased to $39.7 billion. At the beginning, the Social Se curity program was sold to the American public as a form of old age "insurance." The taxes were represented as the "premiums"

paid for this insurance. Every body who was getting benefits was assured that he could accept these with no loss of "dignity',', because he was "only getting what he had paid for." This was never true, even at the beginning, and has become less true year by year. The low-wage receivers have always been paid much more in proportion to their "premi urns" than the higher-wage receivers. The disparity has been increased with succeeding revi sions of the act. The typical bene1972 THE BALLOONING WELFARE STATE 229 ficiary even today is recei ving benefits worth about five times the value of. the payroll taxes. he and his employer paid in.2 A Sad Mixture of Insurance and Hand~uts The OASDI program has devel oped into a mixed system of insur ance and welfare handouts, with the welfare element getting con stantly larger. It is today a bad system judged either as insurance or as welfare. On the one hand, benefits in excess of the amounts they paid for are being .given, in some cases, to persons who are not in need of welfare. On the other hand, persons who are in fact re ceiving welfare handouts are be ing taught to believe that they are getting-only "earned" insurance.

Obviously, welfare programs can be expanded even faster than otherwise .if they are masked as "contributory insurance" pro grams. Our concern here, however, is not with the defects of the OASDI program but primarily with its rate of growth. In 1947, social se curity benefit payments covered only old-age and survivors insur ance and amounted to less than half a billion dollars. In 1956, dis ability insurance was added, and in 1965, health insurance. In 1970, these payments reached about $39 billion. Unemployment Insurance Now, let us look at unemploy ment insurance. This program was also set up under the Social Se curity Act of 1935. But whereas old-age insurance was on a strictly national basis, unemployment in surance was instituted on a state by-state basis within the broad scope of certain Federal criteria. While provisions have differed in each of the fifty states, unem ployment insurance has shown the same chronic growth tendency as old-age benefits. In 1937, the states typically required periods of two or three weeks before any benefits were paid. The theory behind this was that a man just out of employ ment would have at least some minimum savings; that the state would be given time to determine his benefit rights; and that the benefit funds should be conserved for more serious. contingencies by reducing or eliminating payments for short periods of unemploy ..

mente Now the waiting period has been reduced to -only one week, and in some states does not exist at all. In contrast with the $15 to $18 weekly benefit ceilings in various states in 1940, the maximums now range between $40 and $86 a week, exclusive of dependents' allow ances in some states. Reflecting both legislated in;;. creases and rising wage levels, na230 THE FREEMAN April tionwide average weekly benefit payments increased from $10.56 in 1940 to $57.72 in 1971. Even after allowing for higher consumer prices, the real increase in pur chasing power of these average benefits was 63 per cent, and they continue to increase much faster than either wages or prices. For example, from its average in 1969, the weekly payment in June, 1971, had increased 25 per cent as com pared to an8 per cent increase in wages and an 11 per cent increase in prices. Fulltime Benefits As of 1971, state legislation had increased the maximum dura tion of unemployment benefits from the predominantly prevailing 16-week level in 1940 to 26 weeks in 41 states - and of longer dura tion ranging to 39 weeks in the other states. In December, 1971, Congress voted to provide. 13 weeks additional benefits in states with sustained unemployment rates of more than 6~ per cent.

This made it possible for workers in such eligible areas to draw such benefits up to a total of 52 consecutive weeks. Total annual benefit payments increased from about one-half bil lion dollars in 1940 to $3.8 billion in 1970 - more than a seven-fold increase and the highest payout in history. In 1970 alone, total benefits increased 80 per cent ($1.7 billion) over the 1969 level. The combination of legislated increases in maximum weekly benefits and in maximum duration of the bene fits has increased nearly tenfold the total benefits potentially pay able to the individual unemployed worker in a year's period (dollars per week multiplied by the num ber of weeks). 3 This is bound to increase still further. On' July 8, 1969, Presi dent Nixon called upon the states to provide for higher weekly un employment compensation bene fits. He suggested that weekly maximums be set at two-thirds of the average weekly wage in a state so that benefits of 50 per cent of wages would be paid to at least 80 per cent of insured workers.

Only one state - Hawaii - re sponded promptly with the full raise suggested, but other states have scheduled future increases. There can be no doubt that un employment compensation reduces the incentive to hold on to an old job or to find a new one. It helps uniQns to maintain artificially high wage rates and it prolongs and increases unemployment. One economist has likened it to "a bounty for keeping out of the la har market."4 Moreover, it is a complete mis nomer to call it unemployment "insurance." In the United States 1972 THE BALLOONING WELFARE STATE 231 the workers do not even make a direct contribution to it (though in the long run it must tend to re duce the real pay of the steady worker). Like so-called govern ment old-age "insurance", it is in fact a confused mixture of insur ance and handout. Those who are continually urging an increase in the percentage of the previous wage-rate paid, or the extension of the benefit-paying period (to avoid undisguised relief), forget that it violates ordinary welfare standards of equity by paying larger sums to the previously better-paid workers than to the previously lower-paid workers.

But apart. from these shortcom ings, what we are primarily con cerned with here is the tendency of unemployment compensation, once adopted, to keep growing both as a percentage of weekly wages Leisure Is Not Free and in the length of idle time for which it is paid. Just what success, if any, the increasingly costly Social Security and unemployment compensation programs have had in enabling the Federal government to "quit this business of relief" we shall see in a subsequent article. ~ • FOOTNOTES • 1 Encyclopedia Britannica, 1965, ar ticle "Bismarck", Vol. 3, p. 719. 2 Colin D. Campbell and Rosemary G. Campbell, "Cost-Benefit Ratios under the Federal Old-age Insurance Program," U. S. Joint ECQnomic Committee, Old-age Income Assurance, Part III (Washing ton, D. C., U. S. Government Printing Office, December 1967), pp. 72-84. 3 Much of the foregoing material on Social Security and unemployment com pensation is derived from studies by the American Enterprise Institute, Wash ington, D. C.

4 W. H. Hutt, The Theory of Idle Re sources (London: Jonathan Cape, 1939), p.129. IDEAS ON $ LIBERTY LEISURE IS NOT FREE. To the extent that we choose it rather than productive work, we exchange it for real income. Longer vaca tions, more holidays, and other time-off practices - like a shorter work week - must all be charged against real income. The aver age worker has gained about 50 hours in additional vacation time since 1960. The ten-hour, four-day week may not reduce work time; it may even add to the productive use of resources and equipment. But by emphasizing leisure instead of work it is likely to point in an unhelpful direction. HERBERT R. NORTHRUP, professor of industry and. director, Industrial Research Unit, Wharton School of Finance and Commerce.

CLARENCE B. CARSON THE FOUNDING OF THE AMERICAN REPUBLIC 9 Prelude to Independence 232 THE ISSUE was joined, and unre mittingly pressed, after Parlia ment passed the Coercive Acts in 1774. George III declared in Sep tember of that year that "the die is now cast, the colonies must either submit or triumph .... "1 Young Alexander Hamilton put the matter this way: "What then is the subject of our controversy with the mother country? - It is this, whether we shall preserve that security to our lives and prop erties, which the law of nature, the genius of the British consti tution, and our charters afford us; or whether we shall resign them into the hands of the British House of Commons .... "2 Heretofore, when Britain had been faced by colonial resistance, Parliament had backed down. This time, .Parlia ment held its ground, and the ex ecutive prepared to use force. When that happened, a new dimen sion was added to the issue, the dimension of independence - inde pendence or submission.

Colonial leaders· did not rush to formulate the issue in this way. On the contrary, they clung to the con nection with Britain, continued to profess their allegiance to the king, and indicated a willingness to negotiate if Britain would· atDr. Carson shortly will join the faculty of Hillsdale College in Michigan as Chairman of the Department of History. He is a noted lecturer and author, his latest book entitled Throttling the Railroads.

1972 PRELUDE TO INDEPENDENCE 233 tend to their grievances. Indeed, George III had been ruling for six teen years before independence was declared, specific grievances had .gone unresolved. for thirteen years, and British troops were en camped against American forces for more than a year . Colonists did sometimes rush· to resist par ticular measures, but they moved very slowly in conceiving of chang ing their relationship to Britain. Nor can it be maintained that the colonists moved slowly in grasping the nettle of independ ence in order simply to manipu late the British into taking aggres sive measures which would deter mine the outcome of the question. The provocation came increasingly without the aid of colonial induce ment. Probably, most Americans did not want independence throughout the years of resistance. What is even more certain is that many Americans did not want the quarrel to eventuate in· independ ence and that others who did be gin to think of separation were loathe to alienate this goodly num ber so .long as it could be avoided.

So far. as we can tell, virtually all Americans opposed various of the British measures, with the obvious exception of Crown officiaJs. This near unanimity was sundered by the question of independence. The slowness of the movement for in dependence to surface can be attributed to the desire to avoid in ternal divisions as well as, per haps, the calculation of leaders not to outrun their followers. The colonists, in any event, did not move· SWiftly toward deciding for independence; and on the posi tive side, they employed delibera tive bodies when and where they could to make the decisions. Of course, these deliberative bodies were frequently not legal, but they were the nearest thing to it that the colonists had available. From 1774 into 1776 the colonists were frequently denied their legal legis lative assemblies; and when these could not meet, other bodies re sembling them were assembled.

The First Continental Congress The main focus of the Coercive Acts was on Boston and Massachu setts. The Boston· Port Act which closed the port of Boston until the tea was paid for might conceivably have separated Boston from the rest of Massachusetts, at least for a time. But when other acts fol lowed to alter the government of all of Massachusetts, this potential effect was nullified by Parliament itself. There was a greater prob ability that Massachusetts would be isolated from the other colonies and that the British might succeed in a policy of divide and conquer. But the colonial leaders were in tent on preventing any such policy 234 THE FREEMAN April from succeeding. The Committees of Correspondence were already in existence. Moreover, other colonies had grievances of their own as well as those shared with Massa chusetts. Confronted with the Coercive Acts, some of Boston's leaders wanted to take immediate eco nomic measures against Britain by way of retaliation. However, there was widespread sentiment throughout the colonies for a con gress to be held to decide upon what action to take. Providence c~lled for such a congress on May 17, Philadelphia on May 21, and New York City on May 23. The Massachusetts House of Repre sentatives went along with the idea by issuing a call for a congress on June 17. Within colonies, delegates were elected by provincial con gresses or county conventions.

The First Continental Congress met in September, 1774, in Phila delphia. Twelve colonies sent 56 delegates. Only Georgia did not send delegates, which was not sur prising, since that colony was not very populous, its government was not self-supporting, and it was de pendent more than others on Great Britain. But before the Congress as sembled, important new formula tions of ideas had entered the stream. In July, Thomas Jeffer son's A Summary View of the Rights of British America ap peared, followed in August by James Wilson's Considera,tions on ... the Legislalive Authority of . . . Pa,rliament. While neither of these works necessarily repre sented colonial opinion, they do in dicate the direction in which it was thrusting. The colonists had held firmly to the idea from 1765 on that Parliament could not lay taxes for the raising of a revenue, but they had shifted to a harder and harder position as to what was the authority of Parliament over the colonies. The main objection to the Stamp Act was that it was a di rect tax. The major objection to the Townshend Duties was that they aimed to raise a revenue. The Tea Act was opposed at the out set both because it was monopo listic and would raise a revenue.

Jefferson of Virginia and Wilson of Pennsylvania went beyond this position to suggest that the legis lative assemblies in America were equals of Parliament in law making and that Parliament really should have no authority over America. Freedom to Trade Jefferson's position comes out in part in his criticism of an earlier act of Parliament suspending the legislature of New York. He said, "One free and independent legis lature hereby takes upon itself to 1972 PRELUDE TO INDEPENDENCE 235 suspend the powers of another, free and independent as itself .... "3 In a closing impassioned appeal to the king,. Jefferson pleaded: "N0 longer persevere in sacrificing the rights of one part of the empire to the inordinate desires of another, but deal out to all equal and im partial right. Let no act· be passed by anyone legislature which may infringe on the rights and liber ties of another ."4 Through the de bates over the years there had been general agreement by colonial spokesmen that it was necessary for Parliament to regulate com merce with other nations. That is, Am"ericans were still very much under the influence of mercantilist assumptions. Jefferson, however, appeared to see no need for such regulation; rather than a benefit to the colonies the regulations in terfered with the natural course of trade and set the stage for tyr anny. For example, he says: "That the exercise of a free trade with all parts of the world, possessed by the American colonists as of natural right . . ., was next the object of unjust encroachment .... "

Their "rights of free commerce fell once more the victim to arbi trary power .... History has in formed us that bodies of men as well as individuals are susceptible to the spirit of tyranny. A view of these acts of Parliament for regu lation, as it has been affectedly called, of the American trade . . . would undeniably evince the truth of this observation."5 In short, the colonies did not need parliamen tary regulation of their trade but should rather see it as a usurpa tion of their rights and an instru ment of tyranny. The Dominion Theory James Wilson's argument is mainly that the only political con nection of the colonies was with the king. To support this view, he reviews American history: Those who launched into the un known deep, in quest of new coun tries and habitations, still considered themselves as subjects of the English monarchs, and behaved suitably to that character; but it nowhere ap pears, that they still considered themselves as represented in an Eng lish parliament extended over them.

They took possession of the country in the king's name: they treated, or made war with the Indians by his authority: they held the lands under his grants, and paid him the rents reserved upon them:· they established governments under the sanction of his prerogative, or by virtue of his charters .... 6 The principle toward which Wilson was moving is one which eventu ally came to be known as the do minion theory of empire, a theory in ,vhich each province had its own government but continued to 236 THE FREEMAN April have allegiance to the English monarch. John Adams argued this case more explicitly in the Novan glus Letters, which appeared after the First Continental Congress had dissolved itself. 7 Results of the Meeting The First Continental Congress had a relatively brief session from September 26 to October 22 of 1774. It dealt with four major points during that time. The first of these was the Suffolk Resolves which were presented by Massa chusetts delegates and when con firmed were formal advice from the Congress to that colony. The Resolves declared the Coercive Acts unconstitutional, advised Massa chusetts to form its own govern ment until such time as the acts were repealed, recommended that the people of that colony arm them selves and form a militia, and called upon them to adopt economic sanctions against Britain. This was, indeed, a strong stand against British action, and it is not too much to label it defiance.

The Congress next dealt with the Galloway Plan of Union. It was the work of Joseph Galloway of Pennsylvania, and is usually considered to have been conserva tive in character. Be that as it may, the Plan was intended not only to provide a general govern ment for the colonies· but to do so within the general frame of royal and parliamentary authority in the British empire. The Plan was defeated, but there is little reason to suppose that had it been adopted anything would have come of it. The Declaration and Resolves was the major policy position adopted by the Congress. It set forth the rights of the colonies, enumerated the abuses of recent years, delineated, once again, the limits of parliamentary authority, and called for economic sanctions. A considerable debate occurred within committee as to whether they should found their argument for rights on natural law or not. 8 The issue almost certainly was not over whether there is natural law and naturai right but over the impact of referring to them on the colonial relationship to Great Britain. Those determined to pre serve the connection with Britain wanted to hold on to the idea of their tracing their rights to Brit ain. Once the claim went to the laws of nature the basis for mak ing a definitive. break would be laid. The outcome, however, was that the Congress confirmed both sources for their rights. The pre amble to the ringing statement of rights reads: That the inhabitants of the Eng lish colonies in North America, by the immutable laws of nature, the 1972 PRELUDE TO INDEPENDENCE 237 principles of the English Constitu tion, and the several charters or compacts, have the following rights [among others] : That they are entitled to life, lib erty, and property, and they have never ceded to any sovereign power whatever, a right to dispose of either without their consent.

That our ancestors, who first set tled these colonies, were at the time of their emigration from the mother country, entitled to all the rights, liberties, and immunities of free and natural-born subjects within the realm of England. That by such emigration they by . no means forfeited, surrendered, or lost any of those rights .... 9 The line of action they were to undertake was provided for by the establishment of a Continental As sociation.The men gathered at the Congress hoped to get British policy altered by the use of eco nomic sanctions. They adopted a program of non-importation, non consumption, and non-exportation from, of, and to Britain, the non exportation to be put into effect later than the others. Enforcement was to be carried out in this way. "In the first place, the people were asked to pledge themselves not to buy British merchandise - the Nonconsumption Agreement-thus leaving ill-disposed merchants no market for their proscribed wares.

Secondly, the enforcement of the Associated. was entrusted to local committees .... "10 Economic sanc tions are, of course, a two-edged sword: they hurt the imposers as well as those on whom they are im posed, though not necessarily in equal degree. In any case, they were probably the most nearly peaceful means open to the colo nists to attempt to inflict damage on the British. In the colonies there was much sentiment that whatever they did without would be good for them, in any case. Whatever the merits of economic sanctions in general, they did not lead to a peaceful resolution of the dispute between· the colonies and England. The great majority of those in power in England favored the use of force now to bring the colonists to terms. Colonial peti...: tions, declarations, and resolutions were rej ected with alacri ty by Parliament. Colonial agents in London were refused in their re quest to appear before the House of Commons on behalf of a peti tion from America by a vote of 218-68. Petitions from London and Bristol merchants were denied an effective hearing by a vote of 250 89. William Pitt, now Earl of Chatham, offered a resolution for the withdrawal of troops from Boston; it was defeated by the Lords temporal and spiritual, 68 18. Charles James Fox's efforts to get the ministry censured by the 238 THE FREEMAN April House for its American policies was defeated 304-105.11 On Febru ary 2, 1775, Lord North, the king's chief minister, declared that some of the colonies were-in a state of rebellion and that more troops should be sent to America. 12 Since the two sides were now set on a collision course, it was only a matter of time until the contest would erupt into open hos tilities. On February 9, Parliament officially declared Massachusetts to be in a state of rebellion. On Feb ruary 26, British troops attempted but failed to seize colonial military supplies at Salem. Late in the month Lord North succeeded in getting what was billed as a con ciliatory plan through Parliament.

It permitted the colonies the op tion of taxing themselves instead of having the tax imposed by Parliament for meeting imperial expenses. The concession hardly interested the colonies. On March 22 Edmund Burke, longtime friend of America in Parliament, made his famous speech calling for re conciliation with America. It did not sway Parliament, but the next day Patrick Henry addressed his fellow Virginians in a speech of a different temper which may have helped to sway a continent. Had it been heard by all colonials in the version with which later Ameri cans are familiar, it would surely have aroused the passions of many of them for action. Henry grew weary of the vain efforts of those seeking peace by some stra tegem or other. To those of this temper, he cried: Gentlemen may cry-peace, peace but there is no peace. The war is ac tually begun! The next gale that sweeps from the North will bring to our ears the clash of resounding arms! Our brethren are already in the field! Why stand we here idle?

What is it that gentlemen wish? What would they have? Is life so dear or peace so sweet as to be pur chased at the price of slavery? For bid it, Almighty God - I know not what course others may take; but as for me, give me liberty or give me death! Lexington and Concord No more were Lord North and the king determined upon peace. On March 30, Parliament passed the New England Restraining Act, which barred the North Atlantic fisheries to New Englanders and prohibited any trade between these colonies and anyone else except in Britain and the British West Indies. The next month these pro visions were extended to several of the colonies south of New Eng land. On April 14 General Gage got his orders to use force to break up the rebellion in New England. He acted with dispatch by. sending troops to Concord on April 19 un der orders to seize a m uni tions 1972 PRELUDE TO INDEPENDENCE 239 depot there. These troops were met by colonials at Lexington, someone fired ("the shot heard round the world," Thomas Paine said), and a small battle took place. It was enlarged during the course of the day, as riflemen gathered from all sides and threatened to destroy the British forces at one point.

Reinforcements arrived, however, and the British were able to re turn to Boston. Seventy-three Brit ish troops were killed during the day, and a lesser number of co lonials. Fighting on a warlike scale had taken place; the resolu tion of the British and the Ameri cans would now be tried by arms. Less than a month after Lexing ton and Concord a Second Con tin ental Congress assembled at Philadelphia (May 10). The First Congress had voted its own dis solution, but they provided that a new congress should meet if the disputes had not been settled. So it was that a new body was as sembled that would attempt over the next half dozen years to guide the affairs of what was not yet the United States. Among the mem bers of the Second Continental Congress were some of the most talented men ever to grace the American scene, men whose names will live as long as the founding of the Republic is remembered.

From Massachusetts came John and Samuel Adams along with John Hancock who was elected to preside over the· congress, from Pennsylvania came Benjamin Franklin, Robert Morris, and J ames Wilson, among others, from Connecticut came Roger Sherman and Oliver Wolcott, from Virginia came George Washington, Richard Henry Lee, and Thomas Jefferson, and so on through the roll call of the signers of Declaration of Inde pendence, as well as many who had left the Congress by that time. Some of the most talented fol lowed other pursuits for the states during the war so that during some of the most trying days it was not so lustrous a body. But at its inception it contained most of the men who would play the lead ing roles in guiding America to in dependence. A Colonial Army Congress was confronted with the task of what to do about the fighting from the moment it met. New Englanders had taken mat ters in hand partially already, and on the same day that Congress met in Philadelphia Ethan Allen and Benedict Arnold led a force of co lonials in taking Fort Ticonderoga on Lake Champlain. And on June 17 the Battle of Bunker Hill took place as a result of a British de cision to drive the Americans from a redoubt on Breed's Hill. This battle pitted a British army 240 THE FREEMAN April against a colonial army, and though the British drove the Americans from their positions they did so at the expense of heavy casualties.

Before the Battle of Bunker Hill, however, Congress had acted to take charge of the fighting. George Washington was appointed commander-in-chief of the armed forces of the colonies; he left straightway to take charge of the forces in Massachusetts, which he accomplished on July 3. George Washington had gained consider able military experience in the French and Indian War. He had sided with the colonies from the outset, and while he was never strident in his resistance he was already beginning to show that firmness which was to become his hallmark. A very important con sideration at the moment of his selection, of course, was that he was from Virginia, the most popu lous of the colonies; and the New Englanders could see that it was essential to bring other colonies to their support. The choice of Washington was unanimous, and through all the difficult years and wrangling between Washington and Congress, that body never really faltered in its support of him. Washington chose not to take a salary for .. his contribution but only to have his expenses paid.

Though feeling was running high in America against Britain, there were those in Congress who believed that they would be remiss in their duty if they did not make yet another effort to achieve re conciliation. John Dickinson took the leadership in drawing up and getting through Congress on July 5, 1775 what is known as the Olive Branch Petition to the king. The members assembled declared them selves "Attached to your Majesty's person, family, and government, with all devotion that principle and affection can inspire .... " This being the case, "We, there fore, beseech your Majesty, that your royal authority and influence may be graciously interprosed to procure us relief from our afflict ing fears and jealousies .... "13 Recognizing the realities, however, Congress on· the next day adopted declarations drawn by Jefferson and Dickinson which explained the occasion for their taking up· arms.

Congress adjourned on August 2 to await developments. They were not long in coming, for George III proclaimed the colonies to be in open rebellion on August 23. Benedict Arnold led an expedi tion to Canada in the fall, with the permission of General Wash ington. In October, Congress au thorized a navy, followed by the opening up of correspondence with other nations in November, with the idea of gaining friends. In 1972 PRELUDE TO INDEPENDENCE 241 November, the colonies received word that. the king had refused to receive the Olive Branch Petition. The House of Commons then de feated a motion to make the Peti tion the basis of reconciliation by a vote of 83 to 33. Late in 1775 a royal proclamation was issued clos ing the colonies to all commerce after March 1, 1776. A Reluctance to Separate That all these things had occur red and that the colonists still could not bring themselves to de clare for independence indicates how reluctantly they took that step. By the winter of 1775-1776, some goodly number had already decided for independence; but' many had not. •This was a most difficult decision to make, much harder than merely deciding for resistance. Those who took this step must forswear ancient alle giances, must commit the most heinous of crimes (or so they had been taught) by becoming traitors, must· hazard their lives and for tunes upon the uncertain outcome of a war, must almost certainly divide the country, and might well let loose domestic disorder on a large scale. Prudent men must ever ponder carefully their course before taking such an irrevocable step. Arguments were made in public for and against independ ence even as men wrestled inwardly with the difficult question.

If men of those times had used such terms as "conservative" and "liberal," which they did not, they might well have debated the ques tion of which was the conserva tive position. From one point of view, it would have been conserva tive to have continued old alle giances and connections. But from another angle, Britain was the in novator, and the colonists had in sisted all along· that they were contending for the ancient consti tution and the old order and har mony that had prevailed. Indeed, the father of conservatism, Ed mund Burke, saw the justice of their contention though, of course, he could ·not advise the colonists to become independent. Probably, much of· the waiting was in the hope that England would take some action that would sway the most reluctant toward independence. While this never happened, as time went on, and Britain committed more and more acts, more did decide for inde pendence.

Thomas Paine But it was the little book, Com mon Sense, published by Thomas Paine in January of 1776 which did so much to galvanize Ameri can opinion in favor of independ ence. Within three months, 120, 000 copies of it were in circula242 THE FREEMAN April tion. George Washington said that it "worked a powerful change in the minds of many men," and the testimony of other contemporaries as well as historians confirms this judgment. That this little pamphlet should have had such currency and impact must surely be attributed to the fact that it encapsulated an idea whose time had come rather than to the character of its author. Few would have predicted before 1776 that Thomas Paine would have the niche in history which he gained. He was born in Norfolk, England, the son of a staymaker. He had not done well as a government clerk, as a husband, or as manager of his own financial affairs. Ben jamin Franklin encouraged him to come to America in 1774, which he did, to be made editor of the Pennsylvania Magazine. Somehow he grasped the tendency of the currents in the new land and was able to render them into language which moved his lately acquired feIiow countrymen, the phrases of which still ring with power after two centuries.

Paine took as his task in Com mon Sense the convincing of Amer icans that the time had come for independence. He sought to con vince them that the time was right, that they could succeed, and that their fears of the conse quences of independence should be seen in contrast with the certain ties of ruin if they did not follow the indicated course. The body of the work begins in a peculiar way; it is theoretical and apparently remote from his object. He iterates the distinction between government and society, a distinction which, he says, peo ple frequently do not take care in making. Society, he points out, is natural in origin; it arises out of the need of man for his fellows. Government, by contrast, is a con struct, albeit a necessary one. The point was quite germane, however. Paine was commending to a people that they cast off the government over them. If government and so ciety can be distinguished one from the other, they can be sep arated. To rend society might be ruinous, but to cast off a govern ment which was not performing its allotted function would only provide the opportunity for some thing much better.

Attack on Monarchy Much of Paine's rhetoric was aimed at monarchy in general and in particular. The colonists, many of them, had shifted in their think ing to the point where they were willing to acknowledge their al legiance only to the king. This was the remaining cord to be severed. Of the institution of monarchy, Paine said: 1972 PRELUDE TO INDEPENDENCE 243 Government by kings was first in troduced into the world by the heath ens, from whom the children of Is rael copied the custom. It was the most prosperous invention the devil ever set on foot for the promotion of idolatry. The heathens paid divine honors to their deceased kings, and the Christian world has improved on the plan by doing the same to their liv ing ones. How impious is the title of sacred majesty applied to a worm, who in the midst of his splendor is crumbling into dust!14 Of English monarchy, he had even more scathing things to say.

Where did the line originate? A French bastard landing with an armed banditti and establishing him self king of England against the consent of the natives is in plain terms a very paltry, rascally origi nal. It certainly has no divinity in it. However, it is needless to spend much time in exposing the folly of hereditary right; if there are any so weak as to believe it, let them prom iscuously worship the ass and lion, and welcome. I shall neither copy their humility nor disturb their de votion.l 5 George III was disposed of as the "royal brute of Britain," and a long line of monarchs dispar aged as hardly worthy of mention. But the whole subject of monarchs soon palls on him: "Of more worth is one honest man to society, and in the sight of God, than all the crowned ruffians that ever lived."16 Mother England? Paine deals with another diffi cult point for Americans. England is the mother country, or so it has been claimed. He denies the alle gation. Europe is the origin of America, he says, in what may be one. of the weakest of his argu ments. But, in any case, Britain did not mother America; the in habitants of the New World were dri ven from her shores and, in contrast even to the behavior of brutes, she was making war on them. Moreover, there is no reason in an island attempting to govern a continent.

Above all, Paine held up for ex amination the past record under Britain and contrasted it with the vision of what America should and could be. This should move men to an early separation. o ye that Jove mankind! Ye that dare oppose not only the tyranny but the tyrant, stand forth! Every spot of the Old WorId is overrun with op pression. Freedom has been hunted round the globe. Asia and Africa have long expelled her. Europe re gards her like a stranger, and Eng land has given her warning to de part. O! receive the fugitive, and prepare in time an asylum for man kind.l 7 It took little more to tip the 244 THE FREEMAN April scales for independence. In May of 1776 Congress learned that the king had succeeded in hiring Ger man (generally referred to as Hessian) troops to send against them. On June 7, Richard Henry Lee introduced a resolution to the effect that the colonies were now independent of Britain. On June 11, Congress appointed a com mittee to draw up a declaration.

The painful decision was all but made. ~ • FOOTNOTES • 1 Quoted in Merrill Jensen, The Found ing of the Nation (New York: Oxford University Press, 1968), p. 572. 2 Leslie F. S. Upton, ed., Revolutionary versus Loyalist (Waltham, Mass.: Blais dell, 1968), p. 21. 3 Edward Dumbauld, ed., The Political Writings of Thomas Jefferson (New York: Liberal Arts Press, 1955), p. 22. 4 Ibid., p. 32. 5 Ibid., pp. 19-20. 6 Jack P. Greene, ed., Colonies to N a tion (New York : McGraw-Hill, 1967), p.225. 7 See Anne H. Burleigh, John Adams (New Rochelle: Arlington House, 1969), pp.122-29. 8 See J ens~n, Ope cit., p. 493. 9 Richard B. Morris, The American Revolution (Princeton: D. Van Nostrand, 1955), p. 114. 10 John C. Miller, Origins of the Amer ican Revolution (Boston: Little-Brown, 1943), p. 385. 11 See Jensen, Ope cit., pp. 575-78. 12 Ibid. 13 John Braeman, The Road to Inde pendence (New York: Capricorn Books, 1963), p. 275.

14 Nelson F. Adkins, ed., Thomas Paine (New York: Liberal Arts Press, 1953), p.10. 15 Ibid., p. 15. 16 Ibi(l., p. 18. 17 Ibid., p. 34. Next: The Declaration of Independence. The Law IDEAS ON $ LIBERTY IT IS IMPOSSIBLE to introduce into society a greater change and a greater evil than this: the conversion of the law into an instru ment of pIunder. No society can exist unless the laws are respected to a certain degree. The safest way to make )aws respected is 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 plunder appear just and sacred to many consciences, it is only necessary for the law to decree and sanction it. Slavery, restrictions, and monopoly find defenders not only among those who profit from them but also among those who suffer from them.

FREDERIC BASTIAT (1850) HANS F. SENNHOLZ AFTER full use of the presidential influence to get the legislation adopted, President Woodrow Wil son signed the act establishing the Federal Reserve System, on De cember 23, 1913. The Reserve Banks opened their doors for busi ness on November 16, 1914. Why? What was the origin of this new System? How does it work? What are its good points, if any, and what are its dangers? Trade cycles had been an un happy experience in the United States as well as in Western Europe. The panic of 1907 and the subsequent lethargy of business and finance had increased the widespread clamor for banking and currency reform. "We need a more flexible currency," the advo cates of a reorganization of the American banking system asDr. Sennholz heads the Department of Eco nomics at Grove City College and. is a noted writer and lecturer on monetary and economic principles and practices.

The edefal eserve ystem serted; "a currency that can he made to expand or contract in a,c cordance with the needs of busi ness." This flexibility was to eliminate the recurring periods of financial stress and disorder. The "reformers" pointedap provingly at the currency systems in Western Europe. There was, for example, the Bank of Eng land. It enj oyed a partial monop oly of note issue, and served the government as banker and as a.gent. All other banks kept ac counts with the Bank of England because its currency notes com manded the greatest confidence and widest circulation. At the end of each clearing period, the claims of all other banks were settled through transfers among their respective deposits with the Bank of England. It was the "lender of last resort." In times of financial crisis it was expected to stay liquid, and to grant accommoda245 246 THE FREEMAN April tion to the most esseJ,1tial credit needs. It had done so during the crises of 1873 and of 1890. And in 1907 it had allayed alarm in Eng land by merely increasing its dis count rate.

There ,also was the Reichsbank of Germany. It, too, conducted a discount policy for the protection of general banking liquidity. But the Reichsbank differed from the Bank of England in one important respect, which had great appeal for the planners in the United States. This was the "elasticity" in its note circulation. So our central banking institution was fashioned, in general, after the Reichsbank. While the Bank of England al ways held a full gold reserve for its notes issued, the Federal Re serve System was required to maintain a, gold reserve of only forty per cent against its issue notes; sixty per cent could be held in trade and agricultural paper discounted by member banks. And the Reserve Banks had to keep on hand, in "lawful money," only thirty-five per cent of all their deposits. In an emergency the full reserve requirements could be suspended for thirty days, with renewals of suspension for further periods of fifteen days each - but at a penalty of a graduated tax on the deficiency in reserves. All these features were to give the new bank flexibility and elasticity.

Economic control over the new System was given to seven gov ernors who are appointed by the President and approved by the U.S. Senate. Of course, ultimate control lies in the hands of the President who makes the· appoint ments. In all important policy matters pertaining to American money and credi t, his decision prevails. In this age of radical interven tionism and socialism, a sharp distinction must always be made between economic control that is decisive, and legal ownership that is empty and meaningless. The 1913 Congress that created the Federal Reserve System gave con trol to the President acting through his seven governors, but rested the legal ownership with the commercial banks that were to join the System. The member banks thus could be made to fi nance the System through the forced sale to them of "stock" that lacked any right of control. After all, the new System was to afford support .and stability to commercial banks. Why shouldn't they be made to finance such bene fits? At least, this was the ra, tionale of government in 1913.

If the legal ownership of the System should ever be placed with the Federal government - which the U.S. Congress, the creator of 1972 THE FEDERAL RESERVE SYSTEM 247 the System, may legislate at will - the meaning and substance of the System will remain unaltered. The Federal Reserve was to a,c commodate its memher banks with emergency reserves and credi ts. After 50 years of rapid growth of government it now holds complete powers over our money and bank ing. It works with three important instruments to suit whatever its purposes m,aybe at any given time. In the beginning it had or at least used - only one. This was the rediscoun.t irnstrumen.t. Rediscount Rate Promissory notes, drafts, and bills of exchange, growing out of actual commercial transactions and with a maturity not to exceed ninety days, accepted by the com mercial banks and then redis counted with the Federal Reserve - this constituted, by law, the base and the boundary for the money the Federal Reserve could create.

Thus a direct causal connection was to be established between the money supply and the demand for money. Since the total of com modity bills --rediscounted was sup posed to be determined by the intensity of economic life, basing the money supply on that total was supposed to bring about a perfect adjustment of this supply to the fluctuating "needs of busi ness." This arrangement was to make money "neutral," smoothly rendering the vital service of a medium of exchange without it self affecting prices. Of course, it did no such thing. The volume of "p.aper" thus of fered the Federal Reserve for rediscount - and hence the amount of currency and credit it could feed into the economy - was de termined primarily by the redis count rate which the Federal Re serve itself established and could change ,af will. As so often hap pens, the planners had put the cart before the horse. Also, by 1935, the boundaries in this channel of operations had been materially widened. The paper presented to the Federal Reserve for advances to its mem ber banks no longer had to arise out of commercial transactions. It could even be government securi ties. If the notes, drafts, or bills of exchange had been drawn "for agricultural purposes," they could now have a maturity of nine months instead of three. Not only banks, but individuals, partner ships, and corporations also had been given access to the discount ing facilities of the System. Fin ally, in 1942, the Federal govern ment was authorized to borrow up to five billion dollars directly from the Federal Reserve. And every loan the Federal Reserve System made to any borrower, for· any 248 THE FREEMAN April purpose, under these relaxed con ditions, allowed it to issue that much more currency, or credit in the form of a bookkeeping entry subject to the check of thebor rower.

Open-Market Operations The second tool of the Federal Reserve System is its authoriza tion to buy or sell certain securi ties· in the open ma,rket. The orig inal Act granted it this power to buy and sell obligations of the United States, and of any state, county, district, political subdivi sion, or municipality in the United States. By the 1920's it was recognized that these open-market transac tions by the Reserve Banks offered an important method of central credit control. So a concentration of this power into the hands of one regulatory body was advo cated. Legislation enacted in 1933 decreed that no Federal Reserve Bank should engage in open-market operations .except in accordance with regulations adopted by the Federal Reserve Board. To im prove and formalize this centrali zation, the Open Market Commit tee was organized. And in 1935 an amendment to the 1933 Act finally provided that "no Federal Reserve Bank shall engage or decline to engage in open-market operations ... except in accordance with the direction of, and regulations adopted by,· the Committee."

With this tool in familiar use, the Federal Reserve System no longer had to wait for member banks to ask for .discounts and advances, at whatever rate it might have set, in order to affect the money supply. It could do so directly, on its own initiative, by buying or selling securities to make the money and capital mar kets more liquid or more tight, as it might wish. In payment for securities the Federal Reserve merely draws, on itself, a check which constitutes newly created money. Then, as this check is deposited by the recipient in his bank, and redeposited by that bank, it winds up as an addition to the reserve account of some bank with the Federal Reserve. Open-market operations of the Federal Reserve may deal in long term securities. Thus they may affect, directly and immediately, long-term interest rates and yields. They are, therefore, a quite comprehensive instrumentality of control. For this reason such op erations have high prestige and preference in the plans of the money managers.

Reserve Requirements The third and perhaps most powerful instrument of credit con trol in the hands of the Federal 1972 THE FEDERAL RESERVE SYSTEM 249 Reserve System is its authority to change the reserve requirements of its member banks. Both the rediscount process· and the open market transactions either in crease or decrease member bank reserves, and hence. the amount of credit which these banks can· make available. But changing the per centage of its deposits which a bank must keep as a reserve is an even more drastic form of influ ence over the money and· credit supply. Suppose a, bank has one million dollars of demand deposits. If the reserve requirement is ten per cent, it must .keep one' hundred thousand dollars in its Reserve Bank. It may loan out or invest the rest. But if the reserve re quirement should now be lowered, let us say, to five per cent, our bank would need only fifty thou sand dollars as a reserve against its demand deposits. It can now lend or invest the remaining $50,000.

If' this were the only effect, only $50,000 of additional money would enter the economy. In real ity, however, this is merely the beginning of a chain of money creation .. Let's assume that our bank· decides to hold the reserves thus set free as "excess reserves." It may then extend more credit to its customers. Of course, it would have to proceed very slowly lest it lose its reserves to other banks or customers demanding cash. It can not. proceed any faster than other banks that also are expanding their credits on the basis of their newlywonexGess reserves. This is an oversimplification, 'of course. But the impact on the capital and money markets of changes in reserve requirements is extremely potent. It is esti mated that at present a, fluctuation of only one per cent tends to in crease or decrease the total volume of bank credit by more than six billion dollars. This authority to vary reserve requirements was given to the Federal Reserve Sys tem in 1933, as a special em,er~ gency power. Since 1935 it has been a permanent instrument of credit control.

A Most Important Tool in the Armory of Intervention An appraisal of the good points and bad points of the Federal Re serve System depends on the po litical and economic philosophy of the appraiser. If he fa,vors' gov ernment control over our economy he will regard the Federal Reserve most favorably, for it holds abso lute power over the people's money and credit. If· one is convinced of the bene ficial nature of an enterprise economy, he will unconditionally 250 THE FREEMAN April rej ect the Federal Reserve Sys tem. He will condemn it as the controlling body of an important industry. He will blame it for having shattered the American dollar; for having caused booms, busts, recessions, and depressions; and for having made the fifty-six years of its existence a period of unprecedented economic insta bility. In the opinion of this writer, this instability has fostered the growth of ideologies that are hos tile to individual liberty. The Fed eral Reserve, through its policies of "boom and bust," helped to usher in the New Deal. And it now acts as midwife to ever more extensive government controls.

Since it began operating in 1914, the Federal Reserve System has put some $55 billion in circu lation, has extended some $65 bil lion in credit, and thereby has depreciated the .dollar by almost three-fourths. And it continues to inflate the money supply at an accelerating rate. First, the economic' planners in Washington clamor for an expan sion of the volume of money and credit, in order to bring about or sustain - a boom, prosperity, and full employment. They rejoice over wage boosts, but dislike the parallel price rises and the hard ships wrought upon those with fixed incomes. They approve of additional housing construction, but disapprove of higher prices for houses. They like one set of inflationary effects, but decry the inevitable twin set. And the eco nomic planners are always most anxious indeed to do something about these undesired effects. In order to "fight" inflation, they want to curb economic actions with credit controls, price con trols, wage controls, and all· kinds of other government controls over our economic lives. They want socialism. In my opinion, an ac celeration of the present long range credit expansion will lead us rapidly into the controlled econ omy they desire.

Under these conditions, the F'ed eral Reserve System, is the most i,mportant tool in the armory of ec'onomic interventionism. In the Governors' own words, it is the system's objective "to help coun teract inflationary and deflation ary movements, and to sha.re in creating conditions favorable to sustain high employment, stable values, growth of the country, and a rising level of consumption." This is plain interventionism, with all of the planner's usual assumption of benevolent omni science. An institution which was established as a, cooperative un dertaking by the banks of the country to pool their resources has developed into the right hand of 1972 THE FEDERAL RESERVE SYSTEM 251 the government in promoting its "New Deal" and "Fair Deal" ob jectives. The beautiful fallacies of socialist "central planning" are being substituted for the hard, but lasting and productive, truths of a free market. And the Federal Reserve System supplies the ma gician's cloth under which the substitution is made.

Its part in the colossal meta morphosis of our country is not limited to the maintenance of cheap money, in order to prolong or create a, boom. It also provides the government itself with the money the planners think they should have, beyond the amount they dare take directly in taxes. The Federal Reserve System facilitates the government's own inflationary financing "in periods of emergency." It makes easy the inflationary financing of budget deficits and the inflationary re funding of government loans. It stabilizes the government bond market through inflationary meth ods and manipulates this market to the advantage of the govern ment. It does all of this by wreck ing the purchasing power of the dollar; by subtly stealing from the people of this country what it thus provides for the government, through a process similar to the coin-clipping of ancient kings but. much more diabolical because so much less visible.

Emergency Banking Laws No matter how grave our in dictment for past and present evils, we must anticipate, an even more ominous role of the System in the future. For periods of na tional emergency, an administra tions since that of Eisenhower have issued emergency banking regulations that grant extraordi nary powers to the Federal Re serve System. Although these may differ in detail, in substance they are much alike. For instance, let us look at Emergency Banking Regulation No.1, issued on January 10, 1961. It is probably the most radical order that ever emanated from an American government. Yet, few voices of protest are heard, for few would dare oppose govern ment preparations for a national emergency. Emergency Banking Regulation No.1 is just one of a, number of emergency measures that would impose government control over rentals, prices, salaries -and wages, and introduce rationing. The Reg ulation orders the instant seizure of most bank deposits "in the event of an attack on the United States." The Regulation is based on The Trading with the Enemy Act of October 6, 1917, and covers all banking institutions, including every commercial bank, trust com pany, private bank, savings bank, 252 THE FREEMAN April mutual savings bank, savings and loan association, building and loan association, cooperative bank, homestead association, credit un ion, and United States postal sav ings office.

Section 2 of Chapter V is most shocking in its wanton denial of individual freedom and private property. Lest we· be suspected of misinterpretation, we quote: "(a) No depositor or share or sav ings account owner may transfer in any manner or by any device whatso ever any balance to his credit on the date on which this Regulation be comes effective, except for the pay ment of (i) expenses or reconstruc tion costs vital to the war effort, (ii) essential living costs, (iii) taxes, (iv) payrolls, or (v) obligations in curred before the date on which this Regulation becomes effective, to the end that the best interest of the war effort and the public will be served. (b) Banking institutions shall pro hibit the transfer of credit in any case where there is reason to believe that such transfer is sought for any unauthorized purpose. (c) After this· Regulation becomes effective, banking institutions shall retain until released by Federal au thority the original or a photographic copy (face and reverse sides) of each check and other evidence of transfer of credit in the amount of $1,000 or more."

In short, your money in the bank is blocked unless you propose to spend it toward the war effort, Le., buy U.S. Treasury ob ligations or finance expenditures deemed "vital" by the government. You may withdraw your .money for living expenses, but only sums deemed "essential." You may pay taxes and wages, and discharge old obligations. But any other use of your money is prohibited. Let us assume that you were saving for another car, new furniture, or a house, or for your children's college education. As such objec tives can hardly be called "essen tial," neither for the war effort nor individual living, your money could be blocked. The Emergency Regulation would permit business to pay taxes and wages, but deny all other ex penses of doing business.· After all, manufacturers need materials, tools, and equipment in order to produce goods and services. Mer chants need ever new supplies of merchandise in order. to .stay .in business. Even professional peo ple, such as doctors and dentists, have expenses other than taxes and wages. This is why the Regu lation would halt all economic ac tivity but that of government. In fact, no enemy attack no matter how devastating to human life and property' could conceivably have a more disruptive effect than the Emergency Banking Regula tion.

1972 THE FEDERAL RESERVE SYSTEM 253 Chapter VI, Section 1, .of the Regulation would radically change the very nature of banking. "N0 banking institution may make any loan, extend any credit, or dis count or purchase any obligation or evidence of debt, unless it is estab lished and certified in writing by the borrower and a banking institution that the purpose is to pay (i) ex penses or reconstruction costs vital to the war effort, (ii) essential living costs, (iii) taxes, or (iv) payrolls, to the end that the best interests of the war effort and the public will be served." It is ironic that the stated purpose of the Regulation is "con tinuance of operations and func tions" of all banking institutions. Indeed, banks would be required to "remain open and continue their operations and functions." (Chapter IV, Section 1). In real .. ity, the stated purpose should read "cessation of all banking opera tions and assumption of the ex clusive function of government finance." After all, what is ba.nk ing? It is negotiating credit be tween lenders and .borrowers, and maintaining cash balances for the convenience of depositors. It is obvious that banking ceases to exist if credit can no longer be-ne gotiated and ca.sh no longer be paid upon demand by the deposi tors. The Emergency Regulation would make all financial institu tions agencies of the U.S. Treasury, with the Federal Reserve System as a subtreasury that polices the banking system. ~ IDEAS ON LIBERTY Trade in Good Faith THE ECONOMIC LIFE of the world in 1913 went on in an atmos phere of good faith. Men with liquid capital used the capital themselves confidently in business enterprises or loaned their capital at market rates of interest to others who would use it in productive operations. There were no billions of dollars of "hot money" such as characterized jhe decade of the 1930's, moving nervously. about from one financial· center to another· through fear of confiscation or through fear of further currency debase ment - moving from countries which their owners distrusted more to countries which they distrusted less, but finding no where a place which they could really trust.

BENJAMIN M. ANDERSON, Economics and the Public Welfare A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN Willmoore Kendall Contra Mundum I KNEW Willmoore Kendall, who is now presented posthumously in a wide-ranging selection called Will moore Kendall Contra, Mundum (Arlington House, $11.95), when he functioned as the book editor at Bill Buckley's National Review. I had heard stories that he was a ,most "difficult" man, forever get ting into trouble with his col leagues, whether at Yale or else where, for disputatious reasons that, according to Dwight Mac Donald, often ended in the "shout ing stage." But, like Jeffrey Hart, who contributes an illuminating biographical introduction to this representative collection of Ken dalliana, I found him to be unfail ingly considerate at all times. I could only conclude that most of the difficulties that Kendall en countered came from the "liberal" bi,as of academia, a bias that re fused to accept the fact (which Kendall insisted upon) that oJPer American orthodoxies that still prevailed beyond the limits of the campus had a continuing legiti macy, even though (as in the ca.se of Senator Joe McCarthy) their proponents sometimes made stupid mistakes in arithmetic. It was the 254 standard opInIon at the Yale of Willmoore Kendall's time that "McCarthyism" imperiled aca demic freedom, yet ironically, the only academic causualty of the "McCarthy period" that I know was Willmoore Kendall, who was chi vvied into relinquishing his professorial tenure because he in sisted on the need for strong means to keep Communist subver sives out of sensitive positions in Washington. The actual "Mc carthyism" of the campus in the Fifties and early Sixties w,as prac ticed by the liberals themselves, and Willmoore Kendall was their most conspicuous victim.

But what were Kendall's actual posi tions? As one uncovers them in the articles in Willmoor KendaU Contra Mundum, they were mostly derived from an intense preoccupa tion with The Federalist, particu larly the contributions of James Madison. Kendall had his· reserva tions about John Locke because, as he saw it, Locke's thinking (which trusted to the good sense of the British parlia.ment) provided for no substantial defenses against the possible madness of a majority as represented by a single branch of 1972 WILLMOORE KENDALL CONTRA MUNDUM 255 government. It is the triumph of the American system that it has provided for what Kendall calls "the two majorities." The same electorate that selects the Presi dent as the leader of "all the peo ple" also determines the composi~ tion of Congress, which, through its committee system and its con trol of the purse, often acts as a brake on what a Utopian occupant of the White House might want to do.· This is the Madisonian system as bequeathed to us by the Found~ ers, to whom Kendall made the un~ orthodox obeisance of accepting all their goals, the necessity of pro~ viding for the common defense and maintaining a more perfect union as well as the desirability of protecting such individual rights as free speech and freedom of as sembly.

One thing that made Kendall ·"difficult" was his refusal to slide around the great enigmas of our time. How does one reconcile a be lief in justice with a belief in ma jority rule? (After all, an abso lute majoritarian must concede the right of 50.1 per cent of the voting population to send 49.9 including nonvoters - to the gas chambers.) How does one square the use of the Fourteenth Amend~ ment to compel many things that were left to the jurisdiction. of the States, or to the individuals them selves, by the Ninth and Tenth Amendments? (After all, nobody has ever argued that the Ninth and Tenth Amendments have been repealed.) Kendall could not settle the great contradictions, but he in~ sisted that they be confronted and argued about. And this made him an uncomfortable fellow among his faculty colleagues in the' univer sity common room, most of whom accepted an unconscious bias for the Declaration of Independence, which stresses equality, and against the Preamble to the Con~ stitution, which says nothing about it. But if Kendall wasn't liked by his fellow professors, his faculty for directing students to the actual words of our basic docu ments made him a great teacher.

In his essay on "The Two Ma jorities" Kendall speaks of the "bias toward Quixotism inherent in our presidential elections" and the "corrective" of "Sancho Pan~ zism" as applied by the off-year and staggered elections for Con gress. He himself was Don Quixote in his hopes that universities could actually provide for real con frontation of issues and Sancho Panza in his willingness to under cut the modern liberal orthodoxy. His bloodiest fights came over his insistence that "equality of oppor~ tunity" is the ignis fatuus, the light of fools, of modern political discourse. To get "equality of op portunity," one would first have to 256 THE FREEMAN April abolish the family, which would be wrong. Secondly, one would have to level off incomes and ac cept some form of socialism. This would not only be morally wrong in Kendall's opinion, but it wouldn't work. Kendall trusted the "second m,a jority," that of Congress, to resist the attempt to legislate "equality of opportunity." He didn't live to see what our judges are doing to confuse our educational scene, but he would, if he were still around, almost certainly make the point that it must hurt everybody, the poor included, if superior minds are to be kept by a leveling proc ess from getting a superior educa tion. If it hadn't been for inequal ity, the poor would never have had the benefits resulting from such modern commonplaces as vaccina, tion, pasteurization or, indeed, the electric light bulb. We all have a stake in letting the uncommon man get all the opportunity that his genes, his family or the pure luck of an unequal draw can give' him.

This doesn't mean that when com pulsorily seized tax money is be ing spent it shouldn't be disbursed in accordance with a sense of equal justice. But it does mean that non governmental agencies, such as the family, the corporation, the foundation and the private school, should be left alone to favor in dividuals and causes as they choose. Out of the variety of in ventions, discoveries and good works that come from letting in dividuals push their unequal fac ulties as far as they can, we get a far better quality of life for everyone than would otherwise be the case. Kendall was always delightfully alive to paradoxes. He multiplied difficulties for himself by his re fusal to allow people - such as my self - to ground their assertion of rights on feelings that we must assume are fairly common to hu' man beings everywhere. John Locke, I take it, based his claim that governments are instituted to protect the individual in his right to life, liberty and property not only on what he took to be histori cal evidence but also' on his own interior feelings. Those feelings happened to be in accord with what is asserted as Revelation ("Thou Shalt Not Steal" and "Thou Shalt Not Kill"). In his own thirst for both divine sanc tions and human delaying agen cies, Willmoore Kendall couldn't admit that Locke was doing the best he could in a pre-Madisonian situation. If Locke had had to corral thirteen separate colonies under one Constitutional roof, he might have done more to eliminate the dangers inherent in a pure maj ori ta:danism as practiced by a single arm of government. t> tt1e Freeman VOL. 22, NO.5. MAY 1972 ANew AgriculturalRevolution George B. Mueller 259 Examining the implications of the recent movement among farmers toward collective bargaining.

WelfarismGone Wild Henry Hazlitt 265 Social welfare expenditures exceed $170 billion in 1971, with no end i'n sight. Th'e Foundingof the American Republic: 10. The Declarationof Independence Examining it in context, for its relevance then and today. Clarence B. Carson 273 The Causes of Inflation Hans F. Sennholz 284 Welfare and redistribution programs inevitably lead to a government monopoly of money and inflation. To Be Free and Equal Ray L. Colvard 293 If we must err concerning our differences, may it be on the side of freedom. Status: End Product of Welfare Morris C. Shumiatcher 297 A review of a century of welfarism among the Indians of Canada, with lessons for all of us who may be tempted onto that backward path to a feudal society. Book Reviews: "Power Through Subversion" by Laurence W. Beilenson "Man, Economy and State"by Murray Rothbard Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

316 319 tt1e Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230 LEONARD E. READ PAUL L. POI ROT President, Foundation for Economic Education Managing Editor THE F R E E MAN 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. 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, 1972, 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; 10 for $2.50; 25 or more, 20 cents each.

Articles from this journal are abstracted and indexed in Historical Abstracts and/or America: History and Life. THE FREEMAN also Is available on microfilm, Xerox University Microfilms, Ann Arbor, Mich igan 48106. permission granted to reprint any article from this issue, with appropriate credit, except "Welfarism Gone Wild/' and "Status: End Product of Welfare."

EVERY AMERICAN school boy and girl is familiar with the agricul tural revolution. It was this revo lution that enabled American workers to leave the farm and build a great nation. The· modern techniques and tools used on our present-day, family operated, com mercial farms are the envy of the world. Even Premier Krushchev came over to take a first-hand look at our tremendous agricultural productivity. Our family farms, bigger and more efficient than ever, are putting food on the typi cal American's table for less than 17 percent of his wages. Cer tainly, if there ever was asuccess story, it is America's family farm. Mr. Mueller, of Clifton Springs, New York, owns and operates a family farm specializing in dairying a.nd cash crops. As farmers, we are presently in vesting twice the amount industry averages in capital tools per man. Because of this heavy capital in vestment, and the fact that most farmers still put in a full. day of productive work, our American farm products remain competitive in world markets. In contrast, each year that passes, we see more and more of our industries failing to meet competition abroad. The shelves in our stores are increas ingly stocked with products "Made inJ apan" and elsewhere.

In spite of nearly nine billion dollars of agricultural products ex ported last year, the United States experienced a minus balance of trade for the first time in 83 years. To make matters worse,dock worker strikes have seriously 259 260 THE FREEMAN May curbed agricultural feedgrain ex ports,. threatening a permanent loss of markets that took years to develop. Thus, agriculture, one of our few industries still able to compete, has been partially shut off from world markets. Our fam ily-based agriculture, the strong est in the world, has a tremendous ability to compete if only permit ted to do so. liThe Farm Problem" Agriculture is overcrowded, as are most other businesses in the United States. We have too many drug stores, too many hardware stores, too many grocery stores, too many insurance salesmen, too many barber shops, and so on•. This is the American way. Busi nessmen are supposed to be free to enter any field of production and trade in which they think they can make a profit. The result is keen competition in most busi nesses. The consumer benefits from competition by getting better serv ice and lower prices. Competition also has resulted in numerous business failures. The typical busi ness earns a slim profit, if any.

Only the best managed firms (those that serve the consumer best), reap a substantial profit. Such is the nature of our cher ished system of competitive enter prise. The· agricultural business is especially crowded because it was the original and only way of life for many Americans. The move ment of workers out of agricul ture has not been rapid enough to prevent this overcrowding. Farm ing generally is a wholesome, healthy, and satisfying work, and many people are willing to accept a lower standard of living rather than give up such a way of life. Farming, because of its appeal, will always be crowded, and profit margins for the "average" farmer will always be low. Only the well managed farm, operated with a judicious amount of modern tools and the latest know-how, will yield a good profit. This is as it should be, for this type of farm operation is serving the consumer best. Time and again we hear dire predictions of the takeover of farming by corporations. It is true that the family farm has changed and tends to look more like a fac tory every day. My neighbor used to be one of the largest poultry farmers in the county with 3,000 layers - and quite successful. But progress has left him behind.

Those in the vicinity who intend to stay with chickens are building 500-foot-long houses to hold 43,000 birds in wire cages, wall-to-wall. These are still family -owned and -operated farms, but they are large and efficient. Likewise, the dairy farms of 30 years ago with 12 cows 1972 A NEW AGRICULTURAL REVOLUTION 261 are now either out of business or have grown much larger. They, too, are still family-owned and -operated. The only corporate agri culture in my county consists of a few acres of vineyards owned by a winery. The United States De partment of Agriculture reports that corporations account for only 1 per cent of our farms, 7 per cent of our farm land and 8 per cent of our agricultural production. A closer look reveals that ninety per cent of these are actually family farms that have incorporated to ease the transfer to the next gen eration. It is apparent that the family farm that has mechanized and is under the skillful management of its owner is still very com petitive. Corporations, with their high fixed costs, have found it· al most impossible to compete with the American family farm.

I think we do not have a "farm problem." In fact, agriculture, be cause of the private research by feed, seed, building supply, chemi cal, machinery, and fertilizer com panies, has kept up with modern methods as well as has any U.S. industry. The development of hy brid seed corn is an excellent ex ample of how private researchers, competing for a profit, benefit all of us - especially the consumer. The research by Land Grant Col leges and by the U.S.D.A. has sup262 THE FREEMAN Ma,y plemen'ted and stimulated this pri vate research. Agri-business sales men, farm catalogs, advertising folders, and numerous farm publi cations, in addition to government sponsored agricultural extension service (county agents), have made this valuable research avail able to all American farmers - big and small. Use of this modern knowledge has made the American family farm the most' efficient in the world. Rather than looking upon agriculture as a serious prob lem, we should consider it our big gest success story.

The Winds of Change A' fundamental change is taking place in the thinking of the Ameri'can farmer. We have long been' singled out by politicians as a group of people to be pitied. Farm publications keep telling us how much we suffer. Our farm leaders are especially sympathetic to our "sad" plight and pledge all sorts of programs to bring-us aid. We farmers have heard this so long and so often that we are begin ning to believe it. The independent, self-reliant, self-thinking farmer is wavering. So often told that we must cooper ate with others and "set our own price," we are beginning to move in this direction. The appeal of collective bargaining is gaining momentum among farm people. Farm editors and farm leaders' would not dare suggest that com petitors in any other business get together to set prices; yet, they boldly advocate a monopoly control over supply by farmers, using such terms as "disciplined marketing"

or "supply management." When examined closely, their object is a monopoly control over the total supply. The result is presumed to be higher prices and returns for the farmer at the expense of the consumer. But let us look at how this will affect the family farm. The family farm is dominant in America today because it is a strong ,compet·itor. It is' dominant because of its ability to survive in periods of low prices. The family farmer can let the' hired man go and work harder himself in 'pe riods of low prices. The farmer's wife. can even take a job in town in order to help save the farm. These are options not available to the larger, more heavily capital ized corporate farms. Interestingly enough, many of the farmers working the' hardest for collective bargaining - and the se curity that, the higher and more stable prices will bring - are the large operators. Through careful management and hard work, they have built ,large, efficient enter prises which they now wish to pro tect. In periods of high prices, they prosper. But low prices put 19'72 A NEW AGRICULTURAL REVOLUTION 263 the large farms to the test, caus ing many to fail. Fluctuating farm prices thus tend to even the score, so that the little fellow. has an op portunity to compete. What will happen to the small family farm when collective bargaining assures stable high prices for the large farmer ? Won't this be the opening corporations are looking for and won't they come pouring into agri culture once we assure a higher profit margin?

To limit "overproduction" when bargaining achieves a better price for farmers, there will have to be some kind of a quota system. Just as laborers wait in line to work on union jobs, so shall young far-· mers wait in line to farm. In good growing years we will be forced to let a portion of the crop rot to insure higher. prices. from the consumer. It will be an entirely new ball game for the self-reliant, independent, competitive farmer. But he will adjust, once he tastes the fruits of collective action. As time goes" on, I anticipate that these quotas will be purchased by the larger growers; and the larger growers will merge and form even larger corporations. Once we establish "rights" as to who can farm and how much, we are opening the door to big busi ness in farming. Just as truckers "rights" are soon purchased by the larger trucking firms, the farmers "rights" will also flow to ward where the money is. By turn ing to collective bargaining, we may be dooming the family farm.

We already have legislation." to prevent buyers from discriminat ing against us when we sell· coop eratively - The Agricultural Fair .Practice Act. The National Agri cultural Marketing and Bargain ing Act (Sisk Bill) is about to be passed in Congress. It would force the buyer of farm products to ne gotiate in good faith with his reg-· ular suppliers and prevent him from buying from· other sources during these negotiations.· The next logical legislative step will be a requirement for compulsory arbitration if negotiations fail. Along with this will have to come a limit on entry and quotas for all existing farmers. In summary, we are witnessing in a few short years the coming of a monopolistic type of collective bargaining for agriculture. Farm ers are accomplishing this through strong and efficient lobbies in Washington. Farmers may soon have the collective bargaining pow ers that it took labor a century of bloodshed to obtain. Even the D.S.D.A., after 35 years of all sorts of farm programs that have failed, now suggests that we try farm bar gaining. The collective bargaining juggernaut is rolling in ;high gear and is on a collision cqurse with 264 THE FREEMAN May the family farm. There is definite ly an agricultural revolution in progress.

The Consumer Is Still King The first priniciple of business is that the customer is king. To prosper over a period of years, a business must serve the customer well. Now, as farmers, we find our selves looking at our customers as adversaries from whom we should demand better prices rather than earn them. Like many unionized wage earners in our society, we foolishly believe we can raise our standard of living -by demanding more for doing less. The time has come for the American consumer to remind the farmer that he is a businessman, expected to compete as he pro duces the food and fiber that our nation needs. Farmers are no more -justified in getting together to manipulate prices than are oil companies, or auto companies, or drug companies, or any other busi ness competitors. It is time to re mind the farmer that competition is still the foundation of free en terprise. True, farmers have more votes and, therefore, more power in Washington than have other businesses. But does this justify a war against consumers? The con sumer, if alerted, has more power - economic or political - than any conceivable combination of pro ducers. Perhaps it is time for consumers to take a hand in steer ing a course for agriculture. , HENRY HAZLITT Welfarism Gone BOTH SOCIAL SECURITY·and unem ployment compensation. were pro posed in large part on the argument of Franklin D. Roosevelt and others in 1935 that they would en able the government to "quit this business of relief."

Though all the social "insur ance" programs he asked for were enacted, together with a score of others, and though all of these sup plementary or "substitute" pro grams have been constantly en larged, direct relief, instead of showing any tendency to diminish, has increased beyond anything dreamed of in 1935. Henry Hazlitt is well known to FREEMAN read ers as author, 'columnist, editor, lecturer, and practitioner of freedom. This article will ap pear as a chapter in a forthcoming book, The Conque8t 01 Poverty, to be published by Arlington House. The number of welfare reCIpI ents in New York City alone jumped from 328,000 in 1960 to 1,280,000 in October, 1971 (exceed ing the total population of Balti more) and was still growing. On March 10, 1971, the U. S. Depart ment of Health, Education and Welfare reported· that more than 10 per cent of the residents of the nation's twenty largest cities were on welfare. In New York City, Bal timore, St. Louis, and San Fran cisco, it was one person in seven; and in Boston, one in five. The Mayor of Newark, N. J. told Con gress on January 22, 1971 that 30 per cent of the population in his city was on relief.

For the whole country, the num ber of people on welfare grew from 6,052,000 in 1950 to 7,098,000 in 265 266 THE FREEMAN May 1960, to 9,540,000 in 1968, to 12, 912,000 in September 1970, and to 14,480,000 in September, 1971. Because payments to individuals kept increasing, total expenditures for relief grew still faster. Here is a condensed record: 193-6 $ 349,892 $ 20,202 1940 1,123·,660 279,404 1945 1,028,000 417,570 1950 2,488,831 1,095,788 1955 2,939,570 1,440,771 1960 4,039,433 2,055,226 1965 5,868,357 3,178,850 1970 14,433,500 7,594,300 1971 18,631,600 9,932,000 Sources: U. S. Department of Health, Education and Welfare, NeSS Report F·5 July 6, 1971;. and Social· Se curity Bulletin, December, 1971. In the fiscal year 1971, relief ex penditures of $18.6 billion were running at more than four times the rate of 1960, more than sixteen times the rate of 1940, and more than 53 times the rate of 1936.

To economize on figures, I have not only confined myself to five year interval comparisons, but I have not shown the division be tween state and local funds. Yet these comparisons are part of the explanation of the skyrocketing growth of these relief figures. It will be noticed that while the Fed eral contribution' to direct relief expenditures was only 5 per cent in 1936, it was 25 per cent in 1940, 44 per cent in 1950, and 53 per .cent in 1971. Yet.relief was actually adFiscal year All Funds (000) Federal Funds (000) ministered at the state and local level. In fact, it was for the most part administered by the cities and counties. The localities contributed only 26 per cent toward the total cost of the relief they handed out in 1940, only 11 per cent in 1950, 13 per cent in 1960, and 11 per cent in 1970. When a city government is contributing only 11 cents of its own for every dollar it pays out to relief recipients, it can distribute its political favors cheaply, and has little incentive to exercise vigilance against overpayment and fraud.

Most of those who discuss the mounting cost of direct relief treat this figure in isolation as if it rep resented the total cost of "the war against poverty." In fact, it is only a small fraction of that cost, re cently running in the neighborhood of not much more than a tenth. The following figures are from an offi cial table of "Social Welfare. Ex penditures Under Public Pro grams."l Social Welfare Expenditures (in millions of dollars) State and Year Total Federal Local 1935 $ 6,548 $ 3,207 $ 3,341 1940 8,795 3,443· 5,351 1945 9,205 4,399 4,866 1950 23,508 10,541 12,967 1955 32,640 14,623 18,017 1960 52,293 24,957 27,337 1965 77,121 37,720 39,401 1968 113,839 60,314 53,525 1970 145,350 77,321 68,029 1971 (p.) 170,752 92,411 78,341 1972 WELFARISM GONE WILD 267 Revenue Sharing? This gigantic total of $171 bil lion for "social welfa.re" is more than triple the figure for 1960 and more than 26 times the figure for 1935. Yet the 29-fold increase in Federal expenditures for· welfare in the 35-year period, instead of reducing the burden on the states and cities, as originally promised, has been accompanied by a 23-fold increase even in that local burden.

A similar result is evident if we consider the cost of direct relief alone. Though the Federal govern ment was contributing only 5 per cent of that total cost in 1936 com~ pared with 53 per cent in 1971, the cost to the States and localities has increased 26-fold. So much for the theory that "revenue-sharing", or increased Federal contributions, do anything in the long run to reduce the burden of welfare spending on the states and localities. They lead merely to a total increase in that spending. So the tendency of welfare spend ing in the United States has been to increase at an· exponential rate. This has also been its tendency elsewhere. Only when the economic and budgeta,ry consequences of this escalation become so grave that they are obvious. to the ma jority of the people - Le., only when irreparable damage has heen done - are the welfare programs likely to be curbed. The chronic inflat ion of the last 25 to 35 years in nearly every country in the world has been mainly the consequence of welfarism run wild.

The causes of this accelerative increase are hardly mysterious. Once the premise has been accepted that "the poor", as such, have a "right" to share in somebody else's income - regardless of the reasons why they are poor or others are better off - there is no logical stop ping place in distributing money and favors to them, short of the point where this brings about equality of income for all. If I have a "right" to a "minimum income sufficient to live in decency", whether I am willing to work for it or not, why .don't I also have a "right" to just as much income as you have, regardless of whether you earn it and I don't? Once the premise is accepted that poverty is never the fault of the poor but the fault of "society" (Le., of the self-supporting), or of "the capitalist system", then there is no definable limit to be set on relief, and the politicians who want to be elected or reelected will com pete with each other in proposing new "welfare" programs to fill some hitherto "unmet need", or in proposing to increase the benefits or .reduce the eligibility require ments of some existing program.

No complete count seems to ex ist anywhere of the present total 268 THE FREEMAN May number of welfare programs. The $171 billion expenditure for social welfare in the fiscal year 1971 is officially divided into roughly $66 billion for "social insurance", $22 billion for "public aid", $11 billion for "health and medical programs", $10 billion for "veterans' pro grams", $56 billion for "educa tion", nearly $1 billion for "hous ing", and $5 billion for "other so cial welfare". But these sub-totals are in turn made up of 47 different groups of programs, and many of these in turn consist of many sepa rate programs. 2 A Jungle of Agencies The weary taxpayer reads about such things as food stamps, job training, public housing, rent sup plements, "model cities", commu nity-action projects, legal services for the poor, neighborhood health centers, F AP, Office of Economic Opportunity (OEO), Medicaid, Old Age Assistance (OAA), Aid to the Blind (AB), Aid to the Per manently and Totally Disabled (APTD), Aid to Families with Dependent Children (AFDC), Gen eral Assistance (GA), manpower training programs, Head Start, VISTA, and on and on, and has no idea whether one is included under another, whether they duplicate each other's functions, which, if any, have been discontinued, or which are just about to start. All he knows is that there seems to be a new one every month.

In 1969, Mrs. Edith Green, a Democratic Congresswoman from Oregon, asked the Library of Con gress to compile the total amount of funds a family could receive from the Federal government if that family took advantage of all the public assistance programs that were available. Taking a hypothetical family of a mother with four children - one a preschooler, one in elementary school, one in high school, and one in college - the library informed her of the following: This family could collect $2,800 from public assistance; $618 fr.om medical assistance because of .AFDC; $336 in cash value for food stamps; and about $200 from OEO for legal services and health care. The family would also be entitled to public housing or rent supplements ranging in value from $406 to $636. The preschool child would be en titled to enter Head Start, the av erage cost being $1,050 for each youngster. The child in high school would be eligible for $1,440 worth of services from Upward Bound and the youngster in college would be eligible for an education oppor tunity grant that could be worth anywhere from $500 to $1,000. He also would be eligible for a Na tional Defense Education Act loan, and if he took advantage of the 1972 WELFARISM GONE WILD 269 forgiveness feature, he could get an outright grant of $520. He would also be eligible for a work study program costing in the neigh borhood of $475. If the mother wanted to participate in the job opportunity program, this would be worth $3,000.

So this imaginary family, a mother with four children, would be able to take advantage of .grants and services worth $11,513 for the year. In another hypothetical case, a mother with eight children could total an annual welfare income of $21,093.3 In 1968 Congressm'an William V. Roth, Ji and his staff were able to identify 1,571 programs, including 478 in the Department of Health, Education and Welfare alone, but concluded that "no one, anywhere, knows exactly how many Federal programs there are." In February, 1972, administra tion witnesses testified before a Congressional committee that there were 168 separate Federal pro grams geared in whole or in part to combating poverty. But as the total expenditures of these 168 pro grams were only $31.5 billion (out of $92 billion of Federal "social welfare expenditures") this must have been an incomplete list. While the Federal government keeps piling up new welfare pro grams, under Democratic or Republican administrations, almost every individal program shows a tendency to snowball. One reason is that when Congressmen propose a new program, the expenditure set in the initial year is almost always comparatively .moderate, to allay opposition - the "entering wedge"

technique; but annual increases in spending are built into the law. An other reason is that when a new welfare program is launched, it takes people a little while to catch on to it; and then the stampede be gins. A still further reason is that the bureaucrats who administer the program - eager to demon strate their own vicarious compas sion and liberality, as well as the indispensability of their jobs - not only interpret the eligibility re quirements very leniently, but ac tively campaign to advise potential "clients" of their "legal right" to get on the rolls. There has been a great deal of discussion in the last few years re garding the extent of fraud and cheating among those on relief. From the very nature of the prob lem this can never be exactly known; but the evidence indicates that it is substantial. In January, 1971, after a door to-door check on welfare cases, the State of Nevada struck about 22 per cent of the recipients - 3,000 people - from the relief rolls. The State Welfare Director reported 270 THE FREEMAN May that they had been cheating tax payers out of a million dollars a year through failure to report in come from other sources, including unemployment benefits. The di rector blamed the frauds on a Fed eral regulation that permitted wel fare applicants to obtain aid sim ply by stating that they met all qualifications.

In Michigan, state welfare offi cials discovered cases of money be ing pocketed by welfare clients for dental work which was never per- . formed. In California, a group of San Francisco Bay area residents - all fully employed - conducted an ex periment to prove to county super visors how easy it is to get on re lief. They traveled the circuit of welfare offices, applying for and getting on welfare, usually with out even furnishing identification. Governor Reagan said that "one managed to get on welfare four times under four different names in one day - all at the same office." In his message to the California legisla ture, Governor Reagan pointed out: "The same govern ment that requires a taxpaying citizen to document· every state ment on his tax return decrees that questioning a welfare applicant demeans and humiliates him." A spot check of welfare rolls in New York City by the General Ac counting Office, reported in September, 1969, showed that 10.7 per cent of all families on relief there did not meet the eligibility re quirements, and that 34.1 per cent of those who were eligible were being overpaid. 5 In 1971, New York City Comp troller Abraham Beame revealed that the city was losing $2 million a year as a result of forged checks.

More millions were lost because people on relief falsely complained that they had not received their checks; they were maileddupli cates. Simply requiring those on relief to come and pick up their checks, rather than getting them by mail, lowered New York City's welfare lists by about 20 per cent. It is impossible to know how much of the blame for the national and local welfare mess is to be put on relief cheaters and how much on loose administration. It is made so easy to get and stay on relief legally that cheating hardly seems necessary. On January 12, 1969, The New York Times ran a front-page story under the headline: "Millions in City Poverty Funds Lost by Fraud and Inefficiency." It reported that "Multiple investigations of the city's $122-million-a-year anti .. poverty program are disclosing chronic corruption and adminis trative chaos," and quoted an as sistant district attorney as say ing: "It's so bad that it will take 1972 WELFARISM GONE WILD 271 ten years to find out what's really been going on inside the· Human Resources Administration." The next day Secretary of Labor W.

Willard Wirtz said that New York City had the worst administrative problem of any antipoverty pro gram in any city in the country. But the New York situation kept getting worse. In January, 1971, a welfare mother and her four children were assigned to the Waldorf Astoria, one of New York's most elegant hotels, at a cost of $152.64 for two days. The City's welfare agency claimed with a straight face that there was no room elsewhere. But many other routine practices of the City were almost as costly, wIth entire hotels "temporarily" filled with re lief families at hotel rates. One family was put up at the Broad way-Central at a cost of $390.50 a week., Another, a welfare family of fifteen, was put up at a Bronx motel at a rental that would add up to $54,080 a year. 6 Dependent Children Much the fastest growing relief program has been Aid to Families with Dependent Children (AFDC). In the ten years from 1960 to 1970 the number of people aided by this program increased from 3,023,000 to 9,500,000. Costs soared from $621 million in 1955 to $4.1 bil lion in 1970.

The nationwide cheating on this is probably higher than on any other welfare program. The rea son is that a mother and her ·chil dren, legitimate or illegitimate, become eligible for AFDC relief if there is no employed father pres ent. The mothers report that the father· has "deserted." "The fact is,"according to one authority, "that in many cases the father never really deserts. He just stays out of sight so the. woman can get on AFDCrolls. In slum areas, everyone knows this goes on. It is widespread in New York City." Governor Reagan reported that he knew there were 250,000 homes in California where the father had run out. One of the fundamental causes for the huge and growing load of relief cases is that there is no adequate investigation of eligi bility. The excuse offered by some welfare workers is: "It's impos sible to do adequate eligibility checks. There isn't time. It's a question of helping people who need help rather than catching people who need catching."

Still another reason why there is no adequate investigation of eligibility is that Federal bureau cratic regulations discourage it. As Governor Reagan has put it: "The regulations are interpreted to mean that no caseworker can challenge or question a welfare ap272 THE FREEMAN May plicant's statements."7 Instead of trying to reform this situation, the Department of Health, Education and Welfare seems mainly concerned to defend it. It has published and circulated widely a booklet called Welfare Myths vs. Facts. This turns legiti mate criticisms into "myths" by grossly overstating them, and then produces questionable answers. For example: "Myth: The welfare rolls are full of able-bodied loafers. "Fact: Less than 1 per cent of welfare recipients are able-bodied unemployed males." This figure, implying that it would have a negligible effect on welfare to find jobs for these men, is incredibly low. It is apparently achieved by treating any physical impairment, however trivial, as a qualification for family relief; it ignores employable women; and it ignores the fact that the average relief family consists of 3.7 per sons, who would move off the rolls if the breadwin'ner went to work.

Another example: "Myth: Once on welfare, always on welfare. "Fact: The average welfare family has been on the rolls for 23 months .... The number of long term cases is relatively small." A 23-month average for families on relief is hardly something to be complacent about, even if the figure is accurate. The Department's own charts show that more than a third of those on welfare have been there three years or more. More over, the Department's average does not count "repeaters." If a family were on relief for, say, 23 months, off a month, back on for another 23 months, and so on, it would not raise the· average. Nor does any figure based on relief at any given point· in time count the prospective 're~aining period each case will be on the rolls. Already families have been found on relief for three generations. 8 Small wonder that President Nixon, in his State of the Union message of January, 1971, called the existing American relief sys tem "a monstrous, consuming out rage." I) • FOOTNOTES • 1 Statistical Abstract of the United States: 1971, table no. 430, p. 271, and Social Security Bulletin, December 1971.

2 See Social Security Bulletin, December 1971. 3 Human Events, December 13, 1969. 4 New York Times, February 16, 1972. 1) These examples were cited in an article "Welfare Out of Control" in U. S. News & World Report, February 8, 1971. By coincidence, Time and Newsweek also carried long feature stories on welfare in their issues of the same date, covering similar material. 6 Time, February 8, 1971. 1 U. S. News & World Report, March 1, 1971. 8 An excellent analysis of the HEW Welfare Myths vs. Facts pamphlet ap peared in The Wall Street Journal of January 27, 1972 by Richard A. Snyder, a member of the Pennsylvania Senate.

CLARENCE B. CARSON THE FOUNDING OF THE AMERICAN REPUBLIC 10 The DeclaraOtion of Independence THE DECLARATION OF INDEPEND ENCE is a peculiar, unusual, and in many ways, unique document in the modern world. Of revolutions there have been a surfeit, and more, in the last two hundred years. And accompanying them have been pronouncements, direc tives, statements, proclamations, and declarations enough for a good start on papering the walls of the Pentagon. Of all such documents, however, one stands out and looms above the rest - the Declaration of Independence. Not only has it been revered usually by the people of the United States, provided the grist for innumerable orations, been memorized - in part - by school children; it also has been almost endlessly quoted in reproach of actual American ways and has been looked to by peoples of other lands as a standard. Supreme Court justices have appealed to it, would-be revolutionaries have claimed its rhetoric, while those of a conservative bent have sought their principles within it. For most of the history of the United States only one national holiday Thanksgiving - has ranked with the 4th of July, the day set aside for celebrating the signing of the Declaration of Independence.

Dr. Carson shortly will join the faculty of Hillsdale College in Michigan as Chairman of the Department of History. He is a noted lec turer and author, his latest book entitled Throttling the Railroads. 273 274 THE FREEMAN May It is somewhat strange and a matter for wonder that this docu ment among all those of an era rich with elegant statements should have attained its unique position. John Adams thought tha.t the second day of July would be celebrated, for it was on that day that the resolution for independ enee was adopted. Moreover, he later declared of the Declaration that "There is not an idea in it, but what had been hackneyed in Con gress for two years before."l That portion of the document to which people usually refer is exceedingly brief, comprising, at most, two paragraphs, the first of which is only a sentence in length. The re mainder of the. document is of his torical interest only. Moreover, the Declaration is not now, and never has been, a pa.rt of the funda mental law of the United States.

It lies outside the structure of law which is made up of constitutions, statutes, and the common law. There are, of course, reasons for its position, and they will come out in an· analysis of the document and discussion of its background and extension. There are three dimensions of the Declaration of Independence which should be carefully con':' sidered for a clear understanding of it. The first is the contemporary context within which it was writ ten, adopted, proclaimed, and served its purpose. However much it ma.y have come to belong to the ages, the Declaration had a defi nite purpose and a particular role at the time. The second dimension is its past. The words and phrases are given their meaning not only within the contemporary rhetoric but also from historical doctrines and beliefs. Too, the later applica bility of anything said is condi tioned by the context of a then past history. The third dimension is its future. What men have made of the document, frequently out of context and with no attention to the concepts which give it any con tinuing validity, tells us something of the reason for its importance.

The Declaration in Context The story of the composition and adoption of the Declaration is fairly simple. Richard Henry Lee's resolution for independence, intro duced on June 7,1776, was not im mediately adopted. On June 10, Congress decided to delay further discussion of it until July 1, for many delegates awaited instruc tions, or changes in instructions, from their legislatures before act ing affirmatively for independence. Lee's simple and straightforward resolution would have been ade quate for the formal declaring of independence. But America badly needed aid from foreign powers if the appeal to arms was to be suc1972 THE DECLARATION OF INDEPENDENCE 275 cessful. Thomas Paine had sug gested in Common Sense that some sort of manifesto be published in order to gain friends with other nations: "Were a manifesto· to be published and dispatched. to for eign courts, setting forth the mis eries we have endured and the peaceable methods which we have ineffectually used for redress; de claring at the same time that ... we had been driven to the necessity of breaking off all connections . . .

- such a memorial would produce more good effects to this continent than if a ship were freighted with petitions to Britain."2 This was apparently the origin of the idea for a declaration. Therefore, fol lowing the determination to delay adopting Lee's resolution, Con gress appointed a committee to produce such a document. The com mittee was composed of Benjamin Franklin, John Adams, Robert Liv ingston, Thomas Jefferson, and Roger Sherman. Thomas Jefferson was assigned the task of producing a draft of the proposed declaration. Had John Dickinson been favorably disposed toward independence at this juncture, the task would prob ably have been his. Jefferson had only lately acquired a considerable reputation as a writer with his Summary View of the Rights of British America. In any case, his selection turned out to have been one of the happiest decisions ever made by a committee. Some minor changes were suggested by Frank lin and Adams, and these were in corporated· in the document. Con gress also made a few alterations. 3 But the finished work was sub stantially what Jefferson had pre sented to the committee. Much of the honor which has fallen to the Declaration should be ..credited to J efferson's felicity of style, grace ful turns of phrase, .and the evoca tive power of words appropriately juxtaposed.

Congress acted quickly once the Lee resolution came before it again on July 1. The next day it was approved unanimously by 12 colo nies, though the New York dele gation abstained. And then - on the July 4 date which was to be celebrated by posterity - Congress approved the Declaration of In dependence. The stated purpose of the Dec laration was to declare to "man kind" the "causes which impel them to the separation." It was ad dressed, then, to the world at large. It can be conveniently divided into three parts for purposes of discus sion: the first is a theoretical justi fication of revolution and inde pendence; the second is an enumer ation of the abuses suffered at the hands of the British;· and the third is the formal declaring of inde pendence.

276 THE FREEMAN May A Dangerous Action The theoretical justification of revolution is contained in the first two paragraphs, which are also the most often quoted parts of the Declaration. Interspersed through these paragraphs runs a litany of phrases which have become etched in the minds of Americans: "Laws of Nature' and of Nature's God," "truths to", be self-evident," "all men are created equal," "endowed by their Creator," "unalienable Rights," and "Life, Liberty and the pursuit of Happiness." The ideas may have been hackneyed, as John Adams said, but the phrases in which Jefferson caught them elevated above the trite and ordi nary to the sublimity of enduring poetry. Yet, ideas are dangerous, as every tyrant knows and even par ents of small children suspect; and there is no more dangerous con text for setting forth thoughts than the one for which these were written. The Declaration not only declares independence but also proclaims revolt - revolution.

Sages may debate as long as they will whether the American revolu tion was indeed a revolution - and the question is important in some of the later meanings of the word - but there can be no doubt that it was a revolution in the root sense of the word. That is, it was a revolt against and a casting off of the governmental authority which had been exercised over the colonies. Not only that, but it was successful-the basic distinction between a revolution and a rebel lion. Nothing more dangerous to the peace and safety of a people can be imagined than a revolu tion: the former authority is cast off,whether law and order will be maintained is gravely in doubt, and man's bent to destruction is likely to be loosed from the ulti mate means of confining it. The point of emphasizing the danger of revolution is to enter a warning: the opening paragraphs of the Declaration of Independence are not something to be casually trotted out on any and all occa sions. They are a theoretical justi fication of revolution, and those who intend less than revolution may well take care in how they re fer to them. But the point is also to note the qualifying conditions of the document as to what justi fies revolt: "Prudence, indeed will dictate that Governments long es tablished should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more dis posed to suffer, while evils a.re sufferable, than to right them selves by abolishing the forms to which they are accustomed."

The case for revolution, as Jef ferson presented it, can be sum1972 THE DECLARATION OF INDEPENDENCE 277 marized in this way. The Creator has endowed men with certain rights. Governments exist for the purpose of securing these rights to those under them. When agov ernment rather than performing these ends primarily begins de stroying them, and· indicates by a long term trend that it cannot be brought back to its purpose, "it is the Right of the People to alter or abolish it.... " This is the nub of the argument. A Majority Form of Action There is much that is left out of the simple statement of the doc trine of the right of revolution contained in the, Declaration of In dependence. There was no need to spell it out on this occasion, and many of the restrictions are im plicit. The oppressions must afflict the people generally; they must, therefore, be by a power alien to the generality of the people. And the right to revolt belongs, at the least, only to a majority, probably only to a consensus, and, ideally, to the people generally. This is to say that a mino'flity does not have a right to revolution. The whole idea of a minority having such a right is shot through with contra dictions. The minority could only effect this "right" by overcoming the majority. If a minority had a "right" to alter or abolish a gov ernment and to erect another in its stead, it would be a "right" to impose its will on a majority.

Do minorities not have rights, then? Assuredly, they do, or so Jefferson and many of his contem poraries thought. All men have rights; but the recourse to revolu tion belongs only to the preponder ance of the people. But suppose a minority (or, for that matter, a combination of several minorities) is oppressed and persecuted, what recourse do the members have ? The Founders believed that the members of a minority have rights as individuals which should be pro tected in the system along with the rights of those who happen to be long to the majority or consensus. For example, they have the right to persuade others of the justice of their cause - that is, to become the maj ori ty. Freedom of speech and of the press are devices for assuring the opportunity of exer cising the right of persuasion. But suppose all fails within the system to relieve the oppression? What is the ultimate recourse of a minor ity? The ultimate recourse of an oppressed minority is migration.

The right to migrate for a minor ity is the corollary of the right to revolution for a majority. Metaphysical Foundations The right of revolution is meta physical, not existential (and none may logically claim such a right 278 THE FREEMAN May who have not a metaphysics on which to found their case). No government can, in practice, admit the right of its people to revolt against it at any time. The mo ment such a right is acknowledged effectively, the government abdi cates its former power and anoth er government takes its place. No governmental system can be con trived which provides for the right of revolution (though, in terestingly, the right of migration can be established). The matter is as clear as it can be when it is seen that the right of revolution involves the right to take up arms against the government. A govern ment ceases to be the government when men take up arms against it with impunity. The United States government can decree that the 4th of July is a national holiday - Independence Day -, and cele brations can be held in which the first two paragraphs of the Decla ration of Independence are read, but the United States Constitu tion could not, and does not, in corporate within it the right of revolution. (It does, however, pro vide for turning out of office some of those who govern, at stated intervals, but the discussion of this can wait.) That is to say, again, the right of revolution is metaphysical, not existential, an explanation of which follows.

The right of revolution has its being prior to, outside of, and be yond government. Jefferson was making his case within a tradition whose groundwork was laid long before. The Declaration of Inde pendence had a past, then, which needs to be a little explored. The two main traditions appealed to are theism and natural law. The rights alluded to are said to be derived from "the Laws of Nature and of Nature's God," and ones with which "they are endowed by their Creator." If there were only history and present existence, no right to revolution could be estab lished, for no government that ever did or does exist could or would accord it. The appeal to right, in this sense, requires an appeal to right that existed before history. It is an appeal to that which and He who was before governments came into being. Although our language has no tense for it, it is an appeal to the timeless and the enduring, to that which has no tense.

In this timeless sphere, J effer son tells us, "all men are created equal," and are endowed by their Creator "with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Hap piness." This has been, no doubt, the most troublesome passage in the Declaration. What can it mean that all men are created equal? The most immediate meaning, 1972 THE DECLARATION OF INDEPENDENCE 279 within the time context, is that Americans are equals of English men. They had been contending for this since the dispute between the two had occurred. Americans had claimed that they had the same right to tax themselves as Englishmen, the same right to legislate, and eventually they claimed the same trading pri vi leges. It was the failure of the British government to accord them equal rights which had pro voked the dispute. The justifica tion for revolt now became the fact that they had been deprived of their rights. This needs further discussion in terms of what men were to make of the phrase later.

Before going into that, one other matter from the past needs to be considered. The· justification for revolt by the colonies was tied up with the institution of monarchy. Whether or not they would have their grievances redressed depended in considerable measure upon the will of the king. Hereditary monarchy had long posed a problem in. po litical theory, at least for Western thinkers. Suppose the monarch were a tyrant? Suppose he im posed his will, in an arbitrary and despotic fashion, over the people? It had long been held, by some, that it was the right of the people to kill a tyrant. However attractive the idea might have been. to some Americans, they never seriously considered it. And for very good reason: it would not have settled the issues in contention. But the fact that they were ruled by a monarch gave the colonists a justi fication for revolution that is de nied to those who live underelec tive executives.

EqualitySefore the Law Returning to the matter of equality, it should be stated that the phrase "all men are created equal" had and has a much broad er potential of application than to the simple proposition of the equal ity of Englishmen and Americans. Its meaning is fairly clear in the context: all men have an .equal claim to certain natural rights. More, the case is implicit for equality before the law, that is, that the law shall deal with acts and not classes of people. Nor is there any reason to doubt that Jefferson believed this principle applied to blacks as well as whites, and that there shou~d only be free men, not slaves. Later in American history, some have read the Declaration of In dependence into an idealistic framework. It is from this angle that some would see the Declara tion as calling for continuing rev olution and as a dream for Amer ica that is yet to be realized. Such notions separate the doctrines al28Q THE FREEMAN May most entirely from the context of ideas behind them as well as the temporal context in which they were written. Continual revolution is a nonsensical notion; within this context, at least, it could only mean a continual warfare over who is to govern. Jefferson based his argument on metaphysical propositions, not idealistic ones.

The equality upon which he bases his position is one that has always been, not one that might someday be achieved. True, he declares that the purpose of government is to secure men their rights. It is surely true, also, that governments have most frequently not done this well. The point may be too ab struse to be readily grasped, but Jefferson was not saying that an ideal government would establish this ideal equality; he was saying that a government performing its appropriate function would do so. Of course, the phrases do not touch upon equality within society at all; they apply to equality be fore the law. The theoretical justification of revolution contained in the first two paragraphs tells us only that there can occur situations in which a people may be justified in revolt ing against the authority over them. This is the case, we are told, when the government has consistently abandoned its role of protecting the people in' their rights and become the persistent violator of them. It is the burden of the body of the Declara tion to show that the British government had done this to America.

The Case Against the King The case is summed up in the next to last sentence of the second paragraph: "The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct obj ect the establishment of an ab solute Tyranny over these States." It should be noted here that all the acts are blamed upon the monarch. There was, of course, a reason for doing this as a tactic. Loyalty to the king was the tie that Americans had clung to the longest. It was the one which now must be disavowed and broken if independence was to be achieved. Some purport to see in this blam ing of all the acts of the govern ment upon the king disingenuous ness by Jefferson and those who concurred in his formulations. The charge has little merit; the tactic is fully justified in British consti tutional theory. By that theory, the acts of ministers are acts of the king. Even the acts of Parlia ment are acts of the Crownin Parliament. Moreover, the king had neither disallowed nor disa vowed the acts in question, which he might have done. If there was 1972 THE DECLARATION OF INDEPENDENCE 281 disingenuousness to be charged, it should be about the fact that they had delayed so long in laying upon the king the blame for what was happening. Colonists had, for a decade, blamed Parliament and ministers for what was happen ing. But this, too, is understanda ble; it was a means of resisting without revolt. Now the case could be stated bluntly, and the blame could be placed where it justly rested, in the final analysis.

In any case, the British govern ment was indicted for its acts by a listing of them in the Declara ration, acts charged to George III. Even a· truncated version shows how weighty and .damaging was the case against him: He has refused his Assent to Laws .... He has forbidden his Governors to pass Laws .... He has refused to pass other Laws for the accomodation of large dis tricts of people .... He has called together legislative bodies at places unusual, uncomfort able, and distant from the depository of their Public Records. . . . He has dissolved Representative Houses repeatedly .... He has refused for a long time, after such dissolutions, to cause others to be elected. . . . He has endeavoured to prevent the population of these States .... He has obstructed the Administra tion of Justice. . . . He has made Judges dependent on his Will alone .... He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our People, and eat out their substance.

He has kept among us, in times of peace, Standing Armies without the Consent of our Legislatures. He has affected to render the Mili tary independent of and superior to the Civil Power. He has combined with others to subject us to a jurisdiction foreign-to our constitution. . . . ( F or quartering large bodies of armed troops among us. For protecting them ... from Pun ishment .... For cutting off our Trade with all parts of the world. For imposing Taxes on us without our Consent. For depriving us, in many cases, of the benefits of Trial by Jury. For transporting us beyond Seas to be tried for pretended offences. For abolishing the· free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarg ing its Boundaries .... For taking away our Charters .... For suspending our own Legisla tures, and declaring themselves in vested with Power to legislate for us in all cases whatsoever.

He has abdicated Government here, by declaring us out of his Protection and waging War against us. He has plundered our seas, rav aged our Coasts, burnt our towns, 282 THE FREEMAN May and destroyed the Lives of our peo ple. He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, deso lation, and tyranny .... He has constrained our fellow Cit izens taken Captive on the high Seas to bear Arms against their Coun try .... He has excited domestic insurrec tions amongst us.... A case can be made, of course, that there is some hyperbole amongst the charges listed. Some of the acts were done only against selected colonies. One or two of them may have been mere poten tiality.Some of the charges are repeated in slightly different form ulations. Yet everyone of them has substance behind it. The na ture of the Declaration was such that an act done against one of the colonies could properly be con sidered as done against all of them. A jury charged with estab lishing the facts alleged in the indictment almost certainly would have found Britain guilty of all, or almost all, of the charges brought, after reviewing the mass of evi dence that could have' been as sembled.

No Alternative The Declaration of Independence was not suddenly sprung upon Britain and the world. The Americans had not suffered abuse in silence, only to lash out in a fit of anger without warning. As J effer son said: "In every stage of· these Oppressions We have Petitioned for Redress in the. most humble terms: Our repeated Petitions have been answered only by re peated injury." Not only had ap peals been made to the king but also to the British people, or, as the Declaration says, "to our Brit ish brethren.'" But "They too have been deaf to the voice of justice and consanguinity." But one course lay open to the Americans, then, and they were taking' it. The final paragraph de clares the independence .of the states from Great Britain. The phrases of the concluding para graph are, if anything, more fe licitous than those of the opening paragraphs. The rhetoric, once again, rises above anything re motely petty or trivial to state the case for the ages. There is an ap peal "to the Supreme Judge of the world for the rectitude of our intentions," and "in the Name, and by Authority of the good Peo ple of these Colonies." They "sol emnly publish and declare" that they are "Absolved from all' Alle giance to the British Crown," and that they are "Free and Inde pendent States." "And for the support of this Declaration, with a firm reliance on the Protection 1972 THE DECLARATION OF INDEPENDENCE 283 of Divine Providence, we mutually pledge to· each other our Lives, our Fortunes and our sacred Honor."

The Declaration of Independence has been celebrated but. not be cause it contains a theoretical justification of revolution or be cause it indicted George III for the wrongs done the colonies. Americans have no more generally venerated revolution as a good than they have clung to an enmity with the British people. The mes sage of the Declaration is that revolution is a thing to be avoided so far as can be done, and entered upon only under dire necessity. The results of revolution are too unpredictable to warrant its en couragement; the destruction it portends too likely for the casual contemplation of it as a means to good ends. Revolution is negative and destructive. Far from being a thing of great value, it is a devalu ation of the political coin of the realm. The Declaration of Independence has been celebrated for good and sufficient reasons, reasons other than those connected with revolu tion. It has been celebrated, of course, because it marks the be ginning of independence. It marks, too, the inception - the birth - of a nation, though it probably had not been conceived at the time. It was surely almost accidental that the very name by which thisna tion was to be called - the United States of America - appeared in the Declaration. It was only the statement of a hoped-for condition - "the united States of America"

- when it was written. The Declaration contains, too, a principled statement of the great purpose for which governments exist ..-:. to protect the people in the enjoyment of their rights. The first two paragraphs of the Dec laration may be read and re-read - as they have been over the. years - not as a justification or call for revolution but as a reminder of the good and proper ends of gov ernment to a people who have in their hands the control of the gov ernment over them. It contains, too, in its main body a list of abuses to which governments are prone. These United States had a goodly beginning, in spite of the revolution which was made. The good beginning was because of the great principles which were raised up before the people in the Dec laration of Independence. t) 1 Quoted irt John R. Alden, A History of the American Republic (New York: Alfred A. Knopf, 1969), p. 243. 2 Nelson F. Adkins, ed., Thomas Paine (New York: Liberal Arts Press, 1953), pp.43-44.

3 See Alden, op cit., pp. 241-42. Next: The War for Independence.

The Causesof HANS F. SENNHOLZ IT IS NOT MONEY, as is sometimes said, but the depreciation of money - the cruel and crafty destruction of money - that is the root of many evils. For it destroys in dividual thrift and self-reliance as it gradually erodes personal sav ings. It benefits debtors at the ex pense of creditors as it silently transfers wealth and income from the latter to the former. It gen erates the business cycles, the stop-and-go boom-and-bust move ments of business that inflict in calculable harm on millions of peo ple. For money is not only the me diurn for all economic exchanges, but as such also the lifeblood of the economy_ When money suffers depreciations and devaluations it invi tes government price and wage Dr. Sennholz heads the Department of Eco nomics at Grove City College and is a noted writer and lecturer on monetary and economic principles and practices.

controls, compulsory. distribution through official allocation and ra tioning, restrictive quotas on im ports, rising tariffs and sur charges, prohibition of foreign travel and investment, and many other government restrictions on individual activities. Monetary de struction breeds not only poverty and chaos, but also government tyranny. Few policies are more calculated to destroy the existing basis of a free society than the debauching of its currency. And few tools, if any, are more im portant to the champion of free dom than a sound monetary sys tem. Inflation is defined here as the creation of new money by mone tary authorities. In more tradi tional usage, it is that creation of money that visibly raises goods prices and lowers the purchasing power of money. It may be creep284 1972 THE CAUSES OF INFLATION 285 ing, trotting or galloping, depend ing on the rate of money creation by the authorities. It may take the form of "simple inflation," in which case the proceeds of the new money issues accrue to the govern ment for deficit spending. Or it may appear as "credit expansion,"

in which case the authorities chan nel the newly created money into the loan market. The government may balance its budget, but in order to stimulate business and promote full employment it may inject new credits into the bank ing system. Both forms are infla tion in the broader sense and asi such are willful and deliberate policies conducted by government. Ours is the age of inflation. 1 All national currencies have suf fered serious depreciations in our lifetime. The British pound ster ling, the shining example of hard money for one hundred years, has lost almost 90 per cent of its pur chasing power and suffered four devaluations since 1931. The pow erful U.S. dollar of yesteryear has lost at least two-thirds of its pur chasing power and continues to shrink at accelerating rates. In the world of national currencies there have been nearly 400 full or partial devaluations since World War II. Many currencies have suf1 Cf. Jacques Rueff, The Age of Infla tion (Gateway Editions, Henry Regnery Company, Chicago, Ill., 1964).

fered total destruction and their replacements are eroding again. Ideas Shape Policies To inquire into the causes that induce governments the world over to embark upon such monetary policies is to search for the mone tary theories and doctrines that guide their policy makers. Ideas control the world, and monetary ideas shape monetary policies. Several distinct economic and monetary doctrines have combined their forces to make our age one of inflation. One doctrine in par ticular enjoys nearly universal ac ceptance: the doctrine that gov ernment needs to control the money. Even many of the champions of private property and individual freedom stop short at money. They are convinced that money cannot be left to the vagaries of the mar ket order, but must be controlled by government. Money must be supplied and regulated by govern ment or its central bank. That money should be free is incon ceivable to typical twentieth-cen tury man. He depends on govern ment to mint his coins, issue his notes, define "legal tender," estab lish central banks, conduct mone tary policy, and then stabilize the price level. In short, he wholly re lies on government regulation of money. But this trust in monopo286 THE FREEMAN May listie monetary authori ty operating through political processes inevi tably gives rise to monetary de struction. In fact, money is in flated,. depreciated, and ultimately destroyed wherever government holds monopolistic power over it.

Government Control of Money Throughout the history of civili zation, governments have been the chief cause of monetary deprecia tion. It is true, variations in the supply of metallic money, due to new gold and silver discoveries, occasionally affected the value of money. But these changes were rather moderate when compared with those caused by government coin debasements or note infla tions. Especially since the rise of statism and the "redistributive so ciety," governments all over the world have embarked upon un precedented inflations the disas trous effects of which can only be surmised. To entrust our money to government is like leaving our canary in trust with a hungry cat. From the Roman caesars and the Medieval princes to contempo rary presidents and prime minis ters, their governments have this in common: the urgent need for more revenue. The large number of spending programs such as war or preparation for war, care of veter ans and civil servants, health, edu cation, welfare, urban renewal, and the like, places a heavy burden on the public treasury, which is finally tempted to provide the necessary funds through currency expansion.

True, government at first may merely endeavor to· tax wealth and income - tax Peter to pay Paul. But this convenient and popular source of government sup port is practically exhausted when Peter's income tax reaches one hundred per cent. At this point, for additional revenue, the govern ment must either raise everyone's taxes or turn to currency expan sion. But the former is rather un popular and therefore inexpedient politically. To win elections, the taxes may even be lowered and the inevitable deficits covered through currency creation, I.e., inflation. The Steps Toward Monopoly The first step toward full devel opment of this source of revenue was the creation of a government monopoly of the mint. To secure possession of the precious metals that circulated as coins, the sover eign prohibited all private issues and established his own monopoly. Minting became a special preroga tive of the sovereign power. Coins either carried the sovereign's pic ture or were stamped with his fa vorite emblems. But above all, his mint could now charge any price for the coins it manufactured. Or it could reduce the precious metal 1972 THE CAUSES OF INFLATION 287 content of the coins and thus ob tain princely revenues through coin debasement. Once this pre rogative of sQvereignty was safely established, the right to· clip, de grade, or debase the coinage was no longer. questioned. It became a "crown right" that was one of the chief sources of revenue. 2 An essential step toward gradual debasement of the coinage was the separation of the name of the monetary unit from its weight.

While the original names of the coins designated a certain weight and thus afforded a ready concep tion of their gold or silver con tents - pound, libra or livre, shil ling, mark, and soon-the new names were void of any reference to weight. The pound sterling was no longer a pound of fine silver, but anything the sovereign might designate as the national monetary unit. This change in terminology widely opened the door to coin de basement. The next step toward full gov ernment control over money was the passage of legal tender laws, which dictates to people what their legal money can be. Such laws are obviously meaningless and super fluous wherever the ordinary law of contract is respected. But where government wants to issue inferior 2 Cf. Elgin Groseclose, Money and M(Ln (Frederick Unger Publishing Co., New York, 1961), p. 55 et seq. coins or depreciated paper notes, it must use coercion in the form of legal tender legislation. Then it can circulate worn or· debased coins side-by-side with the origi nal coins, falsify the exchange ratios between gold and silver coins, .and discharge its debt with the overvalued coins, or make payments in greatly depreciated fiat money. In fact, once legal tender laws were safely estab lished, debt repudiation through monetary depreciation could be come one of the great inj ustices of our time. Contemporary juris prudence and jurisdiction were ut terly paralyzed in their defense and administration of justice once they accepted legal tender laws. A debt of a million gold marks thus could be legally discharged with one million paper marks that bought less than one U.S. penny.

And a government debt of fifty billion 1940 dollars can now be paid or refunded with a 1971 dol lar issue that is worth less than one-third of the original amount. With the blessings of the courts, millions of creditors can now be swindled out of their rightful claims, their property legally con fiscated. 3 But absolute government con trol over money was only estab3 LudWig von Mises, Human Action (Yale University Press, New Haven, 1949), PP. 432, 444.

288 THE FREEMAN May Jished when money substitutes in the form of paper notes and de mand deposits came into promi nence. As long as governments had to make payments in commodity money, inflationary policies were limited to the primitive methods of coin debasement. With the ad vent of paper money and demand deposits, however, the power of government was greatly strength ened, and the scope of inflation vastly extended. At first, people were made familiar with paper money as mere substitutes for money proper, which was gold or silver. Government then proceeded to withdraw the precious coins from individual cashholdings and concentrate them in its treasury or central bank, thus replacing the classical. gold-coin standard with a gold-bullion standard. And finally, when the people had grown ac customed to paper issues, govern ment could deny all claims for redemption and establish its own fiat standard. All checks on infla tion had finally been removed.

The Role 01 the Central Bank The executive arm of govern ment that conducts the inflation usually is the central bank. It does not matter who legally owns this bank, whether private investors or the government itself. Legal own ership always becomes empty and meaningless when government assumes total control. The Federal Reserve System which is legally owned by the member banks is the monetary arm of the U.S. Govern ment and its engine of inflation. It enjoys a monopoly of the note issue which alone is endowed with legal tender characteristics. Com mercial banks are forced to hold their reserves as deposits with the central bank, which becomes the "banker's bank" with all the re serves of the country. The central bank then conducts its own infla tion by expanding its notes and deposits while maintaining a de clining reserve ratio of gold to its own liabilities, and directs the bank credit expansion by regulat ing the legal reserve requirements the commercial banks must main tain with the central bank. En dowed with such powers, the cen tral bank now can finance any government deficit, either through a direct purchase of treasury obli gations or through open-market purchase of such obligations, which creates the needed reserves for commercial banks to buy the new treasury issues.

The final step toward absolute government control over money, and its ultimate destruction, is the suspension of international gold payments, which is the step Presi dent Nixon took on August 15, 1971. When a central bank is hope lessly overextended at home and 1972 THE CAUSES OF INFLATION 289 abroad, its currency may be de valued, which is a partial default in its international obligations to make payment in gold; or, in an outburst of. abuse against foreign ers and speculators, the govern ment may cease to honor any pay ment obligations, as in the case of the U.S. default. All over the world, government paper now forms 120 national fiat standards that are managed and depreciated at will. The decline of monetary free dom and the concomitant rise of government power over money gave birth to our age of inflation. Step by step, government assumed control over money, not only as an important source of government revenue but also as a vital com mand post over our economy. The result is continuing inflation. Only monetary freedom can impart stability.4 Welfarism and Inflation Even the noblest politicians and civil servants can no longer be ex pected to resist the public clamor for social benefits and welfare.

The political pressure that is 4 Cf. Ludwig von Mises. The T he01"'J1 of Money and Credit (FEE, Irvington, N. Y., 1971), pp. 413 et seq.; Murray N. Rothbard, Man, Economy, and State (D. Von Nostrand Co., Princeton, 1962), p. 661 et seq.; also his concise What Has Government Done to Our Money? (Pine Tree Press, 1963). brought to bear on democratic governments is rooted in the popu larr'ideology of government welfa.re and economic redistribution. It inevitably leads to a large number of spending .programs that place heavy burdens on the public treas ury. By popular demand, weak administrations seeking to pro long their power embark upon massive spending and inflating in order to build a "new society" or provide a "better. deal." The peo ple are convinced that government spending can give them full em ployment, prosperity, and economic growth. When the results fall far short of expectations, new pro grams are demanded and more government spending is initiated.

When social and economic condi tions grow even worse, the dis appointments breed more radical ism, cynicism, nihilism, and above all, bitter social and economic con flict. And all along, the enormous increase in government spending causes an enormous increase of taxes, chronic budget deficits and rampant inflation. 5 The "redistributive" aspirations of the voting public often induce their political representatives in Congress to authorize and appro priate even more money than the President requests. Such programs 5 Henry Hazlitt, Man V8. The Welfare State (Arlington House, New Rochelle, N. Y., 1969), p. 57 et seq.

290 THE FREEMAN May as social security, medicare, anti poverty, housing, economic devel opment, aid to education, environ mental improvement, and pay in creases for civil servants are so popular that few politicians dare to oppose them. The government influences per sonal incomes by virtually every budget decision that is made. Certainly its grants, subsidies, and contributions to private individu als and organizations aim to im prove the material incomes of the beneficiaries. The loans and ad vances to private individuals arid organizations have the same ob jective. Our foreign aid program is redistributive in character as it red uces American incomes in order to improve the material condition of foreign recipients. The agri cultural programs, veteran's bene fits, health, labor and welfare ex penditures, housing and commun ity development, Federal expendi tures on education, and last, but not least, the social insurance and medicare programs directly affect the incomes of both beneficiaries and taxpayers. As the benefits generally are not based on tax payment, but rather on considera tions of social welfare, these pro grams constitute redistribution on a nationwide scale. Foreign aid programs have extended the prin ciple of redistribution to many parts of the world.

Whenever government expendi tures exceed tax collections and the government deficit is covered by currency and credit expansion, we suffer inflation and its effects. The monetary unit is bound to de preciate and goods prices must rise. Large increases in the quan tity of money also induce people to reduce their savings and cash holdings which, in the terminology of mathematical economists, in creases money "velocity" and re duces money value even further. It is futi,Je to call these people "irresponsible" as· long as the government continues to increase the money stock. Labor Union Pressures A very potent cause of inflation is the unrelenting wage pressure exerted by labor unions. It is true, labor unions do not directly en hance the quantity of money and credit and thus cause the depreci ation. But their policy of raising production costs inevitably causes stagnation and unemployment.

This is why the union strongholds are the centers of unemployment. Faced with serious stagnation, the labor leaders are likely to become spokesmen for all schemes of easy money and credit that promise to alleviate the unemployment plight. The democratic government in turn does not dare to oppose the unions for political reasons. On 1972 THE CAUSES OF INFLATION. the contrary, it does everything in its power to reduce the pressure which mass unemployment exerts on the union wage rates. It grants ever larger unemployment bene fits and embarks upon public works in the depressed unionized areas. At the same time it expands credit, which tends to reduce real wages and to encourage employment. The demand for labor is de termined by labor costs.. Rising costs reduce the demand, falling costs raise it. Inasmuch as infla tion reduces the real costs of labor, it actually creates employment. When goods prices rise while wages stay the same, or prices rise faster than wages, labor be comes more profitable to employers.

Many workers, whose employment costs heretofore had exceeded the value of their productivity so that they were unemployable, now can be profitably re-employed. Of course, this employment-creating policy is then counteracted by such unemployment factors as rising minimum wage rates, higher un employment benefits and welfare doles, and rising union wage scales and fringe-benefit costs. In many industries, the labor unions have introduced "cost-of-living clauses" that aim to prevent the decline of real· wages through monetary de preciation. Or their wage demands take into consideration the rising rates of monetary depreciation. Their demands may become "ex orbitant," their strikes longer and uglier, and the economic losses in flicted on business .and the public ever more damaging until busi nessmen clamor for government wage controls. With wage controls come price controls and the whole paraphernalia of the command system.

The "New Economics" To give "scientific" justification to the policy of inflation, a host of contemporary. economists have de veloped intricate theories, com monly known as the new econom ics. Basically, they all ascribe to government .the magic power of creating real wealth out of noth ing, of raising the "national in come" through minute efforts of the central bank and its printing presses. They are unanimous in their condemnation of the gold standard, which to them means domination by "external forces" and denial of national independ ence in economic policies. Of course, the "independence" they so jealously uphold is tantamount to government control over money matters. They want "fiat money," i.e., government money without re straint by a commodity such as gold. Though some would allow us the freedom to buy and hold gold coins or bullion, they know very well tha t the legal tender laws 292 THE FREEMAN May that support the fiat standard deny us the right to use gold in economic exchanges, which rele gates all coins to hoards and coin collections.

Only free money is sound money. This is why one should be suspi cious of any and all proposals that would enhance the power of gov ernment over money. A currency reform, whether domestic or in ternational, that does not endeavor to dismantle this power, cannot provide monetary stability. It is destined to lead to more inflation and depreciation, to· economic up heaval and decline. Sound money means the gold-coin standard; it makes the value of money inde pendent of government, as the quantity of gold is independent of the wishes and manipulations of government officials and politi cians. It needs no "rules of the game," no arbitrary rules people must learn or government must observe. It is born in freedom and follows inexorable economic law.6 6 Hans F. Sennholz, Inflation or Gold Standard, Constitutional Alliance, Inc., Lansing, Michigan. .. ~ -x- * Frugality and Economy Manifestly nothing is more vital to our supremacy as a nation and to the beneficent purposes of our Government than a sound and sta ble currency_ Its exposure to deg radation should at once arouse to activity the most enlightened statesmanship, and the danger of depreciation in the purchasing power of the wages paid to toil should furnish the strongest in centi ve to prompt and conserva tive precaution.

In dealing with our present em barrassing situation as related to this subject we will be wise if we temper our confidence and faith in our national strength and re sources with the frank concession that even these will not permit us to defy with impunity the inexor able laws of finance and trade .... Closely related to the exagger ated confidence in our country's greatness which tends to a disre gard of the rules of national safe ty, another danger confronts us not less serious. I refer to the prevalence of a popular disposi tion to expect from the operation of the Government especial and direct individual advantages. GROVER CLEVELAND Second Inaugural address, March 4,1893 RAY L. COLVARD PERCEPTIVE S'fUDENTS of the free dom philosophy will note the ab surdity of my title. Freedom and equality are opposed and contra dictorypoints of the political econ omy. One extreme is the un shackled and unmuzzled· autono my of personal independence. The other is the leveling tit-for-tat security of collectivism. As indi viduals or as a nation we cannot have it both ways. One extreme is anarchy. The. other is regimenta tion.

The demand for absolutes, for wanting it all, is an earmark of immaturity. We who would be adult are not surprised when we see an ill-tempered preschool child kick his new tricycle viciously, then scream in his tantrum of fury that "the bad thing hurt me." He is utterly frustrated by the atMr. Colvard teaches at Clairemont High School in San Diego~ tendant consequence to him; his toe is bruised. His wails of an guish and rage are designed to bring parental compassion and, hopefully, a new toy to offset the "injustice" of his misfortune. During the past few weeks at institutions of higher education in Southern California, a new year's glut of academic graffiti has ap peared with slight variations in artistry and spelling. This is an example: I AM A PAWN IN THIS CAPITALIST CHESS GAME. When I see this particular epigram, I invariably think of an unruly child and his tricycle. Doubtless I am biased by age if not by maturity. I tend to agree with Milton Friedman's concept of economics: "There is no free lunch." As a militant middle-of the-road high school teacher I mis trust lobbyists for farm subsidies and advocates for welfare rights.

293 294 THE FREEMAN May Each man's right to be different is a right. James Madison delineated this point. Writing in the National Gazette in 1792 he noted: ... as a man is said to have a right in his property, he may be equally said to have a property in his rights. When an excess of power prevails, property of no sort is duly respected. No man is safe in his opinions, his person, his faculties or his posses sions. Few of our youth, if allowed to choose individualism, will resign themselves to the "security" of mass equality. They, like the great Goethe, know "as soon as you trust yourself, you will know how to live." Not only do they see the satirical paradox in: "Be my brother or I'll kill you"; they see it as well in the vaunted revo lutionary concept of Rousseau that individuals must "be forced to be free." The right of the in dividual to, choose must include the right to choose unwisely. It follows, moreover, that a mature individual will accept the respon sibility not only of choosing, but also of the consequences. In a free society each individual does what he thinks is best for him individ ually.

An acquaintance of mine re tired from the Navy as a Chief Petty Officer in 1960. An uncle of his was highly critical. "Twenty years in the service," the elder kinsman said, "and you're still only an enlisted man. My son's been in for just six years and he's a Lieutenant Commander/' During the ten years which have elapsed since the incident, the re tired Chief has been a high school history teacher. Recently his un cle commiserated with him again for his lackluster showing. "You still stuck in the classroom?" the old man asked. "By this time you should be a principal." He is com pletely unable to accept the be havior of his forty-five-year-old nephew as rational. That the nephew may value· satisfaction over prestige in his work is whol ly incomprehensible. Let Each Be Responsible for The Results of His Choices My professor in an industrial management course described an accident which occurred in a corn starch refinery several decades ago. An explosion in a partially filled railway car caused adjacent cars and loading platforms to be demolished. Fires spread through out the area. Three workers were killed in the blast, a dozen seri ously inj ured screamed in pain and terror. The manager was in shock, walking about muttering aimlessly: "What will I do? What will I do?" A dispatcher from the shipping office took charge. He 1972 TO BE FREE AND EQUAL 295 quelled the panic about to start, he sent out crews to fight fires, he or ganized rescue squads to get aid to the injured, he put men at work clearing paths for the fire trucks and ambulances which he sum moned.

The professor concluded his lec ture a few minutes early and left the room. I followed him to his office. "Look," I said, "I want to hear the rest of the story. Wasn't the manager fired; didn't the dis patcher get a promotion?" "Of course not," he said. "The dispatcher,' when it was all over, was still a dispatcher. That was his job. The plant manager was still the manager. Why not? He had a Ph.D. in chemistry and a Master's in Business Administra,tion. He earned his position by ten years of university study, ten years of management training, and 'know-how' that saved the company ten million dollars every year. Both men were in their eco nomic positions of their own free choice. Only in folklore would the dispatcher be jumped precipitous ly to the office of vice-president as the disgraced manager was stripped of his executive wash room key and drummed in dis grace out of the company's gates.

In industry prospective managers choose to become and become high salaried managers because they take on a responsibility to drive themselves toward that ambition." "I doubt that I'm that ambi tious,n I told him. "Neither am I," he said. "I know. it and I'd rather be here in the university. But there .is an important point that you and I, the less intensely ambitious peo ple, must remember: it's morally dishonest and intellectually shal low for us to blame anybody but ourselves for the responsibility of our choices." Self-Respect Comes First Three hundred years ago the philosopher , John Locke, told us:' "He that would have his son have a respect for him and his orders, must himself have a great rev erence for his son." Whenever I point the finger of scorn at my fellows I am acutely aware of the three remaining fingers pointing back to me. We who have chosen to work in the nation's schools are guilty threefold in denying stu dents freedom to choose. Wearbi trarily determine performance levels for them; we defend our legal public monopoly of pedagog ical services; and we demand com pulsory attendance laws. Perhaps we need a greater reveren~e for the business we are in and a healthier confidence in our per formance.

Although contemporary legal de cisions have weakened the educa296 THE FREEMAN May tional concept "in the place of a parent," the· students who come into our classrooms are morally our sons - or daughters - and each of them deserves from us an indi vidual acceptance as an independ ent, unique, and thinking person ality. As teachers we must not beat them down to a placid level of mediocrity. Hopefully, we can, if we try enough, give each of them the elbow room of Illulti lateral awareness, of diversified choice, of unlimited scope, of an unequivocal independent responsi bility for his or her own self realization. We can no longer af ford the luxury of blaming an im perfect economic system for our own nonsuccess. As Voltaire wrote, "It is not the scarcity of money, but the scarcity of men and talents, which makes a state weak." Faith in Freedom The lack of faith o.f so many of us in schools, educators, and school boards, weakens our teaching of personal responsibility by the ubiquitous trust we have in an awesome and benevolent govern ment whose panacea is looming for all our ills. Voltaire, the man of reason, said something also for those of us who are looking to this powerful benefactor for support: "In general, the art of government consists in taking as much money as possible from one class of citizen to give to the other." It is un fortunately the commonplace for school superintendents to vie for the Federal·bonanza. Their quest for "equality," at the cost of free dom, causes them to bus "Yellow"

students to "Brown" neighbor hoods and "Black" students to "White." Perhaps we should ask ourselves whether equality is a laudable goal or whether freedom of choice might not be more in keeping with the democratic prin ciples in which we claim faith. If we must err, please God, may it be on the side of freedom. ~ IDEAS ON LIBERTY The Fundamental Political Principle Now, the cardinal doctrine of any sound political system is, that rights and duties should be in equilibrium .... An immoral political system is created whenever there are privileged classes - that is, classes who have arrogated to themselves rights while throwing the duties upon others. In a democracy all have equal political rights. That is the fundamental political principle. WILLIAM GRAHAM SUMNER What Social Classes Owe to Each Other (1889) STATUS end product ofwelfare MORRIS C. SHUMIATCHER IN 1066, William the Conqueror proclaimed himself master of all of the lands of Britain he had taken and occupied - all of which he declared to be his property as lord, or his fiefdom as king. Feudal culture grew upon the premise and concept that all life should be ordered in accordance with the es tate in land given to each man and the status thus acquired by him and his family.

Beneath the monarchial master who was king stood the lords, who acquired their lands from the crown and were therefore bound in loyalty to their sovereign. They were, of course, required to sup port the monarch with money in time of peace and with men and arms in time of war. The rights and duties of the lord vis-a-vis his king were fixed and certain. The lord's knights and men were like wise bound to do service and grant support, to receive and swear fealty to the lord and to the king. The lord, in turn, was bound to recognize the status of his knights and to accord them the benefits of that status in the feudal society. The serfs and vassals of the lord's Dr. Shumiatcher is a prominent lawyer in Regina, .Saskatchewan, well known as a lec turer, writer, defender of freedom. This article is excerpted by permission from his new book Welfare: Hidden Backlash (Toronto: Mc Clelland and Stewart Limited, 1971).

297 298 THE FREEMAN May estate in turn swore fealty to their lord. Theirs was an obligation to serve him in return for which they enjoyed the right to till the soil to which they were bound. Though technically a free man, the serf passed with the ownership of the land from owner to owner. He grew his grain on the lord's soil, ground his-flour at the lord's mill, baked his bread in the lord's oven, and for these rights he paid a fee to the lord in terms of his labor. The lords, the nobles, the knights, the serfs - all had their place in society, fixed by the cus toms of the feudal hierarchy. Sta bility was the criterion of the so ciety that William and his succes sors sought to achieve and which, for five centuries, assured security to each class according to custom. Every individual had a place - and there was a place for every in dividual, but that place was, in fact, a prison. The bars of feudal society were the multitudinous rules and regulations which gov erned the daily life of all people.

Each was bound by the invisible chains of his status that could not be altered. Each man's estate was determined not by what he did or what he was capable of doing or what he might wish to do. It was determined by where he was born, and when, and to whom. The cloth ing which each member of an es tate could wear was regulated. The games one could play, the hom·. age to be received or rendered, the spouse one might take in marriage, the rituals one was required to perform - all of these were fixed and determined by rules from which there could be no deviation. Departure from the rules meant loss of status or ostracism, and failure to abide by the edicts of the church might mean denounce ment, imprisonment, or death. All of the minutiae of life, from womb to tomb, were strictly regulated and religiously enforced by the feudal society. It might be the king's prerogative to travel through the country and enjoy the lord's bed and board, or the lord's right to sample his vassal's beef or his bride, or the knight's lib erty to loot and plunder from an enemy.

A Break from Feudalism The curtain of security that the feudal· system and the medieval church had cast about all members of society was gradually torn away. Serfs and vassals and knights broke through that curtain and left the land and moved into the towns where they became arti sans and tradesmen, merchants and dealers. Gradually, they en tered the middle-class. professions and some became members of· a new class of bourgeoisie. They were able to work under contracts 1972 STATUS: END PRODUCT OF WELFARE 299 which, for the first time, they were free to negotiate for themselves. Their status was no longer deter mined by the accident of birth. It mattered not who they were. What did matter was what they were able to do, and as a consequence they came to be recognized and re warded for what they did. Their prod ucti vity determined the money return they could expect to receive for their services from their neigh bors and fellow-burghers. Reward came not as a result of their status and the rights and obligations flowing out of that status, but as a result of what they knew and what they produced that was use ful and salable. The free market replaced the rigid rules of the feudal estates. Free contract re placed fealty. Value, openly deter mined, replaced price arbitrarily ordered. The law of the market place came to displace the law of the feudal lord. Free competition eventually replaced legislated con trols.

The new society was ~ less se cure place for the individual than the feudal society had been. A man soon found that he ran the risks of failure and starvation. And if he did not succeed, he was likely to be abandoned, and might fall sick and die without so much as a crust of bread or the presence of a priest. Until there were estab lished the guilds and friendly societiesand brotherhoods of mu tual assistance, this new freedom was a fearsome thing. Yet it was a challenging experience as well, and one which was welcomed by those who, for the first time, were free to pit their ingenuity and energies, not against the intransi gent. forces of a system that fixed in advance the limits of their own growth and development, but against natural forces which they might succeed in overcoming and turning to their own advantage. In the new game, the deck was at least .not stacked against .them from the outset; they had a chance to win. With knowledge, skill,· per siste~ce, and luck, an amazing number of men did succeed.

Release of Energy Out of this new freedom from the strait jacket of status which had so long limited and strictly defined ~he rights and obligations of each class in society, there were generated new energies. Origi nality emerged, and innovations that enlivened an age which, for five hundred years, had fed only on the past. New trades and indus tries came into being. Enterprise and invention appeared. Explora tion of new continents began. Sci ence, which had been mired in su perstition and darkness, made its first timorous appearance in Eur ope. The unyielding barriers that 300 THE FREEMAN May for so long had classified and cate gorized all people began to crum ble. With the breakdown of the feudal rigidities, men and women were free to move about the coun try and to choose occupations that theretofore had been barred to them. Literature and the arts en tered a new era; with the end of feudalism came the awakening of the human spirit. Let loose were the latent energies of those paint ers and sculptors, poets and play wrights, composers and musicians, whose legacy reminds us that the Renaissance was an age not only in which the old rigidities of status disappeared, but one in which the flowering of man's spirit produced a great cultural treasure house after its long feudal hiber nation.

What was the one overriding change that took place when feudal society crumbled and gave way to a new approach to life? The great legal historian, Sir Henry Maine, in his work, Ancient La,w, stated that "the movement of progres sive societies has hitherto been a movement from status to con tract." It was the substitution of flexibility for fixed and unyielding human relationships. Primitive so cieties impose on individuals and on classes of people a system of law designed to perpetuate the values which those having power to impose it themselves embrace or consider necessary. Such laws may not be of general application; as a rule they enunciate no ab stract principles by which the in dividual may be guided in respect to his future conduct. More often the law consists of rules devised to deal with individuals or groups of individuals in respect of speci fic acts or relationships. Three Principles for Laws There appear to be at least three essential principles that ought to govern substantive laws in a so ciety in which freedom of contract and not status governs the rela tionship among men.

The first principle: laws should, as far as possible, be general and of general application. They ought r..ot to be designed for the purpose of regulating the special relation ships between A and B as distin guished from relationships be tween all other persons. Neither should they attempt to apply one set of principles to class A persons and a different set of principles to class B persons. All persons, of whatever class or "status," should be treated alike,not only by pro cedural laws but by substantive law as well. It is in this context that the principle of egalitarian ism takes on its most significant meaning. Laws ought not to make fish of one group and fowl of an other. When laws are made es1972 STATUS: END PRODUCT OF WELFARE 301 pecially applicable to one class of persons as opposed to another, it generally follows that since the act of legislating is nQt a creative one in the sense that it is capable of producing something new - but is only distributive in nature - what the legislature has done is simply to take from Peter and give to Paul. It is then not long before Peter will press for a compensa tory law against Paul to redress the imbalance and right the inj us tice he considers has been done him.

Let us take a simple illustration. If the wages payable to one group in the community are fixed by law - as, for example, those paid to policemen or postmen or medical men - then inj ustice in the balance of the community is bound to re sult. If the wages of the one group are inordinately high as compared to those of other working groups, all persons in the community ex cept the class enjoying the new higher wage level are penalized. If the wages fixed by law for. the spe cial group are inordinately low, then, of course, it is obvious that they are made the special marks for discrimination and have been unjustly treated. Or let us suppose that by law all wages are fixed ac cording to a master wage plan. It is possible, though most unlikely, that any legislative body will ever possess the sublime knowledge or wisdom to fairly legislate on so vast a subject. But even if such a body were able to equitably fix wage norms for all citizens, such legislation would be meaningless unless it also fixed by law the prices of all goods andcommodi ties and services. Assuming the ex istence of a sufficiently wise and all-knowing legislative or adminis trative body to accomplish such an end, is it conceivable that equity could be achieved for all persons in our own country, dependent as it is upon its trade with a hundred other sovereign states, each pre sumably pursuing a policy of eco nomic lawmaking designed to achieve the optimum in the fair distribution of goods among all of its own citizens by law? Surely, what the closed feudal society found it possible to achieve, by rules designed to preserve the status of each class only at the price of personal freedom, a world of nations dependent upon inter national trade and exchange is rather less likely to create within the context of a society committed to maintain some semblance of personal freedom.

General Rules, Applicable to Everyone The second principle that ought to govern substantive laws is that, in character, they should be gen eral and abstract and should deal 302 THE FREEMAN May only with situations that may arise in futuro. Such laws ought to lay down general or abstract princi ples, and they ought never to oper ate retroactively. Laws of general principle and of universal applica tion are, as the Latin word indi cates, the only true leges. These are to be distinguished from privi leges, or private or special rights, which the Latin privatum-leges or privilegium describes. Privileges granted· in special situations or to particular groups are bound to re sult in the deprivation of rights in all other situations and to all other groups. Only where virtually all members of a society agree that the granting of special privileges or rights to persons holding a particular status is desirable and in the interests of all groups ought they to be granted. If granted, they ought to be clearly defined as a special privilege. For a private right to one group of necessity im poses new corresponding burdens upon all other groups who are bound to respect it or give it ef fect. What is the privileged group's meat may well become the nonprivileged or underprivileged group's poison.

To illustrate, discriminatory laws against the Negro - in edu cation, in employment, in the ownership or use of property are of a character which cannot be supported in a free society for they specifically deny to one group of persons .within the community rights to which all other groups are admitted. The white man who claims a right to be free from the presence of black men in his neigh borhood seeks to deny to the black man the same right which he as serts for himself. That right is the right to live where he wishes, and it is a right that ought to be en joyed by all men regardless of their color. The determination of where each wishes to live ought not to be the subject of a penal law. If the black man wishes to purchase a house in the white man's neighbor hood, it is an abridgment of his freedom to prohibit him so doing. If the black man wishes to send his children to the school in which the children are predominantly white, it is an assault upon the black man's freedom and, indeed, upon the freedom of all members of the community to prevent him from doing precisely that.

But if the black man is to be freed from the shackles of his color status, it cannot be by the coercion of the white man. The white man, no less than the black, is capable of being enslaved. Thus, it is no less an abridgment of the white man's freedom to deprive him of the right to sell or dispose freely of his property to whom ever he chooses than it is to pro hibit the black man from purchas1972 STATUS: END PRODUCT OF WELFARE 303 ing any property from. any person willing to sell it to him. In the regulation of human af fairs, decent human conduct can seldom be successfully underwrit ten by penal statutes. The state can give no guarantees that man will act understandingly with his fellow man. At best, governments can crystallize the sentiments and standards of conduct that the ma jority of the members of a com munity freely choose to accord to all men. It can provide guidance and incentives for such conduct.

By its own example over a long period of time, it can influence the ways and mores of the members of society, as for example, by its own fair employment policies. The role of government is to open as many doors of opportunity as it can; it is then for the individual to choose whether he will enter. Principles 01 Natural Justice The third principle to which laws in a free society ought to ad here, both as to their substantive content and their. application, is that at all levels those concerned with making or administering them should act in accordance with principles of natural justice and not according to personal whim, the transitory pressures of public outcry, or the conveniences of administrative officials. It is today a fashion among some legal theorists to declare that the law consists simply of the statutes as they have been enacted by Parliament and the legisla tures, the municipal councils, and the great and burgeoning body of administrative agencies of govern ment. Hence, it is argued, law is whatever men, acting as members of these bodies, declare it to be.

Some academicians such as Dean Roscoe Pound and Mr. Justice Holmes gave this theory great cur rency in their writings and judi cial decisions, and these have in fluenced many lawyers and judges in holding that whatever legisla tors state the law to be ,is, in fact, the law; that "whatever is is right." Theirs has been described as the positivist theory of law. The positivist takes the position that it· is within the sole and ex clusive power of Parliament and the legislatures to determine the wisdom of the policy of any piece of legislation. Itis not within the province of the courts to strike down any law or to hold it invalid simply because it offends the court's concepts of what is fair and r'easonable. Parliament and the legislatures are the sole judges of the propriety of any statute. Only if legislation infringes the jurisdictional provisions of the Constitution will the courts de clare a statute ultra vires. The positivist lawyer then seizes upon 304 THE FREEMAN May this rule to support his position, since there exists no higher au thority to adjudicate upon the validity of any law. Whatever the high court states to be the law is, in fact, the law. Of course the positivist lawyers, though they may be in vogue today, would not go so far as to argue that "what ever is is right." They would con tend, however, that it is for the legislature alone to determine policy and to write the law. It is for the courts to apply it.

Conformity to Natural Law But there is a growing body of thoughtful opinion that takes an other view. If legislation does not conform to the principles of natu ral law or natural justice, then the judicial process may operate to have such nonconforming laws set aside and declared void and of no effect. While the principles of the common law go some distance in assuring that statutes and regu lations are applied reasonably, it is also a cardinal rule that statutes must be interpreted to accord with the intentions of Parliament and not necessarily with the precepts of reason or fairness. Yet, where laws violate the principles of the Constitution, ample judicial power is available to the courts to set aside the offending legislation. Why may there not be imported into the Constitution the power of a court to testa law according to standards of reasonableness, or ac cording to the law's conformity to the values that society regards as vital to its preservation? ...

Neither the judiciary nor the legislature, nor indeed the execu tive, enj oys any monopoly of wis dom or good judgment. The limi tations of each are inherent in the nature of mankind. They are even more apparent in the business of statecraft than in the private af fairs of men. By its very nature, the legislature is primarily con cerned with the state - a corporate body, separate and distinct from the individuals who are apart of it. As the power of the state grows, it becomes the chief com petitor of the individual for power and wealth and, of course, for final autonomy. The executive, as rep resented by the nation's vast bu reaucracy, acts as the arm of the legislature in carrying out and applying the body of laws, in na ture prohibitory, compulsory, con fiscatory - all designed to regulate the conduct of the citizen. The legislators, who are presumed to represent the individual citizen no less than the executive of the state, in fact compete with the in dividual for such areas of free ac tion as exist.

In the scramble for freedom, the need for independent arbiters to determine the boundaries as be1972 STATUS : END PRODUCT OF WELFARE 305 tween individuals, on the one hand, and the state and its officials, on the other, becomes vital. Judges sitting in courts of law are ca pable of providing a forum in which the conflicting rights of the individual and the state may be determined with a degree of fair ness likely to be found in no other place. Their decisions may not be free of error, but judges admit to error (something I have seldom heard any politician publicly do). Error, indeed, is recognized as a likely concomitant of the judicial process, hence the right to appeal to other courts of superior au thority. Judges, by their long ten ure, are made as free as it is pos sible to make men from extraneous influences and improper biases. On the other hand, the very raison d'etre of the politician is his bias for or against policies that he formulated or that were foisted upon him before he was confronted with the facts, and often long be fore he entered public office. What, after all, is a party platform ex cept a bundle of biases and popu lar preconceptions? In· a court of law, the tyranny of the majority has no application. For considera tion are only the rights and obliga tions of the individuals before it.

Imperfect though judges and courts may be, they constitute the one institution in civilized society that is designed to seek to adjust the rights and obligations of in dividuals among themselves, and of individuals in relationship to the state, upon principles that do not seek justifica tion in the weight of numbers (as from an electoral majority), in the power of sanc tions (as from the police power of the state), or in the influence for good or ill-of status or wealth. Freedom Y5. Equality A court of law will treat all par ties who are before it equally. But it will not attempt to make all who are before it equal. Thus, judges, recognizing realities and in 'no way constrained to do what is popular - rather than what is right - avoid the politician's pen chant to embrace the principle of egalitarianism when all of the ob servable facts belie its validity. The politician today has grown fearful of a free society because freedom has a way of encouraging diversity and compounding the "problems" of administering any political program. The more uni form the people of any society, the simpler it is for governments to control them and to maintain fixed standards of living and established norms of behavior. If men are free to do as they choose, disparities among them are likely to increase.

Such a trend would be contrary to the most commonly expressed slo g~ns of politicians that all "dis306 THE FREEMAN May parities" - regional, class, color, personal - ought to be eliminated. Will Durant stated the proposi tion clearly enough: "Freedom and equality are sworn and everlasting enemies, and when one prevails the other dies. Leave men free, and their natural inequalities will multiply almost geometrically."l If equality were the summum bonum of society, restrictions without number upon man's free dom might be justified in order to render all men as nearly equal as human institutions and devices are capable of rendering them. But re strictions upon liberty that are imposed to attain equality do not necessarily result in achieving that end. More often, such restric tions produce simply a fresh va riety of inequalities. At the same time, the loss of freedom deprives society of its most vigorous cata lyst for growth without substi tuting any benefit in exchange.

Hence the argument in favor of restricting freedom to attain equality among all mankind is a mere chimera and sham, more at tractive as a rhetorical phrase than as a viable possibility. Our experience and knowledge of the revolutions in Russia and China show that those who justify the abridgment of liberty in the name of equality end up by themselves 1 Ariel and Will Durant, The ~essons of History, p. 20. monopolizing liberty and declar ing, in the words of George Or well's elite of pigs, that while all persons are equal some are more equal than others. Freedom to Contract We have observed that the struggle of free men against feudalism's concept of status was a long and arduous one. While it was underwritten by the natural desire of individuals to improve their lives by exercising their la tent abilities, the concept of free contract found its rationale and justification in the principles of natural law. Its source was the ec clesiastical law. In the upheavals that saw the decline and demise of feudal society, the principles of the Old Testament and the power of the clergy played no small role.

The appeal to natural law was heard in many places. When Adam delved, and Eve span, Who was then a gentleman? Such was the theme of a sermon in Nat Tyler's Rebellion. Traditionally, there are certain basic "rights" to which a man is naturally entitled: the right. to safety of his person, to liberty of his body, to his own good name, to freedom from malicious vexation by legal process, the use and en joyment of his own property, the 1972 STATUS : END PRODUCT OF WELFARE 307 right to pursue ~nmolested his trade or occupation. These are ele ments necessary to the individual in order that he may live as he may desire. Lord Denning stated: "What matters is that each man should be free to develop his own personality to the full; and the only duties which should restrict this freedom are those which are necessary to enable everyone to do the same. Wherever these in terests are nicely balanced, the scale goes down on the side of freedom."2 "Natural law" has been given scant recognition by the courts in recent times save in relation to procedural formalities which must be adhered to by any person who decides anything that affects the rights or liabilities of others. In substantive matters, Parliament and the legislatures are regarded as the sole judges of what is right and just and reasonable. It is a theory that has more to commend it in the abstract than in. practice.

Nothwithstanding the unwilling~ ness of courts of law to enter into this field, in 1957 the Quebec Ap pellate Court did recognize the substantive principles of natural justice in a case involving a suit against a school authority in which the right of parents to. educate 2 Sir Alfred Denning, Freedom Under the Law (London: Stevens and Sons Limited, 1949), Pp. 4-5. their children was in issue. In my view, the Chabot case 3 is one of the outstanding judicial landmarks of our time because it gave recog nition to the idea that there are, or ought to be, certain areas in hu man relationships that stand out side the ambit of the state's law ful authority to control. It is a landmark, also, because here there exists the basis for a true mar .. riage of philosophical ideals and legal principles between the prov inces in which the common-law tradition runs, and the Province of Quebec whose dominant legal traditions are rooted in the French Civil Code. The Chabot case holds that the right of a parent to deter mine how his child is to be edu cated is inviolable; the parents and not the state have a para mount obligation for the child's upbringing and, accordingly, it is the parents' right to determine the school their child should attend. It is a right of which no government may deprive the parent.

Rights Dissolve into Status Man is as much wronged when he is deprived of a society in which his natural rights may flourish as when he is deprived of an environ ment which lacks fresh air and pure water and sunshine in which his body may thrive. These rights 3 Chabot 'V. School Commissioners of Lamorandiere (1957) 12 D.L.R. (2d) 796.

308 THE FREEMAN May have traditionally been expressed as variations upon the basic theme of the individual's right of non interference at the hands of the king or his minions: the right to be let alone, the right to be free of the overwhelming powers of the state. -,' But in recent times, this con cept of the natural rights of man has undergone a metamorphosis. The freedom to be let alone has all but dissolved itself in the de mands of the welfarist to be med dled with and cared for. The free dom to raise children according to one's conscience has disappeared in the welter of boards and agen cies, school hierarchies, and teach ers' federations, all of which claim such vast expertise and so pro found a knowledge of pedagogy that they have succeeded in creat ing an educational system more expensive and more remote from the child's home and family than any hitherto produced by a civil ized society.

Natural Rights The freedom to negotiate and enter into agreements according to the best judgment of those who are parties to such contracts has disappeared .in the overwhelming zeal of politicians to scrutinize, modify, and nullify their terms ac cording to the exigencies of politi cal popularity based upon such esoteric principles as Canadian na tionalism. The natural right of the citizen to deal with his property with the same skill and acumen he demonstrated in acquiring it is de nied him by a higher, state au thority whose capacity to produce, innovate, or invent has proven it self something less than outstand ing. The natural right to practice one's profession according to its traditional tenets, and to be re stricted only by those rules that fellow practitioners, likewise trained and skilled, might impose, is fast disappearing with the state's aggressive policies against the learned professions in. estab lishing such state-directed schemes as medicare. These whittle away the quality that, more than any other, has contributed to success in the practice of medicine - a re lationship of confidence and trust between doctor and patient, free of interference, direction, or con trol from any branch of govern ment.

Some now claim that natural rights mean the right to be fed, clothed, and housed by the state and at public expense; the right to be cured by the state when sick; the right to be entertained when bored; the right to be sent· away on vacations when tired; the right to be protected against one's folly in making contracts; to be relieved 1972 STATUS: END PRODUCT OF WELFARE 309 of one's carelessness in the abor tion clinic; and to have one's un wanted children made wards or one's half-wanted children cared for at day centers. And for some of the more sophisticated, who claim it as a natural right to be among the new elite, there is the right to spend four years or more at a university campus to learn how to malign, with unimaginative and stereotyped obscenities, the society whose duty it presumably is .to shower all of these blessings like rain upon the deserving and undeserving alike. Who Are You?

Bills of rights and charters of human liberties may go some dis tance in restraining governments from zealously pursuing programs for what is euphemistically called general welfare at the expense of the individual's personal liberty and well-being. But in the last analysis, the extent to which gov ernments will succeed in stifling human liberties will be determined by the philosophy of la.w that judges, sitting in their courts, are prepared to apply to the laws that threaten the individual's liberties. The bulwarks of liberty can only be constructed piecemeal and slowly, as individuals appear be fore the courts seeking to assert rights against specific abusive ac tions of the state. We have travelled a long dis tance into the kind of society in which status plays the major role. Federal and provincial laws dove tail to classify all persons in a manner that freezes the position of each of us almost as effectively as did the feudal system nine hun dred years ago. It is true that there exists no legal prohibition against moving from one stratum to another. But the incentives (or lack of them) encourage the in dividual to clasp, like some magic amulet, the rights (and disabili ties) of the particular class in which he finds himself. A static society is the inevitable result.

That is the kind of society that af fords the highest degree of "se curity" for the citizen and causes least trouble to the state bureauc racy. Let us consider a few ex amples. Are you an aged person? If so, your status places you in a special slot that entitles you to pension checks, and in certain places you become entitled to medical care, reduced public transportation fares, and other special allowances. Are you an unemployed person? This status entitles you to claim upon the state for certain weekly payments so long as you are not offered alternate employment that suits you. If you follow the prac tice that the scheme in fact en courages, you will build up suffi310 THE FREEMAN May cient reserves in the plan to take a holiday at the expense of the Unemployment Insurance Commis sion, whether or not you are ac tually unemployed and unable to find a job. Are you an employee in a plant in which there has been certified a particular trade union? Then your status is strictly prescribed by the labor legislation under which the certification order was made. The ternls and conditions of your employment will not be de termined by you in your own per sonal capacity, or according to your own abilities, or even by the contract which you, personally, may have entered into with your employer. Neither is your produc tivity (unless you are paid upon a piecework basis, a principle re jected by most trade unions) the determinant factor of your earn ings. The established trade union assumes the role of your agent and representative, and you are bound by the terms and conditions that are negotiated for you by its officers.

Are you a medical practitioner in a province which has adopted medicare? If so, your status is de termined by act of the legislature; your schedule of fees is approved by the government, and every at tendance upon your patient is scrutinized by the government computer system that is operated by employees of the state. Your ac counts are examined and approved or rejected by government em ployees, and your rights as the medical adviser of your patients are prescribed according to the regulations of the state commis sion. Privileges Proliferate If you are any of these, there are programs for you. And these came into being through the ac tivities of pressure groups, organi zations, and regional agglomerate~ which have made demands upon governments to meet special situa tions. But more often than not, the payments and subsidies and grants and allowances, most of which came into being for temporary ad hoc reasons, ultimately become permanent fixtures built into the fabric of the state that no politi cian dare discontinue. They are now coming to overwhelm citizens by their costliness. Like the pro verbial white elephant the Em peror of Siam is said to have pre sented as a gift to the subject he was most solicitous to destroy, so Canada's politicians have been pro viding their special gifts in aid of every class and category in the country - each singled out for benefactions so expensive to main tain as to ensure its ruin.

No doubt, some of the programs in limited form can be justified.

1972 STATUS: END PRODUCT OF WELFARE 311 But their proliferation results in the cre·ation. of privileges and rights based not upon what any in dividual is doing or has done but rather upon the status that the individual can persuade legislators he is entitled to claim. Not the least. among the claimants are legislators themselves. Among the more extravagant in recent times was the status accorded Toronto aldermen when they voted them selves life pensions after five years' service on the metropolitan council. The value of each pension is estimated to total in excess of $50,000 .. Their own contribution to the scheme is to be about $3,600. The balance, of course, is to be loaded upon the backs of the docile taxpayers. Rights and responsibili ties are based less and less upon what a person does and more and ever more upon who he is. The feudal principle of status has been revived unde'r the guise of "prog ress." In fact, the principle is as retrograde as it is outrageous.

"50 Long as th'e Sun Shines .. /' Was this not .the very same premise upon which the Treaties between the Queen and the Indian bands of Canada were drawn a hundred years ago? "So long as the sun shines and the waters flow," Indians and their descend ;Rnts were promised the govern ment's continuous benevolence and care. The Queen promised that they and their descendants would be saved from pestilence and fam ine; their children would be edu cated; the medicine chest would always be at the agent's office to cure their ills. A special status was thus created not only for the Indians who signed the Treaties and their families who were' then directly affected' by their terms. This special status was to continue forever. In the result, Indians were reduced to the status of wards of the great Queen Mother. The legislation creating this sp~ cial status was regarded as an act of benevolence and kindness. But in the result, the legislation had the effect not only of taking from the Indian his lands - this was a loss of comparatively minor di mensions - but also of taking away his independence, his self reliance, his chance' to succeed, and the possibility that he might fail.

The status of beneficiary in a welfare state especially designed for him robbed the Indian of all desire he might have had to cre ate his own niche in the new bur geoning society that was in the making everywhere about him. In effect, the Indian traded his free dom for treaty money and the promise of perpetual care in the white man's happy hunting ground. Even the hunting became a thing that the white man was to 312 THE FREEMAN May control and restrict. He was com pelled to surrender suzerainty over the vast tra.cts of land that had been his. But instead of taking title to the new reserved proper ties in order that he might own and control them, the Indian ac cepted a hybrid kind of right to live on the lands designated and to use them collectively with others. This kind of property right was of little value in any practical sense. Legally, he might claim a right as beneficiary. But his was the child's right to use a public playground according to the rules made by his elders and betters.

Just as playgrounds are said to be laid out and supervised in the best interests of the children, so it was the intention of the white man's government to designate and con trol the reserves in the best inter ests of the Indian. But although children grow up and leave their playpens, and one day reach ma turityand manhood and come to occupy a place in the world of grown men and women, the Indian remained a child, hemmed about by the protective fences and the paternalistic rules of an unreal world. Protected as a child, he acted as a child. Suspected of im maturity, he remained immature. Sheltered from the risks and ad versities of the outside world,he avoided the contests of competi tion, the disappointments 'Of failure, the stimulus of success. The Indian too often still speaks as a child, understands as a child, thinks as a child. He has not put away childish things because he never has really matured. Our society condemns him to perpetual child hood.

The Indian's reserve is the feu dal estate of our century. His presence is an anachronism of medieval times. This must be a matter of concern to us all be cause the Indian is our neighbor, and his frustrations and failures are things in which we all share. But his status has an additional significance for all of us because it casts the shadow of the future for every man and woman in our time and in our children's. His is the estate into which all of us are entering by virtue of the special status that we either seek as mem bers of an artificially created class or are assigned by paternalistic governments. The result in both cases will be the same. The quality of life in the welfare state into which we have entered will even tually differ in no significant way from the welfare state in which the Indian has lived for a century. Indians All If we are concerned over the plight in which the Indian finds himself at this juncture of history, after a hundred yea.rs of state 1972 STATUS: END PRODUCT OF WELFARE 313 welfarism, it may be appropriate to consider at the same time the condition in which the non-Indian population of Canada is likely to find itself after we have lived just half that period in the great wel fare society that has been designed for the rest of the people of this country. Are the conditions of the welfare state in which every citi zen has been enrolled in any sig nificant way different from those which, for a century, have char acterized the Indian's way of life?

If the direction and regulation of the daily life of the Indian has brought him to his sorry plight, is there any likelihood that the same kind of policy, pursued na tionally, will produce among the rest of us the kind of growth that we envisage for Canada's second century? This is hardly likely to be achieved unless there exists both within and without the re serve the kind of society in which a man can develop his independ ence and grow to maturity ; where he will discover the motives and incentives that are lacking and that are so necessary to the growth of any self-reliant human being. Where Does One Turn? There was a time when such a society could be found outside the Indian reserves. That kind of so ciety is now a vanishing phenomenon. The whole of our nation is fast becoming one great Indian reserve in which the agents of the state are directing our lives and destinies as certainly and as com pletely as they have been dragoon ing the lives and destinies of the Indian people for the past hundred years. It is now not simply a ques tion of where the Indian can go to regain some self-respect and inde pendence. The question is whether any of us can maintain his own self-reliance and identity as viable human beings in the face of the assault upon our lives by the power of the state. The welfare cult, to which almost all politicians appear to be committed in the mis taken notion that the individual wishes to be treated as a depend ent child, has moved Canadians behind the protective shadows of an all-enveloping, maple-leaf cur tain. To some, it may seem a wel come shelter from the adversities of the times. But as surely as it reduced the Indian to a state of slavish dependence and deprived him of his freedom to Iive as a self-sufficient human being, so it will cause us all to degenerate into mere digits whose only real ex istence will be found in the books and c·omputers, the statistics and reports of the proliferating gov ernments of this country.

My one hope is that the Indian may regain his soul and find his 314 THE FREEMAN May independence in a free society wherever he may choose to build it. My great fear is that govern ments will succeed not only in holding to ransom the Indian;s soul as it has held his property, but that before many years have passed it will make Indians of us all. Although the white man has not yet been reduced to the status of the Indian, he is well on the way to assuming that same status; all of us have become welfare oriented. Little wonder that' almost every proposal that reaches the public from a political platform, whether concerned with Indians or non Indians, repeats ad nausea,m the need for more welfare rather than less, greater money payments rather than fewer, more govern ment agents to the barricades rather than their withdrawal, more educational direction rather than freer choice. The concept of welfare has become so ingrained in the white man's way· of life that it has become his overriding philosophy of life. It is the panacea for all ills. If there is 'poverty then naturally poverty can be cured by government money. If there is ill health, it can be eliminated by state-paid medical care. If there is ignorance, it can be dis sipated by government schools.

The fact, however, is that poverty and ill health and ignorance cannot be eliminated simply by at tacking their symptoms with a barrage of money any more· than a case of measles can be cured by scraping off the pimples. As a fever can be fought off and over come only by the body in which the illness resides, and only by the generation in that body of the strength and will to .grow well, so the ills of poverty and disease and ignorance can only be cured by strength generated in the body of the individual who suffers from them. External palliatives,. such as money grants, may seem to bring temporary relief to the patient, and they assuredly give a very sub stantial cushion of comfort to those who· administer that relief. But they will not produce a healthy. individual any more than they can foster a vigorous or viable com munity of men. Where Lies the Hope? There may be elaborate schemes proposed for the reparceling of lands or the redistribution of wealth as a result of which the impoverished Indian may be given a greater share. But the natural differences among human beings will reassert themselves, and in the end nothing is genuinely changed.

The only way that real change can be achieved - the only genuine revolution that can change men's lives - emerges from the acquisi1972 STATUS: END PRODUCT OF WELFARE 315 tion of new skills, the generation of positive motives, and the en lightenment of the human mind. The only true emancipation of the Indian can come with his develop ment and growth as an individual. This kind of change requires time - many decades of it - and pa tience on the part of the Indian and the white man, and the kind of understanding that rejects simple solutions and instant answers. Because of his own experience with the welfare state, no' one in Canada today can testify more elo quently to the depressing results of that state than the Indian. At tractive though it might seem, it is the trap that ensnares the un wary. It promises the ideal. of egalitarianism to the poor; it holds out the prospect of fair shares for all. The Indian, in his naivete and ignorance, succumbed to these blandishments.

The rest of us, however, will have no excuse for our self-de basement. If we anow the Minister of National Health and Welfare to ensnare us further into the wel fare state, because it is easier to computerize twenty-three million people for' guaranteed incomes than it is to face up to the need of exciting Canadians as individuals to the joy of earning their own incomes and guaranteeing their own futures, we will be skidding down the same sticky, tricky road that the Indian started down a century' ago. We will end up in. the same morass, the same dreadful decay. If this does happen, the white man will have walked into the slough of despond with his eyes wide open. He will learn that the blandishments of the great na tional bonanza can become only the bars of the new national Bastille. The Indian knows this road only too' well. His history is its map, and every trap bears witness to his suffering. At this juncture in our joint history, it is we who need the help of the Indian more than he needs ours. He canwa,rn us that there will be no good hunt ing in a country whose govern ment officials multiply faster than jack rabbits, for it will be found that all the cabbages we grow in this green and pleasant land will never be enough to satiate them.

f) IDEAS ON LIBERTY Security May Betray Us AU grants, all subsidies, all rewards for services not rendered have a deleterious effect on character; and if character is not of fore most consideration, what is? ARCHIBALD RUTLEDGE A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN LAURENCE W. BEILENSON must feel like the man who sees an auto mobile bearing down on a blind man and suddenly loses his voice. He wrote a book not long ago called The Treaty Trap, which tried to tell our statesmen that nations which depend on treaties for safety invariably discover that promises in international life only last as long as they prove conven ient. In spite of Mr. Beilenson's warnings the quest for written assurances of detente, or arms lim itation, or defined spheres of in fluence, goes on. Meanwhile, as communiques are issued and treaties are signed, the nations continue to break their word in almost routine fashion.

Save for those who are w~ak, all of them are guilty, whether they happen to be communist, capitalist or "middle way" socialist. In his second book, Power Through Sub316 vers'ion (Public Affairs Press, $8) , Mr. Beilenson explores the long and lamentable history of the vari ous ways in which nations have tried to weaken each other as they pursue the game of balancing the power. Curiously, this is the first history of its kind. But who, as we seek a "generation of peace," will read it? Must Mr. Beilenson's larynx fail him again as the auto mobile moves toward the blind man? Various "Blades" of Subversion Mr. Beilenson begins by clarify ing the ambiguous words he is forced to use. He speaks of the various "blades" of subversion. An "influencing subversion" will use the blades of propaganda, agita tion or offensive terror to get an other government to follow certain policies without actually trying to overthrow it. A "decisive subver1972 POWER THROUGH SUBVERSION 317 sion" will employ an armed fifth column within an enemy state to change the government without actually using the means of ex ternal warfare. -"Traditional sub version" is subversion before Lenin. "Spigot subversion" is when you turn it on and off. There is "auxiliary subversion," "oppor tunist subversion," "spotty sub version," the "Vergennes Varia tion," and the "Lenin Adaptation."

The last is the worst, for, as Mr. Beilenson makes plain, it never sleeps and it never ends. Lenin actually developed no new "blade" of subversion. He learned without benefit of Marx, by going to the history of Bourbon and Hapsburg Europe and by studying the way Napoleon spread the French Revolution. Traditional subversion, using such "blades" as bribery and the smuggling of arms, usually preceded the march ing of armies. Britain employed "spigot subversion" to keep con tinental Europe off balance. The Vergennes Variation The Vergennes Variation was employed by France to help Amer ica. Vergennes expected no imme~ diate benefit by sending arms to help the colonists defeat the Brit ish Gentleman Johnny Burgoyne at the Battle of Saratoga. The French foreign minister expected that an independent republic in America would follow its own in terest, even to the point. of rank ingratitude. All he wanted out of the deal was to keep the British from deriving strength from America in wars still to come.

The young United. States ful filled Vergennes' expectation of ingratitude the .moment when it became profitable to our Founding Fathers to sign a treaty of peace with Britain. A century and a half later Truman, Marshall and Ache son used the Vergennes Variation on their own to help France through Marshall Plan money and the NA TO alliance. De Gaulle proved just as ungrateful as America's John Jay had proved at the end of the Eighteenth Cen tury. But an ungrateful France, says Mr. Beilenson, is better for the United States than a Com munist France. The Lenin Adaptation The Lenin Adaptation has made use of all the traditional blades. But where "traditional subver sion" often ended in open war, Lenin used his own adaptation as a substitute for war. Lenin did not believe in an adventurous policy. He had a fanatic's fixation on preserving his socialist base. He believed that one could recognize a revolutionary situation, but he 318 THE FREEMAN May made no pretense to being· a prophet about timing. In 1848 there were revolutionary situa tions all over Europe. But the rev olutions were either aborted or repressed .. Since nobody could be sure about timing, Lenin believed in the long-term financing of for~ eign Communist parties, fronts and secret agents who would be on the spot if a revolutionary sit uation should become ripe. Khru shchev, who followed Lenin's strat egy, couldn't have known that Castro would turn the anti-Batista revolution into a fullfledged Com munist revolution. But the Com munists had their party and their "sleepers" ready to exploit Cas tro's discovery that he had always been a Marxist.

What burns Mr. Beilenson up is that "bourgeois" statesmen can never seem to realize that Com munist nations believe in having their mounts "well shod on all four feet" even when the talk is of detente, or coexistence, or peace. All Communist agreements are like· pie crusts, made to be broken if a revolutionary situation de velops. Ho Chi Minh waited for twenty years to take over in North Vietnam. Mao Tse-tung was will ing to enter a coalition with Chiang Kai-shek in 1946, but when the Soviets gave him all those captured Japanese arms he would settle for nothing less than the total defeat of the Kuomin tang. Lenin signed the Treaty of Brest Litovsk with Imperial Ger many to'. take Russia out of World War 1. But when the Soviets opened an embassy in Berlin, they used it to spread subversion inside the country that had permitted Lenin to ride to the Finland. Sta tion in a sealed car. The Lenin Adaptation makes no connection with gratitude.

The Cautious Soviets As Mr. Beilenson sees it, the Soviets, in using the Lenin Adap tation, err on the side of super caution. If the United States hadn't been obsessed with Suez in 1956, Khrushchev would never have dared send his tanks into Hungary to suppress the revolt. The Soviet army had withdrawn from Budapest in fear that Brit ain and America might send help to the Hungarians. But when it became plain that Eisenhower and John Foster Dulles were giving priority to their dispute with Eng land, France and Israel, the Soviet army returned to Hungary. This does not mean that the Soviets will always be cautious. Lenin believed'in the inevitability of war with the capitalist world, and if the Soviets ever thought they could win that war without 1972 POWER THROUGH SUBVERSION 319 risk to the socialist base they would certainly fire off their mis siles and send their armies marching. The Not-So-Cautious Chinese Mao Tse-tung's aphorisms are all paraphrases of Lenin's words.

"Political power grows out of the barrel of a gun" is simply Lenin's "supremacy of violence." "Enemy advances, we retreat; enemy tires, we attack; enemy retreats, we pursue" is Mao's way of express ing Lenin's "doctrine of the situ ation." "Fight no battle you are not sure of winning" is Lenin's "caution about war" in Chinese. But Mao has been· more adven turous than Lenin in risking his forces. After all, the Red Chinese invaded North Vietnam and have tried to capture Quemoy and Matsu. Mr. Beilenson would like to see the United States develop an "American Adaptation" to be di rected against Communist rulers who are trying to destroy our form of government. Alas, in our current state of mind, this won't be done. Our "advocates of a good on-paper world" would consider American subversion a breach of international law. Our friends would welcome an American sub version, but we are too soft in the head to see it. Poor Mr. Beilenson.

~ MAN, ECONOMY AND STATE by Murray N.. Rothbard (Los An geles: Nash Publishing Co., 1971, 987 pp., two-volume hard cover $30, one-volume paper $10) Reviewer : Tommy W.Rogers THIS is a welcome reissue of an excellent treatise which originally appeared in 1962. Rothbard devel ops the edifice of economic science in the manner of the old-fashioned "principles" approach - slowly and logically building an integrated and coherent edifice of economic truth from a few simple and basic axioms. First, the Fundamental Axiom of a:ction-that men employ means to achieve ends, followed by two subsidiary postulates: that there is a variety of human and natural resources, and that leisure is a consumers' good. Beginning with the immediate implications of the action axiom, Rothbard discusses various types of interpersonal and social rela tions; the economics of voluntary exchange, the economics of con sumption, the pricing of consumer goods, and production theory. A "radical" feature of Rothbard's analysis of production is a com plete break with the "short-run"

theory of the firm and its replace ment with dynamic Austrian the ory of marginal value productivity and capitalization.

320 THE FREEMAN May The author emphasizes the im mense benefits accruing to all par ticipants in the system of free ex change, and demonstrates the harmful effects of political inter ventions in the marketplace. A cen trally planned economy, Rothard observes, is a centrally prohibited economy. The concept of "social engineering" is a deceptive meta phor, since in the social realm, it is largely people who are being planned rather than machinery and resources. Furthermore, bureau cracy, incompetent enough at handling a stationary system, is vastly more incompetent at planning a progressive one. This book frankly takes off from Mises' Human Action, attempting to spell out some of the implica tions of the earlier work, but also devoting considerable space to the refutation of opposing doctrines. It has meat enough to satisfy the professional economist, but it is not beyond the thoughtful layman.

A book like this one is indeed a basic instrument of economic ed ucation. I) HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each ORDER FROM: THE FOUNDATION fOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 tIle Freeman VOL. 22, NO.6. JUNE 1972 When Men Appeal from Tyranny to God Edward Coleson 323 A bicentennial for the men behind the freeing of slaves in England. Pollution and Property Oscar W. Cooley 336 Not the socialists but the capitalists have the solution to pollution. The Founding of the American Republic: 11. The War for Independence Clarence B. Carson 341 Concerning the distinction between declaring for independence and achieving it in practice. The Cure for Poverty Henry Hazlitt 355 Those who truly wish to help the poor will save and invest to create more and better-paying jobs. The Educational Dilemma Donald M. Dozer 359 Identifying the lines of authority and responsibility in educational affairs.

"I Was a Slumlord ..." An East Harlem owner buys his freedom from rent controls. George Frank 365 Business Baiting - 1972 Style Merryle Stanley Rukeyser 367 A plea for an attempt to understand the nature and function of business before destroying the entire economy. Blood from Turnips Terrill I. Elniff 372 Notes toward an understanding of John law's economic errors. Book Reviews: "Welfare: Hidden Backlash" by Morris C. Shumiatcher "Joseph Story and the American Constitution" by James McClellan Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding. 378 381 tile Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591-7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN 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.

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 invited in any amount~$5.00 to $10,000-as the means of maintaining and extending the Foundation's work. Copyright, 1972,. 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; 10 for $2.50; 25 or more, 20 cents each. Articles from this journal are abstracted and indexed In Historical Abstracts and/or America: History and Life. THE FREEMAN also Is available on microfilm, Xerox University Microfilms, Ann Arbor, Mich· Igan 48106. Permission granted to reprint any article from this Issue, with appropriate credit, except "The Founding of the American Re public," liThe Cure for Poverty" and III Was a Slumlord ... "

When men appeal from EDWARD COLESON OPPRESSION is as old as mankind and unfortunately is still with us. A few decades ago we were certain that we were rapidly outgrowing this ancient affiictionwith the ad vance of civilization, but these hopes have not materialized. Still the quest continues. There are those who look back to,a golden age of freedom and brotherhood in the past, while others seek to find their earthly paradise with the children of nature on a remote tropical is land somewhere. It may be an in teresting exercise of the imagina tion to dream up an idyllic state of nature where "noble savages" are truly brothers and they all live happily ever after. Yet, Rousseau and a lot of other romantic vision aries notwithstanding, there have been relatively few Utopias over the ages. Dr. Coleson is Professor of Social Science at Spring Arbor College in Michigan. to GOD Hobbes l much more realistically described life in this state of na ture as "nasty, brutish and short."

It is not only that primitive man finds it difficult to satisfy his needs with his bare hands or crude tools, but that men prey upon each other. To Hobbes men were brutes so life degenerated into a perpetual con dition of "war of every man against every" other in a struggle not just to survive, as Darwin would say, but to dominate his fel lows. For man is possessed of "a perpetual and restless desire of power after power that ceaseth only in death." President Wilson pressed for "self determination" as a right of all peoples during World War I on the assumption that they wanted to rule them selves. According to Hobbes, they want to rule each other. Nor is this view unique. Adam Smith 2 suggests that this 323 324 THE FREEMAN June lust for power may be the princi pal motive for slavery: "The pride of man makes him love to domi neer, ... therefore, he will gener ally prefer the service of slaves to that of freemen." In fact Smith couldn't find much excuse for the "peculiar institution" but this urge to dominate others. He was convinced that "work done by slaves ... is in the end the dearest of any," for the slave "can have no other interest but to eat as much, and to labor as little as possible." He was certain that "the cultivation of corn degenerated"

and became unprofitable under slave labor in ancient Italy and Greece. He observed that "a small part of the West of Europe is the only portion of the globe that is free from slavery," but that this small part "is nothing in compar ison with the vast continents where it still prevails." Smith thus linked prosperity with freedom .and believed that the human fam ily paid dearly for the luxury of permitting a few to enslave their fellows. If slavery is immoral and uneconomic, how can \ve banish this ancient evil from the earth? Total Tyranny and Split-Level Freedom Historically, slavery has existed on two levels. Sometimes there have been slave states where al most everyone was subject to the whim of a despotic monarch. Long ago the Near East had its rulers who could execute their subjects, even those about the throne, on command without even the pre tense of a trial. Ancient Greece had its tyrants, too, who were often not much more restrained, in spite of all their democratic pre tensions. We used to think that tyranny belonged to the dark ages of the past or to some primitive area of the earth inhabited by cannibals, but Joseph Stalin dem:"

onstrated that a ruler today can hold a nation in bondage as no ancient despot could have done. We are finding that the tools of modern science which we hoped would liberate us can most effect tively enslave us, and perhaps we have seen only the beginnings of scientific despotism in the "Brave New World" of the future. Wheth er the masters who run the appa ratus will get caught in the ma chinery and will also be enslaved is a good question, but historically it has been found that the other end of the slave's chain also bound the master. The world has had considerable experience with societies which were presumed to be half slave and half free. The democratic Greeks attempted to operate at both levels, and the aristocratic masters of our Old South claimed all the "rights of Englishmen"

1972 WHEN MEN APPEAL FROM TYRANNY TO GOD 325 which they denied to their own slaves while they were fighting George III. Even slaveholders rec ognized their inconsistency and sought to have the situation reme died as they set up their new gov ernment. At the time of the Con stitutional Convention, Colonel George Mason of Virginia, him self a slaveholder, condemned slav ery, the great evil of his day, in words that were indeed prophetic: The western people are already calling out for slaves for their new land. Slavery discourages arts and manufacture. The poor despise labor when performed by slaves. They pro duce the most pernicious effect on manners. Every master of slaves is born a petty tyrant. They bring the judgment of Heaven on a country. As nations cannot be rewarded or punished in the next world they must be in this. By an inevitable chain of cause and effect Providence pun ishes national sins by national calam ities. 3 The Foundations of Our Freedom Our Founding Fathers quite properly had a bad conscience be cause of their own inconsistencies, for their claims to freedom were based on an appeal to a Higher Power, not just to some abstract principles as with the French Rev olution a few years later. After all, their ancestors had resisted the tyranny of their rulers for centuries by insisting that "the King is also under God and under the Law." The Puritans had even fought a war with Charles I a little more than a century and a quarter before our Revolution to maintain their God-given right to freedom.

Patrick Henry later reminded George III that Charles I had had his Cromwell just as Caesar had had his Brutus, but the figure of speech was not appropriate. It would have been more fitting to remind His Majesty that David had had his Nathan, Ahab his Elijah, Belshazzar his Daniel, and Herod his John the Baptist, to name a few kings and their proph ets; like Byron's "Prisoner of Chillon,"4 the Puritans were wont to "appeal from tyranny to God." This was more than a pious ges ture or a political gimmick, more than high sounding rhetoric with out any basis in reality. The Pur itans were men of a Book and they found principles therein that ap plied to the Old Testament era and to the England of the Stuarts as well. The typical oriental despot of the ancient Near East was a god king, head of both Church and State. When religion was a power ful force, this gave his subjects no appeal from his authority. The Hebrew prophets resisted. similar pressures from their rulers and never let them forget that "the 326 THE FREEMAN June most High ruleth in the kingdom of men .... " (Daniel 4 :25) This \vas the Puritan approach. In like manner a few hardy Germans more recently reminded Hitler, "Gott is mein Fuhrer." Such thinking is so foreign to modern philosophy and legal theory that Hitler had his way with the Ger man nation - to its ultimate de struction. But it has not always been so.

The men who founded our na tion were very conscious of the concept of a Higher Law. It would not be an exaggeration to say our government was founded on this principle. Ten years before our "embattled farmers fired the shot heard round the world" at Lexing ton and Concord, William Black stone began the publication of his famous Commentaries on the Laws of England, dedicated to the prop osition that God is the ultimate authority. The colonists so avidly seized on his writings that a dec ade later Burke told Parliament, on the eve of the American Rev olution, that there were more cop ies of Blackstone's Commentaries in the Colonies than in England. It has been customary in the "debunking era" of the recent past to insist that our colonial leaders were not saints and that those who may have made any religious pre tensions were more apt to be Deists than Christians. Certainly there was a considerable' influence from the Enlightenment on this side of the Atlantic, but at least Deists believed in God's Law.

Even such a notorious enemy of the "religious establishment" as Voltaire is quoted as saying that if there were no God, we should have to invent one. By contrast, contemporary philosophers say, ac cording to Harvey COX,5 "If God did exist, we should have to abol ish Him." We have come a long way since the founding of this' nation and it has not all been up hill. If they did not always live up to the standards set by their own consciences, as in the case. of slavery, they were still painfully aware of their shortcomings. They also believed in their accountabil ity to the Judge of all the earth "God is not dead, nor doth he sleep," as Longfellow tells us in the familiar Christmas carol. God's Law and Human Freedom A significant but little-known development of the pre-Revolution ary era was the abolition of slav ery in England. In 1765, the same year Blackstone began publication of his Commentaries, an obscure government clerk, Granville Sharp, met an inj ured slave on the streets of London near the office of his brother, a kindly physician. The slave had been severely beaten by his master and cast out into the 1972 WHEN MEN APPEAL FROM TYRANNY TO GOD 327 street to die. The Sharps eventu ally nursed him back to health and strength, and got him a job. That might have ended it all but the ex master later saw his slave, now recovered in value, and attempted to get him back. When the slave resisted capture, he was thrown into jail; but Granville Sharp got word of it and had the man re leased because he had been ar rested without a warrant, contrary to English law. When Sharp took the unfortunate man to his home for shelter, the master prosecuted him for theft of his slave.

In the ensuing litigation and other cases that came up in the next few years, Granville Sharp began pressing for the abolition of slavery. Although no lawyer and certainly no part of the ruling class, his propaganda campaign, largely directed toward the legal profession at this time, was so effective that the "King's Bench," the British Supreme Court, finally liberated all the slaves in England. This historic decision of Lord Chief Justice Mansfield was passed down on June 22, 1772, just two centuries ago. Said Mansfield, "Tracing the subject to natural principles (the Moral Law), the claim of slavery can never be sup ported." Actually, the number of slaves freed was rela ti vely small, perhaps fourteen or fifteen thou sand, mostly servants of retired West Indian sugar planters, but it was a start. Here was a clear ap plication of Blackstone's principle that the Law of God should be the ultimate standard.

Sad to say, Blackstone had not been that helpful in the protracted litigation: he was also concerned with previous legal opinions and property rights. After all, the maryet value of the freed slaves may easily have exceeded seven hundred thousand pounds ster ling,6 no small loss to the slave holding class.· Nevertheless, it was Blackstone's doctrine of the Moral Law which was clearly basic to the decision, .though the concept was neither new nor unique. John Wesley, the popular preacher of the day, said the same thing: "In spite of ten thousand laws, right is right and wrong is wrong still." Can it be that the law-abiding habits of the English people are rooted in the ancient conviction that there is an ultimate right and wrong which even the king is pow erless to alter? With lawlessness threatening to destroy our nation, perhaps it is about time to re examine the foundations of our legal code. Why should anyone re spect law when he knows that too much of it represents the con niving of pressure groups, seeking to rig the market in their favor and to rook the rest of us ?

The next success in the cam328 THE FREEMAN June paign against slavery was slow in coming and was largely the work of another, William Wilberforce. Unlike Sharp, Wilberforce was an aristocrat, a member of Parlia ment, and an astute politician. He was also recognized as a gifted speaker, even in an age of great orators. In spite of his obvious talents, Wilberforce almost left Parliament when he rather sud denly became a Christian convert of the Reverend John Newton, a former slave-trading sea captain turned preacher and author of "Amazing Grace". Wilberforce nearly decided that politics was unsuited to a Christian. At this crucial point in his career his friends enlisted him in the war against slavery, and the fight dom inated the rest of his life. The abolitionists chose first to attempt to stop the commerce in slaves across the Atlantic. Wilber force gave his first great antislav ery address in Parliament in the spring of 1789, introducing his bill for the abolition of the slave trade. Two months later, the Bas tille was stormed in Paris across the Channel and the French Rev olution was on. Unlike Edmund Burke, Wilberforce was enthusi astic about the changes coming in France ("Bliss was it in that dawn to be alive," said Words worth), and had high hopes that "Liberty, Equality and Fraternity" meant freedom for the slaves.

The French Revolution and the Napoleonic Wars which followed no doubt hindered the English ab olition campaign, but finally in 1807 Wilberforce pushed the anti slave-trade bill through Parlia ment. The big job then was to enforce it. The Royal Navy policed the tropical waters of the Atlantic between Africa and the Americas, the notorious "Middle Passage," for the next half century and more until our Civil War effectively stopped the trade (theimporta tion of slaves had been illegal here also for decades but smuggling continued as long as there was a market) . The British naval patrol oper ated out of the excellent harbor at Freetown in Sierra Leone, West Africa. Here the maritime court sat, and here captured slavers were brought for judgment. If they were convicted, they lost their ship and cargo, an assorted col lection of several hundred Afri cans. The liberated slaves were settled in villages about Freetown to be civilized, educated and, hope fully, Christianized. English mis sionary societies invested many pounds and many lives in the ven ture. After all, this was the "White Man's Grave." Since the slaves came from any point along the Guinea Coast of Africa where they could be obtained, they were 1972 WHEN MEN APPEAL FROM TYRANNY TO GOD 329 very diverse linguistically and cul turally. It was said that a hundred different languages and dialects were spoken on the streets of Free town in those days. It was a costly project, and often a heart-rending one too; and the British stood to gain nothing in the transaction.

Yet, Wilberforce and others con tinued to press the battle on every front in spite of continuing frus tration. The final victory in the English abolition campaign came long after the slave trade was out lawed. The remaining step was emancipation of the slaves in the British colonies, mostly plantation workers on the sugar islands of the West Indies. Wilberforce had grown old in the fight. He died in 1833 as the emancipation bill was making its way through Parlia ment, but he lived long enough to know it would be enacted. An in teresting feature of the law being passed was the provision that the slaveholders should be compen sated by the British government for the loss of their slaves. "Thank God," said the aged Wilberforce 7 a few days before his death, "that I should have lived to witness a day in which England is willing to give twenty millions sterling for the abolition of Slavery."

Opponents of the bill and the faint hearted promised dire ca lamities when the law became effective on the first of August the following year (1834). Military reinforcements were sent to the Caribbean to maintain order, but they were never needed. As Ralph Waldo Emerson tells us, writing ten years later, everything went off smoothly: On the night of the 31st of July, they met everywhere at their church "es and chapels, and at 'midnight, when the clock struck twelve, on their knees, the silent, weeping assembly became men; they rose and embraced each other; they cried, they sang, they prayed, they were wild with joy, but there was no riot .... The first of August came on Friday, and a re lease was proclaimed from alf work until the next Monday. The day was chiefly spent by the great mass of the negroes in the churches and chapels. The clergy and missionaries through out the island were actively engaged, seizing the opportunities to enlighten the people on all the duties and re sponsibilities of their new relation, and urging them to the attainment of that higher liberty with which Christ maketh his children free. 8 Good Works and Laissez Faire The reformers who abolished slavery throughout the British Empire are a fascinating group, both for what they did and for what they believed. It is standard socialist doctrine that the men who made the Industrial Revolu tion in England, the laissez-faire 330 THE FREEMAN June economists and practical business men from the time of Adam Smith through the reign of Queen Vic toria, were a money-grabbing lot devoid of compassion and "social concern" (to use the contemporary jargon). No doubt part of them fit the stereotype perfectly; but there were many others who were Christian gentlemen, in the best sense of that much abused term, and used their wealth and influ ence for the good of mankind.

A recent writer, Robert Lang baum,9 has prefaced his book on the Victorian Age with an inter esting contrast between the men who pushed reform in England, including the abolition of slavery, in the decades before and after 1800, and their grandchildren who belonged to the Fabian Society a century later and l,aid the founda tions for the British welfare state as instituted by the Labor govern ment of our own time. The former group, William .Wilberforce, his relatives and friends, were devout Christians who used their political power - they had an influence out of all proportion to their numbers - to promote worthy causes. They also invested large sums of their own money in private charity. This "power elite," derisively nickna~ed the "Clapham Sect" or the "Saints" by their political ene mies, believed, said Langbaum, "in piety, reform of church and state, moral action and laissez-faire eco nomics." Their posterity a hun dred years later (the famous "Bloomsbury Circle," including John M,aynard Keynes) "disbe lieved in religion and moral ac tion, and did believe in govern ment regulation or ownership of industry. . . ." Thus, too briefly, is described "the century-long mi gration of English liberal intellec tuals from Clapham to Blooms bury," from a Christian free enterprise philosophy to a secular socialism.

It should be remembered that to speak of the Bloomsbury Circle as the children of the Clapham Sect is no figure of speech; they came of the same distinguished f.amilies and were .in fact the grandchil dren and great-grandchildren of the Evangelicals who had been Wesley's disciples and who had successfully promoted so many re forms. Yet today, a multitude of Americans consider socialism as the moral and ethical alternative and laissez-faire capitalism as ut terly unchristian. Obviously, some one is confused, then or now; or the question is irrelevant. Protectionism Abandoned What makes the problem so fascinating is that the next Brit ish attempt to promote the aboli tion of slavery, beyond continuing antislave-trade naval patrol, was 1972 WHEN MEN APPEAL FROM TYRANNY TO GOD 331 to no small degree the work of that arch free trader and free enterpriser, John Bright of the Anti-Corn-Law-League. Shortly after the last slaves were liberated in the colonies, a new propaganda campaign w,as launched in Eng land to abolish protective tariffs.

We don't commonly associate slavery and tariffs, but Frederic Bastiat, a French contemporary of Bright, connects the two in a famous passage, discussing the problems of the United States: ... look at the United States (in 1850). There is no country in the world where the law is kept more within its proper domain: the pro tection of every person's liberty and property. As a consequence of this, there appears to be no country in the world where the social order rests on a firmer foundation. But even in the United States, there are two issues - and only two - that ~ave always endangered the public peace. Wha t are these two issues? They are slavery and tariffs. These are the only two issues where, contrary to the general spirit of the republic of the United States, law has assumed the character of a plunderer. Slavery is a violation, by law, of liberty. The protective tariff is a vio lation, by law, of property.

It is a most remarkable fact that this double legal crime - a sorrowful inheritance from the Old World should be the only issue which can, and perhaps will, lead to the ruin of the Union. It is indeed impossible to imagine, at the very heart of a so ciety, a more astounding fact than this: The law has come to be an in strull1ent of injustice. And. if this fact brings terrible consequences to the United States - where the proper purpose of the law has been perverted only in the instances of slavery and tariffs - what must be the conse quences in Europe, where the per version of the law is a principle; a system ?10 Certainly Bastiat's words have been prophetic. Slavery ne.arly wrecked our nation in the 1860's and the Smoot-Hawley Tariff of 1930, following the Crash of '29, intensified the Depression and pre cipitated an international trade war that helped to bring on World War II. And the problem is still with us. John Bright did not help us rid ourselves of our tariffs, although he did do much to pro mote free trade for Britain in 1846 and thereafter; but he made a real contribution to our attempt to free the slaves at the time of our Civil War. We owe him much.

John Bright's Role John Bright, a prominent mem ber of a new generation of re formers that grew up with the pass ing of the Clapham Sect, makes an interesting character study. He was an earnest Christian, a hum ble Quaker who never outgrew the 332 THE FREEMAN June little· Meeting House which he had attended in his childhood. He was a self-made man, a successful cotton manufacturer from the Manchester area and long a mem ber of Parliament; but he took his faith into his business and politics, and refused to compart mentalize his religion. When Bright ll found free trade in the Scriptures and proclaimed, "As a nation of Bible Christians, we ought to realize that trade should be as free as the winds of heaven," the cynical could smirk that he stood to gain by the Repeal of the Corn Laws and free trade in gen eral; to them he was just using religion to bolster his economic position. The criticism was not fair. It is true that when he pro moted the repeal of the Corn"Laws, he was a national figure and was exceedingly popular; but when he bitterly opposed the Crimean War a decade later, England turned violently against him. Still, he did not adjust his conscience to the whims of the passing mo ment.

The American Civil War was the real test of Bright's charac ter. He abhorred war, although he was not a complete pacifist; he abhorred slavery also, but he was a cotton manufacturer and was well aware of the dependence of the Manchester area on Southern cotton. His good friend Richard Cobden, with whom he had lab ored so mightily in the days of the Corn Law agitation, tended to favor the Southern free traders as against Northern protection ists; but Bright convinced him there were more important prin ciples at stake. Many Englishmen openly symphathized with the South and there were enough in cidents like the Trent Affair \ (the eapture by a Northern naval com mander of a British ship carry ing a couple of Southern agents) to bring the North and England to the brink of war. On the Side of freedom Queen Victoria's husband, Prince Albert, is credited with having helped to avert a conflict in this case, but he was fatally ill at the time and died soon after ward. It was John Bright who re mained the constant friend of Mr.

Lincoln's government throughout the war, although his self-interest as a textile manufacturer would have inclined him in the opposite direction. The American people ex pressed their gratitude, too, in a number of ways. Perhaps the most interesting tribute was con tained in an address given by a distinguished American to a group of English school children after the war. He told them that, of course, American school children loved George Washington first of 1972 WHEN MEN APPEAL FROM TYRANNY TO GOD 333 all, then Abraham Lincoln, but John Bright 12 came third "be cause he is the friend of our country." This' friendship should not be minimized because it is quite ob vious that the North had about all it could handle in defeating the South without European inter vention. Had Britain gone to the aid of the Confederacy, it would no doubt have changed the course of history. And it was the English conscience, the deep-seated oppo sition to slavery throughout the nation, that tipped the balance in favor of the North. Once again the English were prepared to pay for their convictions, this time in widespread unemployment, par ticuarly in the cotton mills, and economic distress for the nation.

But freedom is more important than prosperity, when that is the choice. Conscience and Laissez Faire The freedom story is fascinat ing, but one can read it as a hu man interest story and still miss the point. Present-day scholars \vho know of the mighty labors of a couple or three generations of free enterprisers who sought to rid the world of the blight of slav ery long ago, tend to feel that the English abolitionists were incon sistent. If laissez faire means non interference by government in business, then why should the slave business have been singled out for destruction. Of course, those who raise such questions to day are not defending slavery but questioning the logic of laissez faire. This is an exceedingly impor tant consideration because it re veals a total lack of comprehen sion by our contemporaries of the motives and philosophy of those engaged in that earlier effort. If Wilberforce, Bright, and their as sociates had been anarchists, the point would be well taken; then all they could have done consis tently would have been to wait for sla very to wither away of itself as the Soviet government is sup posed to do some day. While it is true that there are and have been laissez-faire anarchists over the years, these abolitionists cannot be so classified; nor was Adam Smith, the father of the free en terprise tradition, out to abolish government.

Smith did want to do away with the innumerable and senseless mer cantilist restrictions so character istic of his age, because he was certain that they reduced produc tivity (which they were intended to do) and hence resulted in need less poverty and suffering. But Smith'sl:~ "obvious and simple sys tem of natural liberty" was based on "the laws of justice" (the Mor334 THE FREEMAN June al Law) ; he was no anarchist. He believed, as did many of his con temporaries, in a natural harmon ious order; that God had so ar ranged His Creation that "all things work together for good," if we but obey Him (Romans 8 :28). If this is true, the endless attempts to rig the market and rook the neighbors were unneces sary, immoral, and a cause of need less conflict. As Bastiatl-! asked, "How could God have willed that men should attain prosperity only through injustice and war?" Mercantilism, ancient and mod ern, is based on the "frightful blasphemy," that God has so or dered the world that the right is impractical, common decency is suicidal, and the oppression of the weak and helpless is good busi ness. This view Adam Smith and his followers emphatically rejected on philosophical and ethical grounds .. While they might dis agree as to how much government is necessary and appropriate, they did agree that slavery is contrary to the Higher Law and should be abolished. To them it was bad business ·and worse morals.

Christian Gentlemen It may seem preposterous to a multitude of people to speak of the laissez-faire economists and practical businessmen of the In dustrial Revolution as Christian gent!emen much concerned with reform. According to the popular notion, as T. S. Ashton 1;") tells us, "... the course of English history since about the year 1760 to the setting-up of the welfare state in 1945 was marked by little but toil and sweat and oppression." There was some of this certainly, but this is only part of the story. A contemporary historian, Earle E. Cairns,16 writing of Wilber force and the Clapham Sect in the decades before and after 1800, in sists that they accomplished more of a constructive nature than any reform movement in history and there were others who followed them who accomplished much also. Then why the very bad reputa tion of this era? Certainly few periods of history are more no torious than the early Industrial Revolution. Generations of So cialists blackened the good name of these men who did have their failings and this age which did have its problems. Some of their bitterest critics were their own grandchildren, the Bloomsbury Circle. Today, sadder and wiser, we realize that we could certainly learn much from them, if we would forget our prejudices long enough to· examine' the record. Indeed, a contemporary scholar, Karl Pol anyi,17 tell us that the four great institutions of the ,nineteenth cen tury - the balance of power, the 1972 WHEN MEN APPEAL FROM TYRANNY TO GOD 335 gold standard, the market econ omy and lirriited government "produced an unheard-of material welfare" and also "a phenomenon unheard of in the annals of West ern civilization, namely a hundred years' peace" (1815 to 1914). He is, of course, aware of the Crimean War and the Franco-Prussian War, for instance, which he re gards with some reason as fairly minor disturbances (since he is speaking from a European point of view, the American Civil War doesn't count) . It should be added also that Polanyi is a Socialist, ac cording to his own testimony, so his kind remarks about Capitalism take on additional significance.

Perhaps we have come full circle back to our beginnings, as one Englishman wrote recently: "In our own unpleasant century we are mostly displaced persons, and many feel tempted to take flight into the nineteenth as into a prom ised land. . . ." Retreating to the past is clearly impossible, if it were desirable, but we can face the future with courage, as did our Fathers, and take as our motto John Bright's slogan: "In work ing out our political problem, we should take for our foundation that which recommends itself to our conscience as just and moral." ~ • FOOTNOTES • 1 Michael Curtis (ed.) The Great Po !itical Theories, Vol. I, from Plato and Aristotle to Locke and Montesquieu, pp. 296-302. 2 Adam Smith, Wealth of Nations (Modern Library edition), p. 365. 3 Garet Garrett, The American Story, p.,87. 4 Lord Byron, "On the Castle of Chil Ion." 5 Harvey Cox, The Secular City, p. 61. 6 Edward C. P. Lascelles, Granville Sharp and the Freedom of Slaves in Eng land, p. 27.

7 Sir Reginald Coupland, Wilberforce, a Narrative, pp. 516-517. 8 Emerson's Essays (Modern Library edition), Pp. 839-840. 9 Robert Langbaum, The Victorian Age, pp. 9-10. 10 Frederic Bastiat, The Law, pp. 18-19. 11 Asa Briggs, Victorian People, p. 207. I:! George Barnett Smith, The Life and Speeches of John Bright, M.P., Vol. 2, pp. 113-114. 1:~ Adam Smith, p. 651. 14 Frederic Bastiat, Economic Soph isms, p. 88. 15 F. A. Hayek (ed.), Capitalism and the Historians, p. 32. 16 Earle E. Cairns, Saints and Society, p.43. 17 Karl Polanyi, The Great Tran.'~for mation, pp. 3-5.

nd Property OSCAR W. COOLEY IN ALL THE WELTER of worry about "the environment," seldom is prop erty and its relevance to pollution mentioned. To own property is to have a measure of control over a definable portion of one's environment. If one has property, he has a degree of power to prevent his environment from being despoiled. Indeed, the purpose of property, it seems, is to enable man, the owner, to bring environment under control and make it yield up a maximum of satisfactions. It has often been noted that people pollute least - that is, take best care of - that part of the en vironment which they themselves own. The householder is more so licitous of the home he owns than the renter is of the house in which Mr. Cooley is Associate Professor of Economics at Ohio Northern University. 336 he is but a temporary tenant. A family which, on a picnic, might leave litter in a public park and beer cans by the roadside will not dump waste on their own front lawn.

Is it possible, one might ask, for an owner to "pollute" his own property?' To the extent that it is his to utilize as he sees fit, what ever he does with it will be, in his view, its best use. And when a resource is being put to its best use, it can hardly be said to be "polluted." If I deliberately pipe sewage in to a pond on my own land, pre sumably I consider using the pond as a cesspool to be its opti mum use. Hence, there is no abuse, no pollution. If however, either purposely or inadvertently I allow my sewage to flow into a neighbor's pond, against his will, 1972 POLLUTION AND PROPERTY 337 I am without question polluting. lam lowering the value of his property. The obvious remedy is for him to assert his property right and ask me to cease; if I do not, he may ask the public author ities, a major function of which is to protect his and everyone's property rights, to enjoin my ac tion. This is the normal way in which property is protected in a civilized society.

It does not follow that in the case cited the neighbor would, in variably, bring an action against the polluter of his pond. This de pends, on the one hand, on how much damage he is suffering or about to suffer from the pollution, and on the other, on how much it will cost him to get the matter corrected. If the damage is trivial, he will not press the matter; or if he does, his case probably will be dismissed. Even if the damage is considerable, the cost of proving it might be greater, in which case he would endure it as an unavoid able "neighborhood effect" or minor externality. A Private Lake Erie? If, now, the pond is Lake Erie and has no specific owner, but is said to be "social property" or "in the public domain," people. will take a quite different attitude. To pollute it is to injure well-nigh everyone in general but no one in particular. "Everyone" does not go to court and seek inj unction. Hence, it seems one may pollute this "pond" with impunity, there being no owner to object. And so it be comes a public sewer.

As such, it is· at first very use ful, for the dilution is so great that no harm is evident; but as the sewage content of the water increases, inj ury is done to those who would drink the water, to would-be bathers, to fishermen whose catch dwindles, to hunters of waterfowl, and even to people who live along the banks. None of them takes action, however, main ly because he does not consider that he owns that body of water. He does not consider that it is his to utilize and that he can there fore exclude - and enlist the State to help him exclude - all others from its use. In short, Lake Erie is unlike the farm pond, it is not private property. That is why it is polluted. It is public domain, and the public domain easily becomes a public dump. If, now, Lake Erie were con verted into private property - let us assume it becomes· the recog nized property of the "Lake Erie Company," which proves itself the legal heir of those who bought it from the aborigines - we would have a quite different situation.

The company would want to maxi mize income from the lake, as from 338 THE FREEMAN June a tract of owned farm land, resi dential property, forest, coal-bear ing land, or other asset. It might do so by selling rights to fish, to sail, to bathe, to transport passen gers or freight, and by selling water to cities. It would undoubt edly improve its property by stock ing with desirable species of fish, deepening ship channels, improv ing beaches, and so forth. The owner would naturally strive to conserve its lake property in the most practical ways pos sible, so that it would reap a gen erous income, both now and in the future. At the moment, it might pay to sell to the cities along the lake the right to use it as a sewer; but this would threaten the future income to be gleaned year after year from the fishermen, bathers, shippers, boaters, drinkers, and other potential users. Only if the cities would pay the company a sum greater than the present value of all the streams of anticipated future income would the lake be turned into a sewer; and that, one may surmise, would cost such cities as Cleveland and Toledo a pretty penny.

In all the voluminous literature of conservation,l seldom is it pointed out that only under pri1 An exception is Exchange and Pro duction: Theory in Use by Alchian and Allen (Belmont, Calif.: Wadsworth, 1969) p. 563. vate ownership are the resources of the earth most fully conserved, since it is the private owner who has the keenest incentive to maxi mize his returns in future as well as at present. This is because the private owner is conscious of hav ing sacrificed to get his property, a fact which has indelibly im pressed upon him that it is a scarce good, to be carefully husbanded. Public property, on the other hand, is regarded by the public as a "free good," unlimited in amount both now and forever. Since it be longs to everyone, no one person can prevent others from using it. Hence, each reasons that he had better get his while the getting i's good, that is, now. The result, far from conservation, is rapid ex ploitation and waste. The preven tion of pollution is, of course, but a special case of the general prin ciple of conservation.

Correction by Law Environmentalists are wont to visualize land, water and air being protected and conserved by police action. Laws will be enacted - wise laws, enacted by socially minded legislators who somehow are gift ed with the knowledge of just how each natural resource should be utilized to achieve the greatest good for the greatest number, both now and in the future. These laws will set the private, profit-seeking, 1972 POLLUTION AND PROPERTY 339 polluting entrepreneur back on his heels. Once such laws are passed and enforced, the problem of pol lution will melt away. This is the politician's solution to what is es sentially an economic. problem. Undoubtedly, changes in the laws are needed,. Certainly we need changes which will spell out and define the rights of property own ers more clearly and specifically than has been done up to the pres ent. For example, just what are the property rights in a flowing stream? In a body of shifting air?

In the ocean deep? In the fish that swim, birds that fly, animals that wander now largely at will about the environment? The present laws of property are concerned mainly with the solid land, but this con stitutes only about one-fourth of the earth's surface and represents an even smaller fraction of her resources. Gordon Tullock in his booklet, The Fisheries . . . Some Radical Proposals (Columbia, S. C.: Univ. of South Carolina) now out of print, foresees the privatizing of the ocean fisheries. Once the ocean, at least the shallower parts of it, is divided into privately owned plots - and Tullock suggests in some de tail how this might be done - it will be "farmed" much more pro ductively than it is at present, he believes. There was a time when man allowed the land to produce what it would - animals, birds, trees, fruits ,.- and he hunted the prod uct. But it was a laborious and hazardous business, and one may imagine every family ranging over many square miles to bag a living.

Then, man learned to domesticate animals and to till the soil and grow crops. This vastly increased his production. But as to fish and other sea wealth, both organic and inorganic, we are still largely in the hunter stage. We have har nessed only a small fraction of the earth's resources, yet we are al ready obsessed with the threat of overpopulation. The Origin of Property Rights As man evolved from hunter to herdsman to tiller, he devised property in land, for only as each could exercise control over his lit tle corner of the environment could he be sure of reaping where he had sown. As Harold Demsetz 2 puts is: "Property rights arise when it becomes economic for those affected by externalities to internalize benefits and costs." He cites Eleanor Leacock's study of the Indians of eastern Canada. In early days, when they hunted merely for food and a few furs for themselves, conservation of wild2 In "Toward a Theory of Property Rights," American Economic Review, May 1967.

340 THE FREEMAN June life did not pay, and hence they hunted far and wide, recognizing no property in land. But when the white men came and the fur trade became profitable, hunting lands and even individual beaver houses were allotted to families. In the language of economics, they in ternalized external costs and ben efits. The cattle grazing industry acted similarly when the cattlemen discontinued the "free range" and fenced their individual holdings. Man has been slow to define property rights in water and air, not only because of its seeming in exhaustibility, but also because of its fluidity. It is recognized, how ever, that an owner has a right to pure ,vater on his land, even though it flows from his neighbor's land. In like manner, a house holder has a property right to pure air over his house and lot, for what would the latter be worth if overlaid with a vacuum? The growing insistence that power plants, steel mills, and the like cease polluting their neighbors' air is a recognition of this right.

To. pollute my neighbors' land, air, or water is to trespass on his property. The rights of property need to be more sharply delineated and respect for· them intensified. For maximum protection and con servation, resources now said to be in the public domain should be re assigned to the private domain. Not the socialists but the capi talists have the solution to pol lution! , IDEAS ON LIBERTY Social Reforms ,SOCIAL REFORMS which require the citizen to depend too directly on his government for food, occupation, employment, crops, clothes, and homes, compel abrogation or abandonment of consti tutions and bills of rights .... The false laudation of the strength of these instruments naturally creates an impression that they constitute an unbreakable barrier against oppression. But nothing could be farther from the truth. They are futile in every respect if the general principles of government are not observed. They have value only in an economic structure of free enterprise and private property.

From "Liberals" and the Constitution by HENRY PLOW DEEPER CLARENCE B. CARSON THE FOUNDING OF THE AMERICAN REPUBLIC 11 The War for Independence IT WAS ONE THING to declare inde pendence; it was another to ac quire it. It was one thing to rebel against British rule; it was an other to bring off a successful rev olution. It was one thing to make war; it was another to win it. It was one thing to deny the old au thority; it was another to estab lish a new rule. The pledge which closes the Declaration was one to be taken seriously; those who signed it committed their "Lives," their "Fortunes," and their "sa cred Honor." True, those who gathered around to sign the docu ment engaged in some bravado. John Hancock scrawled his name large enough that the king could read it without his spectacles. When reproached with the fact that there were enough people by the same name in his state to as sure him virtual anonymity, Charles Carroll from Maryland added "of Carrollton" to his sig nature, noting that there was only one man who would fit that de scription. But the task that lay ahead required endurance and ten acity to match the decisiveness just exercised.

The difficulties confronting the Patriots - for so those who fa vored independence have been most Dr. Carson shortly will join the faculty of Hillsdale College in Michigan as Chairman. of the Department of History. He· is a noted lecturer and author, his latest book entitled Throttling the Railroads. 341 342 THE FREEMAN June commonly called - were numerous and resistant to resolution. One such difficulty is frequently. ig nored by revolutionists, though failure to deal effectively with it thwarts the purposes for revolt; for the American colonists it was to see that the revolt against Eng land did not turn into a revolt against all authority. The usual course of revolution is for a break down of authority to follow the re pudiation of the old authority. When this happens, there ensues an often brutal contest for power, accompanied by the disintegration of society, bloodletting, and the de velopment of well-nigh irreconcil able divisions among the people.

Power is usually consolidated once again and order restored by an autocratic rule. The object for the original revolt, however noble, is commonly lost from sight as the yearning for order supersedes the quest for the good society. The deepest source of the disin tegrative impact of revolution no doubt lies in the human condition itself. What man is there who would not like a fresh start, who would not like to be free of his debts, who would not like to be re lieved of the tangle of duties and obligations in which he finds him self, who would not relish the op portunity for starting over. Revo lution appears to offer such an in viting prospect. As he made his way home from the First Conti nental Congress, John Adams en countered a man fired by emotions such as these. The man said: "Oh! Mr. Adams, what great things have you and your colleagues done for us ! We can never be grateful enough to you. There are no courts of justice now in this province, and I hope there never will be an other."l John Adams understood that this was not a laudable opinion, and there were many others who intended to prevent the dissolution that would accompany the domina tion of events by men holding such opinions. The Americans were gen erally successful in avoiding many of the pitfalls of revolution. But, by the refusing to arouse the populace by holding forth visions of beati tude that would follow from their efforts, they also forfeited fanatical zeal in their followers. The Amer ican Patriots had quite limited means for achieving their limited ends.

Divided Opinion in America A more obvious difficulty at the time was posed by the Loyalists those who remained loyal to the king and to England. So long as the colonies retained their connec tion with Britain, most Americans joined in the opposition to British policies during the period of rising discontent. They sometimes dif1972 THE WAR FOR INDEPEDENCE 343 fered over tactics and as to the correct theoretical position on the constitution. But once the decision for independence was made, some goodly number of people retained their loyalty .to Britain. These threatened to turn the war into a domestic civil war as well as a war against Britain. How many' Loyalists there were was in doubt at the time and has remained so ever since. Those pros ecuting the war in Britain wanted to believe that Americans in gen eral retained their loyalty, espe cially that the sober and substan tial inhabitants did. Hence, they were favorably disposed to exag gerated acounts of their numbers.

Such a view made sense of the idea of subduing the "rebels," for after such a conquest Britain still might rule America if a substan tial portion of the population was loyal. Moreover, British armies were continually being encouraged to come to this or that province on the grounds that Loyalists would turn out to support them in great number. The extent of loyalism has been revived as an important historical question in the twenti eth century by those attempting to make a Marxist or class-struggle interpretation of American ori gins. These historians have resur rected what was once the British view for reasons quite different than those that would have interested King George III. On this class-struggle interpretation, men of wealth and position in America were usually Loyalists, and the thrust for revolt came from the lower classes. This interpretation is not sub stantiated by the facts. A modern historian describes the social sta tus of the Loyalists in this way: "Some came from quasi-aristo cratic families, like the Fenwicks of South Carolina, and others were the humblest folk. They were rich, like Joseph Galloway of Pennsyl vania, and they were poor; they were large landowners, and they were middling and small men of property; they stood behind coun ters, and they possessed hands un wrinkled by trade or toil. . . .

Truth to tell, the Loyalists were of every station and every occu pation.":! He goes on to point out that Anglican clergymen and other officials dependent upon Britain for appointment or livelihood were likely to remain loyal. He also notes that some men of' conspicu ous wealth were among the Loyal ists,3 a point that is offset by the fact that there were prosperous men among the Patriots as well. Textbook lore has it that the population was divided in this fashion: one-third Patriots, one third Loyalists, and one-third neu trals. About the. only thing to com mend this estimate is that it is a 344 THE FREEMAN June . formula easily remembered by un dergraduates for test purposes. Since no census was ever taken to determine the number of Loyalists and Patriots, most evidence of numbers is indirect. The most critical of such evidence indicates that the Patriots generally pre ponderated over the Loyalists. Loy alists were able to achieve military successes only in conjunction with British armies. They could not even hold territory gained by the British. Once the main army moved on, Patriot militia usually swarmed over the Loyalists. The following estimate of Loyalist strength may be very near the mark: "In New England they may have been scarcely a tenth of the population; in the South a quarter or a third; but in the Middle col onies including New York per haps nearly a half."4 There were, then, Loyalists in considerable number in America after the Declaration of Independ ence. They did not, however, suc ceed in turning the conflict into a fullfledged civil war. They were a threat to internal security; they offered encouragement to Britain to continue the war; they hamp ered the mustering of the resour ces of the states ~ and they attempt ed to undermine the war effort. It is not surprising, then, that the Patriots dealt with them fero ciously when they encountered them in battle or that they were subject to persecution when they were discovered.

Wartime Problems The leaders of the revolt had difficulty enough without civil war. They had to lead by way of make shift governments during most of the war. The colonial governments were no more, once independence was declared. Indeed, they had al ready been replaced with provin cial congresses or legislatures be fore that event in most states. They subsisted for some time without formal constitutions, and their exercise of authority smacked of extralegality, to put the best face on it. Though the states were faced with the crisis of prosecut ing a war, they were under the necessity of moving carefully in order to· carry as many people with them as possible. The states were hardly united, and their war effort was plagued by the fact that each state tended to go its own way. The only union government which existed from 1775 into 1781 was that provided by the Second Continental Congress. It had no constitution, nor any authority ex cept that which derived from the states. It was not a government in the usual sense of the word, though it attempted to perform the diplomatic and military func tions of one.

1972 THE WAR FOR INDEPEDEN CE 345 The most perplexing difficulties, however, were military and finan cial. To confront the most power ful navy in the world, the states had only a few ships that could be called warships; most of the dam age they were able to do against the British was done by privateers which depended upon speed rather than armor. The armies should be called occasional rather than regu lar or standing. True, Congress authorized a Continental Army, made requisitions on the states for men and supplies, appointed gen erals, and undertook the direction of campaigns. There was a Conti nental Army from the time of its formation until the end of the war; but at times - usually in winter - it dwindled to the point that it more nearly resembled a party than an army. When some region was threatened, the army could be fleshed out with numer ous increments of militia. The British did not usually conduct winter campaigns, .so that an oc casional army was nearly enough - for defensive purposes.

The Continental forces, during most of the war, however, were not sufficient to go on the offensive. The army frequently lacked· most of the things which make an army: discipline, effective officers for smaller units, uniforms, blankets, tents, firewood, food, adequate shot and powder, sufficient muskets or rifles and bayonets, and continuity. The initial enlistments were for one year only: only long enough, as Washington observed, for them to absorb some training and come under discipline before their officers had to begin to treat them with great deference in the hope that they would re-enlist. The militia were undependable and un predictable in combat in the open field; they were of greatest use when they outnumbered the enemy. Financing was so ineptly man aged and the consequences were so important both to the conduct of the war and the founding of the Republic that it will receive treat ment in a separate chapter.

Advantages of the Patriots It is appropriate to focus atten tion on the difficulties confronting the Americans in the War for In dependence. It enables us to see highlighted the sacrifices, bravery, and tenacity of those who did per severe to victory. But it is appro priate also to note that the Patri ots had advantages as well as diffi culties. Americans were fighting, usually, on their own soil. They had the potentiality of supplying many of their wants at home. They did not have to conquer Brit ain, only to drive her forces from the states. They had much greater prospects of gaining friends among European nations than did Brit346 THE FREEMAN June ain, for Britain's successes in the Seven Year's War had been at the expense of other major powers. The American Patriots had a cause, too, which much outranked that of their enemy. They were fighting for liberty and independ ence; the best that the British could do was appeal to monarchy, empire, and tradition, and their case for tradition was flawed by the innovations which had pro voked colonial resistance.

Even the method of assembling and maintaining armies was more appropriate than is often appreci ated. It is true, of course, that the army should have been better fed, clothed, shod, munitioned, and housed. A strong case can be made, too, that if Patriot com manders had had larger numbers of seasoned and disciplined troops they might well have won decisive victories long before they did. But it is quite possible that an army composed of men with long-term enlistments in resplendent uni forms, who were extensions of the wills of their officers and who had garnered a series of brilliant vic tories, would have endangered American liberty. Many thought ful Americans feared just the sort of army wanted by any man con fronted with the military tasks before him. Congress was loathe to encourage long enlistments. They feared a standing army, as might be expected of men of Brit ish descent. Americans were con scious not only of British history but of Roman history, and of the threat posed by successful gen erals. America did avoid the shoal of military dictatorship following the revolution, and a plausible rea son why is that there was no army with which anyone inclined to such exploits could be confident of ac complishing them.

Outstanding Leadership The Americans had another ad vantage, too; they had George Washington as commander-in chief. Whether he was a great tactician or not is a question that can be left to military historians. But there should be no doubt that he had that peculiar combination of qualities of a man to whom others turn in difficult situations. He was dignified, tenacious, far sighted, disciplined, correct, and a gentleman. His personal bravery was of the sort that is called fear less among soldiers and sometimes foolhardy for a general. More than once he rallied his troops by exposing himself to enemy bullets. A lesser man than he would have committed and lost several armies, if he could have assembled that many. Washington was sorely tempted to risk his army to rescue and redeem his reputation. Yet he resisted this temptation time and 1972 THE WAR FOR INDEPEDENCE 347 again, believing that it was more important to keep an army in· the field than hazard the American cause on the chance of gaining personal glory. He said after be ing driven from Long Island: "We should on all occasions avoid a general action, or put anything to the risk, unless compelled by a necessity into which we ought never to be drawn."5 He perse vered, persevered when beset by critics in Congress and the states, by the shortages and inadequacies of his army, by superior armies, by a war of attrition in the later years, and by mutiny of some of his forces. He had not only to di rect his armies against enemy forces that frequently outnum bered his, were better equipped, better disciplined, and better sup ported but also to keep up a con tinual correspondence with Con gress and with state officials to gain support and to get men and supplies. Small wonder that he often longed to return to Mt. Ver non and pursue his own affairs.

Yet he persevered for more than eight years, from 1775 to 1783. There were, of course, other generals and officers whose leader ship and ability contributed to the American cause. Among them would be listed: Benedict Arnold (until his betrayal), Henry Knox, Anthony Wayne, Nathanael Greene, and Daniel Morgan. The Continental Army benefited much, too, from foreign volunteers, not ably, Lafayette, De Kalb, and Von Steuben. And there were private soldiers, whose names do not adorn the pages of books, but who en dured untold misery to remain with the Continental Army and provide the troops without which generals are of no account. The British Forces On paper, the British were so far superior to the Americans that no contest might have been ex pected. They had the most power ful navy in the world. They had an established government, the recog nition of foreign powers, central ized taxation, established credit, a much larger population on which to draw, much greater productive capacity, and an existing and dis ciplined army, though it was small.

They hired thousands of Germans to supplement their own forces. Moreover, Loyalists in America might support them. But the task of the British was much more complex and difficult than that of the Americans. Armies had to be transported across 3,000 miles of ocean in un predictable sailing ships. Not only that, but the army and navy had generally to be supplied from home, and this transport was fre quently exposed to Patriot priva teers along the thousands of miles 348 THE FREEMAN June of coast line of the American con tinent. Once their armies left the shelter of the supporting navies and moved inland, they were among a generally hostile popu lation which rallied against them, as Generals Burgoyne and Corn wallis were to learn to their sor row. They were· always short of transport for inland maneuvers, and George Washington saw to it that very little fen into their hands. If America was divided at home, so were the British, though it did not tell much for the first couple of years.

British strategy was threefold: to isolate the continent from the rest of the world by blockade, to divide and conquer America, and to destroy Washington's army. The policy of divide and conquer had many facets: rally the Loyal ists to the cause, separate the re gions from one another, capture the major seaports, and so on.Pa triot strategy was, above all, to keep an army in the field, and, hopefully, to drive the British from· the continent. The British aimed to keep down the atrocities so as not to turn more of the American population against them; in this they were frequently thwarted by armies which plun dered and raped wherever they went. Washington's armies were under strict orders not to plunder, but. they did engage in confiscations to gain stores and supplies. Hostilities broke out in Massa chusetts, of course, in April of 1775, more than a year before the declaring of independence. For the remainder of the year and into the next, the bulk of the British forces were concentrated at Bos ton and environs. This force was under siege and cut off on land by Patriots.

The first major battle of the war took place June 17, 1775. It has gone down in history as the Battle of Bunker Hill, though, in fact, it was a battle over Breed's Hill. The Americans, some 1,200 strong built a redoubt on Breed's Hill, which the British attacked with 2,200 men against a slightly reinforced American force. The British· took the hill, but at a cost of 1,000 casualties, two and a half times the losses by the Patriots. General Gage observed that he could ill afford another victory like that. Shortly after ward, Washington assumed com mand of the Patriot forces, and a stalemate ensued for the next sev eral months. Expedition Into Canada The scene of action shifted else where. For some time, Benedict Arnold, and others, had been pro moting the idea of an expedition into Canada. It was hoped that such an undertaking would bring 1972 THE WAR FOR INDEPEDENCE 349 . the Canadians in on the side of the states, would remove a haven from British forces who could from that vantage point launch an attack against the states, and would show to the British the de termination of America. The plan was the more attractive because Canada was lightly defended. Con gress was reluctant to authorize the expedition because there was still hope of reconciliation. Even so, permission was given for it finally.

Two armies were launched into Canada in late 1775. The main army which set out byway of Lake Champlain was initially un der the command of General Philip Schuyler, but he fell ill and was replaced by the much more· ener getic Richard Montgomery. This army met with a series of success es by taking Forts Chambly and St. John's, followed by Montreal. The way to Quebec, the historic key to dominance of Canada, now lay open. Meanwhile, the second army un der the command of Benedict Ar nold was making its way toward Quebec by a more easterly route. Arnold set out up the Kennebec river through Maine along a route the difficulties of which were only hazily grasped at the start. Arnold and his men braved rapids, unsus pected waterfalls, long overland portages, and some of the most miserable weather ever recorded to reach their destination. "So great were the hardships that officers of the two rear divisions turned back with 350 men. But the rest plunged on through a forbidding wilder ness, overcoming almost incredible obstacles. Some of them became lost; some died; all who could, struggled forward. . . . After a month of desperate effort, 600 scarecrows of men straggled into a camp on· the headwaters of the Chaudiere."G This was in early November; they reached Quebec a few days later.

On December 2, 1775, Montgom ery's army joined forces with Ar nold outside Quebec. Although they now had superiority in num bers over the British, they were unable to take advantage of it be cause Sir Guy Carleton chose to defend the city from behind its walls rather than come out into the open. An assault upon the city on December 31 failed. General Montgomery was able to get a small force within the walls, but he was killed, and Arnold's men who were supposed to make a ren dezvous with Montgomery's were turned back after Arnold, who was wounded, relinquished the com mand. For several months, Ameri cans continued to lay Quebec un der siege, but to no avail. Superior British forces eventually arrived; though American reinforcements 350 THE FREEMAN June were also sent to Canada, they were driven out in 1776. Washington vs.Howe Early in the year of 1776, Wash ington succeeded in placing cannon on Dorchester Heights over look ing the British positions around Boston. Sir William Howe, now in command of the British army, judged his position to be too ex posed, and in March the British abandoned Boston. Howe withdrew by sea to Halifax to await rein forcements. Meanwhile, Washing ton moved his army to New York in the expectation of a British at tack there. It came in August.

Howe drove Washington's army from Long Island, from Manhat tan, a:nd then from White Plains. It then became a near rout as the British under the field command of Cornwallis followed Washing ton in a retreat through New Jer sey . Washington managed to halt the British advance at the Dela ware River in early December. He had gathered all the boats in the vicinity to transport his army across the river; once he had the boats on the· other side, he kept them there. In any case, Howe did not fol low up his advantage. He went into winter quarters in New York City, leaving much of his army spread out over New Jersey. For the Continentals, it had been a year of defeats and withdrawals. On the heels of the Canadian losses had come the ousting of Washington's army from New ·York. The British were now with in a few miles from the capitol at Philadelphia. Washington had only the remnant of an army to oppose the military and naval might of Britain.

Howe could retire to the com forts of New York; he had vic tories enough to sustain him through the winter. No such pleas ant option was open to Washing ton who was faced with the immi nent dissolution of his army and, the way things were going, no prospects of another one. If the British would not attack, he must. Under the cover of darkness on Christmas night he crossed the Delaware with his army to attack the Hessian army at Trenton at daybreak. The Germans surren dered shortly after the attack be gan. A few days later, Washing ton engineered another victory at Princeton. From his base at Mor ristown, Washington continued to drive the British from their posi tions. The extent and impact of the continuation of this campaign is spelled out by Samuel Eliot Mor ison: "In a campaign lasting only three weeks, at a time of year when gentlemen were not supposed to fight, the military genius of America's greatest gentleman, and 1972 THE WAR FOR INDEPEDENCE 351 the fortitude of some five thou sand of his men, had undone ev erything Howe accomplished, re covered the J ersies, and saved the American cause."7 British Occupy Philadelphia In 1777, the British launched their great offensive aimed at di viding America and destroying the Patriot ability to resist. At the beginning of the year, the mass ive force of British arms was cen tered in New York City. Another large army was in Canada. It was placed under the tactical command of General John Burgoyne. Gen eral Howe conceived initially of the grand strategy of attacking north from New York to make a junction with an attacking force from Canada. Such a victory along the line of Lake Champlain, Lake George, and the Hudson could have cut off New England from the rest of the states. However, Howe changed his mind, decided to at tack Philadelphia instead, and put to sea with that destination in mind. He did leave behind an army, of sorts, under Sir Henry Clinton, but it was insufficient to perform both its tasks of occupa tion and conducting a major of fensive campaign.

For a good portion of the sum mer, Howe's destination was a mystery to Washington. The fleet was delayed first by an extended calm and then by contrary winds. Upon hearing that the fleet had been sighted to the south, Wash ington took the main body of his army to the vicinity of PhiJadel phia, leaving Burgoyne to the mercy of the New England militia, as he said. Washington tried to block Howe's advance with a small er army at Brandywine Creek in early September, but was defeated and driven off. Howe moved on to the occupation of Philadelphia, which Congress had lately aban doned in haste. Washington's. at tack early in October on the main British force at Germantown failed to dislodge it. He withdrew his army to Valley Forge after this defeat. Burgoyne's Surrender Burgoyne had about 8,000 men at his disposal, including Loyalists and .Indians. A detachment under Baron St. Leger was dispatched through the Mohawk valley from Oswego. toward Albany. This de tachment was dispersed by troops under Benedict Arnold. Burgoyne proceeded southward at a leisurely pace, one not entirely of his own choosing, since his path was fre quently blocked by trees newly felled by Patriots. Meanwhile, mil itia began to assemble around a core of Continentals whose task was to stop Burgoyne. Eventually, so many militia had gathered to 352 THE FREEMAN June augment the Continentals under the command of General Horatio Gates that Burgoyne was outnum bered two to one. His supply route was cut by Patriots. Burgoyne's hope of being relieved from New York City did not materialize; Clinton made only a foray up the rivel", stopping well short of Al bany. Burgoyne was cut off, sur rounded; he surrendered his army intact at Saratoga on October 17, 1777. Gates was credited with the victory, but men such as John Stark and Benedict Arnold led the aggressive actions which bottled up Burgoyne.

France Enters the War Saratoga was the first great American victory. Trenton and Princeton had been important bat tles for keeping up morale, but they had been won at the expense of contingents of British forces. Burgoyne surrendered one of the major armies in America at Sara toga. There had been much sym pathyamong Frenchmen for the American cause from the begin ning. America had sent emissaries even before declaring independ ence. By 1777, Congress had sent to France the best known Ameri can at the time and America's premier diplomat, Benjamin Franklin. An alliance was drawn up between France and the states in February 1778, and shortly thereafter France was drawn into the war. Not only did Saratoga bring France to the side of the Ameri can Patriots, but it showed to any of the British willing to learn the immensity of the task that lay be fore them. Contemporaries thought General Howe was much too cau tious, even lazy and indifferent, if not a secret sympathizer with the Patriots. Historians of a later date have belabored him for un imaginative tactics. Yet Howe was the only commanding general who ever put Washington's army to rout and administered successive defeats. But to those who would see, Burgoyne's defeat showed what could well happen to any British general who committed his forces beyond naval support. Far from finding numerous Loyalists in the hinterland, Burgoyne found the countryside swarming with militia waiting to demonstrate the marksmanship of the backwoods.

Nor would the continent succumb to the capture of this or that east ern port city, even if one was the capital. America had no central city; it was a land of farmers mainly who knew not the depend ence, common in Europe, on a single city. There was no Rome to fall in America. It is reasonable to conjecture that the American Patriots should have won the war in 1778. They 1972 THE WAR FOR INDEPEDENCE 353 now had an ally who could chal lenge the British fleet and over match the British army. The Americans had shown that they could defeat a British army. Brit ain was not in dire straits, but even the government was no long er so determined to win. Lord North got a bill through Parlia ment in February 1778 aimed at reconciliation· with America. A peace commission was dispatched a little later which was authorized to offer Americans just about everything they had asked for short of independence. A command crisis developed in the British forces in 1778. Burgoyne returned home· on parole and in disgrace.

The Howe brothers resigned com mand of the army and navy in America. General Howe may have been cautious, but Henry Clinton, who replaced him, was inept. Surely, all it would have taken to drive the British from America would have been a decisive mus tering of American strength. The Winter at Valley forge This was not to be the case, however. Perhaps a better omen than Saratoga for the immediate future was Valley Forge. The war was to drag on for the better part of five more years, and the condi tion of the Continental army at Valley Forge in the winter of 1777-1778 tells us why, at least in part. One of Washington's biog raphers has described conditions this way: Thus, at the beginning of 1778, the Army was witnessing one of the strangest of races, a contest between the axes of the men building huts and the harsh wear-and-tear on the remaining garments of those who still had sufficient clothing to permit outdoor duty .... Although hospital huts were built early and in what was believed to be sufficient number, they soon were overcrowded with miser able men who died fast or, if they survived, received little attention. In spite of all exertion, it was the mid dle of January when the last of the troops were under roof. Even then they did not always have straw to take the chill from the earthen floor of their huts. Thousands had no bed covering.

Food, of course, was the absolute essential - and food, more than even clothing or blankets or straw, was lacking at Valley Forge .. , . "Fire cakes"frequently were all the half naked men had to eat in their over crowded, smoky huts. Early in the New Year most of the regiments had to be told the Commissary could is sue no provisions because it had none, none whatsoever .... These were desperate hours. Wash ington continued to watch and to warn. "A prospect now opens," he said February 17, "of absolute want such as will make it impossible to keep the Army much longer from dis solution .... "8 354 THE FREEMAN June Indeed, the army did seem to be on the verge of dissolution. "In December 1777, for example, over two thousand men went home. Hundreds of officers tendered their resignations; on one day alone, fifty threw up their commissions."!> Nor are these resignations and de sertions to be wondered at when the hardships of the army are con trasted with the relatively good life of civilians. It is generally be..; lieved that about the only people in America suffering privation were in the army. One historian says, "Civilians· declined to forgo their pleasures merely because the army was in want; at a ball at Lancaster, Pennsylvania, in Janu ary 1778, over one hundred ladies and gentlemen gathered in all their finery to enj oy a 'cold colla tion with wine, punch, sweet cakes ... , music, dancing, singing ... "

which lasted until four o'clock in the morning."lO These revels were taking place only a short distance from Valley Forge. The incongruities here account for the American impotence. The reason for their existence needs now to be explained. t) • FOOTNOTES • 1 Quoted in Merrill Jensen, The Found ing of a Nation (New York: Oxford University Press, 1968), p. 663. 2 John R. Alden, The American Revo lution (New York: Harper Torchbooks, 1954), p. 85. 3 Ibid., p. 86. 4 Piers Mackesy, The War for America (Cambridge: Harvard University Press, 1965), p. 36. 5 Quoted in ibid., p. 91. G John R. Alden, A History of the American Revolution (New York: Alfred A. Knopf, 1969), pp. 203-05. 7 Samuel E. Morison, The Oxford His tory of the American People (New York: Oxford UniversIty Press, 1965), p. 244. 8 Douglas S. Freeman, Washington, abridged by Richard Harwell (New York: Scribner's, 1968), pp. 373-74.

9 John C. Miller, Triumph of Freedom (Boston: Little, Brown and Co., 1948), p. 225. 10 Ibid., p. 223. IDEAS ON LIBERTY N ext: The Scourge of Inflation. Discipline CALL it high training, or culture, or discipline, or high breeding, or what you will, it is only the sense of what we owe to ourselves, and it is greater and greater according to our opportunities. From an essay by WILLIAM GRAHAM SUMNER HENRY HAZLITT THE THEME of this study is the conquest of poverty, not its "abo lition." Poverty can be alleviated or reduced, and in the Western world in the Jast two centuries it has been almost miraculously alle viated and reduced; but poverty is ultimately individual, and individ ual poverty can no more be "abol ished" than disease or death can be abolished. Individual or family poverty re sults when the "breadwinner" can not in fact win bread; when he cannot or does not produce enough to support his family or even him self. And there will always be some human beings who will tem porarily or permanently lack the abili ty to provide even for their own self-support. Such is the con dition of all of us as young chil dren, of many of us when we fall ill,and of most of us in extreme old age. And such is the perma nent condition of some who have been struck by misfortune - the blind, the crippled, the feebleHenry Hazlitt is well known to Freeman readers as author, columnist, editor, lecturer, and practitioner of freedom. This article will appear as the concluding chapter in a forth coming book, The Conquest of Poverty, to be published by Arlington House.

minded. Where there are so many causes there can be no all-embrac ing cure. It is fashionable to say today that "society" must solve the prob lem of poverty. But basically each individual - or at least each fam ily - must solve its own problem of poverty. The overwhelming ma jority of families must produce more than enough for their own support if there is to be any sur plus available for the remaining families that cannot or do not pro vide enough for their own support. Where the majority of families do not provide enough for their own support - where society as a whole does not provide enough for its own support - no "adequate relief system" is even temporarily pos sible. Hence "society" cannot solve the problem of poverty until the overwhelming majority of families~ have already solved (and in fact slightly more than solved) the problem of their own poverty. All this is merely stating in an other form the Paradox of Relief: The richer the com,munity, the less the need for relief, but the more it is able to provide,. the poorer the 356 THE FREEMAN June community, the greater the need for relief, but the less it is able to provide.

And this in turn is merely an other way of pointing out that re lief, or redistribution of income, voluntary or coerced, is never the true solution of poverty, but at best a makeshift, which may mask the disease and mitigate the pain, but provides no basic cure. Moreover, government relief tends to prolong and intensify the very disease it seeks to cure. Such relief tends constantly to get out of hand. And even when it is kept within reasonable bounds it tends to reduce the incentives to work and to save, both of those who re ceive it and of those who are forced to pay it. It may be said, in fact, that practically every meas ure that governments take with the ostensible obj ect of "helping the poor" has the long-run effect of doing the opposite. Economists have again and again been forced to point out that nearly every pop ular remedy for poverty merely aggravates the problem. I have an;.

alyzed in this study such false remedies as "land reform," the guaranteed income, the negative income tax, minimum-wage laws, laws to increase the power of the labor unions, opposition to labor saving machinery, promotion of "spread-the-work" schemes, spe cial subsidies, increased government spending, increased taxation, steeply graduated income taxes, punitive taxes on capital-gains, in heritances, and corporations,and outri.ght socialism. But the possible number of false remedies for poverty is infinite. Two central fallacies are common to practically all of them. One is that of looking only at the imme diate effect of any proposed re form on a selected group of in tended beneficiaries and of .over looking the longer and secondary effect of the reform not only on the intended beneficiaries but on everybody. The other fallacy, akin to this, is to assume that produc tion consists of a fixed amount of goods and services, produced by a fixed amount and quality of capi tal providing a fixed number of "jobs." This fixed production, it is assumed, goes on more or less au tomatically, influenced negligibly if at all by the incentives or lack of incentives of specific producers, workers, or consumers. "The prob lem of production has been solved,"

we keep hearing, and all that is needed is a fairer "distribution." What is disheartening about all this is that the popular ideology on all these matters shows no ad vance -. and if anything even a retrogression - compared with what it was more than a hundred years ago. In the middle of the nineteenth century the English 1972 THE CURE FOR POVERTY 357 economist Nassau Senior was writ ing in his journal: It requires a long train of reason ing to show that the capital on which the miracles of civilization depend is the slow and painful creation of the economy and enterprise of the few, and of the industry of the many, and is destroyed,or driven away, or pre vented from arising, by any causes which diminish or render insecure the profits of the capitalist, or deaden the activity of the laborer; and that the State, by relieving idleness, improvi dence, or misconduct from the punish ment, and depriving abstinence and foresight of the reward, which have been provided for them by nature, may indeed destroy wealth, but most certainly will aggravate poverty.!

Man throughout history has been searching for the cure for poverty, and all that time the cure has been before his eyes. Fortu nately, as far at least as it applied to their actions as individuals, the majority of men instinctively rec ognized it - which was why they survived. That individual cure was Work and Saving. In terms of so cial organization, there evolved spontaneously from this, as a re suIt of no one's conscious plan ning, a system of division of labor, freedom of exchange, and eco nomic cooperation, the outlines of 1 Nassau Senior, Journal Kept in France and Italy from 1848-52 (London: Henry S. King, 2nd ed. 1871), Vol. I, pp. 4-5. which hardly became apparent to our forebears until two centuries ago. That system is now known either as .Free Enterprise or as Capitalism, according as men wish to honor or disparage it. It is this system that has lifted mankind out of mass poverty. It is this system that in the last century, in the last generation, even in the last decade, has ac celeratively been changing the face of the world, and has provided the masses of mankind with amenities that even kings did not possess or even imagine a few generations ago.

Because of individual misfor tune and individual weaknesses, there will always be some indi vidual poverty and even "pockets" of poverty. But in the more pros perous Western countries today, capitalism has already reduced· these to a merely residual problem, which will hecome increasingly easy to manage, and of constantly diminishing importance, if soci ety continues. to abide in the main by capitalist principles. Capital ism in the advanced countries has already, it bears repeating, con quered mass poverty, as that was known throughout human history and almost everywhere, until a change began to be noticeable sometime about the middle of the eighteenth century. Capitalism will continue to eliminate mass 358 THE FREEMAN June poverty in more and more places and to an increasingly marked ex tent if it is merely permitted to do so. In a previous article ("False Remedies for Poverty," The Free main, February, 1971), I explained by contrast how Capitalism per forms its miracles. It turns out the tens of thousands of diverse commodities and services in the proportions in which they are socially most wanted, and it solves this incredibly complex problem through the institutions of private property, the free market, and the existence of money - through the interrelations of supply and demand, costs and prices, profits and losses. And, of course, through the force of competition. Compe tition will tend constantly to bring about the most economical and efficient method of production pos sible with existing technology and then it will start devising a still more efficient technology. It will reduce the cost of existing production, it will hnprove prod ucts, it will invent or discover wholly new products, as individual producers try to think what prod uct consumers would buy if it existed.

Those who are least successful in this competition will lose their original capital and be forced out of the field; those who are most successful will acquire through profits more capital to increase their production still further. So capitalist production tends con stantly to be drawn into the hands of those who have shown that they can best meet the wants of the consumers. Those who truly want to help the poor will not spend their days in organizing protest marches or relief riots, or even in repeated protestations of sympathy. Nor will their charity consist merely in giving money to the poor to be spent for immediate consumption needs. Rather will they themselves live modestly in relation to their income, save, and constantly in vest their savings in sound exist ing or new enterprises to create not only more jobs but better paying ones ("Private Wealth, Public Purpose," The Freeman, December, 1970).

The irony is that the very mir acles brought about in· our age by the capitalist system have given rise to expectations that keep run ning ahead even of the accelerating progress, and so have led to an incredibly shortsighted impatience that threatens to destroy the very system that has made the expec tations possible. If that destruction is to be pre vented, education in the true causes of economic improvement must be intensified beyond any thing yet attempted. * DONALD M. DOZER FORMAL systems and institutions of education always represent a gift from the present generation to the next generation. The school at all levels is a highly complicated social phenom enon. It depends, first of all, upon a controlling or governing body a body of taxpayers in the case of public schools, a body of parents and financial donors in the case of private schools. This supporting body forms the principal in the entire educational complex; it is the base upon which the system rests.

To carryon the actual admin istration of the school, this sup porting body selects a committee which is called by various names ranging from a board of educa tion to boards of trustees or re gents. Representing the original constituent body this board emDr. Dozer is Professor of History at the Uni versity of California, Santa Barbara. ploys the administrators of the school, namely the principal, head master, chancellor, president, deans and instructors, who to gether constitute the implement ing agent of the system and who supply the technical expertise needed to operate it. The· beneficiaries of this system are intended to be the pupils. or students, who are thus enabled to be brought into contact with per sons who are expected to transmit the skills, amenities, and values of the past to present and future gen erations and to stimulate in them enlarged visions for the future.

This basic structure prevails at all levels of the educational proc ess, from the kindergarten through the university, and is grounded upon certain wen-defined legal obligations and relationships which are the product of centuries of educational experimentation. Within this structure have ap peared many delicate nuances of 3fi9 360 THE FREEMAN June administration and elements of conflict within recent decades. Per haps the most serious of these has been the penetration of political pressures and the resulting clash of political forces within the aca demic community. It is now widely acknowledged that the great majority of our col leges and universities have lost the trust of the public. The wave of public indignation which was directed against them after the Berkeley riots in 1964 has been followed by a wave of even more ominous public revulsion. These institutions are experiencing the most serious crisis of confidence that they have faced in many decades. They are no longer re spected as the quality institutions which they once were under such educator-statesmen as Charles W.

Eliot and A. Lawrence Lowell of Harvard University, David Coit Gilman of Johns Hopkins, Nicholas Murray Butler of Columbia, Rob ert Gordon Sproul of the Univer sity of California, and James R. Angell of Yale Universi ty. Why the Degeneration? Why has this degenerationoc curred, and what should be done about it? One of the major casualties of the social and economic upheaval of our times is the principle of authority, or more precisely the principle of management. In in dustry the claims of owners and boards of directors to the exercise of management responsibilities are being repeatedly challenged. In institutions of higher learning in the United States the growing pressure for unionization of teach ing faculties and staffs and for in volvement of students in the coun cils of administration raise ques tions as to the locus of power and the right to exercise it. It is a well-known doctrine of law that the principal in a legal transaction controls the actions of his agent within the context of their agreement and that, if the agent exceeds his authority, his unauthorized action must be re garded as ultra vires or of no legal effect.

A major reason for the present plight of institutions of higher learning is that in the area of education the essential relation ship of the agent to his principal has been ignored. In many cases the supporting body, as we have called it above, has neither exer cised nor defended its responsibil ity for determining the scope of the education which it is financing but has, on the contrary, allowed its agent· to assume by default free-wheeling authority, with often anarchic results. Similarly the agents of the supporting body, who are expected to act as execut1972 THE EDUCATIONAL DILEMMA 361 ingofficials for the supporting body and to be accountable to it, have been faithless servants. Especially in the colleges and universities which are supported by taxpayers they have yielded to the political force exerted by pressure groups of race and social class and by mil itant student activists. Higher 'ed ucation has accordingly been al lowed to become a thing of whims and fads bending before the chang ing winds of the moment.

Taypayer Revolt It is asking too much of human nature to expect that the princi pal, namely, the taxpayer, will indefinitely support an institution which, while professing to con tribute to his enlightenment, in fact dedicates itself to the destruc tion of the society which the prin cipal himself has formed. As a horde of militant. students were thronging across the campus of one of the California universities and occupying the student center, a local businessman raised his voice in protest to the chancellor of the university. The chancellor defended his do-nothing policy saying: "We havebeen teaching these students for fifteen years to think for themselves, and now they are doing it!" . A lamentable misconception has been allowed to develop in higher education as to who is principal and who is agent, who calls the tune and who should dance to it, who pays the bills and who should furnish the services paid for.

Dr. Stephen J. Tonsor has stated the obvious but forgotten truism: "The university does not belong to the students; it does not belong to the faculty ; it does' not belong to any special pressure group in the society that happens to feel the call to revolution or a prophetic mission. The university belongs to the whole of the society or the corporate reality which brought it into existence and which sustains it."l The relationship of taxpayers to educators in a publicly supported educational structure is that of employer to employee. The same relationship exists between boards of trustees of private institutions and the designated officials of those institutions. In the complex of relationships at various levels in the education al structure it is possible to iden tify a producer-consumer relation ship in the classroom between teacher and student. The student can either accept or reject the product, but, as the object ulti mately acted upon by both the supporting body and the execut ing body, he is not entitled to de1 "Authority, Power and the Univer sity," New Guard, XI, No; 6, September 1971, p. 5.

362 THE FREEMAN June fine the nature of the product. In other words education in the class room cannot be successfully organ ized around the democratic prin ciple. If it is organized on the basis of this principle on the assumption of the existence of an exclusive producer-consumer relationship between teacher and taught, the corollary principle that the con sumer is always right must be accepted. This is to require the teacher to become a classroom demagogue, an ingratiating sales man, and to elevate the student into the position of principal. Un der these conditions education be comes a hopeless exercise and eminent professors who express unpopular views can be destroyed by immature classroom critics. Conflict of Responsibility In the triangle of conflict which has been accordingly created be tween administrators, faculty, and students, administrators, unless checked by firm directives from the supporting body, will invari ably offer up the faculty as sacri fice to student demands. Com monly, administrators utilize stu dent activism as a lever for sup pressing faculty dissent.

These problems have been griev ously aggravated by the superim position of the money and power of the government in Washington upon the great majority of our institutions of higher learning, both public and private, during the past quarter century. Bold in deed - and almost unique - has been the educator who could re sist these advances. Increasingly the central government itself has assumed the role of principal in the educational process, dictating standards, imposing conditions, and supplying lavish funds, amounting to as much as $23 bil lion in the higher-education bill for 1972. The old supporting local bodies have therefore largely ab dicated their responsibility. To the extent that local sup porting bodies, whether public or private, still retain any directing authority over education, they must be recognized as principal in the operation, entitled to exert full control over the scope, purposes, and actions of the colleges and universities with whose responsi bility they are entrusted. And, in accordance with the legal rights of management and the legally rec ognized doctrine of the relation ship between principal and agent, whenever government, whether state or national, is acknowledged to be the supporting body it must be accorded the full powers of principal in the educational op eration. In other words, final power cannot be assumed, either willfully or by tacit consent of the 1972 THE EDUCATIONAL DILEMMA 363 principal, by the agent, that is by presidents and deans and least of all by students. However distaste ful this rule of conduct is, it must be respected unless the supporting body in each case decides to stand the educational system on its head.

The Fallacy in Public Education But events in the area of higher education in the last decade have newly exposed the essential fallacy in the concept of public education. Government at all levels, being necessarily primarily political in character and .having police power at its disposal, has interests which are antithetical to education in the fullest sense. All that it is inter ested in doing and all that it is capable of doing in the area of education is to train citizens, not educate them, in the skills of re sponsible citizenship. This is a very limited function, and it may be seriously doubted whether the state should involve itself even in this operation, since, by assuming this minimal training responsi bility, it will inevitably undertake to impose its political will and rigidified formulas upon the citi zenry. Libertarian principles rightly condemn government control over education at all levels. Herbert Spencer· pinpointed the fallacy in his Social Statics, published in London in 1851: "What is meant by saying that a government ought to educate the people? ...

What is the education for?" And from these questions he concluded, "Clearly to fit the people for social life - to make them good citizens. And who is to say what are good citizens? The government: there is no other judge." He asked further, "And who is to say how these good citizens may be made?" Again, his answer was, "The gov ernment: there is no other judge." Spencer's conclusion is as irresist ible as it is ominous. Jefferson's Views The political uses of institutions of higher learning to accomplish certain predetermined national purposes were fully appreciated by Thomas Jefferson and have beeen emulated by his successors in gov ernment. At a special meeting on March 4, 1825 of the Board of Visitors of the University of Vir ginia, which Jefferson had founded and of which he was then serving as rector, the Board, with Jeffer son present, adopted the following resolution: Whereas, it is the duty of this Board to the government under which it lives, and especially to that of which this University is the immedi ate creation, to pay especial atten tion to the principles of government which shall be inculcated therein, and 364 THE FREEMAN June to provide that none shall be incul cated which are incompatible with those on which the Constitutions of this State, and of the Ul)ited States were genuinely based, ...

Resolved, that it is the opinion of this Board that as to the general principles of liberty and the rights of man, in nature and in society, the doctrines of Locke, in his "Essay con cerning the true original extent and end of civil government," and of Sid ney in his "Discourses on govern ment," may be considered as those generally approved by our fellow cit izens of this, and the United States, and that on the distinctive principles of the government of our State, and of that 'of the United States, the best guides are to be found in 1. The Dec laration of Independence, as the fundamental act of union of these States. 2. The book known by the title of "The Federalist", being an author ity to which appeal is habitually made by all, and rarely declined or denied by any as evidence of the general opinion of those who framed, and of those who accepted the Constitution of the United States, on questions as to its genuine meaning. 3. The Reso lutions of the General Assembly of Virginia in 1799 on the subject of the alien and sedition laws, which ap peared to accord with the predomin ant sense of the people of the United States. 4. The valedictory address of President Washington, as conveying political lessons of peculiar value.

And that in the branch of the school of law, which is to treat on the sub ject of civil polity, these shall be used as the text and documents of the schoo1.2 As thus envisaged, by Jefferson public education could be con verted into a powerful apparatus to serve "good" national ends, which were thus defined in the resolution of March 1825. But is there a, consensus at anyone time that the current government of state or nation ought to be the principal educator? When we acknowledge it as such, we assume that government now is and will forever remain the kind of govern men which, in the judgment of a majority of citizens, it ought to be. This situation, if it exists at a single moment, may change in the next, but the powers of that gov ernment in the area of education will not automatically diminish. The principles of a free society therefore demand that political governments at both the state and national levels shall retreat from their positions of control over in stitutions of higher learning. This retreat is rendered especially im perati ve by the admission of youths between 18 and 21 years to the franchise, which can only have the effect of intensifying the political tug-of-war in the class room which was the maj or cause of the academic crisis of the 2 Jefferson's Works, Vol. 19, pp. 459 461, Washington, 1907.

1972 THE EDUCATIONAL DILEMMA 365 1960's. Only the divorce of gov ernment from academic responsi bility will prevent institutions of higher learning from becoming completely politicized and their inmates reduced to cogs in a totalitarianized political machine. Education is, largely, the busi ness of stimulating rigorous in tellectual discipline. But it must limit itself to intellectual disci pline and should not impose the discipline of any political party, of any religious group, or even of any national state unless it is plainly advertised as such and is there fore known to be serving necessar ily as a part of the indoctrinating apparatus of that party, group, or state. I) r WAS A SLUMLORD. Here is how r came to be one. r was born 69 years ago. r learned the craft (maybe the art) of cabinet-making in my native land, Hungary. This would have been my 50th year of working actively, creating in wood many things of lasting beauty. My name is well-known and well-respected in the trade.

About 20 years ago r bought a small factory building in East Harlem, at 508 East 117th Street, where r worked together with my team of 10 to 12 men. With changes, improvements and addi tional construction, the factory cost me about $65,000. A few years after I bought the building, the adjoining building, © 1972 by The New York Times Company. Reprinted by permission from The New York Times, January 30, 1972. No. 510, was offered to me at a bargain price because it was in poor repair. With the idea of ex panding my workshop into it, or using the lot for parking, I bought it. For $12,500 in cash r became the owner of a four-family house. The four families living in the house are all decent working peo ple. To my knowledge they do not need and never asked for charity, public help or assistance. Yet the law forces me to give them shelter and heat at a lower price than my own cost. For several years now my cash expenses have exceeded my income by about 25 per cent, and this without interest or amortization payments on the mortgage.

The building was in poor repair when I bought it. By now it is the favored hunting ground of every city inspector.

366 THE FREEMAN June The building needs a new roof, new walls, new ceilings, new plumbing, new wiring, new doors and a new heating system. It needs about $15,000 worth of repairs. The building now has a gross income of $2,600 a year, of which I am paying for taxes and heat about $3,000. Why didn't I apply for a hard ship rent increase? My accountant told me there would be a blizzard of paperwork, and that if he was able to get me any increase, my fee to him would have taken away whatever I gained in the first two years. So far I have been fined four times for failure to comply with orders to correct building code violations! I was summoned to court again only a few weeks ago, and I explained my predicament to the judge. He assured me of his "sympathy," fined me $40 and promised that my next fine would be much higher. I did not go home from the court. I went straight to the offices of the local Roman Catholic Church and asked them to accept the building as a free gift. They didn't. An hour later I made the same offer to the Protestants.

Again the answer was no. Next I offered the building free, without any money, to the four tenants. They didn't want it. Okay, I will abandon the building, was my next thought. I will stop collecting rents, will not pay taxes or heat. I .will let the city take over. This sounds like an easy way out, but my lawyer tells me it cannot be done without my be ing legally financially responsible. So, here I am with a building assessed by the city at $21,000 - I repeat $21,000 - that I cannot give away, I cannot sell, and I cannot abandon. I am forced by law to operate it. That is, I was. I am not any longer. I have sold the building for $30,000. As an extra inducement I threw into the bargain my good old fac tory. building, which cost me close to $70,000, for nothing. In other words, I sold real estate that cost me $80,000 about 15 years ago for $30,000, to be paid without inter est in six years.

With the $50,000 that I lost on the deal - and which is a major part of my life savings - I bought freedom. At 69 I am too old to start a revolution, or to fight City Hall. On the other hand I do not like to be summoned to appear in crim inal court, when my only crime is that I dared to own a building in New York. I will badly miss my shop, where I spent 49 happy years. But . I am no longer a slumlord! I) MERRYLE STANLEY RUKEYSER IN THE NINETEEN SEVENTIES,busi ness baiting, no less virulent than in the past, has become more sub tle and sophisticated. It consists of efforts to equate technology with utter disregard for ecology. The new attack is sometimes launched in a flood of tears for consumers. Behind the new ~ for national economic backsliding is the runaway expansion of the welfare state which exalts leaners at the expense of producers. The new politics denigrates the sys tem for cultivating progress through rewards and incentives.

Theorists and their youthful ad herents repudiate concepts of de velopment and plump for a zero growth in population and material well-being. They stigmatize the use Mr. Rukeyser is well known as a business con sultant, lecturer, and columnist. of electricity in labor-aiding tools of production as antisocial pollu tion, and blithely advocate the replacement of mechanically driv en equipment with the primitive "sweat and groan" of human mus cle power. Such academic naivete brings to mind a conversation years ago with an economic minister in In dia. As we discussed the low level of living in that sub-continent, I asked what steps native leaders were taking to supplement the efforts of the human muscle with advanced machinery. In a patron izing manner, he called my atten tion to India's surplus of workers, as though it were self-evident that India, in the circumstances, had no use for "labor saving" capital goods. But what the Minister did not seem to grasp was the fact 367 368 THE FREEMAN June that continuance of crude tech niques for using men as dray horses necessarily condemned In dian workers to low, productivity and a meager living.

Conditions Change Critics of business fall into the booby trap of assuming that ev erything is static. More than four decades ago, oil authorities were forecasting that in eight years the supply would run out. They proved to be astigmatic, perceiv ing only the then known reserves. They overlooked the fact that, with incentives, wildcatters would ferret out new sources of supply. And when, if, and as we consume all the known supplies of fossil fuel, the creative side of man will find substitutes in such newer technologies as atomic and solar energy. And in the process, they doubtless will achieve a measure of pollution control. The new enthusiasts in ecology carry a good cause to unreason able excesses. They ascribe utter irresponsibility to businessmen. They assume that corporate exec utives are solely concerned with "the bottom line" on the profit and-loss statement, and the devil take the hindmost. They lack the imagination to sense the oppor tunities for improvement within the system. Earlier in the cen tury, there was in some aspects of farming, for instance, and in the indiscriminate cutting down of trees in the forests, a seeming lack of concern for the future.

But protests were heard; there has been measurable progress in the development of scientific agri clJlture in place of the primitive "n1ining of the soil." And in Ore gon and elsewhere pioneer efforts were undertaken to avoid the de~ nuding of forests with the new concept of tree farms with new plantings to replace cuttings. In the American system, the guiding motto should be the line from the poet Louis Untermeyer, who wrote: "From sleek content ment, keep me free." Progress is never enough, and the operating principle of topflight business 'management is: "Let's seek to do better tomorrow what we appear to be doing well today." The con- ' tinuingvigor of the American competitive system depends on the knowledge and courage of the elite who understand its functioning and have the means of communi cating the benefits to others. Fear of Technology What we see today is a recur rence of the simplistic revolt in the nineteenth century of men like Samuel Butler, who decried the Industrial Revolution. In his ErehuJon in 1872, Butler appeared as the enemy of the machine.

1972 BUSINESS BAITING - 1972 STYLE 369 In this new era ecologists are decrying technology as a polluter, ignoring the capability of technol olgy to develop methods to mini n1ize pollution. The alarm ringers assume that they alone want a world of pure air and pure water. They jump to the conclusion that the profit motive is the enemy of Nature. Perceptible gains will come when there is mature recog nition that technology is a human tool and can be devoted to man's ends. If, by way of illustration, existing methods of burning coal or using gasoline in automobile engines pollute, then it makes sense to accelerate research and development to find ways of achieving the benefits while con trolling the adverse. effects. In stead of viewing the problem in the naive spirit of setting the good guys against the bad guys, it is time to recognize that leaving the environment in the form that men find it is consistent with good business. If consumers desire less pollution, they will need to under stand that devices to avoid pollu tion are a cost of producing goods and services.

Thomas Robert Malthus, the economist, warned in 1798 of on coming unavoidable poverty and distress on grounds that popula tion increases by geometric ratio and the means of subsistence only by arithmetical ratio. However, his prophecy has been unfulfilled. Methods of cultivating land have not remained static. Creative minds in science, invention and engineering have developed new and better means of production, and in advanced economies a spec tacularly smaller ratio of the total population than in earlier times is producing vastly more abundant quantities of food and fibers. In light of the contemporary or ganized efforts to put a ceiling on economic progress, it doesn't make sense for investors, financiers and managing directors of great com panies to ignore the impact of the new-style business baiting. Per haps I can do no better than to repeat here what I said in 1938 in my pamphlet "Sell the Business as Well as the Product": 1mproving the climate of popular opinion would help to remove the bar riers to a free circulation of goods and services from makers to users.

... Misstatements and misconcep tions about business have been so widely propagated that dissemina tion of the truth by business would be .enormously helpful. Business would not have to gild the lily, for truth is much more favorable than current rumor. The country needs to escape from the tyranny of obscure, weasel words and from doctrinaire ideology. Sim ple arithmetic, in double-entry form, as understandable as the family bud get, can be used to photograph for 370 THE FREEMAN June the lay mind the essential processes of business. Such new style "candid camera" shots which give glimpses behind the scenes in the business world will help to promote friendly cooperation among government, busi ness and labor. It can make crystal clear that the unwarranted sniping at business is directed at the vital in terests of millions of life insurance policy holders, owners of savings ac counts, ... and of tens of millions of individual owners of shares of Amer ican corporations.

These comments made thirty four years ago are a reminder that business baiting is not a new phenomenon in 1972. Only the rhet oric has changed. In the intervening years, great strides have been made in human izing corporate reports, and today some alert companies, such as Standard Oil (N.J.), U.S. Steel and others, have used TV commer cials creatively to depict the social usefulness of their enterprises. James M. Roche, who recently re tired as chief executive of Gen eral Motors, has in recent months taken leadership in urging greater attention to the attacks on the premises on which free enterprise rests. The Brave New World Basic in this approach is ob jective understanding of the sig nificance - of the revolt of some articulate young people. Since they will in due course inherit the earth, their views, including their misconceptions, should not be ig nored. Noone questions the right to dissent, but it is important also to develop a sense of responsibil ity in discussing matters relating to the well-being of the people.

Certainly, the "brave new world" won't be ushered in by escapists. Youths who indiscriminately re ject the mature as hypocrites have little insight into the history of man. In downgrading their par ents as insincere because their conduct doesn't always square with their professed code of ethics, the young tend to overlook that through the ages man has been caught in the conflict between his animal instincts and his stand ards of civilized procedure. It would, of course, be millenary if everyone invariably lived up to his code; but the remedy for human frailty certainly is not the rej ec tion of standards. Much of the venom against the Establishment springs from an emotional distaste for the compet itive system, which calls upon in dividuals to stand up and be mea Slued. Much loose talk glorifying the "underprivileged" and the "disadvantaged" is really quarrel ing with the Lord for creating man with an infinite variety of differences in aptitude, skill, moti1972 BUSINESS BAITING - 197.2 STYLE 371 vation, and LQ. The demagogic struggle to level down is an effort to replace divine patterns with man-made molds making all per sons identical.

Much of the business baiting results from an emotional bias against competition. It takes char acter to be willing to be measured, and to face the grim fact that not all of us are topnotchers in every skill. And it would be a dull world indeed if we were all cast in pre cisely the same mold. Instead of letting destructive emotions be come dominant, there should be not only a renaissance of respect for the work ethic, but also new approval for self-supporting in dividuals who achieve up to their own optimum in all categories of talent. The diligent hewers of wood and drawers of water de serve respect, which should not be reserved exclusively for glamorous creative artists, publicists, profes sional men, and chairmen of cor porate boards. The threat to economic and other achievement does not come primarily from overseas compet itors, but from ill-conceived, mis guided theories developed at home.

No investments in growth are at tractive if the "wave of the fu ture" is for home-grown com munes in place of competitive effort. Prosperity will rest on a slender reed indeed if those who vote and ratify public policy don't understand the factors that make for better living. Slogans against the Establish ment should be examined minutely to determine whether they hide rejection of self-discipline, thrift and industry. In a free society, no one is forced to work for a higher standard of living than he desires, but none who undermines the sys tem by circulating misconceptions should go unanswered. Just as a freeman is entitled to express his views, his neighbor should have the freedom to audit and appraise the other fellow's opin ions. Then the validity of concepts can be tested in the unrestrained Inarket place for ideas. , IDEAS ON LIBERTY A Precarious Life ANY COMMUNITY which depends for its economic growth up,on the whims of succeeding Congresses is in economic jeopardy. Some day, the taxpayers might say "no," and then where is the life of that region which has become wholly dependent upon federal help?

From an address in 1955 by CLARENCE A. DAVIS Under Secretary of the Interior BLOODfrom TURNIPS ~ Notes toward an ltnderst~nding of John Law's TERRILL 1. ELNIFF economlC errors WHEN JOHN LAW arrived in France in 1716, he found France on the edge of bankruptcy. The government debt amounfed to 2.4 billion livres plus another 590 mil lion livres worth of billets d'etat outstanding royal promissory notes which were worth about one third of their face value. The deficit in the government accounts for 1715 was 78 million livres - a deficit of nine million livres more than the total revenues for that year. 3 The people were overtaxed and starv ing, and commerce was at a stand still. 4 Law received a charter for his Banque Generale in 1716. It was a private operation, handling all the normal functions of a bank. It was also authorized to issue bank notes called "bank crowns," which were to be redeemable "in money of the weight and denomination of the day of issue."5 This was sound banking policy, even though Law's Mr. Elniff teaches American history at the Ben Lippen School, a Christian preparatory school in Asheville, North Carolina.

372 1972 BLOOD FROM TURNIPS 373 "land bank" had an unsound money based on anticipated royal rev enues and landed securities. (What Law was to do later would have destroyed even a bank with a sound money base.) Concerning Law's banking methods and poli cies, one historian of modern bank ing wrote: "If the bank had con tinued upon the sound basis of a bank discounting commercial paper and acting as the fiscal agent of the Treasury, France would have been under a great debt of grati tude to Law for introducing into her commercial relations the methods of the modern business world."6 A period of recovery and great prosperity followed. But the bank did not continue on that sound basis. Law's next step was to organize the Company of the West and combine into it sev eral other small French trading companies, as well as negotiating with the Regent, d'Orleans, for the# farming of taxes, money coinage, the tobacco monopoly, and the as sumption of the entire .national debt. 7 On December 27, 1718, his Banque Generale was made a pub lic institution - the Banque Royale - and payment of notes in bank crowns (which required specie) was stopped, making the banknotes of the Banque Royale legal tender.

When in May, 1719, the Company of the West was reorganized into the Company of the Indies, the speculation began and the new shares were bid up and up - and the boom was on~ The price on the shares was 500 livres par, but they brought a premium of 5000 livres. By the end of November they were selling for 10,000 livres. By year's end, they brought up to 12,000 livres, and by January 6, they were up to 18,000 livres. 8 But then the tide began to turn. As the mar ket began to drop, "the more pru dent speculators were endeavoring to convert their gains into more solid property by the purchase of real estate or by shipping gold abroad."9 On May 1, 1720, a decree from Law announced that by De cember 1st all shares in the com pany would be· scaled down to 5500 livres per share and that all bank notes would be reduced fifty per cent in value. A commission ap pointed by the Regent to examine the bank found that it had less than ten per cent assets against its three billion livres of circu lating banknotes and only 49 mil lion of that was in gold or silver .10 On July 16th there was a run on the bank, people demanding gold or silver for their banknotes. Ten women were killed in the confu sion. "Repeated riots expressed the feeling of the public that it had been deceived· by financial tricks, and that the upper classes had profited at the expense of the com munity."l1 374 THE FREEMAN June What John Law was trying to do for France has been succinctly summarized by Will Durant: His central conception was to in crease the employment of men and materials by issuing paper money, on the credit of the state, to twice the value of the national reserves in silver, gold, and land; and by lower ing the rate of interest, so encour aging businessmen to borrow money for new enterprises and methods in industry and commerce. In this way money would create business, busi ness would increase. employment and production, the national revenues and reserves would rise, more money could be issued, and the beneficient spiral would expand. If the public, instead of hoarding the precious metal, could be induced, by interest payment, to deposit its savings in a national bank, these savings could be added to the reserves, and additional currency could be issued; idle money would be put to work, and the pros perity of the country would be ad vanced,1~ This was John Law's "system."

Law himself summarized it even more succinctly when he said, "Money is the blood of the State and must circulate. Credit is to business what the brain is to the human body."13 When the same idea was proposed at the beginning of the French Revolution, Jacques Necker, the minister of finance, observed that "They had only to provide themselves with a paper mill and a printing press to make the nation solvent."14 Two Basic Errors Led to failure of John Lawls System Why did John Law's "system" fail? We cannot blame his failure on his motives: there is every in dication that he was sincerely bent on benefiting France. Even his enemy, Duc de Saint-Simon, ad mitted there " was neither avarice nor roguery in his composition."I;) It is common to blame the specu lators whose speculative frenzy both made and broke Law's sys tem: "The principles upon which he had established his bank were theoretically sound; they would have made France solvent and prosperous had it not been for the incredible avidity of speculators and the extravagance of the Re gent."lG But why did they specu late? If Law's system was basi cally sound, why did it cause a situation in which speculation would be expedient? Why, to put the issue in its starkest form, did John Law think he could get blood out of turnips? Did the rules of algebra fail? Or did Law misapply them?

Involved in Law's system are two logically separable, though closely intertwined, economic fal lacies: (1) that money must cir culate, and (2) that successive 1972 BLOOD FROM TURNIPS 375 credit expansions will lead to a spiral of economic prosperity. The error concerning the circu lation of money is one of mistak ing effect for cause. Money is a medium of exchange, as Law be lieved, but it is also a market com modity which takes on value in exchange.I 7 Therefore if people do not circulate their money, it can only be because they anticipate that it will be worth more in ex change at a later time. On the other hand, if people believe that their money will lose value in the future, they will circulate it in the present. 18 Thus circulation is neither an index of prosperity, nor of adversity: it is not wise to cir culate money in a deflating mar ket, and the circulation of money in an inflating economy is not' a sign of prosperity, but rather of sickness. There are times when money must not circulate.

The second error is an extension of the first: that successive credit expansions (i.e., lowering the in terest rate and loaning more money) will lead to a spiral of economic prosperity: that money can create business, which would increase production, which would result in greater tax revenues and foster a new credit expansion, which would create new business, and so on. Law's error may be pointed out with two observations: (a) If the old debt is paid off before the new credit expansion takes place, there has been no net gain for the economy. Consump tion must be curtailed and savings invested in order to finance such progress. It is only a question of when one is going to curtail con sumption and invest savings - now or later. (b) If the old debt is not paid off, and a new credit expan sion is made, the net result is a higher price level for everyone as prices are bid up with the extra money available. This bidding up of prices, however, does not affect everyone equally: While the process is under way, some people enjoy the. benefit of higher prices for the goods or serv ices they sell, while the prices of the things they buy have not yet risen or have not risen to the same extent.

On the other hand, there are people who are in the unhappy situation of selling commodities and services whose prices have not yet risen or not in the same degree as the prices of the goods they must buy for their daily consumption. For the former the progressive rise in prices is a boon, for the latter a calamity. Be sides, the debtors are favored at the expense of the creditors. 19 This process may continue for a longer or shorter period of time. How long it lasts depends on psy chological factors. It will last as long as the people maintain con376 THE FREEMAN June fidence in the relative soundness of the money or faith in the bank or government: Let Ludwig von Mises finish the story: But then finally the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against "real"

goods, no matter whether he needs them or not, no matter how much he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as lTIOney are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.~o The result of such a breakdown is that people return to barter or develop a new kind of money. The result in France was that the bank was closed, the legal tender was suspended, the company's contracts were cancelled, and the stock was readjusted.: n There was an at tempt to restore both public and private obligations and fortunes to the levels which existed before the inflation. But "those who had fled the country with their win nings transmuted into gold, those . who could command the royal fa VOl", and those who were a,ble to keep their gains in hiding were the only ones who escaped.":.!:.!

David Ogg has observed that "This disaster . . . created no diminu tion in the amount of national wealth but only a change in its distribution."~3 But such a redis tribution of wealth, of course, al ways means a terrible waste of re sources and efficiency, and thus, while there may have been no di minution in the aggregate amount of national wealth, there was cer tainly an interruption of economic activity that is tantamount to a destruction of wealth. This is true because human needs and desires continue. It is impossible to inter rupt hunger or to mark time in starvation while an economy re covers. Why did John Law think he could get blood out of turnips? Because he misunderstood the na ture of turnips. John Law's mathe matics of compound interest were not in error; his "rules of algebra" did not fail. He simply erred in applying them to human affairs. His system was broken on the rocks of reality - one part of which is the fact that human beings place value on that which they ex change for money.

Ludwig von Mises has observed: The body of economic know ledge is an essential element in the structure of human civilization; it is the foun dation upon which modern industrial1972 BLOOD FROM TURNIPS 377 ism and all the moral, intellectual, technological, and therapeutical achievements of the last centuries have been built. It rests with men whether they will make the proper use of the rich treasure with which this knowledge provides them or whether they will leave it unused. But if they fail to take the best ad vantage of it and disregard its teach ing and warnings, they will not annul economics; they will stamp out so ciety and the human race. 24 John Law failed because he had an erroneous understanding of economic concepts. Seventy years later the French Revolutionists made the same mistake, but it was not because they did not know. They chose, for political reasons, to ignore the body of truth. They did not annul it; but they very nearly stamped out society and the human race. I) • FOOTNOTES • 1 Ludwig von Mises, Human Action; A Treatise on Economics, 3rd revised edition. Chicago: Henry Regnery and Yale University Press, 1966, p. 177.

2 Frederick C. Green, Eighteenth-Cen tury France: Six Essays, London: J. M. Dent, 1929, p. 28. 3 Will and Ariel Durant, The Age of Voltaire.. A History of Civilization in Western Europe from 1715 to 1756, with Special Emphasis on the Conflict be tween Religion and Philosophy, New York: Simon and Schuster, 1965, p. 13. 4 Green, op. cit., p. 6. 5 Charles A. Conant, A History of Modern Banks oj Issue, New York: G. P. Putnam, 1927; reprinted by Augustus M. Kelley, Publishers, 1969, p. 33. 6 Ibid. 7 Ibid., p. 35. g Ibid., p. 37. o Ibid., p. 38. 10 Ibid., p. 39. 11 Durant, op. cit., p. 15. 12 Ibid., p. 11. 13 Green, op. cit., p. 7. 14 J. M. Thompson, The French Revo lution, New York: Oxford University Press, 1966, p. 196. 15 Durant, op. cit., p. 13. 16 Ibid., p. 15. 17 Mises, op. cit., p. 401 f. 18 Ibid., p. 426 f. 19 Ibid., p. 413. 20 Ibid., p. 428 21 Conant, op. cit., p. 39. 22 Ibid., p. 40.

:!3 David Ogg, Europe of the Ancien Regime, 1715-1783, New York: Harper and Row, 1965, p. 255. 24 Mises, op. cit., p. 885. IDEAS ON LIBERTY The Astonishing Similarity WHAT CHIEFLY STRIKES today's reader is the astonishing similarity of the arguments put forward by our own contemporary inflation ists to those of the inflationists 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. From HENRY HAZLITT'S introduction to Fiat Money Inflation in France by Andrew Dickson White, available at $1.25 in paper back from the Foundation for Eeonomic Education, Irvington, N.Y. 10533.

A REVIEWER'S NOTEBOOK HIDDEN MORRIS C. SHUMIATCHER'S Wel fare: Hidden Backlash (Toronto: McClelland and Stewart, Limited, $10.00), is one of the saddest books I have ever read. The sadness has a double focus. First, the book tells the story of what the white man, through his blindness, did to the Indian in Canada. But even more ominous (for it could carry both the white and the Indian into the same bitter trough of degrada tion) , there is the between-the lines story of what compulsory State welfare philosophy threatens to do to everybody in Canada who is within reach of a paternalistic legislature in Ottawa. The white man in Canada can't say that he hasn't had plenty of warning. Mr. Shumiatcher, a law yer who once served as assistant 378 JOHN CHAMBERLAIN to the socialist premier of Sas katchewan, was once imbued with the idealistic notion that the only thing needed to abolish any wrong to an individual was a generous appropriation of money. He lived to learn that the worst thing you could do to a human being, wheth er white, red - or, by extension, black - was .to make him a ward of government. A house cat, even though fed in a protected kitchen on choicest liver, still manages to maintain an aura of self-respect.

Not so the human animal when fed by government, as Mr. Shu miatcher discovered in the days of his socialist novitiate and during his subsequent travels as a legal counsel for. the Indians in Jwestern Canada. The Queen's commissioners had 1972 WELFARE: HIDDEN BACKLASH 379 good intentions back in the Eigh teen Seventies when they em barked on the idealistic course of protecting the Indian. They thought of him as a potential white man who could become self supporting if .settled on the land. The assumption need not have been fatal if the Indians had been permitted to match their wits in the market place with the new set tlers who were pouring into west ern Canada. The Perils of Protectionism True enough, the Indian was not an agriculturalist. But he could have learned the hard way, through crop failures. The trouble with the Queen's philosophy (Did you know that Queen Victoria was a social ist?) is that it insisted that the Indian be protected against the possibility of being rooked in a trade with an unscrupulous capi talist. Penned in on his reserved lands, the Indian was not allowed to farm for the market place. The white man who was supposed to be the Indian's keeper became his jailer, shutting him behind a buck skin curtain for a wholly question able good.

With enough welfare money in his pocket to buy' firewater, the Indian was under no compulsion to take jobs building the railroads or clearing the forests. Japanese and Chinese laborers came in to do the strong-arm work and re mained to become self-respecting gardeners and restaurant owners. While strong-backed people from Eastern Europe made farms for themselves and took their chances in ,the market, the Indian sank deeper and deeper into sloth. His children, taken from the wild .and forced to sit in government schools, learned little of value to a future on a reservation or in a city ghetto. The crowning blow came when the Northern Indian was forced to become a "protected" trapper. Originally, the Indian trapper could sell his furs where he pleased. The Hudson's Bay Com pany was the big buyer. To get ", a continuing supply of furs, the Hudson's Bay Company would ad vance the Indian enough money for a season's grubstake. The so cialists of Saskatchewan thought it demeaning for the Indian to have to go to a capitalist organi zation for a livelihood. According ly, they set up a State Marketing Service and made it a punishable offense for the Indian to sell his furs elsewhere.

Unfortunately the socialists failed to follow through with any of the capitalist services that the Hudson's Bay Company had pro vided. Where the Indian trapper had once been able to get $400 in credit and food to go on the trap380 THE FREEMAN June line for a full season, the social ists insisted on pay-as-you-go. They limited the size of the initial amount a trapper c·ould borrow to some twenty dollars. This meant that the trapper· could only stay out for a week at a time. When he returned with his pelts, he had to wait around for the Marketing Service check. It seldom came on time. Naturally the Indian's peri ods of drunkenness became more frequent and more prolonged. But the wicked capitalist - Le., the Hudson's Bay Company-had been defeated. A Century of Medicare The Indians of Canada have had socialized medicine for a far long er period than their white broth ers. But in Saskatchewan, accord ing to Mr. Shumiatcher's evidence, the incidence of sickness, particu larly of communicable disease, is greater among the Indians than among the population as a whole.

The life expectancy of the Indian has fallen behind that of the gen eral population. Tuberculosis and venereal disease once threatened to end the "Indian problem" by de pleting their bands. The deplor able health record of the reserva tion Indian was compiled at a time when he had a right to claim med ical and hospital services "without money and without price." After watching what bureaucratic medicine has done to the Indian, Mr. Shumiatcher trembles to think what may happen to the popula tion as a whole now that all Cana dians have the same medical "rights" that the Indian has had for five generations. Looking into the future, Mr. Shumiatcher suspects that the whole of Canada will become a vast reservation for everybody. Unfeel ing people have talked about the "seven deadly sins of the Indian." First, the Indian is dirty. Second, he is withdrawn from normal so ciety. Third, he won't work. Fourth, he is unreliable and aimless. Fifth, he is a school dropout. Sixth, he is promiscuous. And seventh, he es capes from reality through alcohol and peyote. These are the sins that develop when one is not forced to compete in the world. Mr. Shumi atcher sees all these deadly sins repeated in the white hippie pads that have been spreading over Canada.

Reservations for Everyone? The bloom goes quickly from the flower children. Promiscuity in the pads and communes has increased venereal disease among the young in a terrifying way; one estimate is that the increase has gone as high as 1,000 per cent in five years. The hippie is supported in his in dolence by a mixture of panhan dling, shoplifting, and r~mittances 1972 WELFARE: HIDDEN BACKLASH 381 from spineless parents. This is welfarism of a sort, especially when the panhandling and shop lifting is condoned. Mr. Shumi atcher has an uneasy feeling that the hippie way of life will more and more spread to the general population as the politicians, seek in votes, offer bigger and better handouts, thus emulating the spineless parents who have allowed their offspring to grow up with the impression that affluence is no longer dependent on dedication, training and work. Though Mr. Shumiatcher's book is limited to Canada, it could, pre sumably, have drawn upon "south of the border" material to make the same points. The U.S. has done badly by its Indians by following practices that are very similar to those instituted by the Queen's commissioners in Canada. If our hippie problem has been mitigated, it is largely because many of our flower children have gone to To ronto and other Canadian cities to escape the Vietnam War. As for our State Welfarism, it grows apace.

Will it soon be "Lo! The poor White Man"? Read Mr.Shumi atcher and weep. ~JOSEPH STORY AND THE AMERICAN CONSTITUTION by James McClellan (Norman, Okla homa: University of Oklahoma Press, 1971) xvii, 413 pp, $12.50. Reviewed by Gottfried Dietze THE GREAT HOPE of the American Revolution was that self-govern.ment would lead to an increasing emancipation of the individual. Fortunately, the Founding Fathers, in what John Fiske called the crit ical period of American history, also knew that excesses of democ racy could be detrimental to free dom by opening the door to major itarianism and anarchy. Display ing the kind of common sense Blackstone hoped would prevail among the members of Parliament - who would consider themselves bound by the common law and re frain from oppressing life, liberty and property - Americans, in or der to secure free government, adopted a Constitution providing for a more perfect Union. Implied in this Union was a balance be tween the rights and powers of the states and the nation, acting as mutual checks upon arbitrary government. Since the new nation was to be formed out of existing states and since the powers of the national government were few and defined, whereas those of the states were many and not enumerated, 382 THE FREEMAN June the immediate implementation of the federal balance involved a strengthening of the national gov ernment. The difficulty of that task is reflected in Alexander Hamilton's letter to Gouverneur Morris of February 27,1802, in which he writes that he was "still laboring to prop the frail and worthless fabric." Earlier, The Federalist had left no doubt that the more perfect union was a mere means for securing the rights of the individual. In essay 78 of that commentary, Hamilton also stated that the judiciary was to be the guardian of the Constitution and the free government it created.

In the exercise of that guardian ship during the first decades of the new nation, Chief Justice Mar shall generally is credited with having played the major part. However, upon reading McClellan's attractive, scholarly book, the stu dent of government may well de cide that at least as much credit is due to Justice Story. Story was only 32 years old when in 1811 President Madison named him to the Supreme Court. At that time, the high bench had been presided over by John Marshall for ten years and he was to continue to head it for nearly another quarter of a century. While this reviewer feels that the Marshall Court had distinguished itself before it was joined by Story, through such important decisions as Marbury v. Madison (1803) and Fletcher v. Peck (1810), Mr. McClellan em phasizes the importance of Justice .Story for American constitutional development, showing the broad range of Story's interests and achievements.

When appointed to the Court, Story had been a member of Con gress, a Speaker of the House in his home state, Massachusetts, the author of various books on the law and a volume on poetry. While on the Court, he published his classic Commentaries on the Constitution and became a founder of the Har vard Law School where he taught for sixteen years. The author mar shalls evidence that Story was a true renaissance man. He could have added that Story translated and commented upon Robert von Mohl's work on the American Con stitution, a study which indicates that the outstanding Germ.an con stitutionalist of his time had in sights similar to those of Tocque ville. The author emphasizes that Story is unique in that he was the first and only disciple of Ed mund Burke ever to sit on the Supreme Court. This may be tech nically correct if discipleship im plies an unequivocal acknowledg ment of influence. There were, of course, many conservatives on the high bench who, like Story, felt 1972 OTHER BOOKS 383 that the Constitution was no mere reflection of temporary whims of the American general will but w,as a transmutation of constitutional ist principles which had gradually become embodied in Western civil ization, such as Christian ethics, natural law and the common law.

The fact that in recent years the Court has moved away from these principles must not lead us to for get that up to Franklin Roosevelt's court-packing plan, the Court gen erally was considered a conserva tive institution and a bulwark for laissez faire. A strong defender of private property, Story, in the famous Charles River Bridge case of 1837, dissented from the majority of the Court. "In a powerful, exhaustive dissent, Story proudly excoriated the Court in the name of property and th.e constitutionally protected rights of the common law. This last great undertaking on behalf of property was his best, a mag num opus which epitomized years of study spanning more than three decades of dedicated effort." De claring that he stood behind Mar shall's decision. in Fletcher v. Peck, a decision which gave broad pro tection to property rights through the doctrine of implied limitations, Story exclaimed: "I stand upon the old law, upon law established more than three centuries ago, in cases contested with as much abiIity and learning as any in the an nals of our jurisprudence, in re sisting any such encroachments upon the rights and liberties of the citizens, secured by public grants. I will not consent to shake their title deeds by any speculative niceties or novelties." There was "no surer plan to arrest all public improvements, founded on privat~ capital and enterprise, than to make the outlay of that capital un certain and questionable, both as to security and as to productive ness." Negating Marshall's doc trine of implied limitations amounted to an infringement upon the constitutional provision that no state shall make laws impair ing the obligation of contracts laws which had prompted the de sire for the Philadelphia Conven tion and a more perfect union.

Like Marshall, Story favored a strong national government. Since our time had been characterized by a march of power to Washing ton to the detriment of freedom, it could be argued that Story's emphasis on· national power po tentially hurt the very values he was favoring, namely, Christian ethics, natural law, the common law and the Constitution with their far-reaching protection of human rights, including those of property. Such a verdict would be unfair to Story who wanted na tional -'power (rudimentary as it 384 THE FREEMAN June was at his time) only as a means for the protection of those rights from the states, whose power at that time was considerable. Just as he resented oppression by the state governments, he also would have disliked a despotic national government. Similarly, it would be unfair to blame Story for fa voring judicial review. For~ again, he conceived of that institution as a mere means for the preservation of free government and not as one for the promotion of social legislation and perverted concepts of civil rights.

Mr. McClellan is to be congratu lated for having shed new light on one of America's greatest jur ists - perhaps the greatest of them all. Given the recent publication of Gerald T. Dunne's Justice Joseph Story and the Rise of the Supreme Court, the important role Justice Story played in the development of the American Constitution at last may well get the recognition that has long been its due. ~ HANDSOME BLUE LEATHERLEX FREEMAN BINDE'RS $2.50 each ORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 tt1e Freeman VOL. 22, NO.7· JULY 1972 Power to the People: the Mask of Despotism Carl A. Keyser 387 How the earliest seeds of socialism 'sprouted and grew in the United states in the late nineteenth and twentieth century. Vouchers: GovernmentControl of Private Schools? John P. Cahill 397 "It is hardly lack of due process for the government to regulate that which it subsid izes."

Ownership:Free but Not Cheap Gary North 401 The private owner cannot escape the costs of ownership and the obligation to act as steward of his goods for the public's benefit. Off the Beaten Track Leonard E. Read 415 There is no way to follow the crowd to a new idea or a better way of life. The Founding of tbe American Republic: 12. The Scourge of Inflation Clarence B. Carson 419 The early American attempts at deficit financing were "not worth a Continental." The Pine Tree Shilling The story of the first private coinage in America. Kevin Cullinane 434 Zoning Laws: The Case for Repeal David J. Mandel 437 The more scarce and valuable a given resource, the more urgent the need for private ownership and market disposition. Book Reviews: "Safe Places" by David and Holly Franke "Freedom and the Law" by Bruno Leoni Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

444 447 tile Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN is published n10nthly by the Foundation for Econon1ic Education, Inc., a non political, nonprofit, educational champion of private property, the free market, the profit and loss system, and limited government. 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 n1ailing list. Donations are in vited in any an10unt-$5.00 to $10,000-as the means of maintaining and extending the Foundation's work. Copyright, 1972, 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; 10 for $2.50; 25 or more, 20 cents each.

Articles from this journal are abstracted and indexed in Historical Abstracts and/or America: History and Life. THE FREEMAN also is available on microfilm, Xerox University Microfilms, Ann Arbor, Mich igan 48106. Permission granted to reprint any article from this Issue, with appropriate credit, except "Power to the People: the Mask of Despotism," "The Founding of the American Republic," and "Zoning Laws: The Case for Repeal."

CARL A.KEYSER PO~ER TO THE PEOPLE the naas. of despotisna THERE IS a specially apt para graph in The First Leftist,l a pamphlet by Dean Russell, which is worth quoting. The rallying cry of this new Left [the J acobins in 18th century France] was: All power to the people. And as always it sounded good to the people. But the point that the French people missed is the same point that haunts the world today [1951]. It is this: The people can not themselves in dividually exercise the power of gov ernment; the power must be held by one or a few persons ... whether the form of government is a kingdom, a dictatorship, a democracy, or what ever. If the people truly desire to re tain or regain their freedom, their at tention should first be directed to the principle of limiting the power of government itself instead of merely demanding the right to vote on what Mr. Keyser is Commonwealth Professor Emeritus of the University of Massachusetts at Amherst where he had specialized in ma terialsengineering and metallurgy. This article is adapted from a book manuscript Mr. Keyser is completing on the expanded role the Federal government assumes in our lives.

party or person is to hold the power. For is the victim of government power any the less deprived of his life, liberty, or property merely because the depriving is done in the name of - or even with the consent of - the maj ority of the people? According to Elie Hal evy2 so cialism was considered by its early advocates as a natural evolution of liberty, fulfillment of the rev olution of 1789, the end of the subjection of labor by capital. "But on the other hand," wrote Halevy, "it is also a reaction against individualism and liberal ism; it proposes a compulsory organization in place of outworn institutions destroyed by the Rev olution." Thus, old despotisms were to be replaced by new ones. Men were again to surrender themselves to the tyranny of the state. In the years following the Na poleonic wars Charles Comte and Charles Dunoyer founded a peri388 THE FREEMAN Jul·y odical called Le Censeur (The Censor) in France. The observa tions made in 1815 have perman ent validity.

"The first way," wrote Dunoyer, "that occurs to man to satisfy his needs is to take; plunder was the first industry, as it was the first end of human association; history hardly knows a society that was not first formed for war and pillage."3 "The first need of man," stated Charles Comte along the same line of thought, "is to provide for his subsistence, and, as we have al ready seen, he can do so only by the spontaneous product of nature, or by what he seizes from his fellows, or by the produce of his industry."4 Government Subverted The justification for peaceful government is to prevent the sei zure of one man's life and property by another. Today, government has been subverted to perform the very function the prevention of which justifies its existence: pil lage. This occurs when the gov ernment attempts to fulfill what are commonly ·called social needs: it takes from some and gives to others.

"In their present state," accord ing to Dunoyer at the start of the nineteenth century, "the nations can be compared to swarms made up equally of hornets and bees, swarms in ~hich the bees agree to produce torrents of honey for the hornets, in the hope of keep ing at least a. few combs for them selves. Unhappily, there is not al ways even a small part left for them . . . Man's concern is not with government; he should look on government as no more than a very secondary thing - we might almost say a very minor thing. His goal is industry, labor, and the prod uction of everything needed for his happiness. In a well-ordered state, the government must be only an adjunct of pro duction, an agency charged by the producers, who pay for it, with protecting their persons and their goods while they work. In a well ordered state, the largest possi ble number of persons must work, and the smallest possible number must govern."5 The same thought was expressed by Count Henri Saint-Simon, a brilliant but somewhat erratic and eccentric philosopher-economist, who was cognizant of the work of Comte and Dunoyer and who iron ically later became the founder of French socialism.

"Society," stated Saint-Simon, "needs to be governed as little as possible, and there is only one way to accomplish that - to be governed as cheaply as possible."6 Later Saint-Simon and his fol1972 POWER TO THE PEOPLE : THE MASK OF DESPOTISM 389 lowers forgot this advice and ad vocated a tyrannical industrial state ruled by a scientific elite. Dunoyer and Comte divided so ciety into two classes: those who wish to plunder and those who wish to produce and exchange in peace. Dunoyer wrote of the strug gle between these two classes. "We must not forget," wrote Dunoyer of the peaceful producer class, "that its members are still few in numbers and isolated from each other; that there are few means of communication and de fense; in a word it is not organ ized, while, generally speaking its enemies are organized."7 These and sicmilar thoughts made their way via Saint-Simon to Auguste Comte, the founder of positivism, to Buckle, the histori an, and finally to Herbert Spencer, the economist and philosopher. The philosophy was accepted in Eng land, the United States, and else where, playing a major part in the nineteenth-century economic ex pansion of the American West.

By the end of the nineteenth century socialism was thriving, claiming to be a new liberalism. It took hold first in Germany, later in England and the Scandinavian countries, and then in violent form, in Russia. Finally it evolved into the Fascism of Italy, the National Socialism of Germany, and the welfare state in England' and the United States. T.he strug gle between the peaceful produc ers and plunderers still goes on. The peaceful producers are "few in numbers and isolated from each other . . . there are few means . . . of defense ... , [the producer group is] not organized, while, generally speaking its enemies are organized." Near the end of his book Elie Halevy asked, "Am I going to be told about a future state of the human race, when a perfect so cialism will be united with a per fect freedom? What freedom? The freedom to do nothing, as in the abbey of Theleme, or the absence of obedience to a master, along with incessant labor like an ant or a bee? This ultra future ... goes beyond the limits of my vision.

And when I see men giving them selves up to these dreams, I can not help but think of Kant's dove trying to fly in the void or of Hegel's swimmer without water."s Loss of Freedom Socialism ends, although the end may be many years in coming, in tyranny and loss of freedom. The nineteenth-century French Socialists were followed by Napol eon III, the Socialists of Russia lasted a few months and yielded to Bolshevism, the postwar So cialists of Italy were followed by Mussolini' s Fascists, and after a 390 THE FREEMAN July dozen or so years the Socialists of Germany succumbed to Hitler's terror. In Spain, Franco was So cialism's heir. Once the terror takes over only a war seems able to bring about a change, and there is no assurance that a new terror will not replace the old. Under some forms of terror vestiges of private ownership were allowed to remain, as attempts were made to gain social security without com pletely extinguishing economic freedom. But freedom is indivis ible and freedom compromised is freedom lost.

Henry Watterson, the grand old editor of the oldtime Louisville Courier-Journal was rightly fear ful of unlimited government, even if it was the choice of the people. "We are told by Herbert Spen cer," wrote Watterson, "that the political superstition of the past having been the divine right of kings, the political superstition of the present is the divine right of parliaments and he might have said of peoples. The oil of an nointing seems unawares, he thinks, to have dripped from the head of the one upon the heads of the many, and given sacredness to them also, and to their decrees." "That the Proletariat, the Bol sheviki, the People are on the way seems plain enough," he wrote in 1919 with unusual foresight. "How far they will go,· and where they will end, is not so clear. With a kind of education - most men are taught to read, very few to think - the masses are likely to demand more and more for themselves.

They will continue strenuously and effectively to resent the startling contrasts of fortune which oppor tunity and aptitude have created in a social and political structure claiming to rest upon the formula 'equality for all, special privilege for none'." "The law of force," continued Watterson, "will yield to the rule of numbers. Socialism, disappoint ed by its Utopia, may then repeat the familiar lesson and reproduce the man-on-horseback, or the wor ld may drop into another abyss, and, after ensuing 'dark ages'. . . emerge with a new civ ilization and religion."9 At another point in Marse Henry , Watterson nevertheless wrote: "As poorly as I rate the reign of majorities, I prefer it to the one-man power, either elective or dynastic."lo Socialism and Mediocrity James Gibbons HunekeI' was a connoisseur of music, the arts, and literature. He lived from 1860 to 1921 and witnessed the socialist drift of the Western world, includ ing the Red revolution in Russia.

His biographer, Arnold T. Schwab, claims that HunekeI' was "the 1972 POWER TO THE PEOPLE: THE MASK OF DESPOTISM 391 most versatile and one of the most entertaining and influential Amer ican critics ..." Huneker's inter ests ranged far beyond the arts into political ethics and led him to spend time in the greasy restau rants of New York arguing com munism with those of the van guard such as Emma Goldman. The last book Huneker wrote, Varia,Uons, was a collection of essays published posthumously in 1921. 11 In his powerful essay, "Socialism and Mediocrity," Hun eker quotes Yves Guyotl 2 : "There are three words which socialism must erase from the facade of our public buildings, the three words of the republican motto: Liberty, Equality, and Fraternity. Liberty because socialism is a rule of tyranny; equality because it is a rule of class; fraternity because its policy is that of class war."

Huneker himself then goes on to write: "M. Guyot might have quoted Napoleon, a realist, a cynic in politics, for he knew its seamy side, who said: 'Tell men they are equal and they won't bother about liberty.' How true - if we are all reduced to the level of slaves and live in filth and depravity, we shall not be concerned with ,freeing our selves from this condition, provid ing we all equally enjoy the same conditions of our non-existence. "Guyot ... attacks Karl Marx on his weakest flank, and, incidentally, proves him not to have been a proletarian, but the son-in law of a Prussian Junker. The selfishness of Marx, his tyrannical behavior, his unphilosophical wrath when opposed by two such intellectual giants as Bakunin 13 and Lassalle 14 ; his jealous attitude toward Ferdinand Lassalle, espe cially after his tragic death, are all well known. Able but frequent ly unscrupulous men amuse the idle and attract the multitudes such are the leaders . . . These leaders are plagiarists, with some variations, of all the communist romances inspired by Plato."

The Exploitation Theory Not only did Marx and Lenin plagiarize Plato but, according to Huneker, they "built up their theories upon a sentence of Saint Simon and three phrases of Ri cardo's. Our author [Huneker is quoting Guyot] gives these ex amples: 'German socialism is de rived from two sources: (1) The French doctrine of Saint-Simon; "The 1vay to grow rich is to make others ,work for one,' which in Proudhon's mouth becomes 'the exploitation of man by man.' (2) Three formulas of Ricardo, viz.: (a) 'labor is the measure of val ue',. (b) 'the price of labor is what prov,ides labor in general with the means of subsistence, and of per petuating his species without 392 THE FREEMAN July either increase or diminution',. (c) 'profits decrease in proportion as wages increase.'" Saint-Simon and Proudhon are guilty of vicious distortions and Ricardo of abject assininity unworthy of yet another tiresome refutation.

"N0 Socialist," Huneker con tinues, "has succeeded in explain ing the conditions for production, the remuneration, and the distri bution of capital in a collectivist system. No Socialist has succeeded in determining the motives for action which an individual would obey. When pressed for an answer, they allege that human nature shall be metamorphosed, but that the individual remains a constant quantity! Rank materialism, all this, and absolutely without vi sion ... "It may be said that man is ready for every form of sacrifice save one: nowhere and at no time has he been found to labor volun tarily and constantly from a dis interested love for others. Man is only compelled to productive labor by necessity, by fear of punish ment, or by suitable remuneration. The Socialists of today, like those of former times, constantly de nounce the waste of competition. Competition involves losses, but biological evolution, as well as humanity proves that they are largely compensated by gain. Fur thermore, there is no question of abolishing competition in social istic conceptions; the question is merely one of substitution of po litical for economic competition.

If economic competition leads to waste, and claims its victims, it is none the less productive. Political competition has secured enormous plunder to great conquerors such as Alexander, Caesar, Tamerlane, and Napoleon; it always destroys more wealth than it confers on the victors. The Socialist formulates a theory of robbery and calls it 'restitution to the disinherited.' Disinherited by whom? Disinher ited of what? Let them produce their title deeds ... Georges Ber nard says that 'socialism will be a regime of authority.' On this point Guyot grimly agrees with him. In reality it will be the most oppres sive spiritual and material system ever invented by man. " ... The future - which is said by some to belong to socialism will work out the problem of medi ocrity, especially if socialism is involved; mediocrity and social ism are not poles asunder. Con crete houses filled with concrete people who will eat, drink, .and think alike will cover the land.

Everything will be concrete, even our opinions. In his concrete Cap itol a concrete President will de vise concrete laws. Art, music, literature will be so concrete that our native Gradgrinds, hungry for 1972 POWER TO THE PEOPLE: THE MASK OF DESPOTISM 393 hard facts, will be ravished into the seventh concrete heaven . . . And this coming age of concrete, wherein all must walk and look alike, is it not a dream compared with which Dante's Inferno would be a Garden of Armida ?"H) Boris Pasternak would probably have answered, "Yes." Early Signs of Socialism Socialism, according to the classic definition, concerns itself with the collective ownership of the means of producing and dis tributing goods, under democratic government control. In practice Socialism has been expanded to cover government ownership, op eration and control of all the facilities and institutions which, even indirectly, contribute to the production and distribution of goods. Additionally, Socialist gov ernments have assumed responsi bility for providing those services which are used by most citizens, and for providing material secur ity for all of their citizens. Ac cording to this concept the govern ment of the United States has been engaged in Socialist activities ever since it was established.

Post-offices and post-roads were authorized in the Constitution un der Article 1. Certainly this would represent ownership and control of facilities which contribute in directly to the production and distribution of goods. Additionally, the provision of a service used by most citizens is involved. (The. argument is often made that serv ices used by all citizens should be provided by the government since this will take the profit out of the activity. How about breathing, for instance?) Eventually the Con gress made the handling of mail a government monopoly, and after 182 years of dismal deficits, the Socialistic postal service has been changed to an independent govern ment agency which is supposed to resemble a private corporation and which is supposed to be self-sup porting. It remains, however, a government agency, presumably owned by the people, and it is not less Socialistic than it was before.

The big-government liberals, who double as humanitarians when they dispense the money they have stolen from the thrifty, until recently revered Thomas Jefferson as a near-God, which, of course, he wasn't. Then one of his bi ographers made the rather un remarkable disclosure that Jeffer son had been a Negro slaveholder and this relegated him to the po sition of a latterday leper. Some years earlier it had been revealed that Jefferson regarded govern ment as "inherently corrupt, op pressive, and malevolent."16 This should have forewarned the lib erals and caused some anguish, but 394 THE FREEMAN July it didn't. Perhaps it was because, in spite of Jefferson's mistrust of government, he was responsible for several early American socialist sorties. The first Jeffersonian socialist endeavor was the Louisiana Pur chase of 1803, by which the United States became a dealer in real estate. This was an atypical so cialist activity in that it proved enormously profitable. The profits from the sale of Louisiana Pur chase land helped to pay the cost of running the government for the second fifty years of the country's existence. Although the interna tional legality of the enterprise was authorized under the treaty making powers granted by the Constitution, there is nowhere a clear authorization for the United States to engage in a real estate development the size of the Louisi ana purchase. Acquisition of ter ritory on a limited scale for pur poses of defense would certainly be permissible, but it is question able whether a big purchase could be justified under the general wel fare clause. In any event, who was to question the constitution ality of such a step? This and later real estate ventures of the United States have proved to be quite generally profitable in spite of their socialist nature. Perhaps it all proves that even socialists can make money in real estate.

A Federal Surplus! By 1806 the income of the Fed eral government had grown be yond what was needed for the limited government the nation then enjoyed. Small amounts of money were needed for service of the national debt and for national defense, the major government ac tivity. Unbelievable as it now seems, there was great concern over what to do with surplus funds! Handling this problem, Jefferson showed himself to be the eternal politician. Instead of rec ommending that customs duties, the major source of Federal in come, be reduced, he sought ways to increase spending. "Congress," he wrote, "should explore the pos sibilities of Federal appropriations for the great purposes of Federal education, roads, rivers, canals, and such other objects of public improvement as may be thought proper."17 It is to Jefferson's ever lasting credit that he was enough of a constitutionalist to have felt that an amendment would be needed to permit such a socialist invasion of fields heretofore large ly private. In this he was unlike twentieth-century politicians who increasingly agree with Mr. Dooley that "th' Constitution iv th' United States is applicable on'y in such cases as it is applied to on account iv its applicability."

It is noteworthy that for 82 of 1972 POWER TO THE PEOPLE: THE MASK OF DESPOTISM 395 the first 112 years preceding World War I surpluses were a problem.I 8 What a lovely problem! This brings to mind the 1970 row over federal-state revenue shar ing. 19 If the states are in need of more money and the Federal gov ernment is so overbu.rdened with cash that it can afford to give some to the states, why not simply reduce Federal taxes and allow the states to raise their own funds? Under this scheme the money would be raised where it is spent and the public could keep a better eye on how it was spent. Under revenue-sharing the Federal gov ernment will parcel out its favors subject to the influence of politi cal pressures far removed from the people who fill the till. This is hardly likely to contribute to care ful taxing and spending. The socialist proposal of Jeffer son that Congress consider Fed eral support of education have led many to consider him as the father of publicly-supported education.

Not until about sixty-five years later did Federal support of educa tion become a reality. In 1862 the first Morrill Act, known as the Land Grant Act, was passed pro viding for the establishment and maintenance of state colleges. Republican president, Rutherford B. Hayes (1877-1881), later pro posed that Federal grants be made for public education. "Whatever government can fairly do," wrote Hayes, "to pro mote free popular education ought to be done. Wherever general edu cation is found, peace, virtue, and social order prevail and civil and religious liberty are secure."20 Hayes was not a very reliable prophet, as the recent riots, tur moil and general breakdown of the legal and social traditions of the country have proved. Events in the 1930's in Germany, where public education had long been a tradition, also seem to show that education isn't the answer to all men's problems. Republican presidents Arthur (1881-1885) and Harrison (1889 1893) continued pressing for Fed eral support. In 1890 the second Morrill Act was passed granting $25,000 annually to each of the land grant colleges. In 1971 Con gress appropriated 18 billion dol lars in aid to education. Socialist enterprises have a way of grow ing on you.

In spite of all, socialist intru sions by the end of the nineteenth century represented a minuscule portion of American endeavor. The twentieth century has been quite different. The Federal government entered the field of social security under President Franklin Roosevelt. So cial security was not an invention of Roosevelt nor of his braintrust396 THE FREEMAN July ers, Bismarck having imposed it in Germany many years before. From Germany the idea spread to the countries north and west of Germany until it reached the United States. In this country the material security an individual might attain was, prior to Roose velt II, largely a private matter attended to by individuals them selves or by their relatives and friends, the latter often acting through churches and charitable or fraternal organizations. In ad dition to these private sources of material security, tax-supported services such as local "poor farms"

were provided by towns, cities, counties, and states. Herbert Hoover and the Republican lead ers of the 1920's and 1930~ en dorsed local tax-supported efforts and private charity as the solu tion to helping the needy. The socialism represented by tax supported welfare was on a state or lower level. Roosevelt's contri bution .to socialism consisted of federalizing the oldtime local socialist endeavors. Accompanying the federalization and wild ex pansion of these socialist activities there was a simultaneous and enormous transfer of power from individuals and local communities to Washington. The socialism that has been with us almost since the founding of the republic has been sponsored at times by the political ancestors of both Democrats and Republi cans. Since the turn of the cen tury, and particularly in the mid dle third of the century, both parties have accelerated their sponsorship. But it must be re membered that the politicians do not lead the people. They follow. ~ • FOOTNOTES • 1 Russell, Dean, The First Leftist which appeared in In Brief, vol. 7, no. 3, Foun dation for Economic Education, Irving ton-on-Hudson, New York, 1951, p. 7.

2 Halevy, Elie, The Era of Tyrannies, Essays on Socialism and War, trans. by R. K. Webb, Doubleday and Co., Inc., N.Y., 1965. 3 Ibid., p. 29. 4 Ibid., p. 29.· 5 Ibid., p. 31. 6 Ibid., p. 32. 7 Ibid., pp. 32, 33. 8 Ibid., pp. 313, 314. 9 Watterson, Henry, Marse Henry, An Autobiography, v. II, pp. 289-290. 10 Ibid., pp. 158, 159. 11 Huneker, James Gibbons, Variations, Charles Scribner's Sons, N. Y., 1921. 12 French laissez-faire economist, 1843 1928. 13 Russian anarchist, nihilist, and ter rorist who believed in anarchy excepting in organizations he controlled. 1814-1876. 14 German socialist and economist. 1825-1864. 15 See Huneker, OPt cit., PP. 111-120. 16 Clinton Rossiter quoted in Kimmel, Lewis H., Federal Budget and Fiscal Poli cies, 1789-1958, The Brookings Institu tion, Washington, D. C., 1959, p. 3. 17 See Kimmel, op. cit., p. 16. 18 Ibid. 19 Federal deficit sharing, rather than Federal revenue sharing has yet to be proposed. It might be more apprppriate.

20 See Kimmel, OPt ·cit., p. 47.

GovernmentControl ofPrivateSchools? JOHN P. CAHILL I FEEL rather like the man in the science fiction novel, who has stumbled upon a great horror and is not believed until it is nearly too late. I have sixteen years of private education under my hat and wish the private schools of America nothing but prosperity. So how can I be against the "voucher" system? Do I not real ize that this system is designed to save the failing private schools and provide them with the needed financial assistance; that it is de signed to promote the greatest amount of freedom of choice for the parent regarding the education of his children? I know what it is designed to do. And I know that what it is designetl to do and what it may in fact do, are not necessarily syn onymous. Mr. Cahill of Lakewood, California, plans to enter Law School in the fall. The scheme is designed to work this way: The level of government which has enacted the program will present to the parents of each child of school age a voucher rep resenting an agreed upon amount of money; the parent will present this voucher as tuition to the school, public or private, where the child is enrolled; the school in turn will take this voucher to the proper government agency, where it will be cashed.

It is alleged that in this ",'ay everyone will be satisfied and free dom of choice ,viII be preserved. Parents are happy; they may now send their children to whatever school they choose with no anxious thought for expenses. The private schools are happy; they \viIIpros per and grow through the influx of new students and their vouch ers. Religious schools are happy; they may now take advantage of 397 398 THE FREEMAN July the government largesse, and (as it is the parent that is being helped directly and not the school) the Supreme Court is not offended. The pa;rish school will once more flourish throughout the land. Right? Principles and Facts Ignored Well, perhaps. And perhaps not. As a "conservative" program of action, the voucher system ignores some basic principles and obvious facts. 1. The unwillingness or inability of the users to continue to pay the tuition and operating costs of the private schools is one reason that they are in need of financial as sistance.

2. This inability to pay is in no small part brought about by in creased taxes and inflation caused by increased government deficit spending. 3. No one can give what he does not have. If the government is go ing to pay the expenses of all the children in private schools in ad dition to those in public schools, it must find a source for the ad ditional funds that will be needed. 4. The government has two sources for these funds: increased taxes or further inflated currency. Not to be forgotten are the ad ditional hundreds of highly paid bureaucrats who will be needed to administer such a program. The result will hardly be the great triumph of justice which is pre dicted: •. The taxes of everyone who pays school taxes will increase. • Some of these taxpayers will now receive a return for their money which they did not receive in pre-voucher days. • Those with children in the public schools will be forced to pay increased taxes with no increased return.

• Those with no children in any school will pay increased taxes and continue to receive nothing in re turn. How anyone could think that confusion and injustice will be anything but compounded with the implementation of this scheme, I do not know. But let us face the issue squarely: there are few to day who will permit themselves the thought that feeding from the public trough is other than a vir tuous act. Nevertheless, there are other arguments which may hit. home where economic and moral ones have missed the mark. We live in an age in which gov ernment, at all levels, is anything but disinterested. The bureaus and agencies of government are peopled with men beset with the meddling urge as never before in history. Money distributed by the government has seldom had more strings attached than now. Busing 1972 VOUCHERS: GOVERNMENT CONTROL OF PRIVATE SCHOOLS? 399 to achieve racial balance in the public schools is a good example.

The voucher scheme cries out to be used as an indirect licensing system for the private schools. There are already hints in the press that certain "modifications" and "safeguards" will have to be introduced into the program if it is passed. Private schools, for in stance, that maintain a racial im balance will not be able to cash their vouchers. Some Perturbing Questions There are other points upon which private, especially religious, schools might do well to meditate. Would a school be permitted to cash vouchers if that school pro moted teachings contrary to the government policy, such as artifi cial birth prevention or abortion? Could a school with an "inade quate" sex-education program cash vouchers? Given the temper of the times, one would think that "ac creditation" for participation would not come cheaply. How could the bureaucrat think that it was other than his duty to "protect" the parent and child from the "misuse" of their new found freedom in a "below stand ard" school? May a school be dropped from the program because its graduates are untrained in sensi ti vity ?

These thoughts must not be overlooked. They are discussed every day in the educational estab lishments, whether public or pri vate. To think that they will not be considered by the agencies ad ministering such a program is naive. After all, someone must ad minister the program and it must be administered according to some one's norms; why not the ones prevailing in the educa tional es tablishments? When one considers the intellectual and bureaucratic environment, the voucher system does not augur well for the private schools. In the main, it will serve to make them less private. Let.us suppose that a school's administration elects to stay out of the program or, having been in for a while, discovel~s restrictions that it cannot tolerate and decides to withdraw. In the first case, those who elect to stay out of the program will not be relieved of the burden of financing it. And the ostensible intent of the scheme is to aid those who are not no\v par takers of the public moneys. The second case seenlS highly unlikely.

A school \vould have to be very wealthy indeed to survive if it \vere to reject its prevailing source of regular income, the government. A school \vhich had grown de pendent on the prognlnl could be dealt a mortal blow if it \vithdre\v or was expelled from the program. How many parents \vould continue 400 THE FREEMAN July sending their children if the "free" tuition vouchers from the govern ment were rendered worthless at this school, especially in the face of higher taxation to support the other private schools on the pro gram? Survival through Competition But what of the private schools themselves? Won't they die out without some sort of government assistance? Good schools will not die out. There is more to the plight of the private school than the ability of the user to pay. W,illingness is a major factor. When the religious school is "secularized" or the de nominational or other private school loses its tradition and be comes, in essence~ no different than the public school, the sacri fice that a man must make to "pay twice" for his child's education loses all reason. Why should a man who is forced to support the public school system pay again for a pri vate school education if the prod uct is like that of the public school?

A return to the first principles of their founders may not save private schools. But it is a first step, and a giant one, in the right direction. The voucher system is a step backward and downward into the mire of government control of all aspects of our lives. The man who is truly interested in quality education will look first to principles of freedom and honor. He may check the government schools to see if education based on compulsion in attendance and support can truly inculcate these principles. And then he must de cide whether the voucher system increases freedom and yields an education based on principle or whether it leads to dependence on government, government control of our lives, and education based on force. ~ IDEAS ON L$ LIBERTY Educational Responsibility THE PARENT can and should look beyond himself for specialized help in a proper education of his child, but neither parent nor teacher should be confused about the parent's ultimate responsi bility or the proper role of the school in the upbringing of the young. Unfortunately, such distinctions have blurred in our soci ety. The growth of the public school system has been more than matched by a bureaucracy to regulate its working.

GEORGE ROCHE III, Education in America GARY NORTH OWNERSHIP FREE BUT NOT CHEAP Ownership of the means of production is not a privilege, but a a social liability. Capitalists and landowners are compelled to employ their property for the best possible satisfaction of the consumers. If they are slo'wand inept in the .performance of their duties, they are penalized by losses. If they do not learn the lesson and do not reforn~ the,ir conduct of affairs, they lose their 'wealth. No investment is safe forever. Hewhodoes not use his property in serving the consumers in the most efficient 'way is doomed to failure. There is no room left for people who would like to enjoy their fortunes in idleness and thoughtlessness. LUDWIG VON MISES 1 THERE IS no more fundamental question in the field of political economy than that of the owner ship of property. Marx, no .less than Adam Smith, saw this clear ly. Invariably, the question of ownership must raise the question of sovereignty. It also raises the Mr. North is a member' of the staff of the Foundation. for Economic Education. This arti cle will appear as a chapter of his forthcom ing book, An Introduction to Christian Eco nomics (Nutley, New Jersey: Craig Press).

knotty question of stew:ardship. The roots of Western Civiliza tion extend back to the Hebrews. The message of the law and the prophets of the Old Testament returned again and again to the issue of ultimate sovereignty. The message was clear enough: God is sovereign, and not men, nor any human institution. All earthly, human sovereignty is therefore derivative and limited. The advent of rationalist and 401 402 THE FREEMAN July outright anti-Christian philoso phies shifted the language of the sovereignty issue, but not the dif ficulties. If God were removed from the day-to-day operation of the uni verse, then sovereignty would have to be found elsewhere. Eighteenth-century rationalists from Adam Smith to Jean Jacques Rousseau, from the Physiocrats to the J acobins - attempted to dis cover where sovereignty lies, in principle, in human affairs, and their answers concerning the ab stract locus of sovereignty de termined the kind of society they hoped to attain through the use of political action.~ Obviously, they arrived at very different answers.

It is possible, of course, to imagine full sovereignty apart from organized institutions pos sessing the right of legal com pulsion. Sovereignty might be claimed strictly on the basis of conscience: voluntary tithing to a church, for example, or volun tary taxation by the state (as some market advocates have ar gued). As a rule, however, where we find any institution which claims sovereignty and receives support from a majority of the citizenry, we also find compulsion. In the United States, the classic example is the shift in sovereignty from the state-established relig ious denominations that once re ceived tax funds to support their operations to the government edu cational institutions. The public schools became the institutional ized churches of the local commun ties, and recent court decisions indicate that they are about to become national churches. 3 Those who officially denied that church and state ought to be linked, in most cases simply substituted a new. priesthood for the· older one, Le., the one which no longer could convince a majority of citizens of its claims of sovereignty.4 In modern, industrialized na tions, the conflict over sovereignty is between the state and the mar ket. In the Soviet Union, and pre sumably in the other iron curtain countries, the conflict is four-way: national state, planning region, market, and Communist Party.G As Ludwig von Mises puts it, the control of scarce economic resources can be handled in two ways: profit management or bureaucratic man agement. G Both are legitimate in their own spheres, but in the mod ern economy, statist bureaucratic management seems to be trium phant everywhere we 100k.7 Our universe operates in terms of the fact of economic scarcity.

A t zero price, thE;re is greater de mand for than supply of economic goods and services. (If there is an equality of demand and supply, or an excess of supply, the goods are not economic goods, and therefore 1972 OWNERSHIP: FREE BUT NOT CHEAP 403 they are not objects of human action. S ) Those who possess skills or resources that are desired by the public at a price greater than zero must, by definition, act as stewards for those who are will ing and able to purchase these desired products. No matter how secure his legal title to ownership, each owner must face the eco nomic responsibilities of steward ship. This, in fact, is one of the miracles of market arrangements. The requirements of the many, considered as a collective unit, are met by the activities of individual men and women. The philosophi cal problem of the one and the many, which transforms itself into the problem of the collective and the individual, is answered in the realm of economics by the opera tion of the market. The fact that few men take the market seri ously is indicative of the collapse of philosophical inquiry into this crucial intellectual problem over the last century.!) The Mixed-up Economy The so-called "mixed economy"

is one of the means by which men attempt to avoid the implications of the market's solution. "We are neither socialists nor capitalists" is a rallying cry for contemporary economists, theologians, and "prac tical" businessmen. These people think that they are saying something quite profound and very modern when they promote such a slogan. What they are saying is in reality quite muddled - the product of a lack of serious thought. To say that you favor neither full collectivization nor full economic anarchy is not say ing anything at all. Noone in a position of political authority ad vocates full collectivization, as the survival of the Liberman reforms and the private farm plots in the Soviet Union ought to indicate. Pure anarchism, while it may find more vocal and intelligent advo cates than pure collectivism, has always been a tiny intellectual stream in human history. So the "neither socialist nor capitalist"

slogan is not relevant as a philo sophically unique statement. Mises, as usual, has seen the emp tiness of such slogans, and he calls our attention to the crucial contribution the market makes in solving the problem of steward ship: All attenlpts to abolish by a conl promise the contrast between conl mon property and private ownership in the means of production are there fore nlistaken. Ownership is always where the power to dispose resides. Therefore State Socialism and plan ned economies, which want to main tain private property in name and in law, but in fact, because they subordi nate the power of disposing to State 404 THE FREEMAN July orders, want to socialize property, are socialist systems in the full sense. Private property exists only where the individual can deal with his pri vate ownership in the. means of pro duction in the way he considers most advantageous. That in doing so he serves other menlbers of society, be cause in the society based on division of labour everyone is the servant of all and all the nlasters of each, in no way alters the fact that he hinlself looks for the way in which he can best perform this service. 10 Mixed economies do not stand still. They do not allocate re sources and tasks according to permanent, fixed definitions. The mixed economy is a battleground for competing ideologies; without solid, concrete definitions of sphere sovereignty - rules that specifically limit, in principle, the operations of bureaucratic man agement and profit managen1ent the idea of the mixed economy will remain an intellectual monstrosity and, in practice, a very poor means of getting things accomplished.

It is not possible to compromise, either, by putting part of the means of production at the disposal of so ciety and leaving the remainder to in dividuals. Such systems simply stand unconnected, side by side, and oper ate fully only within the space they occupy. Such mixture of the social principles of organization must be considered senseless by everyone. No one can believe that the principle which he holds to be right should not be carried through to the end. Nor can anyone assert that one or the other of the systenls proves the better only for certain groups of the nleans of production. Where people seem to be asserting this, they are really as serting that we must demand the one system at least for a group of the 111eanS of production or that it should be given at nlost for a group. Com pronlise is always only a momentary lull in the fight between the two prin ciples, not the result of a logical thinking-out of the problem. Re garded from the standpoint of each side, half-measures are a tenlporary halt on the way to complete suc cess. ll Serving Others Is it really true that the mar ket, as an impersonal mechanism, pressures individual citizens, in their role as economic actors, to satisfy the needs of their fellows?

A brief analysis should help to answer this question in the af firmative. Consider the occupation of'the farmer. He owns land and tools. He possesses skills and spe cialized knowledge. The more pro ducti ve he is, the more specialized his labor and, presumably, his tools. These assets constitute his capital. The very fact of his legal ownership brings the problem of cost into the forefront: how much does it cost him to own his assets? The doctrine of alternative costs 1972 OWNERSHIP: FREE BUT NOT CHEAP 405 tells us that he must forfeit the use of all those economic goods and services that he could pur chase if he were to sell or lease his capital (including his human cap ital). He has chosen to remain the owner of these particular assets, but he must forfeit all those assets that are lower on his scale of values, but that might be pur chased if he divested himself of the ownership of his present scarce economic resources.

There is only one way in which his legal ownership, and therefore control, of these scarce economic resources would cost him nothing. If he has absolutely no other de sires than to be exactly what he is, where he is, controlling just these economic resources and no others. This is the ultimate goal of economic perfection toward which men strive, of course, but it does not describe the conditions of real, acting men. But it is only under this assumption, that a man has no other alternative uses for his capital or the assets that could be gained in voluntary exchange, that zero opportunity costs would pre vail. So long as men have unful filled desires for additional scarce economic resources, they will bear the burdens of opportunity costs. They must choose one goal or set of goals and not another; they must select the appropriate means of achieving their economic goals; they must exercise responsible choice.

"Every man has his price." Most of us believe this to be valid as a regulatory principle, despite the fact that we know that on some points in time, some men could not be compelled by the whip or ind uced by the carrot to respond to the desires of other men. Men are always trying to improve the economic conditions. This means "that they must bear the costs of change in a world of limited re sources. Even a decision to remain inactive is a decision: one forfeits the benefits that change would have brought. In short, there is always a trade-off in economic choosing, even in decisions not to trade at all. Ownership, a Social Function Any resource - human, animal, inanimate - which can command a price imposes costs on its owner. Each individual must use the re sources under his authority in order to serve others, either through the mechanism of the market or the coercive power of the state. To the extent that the market is allowed to function as the sovereign authority over eco nomic transactions, individual owners must attempt to meet the demands of other possessors of scarce economic resources, as reg istered on the market in terms of 406 THE FREEMAN July discrete prices. Hence, total hu man autonomy is inconceivable.

Those who argue that the market involves anarchy are unaware of how the market operates. Economic actors must meet the demands of the public if they are to survive. The farmer in our original ex ample is required to use his land, tools, brains, and skills more ef fectively than do his competitors. If he obstinately or ignorantly re fuses to do this, he will lose con trol over his resources. Under the market economy, a man holds his goods as a steward for other men; he cannot hold his goods auton omously. Under the free market, ownership is a social function. The meaning of private property in the market society is radically different fronl what it is under a system of each household's autarky. Where each household is economi cally self-sufficient, the privately owned means of production exclu sively serve the proprietor. He alone reaps all the benefits derived from their employment. In the market so ciety the proprietors of capital and land can enj oy their property only by enlploying it for the satisfaction of other people's wants. They must serve the consumers in order to have any advantage from what is their own. The very fact that they own means of production forces them to submit to the wishes of the public.

Ownership is an asset only for those who know how to employ it in the best possible way for the benefit of the consunlers. It is a social func tion.l~ Is this a denial of the free own ership of private property? Abso lutely not; it is the necessary concomitant of such ownership. It is therefore a denial of the gratuitous ownership of property. Nothing is free from costs under a market economy - not lunches, not talents, not even dreams, for dreams must use up that highly valuable and irreplaceable scarce economic resource: time. Opportunity Costs Men, in their decision to com pete for access to some particular resource, bid up its price. By bid ding up the price of an economic good, they impose higher and higher costs of ownership on all those who hold legal, exclusive titles to the good. These costs come in the form of opportunity costs. Since the scarce economic resource is now more valuable in the opinion of the public, it com mands a higher price, and there fore the value of the resources that the owner could gain access to by selling his title of exclusive control to someone else is continually increased. He pays a price, mo ment by moment, for his refusal to part with his property; if he retains title. to one piece of 1972 OWNERSHIP: FREE BUT NOT CHEAP 407 property, he is thereby prevented from gaining access to other goods and services that his property could be exchanged for. If some thing commands a price, it is not gratuitously possessed. Free ownership may command very heavy costs. It is the right of free, exclusive control over property which makes the economic burden inescapable; the free market im poses responsibility with every grant of economic power.

The farmer who does not wish to sell his land, whether for senti mental reasons, or a fear of change, or a commitment to the ideals of rural life, or just to keep old Charlie Drackett from getting his dirty hands on the bottom forty, is thereby compelled to pay for his use of that land. He has to defend his possession of exclusive control, daily, in the market place. It is not his legal title that is in question; it is his economic abil ity to defend it against others who think they could use his property in order to better service the needs of the public. He does not have to defend it in the way his great-grandfather did - shooting Indians or revenuers or Hatfields or McCoys - but by using it to satisfy the incessant demands of an unsentimental public. If he fails to do this, he suffers economic losses. He may have to dip into his life savings to keep his farm going. He may have to go deeper into debt. Finally, if he continues to fail to meet the public's de mands for more food, cheaper food, better quality food (or even lower quality food, nutritionally, if that is what the public wants), his mortgage will be foreclosed.

The bank will sell it, or the tax collector will sell it, to the highest bidder. This highest bidder is a middleman. He is acting on behalf of the public. He thinks he can use the land and other capital assets more efficiently than any one else can. If he is wrong, the process will start over again. Private property is held in stew ardship for the public. Title to property is not held by "the public." Titles are ~eld by individual owners. But the market combines the myriad of discrete demands of many individuals and imposes costs on the possessors of all desired economic resources. No owner can resist the pressure of market demand without bearing these costs. Day after day, market pressures force all owners to ask themselves, "What's it worth to me to hold onto this?" The public responds, through the market, "You'll have to meet our price if you want to keep it." Day after day, all those who retain free title to a particular piece of property meet this price. They pay in the forfeited opportunities that might 408 THE FREEMAN July have been: the vacation, the new car, the shares of IBM, and silence from "the little woman" who wants to sell out. This is the law of survival in the free market.

May the best (most efficient) man win. Ownership Contingent on Right Use During the English Reforma tion the problem of the j ustifica tion of ownership came to a head with the confiscation of the prop erty of the monasteries. "The Reformation theorists," writes Richard Schlatter, "failed to solve their first great problem. They were not able to work out a theory which would justify large-scale confiscation and at the same time mesh with their other ideas about the nature of private ownership and its rights. For a consistent theory they substituted an emo tional attack."1:~ They attacked clerics for their alleged misuse of wealth. But Sir Thomas More, the great Roman Catholic layman, an swered this argument in A Suppli cation of Souls. If this is a valid premise for expropriation, he wrote, then there will be no end of expropriation. The King may use it against the church, but then the people will use it against the mer chants (who bought the land from the King). Thus, concludes Schlat ter, "The theorists of the Reforma tion could-not answer More's' arguments without admitting the prin ciple that all ownership was con tingent upon right use. But no property owner was willing to grant that that principle should be enforced by any authority in this world. The theoretical prob lem was left unsolved."14 Economic vs. Legal Control The solution to this theoretical problem is found in the analysis of the operation of the free market.

Yes, ownership does depend, eco nomically, on proper use of re sources. The legal title, however, does not rest on economic founda tions but on historical or formal legal principles. Jt is the magnifi cent fusion of the right of free legal ownership. and cost-bearing economic control of resources which the free-market common wealth provides that overcomes the theoretical dilemma of medieval property theory. Laws against the confiscation of private property insure the smooth operation of the free market, and this in turn pro duces a system of economic organi zation which requires each owner of property to assume the costs as sociated with the control of prop erty. Mises summarizes it quite well: Private property is a human de vice. It is not sacred. It came into existence in early ages of history, 1972 OWNERSHIP: FREE BUT NOT CHEAP 409 when people with their own power and by their own authority appro~ priated to themselves what had pre viously not been anybody's property.

Again and again proprietors were robbed of their property by expro priation. This history of private property can be traced back to a point at which it originated out of acts which were certainly not legal. Virtually every owner is the direct or indirect legal successor of people who acquired ownership either by ar bitrary appropriation of ownerless things or by violent spoliation of thei r predecessor. However, the fact that legal for malism can trace back every title either to arbitrary appropriation or to violent expropriation has no sig nificance whatever for the conditions of a market society. Ownership in the market economy is no longer linked up with the remote origin of private property. Those events in a far-distant past, hidden in the dark ness of primitive mankind's history, are no longer of any concern for our day. For in an unhampered market society the consumers daily decide anew who should own and how much he should own. The consumers allot control of the means of production to those who know how to use them best for the satisfaction of the most urgent wants of the consumers. Only in a legal and forn1alistic sense can the owners be considered the succes sors of appropriators and expropria tors. In fact, they are Inandataries of the consun1ers, bound by the op eration of the 111arket to serve the consumers best. Under capitalism, private property is the consumma tion of the self-determination of the consumers.l 5 The confusion in men's minds between the concept of free legal title and gratuitous ownership has led to numerous injustices in politi cal and economic affairs. Mistakes in analysis at this point too often lead to cries of political interven tion to right some supposed wrong.

People want the state to enforce false analyses that seem, in the short run, to benefit some special interest group. Some men believe that free own ership is gratuitous, and that the deviation from such a hypotheti cal universe is the result of "ex ploitation." They do not compre hend that they must defend their ownership in the market, satisfy ing the demands of the public ef ficiently. An example of this kind of erroneous thinking can be found in the case of American farmers during the great depression. of the 1930's. It was not uncommon for farmers to face the foreclosure of their mortgages by the local bank, or .else by the solvent bank \vhich had acquired the assets of the bankrupt rural bank. (Over 9,000 banks suspended payments in the years 1930-33, not counting banks that merged,vith others and those closed temporarily by the states or the Federal government during 410 THE FREEMAN July "bank holidays."16) Sometimes tax foreclosures would occur. In any case, local farmers would occasionally attend the auction, and a group of them would surround or threaten potential bidders, espe cially if they were outsiders to the community. Violence, or the threat of violence, was used directly to reduce the price of the bids, thus lowering the particular farmer's costs in regaining title to his farm.

The true costs of operating the farm were therefore artificially re duced, thereby lowering the own er's burden of responsibility to the public, as registered on the open market. Agricultural Legislation This, however, was too crude and direct a form of violence to be used often, even when local law en forcement authorities permitted it. Violence could be applied far more effectively through state legisla tures and the United States Con gress. In 1934 three acts were passed by the Federal government, adding even further intervention into an already controlled farm market (e.g., the Farm Credit Act of 1933) : the Farm Mortgage Re financing Act, involving Federally insured loans; the Farm Mortgage Foreclosure Act, extending the au thori ty to the Land Bank Commis sioner to enable him to make loans to farmers, allowing them to redeem their farm properties prior to foreclosure; the Frazier-Lemke Bankruptcy Act, allowing the farmer who had lost his farm through foreclosure to demand a "fair and reasonable" appraisal and to repurchase his property over a period of six years at one per cent interest (interest rates were fairly low in the free market in these years, however). This last act was declared unconstitu tional in 1935, but a similar act, shortening the repurchase time to three years, was upheld in 1936.

In short, the coercive monopoly of legitimate power which belongs to civil government was applied in order to thwart the operation of the free market. Men successfully reduced the costs of ownership through collective violence or the threat of violence. Harold Under wood Faulkner, no supporter of the free market, has commented on the implications of these early policies of New Deal agriculture: A survey of the farm legislation passed during the five years 1933 1938 make clear certain facts. First of all, "economic planning" was car ried further with respect to argicul ture than to any other economic in terest. The government took upon it self the responsibility of attempting to determine both production and prices as well as maintaining soil resources and handling most of the 1972 OWNERSHIP: FREE BUT NOT CHEAP 411 credit resources of the farmers. In the second place, this program was carried out at the expense of the consumer. Agriculture was to be a favored industry, with the taxpayer and consumer paying the bill. This, of course, did not disturb the farmer; he insisted that agriculture was now merely receiving protection as indus try had long received it through the protective tariff. Finally, it should be noted that the government en tered so definitely into the program of financing agriculture that by 1937 its agencies held about half of the long-term agricultural paper of the country. This was indeed a big step from the laissez-faire policies of a quarter century earlier. 17 Exclusive Right of Access Not only do men erroneously be lieve that free title to a piece of property ought to bring with it gratuitous ownership, but they also err in believing that the right to bid on another's property is, in and of itself, an exclusive pos session of one bidder or one group of bidders. Such ~xclusive access involves a legal title, by definition.

In' other words, they think that their legal right to increase an other's opportunity cost for re taining possession of his property is, in effect, their own gratuitously held prerogative - a titled right to exclusive control of one segment of the market. Trade unions, for example, call in the coercive power of the Federal government (through the Wagner Act and the National Labor Relations Board) to defend their exclusive right to bid, on a particular labor contract, utterly free from the outside com petition from other workers who might be willing to work for less money. The members of such or ganizations assume that they have a legitimate right to hold a job (or gain access to one through the union) apart from the daily com petition necessary to defend their presence in that particular occu pation. They call in the state to create by fiat a title to that occu pation by arbitrarily excluding others from bidding.

- to a Given Job Wha t members of a union do have title to is their ability to work. But members of such co ercive structures think that be cause they have legitimate title to their labor they also should have legal title to an opportunity to exercise their talents in some spe cific occupation, apart from out side competition, thus forcing the employer's costs of operation higher than a free labor market would have permitted. They ex clude other citizens who equally have title to their own labor, but who are not permitted to bid down the cost of hiring labor. By granting, by fiat intervention, ti412 THE FREEMAN July tles of exclusive bidding rights to one group of laborers, the state effectively robs other men of their right to bid, and therefore of their right to exercise their per sonal talents. By this confusion of the right to bid in the market and a title of exclusive access to that segment of the market, the state increases the employer's costs of operation, re duces the union member's oppor tunity costs (it does not cost him as much to retain his job, for out side competition for that job is eliminated, by state fiat), and it deprives nonunion laborers of their right to exercise their par ticular callings before God and society. A man's legitimate right to bargain for his job, continu ously (or whenever his labor con tract is subject to renewal), is transformed by state fiat and le galized coercion into his right to avoid continuous bargaining. A three-way bargaining structure employer, union member, and non union member - becomes, through the threat of state violence, a two .way bargaining structure, as the nonunion member is driven to accept other employment which he would not have chosen voluntarily.

An exclusive title - a property right, in other words - is created by state fiat, where only a right to bargain in an open market had existed previously. - to a Given Market Area Trade union members are not alone in this confusion, unfortu nately. Many, many businessmen involve themselves in precisely the same error. They use the inter ference of state violence to keep outsiders away from the market place. A three-way structure should exist: the consumer, the American producer, and the for eign producer. Instead, the Amer ican businessman seeks to make the structure a two-way arrange ment: the consumer and only the American producer. Like the labor union member, he seeks to trans form a right to bid in the market into an exclusive title of entry into the market. The usual means for this kind of operation is the tariff or the import quota. In principle it is identical to the ac tivity of the state-supported trade union. Ironically, many business men who derive great personal satisfaction from castigating the "immoral" trade unions involve themselves in the same "immor ality." The game is the same; state "protection" from outside interference - the exclusiveness of a legal title to private property.

Instead of a legal title to dispose of their assets and skills as they see fit, in open competition, sub ject to the imposition of the bur dens of the responsibilities of ownership, businessmen want title 1972 OWNERS!IIP: FREE BUT NOT CHEAP 413 to an exclusive right to dispose of their assets, apart from competi tion, apart from the fun burdens (costs) of responsible ownership. Only the intervention of the state can grant such an escape from re sponsibility, so they call for the intervention of the state. Men simply like to enjoy the fruits of ownership apart from the respon sibilities of ownership. They give up some of their freedom (or their neighbor's freedom) in order to escape from responsibility. They call for the creation of legal titles where none could exist on a free market. Conclusion On the one hand, the owner of an exclusive title - a property right - cannot escape the costs of ownership and the concomitant ob ligation to act as a steward of his goods for the public's benefit. He cannot escape so long as political intervention into the market does not occur. The fruits of ownership are not separated from the bur dens of ownership. On the other hand, those who seek to make a bargain cannot, apart from state coercion or private violence, trans form the right to dispose of one's own property (talents) into an ex clusive title to dispose of that property on a specific market apart from entry by other property own ers who wish to bargain with their property. Titles of ownership re fer to the control of property and skills by the owner; they do not refer to reciprocal relationships of exchange, where two owners seek to dispose of their property in a mutually acceptable manner. In fact, if exclusive titles are granted respecting the reciprocal human relationships, the rights of control over one's own assets are thereby diminished. The title to property, which involves the right of volun tary disposal of that property, is compromised when the state inter feres in the market in which men seek to dispose of their property.

By granting titles of exclusive ac cess to certain markets, the state thereby revokes some of the rights of ownership. The rights of own ership involve both the right to bid and the right to be bid against. Compromise either of the last two rights, and you have compromised the original rights of ownership. The right to be bid against is the provision of the legal struc ture which allows individuals in the marketplace to have the costs of ownership imposed on them selves and all other owners. Each time any group gets the state to protect it against the economic bidding of the public, it thereby red uces the efficiency of the mar ket as well· as the members' own responsibility to bear the full costs of ownership. The overall 414 THE FREEMAN July wealth and overall freedom of the community are simultaneously re duced, because without efficiency, wealth is reduced, and without re sponsibility, freedom is reduced.

If men would remain free, they must demand that they and their neighbors retain the rig ht of responsibility. They must resist the attempts of men who would seek to escape both freedom and re sponsibility by lowering their competition from other partici pants in the market. Ownership is free, but not cheap. The same is true of freedom. I) • FOOTNOTES • 1 Ludwig von Mises, Human Action (3rd ed.; Chicago: Regnery, 1966), pp. 311-12. 2 Cf. Robert A. Nisbet, Social Change and History (New York: Oxf9rd Univer sity Press, 1969), ch. 4; Louis I. Bred voId, The Brave New World of the En lightenment (Ann Arbor: University of Michigan Press, 1961). 3 The concept of the public schools as America's only establis·hed church is brought forcefully in Sidney E. Mead's The Lively Experiment (New York: Harper & Row, 1963), ch. 4. Cf. R. J. Rushdoony, The Messianic Character of American Education (Nutley, New Jer sey: Craig Press, 1963).

4 The separation of church and state, it must be stressed, came to the American colonies quite early; Rhode Island ac cepted the principle from the beginning. But orthodox Connecticut was forced to adopt it as a result of the religious tumult caused by the Great Awakening of the mid-eighteenth century; it was brought in to existence by Christians, not secular ists or the tiny handful of Unitarians and Deists: Richard L. Bushman, From Puri tan to Yankee (Cambridge, Mass.: Har vard University Press, 1967), ch. 13. 5 Paul Craig Roberts, "The Polycentric Soviet Economy" The Journal of Law and Economics, XII (April, 1969): Her bert S. Levine "The Centralized Planning of Supply in Soviet Industry," (1959), in Wayne A. Leeman (ed.), Capitalism, Market Socialism, and Central Planning (Boston: Houghton Mifflin, 1963); Gary North, "The Crisis in Soviet Economic Planning," Modern Age, XIV (Winter, 1969-70) .

6 Ludwig von Mises, Bureaucracy (New Rochelle, New York: Arlington House, [1944] 1969). 7 Gary North, "Statist Bureaucracy in the Modern Economy," THE FREEMAN (Jan., 1970). 8 Murray N. Rothbard, 1\Jlan, Economy and State (Los Angeles: Nash, [1962] 1971), p. 4. 9 R. J. Rushdoony, The One and the Many (Nutley, New Jersey: Craig Press, 1971), surveys the history of this vitally important philosophical problem". He argues that modern philosophers prefer to avoid discussing the issue because they have been able to find no secular answer to it. 10 Mises, Socialism (New Haven, Conn.: Yale University Press [1922] 1951), pp. 275-76. 11 Ibid., p. 276. 12 Mises, Human Action, pp. 683-84. 13 Richard Schlatter, Private Prop erty: The History of an Idea (New Bruns wick, New Jersey: Rutgers University Press, 1951), p. 81. 14 Ibid., pp. 86-87. 15 Mises, Human Action, p. 683. 16 Historical Statistics of the United States: Colonial Times to 1957 (Wash ington, D. C.: Bureau of the Census, 1960), p. 636 (explanation of statistics on p. 619).

17 Harold Underwood Faulkner, Amer ican Economic History (5th ed.; New York: Harper & Bros., 1943), p. 656.

THE BEATENTRACK O_F_F _ LEONARD E. "READ I HAVE long been intrigued by the seeming paradox that the more one knows the more he knows he does not know. This is another way of saying that every gain in knowledge increasingly exposes one to the infinite unknown. 1 Another aspect of this intrigu ing paradox: as a person grows in knowledge he is exposed to a new set of friends - and almost cer tainly faces a dwindling number of old friends. There are many ways to lose friends, of course, but what I am suggesting is that a dwindling audience is not nec essarily a sign of failure; on the contrary, it may signify personal progress. This is the point I would like to explore. Ortega presents us with the reali ty of this problem: 1 See "The IFiHdom in Knowing I Kllow j\/ot," ]\'OtCH from P/;;E, March. 1971. Copy on request. So far as ideas are concerned, meditation on any theme, if positive and honest, inevitably separates him who does the meditating from the opinion prevailing around him, fronl that which ... can be ca:lled "public"

or "popular" opinion. Every intel lectual effort sets us apart froni the commonplace, and leads us by hid den and difficult paths to secluded spots where we find ourselves anlid unaccustomed thoughts. These are the results of 111editation.:! Why dwell on this? A simple reason: if you are on the right track and gaining in knowledge but fail to read these signs aright, you may throw in the sponge simply because liRteners are fe\v; you may call it quits just before the dawn. In a word, I hope to :! What Is Philosophy? by Ortegoa y Gasset (New York: W. W. Norton & Company, Inc., 1960) p. 15. 415 416 THE FREEMAN July present an antidote for discour agement, a way of viewing matters that will help to "keep the chin up." Not only yours, but my own! In the area of our concern, it is easy to mistake success for failure. Why? Simply because success is often equated with a growing number of adherents, failure with a declining number, as if the quality of ideas and the quantity of better thinkers go hand in hand. We tend to expect that any improvement in ideas will auto matically attract a wider audience; whereas, quite the opposite might happen.

Popularity Contests Not the Path to Truth My thinking in this matter has been stimulated in part by a slight drop in FEE's mailing list over recent months, while at the same time we are told by others that our publications and seminars are better than ever before - and that we must do' something to "reach more people." Were numbers here and now the sole measure of success,' then the recipe would be (1) a. point of view consistent with "public" or "popular" opinion; and, (2) char ismatic personalities. Examples can be found in the political realm: engaging and energetic copycats of the current consensus putting themselves in the vanguard. Were ours just a numbers game, then we would attractively proclaim "free enterprise" and loudly decry "socialism." And let it go at that! For there are mil lions paying lip service to freedom and proclaiming opposition to so cialism who are anxious to ally themselves with those of similar leanings - so long as the specific aspects of these opposed ways of life are left unexamined. But nev er, for heaven's sake, go beyond the generalities and attempt a de tailed study of these ideologies!

To do so assures alienation, a marked dwindling of old friends, perhaps a few new ones. Our meditations .at FEE over the past quarter century have been positive and honest. Even our de tractors concede that we have so operated, and with consistency. In the beginning our position was more or less a generalization: in favor of freedom and opposed to socialism and other variants of authoritarianism. But the more we meditated, the more did some commonly accepted practices of "free enterprisers" and "anti-so cialists" show up as bearing the seeds of socialism behind the la bels. Further, we have never held the results of these meditations to ourselves for fear of giving of fense, that is, we have not bowed to. expediency. For instance, some 20 years ago 1972 OFF THE BEATEN TRACK 417 we published The Tariff Idea, a critique of protectionism, the case for freedom in, transactions. The criticisms we received were severe, and several large corporate sup.,.

porters dropped FEE then and thereafte;r. Over the years all of our books and each of nearly 3,000 essays have, in one way. or an other, affronted the mores, gone counter to the current trends and accepted opinions. This is to say, we have upheld the basic principles of voluntary exchange, private ownership, limited government while, at the same time, challeng ing those flaws of coercive or gov ernmental intervention parading under the name of free enterprise. Such unaccustomed thoughts are not popular! To Find a Better Way This is why the serious freedom devotees may not rely on numbers -popular acclaim - as an objec tive. For the prime requirement of such an objective is to stay on the beaten track, to go along with commonly accepted notions. But must we not abandon the beaten track if we would find a better one? To "go along" is to go with out prospect of improvement. To play the numbers game is to ac cept the fallacies that ought to be exposed and displaced.

The soundness of a philosophy cannot be gauged by numbers of followers. In this respect, the phi losophy of freedom is similar to religion. True, we can count the financial supporters of the several religions and the church attendees, but these numbers reveal abso lutely nothing as to the depth or profundity of religious convic tions.Religious faith, so-called, is founded on diverse forces, rang ing all the way from fear and su perstition to cosmic consciousness. We must note, however, that all of the significant religions have been inspired by some one whose purity of thought - meditations, if you will - provided that rich spiritual insight which made possible the awakening of others. High Mortality of New Ideas Continuing the analogy, be it noted that each religion was, ini tially, an affront to "public" and "popular" opinion, a complete break with the mores. Each was born in an environment more or less hostile to its precepts. These initiators of high ethical, moral, and spiritual ideas have, in every instance, presented thoughts un familiar to most people at the time.

It is only when we make prog ress in learning what the ideal is, while standing foursquare there with in' our proclaimed positions, that we aid the cause of freedom. True, we will never fully compre418 THE FREEMAN July hend the ideal, let alone realize it, but we can everlastingly strive for this purity in thought. Be certain of this: the nearer we come to knowing and upholding the ideal, the greater is the probability that the good society may emerge. Why? Because men can establish the good society only upon what is right and true. Upon that alone, and nothing else! Fungus may be spawned by a muck heap; but the good society is the emergence and flowering of the best there is in thoughtful meditation. The best flows always from one - the one who comes nearest to being the perfect ex emplar. Viewed in this manner, the so-called problems of society break down to a level a person might comprehend. One's duty is not to fall in step with present im perfections but, rather, to strive for his own perfection. Upon whom, then, does the solution de pend? Upon the world's most im portant person: YOU! f) IDEAS ON L$ LIBERTY The Personal Practice of Freedom FREEDOM RESTS, and always will, on individual responsibility, individual integrity, individual effort, individual courage, and individual religious faith. It does not rest in Washington. It rests with you and me.

Two things you and I can do, and two only. First, we can prac tice what we profess. Second, we can each preach, from our own personal pulpit, the principles we practice, whether that pulpit looks out upon a continent, a country town, or a single cottage. As we thus prove our faith by our works - as we accept with diligence and devotion the responsibility for areas within our reach - as we inspire those about us and send them in turn to inspire others - we shall find that we are making an ever-increas ing contribution to the accomplishment of our century's most challenging job. Over and above all else we shall find - you and I, individually that ours have become unconquerable souls. ED LIPSCOMB CLARENCE B. CARSON THE FOUNDING OF THE AMERICAN REPUBLIC 12 The Scourge of Inflation A theft of greater magnitude and still more ruinous, is the mak ing of paper money ,. it is greater because in this money there is ab solutely no real value,. it is more ruinous, because, by its gradual depreciation during all the time of its existence, it produces the effect which 'Would be produced by am infinity of successive deteriora tions of the coins. All these iniquri ties a,re founded on the false idea that money is but a sign.

- COU NT DESTUTT TRACY MEN AT EASE and in comfortable circumstances must find it difficult to comprehend the sufferings of the Patriot armies during the War for Independence. These armies had to· suffer, in addition to those tribulations incident to war, from lack of clothing, blankets, suffi cient food, drink, transport, and many other of the necessities of life. Yet it is the judgment of the generality of historians that most of this deprivation was unneces sary and unwarranted. There was food aplenty in the states, and there was at least the potentiality of enough clothing. It may be added that there were enough men of the right age to' have consti tuted overwhelming forces against Dr. Carson shortly will join the faculty of Hillsdale College in Michigan as Chairman of the Department of History. He is a noted lecturer and author, his latest book entitled Throttling the Railroads. 419 420 THE FREEMAN July those the British actually sent to America, and there was a poten tiality for manufacturing adequate munitions for the war. (For ex ample: "In 1775 the Union pro duced 30,000 tons of crude iron one seventh of the world's total output.") 1 It is quite probable that the war could have been brought to a successful conclusion long be fore it was had these resources been devoted to the effort in suf ficient amounts. They were not.

The main reason why men and materials were not brought to focus adequately on the war effort was the method used to finance the war. The successful prosecution of a war - any war - requires that a sufficient amount of energy and resources be diverted from other uses in order to accomplish the end of winning the war. To ac quire the -necessary goods and services, government enters the market. (This is not to deny that a government may acquire services, and sometimes goods, voluntarily from those who are actuated by principle or other motives. To the extent that this is the case, neither force nor the market may have come into play in the acquisition. But neither the War for Independence, nor any other known to this writer, were fought primarily with such re sources.) Government may enter the marketplace in such a way as to take advantage of the services offered in a market, or it may in tervene in the market in such ways as to make that instrument virtu ally useless for its purposes. The market is a place where voluntary exchanges are made, where goods and services are sold to the high est bidder. When government en ters the marketplace it becomes a bidder among bidders for the sup ply of goods and services available.

What the government acquires there, others are denied, or vice versa. Government Takes Goods Before government can become a bidder in the market it must ac quire goods and services, or their equivalent, for making exchanges. This necessity poses what is the most enduring problem of govern ment: the government, as govern ment, is not a producer of goods nor provider of services, and has none of these to offer in exchange. Before it can operate in the mar ket, then, government must ac quire these, or their equivalent, from those who own or produce them. In effect, government must take goods and services from those who provide and produce them. For this to be done equitably and justly, experience indicates that this appropriation should be spread over and apportioned among the producing citizenry.

1972 THE SCOURGE OF INFLATION 421 Money has afforded a means for apportioning taxes and a way for government to enter the market place for trading without interfer ing destructively with the func tion of the market. In. short, money can enable a government to use the marketplace asa major source of goods and services which it needs, particularly in war. For this to happen, however, govern ment must respect the nature and character of money. Money is a medium of exchange, i.e., it is that through which are made ex changes of goods for goods, serv ices for services, or any other combinations of these. What a given unit of money will command in goods and services in the mar ketplace is a ratio between the quantity of money and quantity of ,buods and services, as modified by the strength of the desires of all who have any of these in their possession or wish to acquire them. To put the matter con cretely, if a bushel of wheat brings one dollar this means that the quantity of money is such, the quantity of wheat is such, the de sire for wheat is such, and the desire for money is such, that one dollar is the price that will effect an exchange. If the quantity of money .is increased, and all else remains the same, the .price of wheat may be expected to rise in proportion to the increase of money. A money tax enables the government to reduce the supply of money available to private bid ders, and thus to become an effec tive bidder for its needs in the market.

Monetary Manipulation It is theoretically clear, then, what the consequences would be if the government attempted to get its needs by simply increasing the money supply. It would reduce the quantity of goods and services a given unit of money would com mand. But why could the govern ment not do this as a means of taxation, thus avoiding the oner ous necessity of a direct appro priation of money? Of course, it could do this. Thomas Paine de clared that this is just what the Congress did during the War for Independence. It would have cost ten or twelve million pounds ster ling, he estimated, to have financed the war by ordinary taxation.; "and as while this money was is suing, and likewise depreciating down to nothing, there were none, or few valuable taxes paid; con sequently the event to the public was the same, whether they sunk ten or twelve millions of expended money, by depreciation, or paid ten or twelve millions by taxation; ... And therefore ... [the] debt, has now no existence; it having been paid, by everybody consent422 THE FREEMAN July ing, to reduce as his own expense, from the value of the bills con tinually passing among themselves, a sum, equal to nearly what the expense of the war was for five years."2 Thomas Paine was, as usual, an adept pleader of special causes, but he was no scholar, and certainly not an economic histor ian. His statement that everybody consented is simply not true, and he ignores both the ruinous train of consequences following upon the inflation and the question of whether or not it was effective in its object of providing for the armed forces.

It is not necessary, however, to explore the theoretical impact of the inflation further; it unfolds in the story of the financing of the war. The 'Congress and the states did attempt to finance the war effort primarily by the issu ance of paper money. Congress issued what is known as Conti nental currency. The notes did not bear interest, as such currency sometimes did, but they were sup posed to be redeemed by the states at a later date. Just how much was issued from the first issue in 1775 until an entirely new currency was issued in 1780 is in doubt. The estimates range from $191,552, 3803 to $242,100,176 4 • It is com monly believed today to have been over $200 million 5 • Even if an ex act figure could be agreed upon, however, we would still not know how much of the currency was in circulation, for it was extensively counterfeited. There were domes tic counterfeiters; and the British government, as a matter of policy, attempted to destroy the currency by introducing counterfeit money.() All accounts agree, however, that Congress issued more and more of the currency over the years through 1779. A recent es timate of the sums issued goes as follows :7 1775 $ 6,000,000 1776 19,000,000 1777 13,000,000 1778 63,500,300 1779 90,052,380 This process of issuing more and more set in early. The initial issue was to have been for $2 mil lion, but before it had been accom plished Congress authorized an other $1 million. R Before the end of the year $3 million more was issued.!) This despite the fact that Congress had intended only one issue at the beginning. And, there were those who attempted to pre vent the escalation. Benjamin Franklin said : "After the first emission I proposed that we sholl1d stop, strike no more, but borrow on interest those we had issued. This was not then ap proved of, and more bills were issued."lo The process of issuing more and 1972 THE SCOURGE OF INFLATION 423 more of the currency and raising the amounts of single issues is easily explained. Once the money had been issued, it fell into pri vate hands in return for goods and services. The government no longer had _. access to the currency.

Congress then made further issues in order to have money to spend. The more it issued, the less the money was worth; larger and larger issues were made in the attempt to get the results that could be obtained by smaller is sues earlier. Reliance on paper money has - for these reasons, and more complex ones where there are combinations of taxa tion and fiat money financing - a pyramiding effect. Money vs. Currency Why did the government not recover the money in some way? In general, this could have been done eithe-r by taxation or by bor rowing, or some"combination of these methods. The government did not retrieve the money for about the same reason it was is sued in the first place, namely, to avoid taxes and because the credit of the Congress was not good. Before examining into the ques tion of taxation and borrowing, however, one justification offered for issuing paper money needs to be explored.

Curtis Nettels, a present-day historian, describes the j ustifica tion for a Continental currency this way: "The Union as a whole suffered from an acute shortage of hard money; all the coin in circulation in 1775 would not have paid a year's expenses of the Con tinental Army." Some men at the time of the revolution held that a certain indeterminate amount of money is necessary to facilitate commerce. They thought that money could be issued up to the point of meeting the need with out depreciating, but that once the point of sufficiency had been passed, the currency would begin to decline in value. It may not be an adequate reply to Professor Nettels to say that Congress could have issued $10 trillion in paper money and it would not have been enough to pay "a year's expenses of the Continental Ar my," but the statement is correct. The only way I can make sense of the earlier idea is to suppose they believed that price is something inhering in the item offered for sale rather than being determined by supply and demand. Some clar ity may be brought to the subject by distinguishing between money and currency. Money may be any thing which serves as a medium through which some transactions are made. Currency is that which serves generally in an area to effect transactions. All currency 424 THE FREEMAN July is money, but not all money is cur rency. Money becomes currency in one of two ways: either because it is wanted by traders and is in sufficient supply to effect trans actions, or because it has been made legal tender by some gov ernment. The only purpose for making a money legal tender is to force it into currency when it would not be the currency on its own merits. The very fact that Congress relied upon tender laws and used even harsher measures to give their bills currency should dispose of the argument that they were issued because of a shortage of hard money.

The real reason for the Conti nental currency issues, then, was that Congress and the states were attempting to finance the war without levying taxes directly. They are entitled to some sympa thy for the difficult situation in which they were trying to func tion, but no amount of sympathy alters the consequences of actions. Congress had no authority to levy taxes. With equal validity, it can be said that Congress had no au thority to issue money. The truth of the matter is that Congress had as little and as much power as it could manage to exercise during the period under consid eration. It had no constitution, hence, no constitutional limits on what it could do. Its members, however, were delegates from the states. It may well be that had Congress attempted to levy taxes it would have been repudiated by the states or by the people. At any rate, Congress did not even at tempt to levy taxes. It was not that the members could see no need for taxes. Congress declared, on many occasions, that the states should levy taxes. Elaborate sche dules were devised for apportion ing the costs of the war among the states. Solemn proclamations were issued urging the states to tax. For example, in 1777 Con gress admonished the states to "raise by taxation in the course of the ensuing year, and remit to the treasury such sums of money as they think will be most proper in the present situation of the in habitants. . .."11 States Under Political Pressure All this was of little· avail. The states were not much more in clined to levy taxes to pay for the war than Congress was. One historian sums the matter up in this way: "Before 1780, most of the states shrank from collecting taxes for any. purpose. Massachu setts did not vote any levy in 1776, and in 1778 resorted to a lottery to raise $2,000,000. Virginia wait eduntil 1781 before making a se rious attempt to obtain revenue from taxes. The performances of 1972 THE SCOURGE OF INFLATION 425 the other states were not much better."12 There are several rea sons for this state of affairs. For one, ~he hold of the state govern ments over the citizenry was some times precarious, particularly in states where Loyalists were numer ous. Extensive taxation might have jeopardized the tenuous at tachment which many had for their state governments. For an other, the objection to taxation without representation by the British must have turned into a more general objection to tax ation. This appears from the difficulty of collecting the taxes that were levied. "In Pennsyl vania, for example, from 1778 to 1781, less than half the taxes as sessedwere collected; it was not uncommon for citizens to slam the door in the tax-collector's face and get away with it."l;~ But, above all, legislators were curry ing favor with their constituents by avoiding taxati~n. Sumner said that the "governors of the States could not urge taxation and zeal upon the legislatures without a painful and unpopular contest.

The members of a legislature who laid taxes must expect to return to their constituents to face grum bling and popular dissatisfac tion." H Instead of taxing to retire the Continental currency, the states issued large amounts of paper money themselves. "The emission 'of all the states exceeded $200, 000,000. Virginia led the way, fol lowed by North Carolina; then came South Carolina. Georgia, Delaware, and New Jersey exer cised the most restraint."1;' A minor stream that added to this flood of paper. currency is sued by Congress and the states was provided by domestic loans. Loan office certificates and certif icates of indebtedness were issued to the extent of $20 million. III The loan office certificates circulated generally, one writer notes, "ef fecting essentially the same con sequences as would have attended the issue of an equal quantity of paper money."17 Paper Declared Legal Tender Successive interventions were made in the market, interventions which followed logically from the use of fiat money to finance the war. The first of these interven tions was to make the paper legal tender so that it would circulate as money. The specific actions to do this were by the states. For ex ample, the Council of Safety of Pennsylvania declared in 1776 that anyone who refused to accept the Continental currency would for feit whatever he refused to sell and be subject to a penalty besides - all this for a first offense -, and be banished from the state for a 426 THE FREEMAN July second offense.l 8 In the same year, Rhode Island made both state and Continental notes legal tender. In addition to providing penalties for not accepting this paper, that state prohibited the buying of specie with paper or differentiating in prices of goods when offered gold or silver instead of paper .19 Sometimes even more drastic measures were authorized to make people take the paper money.

When he was in command of forces at Philadelphia, General Putnam made this announcement: "In future, should any of the in habitants be so lost to public vir tue and the welfare of their coun try, as to presume to refuse the currency of the American states in payment for any commodities they may have for sale, the goods shall be forfeited, and the person or persons so refusing, committed to close confinement."2o In a similar fashion, George Washington was authorized to take goods from those who refused the Continental currency and to arrest and con fine them. 21 Rising Prices - and Controls With such Draconian measures to support it, the Continental paper money did circulate. But the more of it that was issued, the more it depreciated. The most no ticeable effect of this to the public was a general rise in prices. (Prices of particular goods and services rise and fall as demand and supply fluctuate even if the amount of money in circulation re mains stable. And, given blockades and the kinds of demands incident to war, some prices would have risen inevitably during these years., However, the price in creases were not only general but some of them are rises in Con tinental currency in relation to what they could be bought for in specie, which indicates that it was the currency which occasioned some of the increases.) Some of the state governments intervened in the market further by attempt ing· to fix prices. As frequently happens, the legislators sought to control the effect - the rise in prices - rather than the cause the increase in the money supply.

Congress recommended tha t re gional conventions be held to set prices for particular areas. The New England and Middle states held such contentions, but the Southern states south of Mary land steered clear of price con trols. After a convention had agreed upon the general features of prices, it was up to the indi vidual states to enforce the tariffs. The following is a description of penalties adopted by Rhode Island in 1777: The penalty of demanding more than the tariff price was set at the 1972 THE SCOURGE OF INFLATION 427 value of the article,- half to the State, and half to the informer. Any one who refused for his commodities the tariff price, and afterward sold them for any other goods, was to forfeit the value thereof, half to the State, and half to the informer. If complaint was made that articles necessary for the army or navy were withheld by monopolizers,· the State officers and Judges or any two J us tices of the Peace might issue a war rant to impress and seize the same, breaking open buildings. the goods were to be appraised by two indif ferent men at prices not to exceed those of the tariff. Anybody who contracted to receive for labour or goods more than the tariff rates was to be counted an enemy of the coun try, and fined twenty shillings for every article sold of the price of twenty shillings or under, and a sum equal to the value of the article, if it was worth more than that. 22 The price controls, where they were at all effective, resulted in shortages. John Eliot wrote from Boston in June of 1777 : "We are all starving here, since this pia guy addition to the regulating bill.

People will not bring in. provision, and we cannot procure the com mon necessaries of life. What we shall do I know not."23 What they did, of course, is what people ever do: evade the regulations, barter, blackmarket, produce a money that will purchase goods, and find a va riety of means to perpetuate the market, however inadequate they are compared to the opportunities in a free market. Army Requisitions By 1778, the armed forces were finding it increasingly difficult to acquire goods with paper money. "Though paper money was taken, with more or less reluctance, in return for most things, some serv ices were rendered only upon promises of receiving specie."24 George Washington wrote in 1779 that "a wagon load of money will scarcely purchase a wagon load of provisions."25 The country was in the grip of a runaway inflation. Every man of intelligence knew that the root cause was the in crease of the money supply (much as this is known in our day),· yet there was not the will to deal ef fectively with it.

To get supplies and transport, the army had to resort to its equivalent of barter, I.e., impress ment and requisition from the surrounding populace. There had been some impressment, particu larly of transport, from the be ginning of the war; but by the time of the Yorktown campaign in 1781 this method seems to have been relied upon almost exclu sively.26 There was more and more of this done before 1781, how ever. By the latter part of 1779, supplies in general were being 428 THE FREEMAN July requisitioned. On December 11, 1779, Congress "voted requisitions on the States for specific supplies of flour and Indian corn. Decem ber 14, they established a system of requisitions and contributions of this kind, Maryland alone vot ing no. February 25, 1780, an elaborate apportionment of req uisitions for such supplies was made. . . . Each State was called upon for the staples which it pro duced."27 The most drastic impact of in flation is that it tends to disin tegrate and divide society, to turn employee against employer, the governed against the governors, the creditor against the debtor, the prod ucer against the consumer, the populace against speculators, and so forth. Inflation tends· to re verse the rules of economic be havior: where once it was prudent to save money, it becomes expedi ent to spend it; where once it was good business to supply consumers with durable goods, it becomes profitable to delay the sale; where once creditors were those who were better off, it now becomes good business to borrow money and repay it with a currency that is less valuable than when the loan was made. The solid citizen who is cautious and prudent can do well over the years by hard work, care ful investments, and saving, when the money supply is stable.

His prosperity may well be de scribed as virtue rewarded. Infla tion sets the stage for wealth to be gained in a different fashion: by borrowing, by holding on to goods for the inevitable higher prices, and by attending closely to the swift changes in the value of the money. Such means of gaining riches are widely resented, par ticularly during a war. Unhappy Consequences of Rampant Inflation Men contemporary with events frequently described the conse quences of the inflation as well as could be done. Josiah Quincy wrote these words to General Washington: I am firmly of the opInIon, and think it entirely defensible, that there never was a paper pound, a paper dollar, or a paper promise of any kind, that ever yet obtained a general currency, but by force or fraud, generally by both. That the army has been grossly cheated; that creditors have been infamously de frauded; that the widows and father less have been oppressively wronged and beggared; that the gray hairs of the aged and the innocent, for want of their just dues have gone down with sorrow to their graves, in consequence of our disgraceful de preciated paper currency .... 28 By 1778, John Adams could say that "every man who had money 1972 THE SCOURGE OF INFLATION 429 due to him at the commencement of this war, has been already taxed three-fourth parts of that money.

. . . And every man who owed money at the beginning of the war, has put three-fourth parts of it in his pockets as clear gain. The war, therefore, is immod erately gainful to some, and ruin ous to others."2D A historian who lived through that period has written: The aged who had retired from the scenes of active business, to en joy the fruits of their industry, found their substance melting away to a mere pittance, insufficient for their support. The widow who lived comfortably on the bequests of a de ceased husband, experienced a frus tration of all his well-meant tender ness. The laws of the country inter posed, and compelled her to receive a shilling, where a pound was her due. The blooming virgin who had grown up with an unquestionable title to a liberal patrimony, was legally strip ped of every thing but her personal charms and virtues. The hapless or phan, instead of receiving from the hands of an executor, a competency to set out in business, was obliged to give a final discharge on the pay ment of 6d. in the pound. In many instances, the earnings of a long life of care and diligence were, in the space of a few years, reduced to a trifling sum. . . .

That the helpless part of the com munitywere legislatively deprived of their property, was among the lesser evils which resulted from the legal tender of the depreciated bills of credit. The iniquity of the laws estranged the minds of many of the citizens from the habits and love of justice. The nature of obligations was so far changed, that he was reckoned the· honest man, who from principle delayed to pay his debts. The mounds which government had erected, to secure the observance of honesty in the commercial intercourse of man with man, were broken down. Truth, honor, and justice were swept away by the overflowing deluge of legal iniquity .... 30 Decay of Public Virtue George Washington wrote: "Speculation, peculation, engross ing, forestalling, with all concomi tants, afford too many melancholy proofs of the decay of public vir tue .... " And a writer to a New Jersey paper assessed the blame for this: "I do not say that the abundance of money is the only ca use of the decay of virtue or in crease of vice, but I say it is a very principal cause, it operates more this way than any other, yea, than all other causes put to gether ."31 The inflation contributed much to the ~ss of confidence in the Congress, the state governments, and the very cause they were com mitted to at the time. The idea was advanced, when the first issues of paper money were made, that 430 THE FREEMAN July its becoming currency would help to tie people to the cause of inde pendence. Since the fate of the money - its eventual redemption - would depend upon the success of the revolt, those who came into possession of it would be commit ted to victory. So it might have been, I suppose, if the Congress had been content with one or two issues, if the states had refrained from issues, and if the governments had then turned to direct taxation. But the effect of issuing more and more was not only to re duce the value of the money but also to undermine confidence in the governments which issued it.

In fact, people began to suspect rather quickly that Congress would eventually repudiate its paper. To counter this fear, time and time again Congress reiter ated the determination to redeem The Function of Price .THE PRICE SYSTEM is the control board, the regulator, the ther mostat - as it has been variously put - by which economic conduct is determined in a private-enterprise economy. The guidance provided by prices has two main aspects. In the first place, by setting up judgments as to the significance of each factor the price system calls forth and allocates the available pro ductive resources. Under the influence of price each factor flows into the channel which - according to the market's evaluation promises the greatest result. In the second place, through the same market appraisal that directs the utilization of productive factors, the price mechanism awards shares in output to those who furnish personal services of various kinds, to those who - by accumulating and investing - provide the tools, and to all others who make con tributions in the opinion of the market. Moreover, prices chart the course of the consumer as he utilizes the general claim to output which has been awarded to him.

From Shirtsleeve Economics: A Commonsense Survey by William A. Paton 1972 THE SCOURGE OF INFLATION 431 it and denounced those who said that it would be otherwise. In 1778, Congress adopted the follow ing resolution: "Whereas a re port hath circulated in' divers parts of America, that Congress would not redeem the bills of credit issued by them to defray the expenses of the war, but would suffer them to sink in the hands of the holder, whereby the value ,of the said bills hath, in the opin ion of many of the good people of these States, depreciated ; and lest the silence of Congress might give 'strength to the said report; resolved that the said' report is false and derogatory to the honor of Congress."~::! One writer notes that "as paper money depreciated more ,and more, the pledges of Congress in respect to its redemption were more frequent and intense in form of expression."33 They Tried to Stop Congress resolved in September 1779 to issue paper money only to the total of $200 million. "Upon this mountain of paper," a mod ern historian has written, "Con gress resolved to make its final stand. . . . But . . . the defiant proclamation of September 1779 proved the signal for another sharp selling wave in Continental money. By January 1780, the army was paying for supplies twice what it had paid in September 1779; and by March 1780, prices had risen four times above the level of September 1779."34 At that point, Congress began the outright repudiation of its paper, though the culmination was to come later. In March of 1780, Congress devalued the currency by proclaiming that it should now trade at forty to one of gold or silver. To finance this exchange, new paper money was to be issued to be redeemed by the states by taxation. An elaborate plan was contrived for the retiring of the old currency and replacing it with the new. The plan did not work.

There was no reason why it should. If the new money was more valuable than the old, it would not circulate, according to Gresham's Law, assuming the old money was still legal tender. In fact, the new money quickly fell to the same value as the 01d,35 and the whole became virtually worth less by 1781. In March of 1781, Congress abandoned the accept ance of its own paper money as legal tender. It was now to be ac cepted only on a sliding scale that was supposed to represent its de preciation. Thereafter, it depreci ated so rapidly that it shortly ceased to circulate at al1.3G Specie came out of hiding and replaced paper money as the currency of the land. All these untoward events might 432 THE FREEMAN July be accepted as the cost of the war, but only if the currency had enabled the Congress to bring the resources of the country to bear on the war effort. That, however, was emphatically not the case. On the contrary, the paper money plus the absence of significant tax ation tended to disperse the re sources of the country and the energies of the people. Congress and the states were continually short of money, whereas the pop ulace had an abundance. In con sequence, the production, trans port, trading, and provision of goods and services were concen trated on the civilian population, and the armed forces received short shrift.

Suppliers Refuse to Cooperate In the later stages of the war, as already noted, the army had to abandon the use of the paper mon ey substantially and turn to direct methods to get goods and services. This was not only an inconvenient and inefficient method of gather ing material but also made people resent the army. For example, here are reports of the situation in Vir ginia in 1781 - at a time when a major British army was concen trated there and Washington was about to win his greatest victory. An agent sent to impress trans port reported: "I have been much perplexed, for after having impressed them, the owners of some, by themselves or others, have taken, in the nighttime, a wheel or something to render them use less; and I don't recollect any law to punish them, if it could be proved." The Quartermaster wrote to the war office: "Let me entreat, sir, that something may be done to draw the people with their means of transportation into the service willingly. I find them so opposed to every measure that is oppressive that it is almost im possible to effect anything of con sequence that way. Many of the' teamsters upon the late occasion have deserted with their wagons after throwing their loads out at improper places .... "37 Nor were taxes in kind a way to get goods where they were wanted.

General Washington wrote to the President of Pennsylvania in 1782: "A great proportion of the specific articles have been wasted after the people have furnished them, and the transportation alone of what has reached the army has in numberless instances cost more than the value of the articles themselves."38 It is not difficult to explain why this was so. The com modities had been taken without reference to a particular need, had been stored where no army might appear, except by accident, and were often spoiled when they were wanted. By contrast with this poor 1972 THE SCOURGE OF INFLATION 433 form of barter, the market is an efficient and felicitous device when acceptable money is in cir culation; the market tends to make the goods available where and when th~y are wanted, and .moneyis flexible: it can call forth a variety of goods. The American cause was not lost as a result of the inflation.

It was won despite the inflation. But victory was almost certainly delayed for several years; much suffering resulted; and the peopIe's confidence had been sorely tried. Indeed, we have not finished yet in this work with the conse quences of the inflation, for they followed into the Confederation period. But the lessons of the ex perience were not lost on the leaders of that generation. In time, they were used to try to prevent a recurrence of the mis takes. Unfortunately, we cannot report that these lessons are still remembered to the seventh gen eration. t) • FOOTNOTES • 1 Curtis Nettels, The Emergence of a National Economy (New York: Holt, Ririehart and Winston, 1962), p. 42. :2 Quoted in Albert S. Bolles, The Fi nancial History of the United States, I (New York: D. Appleton, 1896, 4th ed.), p.208. :~ See N ettels, Ope cit., p. 24. -Ie See William G. Sumner, The Finan cier and the Finances of the American Revolution, I (New York: Dodd, Mead, and Co., 1891), p. 98. Sumner indicates that one estimate runs well over $300 millions, but that it includes reissues.

5 See John R. Alden, A History of the American Revolution (New York: Alfred A. Knopf, 1969), p. 255. G See Bolles, Ope cit., pp. 150-57. 7 N ettels, Ope cit., p. 24. 8 Bolles, Ope cit., p. 39. !) Ibid., p. 43. 10 Ibid., p. 39. 11 Ibid., p. 193. 12 Nettels, Ope cit., p. 24. 13 John C. Miller, Triumph of Freedom (Boston: Litt1e~ Brown and Co., 1948), p.458. H Sumner, Ope cit., p. 274. Hi Nettles, Ope cit., p. 25. 16 Samuel E. Morison, The Oxford His tory of the United States (New York: Oxford University Press, 1965), p. 230. 17 Bolles, Ope cit., p. 260. 18 Ibid., pp. 121-22. II) Sumner, Ope cit., pp. 46-47. ~o Bolles, Ope cit., p. 119. :n I bid., p. 121. ~2 Sumner, op. cit., pp. 56-57. ~:{ Ibid., p. 61. ~-Ie Bolles, Ope cit., p. 68. ~G Ibid., p. 132. ~() See Sumner, op. cit., pp. 142-52. ~7 Ibid., p. 239. ~8 Bolles, Ope cit., p. 139. :29 Ibid., p. 128. 30 Ibid., pp. 176-78. :n Ibid., p. 216.

32 Ibid., p. 206. 33 Ibid. 34 Miller, Ope cit., p. 463. 35 See Sumner, Ope cit., p. 86. 36 Ibid., pp. 94-95. 37 Ibid., pp. 152-53. 38 Ibid., p. 243. Next: The American Triumph., The PineIree Shilling KEVIN CULLINANE BOSTON was a hustling frontier trading center in 1652 when a young goldsmith, at the urging of hard-pressed merchants and arti sans, began minting coins of value they could trust. Only 32 years had passed since the landing of the Mayflower, but already the industrious frontiersmen suffered from having debased European coinage traded off to them before they could learn of the latest cur rency inflations being worked by the rulers of Europe. Dutch ducators, guilders, rix dollars and ryals; Portuguese j 0 annes, moidores, reis, and crusa does; French livres; and Spanish doubloons, rials, dollars and pis toles circulated side by side with English coins in the colony whose merchants were eager to trade with all comers.

But what to do about the fluctuMr. Cullinane is co-founder and Academic Director of the Academy of the Rockies, a one-year work - study - adventure prep school at Bonners Ferry, Idaho. 434 ating values of these varied Euro pean coins so unpopular in local trade? The answer to their coinage problem came at a meeting in Boston in 1652 when the men of the business community agreed among themselves to purchase, use, and mutually honor coins which would be produced by a local goldsmith. Accordingly the colony's General Court granted a franchise to Capt. John Hull and his partner, Robert Sanderson, to mint twelvepenny, sixpenny and threepenny coins .. The early Puri tans were ready to turn to the marketplace for their money, sturdily ignoring the prohibitions of their English rulers. The twelvepenny coin became the famous Pine Tree Shilling. After several modifications it was stamped with "Masathusets" and a pine tree on one side, and "1652"

and "New England" on the other. Today the coin is little men tioned in books, articles or pam phlets dealing with coinage and 1972 THE PINE TREE SHILLING 435 monetary problems and that's too bad, for of all the marketplace coins produced in America, the Pine Tree Shilling was the first, and one which adhered most close ly to the principles of coinage in tegrity. The particularly sound policy of the Pine Tree Shilling minters was their practice of striking coins only when a custo mer came to their shop, bringing his own silver with him.I What a check on inflation! Most minters - government or private - using their own supply of metal, mint coins in whatever quantity they think expedient, and assign them a value. The metal mayor may not be of high value; a dollar coin may be minted of 90t worth of silver, for instance, . or lOt worth of cupro-nickel. The difference between the lOt worth of metal and the $1.00 cost to the public is kept by the mint. That difference is called seignioralge, implying a lordly right of the rul er to such profit.

This system of minting allows the minter - in most cases the government - to control and man ipulate not only the quality of the currency, but also the quantity 1There are a few other instances of this minting policy in American history. For an interesting account of post-Revo lution private minting see, William C. Wooldridge, UNCLE-SAM THE MONOP OLY MAN (Arlington House, New Ro chell, New York) Chapter 3. which will be available to the marketplace. This is why it is said that those who control the cur rency control the commerce of a country. Captain Hull and Robert Sand erson did not control the quantity of coinage minted for the market place; the marketplace - their cus tomers - controlled the quantity. The two minters limited them selves to guaranteeing the quality of the coins. They produced 100 shillings for every fifteen ounces of silver brought in by their cus tomers; each shilling was guar anteed to contain .15 ounce of silver. In establishing the silver quality they desired, the merchants and the General Court purposely kept the content of silver at three fourths that of the English shil ling. They hoped thereby to keep the coin in the Boston area and to prevent its moving, a La Gresham's Law, into European trade.~ ~ In this the Bostonians were foiled; the coin did move out into international trade. Because the Pine Tree Shilling contained the same quality alloy as the English Shilling, it did not matter to the Europeans that it was a lighter coin. Its value was simply three-fourths the value of the English Shilling - if the English Shilling was valued at twenty cents, the Pine Tree Shilling's value was fifteen cents. As a result of this international acceptance, the General Court attempted to halt its· natural outflow by imposing a heavy fine upon anyone caught export ing more than twenty of the coins.

436 THE FREEMAN July An Honest Assay Into Hull's small mint came silver buttons, tankards, goblets, knives, old sword hilts, spoons and European coins to be assayed, melted down and converted into the Pine Tree Shilling. Bullion from Peruvian mines, sometimes taken by privateers from Spanish galleons, found its way to the Boston melting pot as well. Often the pieces to be melted contained a higher percentage of silver than the finished coins, which were alloyed with copper, so an honest assay was important. To determine the silver content of the variously shaped family pieces brought into their shop, the two men used the technique developed nineteen hundred years earlier by Archimedes: the pieces to be melted were \veighed, then sub merged in a tub of water which was filled up to an overflow spout so that the object spilled its exact volume of water into a measuring vessel beneath the spout. Given the volume of the object and its weight, the minters computed the percentage of silver it contained.

Their fee was handsome - they kept one out of every twenty shil lings minted plus wastage - but their risk was great as well, for though they were providing a much needed service, they were also turning their backs on a restriction imposed by the English government which expressly for bade private coinage in the col onies. Risky it may have been, but the Bostonians were ever an in dependent lot, and they needed honest coinage in their commerce. With reliable coins of intrinsic value, hard work by the colonists was more easily rewarded. Mer chants and artisans could sell their goods or labors rather than barter, and they could save the coins they received until they wanted to spend them. So useful and popular was the Pine Tree Shilling that the English government chose to ignore its existence rather than attempt to suppress its circula tion; an important early step toward independence was taken 129 years before that fateful April morning in Lexington.

After the American Revolution - and both before and after the Constitution - private minters supplied Americans with coins of integrity, and thousands of mer chants have minted private tokens to be used in their transactions. But the proud silver coin - the Pine Tree Shilling - was the first. And like so much that emanated from the first generations of New Englanders, it was honest, inde pendent and reliable; an impor tant part of our free-market heri tage. ~ DAVID J. MANDEL It is my argument that an analy sis of our experience with zoning laws since the passage of New York City's comprehensive zoning code of 1916, the model for most of the zoning codes of the United States, compels the conclusion that zoning laws do not accomplish what they were supposed to ac complish, that their premises are faulty, that zoning is an irre·· deemable failure, and therefore, that zoning laws ought to be re pealed. The argument is made with special reference to New York City but without limitation to it or to metropolitan areas.

A proposal to repeal any 20th century social regulatory legisla tion is usually greeted with a sharp intake of breath and then Mr. Mandel is a practicing lawyer in New ~ork City. This article is reprinted by permis sIOn from the December 1971 issue of The Architectural Forum. Copyright 1971 by Whit ney Publications, Inc. the muttered pejorative, "laissez faire." Zoning codes, an expres sion of our desire to act rationally and to use the tools of modern sci ence to respond to human needs, have until quite recently been gen erally regarded as immune from fundamental attack. In the last few years even the most passion ate admirers of the idea of zoning have noticed that zoning laws are not entirely benign. The time is ripe to consider afresh the premi ses of zoning and its effects. A modern comprehensive zon ing code draws a map dividing the area into separate use zones, com mercial, residential and industrial, usually further broken down into subzones. (The latest New York City zoning code, 1960, establishes 41 types of commercial zones, 12 types of industrial zones, and 13 types of residential zones.) Be sides establishing use zones, zon437 438 THE FREEMAN July ing codes set formulas regulating the bulk and height of structures within each zone and subzone.

The social value of legislating separate use areas is open to seri ous question. To be sure, separa tion of land uses is a natural proc ess that occurs in the absence of zoning. It is natural for businesses to cluster, for heavy industry to occupy certain terrain, for single character residential areas to de velop at certain places at certain times. To the extent that zoning simply recognizes the natural proc ess, it changes nothing and causes no loss. Wherever zoning has op erational effect it mandates a use that is not natural (i.e., one that would not occur in the absence of zoning) and perforce it man dates an unnatural allocation of resources that tends to impover ish the total community. In con temporary terms, it is bad ecol ogy. It is bad ecology partly because it regards the interest of some proximate land users as the equiv alent of "the general interest." The entire organism, the total community, is thrown out of bal ance for what is presumed to be the interest of a local part. As sume, for instance, that an area is zoned for one-family homes, minimum lot size one-half acre, and that a builder proposes to build a highrise apartment building on a part of that area. The proximate land users, or even only a majority of them, want zoning restriction as protection for their interest in maintaining "the char acter of their community." But protection of their interest means a loss to the owner of the land, an injury to his interest; it de prives workmen of jobs; it de prives the potential apartment dwellers of the opportunity to rent or buy quarters that they might want and be willing to pay for. It prevents concentrated use where concentrated use is indi cated by the willingness of some one to risk his money and conse quently condemns a greater quan tity of land to development in order to house the same popula tion.

Is It Fair? One may also question the fun damental fairness of allowing the residents of subdivisions to use the political process to insure that their neighbors will not live in apartment houses or be less af fluent than they, or will not con struct homes appreciably smaller than theirs, or build a factory. In effect, zoning grants to a local ma jority the right to exclude which is the essence of ownership. The rationale for allowing B to exercise rights of ownership over A's land ought to be found in the 1972 ZONING LAWS: THE CASE FOR REPEAL 439 impact to B of A's proposed use of A's land. Any use that A puts his land to will have some impact on B. On one end of the scale are those uses that palpably impact on B, those uses that may be thought of as "overflowing uses." When A creates noxious smells that waft over to B's land or A creates noises that substantially disturb B, A is really using not his own land but B's. The fairness 'of al lowing B or a governmental agency as representative of B, to restrain A from overflowing use seems clear. Traditionally such conduct is controlled by the law of nuisance, civiI and criminal.

The case is otherwise where A's proposed use has "minimal" impact on B's enjoyment of his land. Then the Common Law is neutral, confessing its inability to judge, absent overflowing use, whether there is greater merit in A's proposed use or in B's de mand that it be restrained. Since in this example it is impossible to discern rationally whether there is more merit in one course or the other, the basis for zoning's claim to fairness must rest elsewhere than in its ability to balance com peting interests fairly. Restraining the Majority It is in the employment of the political process, the will of the majority as expressed· by a fairly conducted vote, on which zoning's claim to fairness must rest. But to equate "majority rule" with "fair ness" or "democratic process" is terribly inexact. We may assume that "majority rule" is fair when applied to the political process (al though its best justification is practicality, not fairness). But we are bound to conclude that the hall mark of the democratic state is its restraint in applying the political process to the activities of its citizens.

Since zoning is only one of a host of forces shaping .land use it is difficult to measure its practical effects. There certainly is no evi dence that the introduction of comprehensive zoning has im proved the amenities of cities and substantial evidence that it has reduced them. Changing Technology The draftsmen of the 1916 zon ing code of New York City began their work in 1913 and it lasted without substantial revision until 1939. Like all zoning plans it was drawn in the light of technology generally available some years earlier and it was addressed to problems set in motion decades or centuries earlier and then appar ent~ The decent motives of those draftsmen and their competence are unquestioned but. their for ward vision had to be small. Their 440 THE FREEMAN July image of the ideal city was heav ily tinted by their memories of a more bucolic and less populous city of their youth. They were constrained to project the future as a virtually straight-line exten sion of the past. They simply could not (nor could anybody else) an ticipate and plan for the tumultu ous events of the next 23 years: United States entry into World War I, the virtual cessation of im migration. after 1924, the Great Depression, the ubiquitous and ferocious automobile, aircondition ing, the supermarket, penicillin.

Clouded Crystal Ball The planners' cloudy crystal ball, focused on the presumed unhealth iness of the towering office building, engendered the zoning ziggurats, the wedding-cake build ings that mar the horizon without lessening congestion in any mean ingful way or adding to the com fort of office workers. The zoners' fondness for and familiarity with row houses and their evident an.. tipathy to tenements promoted the construction and the retention of smaller houses. Dwellings adequate according to the standards of 1919 or 1925 but decrepit and dilapi dated 30 or 40 years later often cannot be restored to livability and economic usefulness because of zoning restrictions. Inner city areas are thus condemned·~ to total devastation before rebuilding can begin. Neighborhoods that might have survived in changed but rec ognizable form are totally oblit erated, their diversity and their humanity trucked away with the rubble.

Lack of Flexibility The consequences of the inher ent lack of flexibility of zoning are multifarious. Some land stays idle awaiting industrial use that never arrives. The assemblage of economically buildable parcels is made unnaturally expensive be cause builders must pay not only for the inherent value of land but also for the value conferred by zoning. Tax rolls are permanently maimed and the economic viability of the city endangered because tax concessions can be extracted for large scale development where small scale and piecemeal rebuild ing is hampered by zoning restric tions. Long after neighborhoods have been thoroughly run down and all but abandoned they con tinue zoned for residential use, the nonresidents thereof protected from industrial incursion. Where zoning's mortmain prevails, sound residences now too large for sin gle-family occupancy will often de cay to total uselessness before a new use as shop, store or multi family residence is permitted by grant of variance or rezoning. The 1972 ZONING LAWS: THE CASE FOR REPEAL 441 hub city stagnates while green areas at the city's fringe or in .the suburbs are paved over. Multi tudes are condemned to commuter trains who, but for zoning, might have lived in comfort close to their work.

Freedom Encourages Excellence One of the goals of zoning was a better-looking city. Sadly, the goal remains unrealized. Zoning provokes monumental errors. Dis satisfied with the wedding-cake structure induced by the previous code, misled by the fortuitous ex cellence of Lever House and the Seagram Building, the 1960 code draftsmen granted height premi ums for deep, ground-level set backs. The result: Sixth Avenue, lined with surly, remote towers disdaining mere commerce, with out a drug store or a delicatessen, inhullUlnly neat, without shelter or human scale for three-quarters of a mile. Repealing zoning is no guaran ty of architectural excellence. One thing is certain, ugly buildings will continue to be built. But archi tectural excellence is encouraged by· freedom not by conformity to stale committee judgment. Variances and rezoning are in sufficient remedies for zoning's rigidity, its basic conservatism.

Both do add some flexibility; both are objectionable. Proceedings for variances from zoning's rigors, limi ted in scope to begin with, are expensive and time-consuming. They are a potent source of graft and. neighborly extortion. Spot re zoning is so patently unfair it is unconstitutional. Comprehensive rezoning has to be so infrequent that it adds only minimal flexibil ity. "Discretionary zoning" is un disguised tyranny. A Proper Blend·of Uses Has zoning increased the amen ities of the city by legislating the separation of residential, commer cial and industrial use zones? In much of New York City an ob server uninformed of the exist ence of such zoning would be hard pressed to discover it for most areas exhibit a blend of uses. In much of Manhattan, for instance, the separation is a matter of a few feet, around the corner, across the street. Even so, Park Avenue be tween 59th Street and 95th Street is no more pleasant and a lot dull er without stores and offices than Madison and Lexington with them.

In mid-Manhattan and for certain people, at least, the quality of life is not diminished by proximity to commercial activities and may even be enhanced by it. Vertical separation is sufficient for comfort. Indeed, the City of New York has recently begun to encourage the construction of buildings with 442 THE FREEMAN July offices and stores below and apart ments above, an arrangement that zoning restricted for 50 years. The minimum conclusion is that a blend of commercial and resi dential uses does not by itself make for unpleasant living. Residential and Industrial The compatibility of residential and industrial use turns entirely on the question of overflowing or nuisance use. -There is otherwiRe no categorical answer to the ques tion of whether the operation of a factory at any spot on a map will diminish the amenities of a near by residential area. Zoning treats the problem of overflowing use in the grossest terms, quarantining the patient instead of trying to cure the disease and coincidentally creating enormous traffic prob lems by confining factories to re mote areas. To assert that this quarantine approach of zoning has contributed to the intensity of our present pollution problems is not wrong. Governmental coercion ought to be directed at compelling factories to confine their business to their own land so that they are unobjectionable neighbors wher ever they are. The quality of life is not and ought not to be depend ent upon legislative separation of residential and industrial areas.

Zoning's bulk and height limita tions turn out to be equally irrelevant to the quality of life. People can live and, work in very large buildings in great comfort and in smaller ones in squalor; the con trary is also true. Old Problems Remain; Zoning Brings New Ones From these conclusions one fur ther conclusion can be drawn. The unlovely city is not caused by a lack of zoning and is not helped by zoning. Zoning simply creates a new set of problems. No zoning plan can be devised that does not exhibit the de'adly defects of the zoning plans dealt with here. Zoning plans face the problems of the future with the full confidence that they can pre vent 1915 or 1938 or 1959 from ever coming back. They are and have to be drawn in the light of old technology, old resources, old problems and old ideas. They are inherently inflexible, unable to ad just to new technology, new re sources, new ideas, new needs.

Zoning plans can confer order, but the order is the order of the ceme tery or Williamsburg. Zoning, like all ecosystem modifications, itself produces effects unforeseeable when the plan is made. The great er zoning's scope the greater the chance that these unforeseeable effects will cause monumental and persistent harm. To argue that the huge size and complexity of mod1972 ZONING LAWS: THE CASE FOR REPEAL 443 ern cities make imperative the im position of zoning is quite un true. The larger and more com plex the ecosystem the less likely that it can be controlled by plans set years before. After a half-century of compre hensive zoning in an era of in ,cT,easing regulation it may be somewhat haTd to accept the idea that places can flourish without zoning, but they always have and Incompatible Systems they do so now.1 For all· these rea sons I conclude that the· most ac ceptable order of land use will arise without zoning just as the public press will have its most ac ceptable order without censorship.

1 Though my grandfather warned me that "'for example' is no proof," inter ested readers are directed to examine Houston, Texas, which has never been zoned and which is the subject of an ad mirable article by Bernard H. Siegan, "Non-Zoning in Houston," Journal of Law and Economics, April, 1970. ~ IDEAS ON LIBERTY By DEFINITION, zoning is an interference with the right of owner ship. When an owner of a property lnay use such property, con sume it, give it away, exchange it - all as he wi~hes - that is ownership. Zoning reduces his latitude of action by political restrictions that prevent certain possible uses and require others. Zoning and owning are different systems of determining land use. Either the land will be privately owned and its use determined by the owner to his greatest satisfaction from the choices available to him in the market place, or the land will be used as directed by government.

Zoning and owning are incompatible. Since the former is an interference with ownership, zoning at best is a "respectable" mid-twentieth century form of theft of an owner's right to own. Whenever the right to own is removed, restricted, or eroded in any manner, society declines toward a lower level of economic goods that is matched by a lower level of spiritual and moral values. Fl'om "Zoned 01' Owned'?" by J 0 H N C. SPA R K S A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN PLAYING the percentages may let you down: a well-protected polit ical candidat.e, for example, can be shot in a suburban shopping cen ter by a kook trailing him from a distant city, which means there is no absolute safety anywhere. But David and Holly Franke, distressed by poll findings that one American in eight would like to move abroad to escape crime, drugs and long distance busing to poor schools, decided to go by the percentages anywa,. They got out the FBI crime reports, looked up the places with low rates of homicide and forcible rape, and wrote to a thou sand promising U.S. communities for information about local condi tions. Then they set out on an au tomobile tour of America to have a look at forty-six communities 444 where it seemed that life might still be happy, tranquil, profitable and at least relatively free of the fear that the U.S. is doomed to a continuing steep decline.

The result of this unique odys sey is a gigantic volume of 932 pages, Safe Places (Arlington House, $13.95). The book is part narrative and description, part so ciological analysis, and part ency clopedia. The easy reading alter nates with the dry statistics of real estate offerings, job oppor tunities, teacher-pupil ratios, pub lic tennis courts and all the other things that one must consider if one is to pull up stakes and make a move to a new place. Thus the book makes its appeal to two class es of reader, the person who wants an answer to the question of 1972 SAFE PLACES 445 "Whither America? ," and the gen uine seeker for' a new life where he won't be mugged or murdered if he takes a little stroll after dark. The first type of reader will skip much of the material that tells of such things as the avail ability of savings banks and the proximity of golf courses; the sec ond type, with real commitments to make,will want to ponder ev ery word.

Good News - and Bad The good news of the Frankes' book is that there are many spots throughout America that retain their beauty and their calm along with the opportunity to make good livings at interesting jobs. They can be found in New England, in towns such as Farmington, Con necticut, or Camden, Maine; in the Deep South along the Gulf Coast (Fairhope, .Alabama, sounds abso lutely delightful) ; in Arizona (the Flagstaff area); even in the sup posedly flat Middle West (see Tiffin, Ohio, or Winona, Minne sota.) Surprisingly, there is a safe and lovely town within shouting distance of New York, as the Frankes learned by dalliance in Nutley, New Jersey. Highland or lowland, desert or four-season Northland, there are good places for all tastes in the continental U.S. There are, nonetheless, disturbing factors that the Frankes make no attempt to hide. One particu larly disconcerting thing about the book is the way the authors have to squirm to get away from the in terwea ving hippie and drug prob lems, which tend to be peripatetic.

Our travelers blame the populariz ing effects of TV and the return of college students for the fact that drugs are almost universally available. Another worry is the spill-back from California, which means that people are buying up the available properties and local businesses in Nevada, Oregon and Idaho, much to the dismay of Ore gon's Governor Tom McCall who wants to keep his State green and unpolluted. Florida and California both suffer from being too popular, and the drive of the American pop ulation into the Sun Belt could eventually inundate and spoil the southeastern corner of Texas, where the humus on alluvial lands runs 1,600 feet deep and the lem ons are bigger than oranges. Then there is the question of money: inflated currency may still buy good homes in Ogallala, Neb raska, and pay the one per cent city sales tax in Alpine, Texas, but how does the average pocketbook finance the search for safety in California? To the Frankes, Cali fornia is still a most glamorous State. So' it is with mournful hon esty that they feel compelled to 446 THE FREEMAN July report that earthquakes are not the only things that menace the good life west of the Sierras. Cali fornia, 'in fact, has replaced New York as the symbol of what has gone wrong with America. Look ing hard, the Frankes singled out as safe places three California communities - Belvedere on the north shore of San Francisco Bay, St. Helena in the Napa Valley, and San Marino, a southern California encla ve just off the ~asadena Free way. All of these places have low crime rates, with no murders or forcible rapes occurring in any of them for the year 1969.

The Price May Be High But to escape from San Fran cisco, which has a murder rate of 17.7 per 100,000 population, to a commuter's heaven in Belvedere demands a bank president's wad. Bayfront property in Belvedere starts at $90,000, "with $125,000 a more realistic estimate of what you would probably pay." As a real estate agent put it to the Frankes, "Marin County is like a country club - if you can afford to pay the dues, it's great." The cost, then, of getting one's children out of San Francisco, which fathered the Haight-Ashbury hippie culture, to safe Marin County is· so far be yond most purses that it won't bear thinking about. St. Helena in the Napa Valley is a better homebuying prospect, but it is more than an hour from San Francisco where the jobs (save for grapes and truck crops) happen to be. As for San Marino, near Los Angeles, the citizens have had to be a most stalwart breed to support their unusual police department. There is a constant 24-hour surveillance of the whole community, with a strict "House Watch" service and tough zoning that prohibits cer tain types of business that might attract the attention of criminals.

The police make checks every day at incalculable moments of all property that is empty. So, though San Marino is safe, it lives under a virtual state of seige. Small Colleges Are Soler Many of the places investigated by the Frankes happen to be col lege towns. But the rule is that a college must be small to add to the livability of a place. Moscow, Idaho, can "digest" the University of Idaho because the preponder ance of its 6,000 students are in agriculture, business, engineering, law, mines, forestry, wild life, ed ucation and economics. Unlike the liberal arts students when they exceed a critical volume, the "ag gies" and the business majors are serious types. Grinnell, Iowa, is another placid college town that has had no murders, forcible rapes or serious campus disturbances.

1972 SAFE PLACES 447 But, again, Grinnell is small and, with a faculty-student ratio of 1 to 10, its college is geared to rather intensive work. For Freeman readers, the Frankes' sidetrip from Grinnell to the Amana Colonies forty miles east of the town points an inter esting moral. The Amana Colonies were created by an Old World sect known as the True Inspirationists. Of German, Swiss and Alsatian ancestry, the True Inspirationists held things in common and hand ed down their skills from father to son. But in 1932 they switched to free enterprise and separated church from state. The change has brought great prosperity without any diminishment of the local craftsmanship. Safe Places is fascinating re porting, and the riches the book contains are far too numerous for citation in a short review. Whether you want to move for good, or merely want to travel, this is the book for you, and you, and you.

~ FREEDOM AND THE LAW by Bruno Leoni (Los Angeles: Nash Publishing Company, 1972, 204 pp., $7.50) Reviewed by Tommy W. Rogers THOSE WHO VALUE individual free dom, suggests the late Professor Leoni, should reassess the place of the individual within the present legal system· which is centered on and almost completely identified with legislation. While many today pay lip serv ice to the Romans and to the Brit ish for their legal wisdom, few realize how limited was the legis lation and, consequently, how great the sphere of the individual in both Rome and England during the centuries when their respec tive legal systems were most flour ishing and successful. Both the Romans and the Eng lish, Leoni writes, shared the idea that the law is something to be discovered more than to be enact ed, and that nobody is so powerful, or so righteous, as to insist that his own will be made the law of the land. Today, ordinary legisla tion and even constitutions and codes are presented, not as the re sult of an orderly historical proc ess, but as a new approach, through unprecedented decisions, to what the law should be. Legis lation has come to resemble a sort of dictate that the winning major ities impose upon the minorities.

Leoni decries the current tend ency to identify law exclusively with legislation and written stat utes to the neglect of common law, custom, convention, tacit rules and private spontaneous .adjustment. He deems it questionable that leg islation should be used as a means of subjecting minorities. "It also 448 THE FREEMAN July seems unquestionable that we should reject the legislative proc ess 'whenever it is possible for the individuals involved to obta,in their group objectives without de pen(Ung upon the decision of a. group and without actually con straining any other people to do what they would never do without constraint." Leoni maintains that blind ac ceptance of the contemporary legal point of view will lead to gradual destruction of individual freedom of choice in politics, the market, and private life. The contempo-' rary legal point of view means the increasing substitution of group decisions - majority rule for individual choices.

Leoni notes the semantic confusion in the words "freedom" and "constraint" and examines the re lation of freedom to such concepts as the "rule of law," "equality be fore the law," and "representative government." He discusses such topics as rent control, privileges and immunities granted to labor unio'ns, and the general prolifera tion of statutory and administra tive law. Freedom and the Law grew out of Professor Leoni's lectures at the Fifth Institute on Freedom and Competitive Enterprise at Claremont Men's College in 1958. The current edition of the book (first published in 1961) is sponsored by the Institute for Humane Studies, Inc., Menlo Park, Cali fornia. ~ HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each ORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 tile Freeman VOL. 22, NO.8· AUGUST 1972 Are We MarxiansNow? Hans F. Sennholz 45,1 How Marxian views affect American attitudes regarding class conflict, monopoly, and international affairs.

Free Enterpriseand the Russians Erik von Kuehnelt-Leddihn 461 A survey of the prospects for a return toward freedom in the USSR. The Foundingof the American Republic: 13. l'he American Triumph ClarenceB. Carson 471 The military victory and the peaceful triumph of freedom that followed. Energy:the UltimateRaw Material James Wei 486 An outstanding Chemical Engineer distinguishes fact from fiction in the continuing search for a clean and adequate energy supply. The Natural Historyof GovernmentalIntervention MiltonFriedman 497 How one intervention leads to another, with effects the opposite of the good intentions. Abortion:aMetaphysicalApproach Thomas L. Joh'nson 498 Concerning the life process and the stage at which a cell becomes a human being. Book Reviews: 506 "To Free or Freeze" by Leonard E. Read "What, How, for Whom: The Decisions of Economic Organization" by Henry N. Sanborn "Imputed Rights" by Robert V. Andelson Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

tile Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON-ON-HUDSON, N. Y. 10533 TEL.: (914) 591-7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN 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. 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, 1972, 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; 10 for $2.50; 25 or more, 20 cents each.

THE FREEMAN is available on microfilm from Xerox University Microfilms, Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Per mission granted to reprint any article from this issue, with appropriate credit, except "The Founding of the American Republic," and "Energy: the Ultimate Raw MateriaL"

HANS F. SENNHOLZ _-..AREWE MARXIANS •NOW~__ IDEAS are the forces that lift or destroy civilization. They bring peace and prosperity, or breed wars and revolutions. Ideas shape our laws and institutions, and gov ern individual action and social relations. No wall or boundary can forcibly retain an idea. It sweeps around the earth like a storm that spares nobody. Ideas are stronger than bombs and missiles, they are mightier than an armada with megatons of explosives. The philosophical, social and economic ideas of Karl Marx have been more influential than those of all other socialists. They have had, and continue to have, a pro found impact not only on the lives of billions of people living in com munist and socialist societies who Dr. Sennholz heads the Department of Eco nomics at Grove City College and is a noted writer and lecturer on monetary and economic principles and practices.

worship him as their apostle and master, but also on the thoughts and policies of all others. Surely, no one would label the American society as "Marxian,'~ or describe our social and economic policies as "Marx inspired." There are very few Americans who would cour ageously confess allegiance to the doctrines of Marx. And yet, seri ous contemplation cannot escape the conclusion that contemporary American thought on some three major issues - the conflict of in terests in society, the concentra.:. tion of business, and our outlook on the world - bears a startling resemblance to the doctrines of Karl Marx. At this place we need not inves tigate why and how this similarity came about, nor ascertain the channels of education and com munication that facilitated the sway of Marxian ideas. In fact, 451 452 THE FREEMAN August in order to demonstra te the re semblance of contemporary thought to Marxian doctrines we need not even prove that Karl Marx was the original author of prevailing American thought.

After all, there were many other originators of socialism whose in tellectual interdependence is dif ficult to record. Economic Conflict Most Americans seem to agree with the Marxian doctrine of poli tical, social and economic conflict. Their traditional belief in a harm ony of interest has gradually given way to trust in conflict and force. Americans now agree with Marx that social groups pursue conflict ing interests that are reflected in antagonistic political and economic programs. Where in the past they had relied on individual initiative and action, they now depend on collective measures through legis lation or regulation, or collective programs for political and eco nomic pressure groups· or business and labor organizations. He who stands alone today without the shelter and security afforded by his interest lobby or union is a rare exception. In every session of Congress hundreds of new laws are passed that aim to confer rights and priv ileges on some groups while re stricting those of others, or grant property and income to some at the expense of others. The political process has become a wrestling match between ever-changing al liances of pressure groups fighting over economic privileges and bene fits. Just listen to· the daily news casts. Most of the reports, whether national or local, deal with the most noisy manifestations of this collective conflict.

Karl Marx was a forceful spokesman of the conflict and ex ploitation doctrine. Even in the United States, this bulwark of the free world, the doctrine has swayed public opinion. It makes its appear ance in the popular notion that the unhampered capitalistic econ omy delivers the wage earners to the discretion and power of wealthy industrialists. The indi vidual worker is said to be help less and in need of legal protec tion in his bargaining with man agement whose primary concerns are power and profit. The un bridled market system with its profit motive and unhampered competition as it prevailed in this country before World War I is condemned for having inflicted hardship and deprivation on many generations of workers. Such no tions, which are popular versions of the exploitation theory, have invaded our colleges and universi ties, indeed all channels of educa tion and communication. They 1972 ARE WE MARXIANS NOW? 453 have radically changed our politi cal parties and our churches. They have given rise to a gigantic labor union movement and to the "New Deal" in social and economic mat ters. In fact, the exploitation theory determines our basic "eco nomic" policies at all levels of government.

Labor Policy The ever-growing mass of labor legislation is one of the fruits of the exploitation theory. Its advo cates credit modern social policy for having reduced the work week to 48, 44, and 40 hours, or· even less. They applaud labor legisla tion for having eliminated women's and children's labor. And they ascribe the present rate of wages to the minimum wage rates set by authoritative intervention. Indeed, practically all labor fm provements are credited to social legislation and labor union inter vention. Compulsory social insurance, in cluding unemployment assistance, Medicare and Medicaid, stem from the same intellectual roots. Capi talism is said to be incapable of giving sustenance to· the unem ployed, sick, or aged laborers. Therefore, social policy must as sure decent living conditions to an ever-larger part of the population. Also, modern taxation reflects our adoption of the exploitation theory. Most taxes aim not only at raising revenue but also at correct ing or alleviating the alleged evils of our economic system. Some taxes aim at a "redistribution" of wealth and income. Confiscatory rates are imposed on entrepreneurs and capitalists whose income and capital are thus transformed into goods for consumption by the "un derprivileged." Other taxes aim at changing business customs and conduct or at regulating produc tionand trade. All presidential candidates promise more of the same.

Our labor unions derive their very justification for existence from the exploitation doctrine. Few Americans would disclaim the boast of union leaders that their unions have raised, and still are raising, wages for all workers through association and collective bargaining. American public opin ion believes that recent history has proved the beneficial nature of trade unionism without which workers would be subjugated to the greed and arbitrariness of their employers. Because of the common fear of labor exploitation, the people suffer strikes or threats of strikes, union coercion and vio lence, and endless agitation of hate and envy by labor leaders against the wicked selfishness of exploiters. To many millions of Americans, membership in a labor union is an 454 THE FREEMAN August important social duty and strike a holy task. Clash of the Generations In recent years the conflict doc trine has been broadened to cover yet another area: the relations be tween different generations. It thereby succeeded in pitting mil lions of American youth against their elders in a so-called "gen eration gap." Numerous student organizations of the "New Left"

are attacking the "establishment" that represents the older genera tion with arguments that are taken without much change from the armory of Marx. The era of campus violence was ushered in by the Students for a Democratic Society (SDS), a quasi-Marxian class organization. It was followed by such groups as the Progressive Labor Party, the Weathermen, the Young Workers Liberation League, the Young Socialist Al liance, the National Peace Action Coalition, the New American Movement, and many others. Al though the members of such mili tant groups comprise only small minorities of students, it appears that many millions of young peo ple agree with the radicals on the existence of conflict.· If there is collective conflict in our social and economic spheres, why should there be peace and harmony be tween the establishment and its opposition, between the older gen eration and youth? Racial Conflict One of the ugliest manifesta tions of the conflict doctrine is found in our race relations. We are told again and again that it is our capitalistic system that im poses conditions of hardship upon a minority of its citizens, and that finally the angriest of them have been driven to assault the exploita tion order . We are accused of wicked standards' of white moral ity and capitalist middle-class be havior that condemns the rioting and looting but lacks human con cern for millions of deprived Ne groes in our midst.

A .solution to the growing prob lems of racial strife is sought in ever-costlier government pro grams, in more public welfare and public care. While Newark was burning, and as twenty-seven Americans were losing their lives there, the Federal Government tried to rush through Congress 8 bill to provide $20 million a yeal for two years to exterminate thE rats that infest the city slums. Ii was suggested that eradicatin~ rats would ultimately help to pre· vent the racial riots, as it woul( indicate to the rioters that some, body really cares. One may agree with the militan "Civil Rights" leaders that, fo: 1972 ARE WE MARXIANS NOW? 455 the first time in American history, political and social conditions are ripe for open rebellion and revolu tion. But our explanation differs fundamentally from theirs. The teachings of conflict and socialism, which for a long time were limited to white pressure groups, have finally reached millions of Ne groes. In their incredible blind ness our political leaders eagerly sow dissatisfaction and make reck less promises of redistribution while condemning the private property order - openly encourag ing Negro protests against that order. It is collectivism, not capi talism, which breeds insurrection and revolution.

Sexual Conflict In the United States the con flict doctrine finally was extended to cover sexual relations. There can be little doubt that women's liberation has become a major and militant movement. In some of its aspects the move ment is hardly new. More than 50 years ago it led to the 19th Constitutional Amendment that gave American women the right to vote. But in recent years, espe cially since the appearance of Simone de Beauvoir's The Sec'ond Sex and Betty Friedan's The Fem inine Mystique, it acquired the familiar symptoms of conflict and confrontation. Some of its radical spokesmen sound like the other conflict champions although they substitute sex for race, class, or generation. Their charges are al most identical: the capitalistic system breeds exploitation and slavery and therefore should be abolished. Economic freedom means freedom for men only, but exploitation and dependence for women. Therefore, it must give way to the political process, to legislation and regulation, in short, to a new order.

Concentrations and Monopolies Although most Americans would disclaim any sympathy for Karl Marx and his teachings, they seem to be in full agreement with him not only on his doctrine of con flict of interest and class struggle but also on his theory of industrial concentration and monopoly. In Das Kapital Karl Marx pro claimed the inevitable coming of socialism on grounds that capital ism causes a gradual pauperiza tion of the working classes. The exploitation profits, which busi nessmen pocket by means of the employment contract, are invested in an ever-growing apparatus of production, today called automa tion, which in turn creates a grow ing .army of unemployed and un deremployed paupers. In the decades that followed the publication of Das Kapital, it 456 THE FREEMAN Au,gust proved to be most difficult to in culcate this doctrine in the minds of American workers. Every year, wages rose and conditions im proved on account of expanding capital investments and rising la bor productivity. In fact, the standards of living of American working people rose to levels that are unprecedented in human his tory. And with the rise in labor productivity and wage rates, the conditions of health, life expect ancy, education, recreation, and leisure improved immeasurably.

A more plausible theory on which the doctrine of inevitability of socialism could be based had to be found. Today, communist pro1Jaganda, whether in the form of arrogant prognostications that our. grandchildren will live under communism or as blaring news casts by Radio Moscow, proclaims the coming of socialism on grounds that capitalism is degen erating to dire monopolism. What ever capitalism may have achieved in the past, its dreadful degen eration gives rise to vast concen trations of wealth matched by dismal poverty, automation and unemployment, and other discrep ancies and imbalances. Prosperity under capitalism, we are told, is only short-lived and must soon give way to monopolistic exploi tation, depression, and unemploy ment. Many Americans are increas ingly receptive to this doctrine. Certainly the Founding Fathers were aware of the inherent dan gers of monopoly. Thomas Jeffer son had even advocated a Con stitutional amendment outlawing monopolies. But the Founding Fathers were also fully aware that governments were spawning the monopolies. Some three hun dred years of European mercan tilistic monopolistic policy had taught them that the government issue of licenses, franchises, reg ulations, and controls gives rise to monopolistic restrictions and economic maladjustments.

The forces of Competition Under the influence of European socialistic thought and Marxian indoctrination, this causal connec tion between government and monopoly has been gradually for gotten. Instead, many Americanf: are now led to believe that the capitalistic market economy breed~ monopolies, and that "big busi· ness" tends to degenerate to mo, nopoly. In reality, the unhamperec market economy, through the op, eration of free competition, pre, vents anyone businessman fron charging monopolistic prices. Eve] if one should be the only produce: in the field, potential competition the competition of substitutes, an4 the elasticity of demand, preven 1972 ARE WE MARXIANS NOW? 457 him from exploiting the situation. Potential competition exists in all fields of production and com merce which everyone is legally free to enter. Most corporations are searching continuously for new lines and items of produc tion. They are eager to invade any field in which business earn ings are unusually high. The in vasion of another field by a cor poration may involve no more than a single retooling or reor ganization that is achieved in a few weeks or months. Or,brand new facilities may be employed for an invasion. Thus, one pro ducer, whether he is a monopolist, duopolist, or a competitor among many, always faces the potential competition of all other producers.

But even if American enter prises failed tq compete with each other and potential competition failed to exert a restraining in fluence on monopolists - which is a most unrealistic assumption the people would escape monopol istic prices through recourse to substitutes. .In many fields the competition of substitutes is more important than that of compet ing enterprises. In· the manufac ture of clothing, for instance, a dozen different materials vie with each other for the consumer's dol lar. The .monopolist of anyone material is powerless because mo nopolistic pricing would induce consumers to switch immediately to other materials. The manufac turers of suspenders compete not only with each other and with potential competitors, but also with the producers of belts. In the transportation industry the railroads compete with trucks, cars, airplanes, pipelines, and ships. Elasticity of Demand The existence of substitutes makes for demand elasticity which, in turn, makes monopolistic pricing unprofitable; for higher product prices would greatly cur tail product demand, and thus sales and income of the monopol ist. Therefore, he again must act as if he were a competitor among many.

All producers, in fact, compete with all other producers for the consumer's dollars. The manufac turer of television sets competes with the manufacturer of freezers and refrigerators. If the monop olist .of one commodity - say, tele vision sets - should raise his price, the consumer may forego the pur chase of a new set and buy in stead a second-hand set or a re frigerator. We consumers do not allocate our income to the satis faction of categories of wants but to that of specific wants yielding the greatest net addition to our well-being. This addition, in turn, 458 THE FREEMAN August is determined by the urgency of our wants and by the cost of satisfaction. This consideration of some fun damental principles of market economics runs counter to the in terpretations offered by Marxian propaganda and, unfortunately, also by many fellow Americans. Our statist politicians and anti trust bureaucrats partially em brace the Marxian explanations.

They subscribe to the theory that our capitalist system breeds mo nopolies. But then they part with Radio Moscow by proclaiming their desire to save this monopoly breeding system from its own des truction. They propose to control the monopolies through govern ment action. Almost every day now, the Antitrust Division of the Department of Justice charges some businessmen with monopolis tic conspiracy. These charges, be ing made in the limelight of world wide publicity, poison the political atmosphere and create a badly distorted picture of our enterprise economy. In fact, the Antitrust Division is one of the most effi cient arms of socialist propaganda. Anticolonialism Many Americans also agree with the Marx-Lenin doctrines of co lonialism and imperialism. In the name of national sovereignty and anticolonialism the United States Government has promoted nation alism and socialism in all corners of the world. It has exerted its great influence toward the reduc tion of European influence and possessions in Asia, Africa, and Latin America. We urged the Dutch to leave Indonesia, we ap plauded the French retreat from Indochina, we blatantly demanded British and French withdrawal from the Suez Canal, we urged the Belgians to leave the Congo, and the French to surrender North Africa, we censured Portu gal for her African possessions and imposed sanctions on Rhodesia.

The Western retreat from Suez to Panama, from Indonesia to Al geria, from the Congo to Morocco evidences an ominous weakness of Western civilization. Blinded by socialistic doctrines and preju dices, our statesmen hail retreat as progress and defeat as victory. Their world view is perverted by conceptions of "capitalist colonial ism," which are derived from the teachings of Marx and Lenin. Echoing the communist leaders in their attacks on the West, they level the charge that European colonialism has kept the economi cally backward nations subjugated for centuries. This misconception of history flows from a bad distortion of facts. The European colonies were acquired during the age of mer1972 ARE WE MARXIANS NOW? 459 cantilism and nationalism. The spirit of capitalism with its con cern for individual freedom and private property, which shaped British foreign policie·s during the nineteenth century, completely transformed colonial possessions.

The British overseas settlers be came virtually independent - en joying a dominion status. All other territories dependent on British rule were governed according to "open-door" principles. The Brit ish Empire was R'vast free-trade area in which the government un dertook only to maintain law and order. Laissez Faire Capitalism is the system of in dividual freedom and private prop erty in production as well as con sumption. In both domestic and foreign affairs it implies laissez faire, which means free trade and an open-door policy that welcomes everyone and discriminates against no one. The exploitation of colonial possessions is inconsistent with the concepts of competitive pri vate enterprise and voluntary ex change. An American or Euro pean business that invests its cap ital in an underdeveloped country does not exploit the natives. Cap ital investments anywhere raise labor productivity and consequent ly wages. The United Fruit Com pany, for instance, did not enslave the people of Latin America by creating plantations in wilder ness. On the contrary, it raised native prod ucti vity and improved working conditions.

And yet, most Americans are convinced that European colonial ism is responsible for world pov erty and upheaval. Why else would the U.S. Government have helped to liquidate European in fluence in all corners of the world and sanction and support revolu tionary movements? Even today it strongly opposes the white admin istrations of Portuguese Africa, Rhodesia and South Africa. Many Americans even approve of the confiscation or nationalization of private enterprises by the govern ments of newly independent coun tries. They agree with the Marx ians the world over that. a sov ereign state can legally seize and confiscate any foreign enterprise in disregard of valid contracts and agreements. This is why the new states in Africa and Asia can seize and destroy huge European investments with impunity. And Fidel Castro could seize more than one billion dollars of American investments. During the eighteenth and nine teenth centuries most Americans were conscious of the natural rights of individuals, and there fore believed in an idea of state sovereignty that was severely lim460 THE FREEMAN August ited by inalienable personal rights.

State sovereignty was encompassed by the individual rights to life, liberty, and property. This con cept of limited state sovereignty, which true friends of freedom continue to embrace, denies the right of any government to seize or nationalize any enterprise with out the owner's consent. Are we Marxians now? Most Americans will indignantly an swer this question in the negative. After all, they nei ther condone dictatorship with its one-party system nor the ruthless suppres sion of dissent and brutal treat ment of dissenters, which charac terize all communist countries. They are "civilized" and therefore abhor all manifestations of in humanity. But unfortunately, many Americans unwittingly share im portant philosophical, sociological, and economic beliefs with Marx ians the world over. These beliefs give rise to policies that please the Marxians. Ultimately, they will breed the very political and eco nomic tyranny which Americans so abhor. fJ IDEAS ON LIBERTY A Useful Product THE BUSINESS GENIUS who makes and markets a useful product and furnishes employment at good wages to hundreds of fathers, serves his community more usefully than a councilman who votes the appropriation of public funds to build playgrounds.

Without the steady production of wealth, the makers of public budgets would be helpless. For this reason the man richly endowed with business sense serves his fellow men best if he continues at his desk to the end of his days. This line of thought does not win easy acceptance because it is only within recent generations that the social significance of busi ness prosperity has been properly valued. It is now becoming more generally recognized that a nation cannot have too many competent businessmen. Prosperity is more a matter of men than natural resources. Poverty and ignorance have cursed and hum bled mankind from the beginning. Intelligent direction of business will eliminate both. From The William Feather Magazine, April, 1972 WINSTON CHURCHILL used to say that Russia is a riddle wrapped in an enigma within a mystery. But to him who has studied that coun try, its history, religion, language, mentality, the truth will come more easily; the many widespread dan gerous cliches will dissolve beforQ his mental eye.

One of the most co:n;mon of these cliches is to the effect that the Russians are "by nature" col lectivists, that their souls are ach ing for tyranny, all of which makes them so susceptible to Com munism. Did not the large mass of the Russian people consist of serfs? The truth however is dif ferent. In old Russia, in contrast to America, slavery had never been Dr. Kuehnelt-Leddihn is a European scholar, linguist, world traveler, and lecturer. Of his many published works, perhaps the best known in America are Liberty or Equality? and The Timeless Christian. ERIK VON KUEHNELT-LEDDIHN institutionalized; the majority of the farming class had consisted of free people. As a matter of fact, serfdom as an institution had only existed in central and western Russia, but not in the far north, in the south, in the eastern part of the country, and certainly not in Siberia. (The Cossacks lived notoriously a very free life.) It is true that in large areas, as a result of the abolition of serfdom in 1861, the peasants were given land collectively which resulted in a very poor agriculture with re current famines; but Stolypin, the "arch-reactionary" Minister of the Interior, disestablished the collec tive holdings, the M irs, early in this century. The subsequent in dividual farming, together with a second agrarian reform, initiated the rapid development of Russian agriculture with the ambitious 461 462 THE FREEMAN August peasants, the kulaks, leading the nation to a new agrarian wealth.

(The final goal of the gradual re form was to have only 11 per cent of the arable area covered with large estates by 1930.) By 1916 only 23 per cent of the usable land was in the hands of big land owners, whereas in Britain this share was 55 per cent! And we ought to add to this that Russia never had a ruling nobility. Old Russian titles mean a great deal more in Hollywood than they ever meant in Russia. Social arrogance, as we know it in the West, was unknown there; it came into being only in recent decades as a result of Marxist indoctrination with the accent on class consciousness. He who knows the USSR or reads con temporary Russian plays and novels is fully aware of this rather depressing fact. Russians, indeed, are by nature great individualists; they always constituted a nation of eminent independent thinkers, poets, scien tists, philosophers, artists, musi cians, mathematicians and so forth. Edward Crankshaw ex plained in a brilliant article in In ternational Affairs (October, 1945) how precisely due to her people's individualism a purely parliamentary democracy for Rus sia is out of the question - now and forever. This might sound paradoxical to American ears but Harold Laski had previously pointed out to us that representa tive democracy, in order to be workable, has to rest on two prem ises: a two-party system and, more importantly, a common framework of reference, a common language, the thing which Walter Lippmann called a "Public Philosophy." Such a common framework has never existed in eastern or southern Europe where, for a variety of reasons, intellectual individuality and not a sentimental community spirit always prevailed. All of which moved the classic British liberal Walter Bagehot to the con clusion that democracy needs a rather "stupid people" (Letters on the French Coup-d'-Etat, 1852) .

The Russians, in other words, are too bright for their own good. They will always have a govern ment-from-above which can be spiritual or materialistic, liberal or tyrannic, benevolent or malig nant. Self-government in Russia can only be local and limited. Degrees of Government Intervention In the various forms of society, government and economics are ad mittedly interdependent, but not in a crudely automatic way. There are provider states which are not socialistic, there existed liberal as well as communist monarchies (the Empire of the Incas) and totalitarian democracies. Spain, 1972 FREE ENTERPRISE AND THE RUSSIANS 463 for instance, has a rather limited political freedom but a great deal of economic liberty. Brazil has a military dictatorship but its econ omy rests on free enterprise. Con tinental Europe before 1848 had a free market economy under royal absolutism. But the USSR boasts a democratic label and has prac tically no freedom, neither eco nomic, nor intellectual, nor reli gious. It knows not even the free dom of residence.

Old Imperial ("Czarist") Rus sia, however, had a far-reaching economic freedom. Of course, we always ought to distinguish Rus sia before the liberation of the serfs from the Russia between 1861 and the issuing of the Con stitution (1905), and the latter from the liberal monarchy between 1905 and the Revolution. The free dom of expression during this "terminal" period was nearly com plete. In 1912 the Pravda" founded in broad daylight, violently attacked the government. There were, moreover, Bolshevik dele gates in the Duma (Diet), but no Anarchists ("Social Revolution aries"), a party which indeed rep resented total individualism, but also murder and arson. (It was banned by law, but Kerenski se cretly adhered to it). As a matter of fact, the government favored the Social Democrats, with their menshevik and ',:~olshevik wings, over the Anarchists, the latter claiming not Marx, but Bakunin (a nobleman) and Prince Kropot kin, who died in 1921, as their founding· fathers and spokesmen.

(Incidentally, the great bolshevik leaders beginning with Lenin were frequently members of the no bility.) Progress through freedom It was thanks to economic free dom that Russian industry, though late getting started, enjoyed a fabulous development in the quar ter century before the Red Revolu tion. The annual increase of Rus sia's industrial output and capacity in those years was far larger than that of any other modern nation, including that of the United States. Evidence may be found, of all places, in the Illustrated His tory of the Russian Revolution (New York, 1928), a Communist publication. Obviously, Russian labor, largely lacking skills, dis cipline, and the famous "Protes tant work ethics," could not be well paid any more than in any other "emerging nation" in the first phase of industrialization when heavy investments are nec essary and the purchasing power of the masses is still exceedingly low. The new class of Russian en trepreneurs, needless to say, were not members of the old upper lay ers, but homines novi - industri464 THE FREEMAN August ous blacksmiths, bright peasant boys, aggressive skilled workers with foreign experience. Small amounts of capital allowed mira cles to be worked, and soon Russia became Europe's "Eastern America," brimming with Horatio Alger stories.

One has to admit, however, that the newly rich often displayed their freshly acquired wealth in rather crude fashion. Thus, today a foreign embassy in Moscow is housed in the palace of a sugar king's mistress - but this particu lar millionaire was the son of a serf. Yet, we may be sure that his income, if .spread· evenly among his workers, would not materially have improved their lot, which surely worsened after 1917. At the outbreak of World War II the wages paid to workers were lower than before the Revolution. One has only to read the splendid work of Manya Gordon, Workers Before arnd After Lenin (New York, 1940), to get the relevant data. Of course, the illusion that a radical redistribution of income fundamentally improves the Iiving standards of the lowest classes is still general among loose-thinking sociologists. Socialism also feeds on this erroneous belief. It is, however, the bigger cake, not the reslicing, which improves the lot of the many. And the bigger cake requires. wise reinvestments, good management, and a high ethical concept of work.

With the Communist Revolu tion, Russian industry and agri culture took a nose dive. The peasant class, at first, did not· re sist Communism, because the re mainder of the large and medium estates was distributed among them. Lenin also permitted during several years a minor trade which quickly started to bloom. These, even to Lenin's mind, were only temporary concessions. Stalin liquidated not only the "New Economic Policy" (NEP) but also the independent peasantry. First the kulaks were expropriated and partly exterminated; then·the rest were crushed and collectivized. The Five-Year-Plans were put into action. Since then, a dark night had settled over the Russian economy. A Low Standard of Living Today, we might get impressive (but who knows how. accurate?) statistics about production but we do know that East German aid to the space program has been sub stantial. We also k'now that ma chinery imported from Czecho slovakia and Hungary abounds in the USSR, but we fully realize that the living standards of the masses, including the professional class (other than a tiny top sec tor), are truly miserable. Assum1972 FREE ENTERPRISE AND THE RUSSIANS 465 ing that the rouble is US $1.20, the salaries and wages for work ers, doctors, factory directors are not so terribly bad by West.;.

European standards. But let us remember that the rouble can be bought in Vienna or Zurich for 19 cents, and this gives us a far more accurate picture of condi tions in.side the Soviet Union. One must admit that medical services (of a modest nature) are gratuitous. Also, :rents are very low, but not so if we consider them in relation to space; then, indeed, they are very high. Only univers ity professors, members of the Academy of Sciences, directors of leading theaters, writers, prima ballerinas, and certain very highly placed civil servants live well; but we should not believe that thereby they are all "bought" and really believe in Communism. The purely managerial class is not at all well off. A factory director usually could not feed his family. His wife would have to work as well. Yet, socially speaking, he would ar rogantly look down on teachers, engineers and so forth. Status and income are by no means identical.

The "Theory of Convergence" Curiously enough, there is in the Western world, and especially in the United States, a rather widely-held belief that the radical differences in social structure and economics between East and West are gradually disappearing, that the West is becoming more and more "socialistic" and the Soviet Bloc more and more "capitalistic," thus eventually ensuring peace. This is the famous "theory of convergence", a very soothing theory indeed. Andrei Amalrik, the brilliant (and again jailed) author of Will the Soviet Union Survive Until 1984? has rightly ridiculed this notion because he knows only too well that prac tically aU Russians are absolutists, that institutions in the East are not bent but broken, that dog matism and revolution, not rela tivism and evolution, dominate Eastern life. English-speaking na tions, to the contrary, are enam ored of the notion of evolution, of nice, little, painless, gradual changes. In addition, they mistake welfarism for socialism. The latter means the ownership of the means of production by the state. Of course, in practice all socialist countries are "welfarist" (and stand for the Provider State), but not all Provider States are social istic. (In Sweden 90 per cent of economic resources are still pri vately owned, though this might change in the near future. Of course, "welfarism" in the West ern world is on the rise, but this itself will never close the gap be tween East and West.) Even the 466 THE FREEMAN August undeniable convergence between Russia and Red China does not particular ly make for peace.

The only socialist country in Europe which has made ideolog ical compromises on the economic front is Yugoslavia, which from the Muscovite point of view is a heretical outsider. It still has a free peasantry and small private enterprises with up to fifteen em ployees. But the future of Yugo slavia nationally and economically is dim. Economically, this is the case because free enterprise is a system which walks on long legs and socialism on short legs. What happens if one leg is long and the other one short? Such an economy will be prone to fall on its nose. And besides Yugoslavia, only Poland has, a non-collectivized peasantry. No More Private Enterprises When I first visited the USSR in 1930 at the age of twenty, I was even then struck by the fact that the only surviving free en trepreneurs were the watch-repair men, the bootblacks, cobblers and a few tailors. I saw no private stores left. At my later visit in 1963, "socialization" was total and complete. Bootblacks received a salary and that was it. As far as the Soviets were concerned, there was and there still is no sign of an economic "convergence". (There is, however, a fair amount of neo Stalinism in the domains of in tellectual and religious life). It is , tru e that there are a few eco nomic theorists (like Liberman) who, though not dreaming of a renewal of private enterprise, are attracted by the idea of competi tion. But it is impossible to see how one could have genuine com petition when the economy iscen~ trally planned and rests squarely on state monopolies (dragging along totally uneconomic indus trial enterprises) .

A return to private enterprise and private ownership is, above all, ideologically out of the ques tion. It is significant that the micro-elite with their very sub stantial incomes squander them almost planlessly because they cannot buy anything of permanent value - real estate, houses, preci ous metals, bonds with a fixed value. The datcha (country house) which, after a fashion, they "own" stands on state ground and could be "removed" any time. They spend vast sums on good food, expensive drinks, pictures (also from officially proscribed painters) and - perhaps the only genuine piece of real estate - on pompous mausoleums in exclusive cemetery sections. There won't be and there cannot be in this domain a gen uine change, because communism's most fundamental dogma is state 1972 FREE ENTERPRISE AND THE. RUSSIANS 467 ownership of the means of pro duction, and the Kremlin's. crucial strategy is the utter material de pendence of its subjects upon the state. (That the state one nice day should wither away, nobody while of sound mind takes seri ously.) Is there a hankering of the Rus sion people for personal indepen dence and private enterprise? A genuine yearning? Or is the Rus sian underground opposition mere ly hostile to the most tyrannical aspects of the present govern ment while accepting in its heart a socialist order? There isa wide spread belief in the West (in America, probably, more than in Europe) that the memory of per sonal property and free enterprise in the USSR is dead as a door nail and that what the Russians today desire is merely a bit more privacy, freedom of expression, and a chance to read flashy Ameri can periodicals. By and large this view is not true to fact. To the contrary, the critique of the to tali tar ian excesses of the regime is more and more being supplanted with a mounting protest against the system itself. The once so meekly expressed preference for a "genuine Marxism-Leninism" to Stalinism or Neo-Stalinism is in creasingly replaced with violent attacks against Marxism. I think there would be an even more general attack in the underground publications against all forms of socialism if there were a better understanding of the nature and possibility of private enterprise on a large scale.

A Cruel System of Controls In the mid-nineteen-thirties a Hungarian Communist writer. Erwin Sinko, settled for more than a year in Moscow. In his brilliant account of that period published in German, Der Romarn eines Romans (Cologne, 1962 and 1967), he provides us with a great many interesting observations and insights. (Sinko died as a Titoist in Yugoslavia only a few years ago). He was in the USSR at the beginning of the Big Purges but shamefacedly admits that he was not aware of them. He saw that the USSR was pro ducing goods far more expensively than Western Europe (largely on account of poor work ethics and the frightening bureaucracy) and quotes his Jewish landlord to the effect that he would never become a Bolshevik because Socialism is intrinsically cruel. He also offers us a wonderful, lively portrait of a cobbler who then still was able to pur,sue his humble trade on a street corner almost literally crushed by taxes designed to ruin his business. But the man held out heroically to keep his precarious 468 THE FREEMAN August freedom and independence. Stub bornly he refused to join the state owned shoe repair workshops.

Today, needless to say, nothing of the sort would be tolerated for a moment. All that remains of private enterprise is the gray mar ket for agricultural products pro visioned from the small personal plots of the farmers (always sub ject to recall and cancellation), a very limited market without which the Soviet population would have died of starvation years ago. (The misery of a peasantry con stituting over 30 per cent of the total population of the country, which in spite of excellent soils is unable to feed the USSR properly, is really the scandal of the cen tury.) Socialism Easy to Explain During my stay in the USSR I often talked with people about their country's economic problems. Thanks to a variety of sources (among which Western radio stations figure prominently) the masses of the Russians do realize that our living standards are much higher than theirs and many of them, in a way, are puzzled by this state of affairs. "Here," they said, "everything is carefully cal culated and planned in advance, and you in the West are subject to the chaos of a free competitive enterprise. How then is it possible that you are so much better off than we are?" This surprise is simply due to the fact that Social ism is what Tocqueville called une !ausse idee claire, a false, but clear idea.

One can explain socialism to anybody in ten minutes, giving him the essence of that doctrine in a nutshell. Free enterprise, which is far more progressive and sophisticated, needs a great deal more time and effort for its ex position. (Socialism, one ought never to forget, exists in many a primitive society with very little stress placed on human personality and therefore it appeals so strong ly to people in the Third World.) Of course, the value of small personal enterprise was quickly grasped by my interlocutors. "But do you think it to be just if a single person has millions of rou bles or owns a huge factory em ploying hundreds of workers they would then be at his mercy, wouldn't they?" Such arguments arise because among the Soviet citizens there no longer exists the memory of a free laboring class (or of collective bargaining) . The real surprise to most of my acquaintances came when I told them about the workings of a stock company. "Yes, fine, but who is permitted to buy these stocks?

What party affiliation must he have?" The idea that simply any19'72 FREE ENTERPRISE AND THE RUSSIANS 469 • body can buy stocks and thus get a share in the enterprise came as an added shock, but once a man pointed an accusing finger at me and said: "What you tell us can't be true arid I'll tell you why. If your representation is correct then a worker could buy shares of his own factory and get the dividends of his own labor and thus become employer and employee in one person - the boss of his manager - and that's patently impossible." When I explained to him that it was quite feasible and occasionally does happen, everybody was non plussed and one person declared that such state of affairs was "exceedingly democratic" (which in a certain way it is). Signs of Opposition Yet "capitalist thinking," with out the slightest chance of being adopted by the government, is gaining growing adherence in op position circles. The excellent work by Cornelia 1. Gerstenmaier, Die Stimme der Stumm en (which will soon be published in the United States) shows a real change of mind. The author, who is a serious German scholar and has spent considerable time in Russia, is the daughter of a form er chairman of the Bonn Diet. She had and still has access to the typed and retyped publications of what one jokingly calls Samizdat, the "Self-Publishing Company".

There she tells us, among others, of the famous programmatic pamph let of Alekseyev and Zorin, "Time Does Not Wait," where these two authors - the pseudonyms cover a technologist and an educator - in form us that "the deadly grip of the government on economics must come to an end." A manifesto of the so-called "Democratic Move ment of Russia, the Ukraine and the Baltic Nations" - this label itself tells a story! - insists that state, group, and private enter prises ought to get the same rights in managing the means of production. Growing Appreciation for Freedom Probably the most moving doc ument in this book is that by Boris Talantov, an outstanding underground leader who early this year died in a Kirov (Vyatka) prison. Talantov was a layman and a mathematician but the scion of a family of priests. Himself a profoundly religious person, he de nounced the Moscow Patriarchate for collaborating in an abject way with the Soviet government, an accusation widely printed in the West and forcefully repeated by Alexander Solzhenitsyn in an open letter. (Archbishop Nikodim - a most disreputable character as we can see from Andre Martin's book on religion in Russia - thereupon 470 THE FREEMAN Au.gust declared that Talantov "never ex isted" but had been invented by anti-Soviet propaganda.) The testimony of Talantov is all the more valuable because religi ous groups in the Old World (un der monastic influence) have tra ditionally shown very little inter est in the burning question of private property and free enter prise. But Talantov, in whom we have to see primarily a religious martyr of the Eastern Church, as the author of a widely circulated pamphlet entitled, "The Commun ist Party of the Soviet Union as Ruling Class in Soviet Society,"

knew the real nature of the evil. Here he gave us a precise analysis why there can be no freedom, no respect for the dignity of the per son in a socialist system. He even strongly emphasized the economic superiority of free enterprise over state capitalism. The latter insures the total enslavement of the work ing class and, incidentally, also the economic enforcement of atheism by a methodic discrimination against religious workers. Private Service enterprise, Talantov insisted, not only guarantees a minimum of freedom, but also produces goods of greater quality with fewer economic inputs. Has the Russian underground embraced Adam Smith? It would be premature to answer this ques tion in the affirmative. It is cer tain, however, that a chance for sound economic thinking exists, not, of course, within the Soviet government, but among its in ternal enemies who are all very much aware of the West's ma terial superiority. As a matter of fact, religious, political and eco nomic truth in the Soviet Union is engaged in a heroic uphill fight; whe:weas in the West, truth, due to mental sloth, envy, jealousy, and the masochistic denigration of one's own traditions, is slipping and sliding, is obscured and for gotton. Under these circumstances it would be a real shame for us, who had all the breaks, if the Light again would be coming from the East. t) IDEAS ON LIBERTY WHOEVER could make two ears of corn, or two blades of grass, to grow upon a spot of ground where only one· grew before, would deserve better of mankind, and do more essential service to his country than the whole race of politicians put together.

JONATHAN SWIFT CLARENCE B. CARSON THE FOUNDING OF THE AMERICAN REPUBLIC 13 The American Triumph THAT THE AMERICANS were even tually.triumphant in the War for Independence is a matter of rec ord. The triumph was military, diplomatic, and big with portent for the future of republics. That the triumph could have come ear lier, could have been more decisive, and could have involved the United States in fewer entanglements, is speculation. George Washington thought that the victory could have come much sooner. In his circular letter to the governors of the states in 1783, he declared that if he had sufficient space he "could demon strate to every mind open to con viction, that in less time, and with much less expense than has been incurred, the war might have been brought to the same happy con clusion, if the resources of the continent could have been properly drawn forth. ! ••"1 Speculation is not history of course, but it does sometimes help to shed light on history. The prolongation of the war due to the failure to muster American resources effectively brought in its train a host of consequences, some of which en tangled America with European powers at just that time when they were effecting their inde pendence of England.

Dr. Carson shortly will join the faculty of Hills dale College in Michigan as Chairman of the Department of History. He is a noted lecturer and author, his latest book entitled ThrottlinA the Railroads. .1'71 472 THE FREEMAN August The scope of the war was great ly broadened from 1778 onward. It spread and extended over much of the North American continent. There was extensive fighting in the Ohio valley, in Georgia and the Carolinas (fighting which involved Loyalists on a considerable' scale, and heightened domestic animosi ties), in western New York, as well as elsewhere. Those who fol 19w only George Washington's army during the course' of the war lose sight of the vast amount of territory being contended for. The war became, also, a world war before it was over. France entered the fray against Britain in 1778, Spain in 1779, and Holland in 1780, though the last two were not allied with the United States. In addition, there was a naval League of Armed Neutrality of other Eur opean powers organized against Britain.

American diplomats went to Europe seeking allies, munitions, and, above all, loans, to bolster sagging finances. European mon archs were hardly devoted to the idea of the rise of a republic in America or its independence (though some Frenchmen were) ; most of them did have axes to grind with Britain. Moreover, there was territory they would like to acquire or protect, and trade they would like to gain for their ships and ports. The aborning United States was caught up to some extent in the cross currents of the conflicting interests of Eu ropean powers. Some Americans notably Silas Deane, Arthur Lee, Benj amin Franklin, John Adams, and John Jay - experienced the machinations of European diplo mats at first hand, an experience which confirmed most of them in their beliefs about the corruption of the Old World. However, Amer ica came out of all this much bet ter than might have been expected.

Changed British Strategy Despite the French alliance and the portending entry of other Eu ropean powers into the conflict, the American military position did not generally improve for some while. British strategy did change from what it had been up to 1778. During the early part of the war, Britain had focused the major military effort on the Mid dle States and their seaport cities. This approach was largely aban doned after Saratoga. Though the British continued to hold New York City and to concentrate the maj or army there, as things turned out this was a defensive position from 1778 until the end of the war. British strategists at home pushed for the concentration of of fensive measures in the South. Having failed in their efforts to 1972 THE AMERICAN TRIUMPH 473 conquer America by attacking at the points of the concentration of strength, they advocated attack ing at the weakest point. This strategy had much to commend it.

After all, the key to the effective control over much of what had been English· America was Vir ginia. Virginia was the most pop ulous of the states, the oldest of the colonies, the one in which the Anglican religion had been long est established, the producer of much that was most wanted by British merchants for world trade, and the hub of the Southern wheel. If Britain could control Virginia and the lower South, plus Canada, it might still dominate the vast ea5tern Mississippi valley region. Virginia already laid claim to much of the territory west of the Alleghenies; the conquest· of Vir ginia might vouchsafe it to Brit ain. The approach to Virginia might be made from the lower South which was the weakest link in the colonial chain. Georgia was the least populous of the states, and a considerable portion of the population of South Carolina was slave. North Carolina was known to have an important Loyalist con tingent.

Savannah fell to British forces in December of 1778, and early the next year they took over· the rest of Georgia and installed a· Loyal government. But the British stationed in Georgia had little suc cess during the next year with their forays into South Carolina; the force sent there was not ade quate to such a campaign. Early in 1780, however, General Clinton, who had been reluctant to under take the Southern campaign, fin. ally did so; he was able to take Charleston May 12, 1780 with a vastly superior military and naval force. Clinton returned to New York, entrusting the Southern campaign now to Lord Cornwallis. Cornwallis was probably the ablest field commander the British ever had in America. He was daring, courageous, beloved of· his men, could win battles when the odds were against him by audacious tactics, ana. did win many battles. In fact, he won most of the battles and lost the war.

For the remainder of 1780, Cornwallis see-sawed" back and forth between South and North Carolina with his army. Virtually the whole Patriot army in that region had been surrendered at Charleston, necessitating the as sembly of a new force in the deep South. Congress sent General Ho ratio Gates, the victorious com mander at Saratoga, southward with a core of Continentals to do the job. As it turned out, his vic tory at Saratoga had given Gen eral Gates a much greater reputa tion than he deserved. Cornwallis 474 THE FREEMAN Au.gust routed his army at Camden in August; Gates fled the scene of battle on the fastest horse he could command, and was sixty miles away before he considered it safe to stop. His army was scat tered, and his reputation was ruined. Nathanael Greene assumed command of the Patriot forces in the Carolinas late in the year, and· he proved worthy of the call ing. He was as successful at ma neuvering as his mentor, George Washington, but Cornwallis did not tarry overlong to test his tal ents. Instead, Cornwallis moved northward into Virginia in 1781, while Greene drove southward in to South Carolina. In the course of the year he was so successful against British posts that they held only Charleston by the end of the year. Indeed, a pattern emerged in the South similar to the one elsewhere on the continent. The British frequently won the pitched battles, but once the main army moved on, the post left behind soon fell to Patriot forces.

During the late spring and into the summer of 1781 Cornwallis rampaged across Virginia with a much larger army than the Ameri cans could muster in that state. When the American forces were increased, Cornwallis decided to establish a base accessible to the sea. He decided upon Yorktown which is located on the penin sula between the York and James rivers. He set up camp there in early August. Showdown at Yorktown Virginians had for some time been pleading with Washington to come with his army to save his home state. However, Washing ton was confronting the largest Bri tish army in America in New York; victory over it would most likely be decisive; he wanted only the help of the French fleet to undertake it, and the French fleet was rarely available to him. How ever, he determined upon con centrating his effort against Corn wallis at Yorktown when the French agreed to aid him. Wash ington's Continentals were now re inforced by a major French army under the command of the Comte de Rochambeau. Washington took pains to tie Clinton's army down in New York both by leaving a sizable detachment behind and by getting misleading information to him.

The attacking army usually has a plan which, if it' works, should bring victory, much as each play by the offense in football is con ceived to make a, touchdown - if it works. In battle, the aim is to bring such force to bear at select ed points that it may be expected to break up the opposing army.

1972 THE AMERICANTRIUMPH 475 Timing and coordination are the requisite conditions and are the most difficult to achieve. Washing ton's plan depended upon much g~eater coordination of a variety of elements than would commonly be involved. He had to move an army several hundred miles, most of them going over land. His heavy artillery was dispatched by sea, but its arrival was dependent on the dispersal of the British navy. The French navy had to be available at the right time or Corn wallis might be reinforced or his army transported elsewhere. For once, all went well for the combined American and French undertaking. Clinton kept his army in New York; Admiral de Grasse, the French naval com mander, turned up with the fleet at the right time, and lured the Brit ish navy out to sea after having successfully engaged it in action. Cornwallis stayed where he· was, cut off by sea from retreat. The Continentals and the French were joined by the militia to make a formidably superior force under Washington. Cornwallis did not deign to attempt daring maneu vers to break out in these circum stances; after only a brief. try against the forces, which did not even bring most of his army into play, he surrendered his army in tact. The memorable date was Oc tober 19, 1781.

Yorktown was the great victory of the American War for Inde pendence. It had all, or almost all, of the right ingredients. Washing ton was in command of the victori ous; after so many years of per severance in the face of the odds, his hour had come. That Corn wallis should have been the British commander defeated was as it should be, too, for no other Brit ish commander had routed so many American armies. Even the surrender was dramatically con ducted, though Cornwallis sent a subaltern to do the dishonors. With the French lined up on one side and the Americans on the other, the .British marched be tween them to the tune of "The World Turned Upside Down" to the place where they laid down their arms. The British turned their eyes toward the French, as if in contempt of the Americans. They· were roundly jeered by the Americans who waited to do so, wisely, until the British had thrown down their arms. Thus ended the last great. battle of the war.

There had· been and· were to be American victories elsewhere, some' with great portent for the future, though none so dramatic or decisive for victory in the war as that at Yorktown. Neither the British nor Americans had entirely neglected the western and south.476 THE FREEMAN August ern frontiers. The British attempt ed to dominate the land beyond the mountains largely with the aid of the Indians. However, in 1778 and 1779 George Rogers Clark of Vir ginia broke the back of this domi nance. Of Clark's victory at Vin cennes in 1779, a military histori an has said: "His march across flooded Illinois may not compare for hardship with Arnold's long journey through the Maine wilder ness in 1775, yet the issue was happier, the victory complete and significant. British power in the West was broken, and despite the failure to take Detroit, Clark helped make it possible for the vast area to be included within the boundaries of the United States of America at the peace treaty."2 Less grand in its dimensions but equally important for a smaller area, Georgia was reconquered by the Patriots in 1782, the culmina tion of a long series of exploits by General Anthony Wayne.

Much went on during the War for Independence besides military and naval battles, of course. Nor was the American triumph, in the final analysis, simply a military triumph. What Americans would do with their independence was surely more important than wheth er they would have it. One thing Americans were determined not to have for very long was arbitrary government. They thought that the way to avoid this was to have a written constitution. When Rich ard Henry Lee made a motion for independence in the Second Conti nental Congress in June of 1776, he included with his resolution a proposal that some plan of confed eration be devised. Such a plan to be acceptable, of course, would have to be of the nature of a con stitution. A committee was ap pointed to attend to this even be fore independence had been form ally declareu. A few days after the adoption of the Declaration, the committee presented what were called Articles of Confederation to the Congress. They were drafted, in the main, by John Dickinson.

Congress did not move with such dispatch to approve them, how ever, nor the states to their ratifi cation. Some debate was wedged in from time to time between the more pressing items of business which confronted the Congress. The Articles of Confederation were finally adopted by Congress in 1777 and sent along in due course for the states to ratify. Most of the states acted within the next fourteen months, but Maryland withheld ratification for several years'. The main issue was western lands, particularly the ex tensive claims of Virginia beyond the mountains. Virginia. would have been huge in comparison with the other states if it had con1972 THE AMERICAN TRIUMPH 477 sisted only of the present states of Virginia, West Virginia, and Ken tucky, which it did; but that par ent state laid claim to vast terri tory in the Ohio valley as well. Agreements of the states involved to yield up their western claims brought Maryland into the fold on March 1, 1781.

On the occasion, the Pennsyl vania, Packet editorialized in this jubilant fashion: This great event, which will con found our enemies, fortify us against their arts of seduction, and frustrate their plans of division, was an nounced to the public at twelve o'clock under the discharge of the artillery on the land, and the cannon of the shipping in the Delaware. The bells were rung, and every manifes tation of joy shown on the occa sion .... 3 Truth to tell, however, it had taken more than half as long to get the Articles adopted as they would serve as the foundation for a un ion. The Articles of Confederation The Articles of Confederation were born of the necessity for the sta tes to uni te in order to carry on war against Britain and were given their content by the reaction to the increasing use of British power which occasioned the war. While men recognized the need for united action against a common enemy they were most reluctant to locate much power in a central government - or, if Madison was right in his later analysis, even to establish such a government.

There was considerable ambi guity as to the status of the states and of the union from the outset. That ambiguity was a product both of history and the desires of the people. On the one hand, the colonies had never been united with one another before 1776 except by their allegiance to the king of England, which tended to separate them from one another rather than to link them together. On the other hand, they acted to gether both in their resistance to British impositions and eventually in separating from England. There was no point in time when the states were independent and sov ereign on their own. As John Fiske said: "It is ... clear that in the very act of· severing their connec tion with England these common wealths entered into some sort of union which was incompatible with their absolute sovereignty taken severalIy."4 Yet, the term "state" was early used to apply to most -of them, and the - name has stuck (in general usage even when the "state" in volved is actually. styled a "com monwealth"). The most common meaning attached to "state" in political theory and usage is this: "the body politic as organized for 478 THE FREEMAN August supreme civil rule and govern ment." A "state" is also usually referred to as sovereign and in dependent.

The Articles of Confederation did attempt to clear up any con fusion in status; the question was formally resolved in favor of state sovereignty. The union established under the Articles was sty led a confederation. In common usage, a confederation is an alliance or league among sovereign states. The articles appeared to affirm that this was to be the case. Ar ticle II says, "Each State retains its sovereignty, freedom and in dependence, and every power, j ur isdiction and right, which is not by this confederation expressly delegated to the United States, in Congress assembled." What is im plied here is a division of powers: some to be retained and exercised by the states individually, others to be conferred upon the confed eration to be exercised jointly. But once such powers were conferred, the states would lose their abso lute sovereignty. Could some plan not be devised whereby the states could retain their sovereignty in dividually, yet act together in common concerns? The Articles of Confederation attempted to do this.

What was tried was to make the Congress continually and com pletely dependent upon the states. Congress was denied· the power of taxation, nor did it have any en forcement machinery of its own, Le., it had neither constabulary nor courts. Moreover, the repre sentatives to the Congress were to be chosen by or under the di recti on of the state legislatures. Each state was to have only one vote in the Congress, though a state might have from two to seven delegates. Care was taken that the members of Congress did not gain personal power. This was guarded against by havingmem bers subject to recall by the states at any time and prohibiting that any person serve more than three years in any six year period. The picture that emerges from this is of the states resolutely clinging to their power. With the above restrictions up on it, Congress was ostensibly granted extensive authority. It was empowered to make war and peace, send and receive ambassa dors and ministers, emit bills of credi t, borrow money, make trea ties. and alliances, establish a post office, settle various kinds of dis putes arising among the states, appoint high ranking military and all naval officers, :fix the' value of coins, regulate weights and meas ures, and. manage Indian affairs where a state was not directly involved. Further to cement the union, the Articles provided that 1972 THE AMERICAN TRIUMPH 479 each state was to give full faith and credit to the acts of the oth ers and that citizens of any state could naove frona state to state.

The Articles also limited state power in a variety of ways. States were prohibited to carryon diplo naatic relations with other coun tries or enter into treaties or al liances with them without the con sent of Congress. Ina similar fashion, states were forbidden to form alliances or confederations with one another. States were lim ited in the military or naval forces they could have and restricted in their war-making powers to de fensive action. Although the Articles of Con federation were soon to be ad judged inadequate to the needs of union - and a further critique of them is made in a subsequent chapter -, they are nonetheless important for reasons in addition to the fact that they served briefly as a basis of governing the United States. First of all, the Articles were the first United States con stitution. They were influential in the drawing of the Constitution of 1787; some of the language was taken verbatina into the· later doc ument. They provided for a lim ited government with specified powers, probably the naost inapor tant principle of the Constitution.

And, the Articles attempted to divide and separate powers anaong two different levels of government, a principle which the ·biter docu ment incorporated much naore ef fectively. The Articles of Confed eration signify the triumph of limited constitutional government in America,even though they were a. groping toward and a demon strably insufficient realization of it. The Treaty of Paris, J783 The greatest achievement under the Articles of Confederation was the Treaty of Paris of 1783. By its terms the thirteen states not only attained their independence but also acquired an empire be yond the mountains. The acquisi tion of this vast domain was prob ably the greatest diplomatic tri umph in American history. That a people who had won so few battles, who had such a weak central government, who had nev er managed to bring naany of their resources to bear in the prosecution of the war effort, who were so dependent on the aid of other countries, should have such success at the peace table requires a little explanation.

The American success was helped by the precarious situa tion of the English. Britain wanted an end to the war, but her leaders were eager to prevent gains by European powers. Lord North's governnaent fell in early 480 THE FREEMAN August 1782 in the most humiliating man ner. A motion carried to make it a crime to advance the notion that the colonies could be restored by war. Lord North was replaced by the Earl of Rockingham, "the old Whig and repealer of the Stamp Act," who "was recalled to preside over a government committed to the abandonment of the former American colonies in revolt and to the liquidation of the world war in progress."5 He died shortly, and was replaced by Lord Shelburne who was, if anything, more favor ably disposed -to the Americans than Rockingham. France had already renounced any claim to any territory on the continent of North America in the Franco-American Alliance of 1778.

Even so, France was not eager to see Canada become a part of the United States. Moreover, France was allied with Spain and was, in this way, entangled with Spanish territorial ambitions. As if this were not enough, Congress in structed its peace commission to follow the guidance of the French in the treaty making. It was left to the peace commis sion either to utilize to American advantage the animosities, jeal ousies, and rivalries of European powers or to have American am bitions subordinated to them. It was in the hands, then, of Ben jamin Franklin, John Jay, and John Adams. A hostess thinking in terms of compatible guests probably would not have invited these three at the same time. Jay and Adams could get along well enough together. Both men were distrustful of European diplo mats; they considered them cor rupt and devious. Jay's recent experiences in Spain had fortified him in this opinion. John Adams was a Yankee - an Americ~n-, and proud of it. Truly one of the great men among the Founders, Adams' greatness was circum scribed by a temperament which tended to alienate others and a physique more suited to a mor tician than a statesman. It was his fate to labor ever in the shade of men whose most lauded attain ments he would hardly have con sidered· worthy of his best efforts.

He lacked Franklin's resiliency, Washington's commanding pres ence, Hamilton's dynamic drive, and Jefferson's knack for illumi nating philosophical p<?sitionswith unforgettable prose. Yet, great man he was, his constancy to the American cause was as enduring as Washington's, and his sacri fices for it were rarely exceeded. What he lacked as a diplomat he made up for with his commitment to his country. Benjamin Franklin was - well, Benj amin Franklin: diplomat par excellence, homely economist, scientist and inventor, 1972 THE AMERICAN TRIUMPH 481 and international bon vivant. A good diplomat is one who yields everything to the other party ex cept the substance for which they are contending. For much of his life Franklin had devoted himself to the austere task of learning to get his way by subterfuge. His years in Paris were a fitting epi tome to a long life. These three matched and overmatched the best Europe could send against them.

Even before negotiations got under way, informal French and Spanish proposals had been brought to Jay's attention which would have turned the territory south of the Ohio over to Spain and allowed _B.ritain to keep the territory north of the Ohio. "If this French proposal, which so pleased the Spaniards, had been adopted, the United States would not have secured from Great Brit ain title to the region now com posing the present states of Ohio, Indiana, Illinois, Michigan, Wis consin, and Minnesota, and would have lost to Spain the western part of Kentucky and Tennessee, Mississippi, and part of Louisiana, along with most of Alabama."6 In view of the fact that Spain wanted Gibraltar from Britain and Brit ain wanted to hold on to Florida, the above dispositions might have been made if all interested· parties had gathered around a table to negotiate or if France had been allowed the role of arbitrator.

This did not happen. The Amer icans ignored the instructions of Congress to defer to France, nego tiated a settlement with Britain, and saw to it that this settlement was subsequently made a part of the overall treaty. They were faithful to the terms of alliance with France, for this was not a separate peace, but they undoubt edly exceeded the bounds Congress had set for them. In the treaty, the United States got all the territory west to the Mississippi river, south to the 31st parallel, and north to a line bisecting the Great Lakes, or south of Ca"nada. The British also conceded that the people of the United States could use the North Atlantic fisheries. The independ ence of the states was affirmed, hostilities were to cease, and Brit ain agreed to remove .her armed forces from the United States "with all convenient speed." There were some concessions made by the United States. Both sides agreed that creditors of ei ther country should have no obsta cles put in the way of collecting debts owed them by citizens of the other. Most of the creditors in volved were British. Congress was to recommend to the states that the rights and property of Loyal ists be restored, and the treaty provided that the persecution of 482 THE FREEMAN August Loyalists should end. Britain and the United States agreed to the free navigation of the Mississippi, but Spain, the other country with terri tory on it, did not join in the agreement.

The Treaty of Paris was truly an American triumph. George Washington described its portent in these words: "The citizens of America, placed in the most en viable condition, as the sole lords and proprietors of a vast tract of continent,comprehending all the various soils and climates of the world, and abounding with all the necessaries and conveniences of life, are now, by the late satis factory pacification, acknowledged to be possessed of absolute free dom and independence."7 Some decades ago, an American histori an declared: "On the part of the Americans the treaty of Paris was one of the most brilliant triumphs in the whole history of modern diplomacy."8 A more recent diplo matic historian has seconded this opinion: "The greatest victory in the annals of American diplomacy was won at the outset by Frank lin, Jay, and Adams."9 Disbanding the Troops The greatest triumph of all, however, requires an appreciation of what might have been but was not to stand out in relief. The most critical moment for the success of the American Revolution almost certainly came in 1783. It was at about the time of the Brit ish withdrawal of forces from the east coast. The Continental army, what remained of it in camps along with what might have been summoned again into service, was now the only considerable force in the United States. This was the moment for~ a military coup' d'eta,t, if there was to be one, the moment when the American Revolution might have followed the course of so many others. Nor was the pro vocation lacking ..The military had been sorely neglected during the long years of war. Now that the victory had been won, the army was invited to disband and its members return home without be ing paid what had so long been promised.

George Washington was almost certainly the key to what would and did happen at this critical juncture. His prestige had grown during the years of his command, until at the end of the war he was the preeminent American. His critics had harmed only them selves; they were chipping at granite with teaspoons. He was approached more than once with the idea, tha t he take over the country. There is no evidence that he ever seriously contemplated such a course. On the contrary, he rebuked those who hinted at 1972 THE AMERICAN TRIUMPH 488 such things, and persisted in do ing his duty as he saw it. His duty as he saw it was, having finished his military task to lay down his sword, following the path he had ever trod of subordi nation to the civil authorities, and return to his peaceful pursuits at Mount Vernon. His every utter ance confirmed, too, that in this case duty was happily joined to his heart's desire, for he longed for the leisure to pursue. his pri vate affairs. Moreover, the man ner in which he conducted himself in his resignation and retirement should leave no reasonable doubt as to his sincerity. A little retell ing of some of the events of his last months of service will under score the point.

Two events of early 1783 indi cate that there was danger of a military revolt. The first of these is the one known as the Newburgh Address, which was a letter sent around to Washington's officers exhorting them to take matters into their own hitnds to get what they thought they I deserved. Wash ington ordered his officers assem bled and to be presided over by General Horatio Gates who, it is believed, had a hand in the Ad dress. When they were assembled, Washington ~ame into the room and asked to be allowed to say a few words to them. He told them that he knew well how much they had suffered and could sympathize with their wish to be rewarded. But he bade them to keep their faith in and with Congress. He had with him a letter from a mem ber of Congress which he thought might help to restore their faith if he read from it. But when he opened it up to read, he had diffi culty making out some of the words. He took out his eyeglasses and put them on - he had not worn them in public before -, and looking up from the letter, he said: "I have grown gray in your service,' and now find myself grow ing blind." It is said that the eyes of those gathered round filled with tears, for they knew how sturdily he had borne so much for so many years. It was hardly necessary for him to finish what he had to say.

Once Washington withdrew, the officers adopted a resolution af firming their confidence in Con gress and declared that they re jected "with disdain the infamous proposals contained in a late an onymous address to them."lO Of less potential for mischief was an event in June, though it does show what might have been. Fewer than a hundred soldiers of the· Pennsyl vania Line regiment descended on Congress at Philadelpnia and threatened them in such a way that Congress retired to hold its delibe·rations at Princeton. Wash ington sent troops to put down this 484 THE FREEMAN August little uprising in Pennsylvania. The last major contingent of British forces departed from New York City in early December of 1783. Just prior to their taking leave the Continental troops moved into the city to see that everything went off in an orderly way. It was an occasion for great rejoicing as the Continentals marched in, for the British had occupied the city for more than seven years. A spec tator wrote: "We had been accus tomed for a long time to military display in all the finish and finery of garrison life; the troops just leaving us were as if equipped for show, and with their scarlet uni forms and burnished arms, made a brilliant display; the troops that marched in, on the contrary, were ill-clad and weather beaten, and made a forlo~n appearance; but then they were our troops, and as I looked at them and thought upon all they had done and suffered for us, my heart and eyes were full, and I admired and gloried in them the more, because they were weather beaten and forlorn."ll The time had at last come for George Washington to take leave of the army he had served for eight and a half years. He notified the officers that he would bid them farewell at Fraunces' Tavern at noon of the day of departure. All who could make it gathered there.

It was a moving occasion. Washington was so filled with emotion that he could hardly speak. "With a heart full of love and gratitude," he said, "I now take my leave of you. I most devoutly wish that your later days may be as prosper ous and happy as your former ones have been glorious and honorable." So saying, he asked that each of them would come by to shake his hand, since he feared he would not be able to make it around to them. General Henry Knox, who had served him faithfully for so many years, came fir~t; Washing ton was so overcome that a· hand shake would not do. He embraced him as both of them wept. "Once done, this had of course to be done with all from Steuben to the youngest officer. With streaming eyes, they came to him, received the embrace, and passed on."12 Washington hoped to make it home to Virginia by Christmas when he set out from New York. But there were many festive oc casions to be attended along the way, and he had business to do first. He journeyed to Philadelphia to turn in his accounts. Then he went on to Annapolis to resign his commission before Congress.

This he did just after twelve o'clock on December 23rd. The galleries were packed for the oc casion, though many members of Congress were ahsent at this time. As the ceremony began, Washing1972 THE AMERICAN TRIUMPH 485 ton's biographer says that "a hush of high expectance prevailed." Washington began his address: "Mr. President: The great events on which my resignation depended having at length taken place ; I have now the honor of offering my sincere Congratulations to Congress and of presenting my self before them to surrender into their hands the trust committed to me, and to claim the indulgence of retiring from the service of my country."13 It was a solemn and affecting spec tacle .... The spectators all wept, and there was hardly a member of Con gress who did not drop tears. The General's hand which held the ad dress shook as he read it. When he spoke of the officers who had com posed his family, and recommended those who had continued in it to the present moment to the favorable no tice of Congress he was obliged to support the paper with both hands.

But when he commended the inter ests of his dearest country to al mighty God ... his voice faltered and sunk, and the whole house felt his agitations. When Washington regained his composure, he concluded strongly: Having now finished the work as signed me I retire from the great theatre of action, and bidding an affectionate farewell to this august body under whose orders I have so long acted I here offer my commis sion and take my leave of all the employments of public life. 14 As soon as the ceremony was over, Washington set out for Mount Vernon, and by hard rid ing was able to make it home to spend Christmas day with his wife and grandchildren. The American Cincinnatus had re turned to his plow. ~ • FOOTNOTES • 1 Jack P. Greene, ed., Colonies to Na tion (New York: McGraw Hill, 1967), p. 443. 2 Howard H. Peckham, The War for Independence (Chicago: University of Chicago Press, 1958), pp. 109-10.

3 Quoted in Merrill Jensen, The New Nation (New York: Vintage Books, 1950), pp. 26-27. 4 John Fiske, The Critical Period of American History (New York: Hough ton Mifflin, 1916), p. 91. 5 Dan Lacy, The Meaning of the Ameri can Revolution (New York: New Ameri can Library, 1964), p. 191. 6 Samuel F. Bemis, The Diplomacy of the American Revolution (Bloomington: Indiana University Press, 1957), p. 219. 7 Greene,op. cit., p. 437. 8 Fiske, op. cit., p. 34. 9 Bemis, op. cit., p. 256. 10 Fiske, op. cit., p. 111. 11 Quoted in Douglas S. Freeman, Washington, abridged by Richard Har well (New York: Scribner's, 1968), p. 506. 12 Ibid., p. 507. 13 Ibid., p. 509. 14 Quoted in Samuel E. Morison, The Oxford History of the American People (New York: Oxford University Press, 1965), p. 269. Next:· Freeing the Individual.

JAMES WEI James Wei assumed The Allan P. Colburn Chair of Chemical Engineering at Delaware in 1971, following a distinguished career in industry. He received the B.S. from Georgia Tech and the M.S. and Ph.D. at MIT. At Mobil Oil, he ad vanced from Research Chemical Engineer to Senior Scientist and concurrently held Visiting Professorships at Princeton and Cal Tech. Upon completion of Harvard's Advanced Management Program in 1969 he returned to Mobil as Man ager of Analysis. Prof. Wei received the ACS Award in Petroleum Chemistry in 1966 and the AIChE Professional Progress Award. He is a consulting editor for McGraw Hill and a mem ber of CHEMTECH's Executive Board. Prof. Wei is best known for his work in kinetics, catalysis, and mathematical analysis, but his recent attention has been focused on creating a chemical engineering courSe for freshmen. This article is slightly condensed and reprint ed by permission from the March 1972 issue of Chemical TechnoloAJ'.

ENERGY: THE CIVILIZATION and way of life we know are supported by a steady supply of low cost raw materials drawn from farms and forests, from the mines and wells, and from the air and water. In history when the supply of a raw material runs low and when there is no sub stitute in sight, people wonder whether civilization can survive. William Crooks observed in 1898 that intensive farming depended on the nitrate mines in Chile, and their eventual exhaustion would bring world wide famine. 1 This did not take place as the great chem ist, Haber, and the chemical engi neer, Bosch, rose to the challenge and solved the problem of nitrogen fixation via ammonia synthesis from air and water. As the skills of chemists and chemical engineers gradually in crease, almost any natural raw material can be synthesized or re placed. Outside of hydrogen, the chemical elements are hardly ever theUltimateRawMaterial__ lost from planet earth. 2 There is no such thing as "nonrenewable minerals" even though -rich depos its are exhaustible. Everything that is "used up" is still with us, but in altered and diluted form.

In this closed system of earth, we can and will recycle everything. Given enough energy, or thermo dynamic free energy, we can sep arate and· concentrate any ma terials and recombine them chem ically to form synthetic raw ma terial. All of the precious material con tained in the refuse. of our civ ilization collects on our lands, floats in our air, or runs off into the oceans. They can all be recov ered with sufficient expenditure of energy. From the ocean we are al ready recovering freshwater, mag nesi urn, bromine - it would be even easier if we could develop· or ganisms that concentrate some ele ments. Thus we realize that en ergy is the ultimate raw material which can be used to make food, water, other raw material-as well· as warming and cooling our homes and operating all our ma chinery. Energy Uses in'the Pas,t The United States has always been blessed with an abundance of cheap energy to augment human and animal muscle: from the swift flowing rivers providing water power, and great forests provid ing fire wood, down to the modern coal mines and oil gas fields. To day, this underpinning of our en tire economy and way of life con sumes only 3 per cent of our gross national product. Energy cost forms only 31j2 per cent of the cost of average industrial products, ranging from 8 per cent for chem icals to 0.3 per cent for apparel manufacturing. 3 The consumer cost of energy can be divided into three shares: production cost un der the supervision of engineers, 488 THE FREEMAN August transportation and distribution costs under the supervision of marketers, and federal and local taxes. Table 1 gives the approxi mate current prices. Only a small part of the cost of refined fuel is in the province of engineers. 4 ,5,6 Table 1. Current energy costs Production Consumer cost cost Gasoline, regular 12 36 ¢/gallon Naturalgas 16 148 ¢/thousandcu ft Fuel oil, No.2 11 20 ¢/gallon Electricity 0.7 2.8 ¢/kWh Consumer cost = productioncost + distribu tion and transportationcost + federal and local tax.

VVe use a great deal of energy because it is very cheap. Our tax laws are already designed to make energy more expensive. For in stance, automotive transportation requires three ingredients: vehicle, fuel, and road. The last item be longs to the public sector and is financed mostly from taxes collect ed from fuel. The excise and sales tax on a vehicle is less than 10 per cent of the manufactured cost, but on gasoline it equals manufac tured cost. 7 Despite this fact, the c~pital and maintenance cost of a piece of energy-using equipment is usually 15 to 20 times the an nualcost of fuel, for automobiles, air conditioners, and electric pow er plants. 5, 7 As long as fuel is cheap and equipment dear, we burn fuel up prodigiously. VVhen prices go up, we complain but go on burning without a pause. Past investment in equipment is very expensi ve and cannot be changed readily. VVhen copper is expensive, we can shift to aluminum; when butlers are too expensive we phase them out; but when energy is more expensive, we have neither alternative nor can we do without.

If it were not for the fact that engineers continue to improve equipment to save fuel, our use of energy would be even more prodig ious. For instance, in 1925 it took 25,000 Btu to make a kVVh of elec tricity but today it takes only 9,000 Btu. 8 Historically, the principal de terminants of energy use have been number of people and scale of affluence.9 Figure 1 shows the per capita gross national product of various nations against per capita energy use in 1961.10 It can pass as a fairly straight line, the richer one is, the more energy he burns up. If you look at such curves long enough, you can begin to see an S-curve. As you get richer you will buy more information and service, which require less ener gy than hardware. U.S. commer cial energy use is about 120 times the human intake of food energy; while in India it is about 3 times - for all manufacturing, farming, 19'72 200 ::I 150 ~ CCI ....c enc :=! 100 ea...os.

eau -CD =->- 50en -CD C ..... ENERGY: THE ULTIMATE RAW MATERIAL 1000 2000 Gross nationalproduct per capita(dollars) Figure 1. Nations GNP and energy use, 1961 489 3000 and transport. Figure 2 shows the historical U.S. GNP growth in constant 1958 dollars (where the effect of inflation is taken out) and energy consumption in Quads (a Quad is a quadrillion Btu, or a million times a billion BtU).l1 It appears that of late, energy growth lags a little behind GNP growth. An increase inafHuence without corresponding increase in energy use has never been achieved in the past and is difficult to see in the future. There may be frivolous uses of energy, such as the electric tooth brush; but the bulk is necessary to our way of life: home fires should be kept warm, people have to get to werk, f00d must be de livered, and the wheels of industry have to turn. The pattern of 490 THE FREEMAN August sources and uses of energy today, together with a government fore cast for the year 2000, is given in Table 2.12 Oil and gas have been Table 2. U.S. sources and uses of energy as % of total Projected 1970 2000 SOURCES Oil 43 32 Gas 31 26 Coal 21 16 Hydro 4 3 Nuclear 1 23 USES Residencecommerce 22 13 Transportation 25 13 Industry 31 20 Electricity generation 22 44 capturing markets steadily from coal for the last thirty years, since they are cleaner, more convenient and cheaper. Nuclear power will rise to capture markets from oil and gas in the future. In the use side, electrici ty generation has been the fastest growing segment and will continue to be.

The Two New Crises In recent years, the e~ergy use suddenly faces two new crises: shortage and environment. Hardly a day goes by without a black eye for energy in the mass media: Delmarva Power and Light refus ing new customers in natural gas, a blackout in the eastern seaboard, birds dying in oil spilled at Santa Barbara, opposition to strip min ing in West Virginia, scientists predieting that the polar ice cap will melt and flood coastal cities due to accumulation of carbon dioxide in air, scientists predicting combus tion dusts will block out sun light and cause a new ice age, and a Wall Street Journal article de claring that planet Earth is ap proaching an· energy ceiling .13,14 A year ago, Daniel Patrick Moyni han asked, "When would this in sane increase in energy use stop?" It may seem that the only way out is to use less energy in the future, save the irreplaceable resources for our grandchildren, and repair the damaged environment.

I would like to advance the thesis that there is no inevitable collision course between more en ergy use and better environment: a cleaner environment would mean much more use of energy. The main flaw of ecologists prophesy ing doom is their failure to appre ciate the ingenuity of scientists and engineers in inventing tech nological alternatives. A cleaner automobile means more use· of fuel, to produce hotter' and cleaner exhaust and to over come pressure drop in afterburn ers. Taking lead out of gasoline would mean a lower compression ratio and less efficient engine, which means more fuel. Cleaner smoke stacks in power plants mean either cleaner fuel by more refin ing of oil and coal, or stack gas 1972 ENERGY: THE ULTIMATE RAW MATERIAL 491 1400 140 1200 120 c:a 1000 100Ln en ~ =0-800 80 ..., ..... co 0 c en 600 60 ~=.S! ... "C ca m 400 40 =d 200 20 0 01920 1940 1960 1980 Figure 2. U.S. energy use and gross national product scrubbing and dust removal, all requiring more energy. The Bio logical Oxygen Demand of waste discharged into rivers and lakes by residential-industrial-agricul tural activities would require more sewage treatment and passage of more oxygen into water, which means more energy. The recycling of solid wastes means more energy use. Provided that society will face the facts and give engineers the resources and time, all the pollutants can be reduced to any required level by sufficient expen diture of energy - and a necessary increase in prices, which will de cline as experience grows.

At the end, energy is used to remove all other pollutants and a vast quantity of waste heat be comes the ultimate pollutant. So far, this is a local dispersal prob lem rather than a global problem. The fishes are hot in the outlet of a power plant, and New York City is three degrees hotter than the countryside in the winter. But the man-made waste heat rejection is currently only 50 ppm of the earth's heat budget, or the quan tity of solar radiation that the earth receives and sends back into space. 15 The supply of some forms of energy is short and prices are in creasing. The oil price increase is due to the demands of oil export_ing countries in the Middle East, Libya, and Venezuela, plus a short492 THE FREEMAN August age of tankers; the natural gas shortage is due to industry's un willingness to explore and to lay pipelines under the low existing governmeJt regulated prices; the coal shortage is due to earlier fore casts of its demise, and consequent underinvestment in opening new mines and manufacturing railway hopper cars; the nuclear power shortage is due to unforeseen diffi culties in construction. All of these are short-term problems, many due to past underinvestment in re search and development and plants, that can be solved later.

The costs of mining and extrac tion of a fuel is divided into two parts: the technology cost and rent. 16 The technology costs are managed by the geologists and en gineers in exploration and drilling holes - these costs reflect the bounty of earth and our present state of technology, and cannot be changed except by innovations in technology or by new discoveries. The rent cost includes royalty and bonuses to the land owners, pro duction and severance taxes, Fed eral income taxes, and windfalls for the lucky wildcatters - this cost is negotiable and represents the bargaining position of various parties and can be changed sud denly. We read that in the Persian Gulf, the technology cost of a bar rel of oil is only 10 cents, but the rent cost is $1.60 and going up. Despite the engineers' effort to cut cost every year, the rent costs can go up much faster. To affluent na tions such as Japan and the U.S., this cost increase is an unwelcome burden but, to less developed na tions such as India, this cost in crease is a serious blow.

The Arabs have more than two thirds of the free world oil; can they obtain indefinite increases in prices? We know that North America contains vast fuel re sources in coal, oil shale, and tar sand - many times greater than all the oil in the Middle East. Lab oratory and pilot plant runs show that they can be turned into oil and gas. Given enough money and time to do research and develop ment, chemists and engineers will find out how this could be done in great scales economically, and without damage to environment. Present guesses on synthetic crude oil prices are in the range of $4-$6 a barrel from these solid fuels, while small proj ects such as the Sun Oil process in tar sand in Al berta is almost competitive at present prices. 17 These vast re sources can form a price ceiling on oil and other energy sources for many years to come. The public and our government need to learn the facts, debate the issues, and pass rules on their exploitation.

We do not yet know how to do the mining-extracting-refining in the 1972 ENERGY: THE ULTIMATE RAW MATERIAL 493 ogenic cables that are super-con ducting. I am afraid that after the engineers have d~ne their jobs well and ·technology costs are cut, the dominant cost in electricity trans mission will turn out to he a rent cost again, paid to land owners to acquire the right of way. Radiation hazards 'in nuclear plants can be minimized to any desired level by spending more money. The final' radioactive hot wastes are· being stored in caves now. Eventually, they will be dis posed of by some other means, such as being sent into the sun by rockets. The sun is exceedingly radioactive now - a little bit more won't hurt. It can be our ultimate garbalge dump.1s When it comes to transporta tion, oil is the dominant fuel. Out side of a few electric trains and bicycles, almost everything else moves by oil on the land, in the sea, or in the air. Its dominance is due to its ease in use as a liquid, as well as high power density and low cost. Nature appears to have arrived at the same solution for transportation fuel much earlier.

When nature prepares something for a long journey, such as awal nut for dispersion, a cocoanut for ocean voyage, a salmon tra veling upstream to spawn, or a goose mi grating to South America, the body carbohydrates are converted into lipid or fat. 19 These fats dif0.69 0.46 $4/barrel $10/ton Electricity Gasoline No.6 fuel oil (1% S) Bituminous coal No.6 fuel oil (High S) $2.50/barrel 0.43 Natural gas 40¢/thousand CF 0.40 East Coast wholesale, without tax The approximate current whole sale prices of the more important fuels are shown in Table 3.4 The clean and convenient natural gas seems underpriced in this table. Lower sulfur fuel oils are natural ly more expensive than high sul fur fuel oils. Electricity is the cleanest to the consumer, totally available to do useful work, and the most expensive. Future Energy Uses The large-scale generation of electricity at remotely located nu clear plants and the burning of coal at the mine mouth would re move much danger and pollution from population centers. (Distance certainly lends enchantment here.) The increased cost of electricity transmission could be decreased by new developments, such as crymost economical manner, and with out damage to the environment. If engineers are given the job and the resources, they will rise to the occasion.

Table 3. Fuel prices Equivalent cost Unit cost $/million Btu O.B¢/kWh 2.34 12¢/gallon 1.00 494 THE FREEMAN August vice, but rather low in capacity. The flywheel was tried in buses in Switzerland and is capable of tre mendous improvements. One can conceive of a rotor with an ex ceedingly high speed of revolution, kept inside a high vacuum to mini mize friction, and made of com posite material of carbon filaments in epoxy resin to withstand the tremendous centrifugal forces. There is a great technological innovation on the way that can greatly influence the future pat tern of population distribution and transportation needs: the vi deophone. People live in great met ropolitan regions for the ease of contacting many other people and to use common facilities. These great concentrations lead to crowd ed cities and tremendous transpor tation problems. With a techni cally advanced videophone, one can have vivid and direct communica tions without leaving his home.

Managers and white-collar work ers, scientists and artists can live anywhere they choose and do all their work at home and by video phone; housewives can shop by videophone; students can talk to their professors by videophone. There is no need for people to get together except when they want to have fun together. People would only travel for pleasure then. This could result in a great dispersion of people back to the countryside. 385 200 85 40 1 Chemical energy kcal/g 11.0 9.3 5.2 4.8 4.1 4.1 Table 4. Energy density in storage Electric mechanical energy watt hr/lb (20% heat efficiency) 1,150 550 510 Gasoline Lipid Methanol Ammonia Carbohydrate Protein Sodium-sulfurbattery Conceptualsuper flywheel Lead acid battery Super fly wheel Rubber band For intercity traffic on land, and for long distance travel in the air or in the seas, it is difficult to see how oil can be replaced. For cen ter city stop-and-go traffic, it would be well to switch to vehicles with stored energy that is less heat generating. The rubber band is an obvious energy storage defer from petroleum only by the presence of a little oxygen. In fact, some geochemists believe that pe troleum originates in animal fat buried in the rocks for eons, and that the oxygen is removed by cat alytic action of bacteria or of clay.

Table 4 gives the comparative pow er density of a number of fuels and batteries. 7 It may be a bit un fair to compare gasoline to a bat tery in power density, since the battery carries both fuel and oxi dizer, but the oxidizer of gasoline is ubiquitous air that is always available except in space and un der water.

1972 ENERGY: THE ULTIMATE RAW MATERIAL 495 Future Supply of Energy The recoverable resources of energy in the world are quite large. The solid fuels are much greater in quantity than the liquid and gaseous petroleums, based on a study by Hubbert. 2o We know they are available, but we do not yet have the technology or agreed upon ground rules for their ex ploitation. Before these tremen dous resources can .be touched, there must be research and devel opment, environmental regulations, and ownership and profit rules es tablished. For the nuclear fuels, a de pendence on uranium oxide· ores of $10/lb would mean a rather limited future in comparison with coal. There may be much more urani urn to be discovered. If we are willing to pay more, we can use a great deal of low grade uranium. Future energy supplies will be pJentifulbut not neces sarily cheap. The truly overwhelming solar energy is the ultimate energy source when all else is gone. This prognostication was recently. enun ciated by Gaucher,21 and Glaser 22 has proposed a conceptual· scheme for using solar energy. He envi sioned synchronous satellites that constantly hover overhead at or bits 22,000 miles away, with solar cells 25 square miles in area. The electricity collected from the sun is beamed to earth at a safe in tensity on microwave and collected on giant antennas. This is avail able night and day, and goes through mist and driving rain with less than 5 per cent absorp tion loss. This idea is not far from today's technological capabilities.

For a trial balance, let the world energy demand increase by 4 per cent a year, compounded, based on modest population-GNP growth. With fossil fuel alone, we may be in trouble after 2050; adding cheap uranium, we are in trouble after 2070. After 2100, man-made energy release is 1 per cent of nat ural solar influx and the waste heat disposal problems have to be solved. Summary There is no inevitable collision course between high energy use and good environment. The public should be informed that there are technological alternatives. We read that after 150 years of fog,when sulfur-containing coal is replaced by clean natural gas, winter sun shine is returning to London. Scientists and engineers can solve nearly' all environmental problems when they are given the task, the resources and the time. Any combustion waste can be cleaned up; radioactive wastes can be sent into the sun; phosphates can be removed by tertiary sewage 496 THE FREEMAN August treatments; hot fishes near power plants can be saved by dry air cooling towers; solid wastes can be reduced to ashes, and the re mains recovered and recycled.

Many of these solutions are within today's technological capabilities. Weare only holding back to see which is the best solution, and who should pay, before vast investment programs begin. Even the waste heat disposal problem for earth may eventually succumb to the in genuities of our scientists and en gineers, just as the spectre of world famine forecast by William Crooks was dispelled by Haber and Bosch. All of this may not be cheap, and the cost of using energy may have to go up. But let us tell every one that a clean and adequate en ergy supply can be managed if we give chemists and chemical engi neers a chance. But w~ must plan ahead. ~ - Footnotes 1 Kobe, K. A., Inorganic Process Indus tries (Macmillan, New York, N.Y., 1948), p.230. 2 Jeans, James The Dynamical Theory of Gases (Dover, New York, N.Y.), 1954, p.342. 3 Leontief, W. W., "The Structure of the U.S. Economy," Sci. Amer., p. 25, April 1965.

4 Oil Gas J., p. 100, March 1, 1971; Energy News, 1 (10), March 15, 1971. 5 Elec. World, March 15, 1971. 6 My utility bill at Princeton, N.J. 7 The Autqmobile and Air Pollution, a report of the Panel on Electrically Pow ered Vehicles, U.S. Department of Commerce, Oct. 1967, pp. 49-99. 8 Schurr, S. H., and Netschert, B. C., Energy in the American Economy 1850 1975 (Johns Hopkins Press, Baltimore, Md., 1960) , p. 728. 9 Landsberg, H. H., and Schurr, S. H., Energy in the United States (Random House, New York, N.Y., 1968). 10 Singer, S. F., "Human Energy Pro duction as a Process in the Biosphere," Sci. Amer., p. 175, September 1970. 11 Dole, H. M., American's Energy Needs and Resources, speech by the As sistant Secretary of Interior at Stanford University, January 12, 1971. 12 Mills, G. A., Johnson, H. R., and Perry, H., "Fuels Management in an En vironmental Age," Environ. Sci. Tech nol., p. 30, January 1971.

13 Ehrlich, P. R., and Ehrlich, A. H., Population, Resources, Environment (W. H. Freeman, San Francisco, Calif., 1970) , Chap. 4 and 6. 14 Welles, J. G., "Will the Earth Reach an Energy Ceiling 1" Wall Street Jour nal, January 6, 1971. 15 Landsberg, H. E., "Manmade Cli matic Changes," Science, 170, 1265, (1970); Environmental Quality, a report by the Council on Environmental Qual ity, August 1970, Chap. V. 16 Adelman, M., "The World Oil Out look" in Natural Resources and Inter national Development (Johns Hopkins Press, Baltimore, Md., 1964). 17 Strom, A. H., and Eddinger, R. T., Chem. Eng. Pro gr. 67 (3), (1971). 18 Gordon, T. J., remark at a confer ence at the Institute of Man and Science, Rensselaerville, N.Y., 1969. 19 White, A., Handler, P., and Smith, E. L., Principles of Biochemistry, (Mc Graw-Hill, New York, N.Y., 1964), p. 282. 20 Hubbert, M. King, "Energy Re sources," in Resources and Man, by the committee on resources and man, Na tional Academy of Science-National Re search Council (Freeman, San Francisco, Calif., 1969).

21 Gaucher, L., Chem. Technol., March 1971, 153. 22 Glaser, P., Chem. Technol., October 1971, 606.

The Natural History of Governmental Intervention MARY PETERSONpersuasively illustrates for sevenselected agencies what might be called the ,natural history of govern mental intervention into economic affairs: A real or fancied evil leads to demands to "do something about it"; a polit ical coalition forms consisting of sincere high-minded re formers and equally sincere interested parties; the incom patible objectives of the members of the coalition (e.g., low prices to consumers and high prices to producers) are glossed over by fine rhetoric about "the public interest," "fair competition," and the like; the coalition succeeds in getting Congress (or a state legislature) to pass a law; the preamble to the law entombs the rhetoric and the body of the law grants power to governmental officials to "do some thing"; the high-minded reformers experience a glow' of triumph and turn their attention to new causes; the inter ested parties go to work to make sure that the power is used for their benefit and generally succeed; success breeds its problems, requiring the scope of intervention to broaden; bureaucracy takes its toll so that even the initial special interests no longer benefit; ultimately, the effects are pre ciselythe opposite of the noble objectives of the high-minded reformers without achieving the more mundane objectives ofthespecial interests; yetthe activity is sofirmlyestablished and so many vested interests are connected with it that re peal of the initial legislation .is nearly inconceivable; instead, new governmental legislation is called for to cope with the problems produced by the old; and a new cycle begins.

From Milton Friedman's Introduction to The Regulated Consumer by Mary Bennett Peter son (Los Angeles: Nash Publishing, 1971).

ABORT~ON~ a MetaphysicalApproach THOMAS L. JOHNSON THE ISSUE of abortion has occu pied the minds of humans for as long as civilized society has ex isted. There have been times when abortion was legally condoned and socially accepted, and other peri ods of mankind's history when this practice was outlawed and considered to be a criminal act. Today, at a point in time when the rights of individuals are being attacked, ignored or destroyed, we are again witnessing a resurgence of the debate on abortion, and within the past few years, the passage of laws which remove Dr.. Johnson is Associate Professor of Biology and Professor of Chordate Embryology at Mary Washington College of the University of Virginia. 49H most or all restrictions which have, in the previous history of this nation, protected the individ ual rights of the most vulnerable, defenseless and innocent of human beings: the unborn child.

The abortion controversy is not just another dispute causing peo ple to occupy opposing intellectual and legal camps. It is not a sub ject that can be equated in im portance with other national con cerns. Abortion is an. issue which must be recognized as one of the most, if not the most important argument of our times, for it deals with an attack on the fundamental right of all humans: the right to life. When this right, upon which all other rights depend, can be set 1972 ABORTION: A METAPHYSICAL APPROACH 499 aside; when, at the whim of an adult, a new human life can be destroyed simply because another human does not wish to allow this life to continue; when it is decided that one stage of human life is of no real value - that its existence is an inconvenience to others and can thus be terminated - mankind loses its most precious value. Once the absolute value of each individual to his own life vanishes, existence no longer remains as a right, but becomes a privilege to be granted or denied by those in authoritative positions, by major ity vote, or by the caprice of an unreasoning mother.

The Nature of Existence There is but one approach that can be taken in dealing with the subject of abortion - the meta physical approach. Metaphysics is a branch of philosophy which in volves the attempt to understand the nature of existence, to explain and scientifically analyze natural phenomena, both in the animate and inanimate realms. Since abor tion is dealing with the destruc tion of the human embryo or fetus, it is necessary to examine the biological nature of these en tities and apply this information to another division of philosophy -Ethics -in the attempt to deter mine the correct behavior of men toward these intrauterine stages. Among those who advocate abor tion, who state that a woman should be able to terminate a pregnancy simply because she de sires to do so, there are two sig nificant groups. One group states that the entity within the uterine cavity is not a living human be ing, that the embryo or fetus is simply a cluster of multiplying cells that could be considered as a part of the mother's body. The other group considers the embryo or fetus to be human, but argues that there is a conflict between the rights of the mother and those of the unborn child. That the mother must have full control over her body, and that if she is denied this right she will fall victim to the rights of the unborn.

The Essentials of Reproduction Among Vertebrates What is the actual nature of the intrauterine stages and does a real conflict exist between the mother and the unborn? In order to answer these questions it will be necessary to briefly analyze the known essentials of reproduction, particularly those factors which apply to vertebrates, of which the human is the most advanced form, and correlate this knowledge with the issue of the rights of the em bryo or fetus, and the mother. Sexual reproduction - reproduc tion accomplished by means of the 500 THE FREEMAN August production of sperms and eggs, and their subsequent fusion - is characteristic of most forms of life, and is the only method of reproduction possessed by nume rous animal groups (for example, all vertebrates). Once a mature animal produces the sex cells, they are released from the organs in which they formed (the testis or ovary) and usually pass into ducts leading to the outside of the or ganism. Either the sperms and eggs are released into water, at which time fertilization occurs immediately, or sperm cells are introduced into the female tract and fertilization will eventually take place within the body of the female. The essential point is, that at the time of fusion of sex cells, a new generation of a species is produced.

Within each cell of an animal there are DWO sets of chromosomes (filaments containing genes). When the sex ceUs are formed, each sperm or egg contains only one set of chromosomes, but when a sperm fuses with an egg the full complement of chromosomal pairs is reestablished. It is at this point, at the time of the forma tion of the zygote (the cell formed by .the fusion of the sperm and egg) that a new organism comes into existence. In human reproduction, the sperm fertilizes the egg in the upper portion of the oviduct. A new human life thus begins its existence in the cavity of the ovi duct, and since it takes several days for the new organism to reach the uterus, it is already an embryo by the time it enters that organ. The Point of Separation One frequently hears the argu ment that the zygote, embryo or fetus is a part of the mother's body over which she must have control. Without question, this is not the case. Once sperms and eggs are discharged from the sex organs, they are no longer a part of the organism which produced them. These highly specialized cells, which have been produced by a special form of cell division (meiosis - other body cells are formed by the process of mitosis), are of no value to the organism which formed them (as regards the maintenance of its own life) - thus they either degenerate or they are released from the sex organs and pas~ into a tube on their way out of the body. Ulti mately a small fraction of these discarded sex cells will fuse. Un der no circumstances could one consider mature released sex cells, or any subsequent organism re sulting from the fusion of these cells, asa part of the individual which generated them.

1972 ABORTION: A METAPHYSICAL APPROACH 501 (Although the human embryo attaches itself to the wall of the uterus in order to gain needed substances from the mother for its growth and development, it does not fuse with this organ but remains as a distinct new life ex isting within the cavity of the mother's reproductive tract.) Human life therefore has its beginning (is viable) at a point in time when the necessary genetic information, half coming from the father and the other half from the mother, is brought together by the fusion of the released sperm and egg to form the single-celled zy gote. This individual organism cannot be a part of the mother (it has an entirely different set of chromosomes), but is a sep arate and unique human life. All Vertebrate Life Begins in an Aquatic Environment There is another important, but generally over looked, .aspect of the development of vertebrates which is germane to the discussion of abortion and which would shed light on the nature of the intra uterine embryo or fetus. It is a well known biological fact that all vertebrate life must begin in an aquatic environment. Fishes and amphibians generally release the sex cells into a body of water and the zygotes and embryos develop there. In .the land vertebrates, which do not deposit their eggs into water, a sac forms around the embryo which fills with fluid.

Consequently, each vertebrate, in cluding the human, must spend the first developmental phase of its life in a water medium, and it i.s only after the new organism has achieved the necessary phys ical development (not accom plished by fishes and some amphi bians), that it is able to continue its life in a gaseous environment. (Even if humans should achieve the technological ability to raise what science fiction writers have called "bottle babies," these "bot tles" would be filled with fluid. It is only because the human organ ism begins its life, not in a glass container· in which one could ob serve the rapidly changing new life, but in a dark cavity out of sight, that older humans find it possible to pretend that these younger humans are not living or are not human. If the growth of the unborn child were to be ob served by the mother, the issue of abortion would most likely never have become a matter of worldwide concern, for what psy chologically healthy mother, see ing the unborn child within her self, would choose to destroy it.) Metaphysically, by its nature, every new human life must spend the first months of its existence in an aquatic environment, within 502 THE FREEMAN August the amniotic sac, if it is ever to experience a later stage of human existence. No human life has ever bypassed this requirement, or ever will - at least not for many mil lions of years, if then, considering the present rate of evolution. Ev ery new human life must also have first been a zygote, then an em bryo and finally a fetus before it is prepared to live outside the fluid medium. To contend that hu man life is only human at the time of birth, that the intraute rine entity is not an actual, but only a potential human being, is untenable.

If Not a Human Being, Then What Is It? For those who insist that hu man life begins only at birth, the question that must be asked is: What is this entity developing within the uterus if not an actual human being? Is it possible that by some magic, at the time of birth, that this alleged potential being is somehow, within a matter of minutes, transformed into an actual human being? To rational individuals, in possession of sci entific facts, the answer is incon trovertible. Both the unborn child and the new born child is an actual human being, and at the time of birth, the child is merely moving from one required environment (aquatic) to a new required environment (gaseous) so that it can continue to develop into the succeeding stages of its life until it eventually ends its existence at the time of death. The biological facts relating to the reproductive process and the first stages of human life have been established. It is now neces sary to relate this knowledge to the issue of rights.

Those that contend that the in trauterine being is not human have no problem in their attempt to settle a controversy over rights, f or if this living "thing" is not human, it can possess no rights. Since it is a well substantiated fact that the zygote, embryo or fetus is a human being, their ar gument becomes meaningless and requires no further discussion. Those who contend that a hu man life is existing within the mother during the period of preg nancy do ascribe rights to this new human life, but it is argued that the rights of the mother take precedence over those of the un born child and thus she-has, or should have, the legal and moral right to terminate the life of this new individual at any, or certain limited, stages of its existence. This latter position requires a succinct examination. A woman must have full control over her own body at all times. She must be free to take any ac1972 ABORTION: A METAPHYSICAL APPROACH 503 tion which is deemed necessary to sustain her life. For instance, if it can be medically determined that carrying her unborn child to term would probably result in her death, she cannot be expected or required to sacrifice her adult in dependent life for the life of an immature, dependent offspring.

(Actually, in many such cases, both the mother and the fetus could die, resulting in the loss of two lives, instead of just one.) Since medical science' has advanced to a point at which such life and death situations rarely occur, the argument in favor of abortion in order to preserve the life of the mother has only limited applica tion. Although this is the case, the legal code should specifically grant abortion if the mother's life is seriously jeopardized, which it has done throughout the history of this nation. Mitigating Circumstances Are there other circumstances that might arise which would, or could, legally and morally permit an expectant mother to undergo an abortion? The answer is yes in cases of legally proven (which is sometimes difficult), unwillfully engaged in acts of rape or incest. When an individual does not com mit an act of his own free will, he (or she) cannot be held respon sible for the consequences of this act. Although this is true, it does not alter the fact that a new life is existing and that it will be destroyed if aborted. The most hu mane response to such a circum stance would be to encourage the expectant mother to carry the child to term, but no one could require this of the victim.

There are' some who insist that abortion should be allowed for other medical reasons - in the case of diseased or malformed fetuses. But what individual physician, or board of physicians, or legislative body has the ability to determine what diseased condition or what deformity could warrant killing the unborn (or the born)? No such judgment is possible, either for the intrauterine or extraute rine human. "Handbook on Abortion" Dr. and Mrs. J. C. Willke, in their recently released book, Hand book On Abortion, emphasize this point when they write: "This price tag of comfort or utilitarian use fulness, called euthanasia when applied to incurably ill post-born humans, applies equally well to the pre-born human who is also judged to be so deformed or men tally deficient that he too should not be permitted to live. This cri terion and value judgment which permits humans to continue to live only because they are useful 504 THE FREEMAN August and independent is an utterly bar baric concept. Once life has a price tag on it and is no longer an absolute right, then all life is endangered, all life is only worth the current price tag placed upon it by society, the state, the master race, or those in positions of power."!

Having full control over her own body (having self-determina tion) is an absolute right of each woman, but having full control over another's body, over the body of a new life developing within her reproductive system is not, and never could be her preroga tive. A woman must have the right to prevent conception - to deter mine herself if she wishes to have, or not have, a child - to obtain contraceptive information and ma terials - but she must also bear the responsibility for sustaining the life of a newly formed human if she willfully engages in inter course which results in pregnancy. (It should be noted that certain contraceptives do not prevent con ception, but preclude the implan tation of the embryo in the wall of the uterus. The use of such contra ceptives should be condemned, for 1 Handbook On Abortion is a well rea soned and scientifically accurate work covering all of the primary and secondary issues concerning abortion. It is available in paperback for $.95, plus postage, from Hiltz Publishing Co., 6304 Hamilton Ave nue, Cincinnati, Ohio 45224.

they bring about the destruction of very young lives rather than prevent their coming into exist ence.) A Collectivist View: The Individual Is Expendable Consider the political philoso phy, and the attitude toward indi vidual rights, of those groups which are the most outspoken sup porters of abortion - those con cerned with environmental pollu tion, the population explosion and the "liberation" of women. Each of these groups espouses a collec tivist view of life and considers the individual human to be ex pendable or enslavable as the means of achieving their ends. They are outspoken lobbyists back ing legislation granting the agen cy of force, the government, the authority to establish a myriad of programs which they consider necessary to achieve their aims, and they completely ignore the fact that it is other human lives that will be sacrificed in this at tempt to carry out their master plan for society. The sacrifice of the unborn is just one other aspect of their social engineering which is completely compatible with their view of man - the view that the individual is nothing; the collec tive is all.

There is no conflict of rights between the expectant mother and 1972 ABORTION: A METAPHYSICAL APPROACH 505 the unborn child. Both she and the new life within her have the right to life, a right which must be pos sessed by all humans at all stages of their life. And since it is the function of government to protect the rights of all humans, from the beginning of life to its end, it is right for the government to pro scribe the killing of the unborn by means of abortion - except to save the life of the mother or in in stances where a woman's self-de termination was obliterated, as in the case of forced rape or incest. In her brilliant essay, "Man's Rights," Ayn Rand states: "There are no 'rights' of special groups, there are no 'rights of farmers, of workers, of businessmen, of em ployees, of employers, of the old, of the young, of the unborn.' There are only the Rights of Mum-rights possessed by every individual man and by all men as individuals."

The unborn child is a new indi vid ual having the same rights as all other individuals, and, as with all humans, regardless of their age or station in life, possesses the most basic of all rights, the right without which all other rights would cease to exist, the right. to life. t) When A New Life Begins There is perhaps no phenomenon in the field of biology that touches so many fundamental questions as the un ion of the germ cells in the act of fertilization; in this supreme event all the strands of the webs of two lives are gathered in one knot, from which they diverge again and are rewoven in a new individual life-history .... The elements that unite are single cells, each on the point of death; but by their union a rejuvenated individual is formed, which constitutes a link in the eternal proces sion of life. F. R. LILLIE, Problems of Fertilization A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN SEVERAL YEARS BACK I used to encounter people who spoke of "Leonard Read's freedom philoso phy." Now I run into those who simply say "the freedom philoso phy." Leonard Read must be doing something right to find his recipes becoming the common property of cooks and diners who no longer think of crediting the pioneering chef.

Mr. Read, of course, would deny that he is an originator. In his new book, To Free or Freeze: That is the Question (Foundation for .Economic Education, $3 cloth, $2 paper), he remarks that "prac tically every idea we espouse and pass off as our own is unknowingly taken from others." Even so, I find Mr. Read an original in the way he combines his ideas and his methods. 506 Where else in the country will you find a man who really believes that the way to reform others is to reform yourself in hopes that the example will lead to self-discovery along similar lines in whoever cares to listen? Max Eastman, the crusader who became more con templative in later life, used to re fer to Mr. Read's Foundation for Economic Education as "the mon astery," which I am sure Mr. Read would take -as a compliment. After all, it was the monastery that kept the lamps of learning burning through the Dark Ages. "FEE,"

says Mr. Read in his essay, "Speak for Yourself, John," "is not an in stitutional spokesman nor an or ganization trying to 'reach' any one. Rather, ours is, one might say, no more than an agency offering such services as you may think of 1972 TO FREE OR FREEZE 507 value in your own search and per sonal growth .... Instead of play ing the utterly futile game of try ing to 'reach' others, we can con centrate on getting enough into our own mentalities and improv ing our services to the point where others will reach for us." Emphasis on the Individual In keeping with his pHgrim's accent on first principles, Mr. Read dispenses with the "scientific" jar gon which tries to make political economy over into a predictive natural science like Newtonian physics. To Mr. Read, everything goes back to the individual (no two people are alike!) whose free will and unforeseeable subjective valu ations put an aberrant factor into every economic equation. It is ob vious that economics does not be come a statistical subject until after the fact of choice. The whole question of choice leads from con siderations of GNP and chatter about "parameters," whatever they are, to moral philosophy, with its concern for right and wrong. Mr.

Read wants to think about good and evil, not about the technical questions that lead to so much manipulation of individuals as though they were pawns.~ in some dictator's game of chess. ' The good, to Mr. Read, is any thing that adds to the sum of creativity. Force must sometimes be used to keep one man from in juring another, but this does not alter the truth that what Mr. Read calls "viewpoints, evaluations, in ventions, insights, intuitive flashes, think-of-that's" do not thrive in a world of controls and govern ment seizures. When force, going beyond the police power, is used to transfer wealth, it hurts the sum total of creativity by enfee bling the injured person and en couraging laziness in the supposed beneficiary. Contemplation of the nature of force leads Mr. Read back to the State-as-night-watch man and away from the modern heresy of the State-as-quarter back. The State's proper business is protection against such things as fraud, the spread of disease, and attack from abroad.

Actions Have Consequences Mr. Read does not believe in crystal balls. But he does believe in "ifs." For example, if we per sist in our present course of price and wage fixing, or "incomes pol icy," the "if" will lead to· more scarcities. Scarcities under condi tions of continuing price control, will lead to rationing, to be fol lowed in turn by black markets. The fabric of law will suffer, and the accompanying growth of cyni cism will make for increased vio lence. To control the violence, the government will have to use 508 THE FREEMAN August strong-arm means. And, to admin ister the strong-arm medicine, a tough guy will have to take over. As Hayek said long ago, the goons, in a world of controls, rise to the top. Now, Mr. Read is not saying that the U.S. is bound to persist in its present foolish course; the politicians may come to their senses when they discover that in flation (a matter of the money and-credit supply) cannot be stopped by price and wage boards issuing their ukases. All Mr. Read is uttering is a little "if." The future is not to be glimpsed in any crystal ball for the simple reason that it depends on what is being done by "our actions now."

Change in these actions naturally changes the "if." A Vicious Circle of Subsidies The other day I listened to a plausible plea for State subsidy to the arts. Taken on its own terms, the argument seemed to me at least morally irrefutable. We have had inflation, which means that people have been robbed of· the purchasing power they might have spent on going to plays, or on buying books or visiting museums. As a matter of retributive justice, why shouldn't the State return some of the stolen purchasing power to the art-loving individual? I put this question to Mr. Read. "The trouble," he said, "is that the money is no longer there. There's nothing to be re turned." Of course, there is money there for the arts - and for a million other things - on a short-term basis, provided we are willing to let our children pay the bills. Meanwhile, the quarrel between hundreds of separate pressure groups, each intent on retributive justice, puts an intolerable strain on government, which cannot hope to conjure up the necessary "just"

payments out of a top-heavy tax structure and more inflation. What Mr. Read was really saying is that "pretty soon the resources won't be there." This is something that our politicians, along with the people who prod them, have not yet faced. The Victims of "Help" Mr. Read, "bonded to consci ence," wonders how we are to re verse the drift that is taking our society to "all-out" statism. As a first order of business he insists that those who would stop the downward plunge must "develop the quality of personal incorrup tibility." Politically speaking, the "incorruptible" man should "never give approval to a law that 'helps' anyone." This is hard doctrine for the modern age, which· believes in so1972 TO FREE OR FREEZE 509 called ~~positive" action by the State. But Mr. Read says that "pity, unless spiced with common sense, is what's heartless." Pro viding people with "governmental feeding stations" kindles the vice of avarice. Beyond that, it tends to render people helpless by atro phying their faculties. "Helping people to become helpless,'" says Mr. Read, "is no act of kindness."

If you look at what is taking place in the political and social arenas, it might seem that Mr. Read and his "saving remnant" are hopelessly out of fashion. Nev ertheless, "the freedom philos ophy" has many' more adherents than it had in the Nineteen For ties, .when I first heard Mr.' Read talk about tapping the emergent energy of the ind'ividual. At long last the intellectual currents are not all going the same way, which gives us ground for hope that we'll be free before we freeze. ~ WHAT, HOW, FOR WHOM: The Decisions of Economic Organiza tion by Henry N. Sanborn (Box 8466, Baltimore, Md.: Cotter Barnard, 1972, 356 pp., $5.20) Reviewed by Gary North FIVE YEARS AGO, supporters of the free market who wanted a text book for an introductory course at the college' level in economics had Allen and Alchian's University Economics as the one reasonable selection. Now we have Thomas Sowell's Economics, a reprint of Rothbard's Man, Economy and State, and Prof. Sanborn's new book. Things are looking up.

Sanborn teaches at Towson State College in Baltimore. His perspecti ve is Chicago oriented, i.e., he follows Milton Friedman on monetary theory, George Stig ler on antitrust laws, and positiv ists in general on methodology. He refers constantly to the MV = PT monetary equation, and from this he concludes that a steady increase of the money supply by .the gov ernment will eliminate serious de pressions. A teacher would be wise to assign Rothbard's What Has Government Done to Our Money? along with Sanborn's book. Generally he favors the market as a means of both human freedom and efficiency. He also avoids the use of the "indifference curve" ap proach which has done so much to confuse a generation of students. He writes in a folksy, nonpreten tious. style, which is probably the best reason for the book's superi ority. His footnotes are not bur dened with citations from obscure professional journals, but are graphic and illustrative, using such sources as· the Wall Street Journal, New York Times, News week, Barron's. The inclusion of 510 THE FREEMAN August cartoons also makes it lively; their impact may remain when the mem ory of marginal cost curves hag long faded.

This would be an ideal book for a one semester course, especially for nonmajors. It should also be a source of classroom controversy. For example, on page 299, he simultaneously praises military conscription laws and calls for the abolition of laws against prostitu tion and narcotics. His basically pragmatic approach mars the final chapter especially, where he calls for various. kinds of government intervention to eliminate minor de fects of the market system ("neighborhood effects," natural monopoly), but on the whole these deviations are few. The first half of the book is exceptionally good. The one major flaw is his explana tion of profits: he accepts the en trepreneurial theory of Frank H. Knight (and Mises), only to aban don it in later pages for a "return on company inputs" theory which is distressingly vague, for good reason. If this is cleared up in later editions, it will be a very good introductory textbook.

~ IMPUTED RIGHTS by Robert v. Andelson (Athens: University of Georgia Press, 1971, 153 pp. $6.00) Reviewed by Edmund A. Opitz IN VIEW of the central importance of the idea of rights to the philos ophy of liberty it is astonishing that books dealing with the subject are so few. Professor Andelson's formidable little volume stands virtually alone; interest in the idea, either for its own sake or for its significance in our history, has inspired few researchers and writ ers. There are other puzzling ques tions. The doctrine of individual rights is an idea of the first mag nitude, to be ranked alongside the idea of gravity or the theory of relativity. Why, if the idea is so important, did it take Western civilization more than two thou sand years to grasp it? Why has no other civilization even come close? Why, having once embraced the idea of rights, did we abandon it in a fraction of the time it took the West to gain it? And after having largely let go of the sub stance, why do we so pathetically cherish the label of "rights" that we now paste on patents of privi lege granted by the state!

Things were different in the eighteenth century. Men of that era echoed Locke when they talked about the right to life, liberty, and 1972 OTHER BOOKS 511 property. What began with Locke as a philosophical speculation worked its way into men's bones and became something they could almost taste. Conditions in the American colonies gave eaeh man unaccustomed liberty to live his life and be responsible for the property he produced. And there were, in addition, religious convic tions about a protected, private domain in each individual whose invasion would violate the sacred prerogatives of the person. Mon archy broke itself against these convictions, which in turn were strong enough to generate the ideal of a government instituted solely to secure these rights. It is to the idea of rights in this tradi tion that Dr. Andelson addresses himself, and in a closely reasoned, gracefully written book, he vindi cates this idea in a masterful way.

Briefly surveying the history of his subject, the author finds three distinct theories of human rights, as analyzed in .terms of ground, end, and regulating principle. He finds strong reasons for rejecting the radical-humanist and utilitar ian arguments for rights and places himself in the metaphysical tradition which "derives rights from man's place in a purposive order." The book's frame of refer ence is theological; it is an exami nation of "the nature of man in the light of the distinctive end for which he was created." A society which maximizes personal liberty for all and jealously guards indi vidual rights provides the context in which men and women may best fulfill their earthly purposes and achieve their transcendent goals. The first half of the book lays the theoretical groundwork for what the author terms "a, rationalized soeial structure deduced from Christian premises," and it is a pleasure to watch a carefully ar ticulated argument unfold. The author's orientation is broadly Calvinistic, and he views man as "fallen." That is to say, man's na ture is out of joint; so an empir ical examination of human nature as it is does not disclose any such thing as "rights" organic to man as such. But human nature is more than natural, which is to say that rights are imputed to man by his Maker. Even those who do not ac cept the author's theology will find this a meaty discussion.

So much for the theoretical groundwork; now for the practical application. Professor Andelson proves to be tough-minded and co gent· as he tests his philosophy of personal rights against a number of vexed issues. Guided by "the evidence of social data. and the rules of logical consistency," the author proceeds to spell out in some detail that "structure of mu tual noninterference which pro512 THE FREEMAN August vides the only rational criterion for adj udicating competing claims to personal fulfillment." There is no room in Professor Andelson's philosophy for government welfare programs: H •••the alleviation of misery is not, as such, a right, and ought not, as such, be coercively enforced. For the use of coercion, other than to guarantee rights, is an infringement upon righ¥s . . ." Beyond this, he would not counte nance any effort to legislate mor als; conduct which merely offends sensibilities and is not clearly pre datory is no concern of the law.

The author champions the right of private association (and dissoci ation) and thus comes into conflict with aspects of current civil rights legislation. The law should enforce contracts and protect rightful property. The laborer is not a com modity, the author affirms, but "his labor is. the commodity par excellence" - a position at vari ance with monopoly unionism. And as for the United Nations, its ab surd Declaration of Human Rights "is proof of its untrustworthiness to wield supreme authority." This brief resume· of some of the issues may convey the notion that Dr. Andelson is forthright to the point of abrasiveness. Correct! The reviewer dissents vigorously from several of the opinions ex pressed but applauds the candor which makes this a cleansing book and an important one. , HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each ORDER FROM : THE FOUNDATION fOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 the Freeman VOL. 22, NO.9. SEPTEMBER 1972 Advertising Israel M. Kirzner 515 The positive role of advertising in a capitalistic, free-market economy.

What Do You Have Againstthe Poor? Leonard E. Read 528 Welfare schemes often backfire and injure most the ones they were supposed to help. ACloserLook at Gold Charles E. Weber 533 A historical review of the monetary uses of gold in most nations of the world. Cause and Effect StanleyYankus 545 According to the natural order of the universe, each is responsible for his self improvement. The Foundingof the American Republic: 14. Freeingthe Individual Cla,rence B. Carson 550 The strengthening of the institutions of freedom in the various states just followIng the end of the war. The Productivityof Freedom C. Lowell Harriss 56,2 The general case for reliance on voluntary processes of the market rather than coercive intervention in most human affairs. Book Reviews: 570 "Nine Lies About America" by Arnold Beichman "Hazardous To Your Health" by Marvin H. Edwards Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

tt"1e Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON-HUDSON, N. Y. 10533 TEL.: (914) 591-7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN 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. 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 meanl: of maintaining and extending the Foundation's work Copyright, 1972, The Foundation for Economic Education, Inc. Printel in U.S.A. Additional copies, postpaid, to one address: Single copy, 51 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.

THE FREEMAN is available on microfilm from Xerox University Microfilm~ Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Pel mission granted to reprint any article from this issue, with appropriat credit,except "The Founding of the American Republic."

ISRAEL M. KIRZNER ADVERTISING has been badly treated by many scholars who should know better. Not only Marxists and liberals, but even conservatives have given adver tising a bad press. Let us examine some of the criticisms. • First, many advertising mes sages are said to be offensive - by esthetic or ethical and moral stand ards. Unfettered, unhampered,lais sez-faire capitalism, it is contended, would propagate such messages in a way that could very well demoralize and offend the tastes and morals of members of society. • Second, advertising, it is argued, is deceitful, fraudulent, full of lies. Misinformation is spread by adver tising, in print, on the airwaves, and this does harm to the members of so ciety; for that reason advertising should be controlled, limited, taxed away. Dr. Kirzner is Professor of Economics at New York University. He is the author of The Eco rt0?'lic Point of View, Market Theory and the Price System, and An Essay on Capital •.This .:lrticle is transcribed from a lecture.

• Third, it is argued that where advertising is not deceitful, it is at best persuasive. That is, it attempts to change people's tastes. It attempts not to fulfill the desires of man but to change his desires to fit that which has been produced. The claim of the market economist has always been that the free market generates the flow of production along the lines that satisfy consumer tastes; their tastes determine what shall be pro duced - briefly, consumer sovereign ty. On the contrary, the critics of ad vertising argue, capitalism has devel oped into a system where producers produce and then mold men's minds to buy that which has been produced. Rather than production being gov erned by consumer sovereignty, quite the reverse: the consumer is gov erned by producer sovereignty. • A fourth criticism has been that advertising propagates monopoly and is antithetical to competition. In a competitive economy, it is pointed out, there would be no advertising; each seller would sell as much as he would like to sell without having to 516 THE FREEMAN September convince consumers to buy that which they would not otherwise have bought. So, advertising is made pos sible by imperfections in the market.

More seriously, it is contended, ad vertising leads toward monopoly by building up a wall of good will, a pro tective wall .of loyalty among con sumers which renders a particular product immune to outside competi tion. Competing products, which do not share in the fruits of the adver tising campaign, find themselves on the outside. This barrier to entry may gradually lead· a particular producer to control a share of the market which is rendered invulnerable to the winds of outside competition. • Finally - and this in a way sums up all of these criticisms - advertis ing is condemned as wasteful. The consumer pays a price for a product which covers a very large sum of money spent on. advertising. Adver tising does not change the commodity that has been purchased; it could have been produced and sold at a much lower price without the adver tising. In other words, resources are being used and paid for by the con sumer without his receiving anything that he could not have received in their absence.

These are serious criticisms. We have learned to expect them to be emphasized by contemporary liberal economists. To Marxist thinkers, again, advertising is es sential for capitalism; it is seen as a socially useless device neces sary in order to get excess production sold. They see no positive elements in advertising at all. But even conservative thinkers and economists have pointed out some apparent limitations, weaknesses, criticisms of advertising. The Free Economy and How It Functions It is not my purpose here to defend each and every advertis ing message. I would rather dis cuss a free economy, a laissez faire economy, pure capitalism. I would like to show that in such a world, advertising would emerge with a positive role to play; that it would add to the efficiency with which consumer wants are satis fied; and that, while the real world is far from perfect, a large vol ume of the criticism would fade away were it understood what rolE advertising, in fact, has to. pIa) in a pure market economy.

Let me imagine a world, a freE market, in which there are no de ceitful men at all. All the mes sages beamed to consumers an< prospective consumers would be as far as the advertisers them selves believe, the strict truth. Wl will consider later the implica tions of the fact that men are im perfect and that men succumb tl the temptation in selling some thing to say a little bit less, ; Iittle bit more, than the exac truth. In the meantime, let u 19'72 ADVERTISING 517 talk about a world of honest men, men who do not try to deceive. Further, let us imagine a pure market economy with government intervention kept to the absolute minimum - the night watchman role. The government stands to the sidelines and ensures· the pro tection of private property rights, the enforcement of contracts free ly entered into. Everyone then proceeds to play the game of the free market economy with pro ducers producing that which they believe can be sold to the con sumers at the highest possible money price. Entrepreneur pro ducers, who detect where resources are currently being used in less than optimum fashion, take these resources and transfer them to other uses in the economy where they will serve consumer wants· which the entrepreneurs believe are more urgently desired, as measured by the amounts' of mon ey consumers are willing to pay for various products.

We will assume that there is freedom of entry into all indus tries. No entrepreneur has sole control over any resource that is uniquely necessary for the produc tion of a given product. No gov ernment licenses are required in order to enter into the practice of a given profession or to introduce a particular product. All entrepre neurs are free to produce what they believe to be profitable. All resource owners are free to sell their resources, whether labor, natural resources, capital goods. They are free to sell or rent these resources to the highest bidder. In this way the agitation of the market gradually shuffles re sources around until they begin to be used to produce those products which consumers value most high ly. Consumers arrange their spending to buy the commodities they believe to be most urgently needed by themselves. And the market flows on in the way that we understand it.

Open Competition We say this is a free. market, a laissez-faire, competitive system. But we do not mean a perfectly competitive market, as this no tion has been developed by the neo-classical economists. In a per fectly competitive market, each seller faces a demand curve which is perfectly horizontal. That is to say, each seller believes that he can sell as much as he would like to sell without having to lower the price. Each buyer faces a perfect ly horizontal supply curve and each buyer believes that he can buy as much as he would like to buy of anything without having to offer a higher price. In such a world of "perfect competition," we have what we call an "equilib518 THE FREEMAN September rium" situation, that is a situa tion where all things have already been fully adj usted to one another. All activities, all decisions have been fully coordinated by the mar ket so that there are no disap pointments. No participant in the economy discovers that he could have done something .better. No participant in the economy dis covers that he has made plans to do something which it turns out he cannot do.

In this model of the perfectly competitive economy, there would in fact be no competition in the sense in which the layman, or the businessman, understands the term. The term "competition" to the businessman, the layman, means an activity designed to out strip one's competitors, a rivalrous activity designed to get ahead of one's colleagues, or those with whom one is competing. In a world of equilibrium, a world of "per fect competition," there would be no room for further rivalry. There would be no reason to attempt to . do something· better than is cur rently being done. There would, in fact, be no competition in the everyday sense of the term. When we describe the laissez faire economy as competitive, we mean something quite different. We mean an economy in which there is complete freedom of en try; if anyone believes that he can produce something that can serve consumers' wants more faithfully, he can try to do it. If anyone believes that the current producers are producing at a price which is too high, then he is free to try to produce and sell at a lower price. This is what competi tion means. It does not mean that the market has already attained the "equilibrium" situation, which goes under the very em barrassing technical name of "per fectly competitive economy."

Non-Price Competition Now, economists and others un derstand generally that competi tion means price competition: off ering to sell at a lower price than your competitors are asking, or offering to buy at a higher price than your competitors are bid ding. Entrepreneurs will offer higher prices than others are off ering for scarce labor. They will offer to sell a product at lower prices than the competing store is asking. This is what price com peti tion means. This is the most obvious form in which competi tion manifests itself. However, we must remember that there is another kind of com petition, sometimes called "non price competition," sometimes called "quality competition." Com peti tion takes the form not only of producing the identical product 1972 ADVERTISING 519 which your competitors are pro ducing and selling it at a .lower price, not only in buying the identical resource which your com petitors are buying and offering a higher price. Competition means sometimes offering a better prod uct, or perhaps an inferior prod uct, a product which is more in line with what the entrepreneur believes· consumers are in fact de sirous of purchasing. It means producing a different model of a product, a different quality, put ting it in a ditferentpackage, sell ing it in.a store with a different kind of lighting, selling it along with an offer of free parking, sell ing through salesmen who smile more genuinely, more sincerely.

It means competing in .many, many ways besides the pure price which is asked of the consumer in monetary terms. With freedom of entry, every enterpreneur is free to choose the exact package, the exact oppor tunitywhich he will lay before the public. Each opportunity, each package has many dimensions. He can choose the specifications for his package by changing many, many of these variables. The pre cise opportunity that he will lay before the public will be that which, in his opinion, is more urgently desired by the consumer as compared with that which hap pens to be produced by others. So long as there's freedom of entry, the fact that my product· is differ ent from his does not mean tha t 1·am a monopolist. A Disservice to Economics The late Professor Edward H. Chamber lin of Harvard did eco nomics a great disservice in argu ing that because a producer is producing a unique product, slightly different from what the fellow across .the street is pro ducing, in some sense he is a mo nopolist. So long as there's free dom of entry, so long as the man across the road can do exactly what I'm doing, the fact that he is not doing exactly what I'm do ing is simply the result of his dif ferent entrepreneurial judgment.

He believes that he can do better with his model. I believe I can do better with mine. I believe that free parking is more important to consumers than fancy lighting in the. store. He gives a different package than I do. Not because he couldn't do what I'm doing, not because I couldn't do what he's doing, but because each believes that he knows better what the consumer is most anxious to ac quire. This is what we mean by competition in the broadest sense, not merely price competition, but quality competition in its mani fold possible manifestations. Professor Chamberlin popu520 THE FREEMAN September larized a distinction which was not original with him but which owes its present widely circulated popularity primarily to his work. Tha t is a distinction between "production costs" and "selling costs." In his book of almost forty years ago, The Theory of Monopo listic Competition, Chamberlin ar gued that there are two kinds of costs which manufacturers, pro ducers, sellers, suppliers incur.

First, they incur the fabrication costs, the costs of producing what it is they want to sell. Second, they incur additional expenditures that do not produce the product or change it or improve it, but merely get it sold. Advertising, of course, is the most obvious ex ample which Chamberlin cited. But "selling costs" of all kinds were considered by him to be sharply different from "produc tion costs." In his original formu lation, Chamberlin argued that "production costs" are costs in curred to produce the product for a given Demand Curve while "sell ing costs" simply shift the De mand Curve over to the right. That is to say, the same product is now purchased in greater quan tities at a given price but the product is the same. A false Distinction The fallacy in the distinction between production costs and selling costs is fairly easy to notice. In fact, it is impossible for the outside observer - except as he resorts to arbitrary judgments of value - to distinguish between expenditures which do, and ex penditures which do not, alter the prod uct. We know as economists that a product is not an objective quantity of steel or paper. A prod uct is that which is perceived, un derstood, desired by a consumer.

If there .are two products other wise similar to the outside eye which· happen to be considered to be different products by the con sumer, then to the economist these are different products. Ludwig von Mises gives the example, which cannot be im proved upon, of eating in a res taurant. A man has a choice of two restaurants, serving identical meals, identical food. But in one restal1rant they haven't swept the floor for six weeks. The meals are the same. The food is the same. How shall be describe the money spent by the other restaurant in sweeping the floor? "Production costs" or "selling costs?" Does sweeping change the food? No. Surely, then, it could be argued that this is strictly a "selling cost." It is like advertising. The food remains the same; but, be cause you have a man sweeping out the floor, more people come to this restaurant than to that.

19'i~ ADVERTISING 521 But this is nonsense. What you buy when you enter a restaurant is not the food alone. What you buy is a meal, served in certain surroundings. If the surround ings are more desirable, it's a different meal, it's a different package. That which has been spent to change the package is as much production cost as the sal ary paid to the cook ; no differ ence. Another example that. I recall was the case of the coal being run out of Newcastle and traveling along the railroad toward Lon don. Every mile that coal travels nearer the London drawing room, the Demand Curve shifts over to the right. How shall we describe that transportation cost? "Produc tion cost" or "selling cost?" Of course, it's "production cost." In fact, it's "selling cost" too. All "production costs" are "selling costs." All costs of production are incurred in order to produce some thing which will be more desir able than the raw materials.

You take raw meat and turn it into cooked steak. The act of changing the raw meat into cooked steak is to make the consumer desire it more eagerly. Does this simply shift the Demand Curve over to the right? Of course, it does that. It does it by changing the product. Another example supposes there are two identical pieces of steel, except that one piece has been blessed, while the other piece is subject to a spiritual taint, which to the· scientist is not there but which is very vivid and vital to the consumer. How shall we de scribe the expenditure on the com modities? Shall be describe the difference between them as non existent? Or should we not rec ognize that, if something is spir itually tainted to the consumer in his view, not necessarily in mine or yours or the economist's or other than in the mind of the consumer - then he will not buy the tainted item, even though to the objective laboratory scientist there's no difference between the items? The economist has recog nized these as two different com modities. There'll be two Demand Curves. The fact that the scientist doesn't see any difference - they look the same, they smell the same, if you touch them they feel the same - is irrelevant. We know, as economists, that what we find in a commodity is not the objec tive matter that is inside it, but how it is received by the con sumer.

Clearly then, the distinction be tween a so-called "selling cost" and "production cost" is quite ar bitrary. It depends entirely on the value judgments of the outside observer. The outside observer 522 THE FREEMAN September can say that this particular sell ing effort does not change the product, but in that situation he is arrogating to himself the pre rogative of pronouncing what is and what is not a product. That is something which violates our fun~ damental notions of individual consumer freedom: that a con sumer's needs are defined by no one else other than himself. This may seem quite a detour from ad vertising and yet it is all rele vant to the question of what role advertising has to play. The Provi$ion of Information Let us consider how some of these notions apply to the matter of information. One of the stand ard defenses for advertising· is that it provides a service which consumers value: the provision of knowledge, the provision of in formation. People buy books. Peo ple go to college. People enroll in all kinds of courses. Advertising is simply another way of providing information. To be sure, it would seem that the information provided by suppliers comes from a tainted source, but don't forget that we are imagining for the meantime a world without deceitful people.

We can even relax that assump tion for a. moment. It may be cheaper for the consumer to get his information from the supplier or the producer than from an out side source. In other words, if you, a consumer, have the choice of acquiring information about a particular product - either more cheaply from the producer or more expensively from an outside, "ob jective" source - you may decide that,on balance, you're· likely to get a better deal, penny-for-penny, information-wise, by reading the information of the producer, scan ning it perhaps with someskep ticism, but nonetheless relying on that rather than buying it from an outside source. Technically, this involves what is known as the problem of transactions costs. It may be more economical for the information to be packaged to gether with the product, or at least to be produced jointly with the product, than to have the infor mation produced and communi cated by an outside source. This is a possibility not to be ignored.

Advertising provides informa tion, and this goes a long. way to explain the role which advertising and other kinds of selling efforts must play. Does this not seem'to contradict the point just made, that there is no distinction be tween "production costs" and "selling costs"? Surely informa tion about a product is distinct from the product. Surely the costs incurred to provide information are a different kind of costs than 1972 ADVERTISING 522 the costs incurred to produce the product. The answer is clearly, no. Information is produced; it is desired; it is a product; it is pur chased jointly with the product itself; it is a part of the package; and it is something which con sumers value. Its provision is not something performed on the out side that makes people consume something which they would not have consumed before. It is some thing for which people are willing to pay; it is a service.

You can distinguish different parts of a service. You can dis tinguish between four wheels and a car. But the four wheels are complementary commodities. That is to say, the usefulness of the one is virtually nil without the availability of the other. The car and gasoline are two separate products, to be sure, and yet they are purchased jointly, perhaps from different producers, differ ent suppliers, but they are none theless parts of a total package, a total product. If it happens that the information is produced and sold jointly with the product it self, then we have no reason to question the characteristics of the costs of providing information as true "production costs," not producing necessarily the physi cal commodity about which infor mation is produced, but producing information which is independently desired by consumers, in dependently but jointly demanded, complementarily used together with the "product" itself. In other words, the service of providing information is the service of pro viding something which is needed just as importantly as the "prod uct" itself.

Why the Shouting? There is another aspect of ad vertising which is often over looked. Information is exceedingly important. But, surely, it is ar gued, information can be provided without the characteristics of ad vertising that we know, without the color, without the emotion, without the offensive aspects of advertising. Surely information can be provided in simple straight forward terms. The address of this and this store is this and this place. These and these qualities of com modities are available at these and these prices. Why do illustrated advertising messages have to be projected? Why do all kinds of ob viously uninformative matter have to be introduced into advertising messages? This is what renders the information aspects of adver tising so suspect. The Marxists simply laugh it away. They say it is ridiculous to contend that ad vertising provides any kind of genuine information. If one rests 524 THE FREEMAN September the defense of advertising on its informative role, then one has a lot of explaining to do. One has to explain why information that could be provided in clear cut, straightforw.ard terms is pro vided in such garish and loud forms, in the way that we know it.

The answer, I think, is that ad vertising does much more than provide information which the consumer wishes to have. This· is something-which is often over looked, even by economists. Sup posing I set up a gas station. I buy gasoline and I have it poured into my cellar, my tanks. I have a pump carefully hidden behind some bushes, and cars that come down the road can buy gas if they know that I'm here. But I don't go to the effort to let them know I'm here. I don't put out a sign. Well, gas without information is like a car without gas. Information is a service required complementarily with the gas. Customers Want to Know Where to find the Product Supposing, then, I take a piece of paper, type very neatly in capi tal letters, "GAS," and stick it on my door. Cars speed down the road in need of gas, but they don't stop to read n1Y sign. What is missing here? Information is missing. Don't people want information?

Yes. They would like to know where the gas station is, but it's a well kept secret. Now, people are looking for that information. It's my task as an entrepreneur not only to have gas available but to have it in a form which is known to consumers. It is my task to sup ply gas-which-is-known-about, not to provide gas and information. I have not only to produce op portunities which are available to consumers; I have to make con sumers aware of these opportuni ties. This is a point which is often overlooked. An opportunity which is not known, an opportunity to which a consumer is not fully awakened, is simply not an oppor tunity. I am not fulfilling my en trepreneurial task unless I project to the consumer the awareness of the opportunity. How do I do that? I do that, not with a little sign on my door, but with a big neon sign, saying GAS; and better than that I chalk up the price; and better than that I make sure that the price is lower than the price at nearby stations; and I do all the other things that are necessary to make the consumer· fully aware of the opportunity that I am in fact prepared to put before him. In other words, the final package con sists not only of abstract academic information but in having the final product placed in front of the consumer in such a form that he cannot miss it.

1972 ADVERTISING 525 Free $10 8illsl The strange thing a.bout the world in which we live is that it is a world in which $10 bills are floating around, free $10 bills! The problem is that very few of us notice these $10 bills. It is the role of the entrepreneur to notice the existence of $10 bills. An entre preneur buys resources for $10 and he sells the product for $20. He is aware that resources avail able for $10 are currently being used in less than optimum faShion, that commodities for which con sumers are willing to pay $20 are not being produced, and he puts these things together. He sees the $10 bill and makes the combination which other people do not see. Anybody might do it - freedom of entry. The entrepreneur notices the $10 bill, gets it for himself by placing in front of the consumer something which he had not no~ ticed. If the consumer knew where he could buy resources for $10 and get the product that is worth $20, he wouldn't buy from the en trepreneur. He would do it him self. Since he doesn't know, I, as entrepreneur, have to create this opportunity and make the con sumer aware.

It is not enough to buy gas and put it in the ground. The entrepre neur puts it in the ground in a form that the consumer recognizes. To do this requires much more than fabrication. It requires com munication. It requires more than simple information. It requires more than .writing a book, pub lishing it, and having it on a li brary shelf. It requires more than putting something in a newspaper in a classified ad and expecting the consumer to see it. You have to put it in front of the consumer in a form that he will see. Otherwise, you're not performing your entre preneurial task. The Growth of Advertising Advertising has grown. Com pare the volume of advertising to day with the volume of 100 years ago and it has grown tremendous ly. More! Consider the price of a commodity that you buy in a drug store or in a. supermarket. Find out what portion of that price can be attributed to advertising costs and it turns out that· a much larg er percentage of the final cost to the consumer can be attributed to advertising today than could have been attributed 50 years ago, 70 years ago, 100 years ago. Why is this? Why has advertising ex penditure grown in proportion to total value of output? Why has ad vertising expenditure grown in proportion to the price of a finished commodity? Why has advertising apparently grown more offensive, more loud, more shrill? It's fairly easy to understand.

526 THE FREEMAN September I give, as ~xample, the lobby walls of a college building that I know very well. At one time this was a handsome lobby with walls of thick marble; you could walk from one end of the building to the other and the walls would be clear. SOIne years ago an enterprising entrepreneur decided to use some free advertising space. He pasted up a sign. It was the only sign on the wall; everybody looked at it, saw the message. I don't remem ber what the message was or whether it was torn down', but I do remember that soon afterward those walls were full of signs. As you walked down the passage, you could read all kinds of messages, all kinds of student activities, non student activities, student non activities. It was fairly easy to learn about what was going on simply by reading the signs. At first,. the signs did not have to be big. But as advertisers saw the opportunity, the free space gradually filled up. The Ricardian rent theory came into play; all the free land was in use. And as the free land or space was taken, of course, it became more and more important to get up early to paste up your sign. That was the "rent,"

the high price, getting up early. But more than that, it became ne cessary now to arouse all kinds of interest in me in order to get me to read these signs. In other words, the variety and multiplic ity of messages make it harder and harder to get a hearing. The Price of Affluence We live in a world which is often described as an "affluent society." An affluent society is one in which there are many, many opportuni ties placed before consumers. The consumer enters a supermarket and if he is to make a sensible, in telligent decision he is going to have to spend several hours calcu lating very carefully, reading, re reading everything that's on the packages and doing a complete re search job before feeding all the information into the computer and waiting for the optimum package to be read off. It's a tough job to be a consumer. And the multi plicity of opportunities makes it necessary for advertisers, for pro ducers, to project more and more provocative messages if they want to be heard. This is a cost of af fluence. It is a cost, certainly; something that we'd much rather do without, if we could; but we can't.

The. number of commodities that have been produced is so great that in order for anyone particular product to be brought to the attention of the consumer a large volume of advertising is necessary. And we can expect to get more and more. Is it part of 1972 ADVERTISING 527 production costs? Very definitely, yes. It is completely arbitrary for anyone to argue that, whether or not the consumer knows it,· the commodi ty is there anyway, so that when he pays the price which includes the advertising communi cation he is paying more than is necessary for the opportunity made available. For an opportunity to be made available, it must be in a form which it is impossible to miss. And this is what advertis ing is all about. One more word about the of fensiveness of advertising. Ulti mately in a free market, consum ers tend to get what they want. The kinds of products produced will reflect the desires of the con sumer. A society which wants moral objects will get moral ob jects. A society which wants im moral objects will tend to get im moral objects. Advertised com munication is part of the total package produced and made avail able· to consumers. The kind of ad vertisingwe get, sad to say, is what we deserve. The kind of ad vertising we get reflects the kind of people that we are. No doubt a different kind of advertising wo~ld be better, more moral, more ethi cal in many respects; but I'm afraid we have· no one to blame but ourselves, as in all cases where one deplores that which is pro duced by a market society.

A final word about deceit. Of course, deceitful advertising is to be condemned on both moral and economic grounds. But we have to put it in perspective. Let me read from one very eminent economist who writes as follows: The formation of wants is a com plex process. No doubt wants are modified by Madison Avenue. They are modified by Washington, by the university faculties and by churches. And it is not at all clear that Madi son Avenue has the advantage when it comes to false claims and exaggera tions.! Take with a Grain of Salt In other words, we live in a world where you have to be careful what you read, to whom you listen, whom to believe. And it's true Qf every thing, every aspect of life. If ·one were to believe everything pro jected at him, he would be in a sorry state. It is very easy to pick out the wrong messages to believe. Now, this doesn't in any way condone or justify deceitful messages of any kind. We have to recognize, however, while particular produc ers may have a short-run interest in projecting a message to con sumers of doubtful veracity, that 1 H. Demsetz, "The Technostructure Forty-Six Years Later," (Yale Law Jour~ nal, 1968), p. 810.

528 THE FREEMAN September so long as there's freedom of com petition the consumer has his choice not only of which product to buy but who to believe. And notice what is the alternative in this world of imperfect human beings. The alternative, of course, is government control - still by imperfect human beings. So there is no way to render oneself invul nerable to the possibility of false, fraudulent, deceitful messages. It would be nice to live in a world where no deceitful men were present. It would be cheaper . You could believe any message re'" ceived. You wouldn't have to check out the credentials of every advertiser. But that is not the world in which we live. You check out the credit standing of individ uals, the character of people with whom you deal; and this is an un avoidable, necessary cost. To blame advertising for the imper fections and weaknesses of man kind is unfair. Advertising would exist under any. type of free mar ket system. Advertising would be less deceitful if men were less de ceitful. It would be more ethical, less offensive, if men were less offensive and more ethical. But advertising itself is an integral, inescapable aspect of the market economy. I) WHAT DOYOU HAVE THE POOR -----------LEONARD E. READ----------WHENEVER he hears someone de mand a minimum wage law or any other impediment to freedom in transactions, my friend asks in all seriousness, "What do you have against the poor?" His point is well-taken. Unquestionably, many sponsors of welfare schemes - the long-run effect of which is to kill the goose that lays the golden eggs - are well-intentioned. Their hearts, if not their heads, are in the right place. The idea that they are doing offense· to the very per sons they wish to help is a shocker - hopefully, an eye-opener.

1972 WHAT DO YOU HAVE AGAINST THE POOR? 529 Perhaps the first shock would stem from the thought that a minimum wage law might do in jury to anyone at all. Possibly to the wealthy employer, but surely not to the poor!· The fact,· however, is that those who have little to of fer in the way of marketable skills are marginal producers at best; their services are wanted by others only at very low wages. In deed, the total disappearance of such marginal producers would scarcely affect the overall econ omy. So my friend is quite right. It is primarily, if not entirely, the poor who stand to lose if wage rates are pegged artificially high; those who sponsor minimum wage laws behave as if they hold a grudge against the poor. The fact that a fair share of these sponsors act from motives of sympathy or pity - that they bear no grudge - in no way changes the consequences of their actions .. Nonetheless, they victirp. ize the poor. They hurt most the ones they love - and all because they fail to recognize these simple facts: 1. The eternal problem of eco nomics is to overcome searei ty.

2. Plenitude is achieved by the application of human energies to natural resources and to the ex change of the numerous speciali zations. 3. The value of anything to anyone is always a subjective judg ment - whatever one is willing to give up or trade for something else. 4. Freedom of production and trade - the free market - is the goose that lays the golden eggs and all impediments to this proc ess, to the extent of their force and coverage, are destructive - ob stacles to plenitude. 5. Minimum wage laws of say $2.00 leave unemployed all persons whose services are not of that much value to others. 6. To the extent of the produc tive potential thus unemployed, to that extent is the number of gold en eggs reduced. But far worse: to that extent is everyone who can not produce up to $2.00 an hour decreed waste and relegated to the economic scrapheap. Wage Floors Hurt the Poor Nearly all who think of them selves as professional economists, regardless of their differences on some matters, agree that mini mum wage laws inflict injury first and foremost on the poor. Even the avowed socialist, Gunnar Myr dal, the celebrated Swedish econo mist, turns thumbs down on this economic monstrosity.! The writ ings of economists in support of 1 See The American Dilemma (rev. ed.) by Gunnar Myrdal (New York: Harper & Row, 1962).

530 THE FREEMAN September this point are plentiful, indeed. However, not all sponsors of minimum wage laws are "good guys" lacking in economic sense. There are countless thousands, perhaps a majority, whose motiva tions are mercenary . The first type is to be found in labor un ion "leadership." The motivation here is to keep these low-wage, marginal producers off the labor market, that is, to eliminate them from. competition. Permit no one to wait on table for, say, $1.00 an hour, even if he wishes to do so, and the union gains a monopoly of waiters' jobs. Call this crass ma terialism or what you will, it is not inspired by sympathy or pity. The second type is to be found in political "leadership." The mo tivation here is to climb on the bandwagon of labor union popu larity in order to get elected to office. Sympathy? Hardly! As a novelist says of one of these characters, "He had learned to love the poor, profitably!"

Minimum wage laws generally call to mind only those legislative edicts bearing the label. In 1938 the minimum was 25 cents; in 1945, 40 cents; and since has risen step by step to $1.60. Presently, the proposal is $2.00. These edicts, however, are only the obvious. Every arbitrary wage coercively imposed by labor unions, over and above whatever the free market wage would be, is really a mini mum wage. The minimum wage for a captain of a 747 jet is $57,000 annually. Try to get the job for less! But stop not here. The tariff and all other restric tions to free and unfettered ex changes are, in a strict economic sense,minimum wage laws. Those who condemn minimum wage laws, so called, and lend support to other infractions of the free market such as wage and price controls are proclaiming their inconsist ency. Everyone of these fixities and rigidities - these closures of the market - wreak their hardship on consumers; and the poorer the person, the greater the hardship!

A More Helpful Approach What is the alternative? What advice shall we give the person who earnestly desires to help "the poor?" First of all, he must recognize :3nd respect as an individual the one he would love - which means to encourage but in no way to in terfere with that person's capac ity, will, and effort to help him self. In other words, afford him every opportunity to earn. his way. How earn it? By serving others, of course. How else does anyone earn anything! And what is the most likely opportunity for a poor man to earn his way? By selling his services to the highest bidder 1972 WHAT DO YOU HAVE AGAINST THE POOR? 531 in open competition. Let. buyers compete for his services - which means, in general, that the highest bidder will be the employer who can most profitably use that per son's services. That employer will earn a profit, not because he is ex ploiting anyone, but because he is most efficiently using scarce re sources for purposes that consum ers want and can afford. And "the poor" will reap benefits both as employees and consumers as they move upward out of poverty.

The question is this: how can these countless thousands in the labor union and political cate gories so flagrantly abuse the poor and be applauded rather than con demned .for their actions? The an swer is that labor union people and politicians who sponsor this nonsense are doing precisely what most citizens believe to be right. The overwhelming majority of cit izens, operating on good inten tions, fail to recognize that im pediments in the market must frustrate their objective. Were the consensus free-market oriented, the political meddlers would not get to first base with their schemes; they would be thrown out of office. The next question is, what shall be done to bring more light into this darkness? Perhaps it boils down to this: more individuals than now learning to respect the preferences of others as well as their own. If I prefer to wait on table for $1.00 an hour, why should not this disposition on my part be as much honored as that of another who prefers to be President of the U.S.A.? Maybe you prefer teaching for the sheer joy of it - psychic gain - to run ning a cannery where you might make a fortune - monetary gain.

I say, blessings on you and on all others whatever their preferences, so long as you and they are peace ful. This is no more than simple justice, and anyone who acts to the contrary dons the robes of a dictator, intending to run the lives of others. A Fount of Wisdom This simple justice and the aforementioned simple facts would seem to be within the grasp and the practice of a majority of citi zens. It is my contention that these are attainable achievements in the moral and economic realm. By and large, however, they are not attained. Why? What is the im pediment that hinders us from ac tually attaining the ends which in fact are within our power to at tain? A priceless answer if it can be discovered! Let me share a thought that is becoming more and more a conviction. The essense of this thought was expressed by Ralph Waldo Emerson: 532 THE FREEMAN September We lie in the lap of immense intel ligence, which makes us receivers of its truth and organs of its activity.

When we discern justice, when we discern truth, we do nothing of our selves, but allow. a passage of its beams. (Italics mine) I have quoted this before, cer tain that it expressed an impor tant truth. However, it took the remarks of a recent acquaintance to .help me realize its full mean ing.This individual, as we met for the first time, acknowledged how helpful my writings had been, and then added, pointing to the head, "It, is all here. You have merely helped me put together and to bet ter understand that which is al ready within me." This is an in sight that rivals Emerson's! Emerson's point now seems clear to me and it helps to explain what stands between the attain able and its attainment: a failure to realize one's potential or an unFrom Within willingness to discover and to heed the truths within. As Emerson so eloquently phrases it, we do, indeed, "lie in the lap of an immense intelli gence." As with all radiant en ergy, this intelligence is in con stant movement and it flows through all life. The problem of gaining understanding is one of arresting "its beams," of inter cepting or appropriating that which already is within us or is passing through us.

We can be helpful to one an other, not by posing as this in telligence but by using, express ing, sharing such of this mysteri ous energy as we may be fortunate enough to intercept. Once this way to enlightenment is perceived and practiced - a near reversal of present methods - then we may befriend the poor, not merely in proclaimed intentions but in real ity. Our hearts and heads will be working in harmony. ~ JDEAS ON LIBERTY No CHURCH has ever gone into politics without coming out badly smirched. Individual Churchmen may be, and ought to be, if they are well informed, interested in schemes of social legislation; but to advocate a sloppy socialism~ under the name of "Christian pol itics and economics" is, in my opinion, an impertinence .... Christianity aims at saving the soul-the personality, the na ture of man, not his environment. In direct opposition to Marxian socialism, we are taught that from within, out of the heart of man, comes all that can exalt or de,file him.

WILLIAM RALPH INGE A Closer Look at CHARLES E. WEBER WHEN WE CONTEMPLATE the gold coins from previous centuries we are painfully reminded to what extent modern man has lost his monetary freedom and hence an important aspect of his economic freedom. For thousands of years, with only relatively few and brief exceptions prior to 1915 (or 1934 in the case of the United States) nearly all nations in the main stream of human progress have enjoyed the advantages of the use of gold coinage as a monetary me dium. Cowrie shells, stone wheels, rolls of bright bird feathers, salt, bronze ingots and the like were Dr. Charles E. Weber received his Ph.D. from the University of Cincinnati in 1954 on the basis of a dissertation on the incunabula (books printed prior to 1501 A.D.) in the German language. After military service in World War II, at times as a member of intelligence units, he resumed his education and started his teaching career at the University of Missouri and the University of Tulsa, where he has been teaching since 1956. except for four years at Louisiana State University (1962-1966).

Dr. Weber is the author of numerous ar ticles on literature, history and monetary ques tions. generally the monetary media of only the least advanced peoples. Restraints on the use of gold as a monetary medium were rare in previous centuries, so rare, in fact, that we are tempted to spec ulate that many of the social and economic problems besetting the world in recent decades might not simply be concomitant phenomena of the decline of the public mone tary use of gold,' but even the re sults of this decline. In our own case, it is probably not a mere coincidence that since 1934, when the monetary use of gold was pro hibited to U.S. citizens, the public debt has climbed to levels that could scarcely have been imagined forty years ago, the purchasing power of the national monetary unit has deteriorated so badly that this decline has become a major national problem, export trade has declined, the centers of large cities have been rotting at 534 THE FREEMAN September an accelerated pace and the prob lem of overpopulation has begun to threaten the very quality of life to which we had become accus tomed.

Prior to 1934 the use of gold as a monetary medium had been deeply rooted in our economic and legal traditions. Undoubtedly as a reaction to the chaos caused by excessive issues of paper moneyl before and during the Revolution, the Constitution provided in Ar ticle I, Section 10, that "No state shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts."2 A handsome U.S. gold coinage was commenced in 1795 to supplement the foreign gold in circulation, which contin ued to have the status of legal tender until 1857 on the basis of laws of 1793, 1816, 1834 and 1843. It was this sort of legal precedent that was the basis for the mone1 For a thorough, lavishly illustrated history of the paper money issues of our land from 1690 to 1789 see the brilliant volume by Eric P. Newman, The Early Paper Money of America. Racine, 1967. 2 In defending this provision, James Madison (The Federalist Papers, No. 10) speaks of "A rage for paper money, for an abolition of debts, for an equal divi sion of property, or for any other im proper or wicked project .... " In No. 44 he con tin ues in the same vein: ". . . the pestilent effects of paper money on the necessary confidence between man and man, on the necessary confidence in the public councils, on the industry and mor als of the people, and on the character of republican government ... "

tary stability of the country (and probably its economic progress) down to recent years. Fiat Money in France There is an interesting parallel in French monetary history. When the revolutionary government of France at the end of the 18th century tried to substitute paper money (assignats) supposedly based on the value of confiscated church properties, economic chaos resulted. 3 Later on, Napoleon I saw the need of a reform to over come the paralysis and reinstated the use of the precious metals. His introduction of the twenty franc piece (the "napoleon") in 1803 was an act of far-reaching con sequences, as we shall see below. Russia had also tried paper mon ey, likewise designated by a simi lar word, assignashii. 4 Although a number of govern ments make every desperate at tempt to suppress the monetary use of gold, faith in the sun metal as a store of value is deeply ingrained in the economic com mon sense of human beings all over the world. When I was in 3 For details, see Andrew D. White, Fiat Money Inflation in France (Irving ton, N. Y.: Foundation for Economic Education) .

4 See the well illustrated volume on Russian monetary history by I. G. Spass kii. RUSSKAIA MONETNAIA SIS TEMA, "Aurora" Press, Leningrad, 1970, p. 201.

1972 A CLOSER LOOK AT GOLD 535 Russia in the summer of 1970, a young man explained to me that the old five rouble pieces struck on the standard used beginning with 1897 are now fetching about 90 paper roubles, nearly a typical month's wages in the present Soviet State. The grimly strict monetary laws and energetic prop aganda of the Soviet State 5 had not been able to eradicate a desire for and a trust in gold. During and immediately after World War II many a family was able to avoid starvation by gradually giv ing up one gold piece after the other to purchase food that could otherwise not be obtained in econ omies paralyzed by war and post war controls. A Coin at Work Let us contemplate a half eagle struck by the young United States in 1800. As in the case of the vast majority of gold coins struck in the world before 1800, there is also no designation of value or weight on this piece. Gold coins need no designation of value or legal tender status to function 5 Strange to say, during the early years of the Soviet State, gold coins were struck with the weights of the older ten rouble pieces struck as late as 1911. The Soviet gold gieces were dated 1923 and bore the emblem of the State and a sow ing peasant. There is evidence that these pieces were struck in very large quan tities, but today they are very scarce.

Doubtless the bulk of them were remelted. ·well. The piece we are contemplat ing is worn, so badly worn that its designs are only slightly above the level of the fields, but its weight is 8.50 grams, only about 3 per cent below its legal weight of 135 grains (8.748 grams). Now let us reconstruct the tre menq.ous economic task that this gold piece performed so well' and so long. The wear on this piece would suggest that it was in cir culation at least until the weight reduction of 1834 and perhaps quite a bit longer. If it changed hands on the average of just once a week over a period of 50 years, it changed hands more than 2,500 times and was thus involved in an exchange of more than $12,500. However, the really remarkable aspect of this performance lies in the fact that every time it changed its owner, the new owner was guaranteed a stable value as long as he wished to keep the piece. What were the costs of this remarkable performance? About 15 cents' worth of gold lost through wear and the very mod est· cost of striking the piece. To have printed paper money for this period of circulation would have approached or exceeded the mint ing and gold loss costs. Far more important, however, is the fact tha t the costs of the gold loss and minting were a very trivial con sideration in relation to the social 536 THE FREEMAN September and economic benefits of the gold piece. Modern paper money, with out a connection with the precious metals, sinlply cannot fulfill the traditional capacity of gold coin age to function both as a medium of exchange and a store of value.

Not only does gold coinage go back to the early days of the American Republic, but it covers some twenty-seven centuries of Western Civilization. It was, in turn, antedated by an even earlier, specifically monetary use of gold, a use that can be r'eadily docu mented. Thus, a nlural painting from Thebes, Egypt, assigned to the reign of Thutmosis III, 1501 1447 B.C., shows the weighing of gold rings and holed disks. 6 De tails of this painting reveal the status that gold had attained as a monetary medium. The weights on the balance pan are in the form of bovine heads and sheep! This illustrates the fact that a transition had been made from an economy in which cattle were used as exchange to one in which the precious metals had taken their place, but the tradition of the cat tle exchange is preserved in the 6 For a reproduction of this painting, see Heinrich Quiring, Geschichte des Goldes / Die Goldenen Zeit alter in ihrer kulturellen und wirtschaftlichen Bedeu tung. Ferdinand Enke Verlag, Stuttgart, 1948, page 48. This book, by the way, is an excellent source of information on the history of the mining, refining and use of gold.

very shape of the weights. To mention a later parallel, the ear lier Latin word for money, pe cunia, developed from pecus, mean ing "cattle." In the case of the Teutonic languages, the German word for cattle, Vieh, is a cognate of English fee. American Indian civilizations never developed a gold coinage as did the Europeans, but gold was used as a medium of exchange in the form of quills filled with gold dust. Undoubtedly, too, the many pre-Columbian gold ornaments, often of considerable artistic merit, played some sort of mone tary role. Coinage in Ancient Greece The very beginnings of Greek gold (or more specifically, elec trum) coinage are nebulous. One type with two confronted lions' heads is actually inscribed "Alyas," a variant form of the name of King Alyattes, fourth of the Mermnad kings of Lydia, who reigned 610-561 B.C. Far more abundantly preserved, however, are the electrum pieces of· various weights (1/12, 1/6 and 1/3 sta ters) bearing the head of a lion with a radiate knob on the fore head. The ~·eights of these pieces are astonishingly consistent. Six specimens of the 1/3 stater pre served in the Boston Museum of Fine Arts have the narrow range 1972 A CLOSER LOOK AT GOLD 537 of 4.66 grams to 4.71 grams, with fracional pieces in a close pro portion. 7 Other very important early series of electrum coins were those of .Kyzikos in Mysia (started before 550 B.C.), Mytilene on the island of Lesbos (ca.

500 B.C. ff.) and Phokaia in Ionia (started before 500 B.C.). These early gold series consisted of elec trum, a more or less natural mix ture of gold and silver, such as was mined in what is now west ern Turkey. Later on, more so phistica ted refining methods were used to prepare the planchets. The huge gold coinages of the kings of Macedonia, Philip II (359-336 B.C.) and Alexander the Great (336-323 B.C.), are notable for the fact that they consisted of nearly pure gold, with specific gravities ranging around 19 (pure gold: 19.3 times the weight-of water). By the time the autonomy of the Greek states had been extinguished by the expanding Roman Empire, no less than fifty of them had struck. gold coins. The Roman Republic and sub sequently the Roman Empire had as a gold unit the aureus, which was first struck in quantity 7 An excellent source for the metro logical aspects of the earliest electrum coinage, including the specific gravities of many specimens, is the catalogue of the holdings of the Boston Museum of Fine Arts published by Agnes Brett in 1955.

around 46 B.C. At that time it had' a weight of 1/40 of a Roman pound (8.19 g). Its high purity persisted hut its weight gradually sank over a period of nearly four centuries. The Solidus The next great gold series, the solidus, got its start in the early fourth century under Constantine the Great (reigned 306-337 A.D.). The solidus was one of the most remarkable and enduring of all gold coins. Its weight and fineness were maintained with only occa sional variations for over seven centuries, in spite of all the mili tary, economic and political vicis situdes of the late Roman Empire and its continuation in the east (the "Byzantine" Empire). During this very long period the soli dus had little competition in ~he wor ld except for the gold of the Islamic dynasties which originally started as imitations of the Byzan tine solidus during the seventh century. The Ostrogoths in Italy also imitated the solidus in great quantities during the fifth and sixth centuries, but unlike the Is lamic imitations, the Ostrogothic solidi bore the name and portraits of the Byzantine emperor and can be distinguished from the Byzan tine pieces only· by subtle stylistic differences. So familiar was the world with the solidus that we 538 THE FREEMAN September seldom find specimens with cuts to test the authenticity of the pieces; forgeries of them were evidently rare. Hoards of them have been found as far away as Scandinavia. Although we have no exact mint records from the Byzantine Empire, the mintage of the solidus was certainly enor mous. As late as about 1950, com mon, worn solidi could be had for as little as about $12., not much more than twice their bullion value. s After the decline of the solidus in the later medieval period it was supplanted by several important Italian, Hungarian and German series. Florence struck the fiorino d'oro (gold florin) beginning with the year 1252. It was imitated in a land with big gold mines, Hun gary, in the 14th century and later. In Germany and the Nether lands, in turn, large quantities of florins were struck in the 15th 8 To illustrate the constancy of the solidus, specimens in the author's col lection weigh as follows: A solidus struck in Milan under Honorius (395-423 A.D.) weighs 4.47 grams with a specific gravity of about 18. A lightly circulated specimen of Constantine VIII (1025 1028) with an inspiring portrait of Christ weighs 4.37 grams with a specific gravity of a bit less than 19, nearly pure gold. In the subsequent decades the weight and fineness of the solidus declined sharply, but Byzantine gold coinage persisted into the 14th century. For a detailed analysis of the debasement of the solidus in the eleventh century, see Byzantinische Zeit schrift, 1954, pp. 379-394.

and early 16th centuries, but they declined in weight and fineness when the German gold mines be gan to be so badly depleted that the gold became too dear in re lation to the huge supplies of sil ver flowing from Saxony and Bo hemia. (The first large-scale coin age of the predecessor of the sil ver dollar was done in Saxony, 1500 if.) The Rhenish gold florin was struck in enormous quantities in such towns as Frankfurt, Co logne, Nuremberg and Utrecht. A quarter million of them were struck in 1418 in Frankfurt alone and· Basel struck 126,020 during the years 1434-5. The Gold Ducat On 31 October, 1284, the Mag gior Consiglio of Venice decided to mint the gold ducat, one of the most important gold coins of all times. It is still being struck from dies dated 1915 in the Vienna Mint nearly 700 years later. In Venice itself, the ducat was struck with the same design (St. Mark and Doge) down to the end of the 18th century. The ducat weight and fineness became a favorite in Germany, the Netherlands, Po land, Scandinavia and Russia. It was even crudely imitated as far away as India, where the Vene tian originals were also in use.

England, France, Spain and Portugal had many gold coinages 1972 A CLOSER LOOK AT GOLD 539 in the later middle ages, but they were of great variety. An out standingly successful English coin of the late medieval period was the noble, which was imitated to some extent in the Netherlands, but the English and French kings changed their standards too often to establish gold coins of the great success and influence of the soli dus and the ducat. The Spanish exploitation of the large deposits in Mexico, Bolivia and Peru re sulted in the huge escudo coinage of the 16th to 19th centuries. Its multiple of eight is familiar to us as the doubloon. As noted above, the gold coin age of the United States was started in 1795, with a modest weight decrease in 1834, after which U.S. gold coinage was con tinued for almost exactly a cen tury on the same standard. About 3/4 of .the enormous U.S. gold coinage was in the form of double eagles (1850 if.).

The Lat;n Monetary Un;on In France a new gold coinage was introduced in 1803 that con tinued to be of great importance until 1914. Denominations of 5, 10, 20, 40, 50 and 100 franc pieces were struck at various times but the most important was the 20 franc piece. The French standard was copied in Italy, Switzerland, Belgium, Spain, Greece, Serbia, Bulgaria, Romania and other lands, in some cases with different names. Some gold coinage on the franc standard con tinued even after World War I, especially in Switzerland. In re cent years the French government has struck considerable quantities of gold using dies with older dates. The prosperous German Empire struck large quantities of gold on the mark standard (1871 1915), while the huge English sovereign coinage (1816 ff.) still dominates the trade in coined gold. India had a long tradition of monetary gold use before the es tablishment of the present Re public of India with its socialistic orientation and hence hostility to private ownership of gold. Gold coinage of the European type was introduced to India no later than the time when the Bactrian Em pire struck gold in a quite Greek form and with Greek inscriptions (ca. 250 B.C. ff.). Later on there were other very important Indian gold series. The Kushan gold coins were fairly close imitations of the Roman aureus, many hoards of which have also been found in India. The very abundant Kushan gold coinage was at first of high purity, like the Roman aureus, and it is even assumed that the .planchets for it were prepared from remelted Roman gold. Dur540 THE FREEMAN September ing the first and second centuries the Roman Empire had a severe balance of trade problem with In dia because of the commerce in spices, gems and other Indian goods desired by the luxury-loving Romans.

Debasement in India With the decline of the Kushan Empire its gold coinage became severely debased, especially after about 200 ~.D. After about 320 A.D. the Gupta kings also con tinued gold coinage in important quantities. After the decline of the Gupta realm, Le., after about 450 A.D., a number of Hindu dynasties continued gold coinage. The famous uninscribed and enig matic elephant pagodas of per haps about 1300 and later are now believed.! to be the private prod ucts of Indian goldsmiths. In the north the Islamic rulers (the Sul tans of Delhi and subsequently the Mughal Emperors) struck gold in large quantities. In the south, the Hindu Vijayanagar Empire struck large amounts of a very neat gold coinage between 1377 A.D. and the disastrous Battle of Tallikota in 1565. Beginning with the 16th century, various European powers struck gold series for their terri tories in India; the Portuguese, the Dutch, the French, the Danes and especially the British, who . first imitated the trusted gold coinage of the moribund Mughal Empire before striking gold in the European style.

In Japan, which has gold mines that have been worked since me dieval times, gold was used in the form of oval plates punched with various devices. During the 19th century base gold rectangles were produced in considerable quanti ties. Just as the Meiji Era brought so many other changes to Japan, its earliest years saw the introduction of a very beautiful gold coinage of occidental style based. on the U.S. gold denomina tions. So highly prized are 20 yen pieces of 1870 (46,139 struck) that they fetch over one million yen today. With the exception of a few gold issues in this century, China has virtually no tradition of the coining of gold, although it has been prized for artistic uses for many centuries in China. 3000 Years of Gold I have surveyed the history of gold coinage in some detail here in order to show what a great economic role it has played in nearly every civilization (with the notable exception of the Chinese), European traditions of the mone tary use of gold can be traced back for nearly three millenia in the form of gold coins alone.

The decline of gold coinage we have witnessed during the last 1972 A CLOSER LOOK AT GOLD 541 three to five decades 9 thus repre sents a radical departure in mone tary affairs. The coining of gold had hitherto been interrupted only sporadically by attempts to sub stitute other media for the pre cious metals. It is undeniably true that many modern economists harhor a strong bias against the monetary use of gold. This bias is by no means difficult to explain, since these economists are the ones who see the most important role for themselves in governments which intervene strongly in the economy. Gold strongly restricts govern mental intervention in the econ omy and the redistribution of wealth from the productive to the nonproductive components of the population. Perhaps to some ex tent, too, the bias against the mon etary use of gold is simply based on ignorance about the present and past monetary roles of gold.

After all, a new generation has come onto the scene since 1934. We appreciate the role of gold as an honest, constructive mone9 The coining of gold has by no means ceased altogether, even in the case of govern men tal mints. During the last 10 to 15 years or so the following govern ments have struck gold in quantity: Austria, Republic of China, Dominican ReDublic, Egypt J France, Great Britain, Katanga, Mexico, Persia, Peru, South Africa, Spain and Turkey. In some cases older dies were used. Many other lands have also struck gold in token quantities. tary medium when we consider the nature of its enemies. Keynes, whom Lenin lauded before the Sec ond Congres'S of the Communist International, considered gold a barbarous relic. Typically, the peo ple who are shouting most loudly that gold is a barbarous relic are the very ones who are most ada ment in their demands to suppress the monetary use of gold by force.

(Who, really, are the barbarians?) These "experts" must know full well just how powerful gold is in spite of their public denials that it should play a role in the mone tary system and in spite of their claims that it is worthless except for filling teeth and the like. Private Coinage When governments have refused or have been unable to strike gold coins in sufficient quantities for commerce, private persons have provided gold coins in many in stances. We need only think of the many private gold coinages in the United States alone: the Bechtler gold pieces struck in North Carolina in the 1830s and later, in addition to the massive amounts of gold struck privately in California in the 1850s and later. There have also been many pri vate gold series in India and Germany, for example. A large pri vate striking of gold on the duca t standard has taken place in 542 THE FREEMAN September Germany during the last two dec ades. In addition, many fogeries of well-known gold types with full or nearly full weight and fineness have been made in large quantities in recent decades. The American double eagle, the British sovereign and the 20 franc piece have been favorite forms of the counter feiters, whose activities have flourished on a vast scale in recent years because of the need for gold coinage and the failure of public mints to perform their traditional duties of providing gold in con venient form.

Because' of the strong biases of many economists against the mon etary use of gold, a number of myths and erroneous conceptions have grown up about gold coin age. Even some libertarian econo mists are lacking in sufficient knowledge about the history of gold coinage to refute the non sense that is often deliberately propagated. It is an error to assume that all gold coinages were constantly be ing eroded in value by debasement and weight reductions. Indeed, the really important gold series were struck overlong periods of time, in some instances for many centuries, without substantial re .ductions. One need only think of the solidus, the ducat, the escudo and the vast gold coinages of· the nineteenth century; the sovereign, the double eagle and the napoleon. It is also an error to assume that the frauds committed in con nection with gold coins were of very great importance. Sometimes coins were filed or sweated (fric tion in bags in which the gold dust was collected) and sometimes test cuts were made by which a small amount of gold was removed.

However, such frauds could read ily be detected by gold scales. Forgeries existed and there were printed descriptions of them as early as the 15th century. Still, such frauds are quite insignificant compared to the vast frauds car ried out in connection with paper money, which is cheaper to coun terfeit than gold coins. Of vastly greater importance, of course, is the fraud carried out against pro ductive citizens by governments themselves which refuse to coin precious metals and keep issuing ever greater quantities of paper money. It is still another error to as sume that gold is the ally only of the wealthy. In this age of compli cated tax laws and deceptive mone tary policies it is the wealthy who can afford the best advice on taxes and investments. For the saver of modest means, a Iittle hoard of gold and silver has often proved to be the best protection against confiscation of his savings by de valuations of currency.

1972 A CLOSER LOOK AT GOLD '543 There's Plenty of Gold The argument that there is "no longer enough gold for monetary purposes" is one of the more ab surd arguments that has been made against the return to the monetary use of gold. The United States could start minting gold again within the very short time required to prep,are the dies. Plenty of gold could be delivered to the mints from the mines now kept idle by governmental restric tions. Any seigniorage charged should not exceed the actual mint ing costs. As to the relation of the new gold coins to the huge heaps of paper money now in circula tion, the problem could be easily circumvented· simply by omitting any designation of value on the coins and employing the familiar weights and fineness of the quar ter eagles, half eagles, eagles and double eagles. The double eagles, for example, might bear the in scription "516 GRAINS, 900 FINE" instead of the erstwhile "TWENTY DOLLARS." As in pre vious generations, the deliverers of gold to be minted would be charged a small fee for minting costs and the gold pieces would be theirs to keep or put into commerce.

Striking gold coins without any designations of value on them is a procedure that was not only used in previous centuries, but also in recent decades. Consider the following examples: Beginning in 1921, Mexico had struck gold pieces so~ewhat larger than the U.S. double eagle. The Mexican pieces are known as the "cente nario" because they originally commemorated the centennial of the Republic. For years these pieces were struck in large quan ti ties with the designation of 50 Pesos. By 1943, however, the des ignation had become meaningless because of the considerable de preciation of the value of the Mexican paper and silver cur rency. In 1943 the centenario ap peared without the usual inscrip tion of 50 Pesos but with an inscription describing the weight and fineness, the really important factors. There are many varia tions on the procedure. Great Britain, for example, struck over 30 million sovereigns between 1957 and 1966 for overseas trade.

These continued to bear no desig nation of value, just as all modern sovereigns (since 1816) had borne none. Market Sets the Value If the government were to re sume the striking of gold pieces, as it should without delay, it would be easy to determine what designation of value, if any, were to be put on them after supply and demand had established a price in terms of other media. For purely 544 THE FREEMAN September monetary purposes, however, no designation of value would really be necessary, since gold coins need no legal tender status to work well, both as a medium of exchange and as a store of value. The lessons of monetary history are clear. Without the resumption of gold coinage or at least a free commerce in all of the precious metals, including especially gold, inflation will go on and on and on. Even just the tolerance of a free gold market would inhibit infla tion by providing a constant gauge of the value of other monetary media.

Those being hurt by inflation should bear the following in mind: The reason that governments 'with a redistributive economic philos ophy frown on gold coins is be cause of the fact that inflation is a big aid if not, indeed, an ·es sential factor in the redistribu tive process. If those persons' in government circles who are talking about "fighting inflation" were at all sincere, they would immedi ately remove all restrictions on the mining and monetary use of gold and resume a govern'mental func tion which had been taken for granted for literally thousands of years in western thought, the striking of gold coins with an established weight and fineness. Those being hurt by inflation have a powerful weapon at their disposal if they would only realize it and act accordingly. They could refuse to buy all bonds, public or . private, that did not contain gold clauses. While it is true that gold obligations have been repudiated in the past,10 the constant demand for gold obligations would un doubtedly have an influence on national monetary policies. Restor ation of the right to own gold and make contracts in terms of gold would be a maj or step toward restoration of the basic principle of economic freedom, a freedom no less sacred than other free doms. The restoration of our tra ditional rights with regard to gold should be vigorously sup ported by all those who prize economic freedom and abhor the emptiness, stagnation, decay and oppression of the omnipotent so cialistic state. ~ 10 But not without a loss of face. The refusal of the United States to redeem gold bonds after 1934 was perhaps the greatest breach of faith that had been committed by it as of then. The exact wording of these bonds is significant. Gold bonds dated May 9, 1918, for example, contain the following clause: "The prin cipal and interest hereof are payable in United States gold coin of the present standard of value." Although the bank ruptcy of an individual may be, in a tech nicallegal sense, different from the bank ruptcy of a nation, the failure to redeem national obligations in precious metals has always been an act parallel to the bankruptcy or dishonesty of an individual.

CAU,SE AND STANLEY Y ANKUS EFFECT IN ANY specific community during any specific period of time, the weather, the water supply, the schools, the customs, the language, the government, and various other environmental factors are nearly identical for all persons. In such similar influences and surround ings it would be reasonable to ex pect the lives of the people to be as similar as sardines. But they are not. It is easy to observe that the lives of some men and women are marred by hatred, scorn, envy, fights, and even murder while others live quiet, respectful, hon orable, peaceful lives in the same vicinity. This startlin,g contrast makes it evident that some individuals are able to achieve a high degree of self-improvement while others have little success. Mr. Yankus moved to Australia from Michigan in protest against government intervention in agriculture, but knows that it is not a sufficient purpose for his life.

The men and women who usually fail in their self-improvement see no rhyme or reason in the events that take place in their lives. As they see it, life is a series of gambles. If something goes wrong, it was an accident; if something turns out all right, it was pure luck. Those who are successful in their self-improvement have learned that opportunities are a product of cause and effect chance plays no part. Favorable opportunities are produced by the use of good methods and hard work. Cause and effect run through the entire gamut of human ex periences, from one's smallest pleasure to his biggest problem. In order to find the happiness we seek in life, it is beneficial to un derstand the role of cause and ef fect. It is my purpose to examine the relationship between cause and effect, self-improvement and free545 546 THE FREEMAN September dome Let me begin with these two premises: (1) Cause and effect operate in the universe. (2) Self improvement is the most effective means of creating freedom.

A farmer near Crystal Brook, South Australia said, "I will pay a reward of two dollars to anyone who can tell me something that happened without a cause." The reward money attracted many wild guesses from people who were eager to get an easy dollar from this farmer. But none of the answers were valid. After some thought, most peo ple will concede that everything has a cause, but the thought of having to accept responsibility for all of their troubles produces fear. So the concession is hedged : "Yes, but I am not in complete control of all the causes that produce troubles in my life. It is not my fault that other people injure me, lie to me, and cheat me in various ways. Furthermore, my freedom is curtailed' by a socialistic gov ernment over which I have no controL" Put Yourself in Charge Assume for a moment that you were in charge of the planet, Earth, and it was up to you to arrange the scheme of things. No doubt, you would want to arrange the affairs of this world so no one could write you a letter of complaint. The only way you could avoid all complaints is by estab lishing perfect justice. What is j ustice e~cept to give to each per son exactly what he deserves?

The means of accomplishing jus tice would be to have cause and effect operate in all things: good for good, bad for bad, no work no pay. In spite of appearances to the contrary, that is how I per ceive the world to be arranged. Our perception of how the world is arranged is very important be cause almost all of our actions re late to it. One of my good friends believes that all diseases are caused by harmful living habits and wrong eating instead of contagious germs. To prove his belief in cause and effect to an acquantance, he said: "Do you think that God gets up in the morning yawning, stretching and saying, 'Gee whiz, I slept badly last night and I am not in a good mood this morning. So I think I will show the people on earth some of my mighty pow er. I'll give Jack diabetes, I'll give Tom polio, I'll give Robert rheu matism, I'll give Henry a heart at tack, and I'll give Sam cancer.' Or do you think that God established perfect laws of cause and effect which work unfailingly and justly at all times and to all people on this earth?" Without hesitation, the acquaintance decided that 1972 CAUSE AND EFFECT 547 cause and effect operated, in the universe. The Bible explains cause and effect in this way: "Be not deceived; God is not mocked: for whatsoever a moan soweth, that shall he also reap." (Galatians 6 :7) Freedom Not for Sale Do you really want freedom?

Your sincere and eager reply may be, "Yes, of course. Give it to me." But is that possible? Let us in vestigate the means of getting any and every fragment of self-im provement we possess. Suppose you want to learn how to speak a foreign language, or learn how to build a modern home, or learn how to repair a radio, or learn any other skill. Can you go into a re tail store and buy these skills for a thousand dollars, or can your parents or anyone else who loves you give these skills to you as a gift, or can the senators and rep resentatives in government enrich your life with these skills by pass ing laws, or could you side-step all the hard work and steal these skills on some dark night? Of course, you cannot. Isn't it magnificent the way the Creator arranged the scheme of things so no one could cheat on his or her self-improvement! You get nothing for nothing; you only get exactly what you deserve as a reward for your personal effort.

This is proof that cause and effect operate in the acquisition of all self-improvement. And since free dom is obtained by self-improve ment, it becomes clear that free dom has to be earned by each in dividual who wants freedom. Let it be emphasized that freedom is an individual affair in self-im provement which can begin right now. Those who wait until the next election to increase freedom, wait in vain. It is a vain hope to be lieve that freedom can be estab lished in a nation by benevolent statesmen for the perpetual en joyment of all. If that were pos sible, it would already have been done a long time ago. Freedom has never been ob tained by the use of an excuse. Many individuals will admit the importance of freedom but they use this excuse : "It is a full time job for me to support my family. I haven't got the time or energy to worry about freedom." Fair enough. However, these individ uals do admit they have enough time to earn a living. If each fam ily practiced the virtue of self improvement by being self-sup porting, it would free more slaves than the Civil War between the States. What is more, no war would have to be fought. To find out who the slaves are, let us trace cause and effect. When a farmer or anyone else accepts govern ment subsidies, medi~al aid, wel548 THE FREEMAN September fare, or whatever, he causes a tax payer to earn part of his living for him. The effect of forcing a taxpayer to work without compen sation is slavery by taxation.

The Pain of Slavery There are many men and wom en who believe that the socialistic idea of slavery by taxation is the ideal arrangement. How can we tell who is right? The answer is revealed by cause and effect. The effect of harmful causes is pain ful. A Spanish proverb says: "God comes to us without a bell." Pain is the silent language used by Cre ation to tell us we are acting wrongly. There can be no dispute that slavery is a painful arrange ment; consequently, the socialistic idea of slavery by taxation is not in harmony with Nature's laws. Time and time again men have turned to government to secure their safety and protection by passing laws. Recently the govern ment of South Australia passed a law to protect car drivers from being killed. The law requires car drivers to wear seat belts; but since the law has been in effect, the number of deaths due to car crashes has increased. The govern ment Minister of Transport is sin cerely puzzled why the law failed to achieve its objective.

Never before in the history of the world have there been more laws in effect than at present. As more and more government laws are enacted each year, it would be logical to expect the government protection to get better. Instead, the daily newspapers report the sad stories of an increasing num ber of individuals who are being harmed and killed. The government laws have failed to furnish protection because al most all of these laws fail to har monize with Nature's laws. In any contest for supremacy, Nature's laws of cause and effect will always prevail over government laws. After school hours, I delivered newspapers to earn some money when I was a boy in Chicago. One cold winter day when it was snow ing, three older boys knocked me down in the snow and stole the money I had collected from my newspaper customers. This bitter experience taught me to take more precautions for my safety. Actu ally, no one else is as deeply con cerned with your protection as you are. You have everything to gain by making protection a do-it-your self project because the only gen uine protection you have in this world is self-improvement. Once you 'grasp the fact that bad effects are never produced by good causes, the secret of obtaining protection is yours. The good that you do will return to you like an Australian boomerang.

1972 CAUSE AND EFFECT 549 Each Experiences the Consequences of His Actions Cause and effect operate in the universe - what does that actually nlean? It means that everything that goes wrong in my life is my own fault. It means that every complaint I have made against others is my fault. Accepting such a heavy burden of faults is not as terrible as it seems. It is really beneficial. If the faults were all caused by other people, my safety and protection would be out of my control. Since the faults are mine, I have the wonderful opportunity of practicing every virtu e I can think of to increase my self-im provement. "And who is he that will harm· you, if ye be .followers of that which is good?" (I Peter 3:13) The men and women who pur sue the ideas of freedom enthusi astically are often hampered and frustrated by all sorts of social istic controls. Under such condi tions it is easy to develop an in tense hatred toward socialists in order to "get even" with them.

However, hatred is a harmful in dulgence because it destroys self improvement. Since freedom and self-improvement go hand in hand, freeing ourselves of hatred in creases our freedom' - we are not tied to our enemies. Here is my homemade recipe for getting rid of hatred: Whenever someone harms us in some way and we are incapable of punishing the offender, we react to the in justice by hating the offender. Hatred is a vote of "no confidence" in Creation. The invisible forces in the universe which are capable of spinning the stars and planets through space are also capable of seeing that justice is done through cause and effect. Our help is not needed by Creation in this particu lar task, even though it may hurt our vanity to have our aid rejected. All that is required of us to get rid of hatred is the understanding that cause and effect are at work in every human situation - noth ing is forgotten, nothing is for given, nothing is concealed.

If you are very skeptical and you want convincing proof that cause and effect will, punish the socialistic offenders for their err ors, try this experiment at your own risk. Insult the first ten peo ple you meet today. Now that you have produced ten causes - ten angry people - make a brave at tempt to escape the effects. Cause and effect always gets its man! You won't be able to escape the penalty for your misdeeds; neither will the socialists be able to es cape the punishment they deserve. Your hatred will be totally un necessary. I) CLARENCE B. CARSON THE FOUNDING OF THE AMERICAN REPUBLIC 14 Freeing the Individual 550 SCRIBES are quite often merciless tyrants in dealing with characters out of the past, spearing them with an assortment of verbs and freezing them in predetermined categories with their adjectives, much as a butterfly collector does with his helpless insects. There is no surer way to shatter the integ rity of an individual or to distort a historical epoch than by the in discriminate use of categories. No man of wit is likely to believe that a category comprehends him, even when it is well chosen. But when categories drawn from other times and places are imposed upon men and events which are foreign to them, the result can only be to confuse the subject under discus sion.

Some twentieth-century histor ians have done just this to Ameri can history of the late eighteenth century. They have called Ameri cans of the time by names, some of which were unknown to them and others which they would have disavowed; they have categorized them as revolutionaries or reac tionaries, democrats or aristo crats, nationalists or state's right ers, liberals or conservatives, and other such categories. They have tried to thrust the events into Dr. Carson recently has joined the faculty of Hillsdale College in Michigan as Chairman of the Department of· History. ·He is a noted lecturer and author, his latest book entitled ThrottJinA the Railroads.

1972 FREEING THE INDIVIDUAL 551 revolutionary and "social" revo lutionary categories, categories drawn from other revolutions and other circumstances. It is a jour nalistic habit into which many historians have fallen to attribute an absoluteness to the views and thrusts of men which violates both what they intend and do. Debates, even great historical debates, can be quite misleading. Men often ad vance positions with more certain ty than they feel, appear to be un alterable in their determination, yet may shortly yield to the other side with good humor when they have lost. Some historians appear to have no difficulty whatever in discovering men's motives, but the fact is that we are not privy to their motives. The subject to be treated below is the reforms and innovations made by Americans mostly in the decade after the declaring of in.:. dependence. The above prelude was made necessary because the pres ent writer both wishes to make known the fact that he is familiar with the cross currents of inter pretationof these years by twenti eth century historians and to dis avow many of the categories that have been used. After the Ameri cans broke from England they did make some changes; they did sometimes differ among them selves as to what the direction of change should be; but there is no need to question their motives or any solid basis for saying for cer tain what they were. Above all, there is no need to push this one into that category and that one into this, with the category being excessively large for the matter at issue and much too confining for the man over any period of time.

More rubbish has been written about the class positions and in terests of the men of these times than any other in American his tory, so far as I can make out. The present writer has neither the space· nor inclination to spend en ergy upon trying to refute what has not been well established, in any case. The Main Thrust of Changes What is established is that there were some changes made during these years. The main thrust of these changes is the freeing of the individual: freeing him from for eign domination, from various government compulsions, from class prescriptions, and for great er control of his own affairs. And, in conjunction with these, there was an effort to erect safeguards around him that would protect him in the exercise of his rights. The thrust to do these things was made along several different paths, and each of these is worth some attention. A primary aim of the Ameri552 TH.E FREEMAN September cans was independence. They wanted to be independent of Eng land, of course; that was what the war was fought about. Many Americans had come to believe that they could only have the re quisite control of their affairs by separating from the mother coun try. This was achieved, of course, by terms of the Treaty of Paris.

But Americans longed also to be independent of European entangle ments. Time after time, during the colonial period, Americans had been drawn into wars that origi nated in Europe but spread to the New World. Americans wanted to be free of the dynastic quarrels, the imperial ambitions, and the trade wars which rended Europe and shook much of the rest of the world. To many Americans, Eu rope was the symbol and embodi ment of corruption, dec.adence, and foreclosed opportunity. To be independent of Europe was, in the final analysis, to be free to follow courses which had not yet, at any rate, proven to be so laden with disaster. Independence did not mean, nor should it be taken to connote, the rejection of either the English or European heritage. Indeed, there was little irrational rejection of either heritage that comes to mind. Though Americans rej ected European aristocracy they did not, for that reason, change names of places in this country derived from aristocrats.

Perhaps, the most extensive thrust of this period was to the freeing of the individual from government compulsion. Liber tarian sentiment had been matur ing for some considerable while in America; it was fostered both by legal trends and religious and other intellectual development. Once the break from England came, Americans used the occa sion to cutaway a body of re straints no longer in accord with their outlook. Religious Liberty Religious liberty was widely se cured within a decade or so of the break from England. Much of it came by way of the disest~,blish ment of churches. The establish ment most readily dispensed with was that of the Church of Eng land. While the Church of Eng land was established throughout the South as well as in New York, it was not very popular; many of its clergy remained loyal to Eng land, and adherents of it were out numbered by dissenters in most states. Its disestablishment was made even easier because it was a national church; membership in it was tied to loyalty to the king of England. The Church of England was everywhere speedily disestab lished. But these actions were not 1972 FREEING THE INDIVIDUAL 553 simply prompted by convenience, for there was increasing belief in religious liberty. Several states had no established churches: namely, New Jersey, Rhode Island, Pennsylvania, and Delaware. But they used the opportunity afforded by independence to remove or re duce restrictions. Some of the dis abilities of Roman Catholics were cut away.

The established Congregational church was maintained for several decades longer in Massachusetts, Connecticut, and New Hampshire. There was, however, some liberali zation in these states. The Massa chusetts constitution of 1780 af firmed that every man had the right to worship in his own way, that no church should be subordi nated"· to any other, and that tax moneys could be used to support ministers other than Congrega tionalists. However, church at tendance was required still, and ministers were supported from taxes.! "New Hampshire followed in the steps of Massachusetts, but Connecticut held out much longer against what its citizens regarded as the forces of iniquity. They al lowed dissenters to escape pay ment of taxes to the established church if they presented the clerk of the local church with a certifi cate of church attendance signed by an officer of the dissenter's own church."2 The constitutions of New Jer sey, Georgia, North a~d South Carolina, Delaware, and Pennsyl vania "explicitly provided that no man should be obliged to pay any church rate or attend any religious service save according to his own free and unhampered wilI."3 But Virginia made the greatest effort to assure religious liberty. This might have been a reaction to the fact that Virginia had the long est establishment and one of the most rigorous. Thomas Jefferson, J ames Madison, and George Ma son were leading advocates of re ligious liberty, but they did not succeed in getting their ideas into law until 1786. This was done by the Virginia Statute of Religious Freedom, which proclaimed reli gious liberty a natural right. An impressive preface states the case: Whereas, Almighty God hath cre ated the mind free; that all attempts to influence it by .temporal punish ments or burthens, or by civil incapac itations, tend only to beget habits of hyprocrisy and meanness, and are a departure from the plan of the Holy author of our religion ....

The legally effective portion of the statute reads this way: That no man shall be compelled to frequent or support any religious worship, place, or ministry whatso ever, nor shall be enforced, restrained, molested, or burthened in his body or 554 THE FREEMAN September goods, nor shall otherwise suffer on account of his religious opinions or beliefs; but that all men shall be free to profess, and by argument to main tain, their opinion in matters of re ligion, and that the same shall in no wise diminish, enlarge, or affect their civil capacities. 4 This was the beginning of religious liberty in America. Freeing the Slaves The movement for freeing the slaves reached a peak in the 1780's which it would not soon attain again. Even before the break from England, the slave trade was ac quiring a bad reputation in Amer ica, but such efforts as were m~de to restrict it were negated by the mother country. Fiske says, "The success of the American Revolu tion made it possible for the dif ferent states to take measures for the gradual abolition of slavery and the immediate abolition of the foreign' slave-trade."5 Nor was sentiment against slavery restrict ed to states in which there were few slaves. ,Some of the outstand ing leaders from the South during this period, most of them slave holders, spoke out against slavery.

Henry Laurens, a leader in South Carolina, wrote in 1776: "You know my Dear Sir. I abhor slav ery ... - in former days there was no combatting the prejudices of Men supported by Interest, the day I hope is approaching when from principles of gratitude as well [as] justice every Man will strive to be foremost in shewing his readiness to comply with the Golden Rule.... "6 Thomas J effer son argued in his Notes on the State of Virginia. that slavery had a bad influence on the manners and morals of the white people as well as its devastating effects on the Negroes. He longed for and hoped to see the day when all slaves would be emancipated. He warned his countrymen of the im pending 'impact on them if this were not done: "And can the lib erties of a nation be thought se cure when we have removed their only firm basis, a conviction in the minds of the people that these liberties are the gift of God? That they are not to be violated but with his wrath? Indeed I tremble for my country," he said, "when I reflect that God is just; that his justice cannot sleep forever .... "7 Some states began to act almost as soon as the opportunity arose.

In 1776, Delaware prohibited the importation of slaves and removed all restraints on their manumis sion. Virginia stopped slave im ports in 1778; Maryland adopted a similar measure in 1783. Both states now allowed manumission at the behest of the owner. In 1780, Pennsylvania not only pro hibited further importation of 1972 FREEING THE INDIVIDUAL 555 slaves but also provided that after that date all children born of slaves should be free. Similar en actments were made in the early 1780's in New Hampshire, Con necticut, and Rhode Island. In Massachusetts, the supreme court decided that on the basis of the constitution of 1780 slavery was abolished in that province. Even North Carolina moved to discour age the slave trade in 1786 by tax ing heavily such slaves as were imported after that time. In order to protect free Negroes, Virginia made it a crime punishable by death for anyone found guilty of selling a freed Negro into slavery. 8 How far sentiment against slav ery had gone may well be best in dicated by the Northwest Ordi nance (1787), an act of all the states, as it were, 'in Congress assembled. The act provided: "There shall be neither slavery nor involuntary servitude in .the said territory, otherwise than in the punishment of crimes, where of the party shall have been duly convicted. . . ." This article was passed, according to one of its proponents, ,vithout opposition. 9 Individual Liberties The bills of rights drawn and adopted in the various states con tained provisions intended to as sure individual liberties. These bills of rights were usually drawn and adopted along with constitu tions but were frequently separate documents. They were usually cast in the language of natural rights theory. For example, Article I of the Massachusetts Declaration of Rights states: All men are born free and equal, and have certain natural, essential, and unalienable rights; among which may be reckoned the right of enjoying and defending their lives and liber ties; that of acquiring, possessing, and protecting property; in fine, that of seeking and obtaining their safety and happiness.l 0 Virginia was the first state to draw both a constitution and a bill of rights. Actually, Virginia's Bill of Rights was adopted June 12, 1776, while the would-be state was still a colony. It was the work pri marily of George Mason, was cir culated among the states, and be came a model for such instru ments.

The Virginia Bill of Rights guaranteed trial by jury in both criminal and civil cases, prohibit ed excessive bail and fines, de clared general warrants to be op pressive, and acknowledged free dom of the press. The protections of a person accused of a crime were spelled out: That in all capital or criminal prosecutions a man hath a right to demand the cause and nature of his accusation, to be confronted with the 556 THE FREEMAN September accusers and witnesses, to call for evidence in his favour, and to a speedy trial by an impartial jury of his vicin age, without whose unanimous con sent he cannot be found guilty, nor can he be compelled to give evidence against himself; that no man may be deprived of his liberty, except by the law of the land or the judgment of his peers. The only specific protection of property, other than the provision for jury trial in civil cases, was the requirement that men "cannot be taxed or deprived of their prop erty for publick uses, without their own consent, or that of their representatives so elected. . . ."11 The Massachusetts Declaration of Rights of 1780, the work main ly of John Adams, was consider ably more thorough. In regard to property, it said: "No part of the property of any indi vid ual can, with justice, be taken from him, or applied to public uses, without his consent, or that of the repre sentative body of the people ....

And whenever the public exigen cies require that the property of any individual should be appropri ated to public uses, he shall re ceive a reasonable compensation therefor."12 Other rights were alluded to than those mentioned in the Virginia Bill: freedom from unreasonable searches, the right to bear arms, the right of peace ful assembly, the prohibition of ex post facto laws, the prohibition of attainders by the legislature, as well as most of those covered in Virginia. Northwest Ordinance The Northwest· Ordinance sums up, in Article II, what may well be considered a 'contemporary con sensus of the protections of the rights of the people most needed: The inhabitants of the said terri tory shall always be entitled to the benefits of the writs of habeas cor pus, and of the trial by jury; of a proportionate representation of the people in the legislature, and judicial proceedings according to the course of the common law. All persons shall be bailable, unless for capital offences, where the proof shall be evident, or the presumption great. All fines shall be moderate; and no cruel or unsual punishment shall be inflicted. No man shall be deprived of his liberty or property, but by the judgment of his peers, or the law of the land, and should the public exigencies make it necessary, for the common preserva tion, to take any person's property, or to demand his particular services, full compensation shall be made for the same. And, in the just preserva tion of rights and property, it is un derstood and declared, that no law ought ever to be made to have force in the said' territory, that shall in any manner whatever, interfere or affect private contracts, or engagements, bona fide, and without fraud previ ously formed.l 3 1972 FREEING THE INDIVIDUAL 557 Some recent writers have claimed that the Founders distinguished between "human rights" and prop erty rights in favor of "human rights." It should be clear from the above that no such distinction can be discerned, nor has the present writer ever seen a quo tation from the original that could reasonably be construed to show that the Founders made any such distinction.

Property was, however, freed from various feudal restraints during this period and made more fully the possession of the indi vidual holding title to it. The most general encumbrance on property ownership was the quitrent - a periodical payment due to king or proprietor on land, a payment that originated in the late Middle Ages as money payments displaced personal servitude. Such claims were speedily extinguished follow ing the break from England, and land thereafter was held in "fee simple." Such royal prerogatives as the right of the monarch to white pines on private land were, of course, nullified. States abolished entail, also, a move which en hanced the authority of the owner to dispose of his lands. With the Declaration of Inde pendence, the whole edifice of mercantilism as imposed from England was swept away. One historian describes the impact of this as follows: "As a result of the American Revolution, freedom of enterprise, that is, the equal opportunity of any individual to engage in any economic activity he chooses in order to amass "vealth, and to hold onto his wealth or dispose of it as he pleases, be came a Iiving reaIi ty in America to a greater degree than before."14 Abolition of Classes Another sort of innovation may be described as anti-class in its character. Fixed classes are sup ported and maintained by govern ment where they exist. Americans of this period wanted to remove government support of classes and prevent the growth of special privileges by which classes are shaped. Some of the actions al ready described were, in part, anti-class measures. For example, the established Church of England was hierarchical and, in England particularly, a major support of class arrangements. Its disestab-' lishment in America struck at the root of government support of class structures. Entailment was a means of perpetuating great estates, just as quitrents were devices for maintaining aristocra cies. Other actions were taken that were even more pointedly aimed at removing government from its role as class perpetuator.

One of these was the abolition 558 THE FREEMAN September of primogeniture. Primogeniture was the rule that the estate of one who died without a will should go either whole or in larger part to the eldest son. States abolished this rule and adopted the practice of dividing the estate equally among the children when' the father died intestate. The tend ency of this was for great estates to be broken up from time to time. Various sorts of provisions were made in state constitutions to pre vent the growth of aristocratic privileges. For example, the Vir ginia Bill of Rights had this pro vision: That no man or set or men, are en titled to exclusive or separate emolu ments or privileges from the commun ity, but in consideration of publick services; which, not being descendible, neither ought the offices of magis trate, legislator or judge to be heredi tary.l5 The Massachusetts Declaration held: No man, nor corporation, or associ ation of men, have any other title to obtain advantages, or particular and exclusive privileges, distinct from those of the community, than what arises from the consideration of serv ices rendered to the public; and this title being in nature neither heredi tary, nor transmissible to children, or descendants, or relations by blood; the idea of a man born a magistrate, lawgiver, or judge, is absurd and un natural.l 6 The animus against titles of no bility found expression sometimes.

So strong was the animus against hereditary positions that the Soci ety of Cincinnati, a voluntary as sociation of officers who had served in the War for Independence, found it expedient to abandon the rule that membership could be inherit ed to allay the indignation against them. Frequent elections and re strictions on the amount of time one could serve in office were ef forts to prevent the emergence of ~ ruling class, at least in part. The kind of equality sought by prohibitions against government ally fostered classes was equality before the law. So far as any other equality was concerned, American opinion of the time ac cepted differences in wealth and social station as inevitable and de sirable results of differences in ability and effott. Undoubtedly, there were those in that day who would have liked to have some portions of the wealth and estates of others - who coveted what was not theirs - as there are in any day, but they were either inartic ulate or ashamed to profess their views. Some historians have made much ado about the confiscation and sale of Loyalist estates during the war. This is treated as if it were a redistributionist scheme, and there is an attempt to give factual support to this notion by 1972 FREEING THE INDIVIDUAL 559 pointing out that large estates were sometimes broken up before they were offered for sale. This did sometimes· happen, but it does not follow that it was done with any motive of equalizing holdings.

Small parcels attract more bidders than large ones; hence, the price attained for large estates was likely to be increased by dividing them up. Moreover, large estates were sometimes formed or added to by buying several parcels. 17 Limitations on Government There were some general chang es in governments during this pe riod, changes in degree from what they had been under British rule. The main tendency was to make the state governments more de pendent upon the popular will than they had been during the colonial period. The new state constitu tions required that all state of ficers either be chosen by the elec torate or appointed by those who had. The main impetus behind mak ing governments depend more closely on the electorate was a pro found fear of government. This distrust of government was most clearly shown in the distrust of governors and courts, those parts of the government that had not been popularly chosen during the colonial period. The colonists feared the legislatures, too, or so the limitations on them would in dicate, but out of their colonial experience, they feared them less than the other branches. In point of fact, Americans relied rather heavily on a narrow and provin cial colonial experience in making their first constitutions. Probably, Massachusetts and New York should be excepted from these strictures.

The office of governor - or what ever the executive might be called, for some states abandoned briefly that colonial title - was stripped of much of the power and most of the independence enj oyed by co lonial chief executives. Colonial governors had usually possessed an absolute veto over legislation. The new executives were stripped of the veto power in all but two of the states - Massachusetts and New York -, and in these the pow er was somewhat weakened. In all the states but New York the legis latures or the constitutions gov erned the assembling and disper sal of the legislative branch. In eight of the states, the chief ex ecutive was elected by the legis lature, and he was made, thereby, greatly dependent upon it. His tenure of office was usually quite brief. In nine states, it was only twelve months, and nowhere was it for a longer period than three years. To prevent the growth of personal power in the hands of 560 THE FREEMAN September the governor, most state consti tutions limited the number of terms he could serve in a given period. 18 Courts and Legislatures The courts generally were made more dependent on legislatures than they had been formerly. The Pennsylvania constitution de scribed the relationship this way: "The judges of the supreme court of judicature shall have fixed sal aries, be commissioned for seven years only, though capable of re appointment at the end of that term, but removable for misbe havior at any time by the general assembly .... "19 Even so, the prin ciple of separation of powers gen erally prevailed as between the courts and the legislature more fully than between governors and legislatures.

The legislatures were subject to frequent elections, a device for making them closely dependent upon the electorate. In ten of the states the lower house was subject to annual elections; in two states their terms were only for six months. The members of the up per house usually had somewhat longer terms, but one state did not even have an upper house. 2o Even so, the powers of the legisla tures were quite extensive. Thom as Jefferson complained that in Virginia: All the powers of government, leg islative, executive, and judiciary, re sult to the legislative body. . . . An elective despotism was not the gov ernment we fought for, but one which should not only be founded on free principles, but in which the powers of government should be so divided and balanced among several bodies of magistracy, as that no one could transcend their legal limits, without being effectually checked and re strained by the others. 21 What had been generally done was this: Americans in establishing their state governments had sought to check them by the elec torate rather more than by an in ternal balance of powers. The peo ple could, however, use their in fluence to abet arbitrary govern ment as well as to check it.

There w,as also some extension of the franchise during this peri od. In addition, several legisla tures were reapportioned to give inhabitants in the backcountry a more nearly proportionate voice in government. One of the trends, in this connection, was the move ment of state capitals inland from the coast to make them more ac cessible to the back country. Most of these were changes of degree r,ather than of kind. To call them revolutionary, as some twentieth century historians have, is a distortion of what happened and a stretching of the me,aning 1972 FREEING THE INDIVIDUAL 561 of revolution beyond reasonable confines. Insofar as they were changes from what had prevailed, they were culminations of trends long afoot. Americans had been tending toward religious liberty in practice long before they estab lished it in fundamental law. They had been ev,ading, so far as they could, quitrents, primogeniture, and entail. Their new governmen tal structures embodied much of what they had been contending with the British for. Bills of rights, bicilmeral legislatures, and weak executives, were built on the British model. The assault on spe cial privilege did run contrary to recent British practice to some extent, but it was quite in accord with what Americans had been doing almost since they had reached the New World. If in their early enthusiasms in government building they did not attend to a broader experience than their colonial one, this did not make their acts revolutionary, only pre cipitate. They were clear enough that they wanted to protect the individual from government in the enj oyment of his rights; they did not at first realize how much more this took than felicitously phrased declarations. Weak governments do not make liberty and property secure; that is the office of power ful governments internally re strained. Many Americans were to learn this lesson, and that rather quickly. But just as their first ex periments were not revolutionary in character, no more were their later alterations a counter-revo lution. ~ Next: The Critical Period.

• FOOTNOTES • 1 See Merrill Jensen, The New Nation (New York: Vintage Books, 1950), p. 132. :! Ibid., p. 133. 3 John Fiske, The Critical Period of A merican History (Boston: Houghton Mifflin, 1916), p. 78. 4 Jack P. Greene, ed., Colonies to Na tion (New York: McGraw-Hill, 1967), PP. 390-91. [) Fiske, op. cit., p. 71 G Greene, op. cit., p. 397. 7 I bid., p. 398. 8 See Fiske, op. cit., pp. 74-75. 9 See Robert A. Rutland, The Birth of the Bill of Rights (New York: Collier, 1962), p. 109. 10 Henry S. Commager, ed., Documents of American History, I (New York: Ap pleton-Century-Crofts, 1962, 7th ed), 107. 11 Ibid., p. 104. I:! Ibid., p. 108. 13 Greene, op. cit., pp. 472-73. 11 Dumas .Malone and Basil Rauch, Empire for Liberty, I (New York: Apple ton-Century-Crofts, 1960),196. 13 Commager, op. cit., p. 103. Hi Ibid., p. 108. 17 See Frederick B. Tolles, "A Re evaluation of the Revolution as a Social Movement," George A. Billias, ed., The American Revolution (New York: Holt, Rinehart and Winston, 1970, 2nd ed.), pp.66-67.

18 See Richard Hofstadter, et. al., The United States (Englewood Cliffs, N. J.: Prentice Hall, 1967, 2nd ed.), p. 160. 19 Greene, op. cit., p. 343. :!o Hofstadter, op. cit., pp. 159-60. 21 Quoted in Nelson M. Blake, A His tory of American Life and Thought (New York: McGraw-Hill, 1963), p. 100.

The Productivityof C. LOWELL HARRISS FREEDOM is more than an end, something which in itself is of incalculable value. Freedom is also a means for achieving other ends. Among the objectives which free dom helps man achieve are those of his economic life. But what, really, does the term "freedom" mean in relation to economics? How does it relate to the productivity of an economy? Both questions are difficult. Nei ther of them am I able to answer to my own full satisfaction. Few of the many aspects are black or white. Gray areas exist. The prob lems are complex. The values in volved are not always in harmony. The lack of certainty does more than compel caution in presenting conclusions. The existence of doubt also leads to failure to recognize points which, it seems to me, should be more nearly clear than debatable. My university students Dr. Harriss is Professor of Economics at Co lumbia University. This article is from an es say written in honor of Marco· Fanno of the University of Padua in 1966.

nll2 seem rarely to appreciate the sig nificance of some maj or elements. And who has not heard, many times and from many sources, statements to the effect that the world's poor, "emerging" coun tries cannot afford freedom be cause of their desire to speed eco nomic development? Economic freedom, however, can make an incomparable contribution to good economic performance. Freedom - The Concept Freedom implies the absence of restraint. Yet we also think of it as the existence of opportunities the more numerous the alterna tives available, the greater our freedom. As related to economic affairs, freedom often seems to mean less, rather than more, re striction imposed through· the po litical process, i.e., by government. Who will deny the validity and the pertinence of this interpretation? Denial may come from the person who has been blessed by the op1972 THE PRODUCTIVITY OF FREEDOM 563 portunity to live where govern mental restrictions bother him little-or by the man who has become desensitized (or never had a chance to develop feelings for economic freedom).

Freedom in the fullest sense, however, covers more than the ab sence of governmental restriction. The freedom that counts econom ically - and humanely - includes the absence of privately created restrictions whose origin is not in some quid pro quo.! The massing of economic power in various parts of an economy with generally "free" markets can restrict the freedom of persons not exercising the power. Freedom in economic, as well as in personal, life requires gove"rn ment and the restraints it imposes. The preservation of order and the 1 By quid pro quo restrictions, I mean those which result from inability or un willingness to meet the terms demanded by others in a generally competitive mar ket: A's failure to get a new auto be cause he was unable to meet the seller's terms or B's failure to get the better job because he was unwilling to study at night. These must be distinguished from privately erected obstacles to entry by persons who have the qualifications into a line of business or occupation. Private (nongovernmental) restriction on free dom may be illustrated: (a) the existence of producing units so large that poten tinl npW~l)m~l!'S fa~e hUl!'dles which are at times insurmountable; (b) wage agree ments that effectively exclude from jobs those persons whose productivity makes them worth less than the wage set.

enjoyment of personal rights can not exist without curbs on action, curbs which limit opportunity but which operate under law. Organ ized economic life needs "rules of the game," a framework within which activity can be carried on with assurance about rights and obligations. A binding legal obligation-to live up to the terms of an agree ment - in one sense limits free dom. In a broader sense, however, a body of law which compels men to respect their obligations is a source of freedom and opportuni-· ty. The legal system makes pos sible the contracts and arrange ments which are indispensable for specialization and capital accumu lation. The essentials of advanced economic life require the govern mental imposition, and enforce ment, of law. Government acts in another way to create, while also restraining, economic freedom. Government can use the power of coercion to prevent undesirable "neighbor hood" or "third-party" effects.

Restrictions against the pollution of air and rivers or inappropriate uses of land provide example. Per sonal and business activity need to be controlled to reduce adverse effects on persons who are not par ties to the transactions. In short, "social costs" of private activity must not be ignored in society's 564 THE FREEMAN September economic calculations if we are to get best overall results. Curbs on some freedoms are necessary to assure the existence of others. Yet the government which re strains (participates or intervenes - different terms carry different connotations) to make liberty pos sible also restricts freedom. In surveying the broad scope of gov ernment restraint in modern eco nomic life, one sees many "gray areas." Their frequency and ex tent, however, ought not to get predominant attention. The cen tral issues deserve attention and most need to be understood. What is the relation of freedom to the essential tasks of an economic system?

What Goods and Services Shall be Produced? An economic system exists to produce goods and services for consumers - today and in the fu ture. 2 But not just anything, not great masses· of this and nothing of that. ~ The nature· and conditions ·of work are no less important than many of the rewards we call consumption. Both posi tive and negative values lie in work, ac tivity, in the job itself. Here, too, free dom plays a role of paramount signifi cance. The more numerous the oppor tunities to seleGt among alternatives, the greater the likelihood that one can settle on the best combination of job conditions among those available and also induce the type change which makes for better jobs. The objective is to produce a vast array of goods and services in the proportions which will best satisfy human wishes. The opti mum combination can be produced only if the public can, and does, reveal personal desires in all their myriad nuances. What methods of showing desires are available?

One method consists of our buying as individuals and as private groups --:- voting in the market place with our money. We can also reveal desires in buying col lecti vely through government. The processes of individual and collec tive buying differ - and so must the quality of the results. Three differences warrant comment. 1. When buying in the market, individuals may not always do what they really prefer, or would prefer if they had more facts, in cluding those which will come with experience. 3 Mistakes are legion. Yet the person who makes an er roneous consumption choice will also bear the burden. The effect on incentives will be direct and unrelenting. When we buy collec tively through government, how ever, a considerable minority perhaps even a majority - will ordinarily have preferred some other arrangement. They would rather have more of this,less of 3 As consumer goods get more complex, the need for information increases.

1972 THE PRODUCTIVITY OF FREEDOM 565 that, a different mix of "public" and private goods and services. The direct and indirect expression of preferences through the process of voting in political elections will leave some of the public getting less satisfaction of its wants than the dollars spent would permit. Compulsion on minorities, there fore, sacrifices human satisfac tions which would be met under a regime of freedom - except for such truly collective wants as na tional defense and internal polic ing. 4 2. In getting produced those things which are most likely to satisfy human wants, the freedom of the market possesses two other inherent advantages over the po litical, that is, the governmental, process. (a) Governmental deci sions are discontinuous. They are made at infrequent intervals. Once made, they often commit spending for months or years, and in amounts which are subject to lit tle change. Much private spend ing, in contrast, shifts constantly.

In the market place we can vote with every dollar on a list of can4 More typically, the family rather than the individual is the unit involved. There are, for example, things I as an in dividual want rather more than higher prices of food, putting a man on the moon soon, or subsidizing the development of new agricultural land. Yet some of the taxes I pay to the national government go for these purposes. didates which is long indeed. Al ternatives shift from day to day. Prices and qualities are kept on the move. New opportunities ap pear. Consumer reaction to them induces changes with a flexibility rarely possible in government pur chasing. (b) Governmental spend ing decisions are made through intermediaries, not by the ulti mate user, the citizen being served. Elected officials, the civil service, and the military place the orders. The public served remains somewhat removed from the choices.

3. New products and new types of services are most likely to ap pear in an environment of free dom. Buyer reactions then indi cate how much of each shall be produced. For many good reasons, government spending patterns tend to be largely stable. Of course, innovation does occur in government, while private monop oly can restrict innovation in the world of business. 5 Yet even private monopolies may act progressively. And most of the world of business is freer and more competitive than govern ment. 5 Obstacles to innovation in business are not limited to monopoly in any strict sense of the term. Lethargy, ignorance, lack of capital, and red tape inside a com pany are among factors limiting innova tion.

566 THE FREEMAN September How to Produce Most goods can be produced, and most desires for services satisfied, in more than one way. Some meth ods are better than others. The general welfare objective is to use the minimum of inputs per unit of output. The closer the economy comes to this objective, the greater the total output obtainable from the productive resources available. In the business world, the hope for profit" and the fear of loss act powerfully to compel economizing in production. Freedom provides opportunity - and more. One pro ducer's aggressiveness in cost cut ting is another's challenge or threat. Governments, however, do not need to meet cost demands in the same sense as do businesses. If the taxpayer can be compelled to pay the bills (including losses in commercial-type activities), what are the inducements to economiz ing? They exist, but making them powerful and effective requires exceptional imagination, effort, and freedom within government.

Efficiency demands smaller rather than greater use of inputs per unit of output. To take ad vantage of opportunities, to ad just to the unending (and also uneven) change (a) of the prices of inputs and (b) of technological possibilities, a producer must be free. He must also be under pres sure to do what seems best. Production possibilities differ widely from time to time, from place to place. Any single pattern, no mat ter how well adapted to some sit uations, will be unsuited to others, and definitely bad for some. Free dom permits the public to benefit from such variety. Where producers are free to seek better methods - and even more certainly where producers are under the" pressure of compe tition to reduce costs - the public stands to benefit. Government agencies cannot be expected to improve efficiency to the extent that, and as promptly as, per mitted by changes in technology and changes in the prices of in puts. Nor does governmental reg ulation appear promising as an "encourager" of cost reduction.

The governmental agency, wheth er as an operating entity or one regulating private businesses, faces more than one disadvantage as a promoter of production efficiency. So does the business firm or the labor union which is somewhat in sulated from the free competition of others. Not the only examples. in America are to be found in the makework policies of labor unions and obsolete local" laws affecting new construction. As producers, many of us may nurse a sneaking sympathy for re straints which impede the growth of productivity if they seem to 1972 THE PRODUCTIVITY OF FREEDOM 567 create demand for our labor or what we have to sell. Neverthe less, the result in any "not-so long" period will be some failure to improve the relation of output to "input. Society suffers. To re peat, protection from the forces of freedom will result in greater use of productive resources per unit of output.

Who Gets What? For the economy as a whole, there can be no Santa Claus, no "free lunch." Society must pay for what it gets. The payments thus made are the incomes of the recipients. Most of us are on both sides - paying and receiving. On one side, we want the amount to be large; on the· other side, we want it to be small. Each of us presumably tries to do the best he can, to make the best settle ment possible with what he has, in getting income and then in us ing it. The greater our freedom to make the best bargains, the bet ter in general will be the results. Noone wants to pay others more than their services are worth, and freedom to reject demands for overpayment reduces the likeli hood that we shall be forced to do so. In turn, the broader our range of freedom, the larger our opportunities to get the most that our services are worth to others. In contrast, restrictions on free dom - whether imposed by gov ernment, the possessors of private power, or one's own commitments made earlier-will make the terms for some of our bargains less sat isfactory than is potentially pos sible.

As a result of such compulsion, we shall pay more than is inher ently necessary for what we get and get less than our services are worth. The distribution of income which results from complete free dom would be less than ideal, judging by. the standards to which most of us hold. The person. with no productive capacity might be left out in the cold because private philanthropy - a not insignificant feature of free society in America - might not fill all humanely dis tressing gaps. Long ago govern ment came to use funds collected in taxes to meet some needs of persons whose income from pro duction seemed inadequate. Who among us does not endorse such policy? Transfer Payments Modify Income Distribution Modern society goes farther. Transfer payments (such as so cial insurance and aid to farmers) modify income distribution. The results differ from those of the free market. Taxes also redistrib568 THE FREEMAN September ute income and wealth. The gen.;.

eral results may, or may not, suit us better than those from freedom. Nevertheless, in three important respects the consequences of free dom have no small economic merit. 1) The kinds of services desired are most likely to be forthcoming if demanders and suppliers are free to make the .best deals pos sible. 2) Efficiency in utilization will be encouraged. The employer will not use labor being paid $4 an hour on jobs worth $3 an hour. Men capable of producing enough to justify $4 an hour will rarely spend their time on jobs worth $3 an hour. The· desire for income leads free men to "allocate" them selves toward the work where the rewards are highest because worker productivity is highest. 3) Men seeking work will not be de nied jobs because someone else sets conditions - sex, color, age, or creed - which are not pertinent to the task. Nor will a man be de nied work because his productivity does not come up to the lowest level of wage rate permitted by law, union-management agree ment, or custom.

Economic progress requires that things be done differently. What could be more obvious than that innovation, change, the striking out in ,new directions, all depend upon freedom? Bureaucracy - in government, in large businesses or labor unions, perhaps even in uni versities, religious organizations, and private foundations-provides stability without which progress is impossible. Yet bureaucracy and the slow decision processes of leg islatures get in the way of the change which makes up the very essence of economic progress. Per haps the greatest contribution of freedom to economic productivity lies in the fruits of progress. Concluding Comment Reality cannot compete with dreams, at least not "fairly." How easy to romanticize, perhaps about free enterprise, perhaps about pos sibilities of improving the world by some governmental policy which will restrict the freedom of oth ers: Mr. Dooley made a good point when he said, "A man that'd ex pect to train lobsters to fly in a year is called a lunatic; but a man that thinks men can be turned into angels by an election is called a re former and remains at large."

Government will inevitably in fluence economic affairs.extensive ly. One element of the essential intervention will deal with private market power. Another will in volve efforts to meet the problems· of particular "soft spots" - indi viduals, groups, areas - in excep tional need. Let's hope that the results will be constructive. Yet is it not a bit sobering to look at 1972 THE PRODUCTIVITY OF FREEDOM 569 almost the oldest example of gov ernmental intervention in the United States - regulation of rail roads - and that which today gets the most financial outlay - agri culture? The results are less than brilliant, scarcely models for the "good society." One reason for the lack of success in these cases is that governmental activity has imposed restrictions on freedom rather than enlisting freedom in combination with those things which government has to offer. One advantage of prosperity is that it frees us from the need to worry about small economic problems. Many details of government spending are just that, small and unimportant. But many are not.

The quality of the decisions must influence profoundly the quality of society. In the words of one of his tory's greatest economists, Alfred Marshall: Government is the most precious of human possessions; and no care can be too great to be spent on en abling it to do its work in the best way: a chief condition to that end is that it should not be set to work for which it is not specially qualified, under the conditions of time and place. ® Reprints available, 10¢ each Supporters of Schemes IDEAS ON LIBERTY THE HARD-WORKEDand over-burdened who form the great major ity, and still more the incapables perpetually helped who are ever led to look for more help, are ready supporters of schemes which promise them this or the other benefit by State-agency, and ready believers of those who tell them that such benefits can be given, and ought to be given. They listen with eager faith to all builders of political air-castles, from Oxford graduates down to Irish ir reconcilables; and every additional tax-supported appliance for their welfare raises hopes of further ones. Indeed the more numer ous public instrumentalities become, the more is there generated in citizens the notion that everything is to be done for them, and nothing by them. Each generation is made less familiar with the attainment of desired ends by individual actions or private com binations, and more familiar with the attainment of them by governmental agencies; until, eventually, governmental agencies come to be thought of as the only available agencies.

HERBERT SPENCER, The Man Versus The State, 1884 A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN \ As Arnold Beichman, the author of Nine Lies About America (Li brary Press, $7.95), puts it, the theme of his trenchant book is "not the 'greening' but rather the lynching of America." The lynch mobs Mr. Beichman is after include learned Ph.D.s as well as hippies, experienced New York editors and journalists as well as campus revolutionaries. The lies that this heterogeneous group tells about America are by no means' limited to nine, but, after all, if the author had done more than hit the high spots his book would have gone on forever. So, in dealing with what Tom Wolfe specifies in a foreword as "the modern intellectual's retro grade habits of mind," Mr. Beich570 man picks out the type of egregi ous mendacity that would have come under the heading of the late Paul Joseph Goebbels's "big lie." Goebbels, a Heidelberg Ph.D.

before he became Hitler's minis ter of propaganda and public en lightenment, had enough intelli gence to know that he was dealing in evil put-ons, which is a left handed compliment that we need not extend to some of the "intel lectuals" placed on exhibition by Mr. Beichma:n. Many of them know not what they do. But it is the effect of the "big lie" that is important, not the motivating intent. Constant repetition of Goebbel sian stuff has people believing (1) 1972 LIES 571 that America is a Fascist country, (2) that America means genocide, (3) tha t "the Bomber Left is a moral force," (4) that the American worker is a "honky," (5) that our political system is a fraud, (6) that our values .are materialistic, (7) that America usually spelled Amerika - is in sane, (8) that the American peo ple are "guilty," and (9) that what our country needs is "a vio lent revolution." Of course, the ave,rage Dayton, Ohio, housewife who is the unassuming heroine of Richard Scammons's and Ben Wattenberg's The Real Majority wouldn't believe even the least of the nine big lies, nor would her machinist husband. But the so called intellectual betters of the Dayton housewife swallow the Goebbelsian bait whole, which is one good reason for withholding Federal assistance from our insti tutions of higher learning. Why, indeed, should the taxpayers be called upon to subsidize the lynch ers?

Attention-Getters Speaking of the intellectuals who .justify bombing and arson as necessary attention-getters, Mr. Beichman calls it a "terrifying logic" as "we move from the old literary explosions of small intel lectual coteries to the infatuation of a new young avant-garde with the power that comes out of the barrel of a gun." Mr. Beichman says it is "small wonder" that a weary European visitor was moved "to make the bitter joke, 'When I hear the word gun, I .reach for my culture.' " But culture, in this era of the "counter-culture," is a weak shield. Editors who should be defending our cultural heritage sell out merely to be "with it." Anything and anyone can make the cover of our mass magazines. It's women's lib (the female chauvinistic kind) one week, gay lib the next, and Yippie Jerry Rubin or Abbie Hoffman the. week after. "Ideas," says Mr. Beichman, "no longer 'trickle down' over a period of time." Instead, they are gobbled up uncritically by pub lishers who, "obeying some edi torial tropism," accord the crazi est notion "the most respectful hearing with color photographs as well." Says Mr. Beichman, our "literary avant-gardists in Amer ica are in permanent danger of being overrun by their own eager middle-class followers."

Raceless Genocide The lies, however, remain lies. How can you call America a Fascist country when anyone in it can say anything, no matter how outrageous? How can our de fense of the right of individuals 572 THE FREEMAN in South Vietnam to live without being overrun by their neighbors to the north be called "genocide"? After all, the South Vietnamese and the North Vietnamese are Orientals together, and our par tiality for the Orientals who pre fer liberty to slavery has nothing whatsoever to do with race. The distinction is moral and intellec tual. The stories of police "genocide" against the Black Panthers were repeated uncritically in our best newspapers. But when one inquir ing reporter, Edward Epstein of the N ew Yorker, tracked the lurid tales of "twenty-eight murdered Black Panthers" down, the num ber shriveled to six incidents in which Panthers were killed by police, and in four of these inci dents fourteen police were shot or killed by the Panthers.

Ends and Means Did this constitute a "national scheme . . . to destroy the Pan thers"? Or was the Panthers' law yer Charles Garry, who first float ed the twenty-eight figure, guilty of indulging in a "numbers game" entirely comparable to Senator Joe McCarthy's waving of a "list of Communists in the State De partment" that came to 146 or thereabouts and was never sub stantiated? To say, with the Bomber Left, that violence is necessary to make ideological and political points is to say that the end justifies the means. Some professors (Cornell and Harvard have had their trou bles with them) have made ex cuses for this notion, but it is hardly a universal axiom even among pragmatists. Mr. Beich man quotes a covey of academics who rationalize the work of the bombers by indulging in "fog banks of nauseating verbiage" that abound in such phrases as "America has spawned the radi calism it deserves." The "kids"

are absolved because the "System" is "bad." But our Bomber Left violence has lacked "the important ingredient of modern revolution an apparat." Mr. Beichman says the "days of rage" of the New Left are little more than Blanquist putschism, the crise de nerfs of "gesture children." The "gesture children" get the headlines, but they are not America. If our political system is a "fraud," how does it happen that a Lyndon Johnson, when Presi den t, can lose control of his party machinery? How can a Nixon come back after two disastrous defeats? How can a McGovern, moving up from nowhere, suddenly win ten primaries? For better or worse, our party "system" certainly ac commodates change. As for our "materialistic" values, Mr. Beich1972 LIES 573 man quotes Alfred North White head on Prometheus, who "did not bring to mankind freedom of the press. He procured fire, which obediently to human purposes cooks and gives warmth. In fact freedom of action is a primary human need."

Not Peculiarly American The final triad of "lies" - that America is "insane," "guilty" and in need of "violent revolution" is too surrealistic to demand much refutation. It was one man, not a multitude, that pulled the trigger on John Kennedy, and it was the one man, not the city of Dallas, that was mad. And, looking at Soviet Russia, Red China, Cuba and North Vietnam, what does violent revolution get you? Com pared to the new tyrants, the Kaiser and Czar were liberals, as Max Nomad once pointed out. The "honky" American worker may not have traveled, but he knows with Mr. Beichman that "racism, tribalism, communalism, religious hate" are less troublesome in Michigan towns than they are in "India, Pakistan, Nigeria, Sudan, Japan, Ceylon ... the Soviet Un ion and China," all of which have repressed minorities. What distinguishes America, says Mr. Beichman in summing up, is that "Americans happen to be ashamed of their prejudices, while almost everybody else .is busy explaining the rationale of racial and religious discrimina tion, and why it is impossible to end them overnight." The very fact that we are an apologetic people proves that we are not fascists, not genocides, not hon kies, not insane. More than others, we are still seekers, looking for a perfection that nobody will ever find.

~ HAZARDOUS TO YOUR HEALTH by Marvin H. Edwards (New Rochelle, N. Y.: Arlington House, 1972, 318 pp., $9.95) Reviewer: Allan C. Brownfeld AMERICANSpresent a curious spec tacle to the world: Citizens of the freest and most prosperous nation on earth engage in ritual hand wringing over the alleged "crises" they find everywhere in their so ciety. Nothing is right, and of the things that are wrong none has come under sharper attack lately than the private practice of med icine. The near unanimity within the body politic about the existence of 574 THE FREEMAN September a health-care "crisis" is frighten ing. President Nixon has pro claimed it, and the only point at issue in the present debate is "which plan" should· be enacted to alleviate it. A presidential candi date has proposed a total sociali zation plan, and even the Ameri can· Medical Association has a plan in which doctors receive govern ment money but avoid government controls. The sickness of Ameri can medicine is the common as sumption.

The hollowness of this assump tion is demonstrated in H aza,rd0 us To Y our Health, a thoughtful and complete analysis of the charges leveled against American medi cine. The author, Marvin H. Ed wards, editor of Priva,te Practice magazine, concludes that, "There is no medical crisis in the United States, but there may be one soon. Experience with government health programs in this country and elsewhere makes it ominously clear that a national· health insur ance program may well result in a severe doctor shortage, overcrowd ing of hospitals 'and physicians' of fices, long waiting lists for hospi tal care, inadequate facilities, loss of privacy, Federal bankruptcy, and, eventually perhaps, discussion in this .nation of the need for mercy killings of the aged to re duce the unbearable costs of gov ernment medicine." Mr. Edwards notes that medi cal care is far more costly under a nationalized system than under private auspices. If the experi ences of European countries are indicative, people tend to overuse and overcrowd .existing medical facilities because they seem free.

Germany has more hospital beds per number of inhabitants than the United States, but all hospi tals are overcrowded throughout the year. The average hospital stay is twenty-four days, com pared to six to eight days in Amer ica. Part of the reason is that there is a lack of interest by the patient in regaining health as soon as possible, and doctors have no concrete feeling for the costs that could be avoided if the hos pital stay were shortened. In addi tion, the cost of the bureaucratic administrative machinery that ac companies every national health insurance system is staggering. The Swedish citizen, for example, pays twenty per cent of his taxes for health. Nationalized medicine was ini tiated in Sweden even though sev enty per cent of the Swedish pop ulation was already covered by private insurance programs. In the name of equality, these sev enty per cent were forced into a compulsory government-adminis tered program in order to provide for the remaining thirty per cent 1972 OTHER BOOKS 575 of the population not privately in sured.

Today there is hardly a single hospital in Sweden where there are not long waiting lists for all kinds of hospital care. It is esti mated that in Stockholm alone there are more than four thousand persons waiting to enter hospi tals, one thousand for operations. In some cases, waiting periods for minor operations may be more than half a year. Dr. Dag Knuts son, head of Sweden's medical as sociation, estimated in the first years of the medical plan that half of the patients in Sweden's hospi tals "need not be there." Mr. Edwards challenges the myth that there is a doctor short age. In the United States today there are 318,000 medical doctors. With a national population of roughly two hundred million, that is an average of one doctor for every six hundred and forty per sons. No other maj or nation in the 'world enjoys anything close to that ratio. Of these doctors, 169,656 are engaged in full time private prac tice. The remainder are engaged as follows: 28,105 in government service, 17,725 in full time hospi tal staffs, 10,452 in full time med ical faculties, 33,247 in resident training, 9,102 in internship, 4,919 in preventive medicine, and 2,653 in 'administrative medicine.

The 'remainder are retired or in some type of work other than the practice of medicine. "The problem," Mr. Edwards declares, "is not that there are not enough graduating doctors, but that too few are in direct pa tient care. In fact, it is. govern ment involvement in the field of medicine which is, in large meas ure, responsible for this situa tion." Discussing the failures and huge cost overruns of Medicare and Medicaid, Mr. Edwards points out that the overwhelming majority of Americans are covered by pri vate health insurance. As of the end of 1969, the Health Insurance Institute estimated 164 million persons under sixty-five - eighty nine per cent of the total - had some form of private protection against medical costs. He noted that "If a national system were to become law, the government pro gram would replace all of these private plans - at a much higher cost. Since eighty-nine per cent of the group in whose behalf such so cialized medicine" plans are being supported are, already covered, the advocates of such plans have not met the burden of proving a 'need' for the' program at all."

"The choice before us," writes Mr. Edwards, "is simple. You and I are now covered by private health plans and we are familiar 576 THE FREEMAN with them; we know what they provide and what they cost, and we know the agent who services them. We know our doctors and most of-us have confidence in them. . . . National Health Insur ance will destroy private insur ance. In return, its advocates promise to solve a fictional health crisis. . . . Government has made similar promises in the past: It has promised to solve the prob lems of agriculture,. of housing, of welfare. Instead, government in tervention has compounded the problems. Do you and I want to spend from twelve to eighty bil lion a year to replace private med ical care with government medical programs that have failed wher ever they have been tried?" Marvin Edwards has made a powerful case. Hopefully, it will provide a new and important di mension to the, thus far, one-sided public discussion of this truly life and death question. ~ CORRECTION: Dr. Sanborn's book, What, How, For Whom, reviewed in the August 1972 issue of THE FREEMAN, does not state spe cifically that the author favors conscription. The author leaves the question open for the stu dent to decide.

GARY NORTH HANDSOME BLUE lEATHERLEX FREEMAN BINDERS $2.50 each ORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 the Freeman VOL. 22, NO. 10 • OCTOBER 1972 The Population Question: Limited Governmentor Limited People? James A. Weber 579 Drawing a true perspective on the governmental aspect of 1I0verpopulation." A Vote for Myself A vote everyone should be able to cast in confidence. Edwa,rd Y. Breese 584 Ageless Faith for a VacillatingAmerica Robert G. Bearce An urgent call for restoration of faith in God, in freedom, in the individual, in our heritage, in ourselves. Flood Relief Paul L. Poirot If a flood destroys my property, am I thereby entitled to yours? Creeping Capitalism: Is Free Enterprise Coming Back? Edward Coleson Examining present prospects for a renewal of freedom as a parallel to Britain's rejection of mercantilism in the century after Adam Smith.

50 Above Zero W. A. Paton A preview of the prospects should we be governed entirely by the collectors of garbage. The Founding of th'e American Republic: 15. The Critical Period Clarence B. Carson The weakness of governments during the early postwar years of the Confederacy gave rise to mounting problems domestically and internationally. Natural Rights _r Ronald Cooney The case for the individual as against the all:,erful State. Heads Will Roll ',,;' LeonardF'ranckowiak A dramatic reason why the people should stand higher than the king. Book Reviews: liThe Bewildered Society" by George Charles Roche, III liThe Spoils of Progress: Environmental Pollution in the Soviet Union'" by Marshall I. Goldman. Anyone wishing to communicate with aU,~horsmay send first-class mail in care of THE FREEMA"*,:forwarding. 586 591 595 612 616 628 632 635 t11e Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON-ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN 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, land limited government.

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, 1972, 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; 10 for $2.50; 25 or more, 20 cents each. THE FREEMAN is available on. microfilm from Xerox University Microfilms, Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Per mission granted to reprint any article from this issue, with appropriate credit, except "The Founding of the American Republic," and "A Vote For Myself."

JAMES A. WEBER THE POPULATION QUESTION Limited government or·limited people? WE, the people, founded the United States of America on the principle of limited government. Now, the government is propos ing to operate on the basis of a new principle: limited people. The need for this complete in version in the relationship between the American people and their government has been heralded by a seemingly endless outpouring of population-control propaganda and other "popullution" pap. Yet, the case for population control re mains unmade. Consider these facts: 1) Population growth in the United States is not a problem. The more hysterical proponents of population control like to draw "runaway" population growth Mr. Weber is a Chicago writer-photographer specializing in public relations. A graduate of Loyola University with an M.A. in Urban Studies, he is doing research for a book on U.S. population.

curves that go practically straight up. However, in the real world, population growth follows an "S" rather than a HI" curve. We are nearing the end of this "8" curve which represents the demographic transition. Conse quently, our population growth is now slowing down and in the fu ture will begin to level out, caus ing a number of noted demogra phers to bail out of their expo nentially rising projections. The most prominent example to date is Donald J. Bogue, director of the Community and Family Study Center at the University of Chicago. In 1963, Dr. Bogue was among those shouting from the rooftops about the perils of over population. At the time, estimates of U.S. population at the end of the century varied from 300 to 400 million. Today, Dr. Bogue is predicting 579 580 THE FREEMAN October a U.S. population in 2001 of about 250 million people - only 42 mil lion or 20 per cent more than in 1970. Bogue further predicts that there will be no more babies born annually in 2001 than there are today.

The President's National Goals Research Staff recognized the lack of any population "explosion" in the U.S. when it stated in July, 1971, in a report entitled "Toward Balanced Growth: Quantity with Quality": "One decision which ap pears not to be urgent is that of overall size of the population even after the effects of a consid erable immigration are taken into account." 2) Population growth in the United States is not a major cause of problems. Population growth has proved to be a boon to those in search of simple solutions to com plex problems. Pollution, crime, overcrowding, resource depletion, lower living standards, reduced governmental services, you name it, population growth causes it, according to these simplistic souls. But the ac cusations are not supported by the facts. Technological Impact Take, for example, pollution. According to Barry Commoner, the increase in population since· 1946 accounts for only about 12 to 20 per cent of the various increases in total U.S. pollutant output.

From 40 to 95 per cent of these increases were caused by new production technologies which re sulted in increas·ed output of pol lutants per unit of production. Commoner points out that it would have been necessary to re duce 1946 population by 86 per cent in order to prevent the rise in pollution which has occurred during the past 25 years. In other words, we would have to have a current U.S. population of 20 to 25 million people to maintain 1946 pollution levels at today's level of technology. By contrast, a 30-per cent reduction in the environmen tal impact of technology would have accomplished the same result. The conclusion is that U.S. popu lation growth has only a minor ef fect on the intensification of pol lution. Conversely, immense re ductions in population size would be required to materially affect pollution levels. There is at the same time an other side to the pollution coin, namely, that although people ac count for only 12 to 20 per cent of pollution, they form 100 per cent of the productive source of funds which must be used in the future to reduce many types of pollution. Lake Erie, for instance, will contilJ,ue to be a problem re gardless of future population 1972 LIMITED GOVERNMENT OR LIMITED PEOPLE? 581 trends. But it will be a problem that can be more easily resolved from a financial point of view by a growing population.

Crowding and Crime Another favorite "problem" of populationists is crime. A classic example of this was a full-page advertisement in the New York Times sponsored by a group called the Campaign to. Check the Popu lation Explosion. Under the head line "Have you ever been mugged? Well, you may be" was a picture of a man grappling with a mug ger. "Is there an answer [to crime in the cities] ?" the ad copy asked. "Yes," it responded, "birth con trol is one." Major central cities such as New York do, in fact, have the highest crime rates. But these cities are losing, not gaining, population. Shall we therefore con clude that crime increases as popu lation decreases? Of course, juvenile delinquency goes up disproportionately during a period of population growth be cause there are more young people around in relation to the rest of the population. The ad also calls attention to this fact with the statement: "City slums - jam packed with juveniles, thousands of them idle - breed discontent, drug addiction and chaos."

Tongue-in-cheekwise, population control is sort of, yes, an "answer" to the so-called "youth problem." But an answer which involves solving problems simply by elimi nating people who have or cause the problems hardly merits serious consideration as a legitimate solu tion. Population Density What about overcrowding? At 55 persons per square mile, the United States is one of the least densely populated countries in the wor ld. Holland, for example, has 975 persons per square mile; Eng land, 588; Switzerland, 382. Overcrowding in the U.S. is a function of population distribu tion, not population size. And peo ple congregate, Le., overcrowd, in metropolitan areas for their mu tual advantage. This is what met ropoli tan areas are all about. But even in these areas popula tion density is decreasing with the continuing exodus of people from central cities to suburbs. This de centralization was initially made possible by improvements in trans portation. It is now being further hastened by revolutionary im provements in electronic commu nications which are rapidly mini mizing the need for centralized paper-shuffling and face-to-face contacts.

Nobody anticipates that the United States will run out of re582 THE FREEMAN October sources in the next 50 years due to population growth. Beyond that, it is difficult to speculate or, to put it another way, it is only possible to speculate because we are not sure of the full extent of existing resources or what new resources may be developed. Fur-~ thermore, many resources now be ing consumed and discarded will increasingly be reused in the fu ture should prices rise due to growing scarcities and the addi tion of pollution charges to processing costs. . Meanwhile, those who weep be cause Americans constitute only 6 per cent of the world's population but consume 40 per cent of the world's annual resource output should dry their eyes. Economies of underdeveloped countries around the world are dependent for their survival on the income derived from this consumption. Reduce or eliminate it and we will really find out what problems are like.

It is a rote assertion of popu lationists that per capita income will not keep pace, Le., we will be forced to accept lower living standards, as population increases. There is, of course, nothing in our previous economic history to in dicate that increases in per capita income cannot proceed side-by side with population growth; the exact opposite is the case. Nor is there anything in our present cir cumstances to support this suppo sition or its converse that per capita income will increase as pop ulation growth decreases, e.g., West Virginia whose population is declining is not noted for boom ing per capita income. Per capita income IS a function of productivity as well as popula tion. A growing population makes possible improvements in produc tivity which are more than a match for population growth, thus resulting in increasing per capita income. "Public Sector" Problems It is also said by population control promoters that growing population will outstrip the capa bilities of Federal, state and local governments to provide services to the people. But, if this is really the case, it can be more readily taken as a mandate for more ef ficient governmental operation and greater concentration on the pro vision of essential governmental services rather than a rationale for population reduction. The idea of eliminating people to make things easier for government is a rather grotesque perversion of the American political promise.

The lack of any major cause and-effect relationship between population growth and the prob lems it supposedly causes prompt1972 LIMITED GOVERNMENT OR LIMITED PEOPLE? 583 ed Conrad Taeuber, associate di rector of the U.S. Census Bureau and director of the 1970 census, to observe: "Our population prob lem is one of tackling the agenda for improvement of our total en vironment. A lowered rate of pop ulation growth may facilitate the tackling of those tasks - but it would be only one small element in the programs which need to be developed." 3) Population control in the United States will not solve any problems. The purpose of popula tion control is to reduce popula tion growth. But population growth is not a major cause of any problems. Therefore, reducing population growth through popu lation control will not solve any problems. This is another way of saying that it is simplistic nonsense to suggest, as the report of The ComSocialism's Poor Record mission on Population Growth and the American Future does, that increases in the "quality of life"

-the Commission's favorite "buzz" phrase - can be achieved through decreases in the quantity of peo ple. There is no automatic, inverse relationship between people qual ity and people quantity. I t is true, of course, that wher ever there are people there are problems. But this is a description of the human condition, not a pre scription for population control. In a creative, free and rightly ordered society, people solve more problems than they make. This is the source of increasing life qual ity. It is unlimited government of the type required· to achieve the stated goals of population control that makes more problems than it solves. , IDEAS ON LIBERTY SOCIALISM has a poor record when it comes to eliminating prob lems: its answer adds up to eliminating people. In fact, one of socialism's major and chronic problems is simply people. Social ism on the one hand destroys production, and, on the other, breeds up the least desirable elements. Its answer is to find the people at fault. Socialism always faces overpopulation; a free economy does not.

ROUSAS J. RUSHDOONY, The Myth 0/ Over.Population FOR MYSELF Enw ARD Y. BREESE THERE'S ONLY ONE VOTE I can cast this year· or any year that's of real importance to myself or to anyone else -and it won't appear on any ballot. Contrary to what most people feel, the vote I cast in a Presi dential election doesn't seem very important to me. The sheer weight of inertia inherent in a burea uc racy the size of ours makes me doubt that any Chief Executive can really make things either much better or much worse. All of the cells of the body politic tend to go on pursuing their individual aims of growth in the same old way no matter who sits back of tha t desk in the White House. The legislators and the courts continue to march to their old, familiar drums. It's been some time since poli tics excited me. Still, I can cast the vote that Mr. Breese has taught Industrial Manage ment· at Georgia Tech and headed the De partment of Humanities at .Embry-Riddle Aeronautical Institute in Florida. At present he is a freelance writer.

584 counts. To my mind, it's the only one that does count on the local, state or national basis. That's be cause it is an intensely personal vote - so personal and so mean ingful that I can't just mark a ballot or pull a lever and then walk away from the voting booth. This one I have to put into ac tion. I have to live with it day by day and even hour by hour. It be comes action and thought and then action again - so it doesn't pass away after one count. It doesn't drop back into the record of events past and forgotten. This vote I must cast over and over and over; it remains a continuing force, set ting up innumerable chains of ac tion and reaction, touching the lives of more and more people be sides myself. I'm talking about my own vote for myself, of course. That's the only one I can cast, and make it stick. I don't mean voting for myself for Congress or City Commission or any other public office. I mean the vote I cast for myself as a member in full standing of the human race - my vote of con fidence in myself as a rational, responsible citizen - responsible among men and under God. That is the all-important vote. My hap piness depends upon it - and my self-respect - and both survival and victory in the battle of life.

1972 A VOTE FOR MYSELF 585 Actually, I have little choice. Be cause I am a sentient being, I have to cast that vote of confi dence in myself or just cast it away. If I do the latter, I've abdi cated a very large part of my membership in the human race. I've chosen to accept my status as a second class citizen - or worse. It's an unthinkable alterna tive. At least, it's unthinkable to me. Of course, once I've cast that vote for myself, I'm elected. In that particular balloting it's the only vote that counts. Before I. cast it I have to be willing to assume the responsibilities, the risks, and the duties that go with the election. I have to be willing to think for myself. Rather than accepting leadership, command, or even blind· guidance from Authority, I have to use my rational faculties. I have to look behind even the best intentioned propaganda, and find the meaning that may underlie the fine words. I must strive al ways to be Homo sapiens, the thinking man.

I mu~t strive to be the moral man - that is, to exercise my faculty of telling right from wrong as these apply to me in my own life and circumstance. Above all, I must strive for the strength to act upon the knowl edge of these things. Rather then yielding to the im pulse to complain or resent the political and economic forces which buffet us in the nineteen seventies, I have to be willing to do something within the-only span of control that is pragmatically open to me - that is, within my own life. I must deal with such menaces as inflation and pollution by re liance on the market forces of supply and demand rather than regulation and control and deficit financing by government. I must combat creeping monolithic sta tism by learning to rely upon my own resources of brain and hands and skills and courage, rather than upon the benificent "big brotherism" of the welfare state. Most of all, the vote I cast for myself is one I also must extend to my fellow man. I must grant to him the same right and the privi lege of self-reliance that I would claim.

I am not afraid of the predicted "collapse by the year two thou sand." That song was being sung to the same tune when the first millenium was ending. I am going to cast a vote for myself this year, and each year, in the assurance that I am not alone in this, and that we who do so not only will survive but will build a world in which we all may live. , AgelessFaith fora VacillatingAmgirc ROBERT G. BEARCE MAN ACTS according to his faith. Even those who ridicule faith in God, in freedom, in the individ ual - even tyrants - have a degree of faith in the brute force they employ. And, unfortunately, this faith in coercion is spreading its contagion of gloom and doom, causing stalwart Americans to doubt the faith of our Fathers. Robert K. Walker, a Tennessee attorney, spelled out the problem in 1968: People who think well of themselves collectively exhibit enthusiasm and morale. When nations cease believing in themselves, when they regard their institutions with cynicism and their traditions with flippancy, they will not long remain great nations.

If America is the world's "last hope," contemplate the worldwide Mr. Bearce is a freelance writer in Houston, Texas. oppression and human degradation if we cannot rejuvenate our faith: • Faith in God • Faith in Freedom • Faith in the Individual • Faith in our Heritage • Faith in Ourselves If we can revive a profound faith in God we will have taken the first step toward revitalizing the moral, economic, political, and social fabric of the United States. Faith in God gives man a proper perspective of his place on earth. Weare imperfect mortals, while only God is omnipotent, omni present, and omniscient. Belief in the Creator also demands an ad herence to certain absolute, endur ing values and principles. These standards and laws may be broken by man but never changed. When individuals and nations acknowl edge God and His laws, they cre ate an atmosphere where prosper1972 AGELESS FAITH FOR A VACILLATING AMERICA 587 ity, peace, harmony, and freedom are nurtured. When man trans gresses the eternal laws, he en slaves himself.

Fai th in God was early reflected by our forefathers. In their rig orous way, the Puritans and other fundamentalist sects were ack nowledging the supreme power of the Creator and their need for His guidance. Thomas Jefferson expressed it thus in 1785: And can the libel,ties of a nation be thought secure when we have re moved their only firm basis, a convic tion i.n the minds of the people that these liberties are the gift of God that they are not to be violated but with His wrath? In'.leed, I tremble for my country when I reflect that God is just; that His justice cannot sleep forever. Benjamin Franklin also echoed the early faith: I have lived, sir, a long time, and the longer I live, the more convincing proofs I see of this truth: that God governs in the aft airs of men. And if a sparrow cannot fall to the ground without His notice, is it probable that an empire can rise without His aid?

Faith in God was written into the Declarabion of Independence. "We hold these truths to be self evident. That all men are created equal. . . ." The signers were expressing their belief in two truths. First, they believed that certain eternal wisdom existed for all men and all posterity. These laws were "self-evident." Secondly, man's equality was the gift of a supreme Creator. Men were "created" equal in the sight of God. Govern ment, or "society," had nothing to do with bestowing equality. Those who said: "That they [men] are endowed by their Cre ator with certain unalienable rights; that amo,ng these are life, liberty, and the pursuit of happi ness," were again stating their faith in God. They were saying that God - not government, or so ciety, or the State - should be the ultimate object of man's allegiance. These rights were entrusted to man by God, not privileges be queathed by any government.

Faith in Freedom Because the Founding Fathers had a resolute faith in God, they also had a perceptive fa,ith in freedom, Le., confidence in and de pendence upon individual choice. They recognized that God coerced no man to love and follow Him, so they, too, put their trust in indi vidual freedom and accountability. Men like Jefferson and John Adams observed that individual freedom and personal responsibil ity were inseparable. If man has the· inherent, God-given right to 588 THE FREEMAN October voluntarily make choices and to order his own life as he pleases, then he also must accept the con sequences of his personal conduct and choice. He must be personally accountable for his use of the free dom with which he is entrusted. This tenacious faith in freedom was expressed in their determina tion to create a constitutional re public - not a democracy - which would provide a maximum of free dom for the individual and a mini murn of coercion in the hands of the government, only that amount needed to prosecute the abusers of freedom. In this atmosphere of a minimum of force against men and a maximum of voluntary action, a tremendous outburst of individual creativity, ingenuity, and energy blessed America. The Founding Fathers adhered to the eternal law that the blessings derived from individual creativity and voluntary association can never be harnessed by or replaced by gov ernment intervention.

Freedom is for the individual. Freedom for government means oppressive taxation and servitude. Freedom centers upon the indi vidual and his inherent right to pursue his own life without inter ference or coercion. If America is not to deteriorate, we too must place the burden for constructive change and harmony in our com munities upon the freely-given and. spontaneous love of the indi vidual. Consider the following maxim: To the extent that we make the State the mechanism for social and economic stability, we will see a proportionate erosion of the political, economic, moral, and spiritual foundations of the United States. Coercive Reform Measures Rather than Voluntary Action Regrettably, the notion is spreading that government can alleviate social ills more effectively than can individuals working spontaneously and voluntarily. Imagine the consternation at the following proposition: Resolved: That the care of all America's needy will be placed in the hands of private charity groups, the church, and the family - terminating the present governmental responsi bility and thus freeing the American citizen of a portion of his tax burden presently created by "welfare" pro grams.

Such a proposal to abolish gov ernment-sponsored welfare would invoke howls of righteous indig nation and disbelief from the faithless. Ask such a person if he would willingly contribute to the support of his own parents in their old age or contribute to a respon sible charitable organization or his church for the aid of those 1972 AGELESS FAITH FOR A VACILLATING AMERICA 589 honestly in need. His answer will be a sincere and enthusiastic "yes." He believes himself to be compassionate and charitable, but he won't say the same of his fel low man; unless the Federal gov ernment intervenes and coerces through taxation and economic re distribution, people· will starve! His faith rests in coercive legisla tion and taxation rather than in the voluntary love and charity of individuals. What is worse, it can be seen that the cynic's faith in God and freedom ends where his confidence in and dependence upon the bene volent State begins. Although God loved man and had faith enough in His creation to give the indi vidual freedom to choose and re:..

ject, our modern state-interven tionists believe that individuals can not be left to their own per sonal freedom and accountability. A Proud Heritage Fortunately, these people who have lost faith in the enduring standards must fight a well-estab lished tradition. America has a profoundly-rooted faith in free dom, in the dignity of the individ ual,and in the laws of God which govern human nature. Tradition may be scorned by the avant garde "progressives" in political, economic, religious, and education al institutions, but its hold in the hearts of Americans in general is not easily broken. We have a proud heritage, one whose milestones are inscribed with toil, dignity, courage, and faith - faith in the works of pre vious generations. Our heritage and our history attest to the ab solute laws and principles to which man must always adhere if he as pires to dignity and prosperity.

The corrupters of our heritage threaten to create a fatal vacuum. Our history holds our mistakes, our successes, our hopes and dreams, and our hard-won knowl edge of the paths which must be followed if our country is to sur vive. Our heritage should be stud ied, cherished, and its meaning passed on to future generations in defiance of those who are now making a profession of flogging America. Men will continue to reject free dom and the worth and accounta bility of the individual. They will defy God and debauch· our heri tage. But the inspiring story of our heritage can never be de stroyed, only belittled and dishon ored. The seeds of freedom have been sown. It is our task to reap the harvest, to preserve· the seed, and to prepare the soil for future harvests. Ultimately, we arrive at the need for faith in ourselves. Though the Pilgrim fathers en590 THE FREEMAN October trusted their lives to God, they must have had faith in themselves as God's earthly tools. They rec ognized that, like all men, they were special creatures in the sight ofGod. They were men of individ ual worth and dignity. And they acted as such! Throughout the colonization and settlement of America, their posterity exhibited the same individualism and self respect. They sweated over the plow, toiled with the harvest, hacked roads through the wilder ness, trudged thousands of miles across the desert, and prayed and they built a land of freedom and human dignity.

None of this progress was dis tributed on golden saucers for the asking; it wasn't accomplished overnight by blissful theorizing; and it was not masterminded by any politician who wanted to ad minister welfare tonics and pab lum to the American populace. Signs of Despair Too many of our fellow citizens are quitting in despair. They have lost faith in themselves, forgotten our heritage, refuse to trust the individual to make his own choice, and lack faith in God. This sullen apathy and mood of defeatism is like a cancer on America, deadly if not removed. Most folks still believe in the foundations of our Faith, but they are woefully short on physical, mental, and spiritual enthusiasm. They lack the enthusiastic com mitment to give that faith mean ing. To believe in freedom is ad mirable, but faith without works is dead. The optimistic attitude is a part of faith, a key to success ful practice.

Our personal commitment to the eternal ideals of our Faith must be contagious. The demand of this hour in history is for men who will respond to that trust in God, freedom, the individual, our heri tage, and ourselves. Today we read a dateless, ageless "want ad" for men who will be articulate, sincere, dedicated, forthright, and vibrant in expressing that Faith. The fire of human endeavor is continually subjected to water and oil-the water poured on it by those who through ignorance or design seek to extinguish human dignity - and the oil of· Faith of those who have dedicated them selves to replenishing the fire of man's, integrity through confidence in individualism, freedom, their heritage, and God. ~ PAUL L. POIROT ASIDE from lives lost, early esti mates of flood damage when trop ical storm Agnes moved up the East Coast in June 1972 ap proached $2 billion, two-thirds of it in Pennsylvania.

Hours of steady, heavy down pour. Rivulets turning to ,torrents. VVarnings and a rush to evacuate known flood plains and other low lying areas. Bridges out. Cars stalled on flooded and debris strewn highways. Daring boat and helicopter rescues of hapless vic tims. Trees uprooted, lawns and fields eroded, homes and cabins and trailers inundated if not up set or washed away entirely. Base ments filled, motors and trans formers and electrical appliances ruined, wells polluted, broken gas and water mains - and the fires, burning to the waterline with no way to get fire-fighting equip ment to the scene. VVater rising in the street, into the lower and sometimes the upper stories of homes and places of business. Services swamped, or entirely out of business. Rescue and relief sta tions. Emergency hospitals, hous ing, feeding, clothing, pumping, water testing, vaccinations. Then the crest passes. Owners -and probably some looters-wade back to survey the damage and carryon the salvage, repair, res toration - or further destruction.

VVhat does one think as he sloshes and scoops and picks 1=;.01 592 THE FREEMAN October through the rubble and slime and stench, sorting what might be saved from what can't or shouldn't? Give thanks that so many lives were saved, that not all property was destroyed? Pray that the sun may shine! Regret the hours and funds expended to build what is gone! Wonder what part of the loss, if any, might have been covered by insurance! How to deduct the rest from his income tax! How to obtain a grant or loan! How to· build or hedge against future flooding! Feel sorry for all victims, but especially sorry for himself! $2 Bil/ion in Perspective Perhaps it might take some time, perhaps it might never oc cur to most victims of the flood damage to view the $2 billion in perspecti vee The toll taken by Agnes in lives and property in the United States is roughly equivalent to the cost of one Apollo mission to the moon - or two weeks of U.S. involvement in Viet nam - or 4 days of government ex penditures on domestic welfare programs - or 30 hours of total spending of taxpayers' property in the U.S.

To be sure, it is no way to measure the total loss of one man's business, his home, his life sav ings - say $100,000 - as amount ing to an average of half a mill for each person in the United States, or the $2 billion total flood loss as an average of $10 per per son. Any loss of private property falls entirely upon the owner of that property, just as a lost life is always that of some one in dividual. And any loss of "public" property, such as roads, streets, parks,· schools, post offices,. libra ries, . sewers, water systems, fire stations, and the like, falls propor tionately upon the taxpayers of the. unit of government involved. Yet, the real loss, wherever the burden falls, is not in the disap pearance of $2 billion of money or currency . Rather, it is a removal from the market of $2 billion worth of scarce and valuable re sources - materials and 'services no longer available to help meet current demands. And in this sense is a storm like Agnes equiva lent in destructive power to an Apollo moon shot. It destroys or removes from the market $2 bil lion worth of scarce and valuable resources for which willing cus tomers and· property owners had in mind, and in fact, other uses.

The fact that a moon shot assesses the $2 billion damage against a broader group of property own ers - at an average of $10 per man, woman, and child - does not ren der it less destructive on the whole than storm Agnes which hit Penn sylvania hardest. The toll in prop1972 FLOOD RELIEF 593 erty, and lives and livelihood de pendent on that property, is about the same in both of these catas trophes. When Federal, state, and local governments spend well over $200 billion a year waging various wars against communism, famine, pesti lence, ignorance, poverty, this means that property, lives, and livelihood are being withdra wn from the open market of willing buyers and sellers at the rate of a storm like Agnes about twice a week. And recent flood victims can testify, that's a lot of resources down the drain. It may be argued, of course, that space exploration is well worth $2 billion a shot. And who is to say him nay if any individual wants to risk his own life and in vest his own scarce and valuable resources in such research and ex ploratory ventures? Or to fight communism in Vietnam? Or to support the prices of farm prod ucts? Or to carry out various other welfare programs? Or what ever else an owner voluntarily does with his property in ways not in j urious to other peaceful persons?

What is deplored are devasta ting forces raging out of control - coercive power that destroys the lives and the property of innocent and unwilling victims: a violent storm like Agnes, a moon shot or any other government project that is not essential to the defense of life and property and that might not be done if the doing depended upon willing buyers and sellers. Violent Recovery? How do individuals, how does an economy recover from an Agnes type distaster? According to the Wall Street Journal, July 13, 1972, "Flood relief funds exceeding $1.7 billion were requested by the President .. . to meet fully the requirements of some 115,000 homeowners and 6,000 business men in six states who sustained flood damage ... 30-year loans at 1 per cent interest, and repayment on the first $5,000 wouldn't be re quired . . . the largest single amount [$1.7 billion] ever allo cated for a recovery effort."

One's heart bleeds for the vic tims of Agnes, especially if he happens to be one of them. But the harsh fact is that neither the President nor the Congress pos sesses $1.7 billion worth of scarce and valuable resources to give to flood victims .. The proposal is to take that additional amount of re sources, by the coercive power of taxation, from present owners, at an average rate of $8.50 per man, woman and child - at a substan tially higher rate, of course, from the smaner number who pay taxes directly: the producers, savers, in vestors, workers and providers of 594 THE FREEMAN October jobs and goods and services. But where does the brunt of this $1.7 billion burden eventually come to rest? It rests upon the jobless, the homeless, the hungry, the sick, the aged and feeble - upon the vic tims of inflation! For the fact is that the U.S. Federal government will resort to the printing press to extract an additional $1.7 bil lion of scarce and valuable re sources from the market. And the resultant higher prices and costs will, in effect, bar from the mar ket the least affluent among pros pective consumers.

The proposed program of ·co erced relief from Agnes is simply another disaster of almost the same proportions. And this, bear in mind, does not begin to encom pass the demands that will arise for dikes, diversion dams, and countless other flood control meas ures in areas subject to chronic or occasional flooding - all at tax payer expense. The Voluntary Way Admittedly, this is no simple, 'easy problem to resolve. And of only one thing may anyone be cer tain: There is no possibility of a solution unless the owners of pri vate property stand ready to shoulder full responsibility for the use of such property, including any loss as well as any gain ac cruing from such use. To help a man build - or rebuild - on a flood plain, if he cannot bear to be flooded, is no service to him or to society. To cite facts and principles in the face of perhaps the worst natural disaster in American his tory may seem unrealistic. The voters of America, generous to a fault, are far more apt to applaud than oppose in the wake of Agnes a major government relief pro gram. Indeed, individuals might voluntarily contribute $2 billion of scarce labor and other resources to such· an effort. But, of· course, we shall never know, in our pres ent state of dependence on gov ernment force to satisfy human wants.

Nevertheless, one is bound to call attention to .the inescapable fact that government is force, and that unlimited force is unbearable tyranny. Somewhere, sometime, somehow, each of us must face the issue and draw the line if he would perserve his freedom and human dignity. The tide of wel farist protectionism and govern ment regulation and control of our lives is at flood stage. Will the American people build and man the dikes, and do so voluntarily? Or will we continue to build houses on sand, in the flood plains, in the naive faith that the flood will curb itself and care lovingly for us. from cradle to grave? t) '"""_''''"~~~h·''''',4!e::::"">,f'''*k;~~~l····'''~''A~t€{:',,",.,",'" Creeping Capitalism: I Fr MANY of our disillusioned con temporaries have given up on the present. If they have not "dropped out" so completely that they have quit thinking altogether, they are wont to retreat to the past. They like to imagine some golden age long ago when life was lovely and things worked out as they should.

If they had just lived back then, think what they could have accom plished. But not today! The pres ent is hopeless. Sad to say, today is all we have. Sad to say also, yes terday had its problems too. Perhaps the classic example of the "displaced. person" in history was Madame Roland who, says Carl Becker,l often "wept to think she was not born a Spartan or a Roman .... " There were no oppor tunities for heroic action in her little world, "the stuffy apartment Dr. Coleson is Professor of Social Science at Spring Arbor College in Michigan. EDWARD COLESON of an engraver doing a small busi ness on the Pont Neuf" in the Paris of 1788. But wait - July 14 came next year, the Bastille was taken and she had an opportunity to be part of as stirring events as the world has ever seen. She was unjustly thrown into prison . and, as she awai ted her turn at the guillotine, she recalled that Soc rates had also been a martyr. On her way to the place of execution, as she passed a statue of Liberty, she exclaimed, "Oh Liberty, what crimes are committed in thy name!" Let's hope that you and I are more fortunate than Madame Roland, but the point is obvious: her age was the "best of times and the worst of times," just as Charles Dickens tells us in the opening lines of his Tale of Tlwo Cities. So was the age of Socrates and that much-maligned era called the present - more precisely, to day.

596 THE FREEMAN October No Instant Answers A lot of good conservatives have been quite overwhelmed by devel opments in the last few decades. If they are ancient enough to re member the election twenty years ago - the strong feeling on the part of many that now we could drastically reduce the vast Federal bureaucracy, liquidate the farm program, reduce welfare expendi tures to a reasonable figure and get people back to work again, trim the national budget so that no one would recognize it, all this and Heaven too, if we just elected the right president come Novem ber - well, such a voter may have given up on the political process some while ago. If the frustra tions of the 'Fifties didn't do it, surely the conservative debacle of 1964 did. But such a political drop out fails to understand the his torical process. There are no in stant problems or instant solu tions. As Walter Lippmann 2 wrote during the Second World War, "the movement of history is mas sive, and the mills of the gods grind slowly. . . ." We need to learn to look far in the past to see' the beginnings of the present, and to peer down into the tomorrows to try to see where we are going.

Free enterprise did not spring full, blown from the mind of Adam Smith in 1776, nor did the "New Deal" arise by spontaneous gen eration in the spring of 1933: both had their roots far in the past. If Socialism has been creeping up on us as far back as any of us can remember, this is the way Capi talism came into being in the early decades of the last century. The seeds of tomorrow are sprouting today, but it isn't easy to guess what the flowers and fruit will be like afterward. We human beings are notoriously poor prophets. One reason why the best laid plans of mice and men go awry is that history has a way of doing a dramatic about-face every once in a while and often even a double switch, like the surprise endings of O. Henry's short stories. Few people could see the threat that Hi tIer posed even years after he cam~ to power in 1933; and when the Nazi blitz was overwhelming Europe a little later, few could see the possibility of stemming the tide. In the .postwar treason trials in France Pierre Laval asked the court how anyone in 1940 could have guessed that Hit ler would not win the war. Men like Winston Churchill and Gen eral de Gaulle walked by faith, while the quislings and other ap peasers walked by sight. If one cannot outguess history, ,at least he can try to be on the side of right and leave the outcome to the One who inhabits Eternity.

1972 IS FREE ENTERPRISE COMING BACK? 597 Laissez Faire Obviously, there was no use in trying to straighten out the chaotic and decadent world of the Old Regime in France in the mid dle of the Eighteenth Century, when a few free enterprise phil osophers called Physiocrats coined the phrase "laissez faire" and sought to bring order out of chaos. While Adam Smith was visiting France (1764-'66), he got ac quainted with the Physiocrats, spent a considerable amount of time with them, and seems to have been influenced considerably by their thinking. But what is incom prehensible is the fact that a hand ful of French intellectuals and a rela tively unknown Scottish pro fessor of moral philosophy should start a revolution which would eventually - long after they were dead - change the whole destiny of the Western World and point the way to freedom. As is well known, Adam Smith's Wealth of Nations appeared the same year that Thomas Jefferson penned the "Declaration of Inde pendence." The two were of a kindred spirit too. Both advocated limited government and the rights of the individual. Jefferson's mas terpiece bore fruit rather imme diately, but The Wealth of Nations came into its own much more slowly and rather hesitantly too.

The book became a best seller and was widely read and .highly ac claimed by distinguished people. Edmund Burke 3 insisted that Hin its ultimate results" the Wealth of Na,tions "was probably the most important book that has ever been written." Since Burke died in 1797 and did not live to see any very tangible results (although Prime Minister Pitt was strongly com mitted to Smith's ideas and was seeking to implement them) one wonders what he meant. Perhaps we may regard this as another of his prophecies, like his premoni- ' tion that the French were in for real trouble. Burke 4 was already deeply concerned about the condi tion of France, the danger of "some extraordinary convulsion," as early as 1769, although the French Revolution did not come for another twenty years. Did he also foresee what would really happen when men had the courage to actually put Smith's theories to the test? That day was long in coming and conditions got worse before they got better. No doubt part of the delay was due to the coming of the French Revolution.

According to JohnChamberlain,5 "If the shadows of the French Revolution and the long Napo leonic struggles had not inter vened, the full Smith doctrine might have become English gov ernmental policy long before 1835 or 1848."

598 THE FREEMAN October The Complex World of Earlier Periods in History Before considering the. very great impact of the French Revo tion and the Napoleonic Wars on the political and economic develop ment of Europe, let us examine briefly what Adam Smith was re belling against. Since many Amer icans remember , at least second hand, the rather simple days of the late Victorian period, the "Gay 'Nineties," it is customary for them to extrapolate backward to even simpler days in the 1790's or the 1690's. This view, of course, is completely fallacious. The world that Adam Smith and the Physio crats knew' was an exceedingly complicated affair and had long been that way, although the indus trial age, which is supposed to be responsible for our nlodern com plexities and perplexities, was still in its infancy. Indeed, nearly two centuries be fore Watt perfected his steam en gine and Smith wrote his protests against interfering with the mar ket, the Spanish were developing a very complicated economic code for the management of their new colonies, even before they knew what they had over here. Ten years after Columbus returned from his first voyage, Ferdinand ~. and Isabella .created the House of Trade at Seville and put it in charge of the commerce of the colonies. Ultimately every aspect of life in the New World was con trolled, presumably to promote the prosperity of the Mother Country.

This system, known to history. as mercantilism, should not be too hard for us to understand, since it is back with us again. This Spanish version of the managed economy should also be of great interest to those who question the wisdom of similar at tempts today. A few examples should illustrate the nature of the regulations and the severity of the punishment for disobeying them. Vineyards were forbidden in the New World on pain of death. (This was not an early try at "Prohibi tion" but was an attempt to help the Spanish wine producers at home.) The death penalty was al so decreed for anyone in the colo nies caught manufacturing any of a long. list of articles, including artistic workings of gold and silver by the Indians. Trade with the colonies was strictly controlled also. Only one port in Spain was open to commerce with the New World and only two or three were allowed on this side of the At lantic.

The easy assumption that free dom grew spontaneously in the virgin soil of the New World does not bear close scrutiny. Certainly this was not true in the Spanish colonies. Freedom is a world view 1972 IS FREE ENTERPRISE COMING BACK? 599 but not a geographic location; we find it in the philosophy book, not the atlas. Nor was this economic folly con fined to the Spanish. The French system of economic controls, well known to Adam Smith through the Physiocrats and his own ob servations while traveling in France, was also a labyrinth of complexity. It required more than two thousand pages to print the textile regulations alone and, like Draco's Code, they could be said to have been written in blood. For instance, sixteen thousand people died as the result of the laws gov erning the production of printed calicoes, either e~ecuted by the courts or killed in being appre hended for the violation of these regulations.

The English rulers had never done as badly as those of Spain and France because the political situation was rather insecure dur ing much of this period (Charles I lost his head in 1649 and James II his throne in 1688), but they had done enough to arouse Smith's wrath. He had a special grudge against monopolies. As Chamber lain 6 says, "... his treatment (in the Wealth of Na,tions) of the monopolies granted to single com panies for trade with the Orient - the East India company, for ex ample - are masterpieces of re strained rage." It cannot be stressed too strongly, however, that Adam Smith was no anar chist; he was not out to abolish the Ten Commandments, the laws against murder and theft, but just the innumerable petty economic regulations that kept goods un necessarily scarce and the mass of the people needlessly poor. Retreat from Freedom The French Revolution and the ensuing Napoleonic Wars seemed to push England and Western Eu rope farther and farther from the laissez faire economic policies ad vocated by the French Physiocrats and Adam Smith. Part of this seems almost inevitable in war time, at least, the way modern wars are fought. Most of us prob ably have forgotten both the dura tion and extent of this conflict: from the Fall of the Bastille on July 14, 1789 to Napoleon's defeat at Waterloo on June 18, 1815 is almost twenty six years; and, 600 THE FREEMAN October while the war was not continuous during this period, it was always too close for comfort. Further more, it was a global conflict, (We sometimes forget that our own War of 1812 was just an extension of the one in Europe.) Needless to say, a war of this ferocity and duration impoverished the partici pants greatly, and the postwar de pression was very severe. Nor is it necessary to point out that free dom was severely curtailed during this quarter-century of conflict, in spite of the early French slogan, "Liberty, Equality and Fratern ity."

Both the English and Napoleon whose Empire included most of Western Europe - and even Rus sia with the Czar's cooperation for a time - blockaded each other's coastline, although much of it was a "paper blockade," particularly for the French who lost control of the seas after Lord Nelson's vic tory at Cape Trafalgar in 1805. The United States, a young nation heavily dependent on foreign trade, found herself in a most awkward position with both sides preying on her commerce. With Napoleon his Continental System, as he called it, was a "Co prosperity Sphere," a managed "European Market" with England excluded, not unlike Clay's "Amer ican System" for the United States a couple decades later. While these blockades can be passed off as war measures, Napoleon's commitment to his brand of mercantilism seems to be more than mere expediency. After all, an important reason for his costly expedition into Spain was to put down opposition to his Continental System and even his disastrous invasion of Russia was certainly in part to compel the Czar to continue to adhere to his protectionist policies. As an Eng lish writer 7 of the last century tells us, "It is well known that Napoleon Bonaparte... enter tained a rooted antipathy to poli tical economy. It was a saying of his that 'if an empire were made of adamant, the economists could grind it to powder.' "

In the meantime, the English were not doing much better. Get ting one's daily bread had always been a great problem for ordinary working people. In 1770 a bushel of wheat cost an English laborer about five days' pay, but the war with Napoleon and bad harvests drove the price to the equivalent of nearly two weeks' wages in 1813. With famine upon them Parliament 8 met and - you won't believe it - they increased the im port duty on grain even more. The argument of the landed aristocrats who then ran England was that this increase would stimulate do mestic production. Evidently, the English ruling class was as far 1972 IS FREE ENTERPRISE COMING BACK? 601 from Adam Smith's free trade doctrines in practice as Napoleon had been, whatever the former might think of the Wealth of Na tions. Speenhamland Poor Law of J795 The English also stuck them~ selves with a disastrous poor law in 1795, a half dozen years after the Fall of the Bastille in Paris and just as Napoleon was emerg ing as one of the greatest military geniuses of all time. This new welfare arrangement lead to diffi culties beyond the maladj ustments growing out of the protracted wars. England had had a problem of poor relief ever since the break up of the medieval manors cen turies before (it was local and less obvious then). The Church had tried to care for the needy until the Reformation and then the State was saddled with the respon sibility. Elizabeth, whose father Henry had started the English Re formation, made the first system atic attempt to cope with the prob lem. New poor laws were passed from time to time to correct the maladj ustments created by the last ones. One writer in 1622 thought the root of the difficulty was the prevalance of monopolies: This engrossing of Trade into few men's hands hath caused our home trades to decay, ... to the utter undoing of all sorts of poor people in England, and the great damage of all his Majesty's loving subjects. 9 A common explanation for the woes of the poor of England from the Sixteenth Century to the Vic torian era is the enclosure move ment, the change from a peasant village-communal type of owner ship to the landed estates of the aristocracy. The classic literary work growing out of this social and economic revolution was Gold smith's Deserted Village, published in 1770. But there have been dis senters from this view, then and more recently. Probably few knew England at this time as well as John WesleylO (he is said to have traveled the equivalent of nine times around the earth during his ministry and mostly on horse back), but he ridiculed Goldsmith and saw considerable progress all around him. It fascinated him.

Chamberlain,ll drawing from Adam Smith's experience, empha602 THE FREEMAN October sizes the advantages of enclosure: no one can or will improve his land or livestock until he has a deed to the property and a fence (hedge) around it. These are simply the facts of life. By contrast, the late Wilhelm Roepke12 seems to have regarded the loss of England's peasantry as a misfortune and an unnecessary one at that. Compar ing the decline of English agricul ture in the last century with the phenomenal rise of Danish farm ing during the same period, he comments: "This decay overcame an agricultural system which had lost its strength, its vitality and its social soundness because it had lost its peasantry." Whatever the cause of wide spread pauperization - monopoly, enclosures, or even the rising fac tory system, as has often been sug gested - the English had prob lems. With the Terror in Paris rising to new heights of ferocity, the English ruling class was pro foundly uneasy and looking for in stant answers. They thought they had found their panacea in an ar rangement worked out by the jus tices of Berkshire in May, 1795, and generally adopted by the other counties of England, although never enacted by Parliament. The Poor Law of 1795 became known as Speenhamland, because the ini tialmeetingwas held in a village of that name.

The Right to Live The new welfare system was a wage-supplement plan based on the "right to live" principle. If a family man could earn half a liv ing, the government supplied the other half. If he earned nothing, he was completely on the dole. If he made enough to survive, he got nothing from the government. De tails varied across the nation, but it was a comprehensive scheme with a "cost of living" escalator tied to the price of bread, addi tional benefits with more depend ents, and all the rest. It sounds 'quite modern. As Karl Polanyjl3 says, "No measure was ever more universally popular." The "war on poverty" was won - all they needed now was to con quer Napoleon. Actually, the latter proved· the easier foe to vanquish. He was defeated at Waterloo in 1815 and sent to Saint Helena. A severe postwar depression then added to the misery and havoc of the war. Poverty was still very much with them. Even those landed aristocrats, who had done well on the high food prices of the war era, now found they were land poor. No small part of the blame for the misery of this period, tra ditionally heaped on the manufac turers of the early Industrial Rev olution, properly belongs to Napo leon - if he was responsible for the war with its destruction and 1972 IS FREE ENTERPRISE COMING BACK? 603 its subsequent economic crISIS.

Part of the problem also was this unfortunate Poor Law, as will be obvious as we examine its eco nomic consequences. Renewed Interest in Freedom Perhaps it .was too much to ex pect anything very constructi ve to come out of those long weary years of war; but with the return of peace Adam Smith's ideas be gan to be taken seriously once more, not just by intellectuals but by practical businessmen, too. In 1820, groups of merchants and manufacturers in both London and Edinburgh petitioned Parlia~ent to remove the many restrictions on trade. A special committee ap pointed by the House of Commons to study the problem found eleven hundred regulations which hamp ered trade in various ways and recommended that they be abol ished. While this was not done instantly, there were several re ciprocal trade agreements nego tiated with the neighbors in the next few years. Western Europe was definitely moving in the di rection of greater freedom.

Another problem that sorely needed attention in the postwar era was the hopelessly tangled labor situation. Ever since the Speenhamland welfare program was devised in 1795, England had sunk deeper and deeper in a hope less quagmire. I have found no writer, left or right, who has had anything good to say for this Poor Law, although most everyone seems to have favored it at its in ception. Polanyi, an avowed So cialist, expresses amazement that any laborer would work at all when he could get along quite as well without doing so. Evidently, some one worked a little. In practice, great numbers of laborers did a little work for an inadequate· pay check which was supplemented by welfare payments, as we would call them. In fact, the employer expected his help to be on the poor rates because he didn't expect to pay them a living wage; neither did his laborers plan on doing a fair day's work for. him.

The consequence of such a sys tem was almost .universal pauper ization. Says Polanyi, "In the long run the result was ghastly," and he allows that at least part of the human and social degradation of 604 THE FREEMAN October early capitalism should properly be attributed to the devastation wrought by the Speenhamland Poor Law of 1795. If it was that bad - and even the liberal Ency clopaedia of the Social Sciences 14 insists that it "demoralized both employer and employed" - surely it should have ~been no problem to abolish it. Actually, laborers were sure they couldn't live without it; and employers who were paying taxes to support the system were loath to have the law repealed be cause, after all, it did help to pay the hired man. Although never established by Parliament, it was finally abolished by Parliament in 1834, after the First Reform Bill had established a more democratic and responsive legisla tive body.

If people couldn't live with the Poor Law, they couldn't live with out it. Hardly anyone had ever said a good word for the Speen hamland welfare arrangement, once they had seen it in operation; yet, there were anguished wails that its abrupt termination caused great hardship and unnecessary suffering. Perhaps the testimony of one who was close to the situa tion at the time may help us un derstand the problems of transi tion. Herbert Sp~cer, whose uncle was deeply involved in the relief problem, before and after repeal, tells us how the change came about in his uncle's parish: A late uncle of mine, the Rev. Thomas Spencer, ... no sooner en tered on his parish duties than he proved himself anxious for the wel fare of the poor, by establishing a school, a library, a clothing club, and land-allotments, besides building some model cottages. Moreover, up to 1833 he was a pauper's friend - al ways for the pauper against the over seer .... however, the debates on the Poor Law ... impressed him with the evils of the system then in force.

Though an ardent philanthropist he was not a timid sentimentalist. The result was that, immediately the New Poor Law was passed, he proceeded to carry· out its provisions in his par ish. Almost universal opposition was encountered by him.... My uncle, however, not easily deterred, faced all this opposition and enforced the law. The result was that in two years the rates were reduced from £700 a year to £200 a year; while the condition of the parish was greatly improved. "Those who had hitherto loitered at the corners of the streets, or at the doors of the beer-shops, had some thing else to do, and one after another they obtained employment;" so thai out of the population of 800, only 15 had to be sent as incapable paupers to the Bath Union ... in place of the 100 who received outdoor relief a short time before .... some years later ... , having killed himself by overwork in pursuit of popular wel fare, . . . the procession which fol lowed him to the grave included not the well-to-do only but the poor.

Several motives have prompted this 1972 IS FREE ENTERPRISE COMING BACK? 605 brief narrative. One is the wish to prove that sympathy with the people and self-sacrificing efforts on their behalf, do not necessarily imply ap proval of gratuitous aids. Another is the desire to show that benefits may result, not from multiplication of artificial appliances to mitigate dis tress, but, contrariwise, from diminu tion of them. [When the Speenham land system was set up in ·1795] ... it was not expected that the poor rates would be quadrupled in fifty years, that women with many bastards would be preferred as wives to mod est women, because of their incomes from the parish, and that hosts of ratepayers [taxpayers] would be pulled down into the ranks of pauper ism.... the larger becomes its exten sion [the involvement of the State] the more power of spreading it gets. The question of questions for the pol itician should ever be - "What type of social structure am I tending to produce?" But this is a question· he never entertains,15 What makes this quotation so interesting is the fact that, with minor editorial changes, one would assume it had been written last week - except that we haven't solved our problem yet. For the purpose of the present discussion, it is obvious that England could not have risen to the heights of prosperity and power a little later with a demoralized and pauperized labor force as the foundation of its national life. Certainly not the least of the reforms which led to Victorian greatness was the lib eration of the English laborer from a vicious system which de stroyed all incentives to work and any reward for so doing. While no doubt the intentions of those who devised the Speenhamland Poor Law were the best, the results over nearly forty years had been, as Polanyi tells us, "ghastly."

The Anti-Corn Law League The next chapter in the story of England's economic liberation was the famous "Repeal of the Corn Laws" in 1846. The Corn Laws were England's "farm program," a very ancient and miscellaneous category of laws passed from time to time to encourage the produc tion of grain. Since bread is· the "staff of life," the promotion of a sound agriculture took on the aura of a sacred duty, although oppo nents of the laws regarded them as a national swindle and insisted that people in general would be better off without them. In his Wealth of Nations Adam Smith had a lengthy "Digression concerning the Corn Trade and Corn Laws" attached to the end of Chapter V, "Of Bounties." In fact, his digression is longer than the rest of the chapter. As might be surmised, he was opposed to those assorted interferences with the market. Early laws, he said, for606 THE .FREEMAN October bade the activities of what we call the "middle man," still the bane of farmers today, according to. popu lar notions. There was deep public concern lest speculators should take advantage of the hungry masses in times of famine, so of ficial attempts were made to keep this from happening. Smith 16 was sure that such misguided efforts only made the crises worse: ". . . a famine has never arisen from any other cause but the violence of government attempting, by im proper means, to remedy the in conveniences of a dearth." What ever he thought, the government had been busy for centuries with its panaceas and would continue its efforts for· decades after his passing; the remedy of his day and the next half-century was an import duty on grain.

In the years following the pub lication of The Wealth of Nations the protection of English agricul ture from foreign competition be came increasingly unpopular. The landed aristocrats created a na tional scandal during the famine times of the later Napoleonic War period by .increasing the tariff on grain when the price was already prohibitive, as has been men tioned. One would suspect that the general public never quite forgave them for that, and anti-corn law feeling continued in the early dec ades of the last century. In 1827 Colonel Thomas Perronet Thomp son17 published his famous Cate chism on the Corn Laws, a series of questions and answers which proved most revealing. Three years later Ebenezer Elliott, "the Bard of Free Trade," came out with his Corn Law Rhymes in which he contrasted the plight of the poor and hungry with the lux ury of the "wicked monopolists" who conspired to hold up the price of bread by keeping out foreign grain. As trade was loosening up over those years, the tax on food became more and more odious to a lot of people. Organizations be gan to be formed to combat the tariff on grain. When a severe fi nancial crisis made a chronic ail ment into an acute affliction, the long-standing opposition to the grain duties began to snowball into. a national movement: the fa mous Anti-Corn Law League· was founded in Manchester in 1839.

JohnBright and Richard Cobden swiftly emerged as the leaders of the movement and England was off on another exciting crusade. To understand the Anti-Corn Law agitation of the next seven years one must know something of the context in which it happened. On the intellectual side it can be said that the seed planted by Adam Smith and nourished by a host of later disciples - scholars, states men, the clergy, businessmen, 1972 IS FREE ENTERPR!SE COMING BACK? 607 schoolteachers and ordinary citi zens-had grown, matured, and was now ready to blossom and bring forth fruit. While a given political or economic arrangement can be imposed by force or fraud, people tend to· get about the sys tem they deserve. Britain had been moving in the direction of laissez faire econom ics for decades, because a lot of people felt that this system was right in the absolute sense, the same as· the multiplication tables or Newton's Law of Gravity. Still, man tends to let things go if he can and not change unless the situ ation gets out of hand so that some sort of readjustment must be made. In the next several years a series of calamities provided the motivation for change, and the free traders were there to capital ize on the situation.

The first of these crises was a serious and widespread economic depression. We in America had our share of it too, the famous Panic of 1837, and no doubt we helped to make it happen. Our "wildcat" financing of a host of internal im provement.] before the crash, proj ects in which a lot of foreign capital was invested, resulted in se vere losses for English investors who bitterly resented the repudia tion of American bonds. After the state of Pennsylvania defaulted on her obligations, one wit writing in the Edinburgh Review,18 "... re marked that whenever he met, a Pennsylvanian at dinner in Lon don he wondered that, nobody carved him up and served' him· in slices to every Englishman pres ent." Of course, the depression re sulted in widespread unemploy ment and much suffering, but John Bright, a textile manufac turer, seems to have blamed the English Corn Laws for much of the distress. Even the drastic de cline in the sale of flannel to America, which put a lot of Eng lish textile workers out of work, Bright blamed on British policy.

He said the Americans were just retaliating against British dis crimination against grain from the United States. While he al lowed that the Corn Laws were not to blame for everything, he in sisted that their repeal would go far in solving a lot of other prob lems. A host of people across the 608 THE FREEMAN October nation shared his views. The prob lem now was to .change the law. Before this was done, however, even worse calamities were to come. liThe Battle of the League" What Bright's biographer 19 has called the "Battle of the League" is an interesting study in how to win political friends and influence legislators. They tried every legiti mate technique known to politics and then available. They distrib uted literally tons of tracts: " ... as many as three and a half tons of tracts were delivered from Man chester in a week."20 The ladies .had tea parties, and Anti-Corn Law League bazaars were held which were more of "the char acter of a great art Exposition than of a mere bazaar;" here cus tomers could buy "free trade hl!ndkerchiefs, anti-corn law breadplates and teapots and anti monopoly pin cushions." A great conference of the clergy was held at Manchester and many ministers began to preach that the corn laws were "anti-scriptural and anti-re ligious, opposed to the law of God."

Since Bright himself was a de vout Quaker and thought in Bibli cal terms, this is just the way he wanted it. It was easy for cynics then and since to see in Bright's efforts a thinly disguised effort to promote his own interests and those of the business community, but this is hardly fair to him. He was no hypocrite. He could be as staunch for what he believed wa.s right when he had nothing to gain and everything to lose. For in stance, he was bitterly opposed to the Crimean War a decade later and on principle, although his stand made him enormously un popular and caused him to lose his seat in Parliament. He was quite prepareQ. to suffer for his beliefs. When Bright found free trade in the Bible - "As a nation of Bible Christians, we ought to realize that trade should be as free as the winds of heaven" - he meant it, and his own' sincerity and deep convictions were convincing: . . . he refused to separa te the spheres of morality and politics.

Moreover, he did all this at a time when the mood of the informed men of the age disposed them to prefer subtle calculations of political expe diency to adherence to general prin ciples of conduct. 21 The Biblical and moral argu ments carried great weight with a lot of people who had helped to abolish slavery throughout the Empire a dozen years earlier, but those who were not swayed by the ethical approach found Richard Cobden's facts convincing. He also was in Parliament and, if less elo1972 IS FREE ENTERPRISE COMING BACK? 609 quent than, his friend, he was still a formidable foe of protectionism. In March, 1845, Robert Peel, then Prime Minister, was listening to one of Cobden's long factual speeches when he crumpled up his notes and remarked to a. colleague sitting next to him, "You must answer this for I cannot." Although Peel had greatly liber alized trade three years earlier, this was not enough to placate the League, particularly since the Corn Laws were still on the books.

Cobden was now certain that the Prime .Minister was quite ready to go the whole way, if he could just find a suitable opportunity. His chance came swiftly in the form of a natural calamity, the tragic Potato Famine in Ireland. That country was seriously over populated, desperately poor and excessively dependent ·on potatoes so when the crop blighted and rotted in the ground in August of 1845, famine was upon them. Es timates have placed the loss of life22 as high as two and a half million people over the next few years. Clearly, limitations on food imports were indefensible in such a situation. Parliament met in special session in January, 1846, and Robert Peel recommended the re peal of the Corn Laws. After months of bitter debate, the bill became a law in June of the same year. As John Bright said, "Fam ine itself, against whom we fought, took up arms in our be half." At long last the duty on grain - the tax on bread as the League was wont to call it - was abolished.

While the repeal of the Corn Laws did not result in .complete freedom of trade, Britain con tinued to move in that direction so that by 1860 she had arrived. The Navigation Laws and Usury Laws had also been repealed. "Laissez faire had reached in Great Britain the culminating point," wrote G.D.H. Cole,23 the Fabian Social ist, and he then proceeds to de scribe the rapid growth of Brit ish trade. Freedom was the fash ion and it proved profitable too. Even Lord Keynes 24 speaks of the late Victorian era as an "economic Eldorado," an "economic Utopia." Another writer says,25 "In our own unpleasant century we are mostly displaced persons, and many feel tempted to take flight 610 THE FREEMAN October into the nineteenth as into a prom ised land, and settle there like il legal immigrants for the rest of our lives." While returning to the past is clearly impossible, if de sirable - they had their problems and we have some very real ad vantages too - still the question remains whether we could regain the best of their world and graft it on to the best of our own. Let us examine this possibility.

Return to Freedom I shall not attempt to predict just how we -are going to straight en things out; like Amos of old, I'm "no prophet, neither a proph et's son." Nevertheless, I think we can get some idea how it might happen from the British transi tion to free enterprise as described in this article. Of course, it is no toriously hard to turn a nation around once it is launched in a given direction - particularly if it is down hill. Tocqueville 26 com ments on this tendency: "The ma chine once put in motion will go on for ages, and advance, as if self-guided, towards a point in dicated beforehand." Another Frenchman a little earlier, Louis XV, remarked cynically as the Old Regime of France was hasten ing to its fall, "Let the good ma chine run itself. It will last our time. After us, the deluge." Louis XVI was swept away by that deluge, but freedom did not come to France in spite of the slogans of the Revolution. Chamberlain 27 remarked a few years ago that, since "politics tends to go by ratchet-action" in a democracy, the time may come when the situation becomes so snarled and tangled that a nation "may be lucky ...

to lose a total war totally," pro vided they are conquered by a magnanimous foe and have "a Roepke serving as advisor to the Ministry of Economics, not a John Maynard Keynes." That is a long string of "ifs" and the· hazards are great if you are not that lucky. The English escaped the equiva lent of the French Revolution nearly two centuries ago but found their way, falteringly but surely, toward the desired goal, a peaceful revolution of freedom. Judging by the British experi ence, a nation needs an intellec tual elite which believes in liberty (let's hope we are building that now) ; a general population which is weary of the endless and sti fling restrictions of mercantilism (many of our people are getting tired of the pretensions and high cost of big government) .; .and crises which afford the possibility of a choice (and all nations have those, particularly the omnicom petent state which attempts more than anyone can accomplish).

Actually, setting up the free 1972 IS FREE ENTERPRISE COMING BACK? 611 system is remarkably easy, when the opportunity comes. Commu nists admit they have never even approximated the Marxian blue print and their government isn't "withering away" today any faster than ours is. No such difficulty was experienced after 1846 for, as Adam Smith 28 says, "All sys tems either of preference or of restraint, therefore, being thus completely taken away, the obvi ous and simple system of natural liberty establishes itself of its own accord" - if people are just wise enough to let it happen. Let us, therefore, be busy at the educa tional task as our first priority. It is well to remember that it was a familiar maxim in England for two decades before the Corn Laws were repealed that "the school master now walks abroad in Eng lish politics." We then need to seize every opportunity which crises afford and, most important of all, ". . . let us not be weary in well doing: for in due season we shall reap, if we faint not." (Gala tians 6: 9) ~ • FOOTNOTES • 1 Carl L. Becker, The Heavenly City of The Eighteenth-Century Philosophers, pp. 151-154.

2 Walter Lippmann, U. S. Foreign Policy: Shield of the Republic, p. 138. 3 George Soule, Ideas of the Great Economists, p. 40. 4 Peter J. Stanlis (ed.), Edmund Burke, Selected Writings and Speeches, p.418. 5 John Chamberlain, The Roots of Cap_ italism, p. 23. 6 Ibid. 7 Henry M. Hoyt, Protection versus Free Trade, p. 72. 8 Robert L. Heilbroner, The Worldly Philosophers, p. 73. 9 Vernon A. Mund, Open Markets, p. 79. 10 Umphrey Lee, The Lord's Horse man: John Wesley the Man, p. 172. 11 Chamberlain, pp. 12-14. 12 Wilhelm. Roepke, The Social Crisis of Our Time, p. 245. 13. Karl Polanyi, The Great Transformation, PP. 77-79. 14 Encyclopaedia of the Social Sci ences, Vol. 12, "Poor Laws," pp. 230-234. 15 Herbert Spencer, The Man versus the State, pp. 24-32. 16 Adam Smith, The Wealth of Nations Modern Library edition), pp. 492-493. 17 Asa Briggs, The Making of Modern England (1784-1867), The Age of Im provement, p. 313.

18 John Chamberlain, The Enterpris ing Americans: A Business History of the United States, PP. 70-71. 19 George Barnett Smith, The Life and Speeches of the Right Hon. John Bright, M. P., Vol. I, p. 122. 20 Briggs, pp. 317-318. 21 Asa Briggs, Victorian People, p. 202. 22 Cecil Woodham-Smith, The Great Hunger, Ireland, (1845-1849), p. 411. 23 G.D.H. Cole and Raymond Postgate, The British Common People, 1746-1946, pp. 336-337. 24 John Maynard Keynes, The Eco nomic Consequences of the Peace, p. 10. 25 Briggs, Victorian People, p. 7. 26 Alexis de Tocqueville, Democracy in America (Mentor edition), p. 50. 27 Chamberlain, Roots of· Capitalism, pp. 207-208. 28 Smith, p. 651.

THE CITY GOVERNMENT in my home town took over the chore of col lecting garbage and trash several years ago. Previously this chore was largely taken care of by scores of small operators, keenly competi tive. I never had any difficulty in having my garbage, ashes, waste paper, brush from tree trimming, leaves, and other refuse removed promptly and efficiently. The pri vate operators had no special re quirements whatever as to pack aging, arranging, or locating the rubbish to be carted away. There was no rigid schedule of removal dates; the operator came when the individual householder asked him to come, .and where a time of colDr. W. A. Paton is well enough known in the United States and abroad for his work in Ac counting and Economics-and well enough known among local garbage collectors-that there's no need to mention hi. home town. 612 5° Above Zero W. A. PATON lection had been agreed upon it could be altered by a telephone call.

When the City took over waste collection there was an immediate decline in the quality of the serv ice. The fixed schedule set by the I)epartment of Public Works pro vided less frequent service than some families desired, but of course no special collection times could be arranged. Moreover, from the outset there have been fre quent deviations from the an nounced schedule. Requirements as to the householder's procedure be came more complex and rigid as time went on. Under one early rule ashes had to be sacked and placed in the garbage cans, in stead of being left on the back porch in cartons or other dispos able containers. Branches and 1972 50 ABOVE ZERO 613 other brush must now be cut up and placed in sacks of specified size (a very inconvenient, time consuming procedure) . Pebbles and stones will· not be removed under any circumstances .. Burning paper - or anything else - on the premises is now prohibited, re gardless of care and safety pre cautions taken. The fancy trucks used by the City are large and costly, and equipped with lifts to spare the backs of the accompany ing staff. The lifting apparatus is very noisy, being easily heard for a quarter-mile or more. Recently all citizens received a printed doc ument which set forth the rules and directives of the "new refuse collection system" as follows: NEW PROCEDURE On the day of collection a two man set-out crew will bring your refuse containers or tied plastic bags from the back yard to the curb.

Several hours later a drive-collector will come by and place the refuse in the truck. He will serve one side of the street at a time. After collection, the resident must bring his containers back from the curb to the back yard. If the resident uses tied plastic bags, only the bags will go to the curb and he will have no containers to retrieve. Plastic bags should be a 2 mill bag such as the Fire Department has for sale. On the day of collection the con tainers or tied plastic bags should be in one location, either behind the house, along the side of the house, outside the garage, or at the curb. Keep your driveway clear! The combined weight of each indi vidual container and its contents cannot exceed 50 pound5. Refuse should be available for col lection by 7: 00 a.m. If your refuse is NOT collected· by 4: 00 p.m. on your assigned day, please call City Hall, 761-2400 extension 257 so provisions for pickup may be made.

No animal waste will be picked up. When a collection day falls on a holiday, the schedule for the remain der of the week will be one day late, and the extra day will then be made up on Saturday. These requirements, with the new feature of a "set-out crew," will obviously make the collection proc ess more complex, more drawn out, and will justify more staff. Note the preemptory "Keep your driveway clear!" No private con cern issues such orders, and not even the U.S. Post Office has gone that far. For how long, one won ders, must this be done on the specified day, and must the house holder stand guard for hours to make sure the driveway is com pletely free of cars or other ob stacles? Note, too, the arbitrary weight requirement. To be sure that this rule is observed must the householder acquire scales 614 THE FREEMAN October and weigh all cans and sacks used, and perhaps leave some half-filled, where heavy materials are in volved? And what is the home owner .supposed to do with the dog dung littering his yard, de posited by roving animals that find the location attractive for the purpose? A side effect of the new rules, already much in evidence, is a marked increase in can$ and bags along our streets for lengthy periods, as a result of the diffi culty many find in meeting the 7: 00 a.ln. deadline plus the hours of delay before the truck arrives to make the collection plus the de lay - oftel]. for several days -:- be fore the resident gets around to removing the empty cans from the curb area. The net result· is un sightly streets, all over town visual pollution, to say the least.

And empty garbage cans left standing in driveways by the col lectors are a nuisance, and may be a hazard, especially after dark. Like It or Lump It As almost goes without saying, the city government took over the waste collection business without asking for any advice from indi vidual citizen customers. More over, in establishing rules, includ ing those of the "new system," the people served were given no opportunity to express· their opin ions. I should add that we. are not as yet prohibited from engaging a private rubbish collector, if we can find one - but such action will not reduce the levy for "utilities" service, or the bills for taxes. The winter of 1971-72 in south eastern Michigan was not charac terized by extremely low tempera tures, but we did have quite a lengthy spell when the thermom eter registered from a bit below zero to 5° above. During this peri od the refuse collection staff of our Public Works Department calmly announced that they would not report for work on days when the temperature was "5° above zero" or less at the regular re porting hour. And the gang main tained this position all winter, de- .

spite a few mild protests from citizens here and there. In my own case my garbage was not touched for one stretch of three successive weeks. 1 was reminded of the times on the farm when we attended to the chore of milk ing the cows when the outdoor temperature stood at 20° below, with the thermometer inside the stable door hovering around the zero mark. I suppose this was not in line with good modern. practice regarding working conditions. Why the Popular Support? One .of the signs of the times that continues to puzzle me is the attitude of some people in· my 1972 50 ABOVE ZERO 615 neighborhood regarding the sphere of government activity. Despite their personal, first-hand experience with the very ohjec tionable system of municipal gar bage and trash collection, many still clamor for more and more interference by government, at all levels, with private business oper ation, including outright take over in some fields, and are vocif erous in their support of the pro grams of nationally known "con sumer advocates" and other· crit ics of the automobile companies· and .business corporationsgen erally. They also tend. to applaud the continuing harrage of attacks on business - in and out of the legislative halls-by officeholders and candidates with strong so cialistic leanings.

Another,. and more widespread, attitude to be observed is the in difference, and lack of complaint, regarding the inefficiencies and failures clearly in evidence in fields where government· has long been in complete charge. This pos ture. is found among those some what sympathetic to private en terprise, as well as among the muddled critics of business and the outright socialists. The reali zation that it is well-nigh useless to try to induce government officials to mend their ways probably has a bearing. Here I'm reminded of the history of our local water service. Years ago this service was provided by a quasiprivate con cern,. and there was no lack of criticism and complaint. And that the water company took consider able heed of dissatisfaction, even in the case of the specific patron, was obvious. Finally, in line with the trend across the country, the municipality acquired the com pany's facilities. From that time on the desires of the individual customer have been completely ignored with respect to water sources, softening, additives, tem perature, extensions, and· so on, as well as the important matter of rates charged. And the tendency to complain, ask for improved service, and urge .lower rates, has gradually faded to the vanishing point.

From time to time, in contem plating the current scene, I get to wondering what it will be like if and when we abandon the free market entirely, and adopt the complete socialist program. What will the Naders and other maleon tents do when there are no private business activities left for them to bedevil? ~ CLARENCE B. CARSON THE FOUNDING OF THE AMERICAN REPUBLIC 15 The Critical Period 616 AMERICANS established weak gov erments after they separated from England. Indeed, the governments were weakest at the points requir ing greatest strength, namely, in the conduct of relations with for eign powers and in the executive branch. It is easy to understand and sympathize with their reasons for establishing weak governments. Government, any government, has the potential for tyranny. Its mo nopoly of the use of force within its jurisdiction tends to make those under it impotent in conflict with it. Men are drawn to it by the opportunity it offers for the exer cise of power, and the likelihood of the abuse of power is almost as certain as death and taxes. Why not, then, guard against these po tentialities becoming actualities by keeping government weak? Let the power reside mainly in the people, and make those in govern ment come hat in hand frequently asking for what they need. Why not, indeed?

Because, in the first place, the attractiveness of a weak govern ment to the law abiding is based largely on illusion, the illusion that weak is synonymous with limited and restrained. It is not; it is sy nonymous with impotent, frail, Dr. Carson recently has joined the faculty of Hillsdale College in Michigan as. Chairman of the Department of History. He is a noted lec turer and author, his latest book entitled Throttlin4 the Railroads.

1972 THE CRITICAL PERIOD 617 and lacking power to perform al lotted functions. Government main tains peace by having the respect of the decent, holding the irra tional in awe, and intimidating the lawless. A weak government is more likely to be arbitrary, capri cious, and even despotic than a strong one, for the uncertain status of its ability to use force leads to unpredictable usages. It was the weakness of the Congress which set the stage for its infla tionary policies. The weakness of state governments resulted in ar bitrary practices for raising sup plies for the army duripg the war. A weak government .is prone to preying on the weak - those who most need its protection - and this penchant is probably aggravated by popular governments which are continuously seeking popular sup port. The treatment of Loyalists by the state governments during and after the war is probably a case in point. Above all, weak gov ernments invite challenges to their authority which, when brought forth, result in war or revolution.

How critical the situation was in America in the mid-1780's is and will remain in doubt, but the por tent of crisis follows necessarily from the condition of the govern ments. That the state governments were weak as well as the Congress is revealed by analysis. Governors were made nearly impotent by their dependence on the legisla tures. Legislatures had consider able power of making laws, but they were not charged with exe cuting them. The Congress estab lished by the Articles of Confed eration had little power at all. It was charged with major respon sibilities, yet it had no independ ent executive, no courts of its own, nor any direct sources of revenue. Moreover, the members of Congress were made so depend ent upon state legislatures for their ten ure that they were most reluctant to act. A Lack of Continuity The bane of republics is a lack of continuity of government be cause the government changes hands so often. Each election may bring a new set of rulers. Monar chy does not suffer much from this defect, but it has others which disqualified it for Americans. The constitution-makers of the revo lutionary period aggravated the discontinuity attendant upon re publics. Not only did constitutions frequently call for annual elec tions but also there were some times limitations on how frequent ly within a period an individual could serve. Members of Congress had no assurance of continuation from one session to the next or even that they might not be re618 THE FREEMAN October called during a session, and were prohibited to serve more than a portion of a given period. It was difficult, in these circumstances, furilie~v~nm@~~~~~@ that continuity which they can have in republics. It is true, of course, that it was virtually im possible for one man to gain much power, but it was equally difficult for him to exercise governmental authority.

Foreign Relations The greatest weakness of gov erning power was in conducting relations with foreign countries. The responsibility devolved upon the Congress for carrying on these relations, but that body did not have the power to compel the ac ceptance of its decisions. It had no courts dependent upon it with authority to act· upon the people. There was talk that Congress might use force upon states, but such a measure would have been war. The states had more power ful governments than did the Con federation, but they lacked authority to conduct foreign re lations. By their grants of power to their governments, it is clear that Americans did not sufficiently ap preciate the necessity for some government exercising the powers that the British had during the colonial period. A good case could be made that this was true regard ing trade restrictions, but the fail ure to empower a government to deal effectively with foreign na tions was like burning down the barn to get rid of the rats if what they opposed was mercantile regu lations.

Tha t Congress was almost im potent in dealing with other na tions does not have to be con cluded from theory alone; history affords examples enough. Nowhere was the weakness clearer than in relations with England. John Adams became minister to the Court of ~t. James in 1785. He hoped to .obtain a commercial treaty with Britain that would open British colonial ports to American ships. But he found the government there unwilling to make any concessiQns,almost con temptuous of the usefullness of any agreement with the Confed eration, and well satisfied with commercial relations as they stood. Instead of being able to make new agreements, Adams found himself occupied with questions surround ing the terms of and compliance with the Treaty of Paris of 1783. Enforcement of Treaties The British reproached the United States through Adams with not complying with the terms of the treaty. The treaty required Con gress to recommend to the states 1972 THE CRITICAL PERIOD 619 that the rights of Loyalists be re stored. (This had been a conces sion by the United States, since the British were not committed to nor did they make reparations for damages done by their armies or Loyalists in the United States.) Congress did, indeed, make such a recommendation to the states, but some of the states were more inclined to further retaliation, and none of them was favorably dis posed to full restitution for Loyal ists. Technically, Congress had complied with the terms of the treaty, but the .failure of the states to heed their recommenda tion pointed up the weakness of the Confederation. The treaty also specified that the states would not hamper or impede the collection of debts by British citizens. One his tory says: "There is no doubt that this article was violated· both in letter and spirit. Virginia, where the debts were heaviest . . . , led the way in passing laws hamper ing the recovery of British debts."1 Congress was, of course, powerless to do anything about the· state recalcitrance.

American compliance with the treaty was made the more press ing, because the British used it as an excuse for failure to comply in the Old Northwest. They had several miIitary posts on the Amer ican side of the Great Lakes. Con trary to the treaty provisions, they did not evacuate them; instead, a secret order to hold them indefi nitely went out in 1784. Though the posts themselves were periph eral, they provided bases for the British to exercise influence on Indians in American territory and for carrying on a lucrative fur trade. 2 This increased the diffi culty of making white settlements in the area and, thus, of the sale of lands by the Confederation. Difficulties with Spain Difficulties with Spain were, if anything, more pressing than those with Britain. Trading priv ileges were not at issue, for Spain had opened up her most important colonial ports to America. The major issues were the location of the boundaries between the United States and Spanish territory to the south and west, and naviga tion and use of the Mississippi and ports on it. The difficulty arose out of differences in claims and designs on the old Southwest between the United States and Spain. Spain had lately reacquired Florida, which included at that time a West Florida extending all the way to the Mississippi. Spain continued its historic claim· to the vast territory west of the Missis sippi. These territories gave Spain control over the gateway to the Gulf of Mexico. The fact that Brit ain had ceded terri tory to the 620 THE FREEMAN October United States did not greatly im press the Spanish, particularly when these same British were clinging to their own posts to the north in defiance of the treaty.

In 1784, Spain concluded trea ties with Indians within the ter ritory of the United States. More over, Spain held onto a military post at Natchez which had been acquired during the war but which was now within the treaty terri tory of the United States. Spain also made private agreements with Americans· for the use of the Mis sissippi ports and was working to undermine the allegiance of those west of the Appalachians to the United States. It was the position of both Britain and the United .States that navigation of the Mis sissippi River was free to all, but Spain did not recognize this posi tion. Nor would Spain grant the right of deposit of goods in New Orleans - a right essential to the effective use of the Mississippi to the United States. The Mississippi and Trade Of course, the use of the Missis sippi was an absolute requirement for the commercial development of the trans-Allegheny region of America. The expense of trans porting freight from the west to the east overland was prohibitive; only lightweight cargo of very high value could even be considered worth transporting in this fashion. Even so, settlers poured into this area in increasing num ber in the 1780's from the older states despite the fact that, as matters stood, they must either switch their allegiance to Spain or be denied the opportunity of developing the country. John Jay conducted negotiations over a considerable period with the Span ish diplomat, Diego de Gardoqui, but the United States had little to offer and the Spanish little to fear from the continuation of the dead lock. Jay saw little hope for set tling the dispute favorably to the United States by negotiation and was entirely unenthusiastic about a recourse to arms. "For," he said in 1786, "unblessed with an efficient government, destitute of funds, and without publick credit, either at home or abroad, we should be obliged to wait in pa tience for better days, or plunge into an unpopular and dangerous war with very little prospect of terminating it by a peace, either advantageous or glorious."3 Barbary Pirates Not all the difficulties of the Confederation were with Euro pean countries; those people com monly called the Barbary Pirates along the African coast of the Mediterranean disrupted trade in a particularly distressing way.

1972 THE CRITICAL PERIOD 621 Several Moslem principalities, or whatever they should be called, had long preyed on shipping in the Mediterranean. Countries who wished to avoid their depredations were expected to pay bribes. Once the Americans cut themselves loose from British protection, they were exposed to these pirates. Algeria. went to war with the United States, or so rumor had it, seized two American ships, and enslaved their crews. The enslaved Amer icans "were forced to carry tim ber and rocks on long hauls over rough mountainous roads."4 Con gress offered to ransom the sail ors, but the amount they could and did offer was too small. A "diplomat" from another princi pality approached the United States with the proposition that the harassment of shipping would cease if tribute in sufficient amount were paid. As things stood, however, the United States could neither afford to pay trib ute nor assemble the necessary force to suppress the pirates. 5 financial Problems Many of the troubles of the Confederation can be traced to fi nancial difficulties. These were fre quently tied in and contributed to the ineffectiveness in dealing with foreign nations. A country that had repudiated its currency at the outset and whose diplomats had to go cup in hand, as it were, to other nations seeking funds was hardly in a good bargaining posi tion. There were, of course, do mestic as well as foreign conse quences of the financial shambles of the Confederation.

The methods used to finance the war had left not only a debt (de spite the repudiation of the cur rency) but also a legacy of con sequences which many do not ascribe to the inflation. Inflation through the· year of 1780 was fol lowed by a drastic deflation. There is no mystery about the cause of the deflation; when the tender laws were removed the Conti nental paper ceased to circulate as money. Much the same thing happened to the paper money that had been issued by the states dur ing the war. Specie replaced the paper as currency, but there was much less of it than there had been of the other. Prices then had to be adj usted downward to make trade feasible in the new currency. The supply of currency was further depleted· when trade with Britain was resumed, for the United States had an unfavorable balance. Americans still showed a marked preference for British goods and large quantities of them were imported, but the British did not buy goods of nearly the same value from Americans. There had long been an imbalance between 622 THE FREEMAN October the two, but it was worse now because the British would not· al low Americans to make up the difference by carrying goods to British possessions. "The result was that within a year or two after the war, . . . there was a dearth of both paper money and hard money."6 Consequences o/Inflation A drastic deflation produces, or is, what is most commonly called a depression. The deflation itself can be correctly described as a healthy corrective to the inflation that preceded it, areturn to·sound values from the grotesquely .in flated situation that disrupted the market. Depressions, on the other hand, are universally deplored, at least in our time. Nor is this so strange, for although prices can be adj usted to the monetary sit uation, the same can hardly be accomplished regarding obliga tions contracted during the in flation. Prices fall, money is hard to acquire, yet debts remain to be paid. As an historian writing about these times said: "Hard is the lot of one who, burdened with taxes and debts and destitute of cash, is· beset by falling prices of the things he makes and sells."7 Historians differ as to the ex tent, depth, and impact of the de pression of the 1780's. Some hold that it deepened and worsened in the latter part of the decade. 8 One historian, at least, cites consider able evidence that economic con ditionswere greatly improving after 1785.9 For example Ben jamin Franklin wrote in 1786: "America never was in higher prosperity, her produce abundant and bearing a good price, her working people all employed and well paid, and all property in lands and houses of more than treble the value it bore before the war;. and our commerce being no longer the monopoly of British merchants, we are furnished with all the foreign commodities we need, at much more reasonable rates than heretofore."lo George Washington wrote in a similar vein in 1787: "In the old states, which were the theatres of hostil ity, it is wonderful to .see how soon the ravages of war are re paired. Houses are rebuilt, fields enclosed, stocks of cattle which were destroyed are replaced, and many a desolated territory as sumes again the cheerful appear ance of cultivation."ll Suffering Debtors The truth seems to be that some people were in distress, and some were prosperous. That is not an earthshaking conclusion, because much the same can be said at any time. But those not doing well at this time were frequently hurt in 1972 THE CRITICAL PERIOD 623 one way or another by the legacy from the war. Those who had gone into debt to buy real property on long terms during the inflation were undoubtedly often hard. put to payoff in the much scarcer money that was now being used.

For example, in Worcester County in Massachusetts, there were over 2,000 suits taken to court for re covery of debt in one year .12 Americans had not only to adj ust to a reduced money supply but also to a new trading situation after the break from England. To many, the new situation provided new opportunities, but others tried to cling to and make a go of the old relations (particularly was this true of trade with England). The states were generally deeply in debt from the war, and some of them ·attempted to begin to retire their obligations by levying taxes. This could be particularly hard on those' who owed debts for their land and had to pay high property taxes as well. These things are relevant to a mounting crisis in the United States because they were the oc casion for pressures on the gov ernments to do something about them. Some of the functions peo ple were accustomed to have gov ernment perform were either not being performed or were irregu larly performed. Americans had not only a legacy of mercantilism but also of monetary manipula tions. Debts, taxes, and trade reg ulations plagued the new govern ments. There was not even a standard currency throughout the United States.

Coinage and Exchange When the Continental and state currencies were repudiated,people used coins primarily for a medium of exchange. There were few mint ed in America during this period, so that foreign coins circulated mostly: "English, French,Span ish, and German coins, of various and uncertain value, passed from hand to hand. Beside the nine pences and four-pence-ha' -pennies, there were bits and half-bits, pis tareens, picayunes, and tips. Of gold pieces there were the johan nes, or joe, the doubloon, the moi dore, and pistole, with English and French guineas, carolins, du cats, and chequins."13 In addition to the difficulty of calculating the respective value of each of these coins, there was the complication that coins were frequently worn or clipped. A man who accepted one of the latter at full value might have it discounted when he tried to use it. Americans did not have a medium of exchange; they had media through which ex changes of money for money were almost as precarious as exchanges in goods and were using coins 624 THE FREEMAN October whose sovereigns could not reg ulate and over whom Americans had no control.

There was hardly any reason, however, for the citizenry to have any confidence in the monetary actions of the Congress, nor, for that matter, of the legislatures of the states. Not only had the Con federation repudiated its curren cy, but the debts which it still recognized were poorly serviced. The total debt of the United States at the end of the war, foreign and domestic, was about $35,000,000. Far from being retired, it con tinued to grow. By way of requi sitions from the states, Congress received $2,457,987.25 in the peri od from November 1, 1781 to Jan uary 1, 1786. This was barely enough to pay current expenses for the government. 14 Robert Mor ris sent along this comment when he resigned as head of the treas ury in 1783: "To increase our debts while the prospect of pay ing them diminishes, does not con sist with my ideas of integrity. I must, therefore, quit a situation which becomes utterly insuppor table."15 Those who succeeded him may have had less integrity than he professed, but they were hardly better supplied with money.

Inadequate Power to Tax It was commonly held that the greatest deficiencies of Congress under the Confederation were the lack of the power to tax and the inability to regulate trade. There should be no doubt that the lack of the power to tax made the Congress almost impotent to per. form the functions allotted to it. As to trade, Congress was almost powerless either to regulate or to prevent the states from doing so. Whether trade needed regulating was debatable, but if it did, a strong case could be made against the states doing it. Indeed, some states undertook to set up tariffs and to discriminate against ships of other lands, particularly those of England. But it was exceeding ly difficult for states to set rates which would accomplish even those dubious advantages supposed to follow from them. If the tariffs were too high, in comparison with those of surrounding states, goods might come into the state from ports of entry located in other states. If imported goods were finally consumed in another state from the one imposing the tariff, the state was actually levying taxes on citizens of other states.

State Barriers to Trade The regulation of trade by the states worked against a common market for all the United States and threatened to turn some states against others. John Fiske de scribed the situation this way: 1972 THE CRITICAL PERIOD 625 Meanwhile, the different states, with their different tariff and ton nage acts, began to make commercial war upon one another. No sooner had the other three New England states virtually closed their ports to British shipping than Connecticut threw hers wide open, an act which she followed by laying duties upon imports from Massachusetts. Pennsylvania dis criminated against Delaware, and New Jersey, pillaged at once by both her greater neighbours, was com pared to a cask tapped at both ends.l 6 Trade discriminations sometimes lead to war. Not only was there the possibility that one American state might go to war against its neighbor but also that discrimina tions against or by foreign coun tries might lead some country to go to war against a state. In such a case, the United States would be drawn into the war, for the authority to make war was vested in Congress. To say the least,· the situation was anomalous.

It is strange, but true, that the events which finally provoked Americans to do something about the union did not directly involve the Congress and its ineffective ness. Perhaps it is not so strange on reflection, for Congress rarely did anything. The failure to act may· be indictable, but I think it would be .hard to get a jury to convict. Congress presented a low silhouette to its critics. True, it repudiated its currency, could not pay its debts, could not force the states to meet their quotas, could not protect its citizens abroad, and did not ·do most of the things it was authorized to do with much energy. But, then, it seldom gave offense, and. people spread over a vast land were more used to opposing government action than seeking it. It is most probable that if some crisis had swept the Con gress away it would have gone with a whimper rather than a bang. In-our day, we have seen exile governments seeking a coun try to govern; the United States was an exile country awaiting a government.

Trouble in Rhode Island It was trouble in New England in 1786-87 that aroused fears which prompted men to action. Paper money, taxes, and debts were the occasion of challenges to some state governments. Most states were under pressure to make paper money issues. Seven had done so by 1787 but, as might be expected, there was consider able opposition to such actions. Rhode Island not only issued pa per money but revived harsh meth ods to try to make it circulate. Faced with fleeing creditors and merchants abandoning the state, the "legisla ture passed an act de':' claring that anyone refusing to 626 THE FREEMAN October take the money at face value would be fined £100 for a first offense and would have to pay a similar fine and lose his rights as a citi zen for a second."17 When the act was challenged, the court declared its opinion that the act was Uncon stitutional. The judges were called before the legislature, interrogat ed, and some of them dismissed.

Rhode Island's government was viewed with contempt by many Americans. Shay's Rebellion Rhode Islanders would probably have been left to suffer the dis advantages of their own govern ment or get out - the latter was' becoming an attractive option but it was not easy to take so san guine a view of events in Massa chusetts. There was widespread dissatisfaction with the foreclo's ures on farms and imprisonment for debts. Some of the discontented wanted a moratorium on the col lection of debts and/or paper mon ey to be issued. Taxes were also levied in such a fashion as to arouse resistance to their collec tion. The discontent may have been agitated by British agents; certainly, money was made avail able for the discontented to use to take action, though who was be hind this was never definitely es tablished. Overt action came when mobs began preventing courts from sit ting. Beginning in early Septem ber of 1786, a succession of courts were disrupted and prevented from conducting business by large groups of armed men: at Worces ter, at Concord, at Taunton, at Great Barrington, and at Spring field. The legislature did not take the desired action, and a rebel force was organized. The climax of these events came in January of 1787. It is known as Shays' Re bellion, taking its name from one of its leaders, Daniel Shays. Mas sachusetts authorized an armed force to put down the rebellion, and the rebel force was dispersed on January 25. New Hampshire was threatened by a rebel force, but the movement was quickly put down by decisive action by, Gov ernor John Sullivan who had been a general during the late war.

Constitutional Convention Called The call for a convention to deal with constitutional matters had been issued prior to these events. It came from some delegates to what was supposed to have been a convention at Annapolis in 1786. The convention was supposed to have dealt with commercial mat ters, but it lacked a quorum of states, so a call was issued for a more general convention for next year. It did not take Shays' Rebel lion to awaken some Americans to 1972 THE CRITICAL PERIOD 627 the need for constitutional revi sion. Anyone who wanted a govern ment for the United States could see that Congress was not supply ing it. "Between October 1, 1785, and January 31, 1786, Congress had a quorum on only ten days, and never were more than seven states represented. Between Octo ber 1, 1785, and April 30, 1786, nine states - the mInImum re quired to do any serious business - were represented on only three days."18 As mobs began to intimi date courts in Massachusetts, one historian notes that "the Congress of the United States had likewise ceased to function."19 As the ri otous events moved to their culmi nation in early 1787, one state after another elected delegates to the Constitutional Convention. Fi nally, even Congress acted by rec ommending to the states that they send delegates. The fear of the rebellion spreading had apparently tipped the scales.

The site of the convention was Philadelphia, the time appointed to convene May 14, 1787, and the object was to contrive a govern ment adequate to the' common tasks of the United States. . ~ • FOOTNOTES • 1 Samuel E. Morison and Henry S. Commager, The Growth of the American Republic, I (New York: Oxford Univer sity Press, 1942, 3d ed.), 265. 2 See Andrew C. McLaughlin, The Con federation and the Constitution (New York: Collier Books, 1962), pp. 77-78. 3 Ibid., p. 75. 4 Curtis P. Nettels, The Emergence of a National Economy (New York: Holt, Rinehard and Winston, 1962), p. 67. 5 Ibid. 6 Merrill Jensen, The New Nation (New York: Vintage Books, 1950), p. 303. 7 N ettels, Ope cit., p. 65. 8 Ibid. 9 Jensen, Ope cit., pp. 247-48. 10 Ibid., p. 249. 11 Ibid., p. 250. 12 Ibid., pp. 309-10. 13 John Fiske, The Critical Period of American History (Boston: Houghton Mifflin, 1916), p. 165. 14 McLaughlin, Ope cit., pp. 64-65.

15 Ibid .. p. 51. 16 Fiske, Ope cit., p. 145. 17 Jensen, Ope cit., p. 324. 18 Forrest McDonald, The Formation of the American Republic (Baltimore: Penguin, 1965), p. 140. 19 Ibid., p. 147. Next: The Making of the Constitution.

oturo ightf RONALD COONEY THE CONCEPT of natural rights no doubt has its origin in the Roman Stoic idea of a "law above the law," of an unwritten law which precedes and is superior to man made law. Christian philosophy, in the persons of St. Augustine and St. Thomas Aquinas, developed and refined the natural law idea, and it was a significant tenet of the eighteenth century Enlighten ment. The doctrine has come down through the centuries as one of the major' arguments against arbi trary and unrestrained govern mental power. In much the same way is the be lief in the natural rights of man a belief in "rights above rights." Likewise, natural rights have been used in the resistance to unj ust authority. Natural rights were partial justification for the GloriMr. Cooney is a freelance writer .-ecently grad uated from the University of Nevada. 628 ous Revolution of 1688, for the American Revolution (the Declara tion of Independence cited man's "unalienable rights"), and for the French Revolution and the Dec laration of the Rights of Man. All of the revolutions since the eight eenth century have drawn at least some of their power from appeals to natural rights.

The connection between natural rights and natural law is instantly recognizable. Both exist prior to the State, and both transcend it. Natural law, like the law of the State, provides protection for the individual's rights from violation by another individual, or - and th.is the State does not do --" by the State. itself. Natural rights and natural law are the final arbiters of liberty. Finally, natural rights and natural law are both denied by those who exalt the State over the individual citizen. those who 1972 NATURAL RIGHTS 629 make the State all and the in dividual nothing. It is to this, as it is to all forms of Statism, that natural rights make a direct and implacable challenge. A Dictatorial Delusion The common delusion of the de fenders of unlimited governmental dominion is that the State confers upon the individual whatever po litical and economic rights he may enjoy. This was certainly the view of Thomas Hobbes, the defender of absolute monarchy and the author of the Leviathan. Hobbes, in 1651, argued for the complete sovereignty of the king as ruler and lawmaker. Hobbes sought to repudiate natural law by placing it on equal terms with the civil law. He states in the Levia,thwn, "The law of nature and the civil law contain each other, and are of equal extent." In other words, natural law (and by extension, natural rights) is as high as, but no higher than, civil law. The sovereign makes civil law, and in Hobbes' kingdom there can be no law higher than the decrees of the sovereign. He, in effect, is the law.

Whatever the political repercus sions of a system like that which Hobbes postulates, there arecer tain moral and ethical questions which it poses. Hobbes' felt that morals and ethics had no place in determining whether or not a systern of government was good or evil. Such a judgment, according to Hobbes, could not be made, or if made, could not be proved. The correlation between Hobbes disa vowal of natural law jnatural rights and objective morality is palpable and direct. Hobbes real ized that the acceptance of un alienable rights of life, liberty, and property would compel one to make a moral judgment of a politi cal system which violated those rights. Having given the sovereign absolute authority to make laws, Hobbes goes on to say that no ethical determination can be made about the sovereign's action, about its goodness or evilness. Ethics, to Hobbes, are purely subjective and inapplicable in political affairs.

The sovereign, it would seem, is above both law and morality; or, like Nietzsche's superman, "be yond good and evil." Hobbes wrote in defense of au thori tarian rule by one man, the monarch. Monarchy was, in Hobbes' day, the most widespread form of government. With the gradual decay of the monarchical form, and the general democrati zation of governments, came the belief that it was not the leader of the nation who was sovereign, but the people themselves. The divine right of kings had become, as Herbert Spencer observed, the "divine right of majorities." But 630 THE FREEMAN October vvhether they represented the in terests of monarchy or democracy, the enemies of natural rights had the same intention - to deny the individual any rights but those granted by the State. Bentham's Faith in Democracy Of the type of thinker who spoke for democracy and against natural rights was the great utilitarian, Jeremy Bentham. No statist in economic concerns, Bentham was curiously inconsistent when it came to limiting, or not limiting, the State's sphere of influence.

Government's function, as Ben tham saw it, was "creating rights." He considered natural law and natural rights "fictions," and in his first work, the Fragment on Government, he castigated Black stone for a contrary belief. Ben tham's antipathy to natural rights sprang from the conviction that natural rights were obstacles to re form, and he was against checks and balances and a system of sep aration of powers for the same reason. Bentham thought, with the faith of the statist in the ability of gov ernment to solve all human prob lems, that by making the act of legislating as easy as possible, the State could deal more readily with society's dilemmas. Bentham did not see what others, most notably the Framers of the Constitution, savv so penetratingly: that the power of the State to achieve good was equaled by its power to achieve enormous harm, that in seeking the former one necessar· ily braved the latter. Bentham did not perceive the difficulty inheren1 in placing all right-giving poweI in the State's hands. He failed tc understand that the capacity fOl bestowing rights could become thE capacity for withdrawing rights Finally, Bentham, like Hobbes be· fore him, was incorrect in assum· ing that the State could creatE rights out of nothing. The State if a delegated authority, and wha1 power it has derives from the in dividuals who comprise it. Sue} being the case, it is absurd to as sume that the State can bestov rights. on its own creators. Th4 State may give order to rights define them more clearly, and pro teet them with laws; but it can n4 more grant rights to the member: of society than a child can gran rights to his parents.

The Ethical Case The ethical arguments in favo' of natural rights are perhaps eve] more telling. If it is true that mel have only the rights the State ha seen fit to give them, what is t, stop the State, at any time and fo any reason, from taking bac: those rights? Furthermore, hO'~ can we say that the State act 1972 NATURAL RIGHTS 631 wrongly if it chooses to take that action? By the logic of the oppo nents of natural rights, the Nazi regime had a perfect justification for recalling the rights, including the right to life of 6,000,000 hu man beings, and should not be con demned or thought of as evil for simply exercising the prerogative to which, as a state, it was clearly entitled. Thus, the denial of nat ural rights quickly resolves itself into a rejection of the ethical dif ferences between governments, making a slave-state the moral equal of a republic. We now arrive at the final ques tion, "What are the natural rights?" Although it cannot be answered precisely, that does not mean it is unanswerable. As has been said before, natural rights precede the State and hence are a prio'f'li in character. Natural rights are every man's at birth and are not State-granted. If each man has an equal claim to liberty, that is, the use of his rights, he can be limited in his freedom only by the claims of other men to an equal share of liberty. The circle of rights around every man ex tends as far as it may without in truding on the rights of other men. For this reason are the "rights" granted by the State bo gus rights. A right to receive wel fare, for example, is invalid since it requires the abridgment, how ever partial, of the rights of the citizen who is compelled to pay for the welfare benefits given to some one else. Natural rights, by con trast, require no abridgment of another individual's rights to ex ist, but are limited only by the same natural rights of another person. I) IDEAS ON 'LIBERTY Nature' s Way IN MAKING his ethical choices, man is guided by a code believed to have the sanction of God; and experience has shown that the good life to which his instinct impels him can be achieved only if he makes his decisions accordingly. The Ten Commandments have been called the Word of God; they can also be described as natural law, and natural law has been described as nature's way of apply ing means to ends.

FRANK CHODOROV, "Free Will and the Market Place"

LEONARD FRANCKOWIAK IN THE SOCIETIES of yesteryear, the king ruled supreme. The say ing that· "heads will roll" was no idle comment but a probability which struck fear in the hearts of the people. When Henry VIII of England said "heads will roll," roll they did! Whenever and wher ever the king was displeased, the shockwaves of his fury would reverberate throughout the dy nasty, and the poor citizen would shudder in fear. The king was al mighty; and people, at best, were humble servants of the king. The king's word was law; his word was justice; he was the absolute ruler; all property was his to con trol; all people were his to control. The king was the government, and there 'was no such thing as indiMr. Franckowiak is a businessman in Chicago. His business includes a weekly radio program in behalf of freedom, entitled We StiII Have 57 Per Cent (referring to the portion of per sonal earnings not taken by taxes). "Heads Will Roll" is from his script for April 10, 1972.

632 vidual freedom for people. Even the democracy of Athens and the Roman Empire, which were what we call representative govern ments, were based upon the prin ciple that government is almighty and man's right to live or die is decided by the state. In days of old, governments were always first and the people second. Then, along came the United States of America and things were different. Man was to enjoy freedom, of which we still have 57 per cent. In other societies, people such as you and I were absorbed by the state. It was as if the government was God on earth. Governments were at the top and people were the servants of government. But when the United States of Amer ica was formed, a dramatic thing happened. In terms of setting up a country, our forefathers did a 1972 HEADS WILL ROLL 633 complete flip-flop. While every other country had government first and people second, the United States was founded in reverse people first and government sec ond as servant of the people. How dramatic that was - a bold, new principle - people first and gov ernment second. The people were to be at the top rung of the ladder and the government at the bottom.

People were to be free to enjoy life; people were to be free to do their own thing in any way that was peaceful; and the government would serve all men, preserve the freedom of all men through law and through order, through justice and through the punishment of criminals. This was a fantastic achievement in the history of mankind - and still is! The mira cle of America is man's precious individual freedom. Freedom with Responsibility Of course, with freedom comes responsibility. If man is to enj oy the blessings of freedom on the top rung of the ladder, then he also has to be responsible - re sponsible for his own welfare, for his own housing, for his own se curity, for his own employment, responsible for his own existence and for his own happiness. That was and always is the price of freedom. If man is to enj oy free dom, and the spirit of freedom to do his own thing, then he must also bear the burden of respon sibility for the consequences of his actions. Man, enjoying the fresh, brisk breezes of freedom, must also be the master of his own fate and destiny. Rich or poor, good or bad, the fortunes of suc cess or the consequences of fail ure, to enj oy freedom is to accept responsibility. This was the foun dation upon which the United States was built: free and sel£' responsible men at the top rung of the ladder and government sec ond as the keeper of the peace.

America Is Changing Now, Iittle by Iittle, America is changing. Men began· to abdicate their individual responsibility and they turned to "benevolent" gov ernment. Housing is now a func tion of government; education is now a function. of government; Medicare is now a function of gov ernment; Social Security is a function of government; so is banking, transportation, electric ity, water, busing, farming, prices and wages, employment and non employment. The war on poverty is now a function of government. And so it goes; man, in his abdi cation of responsibility, has yielded to government - and the rungs of the ladder are no longer clearly defined. Where once the man of America stood proudly at 634 THE FREEMAN October the top and government was a far removed and far-distant second, they now crowd together on the ladder: individual freedom and self-responsibility - 57. per cent; government responsibility and government control - 43 per .cent, and rising. America is shifting priori ties so that the government will be on top and people second calling to mind the divine right of kings of yesteryear, the Russia and Red China of today , where, in fact, "heads still roll."

To abdicate responsibility, to seek welfare from government, is to give up in exchange man's precious freedom because the two are interrelated. To obtain housing from the government is to place housing in control of government. To obtain education from governMisplaced Controls ment is to put government in con trol of education. The price of welfare from government is con trol by government - and control is the opposite of the freedom that was the miracle of America. For man to enjoy his rightfu1 place at the top of Nature's laddeI in the sunshine of human dignity he must first accept his responsi. bility and thereby keep govern· ment beneath him as his servant The divine right of kings and gov· ernments is the principle of yes· teryear. Now is the time fOl dramatic reaffirmation of man kind's greatest discovery: man'~ right to life, man's right to th, pursuit of happiness, and man': right to liberty. Otherwise, "head: will roll." @ IDEAS ON LIBERTY THEY ARE EXPLOITING public ignorance, these politicians wh would put price controls on meat and other food prices. Thes prices have not soared as have the costs of government, and i is the costs of government which need to be controlled.

If the costs of government hadn't risen any more than hav meat prices, there wouldn't be enough inflation to make it problem. The fact is that well over a third of consumer payment fo meat and other voluntary purchases goes to cover costs of thing the government has decreed more important. J. KESNER KAH A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN THE BEWILDERED SOCIETY SOMEWHERE, so Geor~e Roche III believes, the American people took a wrong turn. It was not that their values were wrong - their fore bears had come to the N ew World in order to find space for individ ual development .. The American wanted to be "his own man," to carve out a business, or to develop himself culturally, morally and pro fessionally, without having to ask permission from those who had been placed above him in a social environment that enforced status. But, in coping with a big conti: hent, the American somehow per cnitted technology to creat what Dr. Roche calls "enmassment."

The big organization bred collec sivism, with all its corroding ef fects on the freedom of· the indi vidual to be himself. What was the nature of the mis .:ake that led to "enmassment"? [n The Bewildered Society (Arlington House, $8.95) ,a book which the author describes as a strange mixture of "puffs and pans," Dr. Roche tends to blame everything on the propensity of baffled human beings to try to fight fire with fire. His description of what happened is compelling. The genius of a free people unleashed tremendous cre ative forces in an open environ ment. Seeking the advantages of "economies of scale," our Rocke fellers, Carnegies and J. P. Mor gans turned little companies into big companies, using the special legal advantages accorded to the corporation to gain ends that had a tremendous potential both for good and for bad. If men had only been willing to tackle their en vironment without asking for spe cial favors from government, so Dr. Roche avers, the railroads, the steel companies, the oil refining companies and the real estate op636 THE FREEMAN October erators would have developed in an orderly way t:tIat would not have hurt the little man. But the temptation was too great: the State, throughout the nineteenth century, had too much to give, and it was in the cards that force ful and adaptive men would com bine to conjure special advantages out of the Great Benefactor in Washington.

Men Are Known By the Company They Keep Dr. Roche is ambivalent about the men whom Matthew Joseph son called the Robber Barons. They are to be blamed, so Dr. Roche says, for courting government to gain such special privileges as tar iffs and grants of land. But in act ing as a pressure grol;lp the nine teenth century tycoonery was be having like everybody else. The government owned title to most of the empty continent. Settlers in search of a good quarter section of land rallied to the slogan, "Vote yourself a farm." Everybody was in on the take, as was perhaps in evitable under the circumstances. When "society" as a whole is to blame for a state of mind, there is little point in .making special villains out of those who proved most efficient in providing what people wanted. The "robber baron" enriched himself, but in many in stances he also enriched even those who were forced to sell out to him.

What Dr. Roche seems to be telling us is that the American people in the latter half of the nineteenth century should have found some nongovernmental way of protecting themselves against the "enmassment" called into be ing by the corporate form. After all, nobody compelled farmers to make themselves dependent on cash crops and monoculture agri culture. Producer and consumer cooperatives might have been formed to bring the benefits of "economies of scale" to the little fellow. When Edison developed the power plant, farmers might have availed themselves of small-scale electrical power components, as "Boss" Kettering of General Motors originally suggested. If in dividuals had formed associations to buy tracts of land and then sub divided the acreage to suit them selves, we could have avoided some of the uglier results of urban sprawl. When Henry Ford started making his Model T, he hoped that people would divide their time be tween working for employers and raising their own vegetables on their own acres. The car might have enabled a man to take indus trial employment in prosperous times without quitting a base on the land that could tide a family over periods of depression.

1972 THE BEWILDERED SOCIETY 637 Turning to Government Instead of trying to solve their problems by voluntary association and individual ingenuity, however, the American people allowed them selves to be seduced by the idea that Big Government could be utilized to control and regulate Big Business in such a way that the little competitor would have a chance. For a time, "trust-busting" beguiled the common man. But the Populists, the Mugwumps and the Progressives discovered to their chagrin that business had an uncanny way of dominating the very State machinery that was supposed to give protection to the "public" or to the "consumer." Theodore Roosevelt tried to dis tinguish between "good" and "bad" trusts and wound up in the arms of George Perkins of the House of Morgan. To fight World War I, Woodrow Wilson had to call Bernard Baruch and other Wall Street tycoons to Washing ton to head up the war production agencies. The bankers soon learned how to make use of government created paper to enrich them selves.

As Dr. Roche tells the story, "reform" could not stay the proc esses that led to ever greater "en massment." The New Deal at tempts to save the small farmer ended by giving superior help to the big farmer, who used the universalized benefits of the AAA to buy machinery that his little com petitor could not afford. Instead of halting the movement to the central city, our "progressive" agriculture reforms hastened it. Wartime Interventions Two big wars and a couple of small ones .completed the cen tralizing process. Education was forced into line when the govern ment, in order to fight the wars, had to subsidize the universities to provide research and develop ment for the so-called military industrial complex. In spite of everything, Dr. Roche has not lost his nerve or his sense of proportion. His his torical chapters are enough to make anybody a pessimist, but, in a sudden right-about-face, our hitherto gloomy analyst discovers that only some "twenty-five per cent of all goods and services are produced by the 500 largest indus trials." Controverting Professor Galbraith, Dr. Roche says this must mean that "seventy-five per cent of our goods and services are not produced by 'the technostruc ture.' " Continuing his exploration of the factors that are currently working to halt the processes of "enmassment," .Dr. Roche notes that the big producers need the small producers just as much as the small businessman needs the 638 THE FREEMAN October big. Western Electric, for example, has 40,000 suppliers. And the small businessman provides the major support to America's 6,000 non profit organizations, 320,000 churches, and 100,000 private wel fare organizations. We don't, in short, need the Big State to solve our problems. "Enmassment" need not grow if indi vid uals have the will to do things either alone or in voluntary groups.

Softness at the Top Will enough people read Dr. Roche to rekindle an old faith in the individual? This is, indeed, the question. The day I finished read ing The Bewildered Society I picked up The New York Times and opened it to a story of a sur vey "of 456 of the richest, most powerful and most influential per sons in the United States." What the survey reveals is "a high level of acceptance of Government in tervention in the economy, ap proval of most of the. things that make up the welfare state, and rejection of hard-line anti-com munism in foreign policy." With such softness at the top, has Dr. Roche a chance of making his gospel stick? We can only hope that his still, small voice will somehow reach 456 "leaders" who know not what they do. ~ THE SPOILS OF PROGRESS: Environmental Pollution in the Soviet Union by Marshall I. Gold man (Cambridge, Mass.: MIT Press, 1972), 372 pp., $7.95.

Reviewed by Gary North. ONCE AGAIN, Professor Goldman has demonstrated his remarkable grasp of the· economics of the So viet Union (see the review in the November, 1968 issue of THE FREEMAN). This time he focuses on the whole problem of pollution: ownership, social costs, pricing, responsibility, legislation, and so forth. First, he demolishes the myth of "clean socialism." There is no guarantee that the state owner ship of the means of production will result in cleaner skies, purer water, and rational allocation of clean resources. The actual prac tice of the Soviet Union indicates the reverse: "One of the major arguments throughout this study has been that the concentration of economic and political power in the hands of the Soviet state can be and has been a major factor in the creation of environmental dis ruption. In the .Soviet govern ment's drive toward industrializa tion and economic growth all too often there has been no person or group around with any power to stand up for the protection of the environment."

1972 OTHER BOOKS 639 State power, in theory, may be a tool for doing good, but in prac tice we measure the results. The quest for aggregate economic growth - a mania, says Goldman, which was first given to the mod ern world by the Stalinist Five Year Plans - has granted bonuses to managers for minimizing fac tory costs at the expense of the environment. Fines for damaging the environment seldom match bonuses for reaching quotas. And even these fines are seldom im posed on factory managers. "So far it is the poacher (that is, in dividual citizens) that [is] being harassed, while governmental in stitutions (factories and munici palities) are frequently left to themselves. The real polluters for the most part are not rigorously regulated or penalized .... Yet it is the government institutions (municipal, service, manufactur ing, and agricultural) that are re sponsible for damage hundreds of times more destructive than that of the poachers."

Marxism propounds two eco nomic theories that are almost guaranteed to produce environ mental disruption: the abolition of private ownership and the free (yr~tuitous) cost of SCllrce economic resources. "In a socialist society it would seem that it would be more diffi cult to stimulate preventive action in both the case of public and pri vate social costs. Because private land .ownership is prohibited in the USSR, the individual has less of a vested interest in fighting the construction of a new factory in his neighborhood or the mining of some raw material in the area." The best motivation, operation ally, is simply "the fear of private loss." Thus, the USSR has elimi nated what Goldman calls the first line of defense against pollution. By regarding natural resources as free goods, managers have been led to underestimate costs, waste resources, locate factories uneco nomically, and destroy valuable as sets. Developers of· Black Sea re sorts used sand from the beaches to make cement. This removed the protection from the pounding win ter waves. In 1968 all the trucks in the Abkhazia Republic had to be used in order to bring in ma terials to save collapsing hotel foundations. The erosion in some cases cannot be reversed, and whole sections of the beaches are disappearing.

Lake Baikal, the largest mass of pure water on earth, is steadily being polluted. Kislivodsk, the mountain resort protected from the weather by a ring of moun tains, has had its mountain cover cut away by a limestone quarry, and the winter is now getting in. The Caspian Sea is being lowered 640 THE FREEMAN October rapidly. Dust storms now hit the Ukraine every other year. Yet the only successful protest against one government agency is a protest by some other agency. Lying managers, rigged cost benefit analyses, bureaucratic in transigence, impotent national leg islation, utopian schemes, and pol lution of all kinds are the spoils of Soviet progress. Expenditures to curb air pollution in the Soviet Union are only one-tenth of ex penditures in the United States. Their spirit may be willing but their price system is weak. Gold man's book is a ringing refutation of all those who would argue that capitalism is the primary cause of the "environmental crises." ~ HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each ORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-ON-HUDSON, NEW YORK 10533 the Freeman VOL. 22, NO. 11 • NOVEMBER 1972 Six Ideas to Keep Us Human Edmund A. Opitz 643 The first of two articles on six humanizing concepts that might save us from the "new materialism."

You Rascal, You! Leonard E. Read 652 The domineering habit that leads to war begins in our most intimate relationships. The Roots of "Anticapitalism" Erik von Kuehnelt-Leddihn 657 A scholarly look at the forces of envy and reform which would deny the freedom and dignity of man. The American Economy Is NOT Depression·Proof Hans F. Sennholz 666 The natural consequences of inflation and malinvestment are still painful, despite every assurance to the contrary. Social Inflation Pa,ul l. Poirot 674 Would you believe there's now a new kind of inflation, caused by excessive govern ment spending! I Visit a Managed Society Orien Johnson 676 "I am determined," he said, "not to be conditioned to apathy." The Founding of the American Republic: 16. Makingthe Constitution Clarence B. Carson 684 The background of the men and the miracle they wrought at the convention in Philadelphia. Book Reviews: 700 "Eliot and his Age" by Russell Kirk "The Ideological Imagination" by Louis J. Halle Anyone wishing ~o communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

tt1e Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON-ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor THE F R E E MAN 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. 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 invited in any amount-$5.00 to $10,OOO-as the means of maintaining and extending the Foundation's work. Copyright, 1972, The Foundation for Economic Education, Inc. Printec in U.S.A. Additional copies, postpaid, to one address: Single copy, 5( cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.

THE FREEMAN is available on microfilm from Xerox University Microfilms Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Pel mission granted to reprint any article from this issue, with approprlat l credit, except "The Founding of the American Republic."

EDMUND A. OPITZ as to make us human MOST PEOPLE live lives of quiet desperation, Henry David Thoreau told us. If there was truth in that observation, in the pleasant, spa cious old New England of Tho reau's day, how much more truth is packed into those words in these melancholy days! Events have got ten out of hand and the world lurches into chaos. Things have fallen apart taster than any of us would have dared predict, and we are seized by pangs of guilt and self-doubt. So many promising experiments have gone sour, from the New Freedom of Woodrow Wilson to the latest ukase of the present administra tion. The statesmen of this era talked peace and sought to outlaw war, but they let the twentieth The Reverend Mr. Opitz is a member of the staff of the Foundation for Economic Educa tion, a seminar lecturer,and author of the book, Religion and Capitalism: AWes Not Enemies. century break down into the bloodiest period of all the twenty five hundred years of warfare studied by Pitirim Sorokin. "We live," wrote this great scholar, "in an age unique for the unrestrained use of brute force in international relations."

The threat of protracted inter national conflict is bad enough, but there is also the well-founded fear of domestic violence and crime. And even if we are lucky enough to escape actual robbery, we know that inflation is steadily draining our wealth. We've seen the race issue go from integration to Black Nationalism; we've witnessed the emergence· of the sex and' drug cult, the rise of astrology, witch craft and voodooism; V.D. has reached epidemic proportions among the young ; and then there is abortion, homosexuality, the campus crisis, the environmental 644 THE FREEMAN November crisis, the inner crisis in man him self. For is it not true, as Yeats says in a famous poem, that "The wicked act with dreadful intensity, while the good lack all conviction." Youth Seeking Identity It is a time of troubles for all, but perhaps it's easier for the old whose habit patterns firmed up in a healthier era than for the young who are searching for a value sys tem and cannot find one. Depres sion, in the vocabulary of many young people, does not mean the economic malaise which this coun try staggered through during the Nineteen Thirties; it means the somber mood in which they hang question marks around life, won dering if it really is worth living.

They are trying to find meaning for their lives in terms of the values their elders lived by - or on any other terms - and they are not having much luck. We some times find their behavior rather bizarre; the long hair, the weird clothing, the haphazard life styles. But perhaps these symbolize a message they are trying to get across to us. Some of the so-called hippies, by deliberately being i11 housed, ill-clothed and ill-fed, may be practicing a charade whose message is that the More Abund ant Life, as defined in New Deal terms, is not a proper goal for man. Perhaps they have a suspicion that reality is wider and deeper than the physical universe revealed to common sense - as re ligion has always maintained and so they experiment with mind expanding drugs. They grope after some form of religious expression, but still they drift. Now, we know something about the rise and fall of civilizations.

In our schoolbooks we read about "The glory that was Greece, and the grandeur that was Rome." Toynbee, Spengler and Dawson have made· us aware of dead civil izations on other continents. A civilization comes into existence cradled in dominant ideas, launched by deeds of heroism and self-sacrifice, and it maintains it self in a tonic condition only se long as it has solid grounds fOl believing in itself and its destiny But civili~ations wane; Rome fell; Spengler predicted the decline oj the West. We need not buy ~ single one of Spengler's theories but it is hard to argue against hil phrase: The West is in decline Great numbers of people in thi: favored land no longer believe i1 the things that made Wester] civilization unique. An animal species which ha flourished in a given area may b wiped out by a disease, or it rna be decimated by a predator, or climatic change may destroy it food supply. Everyone of thes 1972 SIX IDEAS TO KEEP US HUMAN 645 afflictions has beset primitive peo ples in times past, but a civiliza tion does not founder for any of these reasons. A civilization goes under when its people, for one reason or another, lose contact with the big keynote ideas of their culture.

Ideas Make Us Human Wherein lies the great differ ence between the human species and every other? We have much in common with other forms of life, especially with the warm blooded vertebrates. In structure we bear some resemblance to the manlike apes, but the critical dif ference in the domain of ideas far outweighs any resemblances. If a chimpanzee has any thoughts at all about what it means to be an ape, they are rudimentary; he's a pretty good animal without even thinking about it. But no man is fully human unless he maintains a lively contact with a set of ideas as to what it means to be a person. This is where our disease has set in, in the realm of ideas. The perilous days we are living through are not the result of a drying up of the food supply, which is more abundant than ever. There's been no marked change in the physique of modern man, and disease·· is not a menace. Nor are we beset by predators. The malaise from which we suffer has impaired the ideas which instruct us what it means to be men and women, and we function poorly in conse quence. The people of our race built the Parthenon, constructed the great systems of philosophy, painted the ceiling of the Sistine Chapel, wrote the plays of Shake speare and the music of Bach; and we can't figure out how to teach our kids tolerance and mu tual respect without busing them all over town! Something is defi nitely wrong with us, and it won't be right with us until we come to terms with six big ideas .. I'll men tion them briefly now and deal with them at greater length later on. They are the right convictions about free will, reason, self responsibility, beauty, goodness, and the sacred. We have "blown it" at everyone of these points, and that's more than enough to account for the sorry spectacle modern man has made of himself.

It also points the way to recovery. Let's, first of all, hear a portion of the indictment leveled at us by contemporaries. Downgrading Man The human race is getting a bad press these days, and we love it. Norman Cousins told us a while back that "Modern Man is Obso lete," and we confer a couple of distinguished editorships on him in a frenzy of approval. Robert 646 THE FREEMAN November Ardrey writes a book to demolish what he calls The Romantic Fal lacy and argues that our fore bea.rs were killer apes, whose blood lust still surges in our veins. And so great is the demand for preach ments of this sort that the book has gone through seventeen print ings! The creature we used to refer to as the glory of creation is, when you scratch the surface, little more than a Naked Ape, Desmond Morris tells us. This book has gone through six print ings and there are two paper back editions. Knowing a good thing when he sees it, Morris writes a second book, The Human Zoo. The Nobel Laureate in bi ology, Albert Szent-Gyorgyi, goes Morris one better with a book entitled The Crazy Ape. And it is common knowledge that this odi ous race fouls its own nest, pol lutes the environment of its neigh bors, wars ceaselessly on its own kind, destroys wildlife, watches Lawrence Welk 'and votes Republi can. The creature Dnce·regarded as Iittle lower than the angels is now ranked several degrees below the beasts!

The books whose titles I have listed above purport to be in the realm of science. In the realm of the admittedly fictitious there is a new school of novelists who aim, in their stories, to reveal man as the pitiable slob he really is. A critic comments that "From Cer vantes to Hemingway, storytellers have assumed that man has hopes and aspirations, and that they could be expressed meaningfully. Bosh, says the new school. Man is a blob, creeping and leaping about in a. world he cannot control, his words meaningless or hypocritical or both."! Immortality of the Soul How different the outlook of a great writer like William Faulk ner, in these words from his speech accepting the Nobel Prize in 1950: "I believe that man will not merely endure; he will prevail. He is immortal, not because he alone among creatures has an in exhaustible voice, but because he has a soul, a spirit capable of compassion and sacrifice and en durance."

Brave words such as these are in danger today of being drowned out by the sheer bulk of the other message, which, through the num erous outlets it has contrived, pro duces the enervating atmosphere of misanthropy in which we strug gle for survival. Take the movies. We are given films which degrade our species by focusing on the sordid, the silly, the ugly, the cowardly, the disgusting; as if all elements of the dramatic were 1 Time, October 13, 1958.

1972 SIX IDEAS TO KEEP US HUMAN 647 lacking in characters who exhibit nobility, heroism, kindness, or even common decency. Another tack is taken in such a, film as "The Hellstrom Chronicle." The mere ability to film those aston ishing pictures of the insect world represents the culmination of the work of many geniuses, but this heartening thought is squelched by the narrator who tells us toward the end of the film that they really do organize things better in the insect world, and human beings should learn from wasps and ants to submerge their individual talents for the greater glory of the hive and termitary! The examples I have cited from works of popular science and the realm of entertainment might be multiplied many times, and they represent no more than the frac tion of the iceberg that pokes it self above the surface of the water. The huge mass below the water line represents the mood, outlook, trend or, drift that sways the multitude.

In many previous ages lonely thinkers and poets sounded the note of pessimism, voiced their despair, and vented their hatred of life. But they were read and heard by only a handful of their contemporaries; they did not reach the multitudes. The masses of men in previous ages were com fortably insulated against ideas of any sort; most of them couldn't read and the range of' the human voice limited the size of the audi ence. The traditional religious be lief gave men's lives meaning and even dignity, and most human energy was used up in producing enough to live on. Catering to the Masses Things are different now. Anti human sentiments, dislike of hu manity, hatred of life, are epi demic among present-day intel lectuals, and the idea that life may not be worth living has perco lated down to the masses of peo ple. This is a new situation in history. The masses of men are relatively inarticulate but only a mass audience can make a book a best seller, or award a golden record to some singer, or enable a film to gross ten million dollars.

The people, books, songs, ideas which ride the crest of fashion today are held there by popular support; whereas, formerly, the artist and composer wrote for wealthy patrons. Joseph Hayden composed magnificent music for the Esterhazys; but Leonard Bernstein writes his Mass for the masses. We are dealing with a perverse attitude toward life which has infected major sectors of Western culture at every level. In the year 1929, Joseph Wood Krutch wrote a stunning little 648 THE FREEMAN November book entitled The Modern Temper, using the word "temper" in the sense of frame of mind, or out look. His maj or point was that educated people had come to as sume that science had exposed as delusions the values and stand ards upon which Western Civili zation had been founded, and that the decline of the West was due to Western man's loss of faith in himself. The prevalent belief, he argued, is that men are animals and animals are machines.

What men believe about them selves is an important factor in the success or failure of their efforts. A golfer who firmly be lieves he can sink a putt is more likely to do so than one who be lieves he'll miss the cup. A swim mer like Don Schollander tells how he gets himself "psyched up" be fore a race and tries to make his opponents feel like losers in a war of nerves. It is a notorious fact in baseball that certain pitchers have the "Indian sign" on a particular batter; he's a dangerous hitter except against this one pitcher. The right beliefs, in short, inspire right action. I don't know what an elephant believes about himself; I suspect that he doesn't believe anything about himself, one way or the other. I think it would not matter; he'd go. on being the same old elephant he always was. Sometimes we say of a pet Saint Ber nard who tries to crawl up into our lap that "Bozo thinks he's a kitten." But we know we're jok ing; and even if this was said seriously, we know that Bozo re mains a dog no matter what he thinks he is.

With the human species it is different: Human beings do not attain their full stature as persons unless they are reinforced by the proper ideas and beliefs about the meaning of being a person. We share our physical being with other mammals; biologically speaking, we are anthropoids. By virtue of our genetic equipment we are clever, adaptable hominids; but no one of us realizes his full potential as a man or woman un less he knows what it means to be human. If we so misread human nature as to regard our species as nothing more than the fortuitous product of natural and social forces, then we have impaired our chances of achieving the most uniquely human qualities within our capacity. Environmentalism If it is generally believed that man is merely the product of his environment - the individual a passive outcome of the time and place into which he was born, the human race a consequence of ac cidental chemical and physical 1972 SIX IDEAS TO KEEP US HUMAN 649 events of a few million years ago - when· such beliefs pervade a culture, the result is pessimism and resignation. The sense of in dividual responsibility is dead in a man who regards himself as a passive creature of his circum stances. The only people who prove superior to their circumstances, who surmount environmental handicaps, are those whose beliefs about the human species endow men and women with the creative energy to overcome life's diffi culties.

It may sound as though I am endorsing a "think and grow rich" formula, or the like. Actually, I am talking about the big picture; the dominant world view enter tained by a culture, the prevailing ideology, the real religion. The dominant world view today is some form of materialism; explicit where Marxianism has taken ·hold, implicit elsewhere. Let me docu ment this assertion from a sta te ment entitled "What I Believe" by C. P. Snow; novelist, scientist, member of the peerage, 'writing in the current issue of the Britan nica Roundtable (Vol. 1, No.3). A publication such as this is no vehicle for publishing radical de partures from orthodoxy; Baron Snow's statement is printed be cause his point of view is com monplace among people who re gard themselves as being in step with up-to-date ideas. Snow writes as follows: "I believe life - hu man life, all life - is a . . . fluke which depended on all manner of improbable conditions happening at the same time." But if all life is a chance occurrence, so is Baron Snow's life. And if Snow's life is a fl uke how can his thinking be anything but a series' of flukes?

His thoughts then are random events,without rational founda tion. "All that happened," he con tin ues, "is within the domain of the laws of physics and chemistry . .. it was a completely material process. . . . A few million years ago, subject to the laws of sta tistical chance, the creatures that were our direct' ancestors came into existence.... Speech and what we call conscious intelligence accrued .... We are still an animal species, but much cleverer than all others." Snow goes on to add, rather wistfully it seems, "It has been a very unlikely process, with many kinds of improbability along the way." Nature1s Passion for Order Now, old Mother Nature has a passion for order. She has an aver sion to disorder, and the Laws of Probability simply record Mother Nature's gyroscopic tug to keep things on course. The Laws of Probability record that the num ber of male and female children 650 THE FREEMAN November born is roughly equal. Flip a penny fifty times and it will come up heads on the average of about every other throw - twenty-five times out of fifty. Make a thous and random throws of a pair of dice and the Laws of Probability can tell you approximately how many times they'll come up snake eyes, and how many times you'll get box cars. Numbers between two and twelve are within the system, and each of the eleven pos sible numbers will appear a cer tain number of times according to the laws of statistical chance.

But let's pose this question: In a thousand random throws of the dice how many times will we get seventeen? How many times will the dice turn into a rabbit? The answer is that this would never happen; spooky questions like this imply belief in magic. Now sup pose we ask the same question, but say that the dice have been thrown once a second for a billion years. Now how many seventeens and how many rabbits? The an swer of any sensible person is "None!" to both questions. The number seventeen and rabbits are outside the system of the little spotted cubes called dice. When a man like C. P. Snow de clares that nonlife becomes life due to the operation of the Laws of Probability over immense time, he attributes magical properties to mere duration. He assumes that dice do turn into rabbits if the time span be measured in billions of years. And when he invokes an other huge block of time to ac count for the transformation of the nonmental into the mental and the nonrational into the rational, he is endowing the mere sequence of days, centuries, and millenia with miracle-working efficacy.

Monkeys vs. Shakespeare We've all heard the assertion intended to illustrate what mere chance and time can accomplish that if a thousand monkeys were seated at a thousand typewriters and banged away for a thousand years they would reproduce every one of Shakespeare's sonnets. The premise upon which this wild il lustration is based is that a Shake spearian sonnet is nothing but a mechanical arrangement of black letters on white paper. There are indeed letters on paper, but there is one other special ingredient in these sonnets: Shakespeare's ge nius. There is no place for genius in the world view ,of the material ist who professes to believe that mind is an offshoot of matter. A poet simply marks the location where a-poem occurs, according to B. F. Skinner: "The poet is also a locus, a place in which certain genetic and environmental causes come together to have a common 1972 SIX IDEAS TO KEEP US HUMAN 651 effect."2 And besides, the genius is a salient individual who stands out above the crowd when really he should be content to seek "so~ cial gains!"

What men believe about them selves has a great deal to do with determining the success or failure of their efforts in the several de partments of life, and when in fluential segments of the literate population embrace notions about the universe which demean man by depriving him of his most dis tinctive characteristics the culture is thrown off base. Let me now probe a little deeper along this line. I shall argue that six major ideas, together with body, brain and nervous system, transform what Snow calls "an animal species, but much cleverer than all the others" into a full fledged member of the human spe cies. A creature with anthropoid features who completely lacks these ideas is not of our species even though he walks, talks, and dresses like a man. Fortunately, in consequence of the animal health and grace in even the worst of men, it is almost impossible for any person to eliminate from his make-up all traces of. these ideas; 2 Saturday Review, July 15, 1972.

some influence remains to keep us reachable. Now then, six big, potent, inter related ideas, without which man is not man. • 1. Free Will. Man's gift of fre:e will makes him a responsible being. • 2. Rationality. Man is a rea soning being who, by taking thought, gains valid truths about himself and the universe. • 3. Self-responsibility. Each person is the custodian of his own energy and talents, charged with the lifetime task of bringing him self to completion. • 4. Beauty. Man confronts beauty in. the very nature of things, and repI:oduces this vision in art. • 5. Goodness. Man has a moral sense, enabling and requiring him to choose between good and evil. • 6. The Sa·cred. Manpartici pates in an order which transcends nature and society. Each of these big ideas is in trouble today. The attack on them has been gathering momentum for a couple of centuries and the case against has just about carried the day in influential circles. We'll further examine these ideas in a concluding article next month. .~ LEONARD E. READ r~~'-'~'-"-'l I ll l l I ---------.-......~.~.~.~..~.~~'-------From whence come wars and fighting among you?

come they not hence, even of your lusts that war in your number? James 4:1 As WITH ALL of my "original" ideas, this one turns out to be "old hat." Upon reading the first draft, an associate remarked, "Why, that is precisely what the Bible says." That accounts for the opening quotation. There then came to mind an .essay by E. W. Dykes entitled "Big Wars from Little Errors Grow." (The Free man, January, 1964.) Old hat or not, the theme needs constant repetition; it is so easily forgot ten. As I view the societal scene from my modest place in it, four current phenomena are outstand ingly impressive: 1. Things on the surface, at least, appear to be amiss, not only in the U.S.A. but world wide: wars with guns, wars with words in religion, edu cation, business, politics, .652 brutishness on the campuses as on the streets. Never in my lifetime have the confronta tions been more pronounced.

2. An amazing awakening to the fact that things are amiss: countless admissions by per sons on all sides of the poli tico-economic argument scholarly intellectuals, colum nists, politicians, and others - many of whom have had a hand in bringing on the very calamity they now decry. 3. A frenzied search for explana tions, causes, reasons - of the most diverse nature. These range from an incompetent bureaucracy to tax loopholes to inequality of income to ex cessive or inadequate. welfar ism to economic growth to lagging GNP - you name it! Never have the assigned rea1972 YOU RASCAL, YOU! 653 sons been more at odds and, as I see it, more astray. 4. A widespread acknowledg ment of trouble but without any noticeable confession of personal shortcomings. Nearly every finger points at some one else; it is impressively you; there is hardly an I in the population. Imagine! All of this rascality and not a professed rascal among us! Why? It is simply because the real evil, the cause of our way wardness, is rarely suspected.

Thus, self-identification is impos sible. People do not link them selves to error about which they are unaware. What is this rascality? It is the domineering habit, the insistence that others act in accord with one's own shadowy lights. Perhaps no one has shaken this habit com pletely, so common is its practice. This habit has its inception in the closest relationships, as in the family, one parent lording it over the other or both of them assum ing an authoritarian as distin guished from an exemplary rela tionship with their children. It takes such seemingly innocent forms as do-as-I-say - a carbon copy way of· life. This tendency, once rooted, spreads by unseen degrees to neighbors, the classroom, the· pul pit, and other associations. Sooner or later, it begins to grow tee.th and takes the form of do-as-I-say or-else, that is, it explodes into out-and-out coercion as in count less thousands of unprincipled governmental compulsions. When not recognized as evil and thus unchecked, it brings on dictator ships and finally reaches its apo gee, its most vicious manifesta tion: mass slaughter.

I am una ware of any evil more pronounced than man lording it over man. Not even God does this. Indeed, He has given us a freedom so radical that we may deny our Maker or otherwise make fools of ourselves. As I see it, thedomi neering habit is the root of allevil 1 and unless there is some realiza tion that it is, we will continue to ascribe nonreasons for our troubles· and without anyone fault ing himself. We will go on ex claiming, "You rascal, you!" A Record of Failure Enough of my theorizing. Let us reflect on an observed fact: an 1 This is close to the idea of Original Sin, as many theologians define it: the tendency of the creature to try to usurp the role of the Creator. That interpreta tion appears to be in accord with the Biblical account which describes the tempter as telling the human creature that if he will eat the forbidden fruit he can become like God. Genesis 3: 5. See also. Nature, Man and God by William Temple (London: Macmillan & Co., Ltd., 1934), p. 496 ff.

654 THE FREEMAN November example cannot be found where domineering in practice - man lording it over man - has resulted in success. 2 The record is failure, without exception. It has to be. A carbon copy is never as good as the imperfect original. Markedly on the increase are the complaints I hear from fathers and mothers about the wayward ness of their children. In some in stances, drugs. But most of them go like this: "She is brilliant, a straight A student in college, but she has bought the whole socialis tic doctrine. She won't do as I say. How do I solve this problem?" I have yet to hear one of these do as-I-say parents confess, "The fault is mine." In far too many of these relationships an unsus pected domineering attitude has been substituted for parental co operation and guidance. Take two cases of domineering that have "teeth": government education and the government postal service.

Government education has three forms of domineering: compulsory attendance, government dictation of the curricula, and the forcible collection of the wherewithal to 2 Success is composed of gains, not losses. Sputniks, moon ventures, the Gateway Arch, and the like-ambitions of a few - are made possible by enormous losses on the part of millions of people. With justice or fairness as the premise, these are failures. pay the bills. That education in America is in a mess goes without saying. It is generally conceded, even by many educators. Show me one person who says, "The fault is mine." Yet, it is the fault of everyone who has had an.y part in endorsing or supporting or prac ticing any form of domineering!3 The government postal service never, even remotely, matched what a free market operation would have accomplished. And it is getting worse day by day. Can you name one person during the past century who confessed the fault is his? No one makes such an admission because he does not recognize the domineering trait as the root of the failure.

The railroads have been subject ed to domineering with "teeth" for decades. They are failing. Not a person takes the blame; it is now and always has been, "You rascal, you!" There is no end to the illus trations that could be given. When Growth Ceases As already stated, the domineer ing habit has its inception in the closest relationships. Correct it here and it will cease to be a men3 This is not "collective guilt" as some would have it but individual error piled high. Al1d, critics to the contrary, each of us is to some extent shaped by the en vironment in which we find ourselves. In another kind of world, you and I would be in another kind of endeavor.

1972 YOU RASCAL, YOU! 655 ace elsewhere. Let us return, for illustration, to those parents whose children refuse to sha:r.e parental views, conform to parental dic tates. True, these parents are unaware that they have been domineering and such recognition is indeed dif ficult. As parents, we tend to for get the growth we ourselves ex perienced during childhood and adolescence. By the time we reach parenthood, our own growth may have stopped. We have arrived, that is, we no longer feel that need to learn which we want our children to feel. If they would only do as we say - think as we do that would be good enough! The insistence that our children do what we ourselves refuse to· do is what destroys the proper relation ships; th~re is no longer a learn ing partnership. Our failure to maintain this kinship in learning is a form of domineering. Looked at from the child's point of view, he is a know-nothing and the par ent the know-it-all. Conflict!

Teacher-Student Relations Perhaps the best way to shed light on the proper relationship between you and me, husband and wife~ parent and child-all close relationships - is to cite an actual case between a teacher and one of his students. My introduction be gan with a letter from the student, a stranger to me. Here it is, abbreviated: "Sir, I am a freshman at a col lege in Florida. Seven short months ago I came here believing in Keynesian economics. That is what I had been taught in high school and I had accepted it with out question. Since coming here I have been made aware of these fallacies, and due to my teacher, ............................. It is like I have been blind and suddenly recovered my sight." A few days later, the teacher, also a stranger to me and un aware of the student's letter, wrote in part: "I am a Social Science professor at a private, small liberal arts col lege. I am very much interested in the freedom point of view and, for the last few months, have spent time trying to understand the view". (Italics mine) Fascinated with these. two let ters, I invited the professor to one of our Seminars. In getting to know· him, I discovered what turned the student from socialism to a free market point of view.

This professor is trying to under stand; he and his students are part ners in the learning process. They have a common goal: enlighten ment! Contrast this with the par ent whose goal is to make the child a carbon copy of himself. The parent may not think of this 656 THE FREEMAN November as domineering, but he gives that impression to the youngster. In this circumstance, the parent and child are not in partnership but in conflict. This matter of posture applies in all close relationships. If we wish to put an end to the more horrible consequences of the domineering habit such as state socialism and eventually mass murder, we can do so by nipping it in the bud. This is to say, rid ourselves of the habit where it is born, namely, in our close rela tionships, whatever they happen to be. Riddance requires no more than (1) an awareness that the domi neering habit - freedom's oppo site - is the root of all evil, (2) an ability to recognize domineer ing in ourselves and to be done with it, (3) an appreciation that learning is just as much a require ment for the parent as the child, for the teacher as the student, for me as you, as much needed at eighty as eight, and (4) a strict observance of the Golden Rule.

Once we recognize that the vici ous domineering of dictators is but the political extremity of the domineering habit that lurks in the mill run of us, we should ex claim, "You rascal, you 1" only to the. image we see in the mirror. Breaking ourselves of a bad habit is the way to destroy its most ma licious manifestation. Remove the source - that's all. ~ IDEAS ON LIBERTY Aggression Is Always Wrong "LIBERALS" suffer a myopia, an inability to see that aggressive force is used to build the welfare state. True, there is considerably less outright violence in tax collections for interventionism than in full-scale war. Big Government relies much more on the threat of force, rather than on its actual employment, to promote the payment of taxes. But anyone could easily witness the trans formation of potential energy into kinetic energy - the threat into the-reality - by trying to spend for himself the portion of his taxes which would go for, say, farm subsidies. Not surprisingly, few citizens have made this interesting experiment.

CRAIG HOWELL IN MANY MINDS, "capitalism" has come to be a bad word, nor does "free enterprise" sound much bet ter. I remember seeing posters in Russia in the early nineteen-thir ties depicting capitalists as Frank enstein monsters, as men with yel low-green faces, crocodile teeth, dressed in cutaways and adorned by top hats. What is the reason for this widespread hatred for capital ists and capitalism despite the ov erwhelming evidence that the sys tem has truly "delivered. the goods"? In its mature stage it in deed is providing, not just for a select few but for the masses, a standard of living cordially envied by those bound under other polit ico-economic arrangements. There are historic, psychological and moral reasons for this state of af fairs. Once we recognize them, we might come to better understandDr. Kuehnelt-Leddihn is a European scholar, linguist, world traveler, and lecturer. Of his many published works, perhaps the best known in America are Liberty or Equality? and The Timeless Christian.

KUEHNELT-LEDDIHN ing the largely irrational resent ment and desire to kill the goose that lays the golden eggs. In Europe there still survives a considerable conservative opposi tion against capitalism. The lead ers of conservative thought and action, more· often than not, came from the· nobility which believed in an agragian-patriarchal order. They thought workers. should be treated by manufacturers as noble men treated their· agricultural em ployees and household servants, providing them with total security for their old age, care in the case of illness, and so· forth. They also disliked the new business leaders who emerged from the middle classes: the grand bourgeois was their social competitor, the banker their disagreeable creditor, not their friend. The big cities with their smoking chimneys were viewed as calamities and·· destroy ers of the good old life. We know that Marx and Engels in the Communist Manifesto furi657 658 THE FREEMAN November ously attacked the aristocratic so cial movement as a potential threat to their own program. Actually, most of the leading minds of Christian anticapitalist thought (equally opposed to socialism) were aristocrats: VilleneuveBargemont, de Mun, Liechtenstein, Vogelsang, Ketteler.

Bias Against Capitalism Not of Worker Origin Armin Mohler, the brilliant Swiss-German neo-conservative, has recently explained that one of the weakest points of contempo rary conservative thought, still wrapped in the threads of its own obsolete agrarian romanticism, is its hostility against modern tech nology. How right he is! The ex ception might have been Italy with its tradition of urban nobility and of patricians who, even before the Reformation, engaged in trade and manufacture. Capitalism, in deed, is of North-Italian origin. It was a Franciscan, Fra Luigi di Pacioli, who invented double-entry bookkeeping. Calvinism gave a new impetus to capitalism but did not invent it. (Aristocratic entre preneurs in Italy? Count Marzotto with his highly diversified busi ness empire of textile plants, pa per mills, hotel· chains and fisher ies is a typical example. His labor relations are of a patriarchal na ture involving substantial fringe benefits which also characterize Japanese business practice.) The real animosity against free enterprise did not originate with the laborers. Bear in mind that in the early nineteenth century the working class was miserably paid, and this for two reasons: (1) the income from manufacturing was quite limited (true mass produc tion came later) and (2) the lion's share of the profits went into rein vestments while the typical manu fact~rers lived rather modestly. It is this ascetic policy of early Eu ropean capitalism which made possible the phenomenal rise of working class standards. Seeing that the manufacturers did not live a life of splendor (as did the big landowners) the workers at first viewed their lot with surpris ing equanimity. The Socialist im petus came from middle class in tellectuals, eccentric industrialists (like Robert Owen and Engels) 2nd impoverished noblemen with a feeling of resentment against the existing order.

As one can imagine, the arti ficially created ire then was turned first against the manufacturer who, after all, is nothing but some sort of broker between the worker and the public. He enables the worker to transform his work into goods. In this process he incurs various expenses, such as for tools, and a part of the costs of market1972 THE ROOTS OF /"ANTICAPITALISM" 659 ing. He hopes to make a profit from these transactions in order to render his efforts worth while. Curiously enough, his responsi bility toward the enterprise is of far greater scope than that of many workers. No wonder that the interest, once centered on acci dents in the factories, is shifting more and more to the manager diseases. The entrepreneur sacri fices not only his "nerves" but also his peace of mind. If he fails, he fails not himself alone; the bread of dozens, of hundreds, of thou sands of families hangs in the bal ance. The situation is not very different in a stock company.

There, the stockholders sometimes make profits in the form of divi dends - and sometimes they do not. The worker always expects to be paid. The bigger risks are thus atthe top, not at the bottom. Yet, how well the worker is paid depends on several factors, the first of which is the. readiness of consumers to pay for the finished goods a price high enough to war rant high wages. Here we come to the brokerage side of the capital ist. Secondly, there is the decision of the entrepreneur (sometimes the stockholders)· how much· of the gross. profits will be distributed (as dividends,. bonuses, and· the like) and how much should be re invested or laid aside. It is evident that· the enterprise, being competitive, has to "look ahead" in a far more concrete way than does the often improvident worker. The business usually must be planned years ahead. It not only has to adopt the best means of produc tion (which means the purchase of new expensive machinery), but also needs ,financial assets as re serves. Finally, the wages have to be in a sound relationship to the marketing possibilities; and also to the quality of the-work done, the sense of duty of the workers and employees. Virtue enters the picture. Even the net profits paid out are not necessarily a "loss" to the workers, because· a profitable enterprise attracts investors; what is good for the enterprise obvious ly is good for its workers.

There is a commonalty of in terestswhich can be gravely upset by either side.· Needless to say, the most· common way to upset the applecart is through excessive wage demands which, if yielded to, tend to eliminate . the .- profits and to make the merchandise unmar ketable. Politically organized work ers also may pressure govern ments into inflationary policies. Strikes cancel production for a given period and mean economic loss. The inability to sell due to excessi ve wages and prices or to protracted strikes can bankrupt the economy. This mutual relationship be660 THE FREEMAN November tween costs of production and pur chasing power is frequently over looked - especially in the so-called "developing nations." The insist ence on "a living wage," often by well-meaning Christian critics, in many cases cannot be met without pricing the products out of the market. Such critics forget that workers might prefer to work at a low wage rather than not to work at all.

Saving Begins at Home One thing is certain: nascent industrial economies have to start on an ascetic, a, Spartan level. This is true of all economies, free or . socialistic. .The apologists of the USSR can well use this argument in the defense of Soviet economies in their initial stage, but only up to a point: the introduction of so cialism in Russia effected immedi ately a tremendous decline of working-class, peasant-class, and middle-class living standards . which,compared with 1916 levels, have improved only in spots.Large sectors still are worse off than be fore the Revolution. A microscopic minority, however, lives very well indeed.! In the meantime, free economies have made such enor mous strides that the gap between Russia and the West is greater than in 1916. There are two rea1 See "Free Enterprise and the Rus sians," The Freeman, August, 1972. sons for this state of affairs.

First, the Eastern Bloc with the exception of Soviet-occupied Ger many, Latvia, and Estonia, com pletely lacks the famous "Protest ant Work Ethic." Secondly, free enterprise is basically more pro ductive than state capitalism be cause of: (a) the snowballing of millions of individual ambitions into a huge avalanche, (b) the ele ment of competition based on free consumer choice which improves quality and efficiency, (c) the strictly non-political management based on efficiency and responsi bility. So, whence comes the wave of hatred directed against free enter prise? Dissatisfied intellectuals designing utopias and decadent noblemen do not account entirely for the phenomenon. Though nas cent capitalism has not yet "de livered the goods" (children can only show promise, no more) ma ture capitalism has proved that it can provide. Empirically speaking, capitalism has justified itself in comparison with socialism (for the existence of which we have to be grateful in this one respect).

The assaults against free enter prise are launched with the help of theories and of sentiments, sometimes working hand in hand. Frequently these attacks are made indirectly, for instance, by criticiz ing technology. This critique 1972 THE ROOTS OF "ANTICAPITALISM" 661 might be genuine, but often serves as a detour. Much of the current antipollution campaign is subcon sciously directed at capitalism via technology. (This particular prob lem is less acute in the Socialist World only because it is less in dustrialized; it is nevertheless amusing to see the Left embrac ing all the idle dreams of the old conservative agrarian romanti cism.) However, if we examine closely the attack against free en terprise, we find the following elements: • (1) The charge that business cycles are the consequence of free dom rather than political inter vention, though proof to the con trary is well established.

• (2) The attack against the man-consuming, soul-killing, slave driving forms of modern produc tion. In this domain, however, the main culprit is the machine rather than the human factor. Technol ogy per se is strictly disciplina rian. In this respect, socialism or communism would not bring the slightest alleviation. On the con trary! Let us remember the ideal of the Stakhanovite, the absence in socialist countries of genuine labor unions, the limitless means the totalitarian state has for co ercion, regulations, and controls. We must bear in mind that the free world also has a competitive labor market. Man can choose the place and conditions of his work. • (3) The critique of "monopoly capitalIsm," shared in a milder way by the "Neo-Liberal" school, is opposed to all forms of bigness. Still, in the free world we find that most countries have legisla tion against monopolies in order to keep competition alive, to give the consumer a real choice. Any cri tic ism of monopolies by a so cialist is hypocritical, because so cialism means total monopoly, the state being the only entrepreneur.

Deeper Resentments Yet these attacks are frequently only rationalizations of much deep er resentments. At the very roots of anticapitalism we have the the ological problem of man's rebel lion against Original Sin or, to put it in secular terms, his vain protest against the human condi tion. By this we mean the curse to which we are subject, the neces sity to work by the sweat of our brow. The worker is in harness, but so is the manager and so is everybody else. For this uninspir ing, sometimes unpleasant state of affairs, the average man will stick the guilt on somebody; capitalism serves as the convenient scape goat. Of course, work could be greatly reduced if one were will ing to accept a much lower living 662 THE FREEMAN November standard - which few people want to do. Without the opportunities free enterprise provides for highly profitable work, the living stand ards would go down to early medi eval levels. Still, the resentment against this order is directed not so much against an abstraction such is human nature - as against persons. Thus, the culprit is taken to be the "Establishment" - of the "capitalists."

This gives us a hint as to the nature of the anticapitalism which has more and more surfaced since the French Revolution and the de cline of Christianity: envy. Ever since 1789, the secret of political success has been the mobilization of majorities against unpopular minorities endowed with certain "privileges" - particularly finan chil privileges. Thus, in the nine teenth century, the "capitalist" appeared to be the man who en joyed considerable wealth though he apparently. "did not work" and derived a vast income from the toil of the workers "who have to slave for him." Apart from the in controvertible fact that they most ly "slave for themselves," there is some truth to this. The Entrepreneurial Role Almost every worker will usu ally contribute in a minor way to the income of .the entrepreneur or of the stockholders. This is perfectly· natural because a broker must always be paid; and an en trepreneur, as we have said before, is actually a broker between the worker and the consumer by pro viding the former with the neces sary tools and guidance in pro duction. (The merchant is a sub broker between the manufacturer and the public.) It is also natural to pay for borrowed tools for the simple reason that their value is diminished by use. (Thus the trav eling salesman will have to pay for a rented car, the commercial photographer for a rented camera, and so forth.) Beyond; this, the entrepreneur (who is, as we have seen, a broker as well as a lender) takes the risk of failure and bank ruptcy. This situation also may be encountered in the USSR where anyone can get an "unearned in come" for money he puts into a savings bank or where he can buy a lottery ticket.. The purchase of such a ticket is based on an ex pectation (i.e., to make a profit) but also entails a risk (Le., not to win anything).

Risk characterizes all of human existence: to make an effort with out exactly foreseeing its success. Thus, a writer starting a novel or a painter putting the first lines on his canvas is not sure whether he can transform his vision into re ality. He might fail. Often he does. The farmer with his crop is in the 1972 THE ROOTS OF "ANTICAPITALISM" 663 same boat. But the typical worker entering the factory can be cer tain that he will be paid at week's end. It should be noted here that in Austria and Germany, for in stance, the industrial laborer works an average of 43 hours a week (the 40-hour week is in the offing), while the self-employed put in an average of 62.5 hours a week. In other words, the rule within our mature economy is this: the "higher up," the greater the work effort - and the higher, too, the work ethics; the slack em ployee cheats the employer but the slack employer only cheats him self.

Facts and Fiction The trouble, as Goetz Briefs once pointed out, is that the cur rent notions about the profits of the capitalists are totally out of touch with reality.2 The reason for these wrong ideas is partly mathe matical! Let us look at some sta tistics. Too many people think that a radical redistribution of profits would truly benefit "the little man." But what do the figures tell us? According to the E conom,ic Almanac, 1962, published by the National Industrial Conference Board, (page 115), of the national income in the United States, the 2 Das Gewerkschaftsproblem gestern und heute. (Frankfurt am Main: Knapp, 1955), p. 98. compensation of employees amounted to 71 per cent; the self employed earned 11.9 per cent, the farmers 3.1 per cent. Corporation profits before taxes were 9.7 per cent of the total national income (after taxes only 4.9 per cent) and dividends paid out were 3.4 per cent. Interest paid to creditors amounted to 4.7 per cent of the national income. Yet, were the re cipients of these dividends and in terest payments all "capitalists"?

How many workers, retired farm ers, widows, benevolent associa tions, and educational institutions were among them? Would this sum, evenly divided among all Americans, materially improve their lot? Of course not. In other parts of the world the situation is not much different. According to earlier statistics (1958), if aU German incomes were to be reduced to a maximum of 1000 Marks (then $250.00) a month and every citizen given an even share of the surplus, this share would have amounted to 4 cents a day. A similar calculation, expropriating all Austrian month ly incomes of 1000 dollars or more, would in 1960 have given each Austrian citizen an additional 1141: cents a day! But, let us return to corporate profits. The 13 largest Italian companies composed in 1965 a full-page advertisement which 664 THE FREEMAN November they tried to place in the leading dailies of the Peninsula. This statement told at a glance what the dividends had been in 1963, what they were over a lO-year pe riod, what salaries and wages were paid, how much industry con tributed to social security and old age pensions. The relationship be tween the dividends and labor cost was roughly 1 to 12. The com panies added that the estimated number of shareholders (obvious ly from many walks of life) was over half a million - double the number of the employees. Interest ingly and significantly enough, two of the dailies refused to carry the paid advertisement: one was the Communist Unita, the other the Papal Osservatore Romano whose excuse was that it was pub lished in Vatican City, which means outside of the Italian State.

Rooted in Envy To the advocate of equality, the fact that certain individuals live much better than others seems to be "unbearable". The internal rev enue policies which try to "soak the rich" often have their roots in man's envy. It seems useless to demonstrate that a redistribution of wealth would be of no advan tage to the many or that an op pressive tax policy directed against the well-to-do is self-defeating for a country's economy. One usually will get the reply that in a democ racy a fiscal policy which might be economically sound could be politically unacceptable - and vice versa. Pointing out that the spend ing of wealthy 'persons is good for the nation as a whole may bring the snap reaction that "nobody should have that much money." Yet, people who earn huge sums usually have taken extraordinary risks or are performing extraor dinary services. Some of them are inventors. Let us assume that somebody invents an effective drug against cancer and thereby earns a hundred million dollars. (Cer tainly, those who suffer from can cer would not begrudge him his wealth.) Unless he buries this sum in his garden, he would help by lending to others (through banks, for instance) and by pur chasing liberally from others. The only reason to obj ect to his wealth would be sheer envy. (I would add here that had it not been for the liberality of monarchs, popes, bishops, aristocrats, and patricians it would not be worthwhile for an American to pay a nickel to see Europe. The landscape is more grandiose in the New World.) Still, it is significant that one of the few outstanding Christian so ciologists in Europe, Father Os wald von Nell-Breuning, SJ, not noted for conservative leanings, has recently (Zur Deba,tte, Mu1972 THE ROOTS OF "ANTICAPITALIS"M" 665 nich, February 1972) taken a firm stand against the myths of the beneficient effects of the redistri bution of wealth. As one of the architects of the Encyclical Quad ragesimo Anno he emphasized that Pius XI was thoroughly cognizant with this incontrovertible fact but that, in the meantime, this knowl edge has been nearly lost and that therefore demagogical ideas have largely invaded Catholic sociolog ical and economic thinking. Espe cially in the domain of "Third World" economic problems, the learned Jesuit hinted, the hue and cry for "distributive justice" has done a great deal of mischief.

It has become fashionable to at tack free enterprise on moral grounds. There are people among us, many of them well-meaning, idealistic Christians, who freely admit that "capitalism delivers the goods," that it is far more ef ficient than socialism, but that it is ethically on a lower plane. It is denounced as egotistic and ma terialistic. Of course, life on earth is a vale of tears and no system, political, social or economic, can claim perfection. Yet, the means of production can only be owned privately, or by the State. State ownership of all means of produc tion certainly is not conducive to liberty. It is totalitarianism. It in volves state control of all media of expression. (In Nazi Germany private ownership existed de jure, but certainly not de facto.) The remark of Roepke is only too true, that in a free enterprise system the supreme sanction comes from the bailiff, but in a totalitarian tyranny from the hangman.

The Christian insistence on freedom - the monastic vows are voluntary sacrifices of a select few - derives from the Christian con cept that man must be free in or der to act morally. (A sleeping, a chained and clubbed, a drugged person can neither be sinful nor virtuous.) Yet, the free world which is practically synonymous with the world of free enterprise, alone provides a climate, a way of life compatible with the dignity of man who makes free decisions, en joys privileges, assumes responsi bilities, and develops his talents as he sees fit. He is truly the stew ard of his family. He can buy, sell, save, invest, gamble, plan the fu ture, build, retrench, acquire capi tal, make donations, take risks. In other words, he can be the master of his economic fate and act as a man instead of a sheep in a herd under a shepherd and his dogs. No doubt, free enterprise is a harsh system; it demands real men. But socialism, which appeals to envi ous people craving for security and afraid to decide for them selves, impairs human dignity and crushes man utterly. ~ The AmericanEconomy HANS F. SENNHOLZ I Depression-Proof MOST contemporary economists are fully convinced that a major de pression of the 1929-1941 variety cannot happen again. It is incon ceivable, they say, that the Ameri can economy should fall again into such an abyss of despair' when more than 13 million Americans were unemployed, when banks and businesses failed by scores and countless farmers lost their land, when nearly everyone suffered painful losses of wealth and in come. The tragedy of the Great Depression lives on as a nightmare that frightens everyone especially during periods of recession or stag nation. But our politicians and their learned advisors, the econo mists, assure us almost in unison that they will not let it happen again. They are solemnly pledging the awesome power of government to prevent another depression.

Dr. Sennholz heads the Department of Eco nomics at Grove City College. and is a . noted writer and lecturer on monetary and economic principles and practices. The sincerity of their intentions is no more to be doubted than the good will of the policymakers of the Hoover and Roosevelt era who were engulfed by the Great Depres sion. But it may be questioned that we have learned to avoid the dread ful errors of policy that caused and prolonged the disaster. If we re peat the errors that generated the Great Depression, inexorable eco nomic .law assures that it must happen again. Have our policymakers learned the lessons of the Great Depres sion? Their explanations and in trepretations of economc decline differ little from those offered by the politicians of the 1920's and 1930's. And contemporary economic policies, although far more com prehensive and massive in scope and import, are similar to those cond ucted by the Hoover and Roosevelt Administrations.

Most economists echo the expla nation given by the most famous 1972 THE AMERICAN ECONOMY IS NOT DEPRESSION -PROOF 667 and influential economist of our century, John Maynard Keynes. Unemployment and depression are the inevitable resultof inadequate effective demand, according to Keynes. Therefore, monetary and fiscal policy should be employed to increase aggregate demand. The nominal amount of money should be increased, which in the short run would cause interest rates to fall, investments to increase, and income to rise. But in case mone tary policy would be ineffective, because falling money velocity may counteract an increase in the quantity of money, he recommended direct government investment through government tax cutting and deficit spending. 1 Influential Keynesian disciples, such as Alvin H. Hansen 2, Paul A. Samuelson 3, and Abba P.Lerner 4 1 John M. Keynes, General Theory of Employment, Interest and Money (N.Y.: Harcourt, Brace & World, Inc., 1936), p. 250; also Alvin H. Hansen, A Guide to Keynes (N.Y.: McGraw-Hill, Inc., 1953), pp. 21-22.

2 Monetary Theory and Fiscal Policy (N.Y.: McGraw-Hill, Inc., 1949); Busi ness Cycles and National Income (N.Y.: W. W. Norton & Co., Inc., 1951). 3 The Collected Scientific Papers of Paul A. Samuelson, ed. Joseph Stiglitz (Cambridge: M.LT. Press, 1966); Eco nomics, 8th ed. (N.Y.: McGraw-Hill, Inc., 1970). 4 "A Program for Monetary Stabil ity," in Proceedings, Conference on Sav ings and Residential Financing (Chi cago, Ill.: 1962); The Economics of Con trol (N.Y.: The Macmillan Co., 1944). played a major role in brInging the Keynesian system to America. They recommended that the gov ernment implement a continuous policy of full employment regard less of the state of the budget, which became the law of the land in the Full Employment Act of 1946. And all ·Federal administra tionsfrom Truman to Nixon have since then followed the policy rec ommendations of the "new eco nomics." Spendthrift Policies Most of the "new policies" were already being implemented during the 1920's and 1930's. The spec tacular crash of 1929 followed four years of considerable credit expansion by the Federal Reserve System under the Coolidge Admin istration. But it is futile to look back in history without the proper theoretical framework that ex plains causes and consequences.

The Keynesian historian views past experiences in his peculiar light and therefore quickly rejects all other interpretations. To him, the200-year history of business cycles is a long record of economic disequilibria that are caused by inadequate effective demand. This explanation, which has. ele vated inadequate demand or "un derconsumption" to the guiding principle of contemporary econom ic policy, has been the battle cry 668 THE FREEMAN November of the spendthrifts of all ages. And countless monarchs and princes rallied in ready acceptance of such doctrines that seemed to justify conspicuous consumption and deficit spending. But unfor tunately, their policies always re sulted not only in greater misery and poverty of the populace but also instability of state and soci ety. The major political and social upheavals in Western history nor mally followed years of general impoverishment through wasteful consumption by the monarch or ex pensive wars staged by the state.

Booms and depressions do not spring from economic freedom and the individual enterprise system. On the contrary, they inevitably result from government disturb ances of a peaceful market society. In particular, they follow policies of inflation and credit expansion that are designed to finance gov ernment deficit spending or to fa cilitate greater business expendi tures. Ludwig von Mises has clear ly shown how the creation of money and credit by our monetary authorities falsifies interest rates and thus misguides businessmen in their investment decisions. The boom phase of the trade· cycle is a period of maladj ustment in which economic resources are wasted and misused becau8e of false interest rates. Consumer choices and pref erences are ignored because the government, instead of the people, is giving the signals in the capi tal market. 5 When the economic boom finally causes business costs to soar and capital returns to fall until great losses are suffered, a recession in evitably sets in. It is unavoidable once monetary authorities have generated the maladjustment through deficit spending or credit expansion. The unemployment of labor and capital must continue as long as the economic structure re mains maladjusted through gov ernment intervention in the capi tal and labor markets. The. Great Depression taught us this very lesson at a horrendous price. 6 Booms Applauded, Recessions Deplored Representatives of the "new eco nomics" never obj ect to the boom phase of the cycle. In fact, they may applaud it as "great years of uninterrupted economic growth,"

or as a "new plateau," or "new stability." But when the economy finally begins to sag and unem ployment quickly rises, they re5 Cf. Ludwig von Mises, Human Ac tion (New Haven, Conn.: Yale Univer sity Press, 1949). p. 538 et seq.; also The Theory of Money and Credit (New Ha ven, Conn.: Yale University Press, 1953), p.339 et seq. 6 Cf. Murray Rothba'rd, America's Great Depression (Princeton, N.J.: D. Van Nostrand, 1963).

1972 THE AMERICAN ECONOMY IS NOT DEPRESSION-PROOF 669 member their Keynesian recipes: spend more and inflate more. Obviously, the maladjustment that was generated by government interference with the capital mar ket cannot be alleviated by more such interference. The drug addict vlho·is suffering painful withdraw al symptoms cannot be cured by prescribing larger doses of the same drug. But this is precisely the kind of advice Keynesian econ omists give to their governments. When the national economy be gins to falter, they call for more inflation and credit expansion, the very cause of the dilemma. True, the -creation and injection of new funds may temporarily prolong the boom by supporting the malad justments and generating new ones, as the injection of harder drugs in the human body may at first reduce the pain. But to ad minister ever harder drugs must finally kill the patient, as the in jection of ever larger quantities of new funds must destroy the cur rency through hyperinflation and economic disintegration.

In fact, after several decades of Keynesian policies, we seem to have reached the .point where only massive doses of inflation still stimulate-the economic patient. Previous rates of inflation, to which we have :grown ,·accustomed and 'learned to·a(ljast, no longer work as stimuli; businessmen immediately adjust to the rates they anticipate. A five per cent rate that has been foreseen well in ad vance no longer stimulates the economy when it is finally admin istered. Only higher rates than an ticipated still have such an effect. This is also why the Federal defi cits must get bigger and bigger. But while the rate of inflation must accelerate in order to pro vide the Keynesian stimulant, the monetary destruction also accele rates. In the end, government faces an inescapable alternative: to accele rate its spending and inflating to total monetary destruction, or abandon its policy and thereby save the currency. If it chooses the former, it precipitates a de pression through economic disin tegration; if it chooses the latter) the depression that was delayed for so long finally will erupt in full severity. No matter which course the government eventually chooses, the contra-cyclical policies are bound to fail. The Keynesian rec ipe does not make the economy de pression-proof. It merely post pones the depression through mon etary destruction and thereby makes it worse.

Government Safegutmls are ·llIu,OIV Tbe followers of K-e'ynesare not tfte6~ly .economists who are con vinced that a depression can never 670 THE FREEMAN November happen again. The monetarists, while rejecting .the contra-cyclical recipes of the "new economics," deny the possibility of economic depressions on other grounds. "There have been fundamental changes in institutions and atti tudes in the United States since the Great Depression," Prof. Friedman reassures us.7 They are rendering a. major depression in the United States "almost incon ceivable." Establishment of the Federal Deposit Insurance Corporation in 1933, we are told, was a basic change in American banking that made bank failures "almost a thing of the past." By converting all deposit liabilities of private banks into a Federal liability, the F.D.I.G. eliminated the basic cause for. runs on banks, which was the d.epositors' attempt to convert their claims into Federal currency.

Since· both deposits and currency are now Federal liabilities, an im portant cause of credit contrac tions and economic depressions is said to have been removed. These· economists err·.· in their basic assumption that a depression can be, avoided if only monetary contractions can be avoided. Once the malinvestments havebeenmade 7 "Why the American Economy is De pression-Proof" in Dollars and Deficits (Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1968), p. 74. and the boom has run its course, the readjustment must necessarily be painful. The depression is an una voidable phase of the trade cycle once it has commenced. For the central bank then to embark upon credit expansion, in an at tempt to prevent the liquidation of malinvestment, can only delay the recovery and thus prolong. the depression. The Federal Deposit Insurance Corporation that, in effect, makes every bank deposit a government liability is designed to prevent the needed liquidation. Of course, it can do this successfully and thus delay the readjustment if newly created funds are used for the rescue action. But where would the government obtain the funds necessary to prevent massive li quidation of bank credit? From its central bank, of course. The stabilizing power of the F.D.I.C., in final analysis, is nothing but the government power to create and emit new money. Therefore,it is necessary to repeat the answer given to the Keynesian. spenders: more inflation can merely post pone a depression through mone tary destruction and ultimately make it worse.

Deficit financing Another change in banking structure that is said to assure economic stability has been the in1972 THE AMERICAN ECONOMY IS NOT DEPRESSION-PROOF 671 creased importance of government obligations; the phenomenal growth in government debt has made government liabilities an im portant part of bank assets, which afford greater stability to the stock of money and credit. This increased importance of government obligations as bank assets imparts such great con fidence to some economists. To others, however, it is a cause for anxiety. It is indicative not only of the changing role of American banking from mediators of credit to fiscal agents of the Federal treasury, but also of the great re liance on the inflationary powers of government. What would be the status of government obligations without the inflation powers to support them? Every budgetary deficit would send U.S. Treasury obligations to new discounts if it were not for the open-market pur chases by the Federal Reserve System. But this very support through monetary expansion, while it may succeed in the short run, tends to be self-defeating in the long run as it raises interest rates and thus reduces the market prices of fixed-income obligations.

This is why government securities in bank portfolios have been very poor investments ever since World War II, which banks endeavor to avoid wherever possible. In fact, long-term U.S. Treasury obligations have at times, when interest rates rose significantly, inflicted crushing losses on American banks, losses which dubious accounting practices endeavor to hide. The banking losses then provide an im portant motive for early resump tion of credit expansion. The Dethroning 01 Gold Finally, many of the monetarist economists rejoice about the sev ering of all links between gold and the internal supply of money. The "dethroning of gold" is said to reduce the sensitivity of the stock of money to changes in external conditions. Removal of gold from public circulation has made us in dependent at last from the va garies of foreign influence. There by we would avoid monetary con traction which is "an essential conditioning factor for the occur rence of a major depression."

What these economists call the "dethroning" of gold is rather· a "default" of paper. After all, it was the creation of massive quan.:. tities of money substitutes that caused central banks to default on their obligation to .. redeem their currencies iIi gold. But this de fault did not bring stability and prosperity. On the contrarY,it opened the gates for massive in flation and economic· instability. The fiat standard is more unstable than the gold-exchange .standard, 672 THE FREEMAN November which afforded less· stability than the gold-bullion standard, which in turn was less stable than the classical gold-coin standard. It is true, the default in gold payments did stop the runs on banks; no one in his right senses would want to run for paper money the supply of which is potentially unlimited. But the fiat standard does not make us independent of the va garies of foreign influence. It has made the international money mar ket more vulnerable than ever be fore. The U.S. dollar is stumbling from crisis to crisis, with grave dangers to international trade and cooperation and, ultimately, to the stability of the American economy itself.

It is not alone the new monetary structure that affords some econo mists so much confidence in the lasting stability of the American economy. There is also the fiscal structure. "There can be no dis agreement," Professor Friedman asserts, "that the fiscal structure is now an exceedingly important and' powerful 'built-in stabilizer' ."8 Government expenditures, both national and local, now amount to more than one-third of the nation al income. Although the relative growth of government casts som ber prospects for political free-dam, it is argued that the change in the character of both expendi8 Ibid., p. 86. tures and receipts has stabilizing effects on the business cycle. A broad program of social security, unemployment insurance, and a farm program that supports prod uct prices, all tend to increase government expenditures in de pression and to reduce them in prosperity. The same contra-cyc lical effects are derived from per sonal and corporation income taxa tion, which in boom or recession automatically creates budget sur pluses or deficits and thereby off sets from 30 to 40 per cent of any national income change. So goes their theory.

Loaded for Stability This doctrine of the built-in sta bilizers calls to mind the story of the farmer who, before leaving for the market in town, loaded his pack mule with an exceptionally heavy load of potatoes. When his neighbor inquired about the rea son for the heavy load the farmer retorted with a gesture of great learning: "On the muddy road to town the beast needs stability. The heavier the load the greater the . stability!" A bit of plain horse sense ought to tell us that the growing costs of government do. not afford stabil ity; on the contrary, they are making the "private sector" that' is carrying the growing burden of the "public sector" ever ~ore ane1972 THE AMERICAN ECONOMY IS NOT DEPRESSION-PROOF 673 roic and unstable. True, the heavy burdens can be lightened through massive monetary depreciation. The automatic deficits, from ris ing expenditures .and declining tax revenues during recession, can be financed through currency ex pansion. But as the Keynesian con tra-cyclical policies fail to impart stability to the American economy, so do the automatic fiscal stabil izers.

Finally, we are told that there has been an important change in the psychological climate of Amer ica. Before the Great Depression, according to this view, we were more afraid of inflation than of deflation; we wanted "hard mon ey" at all costs. But the Great Depression has changed all that. It has caused public opinion to swing from one extreme to the other. That is why today, after decades of rising prices and mone tary depreciation, the public is still seized by a real fear of depression. What the people may not realize, warn the monetarists, is that the ultimate destination of those who follow the path of infla tion is destruction of the currency. One may fully agree that the ultimate effect of these built-in stabilizers is monetary destruc tion. But what is one to make of the swinging theory? The Ameri can public has approved inflation and credit expansion ever since the Coolidge Administration, clung to easy money throughout the 1930's, endorsed rampant war time inflation during the 1940's, heralded the contra-cyclical poli cies during the 1950's, applauded the accelerator policies of the 1960's, and still continues to rely on massive deficit spending. The fe ver of inflation that has infected American economic thought and policy is rising steadily and dan gerously. And while it rages, nei ther the body politic nor the Amer ican economy is depression-proof.

I) IDEAS ON LIBERTY The Consumer Theory oj Prosperity THE USUAL effect of the attempts of government to encourage con sumption is merely to prevent saving; that is, to promote unpro ductive consumption at the expense of reproductive, and diminish the national wealth by the very means which were intended to increase it. JOHN STUART MILL, Essays on Some Unsettled Questions of Political Economy.

PAUL L. POIROT A PECULIAR tendency of thinking human beings is to behave, not necessarily in response to the facts of a given·· situation, but in re sponse to what they believe is the situation. Men who believe there are dif ferent kinds of inflation may be convinced that different cures are needed. For instance, if it is a "cost push" inflation, and high wages are believed to be the cost of production most responsible for the extra push, then the obvious cure would seem to be a rollback or other control of wage rates. Or, if high profits are believed to be responsible for pushing prices upward, then the most like ly cure would be an "excess-prof its" tax or some such limitation of profits. The latest new kind of inflation is alleged to be "social inflation" - due to the extra expense of cleaning up air and water, foster~"'A ing "consumerism,"· meeting other social goals. And when the doctors of the sick body politic get around to it, they might possibly come to believe that the cure for social in flation is to clamp a lid on Federal spending.

In view of the widespread dis agreement about the facts con cerning inflation in the United States of America in 1972, let us imagine a comparable situation at some other time and place. Let's say it's the year of the millennium in Utopia and see if we can visu alize the facts. Let's further imagine that the residents of Utopia are as bright on the whole as weare, living under what is generally described as a free mar ket economy with quite a lot of government intervention. For the sake of simplicity let's say that about a. third of the la borers in Utopia are members of a union under the leadership of Mr.

1972 SOCIAL INFLATION 675 Goody. And Mr. Goody says to the boys, "Let's have some inflation; instead of the going wage of $3.00 an hour, we'll demand $6.00." But in Utopia there is no way to force an employer to hire anyone at $6.00 an hour if' he doesn't want to; ther'e's no way to force a con sumer to buy labor or its product at $6.00 an hour. So Mr. Goody might have some $6.00 unemploy ment, but no $6.00 labor; and there's practically nothing labor ers can do to bring about wage push inflation. In Utopia, when a businessman decides to have a little inflation, rai~e his prices 5 per cent to double his: profits, a funny thing happens. Consumers decide they'll buy from other suppliers instead, at the old price; and some businesses change ownership, but there isn't any' in flation. However, when the people of Utopia ask the government to pro vide additional services without increasing taxes, and the govern ment finances its deficits by print ing additional money, then there is inflation in Utopia, "social in flation" caused by pumping noth ing but money into the market.

Inflation in Utopia is strictly a monetary phenomenon. If the gov ernment prints the money, it is called social inflation. If anyone else prints it, it is called counter feiting. And that's the fact, the only relevant fact pertaining to in flation - in Utopia, that is. We mentioned earlier the possi bility that once we've identified this new kind of "social inflation" that plagues the United States in 1972, then pe'rhaps one' of the doc tors might find a workable cure. Not bad for a, start is advice from Andrew F. Brimmer, mem ber of the Board of Governors of the Federal Reserve System: "Despite our obvious affluence as a nation, we do not have the capacity to produce enough so that' households can 'maximize their consum ption while minimizing taxes; so that an adequate volume of housing can be built; so that businesses can expand their production facilities, at a maxi mum rate - and also make the invest ment needed to abate pollution; so that governments can meet the in creasing demand for public services while tax revenues lag behind spend ing."!

What the good doctor seems to be prescribing is exercise - of self-reliance and will power. If we don't like inflation then ask the government to stop pampering us and tampering with the money supply and stick to its more ap propriate governmental function of policing the market; otherwise leave us alone. ~ 1 Quoted in U. S. News and World Re port, June 12, 1972, p. 39.

I HAD HEARD of a Iittle town in California wh'ich was credited with being an example of efficient government, and one which did an admirable job of providing for the needs of its citizens. I determined to go there some time and see for myself if these things were true, and if so, to bring back some ideas that might prove helpful to citi zens of other communities. This small town of Tarnal, with a population of about 2,000 people, was established in 1852 on the shore of beautiful San Francisco Bay, just 20 miles north of the City of San Francisco. In the early days the chief industry was the manufacture of gunny sacks and other rough cordage products made of jute. In April, 1951, a disastrous fire burned the huge mill to the ground at an estimated Mr. Johnson, of Mountain View, California,i$ a counselor in public relations and fund raising. I Visit a Managed Society ORIEN JOHNSON loss of $3,000,000 which left 1,000 men without a job. Gradually other industries were begun. A mattress factory, a cotton textile mill, a large laundry, a detergent plant, a clothing factory, a large furniture factory and several other indus tries now provide most of the em ployable residents with jobs.

An official publication described some of the services provided for residents of this unusual com munity which made me even more anxious to visit the place and to talk to someone who might be en joying these benefits. I read that three-fourths of the residents are presently engaged in some aspect of· education in a' free school system beginning with ele mentarygrades on through junior college level. Half of the students attend classes in the evenings. In addition to teaching skills and vo cational training, tbe ,instructors 1972 I VISIT A MAN AGED SOCIETY 677 are "skilled in group behavior." They train students in "terminus g'oals, interpersonal relationships, prop~r acceptance of job, work, completion of goals, and to op erate cooperatively under super vision." There are no unions in this town. Instead, a Trade Advisory Committee, representing both management and labor, works to "aid in defining training stand ards, establishing completion cri teria and assistance in job place ment." They are concerned with both H vocational competence and the development of constructive social attitudes."

An extensive free recreational program includes several well equipped play fields and courts for individual and competitive sports, and facilities for staging music and variety shows by resident or visi ting talent. I was amazed to note that none of the residents ever apply for Medicare simply because all of the medical facilities of a I50-bed fully accredited hospital, an outstand ing therapy X-ray unit, and serv ices of well-qualified consultants and specialists of the San Fran cisco Bay Area are readily avail able, and all at no cost to any of the patients. In spite of these many benefits, I noticed a paragraph describing the work of the Narcotic Treatment Control Unit which is a live in situation treating a large num ber of persons with drug abuse problems. A copy of the weekly newspaper lists the regular meet ings of an Alcoholics Anonymous chapter. Serious crimes also make headlines in this newspaper from time to time, mostly of a violent nature such as stabbings, club bings, fights, riotings and mur ders. Evidently, not all is as idyllic as one would presume in this man aged society.

Meet Lamar Knighton I finally got a lead on a man who worked as a linotypist on the local newspaper and found out he would be glad to meet with me and answer any questions I might have about life as he saw it in this welfare city. I found also that this man was a reader of The Freeman magazine and that he subscribed fully to the libertarian philoso phies of its articles. I arranged a time to go to Tarnal and to look up my new friend, La mar Knighton, to determine, if possible, how he squared his phi losophies with his life. The fog was just beginning to lift as I drove into town. Seagulls were wheeling in circles above the shore as I slowed my car to enjoy the view of the islands in the Bay. A row of small, rundown houses lined the street over looking the 678 THE FREEMAN November water. The other side of the street dropped off in a. gra.ssy meadow to the shore. After 1'd driven about three blocks the street was completely blocked with a huge iron gate. A sign pointed to a parking lot; I found a place to park my car, and 'walked back toa small building at the gate.

A large, muscular guard, dressed in an olive-colored uniform asked me who I wanted to see. "L,amar Knighton," I said. He shuffled through some files in a cabinet and asked for some identification. I showed my driv er's license, and he asked me to sign in ona large register book. A buzzer unlocked the door and I walked about 100 yards to another small building. Here I was asked to empty my pockets into a tray on a counter and step through a metal-detector gate. My next stop was a waiting room where I was told I might sit to wait while Lamar was located and paged. In about thirty min utes a voice sounded over the speaker system, "Knighton visit or." A man nodded toward a door. I walked up two steps and through the door into a large room. There I saw several rows of long tables running the· length of the room with people sitting on each side. On one side sat men, women, and children. On the other side sat only men dressed in blue jeans and blue shirts.

A voice said, "Mr. Johnson 1" I saw a handsome man about 35 years old who introduced himself to me. "I'm Lamar Knighton," he said. "Glad to see you, neighbor." 1 said, "Wen, I'm glad to see you finally. I had to go through a lot of red tape, but here I am." We started talking and I learned that Lamar was a native of Texas, had once been a meatcutter, had served a hitch in the Army, and was now operating the linotype machine in the newspaper office. We started talking about liberty and Lamar told me of his special interest in the subject and how he spends most of his spare time writing essays which he sends to anyone who will read them. What Is Liberty? I had to attend to some business in San Francisco, but promised to write and to come back for other visits. I signed out and walked to the parking area. The gulls were still tracing lazy· freedom circles in the breeze. A few sailboats dotted the Bay. The wind whistled through the tall pine trees on the point. "What is liberty?" I asked myself as I looked back at a stone tower manned with armed guards who would shoot to kill any un authorized person who attempted to escape from that managed 801972 I VISIT A MAN AGED SOCIETY 679 ciety. Surely I could -answer that simple question after such a visit.

But my thoughts refused to focus. I wanted only to experience the liberty I now enjoyed. My eyes turned again to the free-flying birds. My ears caught the sighing in the trees. I breathed deeply of the fresh salt air.' I picked up a stone and ,splashed it into the waves. These were the symbols that translated all my philosophies into experiential realities. This I knew. as freedom. I needed no words. They would come later as I would challenge Lamar to inter pret his freedom concepts as a prisoner in San Quentin peniten tiary. Permission was granted to me to visit this man in the famous 120-year-old institution through the courtesy of a new nonprofit group known as Job Therapy of California. Part of its service is the man-to-man (M-2) visitation program in which citizens volun teer to make one visit a month to a prisoner. I had signed up as a sponsor and was matched with Lamar Knighton, who also had volunteered for the program. My only other commitment is that I will· meet Lamar at the gate of San Quentin on the day of his re lease, and spend the day with him as he begins a new life on the out side. I am not to give or lend him any money, nor take him to stay in my home. I serve only as a friend, to encourage him to earn his own· way and build the kind of life that will be most helpful to himself.

Doing an Article ... After several visits in which we exchanged ideas we had discovered from .books .and periodicals, our friendship began to grow. Between visits we would write essays on various aspects of freedom. I re s,olved on my next· visit to get Lamar's view of the managed so ciety in which he lived. On this particular day I took the freeway that runs along the beautiful coastal range that extends from San Francisco down the Penin sula. Patches of fog were clinging to the top of the redwood hills and a brisk wind tossed whitecaps across the Bay and under the Golden Gate Bridge. The same guard in the gate house asked the same familiar question: "Who do you want to visit ?" "Lamar Knighton," I replied. "Please show your identifica tion." I produced my driver's li cense. "Sign in, please." I signed my name in the visitor's register and the time (9 :40 A.M.) in the ap propriate spot.

"What do you have in the bvief· case?" he asked.

680 THE FREEMAN November "Some papers," I said. "I'm do ing an article for a magazine and want to ask Lamar some ques tions." "That's really not supposed to be done," he said. "Tell the guard at the desk in the visiting room so he'll know what you're doing." "Okay," I promised and began the walk to the next building. I wonder what that rule is for, I asked myself. I'm not the prisoner. Why do they put such restrictions on me? I'm getting a real taste of the managed society. A man in front of me was having difficulty clearing the metal detector. Every time he walked past the machine it blinked a red light and emitted a sharp buzz. Everything was re moved from all of his pockets; still, the machine was picking up some metal object on his person. "Take off your belt," the guard said. The man pulled off his belt and held his pants up as he walked through the space. By this time several other visitors were waiting in line, including wives and girl friends of prisoners, which added to the man's embarrassment as he finished dressing in front of us. I was next and cleared the machine in my first attempt.

Official Delay At 9 :50 I deposited my pass on the desk of the guard in the waiting room and was told to take a seat on the hard oak benches. At 10 :50 I was still thumbing through some old magazines, but my visitor hadn't arrived. I waited another 20 minutes and asked the guard if his call for Knighton had gotten through. He picked up the phone and spoke to another guard sta tion. "He's just cleaning up and is on his way in," he said. At 11 :40 - two hours from the time I signed in at the outer gate - a voice came in over the ampli fying system, "Knighton visitor." I saw Lamar sitting at the table and nodded to him as I walked to the elevated guard desk. "I've got some papers with me," I told the guard. "I'll be interviewing my visitor and thought I'd tell you so you'll know what I'm doing." He shook his head. "I'd better call the Captain," he said. In a few minutes the Captain came in and said, "What's going on here?"

I told my story to him, and gave him a weak smile, but it didn't break the ice. He stared at me a moment, then without a word turned and walked off. I took this as some sort· of reluctant approval and arranged my pad of papers on the table and started talking to Lamar. "When did they call you?" I asked'. "Just about ten minutes ago. I came right over."

1972 I VISIT A MAN AGED SOCIETY 681 When I told -him 1'd been cool ing my heels almost two hours, he smiled knowingly -and said, "Now you're beginning to experience a little of what I run into every day. It's all part of the system." "But don't any of the inmates have anything to say about issues like this ?" "Oh, sure, we can complain, and I will; but they won't pay any at tention." "Surely the inmates have some official avenue of communication to the top," I suggested. "We have the MAC (Men's Ad visory Council) ," Lamar said, "but their main hassle is trying to de cide which radio station we can listen to. We only have two sta tions we are allowed to listen to. I would like to get some classical music once in a while, but never get to." "What about other leisure ac tivities?" I asked. "We can watch television, read, or talk during Honor Block, but all of our other time is supervised."

"What is your work schedule?" "Seven hours a day for 5 days a week." "How much are you paid?" "$7.50." "An hour?" "N0, a month," he said. "And this is based on your seniority in the job training program." "Can you strike?" "Are you kidding?" Hean you shop around for a better job and compete for higher wages?" "No. I might apply for another job-training course but wages would have nothing to do with it." Other Restrictions He knew what I was doing and began to think of other aspects of his life which might compare with a managed socialist government. "My travel is of course rigidly restricted and supervised. I have no choice of doctors or hospitals if I get sick. The education is as bad here as· it is in any sta te-con trolled system - teachers run through their prescribed courses just to draw their salaries. We have no right to assemble in meet ings to hear any views contrary to those of the administration. We have no elections. We couldn't start a new religion of our own, but must take what is provided for us."

"There's another question I must ask," I said. "Do some men get used to this form of life where their physical needs are provided for and everything is managed for them?" "That's the sad truth;" he said. "Some dudes simply don't like to make decisions. They are perfectly willing to have this parent-child relationship for the rest of their 682 THE FREEMAN November days. They get released and in a few months back they come. It's a vicious circle. The mana.ged soci ety, as you call it, is devastating to our initiative. Being dependent upon the system for our basic needs makes us like children, not men. Then when we get out in competition we can't cut it, so back we come to the parental nest." "What does that do to you, as a student of liberty and independ ence?" "I have to fight it all the time," he said with a sad note in his voice. "It's like a dark blanket of gloom. Most of the guys are shot through with negative thoughts. I come on trying to be cheerful and optimistic and they look at me like I'm a kook. It finally got to me the last couple of weeks. I was hit with a bad case of depression." It occurred to me then that I hadn't received a letter from him and I should have known something was wrong.

Destroying Initiative Dr. Karl Menninger, in his book, The Crime of Punishment, quoted Gresham Sykes (The·· Society of Carptives) as saying, "Thefrustra tion of the prisoner's ability to make choices and the frequent re fusals to provide an explanation for the regulations and commands descending from the bureaucratic staff involve a profound threat to the prisoner's self-image because they reduce the prisoner to the weak, helpless, dependent status of childhood . . . . The imprisoned criminal finds his picture of him self as the self-determining indi vidual being destroyed by the re gime of the custodians." On my way home I drove through the old Haight-Ashbury section of San Francisco. A few years ago this was the mecca of the "flower children" - advocates of the completely undisciplined philosophy of life. Their utopian dream soon collapsed. The build ings are even more rundown than ever. A few miserable heroin ad dicts shuffle through the streets or sit in a stupor .on the steps. The same pallor of gloom that afflicts Lamar in San Quentin hangs heavy over this blighted area. Why did the experiment fail at Haight Ashbury? Because the flower chil dren were dependent for their' ex istence upon food stamps, welfare checks, the largesse of. a few so cial agencies, and upon drugs to give them a feeling of euphoria to be able to endure such a miserable life .. Dependency kept them bound in perpetual .. childhood just as de pendency keeps citizens under the control of a managed government.

Children,- you know, are much more easily managed than adults. Before T· arrived at my home I began to cool my resentment to1972 I VISIT A MANAGED SOCIETY 683 ward the unknown guard who neglected to put my call through when he should. After all, I was not a paying customer. His job does not depend upon service, but only upon compliance with regula tions. He is paid by the state. Un der the same situation I might act with similar discourtesy. And the Captain? He probably deals con stantly with lawyers trying to dig up "social injustices" to keep him in eternal hot water. Under simi lar circumstances my own milk of human kindness might curdle, too. I do not blame these men, nor any of the San Quentin officials. They are doing a thankless job which, There Must Be Freedom under our present system of deal ing with criminal offenders, has to be done. But they, too, must resist the pallor of gloom that re sults from the debilitating effect their managed society produces upon their charges and upon them selves.

I came through this experience resolved to double .my efforts .to resist a growing climate of opinion aimed at making all men depend ent upon a custodial government. The admirable struggle of my new inmate friend was aptly stated in his closing remark during my latest visit. "I am determined not to be conditioned to apathy." ~ IDEAS ON LIBERTY THE MOST DRASTIC deprivation which any person can suffer is that of the freedom to utilize and enjoy the faculties which nature has given him and which his will and desire have developed. Keep a man from exercising his mind, his body, his faculties in the pur suit of his own wishes and delights, keep him from enjoying the fruits of his efforts ""7" and you have done everything evil to him that you can. The greatest desire of each person, in short, is to be free to get the most· he can out of life. There is no other way obj ectively to define social goals than to call them the sum of those individual goals which can be harmonized in society.

SYLVESTER PETRO, The Labor Policy of the Free Society CLARENCE B. CARSON THE FOUNDING OF THE AMERICAN REPUBLIC 16 Making the Constitution 684 ... I feel it a duty to express my profound and solemn convic tion ... that there never was an assembly of men charged with a great and arduous trust, who were more pure in their mot,ives or more exclusively or anxiously de voted to the obiect committed to them to ... best secure the per manent liberty and happiness of their country. - James Madison It is too probable that no plan we propose will be adopted. Per haps another dreadful conflict is to be sustained. If to please the people, we offer what Iwe ourselves disapprove, how can we afterwards defend our work? Let us r(J)ise a standard to which the wise and honest can repair. The event is in the hand of God. - George Washington EVEN THOUGH this was an era stud ded with felicitously worded docu ments and momentous pronounce ments, all of these pale beside the Constitution of 1787 - the United States Constitution. It stands alone among them in the impact it has had, in its imitability, and in the role it has had in the lives of generations that were then yet to come.

Dr. Carson recently joined the faculty of Hillsdale College in Michigan as Chairman of the Department of History. He is a noted lecturer and author, his latest book entitled Throttling the Railroads.

1972 MAKING THE CONSTITUTION 685 All this is quite remarkable. Certainly, Congress envisioned no such document when it sent out a call for a convention. Nor could most of those who assembled in convention see how, at the outset, they could overcome the difficul ties in the way of drawing a satis factory constitution. Even were a masterpiece produced, it appeared most likely that it would be re jected by the states. Few have ever remarked it, yet it may well be that the most amazing thing of all is that the Constitution was not the work of a single man, or even of two or three, but of a con vention. It is a commonplace that committees produce little of value ; but here, by a group larger than most committees, the exception was made to happen. Some have described what hap pened as more than remarkable; it has even been called a miracle. George Washington wrote to La fayette that it was "little short of a miracle that· the delegates from so many different States (which States you know are different from each other), in their man ners, circumstances and preju dices, should unite in forming a system of National Government, so little liable to well-founded objec tions."I Miss Catherine Drinker Bowen's recently published book on the convention is called Miracle at Philadelphia. Whatever it was, or should be called, all who are open to an examination of the evi dence will admit that it was an ex traordinary event.

Off to a' Slow Start Even so, the convention did not get underway any more auspici ously than did most other assem blages in that age; it was called for May 14,but there was not a quorum to do business until May 25. It was no easy matter to as semble men from over the length and breadth of the United States; delegates from Georgia, say, had a formidable distance to travel, and even an early start did not necessarily lead to a prompt ar rival. In any case, promptness was. better calculated in weeks than in hours. The Virginia delegation was the first appointed by a legislature, and its members began to arrive in Philadelphia before other out of-staters. It was an impressive delegation, including among its members some of that state's lead ing citizens; George Washington, Edmund Randolph, George Mason, and James Madison. (George Wythe, one of the best legal minds in America, put in an appearance but left shortly to attend his dy ing wife.) Most of the Pennsyl vania delegates did not have to make a journey to get to Phila delphia, so that they were· avail686 THE FREEMAN November able from the beginning. It was an impressive delegation, for it included Benjamin Franklin,Rob ert Morris (who, if he was there, remained silent during the de bates), Gouverneur Morris, and J ames Wilson.

The New England states were not only the slowest in appointing delegates but also theirs were among the last to arrive. Rhode Island rejected the invitation to appoint delegates. (The absence of Rhode Islanders was not con sidered a handicap during the convention, for that state's be havior was so universally deplored that men did not gladly seek the counsel of her citizens.) The New Hampshire delegates were exceed ingly late; two of the four ap pointed finally arrived on July 23. (They could not come earlier be cause the state had not provided for their expenses.) New York ap pointed three delegates - Alexan der Hamilton, Robert Yates, and John Lansing-, rather reluctantly, we gather, for Yates and Lansing withdrew after a short period of attendance and Hamilton was ab sent for an extended period. Over all, twelve states had· 55 delegates in attendance at one time or an other. From most indications, the greatest concern for a stronger general government was among the delegates from the states lo cated from New Jersey southward.

The. leadership in the convention came mainly from four states, and in this order: Virginia, Pennsyl vania, Connecticut, and South Carolina. Two other state delega tions played some considerable role: NewJ ersey and Massachu setts. Delegates from other states were generally less conspicuous during the debates, though Luther Martin of Maryland and George Read of Delaware would have led if they could have attracted fol lowers. Qualifications 01 Delegates The delegates were as well qual ified as could have been assembled in America, qualified both by ex perience and training. Among them were thirty-nine who had served at one time or another in Congress, eight who had signed the Declaration of Independence, eight who had helped draw state constitutions, one, John Dickin son, who is credited with the first draft of the Articles of Confed eration, seven who had been chief executives of their states, and twenty-one who had fought in the war. Thirty-three were lawyers, and ten of these had served as judges. About half of them were college graduates, more from Princeton than from any other in stitution. 2 Both youth and advanced age were represented at the conven1972 MAKING THE CONSTITUTION 687 tion. The youngest delegate was Jonathan Dayton of New Jersey at twenty-six; the oldest, Benja min Franklin, who was, as he said, in his eighty-second year. The av erage. age was in the low forties.

Some of the leaders, however, were rather young: Charles Pinck ney of South Carolina was only 29, Gouverneur Morris 35, and James Madison 36. They were counterbalanced by men of mid dling years and extensive experi .. ence, for example; John Dickin son 54, Roger Sherman 66, and John Langdon 67. George Washington Called George Washington almost did not come, even though his presence at the convention was essential for it was generally agreed that he was America's first personage. When he was informed of his elec tion, he asked that someone else be appointed in his stead. He gave two reasons why he should be ex cused: one that now appears triv ial, that he had already declined an invitation to attend the conven tion of the Society of the Cincin nati which would be meeting in Philadelphia at about the same time; the other, however, was good enough reason in any age, for he was suffering so from rheu matism that he could turn in bed only with the greatest difficulty, and men do not gladly leave the comforts of home when they are ill. Friends so earnestly urged him to attend, however, that he changed his mind.

Washington arrived at Philadel phia before the convention was scheduled to begin. It had long since become difficult for him to go anywhere quietly, and there was good reason to publicize this trip. He was met at Chester by a troop of horse which escorted him into Philadelphia where cannon were fired and bells rung. 3 The fact that Washington had arrived gave notice that the convention was important and that laggards should make haste to get there. When the convention was organ ized, Washington was elected, un animously (as when was he not?) , to preside, an office which he took so seriously that he attended each. session, though it was the most oppressively hot summer in the memory of Philadelphians. If Washington could endure it, oth ers could and did. He was a man of stern visage, impressive phy sique, and high seriousness; with him in the chair, the convention could hardly be anything but what it was, a deliberative body which pursued its business in an absence of frivolity and without stooping to personalities. Though Washing ton did not participate -in the de bates until the closing days when he made a brief speech, there was 688 THE FREEMAN November no doubt where he stood on the Constitution. He signed it gladly, and took care to let men about the country know that he approved of it. The men in the convention were aware that when they looked toward the chair, they were gaz ing at the man who would almost certainly be the first President of the United States. This embold ened those who wanted a strong President to make the office pow erful, for they were confident that Washington would not abuse such powers. Gouverneur Morris wrote to Washington a few weeks after the convention to describe the im portance of his role: I have observed that your name to the new Constitution has been of infinite service. Indeed, I am con vinced that if you had not attended the Convention, and the same paper had been handed out to the world, it would have met with a cooler re ception, with fewer and weaker ad vocates, and with more and more strenuous opponents. 4 Franklin's Role Benj amin Franklin was the other most prominent American; his hold on the affections of his countrymen was not so great as that of Washington, but his inter national fame was such that any gathering which had the benefit of his counsels gained in reputation.

Though he was getting old - in fact, was old -, his mind was still clear, his vast fund of experi ence still at his command, and his accomplishments as a raconteur still led men to seek his company. He was not only aged but also in firm. He had to be carried in a sedan chair to the sessions, and he wrote out any but the briefest of remarks so that they could be read to the convention by .his fellow Pennsylvanian, James Wilson. Franklin contributed most to the convention by avuncular admoni tions to the delegates to com promise, to compose their differ ences, and to put aside so much of their personal desires as might be necessary to accomplish the object at hand. When the convention ap peared to be so near to breaking up over the question of equal or proportional representation, Doc tor Franklin said: "When a broad table is to be made, and edges of planks do not fit, the artist takes a little from both, and makes a good joint. In like manner here both sides must part with some of their demands, in order that they may join in some accommodating proposition."5 At another point, he proposed that the sessions be opened with prayer, for he seemed to think that the influence of re ligion might link them together in their efforts to arrive at a new system. At the close of the con vention, Franklin made an elo.1972 MAKING THE CONSTITUTION 689 quent plea to get those who were holding out to sign what they had helped to make. In a speech, read by James Wilson, Franklin said, among other things: I confess that there ~re several parts of this constitution which I do not at present approve, but I am not sure I shall never approve them: For having lived long, I have ex perienced many instances of being obliged by better information, or fuller consideration, to change opin ions even on important subjects, which I once thought right, but found to be otherwise. It is there fore that the older I grow, the more apt I am to doubt my own judgment, and to pay more respect to the judgment of others ....

On the whole, Sir, I can not help expressing a wish that every mem ber of the Convention who may still have objections to it, would with me, on this occasion doubt a little of his own infallibility, and to make manifest our unanimity, put his name to this instrument. 6 His advanced age may have in creased the influence of his spirit of accommodation, but he had been adept at the arts of politics and diplomacy long before the con tentions of young men tired him. Though the convention was not a large body, a few men did most of the speaking and a great deal of the other work of hamm"ering out the Constitution. The leaders included: Madison, Mason and Randolph of Virginia,. Gouver neur Morris and Wilson of Penn sylvania, Charles Pinckney and Rutledge of South Carolina, Ells worth and Sherman of Connecti cut, King and Gerry of Massa chusetts, and, perhaps, Paterson of New Jersey. According to one tabulation, Gouverneur Morris spoke on 173 different occasions; Wilson, 168; Madison, 161; Sher man, 138; Mason, 136; and Gerry, 119.7 .

James Madison J ames Madison has frequently been described as the Father of the Constitution. Certainly, he was one of its principal architects. He was not impressive to look at; judging by his appearance it would have been easy to have mistaken him for a clerk. He was quite short and thin, "Little J emmy," they called him, "no bigger than a half cake of soap." Nor was he an orator; he spoke in such a low voice that those keeping journals often missed a part of what he said. He made up for these short comings, however, with intellectu al acuity, sharp insight, and ten acity in the pursuit of his object. Moreover, he had prepared himself for the task of making a new con stitution. Much of his time in the months before the convention had been spent in reading, and mas690 THE FREEMAN November tering, the literature on govern ment. A plea to Jefferson in Paris had brought a plethora of books to augment the supply at home. The Virginia Plan, from which the Constitution emerged, was pre sented on the floor by Governor Randolph, but Madison had un doubtedly done much of the work on it. He might be said to have mothered the Constitution, too, be cause he devoted himself to it ex clusively during the months of the convention. His recollection was that he not only attended every session but that he was never ab sent for more than a few minutes, and he was certain that he could not have missed a single speech of any duration. He kept copious notes of the speeches, and they are judged to be the most reliable record of what was said. This was a marathon undertaking itself, but he also spoke frequently, and at length, with a masterful show of erudition.

Gouverneur Morris Gouverneur Morris was, how ever, the most dazzling speaker in the convention, an orator whose learning and close reasoning gave an irresistible thrust to his foren sic skill. He had been maimed both in arm and leg, stumped about on a wooden leg, but it is difficult to think of him as a cripple, for he was reputed to be quite a lady's man and known for being a bon vivant. Madison and Morris were men who knew what they wanted, who pressed the convention step by step in their direction, who took care to see that what they had won by their reasoning was not lost in the maneuvers over de tail, but who yielded gracefully when they were outvoted. There must have been many moments of high drama during the convention, but I think the most eloquent speech fell from Gouverneur Morris. The occasion was the discussion of the counting of slaves for purposes of repre sentation. "He never would concur in upholding domestic slavery,"

Morris said. "It was a nefarious institution. It was the curse of heaven on the States where it pre vailed. . . . Proceed southwardly and every step you take through the great region of slaves presents a desert increasing, with the in creasing proportion of these wretched beings. . . . The admis sion of slaves into the Represen tation when fairly examined comes to this: that the inhabitant of Georgia and South Carolina who goes to the Coast of Africa, and in defiance of the most sacred laws of humanity tears away his fellow creatures from their dearest con nections and damns them to the most cruel bandages, shall have more votes in a Government insti1972 MAKING THE CONSTITUTION 691 tuted for the protection of the rights of mankind, than the Citi zen of Pennsylvania or New Jer sey who views with a laudable horror so nefarious a practice .... And what is the proposed com pensation of the Northern States for a sacrifice of every principle of right, of every impulse of hu manity. . .? He would sooner submit himself to a tax for pay~ ing for all the negroes in the United States, than saddle pos terity with such a Constitution."8 It is generally believed, too, that Morris did much of the work of the committee on style which transformed the disparate ele ments which had survived the de bates into the congruous whole we know as the Constitution spare, brief, and potent with phrases that have since been etched into American conscious ness by court decision and other action or inaction.

Giants Among Men Impressions tumble over one another of the men during the sessions of the convention: of George Washington presiding from his high-backed chair, lean ing forward to try to discern the order of the proposals from amidst the welter of. motions made from the floor, forbearing to speak on the issues because it would not be proper; of James Madison, scribbling away at his notes, taking the floor to make a point, retiring to his quarters at the end of the day to flesh out his notes and re view what had been done; of the proud and passionate Edmund Randolph, a young politician al ready in mid-career, presenting the Virginia Plan to the conven tion, vacillating on issues as the Constitution took shape, unwilling at last to sign the handiwork of the convention which had been shaped from his proposals; of J ames Wilson, tenaciously pres sing for a national government, rising yet once again to speak for giving the people a more direct role in the government; of George Read, difficult to listen to but de termined to be heard, single mindedly arguing for a more powerful executive; of craggy Roger Sherman, whose face would stop a clock but whose arguments moved the convention toward the accomplishment of its task; of Charles Pinckney, young, brash, but sufficiently brilliant in debate to command the attention of the others; of George Mason, ear ly and late a defender of the rights of man, working with an obvious good will to shape the Constitu tion, but at last unwilling to sign it; of John Dickinson, theoreti cian of resistance in youth, com ing to fame with his daring em ployment of reason, now grown 692 THE FREEMAN November older declaiming: "Experience must be our only guide. Reason may mislead US."9; and of J ona than Dayton, the youngest man there, rising to second what had not clear ly been a motion by Gouverneur Morris on the evils of slavery and saying: "He did it ...

that his sentiments on the sub ject might appear whatever might be the fate of the amendment."lo Among the Missing Though the convention was composed of as impressive an ~s semblage of men as could have been got together at any time, there were some prominent Americans not there. John Adams was out of the country, doing his best to rep resent the Congress before the royal court in London. Adams had lately published a book which sur veyed the constitutional arrange ments of various countries, a book whose influence might have been greater if its author had been present at the convention. Thomas Jefferson was in Paris as Minister to France. Any gathering without him was missing one of the American luminaries. Several of the firebrands of the Revolution were missing, if not missed, for they were better known for heat than light. Among them were: Samuel Adams who was not cho sen, Richard Henry Lee and Pat rick Henry who did not choose to attend, and Thomas Paine who was in Europe trying to promote a project for steel bridges in the interlude between revolutions.

Probably if some of these men had been there they would have given such vociferous support to the idea of including a bill of rights that it would have been done, thus removing what turned out to be the major objection to the Consti tution. Rules of Order The convention was organized so as to proceed about its business without interference from out siders or without inhibiting full discussion. The sessions were held behind closed doors; no record of what was said or being consid ered there was to be released with out the approval of the convention. There were no galleries to be played to, no press to be placated. Strict rules governing the be havior of members were adopted. For example: Every member rising to speak, shall address the President; and whilst he shall be speaking, none shall pass .between them, or hold discourse with another, or read a book, pamphlet or paper .... A member shall not speak oftener than twice, without special leave, upon the same question; and not the second time, before every other, who had been silent, shall have been heard, if he wish to speak. ll 1972 MAKING THE CONSTITUTION 693 The convention operated on the rule that no decision on any par ticular of the constitution should be considered final. This enabled the convention to adjust the parts to one another as alterations were made.

The convention was remarkable both for its orderliness and for the absence of rancor among the members. On the one or two occa sions when tempers flared, the strong feeling quickly subsided. There did appear to be some im patience in the last few days with going over ground already cov ered. Even so, an effort was made in the last days to make changes that might satisfy the few· hold outs from signing. It is necessary to read but briefly into Madison's notes to get the feeling that these men were taking very seriously what they were doing, that though their task was urgent everything must be considered with great care. Above all, many were deter mined to stick with the undertak ing until something had been com pleted to present to the public. Doubts and Differences It was well that they were, for their object lay on the other side of a thicket of uncertainties, doubts, and differences.· Even what they were supposed to do at the convention was in doubt. The resolution adopted by Congress calling the convention declared that it was to be for the "sole purpose of revising the Articles of Confederation." It was clear enough what Congress had said, but these men were gathered to represent their states and were supposed to act under their in structions, if any. The instruc tions differed enough one from the other that a good case could be made that the convention could do what its members thought best. Most of those gath ered agreed with the idea that their task was to construct a plan for a new system of government, or accepted it without favil. The few who did not could leave, and some did.

It was only with some difficulty that they a"greed on how they would vote. Delegates from sev eral states were bent on having representation in the new govern ment based on population or wealth, as the Virginia· Plan pro vided. They would have the best chance of getting this into a con stitution if the states had votes in the .convention proportionate to their populations. There was no likelihood, however, that the small er states might agree to this, so the convention votes were by states, each state having one vote regardless of how many delegates there were, just as in the case of the Congress. If a state's delega694 THE FREEMAN November tion was tied in a vote, that state's vote would not be counted. A ma jority of the states present and voting was sufficient to any de cision. States' Rights Sentiment had been building for some time that, if there was to be an effective union of the states, the general government must have the power to use force on individ uals. This, as many saw it, was the only way to "render the consti tution of the Federal Government adequate to the exigencies of the Union ... ,"12 as the declaration drawn at the Annapolis Conven tion the year before had described the need. A man named Stephen Higginson had written to General Knox earlier in 1787 describing precisely what needed to be done: "The Union must not only have the right to make laws and requisi tions, but it must have the power of compelling obedience there to. . . ."13 Washington had writ ten to Madison in March: "I con fess ... that my opinion of public virtue is so far changed, that I have my doubts whether any sys tem, without the means of coer cion in the sovereign will enforce due obedience to the ordinances of a General Government; with out which every thing else fails ....

But what kind of coercion, you may ask. This indeed will require thought .... "14 Washington wrote to John Jay in the following vein: "I do not conceive we can exist long as a nation without having lodged somewhere a power which will pervade the whole Union in an energetic a manner, as the au thority of the State Governments extends over the several States .... "15 There was no way, however, of contriving a general government which could compel obedience with out encroaching on the powers of the states. Indeed, any attempt to work out such a plan had major obstacles in the way. Both theory and history militated against divided sovereignty. Theory said it could not be done; history af forded no clear-cut examples of its having been successfully done. If sovereignty could not be di vided, if a general government was to have coercive power, then the general government would have to be sovereign and the states become but districts in a nation. There were men at the convention who saw it this way and were ready to grasp the nettle.

Firm Determination to Preserve State Sovereignty But such a plan had little hope of ratification, if any. Madison described some of the difficulty in a letter to Edmund Pendleton be fore the convention: 1972 MAKING THE CONSTITUTION 695 The necessity of gaining the concurrence of the Convention in some system that will answer the purpose, the subsequent approbation of Congress, and the final sanction of the States, presents a series of chances which would inspire despair in any case where the alternative was less formidable.l 6 But if Madison had not known be forehand that the states would be jealous of their powers and prerogatives, he would have found out soon enough in the convention. George Mason, his fellow Vir ginian, expressed his determina tion to preserve the vitality of the states in calm but measured words: "He took this occasion to repeat, that notwithstanding his solicitude to establish a national Government, he never would agree to abolish the State Governments or render them absolutely insig nificant. They were as necessary as the General Government and he would be equally careful to pre serve them."17 Luther Martin of Maryland said that he agreed with Mason "as to the importance of the State Governments. He would support them at the expense of the General Government which was instituted for the purpose of that support .... [T] hey are afraid of gran ting powers unnecessarily, lest they should defeat the origi nal end of the Union; lest the powers should prove dangerous to the sovereignties of the particu lar State which the Union was meant to support; and expose the lesser to being swallowed up by the larger."18 Doctor Johnson in contrasting the· Virginia and New Jersey Plans (the-Virginia Plan calling for representation to be apportioned according to wealth and/or population while the New Jersey Plan called for representa tion by states), brought some of the difficulties out in the open. He noted that J ames Wilson and J ames Madison, advocates of the Virginia Plan, did not propose to destroy the states. "They wished,"

he said, "to leave the States in possession of a considerable, though a subordinate jurisdiction. They had not yet however shown how this could consist with, or be secured against the general sov ereignty and jurisdiction, which they proposed to give to the na tionaIGovernment."19 A Unique Situation Some held that they were de parting from experience even to try to contrive a government which depended upon divided sover eignty. Others argued that the American situation was unique, that history afforded no clear model for it, and that they must innovate. Charles Pinckney sum med up the peculiar situation of America in vigorous exposition: 696 THE FREEMAN November The people of this country are not only very different from the inhabi tants of any State we are acquainted with in the modern world; but I as sert that their situation is distinct from either the people of Greece or Rome, or of any State we are ac quainted with among the ancients ....

Our true situation appears to me to be this-a new extensive Country containing within itself the materials for forming a Government capable of extending to its citizens all the blessings of civil and religious lib erty-:-capable of making them happy at home .... 20 Reason is the sword of the young; experience the shield of age. Some of the young men at the conven tion were for casting a new sys tem, but others wanted no such heady innovation. In any case, the states must be preserved. Some of the proponents of an energetic general government de clared that there was little danger to the states to be expected from it. They appealed to the history of confederacies to show that time and again it was the states who had intruded upon and broken up the general government. Others appealed to a broader experience to show that where power was con fided in any government it tended to crush all opposing power.

A Government Worth Serving The general government must have sufficient power and prestige to attract able and dedicated men into its service. The energy of government proceeds from the men in it, as John Francis Mercer of Maryland argued. "It is a great mistake to suppose that the paper we are to propose will govern the United States. It is the men whom it will bring into the Government and interest in maintaining it that is to govern them."21 Ameri cans of that time were familiar with something that their descend ants know little about: of govern ment with so little of power and prestige that able men would not deign to serve in it. A seat in the Congress was hardly coveted by the first citizens, and state gov ernments found it difficult to at tract men of ambition and in tegrity. Some men in the conven tion were loath to provide much reward for serving in the gen eral government, on the ground that men would be attracted for reasons of personal gain rather than service. Alexander Hamilton answered the argument this way: "We must take man as we find him, and if we expect him to serve the public must interest his passions in doing SO."22 The idea was vigorously pushed in the con vention of limiting the length of time a man might serve in the general government as well as making those who left office in eligible for appointive office for a 1972 MAKING THE CONSTITUTION 697 time. James Wilson argued against this idea; he "animadverted on the impropriety of stigmatizing with the name of venality the laudable ambition of rising into the hon orable offices of the Govern ment .... "23 James Madison said: "The objects to be aimed at were to fill all offices with the fittest characters, and to draw the wisest and most worthy citizens into the Legislative service."24 He doubted tha t this could be done by hedging them around with ineligibilities Hnd disqualifications.

Checks and Balances Once grant the points that. suffi cient power be authorized to attract strong men into government and impart energy to it and to give the general government power to act directly upon individuals, however, allwer~ agreed that checks must be introduced on this power. Gouverneur Morris thought the following principles must be in troduced: ... Abilities and virtue, are equally necessary in both branches. Some thing more then is now wanted. l. The checking branch must have a personal interest in checking the other branch, one interest must be opposed to another interest. Vices as they exist must be turned against each other .... 3. It should be in dependent. 25 J ames Madison declared that if it "be essential to the preservation of liberty that the Legislative, Ex ecutive, and Judiciary powers be separate, it is essential to a main tenance of the separation, that they should be independent of each other."26 Separation of Powers Yet, to accomplish this was a most difficult task. In the British system there were different classes to be represented, each class pro viding an independent base for its representatives. In America, there was no such actual division of the population. In Britain, themon archy and the secular members of the House of Lords held heredi tary positions, adding another di mension to their independence.

But Americans neither had nor wanted hereditary officials. Hence, the problem: functions might be separated from one another read ily, but how could those in the dif ferent branches have different sources of their power? Some were for having the executive chosen by Congress. But others pointed out that, if this were the case, he would be dependent on that body. Judges might be appointed by the Senate, but if that body might also remove them from office where was their independence? Prob ably, more time was spent on the question of how the executive 698 THE FREEMAN November should be chosen than any other, though it did not excite the emo tions the way the matter of wheth er representation in Congress should be based on population or by states did. Above all, there was the ques tion of how those who were to govern could be made sufficiently independent of their electors to make wise· decisions without pos ing fatal dangers to the liberties of the people. Undoubtedly, if the government was to be republican it must be based on voters from among the people. Nor, as som.e men never tired of saying, was it to be doubted that those whose rights were involved were the best protectors of them or that the ballot box was the place to do it.

Some thought that frequent elec tions would be the best means· of protecting the people. Roger Sher man observed that "Government is instituted for those who live under it. It ought therefore to be so constituted as not to be danger ous to their liberties. The more permanency it has the worse if it be a bad Government. Frequent elections are necessary to preserve the good behavior of rulers."27 Others questioned this principle, for they noted that a too close de pendence of the government on the people resulted not in wise and stable government but in the pan dering of politicians to the temporary and changing opinions of the populace. Madison had said just prior to Sherman's remarks that the objective of the constitution was "first to protect the people against their rulers; secondly to protect the people against the transient impressions into which they themselves might be led.... "

A "reflection . . . becoming a peo ple ... would be that they them selves . . . were liable to err . . . from fickleness and passion."28 Alexander Hamilton pointed out that lately "the Government had entirely given way to the people, and had in fact suspended many of its ordinary functions in order to prevent those turbulent scenes which had appeared elsewhere."29 Principles Not Compromised Perhaps, enough of the difficul ties have been recounted to illus trate the fact that the Founders were wrestling with real practical and intellectual problems at the convention. Some twentieth cen tury historians have attempted to interpret their differences in terms of class interests and other fac tors. It is not necessary to do this in order to account for the debates; it also drags in matters extraneous to the subjects at issue. Moreover, such an account does not explain the compromises that were even tually made; if men were moved only by narrow interests they 1972 MAKING THE CONSTITUTION 699 would have been expected to cling to their views rather than com promise.

Compromise they did, however, in many matters that initially di vided them. Indeed, some histori ans have gone so far as to describe the Constitution as a "bundle of compromises." The· phrase has sometimes been used derogatorily to imply that on issue after issue men had yielded up their princi ples to the expediency of accom modating a welter of interests. Yet, a compromise need not be a yielding of a principle; it may well be the result of sacrificing narrow interest to the general well being. So it was, quite often, at the convention at Philadelphia; men advanced narrow and limited views in the debates put arrived at great principles through com promise. The stately, but simple, rhythms of the Constitution as it came from the committee on style captured principle after principle in its verbiage, meshed them to gether into a symphonic whole, and provided the plan for the gov ernment of an empire for liberty.

That it could be done appeared most unlikely at the outset. That it had been done was not so clear at the time. That it was done seems now a miracle. It is, there fore, appropriate to examine these principles. • FOOTNOTES • 1 Quoted in Charles Warren, The Mak ing of the Constitution (New York: Barnes and Noble, 1937), p. 737. 2 Ibid., pp. 55-56. 3. Ibid., pp. 99-100. 4 Ibid., p. 730. 5 James Madison, Notes of the Debates in the Federal Convention of 1787, Adrienne Koch, intro. (Athens, Ohio: Ohio University Press, 1966), p. 227. 6 Ibid., pp. 653-54. 7 Warren, Ope cit., p. 125. 8 Madison, Notes, pp. 411-12. The pres ent writer has taken the liberty of mod ernizing the spelling and using complete words rather than the abbreviations as they appear in the original. 9 Ibid., p. 447. 10 Ibid., p. 412. 11 Ibid., pp. 25-26. 1~ Jack P. Greene, ed., Colonies to Na tion (New York: McGraw-Hill, 1967), p.

51l. 13 Quoted in Warren, Ope cit., p. 38. 14 Ibid., p. 44. 15 Ibid., pp. 17-18. 16 Ibid., p. 50. 17 Madison, Notes, p. 159. 18 Ibid., p. 159. 19 Ibid., p. 163. 20 Ibid., p. 185. 21 Ibid., p. 455. 22 Ibid., p. 175. 23 Ibid., p. 177. 24 Ibid., p. 178. 25 Ibid., p. 233. 26 Ibid., p. 31l. 27 Ibid., p. 195. 28 Ibid., pp. 193-94. 29 Ibid., p. 196. Next: Principles of the Constitution.

A REVIEWER'S NOTEBOOK ELIOT JOHN CHAMBERLAIN anclHISAGE IT WAS HARDLY the "age of Eliot" when the poet and critic whom Russell Kirk calls "the greatest man of letters in his time" was alive and active. Shaw, Wells, and Hemingvvay, to pick examples at random, had much greater names. Nevertheless the title of Mr. Kirk's book, Eliot and his Age (Random House, 463 pp. $12.50) has an ex post justification: the dominant literary and philosophical trends of the earlier Twentieth Century are manifestly dying, while Eliot's "moral imagination," which pene trated to the heart of what Mr. Kirk calls "the Permanent Things," is bound to have more and more intIuence as time goes on. T. S. Eliot was considered very much a contemporary symbol for a few brief years when his The Waste Land was taken to be the poetic counterpart of James Joyce's Ulysses. The children of 700 the "lost generation" accepted The Wa.,ste Land, with its vivid images of decay, as the definitive state ment of a negative philosophy. It had been published in The Dial, which Professor Copeland of Har vard considered decadent. With lovely women stooping to auto matic folly, with hollow men lean ing witlessly together, and with people dancing around prickly pears instead of mulberry bushes, Eliot's early poetry evoked a world without values. The contrast with the literature of the ages of belief was painful, even as Joyce's "odys sey" in modern Dublin, when stacked up against the Homeric model, was painful. But pain was delight in ,those days; we reveled in our agnostic gloom.

If The Waste Land set the an archic mood of the early Nineteen Twenties, when all the faiths were questioned, it can't be said that 1972 ELIOT AND HIS AGE 701 Eliot dominated anything when, with the essays of For Lanc'elot Andrewes, he suddenly proclaimed himself in 1928, to be a classicist in literature, a royalist in politics, and an Anglo-Catholic in religion. The generation that had taken The Waste Land to be a full state ment of an enduring despair felt that Eliot had lost touch with reality. The new faiths that were aborning at the end of the Twen ties and in the early Thirties were secular, the politics of the time ac cepted commissars but not kings. As for "classicism," how could the author of Prufrock and The Waste Land have any truck with such sterile categorizing? He had broken a mold, departed from tra dition, and now here he was ex tolling tradition. Eliot's friends in Bloomsbury were mystified, if not aghast.

Prophet or Anachronism? As a magazine editor and essay ist in the Thirties, Eliot was ac cepted as a prophet by a few and as an anachronism by the many. Most of his contemporaries in England had gone Left; the Span ish Republicans, manipulated more and more by the Communists, were all the rage. In America the young flocked to the New Deal and the proletcult took over in the New York publishing companies. It was distinctly not the "age of Eliot." Russell Kirk, who came of age as a writer in the Nineteen Fifties when the new conservative move ment was just getting started in America, cannot really believe that Eliot's magazine, The .Criterion, was generally regarded in the pre World War II period as a futile effort to put back the clock. But if Kirk can't quite conjure up the anti-Eliot flavor of the Thirties, his very inability to credit the potency of the socialist and inter ventionist trends in politics and the power of agnosticism in the spiritual realm has enabled him to see Eliot clear. Kirk sees things in The Waste Land that we couldn't see a generation ago. Eliot was always fascinated by Dante, and Eliot's own career was des tined to have a symbolism that might be summed up in Dantesque terms. The Waste Land and Pru frock were Eliot's Inferno. He struggled out of his earthly hell through the purgatory of his Ash Wednesday. The Paradiso was to come later, when Eliot, defending the idea of a Christian society, found that he could believe in a religion based on revelation and authority.

Going deeply into Eliot's con. temporary journalism as well as into his poems, plays, and books of essays, Mr. Kirk turns Eliot into a J ohnsonian figure of plain com mon sense. Eliot's comments on 702 THE FREEMAN November the march of the dictators, his criticism of Britain's conserva tives for their failure to solve the problem of the social crisis at home and to arm the empire for the coming war against Hitler, have the true prophetic ring. They can stand reprinting as the con temporary observations of the Webbs, the Shavians, the Wells ians, and the wri ters of the Bloomsbury clique cannot. The wonder is that they had such little impact at the time. Bulwark for Conservatism But if the pre-World War II Eliot was a prophet without honor both in his native United States and in his adopted England, he is having his delayed effect. Kirk has managed to turn him into a mighty bulwark for Burkean conserva tism. The inner order, as both Ed ITlund Burke and Russell Kirk in sist, must· affirm cultural and reli giouscontinuity. The outer order, the achievement of a true com monwealth, will take care of itself if the inner order is based on what Mr. Kirk calls Right Reason and a f aith that accepts both the morality and the mystical sense of an unseen ruler of the universe.

Kirk is against what he calls Demon Ideology; human nature, as he sees it, must revolt against the effort to force life into pat terns that come from the brain of a Hegel, a Marx, or even an Adam Smith. Society has an organic con tinuity that includes many logical inconsistencies, and Kirk is willing to accept the organic as against the dictates of individual ration ality and private judgment. As a practical matter, I can see why the organic must be defended against those who would abolish inconsis tencies by invoking force; a sane commonwealth must move slowly when it comes to abolishing any thing that has become dignified by tradition. If we don't move slowly, we end up killing each other. But the Burkean position necessitates a willingness to accept some fuzziness at the edges that makes critical discourse unsatis factory. I wish I could be sure I knew what Kirk means when he speaks of Right Reason. He leaves me groping fuzzily for definition. If reason can be wrong, isn't it a sign that it is unreasonable in the first place? Again, Kirk speaks of the "higher reason," which trans cends "neat constructions." If Kirk, emulating Eliot, is merely saying that there are things we must take on faith (life is rooted in myste~y), I can follow him. But I don't know what he gains by the hypostasis that is implied· by the use of such terms as Right Reason, the Higher Reason, the Permanent Things, and Demon Ideology. They 1972 ELIOT AND HIS AGE 703 demand what might become whole libraries of qualification, and so they become thought-stoppers in stead of thought-liberators.

In general, however, Kirk is plain enough. The Burkean tradi tion, which he exemplifies, cannot be reconciled with Fi ve-Year Plans, or with centralized controls and dictated prices. T. S. Eliot's Burkean common sense implies a general defense of the free mar ket, which makes Kirk's latest book relevant for readers of an economic journal. Incidentally, the book, which is not a biography, contains enough biographical ma terial to satisfy those who are curious about one of our great exiles. In all, it is a most distin guished work. ~ THE IDEOLOGICAL IMAGINA TION by Louis J. Halle (Chicago: Quadrangle Books, Inc., 1972) 174 pp., $6.95 Reviewer: Edmund A. Opitz THIS COMPACT book is divided into thirty-nine short, pithy chapters; the style is terse, sometimes aphor istic. It reads like good conversa tion. A dedicated totalitarian might not get the message, but these pages will surely help the earnest student of society trace the "Gadarene progress" of the na tions from 1789 to 1984. The poli tical disasters of this period proceed inexorably from a wrong assessment of human nature and the human condition, and no im provement is possible except as in dividual persons reorder their own priorities.

It is an observed fact that peo ple differ, one from the other, in their beliefs, their interests, their talents. A free society, such as the nation contemplated by the au thors of The Federalist, seeks to accommodate this diversity, and to profit from it. Most modern na tions, however, are under the sway of an ideology which contends that state power should be used to im pose uniformity on the masses; those who differ, those who dis sent from the ideology are repro gramed or liquidated. In whose minds were conceived the notion that human nature is to be made over? What books argued that this is the task of politics? What is the origin of the modern outlook which persuades so many to per petrate, or endure, or acquiesce in the monstrous evils of the Twen tieth Century? The author touches .upon the straightforward authoritarianism of Hobbes, devotes a couple of pages to Hegel, but dwells at length on the contributions of Rousseau and Marx to the mould ing of the ideological imagination.

There is more to Rousseau than Halle allows, but ideas were 704 THE FREEMAN November launched which turn man into a sick animal and then offer a cure that compounds the disease. The type of man who has emerged in ever increasing numbers since the French Revolution is less con cerned with people and things than with his own feelings about people and things; he's forever fingering his pulse, calculating his responses, examining his motives, and as a result he feels estranged from his fellows. He needs the warmth of the herd to heal the hurt of alienation, and thus is driven to submerge his individu ality and escape personal responsibility in the Marxist state, whose claims on him are total. But the claims are fraudulent; rulers and ruled alike are but falli ble men and the ideas which keep them in their respective places are phony. Weare men and not gods, and should conduct our lives ac cordingly. "It seems to me," Halle writes, "that the primary 'concern of any individual who feels he has a light to live by must be to live by that light himself; it must be with the constant improvement of his own standards; it must be with the level to which he is able to raise himself." I) HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each ORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATION IRVINGTON-aN-HUDSON, NEW YORK 10533 the Freeman VOL. 22, NO. 12 • DECEMBER 1972 Back to BasicsFable of the Berry Pickers W. A. Paton 707 An expert recurs to basic principles for light on some of today's complex problems.

The Argentine Inflation ,Alberto Benegas Lynch, Jr. 715 Another sad chapter in the long list of the failures of fiat money. Six Ideas to Keep Us Human (Part II) Edmund A. Opitz 718 How free will, rationality, self-responsibility, beauty, goodness, and a sense of the sacred may restore man. Are You Getting Your Money's Worth? W. M. Curtiss 727 Questioning the faith that human errors could be avoided if only the government were in total control of our lives. The Foundingof the American Republic: 17. Principlesof the Constitution Clarence B. Carson 734 The concepts of federalism, republicanism, separation of powers, limited government, and transformation of empire. APerfect System of Government? Ludwig von Mises 747 Government is indispensable because men are not faultless, but it can never be perfect. Book Reviews: 753 "The Essential Paul Elmer More -,- a Selection of His Writings" edited by Byron C.

Lambert "Enterprise Denied: Origins of the Decline of the American Railroads, 1897-1917" by Albro Martin "The Growth of Economic Thought" by Henry W. Spiegel "The Evolution of Economic Thought" by W. E. Kuhn "An Economist's Protest" by Milton Friedman Index for 1972 761 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

tt1e Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON-ON-HUDSON, N. Y. 10533 TEL.: (914) 591-7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education illanaging Editor THE F R E E MAN is published n10nthly by the Foundation for EconOlnic Education, Inc., a non political, nonprofit, educational chan1pion of private property, the free n1arket, the profit and loss system, and limited government. Any interested person 111ay receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are n1et through voluntary donations. Total expenses average $12.00 a year per person on the 111ailing list. Donations are in vited in any amount-$5.00 to $10,OOO-as the means of 111aintaining and extending the Foundation's work. Copyright, 1972, 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; 10 for $2.50; 25 or more, 20 cents each.

THE FREEMAN is available on microfilm from Xerox University Microfilms, Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Per mission granted to reprint any article from this issue, with appropriate credit, except "The Founding of the American Republic," and "A Perfect System of Government?"

Backto Basics.. :.~ FABLE Of THE BERRY PICKE~'.: w. A. PATON ACHIEVING and maintaining an in telligent awareness of the eco nomic process - the means and methods by which man makes a living on this rugged planet - re quires understanding, and firmly gripping, a few fundamentals. Only in this way, I've long be lieved, can even the observing and thoughtful individual develop an immunity to economic nonsense, avoid being hoodwinked and mis led by proposals and programs pre sented by politicians and pseudo reformers, in bright colors, that range from the downright fraudu lent to emotional daydreaming. As the first fundamental to be considered in beginning the sys tematic study of economics I pro pose the truism: The total amount consumed can't exceed the total Dr. Paton is Professor Emeritus of Account ing and of Economics, University of Michigan, and is known throughout the world for his outstanding work in these fields. His current comments on American attitudes and behavior are worthy of everyone's attention.

am,ount produced. This is an indis putable fact of life if we rule out manna from heaven and either take in· the whole race or assume a self-sufficient group, large or smal1.1 It has the special merit, as an initial stepping stone on the path to knowledge and understand ing, of being applicable to any community or society, however made up, whatever the production methods and kinds of output, whatever the form of government and other institutional arrange ments, and without regard to cus toms, habits, attitudes, religious views, and so on. Thus it holds in the case of a primitive tribe (ig noring the story-book case of find ing food by merely stretching out a hand ·while lolling comfortably 1 Not to deny, of course, the possi bility of a level of consuming in excess of output in a specific time-period, by tapping stores. Some will recall the ac count of the seven lean years following seven fat years in Egypt, long ago.

707 708 THE FREEMAN December on a sandy beach or on the grass in the pleasant shade of a palm tree), and is also valid in the com plex type of economy, endowed with an advanced technology, with which we are familiar. This propo sition should perhaps be regarded as an adaptation of Say's law, which proclaims the equality and identity - of supply and de mand in the aggregate, and is like wise a universal truth, not to be gainsaid, anywhere, in any econ omic framework. Basic Proposition One is so plainly in view to any intelligent mind that calling for its stressing may seem to be hardly necessary. In today's cloudy atmosphere, how ever, I feel that there is ample justification for explicit statement and restatement of this inescapa ble limitation on the many schemes designed to banish poverty - as officially defined - that are being currently proposed. To puncture the dreams of pie-in-the-sky with \vhich the air is filled - to counter political promises to provide this or that level of living for every body - there is surely need for re newed emphasis on the point that the total amount we can eat de pends on the size of the pie rather than the cutting pattern.

Production Is Primary Here I come to an important corollary of Proposition One: production, not cons10nption, deserves recognition as the primary sector of economic activity. This position conflicts with the widespread and persistent tendency to be con cerned with the consumer's needs and problems - a tendency that has currently found expression in a wave of governmental interfer ence in producing and marketing processes, and a lot of popular clamor for more of the same. The ultimate objective of economic ac tivity, of course, is to provide goods to meet consumer needs. This is just as true in an economy equipped with an elaborate struc ture of factories and machines, and yielding a wide range of consum able commodities and services, as in a primitive community subsist ing on the results of hunting and fishing. We don't use machines simply to make more machines. But since the level of consuming, in total, depends on the level of output it may well be urged that maintaining and enhancing pro ductive efficiency is the matter of prime importance, and worthy of broad popular support. Thus the long history of opposition to tech nical advance, and the current slackening of concern as to dili gence and workmanship on the as sembly line and elsewhere, are at odds with Proposition One, so can't be justified in terms of over all welfare and progress. Preoccu1972 FABLE OF THE BERRY PICKERS 709 pation with "consumerism", to the neglect of improved use of avail able resources, and expansion of productive capacity through capi tal accumulation, does not repre~ sent praiseworthy public policy.

The campaign to "protect" the cons umer by government action becomes especially objectionable when it reaches the point - as it now has - where business firms are subjected to a degree of harass ment that clearly impedes opera tion and increases costs. Indeed this state of affairs is truly omi nous, and should be viewed with alarm rather than acclaim. The wheels of production don't keep on rolling automatically, without an encouraging overall climate and the efficient participation of all hands - attendants and operatives, technicians, managers, and fund furnishers. Opening the Door on Problems Acceptance of Proposition One, with the accompanying view of economic acti vity as a dichotomy of producing and consuming, solves no problems. But recognition of this axiomatic, universally appli cable, feature of economic life does provide a useful approach, a good starting point, for further study; it serves to open the door to an examination of important issues and problems.

The bare statement of Proposition One leaves untouched the cri teria of "producing" and "consum ing" and further inquiry is needed to ascertain the essential char acter of these broad divisions of economic activity, particularly in an economy where specialization and exchange are highly developed and a myriad of consumer com modities and services flow from a complex array of plants and equip ment. What are the earmarks of productive conduct versus nonpro ductive action? It's easy to say that producing consists of making a contribution somewhere along the production pipeline but this doesn't tell us much. For one thing we must distinguish be tween economic and noneconomic goods (the latter being rather hard to find these days, when even the air breathed may not be en tirely free of cost to the user or someone else). And who or what determines the composition of the output either in a particular enter prise or for the whole economy?

Proposition One, as such, leaves this important question unsettled. The problem of drawing a line between the producing and con suming stages, and distinguishing resources employed in producing ("capital goods") from end prod uct ("consumer goods"), is less important, but perhaps deserves a few comments. Where does produc tion end and consumption begin?

710 THE FREEMAN December For example, is the housewife's ac tivity in preparing the family meal and setting the table in the pro ducing sector or a step in the proc ess of consuming? Are the oranges in the picker's basket, or in a pack age or pile in the supermarket, or even on a shelf in the pantry, to be counted as resources devoted to production? The fussy folks insist that the true consumable is not even the glass of orange juice on the breakfast table but the satis faction derived from drinking it. This line of inquiry becomes of some consequence in periodic eco nomic measurement in the case of consumer durables such as cars, washing machines, and residences. Proposition Two The second underlying proposi tion that should be stressed - as I see it - in launching systematic study ·of economics may be phrased as follows: the indiv'idual (or fam ily unit) has the inherent right to consume or otherwise dispose of what he (or the unit) produces a restatement of the old saying that the worker is entitled to the "fruits of his labor". This funda mental can hardly be regarded as a truism, and certainly is not an arithmetic axiom. Its support must be found in human nature and moti vation, with an eye open to the limitations imposed on con suming by the amount of output available. Undoubtedly there is at least a trace of a sense of fairness and justice in most people and some degree of acquiescence in the merit of this second proposition.

It is indeed a dull child who doesn't promptly see the distinction be tween his toys and those of a play mate, and who will fail to protest when his sand castle is demolished by someone other than himself. Close observation of human be havior, moreover, currently and historically, brings to light much evidence of blighting effect on the productive effort of the individual of the seizure by others of all or part of the results of such effort. Acceptance of Proposition Two has always been widespread in the primitive and simple situation, and we don't need to go back to Robinson Crusoe to bring this fact to light. On the current scene, in the midst of all the confusion and folly with which we are beset, there are few who would propose or attempt to justify despoiling someone of the product that plain ly results from his personal effort. Thus we see no campaign to com mandeer for the use of others the product of the chap who has plant ed and tended a garden patch, or built a raft to use out at his cot tage on the lake, or made a couple of rustic chairs for the porch. But the same people· who show a will ingness to go along with this prin1972 FABLE OF THE BERRY PICKERS 711 ciple in these elemental, clear-cut cases, often become confused and change their stance completely, when confronting the complex re quirements of a modern economy, with its elaborate structure of di vision of labor and exchange, pour ing forth a fantastic variety of commodities and services. And it is not difficult to become a bit be wildered by our intricate network of methods and techniques and maze of related markets, with their many millions of interdependent participants, coupled with an im pressive array of business organi zations and an all-pervasive web of monetary and credit facilities.

Indeed, the only way for the in telligent layman to avoid being be fuddled, and victimized by the clever humbug peddlers, is to ac quire a solid understanding of a few ever-present fundamentals, as I've already pointed out. Tom and Dick as Berry Pickers As a means of bringing out sharply this familiar lack of in sight and consistency of attitude I often employed in my classes an example that I labeled the "Fable of the Berry Pickers" (along with much other illustrative material). While a boy on the farm I spent literally hundreds of hours, over a period of years, picking wild raspberries for my mother, and became quite expert as a picker. And this experience undoubtedly accounted for my use of this fable in my teaching. I'll outline the story here, as I recall presenting it in my beginning course in "prin ciples of economics". Assume a big swamp, with many acres of wild red-raspberry bushes, to which no one claims title or maintains any financial interest.

On a particular summer day two neighbor boys, Tom and Dick, equally equipped with pails and both physically fit, spend ten hours in the swamp picking berries, as directed by their respective moth ers. Tom is a careful, persistent, systematic picker, with a strong urge to make a good showing. Dick, in contrast, is a carefree and careless lad, who likes to roam around among the bushes, picking sloppily here and there. At day's end Tom has sixteen quarts of clean, ripe berries, while Dick has about twelve quarts of a mixture of green, overripe, and good ber ries, with a liberal sprinkling of leaves and small twigs throughout. With this condition, I'm sure you vlill all agree, Dick cannot reason ably lay claim to a share of Tom's berries, and I don't believe that many of you would object to Tom's conduct if he should reject the idea of pooling and dividing equally the results of the day's op erations, if Dick - or anyone else - should propose such action.

712 THE FREEMAN December Tom and Dick in the Berry Plant Now let's move on a few years with our berry story. Tom and Dick have grown up and both are employed by a company that has been established in the neighbor hood and is engaged in growing and canning berries for the mar ket. Diligent Tom has moved up the ladder to the position of oper ating manager of the plant, but Dick has not advanced beyond the status of sweeper and handyman. Each is paid weekly by check for his services and the amount of Tom's check is about four times that of Dick's. What are the equi ties, the respective rights, in this situation? Should a substantial slice of Tom's money income be seized by taxation or other form of coercion for use to supplement Dick's earnings, or render assist ance to some other person or per sons regarded as needy poor, or expended in some other way with out Tom's consent? Many people seem to be willing to approve such arbitrary action, including most of those who would not support tak ing part of the berries Tom picked as a boy and awarding them to his inefficient fellow-picker, Dick.

If it be assumed that the re spective contributions of Tom and Dick to the output of the plant at which they are employed are being accurately determined it follows that Tom is just as fully entitled to spend the money income he re ceives as plant manager as he sees fit as he had a right to consume or otherwise dispose of all the wild berries he personally picked in the swamp, years before.~ The two cases, with this assumption, are on all fours, and anyone who holds otherwise is throwing logic and common sense to the winds. Those who don't agree with this conclu sion either fail to grasp the basic identity of the two situations, or don't mind being inconsistent when it suits their convenience or is in line with their prejudices. There is a possible out, however, for persons who give lip service, at least, to the need for fair-mind edness, consistency, in thinking 2 The intervention of the money and credit mechanism, a necessary instru ment to facilitate specialization and ex change, should certainly not be allowed to obscure the basic facts, although many people at times seem to be blinded by fixing their attention on the flow of cash or equivalent rather than serv ices or other economic contributions for which payment is being made. I'm re minded of a tussle on our city council one evening years ago,· during my five year experience as a member, when a fellow councilman proposed that one of our firemen be dismissed because he lived in a community outside our city limits, and spent "his entire salary" in his home neighborhood rather than where he worked. I had some trouble in getting support for the point that the main question for us was not where or how the chap got rid of his cash but the value of the services he provided to our fire department.

1972 FABLE OF THE BERRY PICKERS 713 and conduct. They may challenge the assumption that the contribu tions of Tom and Dick to the out put of the berry plant are fairly and accurately determined; they may urge that in practice - in real life - the Toms are overpaid and the Dicks underpaid. In the sys tem as it stands, they may contend, common labor is exploited and managers and owners are on the gravy train. There is certainly widespread expression of opinion to this effect. (There should perhaps be men tioned here, parenthetically, the view that the more efficient and productive individuals should be forced to share the results of their efforts with their less capable brethren, and currently this ex treme position has a great deal of support. The advocates of this stance are of course refusing to acknowledge the validity of Propo sition Two, as well as ignoring or minimizing the probably adverse effect on total output of large scale and persistent seizure and diversion of the contributions made by the more energetic and competent individuals.) Measuring Productivity and Awards Major Alternative Systems Via Propositions One and Two I have now come to the crucial measurement problem and issue: How is the contribution of the individual participant to be deter mined in a complex economy such as that in which we find ourselves where a host of individuals join hands, so to speak, in operating an elaborate, highly mechanized, pro ductive process or system? And should any limitation be placed on the right of the individual to con sume or otherwise dispose of the amount of his contribution, validly measured?

The study of economics consists essentially in searching for an an swer to these questions. It is pre cisely at this point that the battle between competing isms and ideol ogies is joined. In the existing situation the determination is still largely made by. the forces of an intricate structure of markets, and hence systematic economic inquiry must include an intensive exami nation of the price-making forces of the market, and their results, at all levels. Such an examination, including a survey of historical evidence, will undoubtedly provide a substantial backing for the con clusion that a broad and free mar ket structure, registering auto matically and impersonally the net impact of the attitudes and reac tions of many buyers and sellers to changing conditions, has long since proved itself as a truly amaz ing instrument for directing pro ductive activities and awarding shares of output to participants in 714 THE FREEMAN December the process. Unfortunately our markets are now so heavily laden with interferences and restric tions, especially through govern mental intervention and control, that a free market structure, with strong competitive pressure pres ent throughout, no longer exists, and this condition constitutes an obstacle in analyzing and apprais ing the performance of a market system under more favorable cir cumstances.

In any event, no fair and firm judgment can be reached, as to the merit and potency of a market ap paratus in measuring contribu tions to production, slicing up the output pie for the Toms and Dicks, without giving careful attention to the limitations of this instru,.. ment at the best, as well as under conditions of substantial interfer ence. The fact that ingrained superstition, traditions, taboos, and other attitudes and traits, may make the development of a suitable market structure dif ficult if not almost impossible, should also not be neglected. Some "consideration, moreover, must be given to the proper means to be employed to relieve acute economic distress in a humane so ciety, even if the market is gen erally relied upon to guide both production and distribution of final output, with adequate recognition of the inclination of the Toms to take steps - voluntarily - to ameli orate the hardships of the Dicks.

The major alternative to reli ance on the market for economic guidance, I'm sure we'll all agree, is statism, collectivism, some form of governmental, bureaucratic, compulsion. And I strongly believe that the study of economics, in col leges or elsewhere, should include a careful, thoroughgoing examina tion of the case for this alterna ti ve, as it has been made by the outstanding defenders and advo cates of socialistic programs, in cluding the dictatorial system rep resented by modern communism. The route to sound conclusions is not by way of glorification of the market and wholesale condemna tion - without study - of the so cialist approach. Taking some thing for granted in this world is seldom advisable. This brief statement, I should make it plain in conclusion, is in tended to do nothing more than provide a crutch on which the in telligent and inquiring layman may lean, and outline a useful ap proach - push open the door - to the crucial measurement problems and issues which deserve inten sive study. ~ Reprints available, 10 cents each.

The ArgentineInflati ALBERTO BENEGAS LYNCH, JR. THE ARGENTINE political and eco nomic evolution seems so closely correlated with her monetary situ':: ation that it may be said that the history of this nation is principally the history of its currency. The period of national organiza tion following emancipation from Spain in 1810 until adoption of the Constitution of 1853 was marked by internal struggles and long pe riods of despotism and anarchy, interspersed with times of relative peace and progress. One of the first measures taken by the na tional government was to establish the gold content of the "hard peso." Thus in 1812 a "hard peso" weighed almost two grams of pure gold. In 1822 the first official bank was founded: the Bank of Buenos Aires, entrusted with the issue of the first bank notes, called Argentine pesos, which were ex changed by the public at the rate of 1.8 grams of minted gold. In 1823 conversion was suspended by Doctor Alberto Benegas Lynch, Jr. is pro fessor of Public Finance in the Universidad del Museo Social Argentino and professor of Political Economy in the Argentine Naval Intelligence Service.

decr~e'; for the first time because he/government issue of notes ex ee'd~d the stock of gold. Converti ilJfy was restored in 1825. The ',lowing year saw a relapse into the bad policy of increasing the currency without backing and the peso again became inconvertible. On this occasion, it was mistakenly said that in this way the war with Brazil could be financed "more comfortably." The resultant infla tion brought with it political and economic instability and seventeen years of tyranny and barbarity, demolishing what had been achieved with difficulty in the immediately preceding years. This situation of moral and eco nomic prostration lasted until adoption of the Argentine Consti tution in 1853, described by one of its most important authors and proponents, Juan B. Alberdi, as the document under which respect and guaranties for private prop erty were commanded. In a second period we may in clude almost a century, from 1853 to the rise of Peron in 1943, a pe riod of enviable economic progress 715 716 THE FREEMAN December which brought Argentina to eighth place among the civilized nations of the world. Within the first 75 years we enjoyed, almost without interruption, the advantages of the classical gold standard, a bank note being exchanged for 1.7 grams of gold. We say almost without interruption because in 1876, at the same time as the es tablishment of the National Bank, and at intervals until 1890, the currency was again issued without backing, conversion being tempo rarily suspended as a consequence.

In 1891 the finances were again put to rights and convertibility restored at a rate of 1.42 National pesos to a gram of gold. In the course of time, however, there were successive devaluations until convertibility was prohibited en tirely in 1928, at which time 5.16 National pesos exchanged for a gram of gold. In 1932, instead of restoring the ·Conversion Board and returning to the classical gold standard, Ar gentina turned to that sadly re nowned bankers' bank: the Central Bank. This period, which lasted until 1943, was still one ofprog .. ress owing to the strict limits placed on the authority of the bank and to the reliability and prudence of the government au thorities of the time. But even with the best intentions, the es tablishment of the Central Bank laid the foundations of the State control of the currency which in evitably followed. From the military coup of Peron in 1943 until he was overthrown in 1955 marked the darkest mo ments of Argentine history. The entire banking system was re formed. The Central Bank was transformed from a relatively in dependent body into the lackey of the government, thus allowing cap ricious control over currency and credit. The policy of deficit spend ing became the rule; open market operations were carried out sys tema tically in order to inj ect "fresh money" into circulation; rates of interest were manipulated at will; bank reserve requirements were constantly lowered by gov ernmental action. In addition to such monetary policy, compulsory membership in trade .unions was imposed, the level of taxation be came exorbitant, international trade was totally controlled through huge bureaucratic organizations with their various tariffs and quotas and subsidies. To complete the governmental interference in the market, price controls were imposed throughout the economy.

This suicidal policy provoked an unprecedented economic situation: Argentina was reduced to one of the lowest rungs among the so called "under developed nations." Monetary reserves were sadly de1972 THE ARGENTINE INFLATION 717 pleted; international trade fell to a quarter of its earlier volume; real incomes and salaries con tracted sharply; indebtedness in creased; agriculture and cattle raising, so basic to Argentina's economy, were largely despoiled; many subsidized and protected in dustries were created as a further burden on the people; all in the midst of a terrible moral corrup tion. Unfortunately, the Peronist eco nomic policy of socialistic tenden cies has persisted to a greater or lesser extent up to this day in Ar gentina. The cost of living index in 1972 is· 360 times what is was in 1943! The peso, once one of the world's strongest currencies, is now the one which is depreciating most rapidly. The cost of living probably will double this year.

Levels of saving have fallen notice ably, and as a result the rate of capital formation is ridiculously low. Real income and salaries are always below the cost of the "fam ily basket." The distribution of wealth does not depend on one's efficiency in meeting the consum er's needs but~ to a large.extent, on the favors of bureaucrats and their irrational monetary policy. The flight of national and foreign capital is terrible. Malinvestment and waste are accentuated in line with the directives of the planners of the day. The United States dollar which exchanged for 3.50 Na tional pesos in 1943 was selling in September 1972 at 1,400 pesos on the black market. This, in spite of the depreciation suffered by the dollar owing to the tendency of the United States government to imi tate Argentina's folly-the bastion of the free world also bowing to socialist policies. Today, perhaps the strongest currency is the Swiss franc, al though currencies such as the Jap anese yen have promising pros pects. It is interesting that a recent lead article in a widely circulated Japanese periodical rec ommends a return to the gold standard at a rate of 0.78 grams per yen. This is precisely what Ar gentinaought to do in currency matters. The foreign exchange re maining .in the hands of the Cen tral Bank should be used to buy gold in the London free market and add it to Argentina's existing stocks, dividing the total by the notes in circulation and fixing the corresponding relationship to gold, restoring convertibility. Theoniy way to put ahrake on :inflation, although it ,may appear tobea truism, is for governments to stop inflating. For that purpose, a monetary standard is required to make people independent of the state manipulation we have here described. ~ EDMUND A. OPITZ as to make us Iluman (Part Two) PART ON;E of this essay presents a diagnosis of the present malaise in terms of a loss of contact with six vital ideas. The ideas which keep us human may be summar ized as follows: • 1. Free Will. Man's gift of free will makes him a responsible being.

• 2. RationaMty. Man is a rea soning being who, by taking thought, gains valid truths about himself and the ·universe. • 3. Self-responsibility. Each person is the custodian of his own energy and talents, charged with the lifetime task of bringing him self to completion. • 4. Beauty. Man confronts beauty in the very nature of things, and reproduces this vision in art. • 5. Goodness. Man has a moral sense, enabling and requiring him to choose between good and evil. 718 • 6. The Sacred. Man partici pates in an order which trans cends nature and society. It is no secret that a great many philosophers and scientists deny free will and affirm determinism; it is also a fact that no one can really bring himself around to be lieving that he is an automaton. A philosopher who announces him self as a determinist presumes to offer us a conclusion he has ar rived at after observation, after marshalling the relevant evidence, after reflection, and as the end re sult of a chain of reasoning. Each of these steps reflects the action of a free being, and these free actions can never be pieced together so as to contrive an unfree result. Man's will is free; it is so free that it can deny this freedom!

Take the case of Baruch Spin oza. If any man ever lived free it was Spinoza; he was th~ "inner 1972 SIX IDEAS TO KEEP US HUMAN 719 directed" man par excellence. But Spinoza's own experience clashed with the new world view of Mech anism - the notion that the uni verse is constructed along the lines of an intricate piece of clockwork. Ideology overcame experience and Spinoza denied that his will was free. I quote from Proposition XLVIII of his Ethics: There is in no mind absolute or free will, but the mind is determined for willing this or that by a cause which is determined in its turn by another cause, and this one again by another, and so on to infinity. The mind is a fixed and determined mode of thinking, and therefore can not be the free cause of its actions, or it cannot have the absolute faculty of willing and unwilling; but for will ing this or that it must be determined by a cause which is determined by an other, and this again by another, etc. Q.E.D.l Free Will If the individual does not have free will, then he is not at liberty to reject determinism! But where will a man find a position from which he might judge whether his will is indeed free, or not. The answer is: Only as he looks within himself, at the workings of his in ner life; by introspection, in other 1 Spinoza, pp. 74-5 of the Everyman's Library edition of Ethics, (New York: E.

P. Dutton & Co., 1925). words. Now introspection is rather frowned upon today as a means of getting at the truth, as not being in accord with scientific technique. Early science viewed nature from the standpoint of the external ob server, as a theater goer views a play. The man occupying the seat in the first row of the balcony is observing the drama unfold upon the stage ;he is detached from the action, is not involved in the play, his standpoint is objective. The world view that grew out of sci ence is assumed to be the way the universe looks to an outsider who is not part of the action, merely looking in upon it. Once this approach is adopted, what follows? Let me answer by quoting from Jacques Barzun's great book, Science: The Glorious Entertainment: "Pure science was engaged in sketching, bit by bit, the plan of a machine - a gigantic machine identical with the uni verse. According to the vision thus unfolded, every existing thing was matter, and every piece of matter was a working part of the cosmic technology."2 Thus emerged the ideology bearing the label Mecha nistic Materialism, and human be ings schooled in this ideology come to think of themselves as mere cogs in the world machine. And 2 (New York: Harper & Row, 1964) p.21.

720 THE FREEMAN December just as every gear and cog in .the machine is moved by another, so is every human action the mere effect of a previous cause, and so on. Observe a man's actions from the outside and you see only his body and limbs in motion; nothing that you can see from the outside gives you any assured knowledge of what is going on inside him. You cannot observe his will from the outside, nor his mind. You might guess what's going on, but that's the best you can do. A HiddenlnnerLHe There is one region of the uni verse which will always be beyond the ken of the external observer, and that is the region. of the inner life. Each man's inner life is con cealed from all the world; he alone has access to it. Millions of people can view the same eclipse of the sun, but only one person can know your inner life, and that is you. Truth about the will in ac tioncan be known by introspec tion only; it will never be disclosed to those who adopt the standpoint of the external observer and re fuse· to shift their perspective. If there is indeed freedom of the will, this is a truth which, in the na ture of the case can be known only as each person knows it first hand in himself. Let a man look within himself and he knows with solid assurance that he is capable of exerCISIng freedom of choice in situations where real alternatives are open to him. Which of us has not wrestled with dilemmas of the type: "I want to do this; but I ought to do that"? We know, in this context, that the will is free.

There's an old story about Gali leo, who assured one of his con temporaries that the ring around Jupiter was composed of satel lites; "I've seen them through my telescope; take a look and see for yourself." The friend had figured out that the ring was solid and re fused to put his eye to the glass, the only posture from which he could test his theory. The free will, if it operates at all, operates only within, and those who are so wedded to the standpoint of the external observer that they refuse to look within, effectively bar themselves from ever obtaining ~ny knowledge of the matter. The consequence of this state of affairs is unfortunate. It is "un scientific," the average man is led to assume, to believe he has free will, and that decisive .action on his part can make a real difference in life. He is taught that he is de termined by heredity, or environ ment, or race, or childhood trau mas, or poverty, or by some other factor· that limits his capacity for free choice; and his ability to choose is impaired because he thinks he doesn't have it! The ini1972 SIX IDEAS TO KEEP US HUMAN 721 tiative is giv~n over to environ ment and man only reacts; he doesn't act. Adjustments to the environment, comfort, and ease then come to be the goals of life.

If we accept the dictum of a great economist that "the end, goal or aim of any action is always the relief of a felt uneasiness," then we have given up on life, for we'll never rest easy until we're dead! To live is to strive for greater in tensity of life, and this means that we may choose adventure, hero ism, suffering, and maybe even death. The issue of free will consti tutes a battleline of first impor tance. A people among whom the flame of life has burned so low that their philosophers preach de terminism will be severely handi capped in the game of life. They will find it difficult to put their trust in reason and, as we might expect, reason itself is now under attack from several quarters. Rationality The second of the big ideas which make man man is this: Man is a reasoning being who, by tak ing thought, gains valid truths about himself and the universe. The attack on the rational mind comes from several quarters. Phil osophical materialism and mech anism assumes that the ultimate reality is nonmental; only bits of matter or electrical charges or whatever are, in the final analysis, real. If so, then thought is but a reflex of neutral events. "Our mental conditions," wrote T. H.

Huxley, "are simply the symbols in consciousness of the changes which take place automatically in the organism." Evolutionism, popularly under stood, is materialistic and mechan ical. So viewed it conveys the idea that living things began as a stir ring in the primeval ooze and be came what they are now by ran dom interaction with the physio chemical environment, moved by no purpose, aiming at no goal. Darwinism offers an account of organic change which has no need of intelligence to .. guide it. From popular psychology comes the notion that reason is but ra tionalization, that conscious men tal processes are but a gloss for primitive and irrational impulses erupting from the unconscious mind. Psychoanalysis discredits mind by subordinating intellect to the id. From Marxianism comes the no tion that class interest dictates a man's thinking. There is one logic for the proletariat and another for the bourgeoisie; and the mode of production governs the philosoph ical systems men erect, and their life goals as well. The unfortu nately placed middle class forever 722 THE FREEMAN December gropes in darkness, unable to share the light revealed to Marx and his votaries.

Convictions about the reality of reason and free will develop in the context of our vision of the ulti mate nature of things. And here I bring up again the ideology of Mechanistic Materialism. There are several kinds of Materialism, the most prominent today being Dialectic Materialism, the official religion of Marxianism. However, the several brands of Materialism differ only in nonessentials; they agree that all forms of conscious ness arise, develop, and disappear with changes in the material world. Every variety of Material ism downgrades mind; it makes mind an offshoot of matter, a de rivative of material particles, an epiphenomenon. II Man is but the outcome of accidental collocations of atoms" Let Bertrand Russell tell us in his own words: "Man is the prod uct of causes which had no pre vision of the end they were achiev ing; his origin, his growth, his hopes and fears, his loves and his beliefs, are but the outcome of accidental collocations. of atoms.

... Brief and powerless is Man's life; on him and all his race the slow, sure doom falls pitiless and dark. Blind to good and evil, reck less of destruction, omnipotent TIlatter rolls on its relentless way."3 Of course, if matter is the ulti mate reality, mind is discredited. But if this discredited instrument is all we have to rely on, how can we put any confidence in its find ings? If untrustworthy reason tells us that we cannot trust rea son, then we have no logical ground for accepting the conclu sion that reason is untrustworthy! Well, I don't trust the reasoning of people who champion the irra tional, and I do know that our reasoning powers may be - like anything else - misused. But when human thought is guided by the rules of .logic, undertaken in good faith, and tested by experience and tradition, it is an instrument capable of expanding the domain of truth. Reason is not infallible, but it is infinitely more to be t rusted than nonreason!

Self-Responsibility The third great truth is that each man is the custodian of his own energy and talents, charged with bringing himself to comple tion and having a lifetime to do the job. Gifted with reason and free will, the human being must take himself in hand in order to complete his development; most :~ From the essay "Free Man's Wor ship." Reprinted in Selected Papers of Bertrand Russell (New York: Modern Library, 1927) pp. 3, 14.

1972 SIX IDEAS TO KEEP US HUMAN 723 animals, on the other hand, simply mature, brought to full term by innate drives. Human beings are not thus programmed, and occa sionally we have to act against in clina tion and instinct and inertia if we would achieve our goals. This is simply illustrated in sports, where the successful per former forces himself to train even on those days when he'd rather be doing something else. The bike club I ride with held a century run over a six mile course. A couple of youngsters turned up in full regalia and rode off, one pacing the other, looking very pro fessional. Quite a few miles later I noticed that one of the young men had dropped out; so I asked the other what happened. "I train every day whether I want to or not," he replied, "he just goes out when he feels like it." There you have it on a small scale, but the same principle ap plies to life. "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."

The persistent downgrading of life, during recent centuries has reduced man to a cosmic accident inhabiting a fourth rate planet, lost in the immensities of space and time, in a materialistic uni verse devoid of values. This dubi ous vision has not been vouchsafed to the birds and the beasts, but only to human beings. Only man among all the creatures of the planet has been able to take all time and all space within his pur view and draw conclusions of any sort. And it is a perverse kind of silliness for a creature gifted with the ability to understand and ex plain to bemoan his littleness in the face of the unimaginable vast ness of the cosmos. Whose mind is it that comprehends all this? What creature controls an enlarging do main? Man confronting the uni verse as astronomer, physicist, ge ologist, engineer, is entitled to stand tall; would that he might do as well in other departments!

Beauty In the area of aesthetics, for example, to illustrate the fourth vital idea. Here man confronts beauty in the very nature of things, and reproduces his vision in art. In a materialistic age it comes to be believed that particles of matter in motion are the only realities; which means that beauty is unreal. "Beauty," we are told in the familiar phrase, "is in the eye of the beholder." How did it get there? we want to know, unless loveliness - as every great artist 724 THE FREEMAN December has taught us - is real, and out there waiting to be experienced. What shall a painter resort to when the ideology of the age con vinces him and his potential public that matter is the ultimate reality and beauty a mere illusion? Let Picasso answer: When I was young I was possessed by the religion of great art. But, as the years passed, I realized that art as one conceived it up to the end of the 1880's was, from then on, dying, condemned, and finished and that the pretended artistic activity of today, despite all its superabundance, was nothing but a manifestation of its agony.

As for me, from cubism on I have satisfied these gentlemen (rich people who are looking for something ex travagant) and the critics also with all the many bizarre notions which have come into my head and the less they understood the more they ad mired them .... Today, as you know, I anl famous· and rich. But when I am alone with my soul, I haven't the courage to consider myself as an artist. 4 One more quotation, this time from Joseph Wood Krutch, gen eralizing about modern artists: They no longer represent anything in the external world, because they no longer believe that the world which 4 Quoted by Joseph Wood Krutch in And Even If You Do (New York: Wm. Morrow & Co., 1967) p. 186. exists outside of man in any way shares or supports human aspira tions and values or has any meaning for him.') Art once celebrated the great ness of the human spirit and man's aspiration for the divine; great art reconciled man to his fate.

"We are saved by beauty," wrote Dostoevsky. Art now is the reach ing out for bizarre forms of self expression by more or less inter esting personalities; or it becomes outright buffoonery and charla tanism. Goodness The fifth big idea has to do with ethics; it is the conviction that moral values are really embedded in the nature of things, and that men have the capacity and are un der the necessity of choosing the good and eschewing evil. Given a revival of belief in reason and free will I am confident that ethical questions will be brought within the human capacity to resolve. But if we succumb to the attacks on reason and free will, and if we accept the ideology of Materialism we will seek in vain for some sub stitute for ethics. We reduce mor ality to legality; we confuse what is right with what works; or what advantages us, or what pleases us. These things, including utilitari5 Ibid., p. 185.

1972 SIX IDEAS TO KEEP US HUMAN 725 anism and relativism, boil down to ethical nihilism, for if nothing is really right, then nothing is really wrong either. The Sacred The sixth big idea pertains to the human experience of the sacred - a dimension which tran scends the workaday world. This encounter evokes awe, reverence, a sense of the sublime; and it pro duces - in the intellectual sphere -the philosophy known as Theism. Theism is the belief that the uni verse is not merely brute fact, but that a mental/spiritual principle is at the heartof things; the finite mind in each of us is somehow grounded in an infinite Mind. In one perspective, Theism encom passes all the other ideas; and in another perspective, if our think ing is right on the previous five ideas, Theism is an immediate inference. We res,ist the word "God" be cause for most people the notions of their childhood still cling to it, and these notions they have out-i grown while they have not per mitted their ideas of God to grow with them. But if one rejects the idea of God, he has no logical stop ping place short of the idea of Materialisim; and if he goes this far, he has embraced an ideology which shortchanges his own men tal processes. Mind, reason, logic, and God are all bound up together.

Santayana was once referred to as an atheist, and he replied, "My atheism, like that of Spinoza, is true piety towards the universe, and rej ects only gods fashioned by men in their own image, to be servants of human interests." Genuine Theism demands that we be "atheistic" toward the false gods. Theism 'contends, as a minimum, that a Conscious Intelligence sus tains all things, working out its purposes through man, nature, and society. This is to say that the universe is rationally structured, and this is why correct reasoning pans a few precious nuggets of truth. Acceptance of the Creator re minds men of their own finitude; no man can believe in his own omnipotence who has any sense of God's power. And finite men, aware of their limited vision, have a strong inducement to enrich their own outlook by cross fertili zation from other points of view. When theistic belief is absent or lacking in a society, men are beguiled by the prospect of estab lishing a heaven on earth. They vainly dream that some combina tion of political and scientific ex pertise will usher in utopia, and they use this future possibility as an excuse for present tyranny.

lJnder Theism, they modestly seek 726 THE FREEMAN December to improve themselves and their grasp of truth - thus making the human situation more tolerable, more just, more enjoyable - confi dent that the final issue is in God's hands. But won't men perversely use Theism as in excuse for intoler unce and even persecution, as in deed has happened in history? Of course they will, for there is no good thing that cannot be mis used. But reflect on the deadliness of the alternative as exhibited by regimes which make atheism offi cial. Communism, during its first fifty years in several countries, has taken a toll of at least eighty four million lives! What is Man? the creature from Mars might ask. And our answer would be that man is a being with an anthropoid body and six ideas. What if he loses contact with one or more of these ideas? our ques tioner continues. In that case, we answer, his humanity is thereby that much diminished.

Diminished man has come to the fore at an accelerating rate during the past century. In statecraft, he was unable to resolve minor dif ferences between Western nations and thereby prevent them from tearing each other to pieces in the cycle of wars which began in 1914. In religion, we have a split be tween the "death of god" trend, on the one hand; and, on the other, an emphasis on push-button sal vationism. In education, there is agreement on one point only, that there is a crisis in the schools; but there's no consensus as to cause and cure. Philosophers have aban doned the great tradition in phi losophy to embrace one fad after another; positivism, linguistic analysis, existentialism. Then there is the "treason of the intel lectuals," many of whom have found communism and socialism irresistible; who resolved that there should be no more war in the Thirties but decided a few years later that war was a wonder ful thing. And in personal life, at a time when the male is giving his worst performance, unable to re concile women to their roles in life, the female wants liberation so she can imitate the' male!

It goes without saying that as I list a portion of the indictment against modern man, I have in mind statesmen, artists, philos ophers, theologians, intellectuals, as well as ordinary men and women, who have kept the faith, who have not lost their heads. I am not certain that the madness from which we suffer has run its course, and that we've turned the corner, but I am enough of an optimist to have confidence that the corner is within sight, and that there is sufficient health in us t.o make it. ~ Ar.e You Getting Your MoneysWorth? W. M. CURTISS IN TERMS of personal income and its purchasing power, one must conclude that Americans never had it so good! With the great strides in technology and the tremendous investment in the tools of produc tion, workers are fantastically pro ductive. And, in a general way, one's income is based on what one produces, as valued in the market place. In a free economy, one may ex change his money or property for things or services he values more than the money or property he gives up. Thus,both the buyer and seller benefit from the exchange and each is better off, in his judg ment, than before.

But what are you getting for Dr. Curtiss is Executive Secretary and Di rector of Seminars at The Foundation for Eco nomic Education. your money today? How much of your spending is for things you'd rather do without if the choice were entirely yours! One might argue that we always spend our money in the way we choose, given the alternatives. We pay a dentist to relieve a tooth ache, not because a trip to the beach wouldn't be more fun. but because it is less painful to visit the dentist. If we lived in a dry climate we might avoid the pur chase of an umbrella. If we lived near our work we might avoid buy ing a second car. If we lived in Maine, we might not buy an air conditioner. And so on through many choices like these, where no one else is forcibly influencing our decision. Even under coercion, we still '7?'7 728 THE FREEMAN December choose among alternatives. We may give our wallet to an armed rob ber, under the circumstances. Most of us grudgingly pay our taxes, rather than face the consequences of refusing to pay. But these choices, the alternatives we choose under duress, differ from our purely voluntary spending. And in order to know whether we've "ever had it so good," we ought to con sider those expenditures which are forced upon us, for things we'd rather do without.

Crime Costs An example is the cost of crime. Government is essential for the protection of life and property, and most people will willingly pay to be protected from the few per sons who have no respect for the life and property of others. But the mounting incidence of crime in our affluent society calls for further consideration of the costs and possible causes. How do you feel about the cost of installing a burglar alarm sys tem in your home? Or having near tamper-proof locks put on your outside doors? Or the extra cost of a buzzer to make certain you remove your auto keys? Or the extra cost of taking a taxi be cause you're afraid to ride a sub way? These are just a few of the many examples of the rising costs of crime over recent decades. More direct costs, of cOllrse, include losses of life and property by per sons who are objects of the bur glary or perhaps just innocent by standers. Mounting also are the costs of prevention, detection, and punishment, including the hiring of extra police, additional court costs and the like. Attempts have been made to estimate such costs but who can say, and with what accuracy? What is certain is that the money one is forced to spend either to prevent crime or to re pair the damages is money that cannot be spent voluntarily for other things.

No doubt, the people of the United States are among the most productive and affluent in the world. We have a very high level of living in automobiles, color tele vision sets, the quality of food we eat, education, medical services, housing, leisure, travel, and a host of other things. But our level of living also in cludes a few items we might change if we could. The costs and consequences of crime are among these items.W e can take little comfort in knowing that our crime costs per capita may be the highest in the world! Much of the cost is buried in the total expenditures by governmental units - federal, state and local-the total support of which takes some 40 per cent of 19'72 ARE YOU GETTING YOUR MONEY'S WORTH? 729 our very high productivity. So, we may say that our affluence sup ports the most costly government in the world. But, if we had our "druthers," is this the "level of living" we would buy?

Why Crime Increases Much of the crime, especially in our larger cities, is tied to the in creasing use of illegal drugs. The daily cost of supporting a drug habit far exceeds what many a user is able to earn legally. Many addicts thus turn to robbery, pros titution, "pushing" drugs on others, and various sorts of or ganized criminal acti vity. Why does this happen? If a product or service is forbidden by law, and if some people want the product or service badly enough, someone will undertake to provide the illegal item, usually at a price to cover the risk of getting caught breaking the law. A classic· ex ample comes from the "prohibi tion era" following World War I, with the resultant high cost of bootlegging, gang wars, and at tempted law enforcement activi ties. Prohibition eventually was ac claimed a failure and was repealed. Whether the morality of the peo ple was improved or diminished by the experiment is not the sub j ect of this inquiry. Nor is the question of whether the government should attempt to legislate morality. We are merely pointing out the tremendous costs involved, costs forced upon individuals who might rather have spent their money in some other way.

Not repealed, however, is the governmental attitude toward al coholic beverages. Instead of di rect prohibition, there is now a "prohibitive" tax on liquor. Like wise, "cigarettes may be hazard ous to your health," and are heavily taxed. These taxes and the high costs of enforcement are a part of today's high cost of living. These three examples - drugs, cigarettes, and liquor - illustrate problems which arise l~rgely out of government intervention, and then have to be controlled, to some extent, at very high costs to tax payers. In any event, when the total cost of government becomes as burdensome as it is in this country, the incentive to cheat is strengthened, as anyone could testify who either files or fails to file an income tax return. There is a strong temptation to get "a piece of the action" by government workers who handle "public money," award contracts, purchase items for government use, and the like. And even the rare few who occasionally expose such cheating must be sorely tempted not to do it. Who wants to be a model of in tegrity in a den of thieves!

730 THE FREEMAN December Welfare Costs Government welfare activities are another source of corruption. Such programs-have grown by leaps and bounds in the past quar ter century at a time when the na tion was never more affluent. The reasons are many and often com plicated. Many social workers and other government employees seem to measure their success by the number of cases handled and the amount of money distributed. So cial Security offices, for example, post notices in local papers saying in effect: "Are you getting all the Social Security you are entitled to? Come in and let us help you!" Workmen's Compensation clients are officially advised not to deal with employers but to come di rectly to the Board. Aside from the outright cheat ing, one of the causes of the rising cost of welfare, a cause which the welfare client cannot change, is minimum wage legislation. Wages, set higher by law than they would be in a free market, increase un employment. The unemployables are especially the young, the old, and members of minority groups.

Whether for lack of skill, or of education, or whatever the rea sons, unemployment rises sharply in such categories whenever mini mum wages are raised by law. In creasing unemployment means in creasing welfare costs. Respect for Property Part of the problem is the break down of respect for property. And especially is this true of the grow ing volume of "unowned" or "pub lic" property. Consider, for in stance, the breaking of windows and other destruction of school property. The problem is serious enough that some schools have gone to the considerable expense of installing "unbreakable" glass. Some new school buildings are be ing built without windows. College buildings and grounds are prime targets for vandalism; public parks and playgrounds also are used and treated with disre spect. It seems that what belongs to everyone belongs to no one. The cost to those who must pay for such vandalism and destruction lowers their level of living, de prives them of alternative ways they would spend their money.

Governmental efforts at "con sumer protection" go far beyond curing us of the "bad habits" of drugs, alcohol, and tobacco. The government also tries to do to us what is "good" for us. An illustra tion is the requirement that vari ous grocery and other items be priced by weight so that shoppers can more easily compare products of different distributors, different size packages, and the like. How ever, after sellers have gone to the expense of doing this (which con1972 ARE YOU GETTING YOUR MONEY'S WORTH? 731 sumers pay), few shoppers pay any attention to it. Similarly, when consumers bor row money, or buy on install ments, shouldn't they know their interest costs expressed as a sim ple rate per year? How else can they compare different sources of credit? So, the revealing of these figures is required by law and adds to the cost for the consumer who is to be protected. Again, there is evidence that few con sumers use this new service they have paid for.

One of the most absurd of all consumer protection items is the compulsory addition of seat belts to autos. Why should I have to be compelled to pay for seat belts to protect me in an auto accident? If I think seat belts are useful, I will have them installed and will use them! Who is likely to be more in terested than I am in protecting me from inj ury? Upon discovery that only one-third of the drivers were using the seat belts they had been forced to pay for, all drivers were then subjected to the costs of installing buckle-up buzzers and lights and other educational de vices. Other consumer protection items such as air bags, more effective bumpers, and other gadgets will be compulsory additions before long and the cost of automobiles to the consumer is bound to reflect the additional expense. It is estimated that by 1975 the cost of these ad ditions, which the consumer did not order, will be more than the total cost of a new car when Amer icans were less affluent than today.

This might be a part of your "level of living" you would do without if you had a choice. Most "consumer protection" plans show a complete lack of faith in two very important as pects of the market. One is the wisdom of the consumer in look ing after his own interest and. the other is the power of competition between suppliers in an unfettered market to serve the consumer as he wishes. Gambling The attitude of governments toward gambling is a curious thing . At times, it has appeared that governments have considered gambling to be immoral and have tried to ban it completely. More recently, governments have per mi tted gambling in some places, but not in others; You may be per mitted to bet on a horse race at the race track but not elsewhere. You may indulge in games of chance if they are conducted by churches licensed by the state. So, perhaps gambling is not really a moral problem at all!

In recent years, in their quest for new sources of revenue, more 732 THE FREEMAN December and more states are permitting and encouraging gambling so long as the state gets a substantial cut of the proceeds. In New York State, you need not go to the track to bet on the horses if off-track betting is more convenient. State lotteries also are gaining in popu larity and respectability, with a large "take" going to the state. Still, the state is partly in and partly out of the gambling busi ness. Many types of gambling such as the "numbers" game, bet ting on human athletes or teams, and other games of chance are still illegal. It would be difficult if not impossible to estimate the amount of money which governments spend unsuccessfully to enforce gambling or anti-gambling laws - another example of spending your money in a way you might not spend it yourself, given a choice. The Problem Most of the economic problems tha t are left to the mar ket are solved without great fanfare. We either buy, or refrain from buy ing, and thus send a meaningful signal to the producer. It doesn't require a committee or a govern ment commission, or a popularity vote to make the decision. If enough people object to tail fins on their autos, the manufacturer will soon get the message. And if the decision of the market goes against the lover of tail fins, he rarely makes much of a fuss. But let the decision be made by a gov ernment bureau, or even a Harvard professor, and a feeling of disen franchisement is certain to arise.

Practically all of the maj or economic problems that seem so troublesome are the result of some activity of government when it has gone beyond its principled role of protecting life and property. One of our most serious, with ramifi cations in many areas of life, is inflation. Inflation is simply the re sult of the Federal government spending beyond its means and expanding the supply of money to support its profligacy. School problems, involving such questions as how to finance them, who should run them, who should attend them, and what should be offered in them, are largely prob lems which arise because govern ment has assumed much of this responsibility. Little choice is of fered those concerned. The problem of housing, espe cially in urban centers, is largely a result of the intrusion of govern ment into urban renewal, rent con trols, construction codes, and other restrictions.

Consumer protection would cause no difficulties if it were a voluntary thing between buyer and seller. Auto manufacturers would ghidly supply seat belts to those 1972 ARE YOU GETTING YOUR MONEY'S WORTH? 733 who want them and are willing to pay for them - just as radios are made available. The problem arises when motorists who neither want nor use them are compelled by law to pay for them. Just now, control of pollution of air and water is being promoted by a few vocal individuals, organi zations, and an imaginative press, In haste to respond to such pres sures, governments are certain to further add to their already over extended activities. Are you getting your money's worth? The question finally boils Freedom down to whether you are primarily interested in freedom of choice for the individual - your choice with your own money - or "full security and protection" by government in every last detail.

True, some consumers will make a lot of mistakes, as judged by you and me, in their choices as to how to spend their money. But far more serious than the combined errors of individuals is the master error - a belief that such mistakes could be avoided if only the gov ernment were in total control of our lives. t) IDEAS ON LIBERTY FREEDOM CAN WELL BE LOST to us through misinterpretation of it. When we think it gives us the right to another man's harvest, or entitles us to an honor we are unwilling to earn, we place our selves in a bondage that curtails our true growth in every way. Through the privilege of choice our way is opened for us to become what we will. The wise use of this faculty brings out the best that is in us, and thereby places us in positions and circum stances that are compatible with our abilities and much to our liking ... Freedom does not mean that each shall have the same thing, or even express in the same way; for it is every man's right to discover the path to his highest good. But how we use this priceless heritage of choice decides what we become. True freedom is· experienced as we· earn it through thought and deed.

LA VERNE BOWLES From the "Daily Guide to Richer Living" for September 15, 1960, appearing in Science of Mind.

CLARENCE B. CARSON THE FOUNDING OF THE AMERICAN REPUBLIC 17 Principles of the Constitution 734 THE QUESTIONSat issue in the con stitutional convention were rarely, if ever, philosophical in nature. The men gathered at Philadelphia in 1787 were practical men, by and large, going about the practical business of proposing how power would be disposed, arrayed, and distributed in the United States. Nor is the Constitution a treatise on philosophy; except for the pre amble, the document deals exclu sively with the practical and the mundane. Nonetheless, the debates were informed by principles, as remarks and occasional flights of oratory indicate, and the Consti tution is based on high principles, which we may know both from analysis and an examination of the apologies for it. These principles follow, if not inevitably then naturally enough, from the Founders' understanding of human nature. The same human nature which made government necessary, they thought, made cer tain principles appropriate to it and essential if it was to endure for any extended time. Govern ment is made necessary because man is not perfect. James Madison put the matter succinctly: If men were angels, no government Dr. Carson recently has joined the faculty of Hillsdale College in Michigan as Chairman of the Department of History. He is a noted lec turer and author, his latest book entitled Throttling the Railroads.

1972 PRINCIPLES OF THE CONSTITUTION 735 would be necessary. If angels were to govern men, neither external nor in ternal controls on government would be necessary,! Obviously, Madison thought men are not angels; on the contrary, man is a flawed being, needing restraints whether he belongs among the governed or the gov ernors at any particular time. Human Nature Is Suspect There is no indication that any of the other Founders thought otherwise. Alexander Hamilton de clared that "men are ambitious, vindictive, and rapacious." 0) Nor could he see that human ~ature was more dependable because the beings involved lived in republics rather than under monarchs: Has it not ... invariably been found that momentary passions, and immediate interests, have a more ac tive and imperious control over hu man conduct than general or remote considerations of policy, utility, or justice? Have republics in practice been less addicted to war than mon archies? Are not the former admin istered by men as well as the latter?

Are there not aversions, predilec tions, rivalships, and desires of un just acquisitions that affect nations as well as kings? Are not popular assemblies frequently subject to the impulses of rage, resentment, jeal ousy, avarice, and of other irregular and violent propensities?3 Hamilton's low estimate of human nature is well known, but the gentle spoken Benj amin Franklin did not rate it much higher. He declared that when you "assemble a number of men to have the ad vantage of their joint wisdom, you inevitably assemble with those men, all their prej udices, their passions, their errors of opinion, their local interests, and their selfish views." He predicted that the government they were provid ing for in the convention "can only end in Despotism, as other forms have done before it, when the peo ple shall become so corrupted as to need despotic Government being incapable of any other."4 A fair interpretation of this latter statement would be that man has an ingrained downward bent. The political implications were spelled out by Madison in this way: "In framing a government which is to be administered by men over men the great difficulty lies in this: YO~ must first enable the government to control the governed; and in the next place oblige it to control itself.";' Capable of Reason It does not do j llstice to the Founders' conception of human nature simply to emphasize the flawed side. Man is a rational ani mal, they thought, i. e., capable of 736 THE FREEMAN December reason. He loves liberty, and needs it for the fulfillment of his pos sibilities. He is self-interested a trait that can be turned to good use - but he is also capable of conceiving a general interest which embraces others as well as himself. He is an active, responsi ble being, capable of invention, construction, concern, and what goes by the name now of crea tivity. Put power in his hands over others, however, and he must be carefully watched .. This was the cornerstone of their political faith.

With these views of human na ture, the Founders combined an unusual mixture of hope and resig nation about the government they were contemplating, hope that they could contrive a system that would be lasting but resigned to the likelihood that it would founder sooner or later on the· shoals of the lust for power of those who governed and the bent to corrup tion of the governed. Many of the debates of the convention hovered around the question of whether too much or two little power was being conferred and whether those who would exercise it would have sufficient leeway to act energeti cally or be sufficiently restrained to prevent arbitrary and despotic action. The debates reflected these concerns; the Constitution em bodied their conclusions. The con vention was the forge; the Constitution was the finished and tem pered metal. The following are its most salient principles: ) . federal System of Government The federal system of govern ment, as we know it, was invented at Philadelphia in 1787. Diction aries, encyclopedias, and textbooks now define a "federal government"

as one in which there is a division of powers between a general gov ernment, on the one hand, and local (or state) governments, on the other, both governments hav ing jurisdictions over the citizenry within their bounds. A confedera tion is now held to differ from this arrangement in that under it the individual states retain the sole authority to use force on individ uals. No such distinction appears to have existed in 1787. The only percei vahle distinction was a grammatical one. "Confederation" was the noun form used to de scribe the organization of the states into a unit. "Federal" was the adjective form of the word "confederation." For example, Richard Henry Lee, who was op posing ratification of the Consti tution, said that the "object has been all along to reform our fed eral system. ~ . ."6 He could only have been referring to the system under the Articles of Confedera tion as "federal." In adjoining sentences, Hamilton employed the 1972 PRINCIPLES OF THE CONSTITUTION 737 words as if interchangeable in meaning. 7 Initially in the conven tion, those who favored a general government with sanctions re ferred to it as "national." They did not, however, get the system they had .. concei ved, and in the course of the debates "national"

had odium attached to it. Those who favored adoption of the Con stitution referred to themselves as "federalists," and to the govern ment as a "federal" one, 8 in part, one suspects, to minimize the ex tent. of the innovation. Clearly, what they had wrought was not a confederation, and it came to be called a :'federal" government. It made sense, once the Amer ican system had been devised, to use the words "federal" and "con federation" to call attention to structural differences in systems, but this development in language has tended to obscure the inven tion that took place. Occasionally, however, it has been pointed out. A present-day writer notes that the "United States is regarded by many students as the archetype of a federal system. . . . Even gen eral definitions of the term seem to derive from the American model."o James Madison wrote one passage, too, in which he called attention to the new char acter of what they. had devised: The proposed Constitution ... is, in strictness, neither a national nor a federal Constitution, but a composi tion of both. In its foundation it is federal, not· national; in the sources from which the ordinary powers of the government are drawn, it is partly federal and partly national; in the operation of these powers, it is national not federal; in the extent of them, again, it is fed eral, not national; and, finally in the authoritative mode of introduc ing amendments, it is neither wholly federal nor wholly nationa1.10 It is a brilliant description of the complex arrangements in the Con stitution, but, unfortunately, Madison is speaking in an un known tongue so far as present day Americans are concerned. Not only did the distinction between "federal" and "confederation" take place, but in contemporary usage "federal" is employed almost ex clusively to refer to the general government and has, thus, become a synonym of "national." Whereas, Madison used "federal" to refer to those things in the Constitu tion in which the states retained their force and vigor.

At any rate, the main feature of the federal system of government is that the power of government was divided between the general government and the state govern ments. Such a division has the appearance of being a division of sovereignty, something which poli tical theorists have said could not 738 THE FREEMAN December be done. The Founders disposed of the theoretical problem by ignoring it in that they did not vest any such absolute authority as is described by sovereignty in any government. A political scien tist has put the matter correctly in this discussion of the American government: "Sovereignty, in the classic sense, has no meaning; divided as power is, the element of absoluteness which is essential to the concept of sovereignty is not present."ll The Constitution acknowledges the existence of the states and vests some of the powers of government in the United States. Power is dispersed rather than concentrated, and each of the coordinate (not levels of) governments has its own jurisdic tion.

The Role of the States Both the general and the state governments are independent of each other to a degree but are also dependent on one another. These relationships are provided for by intricate arrangements. All elec tions take place within states and under their auspices. The Consti tution was only to go into effect after the ratification by conven tions held state by state. The se lection of the personnel for the branches of the general govern ment involved the states to greater or lesser degree depending upon the office involved. The House of Representatives was to be com posed of members chosen from districts within states, and the number allotted to each state was to be based on population. Each state, on the other hand, has two Senators, providing for an equal ity of the representation of states in the upper house. This was worked out in what is sometimes called the Great Compromise of the convention, or the Connecticut Compromise. The President is selected by an electoral college, each state having as many electors as it has Representatives and Sen ators. The members of the courts were to be appointed by the Presi dent with the advice and consent of the Senate. The Senate was also given major powers in the ap proval of other appointments and in treaty making. The states re tained a large role both because of the preeminence of the Senate and that everything having to do with popular election is done by and within states.

The general government was clearly given control over the mas sive use of force and the states were left with the preponderant authority to use force ordinarily. The general government is author ized to raise and maintain armed forces and may call into action un der its authority any state mili tary force. Laws made in pursu1972 PRINCIPLES OF THE CONSTITUTION 739 ance of the Constitution are de dared to be the supreme law of the land. The states retained most police powers, courts dealing with most civil and criminal matters, and much that has to do with the protection of life, liberty, and property. The general government is charged with protecting the states from foreign invasion and from one another. The line be tween the powers of the states and those of the general government was not marked by great detail; it was, no doubt, expected that they would contend with one an other over various jurisdictions and thus limit one another. Such contentions were expected to coun terbalance the extensive use of power by any government.

To say that federalism was an American invention is not to im ply that it sprang from the head of Zeus fully clothed at Philadel phia in that summer. Actually, the Founders were encompassing a tradition when they devised the federal system. There were ele ments of federalism in the British colonial system. Each colony had its own government to deal with local matters. The British govern ment exercised the type of powers over the colonies that were now to be vested in the general govern ment. Moreover, the Congress un der the Articles of Confederation had much of the authority which was now vested in the general government, even if it lacked the power for the full exercise of it. Most of the innovation was in the wresting of a pattern from an im perial system and installing it in a republican setting. 2. Republican Form of Government There are two basic require ments which must be met if a government is to be styled a re public: (1) it must be popular in origin, Le., draw its authority from an extensive electorate; and (2) power must be exercised by representatives. It is distinguished from an· heredi tary monarchy in that it is based on popular elec tion and from democracy in that power is wielded by representa tives. Those who favored the new Constitution took pains to show that the government it provided for was republican in character.

James Madison showed that its powers were derived from the peo ple by this explanation: The House of Representatives, like tha t of one branch at least of all the State legislatures, is elected immedi ately by the great body of the people. The Senate, like the. Present Con gress and the Senate of Maryland, derives its appointment indirectly from the people. [The Senate was chosen by state legislatures until the ratification of the 17th Amendment.] The President is indirectly derived from the choice of the people, accord740 THE FREEMAN December ing to the example in most of the States. Even the judges, with all other officers of the Union, will, as in the several States, be the choice, though a remote choice, of the people them selves. 12 As they understood the differ ence between a republic and a de mocracy, it was a republic, not a democracy. Though it was based on the people, the people acted through representatives. Popular decision went through a series of filtrations, as Madison put it, be fore it became government action.

The United States was not a monarchy, and safeguards were introduced to prevent its becom ing one, as Madison said: Could any further proof be required of the republican complexion of this system, the most decisive one might be found in its absolute prohibition of titles of nobility, both under the fed eral and State governments; and in its express guaranty of the republi can to each of the latter.l 3 3. Separation and Balance 01 Powers If there was one principle upon which the Founders were agreed more than any other it was that of the separation of powers. Mon tesquieu had taught them that it was a requisite of good govern ment. Both they and Montesquieu knew the separation of powers in principle from the British ex ample. State governments already incorporated the principle, how ever imperfectly. Once it was de cided that the power to coerce individuals would be lodged in the United States government there was little doubt that a system of checks and balances must be lq cated in the system. If the indi vidual could be coerced by it then the government must be re strained by checks and balances.

For this to be done, there must be several branches to limit one another. The branches, as con stituted, made it a mixed govern ment.· This idea is not so well known anymore, for it comes from classical theory, which no longer is the basis of our studies as it was for the Founders. The idea is that there are three possible pure modes of rule: they are, monarchy, aristocracy, and democ racy. In this sense, neither the United States nor the states have a pure form of government; they are, instead, mixed. In the United States government, the President is based on the monarchical prin ciple, the Senate the aristocratic, and the House the democratic (both because it has more members and is directly elected). It was not monarchy,aristocracy, or democracy, but rather drawn from 1972 PRINCIPLES OF THE CONSTITUTION 741 principles of each of them as a form, Le., from rule by one, rule by a few, and rule by the many.

The Founders had considerable difficulty devising a mixed gov ernment from a constituency which contained no fixed classes. As they saw it, it was very im portant that each of the branches be distinct from the other in the manner of its selection. A mixed government was desirable, in the first place, because there were dif fering functions of government which could best be entrusted to one, to a few, or to many. But, if the functions were best performed in this way, the division should not be watered down by having all the branches chosen by the same electorate. Perhaps it would be most accurate to say that they partially solved the problem. The members of the House were di rectly elected, and the number of them apportioned according to population. The Senate was to be elected by the state legislatures. This was natural enough and did base the choice on two different realities. But they never hit upon any comparable reality from which the President could be chosen.

Having him elected by an electoral college was an artificial expedient which, while it did give him an independent basis of selection, did not provide him with one that was organic to the country . Three Branches of Government There was much talk in the convention of making each of the branches independent of the other, and much was done to achieve this principle. The branches were· not only given different sources of election but also were provided protections from one another. The houses of Congress make their own rules, are judges of the elec tions of their members, and joint ly set their pay. They have a con stitutionally established regular time of meeting, and may adjourn by agreement one house with the other. The President can protect himself by the use of the veto and by his powers of patronage. More over, he is commander-in-chief of the armed forces as well as having at his disposal the Federal con stabulary. The members of the courts are to be paid according to a regular schedule, their salaries not to be reduced during their tenure, which is for life or during good behavior.

But there is no denying that the branches are also interdependent and entwined in their operation. All legislation must pass both houses of Congress on the way to becoming law. Even appropria tions, which must originate in the House, must still pass the Senate before they can go into effect. The President can veto acts of the Congress; in which case, such an 742 THE FREEMAN December act can only become law by being passed by at least two-thirds ma jorities in each of the houses. The President and the Senate are par ticularly entwined in the appoin tive and treaty making powe'lts,., Amendments to the: Constitution not only regularly involve both houses of the Congress but the state legislatures as well. The ef fect of all thi.s interdependence is to require government by a con sensus of the branches and, in the case of constitutional amend ments, of the states also. The more important the decision, the broader the base for its approval must be for it to be put into effect.

4. Limited Government The crowning principle of the Constitution is limited govern ment, for all the other principles tend toward and are caught up in this one. The federal system of government, the republican form of government, the principle of separation all place procedural lim its on the powers of the govern ments. The independence of the branches, one of another, and of the state and general governments provides them with a base from which to check and limit one another. Their interdependence makes the concurrence of branch es and governments necessary for action to be taken. The Constitution provided not only for procedural limits on gov ernments but for substantive ones as well. One way in which the gen eral government is substantively limited is by enumerating its pow ers. This is done most directly in setting forth the legislative pow ers of the government, which pow ers are all vested in the Congress.

They are contained in Section 8 of Article I, and read, in part, as follows: The Congress shall have Power to lay and collect Taxes .... To borrow Money on the credit of the United States; To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; To establish an uniform Rule of Naturalization . To coin money . To establish Post Offices and post Roads; .... To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water .... To have placed all legislative au thority in the Congress was a limitation on the other branches. To have enumerated the powers implied that those not listed were not included. Discussions within the convention bear this out. For example, the question was raised as to whether or not the general 1972 PRINCIPLES OF THE CONSTITUTION 743 government ought to be granted the authority to construct canals.

The idea was rejected on the ground that this would involve the general government in projects which would be mainly beneficial to the people of particular states. The point, however, is that they were operating on the assumption there that if the power were not listed it was not granted. But it is not necessary to con clude only from the enumerated powers that the general govern ment is limited by the Constitu tion. There are specific limitations contained in it. The Constitution required that all direct taxes be apportioned on the basis of popu lation. (This prohibition was later removed by the 16th Amendment.) Other taxes must be levied uni formly throughout the United States. All taxation must be for the common defense and general welfare of the United States, which should be conceived as a major limitation. Specific restric tions on the general government are listed in Section 9 of Article I, of which the following is a partial list: The Privilege of the Writ of Ha beas Corpus shall not be suspended, unless when in Cases of Rebellion or Invasion the public Safety may re quire it.

NoBill of Attainder or ex post facto Law shall be passed .... No Tax or Duty shall be laid on Articles exported from any State .... No Money shall be drawn from the Treasury, but in Consequence of Ap propriations made by Law.... No Title of Nobility shall be granted by the United States. State governments were also limited in the Constitution in sev eral ways (Section 10, Article I). The following is an example: No State shall enter into any Treaty, Alliance, or Confederation, grant Letters of Marque and Re prisal; coin Money, emit Bills of Credit; make any thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder or ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility. Some delegates to the conven tion were heartily in favor of a specific prohibition being placed in the Constitution against the United States government emit ting bills of credit (Le., issuing paper money). Others said that occasions might arise, such as during the late war, when the is suance of paper money might be necessary. The upshot was a silent compromise. Congress is not au thorized to emit bills of credit, but neither is it specifically prohibited to do so. (The going assumption, however, was that if it was not granted it was prohibited.) 744 THE FREEMAN December Curbing the Majority The other main limitation in the Constitution was the tacit limitation on the powers of the people. There was much concern expressed both in the constitu tional convention and in the state ratifying conventions about limits on the people. The Founders per ceived that a majority may be tyrannical; it may work its way so as to intrude on the rights of individuals, which rights were considered to be the premier ones.

Alexander Hamilton said: "The voice of the people has been said to be the voice of God; and, how ever generally this· maxim has been quoted and believed, it is not true to fact. The people are turbu lent and changing; they seldom judge or determine right."14 Moses Ames, speaking in the Massa chusetts convention which was considering the ratification of the Constitution, said: "It has been said that a pure democracy is the best government for a small peo ple who assemble in person .... It may be of some use in this argu ment ... to consider, that it would be very burdensome, subject to fac tion and violence; decisions would often be made by surprise, in the precipitancy of passion, by men who either understand nothing or care nothing about the subject; or by interested· men, or those who vote for their own indemnity. It would be a government not by laws, but by men."15 James Madi son declared that "on a candid examination of history. we shall find that turbulence, violence, and abuse of power, by the majority trampling on the rights of the minority, have produced factions and commotions, which, in repub lics, have more frequently than any other cause, produced despo tism."16 The people were limited by the original Constitution in that they could act only through represent atives, that except for the House of Representatives the branches were indirectly chosen, and that the courts were most remote from popular control. Both the govern ment and the people are limited by the vesting of effective negative powers on any legislation in each of the houses, of a veto in the President, and the establishment of a Supreme Court which, it was understood, would have a final negative. Positive action requires a concurrence of the branches; while several of them have the power of negation. The direct power of the people is also limited' by the staggering of the terms of offices. The House of Representa tives is chosen every two years.

The terms of Senators are for six years, and approximately one-third of them are chosen every two yearS. The President's term is for 1972 PRINCIPLES OF THE CONSTITUTION 745 four years, and the members of the courts serve during good be havior. This provided both for stability in the government and a safeguard against the people's working their will over the gov ernment while they were under the sway of some temporary passion. 5. The Transformation of Empire. One of the least appreciated principles of the Constitution is that contained in the provision which makes it possible to dis solve an empire periodically by adding new states to the union. The United States had an empire from the beginning; indeed, writ ers and speakers frequently re ferred to the United States as an empire. At the least, however, the United States had a vast territory west of the Appalachians and to the north and west of existing states. It was of considerable in terest at the convention what pro vision should be made for the future of this territory. Should it be carved into provinces which, when anyone of them became populous enough,_ would be ad.,.

mitted on equal terms with the older states. Gouverneur Morris, among others, argued vigorously that this should not be the case. He feared that in time the west ern states would outnumber the eastern states; "he wished therefore to put it in the power of the latter to keep a majority of votes in their own hands." He summed up his case in this way: "The busy haunts of men not the remote wilderness are the proper school of political talents. If the Western people get the power into their hands, they will ruin the Atlantic interests. The back members are always averse to the best meas ures."17 On this occasion, however, Mor ris was outpointed by the leaders of the Virginia delegation. George Mason said: "If the Western States are to be admitted into the Union, they must be treated as equals and subjected to no degrad ing discriminations. They will have the same pride and other passions which we have, and will either' not unite with or will speedily revolt from the Union, if they are not in all respects placed on an equal footing with their brethern." Edmund Randolph de clared that it was entirely "inad missible that a larger and more populous district of America should hereafter have less repre sentation than a smaller and less populous district." Madison joined in the colloquy by saying that "with regard to the Western States he was clear that no un favorable distinctions were admis sible, either in point of justice or policy."IS 746 THE FREEMAN December The Constitution simply states that "New States may be admit ted by the Congress into this Un ion ...", followed by some protec tions of the territory within exist ing states. The manner of provid ing for representation, however, assured that new states would be on a par with the original thirteen when they came into the union.

The effect of this has been the dissolution of empire by the ad mission of new states. In short, the Constitution provided for the transformation of empire into states which joined the union as fullfledged members of an expand ing United States. The state delegations present and voting in the convention at its close gave unanimous approval to the Constitution. Only a very few individuals refused to sign the handiwork of the convention. The document was submitted to the Congress, from whom it was to go to the states which were asked to hold ratifyingconven tions. As the signing was taking place, Benj amin Franklin made the last public remarks recorded for the convention. James Madi son. described them this way: Whilst the last members were sign ing it Doctor Franklin looking toward the President's Chair, at the back of which a ... sun happened to be paint ed, observed to a few members near him, that Painters had found it difficult to distinguish in their art a ris ing fron1 a setting sun. I have, said he, often and often in the course of the Session, and the vicisitudes of my hopes and fears as to its issue, looked at that behind the President without being able to tell whether is was ris ing or setting: But now at length I have the happiness to know that it is a rising and not a setting sun.!D All who would having signed, the convention adjourned sine die.

~ Next: The Bill of Rights. • FOOTNOTES • 1 James Madison, Alexander Hamilton, and John Jay, The Federalist Papers (New Rochelle: Arlington House, n. d.), p. 322. Hereinafter referred to as The Federalist. :! Ibid., p. 54. :{ Ibid., p. 56. 4, James Madison, Notes of Debates in the Federal Convention of 1787, Adrienne Koch, intro. (Athens, Ohio: Ohio Univer sity Press, 1966), p. 653. 3 The Federalist, p. 322. 6 Richard W. Leopold, et al, eds., ProbleTfLs in American History (Engle wood Cliffs: Prentice-Hall, 1966), p. 134. 7 The Federalist, p. 114. 8 See Hamilton's argument in The Fed·· eralist #9, for example. n Richard H. Leach, American Federalism (New York: Norton, 1970), p. 2. 10 The Federalist, p. 246. 11 Leach, op. cit., p. l. I~ The Federalist, p. 242. 13 Ibid. 14 Elliot's Debates, Bk. I, Vol. 1, p. 422. 13 Ibid., Vol. 2, p. 8. Hi Ibid., Vol. 3, p. 87. 17 Charles Warren, The Making of the Constitution (New York: Barnes and Noble, 1937), p. 594.

18 Ibid., pp. 594-95. In Madison, Notes, p. 659.

APerfectSystenlof Government? LUDWIG VON MISES THE "SOCIAL ENGINEER" is the re former who is prepared to "liqui date" all those who do not fit into his plan for the arrangement of human affairs. Yet historians and sometimes even victims whom he puts to death are not averse to finding some extenuating circum stances for his massacres or planned massacres by pointing out that he was ultimately motivated by a noble ambition: he wanted to establish the perfect state of man kind. They assign to him a place in the long line of the designers of utopian schemes. Now it is certainly folly to ex cuse in this way the mass murders of such sadistic gangsters as Stalin and Hitler. But there is no doubt that many of the most bloody "liquidators" were guided by the ideas that inspired from time immemorial the attempts of philosophers to meditate on a per fect constitution. Having once hatched out the design of such an Dr. Mises needs no introduction to Freeman readers. This article is reprinted by permission from The Ultimate Foundation of Economic Science (Princeton, New Jersey: Van Nostrand, 1962) pp. 94-101, now out of print.

ideal order, the author is in search of the man who would establish it by suppressing the opposition of all those who disagree. In this vein, Plato was anxious to find a tyrant who would use his power for the realization of the Platonic ideal state. The question whether other people would like or dislike what he himself had in store for them never occurred to Plato. It was an understood thing for him that the king who turned philos opher or the philosopher who be came king was alone entitled to act and that all other people had, with out a will of their own, to submit to his orders. Seen from the point of view of the philosopher who is firmly convinced of his own infalli bility, all dissenters appear merely as stubborn rebels resisting what will benefit them. The experience provided by his tory, especially by that of the last two hundred years, has not shaken this belief in salvation by tyranny and the liquidation of dissenters.

Many of our contemporaries are firmly convinced that what is needed to render all human affairs '1L1'1 748 THE FREEMAN December perfectly satisfactory is brutal suppression of all "bad" people, Le., of those with whom they dis agree. They dream of a perfect system of government that - as they think - would have already long since been realized if these "bad" men, guided by stupidity and selfishness, had not hindered its establishment. A modern, allegedly scientific school of reformers rejects these violent measures and puts the blame for all that is found want ing in human conditions upon the alleged failure of what is called "political science." The natural sciences, they say, have advanced considerably in the last centuries, and technology provides us almost monthly with new instruments that render life more agreeable. But "political progress has been nil." The reason is that "political science stood still."l Political sci ence ought to adopt the methods of the natural sciences; it should no longer waste its time in mere speculations, but should study the "facts." For, as in the natural sci ences, the "facts are needed before the theory."2 One can hardly misconstrue more lamentably every aspect of human conditions. Restricting our criticism to the epistemological 1 N. C. Parkinson, The Evolution of Political Thought (Boston, 1958), p. 306.

2 Ibid., p. 309. problems involved, we have to say: What is today called "political sci ence" is that branch of history that deals with the history of poli tical institutions and with the his tory of political thought as mani fested in the writings of authors who disserted about political insti tutions and sketched plans for their alteration. It is history, and can as such never provide any "facts" in the sense in which this term is used in the experimental natural sciences. There is no need to urge the political scientists to assemble all facts from the remote past and from recent history, falsely labelled "present experi ence."3 Actually they do all that can be done in this regard. And it is nonsensical to tell them that conclusions derived from this ma terial ought "to be tested by ex periments."4 It is supererogatory to repeat that the sciences of hu man action cannot make any ex periments ....

That every human action has to be judged and is judged by its fruits or results is an old truism. It is a principle with regard to which the Gospels agree with the often badly misunderstood teach ings of the utilitarian philosophy. But the crux is that people widely differ from one another in their appraisal of the results. What o I bid., p. 314. 4 Ibid.

1972 A PERFECT SYSTEM OF GOVERNMENT? 749 some consider as good or best is often passionately rejected by others as entirely bad. The uto pians did not bother to tell us what arrangement of affairs of state would best satisfy their fellow citizens. They merely expounded 'what conditions of the rest of mankind would be most satisfac tory to themselves. Neither to them nor to their adepts who tried to realize their schemes did it ever occur that there is a fundamental difference between these two things. The Soviet dictators and their retinue think that all is good in Russia as long as they them selves are satisfied. But even if for the sake of argu ment we put aside this issue, we have to emphasize that the concept of the perfect system of govern ment is fallacious and self-con tradictory. The Human Condition What elevates man above all other animals is the cognition that peaceful cooperation under the principle of the division of labor is a better method to preserve life and to remove felt uneasiness than indulging in pitiless biological competition for a share in the scarce means of subsistence pro vided by nature. Guided by this insight, man alone among all living beings consciously aims at substi tuting social cooperation for what philosophers have called the state of nature or bellum omnium contra omnes or the law of the jungle.

However, in order to preserve peace, it is, as human beings are, indispensable to be ready to repel by violence any aggression, be it on the part of domestic gangsters or on the part of external foes. Thus, peaceful human cooperation, the prerequisite of prosperity and civilization, cannot exist without a social apparatus of coercion and compulsion, i.e., without a govern ment. The evils of violence, rob bery, and murder can be prevented only by an institution that itself, whenever needed, resorts to the very methods of acting for the prevention of which it is estab lished. There emerges a distinction between illegal employment of vio lence and the legitimate recourse to it. In cognizance of this fact some people have called govern rnent an evil, although admitting that it is a necessary evil. How ever, what is required to attain an end sought and considered as bene ficial is not an evil in the moral connotation of this term, but a means, the price to be paid for it.

Yet the fact remains that actions that are deemed highly objection able and criminal when perpe trated by "unauthorized" indi.,. viduals are approved when com mitted by the "authorities." Government as such is not only 750 THE FREEMAN December not an evil, but the most necessary and beneficial institution, as with out it no lasting social cooperation and no civilization could be devel oped and preserved. It is a means to cope with an inherent imper fection of many, perhaps of the majority of all people. If all men were able to realize that the alter native to peaceful social coopera tion is the renunciation of all that distinguishes Homo sapiens from the beasts of prey, and if all had the moral strength always to act accordingly, there would not be any need for the establishment of a social apparatus of coercion and oppression. Not the state is an evil, but the shortcomings of the hu man mind and character that imperatively require the operation of a police power. Government and state can never be perfect because they owe their ra,ison d' etre to the imperfection of man and can at tain their end, the elimination of man's innate impulse to violence, only by recourse to violence, the very thing they are called upon to prevent.

The Fight for Liberty It is a double-edged makeshift to entrust an individual or a group of individuals with the authority to resort to violence. The entice ment implied is too tempting for a human being. The men who are to protect the community against violent aggression easily turn into the most dangerous aggressors. They transgress their mandate. They misuse their power for the oppression of those whom they \vere expected to defend against oppression. The main political problem is how to prevent the police power from becoming tyran nical. This is the meaning of all the struggles for liberty. The es sential characteristic of Western civilization that distinguishes it from the arrested and petrified civilizations of the East was and is its concern for freedom from the state. The history of the West, from the age of the Greek city state down to the present-day re sistance to socialism, is essentially the history of the fight for liberty against the encroachments of the officeholders.

A shallow-minded school of so cial philosophers, the anarchists, chose to ignore the matter by sug gesting a stateless organization of mankind. They simply passed over the fact that men are not angels. They were too dull to real ize that in the short run an in dividual or a group of individuals can certainly further their own interests at the expense of their own and all other peoples' long-run interests. A sQciety that is not pre pared to thwart the attacks of such asocial and shortsighted ag gressors is helpless and at the 1972 A PERFECT SYSTEM OF GOVERNMENT? 751 mercy of its least intelligent and most brutal members. While Plato founded his utopia on the hope that a small group of perfectly wise and morally impeccable phi losophers will be available for the supreme conduct of affairs, an archists implied that all men with out any exception will be endowed with perfect wisdom and moral im peccability. They failed to con ceive that no system of social co operation can remove the dilemma between a man's or a group's in terests in the short run and those in the long run.

Man's atavistic propensity to beat into submission all other peo ple manifests itself clearly in the popularity enjoyed by the socialist scheme. Socialism is totalitarian. The autocrat or the board of auto crats alone is called upon to act. All other men will be deprived of any discretio:q to choose and to aim at the ends chosen; opponents will be liquidated. In approving of this plan, every socialist tacitly implies that the dictators, those entrusted with production management and all government functions, will pre cisely comply with his own ideas about what is desirable and what undesirable. In deifying the state - if he is an orthodox Marxian, he calls it society - and in assign ing to it unlimited power, he deifies himself and aims at the violent suppression of all those with whom he disagrees. The socialist does not see any problem in the conduct of political affairs because he cares only for his own satisfaction and does not take into account the pos sibility that a socialist government would proceed in a way he does not like.

Lost in Details The "political scientists" are free from the illusions and self deception that mar the judgment of anarchists and socialists. But busy with the study of the im mense historical material, they become preoccupied with detail, with the numberless instances of petty jealousy, envy, personal am bition, and covetousness displayed by the actors on the political scene. They ascribe the failure of all poli tical systems heretofore tried to the moral and intellectual weak ness of man. As they see it, these systems failed because their satis factory functioning would have required men of moral and intel lectual qualities only exceptionally ,present in reality. Starting from this doctrine, they tried to draft plans for a political order that could function automatically, as it were, and would not be embroiled by the ineptitude and vices of men. The ideal constitution ought to safeguard a blemishless conduct of public affairs in spite of the rulers' and the people's corruption 752 THE FREEMAN Decembeor and inefficiency. Those searching for such a legal system did not indulge in the illusions of the utopian authors who assumed that all men or at least a minority of superior men are blameless and efficient. They gloried in their real istic approach to the problem. But they never raised the question how men tainted by all the shortcom ings inherent in the human char acter could be induced to submit voluntarily to an order that would prevent them from giving vent to their whims and fancies.

However, the main deficiency of this allegedly realistic approach to the problem is not this alone. It is to be seen in the illusion that government, an institution whose essential function is the employ ment of violence, could be oper ated according to the principles of morality that condemn peremp torily the recource to violence. Gov ernment is beating into submis sion,imprisoning, and killing. People may be prone to forget it because the law-abiding citizen meekly submits to the orders of the authorities so as to avoid pun ishment. But the jurists are more realistic and call a law to which no sanction is attached an im perfect law. The authority of man made law is entirely due to the weapons of the constables who enforce obedience to its provi sions. Nothing of what is to be ~aid about the necessity of gov ernmental action and the benefits derived from it can remove or mitigate the suffering of those who are languishing in prisons.

No reform can render perfectly satisfactory the operation of an institution the essential activity of which consists in inflicting pain. Responsibility for the failure to discover a perfect system of gov ernment does not rest with the alleged backwardness of what is called political science. If men were perfect, there would not be any need for government. With imperfect men no system of gov ernment could function satisfac torily. The· eminence of man consists in his power to choose ends and to resort to means for the attain ment of the ends chosen; the ac tivities of government aim at re stricting this discretion of the in dividuals. Every man aims at avoiding what causes him pain; the activities of government ulti mately consist in the infliction of pain. All. great achievements of mankind were· the product of a spontaneous effort on the part of individuals; government substi tutes coercion .for voluntary ac tion. It is true, government is in dispensable because men are not faultless. But designed to cope with some aspects of human im perfection,·it can never be perfect.

~ A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN The EssentialPaul ElmerMore ALONG toward the end of the Nine teen Twenties, the philosophy of humanism - it was called the New Humanism then, just to make it fashionable - had a short-lived re vival in literary New York. The New Humanism set its face against most of the prevailing 'isms of the day, against humanitarianism, so cialism, liberalism, anarchism, progressivism or whatever. Natur ally its enemies vastly outnum bered its friends, but for a brief period the New Humanism had its magazine outlets (Seward Collins's Bookman and, to a limited extent, Lincoln Kirstein's Hound and Horn). For one excited year Irv ing Babbitt, the Harvard don who had made an arch-devil out of Rousseau, and Paul Elmer More, a legendary figure who had been literary editor of The Nation be fore World War I (what a differ ent Nation it had been then!), were the subject of thousands of arguments in Greenwich Village.

Babbitt and More were the Old and New Testaments of the New Humanist movement, and as we searched the texts (Babbitt's Rousseau and Romanticism and More's Shelburne Essays) we found horrifying things. One of our group, C. Hartley Grattan, got up a book, The Critique of Human ism, to which we all contributed scornful papers. My own was a defense of the modern novel against New Humanist critics. We hated Paul Elmer More with a special passion for his defense of property. Had he not said that, "looking at the larger good of society, we may say that the dollar is more than the man, and that the rights of property are more important than the right to life"? (The italics were More's.) More had written the infuriating words in 1915 in response to Socialist Morris Hilquit's attack on the 754 THE FREEMAN December Rockefellers for their alleged hir ing of "criminals and thugs to shoot the strikers" in the coal fields of Colorado. Remembering the recent executions of Sacco and Vanzetti, whom we considered vic tims of the propertied classes of Massachusetts, we could only con clude that Paul Elmer More was a cold-blooded enemy of humanity who deserved all that he got in our now-forgotten Critique of Human ism.

New Wars to Wage in J929 The quarrel over the New H u manism was at the height when the stock market crashed in 1929. But as the depression snowballed, with the bread lines lengthening, literary New York soon turned to more immediate concerns. Babbitt and More were forgotten; the newer quarrels were over Howard Scott's Technocracy, Rexford Tug well's Brain Trusters and the Stalin-Trotsky split in the Soviet Union. The intellectuals of the Thirties went off in several soci ological directions, some of them to work for writers' projects on the WP A, and the big tempest over the New Humanism blew no more. Since then the works of Paul Elmer More have gone out of print, and only an occasional Rus sell Kirk has seen fit to talk about More as though he were a living author. The republication of a selection from More's writings in The Es sential Paul Elmer More, edited wi th an introd uction and notes by Byron C. Lambert (Arlington House, $12.95), is an eye opener after all these years. Rereading that once-hated essay by More in defense of property, I am struck by its subtlety. What seemed, in 1929, to be a crass defense of rich men was actually nothing of the kind. More was championing the rights of property not particularly because he cared for the Rockefell ers, but because he believed that the right to life could not be se cure if property were not itself secure. More had written his essay before Lenin had taken over in Russia and rendered life precari ous for generations to come. With tremendous foresight More ques tioned that "community of owner ship" would "eliminate the greed and injustice of civilized life." He had nothing to go on here beyond his observation that socialists were "notoriously quarrelsome"

among themselves, yet he turned out to be eminently correct. Look ing back over the long past,. More found "a convincing uniformity in the way in which wealth and civil ization have always gone together, and in the fact that that wealth has accumulated only when private property was secure."

1972 THE ESSENTIAL PAUL ELMER MORE 755 In the Worker's Interest It was in the interests of the working men that More defended the property relations of the cap italist order. He had noticed, he said, that nearly all that makes life more significant to men than it is to beasts is associated with possessions. This is true "with property, all the way from the food we share with the beasts, to the most refined products of the human imagination." More was not sentimental about the workers, but he argued that those who were careless about ownership would not see to it that "labour shall receive the recompense it has bar gained for" and that "the labour er, as every other man, shall be secure in the possession of what he has received." As for the old canard that the desire for property encourages "materialism," More said that the sure way to foster the spirit of materialism is to unsettle the material basis of so cial life. "The mind," he argued, "will be free to enlarge itself in immaterial interests only when that material basis is secure, and without a certain degree of such security a man must be anxious over material things and prepon derantly concerned with them."

All this, in 1972, sounds most reasonable. What More was say ing as far back as 1915 is that the property right is a human right, and that a man without possess ions is inevitably at the mercy of others, and especially at the mercy of the political bureaucrats who run the State. In 1929 most of us were too stupid to see the validity of More's reasoning. Training for Civilization In a foreword to Professor Lambert's selections of "The Es sential Paul Elmer More," Russell Kirk writes that "if some of us are to fight our way to shore, we need More's chart." The chart is here, for the Lambert selections give us More in all his catholicity. He was immensely learned in Greek, Latin, Sanskrit and several modern languages, yet he hated the pedantry that would shun ideas in order to concentrate on such things as linguistics and archae ology. He thought Greek and Latin supplied a good discipline, but an equally important reason for studying the classics was to learn something about the rise and fall of civilizations. It was "a virile scholarship of ideas" that he was after.

More wrote long before we had a "counter-culture," or before the modern theory of "relevance" had been elaborated. But his essay on "Natural Aristocracy" could stand for a good commentary on the cultural and educational trends of the Nineteen Sixties. Concentra756 THE FREEMAN December tion on currently topical studies, he said, "results in isolating the student from the great inheritance of the past; the frequent habit of dragging him through the slums of sociology, instead of making him at home in the society of the noble dead, debauches his mind with a flabby, or inflames it with a fanatic, humanitarianism. He comes out of college ... a nouveau intellectual, bearing the same re lation to the man of genuine edu cation as the nouveau riche to the man of inherited manners." More, of course, had not heard about "relevance." But he knew all about cant, and he had the answer to the Sixties way back in 1915.

ENTERPRISE DENIED: Origins of the Decline of American Rail roads, 1897-1917 by Albro Martin (New York: Columbia University Press, 1971, $10.95, 402 pp.) Reviewed by Joseph M. Canfield AMERICA grew at a phenomenal rate during the first decade of the twentieth century, and the rail roads tried to expand to meet the challenge. This era produced Pennsylvania Station and Grand Central Terminal in New York and Union Station in Washington, conspicuous evidence of the desire of the railroads for expansion. Railroad buffs can show, from their own photo collections, or from the pages of a plethora of published railroad histories, dra matic evidence of the increase in size and power of locomotives in this period. But rolling stock is easy to acquire, even when capital f or fixed way and structures is difficult to obtain. President Elli ott of the Northern Pacific Rail way observed, in 1907, that the roads were "attempting to force a three inch stream through a one inch nozzle." The congestion of the railroads was a harbinger of things to come.

The warning sounded by Elliott and other railroad leaders wasn't heeded. Martin declares, and dem onstrates his point statistically, that the capital needed for expan sion of the railroad plant was far, far short of what was needed to cope with expanding -traffic. His table shows that the growth 'capi tal available in certain years, be fore World War I, came to as little as a fourth of the amount actually required to handle the traffic being thrust upon the rail roads. In those "Golden Years" the price index rose rapidly. Every thing that the railroads bought cost more. Labor demanded-and received - substantial -wage in creases~. But under the regulatory philosophy prevailing, the rail roads were not permitted to raise rates at all.

1972 OTHER BOOKS 757 Railroad regulation was based on a philosophy, called by Martin "Archaic Progressivism." It had several assumptions, all now proved to be substantially invalid. One was that the railroads were overcapitalized. This supposedly made the shippers pay excessive rates in order to give the security holders undeserved earnings. The fallacy was ultimately exploded, as a result of the ICC ordered val uation of the railroads, but· it is still believed in many sectors of the community and still taught in many schools. Another fallacy was the concept of a "reasonable rate." A freight rate is a price for moving goods, nothing more. Hopefully, it would permit satisfactory recompense to the carrier , covering the· cost of service and a return on invest ment. At the same time it must be at a level that will permit goods to move. Somehow, the Progress ives in Congress - and elsewhere - believed in a concept of "reason ableness" substantially independ ent of market factors inherent in the setting of any other price.

This undefined and undefinable concept buttressed the determina tion of leaders in the "Progressive Era" to deny the railroads in creases in rates. Three times in the Roosevelt Taft-Wilson period, the railroads went to the Interstate Commerce Commission for general across the-board increases in freight rates. The chapters in which Mar tin describes these exercises in futility are entitled, "The First Denial," "The Second Denial," "The Third Denial." The philoso phy of the times, the prevailing political climate, the laws creating the Commission and directing its activities doubtless left any other kind of decision outside the realm of probability; the parties in volved really didn't know how the economy worked. They appeared quite unaware of how tinkering at one point in the economic sys tem could produce unwanted re sults in other areas. Even the rail road officers, expert railroaders, were quite unaware ·of the ideas prevailing outside their own group - and how to contend with them.

"Defeat of the young by the old and silly." This quotation from one of Vachel Lindsay's poems ap"" pears at the head of the chapter "Third Denial." The quotation is appropriate in view of the suc ceeding generations which have had to contend with inadequate transportation. The men who "'starred" in that era in placing the regulatory shackles on the railroads may well be described as "old" and/or "silly." Typically they were men whose thinking on railroads had congealed in the conditions of the 1870's, with rem758 THE FREEMAN December edies based on interpretations which probably weren't valid even then. They were men of advanc ing years who clung to ideas which had lost contact with the real world they were supposed to be legislating for. Robert M. LaFollette fought valiantly as late as 1917 to pre vent any rate increase. An in crease didn't fit in with his ideas of Commission regulation. La Follette's reputation was based on his earlier career in Wisconsin where his Wisconsin Railroad Commission was considered a model of the genre. Elsewhere it has been shown that this Commis sion came close to depriving Mil waukee of both power and trans portation a few years later.

Theodore Roosevelt's blocking of E. H. Harriman's control and revitalization of the Alton Rail road served only to provide first rate publicity for an exceptional case of looting a railroad. And it kept the Alton from its full poten tial in the railroad system until after World War II. William Howard Taft succeeded in alienating every shade of opin ion on the railroad question. But he proudly took credit for the Parcel Post Law. This forced the railroads to haul packages as mail at much lower rates than they had received for similar packages when handled as express - not very helpful when earnings were already jeopardized and the roads thirsting for capital. Louis D. Brandeis, while sup posedly protecting the "public," played maj or roles in all three "Denials." In fact, he made the hearings pretty much his show. He cleverly trapped railroad offi cials and twisted the effect of their testimony, while refutations didn't get the publicity his presen tation received. He was on the Supreme Court when the Adam son Act (8-hour railroad day) came before that body. He served neither the railroads nor the pub lic.

The 8-hour day crisis as it built up under Wilson demonstrates the silliness of the time, the age, the movement. Martin describes a dra matic scene at the White House where Wilson had summoned thirty railroad· presidents: If the railroads would cooperate he was willing to do all he could to get the ICC to grant rate relief, pro vided that the eight-hour commission recommended it. Pointing his finger at the. railroad presidents, he de clared, "If a strike comes, the public will know where the responsibility rests. It will not be upon me." The crisis had been forced upon the railroads by denying them normal economic freedom. Placing the entire onus for a strike on the railroad presidents was not in ac1972 OTHER BOOKS 759 cord with the moral principles of our American tradition. It was reprehensible to order the rail roads to increase their costs (by shortening the working day) with out permitting commensurate rate increases by grant of the Inter state Commerce Commission. If Wilson could order the railroad men, he could instruct the Com mission. He didn't choose to give equal treatment.

In the winter following Wilson's "salon," the nation paid dearly for the maltreatment of its railroads. The incredible congestion at the ports, the car shortages, the short ages of necessities, the skyrocket ing prices, the approach to civil rights were among the end results of following policies which did not allow the railroads to operate in a free market. ~ THE GROWTH OF ECONOMIC THOUGHT by Henry W. Spiegel (Englewood Cliffs, New Jersey: Prentice-Hall, 1971), 816 pp., $12.95. ~ THE EVOLUTION OF ECO NOMIC THOUGHT by W. E. Kuhn (2nd ed.; Cincinnati: Southwestern, 1970), 500 pp., $10.20. Reviewed by Gary North THERE ARE a lot of textbooks trac ing the development of economic thought. Too many of them, in fact. Sometimes one of these can become a true classic, such as Joseph Schumpeter's History of Economic Analysis, but most of them gather dust on the shelves, for good reason. They are essen tially reference books and tortures inflicted on undergraduate stu dents.

The two books under review are, from the point of view of the free market position, quite serviceable. Spiegel's is more clearly a refer ence book, going from school of thought to school of thought, . scholar by scholar. His is a sum mary, a descriptive work, with very little critical analysis. But he gives a fair presentation of the advent of marginalism and the contributions of the Austrian School. The book contains a superb annotated bibliography, 130 pages long. It is a kind of miniature en cyclopedia, and for quick refer ence for refresher purposes, Spie gel's is an ideal guide. Kuhn's book is more technical and analytical. In contrast to Spie gel's brief sketches of the con tributions of many economists, Kuhn has focused on key members of various schools of thought, thus enabling him to present more com plete descriptions of their con tributions. The first half of the book is arranged in terms of the various economic schools: "From Menger to Bohm-Bawerk," "From 760 THE FREEMAN December Marshall to Wicksell," "Keynes,"

and so forth. The second half is devoted to important areas of in quiry, such as "Monetary and Banking Theory," "International Trade Theory," and "Business Cy cle Theory." At the end of each chapter he adds a helpful bio graphical section, although the sketches are brief. By avoiding the pitfalls asso ciated with any single form of or ganization, whether purely chrono logical, topical, or biographical, Kuhn has produced a textbook that deals adequately with both history and issues, people and ideas. The careful student can come away from the book with a better chance of remembering some of the data jammed into the chapters. So long as the reader under stands the limitations on textbooks - that they should be used to in trod uce us to the key primary sources and to refresh our memo ries once we have read the basic original materials - an investment in either or both books could pay off. Next time, you can look up that seemingly obscure footnote and find out why the author· bothered to make reference to some long-dead economist. It will help us to understand why Keynes said that the intellectuals and politi cians of any era are quite likely to be mouthing the phrases of some "academic scribbler of a few years back."

~ AN ECONOMIST'S PROTEST by Milton Friedman (22 Apple ton Pl., GI en Ridge, N. J.: Thomas Horton & Co., 1972), 219 pp., $2.95. This paperback collection of Prof. Friedman's Newsweek col umns is a handy. reference guide for those who want a simplified, quick introduction to the author's controversial opinions. Sections on "Nixon Economics," "Monetary Policy," "A Volunteer Army," "So cial Security and Welfare," "Gov ernment and the Interests," and "Government and Education" pres ent numerous articles that have been plaguing "liberals" over the past six years. For example, the section on "Monopoly" contains three essays, two of which assail the Post Office, and the third one criticizes governmental regulation and state ownership in general. ~ THE FREEMAN-Volume 22, January-December1972 Prepared by BETTINA BIEN GREAVES of the Foundation staff NOTE: In page references, the number preL:eding the colon designates the month, those follow ing refer to pages. All articles have at least three entries-author, subject, and title--except in a few cases when title clearly indicates subject matter. Books reviewed are listed on page 768.

A ABORTION: a metaphysical approach (T. L. Johnson) 8:498-505 ACADEMIC freedom Educational dilemma, The (Dozer) 6:359-365 ADVERTISING (Kinner) 9:515-528 ADVERTISING Economic-power syndrome, The (Petro) 4: 212-225 AGELESS faith for a vacillating America (Bearce) 10:586-590 AGRICULTURAL revolution, new (Mueller) 5:259-264 AMERICAN Competitivism: cause or result? (Heiner) 3:164-167 AMERICAN economy is NOT depression proof, The (Sennholz) 11: 666-673 AMERICAN Republic, founding of. See Carson ANARCHY Perfect system of government? A (Mises) 12:747-752 ANTICAPITALISM, anti-business ideology Are we Marxians now? (Sennholz) 8:451-460 Business baiting-1972 style (Rukeyser) 6:367-371 Economic-power syndrome, The (Petro) 4: 212-225 Objectivity and accountability: a one-way street (Hardesty) 4: 195-204 Roots of "Anticapitalism," The ( Kuehnelt-Leddihn) 11 : 657·665 "ANTIPRENEURS" Objectivity and accountability: a one-way street (Hardesty) 4: 195-204 ARE we Marxians now? (Sennholz) 8:451-460 ARE you getting your money's worth?

(Curtiss) 12: 727-733 ARGENTINE inflation, The (Benegas Lynch) 12:715-717 B BACK to basics - fable of the berry pickers (Paton) 12:707-714 BALANCE of trade/payments Founding of the American Republic, The (Carson) #6, 1:42-54 In search· of a new monetary order ( Sennholz) 1: 3-11 See also Money; Trade BALLOONING welfare state, The (Hazlitt) 4:226-231 BARGER, Melvin D. See Book reviews (Voorhees) BASTIAT, Frederic - ideas of On re-reading The Law (Colvard) 2:76-81 BEARCE, Robert G. Ageless faith for a vacillating America 10:586-590 BENEGAS· Lynch, Alberto, Jr. Argentine inflation, The. 12: 715-717 BLOOD from turnips (Elniff) 6:372-377 BREESE, Edward Y. Vote for myself, A. 10: 584-585 BROWNFELD, Allan C. See Book reviews (Edwards) BUSINESS baiting - 1972 style (Rukeyser) 6:367-371 c CAHILL, John P. Vouchers: government control of private schools? 7: 397-400 CAN we sustain prosperity? (Paton) 1: 33-41 CANFIELD, Joseph M. See Book reviews (Martin) 761 762 THE FREEMAN December CAPIT AL, capitalism Are we Marxians now? (Sennholz) 8: 451-460 Cure for poverty, The (Hazlitt) 6: 355-358 Economics: a branch of moral philosophy (Read) 1: 22-27 Why can't we have both? (Hockman) 2: 67-73 See also Free Market CARSON, Clarence B.

Founding of the American Republic, The: (6) Mercantile impasse, The. 1: 42-54 (7) First American crisis, The: 1763-1766. 2: 112-124 (8) British acts become intolerable. 3: 147-159 (9) Prelude to independence. 4: 232-244 ( 10) Declaration of Independence, The. 5: 273-283 (11) War for independence, The. 6: 341-354 (12) Scourge of inflation, The. 7: 419-433 (13) American triumph, The. 8: 471-485 (14) Freeing the individual. 9: 550-561 (15) Critical period, The. 10: 616-627 ( 16) Making the Constitution. 11: 684-699 (17) Principles of the Constitution. 12: 734-746 CAUSE and effect (Yankus) 9:545-549 CAUSES of inflation, The (Sennholz) 5 :284-292 CHAMBERLAIN, John. See Book reviews. CITY /local government 5° above zero (Paton) 10:612-615 "I was a slumlord . . ." (Frank) 6: 365-366 Zoning laws: case for repeal, The (Mandel) 7: 437-443 CIVILIZATION, basis of Six ideas to keep us human (Opitz) #1, 11: 643-651 We and the third world: a note of Christian dissen t (K uehnelt-Leddihn) 2: 85-94 CLOSER look at gold, A (C. E. Weber) 9: 533-544 COLESON, Edward Creeping capitalism: is free enterprise coming back? 10:595-611 When men appeal from tyranny to God.

6 :323-335 COLLEGES/universities Educational dilemma, The (Dozer) 6: 359-365 COLONIALISM Are we Marxians now? (Sennholz) 8: 451-460 We and the" third world: a note of Christian dissen t (K uehnelt-Leddihn) 2: 85-94 COLV ARD, Ray L. On re-reading The Law. 2:76-81 To be free and equal. 5: 293-296 COMMUN AL societies I visit a managed society (0. Johnson) 11: 676-683 Utopia: a dream into nightmare (Winston) 3: 131-139 COMPETITION Advertising (Kirzner) 9: 515-528 American competitivism: cause or result'? (Heiner) 3:164-167 CONSUMER sovereignty vs. consumer protection Are you getting your money's worth? (Curtiss) 12: 727-733 Economic-power syndrome, The (Petro) 4: 212-225 New agricultural revolution, The (Mueller) 5: 259-264 Productivity of freedom, The (Harriss) 9: 562-569 CONFLICT of interests and "classes" Are we Marxians now? (Sennholz) 8: 451-460 Status: end product of welfare (Shumiatcher) 5:297-315 COOLEY, Oscar W.

Pollution and property. 6: 336-340 COONEY, RONALD Natural rights. 10: 628-631 COOPERATION, social and the market American competitivism: cause or result? (Heiner) 3:164-167 Perfect system of government? A (Mises) 12:747-752 CREEPING capitalism: is free enterprise coming back? (Coleson) 10:595-611 CRIME Are you getting your money's worth? (Curtiss) 12: 727-733 Population question, The (J. A. Weber) 10: 579-583 CULLINANE, Kevin Pine tree shilling, The. 7: 434-436 CURE for poverty, The (Hazlitt) 6: 355-358 CURTISS, W. M. Are you getting your money's worth? 12: 727-733 D DEMERS, Robert W. Digging ditches. 3: 140-141 DIETZE, Gottfried. See Book reviews (McClellan) DIGGING ditches (Demers) 3: 140-141 DISASTER relief Flood relief (Poirot) 10:591-594 DOZER, Donald M. Educational dilemma, The. 6: 359-365 1972 INDEX 763 DRUGS, narcotics Are you getting your money's worth? (Curtiss) 12:727-733 E ECONOMIC depression, boom-bust cycle American economy is NOT depression proof, The (Sennholz) 11: 666-673 .ECONOMIC development/progress/ production Back to basics - fable of the berry pickers (Paton) 12:707-714 Can we sustain prosperity? (Paton) 1: 33-41 ECONOMIC-power syndrome, The (Petro) 4:212-225 ECONOMICS: a branch of moral philosophy (Read) 1: 22-27 EDUCATION, governmental vs. private On re-reading The Law (Colvard) 2:76-81 Vouchers: government control of private schools? (Cahill) 7:397-400 You rascal, you!, (Read) 11: 652-656 EDUCATIONAL dilemma, The (Dozer) 6: 359-365 ELNIFF, Terrill I.

Blood from turnips. 6: 372-377 ENERGY: the ultimate raw material (Wei) 8 :486-496 ENTREPRENEUR, role of Advertising (Kirzner) 9: 515-528 ENVY On appraising envy (Hazlitt) 3: 142-146 Roots of "anticapitalism," The (Kuehnelt-Lerldihn) 11: 657-665 F FEDERAL Reserve System, The (Sennholz) 4: 245-253 FEDERAL Trade Commission Objectivity and accountability: a one-way street (Hardesty) 4: 195-204 5° above zero (Paton) 10:612-615 FIXED exchange rates and monetary crises (North) 3: 168-185 FLOOD relief (Poirot) 10: 591-594 FOUNDING of the American Republic, The. See Carson FRANCKOWIAK, L~nud Heads will roll. 10:632-634 FRANK, George' "I was a slumlord ... " 6: 365-366 FREE enterprise and the Russians (Kuehnelt-Leddihn) 8:461-470 FREE giving vs. the welfare state (La Dow) 2:109-111 FREE market, free enterprise Advertising (Kirzner) 9: 515-528 Creeping capitalism: is free enterprise coming back? (Coleson) 10: 595-611 Roots of "anticapitalism," The (Kuehnelt-Leddihn) 11: 657-665 Status: end product of welfare (Shumiatcher) 5:297-315 See also Capital FREEDOM and the individual Ageless faith for a vacillating America (Bearce) 10: 586-590 Cause and effect (Yankus) 9: 545-549 Productivity of freedom, The (Harriss) 9: 562-569 Six ideas to keep us human (Opitz) #2, 12: 718-726 To be free and equal (Colvard) 5: 293-296 When men appeal from tyranny to God (Coleson) 6: 323-335 FRIEDMAN, Milton Morality and controls. 1: 28-32 Natural history of governmental intervention, The. 8: 497 FRIEDMAN, Milton-views on money American economy is NOT depression-proof, The (Sennholz) 11: 666-673 FROM price control to Valley Forge, 1777-1778 (Greaves) 2: 81-84 G GAMBLING, lottery Are you getting your money's worth?

(Curtiss) 12: 727 -733 GOVERNMENT, nature and role of Founding of the American Republic, The (Carson) #13, 8:471-485; #14, 9:550-561; #15, 10:616-627;#17, 12:734-746 Heads will roll (Franckowiak) 10: 632-634 Morality and controls (Friedman) 1: 28-32 Natural rights (Cooney) 10:628-631 Perfect system of government? A (Mises) 12:747-752 Population question, The (J. A. Weber) 10: 579-583 Productivity of freedom, The (Harriss) 9: 562-569 Rights and pseudo rights (Lindl) 2: 73-75 Status: end product of welfare (Shumiatcher) 5: 297-315 GOVERNMENT intervention American economy is NOT depression-proof, The (Sennholz) 11:666-673 Are we Marxians now? (Sennholz) 8: 451-460 Are you getting your money's worth? (Curtiss) 12:727-733 Natural history of governmental intervention, The (Friedman) 8:497 764 THE FREEMAN December Nature of modern warfare, The (Osterfeld) 4: 205-211 Ownership: free but not cheap (North) 7:401-414 Power to the people: the mask of despotism (Keyser) 7:387-396 Why can't we have both? (Hockman) 2: 67-73 GREAVES, Percy L., Jr.

From price control to Valley Forge, 1777-1778. 2:81-84 Government intervention (continued) H HARDESTY, C. Howard, Jr. Objectivity and accountability: a one-way street. 4: 195-204 HARRISS, C. Lowell Productivity of freedom, The. 9: 562-569 HAZLITT, Henry Ballooning welfare state, The. 4: 226-231 Cure for poverty, The. 6: 355-358 On appeasing envy. 3: 142-146 Should we divide the wealth? 2: 100-108 Welfarism gone wild. 5: 265-272 Why some are poorer. 1: 15-21 See also Book reviews (Hutt) HEADS will roll (Franckowiak) 10:632-634 HEINER, Ron American competitivism: cause or result? 3: 164-167 HIS TO RY, historiography Founding of the American Republic, The (Carson) #14,9:550-561 HOCKMAN, Jean Why can't we have both? 2: 67-73 HUMANITY, essence of Six ideas to keep us human (Opitz) #1, 11: 643-651 I VISIT a managed society (0. Johnson) 11: 676-683 "I WAS a slumlord ... " (Frank) 6:365-366 IDEAS/ideals/ideologies American competitivism: cause or result?

(Heiner) 3:164-167 Are we Marxians now? (Sennholz) 8:451-460 Creeping capitalism: Is free enterprise coming back? (Coleson) 10: 595-611 Economic-power syndrome, The (Petro) 4:212-225 Off the beaten track (Read) 7:415-418 Roots of "anticapitalism," The (Kuehnelt Leddihn) 11: 657-665 Ideas (continued) Six ideas to keep us human (Opitz) #1, 11: 643-651 When men appeal from tyranny to God (Coleson) 6: 323-335 IN SEARCH of a new monetary order (Sennholz) 1:3-11 INCENTIVE, individual Business baiting-1972 style (Rukeyser) 6: 367-371 Can we sustain prosperity? (Paton) 1: 33-41 Should we divide the wealth? (Hazlitt) 2: 100-108 Why some are poorer (Hazlitt) 1:15-21 INDIVIDU AL freedom/rights/responsibility Abortion: a metaphysical approach (T. L. Johnson) 8: 498-505 Founding of the American Republic, The (Carson) #7, 2:112-124; #9, 4:232-244; #14, 9: 550-561 Heads will roll (Franckowiak) 10: 632-634 Modern volunteer army, The (Kramer) 2: 95-99 Natural rights (Cooney) 10: 628-631 Six ideas to keep us human (Opitz) #2, 12: 718-726 Status: end product of welfare (Shumiatcher) 5:297-315 To be free and equal (Colvard) 5: 293-296 J JOHNSON, Orien I visit a managed society. 11: 676-683 JOHNSON, Thomas L.

Abortion: a metaphysical approach. 8: 498-505 K KEYNES, John M.-ideas of American economy is NOT depression-proof The (Sennholz) 11: 666-673 KEYSER, Carl A. Power to the people: the mask of despotism 7:387-396 KIRZNER, Israel M. Advertising. 9: 515-528 KRAMER, David J. Modern volunteer army, The. 2: 95-99 KUEHNELT-LEDDIHN, Erik von Free enterprise and the Russians. 8:461-47l Roots of "anticapitalism," The. 11: 657-661 We and the third world: a note of Christial dissent. 2: 85-94 L LA DOW, Charles R. Free giving vs. the welfare state. 2: 109-11 1972 INDEX 765 LABOR, wages Ballooning welfare state, The (Hazlitt) 4:226-231 What do you have again"st the poor? (Read) 9: 528-532 LAND, ownership and use of Ownership: free but not cheap (North) 7: 401-414 Should we divide the wealth? (Hazlitt) 2: 100-108 Zoning laws: case for repeal, The (Mandel) 7 :437-443 LEGAL tender: sellers beware (Poirot) 1: 12-14 LINDL, John D.

Rights and pseudo rights. 2: 73-75 M MALZ, Allan. See Book reviews (Hospers) MANAGED society, I visit (0. Johnson) 11: 676-683 MANDEL, David J. Zoning laws: the case for repeal. 7:437-443 MARGINAL producer, who is the? (Paton) 3: 160-163 MARX, Karl - ideas of Are we Marxians now? (Sennholz) 8:451-460 MA TERIALISM/behaviorism/ environmen talism Six ideas to keep us human (Opitz) #1, 11: 643-651 ;#2, 12: 718-726 MERCANTILISM Creeping capitalism: is free enterprise coming back? (Coleson) 10:595-611 Founding of the American Republic, The ( Carson) #6, 1: 42-54 METHODOLOGY, libertarian Economics: a branch of moral philosophy ( Read) 1: 22-27 Off the beaten track (Read) 7:415-418 What do you have against the poor? (Read) 9: 528-532 MISES, Ludwig von Perfect system of government? A. 12:747-752 MISES, Ludwig von - ideas of American competitivism: cause or result? (Heiner) 3: 164-167 Economic-power syndrome, The (Petro) 4: 212-225 Ownership: free but not cheap (North) 7: 401-414 See also Book reviews (Toward Liberty) MODERN volunteer army, The (Kramer) 2: 95-99 MONEY, credit and inflation American economy is NOT depression-proof, The (Sennholz) 11:666-673 Argentine inflation, The (Benegas Lynch) 12:715-717 Blood from turnips (Elniff) 6: 372-377 Causes of inflation, The (Sennholz) 5: 284-292 Closer look at gold, A (C. E. Weber) 9: 533-544 Federal Reserve System, The (Sennholz) 4 :245-253 Fixed exchange rates and monetary crises (North) 3:168-185 Founding of the American Republic, The (Carson) #12,7:419-433 In search of a new monetary order (Sennholz) 1: 3-11 Legal tender: sellers beware (Poirot) 1: 12-14 Pine tree shilling, The (Cullinane) 7: 434-436 Social inflation (Poirot) 11:674-675 MORALITY and controls (Friedman) 1: 28-32 MORALS, morality. See Religion MUELLER, George B.

New agricultural revolution, The. 5:259-264 N NATIONALISM and aggression Nature of modern warfare, The (Osterfeld) 4: 205-211 NATURAL history of governmental intervention, The (Friedman) 8:497 NATURAL RIGHTS (Cooney) 10:628-631 NATURE of modern warfare, The (Osterfeld) 4: 205-211 NEGA TIVE income tax Should we divide the wealth? (Hazlitt) 2: 100-108 NEW agricultural revolution, The (Mueller) 5 :259-264 NORTH, Gary Fixed exchange rates and monetary crises. 3: 168-185 Ownership: free but not cheap. 7: 401-414 See also Book reviews (Goldman; Kuhn; Sanborn; Spiegel) o OBJECTIVITY and accountability: a one-way street (Hardesty) 4: 195-204 OFF the beaten track (Read) 7:415-418 ON appeasing envy (Hazlitt) 3: 142-146 ON re-reading The Law (Colvard) 2: 76-81 OPITZ, Edmund A. Six ideas to keep us human, #1, 11: 643-651; #2, 12: 718-726 See also Book reviews (Andelson; Halle) 766 THE FREEMAN December OSTERFELD, David Nature of modern warfare, The. 4: 205-211 OWNERSHIP: free but not cheap (North) 7: 401-414 p PATON, W. A.

Back to basics - fable of the berry pickers. 12: 707-714 Can we sustain prosperity? 1: 33-41 50 above zero. 10: 612-615 Who is the marginal producer? 3: 160-163 PERFECT system of government? A (Mises) 12: 747-752 PETRO, Sylvester Economic-power syndrome, The. 4: 212-225 PINE tree shilling, The (Cullinane) 7: 434-436 POIROT, Paul L. Flood relief. 10: 591-594 Legal tender: sellers beware. 1: 12-14 Social inflation. 11: 674-675 POLL UTION and the environment Energy: the ultimate raw material (Wei) 8: 486-496 Population question, The (J. A. Weber) 10:579-583 POLLUTION and property (Cooley) 6: 336-340 POPULATION question, The (J. A. Weber) 10: 579-583 POVERTY - government programs Creeping capitalism: is free enterprise coming back? (Coleson) 10: 595-611 Cure for poverty, The (Hazlitt) 6: 355-358 Should we divide the wealth? (Hazlitt) 2: 100-108 Welfarism gone wild (Hazlitt) 5: 265-272 What do you have against the poor? (Read) 9: 528-532 Why some are poorer (Hazlitt) 1: 15-21 POWER, fuel supplies - production and use Energy: the ultimate raw material (Wei) 8: 486-496 Objectivity and accountability: a one-way street (Hardesty) 4: 195-204 POWER - political vs. economic Economic-power syndrome, The (Petro) 4: 212-225 POWER to the people: the mask of despotism (Keyser) 7:387-396 PRICE and wage controls From price control to Valley Forge, 1777-1778 (Greaves) 2:81-84 Morality and controls (Friedman) 1: 28-32 PRIV A TE property Ownership: free but not cheap (North) 7: 401-414 Pollution and property (Cooley) 6: 336-340 Zoning laws: case for repeal, The (Mandel) 7: 437-443 PRIV ATE schools, government control of: Vouchers ( Cahill) 7: 397 -400 PRODUCTIVITY of freedom, The (Harriss) 9: 562-569 PROSPERITY, can we sustain? (Paton) 1: 33-41 R READ, Leonard E.

Economics: a branch of moral philosophy. 1: 22-27 Off the beaten track. 7:415-418 What do you have against the poor? 9: 528-532 You rascal, you! 11: 652-656 RELIGIOUS and moral values Ageless faith for a vacillating America (Bearce) 10: 586-590 Founding of the American Republic, The (Carson) #14, 9: 550-561 Roots of "anticapitalism," The (Kuehnelt-Leddihn) 11: 657-665 Six ideas to keep us human (Opitz) #2, 12: 718-726 We and the third world: a note of Christian dissent (Kuehnelt-Leddihn) 2: 85-94 When men appeal from tyranny to God (Coleson) 6: 323-335 RENT control "I was a slumlord ... " (Frank) 6: 365-366 REPUBLIC, defined Founding of the American Republic, The (Carson) #17, 12: 734-746 REVOLUTION, causes of Founding of the American Republic, The (Carson) #10, 5: 273-283;#11, 6: 341-354 On appeasing envy (Hazlitt) 3: 142-146 RESPONSIBILITY, individual Six ideas to keep us human (Opitz) #2, 12: 718-726 Vote for myself, A (Breese) 10:584-585 RIGHTS and pseudo rights (Lindl) 2: 73-75 ROGERS, Tommy W. See Book reviews (Leoni; Peterson; Rothbard) ROOTS of "anticapitalism," The (Kuehnelt-Leddihn) 11: 657-665 RUKEYSER, Merryle Stanley Business baiting - 1972 style. 6: 367-371 RUSSIANS, free enterprise and (Kuehnelt-Leddihn) 8:461-470 s SAN QUENTIN I visit a managed society (0. Johnson) 11: 676-683 1972 INDEX 767 SELF-IMPROVEMENT /reliance/ responsibility Cause and effect (Yankus) 9: 545-549 Digging ditches. (Demers) 3: 140-141 Vote for myself, A (Breese) 10: 584-585 You rascal, you! (Read) 11: 652-656 SENNHOLZ, Hans F.

American economy is NOT depression-proof, The. 11: 666-673 Are we Marxians now? 8: 451-460 Causes of inflation, The. 5: 284-292 Federal Reserve System, The. 4: 245-253 In search of a new monetary order. 1: 3-11 SHOULD we divide the wealth? (Hazlitt) 2: 100-108 SHUMIA TCHER, Morris C. Status: end product of welfare. 5:297-315 SIX ideas to keep us human (Opitz) #1, 11: 643-651;#2, 12: 718-726 SLAVERY Cause and effect (Yankus) 9: 545-549 Founding of the American Republic, The (Carson) #14, 9: 550':'561 When men appeal from tyranny to God (Coleson) 6: 323-335 SMITH, Adam - ideas of Creeping capitalism: is free enterprise coming back? (Coleson) 10: 595-611 SNYDER, Carl - ideas of Economics: a branch of moral philosophy ( Read) 1: 22-27 SOCIAL inflation (Poirot) 11: 674-675 SOCIAL Security Ballooning welfare state, The (Hazlitt) 4: 226-231 SOCIALISM, socialist ideology Can we sustain prosperity? (Paton) 1: 33-41 Perfect system of government? A (Mises) 12:747-752 Power to thelleople: the mask of despotism ( Keyser) 7: 387-396 Roots of "anticapitalism," The (Kuehnelt-Leddihn) 11: 657-665 When men appeal from tyranny to God (Coleson) 6: 323-335 STATUS: end product of welfare (Shumiatcher) 5:297-315 T T AXES, taxation Back to basics - fable of the berry pickers (Paton) 12:707-714 Founding of the American Republic, The (Carson) #6,1:42-54; #8, 3:147-159 Should we divide the wealth? (Hazlitt) 2: 100-108 Vouchers: government control of private schools? (Cahill) 7: 397-400 THIRD world and us (Kuehnelt-Leddihn) 2 :85-94 THORNTON, Robert M. See Book reviews (Hoffer; Wilder) TO be free and equal (Colvard) 5: 293-296 TRADE, international - history of Creeping capitalism: is free enterprise coming back? (Coleson) 10: 595-611 Founding of the American Republic, The (Carson) #7,2:112-124; #8, 3:147-159 When men appeal from tyranny to God ( Coleson) 6: 323-335 TRADE, international - theory of Nature of modern warfare (Osterfeld) 4: 205-211 We and the third world: a note of Christian dissent (Kuehnelt-Leddihn) 2: 85-94 u U. S. HISTORY and Constitution From price control to Valley Forge, 1777-1778 (Greaves) 2: 81-84 Pine tree shHling, The (Cullinane) 7 :434-436 Power to the people: the mask of despotism (Keyser) 7: 387-396 See also Carson UTOPIA: dream into nightmare (Winston) 3: 131-139 v V ALLEY Forge, from price control to (Greaves) 2: 81-84 VOLUNTEER army, modern (Kramer) 2: 95-99 VOTE for myself, A (Breese) 10:584-585 VOUCHERS: government control of private schools? (Cahill) 7:397-400 w WARS/military draft/conscription Founding of the American Republic, The (Carson) #12, 7: 419-433 Modern volunteer army, The (Kramer) 2: 95-99 Nature of modern warfare, The (Osterfeld) 4: 205-211 WE and the third world: a note of Christian dissent (Kuehnelt-Leddihn) 2: 85-94 WEBER, Charles E.

Closer look at gold, A. 9: 533-544 WEBER, James A. Population question, The: limited government or limited people? 10: 579-583 768 THE FREEMAN December WEI, James Energy: the ultimate raw material. 8: 486-496 WELFARE state Ballooning welfare state, The (Hazlitt) 4: 226-231 Free giving vs. the welfare state (La Dow) 2: 109-111 Rights and pseudo rights (Lindl) 2: 73-75 Status: end product of welfare (Shumiatcher) 5:297-315 WELF ARISM gone wild (Hazlitt) 5: 265-272 WHAT do you have against the poor? (Read) 9:528'-532 WHEN men appeal from tyranny to God (Coleson) 6: 323-335 WHO is the marginal producer? (Paton) 3: 160-163 WHY can't we have both? (Hockman) 2:67-73 WHY some are poorer (Hazlitt) 1: 15-21 WINSTON, Alexander Utopia: dream into nightmare. 3: 131-139 y Y ANKUS, Stanley Cause and effect. 9: 545-549 YOU rascal, you! (Read) 11:652-656 z ZONING laws: case for repeal, The (Mandel) 7: 437-443 BOOK REVIEWS (Reviewers name in parentheses) ANDELSON, Robert V. Imputed rights (Opitz) 8:510-512 BEICHMAN, Arnold. Nine lies about America (Chamberlain) 9: 570-573 BEILENSON, Laurence W. Power through subversion (Chamberlain) 5: 316-319 BUCKLEY, William F., Jr. Cruising speed: a documentary (Chamberlain) 3: 186-189 EDWARDS, Marvin H. Hazardous to your health (Brownfeld) 9:573-576 FRANKE, David and Holly. Safe places (Chamberlain) 7:444-447 FRIEDMAN, Milton. An economist's protest.

12: 760 GOLDMAN, Marshall 1. The spoils of progress: environmental pollution in the Soviet Union (North) 10:638-640 HALLE, Louis J. The ideological imagination (Opitz) 11: 703-704 HOFFER, Eric. First things, last things (Thornton) 2:128 HOSPERS, John. Libertarianism: a political philosophy for tomorrow (Malz) 3:189-190 HUTT, W. H. Politically impossible . ..? (Hazlitt) 1: 58-60 KENDALL, Willmoore. Willmoore Kendall contra mundum (Chamberlain) 4: 254-256 KIRK, Russell. Eliot and his age (Chamber lain) 11: 700-703 KUHN, W. E. The evolution of economic thought (North) 12:759-760 LAMBERT, Byron C. (ed.) The essential Paul Elmer More (Chamberlain) 12:753-756 LEONI, Bruno. Freedom and the law (Rogers) 7:447-448 MARTIN, Albro. Enterprise denied: origins of the decline of American railroads, 1897 1917 (Canfield) 12:756-759 McCLELLAN, James. Joseph Story and the American Constitution (Dietze) 6:381-384 MORE, Paul Elmer. The essential Paul Elmer More (Chamberlain) 12:753-756 PETERSON, Mary Bennett. The regulated consumer (Rogers) 3:191-192 READ, Leonard E. To free or freeze: that is the question (Chamberlain) 8:506-509 ROCHE, George III. The bewildered society (Chamberlain) 10: 635-638 ROTHBARD, Murray N.Man, economy and state (Rogers) 5: 319-320 ROUGIER, Louis. The genius of the West (Chamberlain) 1: 55-58 SANBORN, Henry N. What, how, for whom: the decisions of economic organization (North) 8:509-510 SHUMIATCHER, Morris C. Welfare: hidden backlash (Chamberlain) 6: 378-381 SPIEGEL, Henry W. The growth of economic thought (North) 12: 759-760 TOWARD LIBERTY. Collection of essays in honor of Ludwig von Mises' 90th birthday (Chamberlain) 2: 125-128 VOORHEES, Enders M. Financial policy in a changing economy (Barger) 1: 60-63 WILDER, Laura Ingalls. The little house books - a pioneer chronicle (Thornton) 1: 63-64

About this edition

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Title: The Freeman 1972

Author: Foundation for Economic Education

First published: 1950

Series: The Freeman, volume 22

Source file: The Freeman 1972.pdf

Source page: https://freecapitalists.org/books/the-freeman-1972/

Converted: 2026-08-09 by The Liberty Archive (freecapitalists.org), converter v6

Table of Contents

The Freeman 1972

- In Search of a New Monetary Order; H. Sennholz

- Sellers Beware; P.L. Poirot

- Why Some Are Poorer; H. Hazlitt

- Economics: A Branch of Moral Philosophy; L.E. Read

- Morality and Controls; M. Friedman

- Can We Sustain Prosperity; W. A. Paton

- The Founding of the American Republic 6; C. Carson

- Book Reviews

February

- Why Can't We Have Both? J. Hockman
- Rights and Pseudo Rights; J. Lindl
- On Re-reading the Law; R. Colvard

- From Price control to Valley Forge; P. Greaves, Jr.

- We and the Third World; E. von Kuehnelt-Leddihn

- The Modern Volunteer Army; D. Kramer

- Should we Divid the Wealth? H. Hazlitt

- Free Giving vs. The Welfare State; C. La Dow

- The Founding of the American Republic 7; C. Carson

- Book Reviews

March

- Utopia; A. Winston
- Digging Ditches; R. Demers
- An Appeasing Envy; H. Hazlitt

- The Founding of the American Republic 8; C. Carson

- Who is the Marginal Producer? W. A. Paton

- American Competitivism; R. Heiner

- Fixed Exchange Rates and Monetary Crises; G. North

- Book Reviews

April

- Objectivity and Accountability; C. H. Hardesty, Jr.

- The Nature of Modern Warfare; D. Osterfeld
- The Economic Power Syndrome; S. Petro
- The Ballooning Welfare State; H. Hazlitt

- The Founding of the American Republic 9; C. Carson

- The Federal Reserve System; H. Sennholz

- Book Reviews

May

- The New Agricultural Revolution; G. Mueller

- Welfarism Gone Wild; H. Hazlitt

- The Founding of the American Republic 10; C. Carson

- The Causes of Inflation; H. Sennholz

- The Free and Equal; R. Colvard

- Status: End Product of Welfare; M. Schumiatcher

- Book Reviews

June

- When men appeal from Tryanny to God; E. Coleson

- Pollution and Property; O. Cooley

- The Founding of the American Republic 11; C. Carson

- The Cure for Poverty; H. Hazlitt
- The Educational Dilemma; D. Dozer
- I Was a Slumlord; G. Frank

- Business Baiting - 1972 Style; M. S. Rukeyser

- Blood from Turnips; T. Elniff

- Book Reviews

July

- Power to the People; C. Keyser
- Voucers; J. P. Cahill
- Ownership: Free But Not Cheap; G. North
- Off the Beaten Track; L.E. Read

- The Founding of the American Republic 12; C. Carson

- The Pine Tree Shilling; K. Cullinane
- Zoning Laws; D. Mandel
- Book Reviews

August

- Are We Marxians Now? H. Sennholz

- Free Enterprise and the Russians; E. von Keuhnelt-Leddihn

- The Founding of the American Republic 13; C. Carson

- Energy; J. Wei

- The Natural History of Governmental Intervention

- Abortion; T. Johnson

- Book Reviews

September

- Advertising; I. Kirzner

- What Do You Have Against the Poor; L.E. Read

- A Closer Look at Gold; C. Weber

- Cause and Effect; S. Yankus

- The Founding of the American Republic 14; C. Carson

- The Productivity of Freedom; C. K. Harriss

- Book Reviews

October

- The Population Question; J. Weber

- A Vote for Myself; E. Breese

- Ageless Faith for a Vacillating America; R. Bearce

- Flood Relief; P.L. Poirot
- Creeping Capitalism; E. Coleson
- 5 Degrees above Zero; W. A. Paton

- The Founding of the American Republic 15; C. Carson

- Natural Rights; R. Cooney
- Heads Will Roll; L. Franckowiak
- Book Reviews

November

- Six Idea to Make us Human; E. Opitz

- You Rascal, You; L.E. Read

- The Roots of Anticapitalism; E. von Kuehnelt-Leddihn

- The American Economy is Not Depression Proof; H. Sennholz

- Social Inflation; P.L. Poirot

- I Visit a Managed Society; O. Johnson

- The Founding of the American Republic 16; C. Carson

- Book Reviews

December

- Back to Basics; W. A, Paton
- The Argentine Inflation; A. B. Lynch, Jr.
- Six Ideas to Make Us Human; E. Opitz

- Are You Getting Your Money's Worth; W. M, Curtiss

- The Founding of the American Republic 17; C. Carson

- The Perfect System of Government; L. von Mises

- Book Reviews

Index
Book Reviews
About this edition