Date: 1950-01-01T07:00:00+00:00
Keywords: liberty
Description: The Foundation for Economic Education The Freeman 1978

The Freeman 1978

Foundation for Economic Education
the ~ Freeman VOL. 28, NO.1. JANUARY 1978 A Ford Is Not a Mango Vaughn C. Nystrom 3 Those who would wantonly pluck and redistribute the fruits do not understand the process of production. All These Rights Charley Goodman 9 Concerning the nature of human rights and how best to secure 'and exercise them. The Tyranny of Minorities Russell Shannon 17 It is no service to the public welfare when specialists promote their interests through government intervention. Medical Care and Malpractice Insurance Bettina Bien Greaves 21 Study questions and bibliography for the 1977-78 nationwide high school debate topic. Who Guards the Guardians? Kenneth McDonald 32 When the growth of a bureaucracy passes beyond control, it becomes a law unto itself. World,in the Grip of·an Idea 13. World War II: The Socialist Conflagration Clarence B. Carson 38 The fury of people whose civilized restraints had been weakened and cut away by ideology.

Zoning Laws, the Housing Market and the Ripple Effect George C. Leef 51 Freedom in land use is the alternative to the potential waste, in efficiency, inequity and manipulation of zoning. Reasoning in Economics Edward C. Facey 59 How the science of human action grows logically from man's nature as a rational being. Book Reviews: 62 "Builders of the American Dream" by James K. Fitzpatrick Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson, N.Y. 10533 Tel: (914) 591-7230 Leonard E.. Read, President Managing Editor: Paul L. Poirot Production Editor: Beth A. Herbener Contributing Editors: Robert G. Anderson Bettina Bien Greaves Edmund A. Opitz (Book Reviews) Brian Summers THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of pri vate property, the free market, the profit and loss system, and limited government. Any interested person may receive its publica tions for the asking. The costs of, Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total ex penses average $15.00 a year per person on the mailing list. Donations are invited in any amount as· the means of maintaining and extending the Foundation's work. Copyright, 1978. The Foundation ·forEconomic Education, Inc. Printed in U.S.A.

Additional copies, postpaid: 3 for $1.00; 10 or more, 25 cents each. THE FREEMAN is available on microfilm from University Microfilms International, 300 North ZeebRoad, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "Who Guards the Guardians?" and :"World in the Grip of an Idea."

o Vaughn C. Nystrom A FORD IS NOT A MANGO THE reaction of authorities (and, in deed, the public at large) to the antics of the looters during New York's recent blackout betrays an attitude which, if it becomes wide spread, will sap this country of ev erything that has made for economic success. Certainly, most people were shocked by the violence. Yet, when pressed, many revealed feelings of sympathy toward looters: ((Well, it was their turn to get the goods." ((Many of those store owners were rip-off artists anyway." ((The poor have justly taken from the rich." In order to justify this kind of thinking, one must view economic systems, or rather the goods proMr. Nystrom, who recently earned an M.B.A. in Economics from St. John's University in New York, now manages a small manufacturing and distribut ing business in New York City. duced by such systems as items that are ((given." That's to say, economic goods are simply fruits to which no effort is applied; they simply are.

Ludwig von Mises rightly refers to such an attitude as the ((static men tality."1 Like the child, such persons see the world as a huge playpen, baubles dancing wonderfully before their eyes solely for their pleasure. And like the child, they give no thought whatsoever to the ((whence" of these toys-only the fact that they ((are." Static mentality, then, fails to see that wealth is created by man through his efforts in the economic realm. That store in the South Bronx of New York burned down by looters didn't sprout up like an oak tree. That store was built-built by someone who applied his labor and 3 4 THE FREEMAN January his capital to shape something that would be of service to him and, at the same time, to others. The problem doesn't end with people who, because of their lack of education, may be forgiven for see ing the world this way. It infects the ranks of professionals and scholars who should know better. And be cause higher-ups see things so, many high level policies-which af fect all of us-get their Uspirit" from this world view. I hope to show here how this inability to see that wealth must be created has already led us down some dangerous paths.

Property Rights Endangered If you see all the world as one big paradise, with marvelous goodies here and there, with no thought on your part where these goodies came from, you'll probably-and logically, at that-eonclude there's an awful lot of disparity among owners and the things they own. And since jus tice flourishes among the pristine, you'll also conclude there's reason to shuffle these goodies about until a more equitable arrangement is reached. (Or, if you're not justice minded, you may opt for mere con fiscation.) You'll need a legal arm to "effectthis shuftling, and so the gov ernment (always ready to oblige), according to your plan, will straighten the record. (Of course, the only thing more arbitrary than the original distribution of goods will be the final arrangement, cour tesy of bureaucratic officials. But that's O.K. Nobody really had a right to them in the first place. They were there for everybody.) This isn't solely an error of socialists and communists. How many times have you heard the.

bromide, uWe're not interested in property rights; we're for human rights"? There's a good chance that an elected official representing you at this very moment would give his life's blood to defend that statement. The fact is, human rights cannot exist in a vacuum. We are men com posed of body and spirit; and for freedom to exist in the material arena, we must have inviolable rights to property. If these rights can be abrogated, we simply are not free. Yet these property rights must not be viewed as arbitrary, of the who - got - to - the - mango - tree - fIrst type mentality. They will exist be cause the owner exerted himself in a way that enabled him, acting as a free person among other free per sons, to produce. And his possessions will be none other than manifesta tions of that personal production, either his own, or what he was able to obtain through exchange in the market place.

Seeing property as an arbitrary distribution of what uis," is only one step away from arbitrarily redis tributing it according to some pre1978 A FORD IS NOT A MANGO 5 conceived notion of equity, thereby destroying all property rights; and two steps away from deciding what will be done with the property, there by disposing of all human rights. Accent on Redistribution A random glance at the New York Times brings ample proof that ttthose who know" no longer consider prod uction to be the economic kingpin. No, this wealth about us is here, given. We need only concern ourselves with how best to redistri bute it. Thus, Soma Golden, busi ness writer for the Times writes: ttl think we have got to confront the problem of income distribution, of somehow building a mechanism whereby we can insure that people do get what is regarded as their fair share .... " (My italics)2 That phrase ttwhat is regarded" is loaded with implication: Just who is it who will ttregard" what is fair? Doesn't she really mean ttwhat is decreed"? Or t~what is legislated"? Freedom be comes a shaky affair the· moment some one person or group can decide t~what is fair" in matters of distribu tion.

In less direct ways, .sometimes in frighteningly subtle ones, this at titude pervades our media. Irving Howe, a Professor of English at City University of New York, gives us this piece of wisdom: HA distin guished economist . . . offers us the verity that there is no free lunch-to which I, a non-economist, reply: But of course there is! If you have too much provision and I not enough, then when you yield a little, I may indeed have a free lunch." (My italics)3 The key word is ~~have." Such persons no longer ask why someone uhas." He just does, they figure. The middle classes, accord ing to this view, are born, not only with silver spoons in their mouths, but also with nice clothes on their backs, and two cars in their garages. They have. The fact is, these things were created, produced, sweated for. But that is. not to say that someone has tttoo much." Of course, what the economist means in this case is that someone has made an effort in order to provide that lunch for Mr. Howe.

And since that effort has value on the market, the lunch indeed was not free. When the government engages in redistribution, taking the action away from the personal·sphere (you and me), the complexion drastically changes. The insidious feature of it all is that we don't see just who it is we're taking from. Perhaps if the Irving Howes and Soma Goldens were made to see the production processes as they really work, and then made to take first-hand from someone who had just produced a good, they might have second thoughts about asking all the ~~haves" to ~tyield a little."

6 THE FREEMAN January A BELIEF, an honest belief, that they are under the real influence of benev olence, sometimes leads men to conduct the most intrusive and tyrannical. Power is usurped for the purpose, it is supposed, of doing good .... A man fancies he knows what is best for other men.... He is thoroughly persuaded that such and such a thing is good, and being good, he will compel others to receive and adopt it. ... Yet despotism never takes a worse shape than when it comes in the guise of benevolence .... Under the shadow of this fallacy, vast masses of misery have been poured out upon the world. JEREMY BENTHAM, Deontology Spending Rather than Saving Serious students of economics un derstand the importance of savings and investment to the economy's health. An odd bit of logic accom panies the static mentality with re gard to these very areas. Because economic goods are viewed as eter nally present, any slack in the economic system-recessions and the like-must be caused, not by malinvestment, but by a lack of con sumer spending! So, when· things slow down, the ((experts" recom mend jolts of ((purchasing power" via government programs. You'll hear otherwise quite intelligent people assert that the Great Depression of the Thirties was caused by a phenomenon they call ((under consumption," the implication being that the goods were there, but the consumers hadn't enough money to purchase them!

Vance Packard's The Wastemakers roundly criticizes Big Business for carelessly using resources for profit alone. But the point missed by Mr. Packard and others is the busi nessman's constant reminder that resources are scarce. This he sees reflected in resource prices, which become his costs. He knows their value. The businessman ((spends" only when he believes there are others who'll be willing to ((spend"in turn-willing to buy the products of his business. Not so with those irresponsible planners who don't know the value of resources. Seeing all items about them as ever-present, they are quite willing to ((burn off' these items to keep the economy rolling. Such ig norance of the investment and sav ings factors is well described by Dr. George Reisman in an article, ((Pro duction versus Consumption," in The Freeman (October 1964).4 In this essay, .Dr. Reisman describes a 1978 A FORD IS NOT A MANGO 7 particular form of the static mental ity he calls the ttConsumptionist."

This fellow feels man's needs are irrevocably limited, and so the econ omy remains always on the verge of running down. He fears consumers will become sated and stop spend ing, thereby bringing the economy to ruin. 5 Without going into the rationale of consumptionist thinking, the im plications are obvious. The oft-cited quote of J. M. Keynes, in which he advocates digging holes, burying I don't remember what, redigging the holes, paying the workers, all in order to gain purchasing power, shows the depths to which such thinking can bring us. All. govern;. ment make-work schemes-and in deed most government employ ment-consists in spending without producing, spending without invest ing. In fact, the whole Keynesian system sees investment and savings as Hleakages," as virtual flaws in the continuous flow of ever-increasing spending by consumers. Of course, without investment any economy will die. New capital is needed to replace worn-out capital, and to supply the muscle to under take new economic ventures-all in an effort to satisfy man's limitless desires. This capital can only come about when someone-not spends but withholds spending! He saves.

He willingly refuses to exchange his purchasing power for immediate gratification in order to increase gratification at some future date. The 19th-Century philosopher, James Mill, rightly points. out: HA nation's power of purchasing is exactly measured by its annual pro duce." Not by its government print ing presses; or government make work; or welfare spending. As long as the deification of spending_ goes on; as long as capital is eaten away by confiscatory taxation, spending without corresponding production, or plain looting; as long as people' don't see that what is here is a result of saving and investment-we're heading down the road to destruc tion. A Ford Is Not a Mango A few years ago I had the oppor tunity to go to Hawaii, one of the tropical paradises dreamed of so often in our folklore. While there, I noticed the trees, unlike the stingy maples and sycamores of,my home town, were laden with frui~edible fruit! A friend offered me a mango.

Just like that. Plucked from the tree one minute, eaten the nex~. I had never had anything quite so cCfree" before. 6 I had only thought of fruit as the end-product in along line of economic exchanges, the last being my purchase of it in the neighbor hood market. Then I began thinking how many people, in childlike fashion, see the world as one big mango tree, ready 8 THE FREEMAN for plucking by whoever gets there first. True, it may certainly appear so when we go to large department stores and see the wares displayed, ready as it were, for plucking. But if you think that's all there is to it, you've missed everything. The many processes behind this final display, all the technological, marketing, and financial decisions that went into each product's formation, are too complex for any individual or group to comprehend. As Mr. Leonard Read has pointed out, none of us knows precisely how to make a plain old lead pencil. This most modest of instruments. requires a combination of specialized skills be yond the ken of anyone person.

Multiply that combination of pencil-skills by the countless num bers of items available to business and consumers and you've an idea just how complex is our techno logical system of production. Then throw in marketing (getting the product to the consumer) and fi nance (short-and long-term funding for each operation)-and you've at least an inkling of the economic sys tem we're dealing with. To assume that all this will go on indefinitely, with little or no thought given to the nourishment of these processes, is to close one's eyes-like a child-and just wish the best of all possible worlds into exis tence. The harmony we see in the market place around us is not the harmony of a mythical tropical paradise where abundance is effort lessly ever-present. Rather, it is a balance attained-from the recogni tion that men are free to own prop erty, to produce, and to exchange freely their production in the market place. And because the free market exerts such harmonizing influences on the economic process, you and I are able to purchase at outlets very near to our homes items as diverse as TV's, food, imported wine, an tiques, footwear, Fords-and yes, mangoes. @ -FOOTNOTESlLudwig von Mises, Planning for Freedom (South Holland, Illinois, Libertarian Press, 1974), p. 146.

2Soma Golden, uSelf-Interest Stymies Infla tion Fight," New York Times (Business Sec tion), September 22, 1974, p. 1. 3Irving Howe, uBalanchine and Larchmont," New York Times, November 27,1976, p. 23. 4See Dr. George Reisman's Essays in "Eu clidean" Economics, unpublished (on re serve at St. John's University in Jamaica, N.Y.). I am indebted to Dr. Reisman for clarifying much in terms of free-market economics. 5Harry Browne, in his How You Can Profit from the Coming Devaluation, proves quite neatly that it actually benefits the remaining members of an economy when people Ubury" their purchasing power, as long as they keep on producing. 6 Actually, the mango wasn't "free" at all. Human action, however insignificant, was in volved in obtaining the fruit.

HUMAN RIGHTS, civil rights, equal rights, worker's rights, children's rights, victim's rights, criminal's rights, gay rights. . . . From President Carter's concern with human rights worldwide to the debated outcome of the Miami anti gay vote, the issue' of rights domi nates the headlines. Even when the main subject is something else, such as disarmament or drugs, the rights question often hovers alongside. From crib to casket, folks are claiming special rights to improve their situations. All these rights, re gardless of worth, parade in gar ments of respectability-free choice, human dignity, Constitutional Mr. Goodman's interest in human rights was aroused at Mt. Hood Community College in Oregon where he recently earned an Associate Degree in Social Science. Charley Goodman guarantees. A common attitude to ward rights seems to have extended Voltaire's famous freedom-of-speech statement to proclaim, ~~I disapprove of what you say or do or are, but I will defend to the courts your right to say or do or be it, any time or place."

That sounds reasonable and toler ant enough, and one can understand why so many accept such a creed. But is it really valid? Is everything promoted as a right really right? In the name of human rights, we suffer pornography and obscenity, we relax justice to the criminal and refuse it to the victim f we prey on ability and willingness in order to subsidize indolence, we place ap pearance ahead of qualifications in jobs. Boys cannot be boys, at least on a little league team, and a teacher 9 10 THE FREEMAN January whose school receives Title IX funds dares not use traditional grammar in describing an either-sex situa tion. The Nature of Rights What are rights, anyway? The goose we squeeze· to get our gilded eggs of gratification. with the least restrictions and the least bother on our part? Or do rights have a basis we are overlooking? Most state ments of rights; such as the United Nations' uUniversal Declaration of Human Rights" and the Helsinki Accords, assume rather than estab lish that certain. conditions are de sirable for mankind. It might help us, however, to understand what our rights are if we understand some thing of why they are.

History reveals at least two tradi tions, which merge and part like flocks of starlings~ flowing into to day's practices. One of these per ceives rights to mean human action free from restraint. This route has been marked by such names as Rousseau, Freud and Sartre, in con junction with the Darwinian influ ence. Though doubtless not them selves endorsing all the current manifestations of rights, men like these opened the way to our culture of freethinking and freeliving. Con trary to, but often overlappingthis tradition is another which has been marked by such torchbearers as Cic ero, Locke and Jefferson. Parallel-:ing our Christian heritage, it holds the light for Divinely endowed un alienable rights within a framework of natural law. From this brief history, we can describe two general. views held on rights today. In both cases, rights are considered to exist outside soci ety and generally beyond its legiti mate interference. In contrasting them, we are stressing their var iance in certain moral areas more than their general similarity. Both, for instance, would acclaim our Bill of Rights, though they would dis agree on exactly what other rights are ((retained by the people" according to Article IX. Further, they both mistrust the machinations of highly centralized government. However, the areas of difference are great,· as is the impact that leaning one way or the other can have on our society and government.

The Group or the Individual? The former view claims that whatever a person does, short of physically harming another-his (town thing" -is okay, regardless of consequences. Rights constitute the de facto protector of his particular interests. The individual or group concerned is supreme. Existentialist free will is the guide. In fact, ttfree_ dom" is a more accurate word than ttrights" to carry the idea, except that the two words are more or less interchanged in actual use. Freedom 1978 ALL THESE RIGHTS 11 in this sense is not the lodestar we generally think of when we talk of our American liberties. This view has permeated our cul ture, for both good and bad, everywhere we turn. Two prominent subcultures that bear its stamp are worth mentioning. One is the hippie way of life-no comment needed. Another concerns the welfare state and many of the rights claimed thereunder. If one has a right to whatever life' sty Ie he desires, shouldn't society have to support that life style if the individual can't or won't? The conclusion may not follow the premise in logic, but it seems to in modern social welfare.

The second view is superficially similar, yet deeply different. It looks on rights as man's natural and proper defense against an aggres sive person, society or government. The importance of the individual or group over the state is stressed, but the supreme, guiding position be longs to God or some concept of di vine principles. A good sermon topic, no doubt, but the application ranges beyond pulpit and pew. So, without miring down in ethical philosophy or hanging up on perversions, such as slavery or exploitation, wrought in the name of this view, we ought to pursue it a bit. Later we can tie the two positions together. If we study the subject, we proba bly will conclude that rights cannot stand alone or depend upon individual preference, else rights would be in constant conflict. And if rights can be in conflict, any discussion of them is about as conclusive as de bating whether fried apple pie tastes better than marmalade on rye toast.

Rights would mean either every man for himself or everyone subject to arbitrary government regula tions. Seeming conflicts, such as ownership of private property ver sus the power of eminent domain, indicate that rights may not always cover as much as we think. Much of the history of civilization has been written by the Hdivine right of kings" as opposed to the rights of ci tizens. That di vine right was really no right at all but either an assumption or resignation of power. If, on the other hand, we opt to talk of ~~greater and lesser" rights, we run into a similar logical impasse. A lesser right is no right at all, if it cannot be implemented. Sorry, but we must probe yet deeper. The Aspect of Responsibility The dictionary defines rights as ~~that which a person has a just claim to ... by law, nature or tradi tion." Good, but incomplete. We may expand this statement to say that rights concern the way each of us may expect to be treated by others and the way each of us must treat others. Unfortunately, we often forget the how-we-treat-others as pect. Responsibility, that is. I have a 12 THE FREEMAN January right to work, surely. But not at any job, at any wage, on any terms. If my work habits are unacceptable to my boss or my life sty Ie downgrading to his reputation, my right to work cannot annul his right to set reason able conditions of employment. My right to work at a particular job involves my recognition of the man ager's requirements. In turn, it is his responsibility to honor my right to market wages and humane treatment. Another responsibility we have-not to be confused with the welfare state-is toward those who are truly disadvantaged or disabled through no fault of their own. (This does not mean we are obliged to bail out those who will not accept responsibility for the results of their own ill-chosen actions.) Thus, rights and responsibility go together. But that is not all. While there is no divine catalogue of rights and attendant responsibilities, there are-however much we pick and fuss over them-universal stan dards of moral conduct which en compass rights and responsibilities.

In the West, these standards are generally derived from our Judeo Christian heritage. Not nose-in the-air superpiety, that is, but everyday respect for right living. Does this correlation mean that every right is tied to a moral law? Not at all. Think of a riverboat steaming up the turbid Missouri be tween shoal and shore, guiqred past dangerous ground by marker buoys. Similarly, the channel of rights is indicated by the buoys of morality. In this second view, rights sweep from shoal to shore but cannot transgress moral precepts in either the indi vidual concerned or those around him. In other words, no one has a divinely unalienable right to do what is morally wrong or to force another to accept a moral wrong. Adherence to Moral Law Dear to us in the U,nited States are those truly unalienable rights of life, liberty and the pursuit of hap piness (or property, as formerly stated by Locke). These rights are not written in the sky or guaranteed by history. Rather, they are rights because they are morally justified of themselves, and the diminishing of them, whether by intruder, king or politician, is morally wrong.

Which view of rights, apart from their similarities, should guide American law and culture: freedom from restraint, or adherence to moral law? If we're reasonable and honest, we'll probably have to an swer, albeit grudgingly, ((Some of both." Regardless of our own prefer ence, we can hardly prevent people from committing offensive acts that do not involve others. Possibly we commit some on occasion ourselves. Thus, in the first sense, a person has a right-that is, freedom-to do wrong; he may curse his Maker 1978 ALL THESE RIGHTS 13 though it warp his soul, and the law cannot touch him; he may abuse his body or pervert his mind. But-and here is the fragile,. all-important bal ance point-there is no right, by the second view, to force others into re curring or avoidable contact with or support of one's personal vices, be those vices drug addiction, greed or laziness. The man on the street has freedom to smoke, as long as he is on the street. But he may not enter a private house puffing nicotine with out the owner's consent.

It might be well here to interject a related thought. A good deal of what we toss into the rights stew doesn't concern rights directly but involves personal preference and choice. Many of the energy and ecology is sues fit here. Some favor more con servation; others favor greater utili zation. Neither side has an inhe~ent right to have its way,just as neither has a right to exploit the situation at the unjust expense of others. But we all have the right to participate in the discussion and to enjoy the re sulting benefits. In other words, we sometimes claim a right to a certain course of action or result when we would better claim a right to be in on the action. The current uproar over homo sexuality illustrates some of the pertinent rights issues. There are actually two efforts at stake in the demonstrations and political and religious activities of gays. The equal-rights effort is well publicized. Related, but less .men tioned, is a bid for public approval.

Many heterosexuals would not only extend the rights but also the ap proval. Are they correct? Should we remove all legal barriers to full ac ceptance of homosexuality? Whose Rights? Two important philosophical and practical factors, neither of which has been clearly distinguished, are swirling in the gay-rights eddy. The first of these concerns the question: Whose rights are being violated, anyway? The second revolves around the larger question: How do we in our American society define and determine rights? Let's look at them in turn. The increasingly vocal homosexu als and various partisans have scored a critical point by noting an apparent inconsistency in the opposi tion's stance. They claim that those of us who abhor homosexuality react by trampling on the rights of gays in unrelated areas, especially jobs and housing, as in the Miami voter re peal of an anti-discrimination ordi nance. Is the point valid? If so, only because we have not blocked it .as we should and can.

How do we block it? First, by rec ognizing that everyone has the same basic rights, else rights are meaning less. A murderer has the same rights as a choir girl, save as they 14 THE FREEMAN January pertain to punishment for the former's crime (in which case he forfeits certain of his rights for hav ing deprived his victim of the right of life). The second block is more striking. A gay now has a right to any hous ing or job he wants, as long as those in charge accept him (or, to be sure, if they don't know the situation). But if he has a right to whatever housing he desires, do not you and I, as potential sellers, landlords or neighbors, lose the right to control our property according to our own standards? His right would then clash with ours-an impossible situation. The same applies to jobs, as demonstrated in the sensitive area of education. A teacher is re garded as an exemplar as well as a communicator. If a declared gay is allowed to teach, he-and the school board-is, in effect, telling the stu dents, as well as parents and others who support the school, that homosexuality is acceptable. A re cent court decision in Washington state held that homosexuality is a legal basis for dismissal from a teaching position.

A recent Harris poll indicated a 54-28 percent majority of Americans oppose job discrimination against gays generally. However, a majority also would exclude them from cer tain positions, such as teaching, counseling and psychiatry. But the poll did not cover one fundamental point: Who can fairly decide when a gay can or cannot be hired, if not those responsible for the position? One more item merits comment before we proceed to the second fac tor posed by this gay-rights discus sion. Homosexuality, as both Scrip ture and tradition note, is an espe cially repulsive act. The above ar guments regarding jobs and hous ing, however, apply not only to this act. Drunkenness, drug abuse, wan tonness, even slovenliness and in dolence are among undesirable habits that should not be allowed, in the cloak of rights, to damage the actual right of employers, landlords, neighbors or the general public to control what is theirs. On the other hand, neither may the cloak of rights be donned to cover the prej udice or greed of the self-righteous.

Who Defines Rights? Now, the second factor: who de fines rights in a society? Though we be convinced that rights and morals are transcendent, laws and practices governing them are yet made by man through a constant kneading and pulling of both rights and free doms. Sometimes the decisions are made by rulers, or interest groups, or mobs, or those with muscle enough to enforce their claims. But, in democratic America, citizens must choose the guidelines through legal processes. As long as the American Way yet works, what we 1978 ALL THESE RIGHTS 15 decide individually is eventually re flected collectively in our laws and courts. This is true, be the result fair or ill. However-score the point in red-the determination is not neces sarily made by majority will, but by those who participate in the process. This fact is well illustrated by the vocal pro-and-con dispute over homosexuality; each side is making its influence felt. To be counted, one may yell and demonstrate his de mands, or· he may logically and re spectfully vote and otherwise speak out. Both methods work, but the more we can do the latter, the more likely acceptable the results. Either way,. as long as we are a democracy, we will be governed by the consent of the majority of those who take part. While this method does not guarantee either true rights or mor als, it provides the world's best working ground for them.

So far we have been scanning the flood tides of this rights turmoil. .By now, perhaps, we are beginning to discern some flailing arms and dis traught faces washing about. Who are these? Why, these are the people most deprived of their rights. These are the millions of perplexed Ameri cans who prefer to support them selves, obey the laws, pay their taxes and lead moral lives. They are not the squeaky wheels or. the squawky takers, for they are not always seeking special privileges or favors-and possibly not participat ing as they should. As a result, they are made to support those who will not support themselves: they are often bound by laws they consider unjust, while others flout justice; they are slapped in the face by mis use of tax money; they are forced to pay homage to those who care little for morality. Hard Questions Chances are, this is. the unhappy position in which we find ourselves.

But before we sigh and tighten down our haloes, maybe each of us should ask himself a question: do I ever add to the problem of right and rights in anyway? Do lever: • lie about my kid's age so he can get a free bus ride? • call in sick in order to. get a day off? • go on unemployment although I could actually get work? • pay my workers less than they might otherwise earn in open competition? • sue a manufacturer when I'm hurt by my own negligent use of his product? • take advantage of my neighbor or ignore his need? If I indulge these. and other like acts, outwardly lawful, am 1 not be traying the 3R's of rights, right and 16 THE FREEMAN responsibility? Legality and ethics do not always make the same track: laws may sometimes allow or en courage dubious behavior. Since Watergate, there has been a re surgence of moral indignation in America-lopsidedly centered on the affairs and behavior of public officials. Can't we see that morals touch every aspect of all our lives, private as well as public, before God as well as man?

In a free society, peace, decency, diligence and independence are ever on the defensive. And those who would devour these noble traits are always on the prowl, like coyotes around a bleeding sheep. Because of their din, we often wonder if they're right, and we're too narrow-minded in honoring our convictions. Not so! People cannot grow by commonly accepting or approving the baser acts of man. If we con stantly alter our laws and social standards to accommodate every unseemly human activity, we are flinging ourselves onto an endless downhill mud slide. Self-control, whether in attempting something worthwhile or avoiding something downgrading, is an integral part of greatness. When laws and rights be come independent of a definite and transcendent morality, greatness in America will have disappeared paradoxically strangled by a perver sion of the very forces that created this nation. Listen to the confident tones of the Virginia Bill of Rights, Section 15: ... no free government, or the blessing of liberty, can be preserved to any people but by a firm adherence to justice, mod eration, temperance, frugality, and vir tue, and by frequent recurrence to fun damental principles.

We should, surely, always demon strate tolerance and understanding toward those of questionable be havior. If a holy God lovingly ac cepts penitents, we can scarcely do less than try to lift the fallen, al ways distinguishing between the doer and the deed. Mter all, we may once have been in the same ditch. But, by what surrender to decadence dare we muddy our proud flag by demeaning the very rights it flies to represent? As Columbus determined to sail west, and opened a new world, we must set our own conscionable course so we may renew our world. This course requires an overall sys tem of rights that corresponds to moral values while allowing free dom of personal choice. We may not agree on all the particulars, but we can agree on the direction. Do we want to progress as a peo ple, to advance culturally as well as technologically, to build a healthy and meaningful society? If so, we will engage our responsibilities will ingly, basing them on a true union of right and rights. @ Russell Shannon The TYRANNY of MINORITIES ONE of the basic premises underly ing a free market economy involves voluntary exchange. Continuing trade between two individuals or groups must be mutually beneficial; each party expects to improve its well-being as a result of the transac tion. Were that not so, trade would not continue, for who would volun tarily and knowingly make himself worse oft?

Furthermore, such trade en hances opportunities for specializa tion, the so-called division of labor. As Adam Smith pointed out a while back, this process, too, improves the wealth of nations by increasing pro ductivity. To the extent that any agency limits specialization and trade by closing markets or seizing income, there is a high risk that a reduction Professor Shannon teaches in the Department of Economics, College of Industrial Management and Textile Science, Clemson University. in social well-being will follow, for voluntary exchange is hindered and disrupted. Can we expect, then, that we are apt to get a political struc ture that will minimize such disrup tions? A democratic political system may be preferred to a monarchy or oligarchy on the ground that it is less likely to reduce social welfare. Presumably, the collective intelli gence of individuals, as gathered and expressed by their representa tives, greatly exceeds that of either a single individual or a small group of people.

In America we talk much of our devotion to both democracy and free markets. Indeed, just recently, in 1976, we celebrated the bicentennial of the intellectual origins of both, as represented by our own Declaration of Independence and Adam Smith's Wealth of Nations. Yet we are also often deeply disturbed by the preva17 18 THE FREEMAN January lent tendency of our government to subvert the market system. Government, of course, is not some malicious, autonomous being, a demon to be feared and exorcised. Just like the market, it is a vehicle for expressing our desires and achieving our goals. But now the element of compulsion intrudes. Now one party's gains tend to be at another's expense.· Exchanges cease being voluntary and mutually beneficial. Serving Special Interests Why do such intrusions occur? They are largely, if not solely, the result ofefforls by special-interest groups. That thesis is certainly neither novel nor particularly shocking. But its familiarity should not breed contempt-much less con tent. A simple but vivid illustration will help provide some insight into the matter. It involves government subsidies for sugar farmers.

There are now in the United States about 20,000 sugar farmers.! Recently, Congress agreed to sup port the price of sugar at 13Vz¢ a pound. 2 Since sugar had been selling for about 10¢ a pound, Department of Agriculture officials estimate that American consumers will pay an additional $660 million for sugar. 3 These substantial benefits will be spread over relatively few producers and processors, so each one stands to gain.a considerable amount. Their enthusiasm for such legislation is understandable. (If all that increase goes to sugar farmers themselves, on the average each one would stand to glean an additional $30,000 in net revenue; refiners, however, are apt to get a share.) There are other interested parties who will also benefit. Companies who make sweeteners from corn need ahigherprice to be competitive with cane and beet sugar; they took an active interest in the proceed ings of ·Congress. 4 Besides these, there are also many nutritionists who despair of our sugar intake and the health problems it may provoke.

They· may likewise take delight in any price increase, for it will dis courage consumption. Such matters aside, however, con sider the financial impact of such a subsidy on sugar consumers. The possibilities for spending that hard-earned $660 million on other goods and services certainly are con siderable. Why, then, was there not a great outpouring of outrage? Why were our legislators permitted to carry out such a massive transfer of wealth? Exactly what does this policy mean to the average individual? Since our population is now about 220 million, the sugar subsidy of $660 million works out to about $3 per person. Figured another way: our average annual consumption of sugar is estimated at about 100 1978 THE TYRANNY OF MINORITIES 19 pounds. 5 Since the price-support program raises the price of sugar about 3¢ per pound, that also works out to $3 per person. Thus, prevent ing the program will effectively raise one's disposable income by $3.

Counting the Costs A letter to one's legislator de nouncing the subsidy costs 13¢ for a stamp and a few pennies more for stationery. A post card costs even less. But as all students learn in their first economics class, cost is not simply money paid. Cost refers to opportunities foregone. And in a case such as this, these oppor tunities may be extensive. An individual who writes a Con gressman must be both reasonably articulate and informed. That means at the very least keeping up with the news-spending time and money subscribing to and reading newspapers and magazines and watching TV news programs. Fur thermore, the letter itself takes time to write. What does all this time, effort, and postage add up to? A legal minimum wage of $2.30 an hour suggests that our time is, by and large, worth at least that much. For most people, in fact, hourly wages are much higher; for those people most apt to pay a keen attention to matters such as pending sugar sub sidies, the hourly income is almost certain to exceed $3.

In short, the full cost of notifying one's legislator about one's personal stand and inclination is apt to be more than the $3 one expects to gain by preventing the sugar subsidy. It is simply not worth the trouble. In other situations, of course, the bene fits of curtailing such legislation may very well exceed the cost: after all, many people do send letters to Washington. Nonetheless, the basic elements of the situation by now should be apparent. Here we have a clear and simple case of the political system being used to subvert the market system and cause an overall reduction in our welfare. Specialization requires a market; if the free market is not adequate to provide a satisfactory income, then one may try to use the political system to improve it. But one then gains income by compul sion; the taxpayers receive nothing in return. Yet the populace permit such losses to occur, because they will lose even more by trying to prevent them.

Sugar is but one example. Others abound. Besides sugar, there are wheat, milk, and many other farm products which receive similar treatment. Likewise, the domestic producers of textiles, shoes, steel, television sets and other items have recently sought relief from foreign products. To the typical consumer, the effect of individual quotas and subsidies 20 THE FREEMAN may be trivial. They mean just a few cents more for fabric-or a few dol lars more for a TV set that sells for $400. A total farm program costing as much as $6 billion per year will cost an individual only $30 in taxes. For a family of four, of course, that quickly adds up. Nonetheless, in a great many such cases, it is entirely rational for an individual to ignore what Congress is about to do and simply tend his own garden. For in a great many of those cases, it appears evident that his welfare will be re duced even more if he takes steps to protect himself!

Eternal Vigilance What remedy do we have? One is strongly inclined to endorse political candidates who are stalwart foes of such government intrusions. But they are hard to find. What's more, the advantages to legislators of sup porting such special interest legisla tion are so great that one cannot reasonably expect ""themto be totally immune to such pressures. Nor can the problem be alleviated by insisting that the government balance its budget each year. The damage is clearly done in such pro grams, even though the government may collect enough in tax revenue to finance the subsidy payments in full. In fact, in the case of tariffs, the government even stands to gain revenue from such programs, with no offsetting costs. In short, it is a tormenting di lemma. Constitutional amendments which strictly forbid any and all government subsidies and trade re strictions may very well be the sole solution. Perhaps a public interest lobby will arise to advocate such amendments. But what likelihood is there of adopting them-or keeping them, once adopted? The combined efforts of those who stand to gain from such subsidies and restrictions may very well outweigh the moral fervor of those supporting such amendments. Unless such steps are taken, however, it appears inevita ble that we will continue to have the scope of voluntary exchange reduced and our wealth and well-being con tinually eroded through the tyranny of minorities. 6 @ -FOOTNOTESl"The Sugar and Cream Boycott," Wall Street Journal, April 8, 1977; "The Squeeze on Sugar Cane," Business Week, October 4, 1976, p.32.

2Dan Morgan, "Com Refiners Pushed Sugar Support Bill," Washington Post, August 10, 1977, p. A2. 3"New Plan to Subsidize Sugar on Early Basis is Studied by Carter," Wall Street Jour nal, August 22, 1977. 4Morgan, Ope cit., p. A2. 5Charles G. Burck, "The Tempest in the Sugar Pot," Fortune, February, 1977, pp. 106ft'. 6The pioneering work in this area has been done by James Buchanan, Anthony Downs, Gordon Tullock, and others. For a summary of their views, and references to further reading, see James D. Gwartney, Microeconomics:Pri vate and Public Choice (New York: Academic Press, 1977), Chapter 4.

Bettina Bien Greaves The 1977-78 nationwide high school debate topic ... Medical Care and Malpractice Insurance DURING World War I, the federal government encouraged debating in the high schools as one way to pro mote support for the United States war effort. With a small grant of the taxpayers' money ($50,000) pack aged libraries of materials were dis tributed for ((the promotion of open-minded, impartial study and discussions of such questions as gov ernment ownership and operation of the railroads, government control of prices .... "1 In time, a nationwide high school debate program devel oped. Still today, under the auspices of the National University Exten sion Association, high school debate Mrs. Greaves, a member of FEE's Senior Staff, has a Master's degree in Library SCience. She has been assembling material on the national debate topics for more than 20 years. She also Is the author of Free Market Economics (2 volumes, Syllabus and A Basic Reader, 1975).

tW. S. Bittner, The University Extension Movement, U.S. Department of Interior, Bu reau of Education Bulletin #84, 1919, p. 28. coaches and speech teachers select a single topic each year for in terscholastic debate competition across the country. Practically all the high school de bate resolutions are worded as posi tive proposals for some Federal legislation currently advocated by interested groups and/or being con sidered in the Congress. A list of the high school debate topics over the years reads like a list of the socialis tic laws enacted during that time. Because of the debate format, how ever, students are eager to obtain materials against, as well as for, the proposals in their resolutions. To comply with requests from debate coaches and students, FEE as sembles a debate packet each year, made up of a dozen or more article reprints, each explaining the free market position on some aspect of the current resolutions. Those for 1977-78 resolve that the federal 21 22 THE FREEMAN January government guarantee or establish ((national programs" of comprehen sive health or medical care and mal practice insurance for health care professionals. Following is the ex planation of the free market issues involved, as included in FEE's high school debate packet this year.

STUDY QUESTIONS IN any debate, the first step is to define clearly the terms in the reso lution. Only after agreement is reached on definitions, may positive and negative debaters discuss the issues and implications of a resolu tion without the danger of being misunderstood. * * * * * 1. What would it mean to "estab lish" or "guarantee" a program? Dictionaries clearly define the verbs Hestablish" (originate, found, in stitute, set up in business) and ((guarantee" (undertake to do or to secure, assure the permanent exis tence of). Thus proposals that the federal government establish a pro gram mean that the federal govern ment itself would actually set it up, i.e., get it started. If the federal government were to guarantee a program, it could undertake the program itself, but it need not, for ((guarantee" implies only that it do what may be necessary to assure that the program is carried out.

Thus, in either case, once a program had been ((established," or provi sions made to ((guarantee" its con tinuation, actual operations could be delegated to others-private in dividuals and firms or government al agencies and institutions. 2. Do U. S. citizens want more, better and less expensive health and medical care than now avail able? Yes, of course they do-if we leave out of consideration those who refuse medicine and medical treat ment on religious or other grounds. Everyone who is not well, or thinks he is not well, would ··like to be healed quickly and painlessly in comfortable, luxurious sur roundings. If this could be done sim ply by wishing on a magic lamp, wonderful! But dreaming of such miraculous cures is not realistic. To improve health and medical care takes the time, thought, savings, production, research and attention of countless workers and health care personnel.

Everyone connected in any way with health care and medical treat ment would undoubtedly like to be able to give their patients better, more prompt and less expensive at tention. This would surely give everyone concerned increased satis faction. As fewer persons would be needed in health related professions, the demand for doctors, nurses, 1978 MEDICAL CARE AND MALPRACTICE INSURANCE 23 health aides, hospitals, clinics, etc., would tend to go down and more people could be employed in differ ent branches of production, supply ing consumers with other goods and services they would then want more urgently than additional health care and medical treatment. Moreover, the incomes of the fewer persons remaining in health and medically related activities would tend to be higher ,while the cost to patients, for the sa;meor even better care and treatment, would be less. The improved incomes of health care personnel would be pos sible because fewer doctors, nurses, etc., would be able to care more efficiently for more patients.

3. What would "comprehensive" medical care, or a "comprehen sive" program to regulate heatth care include? Strictly speaking, ~~comprehensive" is all-inclusive. Think of all health and medically related goods and services now sup plied, or which could be. supplied by doctors, nurses, pharmacists, hospi tals, clinics, etc. Then consider all related professions such as den tistry, psychiatry, sanitation, health maintenance, accident prevention, the production, inspection and use of nourishing foods, medical drugs, narcotics, alcohol, safety devices, and so on. A truly Hcomprehensive" program that sought to encompass all such goods and services, connected in any way with medical and health care, would be completely unrealistic. Thus, if a proposal is to be taken seriously, it must be considerably less ambitious. 4. How may medical and health care facilities and services avail able in this country best be im proved andlor made more readily accessible. to. U..S. citizens? ~~Medi cal care" is the art of healing or the science of medicine" the purpose of which is to make sick persons well and healthy, and to keep well and healthy persons from becoming sick.

~~Health care" may be defined as the art or science of keeping well and healthy persons from becoming sick. So dictionary definitions do not re'ally help to draw a sharp distinction between the two. As they over lap so much, the' question of how to improve the quality and expand the quantity of both may. be discussed together. If U. S. citizens are to have more and better health and medical care, more and better health and medical services and supplies will have to be provided. There must be. improved and expanded research in medicine and the related. sciences---biology, chemistry, physiology, psychology, physics and the like. The production of medical supplies and equipment and the' construction of hospitals and other health care facilities and supplies must also be improved and 24 THE FREEMAN January expanded. Thus, more people will have to be employed in these fields and more savings and investments must be channeled into these branches of production.

To persuade more persons to enter these fields, they must have incen tives for doing so. Each must have the hope or expectation that it will improve his or her own situation in some way-by bringing in more money, better satisfying their families, leading to more fame, secu rity, satisfaction or adventure, etc. Otherwise, fewer and fewer persons will be willing to make the substan tial investment of time, effort and money needed. Thus, the crucial problem in sup plying all citizens with the quality and quantity of health and medical care they want, at prices that are not unreasonable, narrows down to making sure that persons with suit able aptitudes, abilities, skills and assets are encouraged in, not dis couraged from, entering and invest ing in the health care and medical professions. 5. Suppose the federal govern ment assumed responsibility for establishing and/or guaranteeing health and medical care for all U.S. citizens? The demand for government health and medical care is due largely to a sincere desire to make adequate care and treatment available to everyone, including those who would otherwise go with out. With this goal in mind, our government has already become deeply involved in health and medi cal care. Also many other govern ments have attempted to provide even more extensive medical care for their people. However, these programs have not worked out as successfully as their proponents had hoped. Therefore, before expanding U. S. government involvement in this area still further, it would be well to consider carefully the ex periences of other countries with such programs.

No doubt many who are treated satisfactorily are very much pleased that they do not pay directly for medical care. It is human nature to enjoy getting ~~something for noth ing," to ask for more of anything that seems to be free or cheap, and to use it less sparingly than if a sub stantial direct cost were involved. This very trait inevitably increases the demand for medical attention wherever and whenever it is offered free of charge or at very low prices. Thus, when medical care and at tention seem to be free for the ask ing, i.e., when no direct monetary cost is involved, the demands of pa tients and would-be patients tend to rise. Faced with sharp increases in the demand for their services, health and medical personnel find it impossible to furnish the same qual ity attention they could supply 1978 MEDICAL CARE AND MALPRACTICE INSURANCE 25 under less harried conditions. Re ports on governmental medical pro grams here and abroad bear this out.

When medical care is provided through government programs, the quality available soon deteriorates. The waiting lines in doctors' offices and for hospital beds grow longer. To save the time of doctors, medi cally untrained receptionists are often given the authority to decide which patients the doctor will, and will not, examine personally. Super ficial, assembly-line type medical examinations become commonplace. Strict controls and regulations are instituted to ration available sup plies of medicine, hospital facilities and health care services. Mountains of government reports and forms pile up that all those involved must file. As a result, medical and health care personnel often become frus trated. Their ambition to provide patients with quality attention is discouraged. The opportunity for in novation is suppressed, so that the treatment available to patients soon begins to lag behind the times and to become obsolescent. Given these provocations, it is not surprising that the morale of those in the health and medical care professions declines. Sooner or later many are spurred to emigrate to locations that are more congenial to doctoring. For detailed accounts of governmental medical programs, see the many books and articles that have been written on the subject.

6. What other factors must be considered if government were re sponsible for health and medical care? Serious ethical questions would soon arise. In the first place, the individual freedom of some is inevitably violated by their having to contribute, through taxes, to the private welfare (health and medical care) of others. Then too, the pro gram administrators cannot avoid ruling on many complex issues. As medical facilities are limited, their decisions may mean life itself, to those entitled to certain treatment, or a death sentence for those denied it. Officials would have to make dif ficult decisions also concerning such matters as religious freedom, euthanasia, suicide, abortion, men tal health and even a person's vol untary actions and habits which might be considered harmful to his health or others. How about the religious freedom of persons whose beliefs lead them to reject medicines or blood transfu sions? Should they be free to refuse?

Or must they be coerced? Even when hale and hearty, they are forced by such programs, against their reli gious principles, to pay taxes to cover the medical costs of others. Should a person suffering from an incurable disease, who prefers death 26 THE FREEMAN January to suffering any longer, be permitted to die quietly? Or must he be made to undergo extraordinary treatment to prolong his physical signs of life? Or perhaps if considered cChopelessly sick" or CCterminally ill" doctors might be encouraged to hasten his end, so as to relieve the government of extra expense. A similar rationale led to the early cCmedical experi ments" of Hitler's Germany. Should persons who reject certain medical treatment be labeled ((men tally sick," confined to asylums and coerced into submission? Reports of such tactics,used to make those who are ((different" conform, have come from Russia in recent years.

Should the confirmed alcoholic or the hard drug user. be permitted to abuse his own body, when this might make him a burden on other taxpayers? How about obese indi viduals whose eating habits are an invitation to heart attacks and thus to potentially heavy medical bills? Should a smoker's freedom be lim ited if officials believe he could be come a cancer victim and thus a drain on the government's. budget? The British government now finds itself on both sides of this question--its Finance Office wants to encourage tobacco sales to reap high excise taxes, while its National Health Service tries to discourage smoking to reduce the possibility of heavier medical expenses later. Debates. on government medical and health care programs cannot ignore such complex issues as these. 7. To what extent does the U. S. government now support, provide and/or guarantee health and med ical care to its citizens? Federal statistics for Fiscal Year (FY) 1976 report $37.5 billion spent on various ((health" programs, including hospi tals apd the medical care of vet erans. Other health-related govern ment programs in FY 1976 added at least $85 billion more, for such things as general retirement and disability insurance, benefits to re tired and disabled coal miners and Federal employees, etc., plus $22.6 billion for such public assistance programs as food stamps and nutri tion. Not included in these figures are allowances for pollution control, safety inspections, conservation and management of water, power, energy, recreational and other natu ral resources, all of which have a direct bearing on people's health.

A partial list of the government's agencies and/or projects in health related fields may be helpful: De partment of Health, Education and Welfare (HEW), Medicare, Medi caid, Hill-Burton grants for hospital construction, Veteran's Adminis tration (VA), Food and Drug Ad~ ministration (FDA), Occupational, Safety and Health Administration (OSHA), Old-age, Survivors and Dis ability Insurance (OASDI), Health 1978 MEDICAL CARE AND MALPRACTICE INSURANCE 27 Maintenance Organizations (HMO), Professional Standards Review Or ganization (PSRO), public health of fices, consumer ~~protection" agen cies, certain aid to ~~disaster areas," support and/or operation of research in the fields of the heart, cancer, neurology, metabolism, dental and mental health, etc. Yet the billions now being spent by government on health-related programs would be ~~peanuts" to the sums that would be needed for anything approaching ~~comprehensi ve" health or medical care for all U. S. citizens.

8. Suppose a national program of malpractice insurance for all health care professionals were es tablished? The goal in an ideal so ciety is to hold everyone strictly ac countable for his actions-the good and the bad. Thus everybody, health care professionals included, should be able to gain by helping others and penalized if they do harm. Health care, however, is not an exact science. Diagnosis and treat ment often rest on educated guesses or speculations. Complete cures, successful treatments, can seldom be ~~guaranteed," for a patient's re sponse often depends on his or her own cooperation and psychological attitude. Yet, if it can be proven beyond a reasonable doubt that a health care professional's diagnosis or treatment was wrong, had no jus tification at all, or that the practitioner failed to use that degree of care which an ~~ordinarily prudent man would exercise in the same cir cumstances," the injured party has a legitimate claim for damages.

What is done cannot be undone, of course. However, persons should be able to recover actual financial losses due to malpractice or negligence and/or be compensated to some ex tent for pain and suffering by those responsible. The obligation of making amends so far as possible for contributory negligence must be assumed by everyone in a free and open society. This obligation helps to assure that adequate precautions are taken, thus reducing human error and carelessness. This in turn ensures the highest quality health care pos sible. However, when patients sue, or threaten suit, on slight prov ocation or even without due cause -whether out of greed, un justified confidence in modern medicine, the belief (ofttimes spur red by lawyers with similar views who take cases for contingent fees) that ~~rich" corporations or in surance companies can well afford to pay-the effect on health and medi cal treatment can be disastrous.

The cost of medical malpractice insurance rises sharply. The traditional privacy of doctor-patient relations is invaded by third parties-representatives of insur ance companies, legal and medical 28 THE FREEMAN January specialists, record-keepers, and the like. Doctors find it advisable to en gage in Hdefensive medicine," often ordering time-consuming and ex pensive consultations and lab tests, or Hping-ponging" patients from specialist to specialist. Health care personnel must increase their fees to cover these additional expenses. They may refuse to take some pa tients. They may hesitate to try newly developed and thus potential ly helpful but as yet unproven medicines or treatment. Many doc tors have chosen to ((go bare," i.e., to practice medicine without mal practice insurance protection. Dis couraged by such conditions, some have threatened slowdowns or strikes, as recently in California, Canada and Great Britain.

Should the federal government become even more heavily involved in medical malpractice insurance than it now is, health care patients, personnel and insurance companies will find this intervention will have effects similar to those that appear in every field in which government interferes-more red tape, controls and regulations, longer delays in reaching settlements, increased standardization, disinterested personnel, less individual attention, political favoritism, higher taxes and/or more inflation to cover costs, increased hardship on those really deserving assistance, and so on. 9. Suppose the provision of health and medical care were left entirely to private enterprise? The more freedom and individual responsi bility, the greater incentive each of us has to use our resources and energies to advantage, to avoid mis takes if possible and to produce as much and as well as we can under the circumstances. This is as true in the field of health and medical care as in every other branch of produc tion. When there is a free market for health and medical care, the cus tomer, i.e., the patient, is boss. He may shop around for treatment, buy or not buy as he wishes, and press for damages if he believes· he is in jured. To compete successfully, everyone in the health-related pro fessions must do his or her very best to serve their patients. Thus the welfare of patients comes first. The more freedom people have in seek ing and in providing medical ser vices and facilities, therefore, the better will be the quality of avail able care and the more will be of fered on the market at costs that are not unreasonable.

In the United States, the provision of health and medical care is still largely voluntary and free. Insofar as this is true, everyone is better off, especially those in need of medical care and attention. However, fed eral, state and local governments are interfering more and more. As a result, government rules and regu1978 MEDICAL CARE AND MALPRACTICE INSURANCE 29 lations multiply. Complicated forms must be filled out by almost every one concerned. Every government rule and regulation, which affects health care professionals, prevents or deters them from following their own best judgment. Doctors and pharmacists are restricted in pre scribing medicines. Regulations are imposed on the construction and op eration of hospitals. Every government interference also tends to divorce still further the benefits received from those who pay the costs. What seems Hfree" is always in greater demand and yet those who pay have no control. For instance, a recent study released by the Investigations Subcommittee of the House Commerce Committee reports that elective surgery is about twice as frequent among government-financed Medicaid patients who are operated on ~~free"

than it is among privately-financed patients. 2 Taxes to finance these various medical programs add to the cost of everything on the market. All these interferences tend to discourage ambition, industry, ingenuity and special effort among health care personnel, leading in time to a de terioration in the quality of the care and treatment available. Before further hampering those who supply us with health and medical care in 2See New York Times, September 1,1977. this country, we should listen to the voice of reason and experience. Dr. Anthony Partridge, a doctor with more than 30 years experience in general practice in Great Britain, including five years before the Na tional Health Service began in 1948, gives us warning: HI can speak as a doctor who was practicing general practice before the National Health scheme started. Within a month, my work load jumped 400 per cent or roughly thereabouts. Now how did I cope with this? And I plead guilty of coping with it in a non-doctoring way. I no longer doctored patients. I had to manage the list . . . and my colleagues are doing it in just this way. Because the patients can have any consultations they like, regard less of the severity, the doctor has to build up defense mechanisms against over-usage of his time.

~~The first defense mechanism is that he employs a receptionist. She is known as ~the dragon at the gate.' Now her job is to cut off as many of what she thinks-and she is not trained-fruitless calls as' she can. For example, supposing a perfectly reasonable person rings up and asks for a call, because her da1:1ghter'sgot a temperature. The chances are that the ~dragon' will say, ~I'm sorry to hear your daughter's got a tempera ture. The doctor's very busy. I'll have a word with him and no doubt he'll put a prescription out so that 30 THE FREEMAN January when you come shopping you can pick it up. I'm sure you'll be helped this way.' Now this patient has never been seen. The prescription is probably for antibiotics, or some thing quite expensive, and could be very dangerous. But this is the way it is done. ((The lucky patient, on the other hand, may get an appointment to see the doctor . . . say, three days later. But because of the fact that each patient on his list-and he has a list of 3,500-has five to six con sultations a year, they average three to four minutes a consultation.

So the doctor doesn't look up. He doesn't stand up. The patient comes in, makes the comment as to what's the matter. The doctor is probably writing a prescription before the pa tient is finished speaking. The next patient is then called for. This is not doctoring, this is mass production. The doctor then sends many pa tients to the hospital. ttNow this is the fate of good doc tors. It kills a dedicated doctor. It really destroys him. He feels so frus trated. But it is awfully good for a bad doctor because you can manage-not doctor, mark you, manage-this vast number of pa tients on this trivial system. ttAnother thing must be realized. Managing a list is very easy. Doc toring a list, or doctoring patients, is very difficult. If you are a rather lazy doctor, this system suits you down to the ground because you can manage by disposing of your pa tients quickly in the morning and you can have the afternoon on the golf course. One of the reasons why this service continues, I regret to say, is because a large number of doctors are quite happy. They've got no worries. They just pass their pa tients around and do not do any doctoring in the sense that we were taught when we were medical stu dents.

ttunfortunately, this is such a large portion of the medical profes sion there isn't enough pressure from the doctors themselves to get this system altered. It is good for bad doctors, good for non-ill pa tients. It's ghastly for dedicated doc tors and ghastly for sick patients, because of the waiting lists and the poverty of the consultation at gen eral practice level. ((The patients lose all consumer control because they do not pay the doctor themselves. The doctor is paid by the State. Now I must make this quite clear to you as an Ameri can doctor. . . . Whatever you do, make sure that the patients remain in control of the medical profession by direct payment by the patient. Don't let your doctors be employed by the State or get messed up by the bureaucracy which goes with it. The State is not interested in quality care. It is only interested in quantity care and votes. The State couldn't 1978 MEDICAL CARE AND MALPRACTICE INSURANCE 31 care less whether the patient has a three-minute or a three-hour consultation-this is my im pression-because that doesn't concern them."3 @ 3From an interview with Dr. Partridge by Dr. Michael Smith, Past President of the Louisiana State Medical Society (August, 1976).

-SUGGESTED REFERENCESBastiat, Frederic. The Law (1850). Irvington on-Hudson, N.Y.: Foundation for Economic Education, Inc. Edwards, Marvin Henry. Hazardous to Your Health: A. New Look at the "Health Care Crisis in America," New Rochelle, N.Y.: Ar lington House, 1972. Haggard, Howard W., MD. Devils, Drugs and Doctors: The Story of the Science of Healing from Medicine-Man to Doctor (1929). New York: Harper & Row. Hayek, F. A. The Road to Serfdom (1946). Chicago: University of Chicago Press. Hazlitt, Henry. The Conquest of Poverty (1973). New Rochelle, N.Y.: Arlington House. Hazlitt, Henry. Economics in One Lesson. (1946/1962). New York: Manor Books, 1975. Huszar,. George B. de (editor). Fundamentals of Voluntary Health Care. Caldwell, Idaho: Caxton Printers, Ltd., 1962. Lindsay, CottonM. (editor). New Directions in Public Health Care: An Evaluation of Pro posals for National Health Insurance. San Francisco: Institute for Contemporary Studies (260 California St., Suite 811), 1976.

Mises, Ludwig von. Bureaucracy (1944). New Rochelle, N.Y.: Arlington House, 1969. Simeons, A. T. W., MD. Man's Presumptuous Brain. New York: Dutton, 1961. Williams, Roger J. You Are Extraordinary. New York: Random House, 1967. OTHER DEBATE TOPICS OF RECENT YEARS "Pollution" and the Environment Energy in the United States The Development and Allocation of Resources Land Use Crime and Punishment Consumer "Protection" or Consumer Sovereignty Mrs. Greaves has a limited supply of her suggested study questions and references for each of these topics, available on request while the supply lasts. Send requests (specify topic or topics desired) to: The Foundation for Economic Education, Inc. 30 South Broadway Irvington-an-Hudson, N.Y. 10533 Kenneth McDonald Who Guards the Guardians? THE FACT that people are foolish, as everyone is from time to time, has been seized upon by reformers to justify all manner of impertinences.

It is only fitting, therefore, that among all the words whose meaning they have debased, reform should be accorded a place of its own. The amendment of conditions which are judged against a standard of instinctive moral values has been reshaped, in an age when those val ues are under attack, to signal amendments which serve only the aims of the attackers. By destroying a society's criteria, and putting nothing in their place save the social Kenneth McDonald is a Toronto writer on economic and political subjects. This article is reprinted by permission from the September 1977 issue of Executive, Canada's man agement magazine of information, opinion, and analysis. 32 theories of the moment, the reform ers further the achievement of those aims. By setting up straw men for their attacks, they weaken the real men whose independence they fear. Thus the excesses of limited pri vate monopolies are invoked to jus tify their replacement by the total monopolies of the state. Public own ership is advanced in all seriousness as the best and wisest means to supply the public with everything from soup to nuts. The soup may lack variety, but it is no longer con taminated by profit. The nuts may be scarce and of one kind, but they are grown on state farms under the supervision of inspectors imbued with the best of intentions.

The whole thrust of the state's ex pansion is toward uniformity. The purpose of the state, after all, is to WHO GUARDS THE GUARDIANS? 33 enforce laws which impose certain restraints upon individual liberty. The purpose of the restraints is to prevent one individual from tres passing upon the liberty of another. The good fences which make good neighbors are policed by the state. Keeping the peace is its one ac knowledged duty. But as the Latin tag attests, the role of guardian is the most danger ous of all. Who, indeed, guards the guardians? The Urge to Reform It is that temptation to butt in which is at the root of the matter. We are prone to it as individuals. In our pride we can see how things might be better ordered, especially as they affect our neIghbors. By prod igies of self-control we may refrain from telling them, but the urge is there nevertheless. What holds us back is partly the fear that our ad vice will be resented but more that it will be ignored.

With maturity we learn to sup press these urges, to take people as they come, even to recognize in them shortcomings of our own. The state, however, is subject to no such impediments. The secret of its power lies in its very remoteness. It is one thing to refrain from advising the man next door, whom we know. It is another thing altogether to compose a set of regulations for peo ple collectively. They' are as diverse as the regulations are uniform. Their diversity constitutes a per petual challenge. If only people would respond to the forecasts, if only the behavior which is predicta ble in general terms would conform in particular ones to the trend of the graph. That is the challenge which the state feels called upon to meet. It has, its servants have come to realize, immense, even limitless power; the power to create money. Not wealth, but the illusion of wealth. Dealers in illusion, the state's servants are its first victims.

Unaware of its futility, they apply themselves to th'~ task with a will. Each fresh set of regulations exposes gaps that must be filled. The estab lishment of one board reveals the need for a second. Unless it sows the seeds for continuance in another form, no commission of inquiry is complete. As the regulations mount, as the boards and commissions proliferate, the law itself is crushed under the weight of them. Relationships which were simple are made complex. Rules which everyone could under stand are multiplied into abstrac tions and interpretations and foot notes to sub-sub-paragraphs until they are incomprehensible to every body, not least the authors, least of all the lawyers and judges whose lives are consumed in deciphering them.

34 THE FREEMAN January How Bureaucracy Grows One result is to bring the civil law into contempt. Another is to· estab lish, outside the courts, a court where there are neither lawyers nor judges, where arbitrary rulings are the prerogative of inspectors, reg ulators and commissioners, and where mountains of precedent are built upon molehills of law. When the growth of a bureaucracy passes beyond control, it becomes a law unto itself. The process is self fulfilling. The failure .of each new intrusion compels it to intrude again. More people are hired, more programs devised. to occupy them, until the bureaucracy's, original purpose is obscured. No longer is it there to administer the law, for the law has been buried. It is there to minister to itself. The contempt which this process heaps upon the civil law is con scripted to bring the criminal law into disrepute. Here, however, the attack is mounted from the safety of that other bastion of liberalism permissi veness.

The doctrine that instinct de ceives, that behavior is conditioned by circumstances, and that the fail ure of individuals to conform to soci ety's rules is not their fault but society's, is applied enthusiastically to the treatment of criminals. Does he steal? He has been de prived by society. Does he commit crimes of violence? He is the victim of a society which, in its disregard for his needs, was violent to him. Does he commit murder? The pres sures that society exerted upon him were too great to be borne. It is in this that liberalism's fun damental hypocrisy is fulfilled. A New Class The attitude which dictates a con cern for people in general while de nying the legitimate aspirations of indi viduals in particular is reversed when some of those individuals break the 'law. Then they are transformed from a condition of individuality to one of membership in a class. Not a crimi nal class, as our forefathers held before the enlightenment, but an underprivileged class, a class which has somehow escaped the welfare net, a class, in consequence, which it is society's duty to rescue.

If members of the class are not responsible for their condition, how can they be blamed, much less punished, for actions which derive from it? Innocent unless proved guilty, they must be freed without delay until the crowded calendar can admit their reappearance. In the meantime society will muster its so cial workers, its psychiatrists, its publicly appointed counsel and its special pleaders to excuse, to ex plain, by all possible endeavors to exculpate the accused.

1978 WHO GUARDS THE GUARDIANS? 35 The police, whose duty to catch the transgressor was discharged upon his arrest, are witnesses to a process which puts them, who de fend the law, upon the defensive. By a curious twist of reasoning, the police are the enemy, not the crimi nal. As the tangible representatives of the society which wronged him, they are clearly in the wrong. The hypocrisy culminates in the treatment of premeditated murder. Whether he be a domestic bandit, who kills for money, or an interna tional one who kills for a cause, he must be preserved from the fate he dealt without hesitation to his vic tims. Flight from Reality The principle of an eye for an eye, which served from Moses' day until recently, has been abrogated by those to whom principles are an en cumbrance. That the victims were innocent, were in fact strangers until the gun introduced a fleeting intimacy, is ignored. Conveniently, they are dead, members of the larg est class of all, and the state has no responsibility for them. It is free to turn its attention to the well-being of their murderer.

Predictably, the word murderer is the first casualty. The domestic murderer is never referred to by that term. It is too precise. It admits of no doubt that he did, with the premedi tation which is inseparable from taking a weapon to the scene of his crime, kill someone on purpose. After the event the word is too harsh a reminder of the harshness of his crime. The welfare state, whose aim is to cushion its wards from the inescap able realities of life and death, must itself escape reality. In court, the domestic murderer becomes ((the ac cused." When guilt has been estab lished he is thenceforward referred to by name, as befits his notoriety. If, after the passage of time, he is referred to again, the public's recol lection is prompted by reference to the crime he was ((involved in." When, in due course, he is released, if the crime was sufficiently news worthy his earlier notoriety will be revived. The name of his victim may even be mentioned, though not in a reproachful way, because he has now paid his debt to society. The murder he committed has been ex punged. It is as if it had never been.

By imputing to the abstraction of society the qualities which can be identified only with the individuals who comprise it, the state, which is itself an abstraction, subverts the truth. Society, which cannot be punished, is blamed for the crime which only a person can commit. The theory that no one, because of upbringing or environment or de privation or whatever, is responsible for anything, requires the creation of a substitute. Since reason and 36 THE FREEMAN January instinct tell us that there can be no substitute, the state must confound us by indirection. Like a magician's audience we are led to believe that things are not what they seem. Society which was to blame in the first place has be come the victim of the murderer it bred. When he has paid to it the debt of his crime his unfortunate lapse will be forgotten, swallowed up by abstractions as woolly as the think ing which gave rise to them.

The International Bandit The international bandit can be disguised in more fanciful terms. He is at worst a terrorist, more often a freedom fighter, a nationalist, an urban guerilla, or simply a member of the Hmovement" of the hour. Never is he a murderer. The people he kills are not the victims of his guns or his grenades or his dyna mite, but of the circumstances which drew them to that particular airplane, or embassy or public place. They are hostages against the ful fillment of demands in which they have no concern. Secure until that moment in the possession of identity and occupation, they surrender both to the cause of their assailants. As hostages they will suffer, as hos tages they may die, but there is nothing personal about it. The abstractions which serve the domes tic scene are applied the more easily to the international. For if the public sector at home is out of control, the super-sector that sprouts from the United Nations abroad is out of all reason.

Compounding the Folly If it is foolish to blame a national society, from which traditional val ues have been banished, for crimes committed by persons, then trans ferring that blame to international society, which has neither tradition nor values, merely compounds the folly. To suppose that, by seconding them to the United Nations, na tional bureaucrats acquire qualities superior to those of their fellows at home, is only the first in a chain of assumptions. If experience leads us to doubt the validity of the domestic assumption-that all wisdom re sides in the state and, by implica tion, in its servants-the sheer im pertinence of the international as sumption may well leave us breath less. Applying to an international court the same social theories which have brought domestic courts into disrepute is to confuse issues al ready confounded. The effect is to dissipate responsibility to such an extent that it disappears.

The dictator who conspires, on grounds of national security, to murder thousands of his fellow citi zens is quick to appeal to the Secu rity Council if his personal security 1978 WHO GUARDS THE GUARDIANS? 37 is threatened. He is blameless at home but he still feels the need for a higher authority to appeal to. That the Security Council should be as powerless as the United Na tions of which it is part is wholly consistent with the theories which gave birth to them both. That na tions which are manifestly unable to govern themselves individually many having acquired nationhood since the day before yesterday should be credited with the ability to govern all nations collectively, in cluding those with centuries of tra dition and cohesion behind them, is the final absurdity. Yet it persists. The motive force can be ascribed to two distinct impulses. First is the natural tendency of the state to dis solve its responsibility in commit tees. The drive to escape responsibil ity, to seek the shelter of a consen sus, at all costs to be fireproof, is the inevitable corollary of social theories which hold that no one is to blame for anything.

The ready assumption of personal responsibility, attributed to George Washington in the matter of the tree and his little hatchet, may be apoc ryphal but its survival springs from Liberty Abused more than Americans' veneration of their first president. It marks a rare quality. How rare may be judged when we try to recall examples of public figures, whose prompt accep tance of responsibility for deemed successes is a daily occurrence, ac cepting responsibility for evident failures. ~~It was my fault"-that, to borrow an American idiom, will be the day. The second motive is more sinis ter. The drive to transfer power from the individual to the state-indeed to render the individual power less-finds its natural extension in the transfer of power from in dividual nations to the interna tional body which foreshadows the world state. If the best is the enemy of the good there is little doubt that, for West ern civilization, the enemy is a creeping mediocrity which substi tutes envy for excellence. The inde pendencewhich drives men to seek the best is attacked by those who would make all dependent on the state.

Western civilization faces a crisis of the spirit. It is the West's belief in its own beliefs which is at issue. @ IDEAS ON LIBERTY THERE is a natural and necessary progression, from the extreme of anarchy to the extreme of tyranny; and arbitrary power is most easily established on the ··ruins of liberty abused to licentiousness. GEORGE WASHINGTON Wlrld L intho grfR9fan Iae~ Clarence B. Carson 13. World War II: The SocialistConflagration WAR is filled with incongruities. On or about May 1, 1945, I watched a command. performance of the Dres den Symphony Orchestra in a small town located along the border of Germany and Czechoslovakia. The command was probably issued by the commanding general of the First Infantry Division-the ~~Bloody Red One"-of the United States Army. The most obvious incongruity was that the United States and Germany In this series, Dr. Carson examines the connection between ideology and the revolutions of our time and traces the impact on several major countries and the spread of the ideas and practices around the world.

38 were at war with one another, and here were American soldiers in bat tle dress being entertained by a German orchestra. Another incon gruity was that amidst the incivility of war-as Patton's Third Army made its final thrust toward Prague-we paused for an hour or so to listen to one of the finest products of Western Civilization, glorious German music performed by a sym phony orchestra. The reason for Dresden's or chestra being quartered in this vil lage adds to the incongruity of the situation. On February 13-14, 1945, Dresden had been subjected to a WORLD WAR II: THE SOCIALIST CONFLAGRATION 39 succession of air raids by British and American planes. Dresden had long been famed as a cultural center and was architecturally one of the most beautiful cities in Europe. It had little significance, almost none, as a military target and had until the above dates only two small raids. Bombing D'resden Although Dresden was not an open city-though it was barely defended-, there was a widely held belief that the Allies did not -intend to bomb it. In consequence, refugees had poured into the city to double its population to 1,300,000 people. Al lied intelligence had reported that German armor was passing through the city by rail, but this wasappar ently known to be false by air force commanders before the raids were sent out.

At any rate, these may well have been the most devastating raids in a brief period in all of history. The city was devastated, over 100,000 people killed according to some _estimates, and 1600 acres laid waste. In the midst of one of the British raids a fire storm broke out raising temper atures to over 1000 degrees Fahrenheit and sucking high winds into the vortex of the fire. The American raid which followed was carried out in the daylight. The bombers were accompanied by fighter planes which added to the death-dealing destruction by straf ing civilians. It was to find refuge from this destruction that the Dres den Symphony had moved to a small town. 1 'There may have been no particu lar malice behind the otherwise wanton bombing and strafing of Dresden. Certainly, the air force personnel involved in the raid were performing their assigned tasks as thoroughly as they could. Appar ently malicious atrocities abounded, however, in World War II. Among the most horrifying of these followed in the wake of the assassination of the SS leader Reinhardt Heydrich by Czech soldiers secreted into Czechoslovakia by the British in late 1941. In retaliation, the Ger mans immediately killed 1500 Czechs. Three thousand Jews were shipped from Czechoslovakia to Po land to be put to death. A few-days after Heydrich's death, the village of Lidice was apparently selected at random to become an object lesson to the Czechs. The whole village was sealed off by the SD. The next day the males were all killed in a mas sacre which took ten hours to com plete. The females, excepting those who were pregnant, were sent to concentration camps. Pregnant women were sent to hospitals to be delivered when their time came.

The new born infants were put to death, and the mothers then sent to concentration camps. 2 The village of 40 THE FREEMAN January Lidice was physically destroyed as well. Germans and Russians sometimes vied with one another in their cruelty to prisoners. The German Admiral Canaris made this report from the Russian front in December of 1941: Our own treatment of Russian prison ers is having awful consequences. In the retreat from Moscow we had to abandon German field hospitals as well. rrhe Rus sians dragged out the sick and injured, hanged them upside down, poured gasoline over them, and set them on fire. Some uninjured German soldiers had to watch this torture; they were then kicked in the groin and sent back to the German lines with instructions to describe how the Bolsheviks were reacting to news of the mass executions and barbaric treat ment meted out to their comrades in German captivity. On another occasion German prisoners were beheaded and their heads laid out to form the SS sym bol.3 Barbarities and Atrocities As the Russian armies swept into East Germany in early 1945, many of the inhabitants fled westward at tempting to escape the terror. Here are two stories recounted by John Toland, from among many, many more: One of these groups was entering the village of Nemmersdorf when Russian tanks abruptly appeared, bulldozing ev erything in their path. Dozens of carts were smashed, side-swiped, rolled over. Baggage spilled out, people were crushed. The tanks rolled ahead oblivi ously, but in a few minutes Dodge trucks appeared. Infantrymen jumped out and began pillaging and raping. At The White Mug restaurant four women were raped many times, dragged outside naked and nailed through the hands to a wagon. Not far away, at The Red Mug, another naked woman was nailed to a barn. When the Russians moved off, they left behind seventy-two dead civilians.

A few miles to the west, Russians were breaking into the village of Weitzdorf. A young woman, Lotte Keuch, watched in horror as her father-in-law and six male neighbors were shot. Next a dozen French slave laborers at the manor were rounded up and their rings taken away-by slicing off their fingers. Then the Frenchmen were lined up, executed. And the raping began. 4 Such barbarities,-and their num ber is so great and the details so fulsome that the sensitivities are soon dulled and the mind numbed by accounts of them-require explana tion. It is undoubtedly true that there have usually been atrocities in the midst of wars. War frequently musters and loosens passions which are not easily contained. It is not easy to prepare men for the business of killing without removing or less ening civilized restraints. The simplest approach is to get men to thinking of the enemy as less than human. This is advantageous, too, for then the soldier may commit acts against them while, hopefully, re1978 WORLD WAR II: THE SOCIALIST CONFLAGRATION 41 taining his inhibitions against doing so against those on his side. At any rate, any historian should be able to call up stories of atrocities from many past conflicts, and he will usually have been aided in his task by those who have found advantage in picturing the enemy in the worst possible light.

Even so, the exigencies of war are not a sufficient explanation for the atrocities of World War II. Warfare may provide the setting for atroc ities, but it also provides the set ting for acts of bravery, restraint, and compassion. A conqueror may destroy all in his path or he may liberate and restore. The character of any particular war is a reflection of the state of civilization of the combatants. It is determined, too, by the aims and ideals of the participat ing countries. The events which cdmprise a war are not self explanatory; they must be referred to the larger framework from which they arise. This is especially so when events conform to a pattern and when large numbers of people are involved in them. Why in World War II? The ferocity and bru tali ty of World War II stands in special need of explanation. This is the case be cause the notion had been widely held that mankind was making great progress in the twentieth cen tury. Barbarity was supposed to be diminishing as a result of the spread of civilization. President Woodrow Wilson had proclaimed that when democracy was in the ascendant wars would be no more. If universal suffrage and large scale voting are sufficient evidence of it, democracy was in the ascendant between World War I and World War II. At the forefront of progress, according to socialist ideologues, was the spread and adoption of socialist ideas.

These give added impetus to the need for explanation of atrocities and ferocity of World War II. Despite the vast literature on the subject, there has been all too little effort to explain World War II by the ideologies that were involved or held sway. True, Nazi racist ideology is usually taken into account, but its explicit collectivism and tacit socialism are usually ignored. There have been ideological explanations aplenty, i.e., explanations by those under the sway of some ideology, but these have left socialism unindicted. Dictatorship or totalitarianism have been blamed often enough, but such explanations do not explain the rise of dictators or the advent of to talitarianism. The scribes of our era have hidden from the implications of the very ideas they hold dear. World War II was the clash of socialist titans. It was ignited by revolutionary socialism and threat ened for a time to consume the whole world in its fire. In the center 42 THE FREEMAN January ring of this struggle were Soviet Communism and National Socialist Germany. The main struggle was for dominance of central and eastern Europe, particularly eastern Europe. The English speaking peo ples were on the periphery of this contest though pride and confused alliances obscured the fact.

A Confused Scene Everything conspired, it almost seems, to obscure or conceal the na ture of the main struggle in World War II. From August of 1939 into June of 1941 Germany and the Soviet Union had a nonaggression and mutual assistance pact with one another. After the brief thrust· into and conquest of Poland, the German effort for nearly two years was con centrated in western Europe: the Scandinavian countries, the low countries, France, and Britain. It was further confused by the push of Germany and Italy into southern Europe and North Africa. More, just as the nature of the struggle began to come into focus after the invasion of the Soviet Union by Germany in June of 1941 it was distorted once again by the Japanese assault. on American pos,. sessions and the British Empire· in the Pacific. With the conflict spread over half the world it is small won der that many lost sight of its cen tral stage, or even doubted that it had one.

A good deal of the confusion can be charged to Hitler's temperament and the adventures into which it led him. He was intuitive, opportunis tic, and often governed by irrational prejudices. Ideology was apt to be sacrificed to whims or prejudices, particularly when he was frustrated by developments. Above all, much of the course of the war was beyond his control. His alliance with Mussolini was hardly founded in love for. the Italian people. War against the British was almost certainly not to his liking, and he had little interest in North Africa or the Pacific. Expe dient alliances and unwanted con testants led him to some strange places. He was given to blaming many. of these misfortunes on the malign influence of worldwide Jewry. Even so, World War II was mainly a contest for control over eastern Europe, and to a lesser extent all of continental Europe. This conclusion is supported from three different di rections: the aims of the-contestants, the arena of the major and pro tracted land battles, and the conse quences of the war. It is tempting to describe it as a war between Pan Germanism and Pan-Slavism, for that was certainly a major element in it, but that theme can here· be subordinated to the contest between two brands of revolutionary socialism: National Socialism in Germany and Soviet Communism.

1978 WORLD WAR II: THE SOCIALIST CONFLAGRATION 43 This is so because revolutionary socialism provided the methods for the concentration of power for the expansive thrusts, whatever the ul timate motives of those who directed them. Lebensraum World War II broke out as a result of the expansive efforts of Germany and the Soviet Union. Germany was expanding to the east: first Austria, then Czechoslovakia, and then the expansion into Poland which pro voked the general war. The Soviet Union attacked westward: Poland, Finland, and annexed Latvia, Es tonia, and Lithuania. The next most likely goal of both powers was the Balkan countries, although that was delayed by Germany's war in the west. Germany and the Soviet Union were on a collision course with one another, though the fact was obscured for a time by the Nazi-Soviet Pact. It brings some clarity to this con fused situation to examine the aims of Germany and the Soviet Union, or, if that is too broad and ambi tious, the aims of Hitler and Stalin.

First, those of Hitler. A ponderous gloss was provided for Hitler's aims by the pseudoscience of geopolitics as advanced by Professor Karl Haushofer of Munich. Geopolitics is a way of looking at geography in terms of the interests and desires of a single nation without reference to the interests and possessions of others. It has been used by con querors throughout history, but prior to the twentieth century none has attempted to give academic stand ing to the subject. The key phrase drawn from geopolitics for Hitler's aims was Lebensraum. It can be literally translated as ((living space," but it was freighted with the nationalistic aspirations of living space for and domination by Germany. It should be noted, too, that socialist regimes frequently suffer from what might be called claustrophobia, a sense of being hemmed in and surrounded by enemies. This has been characteris tic of the Soviet regime throughout its history. The reason for this is not difficult to grasp. The control over their own people is ever threatened by the existence of other countries independent of their will. The Nazis also used the term Grossraum which meant the ((whole space" or area that they required. The term was applied in the following way: Politically the New Order was simple.

German hegemony was to be extended by German arms and accepted by every body else. Nazi values were to be ex ported from their German centre and the pattern of Nazi revolution and Nazi life repeated in other lands. The first pre condition of the New Order was con quest: the land had to be got. How much land was left vague. At the high tide of German successes the concept of the 44 THE FREEMAN January Grossraum, or Greater Germanic Estate, embraced Europe from the Atlantic to the Urals, although a little earlier it had seemed to make do with rather less of Russia. The determining features of the Grossraum were not its borders but its nature. Instead of finding where people lived and then drawing permanent or semi-permanent frontiers to fit the ethnic facts, the Nazis began by desig nating an area and then moved people around in order to make demography fit the facts of power. The Grossraum there fore might be any size and in 1942 one writer envisaged it as covering one sixth of the globe. It was not a fixed area but a biological habitat like a nature reserve.

It was where the German family lived.5 More precisely, it was an area into which the German family might be moved and established after con quest. A Germanic Europe One way to grasp what Hitler had in mind is to understand that he aimed to unify Europe under Ger man hegemony. But it was not to be a unity of equals. Much of Europe, particularly eastern and southern Europe, was conceived as an area to be colonized. The closest thing he had by way of a model for what he had in mind was probably the En glish attitude toward and treatment of the North American Indians. Hitler's racial theories were used to buttress the proposed conquest, domination, and uprooting of peo ples. He held that many of the peopIes of Europe were inferior, indeed all the others were inferior to the Germans. Other Nordic peoples were the next highest in the scale, and under German guidance they could probably be more or less self governing. The Latin peoples would probably be next in line, though for expedient reasons-Germany was allied with Italy and hoped for al liances with Spain and France their position in the ethnic scale was not carefully spelled out. Slavs were considered to be decidedly inferior, not worthy of being civilized, but good potential slaves. The Nazis heaped contempt on the Poles, spoke of them as being subhuman, but once his armies were in Russia, Hit ler was equally contemptuous of the Russians. The level of education proposed for the Russians was de scribed this way by Heinrich Himm ler, head of the SS: ~~I can only repeat what the Fuhrer has asked. It is enough if, firstly, the children are taught the traffic signs at school so that they won't run under our cars; secondly, they learn to count to twenty-five; and thirdly, they can write their names as well. No more is necessary."6 At the bottom of the scale were the Jews.

Compulsory Un"ication What Hitler conceived was a Germano-centric Europe. Thereto fore, Europe had been fragmented into many small countries, depen1978 WORLD WAR II: THE SOCIALIST CONFLAGRATION 45 dent upon one another and the rest of the world. Not only had Europe been fragmented but its focus had been ~~peripheralized." Russia had linked a considerable portion of the land mass of Europe, and some of the most fertile, to Asia. Italy's cen ter was on the Mediterranean look ing to Africa and the Near East. The countries fronting on the Atlantic had thrown themselves into coloniz ing in other portions of the world. Germany would become the heart land of a unified Europe, economi cally self-sufficient, and a power so formidable that the rest of the world would be at bay. In the course of World War II enough of this program was carried out to indicate that Hitler was in earnest about it. Western and cen tral Europe was virtually depopu lated of Jews. There had been talk of resettling them on the island of Madagascar, but nothing ever came of this. They were shipped to the east, mainly to Poland, where a massive liquidation took place. Rus sian Jews were frequently killed on the spot. Poles were moved out of some areas of Poland and Germans resettled there. A vast displacement of persons took place as millions of Europeans were shifted about to work on German industries and farms. These peoples were segre gated from the Germans as far as possible and constituted little more than slave labor.

Clearly, Nazi aims were in opposi tion to that of the Communists, but it needs to be made clear that the Soviet Union had aims of its own. Soviet expansion was (and is) fueled by three fairly distinct but interre lated aims. One of these aims is imperial in character. The Russian Empire was partially dismembered during and after World War 1. West ern portions were cut away to form nations, such as Estonia and Latvia. The thrust of the Soviet Union dur ing the early months of World War II to reclaim this territory attests to the imperial aim. It is probable, too, that Pan-Slavism still played some part in the quest to regain lost por tions of the Russian Empire. The thrust of Germans eastward has long been matched by the Russian thrust westward. Russia has long been technologically backward and has looked toward the West in one way or other to make up this defi ciency. Russian Expansion Another aim of Soviet expansion was strategic. Russia is very nearly landlocked to the west and south.

Leningrad, the major western port before World War II, had access to the Baltic only through waters fronted by Finland, Latvia, Estonia, and Lithuania. Archangel lies far to the north in frigid waters. Russia has long sought, to no avail, a warm water port in the south that would 46 THE FREEMAN January have access to the Mediterranean during time of war. More, there are no natural barriers of consequence separating central Europe from European Russia. Buffer states have provided such solution to this prob lem as has been offered, but when these have been unfriendly, as they generally were before World War II, they were unreliable buffers. The other aim was ideological. In deed, all other aims have generally been subsumed so as to be virtually a part of the ideological aims. When, for example, the Soviet Union estab lished a Communist controlled gov ernment over Poland and made it a satellite state, the imperial, strategic, and ideological aims of the Soviet Union were satisfied in a sin gle stroke.

The ideological aims of the Soviet Union pit that country against every nonCommunist country in the world. In 1919 the Communist International, known for many years thereafter as the Comintern, was founded in Moscow. It purported to be a creature of Communist par ties from around the world, but in fact control over it was monopolized by the Russians. Moscow became the center for the domination of com munist parties founded in countries around the world. These parties were to foment revolution whenever and wherever they could. One of the points to which parties must concur was to this effect: In countries where a communist party is permitted by the laws to function le gally it must nevertheless maintain, parallel with its legal organization, a Hclandestine organisation capable at the decisive moment of fulfilling its duty towards the revolution."7 Moreover, all communist parties must have their ultimate allegiance to the Soviet Union: Communist parties must support un reservedly all soviet republics in their struggles with counter-revolution, urge workers to refuse to transport arms or equipment destined for the enemies of a soviet republic, and pursue propaganda by legal or illegal means among all troops sent to fight against a soviet re public. s This last point shows the marks of having been formulated during the civil war in Russia, but in essence it still describes the relationship be tween the Soviet Union and any parties it controls in other lands.

Worldwide Communism This was a blueprint for the spread of communism around the world and domination by the Soviet Union. It did not necessarily entail conquest in the usual military sense but it did, in effect, envision the fruits of conquest for the Soviet Union. The great prize, historically, for communism was to be Germany. The writings of Marx were replete with references to the coming of rev olution in Germany. The Com1978 WORLD WAR II: THE SOCIALIST CONFLAGRATION 47 munist Party in Germany was grow ing in appeal in the months before the Nazi takeover. Hitler set all that at nought. The Nazis and Communists, then, were profound enemies. To Hitler , Communism was a Jewish conspi racy to dominate the world. To Sta lin, Nazism, usually referred to as ~~Fascism," was the last virulent and aggressive stage of capitalism. It was the mortal enemy of com munism come to life and moving on the world stage. To those not in fected by either doctrine, com munism and Nazism were profound enemies because they were different varieties of revolutionary socialism contesting for control over Europe, and perhaps the world.

Hitler considered asking Stalin for an armistice on several occa sions. There was talk of making con tacts by way of the Soviet embassy in Sweden. Yet, each time he drew back. He is reported to have re marked that it would be of no use even if Stalin accorded an armistice. As soon as he was able Hitler would resume the assault on Russia. By most accounts, the conquest of Rus sia was Hitler's deepest and most abiding ambition, that and ridding Europe of Jews. Despite all their similarities, and in part because of them, Nazism and Communism were irreconcilable opponents at bottom. The eastern front was the scene of the titanic struggle between these socialist powers. Most of the worst horrors and much of the ferocious fighting occurred there. (The major exception to this was the bombing and strafing of civilian populations by both sides in western Europe.) It was in the east that the liquidation of millions of Jews took place, first by massacres with shot and shell, and then in gas chambers. It was in the east that perhaps a half million Gypsies were slaughtered. It was on the eastern front that ideological murders took place, the killing of commissars whenever they could be taken and retaliation by Com munists.

War Casualties One way to measure the scale and ferocity of the fighting is the ·num berof military personnel killed and otherwise lost in the war. The Soviet Union reported seven and a half million personnel as killed or miss ing. German military personnel killed or missing were reckoned at 2,850,000, though all of these were not lost on the eastern front. By contrast, the United States lost 292,100 in all theaters of operation, and the British Commonwealth somewhat over half a million. 9 The scale of the war on the east ern front has probably never been matched in all of history. There have been greater concentrations of forces in smaller areas but not on 48 THE FREEMAN January such a far-flung front. The Germans invaded the Soviet Union in June of 1941 with 135 divisions of their own and 13 Finnish and 15 Rumanian divisions. The Russians brought to bear approximately 136 divisions of their own. At a later date in the war the Germans claimed to have iden tified 360 Soviet divisions fighting against them, and still later there was talk of the Russians having over 500 divisions. By contrast, the United States had 60 divisions on the western front in the spring of 1945. (The division was the largest standard sized unit employed in the war, but the size varied from coun try to country and from time to time,) The Battle of Stalingrad The war was fought on a front stretching for 2000 miles from Leningrad in the north to Rostov in the south. Leningrad was never taken by the Germans, but it was laid under siege for 900 days.

~~Without light or fuel, the inhabit ants of the beleaguered city de pended upon supplies hauled across Lake Ladoga .... Enemy bombard ment, starvation, and disease cut down a million citizens; the dead at times were heaped up in streets lit tered with refuse and excrement."lO One of the reasons the Germans never took Leningrad was that Hit ler did not want his armies bogged down in the hOllse-to-hollse fighting of a large city. Even so, it happened in one of the decisive battles of the war, the battle for Stalingrad in the winter of 1942-43. Here is a brief description of the fighting there: ((The closest and bloodiest battle of the war was fought among the stumps of buildings burnt or burn ing. From afar Stalingrad looked like a furnace and yet inside it men froze. Dogs rushed into the Volga to drown rather than to endure any longer the perils of the shore. The no less desperate men were reduced to automatons, obeying orders until it came their turn to die, human only in their suffering. The Germans were on half rations from the end of November .... The final capitula tion came on 2 February. Ninety one thousand survivors, including a Field Marshal and twenty-four gen erals, were taken captive. The Rus sians h~d already taken 16,700 prisoners during the last weeks of the fighting. Some 70,000 Germans died during the siege, many of them from exposure or starvation, some by suicide."ll The ferocity of Russian attacks gained force by the apparent unconcern of the leaders for casualties and lack of fear of death by the troops. A Ger man specialist described their at titude this way: HSoviet Russians reacted differently to battle from civilized city dwellers. They remained unaffected by high casual ties ... , by close combat, by battles at 1978 WORLD WAR II: THE SOCIALIST CONFLAGRATION 49 night, in villages and in forests. They were used to misery, to lack of care, to absence of leave and of mail, to suffering cold and hunger. They faced death with fatalistic equanimity."12 This war on the eastern front was characterized by a ferocious assault not only on persons but also on prop erty. As German armies moved into the Soviet Union they were followed by economic organizations bent on expropriating and using for their own efforts whatever they could take from the Russians. All state owned property was simply confis cated. The Russians, on the other hand, destroyed whatever they could not take with them as they retreated. The horror of the war was augmented by the massive confisca tion and destruction of property.

Much, indeed most, of Europe west, central, and" eastwas devas tated in tl)e course of World War II. Only three countries, each small in population and peripheral, escaped the destruction: Portugal, Sweden, and Switzerland. (True, Ireland and Spain were spared most of it, but Spain had experienced its own de struction in the civil war just pre ceding World War II.) European civilization, the most vibrant in all of history, was shattered. The greatest work of civilization is the city; indeed, ~~city" and ((civilization" spring from the same etymological root and cities are the centers of civilization. The shattering of European civilization was visible during and immediately after World War II in the rubble of the cities. Cities and Civilization The modern city is a marvelous tribute to man's imagination and ingenuity, a result of his aspirations to build, and a wondrous complex wrought from the cooperation of many men to bring it into being and operate its facilities. The network of highways and railroads which pour into and out of cities gives some indication of their centrality and economic vitality. The huge water mains that supply them, the maze of electric wires that light them, the subterranean sewers which drain them, and the vehicles that ply their numerous streets make it possible for hundreds of thousands of people to live in close proximity to one another in comfort and security.

War turned many of the cities of Europe into torture chambers for their inhabitants. Artillery bom bardment, street fighting, and bombing broke water mains, cut off electricity, made movement precari ous, and made rubble or shells of buildings. The desolation of such small cities as Aachen could only be overmatched by that of huge cities such as Berlin, Leningrad, or Ham burg. It has sometimes happened in his tory that barbarians have conquered more civilized peoples and laid their 50 THE FREEMAN cities waste. When the Germanic tribes conquered the remains of Roman Britain the technology of cities was. beyond their abilities to operate and their needs to use. Those that were not destroyed must have .been left to deteriorate and decay. So it was, too, for much of the western Roman Empire as Europe descended into the Dark Ages. A Fury Born of Ideology But Europe was not laid waste in World War II by barbarians who could not comprehend or utilize cities. On the contrary, every major power involved had large and com plex cities of its own. The Germans who rained bombs on London and bombarded Leningrad into rubble had some of the finest cities in the world. The Americans and British who bombed Dresden and Hamburg and Berlin and Schweinfurt and many other cities were proud of their own great cities. Nor will it do to think of the Russians as constitut ing some uncivilized horde sweeping over Europe, tempting as it might be to do so. True, Russia has long been technologically backward compared to most other European countries, but it was only relatively so in a common civilization.

The fury that gripped .and laid Europe waste in World War II was of a different character. It was a fury born of ideology. It was. a fury un leashed by people who had the trap pings of civilization but whose civilized restraints had been weakened and cut away by ideology. Some account of this must now be made along with the story of further communist expansion. and the rea sons for the. German defeat. , Next: 14. World War II: The Bitter Fruit of Ideology. -FOOTNOTESlSee John Toland, The Last 100 Days (New York: .Random House, 1965), pp. 130-49. 2PeterCaivocoressi .and Guy Wint, Total War: .The Story of World War II (New York: Pantheon Books, 1972), p. 267. 3David Irving, Hitler's War (New York: Viking Press, 1977), p. 363. 4Toland, op. cit., p. 9. 5Calvocoressi and Wint, op. cit., p. 212. 6Irving,op. cit., pp. 403-04. 7Hugh Seton-Watson, From Lenin to Malen kov (New York: Frederick A.Praeger, 1953), p.

74. 8Ibid. 9Encyclopaedia Britannica XXIII (1955), 793R. lOArthur J. May, Europe Since 1939 (New York: Holt, Rinehart and Winston, 1966), p. 76. llCalvocoressi and Wint, op. cit., pp. 476-77. 12May,op. cit., p. 97.

HENRY HAZLITT has called econom ics a science of recognizing secon dary consequences. What he and others who have taken the time to study the working of free markets have perceived is that there is a natural orderliness in uncoerced dealings between men which tends to maximize the well-being of each individual and put resources to their best use. But to accomplish this, a market must be free, which means that each participant must be al lowed to decide for himself how he will use his assets, whether personal skills, money, or physical property. Whenever government compels a person to use his property in a way other than he would freely have choMr. Leef is a recent graduate of the Duke University School of Law, Durham, North Carolina. George C. Leef Zoning Laws, the Housing Market and the Ripple Effect sen, this natural orderliness is up set. The effect of any such tampering with a market may be likened to throwing a stone into a calm pool.

Waves of disturbance will ripple outward. Unfortunately, govern ment will now look upon these rip ples as new problems calling for its false remedies, and throw more stones in an attempt to neutralize the unwanted and unforeseen con sequences of its earlier stone throwing. I call this the ripple effect; it is nothing other than a failure to foresee secondary consequences. This article is about one form of governmental interference with free markets which nicely illustrates the ripple effect. It is about zoning ordi nances, particularly those which 51 52 THE FREEMAN January regulate the type of housing a per son may build on his property. Such ordinances demonstrably have wor sened the housing situation in this country, have been a vehicle for much manipulation, unfairness and favoritism, and, of course, have spawned new coercive remedies de signed to set aright the problems zoning has caused. What govern ment cannot see is that these H rem edies" will even further impair the functioning of the housing market.

A Primer on Zoning A zoning ordinance is a decree by government that land in its jurisdic tion may be used only in accordance with its regulations. These regula tions are contained in a zoning map, which designates the permissible uses for property in each zone. For example, a subdivision might be zoned to permit only single-family dwellings on lots of one acre or more. The original rationale behind zon ing was that it was necessary to prevent nuisances. City govern ments thought it desirable that in dustry and retail trade be segre gated lest their attendant smoke, noise, and traffic im.pose costs on residential areas. The paradigm case zoning was aimed at would be the construction of a steel mill on a quiet, shady street. Zoning based upon this argument was upheld by the Supreme Court even though its adoption might cause an enormous loss to the owner of affected prop erty.I Zoning, however, was not limited to the segregation of industrial from residential areas. It was also used to demarcate the boundaries for single and multi-family housing. When challenged in court, cities argued that allowing apartment buildings to be constructed next to single family houses would shut off air and light to the latter, increase noise and traffic, and deprive children of places to play. Lurking behind these doubtful arguments (which the Su preme Court also accepted as justify ing zoning of this nature) was the objective of protecting the property values of homeowners against the decline which would follow if their area became less exclusive. It will be observed that this concern has noth ing to do with true nuisances such as pollution and noise, but rather is an attempt to use the coercive power of government to protect against those losses which free markets must necessarily sometimes inflict.

The Law of Nuisance The common law had long recog nized actions for nuisance when zon ing first became popular. This action was based upon the idea, inseparaIVillage ofEuclid v. Ambler Realty, 272 U.S. 365 (1926). The value of Ambler Realty's hold ing fell by $300,000 when its tract was put in a residential zone.

1978 ZONING LAWS, THE HOUSING MARKET 53 ble from the argument for freedom, that one does not have a right to make use of his property in such a way as to injure or render less fit for use the property of another. If one did so, he might be compelled by a court to pay for the extent of his damage, and the destructive use might also be enjoined. Now, it cannot be said that nui sance suits ever became a perfect solution to the problem of exter nalities (the imposition of costs by one landowner upon his neighbors). Legal actions have high transaction costs, and success is never a sure thing. And if the losses were spread over a large number of people-e.g., smoke damage from a steel mill almost certainly no one of them would feel sufficiently aggrieved to undertake the expense of a lawsuit (at least prior to the advent of the class action). These factors served to deter many from asserting their legal rights.

All this may be admitted without indicting nuisance law for any in herent flaw. Courts and legislatures could have devised new procedures fairer to plaintiffs and new remedies for accommodating competing inter ests had they seen the necessity to do so. Nuisance law, however, has suffered from extreme neglect dur ing the nation's half-century infatu ation with zoning. Even so, there have been noteworthy nuisance cases in the last few years, indicating that zoning is not the only an swer to the externalities problem. 2 Zoning vs. Nuisance Law It is important to compare the way in which zoning and nuisance law operate. Nuisance law is based on the market idea that one should pay for the costs that he causes to be incurred, and works punitively-at least until people come to know what uses will probably cause them to have to pay penalties. At that point, uses for which the expected costs are too high will be deterred.

Thus, nuisance law should-or could-lead to the same sort of economic calculation which under lies any business decision. An en trepreneur would decide against building a steel mill in a residential area for the same reason he would decide against building one where it was diffieult to get raw materials the costs would be too high. On the other hand, a contemplated use of land, a grocery store, for instance, might impose small costs on the neighboring owners, but still be a worthwhile project becal:lse of large expected returns. It is this sort of 2See, e.g., Boomer v. Atlantic Cement Co., 287 N. Y.S.2 d 112. The court there refused to enjoin the operations of a cement plant, but awarded the plaintiffs the amount by which their prop erty had been permanently damaged (based on market value) plus an amount equal to the ongoing monthly costs the plant imposed on them.

54 THE FREEMAN January rational economic calculation which optimizes the use of resources. Zoning, however, does not allow individual decisions as to the costs and benefits of the uses of land. While zoning may prevent some nuisances 3 , it lacks the ability to discriminate between nuisances which are worth their cost and those which are not, and prohibits some land uses which would not be nui sances at all. This is so because zoning is not predicated upon a cal culation of costs and benefits, but only upon a planning ~~expert's" no tion of how cities ought to be pat terned. With zoning, we pay a high cost in efficiency to prevent an un known but probably small number of nuisances. The planners cannot know how much land will be de manded for each possible use at the time they draw up the zoning map; too much may be allocated to light industry, or too little to multi family dwellings. As a result, we have waste and inefficiency.4 "Exclusionary" Zoning Now we meet' the villain of the piece. After the courts gave the green light to zoning, people quickly realized what a powerful tool they had been given. All manner of reo: strictions might be put on the use of land which would guarantee that ~~undesirable types" would have to live somewhere else. Municipalities frequently enacted ordinances reqUIrIng a mInImum lot size of an acre or more; often there was no provision for apartment houses and mobile homes, while in some cases they were even affirmatively excluded. Various rationales were advanced to justify these interfer ences with freedom, but none more than tenuously linked to any proper governmental function of protecting health or safety, or preventing nui sances. At the bottom was always the desire to exclude people of lesser income from the community.

It was in the mid-sixties that the people who are usually so fond of government planning and who en thusiastically support zoning as long as it is nonl y" commercial interests which are affected, realized that they had created a 31t is not clear that cities would look much different in the absence of zoning. Professor Siegan points out in his book Land Use With out Zoning that Houston has no zoning, yet the market has neatly segregated industrial and residential districts simply on the basis of the differing characteristics which attract each type of development. 4Zoning decisions, it must be said, are not unal terable. Zoning maps may be changed or var iances granted. But it is never certain that zoning mistakes will be corrected through these mechanisms. Whether a zoning change is made or blocked usually does not depend upon abstract considerations of efficiency, but rather on the ability of interested parties to pressure the decision makers. Moreover, these escape hatches from zoning have frequently been used by unscrupulous persons to gain windfalls. See Ellickson, uAlternatives to Zon ing", 40 U. of Chicago Law Rev. 681, 701-05.

1978 ZONING LAWS, THE HOUSING MARKET 55 monster. The shoe was on the other foot now-one of their favored groups, the poor, was being vic timized by zoning. The result was a large number of courtroom battles over the legality of what was called ~~exclusionary" zoning. (Altzoning is exclusionary, but never mind.) The Legal Outcome In several cases, courts struck down large minimum lot size ordi nances. Those who believe in free dom can applaud such decisions; if a group desires to insulate itself from the rest of society, it may do so by purchasing enough land to achieve that objective, but it is wrong to do so through the use of the coercive power of government. Unfortu nately, not all courts and legislative bodies were content with a mere restoration of freedom. Instead, they sought to rectify the problems created by zoning by imposing even more zoning. The leading case, Southern Bur lington County NAACP v. Township of Mt. Laurel, comes to us from the Supreme Court of New Jersey.5 In ringing language, the court invali dated the town's highly restrictive zoning scheme, and then intoned that every developing community has an obligation: Affirmatively to plan and provide, by its land use regulations, the reasonable op5336 A.2 d 713.

portunity for an appropriate variety and choice of housing, including, of course, low and moderate cost housing, to meet the needs, desires and resources of all categories of people who may desire to live within its boundaries. The animating force behind the court's ruling was not a belief in liberty, but rather a simple-minded mathematical notion that each municipality should contain its ~~fair share" of low-and middle-income residents. This idea that people should be distributed throughout society in accordance with precise ratios shows forth even more disturbingly in the so-called ~~inclusionary" zoning or dinance. The concept, which has found some support in academic journals 6 , is to require a developer to include a specific percentage of units for low-income families if he is to be allowed to construct any multi family project. Such an ordinance was enacted in Fairfax County, Vir ginia, but was held unconstitutional by the Supreme Court of Virginia. 7 Making the Problem Worse Both the Mt. Laurel ~(fair share"

requirement and the ~~inclusionary" ordinance recognize that zoning has 6See Kleven, "Inclusionary Ordinances Policy and Legal Issues in Requiring Develop ers to Build Low Cost Housing", 21 UCLA Law Rev. 1432. 7Board ofSupervisors v. DeGroff Enterprises, 198 S.E. 2d 600.

56 THE FREEMAN January been used to limit the number of places where poor people might live, and seek to remedy the shortage of housing which has resulted. But at best they will be ineffective, and will probably succeed in making the problem worse. New housing is seldom con structed expressly for the poor. (One exception, of course, is the federal government, but its efforts, such as the famed Pruitt-Igoe project, have been smashing failures.) Rather, the poor benefit from the filtering down of older housing left empty as wealth ier individuals move into new or better homes. Careful empirical studies have demonstrated that this intuitively appealing proposition is true. 8 Therefore, to the extent that ~~inclusionary" ordinances or judi cially mandated ~~fair share" plans operate to decrease the total amount of housing which is constructed, they will work against the poor by diminishing the filtering down of older housing.

There are a number of reasons to believe that these legal mandates will, in fact, lead to less housing construction. Consider first the like ly eventuality that, under a ~~fair share" requirement, an incorrect amount of land would be zoned for low-cost housing-i.e., more or less BSee Lansing, Clifton and Morgan, New Homes and Poor People: A Study of Claims of Moves, Survey Research Center, Institute of Social Research, Univ of Michigan (1969). than would be so used in an unham pered market. This must be consid ered likely because a developing community cannot know what sort of commerce will choose to locate in it, and hence the characteristics of the workforce which may desire to live there will also be unknown. Merely because there is a heavy industry zone, for instance, there will be no reason to assume that some specific percentage of poor people will be employed. The skill and income level of the workforce will vary greatly depending on whether labor or capital intensive industries move in. Thus, the plan ner's guess will probably be wrong when he zones for housing. If too much land is allocated for one type of housing, too little must be for other types. Some land will be inef ficiently used, total construction will be less than we would have had in the absence of zoning, and fewer old homes will become available to the poor.

Discouraging Developers Secondly, we must consider the attitudes of the would-be developers ordered· by an ~~inclusionary" ordi nance to use a part of their property for the construction of low-cost hous ing. They may be reluctant to undertake the project thus pre sented for any of several reasons. With the mandatory low-income units, the overall rate of return may 1978 ZONING LAWS, THE HOUSING MARKET 57 not be sufficient to induce the builder to devote his resources to this de velopment as opposed to one where he finds no government interfer ence. Or, the developer may have doubts about the marketability of the non-low-income units if com pelled to put them in close proximity to those built for the poor. A related concern might be the possibility of high maintenance costs for the low income units. Reflection upon the way property frequently is treated in the inner city might well dissuade one from building with the poor in mind as tenants. Yet another obsta cle might be the architectural dif ficulties of integrating the smaller low-income units in the same struc ture with larger apartments de signed for the affluent.

Thirdly, many of the reasons which might make the developer hesitant would also be on the minds of prospective lenders. Even if the former were willing, the latter might not be. The result: housing construction foregone. Two more arguments tell against these schemes to provide better housing for the poor. So far we have left out the intended beneficiaries of this new housing, the poor them selves. Are many of them likely to be interested? Professor Banfield has pointed out that the inner-city dweller is accustomed to the nature of life there, and probably would feel bored and uncomfortable if transported out to suburbia. 9 The spa ciousness and solitude would be en tirely alien, and the preferred enter tainments and companionship would be far removed. In ahort, there j s reason to doubt that there would be enough takers for this housing to fill the government's quotas, leading to further waste.

Lastly, it must be emphasized that low-income housing is quite in feasible without government sub sidies. The Mt. Laurel court ex pressly noted this. Do we really want the availability of housing for the poor to depend upon the caprices of federal and state budgeting? The government is anything but a trustworthy provider. A change in administration or voter sentiment could halt building in progress and prevent new construction from being undertaken, again to the det riment of the poor. Uncertainty is one of the prices one pays for gov ernment dependence. No doubt there are more argu ments, and perhaps more persuasive ones which could be advanced against these plans. All I have at tempted to accomplish in this brief space is to show that the govern ment did not, and indeed cannot, take into consideration all of the reactions one might expect to its tampering with the housing market.

Not enough housing for the poor? 9See The Unheavenly City, especially chap ter 2.

58 THE FREEMAN Why then just zone for more, or compel people to build more, says the government. This simple minded solution pays no heed to secondary consequences, and forgets that people have minds and wills of their own. That is why it will fail. Conclusion The adoption of zoning as a means of preventing external costs was ill considered in the first instance . It led to inefficient use of land and at the same time caused many individ uals to suffer great unfairness. Once this authoritarian power to restrict the uses to which a property owner could devote his land was acknowl edged. as legitimate, it followed in exorably that it would be misused to protect well-placed interests and exclude poor people from developing communities. In attempting to solve this government-created problem in the housing market, courts and legislatures have resorted to more of the statist medicine of coercion. ~~In clusionary" zoning and ~Tair share"

plans will not make more housing available to the poor, and will prob ably have the opposite effect. Then, we may confidently predict, gov ernment will react with yet more counterproductive laws and direc tives. The radical solution to the chaos zoning has brought to land markets is to eliminate it. To be sure, people then will erect some buildings and do other things with their property that others will not like. If those uses actually interfere with the en joyment of property by others, those people affected should be encour aged to sue in nuisance to obtain compensation for the damage done. If the offending use does not amount to a true nuisance-an apartment with poor people as tenants, or a building painted an ugly color-that is something peoplew ho Iive in a free society will just have to tolerate as one of the annoyances of life. The alternative to a regime offreedom in land use is zoning with its ever present potential for waste and inef ficiency, inequity and manipulation.

Let us choose freedom. @ IDEAS ON LIBERTY Building One's House PROPERTY is the fruit of labor; property is desirable; is a positive good in the world. That some should be rich"shows that others may become rich, and hence is just encouragement to industry and enterprise. Let not him who is houseless pull down the house of another, but let him work diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built. ABRAHAM LINCOLN Edward C. Facey REASONING IN ECONOMICS ECONOMICS is a science of human action and moves, with nature, from cause to effect. It can do so because the nature of man is known-that he is a rational animal-and prop erties that flow from that nature are understood. One of these properties is the means-ends characteristic of man's actions. These acts are charged with man's conscious pur pose, and economics studies some of the implications of this.

Acts of man give rise to produc tion and prices. They cause the prices and production to be what they are. If prices change, individ uals will respond and instigate changes in the production and sale of the goods involved. The extent of the change cannot be determined Dr. Facey teaches economics at Hillsdale College in Michigan. because the individuals' precise evaluations of the goods are not known. Therefore it is not possible to draw up mathematical relationships be tween quantitative occurrences tak ing place in the market. No mathematical predictions can be made, since the extent of response by acting men to changes about to take place cannot be known. What is known is that men will try to profit. This happens when a sought-for end is valued more than the means thought necessary to achieve it. For example, there will be more quantity demanded if the price of a good is lowered (as the cost to the consumers is lessened relative to their value of it). There will be more quantity supplied if the price of a good is raised (as the revenue 59 60 THE FREEMAN January from the sale of a unit has increased relative to the cost of producing it).

In these cases, things, other than the price changes, remain the same. The Use of Constructs Economic theory operates within ideal situations, called constructs, in order to view certain causal tenden cies undisturbed by many other con current causal factors. In theory one can view developments stemming from a given policy. Then, when those developments do in fact occur, one looks for the causes indicated by theory to see if they are operating. For example, shortages may be seen following control policies. Sup,. pose that there are presently con tinuous shortages in Ruritania and the Ruritanian government has a system of price control. Theory shows that price controls lead to shortages. If there is increasing de mand for certain goods-buyers will ing to offer more money for such goods-but if prices are not allowed to rise in consequence of this, there would then be no incentive for pro ducers to increase the supply of these goods and, thus, shortages would oc cur. If no other dominating influ ences are at work, this is why there are shortages in Ruritania.

Constructs are not to be confused with models. Models are miniature representations of pieces of reality where the coexistence and re lationships of the elements in reality are in the model, as in an archi tectural model. In a construct, the imaginary situation is one where the elements in it do not coexist in real ity. It is not a ~~miniature" of society because, in society, persons' values, technology and the resources avail able, both human and natural, are continually changing. But in con structs unless specifically indicated, these things do not change. The equilibrium construct, wherein people continue to do what they have been doing, is a construct of real importance. With adjust ments, acting men are moving labor, land and capital to keep up with the profitable ventures and avoid the losing ventures. So there is an ever-present tendency to move re sources to serve the most important ends of the consumers. A state of equilibrium-requiring no further adjustments-is never reached be cause, for one thing, men's chosen ends keep changing. So the flows of land, labor and capital constantly shift to keep up with those changes.

Isolating Causes and Explaining Effects In reality, we find many things influencing the price of a good: changing evaluations of the item, the money supply, new labor laws, technological factors, so-called ~~hoarding" of money, weather condi tions' epidemics, wars, and the like. The economist alludes to his 1978 REASONING IN ECONOMICS 61 equilibrium construct and then con siders one or two of such changes taking place, and the effects that can flow from them while other things remain the same. He deduces various laws and theorems, depend ing upon what changes he considers, and thus develops the science of eco nomics. When he comes to explain reality, he simply selects from his theorems the ones which are appli cable to the situation under study. By giving appropriate weight to each theorem used, he will be able to show why the effects viewed in that situation have taken place. For example, suppose there had been a rapid expansion of the money supply in Ruritania along with the imposition of price controls. The economist will want to relate the conclusions of his monetary theory (about the expansion of money) along with the conclusions of his price theory (about the imposition of controls) to the explanation of the historical results. In this case there are two major causes bearing on the observed outcome. If significant technological improvements have also taken place, then the economist may note them and call upon his productivity theory to further eluci date the Ruritarian develnpments.

It should "be stressed that from theory the economist proceeds to the understanding of the historical/sta tistical facts about a society gleaned by observation. He does not get his theory from the facts. These facts result from many causes, and it is not possible to control and manipu late the facts, as in a laboratory, to take away or add causal factors so as to derive hypothetical theory that will explain the facts. Nor is it necessary to do so. For the economist already has his deduced theories at hand, ready to explain economic oc currences or events depending upon which types are to be explained. All he has to do is to select and combine from among these theories the ones which will best help him explain causally, and clearly, the particular economic events that have come to his attention. @ -BIBLIOGRAPHYKirzner, Israel, The Economic Point of View (Princeton: D. Van Nostrand Company, Inc., 1960).

Mises, Ludwig von, Epistemological Problems of Economics (Princeton: D. Van Nostrand Company, Inc., 1960). Mises, Ludwig von, Human Action (New Ha ven: Yale University Pres~, 1949). Rothbard, Murray N., "In Defense of 'Extreme Apriorism'," Souther,,: ~conomic Journal, Volume XXIII, Number 3 (January, 1957). Rothbard, Murray N., Man, Economy, and State (Princeton: D. Van Nostrand Com pany, Inc., 1962). Rothbard, Murray N., "Toward a Reconstruc tion of Utility and Welfare Economics," in M. Sennholz, ed., On Freedom and Free Enterprise, Essays in Honor of Ludwig von Mises (Princeton: D. Van Nostrand Com pany, Inc., 1956).

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN Builders of the American Dream THE WORD Hmyth," as it has come to be understood in America, has a derogatory connotation. It means that someone has been spreading a fake story. But in Europe, as James K. Fitzpatrick points out in the in troduction to his Builders of the American Dream (Arlington House, 165 Huguenot St., New Rochelle, N.Y. 10801, 374 pages, $9.95), a myth is a tale coming down from prehistoric times that, likely as not, had some original validity. There really were chivalric knights. If Prometheus never actually reached close enough to the sun to bring fire back to man, certainly some Pro methean character was the first to make fire by rubbing sticks together or striking something hard with a flint. Myths were perpetuated around hearths and campfires be fore men had written alphabets. They were the best that ancient man could do to account for his origins.

In America we don't need myths. We have our history books. But, as 62 Mr. Fitzpatrick says, presumably echoing Russell Kirk, we do need heroes who represent the high prin ciples and moral convictions of a culture. We need the moral imagi nation. Luckily we can find it in certain larger-than-ordinary-life characters who have refused to set tle for the mediocre, who have tried to exemplify admired characteristics at their best. Mr. Fitzpatrick might have picked many people who have done much for America. But his test is not who should have become an American myth, but who actually did. George Washington Carver, the black scien tist who developed so many scores of ways of making peanuts useful, may have done more for the country than Babe Ruth. But the Babe, with his mighty swing and Gargantuan ap petite for hot dogs, captured the pub lic imagination. He may not have been an exemplary man in his pri vate life, but his worshipers took him as a combined Bacchus and BUILDERS OF THE AMERICAN DREAM 63 Alger hero who could be forgiven much for his prowess on the diamond and his climb from an or phanage that might have left him an incorrigible delinquent but didn't.

The test which Mr. Fitzpatrick has applied to his thirteen· chosen builders of the American dream is a double one. First, the virtue and the value must be there. But, second, there must have been something of a breakthrough nature that made their names part of what Mr. Fitzpatrick calls. ~(the vocabulary of our people." Daniel Boone In establishing his double test Mr. Fitzpatrick is almost as interesting in talking about his rejects as he. is in seeking the ((why" for the popular acceptance of his thirteen builders. His chosen frontier hero is Daniel Boone. Boone was not the first to cross the Appalachians to the ((dark and bloody.ground" of Kentucky-a man named John Finley preceded him. In opening up the land between the Ohio and the Mississippi George Rogers Clark did more than Boone for the white settlers who poured West after the Revolution. But it was Boone's flair, his ability to cajole hostile Indians, his reverence in the belief that God had ordained him to open the wilderness, that made him the people's legendary hero. His reputation was based on a sense offairness andjustice as much as on bravery. And he kept to his mission-his worshipers had to bring his body back from the Mis souri territory to take him to a Ken tucky graveyard in a hearse drawn by four white horses.

Naturally ,George Washington engages Mr. Fitzpatrick's attention as the builder of the dream in our revolutionary epoch. Others solid ified the dream-Hamilton, who wrote Washington's Farewell Ad dress, Madison and Jefferson, who gave us our defining charters. But if it had not been for a Virginia planter who had the acumen to com bine the strategy of Fabius, the Roman delayer, with guerrilla tac tics learned from the American In dians, we would never have had the dream to make palpable. In assess ing Washington at his true worth, Mr. Fitzpatrick vindicates Parson Weems' mythologizing biography after all, Washington could have thrown a dollar across the Rappa hannock, and if he did cut down a cherry.tree he would not have lied about it. In the Civil War period Fitzpat rick rejects Sherman and Grant as dream builders, though it is incon testable, as he indicates, that the slugging, victorious Northern gen erals pioneered the strategies of modern total war. Lee and Lincoln are picked over Sherman and Grant 64 THE FREEMAN precisely because they fought as gentlemen. Oddly, they both be lieved that slavery was doomed and they both hoped that it could be abolished by voluntary action.

Why, in dramatization of the Pro gressive Era in U.S. politics, didn't Fitzpatrick make Theodore Roose velt or Robert La Follette his chief protagonist? He chose William Jennings Bryan, who has gone into myth as a blabbermouth and ig noramus. Actually, as Fitzpatrick demonstrates, Bryan was a prairie G. K. Chesterton who had a well reasoned Distributist ideal for his country. Bryan's essay, HIndivid ualism Versus Socialism," might have been written by Chesterton or by Hilaire Belloc. The doers rather than the intel lectuals take over when Fitzpatrick gives us beautiful portraits of Thomas Edison, Walter Reed, Charles Lindbergh, Babe Ruth, and Eddie Rickenbacker. Will Rogers is something of a mixed bag, part cow boy comedian, part folk philosopher. WaU Disney is treated, interest ingly, as a savior who enabled American parents to give their chil dren a not negligible substitute for the myths that our schools fail to prescribe as part of their cur riculum. True, it would be better if American children were to know C.

S. Lewis, Tolkien and Hans Chris tian Andersen, or even A. A. Milne. But if we must substitute TV and the movies for the written word, it is good that we have such Disney feature-length films as ~~Snow White and the Seven Dwarfs," ttBambi," ~tPinocchio" and ~tAlice in Wonder land." Douglas MacArthur Fitzpatrick's thirteenth ~tbuilder" is General Douglas MacArthur, who was both doer and intellectual. Why MacArthur rather than General George S. Patton if we must have a modern military hero? Because, as Fitzpatrick says, there is a notice able reluctance in America to glory in war for its own sake. We prefer a Sir Galahad to a pagan warrior like Thor or Odin. MacArthur was just as good a fighting man as Patton, but he always held out for an econ omy of means in war. Head-on slug ging was something for Neander thals; MacArthur preferred the flank attack or the leapfrog surprise. He felt there was no substitute for vic tory, but his idea of victory was to bring habeas corpus to the Philip pines (as his father did) or to Japan.

MacArthur was no imperialist. And what about ttimperialism" as part of the American dream? We drove Spain out of Cuba, but Mr. Fitzpatrick sees it as more impor tant that our Dr. Walter Reed drove yellow fever out of the whole Carib bean basin. This, it might be noted, includes Panama, which was a fever swamp before we cleaned it up. @ t t)(~ Freeman VOL. 28, NO.2. FEBRUARY 1978 Some Ideas About Business P. Dean Russell 67 Explaining to the customers and other beneficiaries the facts about business profits. No Continuing City: The Paradox of a Christian Society Edmund A. Opitz 73 Dislocations on the political and economic level cannot be cured at that level, because they stem from a malady rooted on the spiritual level. The Real Exploiters Scott D. Palmer 85 Not the savers and investors but the confiscators of capital are the exploiters of the poor. Regulation and Energy Transport: An Unnatural Disaster John Semmens 90 Widespread economic benefits would follow even partial de regulation.

Through the Eyes of a Connecticut Yankee John C. Sparks 98 Concerning the role of freedom in the advance of civilization. World in the Grip of an Idea: 14. World War II: The Bitter Fruit of Ideology Clarence B. Carson 102 Revolutionary socialism involves drastic and forceful measurestotal war. A Prince Replies to Machiavelli: Philip of England on the Erosion of Freedom E. G. West 116 A good man comes to the aid of his countrymen in espousing liberty. Book Reviews: liThe Revolutionary Ascetic: Evolution of a Political Type" by Bruce Mazlish "Essays on Individuality" edited by Felix Morley Anyone 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 FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson, N.Y. 10533 Tel: (914) 591-7230 Leonard E. Read, President Managing Editor: Paul L. Poirot Production Editor: Beth A. Hoffman Contributing Editors: Robert G. Anderson Bettina Bien Greaves Edmund A. Opitz (Book Reviews) Brian Summers THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of pri vate property, the free market, the profit and loss system, and limited government. Any interested person may receive its publica tions for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total ex penses average $15.00 a year per person on the mailing list. Donations are invited in any amount as the means of maintaining and extending the Foundation's work.

Copyright, 1978. The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid: 3 for $1.00; 10 or more, 25 cents each. THE FREEMAN is available on microfilm from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "World in the Grip of an Idea."

P. Dean Russell Some Ideas About Business THE amount of money spent by business for economic education continues to increase year by year. But the confidence of the American people in our business leaders, and in the market economy itself, con tinues to decline steadily. An exceedingly thorough survey of what people think of business was made by U.S. News & World Report in 1976. That survey confirmed what most of us already knew: We American people in general simply do not trust our business leaders or believe what they say. Further, we favor more government controls over them and the economy in gen eral. A Gallup Poll executive recently ~nformed a group of businessmen Dr. Russell is Professor of Management, University of Wjsconsin at La Crosse. that 23 per cent of the American people now look upon big business as perhaps an actual threat to our freedom and general well-being. The number of us who hold that disturb ing belief today has doubled from the 12 per cent who held it nine years ago, and the trend continues steadily upward.

That's what this article is all about-business and human free dom and how best to communicate the idea that the two are inextrica bly tied together, Le., when the market economy of private own ership disappears, human freedom necessarily and automatically dis appears right along with it. Now here's my basic reference point for effectively communicating that idea: All people hold beliefs and ideas. Those beliefs and ideas are 67 68 THE FREEMAN February always compelling and are some times more precious than life itself; religion, for example. Thus if we wish to be effective communicators in business and economics, we must present our facts and statistics in a manner that will be in harmony with existing beliefs and ideas and desires already held by the reader. You see, it's ideas-not facts and figures-that rule the world. It's what you and I want-not what we need-that determines our actions.

The fact that many of the things we want to do are likely to kill us, and perhaps even destroy our families, doesn't appear to be a compelling argument not to do them. As quick examples, I give you cigarettes, al cohol, and fast driving. Since the facts and statistics don't support what most of us want to do in those areas, we simply ignore or deny them. You understand, of course, I'm not talking about ~~those dumb people out there." I'm talking about edu cated you and me. Since that's us along with everyone else, I suggest we accept ourselves as we are and develop and present our economic facts and figures in harmony with it. Pensions and Insurance Here's an example of how to go about presenting the economic case for private ownership and profits even high profits-that's in har mony with the desires of most peopIe. The basic statistical fact for this example is quoted from an article by Professor Peter Drucker: ~~Employee pension funds now own more than one-third of the equity capital of America's publicly-owned com panies .... And in the truly big businesses (the top 1000 or so com panies), employee pension funds al ready hold majority ownership ... in most cases."

Congressman Jack Kemp said much the same thing when he wrote, ~~More than 51 million work ers have a vital stake-beyond their jobs-in American business. Their retirement funds are invested in stocks and bonds" of our largest in dustrial corporations. ~~In addition, more than 380 million life insurance policies depend to a great degree on business investments." All of us-no exception-want low premiums on our insurance policies and security in our retirement years. It's a fact that both of these ~~universal desires" of the American people are solidly based on the prof itability of business. We-not the rich people-are the real owners of our largest companies. Most of the profits are paid to our retirement funds and insurance companies and endowment funds of educational in stitutions. And those dividends never seem large enough to meet the needs of older people who have re tired, younger people who are trying to protect their families by carrying 1978 SOME IDEAS ABOUT BUSINESS 69 as much insurance as they can af ford, and colleges and universities that are continually searching for funds for scholarships, research projects, and higher pay for faculty.

To paraphrase Pogo of comic strip fame, ((We have_ met the owners of big business and they is us." Can there be any doubt that sec retaries and mechanics will find this information and this approach more persuasive than the customary statistical approach favored by most economists and business com municators? Since those customary charts and equations don't usually relate to what the employee thinks and wants, that employee doesn't even see them, much less believe them. But when the answer to the employee's unspoken question ttwhat's in it for me" is ttbigger pen sions and lower insurance pre miums," you're likely to attract his attention. You see, like you and me, that's what he wants. At that point, not before, he's willing to listen to your facts and figures that justify profits-even high profits-on vari ous other grounds. Freedom of the Press Very few of us actually want to turn the economy over to govern ment. Some do, of course; and again, there's no way you can use your statistics to change the ideas of those persons who want government control and/or ownership of American industry. There's simply no common interest between your wants and their wants. Thus our objective is more likely to be ac complished if we concentrate our ef forts on those persons who are not overtly dedicated to the abolition of the market economy of private own ership and profit-motivated produc tion.

Here's a ((common interest" ap proach to this basic ((ownership is sue" that I've found works fairly well with business and professional people, students, and colleagues in education. Again, it's an approach that aligns 'your wants with a most precious (and related) want held by the overwhelming majority of the American people. It has to do with helping them keep their freedom to write and print and distribute what ever they wish. I assume that almost everybody in the United States is in favor of free dom of the press, even though we may have a bit of trouble agreeing on a final definition. I also assume (with even more confidence) that people in general are now increas ingly influenced by the appealing idea of common ownership and ((pro_ duction for the benefit of everyone instead of for the profit of a privileged few." Is there any way we can tie to gether what we all want (freedom of the press) with the profit motive that undergirds private ownership?

70 THE FREEMAN February There is, indeed. For literally, there cannot be any freedom of the press except in an economic arrangement where (to select a random example) the automobile companies are pri vately owned and the producers are motivated by hope of large profits rather than by any particular desire to serve mankind. Private Property But how can one possibly relate Ford Motor Company (an example of production for profit) with freedom of the press? Well, begin with this empirical test: Wherever in the world the Ford Company can pro duce cars for a profit, freedom of the press exists to some \degree, and usually to a high degree. But wher ever in the world the economic sys tem prevents Ford Motor Company (or its equivalent) from operating for a profit, there is no freedom of the press at all. None. Nor can there be. Check it out. Where in the world is Ford forbidden to own plants and to produce cars for a profit? Russia?

China? Bulgaria? Yes, it's impossi ble for Ford to own and operate plants in any of the ((common own ership" nations that deny the con cept of production for profit instead of for service. Do you have any doubt about the free press situation in any country where the means of produc tion and distribution are owned in common, Le., by the government? You see, the harsh reality of the ((production for service instead of for profit" system is always this: If car companies can't be owned privately, the printing presses can't either, at least not for long. Now where in the world can Ford own plants and produce cars for a profit? South Africa? Brazil? Tur key? Yes, private ownership and production-for-profit is the basic system in those and a hundred other nations. Now what's the ((press free dom" situation in those three (~ques tionable" countries I chose deliber ately? Well, there are indeed restric tions. And sometimes the restric tions are severe. But when com pared with nations wherein presses and automobile plants can't be pri vately owned and operated for a prof it, the ((press freedom" situation is undeniably better in those nations that operate on the profit motive. It checks out in every instance. I can find no exception.

But couldn't it be different? Well, I've never heard of a theory that supports common ownership of the means of production and distribu tion in general but with private ownership of the presses. I don't see how it could be done. The Ends in View Determine the Means Used A government-directed economy of common ownership without to talitarianism is precisely as logical as a market-directed economy of 1978 SOME IDEAS ABOUT BUSINESS 71 private ownership without profits. Both concepts are, of course, illogi caL It is literally impossible for either ttcommon ownership" or ttpri_ vate ownership" to function if this basic motivation and regulator be hind each one is denied. In a socialist economy; how can the gov ernment ttdirect" production unless it compels us to conform to its direc tions? In a market economy, how can we indicate which product or service is most wanted if each item is equally profitable or non profitable to producers?

Encouragingly, the socialist communist intellectuals of Western Europe are now beginning to discuss this reality. Discouragingly, few of them have really faced up to the hard fact that it's always people, not economies, that are controlled. The officials of government can never control and direct things but only people. That's you and me. As Ar' thur Schlesinger, Jr., so aptly phrased it, ttA Communist party that regards the democratic process as anything more than a conveni ence on the road to monopoly power is a phenomenon the world has yet to see." Now for a quick look at private ownership and profit and its possible impact on another freedom that all of us value highly and will go to any extreme to keep-freedom of reli gion. In East Germany, production and distribution facilities are generally owned in common and .are used for the benefit of everyone in stead of for the profit of a privileged few. In West Germany, the means of production and distribution are gen erally privately owned, and the prof its (frequently enormous profits) sometimes go to just a few owners.

Who Owns the Churches? This ownership arrangement and the system of government necessarily required to support it-is the only essential difference between those two halves of a once' united country. Now in which of those two nations, West Germany and East Germany, would you ex pect to find the greatest degree of freedom of religion? The choice' isn't even close, either in theory or reality. For it's absurd to imagine that a religion based on private ownership of churches and seminaries can be· openly practiced for long in a political system based on common ownership of all lands and buildings. The owner deter mines the use. The clergy who im agine they can work out H a viable arrangement" with a socialist gov ernment dedicated to common own ership have-already given up their freedom to preach what they think. Most clergymen still believe in pri vate ownership, you know-along with uresponsible stewardship." But they can't preach that philosophy in the common-ownership countries.

72 THE FREEMAN When you can logically explain to yourself why this is necessarily so, you will have a rather dramatic (and, I find, convincing) story about the necessity and desirability of prof its, including high profits, that are basic to the system of private own ership. You see, your facts and figures on the market economy and profits will then support what the reader wants-a free press and religious freedom. If you can explain to him and her how they hang together, as they do, their attitude toward pri vate ownership and profits is likely to be favorable. Finally, it's surely desirable to point out to the reader that the profit-motivated market economy of Proof of Worthiness private ownership also produces more and better products and ser vices at lower prices than does any other known economic arrange ment. It's also helpful to tell him and her that these products and ser vices are widely available to almost everyone, if the market is truly free.

And the jobs generated by this economic arrangement are the highest paying in the world. But, by and large, the statistics on these economic rewards should be pre sented last and as a sort of secondary benefit. Surely the most persuasive fact is this: The profit-motivated economy of private ownership offers the only possible arrangement for the existence of human dignity and freedom itself. @) IDEAS ON LIBERTY PROFIT is the proof of the worthiness of production; loss is the proof of its unworthiness, of the waste of the energy and thrift that provided wrong tools of production, or of the job-destroying rapacity of tax gatherers or of workers employed in their operation. The greater the profit, the greater the incentive for expanding production and progress, while loss is the proof that progress has stopped. It is not profit that is evil; it is the enemies of profit who are evil; for if they prevail, millions must die as a spreading dearth of tools blights capacity for survival production.

With tools men can produce ten to twenty times as much as without them, with the tool providers getting but one-twentieth to one-tenth of the multiplied production. ENDERS M. VOORHEES, "The Uncommon Man"

Edmund A. Opitz "-__ "-'~-::"':iiiI::-::~----iiil-·f••:. l~~~ NO ~~ --~ . :"\\ \bs-'~, i; ~~::'"'' dCONTINUING \. \CITY pi: ~··'The Paradox of a Christian Society BENEDICT of Nursia pictured the ideal monastery as ((a little state, which could serve as a model for the new Christian society." Those who respond to the call of monasticism and draw apart from secular society are to undertake a new community based upon the bond of fellowship set forth in The Rule of St. Benedict. The discipline of the Order was so rigorous as to make the Spartans appear hedonists by comparison. ((The life of a monk," Benedict writes, ((should be always as if Lent were being kept. But few have vir tue enough for this," he adds sadly, ((and so we urge that during Lent he shall utterly purify his life, and wipe The Reverend Mr. Opitz is a member of the staff of the Foundation for Economic Education, a seminar lecturer, and author of the book, Religion and Cap italism: Allies, Not Enemies.

out, in that holy season, the negli gence of other times." The ((negligence" to which Bene dict referred might crop up any time, for example, when it came a monk's turn to do kitchen work. Servers are urged to ((wait on their brethren without grumbling or undue fatigue." As an inducement to good behavior they are awarded an extra portion of food. But what about wine? ((Godgives the ability to endure abstinence" to some; the others are rationed to a pint a day. Benedict yields this point reluc tantly. ((Indeed we read that wine is not suitable for monks at all," he writes. ((But because, in our day, it is not possible to persuade the monks of this, let us agree at least as to the fact that we should not drink to excess, but sparingly." 73 74 THE FREEMAN February No monk is permitted to call any thing his own. ((He should have nothing at all:" reads the Rule, ((neither a book, nor tablets, nor a pen-nothing at all. For indeed itis not allowed to the monks to have bodies or wills in their own power."

But the instinct for ownership some times broke through this prohibi tion, and the abbot is instructed to search each monk's bed frequently for concealed private property. ((And if anything is found belonging to anyone which he did not receive from the abbot, he shall be subjected to the most severe discipline." Life within the walls outdoes na ture in the harshness of its struggle for existence and only the most fit are permitted to enroll. HWhen any new comer applies for admission," reads the Rule, Han easy entrance shall not be granted him." He must persevere in knocking at the gate, and if he is ((seen after four or five days to endure with patience the insults inflicted upon him, and the difficulty of entrance, and to persist in his demand, entrance shall be allowed him ..." But the new man must then pass time in each of several decompres sion chambers lest he get the spiritual equivalent of ((the bends."

He stays a few days in the guest cell, then graduates to a novice's cell under the surveillance of an elder brother who tells him of ((the harsh ness and roughness of the means through which God is approached .... " After two months of this the Rule is read to him. If he doesn't falter ((again he shall be tried with every kind of endurance." Six months of this and the Rule is again read to him; four more months and another reading. And then, after Hhe shall promise to keep everything, and to obey all the commands that are laid upon him: Then he shall be received in the congregation; knowing that it is decreed, by the law of the Rule, that from that day he shall not be allowed to depart from the monas tery, nor to free his neck from the yoke of the Rule, which, after such long deliberation, he was at liberty either to refuse or receive." Even after this rigorous culling of the unfit the old Adam continued to reassert itself, in ways noted above, and even in physical violence among the monks. This is the implication of Rule LXX: ((No one shall" take it upon himself to strike another with out orders."

Benedictine Influence Such is the discipline of one ear nest and successful. effort to fashion a society of and for saints. It endures to this day. Benedictine monks con,;, verted England. The important Clunisian reformation of the tenth century stemmed from the Benedic tine Abbey at Cluny, France. The Cistercian Order was a twelfth,;, century offshoot. The influence of 1978 THE PARADOX OF A CHRISTIAN SOCIETY 75 these movements on western culture was immense. ~~By degrees," says Newman, writing about Benedict, ~~the woody swamp became a her mitage, a religious house, a farm, an abbey, a seminary, a school of leam iug and a city." Let us turn from the sixth century to the sixteenth, from the historical reality of the Benedictines to a liter ary artist's dream-to Rabelais' exuberant ideal construct of a soci ety of gentlefolk, the Abbey of Theleme. Gargantua is the hero of Rabelais' masterpiece. He is a mighty leader in battle-among other things-and with the help of friends emerged victorious from the Picrocholian War. His friends deserve a reward for their help, and what is a more _ suitable gift for a knight than a castle? This will hardly do for Friar ~rohn of the Funnels, however. Why not, in this case, find a suitable lnonastery and make Friar John its abbot? ~~But the monk gave him a very peremptory answer, that he would never take upon him the charge nor government of monks.

~For how shall I be able,' said he, ~to rule over others, that have not full power and command of myself? If you think,' continued John to Gar gantua, ~that I have done you, or may hereafter do you any acceptable service, give me leave to found an abbey after my own mind and fancy.'" This was done, and we are given a Renaissance man's vision of a model community. The Thelemites had but one rule: Do What Thou Wilt. ~(All their life was spent" writes Rabelais, «(not in laws, statutes, or rules, but accord ing to their own free will and plea sure." This did not mean that Rabelais countenanced a lax hedonism; it means that Rabelais had confidence in the gentleman and his code: HBecause men that are free, well-born, well-bred, and con versant in honest companies, have naturally an instinct and spur that prompteth them unto virtuous ac tions and withdraws them from vice, which is called honor. Those same men, when by base subjection and constraint they are brought under and kept down, turn aside from that noble disposition by which formerly they were inclined to virtue, to shake off that bond of servitude wherein they are so tyrannously en slaved; for it is agreeable to the nature of man to long after things forbidden, and to desire what is de nied us."

In order to get this kind of a per son for his abbey, Rabelais practiced an exclusion almost as rigorous as that set forth in the Benedictine Rule. The inscription on the great gate of Theleme warned off ((. . . religious boobies, sots, imposters, ... bigots." Rabelais wanted no ~~attor neys, barristers, nor bridle champing law-practitioners;" no 76 THE FREEMAN February Husurers, pelf-lickers, . . . gold graspers, coin-gripers. . .. Here enter not, unsociable wight, humorsome churl. ..." . But the red carpet is rolled out for others. ((Here enter you, and welcome from our hearts, All noble sparks, endowed with gallant parts .... Here enter you, pure, honest, faithful, true, Expounders of the Scriptures, old and new; Whose glosses do not plain truth disguise .... Strange doctrines here must neither reap or sow, but Faith and Charity together grow." The net result is that at Theleme, ((Sound bodies, lined with a good mind, Do here pursue with might, Grace, honor, praise, delight."

Mere Freedom-Only That The vision is an enchanting one, and even Albert Jay N ock was moved to enthusiasm. ((The lover of freedom," he writes in his essay on Rabelais, Uthe disbeliever in a dull and vicious mechanization of the human spirit, its debasement and vulgarization of life's abiding val ues, will nowhere find a more abun dant consolation and encourage ment than in this vision of the humanists. Nowhere, we believe, is there a more elevating, convincing, and wholly sound conception of human nature's possibilities when invested with no more than mere freedom-only that." Let it be granted that the vision of Benedict of Nursia and the Rule it inspired reflected a saint's nature and met, to a significant degree, the needs of spiritual athletes for whom life is a period of probation only, and the delights of the world a snare for the soul. Rabelais, on the other hand, although consciously within the Christian heritage, was most at home in that wing of it which em bodied those elements of Chris tianity whIch have been called the last creative achievement of classi cal culture. As a humanist, he pro jected the vision of an ideal society which reflected the new awareness of what a marvelous creature man is at his best-Uhow like a god"-in habiting a world only a little less wonderful than himself.

Thus we have, in theory, taken care of those constructed along heroic lines-the saints and the gen tlefolk. What about the rest of us, who are neither saints nor heroes, and who have been forced to concede that the gentleman's code-while it works well on the tennis court or in the drawing room-does not fully meet the demands of life on all its levels? What about the run-of-the mine citizen? It was possible to dis count him in classical political theory, whose most enduring ex positor, Aristotle, could not conceive of a civilization without slavery. But Christian social theory cannot take this way out. As every man is pre cious in God's sight, so every man must signify in any Christian ~978 THE PARAOOX OF A CHRISTIAN SOCIETY 77 sociology, and he must signify in terms of the Christian understand ing of man-a creature who is out of joint with his true nature, who has to negotiate a fallen world, and who must await another order of reality to attain his own fulfillment.

I take it to be a distinguishing feature of Christian sociology that it is non-ideological and anti-utopian. I would call a social theory ~~ideolog ical" which views man in terms of only one of his aspects; which takes account only of man's material needs; or regards him as a purely spiritual being; or stresses his ra tionality, or his instincts, or what ever, at the expense of his whole ness. It is obvious that man is a creature of many facets, but violence is done if the wholeness of man's nature is ignored or denied. Social Heredity A social theory is Hutopian" to the extent that it assumes that man's felicity is attainable in time and within history by a simple reliance on the natural harmonies, when these are uncorrupted by the artifi cial institutions of civilization. ~~Man is born free," cried Rousseau, Hand is everywhere in chains"-fas tened on him by the societies he has fashioned. Actually, society is man's native habitat. Society is as natural to man as water to a fish-neither organism could survive without its natural environment. As a creature of his genes man is a mere an thropoid; his ~~social heredity" -ab sorbed and learned one generation from another-makes him human.

Harmony, according to the uto pians, is to be attained in one or the other of two directions; by anarch ism or collectivism. That is to say, we might achieve an ideal society if the arrangements between people were the result of freely contracted relationships based on each man's rational calculation of his own self interest or advantage. Or, on the other hand, social harmony might be attained by the political imposi tion of a rational plan from the top down which put every man through his paces, according to the superior wisdom of a ruling elite. In contrast to the position of the utopians---whose dubious premises and faulty reasoning can be used equally well to justify either anar chism or collectivism-man, as he is understood in Christian thought, has his citizenship in two realms, not one after the other, but concur rently. The natural sensory world engages him, obviously. It is an es sential part of his environment which he shares with the animals; but man is the only animal who participates also in a non-spatial, non-temporal environment. This means that so ciety has a more than natural and social significance; it is part of the cosmic scheme.

Our economic needs could not be 78 THE FREEMAN February met if we tackled them individually; and fellowship with others is a ~e mand of our natures. But society has a significance beyond the meeting of our creaturely need for bread and our social need for fellowship; by a just ordering of social life we are, as Augustine put it, ~~schooled for life eternal." City of God The contemporary Anglican theologian, V.A. Demant, writes, ~~perhaps, only because man is not in the Kingdom of God has he to make civilization, but the effort is made because of the pull of his Patria in the Eternal World impels him to make a frame of life which upholds him when he is in via on earth." This point is, of course, the theme of Au gustine's City of God, and I quote from Book XIX. uEven the heavenly city, therefore, while in its state of pilgrimage, avails itself of the peace of earth, and, so far as it can without injuring faith and godliness, desires and maintains a common agreement among men regarding the acquisi tion of the necessaries of life, and makes this earthly peace bear upon the peace of heaven; for this alone can truly be called and esteemed the peace of the reasonable creatures, consisting as it does in the perfectly ordered and harmonious enjoyment of God and of one another in God."

Christian social theory is at odds with most secular social theory, but this is not the only difficulty; it has intramural problems as well. Yield ing to those who demand a Single, Simple Formula, Christian social theory may become a parody of itself in one or the other of two direc tions-material or spiritual. Al though Marxian communism is a purely secular scheme of salvation on the social level alone, and within time, there are some who have seen no incompatibility between com munism and Christianity. A more common parody of the full-bodied Christian position is that which vaporizes it into a cloying spiritual ity. The former seeks to resolve so cial problems without reference to man's spiritual nature and needs; the latter stresses the inner life as if there could be a healthy spirituality apart from a righteous ordering of human relations. When things are right the inner, spiritual life ofindi viduals is ~~in play" with the struc tures of their social life. Josef Pieper has said that the western culture of Christendom might be characterized as ~~theologically grounded worldli ness."

A Bedrock of Faith If man is more than a natural and social being it follows that the prob lems emerging on these levels can not be resolved, or even understood, on these levels alone. The disloca tions that bedevil us on the politi cal and economic level cannot be 1978 THE PARADOX OF A CHRISTIAN SOCIETY 79 cured at that level because they stem from a malady rooted on the spiritual level; they are surface manifestations of a distortion of our beliefs and our system of values. Our society was originally founded on the bedrock of a spiritual faith, and today we must again probe be neath the surface to that same bed rock. But the purpose of going down to bedrock is not to stay there; it is to build from there! Every Christian believes in spiritual values, but not necessarily in the kind that are vacuum pack aged; not in the kind that· become the private jewel of some connois seur for his solitary ecstasy. The path between altar and marketplace has always been a two-way street.

Jesus' summary of the law was two fold: love God and love your neighbor, balancing ethical expen diture by spiritual income. It con veys something like a half truth and a whole error to label man a spiritual being. He is, in fact, a spiritual being who eats, feels the cold, and needs shelter; a being whose nature demands fellowship with his own kind. True spirituality cannot exist apart from sound think ing' just dealing, and efforts to im prove the quality ofhuman relation ships. We have gone through a period when large numbers of people shared a belief that we could solve just about every human problem by political action. This is, of course, absurd. But it is a sorry reaction to this absurdity to subtract one's weight and influence from such healthy forces as are now at work in social and political life. This mood of retreat and resignation is a dubious kind of spirituality. In reality it is a new ((failure of nerve," and a critic has written caustically about those so afflicted: ~~Ha ving abandoned genuine thought about problems especially the new problems that cannot yield to old formulae and incantations-they luxuriate in the feeling of greater purity and spirituality than their fellows."

The Ancient City If we reduce spirituality to a kind of private fancy it is easy for us to think of religion and politics as two distinct spheres, as separate as church and state. Such a view would have been incomprehensible to the ancient Greeks. The classic study of the religious and civil institutions of ancient Greece and Rome is The Ancient City by Fustel De Coulanges. ((The foundation of a city," he writes, ~(was always a reli gious act ... A city was like a little church, all complete, which had its gods, its dogmas, and its worship .... Neither interest, nor agreement, nor habit creates the social bond; it is this holy communion piously ac complished in the presence of the gods of the city." It was a social 80 THE FREEMAN February system ~~where the state was a reli gious community, the king a pontiff, the magistrate a priest, and the law a sacred formula; where patriotism was piety, and exile excommunica tion; where individual liberty was unknown; where man was enslaved to the state through his soul, his body, and his property." Chris tianity, on the other hand, ~~taught that only a part of man belonged to society. . . . The mind once freed, the greatest difficulty was over come, and liberty was compatible with social order."

It is risky to generalize thus about a complex civilization like Greece which underwent several changes of character over the centuries, so let us use Socrates as a type case. Er nest Barker, in his Political Thought of Plato and Aristotle, writes ~~The laws of his country were to him (Socrates) a sacred thing. . . . For him there was no rule of natural justice outside the law ... what is just is simply what is commanded in the laws." Barker goes on to say that ~~To a State like the ancient State both church and State in one-any new religious beliefs, or disbeliefs, resulting in the formation of hostile groups of opinion, were in reality dangerous._" The ancient society, in other words, represents the fusing of religion and politics into a unitary state, leaving little elbowroom for the exercise of individual initiative. ~~The victory of Christianity," wri tes Fustel, ~~marks the end of ancient society. . . . It was not the domestic religion of any family, the national religion of any city, or of any race. It belonged neither to a caste nor to a corporation. From its first appearance it called to itself the whole human race." Such a religion was bound to have momentous polit ical consequences. Christianity created a new kind of individualism.

After some fifteen centuries of its influence, ~~The Englishman .. ," G. G. Coulton writes, Hcould carry his own atmosphere with him every where; he was self-sufficient avec sa Bible et son Anglaise." Encounter and Tension The enlargement of the idea of God, from a family, urban or tribal deity into a Being with universal attributes, developed the kind of re ligious institutiona church which must forever confront politi cal institutions in an atmosphere of encounter and tension. The history of Europe is in large measure polarized between the two powers; sword and scepter, crown and miter, Empire and Papacy. Such a dualism is fatal to the idea of the monolithic state. The effect of this polarity is to decentralize power and disperse au thority. There is no-other way to deal with the root problem of poli tics-the governance of power. In addition to the division of authority between Empire and Papacy, power 1978 THE PARADOX OF A CHRISTIAN SOCIETY 81 was further fragmentized among numerous kings, counts and lesser officials.

In practice, then, during much of the history of Europe, power got itself deadlocked; with the result that there was widespread practice of what might be called ~~interstitial liberties" by the people. Men were free in the spacious nooks, crannies and crevices of European society long before the law moved up to recognize specific freedoms. We had to wait till the seventeenth and eighteenth centuries for a developed philosophy of freedom.! But just about as that occurred, Christianity as conscious faith lost its hold on men's minds and loyal ties, and we began to slide back toward a kind of pseudo-theocracy, or tttotalitarian democracy," which, in modern communism and fascism, amalgamates religion with politics and succeeds in debasing both. Poli tics, in the collectivized state, is a sheer power struggle with no con cern for the ends of justice and free dom. Religion, in the collecti vized state, must be forced into state ser vice as an opiate of the people. Om nipotent government cannot abide a IThe history of the Eastern Church and Empire is another story. Christopher Dawson writes: cCThe Byzantine Church became so closely bound up with the Byzantine Empire that it formed a single social organism which could not be divided without being destroyed.

..." The Making ofEurope, p. 57. uni versal religion; it must construct its own domesticated variety of sec ularized religion. And thus we complete one of those enormous spirals of history. Reli gion, ethics and politics are once again wrapped up in one package, as they so largely were in Greek specu lation. The individual Greek could hardly conceive of ends for his life outside his Polis. Aristotle's remark that ttman is a political animal" might be translated ~~man is a crea ture found only in city-states." Beyond Society With modern men it is different. Our pilgrimage has brought us to a different turn on the spiral of his tory and we know that we have a potential that projects us beyond so ciety. We have acquired a sophisti cation which will not permit us to be reabsorbed into our societies with out inner tension and conflict. This is one result of our centuries of en counter with Christianity. We may be anti-or non-Christian but never theless its effects have leaked into our lives to shape the modern psyche in the region of the values and prem ises we take for granted. Our mood is mostly Christian, whatever creed or philosophy we profess.

This may sound like a call for a religious revival, and, in a sense, it is just that. But a mere revival of religion is not what we need, unless the religion which is revived under82 THE FREEMAN February stands that· man exists for ends be yond society and beyond history Augustine's two cities again. Nor will this sort of a revi val be ac complished by mere exhortation. Perhaps it will not happen at all so long as men expect to wring utopian results out of any kind of political or economic action. There are political implications in the concept of spiritual liberty; the practice of justice is urged upon· us as a religious imperative, and the relevance of the Christian religion to American institutions has been spelled out many times. But where does economics fit in? At first glance, economics appears to deal solely with the provisioning of our material and creaturely needs and to have no religious significance.

This is a misreading of the situation, I believe, so let me say a few words about economics. Economic Activity Fundamental to Human Existence Economic activity is fundamen tal to human existence. A Robinson Crusoe could get along without politicking, but ifhe did not work he would die of hunger and exposure. Emerging from economic activity are the concepts of rights to property and claims to service around which many political battles are fought. Economics, on the surface, deals with prices, .production and the op erations of the market as determined by the buying habits of every one of us. In reality, however, economics is concerned with the conservation and stewardshi p of the earth's scarce goods; human energy, time, mate rial resources and natural forces. These goods-in-short-supply are our birthright as creatures of this planet. Use them wisely, as natural piety dictates and common sense confirms-that is providently and economically-and human well being is the result. Ignore the realities in this area, as we have done in our time, and a host of evils follows. We might be able to live with economic ills if we didn't think we could cure them with political nostrums, but our political efforts aimed at mopping up the conse quences of economic mistakes head us in the direction of the Total State.

Every collectivist ideology-from the Welfare State idea to totalita rian communism-is strung on a framework of economic error. People are prisoners of their beliefs, and so long as they cherish a wrong under standing of economics they will be appealed to by one form of collec tivism or another. But when they embrace sound economics, collec tivism will cease to be a menace. All creatures take the world pretty much as they find it, save man. Man alone has the gifts which ena ble him to entertain an idea and then transform his environment in 1978 THE PARADOX OF A CHRISTIAN SOCIETY 83 accordance with it. He is equipped with needs which the world as it is cannot satisfy. Thus he is compelled to alter and rearrange the natural order by employing his energy on raw materials so as to put them into consumable form. Before he can do much of anything else, man must manufacture, grow, and transport.

His creaturely needs man shares with the animals, but he alone employs economic means to satisfy them. This is an enormous leap. up ward, for by relying on the economic means man becomes so efficient at satisfying his bodily hungers that he gains a measure of independence from them. And when they are as suaged, he feels the tug of hungers no animal ever feels: for truth, for beauty, for meaning, for God. A Means to All Our Ends Whatever may be man's capacities in the upper reaches of his nature-to think, dream, pray, or create-it is certain that he will attain to none of these unless he survives. And he cannot survive for long unless he engages in economic activity. At the lowest level economic action achieves merely economic ends: food, clothing, and shelter. But when these matters are efficiently in hand, economic action is a means to all our ends, not only to more refined economic goods but to the highest goods of the mind and spirit. Add flying buttresses and spires to four walls and a roof, and a mere shelter for the body develops into a cathedral to house the spirit of man.

There are two schools of thought which incline to dismiss economics, but neither has much excuse for being except as a protest against the errors and onesidedness of the other. On the one hand are th~ economic determinists, who argue as if man were merely a soulless appendage to his material needs. For them, the modes of production at any given time decree the nature of man's in stitutions, his philosophies, and even his religions. Economics, under this dispensation, will lose its inde pendence and become a mere tool of the State. On the opposite side of the fence is a school of thought which appears to regard it as a cosmic calamity that each soul is sullied by connection with a body which must be fed and kept warm. Spiritual purity vlill not be attained until there is deliv erance from this incubus; but until that happy day let us try to forget that man has creaturely needs which only the products of human labor can satisfy . Nothing in this scheme disposes men to pay any attention to economics! But there is a third way.

The mainstream of the J udeo Christian tradition is characterized by a robust earthiness which makes it as alien to the materialism of the 84 THE FREEMAN first of the above alternatives as to the disembodied spirituality of the second. Soul and body are not at war with each other, but are parts of our total human nature. It is the whole man who needs to be saved, not just the soul. Creaturely needs are, therefore, legitimate; and being legitimate they sanction the economic activities by which alone they can be met. They cannot be met by political action. The market economy presupposes a moral order, and it needs a framework of law to punish breaches of the rules. But granted this institutional frame work economic activities are self starting and internally regulated. Political action which goes deep er into economic life than main taining the Rule of Law commits the injustice of giving economic advan tage to some at the expense of others.

Christianity is a religion of world and life affirmation. It includes the dimension of eternity but it is not ((other worldly." It can therefore ex tend diplomatic recognition to the A Dangerous Paradox temporal order and respect the in tegrity of its political and economic rules while insisting at the same time that ultimate felicity is not to be attained by any conceivable im provement of that order. Utopia is not within its purview. Contemporary social and scien tific theory is now at least open ended toward this idea, having shed the utopian expectancy of last cen tury. Theories about people and things are no longer expected to hang together with the neatness of a proposition in Euclidean geometry. The rationalist may demand that life conform to his verbal formula tions of it, but reality refuses to be thus coerced. Anyone can draw up a blueprint for an ideal society com posed of bloodless abstractions who are expected to perform like pup pets. But when we deal with man in all his concreteness, the rules must be tempered with artistry. In reli gious terminology, this artistry is the practice of the traditional reli gious virtues of mercy, compassion and charity. ® IDEAS ON LIBERTY WE must beware of the dangers that lie in our most generous wishes.

Some paradox of our nature leads us, when once we have made our fellowmen the objects of our enlightened interest, to go on to make them the objects of our pity, then of our wisdom, ultimately of our coercion. LIONEL TRILLING Scott D. Palmer ~ The 1\ Exploiters ONE of the most dangerous economic myths of our time is the notion that the relative affl.uence of the Western industrial nations is somehow re sponsible for the grinding poverty of the so-called ((third world." Accord ing to this view, greedy Western businessmen who invest in under developed countries ((exploit" the inhabitants by paying them starva tion wages and draining their coun try of its natural resources. The ef fect of this double exploitation, so the liberal doctrine goes, is to reduce a once happy and prosperous people to slavery and abject destitution. As a solution, we are told that the ill gotten wealth of the richer nations, especially the United States, must Mr. Palmer is a doctoral student in philosophy and economics at Indiana University.

be globally redistributed to raise the living standards of the poorer lands. There is only one thing wrong with this liberal fairy tale: it is false. Foreign investment in underde veloped countries, far from reducing the inhabitants' standard of living, has made it possible for them to enjoy a material abundance which they otherwise could not even have imagined. It is easy to understand why dictators in these countries make the irresponsible charge of ((exploitation" to justify seizure of foreign capital; it is not easy to un derstand why this accusation is so readily accepted by intellectual leaders of the West. Let's examine the three main parts of this doctrine of economic exploitation. 85 86 THE FREEMAN February Are Workers Exploited? Does Western business exploit the laborers of underdeveloped coun tries? The liberal reasoning seems to go like this: A business will not invest in an underdeveloped country unless it has something to gain by doing so. If someone gains, then somebody else has to lose. Therefore, since foreign business gains by in vesting in underdeveloped coun tries, the inhabitants must lose; and one way they lose is by being forced to work for lower wages than are paid in the advanced countries.

The first thing to notice here is that the liberals have misun derstood the nature of voluntary ex change: they believe that if one per son gains, another must lose. That is true if the relationship between the two people involves force or coer cion. If you have an apple and I grab it away from you, then I have gained and you have lost. But suppose that, instead of using force, I offered to trade an orange for your apple and we made a voluntary exchange. Then I would have gained, because I wanted the apple more than the orange. If I hadn't wanted the apple more than the orange, I wouldn't have made the trade. But you have gained, too, since you wanted the orange more than the apple otherwise you wouldn't have made the trade. In a voluntary exchange, both participants benefit and no body loses. What is true of trading apples for oranges is also true of trading labor for wage payments. Ifa worker in an underdeveloped country feels that the wages an employer offers him are too low, then he is free to devote his time and effort to tasks which he regards as more profitable. This is true whether or not the employer is a foreigner. If, however, the worker agrees to a specified wage, then he demonstrates that the money he gets is worth more to him than the time and energy he gives up; other wise, he wouldn't have agreed to the exchange. Since he voluntarily en ters into and profits from the ex change, there are no rational grounds for claiming that he is ttexploited."

Does the worker in a backward country make a high wage by West ern standards? No; and this brings us to another argument which pur ports to prove that he is exploited. Suppose that a worker in New York City makes $5 an hour, while a worker in Venezuela makes only $1 an hour for exactly the same work. If the man in New York City is being paid what his work is worth, then doesn't that prove that the Venezuelan-who does exactly the same work-is being exploited to the tune of $4 an hour? After all, if it's the same job and it's worth $5 an hour in New York, then it must be worth $5 an hour in Venezuela. The fallacy in this argument 1978 THE REAL EXPLOITERS 87 comes from a failure. to understand that the value of labor-or, for that matter, anything else offered for sale-is not objective and unchanging but is determined by market condi tions. For example, here in southern Indiana eggs are much less expen sive than they are in New York City. Because of local market condi tions, i.e., a large supply of readily available farm products, the price of eggs is lower here than in the New York market which draws supplies over great distances. In the same way, the large supply of labor in underdeveloped countries, often combined with a lower level of skill than would be found in the advanced nations, tends to push down the price of labor (wage rate) for local workers.

Does the worker in such a country make as much money as he would like to make? No. Obviously, from his point of view, the best wage would be a million dollars an hour. The company, on the other hand, would prefer to pay him nothing at all. The fact that worker and com pany are able to arrive at a com promise figure provides no justifica tion for the claim that either is ~~exploiting" the other. Are Natural Resources Drained? The next part of the exploitation doctrine was the accusation that in dustrial nations drain underde~ veloped countries of precious natu ral resources without proper pay ment. Let us make it clear at the outset that we are discussing a situ ation in which a foreign firm has discovered and brought into use a natural resource which was previ ously unused. What are we to make of this charge? Let's think about it for a minute. The fact that the resource in ques tion was previously unused means, most likely,' that no one had seen' a way to profitably make use of it-and hence. had not bothered to assert any claims to ownership. If a foreign firm discovers a profitable use for it and makes a claim, then for a moment, at any rate--it has made the only such claim to' own ership and is at least the pro tem owner. When the use for the re source becomes known, as it inevit ably will, others may also wish to exploit the resource, and may make competing claims to own it.

It is easy to see that, since the country's government has legal jurisdiction, the competitors for title to the resource must look to that government to arrive at a reason able adjudication of their claims. But if anyone regards the settle ment which results as unrea sonable-as unjustly benefiting the foreign firm at the expense of lo cal claimants' to the resource then he should lay the blame where it belongs. The local government, 88 THE FREEMAN February not the foreign firm, decides on the conditions under which the firm may use the resource. If there is exploitation, then it is exploitation devised and sanctioned by the coun try's rulers, and the problem is not between the people and foreign business but between the people and their government. Do the Rich Rob the Poor? The third and final charge was that Western business has caused the poverty of the underdeveloped nations, and that the industrial countries are rich because they have taken advantage of these unfortu nate lands. We have already seen, in the preceding discussion, that neither of the first two charges will stick: the West is ttnot guilty" of economic exploitation. But rather than simply washing our hands of the matter, let's ask the question: Why are the industrial nations rich and the third-world nations poor?

Why does an American who pushes a button eight hours a day enjoy a higher living standard than an Asian peasant who pushes a hand-plow sixteen hours a day? It will do no good to say that the American works harder; he doesn't. The answer is that the American has more and better tools to work with than the Asian peasant-tools which enormously magnify the pro ductivity of his labor. And there is only one way that these tools can be made available: through capital ac cumulation. Capital accumulation means a di version of labor and resources from purposes of current consumption to the creation of tools needed for higher future productivity. Consider the simplest case. Robinson Crusoe, washed up on his island, may find that if he labors ten hours a day chasing rabbits he can enjoy a diet of two rabbits a day. Suppose he then decides that if he had a bow and arrow, he could enjoy a diet of ten rabbits a day. In order to get the bow and arrow, he must use some of his time and labor to make it: time and labor he would otherwise use to chase rabbits.

Thus, if we assume he devotes five hours a day to chasing rabbits and five to fashioning a bow and some arrows, he has reduced his present standard of living to one rabbit a day in the hope of having ten rabbits a day when he finishes the tools. What is true of Robinson Crusoe is true of whole societies. The only way for a poor nation to improve its liv ing standard is by increasing the number and quality of tools which its people work with. Not just any tools will do, either. If Crusoe, like so many governments of third-world nations, decided to build a steel mill or an atom bomb instead of a bow and arrow, we would justifiably question his sanity. The tools re quired are those to help satisfy the 19'78 THE REAL EXPLOITERS 89 The people of underdeveloped countries really are the victims of exploitation-but not by Western business. Who are the real exploit ers? The real exploiters are their rulers, who make economic progress impossible by punishing domestic success and by taxing, regulating, and nationalizing foreign invest ment right out of the country. The victims who would avoid such exploitation must first throw off the yoke of socialist dictatorship. Then Western business may serve them.@ most urgent needs of the consu-try. Anything, therefore, which dis mers-in this case, Crusoe's need courages such investment or makes for food rather than steel. it impossible, only prolongs the povSince present Iiving standards erty and suffering of the people.

must be curbed in order to produce tools (accumulate capitaD, we can see that the process must take place slowly if at all in a land whose inhabitants are already on the verge of starvation. It would bea tremen dous stroke of good fortune if the members of some other society were willing to provide the local laborers with the tools needed to increase their production and make better lives for themselves. And that is precisely what happens when a business from an advanced nation invests in an underdeveloped counThe Failure of Planning IDEAS ON UBERTY FREEDOM-LOVING people, in the name of preserving and spreading freedom, are unwittingly financing and otherwise sustaining socialist policies which thus far-sensational projects and schemes apart-have yielded little else than social injustice, unemployment, poverty, and conflict. Though the Indian planners and their overseas supporters are full of promises and hope, these policies can hold out prospects of nothing better for the future. . . . Statist policies in India might have been abandoned long ago, but for the intervention of foreign aid, which kept the coffers of the prodigal replenished as they became depleted, the moral support lent to statist policies by visiting ttexperts" from overseas, and the colossal gains in money and power which these policies yield to the politician and civil servant. .

PROFESSOR B. R. SHENOY John Semmens REGULATION AND ENERGY TRANS'PORT:. An Unnatu,ral Disaster THE REGULATION of pipelines for gas, oil and other substances is so complex that the regulation of other modes of transportation appears simple by comparison. Jurisdiction is scattered over a multiplicity of governm~nt agencies, anyone of which can obstruct and delay, but no one of which can give full clearance to proceed. All this, in pursuit of the general welfare. Yet, few would maintain that the general welfare is being served by the collage of policies growing out of such regula tory efforts. Regulation is born of the idea that the market is deficient in some way. These claimed deficiencies run the Mr. Semmens is an economist for the Arizona Department of Transportation and is studying for an advanced. degree in business administra tion at Arizona State University. 90 gamut from notions of consumer ig norance and impotence to producer ignoranc.e and impotence. Propo nents of increased regulation may be found simultaneously contending that without government controls producers not only would collude to gouge the consumer, but would en gage in destructive competition as well. Only with the beneficent guid ance of the regulatory commission can justice and economic efficiency be assured-or so the theory goes.

If such assertions be true, one must wonder how study after study can continue to uncover a recurring pattern of regulation-bred stagna tion, corruption, inefficiency, and protectionism. A revealing defense of regulation was made in 1974 by the General Counsel of the In"' terstate Commerce Commission.

REGULATION AND ENERGY TRANSPORT 91 Four arguments were raised on be half of regulation. First, that the regulatory agencies usually yield, sooner or later, to the inevitable changes in the business environ ment. Second, that the delays oc casioned by the ICC, for example, were not that bad. Third, that the waste engendered by regulation is not as bad as it could be. And finally, that regulation will not be as wasteful in the future as it has been in the past; the ((new" waste mandated by government controls will not be as gross as the ((old" waste. Despite its indefensibility, regula tion persists. The impact that the regulatory system has upon station ary transportation conveyances, primarily for shipment of energy products, will be the focus of the remainder of this report. Imperfect Competition and Incompetent Regulation In approaching the issue of com petition, or rather, its imperfections, as a rationale for government in volvement, many proponents begin by constructing an abstract perfect competition. This perfect version in cludes such notions as an infinite number of buyers and sellers in the market, as well as instantaneous information on supply and demand conditions. Under such a system, it is agreed that no regulation would be necessary. However, no such system exists. What does exist is imper fect competition. The role of regula tion then becomes clear. By careful adjustments to this imperfect envi ronment, it is claimed, the regula tory commission can remove the de trimental consequences and more nearly satisfy all needs.

To be sure, the interveners have the best of the phraseology. After all, the government is seeking to correct the imperfections of the mar ket, to insert deliberated planning and controls in place of the implied chaos of unplanned and uncontrolled markets, to insure fair competition. While phraseology may be useful as propaganda, it is impotent to deal with the economic realities. The unplanned and uncontrolled market is something of a misnomer. Actually, the market is a reflection of the continuous give and take of numerous participants, each of which is making its own plans and exercising its own controls. This very multiplicity of plans provides the flexibility that regulation lacks. And this is why unregulated mar kets consistently exhibit superior performance in meeting the needs and wants of consumers. Contrary to official dogma, it is the planned and controlled seg ments of the economy that are most chaotic. The only competition that has been ~~improved" by regulation is that between the growing number of government agencies and bureaus 92 THE FREEMAN February fighting over jurisdictional author ity. The major result of this achievement has been to divert ef fort from productive activities to legalistic wrangling between the regulated businesses and the vari ous regulatory bodies. The net re sult, of course, is a reduction in the aggregate wealth of the community.

This is no mean accomplishment, but it is questionable whether a reduction in wealth is socially de sirable. It certainly is not the objec tive sought by the intervention. Like some automaton gone ber serk, the regulatory commissions have frequently transformed their initial programming from preserva tion of competition to preservation of selected competitors. There are two predominant techniques. One is paternalism. The other is bureau cratization. Paternalism is evi denced when, in order to prevent ((predatory" or ((cut-throat" competition, the regulatory agency bars new entrants into the field and restricts or discourages innovations. The case-by-case methods followed pro duce no clear guidelines for the reg ulated industry. At the same time, vested interests of existing firms in market shares are treated as a prop erty right. A would-be competitor's proof that it could provide more effi cient service is not considered a rea son for allowing such a firm to enter the controlled market.

Bureaucratization is a more invidious force in the destruction of competition. Even those on guard against paternalistic inclinations fall prey to this vice. The key man ifestation of this phenomenon is the government's voracious appetite for paper. Not only do bureaucracies produce mountains of paper, but they consume them as w~ll. The regulated firm is constantly be sieged to produce more reports, pro vide more statistics, complete more forms. Smaller firms are hardest hit by this imposed cost of doing business. Not too surprisingly, the larger firms may be the only ones able to meet these costs. The reduced competition brought about by the· very actions of the regulatory authorities then becomes their reason for increasing regula tory powers. Nor can the heretofore protected competitors feel at ease. The regulatory agency may, at any time, turn on them with accusations of attempted restraint of competi tion or monopolistic practices, though, in truth, they may only have been following the dictates of the regulatory authorities.

It is apparent that regulation, to date, has been incompetent to achieve improved competition. In capable of assuring good perfor mance in the monitored industries, regulation thrashes about in aim less fashion lopping off consumer options, raising the costs of doing business, insuring misallocation of 1978 REGULATION AND ENERGY TRANSPORT 93 scarce resources, rewarding inefficiency-all to the detriment of the general welfare. The Price Is Not Right The prospects for transmission corridors over the next twenty years are anything but clear. With only limited proven reserves foreseen, the anticipated Hneed" for transport facilities is largely a shot-in-the dark. It is not irrational to ask why we need new pipelines if we only have ten more years' worth ofnatu ral gas to pump through them. Un disclosed in these estimates of re serves are the assumptions regard ing price. If current pricing policies are continued, the prognosis is in deed bleak. On the other hand, studies have indicated that with higher prices, the supply of gas would be stretched out for centuries.

There is nothing magical about this. Neither is it evidence of a vast conspiracy to withhold supplies. It is merely .the working out of the sim ple economic law of supply and de mand. Supply varies directly with price, while demand varies in versely with price. Therefore, if the price is .held below the uncontrolled market level, the quantity de manded will be stimulated and the quantity supplied retarded. Such is the current policy, which inevitably has led to depletion of.reserves and the forecast shortages. Analyses which purport to demonstrate that the supply of natural gas or oil is not sensitive to changes in prices are absurd. Yet, such analyses have spawned a so-called compromise solution based upon ttrolled-in" pricing and the vintaging of oil and gas. Periodically, the vari ous governmental agencies involved in this price control will classify various sources of supply as cCold" or cc new" based upon the initial year of production or discovery. The conse quence, over time, is a plethora of classifications, including ttold new,"

ttnew new," ad nauseam. Once a source of supply has been classified, its price is fixed, based upon the costs incurred in finding and produc ing it. This, its advocates explain, will enable the producer to recover his investment without allowing him an Hunearned windfall" profit-thus preserving incentive while preventing price gouging. Historical cost as a basis for de termining the necessary price to in sure incentive for futureinvestment isa fallacy. Investments must earn replacement costs if the product being generated is to continue to be supplied. If, during the time span that the investor is recovering. his original cost, the replacement cost of the necessary capital equipment doubles, the ttrecovered" capital will only purchase half the replacement resources. In an inflationary envi ronment, controls such as those im posed in the rolled~ in price system 94 THE FREEMAN February result in the consumption of capital.

This consumption of capital will in evitably result in shortages and di minished future potential. Capital Punishment The long-term consequences of price controls and rates of return based upon historical cost have been dramatic. The inability of regulated firms to earn replacement costs on their investments in capital equip ment has led to continual trips to the capital markets. This heavy bor rowing has boosted debt/equity ratios, raised the cost of borrowed funds, and lowered the credit rat ings of the heavy borrowers. A sam ple of electric utilities showed a drastic decline in credit ratings in the ten years between 1965 and 1975. In 1965, 19 per cent of the utilities sampled had AAA bond rat ings. By 1975, there were none. It is an unhealthy trend, if the services provided by these firms are deemed to be necessary. It is obvious that the ((fair" rate of return policies have been inadequate to maintain the levels of service to which we have become accustomed. For example, in the decade of the 1960's, the average return on investment among Standard and Poor's 500 cor porations was nearly 13 per cent.

The average return on investment for oil and gas producers was 6 per cent-this despite the Federal Power Commission's nominally allowed rate of 15 per cent. Obviously, with such a ratio persisting over time, it is inevitable that capital will flow out of oil and gas produc tion and into other ventures. It is a sorry state when public policy has the effect of channeling scarce resources away from the pro duction of necessities in order to make them available for what may be considered more frivolous enter prises. However, the proposed re medy of mandatory credit allocation or government loan guarantees is no solution. Government absorption of available credit has been a large contributor to the problem. In 1960, government borrowings accounted for less than 13 per cent of total borrowings. By 1975, government borrowing amounted to more than 25 per cent of the total. Increasing government intervention into the credit markets, even for such seem ingly salutary purposes of securing funds to finance production, trans mission, and distribution of heating oil, natural gas, electricity, and the like, can only worsen this problem.

Need For Economic Calculation As regulation displaces the mar ket allocation of resources, the gov ernment will have no means of cal culating investment priorities, no means of assessing the cost/benefi t returns, no rational method of al locating resources. Government takeover of pipelines or government 1978 REGULATION AND ENERGY TRANSPORT 95 backed loans would not really lower the cost of financing. Such ma neuvers only result in shifting the burdens of finance onto third par ties. Economic goods have costs, re sources are limited. The selection of one set of alternatives precludes the use of those resources on another. Access to government credit or the Federal printing press does not create wealth, it merely transfers it from one holder to another. Under the complex system of reg ulation that pervades the economy, there ·is no way of knowing which transfers serve to redress and which serve to perpetuate imbalances and distortions created by previous waves of interventions. It is safe to say, though, that public policies will be conservative and cautious when it comes to innovations. The regula tory concept is inextricably tied to the continuation of the present into the indefinite future. In fact, one might go so far as to say that the idea of regulation cannot concep tualize innovation.

Each successive wave of transpor tation technology has found a sepa rate regulatory body set up to con trol all or part of a particular mode of transport. There is no comprehen sion of the generic service per formed by all modes. Consequently, there can be no comprehension of unforeseen methods of accomplishing the same ends. Public policy is firm ly founded upon this myopia. When new techniques come along, they are almost invariably opposed and, at the very least, delayed by regula tory policies. As the regulatory com missions intrude more and more into the economic activities of the nation, capital for innovative ven tures will disappear. Socially Unacceptable In the final analysis, the deliber ated controls that regulation seeks to insert as a substitute for market forces, far from being a stabilizing factor that aids long-term planning, have the effect of creating chaos and aborting l6ng-term planning. The multiplicity of government agen cies, bureaus, commissions and de partments, each having a veto over a regulated firm's proposed mea sures to meet the needs of its cus tomers, insures a lack of coherence to public policy. In the pipeline transportation system, some lines come under ICC regulation, some under FPC. It doesn't stop here, though, as other agencies-FEA, EIA, EPA and ERDA-playa direct role in blocking various operations of these transport modes. On top of this, the Federal Departments of Transportation, Commerce, Justice, Labor, and now Energy, each have their own fiefdoms of regulatory au thority. Add to this the various com parable state agencies and the judi cial system and it is plain to see that nothing will ever be done easily or 96 THE FREEMAN February quickly, if in fact it ever gets done at all.

The path of the regulated firm is strewn with obstacles. Cataclysmic changes in public policy on short notice are a frequent source of dis ruption to a firm's planning efforts. Short-term political considerations have also played a prominent role in the making of regulatory decisions. And it is not unusual to find that a business's rational efforts to provide for its future needs will serve as the impetus for government-imposed penalties. Firms which were perspicacious enough to anticipate the shortages of natural gas and make provisions for supplementary sources of power were among the first to be curtailed by regulatory mandate, while profligacy and lack of future planning on the part of others were rewarded by special dis pensation in government allocation decrees. Of course, the distortions brought about via the regulatory system are not confined to business firms. The ills of this system have spilled over into all segments of society, ag gravating social and economic prob lems. The price controls on sales of interstate gas have had the effect of encouraging industries to move out of the populous northern cities to relocate in the sun belt where in trastate gas is available. Left in the wake of this migration are worsen ing unemployment and economic decline in the central cities. Mean while, the ceiling on prices of domes tically produced oil and gas has had a net economic impact of shifting the production, and the jobs and capital that go with it, to overseas produc ers. This also aggravates un employment problems, creates mas sive debt obligations to foreign countries, and places enormous cap ital investment in areas vulnerable to capricious and unstable foreign regimes.

Why Proposed Remedies Are Bound to Fail Few people will deem these social and political repercussions desirable by-products of regulatory policy. Yet, the remedial actions currently under consideration hold forth no indication that anything has been learned from the unpleasant conse quences of past regulatory interven tions. On the one hand, the Carter Administration is proposing to penalize consumption,while many critics are urging subsidies to pro duction. Each of these measures alone uses only half of the market mechanism. Utilized together, we would enjoy the ludicrous charade of bureaucrats attempting to simu late market conditions by a com bination of taxes and subsidies. In their comprehensive study, The Economics of the Natural Gas Shor tage, 1960-1980, MacAvoy and Pin dyk demonstrate that of the options 1978 REGULATION AND ENERGY TRANSPORT 97 discussed, deregulation, by far, pro vides the most efficient solution to ending the shortages of natural gas.

A Iittle further down the line of ridiculous ((solutions" to regula tion-caused problems are the forced conversion to coal and the sharing of shortages. Spreading the shortages around will only serve to entrench the problem. Allocations by government dictate override the ability of anyone or any firm to plan for its own needs. Enterprise is stifled while everyone must await the latest government decrees. The incentive for foresight is diminished and reliance upon the vagaries of chance is propagated. Under prior ity systems which favor r~sidential use of gas, sections of the country will face 90 to 100 per cent curtail merit of industrial users by 1980. Coal cannot always be substituted for gas. But unemployment and re duced output can be, as the events of last winter have shown. The evidence is clear; regulation has produced negative conse quences. Misallocation, waste, un employment-all have regulation to blame for at least part of the problems. Acknowledging this, though, it is difficult to know where to begin.

So enormous is the mess that it is easy to imagine conspiracies that have perpetrated Hfake" shortages for sinister purposes. Unfortunately, this line of thinking has gained some credence. Energies that ought to be directed at dismantling the barriers to production and satisfac tion of urgent needs are, instead, directed at devising suitable punishments for the ((guilty." The prevention of ((windfall profits" has taken on such overwhelming dimen sions that its proponents seem pre pared to insure a net loss to society in order to guarantee that no one will gain inordinately from the widespread economic benefits that would follow even partial deregula tion. UntH the regulatory ills can be cured, or at least ameliorated, the prognosis for the industries involved will remain bleak, long-term plan ning an exercise in futility, .and so ciety forced to bear unnecessary economic costs without substantive benefit. @ Editor's Note: Mr. Semmens offers a 3-page bibliography of books and articles docu menting his study. That bib liography is available from The Freeman on request.

John C. Sparks Throughthe Eyes of a Connecticut Yankee THE great storyteller, Mark Twain, describes a nineteenth-century Yankee from Connecticut who sud denly and unaccountably finds him self back in the time of the legen dary King Arthur some 1400 years earlier. But the Yankee retains his knowledge and experience from the nineteenth century. The story relates his frustrations when he realizes he is living in an environment without benefit of the knowledge and development of more than a dozen centuries yet to come. His personal Hadvanced" intellec tual plane, however, enables him to become the major magician of King Arthur's court, surpassing the legendary Merlin. The situations are intriguing and humorous, as only Mark Twain could make them. Mr. Sparks, now Chairman of the Board of Trustees of The Foundation for Economic Education, Is an executive of an Ohio manufacturing company. 98 If Mark Twain had lived to write his story today, the Connecticut Yankee would have had a much big ger bag of tricks-a whole century of added knowledge in the various fields of science, medicine, construc tion, engineering, electronics and all the arts and crafts.

Whatever Twain's underlying purpose in weaving the fascinating and humorous tale, we certainly can use his method to compare our lives with the lives of our ancestors in order to learn what has caused the differences. Imagine yourself, say a modern businessman, suddenly turned back a century in time. You are not a scientist, but you have a good lay man's knowledge of many scien tific developments in tools, drugs and medical-surgical procedures. You have enjoyed the electronic ac cumulation and communication of THROUGH THE EYES OF A CONNECTICUT YANKEE 99 data for decision-making in your business. You know about automo tive and jet air travel, have watched television, have vacationed with your family at a variety of the world's interesting places. Without warning, and armed with nothing but the memory of your prior existence, you awaken one morning in some midwestern U.S. city in the 1870's.

Months go by as you undergo a sequence of unusual and exasperat ing experiences. At first you want to tell everyone what the 1970's are going to be like. But then, how could you convincingly describe television to your new acquaintances? And your wild tales of a heart transplant and corrective eye glasses that are worn on the eyeballs merely bring laughter. The description you try to convey of an airplane-a machine that will fly and transport four hundred people from New York to Miami in less than three hours may gain you comparison with another dreamer, Jules Verne. But Jules Verne at least acknowledged he was dreaming of the future, while you claim to have stepped back out of that future. Wisdom suggests that you keep to yourself your knowledge of the late twentieth-century ways of doing things. But the frustration only grows. You miss the comfort of so many Utaken-for-granted" modern conveniences not yet invented or de veloped in the 1870's. An infection that could have been cured quickly by a simple antibiotic shelves you for weeks. A new friend's wife dies of smallpox, common then, but almost unknown a hundred years later. The hours of hard physical labor and tedious mental effort leave little time for recreation. Sanitation mea sures are primitive at best. Hot summer days are without air conditioned relief, winter a time of illness due to the prolonged and bit ter chill. The crude lighting discour ages evening work or even reading.

How you miss the ring of a tele phone, the spot news by radio, the family car for business and pleasure. Missed most of all are your family and friends of that future which you've vacated.-That, plus the reali zation that you will never again enjoy the conveniences and comforts you had known in the late twentieth century. In your loneliness you speculate as to these differences in lifestyle. Are they just a matter of time? You recall the history. of civilizations in decay, while others were growing or advancing. And most vivid in your mind .is the twentieth-century· de cline of England as a world power the high taxation, government own ership of certain resources and· ser vices, government medical services, and other coercive interventions in 100 THE FREEMAN February the lives and affairs of the people. You would recall discussions of the danger of following in the United States the path taken by the United Kingdom. You conclude that time alone is not the key to the rise or fall of civilization. And it occurs to you that enormous power vested in the hands of ruling bodies-even with the best intentions-produces tragic results.

You try again to explain how life might be (was) one hundred years hence, but none will believe. You try to produce the twentieth-century wonders you have known, but you lack the tools, the skilled workers, the capital, the market demand and marketing facilities, the means of transport and communication. In short, you lack the accumulated sav ing and investment and the technol ogy for an advanced industrial econ omy with its miraculous specializa tion and division of labor. It finally dawns on you that free dom is your return ticket to the twentieth century. Freedom of peo ple to act peacefully and to receive and own the fruits of success-and to personally suffer the conse quences of failure-will produce a society of enormous visible progress, both material and non-material. You note that there are some en trenched customs and laws peculiar to the nineteenth century that have a depressing effect on personal free dom. But the seeming paradox is that the nineteenth-century curbs on personal freedom are far less numerous than you had known in the U.S.A. in the late twentieth cen tury. So you begin to see that while freedom is the key, it is not an instantaneous provider of the good life.

The removal of a tyrant and the proclamation of individual freedom does not change the horse and buggy to a new Chevrolet overnight. It takes time in a climate offreedom for individuals to develop their creative talents, with the resultant material and peripheral benefits. No one can lay a measuring stick alongside a civilization and observe: ~~It takes twenty-three and one-half years of freedom to produce an electric re frigerator, or fifty-six years for black and white television." No one can program in advance precisely what a free individual will do. But given an atmosphere of freedom, and with no more government than needed to keep the peace, there is every reason to anticipate fantastic material re sults. There can be no reasonable doubt of the direct correlation in the U.S.A. between the minimal gov ernment interference of the nineteenth century and the explo sion of material progress of the twentieth century.

It is important to avoid confusion. It is the atmosphere of freedom that unleashes man's ingenuity when he 1978 THROUGH THE EYES OF A CONNECTICUT YANKEE 101 learns that he can reap increasing rewards as he better serves the de sires of his fellow man. It is not the transferring of wealth by govern ment force from those who produce it to those who do not; that destroys incentive. Do not credit unemploy ment payments, social security ben efits, compulsory unionization, or progressi ve income taxes for the progress of the twentieth century. For it· is not these government re strictions and compulsory welfare programs that bring about a high level of living; theirs is quite the opposite effect. So let us further consider this twentieth-century paradox in the U.S.A.-a higher level of living than known throughout recorded history, even though individual freedom has been on the wane. But this is not so strange when one considers that neither the new presence nor the new absence of freedom will bring about instantaneous changes. We do not sufficiently understand the miracle of freedom to create it out of nothing in an instant. Nor have we yet managed the total destruction of its manifold blessings. And the great question is: Are we living on borrowed time? Or perhaps the even greater question is this: What am I to do in my time?

It should be clear by now that we have the knowledge and the means to transport ourselves and our pos terity as far backwards through the centuries as we're willing to go with coercive governmental regulation and control over every aspect of our lives. Or, we can try freedom, in the faith that the Yankee ingenuity in herent in every individual can lead to a higher level of civilization than man has yet dreamed. @ IDEAS ON LIBERTY Struggle Inward THIS, then, should be the goal of all individuals and groups. Instead of struggling outward for equality, struggle inward. Let us spend our energies enlightening ourselves and our own groups, beautifying our own neighborhoods, curbing our own propensity to violence and crime. Instead of trying to cultivate virtue in others, concentrate on cultivating virtue in ourselves. As this is done, true worth will command respect and the last barriers will fall. This goal can be achieved not by force and violence, applied by law from without, but only by free will and discipline exercised under law from within.

ROBERT W. BLAKE, "Equality under Law vs. Equality by Law"

Clarence B. Carson ~rld inthB grfRQfan Ioea, 14. World War II: The Bitter Fruit of Ideology THE IDEA that has the world in its grip is at its roots a simple, even a simplistic, idea. It is the notion that what ails us is the pursuit of self interest by individuals, a pursuit which leads to the dispersal of ener gies, diversity, and competition, even conflict. The cure for this, so the proponents of the idea claim, is to forge a social unity in which all efforts will be concerted toward the realization of common goals. Gov ernment is the means they employ In this series, Dr. Carson examines the connection between Ideology and the revolutions of our time and traces the Impact on several major countries and the spread of the Ideas and practices around the world. toward this end, and the method is to remove the legal, social, and cul tural props which enable the indi vidual to act in his own interest; removal of those props makes it necessary for him to act for common goals. Revolutionaries propose to bring this about by drastic and forceful measures. This articulation of the idea is commonly called revolutionary socialism.

World War II was a titanic strug gle between opposing varieties of revolutionary socialism, between Soviet Communism and Nazi Ger many. It was a struggle for domi nance over Europe, particularly cen102 WORLD WAR II: BITTER FRUIT OF IDEOLOGY 103 tral and eastern Europe (and on the Japanese side for the ·dominance of Asia and the' Pacific). Hitler's vari ety of socialism was the more viru.. lent of the two. Soviet Communism is inclined toward subversion, con.. spiracy, and the plodding pace of a projected historical development. Nazism was the vision of a single man, something to be realized in his lifetime. Hitler was the apotheosis of National Socialism, its person .. ification. and deification. Commu nism is supposed to be victorious in the world by the process of his .. torical determinism. National So.. cialism's victory was supposed to be the destiny of a single man-and the German people.

No Time for Subtleties. Hitler grasped the rudiments of the idea that has the world in its grip; the subtleties eluded him, and hee had no time for then1. His socialism came to him by way of osmosis, something filtered into him from the intellectual climate of the time. He tacked his prejudices on the rudimentary idea, and the result was National Socialism. Whatever of intellectual gloss it had came from' such fringe German thinkers as Houston Stewart Chamberlain, Oswald Spengler, Alfred Rosenberg, Karl Haushofer, Friedrich Nietz .. sche, and Richard Wagner. It should be noted that these were not .so.. cialist thinkers, as such, and most of those with a bent toward socialist ideology who entered the Nazi movement were either sloughed off or played minor roles in the government. Hitler's socialism was not Marxian socialism or Revision .. ist socialism or any other' of the generally accepted varieties. It was Hitlerian socialism, i.e., National Socialism-Nazism:. It was revolu tionary, militant,. anti ..communist, racist, nationalist, and martiaL Left to his own devices, it is doubt ful that Stalin would have gone to war against Nazi Germany. During their sixty ..year span, Soviet Com..

munists have gone to war against a major power only once voluntarily, and that was against Japan when it was apparent that the days of the Japanese Empire were already numbered. Soviet leaders have pre .. ferr-ed to let ((you and them" fight rather than to become embroiled in a major war. Communism is bent toward warfare, but it is civil war, not foreign wars in the usual sense. In the first place, communists make a kind of war against the people over whom they rule. In the second place, they foment strife in other countries which can break out as civil wars. The indications are that the leaders of the Soviet Union like very long odds· in their favor when they go to war. The odds, if any, were on the side of Gemany in 1941. By contrast, Hitler sought war rather than avoided it, and major 104 THE FREEMAN February powers were the only ones really worthy of his steel, although he was quite willing to crush any small power standing in his path. More over, Hitler frequently flouted world opinion and flaunted his obnoxious racial ideas before the world. His contempt for other peoples was hardly held in check. Yet, there were times when Hitler apparently longed to be not just the conqueror but the hero of the people of the world. Perhaps, he longed to be loved, as most men do, but was led by what he conceived to be his mis sion to do unlovely things. There is a vast amount of evidence to the effect that he had great personal mag netism and unusual leadership abilities. Time and again generals came to his headquarters discour aged and depressed, ready to give up, only to go forth from their ses sion with Hitler inspired with a new zeal to fight on. It was not just sycophancy that led those around him to speak of his powers.

To Gain the World Anti-communism was his chosen route to world veneration. If the world would only see him as he wished to be seen it would see him as its savior from the menace of communism, or so he hoped. His assault upon Russia was to be a crusade against everything he hated: Bolshevism, international socialism, the Slavs, and the seat of what he conceived to be the Jewish conspiracy. In this struggle, he be lieved the rest of the world would join him if it only once understood what he was doing. Much of the world sawall too clearly what Hitler was doing in Europe, however, to hear what he was saying about Bolshevism. In any case, all that Hitler offered was a Germanic socialism to replace the ttinterna tional" variety of communism. World War II was, according to most savants, a total war. It was war waged not only between military forces but against civilians. It was a war in which vast resources on all sides were mustered behind the war effort. It was waged by propaganda, in battle, on land, on sea, in the air, and, above all, against cities. It was a war of conquest by the Axis powers and one which could only be ended by unconditional surrender, the Al lies proclaimed. It derived its character from totalitarian ideolo gies and entailed the clash of so cialist titans. How socialism gave the war its character needs now to be made clear.

Socialism attacks the foundations of civility at many different levels. Socialist analysis, whether Marx ian, Bernsteinian,. Hitlerian, or whatever, deals with society, and hence the people who compose it, as it were a machine. It speaks of clas ses or races, of industry and agricul ture, of labor, of the proletariat, of 1978 WORLD WAR II: BITTER FRUIT OF IDEOLOGY 105 the bourgeoisie, of nations, and so forth as if these were things mechanical in nature. It pits class against class, race against race, na tion against nation, and group against group for dominance and control. It dehumanizes, reducing man to that accidental portion of himself by which he may be clas sified in some mechanical fashion. It decivilizes. (Statistics applied to man is the ultimate mental act of dehumanization, for it reduces man to a number. And it is hardly an accident that the use of statistics has grown with the spread of socialism, for they are. a prime means of manipulation and direct ing change. Statistics o~ght to be used in public with the same re straint as profanity, for they profane man by reducing him to a virtual nullity.) Another way that socialism at tacks the foundations of civility is to weaken or destroy the inherited cul ture. Culture is society's way both of liberating and restraining man.

Socialism, whether of the com munist or Nazi variety, proceeds by undermining the received religion, morality, education, literature, and customs and either destroying or controlling and redirecting them for its purposes. The removal of civilized restraints was a major con tributor to the ferocity, the extent, and-the atrocities of World War II. But it may be well to examine in some more depth the assault of socialism on the foundations of civil ity at a rudimentary level. The most basic and direct attack of socialism is upon private property. (That the Nazis gave other ideological grounds for their confiscation and control of private property did not alter the primacy of their assault on property.) This set the stage for much else that followed, including the atrocities of World War II and after. A Small Atrocity A simple story may help illustrate the point. This is the story of a small atrocity, an atrocity so insignificant beside the monstrous ones of World War II that it would not appear to be worthwhile to tell it. Yet it is a poignant story and, if I mistake not, one pregnant with meaning. It hap pened in a village not far from Bonn, Germany on a raw overcast morning in March of 1945. The scene was the kitchen of a. small house. In one corner of the room sat an old Ger man couple, huddled in their winter clothes against the chill weather. In the center stood a couple of Ameri can soldiers, cooks for a mortar pla toon of a heavy weapons company. I stood aside, watching. One of the soldiers was picking up china, piece by piece, dropping it to the floor and breaking it. The old couple cringed and mumbled to one another. The soldier silenced them with a menac106 THE FREEMAN February ing look and turned to us to say, HI've been in this war since North Africa, and the Germans are to blame." He proceeded to smash the rest of the china. It may not have been china that would have brought a great price in the market, but it was such as they had, and by the looks of them they could· not easily replace the broken pieces·. It was,as I said, only a small atrocity.

Whatever moved him to this de structi ve act, this callous soldier had grasped, however unwittingly, what lay at the root of the cause of World War II and was re..enacting it. I viewed his act at the time with· a mixture of horror and disgust, but I was helpless to do anything about it, for I had no authority·and was there only temporarily awaiting transpor tation to my platoon. What hurt me, of course, was his wanton disrespect for property, someone else's property at that! I had been brought up to respect property, to use it with care, and to value it: mine, the family's, andthat belonging to others. It was a lesson drilled into me as a child and rein forced on at least one occasion which I recall by a rare whipping from my father. One of my brothers and I had been throwing pieces of baked potatoes at one another. There were several violations going on, but I suspect that the most seri 0us was the misuse of baked potatoes. They were intended to be eaten, not as missiles in fraternal conflict. I was taught respect for much else besides, but I now under stood that undergirding and· but tressing the rest was respect for property.

Disrespect for. Propefly'<, Socialism inculcates disrespect for property, not in the abstract, perhaps, but in the concrete. Socialists hold real property owners in contempt·and particularly owners of productive equipment. When they are in power they confiscate prop erty or take effective control over it. In theory, this might· do no harm to the property, but in fact it is quite otherwise. One of the Catholic popes is supposed to. have said something to the effect that property ownership may not be good for the individual but it is very good for the property. Whatever the merits of the first part of his proposition, the insight in the second part is sound: No better way has ever been found to have prop erty cared for, protected, and used properly than private ownership of it. Property held in common is fre quently abused and neglected, being protected mainly by such habits as have been formed in caring for pri vate property. State-owned property can attract little more respect than the state that owns it; not much, one gathers, as the state becomes bloated with the tasks it takes on and poorly performs.

1978 WORLD WAR II: BI'ITER FRUIT OF IDEOLOGY 107 There is an essential nexus be tween property and man. It is the means of his IiveIihood, the base of his production, the goods with which he trades, and the foundation of his independence. Individual life de pends upon it, and social life withers without it. Socialism breaks this connection between man and prop erty. Socialists fulminate against property and the propertied, de scribe them as capitalists or Hfi_ nance capitalists," as exploiters, and, by implication, hold property in contempt. Property is a vital extension of the man who owns it. It is his lifeline to and from the world about him, a buffer from the outside and one of his most effective means of reaching out to others. In socialist theory, man's individual ownership and control over property is only an inci dent in his historical development. Property is, therefore, separable from the individual who owns it. So it is, of course, but if it is done against his will the effects are devastating. A man's heart is separ able from the rest of his body, but if it is ripped out he must surely die.

Man does not necessarily die when his property is taken away, though he may; but he is bereft of his main protection from, and means of con tributing to, those about him. My central concern here, however, is with the extended impact of the loss of respect for property and a general assault upon it. There is no way to launch an assault upon a man's property without at the same time assaulting him. To put it another way, lack of respect for property is part and parcel of lack of respect for the owner of it. Every property owner surely feels this; it tends to be one of his reasons for going to the defense of his property. A Protective Shield There is a shield, so to speak, which protects each of us from viola tion by others. Property is the out works of the shield. It is the boundary line of our real property, the walls of our house, the enclosure of our vehi cles,. the door to our rooms, and the clothes that we wear. The inner works of the shield are the awe in which we hold life and the respect for the individual and what is his.

Loss of respect for property precedes or accompanies the destruction of the outworks of the shield. Respect for the individual and the awe with which life is held crumble as the outworks are breached. Of course, the assault upon religion, morality, and the received culture accom panies the assault upon property in socialist lands. This assault cuts away the respect for property, for the individual, and for life, too. The ferocity and brutality of World War II, then, was a conse quence of the erosion of respect for property, for the individual, and for 108 THE FREEMAN February life. It frequently occurred in that order, too. The trespass, confisca tion, and alienation of control over property from the owner frequently preceded the assault upon the indi vidual and the callous taking of lives. The Jews in Germany had generally lost the bulk of their prop erty or control over it long before they were shipped to such places as Auschwitz to be exterminated. First, they lost control over department stores, publishing houses, and other types of businesses. Then they were denied employment in many areas.

Only after they had lost whatever means they had once possessed for protecting themselves were they subjected to the Hfinal solution." To talitarianism proceeded in Germany by divesting the people in general of the control of their property. The serving up of Russian soldiers in vast numbers as cannon fodder had been preceded by the confisca tion of their property and increasing control over their lives. The individ ual counts for nothing, Soviet prop aganda had taught, and the leaders demonstrated the validity of the thesis using men as if they were nameless things in combat. A Rus sian detachment in retreat marched by the place where a Russian soldier was lying dead. Someone asked if they were not going to get his iden tification. nFor what purpose?" asked the officer in charge. ~~So that you can notify his family," was the reply. HOh, that's not necessary," the officer said, ~~when they don't hear from him after awhile they'll realize he is dead." Tens of thousands of German prisoners disappeared into the Soviet Union, never to be heard from again. The government of the Soviet Union proposed to plan every aspect of the economy for a huge empire, yet could not be bothered to perform the most basic task of gov ernment of notifying the next-of-kin of those who died in its charge.

First Trespass, then Death Though we may not ordinarily think of it that way, much of the maiming and killing of war could not occur until property had been trespassed. This was certainly true for World War II. The millions of civilians that were wounded and killed by bombings and other sorts of bombardments were usually ini tially the victims of trespass first. Those under shelter were usually secure until the building around them had been struck, set fire, or demolished by shells or bombs. Perhaps it can be visualized this way. One of my most vivid images from World War II is of rooms nakedly exposed to onlookers when the outer walls had been blasted away by bombs or shells. It sticks in my mind that I gazed upward once, though it may have occurred any number of times, .into a delicately appointed bedroom indecently ex1978 WORLD WAR II: BITTER FRUIT OF IDEOLOGY 109 posed for all to see. The three walls left standing were pink, the bed had one leg hanging over that portion of the floor that had been bombed away, and there was a dresser and table or stool. It was a room such as might have been lived in by a young girl. The trespass in such cases, and the violation of civilized rules and decorum, was virtually simultane ous with the maiming and killing.

This is not a brief against war as such. It is intended, however, to call attention to those ideologies which hold property, and hence life, in con tempt, and by so doing turn war into a catastrophically destructive affair. The boundaries of nations, too, serve as a shield protecting the lives and property of people within them. The trespass of these boundaries is, by extension, a trespass upon prop erty. National boundaries were vio lated at will during World War II. Indeed, this was frequently done with callous disregard for the rules of relations among nations: without warning, without any declaration of war, and without restraint. German armies invaded Poland, Norway, Denmark, the Netherlands, Bel gium, Luxemburg, and other lands in this fashion. Nor did the Soviet Union, Japan, and. Italy observe civilized rules for beginning wars against nations. In consequence of such violations millions of persons were carted off to serve one or another nation as slave laborers for their war machines. The condition, once again, was the trespass of prop erty.

The Defeat of Nazism One variety of socialism-Nazism or Fascism-went down to defeat at the end of World War II. That por tion of the ideology which was racist and militaristic was as nearly dis credited as such things ever are. Nazi Germany was thoroughly, completely, and ignominiously de feated. By the first of May, 1945, Allied armies had swept back the once proud German armies onto German soil and that was virtually all occupied. Hitler and his en tourage were in an underground bunker in Berlin, a city shattered and devastated by repeated and pro longed bombings and now under siege by Soviet artillery. The roads out of the city were closed and no regular airports were available. In desperation, Adolf Hitler and his bride, Eva Braun Hitler, committed suicide. The SS detachment was hard put to get together enough gasoline to burn their bodies. Much of Germany was in ruins, and the power of the Nazis had evaporated.

The rubble in the streets was the remains of Hitler's ambitious plans for architecturally redesigning such cities as .Berlin. The reasons for the defeat need some amplification. At its height, the Nazi empire had encompassed 110 THE FREEMAN February most of continental Europe from the Urals to the Atlantic with outposts in North Africa. That portion not occupied was under governments generally friendly to Germany if neutral (Spain, Sweden, Vichy France, etc.) or allied with the Axis (Hungary, Bulgaria, Rumania, etc.) excepting mainly the Soviet Union. What had been European civiliza tion save the British Isles, was under German sway. Never before in history had continental Europe been so near to being under a single power. Hitler had under his control many of the most highly developed lands in the world, a goodly portion of the most skilled peoples in the world, and experts of unsurpassed ability.

German chemists were among the best in the world. (They probably could have made ersatz water if hy drogen and oxygen had been in short supply.) Only oil, among major nat ural resources, was not generally available in sufficient quantity to fuel his war machine. Even so, the potential was there for a Fortress Europe which would have· been im pervious to all outside power. Why that did not happen needs some ex planation. There were undoubtedly many contributing factors to the German defeat. Historical post mortems have already explored them,and they will not occupy our attention here. But the crucial fact is that Hitler never mustered most of the might of Europe behind him. Most of the peoples never identified with the Nazi cause. Such cooperation as they generally contributed to it was grudging at best and something less than half-hearted as a rule. Indeed, Hitler's only significant effort to get the willing support of the peoples of Europe was to picture his as an anti-Communist crusade. That was obviously a flawed position, how ever. He might have been able to overcome the implications of the Nazi-Soviet pact but not the fact that he was at war with Britain and the United States, among many other noncommunist nations.

Moreover, his own cruel regime was hardly an improvement over So viet Communism. Submission Sought In the main, though, the Nazis did not even seek the willing aid of many of the peoples of Europe. On the contrary, the peoples were held in contempt, and the Nazis sought only to beat them into submission. This was in keeping with the ideol ogy. Nazism was national German socialism, and all who were not predominantly Nordic or German were believed to be inferior peoples. The cruel treatment by the SS of the peoples in eastern Europe· made the Nazis as feared and hated as the Communists had ever been. Hitler refused on a number of oc1978 WORLD WAR II: BITTER FRUIT OF IDEOLOGY 111 casions the importunings of his offi cers to be permi tted to recrui t an army from the Russian prisoners of war. Armies of other nations that fought with Germans enjoyed only a kind of honorary status as equals.

Hitler generally held the Italian, Hungarian, and Bulgarian soldiers in contempt as inferior to the Ger mans. Not surprisingly, many of the Italian officers were eager to get out of the war, and the armies from cen tral Europe were at best fair weather friends. In short, the Nazis failed to mus ter the support of Europe because of their ideology. Their national rac ism could only be repugnant to all others. It appears that Hitler could only have mustered the willing sup port of Europe, if at all, by abandon ing his ideology. At any rate, he did not get it, and without it his armies were overcome by forces from the outside even as they were weakened by resistance from within Europe. Promises Unfulfilled Hitler had promised to build a ((folkish state." He had promised to augment the power of the individual by merging it with the collective, to elevate the German people by free ing them from their submission to the Treaty of Versailles. They would become masters by identification with· him as the symbol and embodi ment of themselves. There is no doubt, either, that many Germans felt the surge of power as they heard or saw Hitler speak, as they massed to participate in the performance of the Nazi rituals, as they looked on marching German soldiers and won their first great victories. The might of the German collective was palpa ble at the Nuremberg Party rallies, as hundreds of flags waved above, as searchlights played upward in the skies, as thousands lifted their arms and shouted ~~Sieg Heil"· in unison.

For a few years, many, perhaps most, of the German people were caught up in the pomp, the pageant ry, and the promises of a collective beatitude. If so, their exaltation was short lived. Hitler did not build a (~folkish state." He built a state over which Nazi Gauleiters ruled and the ~~folk" were an instrument of state to be used as their rulers decided. The subjection of other peoples and the importation of forced labor may have hidden from Germans for a time the fact of their own subjuga tion. Collectivism augmented the powers of the rulers at the expense of those who were ruled. Much of the substance of Germany went into building the instruments for and fighting a war. The more the people built the less·· they had. However glorious the early victories, more and more of the young men were required to go to war. As the casu alty lists lengthened many families came ·to know the ultimate cost of 112 THE FREEMAN February war. None could deny the curtail ment of their lives as they spent more and more of their time in bomb shelters to escape the fury of the bombs. The Germans were not a master race, as Hitler had told them, they were only a mastered people.

Disillusionment Just when individual Germans realized this there is no way of knowing for a whole population. What we do know is that by the end of the war many Germans were glad indeed to have done with Hitler and his obsessive vision. In the last weeks of the war the armies of the Western Allies were often greeted by the Germans as heroes. As American tanks, trucks, and jeeps drove through many towns and cities people lined the sidewalks to wave and cheer. This would have been a smart thing to do in any case, but it had the look of spontaneity about it. At least at the moment of their arrival, the Western Allies were being treated as liberators. In the east, a different kind of story was taking place. Germans, and others, were fleeing by the hun dreds of thousands before the ad vance of the Red Army. Taking whatever they could with them, they fled toward the west seeking refuge from an army bent on plun dering and pillaging and destroying what it would. Sometimes before, but certainly as soon as they could lay down their arms, German troops too sought to make their way west to surrender to the Western Allies. For several days after the end of the fighting, the relics of the German armies poured through the lines of the Western Allies making their way to places of internment. Men clung to the sides of whatever vehi cle they could find that would enable them to evade the clutches of the Red Army.

The defeat of the Axis in World War II did not significantly loosen the grip of the idea that has the world in thrall, not for long anyway. True, the hold of the Nazi variety of revolutionary socialism was struck off from western Europe, but in cen tral Europe the grip of revolutionary socialism, communism, was estab lished and tightened. Tyrannizing Poland World War II had broken out in the wake of the German invasion of Poland. The British and French governments had declared war on Germany in an attempt to preserve the territorial integrity of Poland. .. When Hitler heard just before the end of the war that a Soviet spon sored puppet government was being set up in Poland he remarked the irony of it all. The British and French had .gone to war against him to save Poland, and now the Poles were being turned over to Soviet 1978 WORLD WAR II: BITTER FRUIT OF IDEOLOGY 113 tyranny. Indeed, any who would ponder the meaning of World War II, and the impact of the idea that has the world in its grip, could do no better than begin with Poland.

Poland has for several centuries been a bending and bent buffer be tween Russia and western Europe. Time and again Poland has been the scene, or a part of it, of the clashes between European powers and the butt of the treaties by which they ended their conflicts. If ever a people deserved the compassion of men of good will it must surely be the un fortunate Poles. Shortly after the Nazi invasion of Poland the Soviet Union invaded from the east. The country was then partitioned. Part of the country was then ~~Nazified" while the remainder was being ~(Sovietized." The full fury of the SS was Jet loose in the Nazi ~~zone of occupation." Poland's relatively large number of Jews were subjected to a pogrom the like of which had never been seen before. Some of the most notorious Nazi concentration camps were located in Poland, and the most vigorous extermination was carried out there. Thousands of Jews died in an heroic stand against the Nazis in the Warsaw Ghetto.

The resisters were wiped out. Nor were Jews the only victims: numer ous Poles were dislocated to allow Germans to move in; intellectuals and potential leaders got vicious at tention from the SS. The Final Blows As the Red Army advanced upon Warsaw the Polish resistance movement made a determined effort to expel the Germans from the city. The Soviet armies halted their ad vance and waited, apparently with malice aforethought, for the Ger mans to wipe out the resistance. Roosevelt and Churchill appealed to Stalin at least to allow British and Americans to airlift aid to the resis ters, but. their appeal fell on deaf ears. On top of all this, thousands of Polish officers were shot down in cold blood by Soviet forces at the Katyn Forest Massacre. All that remained to -be done to destroy Po land, it would seem, would be to sow the soil with salt. At any rate, the Soviet Union had an eviscerated Poland upon which to impose its regime in 1945. The Soviet Union won the battle for cen tral Europe, a main arena in the contest of World War II. Communist regimes were subsequently imposed on Hungary, Rumania, Bulgaria, Yugoslavia, Albania, and Czecho slovakia. Estonia, Latvia, and Lith uania had already lost all sem blance of independence by being incorporated into the Soviet Union.

Part of Poland was incorporated into the Soviet Union, part of Germany into Poland, and a communist re gime established in East Germany. Finland, too, lost territory to the Soviet Union.

114 THE FREEMAN February Could it have been otherwise? Possibly. It was the style, in some circles anyhow, after World War II to blame the fall of these countries to communism, particularly that of Poland, on decisions made at the Yalta Conference of Stalin, Roose velt, and Churchill in early 1945. This is almost certainly a misread ing of history. The concessions made to Stalin at that conference were largely in recognition of a fait ac compli. The Red Army was al ready in or marching into these countries. It was the presence of the Red Army that made it possible to establish communist regimes generally. The Channel Crossing The decision that sealed the fate of central and eastern Europe was almost certainly made in 1943. It was the ,decision to concentrate British and American forces in Eng land for a cross-channel invasion of France in 1944. It was the decision for the English channel, so to speak, over the Adriatic and Aegean Seas.

The signal for the decision was given in December of 1943 when General Eisenhower was appointed Supreme Commander of Allied Forces and moved from Italy to Eng land to prepare for the cross-channel invasion. The Western Allies had already established a second front on conti nental Europe in 1943. It was in Italy. Winston Churchill favored an assault on the ~~soft under-belly of Europe," probably by way of the Adriatic. Militarily, the most strategic target in all of Europe was the Rumanian oil fields. Once the oil reaching German forces from Rumania and Hungary was cut off the days of the German air force, tank divisions, and guided missiles would be numbered. Politically, if the assault had been made in this way, much of southern and central Europe might have been spared the occupation by the Red Army, and the communist regimes. Instead, armed forces were concentrated in England, and in the course of 1944 much of the military force was with drawn from Italy to attack westward in support of ~~Operation Overlord,"

the cross-channel invasion. The die was cast many months before January of 1945. PostWar Communism The spread of communism greatly accelerated in the wake of World War II. The devastation of western Europe, the defeat and demilitariza tion of the Axis, left power vacuums in much of the world. Wherever these occurred, communists saw them as opportunities for expansion, either by way of joining coalition governments-and occupying key positions in them until one party emerged triumphant-or by foment ing civil wars. Not only had all of 1978 WORLD WAR II: BITTER FRUIT OF IDEOLOGY 115 eastern, most of central, and much of southern Europe fallen to com munism, but with Japan defeated and demilitarized, China became communist. As colonies were cut loose from demoralized European countries, these became prime tar gets for the spread of communism. Communism was the only signifi cant variety of revolutionary social ism in the world after World War II.

But communism is not the only vaPotential Dictators riety of socialism in the world. The idea that has the world in its grip has two faces: one is revolutionary socialism; the other is evolutionary or gradualist socialism. It is ap propriate now to turn our attention to some examination of the working of evolutionary socialism. @ Next: 15. Sweden: The Matrix of Tradition and Gradualism. IDEAS ON LIBERTY IT is customary to call the point of view of the advocates of the welfare state the ~~social" point of view as distinguished from the ~~individualis tic" and ~~selfish" point of view of the champions of the rule of law. In fact, however, the supporters of the welfare state are utterly antisocial and intolerant zealots. For their ideology tacitly implies that the government will exactly execute what they themselves deem as right and beneficial. They entirely disregard the possibility that there could arise disagreement with regard to the question of what is right and expedient and what is not. They advocate enlightened despotism, but they are convinced that the enlightened despot will in every detail comply with their own opinion concerning the measures to be adopted.

They favor planning, but what they have in mind is exclusively their own plan, not those of their citizens. They want to exterminate all opponents, that is, all those who disagree with them. They are utterly intolerant and are not prepared to allow any dissension. Every advocate of the welfare state and of planning is a potential dictator. What he plans is to deprive all other men of all their rights and to establish his own and his friends' unrestricted omnipotence. He refuses to convince his fellow-citizens. He prefers to ~~liquidate" them. He scorns the ~(bourgeois" society that worships law and legal procedure. He himself worships violence and bloodshed. LUDWIG VON MISES, Planned Chaos E. G. West A Prince Replies to Machiavelli: PHILIP OF ENGLAND ON THE EROSION OF FREEDOM THEORETICALLY,the husband of the Queen of England is supposed to be strictly neutral and nonpolitical in his public statements. In practice, it appears that the Prince can no longer stand in the wings when large areas of British freedom are, to him, seriously at stake. Some may readily explain why he should now approach the bounds of protocol. For a constitutional monarchy such as Britain's depends upon the working Dr. West, Professor of Economics at Carleton Uni versity, Ottawa, Canada, Is the author of several books, including Education and the State and Adam Smith: The Man and His Works.

116 of an open and free democratic sys tem; and should any form of to talitarianism threaten, it could brush the monarchy aside and either abolish or seriously emascu late it-as has happened in so many European countries. But another explanation might be more respect ful, as well as more accurate: True patriotism in such high quarters should now be expressing itself, re gardless of the consequences for the personal security of the private palace. And the Prince has such courage. Although the Prince's main A PRINCE REPLIES TO MACHIAVELLI 117 ((bombshell" fell recently, he seems to have been warming up to it for some time. In February 1976, he wrote: ((The welfare state is a protec tion against failure and exploita tion, but a national recovery can take place only if innovators, and men of enterprise and hard work, can prosper." In January 1977, Philip compared Britain's economic troubles to the spread of dry rot in a building. Britain, he observed, had Hvirtually left the league of the big powers" and was heading for the status of a Third-World nation.

2000 A.D. in Britain But it was on October 27, 1977 that the royal feelings were venti lated with a new and astonishing gusto. The Prince appeared in an interview broadcast over Radio Clyde's small regional station. He was taking part in a series of six programs in which prominent peo ple have been invited to give their views of what Britain may be like in the year 2000. This, it seems, was his main chance. Consider first one of his major conclusions: It looks at the moment as if we can expect to see an increasing bureaucracy, bureaucratic involvement in virtually every aspect of the lives of individual citizens. If the experience of other coun tries is anything to go by, this will mean a gradual reduction in the freedom of choice and individual responsibility in such things as housing, the education of children, health care, the ability to ac quire or inherit personal property, to hand on commercial enterprises, and the abili ty to provide for old age through personal savings and, perhaps most im portant of all, the freedom of the individ ual to exploit his skills or talents as suits him best.!

Similar gloomy predictions have been made in many quarters in Bri tain for some time. The forecast of growing bureaucracy has long been heralded as only one symptom of a general complaint that has come to be known as ((the British disease." This disease is an amalgam of exces sive taxation, low productivity, a low growth rate, strong disincentive effects of a welfare state that en courages people to increase their lei sure at the expense of employment, and the increase of debt, especially foreign debt. But in recent weeks there has been such improvement in the economic news of the external financial position of Britain, that considerable euphoria has broken out in government and near government circles. It is true that sterling has now been converted to a hard currency. The British balance of payments, moreover, has made a dramatic recovery. Inflation rates too have been brought down from extraordinary heights, and now the IThis and other quotations from the Prince's speech are taken from The Globe and Mail, Toronto, October 29, 1977.

118 THE FREEMAN February hope is to reduce them to below 10 percent per annum by early 1978. Finally, there has been remarkable success in obtaining oil from Brit ain's North Sea. Others are less jubilant. Inflation is still at a high rate, they point out; and so is unemployment. Judging from past experience, moreover, governments that preside over growing national incomes will be as tempted as ever to pre-empt the pro ceeds of growth in further exten..; sions of subsidies to unremunerative (but politically ~~sensitive") indus tries, to the extension of the welfare state, to further nationalization, and to a new expansion of bureaucracy. North Sea oil, meanwhile, will not last forever (not much beyond the turn of the century). If there is a breathing space provided right now by such a ~~bonanza," the opportu nity should be taken seriously to diagnose Britain's internal struc tural problems once and for all. For these do clearly persist despite the latest short term evidence of exter nal improvement.

Excessive Self-Interest? It seems to be in the company of these observers, and in this context, that the Prince has openly placed himself. What factors would we take into ac count before trying to look into the fu ture? One of the most important is ordi nary human nature, and if we are going to consider the future in these islands, we should look at this nature as it appears in the British character. Self-interest is certainly the most powerful characteristic in most people, and it applies not only in the strictly economic sense. Politicians, bureaucrats, social snobs and even churchmen have a primary interest in the field that oc cupies their attention. Like all facts of life, ambitions and self-interest are neither good nor bad in themselves; they only become good or bad in the way individuals give them expression. The unscrupulous pursuit of ambition and self-interest, whether by individuals or groups for whatever purpose without any restraint has always ended in disaster.

Prince Philip's argument, how ever, does not lead to the stale exhortations of the Utopian roman tic who expresses the woolly senti ment that if only we would all ~~live for the community and not for our selves" all would be well. Rather the argument (on our interpretation) develops into a more sophisticated and balanced one. Prince Philip's position indeed comes near to the broad philosophy of Adam Smith. Self interest should not be snuffed out. It needs, instead, to be harnessed to wholesome ends. This can be done in a framework of appropriate institu tions where there are clear rules, predictable consequences from vio lating them, and the absence of ar bitrary power. The law, in other words, could be a stronger pillar in 1978 A PRINCE REPLIES TO MACHIAVELLI 119 the system. But, shrewdly, the Prince cautions that the law is ~~only as good as legislators make it, as sensi ble as the judges interpret it, and as effective as its enforcement."

A Stronger Moral Code While self-interest should be al lowed much more scope, the neces sary restraints on it can be provided ultimately by individuals them selves in a world of abundant volun tary moral restraint. ((The only completely certain restraint is self control based on the. voluntary ac ceptance of certain moral and ethi cal standards and principles. And this has been a country in which individuals have been inspired by or, to put it another way, had their behaviour modified by the Christian ethic." More precisely, Philip's argument is that moral values and wise in stitutions complement each other: both are necessary conditions for civilization. If we do not watch the development of our institutions they might eventually contradict rather than support our ethical and spiritual values. To take a very crude example, it was the combination of the doctrines of Hit ler's National Socialist German Work ers' Party-more commonly known as Nazis-with a latent popular prejudice against Jews, which produced the con centration camps and gas chambers.

This ghastly inhumanity was certainly not in keeping with the nonnal behaviour of the German people and quite beyond the range of expectation. Any final estimate of life in 2000 A.D. depends therefore, on a guess as to which way ~~the battle of the minds" is going to go. Prince· Philip and Political TtTeory The· Prince posed the -choice be tween a political philosophy which sees all power vested in the state which then concedes privileges to individuals; and the alternative posi tion that the individual counts first and that inherent human rights exist. In the latter view the state exists to preserve and protect the individual's human rights to liberty and integrity. But if we accept that the individual is of paramount importance, we must also accept that individuals, whatever their job or occupation, must have a common moral· code to guide their attitudes and actions. Without this essentialqualifica tion society would be reduced to anarchy.

This is not a new choice. Every genera tion in every community has to make this decision at some time or another. On the face of it the obvious choice would be the philosophy of the individual. Unfor tunately, such a system depends· upon individual restraint and good sense, and it is really too much to expect that everybody would behave like an angel all the· time. It is this human weakness which is always seized upon by the zealous re formers and those who always know bet120 THE FREEMAN February ter to justify their ambition to order the lives of their fellow citizens. The fact is that whichever choice is adopted or im posed, it is always easy to find fault with it, but provided that there is open compe tition to find faults and offer remedies, all is reasonably well. The Prince insists on the necessity for longer term views to replace short term expedients. The latter road leads so easily to irreversible despotism. We expected too much from government. It is impossible that perfect efficiency can be im posed by it, and even if it could the tradeoff is not worth it.

The pursuit of absolute efficiency in a free society can lead to unexpected con sequences. Corrections of real or imag ined faults lead to controls. Then, as the controls mount up, the costs and the bureaucracy, which is required to oper ate the controls, begin to escalate and the emphasis is no longer on the welfare of the individual but on the economic viability of the state. Gradually-and always with the very best intentions and almost unnoticed by the people-the power of decision passes from the individual to a ruling group and the more power a ruling group gathers to itself the more it seeks to protect its position against individual opposition and criticism. Once the law ceases to protect the rights of the individual from the gang any gang-freedom is lost. There is a great and growing number of countries which have got into this situation and there is ample evidence of the restrictive way of life which has developed within them even to the extent of forcibly pre venting their citizens from leaving their country, if they should try to do so.

Freedom Indivisible A major problem is that each in dividual sees things from only his point of view and does not ap preciate enough the fact that free dom is indivisible. The media will fight if the freedom of the press is threatened; the law will fight for its independence; the businessman will fight for his right to exercise his initia tive; the worker will struggle for his right to join or not join a union; and so on; but few of them recognise that an attack on the liberty of anyone of them is an attack on the liberty of all of them. Once a determined government begins the process of eroding human rights and liberties-always with the very best pos sible intentions-it is very difficult for individuals or for individual groups to stand against it. The royal speech questioned the simple-minded attachment to un sophisticated and popular notions of democracy. Here it contained strong echoes of Alexis de Tocqueville and John Stuart Mill in their apprehen sion of what the former called ~~the tyranny of the majority." The impli cation of the Prince's observations, is that the tastes of the ~~biggest gang" in the end will dominate all others and society will become uni form and homogenized.

We have developed a theory of democ racy which holds that the will of the 1978 A PRINCE REPLIES TO MACHIAVELLI 121 majori ty shall always prevail. This is very different from the concept of democ racy as a system for arriving at a consen sus where finally there is a compromise between conflicting points of view and where simple head counting is only used for special purposes. Quite important consequences flow from the new theory of democracy .. For instance, in an industrial society, the proportion of people living in cities and working in the major industries is much greater than those living in small towns and villages and working in small com panies or on the land. Furthermore, the proportion of un skilled workers in industry is much greater than the total of skilled, man agerial, self-employed and professional people combined. At this point the Prince's insight seems to lead him intriguingly to a recognition of some of the findings of the new American study called the tteconomics of bureaucracy." That study predicts the further growth of bureaucracy for several special reasons-including the increasingly strategic position that the bureau crat holds in providing advice to governments, advice that always, and apparently inevitably, leads to an expansion of the bureau's budget and sphere of influence. But once under way the expansion can be cumulative, and for a special reason.

If we regard bureaucracy as com prising all people who in some capacity or another work for the government-incl uding teachers, postal workers, policemen, and the like, the significant fact is that all these people have votes and an above-average propensity to exer cise them at the ballot box. Natu rally they will all be well disposed to a government that grants their separate departments handsome budget expansion. Politicians serv ing the political market will accord ingly be tempted to pass legislation conducive to the growth of public funds destined to boost the demand for public personnel still further. Once this group has reached a criti cal size in political importance a tttipping point" or a point of no re turn is reached. In the words of Prince Philip: HThere is a new factor which will become increasingly sig nificant: the people employed di rectly and indirectly by local and central government may soon out number all other groups put to gether."

The Destruction of the Market After such a tttipping point" has been passed, legislation will occur with new vigor and will cover all corners of life. Among the earliest victims of this feverish process will be the free market. In Prince Philip's terms: Black markets may well begin to flourish, while the major financial and commercial markets will decline. Con sumer products will tend toward an av erage standard with a gradual elimina122 THE FREEMAN tion of items of better quality ... the take-home element of wages and salaries will become relatively less important as all the major necessities will be provided free-in other words out of taxation, and also because fringe benefits associated with employment and trade unions will increase. This dependence on fringe ben efits for even the basic elements of exis tence will ensure a very high degree of job discipline as the loss of a job would not be cushioned by the accumulation of savings or property, while employment direction may well make unemployment benefits more difficult to obtain and in cidentally, it is worth bearing in mind that slavery is no more than a system of directed labour and fringe benefits.

The end of Prince Philip's speech contained an embryonic theory of nationalism, a theory that views na tionalism as a kind of calculated despotism over the minds of citizens. Such mi:q.d-control (and Prince Philip quotes freely from Georg.e Orwell) enables governments to conduct subtle propaganda to. pre vent their peoples from migrating to other, more desirable countries. Whereas individuals in particular oc cupations recognise an affinity with in dividuals in similar occupations in other countries, the existence of an exclusive nation is the vested interest of national governments. EXPerience shows that the more powerful governments become, the more they tend to encourage a spirit of exclusive nationalism and· a hatred and suspicion of anything foreign or multina tional. The Prince predicted that official nationalism ((will lead to increasing state responsibility in cultural, sporting and economic activities and the gradual suppression of anything which does not suit the government economic policies or which does not appear to do justice to the national cultural ideal." Was the organiza tion of the Olympic games close to his thoughts at this point?

Can British Traditions Survive?' All the above predictions, the Prince conceded, might seem almost fanciful in the British context. Was it not unthinkable in Britain with its tradition of freedom and toler ance that such things could happen? I can only say that there were people to be found in many other countries who felt the same way, but the unthinkable happened to them. And if you feel now I ought to suffer the same fate as Jeremiah, let me finish with a chilling sentence from the BBe's interview of the Russian dissident Solzhenitsyn: ((It is not how the Soviet-Union will find a way out of totalitarianism, but how the West will be able to avoid the same fate." In the history of mankind liberty has been experienced for only short and sporadic periods.· And today it is enjoyed in only a few areas in the world. Freedom, indeed, seems to be a situation of unstable equilibrium. It is an unusual circumstance that calls for unusual men. Prince Philip could well be one such man. @ A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN THE REVOLUTIONARY ASCETIC BRUCE MAZLISH, in his The Revolu tionary Ascetic: Evolution ofa Politi cal Type (McGraw-Hill, 1221 Av enue of the Americas, New York, N.Y. 10036, paperback, $4.95), has made a fascinating book out of a most tenuous theory. He begins by invoking the support of Freud and Max Weber, neither of whom was particularly preoccupied with the subject of political upheavals. Freud was concerned with ~~libidinal ties,"

and noted that the strong man of the original ~~primal horde" was usually ego-ridden and able to put aside love for individual or family to serve a group which he identified with him self. Max Weber, using a different terminology, discovered a connec tion between Puritanism and capitalism-the strong man, able to forgo self-indulgence, was in a bet ter position than his lazy and roistering-or even merely familyloving-fellows to build a business career. In short, asceticism can obviously contribute to success of any sort. So Mr. Mazlish has a look at successful revolutionary leaders to see where they conformed to the psychology of the potent tribal chief or the great entrepreneur. Cromwell, Robespierre, Lenin and Mao Tse-tung are the revolutionists who sit for the Mazlish portraits. But whether it was asceticism as such, or simple fanaticism in pursuit of an abstraction identified with an ideal, that drove this Hbig four" to accept blood and terror as the price of change is still. an open question as one puts down the Mazlish book.

Cromwell The Protestant ethic was undeni ably a work ethic, and the more one works the less time one has for 123 124 THE FREEMAN February ((libidinal ties." But this is. only to say that a day has twenty-four hours. Actually, how basically ascet ic in nature was Oliver Cromwell? Mr. Mazlish notes that Cromwell, who was spoiled a bit by his mother, had a fear of death, since he was an only surviving son. His tempera ment was splenetic. Up to the age of twenty-eight, when he had some sort of conversion, he was addicted to horseplay and practical jokes that were not in the best of taste, and he ((lived up" to the dissipating nature of a wastrel uncle. However, his teacher, a Puritan divine named Thomas Beard, who lectured against the dissoluteness of the age,eventu ally prevailed with him. Cromwell got control of his temper and began to exercise a lead ership of men that came natural to him. No doubt this involved asceti cism of a sort. But Mr. Mazlish has to admit that Cromwell, throughout his life, liked his ale and wine, and continued to indulge the sporting tastes of the country gentry from which he came. He fathered nine children, continued to provide a home for his mother, and was pros trated for two weeks after the death of a daughter. None of this suggests that he ever cut himself off from the ((libidinal ties" of a normal life. Ifhe insisted on discipline in his Model Army, the justification was as much pragmatic as it was Puritan.

Mazlish, in the end, has to qualify his report on Cromwell by saying that he put his ((asceticism, insofar as it existed," at the service of an ideal. The qualifying phrase is surely quantitatively inexact. Robespierre With Robespierre, the ((voice of virtue" of the French Revolution, Mr. Mazlish has an easier time. Robespierre was ascetic to the point of viciousness. He glorified the Peo ple but cared nothing for individ uals. But others besides Robespierre made the French Revolution, and asceticism figured very Iittle in the lives of some of the-revolutionists. Danton, for example, horrified Robespierre when he defined virtue as what he did with his wife in bed at night. Mr. Mazlish has to bring in Jeremy Bentham, with his theory of utilitarianism, to explain the Rus sians who studied the French Revo lution to see where it went wrong. Robespierre failed because he never managed to build a party, not be cause of anything that had to do with the question of asceticism.

Chernyshevsky, a forerunner of Le nin, wanted a ((pitiless" New Man to take charge in Russian revolu tionary politics for utilitarian, or instrumental, reasons, but he did, not live up to his own ascetic ideal. As Mazlish says, he was an eclectic thinker who, at one time, said the ((idea of a wife" afforded some pro1978 THE REVOLUTIONARY ASCETIC 125 tection against ~~revolutionary con viction." In his own life Cher nyshevsky wanted both the ((protec tion" and the ~~conviction." Lenin Lenin may have been ~~low-keyed sexually," but his asceticism was never an ideal in itself. Lenin mar ried, presumably for companionship. He always believed in the family. He had his softer feelings, and could have listened to Beethoven every day. For ten years he carried on an unconsummated affair with the beautiful Inessa Armand, and he broke down when Inessa died. But he never let his love for Inessa inter fere with his revolutionary duty.

Lenin loved the revolution more than he loved anything else, but does that make him an ~~ascetic"? He didn't suppress his ~~libidinous ties," he merely subordinated them to the overmastering passion of his life, which was to bring Communism to Russia. Mao Tse-tung Mao Tse-tung, like Lenin, mar ried a revolutionary. According to Andre Malraux, he loved his wife and referred to her in a poem as H my proud poplar," which was a play on her name of Yang K'ai-hui. She was executed in 1930 by the Kuomin tang. Mao later remarried twice. None of this reflects a ~~displaced libido" during the time when Mao was not leading the Long March or hiding in the caves of Yenan while Chiang Kai-shek took the brunt of a Japanese attack that continued for years. The truth would seem to be that revolutionaries are very much like other men save in the choice of the causes they embrace. Some, like Robespierre, are basically ascetic.

Others, like Lenin, are Benthamite utilitarians who suppress their nonascetic characteristics because they have more compelling demands on their time. As for Mao Tse-tung, who knows? Maybe the loss of his first wife to a K uomin tang executioner had more to do than Marx with his .revolutionary stick ing power. In such a case, Mao would be one leader of a revolution who gained strength from the mem ory of a lost ~~libidinal tie." Mr. Mazlish's book suggests more important themes. A Chinese prov erb has it that a great· man is a public calamity. Certainly this is true when a great man resorts to force and fraud as the prime movers of social change. Why do good men fall for delusions, giving first rate loyalties to methods that bring end less woe to human beings who have a right to resent the confusion of politics with religion? The question of displaced loyalty is more impor tant than displaced libido.

126 THE FREEMAN February ESSAYS ON INDIVIDUALITY edited by Felix Morley (The Liberty Press, 7440 North Shadeland, Indianapolis, Indiana 46250) 380 pages. $8.00 Reviewed by Allan C. Brownfeld TWELVE distinguished writers and educators met in Princeton, New Jersey at a ttSymposium on Individ uality and Personality" sponsored by the Foundation for American Studies. The meeting took place in 1956. These were men whose specialties ranged over the humanities, the physical and social sciences, history, politics and economics. Two among them-Friedrich A. Hayek and Mil ton Friedman-have since received Nobel laureates in economics. The essays, initially prepared for that 1956 meeting, have now been reprinted by The Liberty Fund in a volume which is worthy of the seri ous consideration of all those who are concerned with a free society how it can be constructed and how it can be maintained. Arthur Kemp, in his foreword, re flects on ttthe fortunate, perhaps for tuitous, selection of a group of men who had both the courage and the intellectual capacity to transcend the limits of their respective special ties in order to consider the problems of society as a whole, particu larly those relating to individual privacy, individual responsibility and individual freedom of thought and action."

Among the contributors are Roger J. Williams, Joseph Wood Krutch, John Dos Passos, Helmut Schoeck, Richard M. Weaver, and James C. Malin. In a discussion of the political philosophy of America's founding fathers, John Dos Passos notes that, ttlf men could be found to. apply to political problems the sort of first rate rigorous thinking which we have seen applied to physics in our lifetime, and if the study of the sci ence of state building should thus come into its own again, the great formulations of the generation of 1776 would still be found valid .... It is one of the magnificent ironies of history that the zealots for total bu reaucratic rule, whose dogma pro vides them with boots and spurs to ride the mass of mankind, justify themsel ves by the same political phraseology which the men of Jef ferson's day hoped would make forever impossible the regimenta tion of the many by the few."

Few societies have attained lib erty. Dos Passos writes that, t1t is always well to remember that the commonest practice of· mankind is that a few shall impose authority and the majority shall submit . The liberties we enjoy today are 1978 OTHER BOOKS 127 the survivors of the many liberties won by the struggles and pains of generations of English-speaking people who somehow had resistance to authority· in their blood. Their passion for individuality instead of conformi ty was unique in the world." The clear connection between free enterprise and other freedoms is dis cussed by a number of the con tributors. Milton Friedman declares that, ~~A necessary condition for in dividual freedom is the organization of the bulk of economic acti vity through private enterprises operat ing in a free market ... there are only two ways of coordinating the economic activities of millions. One is central direction involving use of coercion-the technique of the mod ern totalitarian state. The other is voluntary cooperation of indi viduals-the technique of the market place."

In an age in which many have advocated the idea of egali tarianism, Dr. Friedman makes clear that, ~(It is a trite, if un palatable, observation that freedom and egalitarianism can be incon sistent objectives. Fortunately, in practice, they have proved not to be. Historically, a free market has produced less inequality, a wider distribution of wealth, and less pov erty than any other form of economic organization. There is less inequality in advanced capitalist countries like the U.S. than in un derdeveloped countries, like India. . . . There appears also to be less inequality in capitalist countries than in collectivist countries like Russia and China. In principle, collectivist societies could achieve substantial equality-albeit at the sacrifice of total output; in practice, they have not done so or even tried to do so." In another essay, Richard Weaver expressed the fear that individ ualism is seriously on the decline. In fact, he believed that the very idea of holding a symposium on the sub ject was indicative of that fact: ((There is an uncomfortable basis of truth in a remark I once heard made by a philosopher: as soon as some thing begins to disappear, we put up signs proclaiming the virtue of it.

The very fact of a symposium ar ranged to discuss the future of indi viduality may be taken wryly as a sign that its prospects are poor. But sometimes men disval ue a thing only because they have forgotten how good it is comparatively. In such cases a fresh look should lead to a revival of faith and also uncover possibilities for preserving what we would be the poorer for losing." One of the major efforts to destroy the individualism upon which free dom is based, Weaver believed, is the modern world's attack upon memory: HThere has never been another· milieu, as far as my knowl128 THE FREEMAN edge goes, which has sought to make forgetting a virtue. ~Forget it' is a password of the time. If people make a mistake or commit a sin (to use an antiquated phrase), they are told to ~Forget it.' '... Those who live with a burden of memory are smiled at amiably, when they are not frowned upon darkly, as impediments in the way of progress .... I cannot see this disparagement of all memory as anything but an attack upon the mind. . . . The human being must live in a present that is enriched and sustained by a past; it is his experi ence stored up in the form of mem ory which enables him to be some thing more than an automaton re sponding to sensory impingements."

Felix Morley, addressing those whose political philosophy stems from Rousseau and his advocacy of the ~~general will," points out that, ~~The protection of minorities HANDSOME BLUE LEATHERLEX against the majority was the inspir ing and historically unique objective of the Founding Fathers. And if anyone at that time had suggested the desirability of a unified general will, to be defined and exercised throughout the states from the seat of central government, he would have been denounced more roundly even than was poor bumbling George III." If 1956 was not a good year for freedom and individualism, the period we are now in is even worse. In the world at large, freedom has diminished, as it has within our own country. The challenges we face are pointed up all too well in this selec tion of essays. The Liberty Fund has performed a significant public ser vice in reprinting them and making them available to a new generation of Americans. @ FREEMAN BINDERS $3.00 Order from: THE FOUNDATION FOR ECONOMIC EDUCATION, INC.

IRVINGTON-ON-HUDSON, NEW YORK 10533 tt1e Freeman VOL. 28, NO.3 • MARCH 1978 The Consumer's Role Cyd Essock 131 Responsible choice by consumers is the key to the survival of the free market economy in the United States. The Market for Labor Dennis Bechara 137 Concerning syndicalism, profit sharing, codetermination and other coercive measures to give managerial power to laborers. Jeremiah's Job Gary North 144 To understand reality and present it in the most effective way is the prophet's job. To Be Forewarned. . . E. W. Kemmerer John T. Flynn 148 What modern-day prophets were trying to tell us. World in the Grip of an Idea 15. Sweden: The Matrix of Tradition and Gradualism Clarence B. Carson 150 The twilight zone of gr~dualism or evolutionary socialism, as exemplified by Sweden. Ten Rules for Understanding Economic Development Robert Higgs 163 A critical appraisal of the collective view; a suggestion that growth is personal.

The Problem with Power Ridgway K. Foley, Jr. 169 The urge to force improvement of others often precludes their voluntary cooperation. Political Medicine Breeds Social Conflict Hans F. Sennholz 175 A society that transfers property by political force is a society at war. Making Sense Out of the World Ralph Bradford 179 Dropping out of life "to find oneself" may be harmful to the health. Awake or Asleep? Earl W. McMunn 184 Political meddling results in erratic economic performance. Book Reviews: 188 "Enemies of Society" by Paul Johnson "This Nation Shall Endure" by Ezra Taft Benson Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson, N.Y. 10533 Tel: (914) 591-7230 Leonard E. Read, President Managing Editor: Paul L. Poirot Production Editor: Beth A. Hoffman Contributing Editors: Robert G. Anderson Bettina Bien Greaves Edmund A. Opitz (Book Reviews) Brian Summers THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political,nonprofit, educational champion of pri vate property, the free market, the profit and loss system, and limited government. Any interested person may receive its publica tions for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total ex penses average $15.00 a year per person on the mailing list. Donations are invited in any amount as the means of maintaining and extending the Foundation's work. Copyright, 1978. The Foundation for Economic Education, Inc. Printed in U.S.A.

Additional copies, postpaid: 3 for $1.00; 10 or more, 25 cents each. THE FREEMAN is available on microfilm from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "World in the Grip of an Idea," "Political Medicine Breeds Social Conflict," and "Awake or Asleep?"

THE CONSUMER'S ROLE Cyd Essock IT takes little effort to be a con sumer. The simple act of buying a good or service is the only require ment for entering the club of con sumerism, for in the free market economy the consumer is a special person. Unlike other economic sys tems, the free market economy, in particular the free market economy of the United· States, caters to the consumer, appealing to his wants and attempting to satisfy .his de sires. Each individual consumer, con sciously or unconsciously, deter mines the fate of. the goods and ser vices on the market each time he chooses one product instead of another. Each penny that is spent on anyone product is the equivalent of Miss Essock is a student at the University of Wis consin, Whitewater, studying journalism, business, and library science and pursuing a career in free lance writing. an economic vote in favor of that particular product and against its competitors.

Therefore, a single consumer and his choices are important, for each consumer's economic vote, when added to the votes of other consum ers, determines which consumer goods will remain on the market. Obviously, the entrepreneur will not want to manufacture product A if the consumer does not like product A and prefers to purchase product B. With the possible exception of the very rich, the individual consumer has limited monetary resources and must budget his expenditures. How he determines his marginal utility will determine how much he will spend, how much he will save or invest, and on what he will make his expenditures. However, the free market econ omy depends upon more than just 131 132 THE FREEMAN March the consumer being able to buy a rib roast or a refrigerator when he so chooses. For the consumer lives in an intangible world of thoughts, ideas, ethics, and morals; and his attitudes toward these cultural as pects of life influence and determine his philosophies and actions. He is just as obligated to consume wisely in this intangible world as he is in the material world in which he physically lives.

Thus the reins of the free market economy lie in the hands of the con sumer. And the consumer, because he is in the driver's seat, has an obligation to consume wisely. Un fortunately, too many consumers are either unaware of this obliga tion, or do not take it seriously, if indeed they even accept the fact that they are obligated to anyone or any thing. Man's Greatest Asset The human mind is man's greatest asset. Without the ability to think and reason, the individual is of no use to himself or to others; for the thinking man is an active man, active in using his mind to make choices that affect not only himself but the society around him. However, unlike the instincts that birds and animals are born with, man's knowledge and understand ing must be acquired through his own endeavors, for he enters this world naked mentally as well as physically. The man who covets knowledge and understanding will find much to learn.

It is Proverbs that tells us: Wis dom is before him that hath under standing .... Get wisdom, get UJ;l derstanding. By applying this thought to eco nomics, one can see that an under standing of the free market envi ronment in which the consumer finds himself helps him to develop the wisdom necessary to consume wisely. King Solomon was known throughout the world for his wis dom-his common sense solutions to problems. This is not to say that all problems can be solved by using just common sense, for they cannot; but the consumer can make sensible de cisions by wisely considering his possible choices. The choices the consumer makes in the intangible world of thoughts and actions are primarily influenced by what he hears and sees. That the forms of communication in a country are immediately taken over when a communistic or socialistic regime comes into power is evidence of the importance of communication systems. If the means of introducing ideas to the masses can be controlled, what they think and thus what they are can be controlled. By controlling the mind, one can control the body.

Thus, freedom of the press and 1978 THE CONSUMER'S ROLE 133 media-newspapers, magazines, books, advertising, television, radio-is a vital necessity if this country is to maintain a capitalistic, free market economy. The field of communication is the link between the consumer, the entrepreneur, and the government. PromotingIntervention One of the dangers threatening the free market economy in the United States today is the tendency of the press and media to advocate philosophies that favor government intervention. Since neither the eargate nor the eyegate is ever satisfied, the sound and visual media have an unlimited market for whatever they choose to present to the consumer; for the con sumer is always willing to hear and see more. ((Let the consumer be ware" can well be applied to this situation because only the consumer himself, through wisdom and under standing, is able to accept or reject the thoughts, ideas, ethics, and morals of others which are continu ally being fed to him. Only the con sumer himself is able to make the choice of what is wise and what is unwise. He will ultimately choose to control his own mind or will choose to let it be controlled for him by others.

Unfortunately, the consumer has not wisely considered his choices in the material world, and the foolish choices of his past are now darken ing his hope for a bright future. What has cast this shadow? The consumer, freed from the mental and physical controls placed on him during the depression of the 30's and the war of the 40's-his pocket amply filled with money breathed a sigh of relief and moved out of his house of bricks into a house of straw. In his eagerness to spend, he no longer chose to act as a knowledgeable, well-informed, rea soning consumer and this led him into compulsive buying and un sound choices. As a result, the consumer, instead of accepting responsiblity for his lackadaisical choices, blamed everyone but himself. Instead of cor recting a deteriorating situation by starting to consume wisely, he con tinued buying and complaining and did not change his habits. Washington, which had stepped into the void created when the demand-supply free market econ omy had been upset during these two decades, took note of the situa tion, took the entrepreneur to the woodshed, and took the consumer under its bureaucratic wing, trying to cure the consumer's very real ills with the wrong medicine-interven tion in the market place.

Thus, the free market economy found itself being pushed down the road which leads to socialism, for government intervention eventually 134 THE FREEMAN March leads to the elimination of the mar ket's reason for being: the making of a profit, an effective tool by. which business determines how best to serve the consumer. While there is little doubt that some entrepreneurs will willingly ~~fleece" the consumer in a free mar ket economy, the problem is not to be solved by the government. Once the government gets its bureaucra tic foot in the door, the choice the consumer may want to make may not be the choice he is allowed to make. Consumer Responsibility The trouble with controls in a free market economy is that the gov ernment tends to consider the con sumer right and the entrepreneur wrong. It puts most of the respon sibilities for the success of the free market economy on the shoulders of the entrepreneur and little on the shoulders of the consumer. But the free market economy is very clear in telling the consumer that he is in control and that he has the obliga tion to consume wisely. However, socialism is telling the consumer to sit back and relax, that government will take over his obligations and save him the trouble of consuming wisely.

For the intellectual consumer who values his freedom to choose and reason, the inroads socialism has made into the free market economy of the United States under the guise of government's helping hand, should be a cause for alarm. Our capitalist economy has regressed to the point where government seem ingly wants to allow only enough freedoms to give the illusion of con sumer leadership and freedom in the market place. As long as the majority of the consumers can be convinced that they still act as the hub of the wheel of the free market economy, able to influence the entrepreneur to pro duce what they want, they are satis fied. The consumer may even mentally reject the idea that he is being con trolled through intervention in the market place if enough of his de mands are being supplied and the decisions made by the so-called con sumer protection agencies do not seriously impede his consumption.

Government control is always what happens to the ~~otherguy," never to himself. His eyes are mentally blinded, for he does not want to see. Our founding fathers came to this country fully aware of the dictato rial nature of government controls. One of the safeguards they estab lished was the division of power in government. They realized that each branch of government would guard its powers jealously and not surrender them to centralized con trol, necessary in any type of dic tatorship. The various branches of 1978 THE CONSUMER'S ROLE 135 the federal, state, and local govern ments were designed to fight to keep and preserve their governing rights. A check and balance on each other, the system itself would discourage government control. Those leaders set up our government not by acci dent but as a well-planned, thought~ ful system, based on a constitution which divided government powers in every way possible.

Personal Freedom Requires Limited Government Government powers in the new nation were severely controlled, for it was felt that the government's power should be limited to national defense and. the court system. The only power they felt really necessary in the government was one which would permit strong enough con trols to repress any person. or per sons who endangered the freedoms of the majority who were existing peacefully. Realizing that the gov" ernment which governs best governs least, the founding fathers incorpo~ rated the principles of this idea into the constitution. Over and over again history has shown that man's freedom is in in verse proportion to government rule, for man is only free when gov ernment is contained. The more fragmented the government, the more freedom man gains. One often hears the view ex pressed that mankind is basically good, but in Romans we are warned that ((there is none righteous no not one" and Jeremiah adds that ((the heart is deceitful above all things and desperately wicked." In other words, man must be continually aware of the necessity to dIscipline his thoughts and actions. It is easy for man to be evil; it is hard for man to be good.

This is why man, who finds him self in a position of power, will tend to put himself first and his fellow man last. This is why power, in whatever form, is a potential dan ger. History has shown us wars, de pressions, and hatreds that have pit;. ted man' against man, brother against brother, and parent against child, and at the root lies the lust for power. Therefore, when the consumer starts applying the above truths of good and evil to economics, he can see that for his own personal well being it is to his advantage to work at being wary so that he is able to consume wisely. Our liberties and our freedoms are to be cherished and can easily be lost because they are literally tied to the apron strings of a free market economy. Two Choices There are only two choices: right or wrong-truth or error. Human intellect must separate the two and apply truth to capitalism, because if it does not, error will prevail and the 136 THE FREEMAN free market economy will cease to exist. Unless man's mind is free, his body never can be.

For the wages of consumer igno rance is government control, the parent of bureaucracy and socialism; but the wages of con sumer wisdom and understanding is Consumerism freedom and liberty. The stakes are high. Only through the human action of intellectual choice can the consumer hope to play his part in the salvation of the free market economy from the very real threat of eventual domina tion by government. i IDEAS ON LIBERTY WE can protect the consumer, but do we really want to close the market and forego all improvements in products and services? Do we really want to substitute administrative dictate from Capitol Hill for individ ual buyer decision? Regardless of any new agency that might be created to represent the consumer, and regardless of the growth of consumerism, the only true reading of the consumer is to be obtained from her actions in the market place. There can be no true spokesman for the consumer other than the actions of the consumer herself. She can rationalize her actions but, try as she might, she cannot explain them in full. That is why she cannot tell you what new or modified goods and services would better serve her needs.

In marketing research I have spent the better part of my life ringing consumer doorbells in a futile effort to get them to tell me how some product or market service can be improved or what new products or services they want, only to find that in our conversation they failed either to visualize their alternatives or identify the true values to which they in final analysis respond. The consumer, in her mute but effective way, can only bring all her value considerations to bear in response to what is offered her. She has her own built-in protective device. If you displease her-if you do not offer her the best alternative-if indeed you deceive her in terms of her own values, she simply and quickly votes H no" in the market place. That is the miracle of the free market-the miracle the consumerist refuses to recognize. MAX E. BRUNK Dennis Bechara The Market for Labor THROUGHOUT HISTORY there have been numerous schools of thought dealing with the determination of wages and the proper role of work ers. Most of these economic philosophies have opposed the free market method of production and employment and have sought, by various means, to alter our allegedly unjust system. Therefore, in order to understand these proposed means and their inherent fallacies, it is necessary to analyze how wages are determined in the free market.

The concept of marginal produc tivity describes the economic forces at work in the labor market. When an entrepreneur needs employees, Mr. Bechara recently earned a master's degree in Labor Law at the University of Pennsylvania. He is an attorney and a member of the bars of the Com monwealth of Puerto Rico and the District of Colum bia. he must offer them enough incentive to entice them away from other pos sible employers. However, the sal ary that an employer may offer pro spective employees is limited by the realities of the market. Con sequently, the employer must weigh how much income he will receive from the production that each new employee will generate. If the employer pays a wage that is above the laborer's marginal pro ductivity, then he will incur losses, which will force him to lower the wages. If, on the other hand, he pays too Iowa wage, lower than the mar ginal productivity, then the prospect of gain will entice other entrepre neurs to take advantage of the dif ference between the marginal pro ductivity and the wages prevailing in the market.

Interventionists, those people who 137 138 THE FREEMAN March argue in favor of numerous laws which create minimum conditions for employment, are inconsistent concerning wage determination. They argue that employers are mis erly and refuse to give employees a fair wage. The interventionists are thus assuming that employers would not compete against one another for workers, because that would tend" to bid wages up toward the point of marginal productivity. But if employers are so guided by avarice, why would they not seize the opportunity for profit when they observe a wide disparity between high marginal productivity and low prevailing wages? Effect of Unemployment It is often argued that in the real world we confront an ocean of un employment and that an entrepre~ neur does not have to entice employ ees already employed, so that he is able to offer a salary lower than the marginal productivity. However, to the extent that there is involuntary unemployment, it is a result of the interventionist policies of the gov ernment. The consequence of impos ing a minimum wage is that those people who cannot produce economic goods worth more than that minimum will not be·hired. Further more, the imposition of inflexible laws that restrict the labor market create unnecessary and tragic human consequences. The argument that we must combat the result of one government intervention with more government intervention is simply a non sequitur.

_Even assuming that the interven tionists are correct about the effect of unemployment on wages, the theory of marginal productivity re mains unassailable. Inasmuch as those who are unemployed are in such a position as a result of the interventionist policies, they cannot effecti vely compete on the labor market with the rest of the employ ees· in the market. Hence, marginal productivity still applies to the employed. If we assume, however, that the unemployed population does com pete with the rest of the labor force, the net effect would be to bring about a readjustment in wages, tak ing the unemployed into considera tion. Those who argue that the un~ employed .can compete with those employed are, in effect, admitting that prevailing wage rates are too high, above· the equilibrium level. Otherwise, no involuntary long term unemployment could result. Therefore, regardless of which point of view we adopt concerning un employment, the marginal produc tivity theory cannot be denied.

Syndicalism Contemporary interventionist philosophy frequently advances the idea of worker ownership-in1978 THE MARKET FOR LABOR 139 common of the means of production. The origin of this notion can be found in syndicalism, an historical reaction to the market system. Syn dicalism argued for the expropria tion of the means of production from rightful owners, and the substitu tion of the workers themselves as the owners. This method of economic organization would allegedly bring about income equality. The syndicalist society, however, denied the existence of change. As some workers sell their shares in production, or simply squander them, income inequalities again re sult, which was the evil that syn dicalism was supposed to remedy. When workers die and leave an in heritance, we have the same prob lem: heirs own shares of enterprises in which they do not necessarily work. Therefore, we find that this system not only created income in equalities, but also allowed people to own shares of entities in which they did not work, both evils in the eyes of the syndicalists. In order to en force the syndicalist method of pro duction, a great bureaucracy with ever-widening powers needed to be created to redistribute wealth con tinually so as to eliminate these consequences.

Syndicalism faced difficulties with respect to growing and dying industries. Aside from the obvious problem of the raising of capital, the syndicalist state had no way to deal with the fact that some industries became prosperous, while others were headed toward bankruptcy. The employees of the bankrupt in dustries would have lost all the as sets they earned, while those employed by the growing industries would oppose any new employee from entering their industry since it would imply having to further di vide the shares of the enterprise among more people. Consequently, syndicalism induced tremendous rigidi ties on the labor market. The syndicalist society failed to perceive the nature of our system, which involves not only production, but exchange. As John Chamberlain put it: In the early 1920's the Italian syn dicalist trade unions seized the factories. But there followed a sitdown strike of the salesmen, the commercial agents, the factors, the middlemen. Syndicalism had no way of entering the world of com merce, the world of connection, which must go either by the law of contract or by administrative fiat. When no provi sion is made for the world of commerce, a vacuum exists outside of the factories. A state is needed to enforce the freely ac cepted terms of contracts or to staff an administrative apparatus. If there is no state, gangsters step in to do the job ... 1 Inequalities Persist Syndicalism, therefore, brought about the same income inequalities which it attempted to eliminate. At the same time it denied the economy 140 THE FREEMAN March the benefits of market pricing under capitalist production and exchange.

Although it may be easy to neu tralize the appeal of syndicalism, the underlying ideas which engendered it remain with us to this very day. These ideas nourish the belief that employees are not receiving their fair share and that laws should therefore be enacted to alter such inequality. Hence we find a rising popularity for such methods as prof it sharing and worker participation in managerial decisions (codetermi nation) as the ways to create a mid dle ground between pure syn dicalism and pure capitalism. It is possible that profit sharing and codetermination may have posi tive consequences in some indus tries, that productivity may rise and that labor-management relations may be improved. However, it does not necessarily follow that what may be good for one firm may be good for the economy as a whole. With regard to profit sharing and codetermination, it must be remem bered that these topics are consid ered here strictly from the point of view of what would take place in the event laws were enacted to compel every firm to establish its own method of profit sharing and codetermination.

Profit sharing is not a new idea, and has been tried before: Albert Gallatin, Secretary of the Trea sury under Presidents Jefferson and Madison, installed profit sharing in his glass works at New Geneva, Pennsylva nia in 1794. Horace Greeley had a profit sharing plan for certain employees at the New York Tribune, and was a strong advocate. In 1886, Colonel Procter intro duced a profit sharing and general em ployee relations program at Procter and Gamble. Eastman Kodak joined the ranks of the profit sharers in 1912, and Sears, Roebuck and Company in 1916. In 1920 the National Industrial Conference Board surveyed the field and found fifty four companies with profit sharing plans; in 1940, its survey uncovered 158 plans. 2 Profit Must Be Earned A profit sharing plan may be de scribed as one which is organized so as to make intermittent payments to the employees out of any possible profits. Consequently, the success of the plan is contingent on the success of the enterprise. If there is no profit in a given year, no contributions can be made.

However, the term ((profit shar ing" is misleading because it implies that profits exist only as the bottom line of an accountant's ledger. Yet, true profits, from a strictly economic point of view, consist of ((the reward willing customers accord· an entre preneur who efficiently uses scarce resources to satisfy their wants."3 Profits that are shared with em ployees or taxed away by the state cannot effectively be a part of an 1978 THE MARKET FOR LABOR 141 economic process by which consum ers reward the most productive and ingenious entrepreneurs. And what of that portion of profit which repre sents an interest payment to the investor? If investors are at liberty to place their savings elsewhere to obtain an appropriate yield, it is not feasible to consider sharing the interest portion of profits. One could argue that if a law were passed imposing profit sharing plans on all enterprises, then there would be no threat of investors withdrawing their funds to other firms. However, this argument fails to realize that under such a law there would be no investment unless the investment yields an interest above the yield which would be con fiscated by the profit sharers.

Therefore, if a universal profit shar ing plan existed, its first conse quence would be to reduce and limit investment to those areas profitable enough to cover the profit sharing burden as well as the interest which investors would find acceptable. All other investments which would pro duce less than that sum would be discontinued, because no investor would find it worthwhile to invest his savings at a negative interest. No Panacea Profit sharing does not promise an extensive future. For the years 1969 through 1974, corporate profits after taxes averaged about $55 billion a year. If that entire amount had been divided equally among an' average employed labor force of 81 million, each worker's share would have been about $13 a week.4 But in that case, .no profits would have been available as interest or a return to investors. Of course, when we speak in terms of figures and aggregates, we deal with imperfect concepts which tend to be misleading. Histor ically, an average of 45 per cent of the annual reports of companies show a loss for the year. 5 Hence, it becomes obvious that the ideal of profit sharing, even if universally applied, cannot become a panacea for our industrial prob lems. The average employee will see his particular work as too far re moved from the actual profits earned, so that the motivation to be more productive is very weak.

Problems dealing with equity will also arise every time the profit is divided, each sector of the labor force demanding a larger share than the one actually allocated to it. Similar difficulties will emerge re garding the ((fair" division of the profit between shareholders and employees. Profit sharing is also a deceiving term because its proponents use it to allude to a mechanism for raising wages. After dividing among the employees what the proponents call profi t, there will still be some amount left over for investors, 142 THE FREEMAN March which will be considered as the net profit. The amount divided among the workers, rather than profit, is another wage, a bonus which is part and parcel of the costs of production. Whatever the problems inherent in the profit sharing idea, some firms still may see it as the better way to pay their workers according to their marginal productivity. This is tolerable in a free market, and there should be no law against it.

But neither should the law deny others their liberty by making profit sharing universal and compulsory. Codetermination Codetermination has become a reali ty in many West European countries. Although each country may have its own devices, the gen eral tendency is to allow a certain number of employees on the board of directors, so that both labor and management may have an influence on decisions which may affect the employees. As in the case of profit sharing, in the free market some firms may look upon the process of codetermination as their better way to compete for employees-and that should be their privilege. However, we are dealing in this essay not with the voluntary actions of employers and employees, but with the possibility that laws be enacted to force this concept on all corporations. In a sense, codetermination is a thrust against the concept of private property, a limitation of property rights but short of outright expro priation. Others than the property owner would enter into the decisions about how to risk his investment.

Instead of economic efficiency, the guide would become political ex pedience. And if business activity is thus politicized, where is the process to end?6 In the long run, an employer can not impose his will on his employees because he is limited by the action of the market. If the employer insists on conducting his personnel affairs in an arbitrary manner, he will lose the most efficient of his employees, who will be hired by his competitors. If an employer insists on acting in an authoritarian way, he will find that in the long run the quality of his employees will deteriorate, the products he manufactures will re flect this and his business will gen erally be affected. Thus does open competition in the market effec tively curb the abuses cited by pro ponents of codetermination. In addition to those who advocate forced profit sharing and codetermi nation are others who believe that the only way to raise wages is through union pressure on employ ers. However, the price mechanism has its effect here as in any other area where commodities are bought and sold. It is possible that unions will be able to obtain wages higher 1978 THE MARKET FOR LABOR 143 than the market level, but adverse effects will follow. In the first place, the industry involved may have to raise its prices to pay for the higher production costs. This may reduce demand for that company's· prod ucts, so that some employees will be discharged. Conversely, if the de mand for these products is not as responsi ve to their price, then the consumers will have that much money less to spend or invest on other products, so that other indus tries will suffer a decrease in their business. At the same time, the long.;.run effect of wages higher than the equilibrium level in any indus try, as imposed by union pressure, is to trap capital. As a result of this, investors will no longer be willing to reinvest in such industries, and the apparent benefits of union pressure become short-Ii ved.

Capital the· Key The only true way for raISIng wages is to allow for capital for mation. Marginal productivity de termines wages in the market, but that productivity is affected by the amount of capital invested per em ployee. American workers are more productive not because they are any more intelligent than other workers, but because they have at their dis posal more efficient and more productive tools. These efficient tools alone cannot guarantee that profits will be made, since profits depend on the behavior of willing customers whose needs have been correctly an ticipated. However, once consumer preferences are correctly foreseen, then the more. producti ve the tools the more the marginal productivity of employees rises. What we may wisely ask of government is that it not interfere with capital formation and that it respect and protect private property and the right of every individual to contract and trade freely with others who are willing. @ ......FOOTNOTESIJohn Chamberlain, The Roots ofCapitalism (Indianapolis: Liberty Press, 1976), p. 245. See also Ludwig von Mises, Human Action (Chicago: Henry Regnery Co., 3rd ed. 1966), pp. 812-820.

2Claude Robinson, Understanding Profits (Princeton: D. Van Nostrand Co., 1961), p. 303. 3"Profit. Sharing," The Freeman, December 1973. 4Statistical Abstract of the United States 1976, U.S. Department of Commerce, Bureau of the Census. 5Robinson, op. cit., p. 79. 6 llImplications of representation trend for U.S. corporations," Harvard Business Review, January/February 1977. HThe Realities of CoDetermination," The AFL-CIO American Federationist, October 1977. llParticipation by Agreement," Lloyds Bank Review, July 1977.

Gary North Jeremiahs Job SOONER or later, those who are in terested in the philosophy of liberty run across Albert J. Nock's essay, ~~Isaiah's Job." Taking as an exam ple two Old Testament prophets, Isaiah and Elijah, Nock makes at least two important points. First, until society seems to be disintegrat ing around our ears, not many peo ple are going to listen to a critic who comes in the name of principled ac tion. The masses want to get all the benefi ts of principled action, but they also want to continue to follow their unprincipled ways. They want the fruits but not the roots of moral ity. Therefore, they refuse to listen to prophets. Second, Nock pointed out, the prophet Elijah was con vinced that he was the last of the faithful, or what Nock calls the Rem nant. Not so, God told the prophet; He had kept seven thousand others from the rot of the day. Dr. North Is President of the Institute for Christian Economics, located In Durham, North Carolina.

144 Elijah had no idea that there were this many faithful people left. He had not seen any of them. He had heard no reports of them. Yet here was God, telling him that they were out there. Thus, Nock concludes, it does no good to count heads. The people whose heads are available for counting are not the ones you ought to be interested in. Whether or not people listen is irrelevant; the im portant thing is that the prophet makes the message clear and consis tent. He is not to water down the truth for the sake of mass appeal. Nock's essay helps those of us who are used to the idea that we should measure our success by the number of people we convince. We are ~~scalphunters," when we ought to be prophets. The prophets were not supposed to give the message out in order to win lots of public support. On the contrary, they were supposed to give the message for the sake of truth. They were to witness to a JEREMIAH'S JOB 145 generation which would not respond to the message. The truth was there fore its own justification. Those who were supposed to hear, namely, the Remnant, would get the message, one way or the other. They were the people who counted. Lesson: the people who count can't be counted.

Not by prophets, anyway. A Sad Message The main trouble I have with Nock's essay is that he excluded another very important prophet. That prophet was Jeremiah. He was a contemporary of Isaiah, and God gave him virtually the same mes sage. He was told to go to the high est leaders in the land, to the aver age man in the street, and to everyone in between, and proclaim the message. He was to tell them that they were in violation of basic moral law in everything they did, and that if they did not turn away from their false beliefs and wicked practices, they would see their soci ety totally devastated. In this re spect, Jeremiah's task was not fun damentally different from Isaiah's. Nevertheless, there were some differences. Jeremiah also wrote (or dictated) a book. He was not content to preach an urtpleasant message to skeptical and hostile people. He wanted to record the results of their unwillingness to listen. His thoughts are preserved in· the sad dest book in the Bible, the Book of Lamentations. Though he knew in advance that the masses would re ject his message, he also knew that there would be great suffering in Israel because of their stiffnecked response. Furthermore, the Rem nant would pay the same price in the short run. They, too, would be carried off into captivity. They, too, would lose their possessions and die in a foreign land. They would not be protected from disaster just because they happened to be decent people who were not immersed in the prac tices of their day. He wrote these words in response to the coming of the predicted judgment: ((Mine eye runneth down with rivers of water for the destruction of the daughter of my people" (Lam. 3:48). He knew that their punishment was well de served, yet he was also a part of them. The destruction was so great that not a glimmer of hope appears in the whole book.

What are we to conclude? That everything is hopeless? That no one will listen, ever, to the truth? That every society will eventually be ripe for judgment, and that this collapse will allow no one to escape? Is it useless, historically speaking, to serve in the Remnant? Are we for ever to be ground down in the mill stones of history? One key incident in Jeremiah's life gives us the answer. It appears in the thirty-second chapter of Jeremiah, a much-neglected pas146 THE FREEMAN March sage. The Babylonians (Chaldeans) have besieged Jerusalem. There was little doubt in anyone's mind that the city would fall to the invaders. God told Jeremiah that in the midst of this crisis, his cousin would ap proach him and make him an offer. He would offer Jeremiah the right, as a relative, to buy a particular field which was in the cousin's side of the family. Sure enough, the cousin arrived with just this offer.

The cousin was ~~playing it smart." He was. selling off a field that was about to fall into the hands of the enemy, and in exchange he would be given silver, a highly liquid, easily concealed, transportable form of capital-an international currency. Not bad for him, since all he would be .giving up would be .a piece of ground that the enemy would prob ably take over anyway. Long-Range Planning What were God's instructions to Jeremiah? Buy the field. So Jeremiah took his silver, and wit nesses, and balances (honest money), and they made the transac tion. Then Jeremiah instructed Baruch, a scribe, to record the evi dence. (It may be that Jeremiah was illiterate, as were most men of his day.) Baruch was told by Jeremiah to put the evidences of the sale into an earthen vessel for long-term storage. ~~For thus saith the Lord of hosts, the God of Israel; Houses and fields and vineyards shall be pos sessed again in this land" (32:15).

God explained His purposes at the end of the chapter. Yes, the city would fall. Yes, the people would go into captivity. Yes, their sins had brought this upon them. But this is not the end of the story. ~~Behold, I will gather them out of all countries, whither I have driven them in mine anger, and in my fury, and in great wrath; and I will bring them again unto this place, and I will cause them to dwell safely: And they shall be my people, and I will be their God" (32:37-38). It doesn't stop there, either: ~~Like as I have brought all this great evil upon this people, so will I bring upon them all the good that I have promised them. And fields shall· be bought in this land, whereof ye say, It is desolate without man or beast; it is given into the hand of the Chaldeans" (32:42-43). What was God's message to Jeremiah? There is hope for the long run for those who are faithful to His message. There will eventually come a day when truth will out, when law will reign supreme, when men will buy and sell, when contracts will be honored. ~~Men shall buy fields for money, and subscribe evidences, and seal them, and take witnesses in the land of Benjamin, and in the places about Jerusalem, and in the cities of Judah, and in the cities of the moun tains, and in the cities of the valley, 1978 JEREMIAH'S JOB 147 and in the cities of the south: for I will cause their captivity to return, saith the Lord" (32:44). In other words, business will return because the law of God will be understood and honored.

God had told them that they would be in captivity for seventy years. It would be long enough to make certain that Jeremiah would not be coming back to claim his field. Yet there was hope nonethe less. The prophet is not to imagine that all good things will come in his own day. He is not to be a short-term optimist. He is not to conclude that his words will turn everything around, making him the hero of the hour. He is told to look at the long run, to preach in the short run, and to go about his normal business. Plan for the future. Buy and sell. Continue to speak out when times are opportune. Tell anyone who will listen of the coming judgment, but remind them also that all is not lost forever just because everything seems to be lost today. The Job Is to Be Honest The prophet's job is to be honest. He must face the laws of reality. If bad principles lead to bad actions, then bad consequences will surely follow. These laws of reality cannot be underestimated. In fact, it is the prophet's task to reaffirm their val idity by his message. He pulls no punches. Things are not ~~fairly bad"

if morality is ignored or laughed at. Things are terrible, and people should understand this. Still, there is hope. Men can change their minds. The prophet knows that in ~~good" times, rebellious people usu ally don't change their minds. In fact, that most reluctant of prophets, Jonah, was so startled when the city of Nineveh repented that he pouted that the promised judgment never came, making him look like an idiot-an attitude which God re proached. But in the days of Elijah, Isaiah, and Jeremiah, the prag matists of Israel were not about to turn back to the moral laws which had provided their prosperity. It would take seven decades of captiv ity to bring them, or rather their children and grandchildren, back to the truth. Invest long-term, God told Jeremiah. Invest as if all were not lost. Invest as if your message, even tually, will bear fruit. Invest in the face of despair, when everyone is running scared. Invest for the bene fit of your children and grand children. Invest as if everything doesn't depend on the prophet, since prophets, being men, are not omni scient or omnipotent. Invest as if moral law will one day be respected.

Keep plugging away, even if you yourself will never live to see the people return to their senses and return to their land. Don't minimize the extent of the destruction. Don't 148 THE FREEMAN March rejoice at the plight of your enemies. Don't despair at the fact that the Remnant is caught in the whirlpool of destruction. Shed tears if you must, but most important, keep rec ords. Plan for the future. Never give an inch. A prophet is no Pollyanna, no Dr. Pangloss. He faces reality. Reality is his calling in life. To tell people things are terrible when they think everything is fine, and to offer hope when they think .everything is lost. To tell the truth, whatever the cost, and not to let short-term considera tions blur one's vision. The Remnant is there. The Remnant will survive. Eventually, the Remnant will be come the masses, since truth will out. But until that day, for which all prophets should rejoice, despite the fact that few will see its dawning, the prophet must do his best to understand reality and present it in the most effective way he knows how. That is Jeremiah's job. @j To Be Forewarned PERSONALLY I can see nothing in sight that is likely to stop our drift in the inflation current. The politicians will not stop the present heavy expenditures because these expenditures have votes and it is with votes they are most concerned. For the same reason they will not provide the revenue for meeting these expenditures through increas ing taxation. Under such conditions, the public will not buy government bonds at rates of interest that are politi cally possible and pay for those bonds out of their savings.

If these assumptions are true, and unless we have a powerful recovery which is not likely while the business public are scared over what is happening and is likely to happen in Washington, the only course that is left is a continuation of our present extravagant financing policy under which funds are obtained by forcing government 1978 TO BE FOREWARNED ... 149 obligations down the throats of the banks and having the banks pay for them by credit secured by these obligations. That is inflation pure and simple and there can be only one end of such a policy. -From a letter by Professor Edwin Walter Kemmerer, Princeton University, to Henry T. Bodman, January 28, 1936. MOST of the states are at the end of the road financially. The same thing is true of the cities. Yet when the war is over the demands upon these local government agencies will be beyond their power. How will the states and cities meet the enormous costs of education? The answer is simple. The government is already laying plans to become their banker and financial fortress-the banker of the states and cities and school districts and counties. Gover nors, county commissioners, mayors, and school-board members will stand in line at the federal treasury for their handouts. They will stand in line not before Con gress but before a federal bureaucrat with almost abso lute powers in his hands. Will it be necessary to amend the Constitution to give that bureaucratic spendthrift power over the object of his philanthropy? He will have no constitutional power to require either a state or a city or a school district or an industrial corporation or a building company or a local utility to do anything. But he will have the power to give or not to give, to open the treasury door or not to open it to the suppliant governor, mayor, or corporation executive. The pass admitting them to the vaults of the treasury will be a certificate of compliance with the conditions which the bureaucrat makes for the federal gift. ® John T. Flynn, As We Go Marching (1944) ~rld intha grfRQfan Iae~ Clarence B. Carson 15. Sweden: The Matrix of Tradition and Gradualism To the north, Sweden extends into the Arctic circle. In summer, that portion of the country is in the land of the midnight sun. In winter, there is darkness at noon. Even as far south as Stockholm the sun does not ascend very high in the midst of winter. Such light as it gives for a short time is more like twilight than daylight. Indeed, it is appropriate to think of Sweden as a Twilight Zone.

Physically, Sweden lies very near In this series, Dr. Carson examines the connection between ideology and the revolutions of our time and traces the impact on several major countries and the spread of the ideas and practices around the world. 150 to the twilight zone between Soviet Communism and the Europe 'that yet enjoys considerable freedom. Its northern boundary is not far from that of the Soviet Union. Its south ern boundary is across the Baltic Sea from East Germany. Socially, Sweden is in the twilight zone be tween tradition and the compulsion of socialism. Economically , Sweden is in the twilight zone between pri vate enterprise and the controlled economy. Internationally, Sweden has long been neutral, a twilight zone inhabited by nations which re fuse to take sides. Gradualism, or evolutionary socialism, is a twilight SWEDEN: THE MATRIX OF TRADITION AND GRADUALISM 151 zone, and Sweden has for a good many years been the reputed show piece of that ideology.

Why Sweden? There are several good reasons for selecting Sweden as one of the exemplars of evolutionary socialism. The most obvious reason is in some ways the least convincing: namely, Sweden's reputation as a socia:list country. This, it turns out, is largely press agentry. There should be no doubt that the idea that has the world in its grip has a firm grasp on Sweden; but Sweden is not socialist by conventional definitions, an important point to which we will return. Nevertheless, Sweden has had some forty years under the political leadership of Social Demo crats, a party that is professedly socialist and has its roots in Marx ism. Nowhere is the welfare state aspect of the idea more firmly im bedded. Another reason for selecting Swe den is the place that tradition still formally holds in the country. Evolutionary socialism is everywhere national socialism (which is to say that it occurs within the framework of nations and par takes of the character of each par ticular nation), but even so there are two distinct political settings in which it has taken place: monar chies and republics. Sweden is a monarchy. As such, it belongs to a configuration of nations, largely on the periphery of Europe, such as Denmark, Norw~y, the Nether lands, and England, which have thus far survived the thrust to re publicanism which had its onset in Europe with the French Revolution.

At any rate, Sweden has a monarch, an established church, and an hereditary nobility. Such things are, of course, anathema to socialists. Every good socialist is ipso facto a republican, an anti-monarchist, an opponent of the religious establishment, and de spises all signs of inequality-in theory, anyway. In practice, it has not worked quite that way. Evolutionary socialism has made some of its deepest inroads in lands with hereditary monarchs. Gradualism has proceeded most smoothly and with the least disturb ance in these lands. There is a reason for this. In re publics, men are theoretically equal before the law, and they do not rel ish or readily accept the intrusions in their affairs that come with gradualism. To·put it another way, republicans are generally anti authoritarian, and socialists are bent on using the political authority to accomplish their ends. By contrast, monarchs are the very symbols of authoritarianism.

People living under them have been conditioned to accept the imposition of authority by those who rule.

152 THE FREEMAN March Socialists may not be comfortable bedfellows with kings, but the exer cise of arbitrary power is made easier for them when they have the royal authority behind them. Tradi tion, too, accommodates change, even those changes made by evolutionary socialism which de stroy tradition at its roots. For these reasons, it is important to examine gradualism against a monarchical background. There is yet another reason for selecting Sweden. Sweden is an in dustrialized country with a rela tively high standard of living. As such things go, it is a prosperous country. When choosing examples, it is better to take from what are reckoned to be the best than to take the worst. Evolutionary Socialism It is a considerable transition to shift from examining revolutionary socialism to evolutionary socialism. The existing differences should not be ignored. Revolutionary socialism is brutal, tyrannical, destructive, and dictatorial. Its most conspicuous fruits are totalitarianism and total war. The ((law school" of revolu tionary socialism is the concentra tion camp, as has been pointed out.

Citizens in such countries are only by some degrees removed from slav ery. Gradualism, in a country such as Sweden, is clearly an improve ment over such conditions. It is, however, only a shift from darkness into the twilight. Revolutionary and evolutionary socialists are brothers under the skin. To put it in the terms of this work, communists, Nazis, and gradualists are ideological brothers. All of them derive their spring from the same central idea. That is, they aim to concert all energies toward common goals, to root out and de stroy all cultural supports to the individual's pursuit of his own self interest, and use government power to impose their programs. They dif fer as to methods, not as to goals. There are two major differences between revolutionary and evolutionary socialism, along with subsidiary ones. One major differ ence is that evolutionary socialists are pragmatic rather than dogmatic.

That is, they are pragmatic as to method though they may be equally dogmatic with revolutionary socialists as to goals. When they are being pragmatic, they may, for example, prefer the control of indus try over ownership. In like manner, they may abandon one sort of ap proach in favor of another without any sense of betraying their goals. One way to say it is that they do not know exactly how socialism wilJ be achieved, or when, but they believe that they are headed in the right direction so long as more and more control over affairs is being collec tivized.

1978 SWEDEN: THE MATRIX OF TRADITION AND GRADUALIS"M 153 Democratic Methods Another major difference between gradualists and revolutionaries is that gradualists propose to achieve their ends democratically. Theyad vocate and generally hold free elec tions, advance near universal suf frage, and permit a variety of candi dates to enter the races for office. There is, however, a fundamental contradiction in their position. The implicit theory on which they oper ate holds that by. the process of vot ing and election the government be comes the voice and arm of society. Society is, so to speak, politicized and empowered. (Rousseau's theory of the ~~general will" is the best known and probably most thorough exposition of this notion. It is set forth in The Social Contract.) In fact, however, modern democ racies operate by the rule of ma jorities and pluralities. Even if we assume that the output from voting machines could somehow be the will of society-a notion which puts considerable strain on the imagination-society is divided by democratic elections. Nor can it be otherwise if there are to be choices of candidates and positions.

Whatever the virtues of ma joritarian rule, unity is not one of them. Yet it is essential to the idea that has the world in its grip that government should act to concert all efforts for the common good. If soci ety is divided as to what constitutes the common good, this can be but a forcing of some people's notions of the common good on others. Hitler's plebiscites and Soviet Communism's one-party slates are much more nearly consistent with the idea. It is fundamentally inconsistent to sup pose that real choices can be made politically, that society can be politicized, and that there can be general accord on actions taken. If society could be politicized it would be polarized by every election. Gradualists attempt to paper over this contradiction. Their programs are what ~~the people" want, they are given to saying. Theirs are ~~social reforms," they declare, implying somehow that they arise from soci ety. Too, they attempt to narrow the gap between parties by having them all support similar ideas and policies. To the extent that they can get agreement that whatever is at issue is a legitimate concern of gov ernment, they tend to succeed in this. To the extent that they are able to keep the issue in the frame of how much and when, rather than whether, they tend to succeed also.

These tactics tend both to obscure the real divisions among a people and enable gradualists to advance toward their goal step by step. Gradualists generally preserve the procedural protections of civil liberties. Thus far, this is a critical difference between evolutionary and revolutionary socialisnl. Procedures 154 THE FREEMAN March tend 'only to be a facade for revolu tionaries, something to be ignored if they get in the way of the desired line of action. Procedural protec tions have generally enabled citi zens in lands where gradualism holds sway to enjoy a considerable variety of civil liberties. But proce dures are just that-established ways for government to act-not anything substantial. Utilitarian Justification of Liberties There is no place in socialist ideology for liberties to be natural rights; their only theoretical justifi cation is utilitarian. Utility is a slippery concept at best, and where the common good is arbiter of util ity, utility is whatever those who have the power to determine it say it is. There are two other supports to civil liberty: tradition (which in cludes constitutions) and private property. Since gradualists are de voted to eroding away tradition and private property, the more they suc ceed the more precarious will be civil liberties.

Be all that as it may, there are important differences between revo lutionary and evolutionary socialism. The differences become blurred in many countries of what is called the Third World. But in the constitutional democracies of West ern Europe and America the differ ences are thus far clear and distinct. The tyranny of communism is on a different scale and order from any thing yet occurring in these lands. Gradualists operate within the framework of laws, however atten uated these may become, to achieve their ends. They do not usually crush groups; rather, they empower them within a framework of con trols. It is the individual, then, who usually feels the weight of their force. He is isolated if he does not belong to some group. He is power less, or nearly so, if he cannot con jure up some popular support. If he does not yield voluntarily to the weight of numbers, he will most likely be punished by the state. The individual's last line of defense is his property,. but that is increasingly circumscribed as gradualism ad vances.

So it is in Sweden and in other lands where gradualism holds sway. Even so, Sweden is not a socialist country by conventional definition. By the usual definition, socialism prevails when the government owns the means of production and dis tribution of goods. This is hardly the case in Sweden. Most of the produc tive enterprises in Sweden are pri vately owned. A London newspaper said, ~~Sweden has proportionately more private enterprise than any other country in west Europe."l The usual figures cited run something like this: about 4 per cent of the enterprises are state owned; 4 per 1978 SWEDEN: THE MATRIX OF TRADITION AND GRADUALISM 155 cent cooperatively owned; and the remainder privately owned. The state is deeply involved in iron min ing, the railways, the airlines, atomic energy, making of alcoholic beverages, and such like. Most of the rest of manufacturing is privately owned. 2 It is most important to un derstand this when we come to dis cuss the sources of Swedish pros perity.

Astute PUblicity The notion that Sweden is socialist, in the conventional sense, is made up partly of assumption and partly of astute publicity. Until very recently, the Social Democrats have headed the governments in Sweden since the 1930's. The Social Demo cratic Party originated as a Marxist party, shifted toward gradualism, but continued to claim to be socialist. The long years of rule gave the impression, which Social Demo crats found more advantage to claiming than denying, that Sweden was socialist. Many Americans got their notions about Sweden from a little book by Marquis Childs. It is called Sweden: The Middle Way, was first published in 1936, and has appeared in several editions and a good many printings. Childs hailed Sweden as the exem plar of the middle way between com munism and fascism. The ttwave of the future" which Childs thought he beheld in Sweden was collectivism largely by way of cooperatives.

However, Sweden did not develop along the lines that Childs foresaw in the mid-1930's. Cooperatives never gained much of a foothold in manufacturing and related enter prises, though they were somewhat more successful in merchandising. However mistaken his prophecy, Childs helped to spread the notion of a socialist Sweden. If the Social Democrats had been bent on nationalizing Swedish in dustry, which some no doubt were, they never gained the kind of ma jorities that would have given them a free hand. Usually, they had only a plurality and had to govern along with some other party. They could ordinarily command only a slight majority in the Riksdag for much less controversial undertakings than the wholesale nationalizing of industries. But it is by no means clear that they would have gone that route had their support been much more substantial. In any case, Swedish prosperity can hardly be attributed to socialism as it is usually defined. Moreover, it is greatly to be doubted that socialism, however it may be defined or extended in meaning, plays any significant role in that prosperity.

There are other and more cogent reasons which provide a sufficient explanation for that. Sweden has some important natu ral resources and advantages of 10156 THE FREEMAN March cation. Perhaps the most impressive natural resource is the huge reserve of some of the finest iron ore in the world. Much of Sweden is forested, and lumbering, paper, and pulp are major industries. Streams in the north with their origins in the mountains provide the basis for numerous hydroelectric dams. Al though Sweden lies north of the United States in latitude the cli mate is much milder than might be supposed, particularly in the south, owing to warming by the Gulf Stream. Hence, farming flourishes in southern Sweden. For the same reason, ports are generally open year round on the Baltic. Shipping and shipbuilding are major indus tries in Sweden. A Trading Nation What Sweden lacks, above all, are deposits of coal, oil, and gas. These must be imported, and Swedish in dustry and prosperity depend upon foreign trade. Indeed, Sweden is one of the major trading nations in the world. Fine Swedish steel has long enjoyed an international reputation, and Swedes compete on the world market in some of the most ad vanced products of modern technol ogy. It may well be that the Swedes are addicted to modernity as much as or more than any other people in the world.

Sweden has enjoyed and benefited from over 160 years of being at peace at home and abroad. The country has not gone to war since the end of the Napoleonic wars. The Swedes have been in our era if not the most peaceful people at least among the most neutral. Their energy and vitality have not been sapped by war, and their cities and countryside have not been destroyed by an invader. True, the Swedes maintain a considerable military es tablishment, and their troops have gone forth in recent times on call from the United Nations, but Swe den continues to enjoy the benefits of peace. The Swedes have been a remark ably homogenous people ethnically and religiously. This may have con tributed little to their prosperity in recent times, but it has probably made it much easier to remain at peace. Minorities, when they are very numerous, sometimes-oft times-make for internal discord, and if they are recently from other lands they may well promote in volvement in wars.

At any rate, the Swedes are very nearly separated from the mainland of continental Europe by the sea, joined by land only to Norway and Finland, and have not been troubled for a long while by invasions or propulsive migrations of other peo ples. Until the twentieth century, the flow of Swedes was outward rather than of other peoples toward them. The Vikings pressed down1978 SWEDEN: THE MATRIX OF TRADITION AND GRADUALISM 157 ward upon Europe in the Middle Ages, and many of them settled there. Even as late as the latter part of the nineteenth century, there was a massive Swedish migration to the United States. By contrast, other peoples have not been drawn to Sweden. Before the twentieth cen tury, the people were generally poor, and the climate is such that only Eskimos, Finns, and some Norwe gians would find it an improvement. Religion and Other Factors As to religion, most Swedes are technically Lutherans, as their forebears have been for centuries.

There is only a scattering of Jews and Roman Catholics among them, and the ~~free" Protestant churches have drawn but a few into their fold. Motorcycle riders are more numer ous than any of these minorities, are probably more influential, and are certainly more .likely to disturb the peace. Resources, location, peace, and other such conditions are but poten tialities, however. What makes the difference is the use of resources, the taking advantage of location, and the following of productive peaceful pursuits. Location and relative weakness may have .contributed to Sweden's neutrality, but the peace achie ved has been the result of a more positive concept than that. It has been the concept of a world drawn together in trade, in intellectual interchange, free movement of people, and living in mutual toler ance of one another. The Swedes appear to have grasped more clearly than most that their prosperity and well-being was dependent on a far flung trade which worked best in times of peace.

More than anything else, it was the triumph of liberalism in nineteenth century Sweden which loosed the energies of the people who began to change the potentialities of their condition into the actuality of productivity and prosperity. The foundations of Swedish prosperity were laid in a series of developments which took place between 1750 and the third quarter of the nineteenth century. Land Reforms The first major development was the break -up of the medieval pat tern of farming. This occurred by two related developments: the en closure of land into consolidated holdings, and the acquiring of more and more land privately owned as small and medium-sized farms. Swedish tenants had customarily tended several small strips of land spread out over an estate. The con solidation of holdings began in the latter part of the eighteenth century and continued apace in the nineteenth century. As a result, there was considerable increase in agricultural production.

158 THE FREEMAN March Another major development was the freeing of trade. Sweden was, in the Age of Mercantilism (seven teenth and eighteenth centuries most notably and disastrously), under the sway of mercantile prac tices. The Swedish government levied tariffs on exports and im ports, granted monopolies, sub sidized production, and restricted domestic trade. These restrictions may well have peaked just after the Napoleonic wars when hundreds of items were placed on a forbidden list. The results were disastrous. By the 1820's a counter trend was getting underway, and by 1860 trade was substantially free so far as the Swedes were concerned. Accom panying the establishment of free trade was the freeing of' enterprise generally from the fetters of mer cantilism. Free trade is often thought of as an absence of or very low tariffs. This, however, is only its most obvious surface feature. What is more deeply involved is the open ing of the way for whoever will to offer his custom in the marketplace.

At its outermost reaches, it is free enterprise. When enterprise was substan tially freed, there was a rapid growth in industrial and agricul tural production. These develop ments are well described by a histo rian of Sweden: Previously, most of Sweden's iron had been exported, but during the last decades of the nineteenth century, a rising proportion of it was used to feed her own industries .... While factories and work shops were widely scattered, the town of Eskilstuna became the llSheffield" of Sweden. And Norrkoping became her Manchester for this and Boras ... were the leading textile centres of the country. Expansion here was not so dramatic, but twice as much cotton was spun in 1900 as in 1870. In addition to these key enter prises, a host of other forms of manufac ture either, like the chemical, electrical and cement industries, appeared for the first time, or were greatly expanded dur ing the period.

. . . In 1860 farming methods were fundamentally little different from what they had been in the seventeenth cen tury. The following decades, however, brought a great transformation. Iron ploughs and harrows began to be widely used, and harvesters and other mechani cal devices were rapidly adopted. The use of chemical fertilizers and the im provement of seed by selection r,aised the productivity of land already under culti vation, while many marshes were drained and wasteland made fertile .... In dairying, the use of the mechanical cream separator, invented by the Swede Gustaf de Laval in 1878, greatly increased the output of butter, which again became one of Sweden's major exports .... 3 These were the conditions within which the Swedes became much more productive and relatively prosperous. No sooner, however, did they substantially increase their productivity than did the gleam of redistribution appear in the eyes of 1978 SWEDEN: THE MATRIX OF TRADITION AND GRADUALISM 159 their politicians. The justification of both redistribution and· control over production was found in socialist ideology. The Social Democrats, car riers of revisionist Marxism, have been the main proponents of this ideology in twentieth century Swe den, but they have been aided and abetted in their endeavors quite often by the members of other politi cal parties. They have made great headway in putting many of these ideas into practice.

Welfare State Capitalism Before getting into that, however, one point needs to be re-emphasized and a new one made. The point that needs to be re-emphasized is that most industry in Sweden has re mained in private hands. Thus,pri vate enterprise (not to be confused here with free enterprise) is the basic source •of such prosperity as the Swedes enjoy. The new point is that the economic system which prevails in Sweden might best be described as Welfare State Capital ism. Some little explanation of the phrase-Welfare State Capital ism-may be helpful. There are those who use the word ~~capital ism" in a laudatory sense, and they are apt to equate it with the free market and free enterprise. Socialists usually use the term in vidiously. Even sO,capitalism is a socialist concept; Karl Marx popularized it. Those who think to pre-empt the term and give it a favorable connotation might do well to reconsider.

~~Ism" smacks of ideology; and ideology smacks of some scheme to use the power of government. How ever that may be, capitalism denotes a preference for or bias in favor of capital expenditure or investment. Socialists use the term to connote a system in which private capital and capitalists are accorded special privileges. The connotative uses of capitalism have entered into the rhetoric which those of all persua sions employ, and there is little likelihood that will change in the foreseeable future; but it is impor tant here that the word be used with as much analytical precision as can be attained. How Capital Originates All peoples use capital, Le., make capital investments. The savage who has an instrument to remove the husk of a coconut is a user of capital. The primitive who saved seed and used an implement to fur row the soil was a capitalist. Every economic system is, in this sense, capitalistic in that capital is employed to increase production.

The only possible difference is in how the capital is provided. There are two basic ways of doing this. One is for individuals to save and invest voluntarily. The other is for the gov160 THE FREEMAN March ernment to take the money from individuals-to confiscate it, that is-and for the investment decisions to be made by those who rule. When the first system prevails it is some times called private capitalism. When the second prevails it can be called state capitalism. Such a sys tem is generally employed in the Soviet Union, for example. Variations and combinations of these two basic systems are possible. The most common combination has been joint financing of projects by private investors and money raised in some fashion by government. Another variation is for government to promote saving and capital in vestment by tax policies. Sweden has used both these methods, but predominately it has provided tax advantages in order to foster ~apital formation and investment. ' One way this is done is by the Investment Funds. These were first authorized by law in 1938, and the enactment has since been amended several times. ((The current position is that by law, every company is permitted to set aside 40 per cent of its profits before tax in any year to an investment fund. There are, however, restrictions attached to this concession. Forty-six per cent of this money must be deposited inter est free in a blocked account in the Central Bank of Sweden and can only be spent on authorisation either by the Crown or by the Labour Market Board for specific projects concerned with in vestment-the only exception is that after five years a company can spend up to 30 per cent of the money set aside without authority from the Board provided this is on a capital project."4 Since taxes on profits of corporations are high, on the aver age about 54 per cent when those of the central and regional govern ments are combined, there is consid erable incentive to place money in the Investment Funds.

Investment Funds The other major device for pro moting investment is the depreci ation policy of the government. All capital expenditure from the Invest ment Funds must be fully depreciated within twelve months of the outlay. All other capital expenditures must be depreciated fully within five years, either in equal installments or on a pre-arranged scale. The re sult: ((There is pressure on the com panies to maintain a steady stream of investment with a major installa tion at least every five years, both to obtain the depreciation tax allow ance and to even after-tax profits."5 It would help in clarifying our thinking if the word capitalism were reserved for use to refer to those systems in which the compul sive power of the state is used to form capital and direct its invest ment or to instances of it. Why?

1978 SWEDEN: THE MATRIX OF TRADITION AND GRADUALISM 161 Because in a free economy there is no preference for or bias in favor of capital expenditure. Nor is it at all clear why there should be preference for capital expenditure over any other in public policy. It may appear that in view of all the benefits that accrue from capital a bias in favor of it might be in order. But appear ances can be deceiving, and they are in this case. It happens that capital expenditure can be wasteful and counterproductive. No benefit would presumably result from expenditure to produce a product which no one wanted. Such expense would be a waste of scarce resources. There will undoubtedly be in stances of malinvestment in a free economy, for there is no certainty that any investment will payoff. But there is a sure way to achieve wasteful and counterproductive cap ital expenditure. It is to separate the ultimate investor from the responsi bility and benefits of careful man agement as occurs in state capital ism, or to make capital expenditures profitable by tax breaks and depre ciation allowances. (In a free econ omy, taxes would fall only on individuals' not on fictitious entities such as corporations and companies.

Hence, there would be no occasion for depreciation allowances and some portion of the present crop of Certified Public Accountants.) It would be descriptive to refer to such systems as capitalism and capitalistic, and they could have whatever onus anyone wished to attach to them. They would describe a prefer ence for or bias in favor of capital expenditure. Identifying the Ideas Since current usage is generally either rhetorical or propagandic, it is necessary to add qualifiers in order to make them as nearly as may be descriptive. The terms pri vate capitalism and state capitalism may be reasonably precise. I here add the phrase, Welfare State Capi talism, by which I understand gov ernment policies, such as those in Sweden, aimed at promoting capital expenditure in support of the wel fare state. A Swede put it this way, ((The state keeps the cow fat in order to increase the amount of milk it can get from it." That is, of course, only a felicitously phrased half-truth. There is evidence that the ((cow" is bloated rather than healthily fat in some industries, such as shipbuild ing, for instance; and there are criti cal shortages, such as in housing, due to misallocation of funds. It is well to keep in mind, too, that Swe den's tax policies are aimed not only at fueling the welfare state but also at bringing industry under cen tralized planning.

Even so, the main point here is that Sweden does not have socialism as that word is understood. The gov ernment may be gradually killing 162 THE FREEMAN the goose that lays the golden eggs, but to date it has put maximum pressure on the goose to lay more eggs. So much has been told to make it clear that the sources of such prosperity as Sweden enjoys are in private industry. Yet Sweden is deeply under the sway of the idea that has the world in its grip. And that idea can be identified with socialism usually. To understand how this can be, it is necessary to expand our under standing of socialism. The heart of socialist doctrine is the idea of purg ing the individual of his pursuit of self-interest. The main line of attack is on the inherited culture and tradition-on the family, the church, education, morality, and so ciety itself. In place of these will come government power. That is what has been happening in Swe den.

On the face of it, tradition is hon ored and preserved in Sweden. This is largely an illusion. Sweden has a monarch, but he does not rule. He sits in at the formal cabinet meet ings for the perfunctory presenta tion of matters that have already been decided, but he may only en liven proceedings by.remarks, not by participating in the decisions. Swe den has an established church with beautiful buildings lavishly fur nished, but few people attend except at Christmas and Easter. Sweden's industry is largely privately owned, but the independence of investors has been eroded away. Sweden has an elected legislature, but the fount of decisions is usually the advice of experts. What remains of tradition has perhaps more importance than the restored hull of a medieval Vik ing ship which has been raised from the bottom of the sea to be put on display in one of the cities, but not much more. Tradition has been eviscerated in favor of gradualism.

The story of how this has taken place needs now to be told. @ Next: 16. Sweden: The Paternal State. -FOOTNOTESlQuoted in Donald S. Connery, The Scan dinavians (New York: Simon and Schuster, 1966), p. 66. 2Paul B. Austin, The Swedes: How They Live and Work (New York: Praeger, 1970), pp. 89-90. 3Stewart Oakley, A Short History ofSweden (New York: Praeger, 1966), pp. 208-09. 4H. G. Jones, Planning and Productivity in Sweden (Totowa, N.J.: Rowman and Littlefield, 1976), pp. 22-23. 5Ibid., p. 31.

Robert Higgs 10 Rules for Understanding Economic Development DURING the past thirty years, con cern about economic development has reached unprecedented heights. Academic writers, periodical editors, foundation directors, and governmental officials have ex pended much time and effort in at tempting to understand why economic development occurs, why it proceeds more or less rapidly, and how to hasten it where it appears too slow. Unfortunately, as a distinctive field of economic development studies has emerged, complete with textbooks and scholarly journals, a body of misconceptions and myths also has emerged to diminish the potential fruitfulness of these efforts Robert Higgs is Associate Professor at the University of Washington and Associate Director of the Center for Studies in Demography and Ecology. His writings include numerous articles as well as books on The Transformation of the American Economy, 1865-1914 and Competition and Coercion.

to understand the process of economic change. Significant progress would result from following ten simple rules of inquiry. Their value is, for the most part, self-evident; but readers famil iar with the literature of economic development will recognize that they are more often ignored than obeyed. 1. DO NOT DICHOTOMIZE THE NATIONS OF THE WORLD. Almost all writers have classified the na tions of the world (sometimes only the .noncommunist world) as either rich or poor, developed or develop ing, more developed or less de veloped. This dichotomization is both false and misleading: false be cause the nations do not fall into two neat camps; misleading because such a division encourages the 163 164 THE FREEMAN March search for explanations of poverty that, with more or less sophistica tion, blame it on the rich. In fact, by any measure one cares to use (e.g., income per capita, literacy rate, ex pectation of life), the nations of the world occupy a continuum, not a dichotomy. The richest and the poorest countries differ starkly, to be sure, but between them lies an enormous variety of intermediate conditions. As one descends from the United States and Sweden through Greece, Mexico, and Turkey, to reach India and Ethiopia, where can a line be drawn to separate rich from poor?

2. DO NOT PERSONIFY THE NA TIONS OF THE WORLD. How often does one read that HBrazil has done this, India has done that." Usually, what is meant is that a certain Brazilian or group of Brazilians has done this, a certain Indian or group of Indians has done that. Nations are abstractions; they do not act. Of course, no one openly disputes this obvious fact; and everyone knows that economy of expression some times warrants the personification of a national society. Yet such usage subtly supports the implicit and mistaken notion that all members of a .nation are alike in essential re spects, that all share the same con ditions, attitudes, and objectives. Nothing could be farther from the truth. Brazilians, like Indians, Thais, or any other people, are di verse in the extreme. They differ greatly in their conditions, at titudes, and objectives. To suppose that ffBrazil does such and such" is to overlook the rich diversity of the individuals who, in the aggregate, constitute the Brazilian nation. It is especially important to notice that many individuals and groups in the poorer countries are rich, and many individuals and groups in the richer coun tries are poor.

3. DO NOT ASSUME THAT THE POORER NATIONS ARE NOT DE VELOPING. Writers who set out to explain ffeconomic stagnation" or fflow level equilibrium traps" are addressing themselves to rare cir cumstances. By any accepted mea sure (e.g., income per capita, liter acy rate, expectation of life), most of the poorer nations are currently de"Underdeveloped countries may be poorer and weak er from an economic point of view than the developing ones, but the painful symp toms from which they suf fer are the same and the disease is the same, no matter whether it is called 'interventionism,' 'statism,' or 'collectivism.'" Gustavo R. Velasco 1978 TEN" RULES FOR UNDERSTANDING ECONOMIC DEVELOPMENT 165 vel oping. Moreover, their rates of development compare favorably with those experienced either his torically or currently by the richer countries. This rapid change is not an artifact of social accounting.

Close observers of such countries as India, Egypt, and Peru (supposedly slowly developing countries) report sweeping changes in the mode of eco nomic life. In such places as Thailand, Greece, and Mexico the rapid pace of change is even more obvious. To picture the poorer economies as tradition-bound, stagnant, and re sistant to change is to accept a false description of current reality. Only a few backwaters remain to fit this long-accepted characterization. 4. DO NOT CONCEIVE OF DE VELOPMENT AS SOLELY ECONOMIC. Economic development revolves around the growth of eco nomic productivity, but such growth takes place as a result of changing human actions. Changes in eco nomic behavior cannot be viewed in isolation from other dimen sions of human action. People raise their productivity in order to gain comfort, wealth, status, power, or security, the principal impetus vary ing from one individual to another.

The incentives that encourage or discourage productivity-raising be havior emerge from the institu tional, cultural, and historical envi ronment within which the individuals act. Changes in this environ ment must precede wide involve ment in the search for higher pro"The value of American aid to underdeveloped coun tries, while scarcely negli gible, is basically limited, because (a) growth re quires more than capital, and (b) 'saving' must be done by the growing coun try itself." William R. Allen ductivity. Perhaps the impetus comes from contact with another culture or from foreign technical knowledge, from new religions or novel organizational schemes. In any event, economic changes grow out of changes in the noneconomic environment. Human behavior forms a whole. To imagine economic development occurring without cor responding developments in the rest of society is grotesque.

5. REMEMBER THAT ECONOMIC DEVELOPMENT IS INHERENTLY DISRUPTIVE AND COSTLY. While economic development augments the comfort, wealth, status, power, and security of some people, it con comitantly diminishes these desira ble things for other people. One man's innovation often implies another man's obsolescence. And as - 166 THE FREEMAN March individuals, few can escape the var ied, undesirable side-effects of the development process. Friedrich Hayek expressed this problem eloquently: ... it is not certain whether most people want all or even most of the results of progress. For most of them it is an involuntary affair which, while bring ing them much they strive for, also forces on them many changes they do not want at all. The individual does not have it in his power to choose to take part in prog ress or not; and always it not only brings new opportunities but deprives many of much they want, much that is dear and important to them. To some it may be sheer tragedy, and to all those who would prefer to live on the fruits of past progress and not take part in its future course, it may seem a curse rather than a blessing. 1 6. DO NOT POSTULATE THAT ECONOMIC DEVELOPMENT IS THE SOLE OBJECTIVE OF SOME (ANY) RELEVANT DECISION MAKER. Simply put, people value many things, and economic de velopment is only one of them. As Peter Bauer has insightfully ob served: . . . conventional incomes could be increased by forcing people to work longer hours or to transfer to more lucra tive but also more arduous or for some other reason less-preferred occupations.

IFriedrich A. Hayek, The Constitution of Liberty (Chicago: The University of Chicago Press, 1960), p. 50. Housewives could be forced to go into paid employment. In fact countless peo ple in rich and poor countries could be compelled to increase their conventional incomes by forcing them to give up work ing habits, attitudes and beliefs which they cherish. It is bizarre to say the least to describe people as irrational for not trying to maximize conventionally mea sured incomes. It is an approach which disregards people's own preferences in such matters as life expectation, posses sion of children, working habits, personal values and social mores, including per sonal preferences for leisure and con templation against higher conventional incomes; it also disregards considera tions of national security.2 7. DO NOT PROJECT YOUR OWN TASTES AND VALUES ONTO OTHERS. To assume that everyone wants what I want, and will bear the same cost to get it, is certain to mislead. Tastes and values differ enormously among the people of the world. If the poor Indians would only eat their sacred cows, they could a vert the threat of starvation advice that is easy for me to give, but rather difficult to take for people deeply committed to the inviolabil ity of all animal life. A long and laudable list of human values (e.g., loyalty to family members in Latin America, devotion to a contempla tive style of life in Asia, adherence 2P. T. Bauer, Dissent on Development (Cam bridge, Mass.: Harvard University Press, 1976, rev. ed.), p. 200.

1978 TEN RULES FOR UNDERSTANDING ECONOMIC DEVELOPMENT 167 to tribal customs and traditions in Africa) has been held up by de velopment enthusiasts as ((barriers to progress." How narrow our vision; how insensitive our appreciation of the values of others. 8. DO NOT ASSUME THAT COM PREHENSIVE GOVERNMENTAL PROGRAMS ARE NECESSARY TO CREATE OR ACCELERATE DE· VELOPMENT. All the countries of Western Europe and their offshoots in the New World, as well as Japan, managed to develop without com prehensi ve governmental planning. Many poorer countries (e.g., Greece, Spain, Mexico, Taiwan, South Korea, Thailand) also. are doing so. Yet the notion· is widely accepted that development requires com"You can be sure that if each Asian worker were backed by $30,000 in capi tal, there would be no mass starvation and no 25 year limit on the average Iife span. Such is the mir acle of wealth. Only a few know how to create it. And the impartial and all-wise free market wi II distri bute it in a manner which cre ates harmony rather than conflict among men."

Harry Lee Smith prehensive governmental planning. Ultimately, the case for comprehen sive planning reduces to the simple fact that some (including the plan ners) wish to coerce others to do what will not be done voluntarily. If people want economic develop ment enough to bear its costs, they voluntarily take the actions that promote it. They migrate to loca tions of superior economic opportu nity, innovate on farms and in fac tories, obtain better educations. If they do not consider the net gains sufficient, they will abstain from such actions. How ironic, then, that the planners should attempt to ~~improve the welfare of the people" by compelling them to bear costs that, in the. people's own judgment, out weigh the corresponding;benefits. 9. DO NOT ASSUME THAT GOV ERNMENTS ARE IMPARTIAL AND BENEVOLENT AGENCIES TO PROMOTE THE PUBLIC INTER EST. Governmental officials are not, in general, disinterested humanita rians. More commonly, they are self-interested bureaucrats, politi cians, soldiers, and dictators. In any event, they are members of the soci ety they rule, and each brings to his office the preferences and loyalties characteristic of his own class, reli gion, region, and ideology. Even if the rulers sincerely wished to pro mote the (~public interest," however, they could not do so. The public has 168 THE FREEMAN "When a businessman is 9ranted a tax concess1on in any country, he would be well advised to prepare himself for the confiscatory taxation or nationalization that wi II soon follow."

P. Dean Russell many interests; indeed every indi vidual possesses a unique and mul tifarious set of interests. It is sometimes said that people do not know how best to serve their own interests, and that therefore the government must act to fill this gap in knowledge. Of course, a govern mental official may know something that I do not know and could benefit from knowing. But the converse is also a possibility. In particular, my precise circumstances and desires, ever changing as they are, can hardly be known to anyone but me. The same can be said, of course, for almost every individual. Governmental officials simply cannot be relied upon to possess superior knowledge. As Hayek says, ((Compared with the totality of knowledge which is continually uti lized in the evolution of a dynamic civilization, the difference between the knowledge that the wisest and that which the most ignorant indi vidual can deliberately employ is comparatively insignificant."3 And even if governmental officials did possess superior knowledge, they could not, for obvious reasons, be relied upon to put that knowledge to good use. As Scott Gordon once put it ((How much enthusiasm for st~tism would evaporate if one were to assume that the government will be run by people like Haldeman and Ehrlichman?"4 10. DO NOT FORGET HISTORY. If this rule were strictly followed, the others would be largely superfluous.

Yet development economics, a quin tessentially historical subject, has been practiced mainly by research ers with neither much knowledge of nor interest in history. Economic development, however, is a histori cal process. To neglect history is to neglect the facts of the matter. And an empirical study that neglects the relevant facts is an absurdity. @ 3Hayek, op. cit., p. 30. 4Scott Gordon, Review of Business Civiliza tion in Decline, by Robert L. Heilbroner, in Journal of Economic Literature 15 (March 1977): 103.

~~~~~~~~~c ~ Ridgway K. Foley, Jr. ~ ~ The Problem € 3 with € 3 Power E L~~~LT'i-~~LT'i-~ WHAT EFFECT does the action of one man exert on the life of another? How much control ought a single individual, or a group of individuals, impress upon the destinies of others? These inquiries represent the meat and marrow of the consid erations underlying the purposive human action. Let us state our abstract premises: no man ought to initiate force against another individual, or de fraud him in any manner; each per son should be free from restraints imposed by other men, singly or in the collective, and should be permit ted to seek his own fortune; applica tion of coercion gains justification only to thwart prior privately initi ated force or fraud and to sanction a common and equal mode of settling Mr. Foley, a partner in Souther, SpaUlding, Kinsey, Williamson & Schwabe, practices law in Portland, Oregon.

disputes between inhabitants which they cannot adjust by themselves. Against the backdrop of these principles, consider the concept of power. One may define power as a position of ascendancy over another person, object, or situation; it con cerns the ability to control a situa tion or to coerce obedience to a com mand. A person manifests power when he possesses the capability of acting and of producing a given ef fect by his actions. Power partakes of coercion and force; it means dominion and control, in this milieu dominion and control of one or more men over the Iives and destinies of other human beings. Thus stated, power represents the antithesis of freedom. Those who love liberty should eschew power and seek self-determination and noninterference with the lives of others. Such an easy answer: easy 169 170 THE FREEMAN March statements in the abstract often present difficult concepts in the ap plication. The core is apparent, the penumbra indistinct. A lesson learned with difficulty involves a life lived without recourse to power over others.

Slight insight illuminates the reason why we can express a dis taste for power in our philosophical guise and yet fall prey to its allure in our daily lives. Man, by nature, exudes sympathy; he seeks to do well, for himself and for his fellow man. Each man, convinced of his own infallibility, sincerely believes that he can better the lot of mankind if only his way represents the chosen path. "There Ought to Be a Law" How often have you heard one say ((there ought to be a law"? Even the most dedicated libertarian some times slips into this easy way of thinking: if only we could compel people to be free, or to accept the free market philosophy, or to treat their neighbors with kindness and love, the world would become such a bet ter place. The ordinary method which comes to mind when one aims to secure laudable goals involves the use of power-but for a ((good" pur pose. Frustration takes control when the stubborn wills of others impede the attainment of ends which the actor believes desirable, right, or necessary.

Consider the individual who holds views similar to those expressed here. All about him the world crum bles by reason of adherence to the socialist tenets concerning the pro duction of abundance by means of people control. Man appears chained to useless laws and insipid politi cians. ~~If only we could elect a liber tarian president and propose laws compelling citizens to accept gold coins or bullion as legal tender," runs a common lament. Yet such political moves, based on power, would not solve our problems. One should not decree that any material be legal tender; men, trading freely, ought to determine by their market choices that which will be accept able: gold, butter, or aardvarks. Election of a libertarian president encompasses a solution only if such a man would act solely on the prin ciples of liberty and carefully avoid any trespass upon the rights of free men to act freely in all endeavors beyond the proper jurisdiction of the state.

On a purely personal scale, one recognizes intrusions of power into almost every facet of life. How often have we discerned an apparent de votee of the freedom philosophy serving on some board or commis sion in a governmental capacity, wholly unaware of his inconsistency and infidelity to the faith? The rule should hold true, whether the par ticipant is a free market economist 1978 THE PROBLEM WITH POWER 171 asked to serve on the Federal Re serve Board, or a local businessman appointed to a state park commis sion: unless the activity promotes the administration of justice or thwarts the initiation of force or fraud, the committed free man ought to decline the position, with explanation, so that his actions re sound in the community. The Tendency to Trample Rights Even the committed freedom philosopher exhibits a predilection to ignore the choice-making rights of his fellow and to impose his will upon his neighbors. The ordinary citizen, unhampered by a devotion to personal freedom and individual 'responsibility, offers a much more likely source of abuse of power. In addition to the natural attributes of sympathy, empathy, and a desire to do good, the human condition dis plays a perverse tendency to exploit his coinhabitants once a person gains ascendancy. It is this bifur cated character which distinguishes man from the angels and from the beasts: man, finite and fallible, can soar to great heights but he can never quite abandon his lower na ture, that shadowy side predestined to coercion and violence.

Power represents the dark side of man's nature, a proclivity which demands ever vigilant attempts to conquer. Persons ascendant over others seldom employ that power in harmony with the desires of the sub jugated. Reason tells us why: no man possesses the talent and insight to determine the best course of ac tion for another man. And, most men in dominant positions don't even evince the impulse to discern and secure those goals. Given this ugly part of man's na ture, and his inclination to subdue and direct those under his sway, one can readily see that rights become trampled in the process. The indi vidual's right (and obligation) to make his own decisions and to choose between alternatives com prise these rights destroyed. And, a right once lost cannot be reclaimed; it is gone forever, and with it a veritable part of the humanity of the possessor. Suppose you desire to purchase furniture for your home. I, as law maker, impose price controls and a minimum wage law upon all furni ture manufacturers. As a result, one-half of the furniture producers who would have occupied a free market are driven from business by their inability to achieve a profit under such circumstances. By my exercise of power, I have limited your choice and deprived you of meaningful alternatives. Once I have impeded your action, you will choose furniture from the stores re maining . You can never reclaim your widest range of choice because other real or potential producers 172 THE FREEMAN March have been excluded from the market by my action.

Again, you create value by pro ducing and selling the service of delivering household goods to cus tomers. You convert this created value into a medium of exchange and use the latter to trade for other goods which renders your life more enjoyable and worthwhile. I, posses sing power as taxing agent, or as commissioner of a public dock, or as a member of the welfare bureau, or in any of a thousand other capacities, deprive you of some of your created or converted value, in the form of taxes. I use these tax funds to audit returns, or to pay for improvements to a dock which bene fits a few persons, or to buy socks or soup for welfare recipients, or for myriad other public deeds. Once I exert my power and reduce your store of value, by whatever means or name, I have deprived you forever of a choice. Unhindered you might have spent those tax funds for food, clothing or shelter, or for time-pieces, amusements, or pencils.

Now, possessing less value, you will purchase either less of the com modities desired or some items to the exclusion of others. Once again, my exercise of power has ultimately narrowed your range of choice be yond regeneration. Power, by its very essence, in volves obliteration of the rights of sonle person. To command or to exercise authority over a person or an event conjures up only situations where the one in power makes deci sions affecting the rights and liber ties of other individuals. One may cede power to another voluntarily, or one may usurp power coercively. Condemnation attends coercive ac tion only, not voluntary choice. When a party establishes a trust, a guardianship, or a conservatorship, when he employs a financial ad viser, investment counselor, or a lawyer, he in effect surrenders power over a part of his life, value, and affairs to another individual or entity. He may make an improvi dent choice, but freedom utters no promise of success. The distinction drawn between a voluntary and a coerced choice is simply that in the former case, the purposive actor makes his own decision, while in the latter case someone else makes his decision for him.

Robbed of Choice Power represents freedom's an tithesis whether one voluntarily re linquishes his choice or the state coercively deprives one of his choice. Voluntary forsaking of choice har monizes with liberty, however, in the sense that man can choose not to choose. Compulsive divestiture of choice represents quite another matter, for here the individual loses all chance to choose. Finally, power feeds on itself.

1978 THE PROBLEM WITH POWER 173 That murky side of human nature contains the predisposition to apply power; it likewise encompasses a drive to enjoy the assertion of power over another. It is this impulse above all others against which one must guard in his daily endeavors, so subtle is its blandishment. Re lated to, but wholly distinct from, the disposition to believe that only the actor knows and can achieve the proper result, the lust for power for power's sake permeates each being. A crafty, almost imperceptible, desire to employ dominion over others pervades our lives. In part, this trait relates to self-interests: each person desires to get his own way in almost all matters. But more than that, man generally enjoys the feeling of exultation collateral to command. Each of us must labor exceedingly hard to bridle this drift in all of our actions, a tendency commonly apparent in the drive of political, business and labor leaders who have outlived their usefulness to strive to retain their seats of jurisdiction.

Liberty Surpasses Power Recur to the earlier suggestion that man displays the decided tendency to seek noble goals by the exercise of power with its concomitant depriva tion of choice. Despite the near universality of this ingrained in stinct, the opposite is true: praiseworthy ends gain attainment through voluntary action rather than coercive application of force. Most phenomena require accep tance by faith; seldom does nature afford us absolute, logically positive, proof. Instead, we gather sufficient evidence to induce conviction, and pronounce a value judgment by way of concllision. I desire to cross a street; I look both directions and listen attentively before I embark upon my way; I cannot say with absolute certainty that no vehicle will jar my journey for one might silently glide around the corner, but I have gathered sufficient evidence to cross the street in a sense of safety. Or, one person may express devotion to another in myriad ways; the recipient of the affection can never be positive about the actor's commitment, but after the passage of time and the accumulation of evi dence, he or she can reach a rea soned decision concerning the rela tionship.

The truth discussed in this section thus rests on faith. One cannot prove to an absolute certainty that free dom works better than slavery, al though rational and empirical evi dence preponderate in that regard. One can never unequivocally dem onstrate that, in a given situation, liberty would produce a better mater ial and spiri tual result than coer cion. For one thing, spiritual bene fits are not subject to proof. For another, mankind does not exist in a 174 THE FREEMAN controlled situation where human experiments can be conducted. No one can measure the damage to the person of one deprived of his 'choice-making abilities, nor can we repeat exact situations in a con trolled and a free state. Nevertheless, those of the liberta rian persuasion steadfastly main tain, on faith and upon sufficient available evidence, that avoidance of power will permit a more desir able outcome than will the use of coercion. One cannot adequately ex plain why a concatenation of human lives takes place, but by and large, such a meshing does occur naturally and regularly. Power corrupts the natural process and thwarts the at tainment of important goals; free dom lights the way to achievement.

Declining the Office Suppose the effect upon the state, the nation, and the world if each potential appointee to a seat of coer cive power reacted to the appointing agency, quietly, thoughtfully and in good taste, without rancor or snob bery, expressing his disinclination to serve in any predatory capacity. Obviously, one cannot reasonably anticipate such universal action. However, the act of one man, or a few persons, rejecting impropriety and spurning power, can serve a dual purpose: first, these actions shine as a beacon for others to observe, con sider and emulate; second, these actions give heart to the weary and frustrated who may rest on the verge of relinquishing all hope for freedom. Surely such an act of rejec tion will be understood and applauded by a few, viewed darkly by some others, laughed at and re viled by many, and ignored by most. Yet, just such a stand as this gains justification because it reflects adherence to the sound principles of liberty and justice. Right actions may not bring material rewards, but spiritual compensation abounds.

What kind of response should ap pointment or proposal for appoint ment or election generate? The riposte must fit the offer, the mood, the community, and the times. No one answer covers every situation. Letters, press conferences, inter views, prepared statements, all sug gest possibilities. Likewise, the con tent of the response demands con formity to the requirements of the event. One can only offer sug gestions, not commands. Two justifi cations light the response: explana tion of the action in fundamental terms not scourged by rhetoric or shibboleth, so that some may com prehend and heed the deed, and ac tion consistent with a faith in free dom. Individual application of these principles to the appropriate oppor tuni ty will swell the tide of princi pled liberty and diminish the unbri dled application of power. @ Hans F. Sennholz Political Medicine Breeds Social Conflict THE advocates of socialized medicine are mostly daydreamers who neither understand the intricacies of medicine nor the economic facts of life. Their words may sound compas sionateand noble when they ex pound the virtues of a national health service that is ~~to secure that everybody in the· country, irrespec tive of means, age, sex, or occupa tion, shall have equal opportunities to benefit from the best and most up-to-date medical services avail able." But in reality, the medical system they can deliver, even when the considerable resources of the Federal government are put at its Dr. Sennholz heads the Department of Economics at Grove City College and is a noted writer and lecturer on monetary and economic affairs. This article is reprinted. by permission from the December 1977 issue of Private Practice.

disposal, is inhuman and highly dis criminatory. It puts politicians and their appointees in charge of an ex tremely important service. It is wasteful of human labor and economic resources, and above all, it generates bitter political conflict harmful to social peace and coopera tion. Medical services, like other ser vices, are subject to a basic economic principle: the demand for any ~~free" service outruns any possible supply. After all, it is basic to human nature and action that the demand for any economic good or service is unlim ited as long as it is ~~free" and ob tainable merely by asking. When the demand greatly out strips the supply, the political au thorities offering the free services and thereby creating the imbalance 175 176 THE FREEMAN March then face agonizing decisions. They may choose to suppress the unlim ited demand by rationing and r:gu lation, and simultaneously expand the supply through ever larger out lays of public funds. Nevertheless, the imbalance can never be cor rected as long as the services remain free and their potential demand un limited. But it is likely to create serious political conflicts on the measures to be taken.

Limited Funds Government resources are always limited to the income and wealth that can be taken from its people by taxation, borrowing, or inflation. When a national health service is to receive more public funds, they must be taken from the people. The victims resent and oppose the mea sure that reduces their income and wealth and limits their spending discretion. It provokes a serious political conflict between the advo cates of national health service spending and the victims who are supposed to provide the financial means. But, the sharpest conflict is likely to ensue between the various recipi ents of public funds. The growing needs of a national health service are in direct competition with the demands of social security, govern ment spending on education, wel fare, housing, and all the other de mands on the limited resources of government. All will fight over the government dollar, proclaiming emergencies and clamoring for top priorities.

The fight over public funds is a political fight that is decided from year to year on the floor of the U.S. Congress. When the Congress adopts the U.S. budget, it imposes a ceiling on total government medical expenditures. The very existence of a ceiling denies and refutes the lofty pretension that a national health service will provide all the needed medical care. The spending ceiling itself then generates an ugly conflict between the numerous branches of the health service. After all, there are 101 dif ferent aspects to medical care and 1,001 specialities that are deserving of the government dollar. And once again our politicians on the floor of the U.S. Congress, most of whom have no medical knowledge, must vote on priorities from eyeglasses to false teeth. Politicians always follow the line of least resistance. They readily give in to medical demands that yield their results quickly and visibly and make a political splash. Inversely they discount and neglect slowly maturing results that are not quickly noticed and pay no political dividends. The pressures of im mediate demand always conflict with the preparations for the remote future when the present politicians 1978 POLITICAL MEDICINE BREEDS SOCIAL CONFLICT 177 may no longer be in office. There fore, politicians rarely take a longer view, which in medical matters causes them to discount the impor tance of preventive medicine, the construction of new hospitals and medical schools, occupational health services, and medical research. In stead, they tend to opt for a free supply of drugs, of doctors' services, and of hospital care.

Deteriorating Service In a political medical care system, the hospitals tend to deteriorate and the number of hospital beds de clines. The system suffers from the insufficient medical equipment, especially newly invented machines that revolutionize established pro cedures. In short, it suffers from all the rigidities and lethargies that characterize centralized political management. But the worst consequence of such a system is the inevitable shortage of hospital beds, medical equipment, and doctors. This creates long wait ing lists for medical care people want and need. In England the Na tional Health Service has an aver age list of more than half a million people waiting for what NHS calls ((noncritical surgery." Many people have to wait for years, or never receive medical help in time. British medical literature is full of horror stories about the consequences of such delays. The doctors themselves are crushed by a huge burden of work.

They have so many patients de manding free medical attention that there is only time and strength for minimal mechanical practice. Doc tors see one hundred or more pa tients a day for a few minutes each, give cursory examinations, and hast ily prescribe something that they hope will do no harm until the prob lem goes away. The patients com plain about their careless treat ment, and the doctors complain about the patients' attitude. The doctor is e~pected to be available to all, at any time and for any ailment, real or imagined. Morale among physicians in a na tional health system tends to be very low. After all, no matter how they serve and labor, their remu neration is determined by budgetary considerations and political deliber ations of fairness and adequacy. A given allocation of funds for remu neration must then be divided among the various groups of doctors in the national health service, the general practitioners, the spe cialists, the hospital staff from the senior surgeon to his junior as sistants. With limited total funds, the health service administration must make most unpopular deci sions of division between the various groups and its individual members.

Even if the administration does not use its remuneration power to 178 THE FREEMAN divide and conquer, which it may be tempted to do, it cannot avoid creat ing suspicion and discontent. The physicians, on the other hand, with this great economic power of the health service administration over them, have no choice but to organize and resort to collective force. In the end, the problems of medicine be come largely political, the physician a politician who is lobbying for the economic interests of his group. In Government in Medicine Great Britainjunior hospital doctors are frequently picketing their hospi tals when they are not lobbying for political action. A redistributive society that transfers income and wealth by political force is a conflict society. A national health service that allo cates benefits and determines re muneration by political force not only is harmful to national health, but also breeds social conflict. @ IDEAS ON LIBERTY THE ADVOCATES of government in medicine point to our· overcrowded hospitals as though they have in mind a solution for the problem. But the fact is that much overcrowding is traceable to increased voluntary insurance benefits, a situation that would only be aggravated if all beds were ((free." The waiting lists for the hospitals of England and Germany are so long that many patients finally gain admittance only to have forgotten why they applied.

The hue and cry of overcrowded hospitals is a twisted statistic, for the beds are overburdened with people who are not really sick. The third party in the. form of health insurance has entered the picture. But the present sad picture, with only part of our population voluntarily insured, would surely be magnified if health insurance coverage were made universal and compulsory. Experience with socialized medicine shows hospitals so overcrowded that the situation becomes near impossible, doctors so overworked that their patients get less and less real treatment, the cost of drugs reaching astronomical figures, the total cost of the social system soaring, and the government calling for investigations. CHARLES G. JONES, M.D., Free Medicine Can Make You Sick Ralph Bradford MakingSense Out of the OUR house guest was a. handsome bachelor of around forty· 'whom we had not seen since he was a teenage boy_ As a very young man he had left high school and joined the army, where he served out an enlistment of several years. Returned to civil ian life, he finished high school and went through college by means of the G. I. Bill's provisions. Mter that he got a good job with one of the government departments in a west ern state.

At the time he ((droppedin" at our house he had been on that job perhaps fifteen years. He had never married, lived frugally, and saved up some money. Also, when his father died he found himself heir to Mr. Bradford is well-known as a writer, speaker, and business organization consultant. He now lives in Ocala, Florida. a substantial legacy. This, plus his savings, he had prudently put at interest. With no family obligations, he figured he could live on the in come thus generated. So he had quit his job and come to Florida to ((look around." And he had got in touch with us for what pointers we might give him about desirable places to live in our adopted state. We soon discovered, however, that the phrase ((looking around" meant much more to him than seeking a new location. He also wanted, as he expressed it, to ((find himself." But that, likewise, was not all. He had set himself, we found, a still bigger task-namely, to ((make sense out of the world." So he was not seeking a new job but expected, as nearly as I could make out, to settle into a career of philosophical speculation.

179 180 THE FREEMAN March What it all came down to, finally, was that this high school and uni versity graduate, who was already at the threshold of middle age, looked upon himself as a kind of sociological lost sheep-a poor little lamb that had lost its way in a rather wicked world. Hence his de sire to Hfind himself." A Conflict of Interests He seemed to feel, also,·that there was some kind of conflict between having a job of any sort and also displaying a concerned interest in the political and economic fortunes of the human creature. But that, too, was not all. As I listened to what rapidly became a monologue he gradually let himself go, and I dis cerned that he seemed really unable to think beyond the familiar and time-worn cliches of the extreme and radical Left. He thought just about everything in the United States was wrong and rotten. In stereotype terms he harped on the evils of poverty, the wickedness of Wall Street, the sins of Capitalism, the tragedy of slums, the barbarities of war-and so on ...

and on. During all this protracted denunciation of his own country, he revealed that he was an uncritical admirer of Lenin, Ho Chi Minh, Mao Tse-tung, and especially of Fidel Castro. His admiration of those characters was equalled only by the fervor of his detestation of the American political and economic system. ~~When a society like ours," he pontificated, ~~ gets too rich, then the people at the bottom of the economic caste system suffer because their jobs are so poorly paid they have less respect for themselves and their posi tion in society. This doesn't happen in countries where most of the peo ple are all poor together. It happens in industrial countries where wealth and affluence are flaunted contin uously in front of the less fortunate people." Later, with evident approval, he added: ~(Some people have claimed that if we got rid of competition, crime, and many jobs that wouldn't be needed in a socialist economy, then every American could have the equivalent of a $20,000 income ....

If people couldn't gain status by competing economically then everyone would be more free to com pete with themselves, that is, by realizing more of their own potential as a person. I don't think there would be much crime, mental ill ness, discontent, or tension in such a world. We have never really had freedom, because what people mean by this is to get away from being oppressed by others so that in their turn they can turn on some one else and live well by the sweat of his work. No one has ever really wanted to eliminate the economic caste sys tem. They merely wanted to get off 1978 MAKING SENSE OUT OF THE WORLD 181 the lower levels and then live better at the expense of those on the bot tom." (Lest you think I may have in vented the rather turgid prose just quoted, I will explain here that it is taken from a letter he wrote a week or so after his visit in our home;) On and on he went, in an endless and tiresome repetition of socialistic cliches and communist phrases. I put up with it for a whole day be cause he was our guest. But finally I had had enough, and told him bluntly that his sophomoric postur ing was neither new nor original that he was only repeating worn-out leftist cliches that I had read many years before, as a very young man, in various socialist journals that I perused avidly in those early days.

He was merely echoing, I said, the tired old communistic jargon of the soap box agitator. At that he pro tested that he was not a communist, whereat I admonished him to stop talking like one, and advised him to season his politico-economic goulash with a dash of Adam Smith and a touch of Milton Friedman. None Is Perfect In doing this I was careful to ex plain that I was not an uncritical apologist for an economic system that sometimes suffered abuses. To defend capitalism, I said, was not to condone the misconduct of some cap italists. American capitalism, I admitted, has its crooks and thieves and petty tyrants and insensitive gougers, the same as socialism in England and Sweden or communism in Russia and Yugoslavia. But we have abundant statutes and legal processes to guard society against crooks, whether of the Right' or Left; and especially we ought not to make the mistake of judging an economic mechanism by the deportment of the relatively few who use it improperly or criminally.

So what? Why bother with all this? Did it have any importance? Should I be concerned because one person chose to denigrate his own country and glorify its enemies? Yes, I think I should, because that man was not alone. I have no way of knowing what percentage of his generation think and talk as he did, but it is probably considerable, be cause many of his age group were exposed to the same sort of leftist collegiate influence; and there are indications that present academic attitudes are doing little to bolster the faith of American students in their country and its institutions. Several years ago I participated in a program that booked me as a ~~col lege visitor." Under its arrangement I would spend two and sometimes three days on a campus, usually with a formal lecture before the stu dent assembly, and with visits to various classes, and one or more question and answer sessions. In 182 THE FREEMAN March those engagements I was amazed to discover the extent to which the same antibusiness, pro-socialistic line was being followed, not by stu dents alone, but by faculty mem bers. I was not making pro-business talks. In my book, being a busi nessman does not confer any special degree of sanctity. My concern was with the principles of freedom; and I spoke for the freedom-from-too much-government philosophy that is well-known to Freeman readers.

Yet more than once I was accused, not only by radical students but by left-leaning faculty members as well, of being an apologist for Hbig business." Would I fare any better today? I doubt it. The casual visitor whose sophomoric diatribes inspired the writing of these paragraphs has long since vanished from my life. He was a rather pleasant chap, decent in his personal life, charitable in his in stincts and impulses. Some trauma tic experience of his youth may have warped his judgment about economic and political reality. Cer tainly he was quite practical about conserving his own cash-and bliss fully unaware, the while, that he himself was a capitalist! I suppose he was really just a casualty of his cliche-ridden generation-a victim of the unbalanced exposure to radi cal propaganda that was experi enced by the average college student of the forties and fifties-a barrage that was still in full thunder, as I have indicated, when I was a college visitor in the mid-sixties.

I note that a discouraging num ber of young people are still trying to ((find themselves." Over and over again I am informed via television interviews and talk-show appear ances that students are still working on the task of nputting it all together" -whatever that may mean. And as for nmaking sense out of the world," this appears to be a devout preoccupation of everybody under thirty! Thinking vs. Working Some of these Seekers after Truth, like our visitor, seem to feel that there is a disharmony or an tagonism between laudably enlarg ing their view of life and the ordi nary business of holding down a job and making a living. But the two things are not necessarily at odds, or in any way mutually exclusive. To be sure, there are people who spend their energies in amassing money to the exclusion of other val ues, but that is because they are simply that kind of people. At the opposite extreme, they would spend Saturday evening at the neighbor hood saloon instead of attending a free concert in the park. Poverty can indeed place severe restrictions upon intellectual development, and the possession of money does confer decided advantages; but these 1978 MAKING SENSE OUT OF THE WORLD 183 things are not conclusively deter minant.

Of course when you attempt to ~~make sense out of the world" you set yourself a rather 1arge task. The world has always been full of cruelty and selfishness and senselessness. It also exhibits amazing reservoirs of decency, devotion, dedication and human kindliness. In larger view, its peoples have always swung from ex treme to extreme in their efforts to devise governmental mechanisms under which to regulate their· rela tions with one another. Alternately this has led to such triumphs as the Athens of Pericles, and to such chaos as was to be found in central Europe prior to Char lemagne. It has contrasted theintel lectual achievements of the so-called Saracenic culture with the back ward state of Christendom during the same period. And today it pre sents the conflicting ideologies found in. the representative democracies, the dictatorships of the right, those of the left, and the hodge-podge of petty tyrannies that exist in some of the ~~emergent" states.

In all this welter of ideological conflict and experimentation, it has seemed to me that the· best course for the individual is to make sense, so far as he can, out of his own life, rather than out of the billions of lives that make up ~~the world." In this effort he will be wise to place major emphasis on his own mental and spiritual development. Since he can not live very richly in self-contemplation alone, he will relate himself to what goes on about him. But above all he will see inde pendence and self·improvement,not just as political or social ideals, but as practical aspects of the business of successful Iiving. I can see no reason why he can not do these things while filling even a routine job. The one thing is a matter of bread and butter. The other is a thing of the spirit. But there is no necessary conflict between them. The main thing, I suppose, is to travel hopefully, as enjoined by Robert Louis Stevenson; to· follow Thomas Carlyle in the realization that we move through mystery to mystery-but. never to yield to his pessimistic conclusion that we pro ceed nfrom darkness and into darkness." ® IDEAS ON LIBERTY Ralph Waldo Emerson EVERY great and commanding movement in the annals of the world is the triumph of enthusiasm. Nothing great was ever achieved without it.

Earl W. McMunn AWAKE or ASLEEP? OVER-REGULATION by government is crippling our agricultural system. But is doesn't stop there. Govern ment meddling is a major threat to our entire productive economy. And a lot of people who should know better are asleep to the danger. Land use, pesticides, air and water quality, energy, taxation and destruction of profit incentives: these are issues which will deter mine the destiny of agriculture and living standards for more than 200 million Americans. The question is whether govern ment promotes progress by robbing individuals of their right to choose. This right of free choice is being taken away by those who believe in an all-powerful government. They Mr. McMunn was for many years editor of The Ohio Farmer and is now director of public relations for Robinson Hybrids, Inc., of Delaware, Ohio. This article Is reprinted from The Ohio Farmer, December 1977. Copyright, The Harvest Publishing Company.

184 do this in the name of ((promoting the public welfare." And yet, history shows that individuals have always done best at solving social and economic problems when they have been free of government tyranny. Think what has been ac complished to improve the lot of mankind just since the turn of this century! Our average life span has been increased more than 30 years. Sound of the human voice can be flashed to any point on earth in a fraction of a second. A person can cross our continent in less than four hours. Almost everyone can own a ((horseless carriage." Many dread diseases have been conquered. We produce enough food for every one-and more. These are only a few of the won ders of our age. They were not prod ucts of government planning or in tervention. Instead, they resulted from uninhibited, creative thinking by free individuals.

AWAKE OR ASLEEP? 185 So freedom to think, to plan, to choose, to dare, to win and to lose is the key to human progress. And this freedom to choose is the prize we are losing. It is a basic human right we may still support with lip service. But the truth is, we are letting it die of neglect. Some freedom of choice is lost every time a new item is added to the agenda of ~~free government service." Wrong Signals It isn't just what government spends for us-even though this is bad enough. The real danger is in getting signals from the wrong source. And in accepting their mis leading messages as gospel truth. Producers who get their signals from the marketplace can usually rely upon the information they re ceive. Strong demand is a signal to supply more of the product. Weak demand is a sign to cut back. It is different when government meddles. Signals between producers and consumers are garbled or delib erately distorted. Political consider ations interfere with economic facts of life. The concern becomes: ~~What will Congress or the President de cide?" Not: ~~What do the customers want?"

Substituting misleading political signals for information from the marketplace isn't new. It has been growing during recent years. But its basic weakness has been brought into clearer focus by events of recent months. Even liberal politicians ap preciate the need for a sound private economy. Tax money is more plenti ful and easier to collect when people are working at productive jobs. Politicians like to have fat chickens to pick. But when business decisions are based upon political considerations, (~confidence" becomes the watch word. ~~Can we believe what the President says?" Or ~~Can we trust lawmakers who mouth hatred for ~business ripoffs' while pushing for an ever-larger tax bite?" These are questions which influence the way the economy will perform. And they are far removed from that basic issue of what consumers want and how producers will be motivated to respond. Our economy is performing in an erratic fashion and political meddling is a major reason. The economy grew at a rate of only 3.8 per cent during the third quarter of this year. The stock market was almost 20 per cent lower than it was the first of the year. And the dollar has been losing ground to almost every major currency in the world with the exception of the Canadian dollar.

As a candidate, President Carter said he would provide stable and predictable government policy. This is what business needs, but so far it 186 THE FREEMAN March has failed to materialize. In fact, business leaders everywhere point to political meddling as a major rea son for the sluggish economy. This is critical, because business decisions on investment and produc tion will determine the level of economic activity. And the Adminis tration counts on economic growth to balance the budget, reduce unem ployment and pay for a long and costly list of social programs. Political-Overkill The underlying fact is that politi cians are trying too hard to run the economy. This applies alike to the President and to a majority of the lawmakers. Politicians who ,promise to cure every ill are likely to -kill more patients than they cure. And political aims -are often con flicting or mutually self-defeating.

One ofthe President's promises was a balanced budget.' He also said he would reduce inflation, cut unem ployment, raise the minimum wage, strengthen the power of labor unions, provide a nationwide system of public health care and expand a number of other social programs. Push one of these - aims and you undermine something else. The truth is we have cultivated unreal hopes about what govern ment can do for us and have not taught people to count the cost. We are looking to government as the source of our prosperity when we should be understanding that wealth is created by a productive private economy. Charles B. Shuman, former presi dent of the American Farm Bureau Federation, sums it up as well as anyone when he says: ~~The greatest threat to the future of our nation to our freedom-is not foreign. mili tary aggression or internal com munistic subversion but the grow ing dependence of the people on a paternalistic government. A nation is no stronger than its people and the best measure of their strength is how well they accept responsibility.

There will never be a great society unless the materialism of the wel fare state is replaced-by individual initiative and responsibility." Yes, too much political meddling is picking our productive economy to pieces. And we of the agribusiness community can interpret some of the damage in terms of meaning to all the people. Ban pesticides-and you lower food quality. Interfere with fertilizer supplies-and pro duction suffers. Destroy profit incen tives-and our food abundance fades away. Take away individual free dom-and we lose the driving force which made us the most favored people on the face of the earth. Bureaucrats expand their power by promising more than they can deliver. They will continue to be oppressive and heavy-handed. But their failures explain the growing 1978 AWAKE OR ASLEEP? 187 disenchantment with government which shows up in one public opin ion poll after another. Large num bers of people are already complain ing about the stupidity and unfair ness of government. These numbers will continue to grow. And the thirst for individual freedom is an in grained force in human nature which cannot be permanently de stroyed. This is the real hope for the future.

Hope versus Fear We have a great story to tell. Are we awake to the opportunity? This is the question. All of us have others we can influence. Decision-makers respond to aroused public opinion. And we will start to move away from the stifling hand of government in tervention when enough people get fed up with the havoc it is creating. Don't lose heart. The time of that awakening may come sooner than you expect! @ IDEAS ON UBERTY THERE is no escaping the fact that human effort is motivated by hope of reward on the one hand, and by fear of punishment on the other. The ideal combination is rewards that are great and reasonably attainable and punishments that are not too severe. America's economic progress is the result of conditions which have provided maximum opportunities for reward, but which have limited the penalties to personal insecurity and business bankruptcy. At the other extreme is the totalitarian state, which promises security at the expense of freedom and which attempts to ttencourage" initiative by the threat of the concentration camp or firing squad.

Under free competition based on personal responsibility and volun tary cooperation, our production of useful goods and services has exceeded anything ever before acomplished. True, we are far from perfect, and in some respects we seem to have been drifting backwards. The big point is that our progress to date is the result of an entirely new and different form of political structure which made it possible for human energy and individual initiative to work under their own natural control. Henry Grady Weaver, The Mainspring of Human Progress A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN Enemies of Society THE HISTORY of the ancient world, says Paul Johnson in his masterly and provocative Enemies of Society (Atheneum Publishers, 122 E. 42nd St., New York, N.Y. 10017, 278 pages, $9.95) is to a large extent a history of lost opportunities. The Greek and Roman civilizations trembled on the verge of significant take-offs, but, even as every other previous civilization since the origi nal ((Neolithic breakthrough," they lost momentum and fell back. Does it have to be that way always? Mr.

Johnson, a former editor of the En glish weekly, The New Statesman, thinks not. But in his opinion it will take a reaffirmation of moral abso lutes, including an additional ((new and secular" Ten Commandments, to rescue the modern take-off (which began in seventeenth-century Brit ain) from the conni vings of the groups which, for shorthand pur poses, he calls the Fascist Left. Mr. Johnson begins his book by doing his own Gibbon. But his ver188 sion of the famous ((decline and fall" of Rome is more subtle than the earlier attempts at explanation. It was not the decline of Roman law that signaled the end of the empire, it was an over-proliferation of laws. The earlier Roman rule, he says, was not free in that it accepted the principle of ((one man, one vote." It was ((free in the more fundamental sense as understood by Thomas Hobbes, when he wrote: (The free dom of the subject is the absence of laws.'" This is equivalent to saying that laws should be few, clear and simple.

When the laws are clear and the distinctions between what belongs to Caesar and what belongs to God are understood by everybody, energy is free to flow. The early Roman Republic was committed to a liberal economic process presided over by a ((night-watchman state." The political power was exercised by elite minorities who saw no reason to interfere with freedom of moveENEMIES OF SOCIETY 189 ment and of trade or with an accom panying freedom of communication, speech, occupation and religion. Citizen or Slave The flaw in all this is that if you weren't a Roman citizen, you could be a slave. This was an inheritance from the Greek world. The more that territory changed hands as the legions marched and counter marched, the more people were Hplunged ... into the servile caul dron." Dynamism was lost. With plenty of muscle power provided by the slaves, no need was perceived for technological experiment. When an inventor devised a new way of drag ging marble to the Capitol, the Em peror Vespasian paid the man off but refused to make use of the idea.

The poor, said Vespasian, must be allowed to earn a pittance. The Romans developed a taste for small-scale but expensive luxury goods from the East. Exports could pay for the luxuries up to a point. But once the provinces had learned to make pottery and textiles and grow their own grain and grapes, the balance of trade swung heavily in favor of the East. Gold taken by the Romans from conquered peoples flowed to India, the ~~sink of the metals." It did not come back recycling had not been discovered. So inflation accompanied the rise of the Caesars. The laws proliferated in the vain attempt to contain the inflation. Taxation destroyed the middle classes. Under Diocletian there were only the upper classes, the honestiores, and the lower group, the humiliores, or (teveryone else." Diocletian promulgated universal price-fixing ~~under penalty of death." It was unworkable. With populations falling and the cities deserted, the barbarians from out side the empire soon had an obvi ously superior culture.

The Dark Ages The Dark Ages were based on feudalism, but the feudal serf was not quite a slave. He sold part of his time to his lord for protection, which implied a contract. Northern Europe climbed out of darkness by its technological inventiveness. The collar-type harness and the selective breeding of larger horses enabled it to develop long-distance land trans port. The iron stirrup came under the Carolingians, enabling the ar mored knight to manage himself and his horse as a unit. The heavy iron plow changed the whole land scape as new fields were brought into production. The Romans had never developed the geared water mill, but mills became a com monplace for making hemp, (tfull ing" cloth and running iron works in the years before the thirteenth century. Populations grew, only to fall into the ~~Malthusian trap" with the Black. Death. But the plague 190 THE FREEMAN March raised the price of labor, and the serfs took to the towns. A new class grew up to mediate between the honestiores .and the humiliores.

The modern take..:offtook place in England partly because the British made the best possible use of re sources in exporting surplus popula tions to America. The open world frontiers controverted Malthus. But it was the superior British law of property, which gave certainty to the enterpriser, that really encour aged the inventiveness that put the industrial revolution into high gear. Mr. Johnson calls liberal capital ism the ~~permanent miracle." But then he hedges. To keep the Hper_ manent miracle" going, he says, we must deal with a Hsyndrome of symptoms" which take the form of ~~ecological eschatology." Eschatol ogy is the doctrine of ~~last things." The Four Last Things, according to the ecological eschatologists, are to be the poisoning of the air, the exhaustion of the soil, the final con sumption of our planet's resources, and eventual mass starvation. A Self-Cleansing Universe Mr. Johnson believes this is all nonsense. He can cite chapter and verse. The universe is a Hself cleansing mechanism." Man can do violence to his environment, but an average-size hurricane releases the energy of 100,000 H-bombs. We have survived thousands of hurricanes. The ten million tons of man-made pollutants in the atmo sphere must be set against the 1,600 million tons of methane gas emitted by natural swamps every year. Car bon monoxide is produced by cars, but in insignificant amounts when compared to the carbon monoxide produced by nature.

The madness of the doom-sayers is compounded by people who misuse the language and by professors who engage in their own form of academic Newspeak. The Marxists make use of the confusion to pro mote their own ends. And the theorists of Hmodern black racism," such as Franz Fanon, preach dooms day ~~for whites only" in their cam paign to substitute the exploited blacks for the white Marxist work ing class as the true proletariat. To save the situation Mr. Johnson calls on the Hbourgeoisie" to reassert its own values. Among the ~~ten sec ular" commandments that must be added to Mosaic law is the ~~moral axiom" that democracy is the ~~least evil" form of government. Laws must guarantee property. And words must be used accurately and in good faith. Mr. Johnson has, of course, de clared war on most of our intellec tual classes. But the truth is on his side, and his enemies-Marx, Freud, Marcuse, Fanon, the Club of Rome, and so forth-will surely not prevail.

1978 OTHER BOOKS 191 THIS NATION SHALL ENDURE by Ezra Taft Benson (Deseret Book Company, P.O. Box 659, Salt Lake City, Utah 84110,1977) 152 pages • $4.95 Reviewed by Melvin D. Barger ALTHOUGH obviously written for the membership of The Church of Latter-day Saints, This Nation Shall Endure is a reassuring book for Americans of other faiths. It car ries some disturbing commentary about the erosion of values that has been robbing us of vitality and pur pose. At the same time,however, it expresses complete confidence that we will eventually rediscover this nation's spiritual foundations .. The book is a powerful statement of Mr. Benson's religious convictions, and it also reflects his patriotism and his beliefs in the free market, private property, and limited government. Ezra Taft Benson attained na tional prominence as U.S. Secretary of Agriculture during the Eisenhower Administration, and more recently he became President of the Council of Twelve, the rank ing apostle of his Church. A descen dant of one of the original Mormon pioneers who made the historic trek to the Salt Lake Valley with Brigham Young in 1847, Mr. Ben son has had a distinguished career as an educator and as a prime mover in farm organizations. He speaks as one who has deep roots in the Mor mon traditions and long experience with the economic concerns of West ern farmers and ranchers. He also espouses the indi vid ualism and self-reliance of farm-bred Ameri cans without endorsing the populist contradictions that have trans formed many farmers into Federal dependents.

In Mr. Benson's view, the United States didn't just happen and the successful bid for Independence was not, as some argue, only the result of good fortune, help from the French, and ineptitude by the British gener als. No, this nation was directly created by God, and has been bless ed above all nations in accordance with· Biblical. promises. The Decla ration of Independence is a ~~spiritual manifesto, declaring not for this nation alone, but for all nations, the source of man's rights." As for the U.S. Constitution, it is workable only with a righteous peo ple, and Mr. Benson quotes this statement from the first John Adams: ~~Our constitution was made only for a moral and religious peo ple. It is wholly inadequate to the government of any other." To anybody who is familiar with the early persecution of the Mor mons and the tragic deaths of Joseph Smith and his brother by mob violence in 1844, it is indeed ironic that Mormon leaders such as 192 THE FREEMAN Mr. Benson are today the most pa triotic of Americans. The great Mormon migration to Utah in the late 1840s was actually a flight to another country, and for years af terwards there were real differences and even armed conflict between the Mormons and the Federal govern ment. Mr. Benson does not touch on these problems, but he does offer a stirring defense of American free dom and democracy.

Mr. Benson argues that the cur rent threats to American freedom come from the external menace of the Soviet Union and internal moral decay. If anything, the latter is the more serious problem, because a morally decadent people lack both the will and the strength to resist a powerful foreign aggressor: HAmeri ca's foundation is spiritual. Without the moral base to our system, we are no better off than other nations that are now sunk into oblivion. If we are to remain under heaven's benign protection and care, we must return to those principles which have brought us our peace, liberty, and prosperity .... Our problems today are essentially problems of the spirit." Will we make that necessary re turn to faith? Mr. Benson believes that we will and he ends on an optimistic note, quoting abundantly from Mormon writings and Biblical prophecies. He views restoration of faith as an essential part of the Divine plan, and he terms the United States the Lord's base of op erations in these last days. ttThis nation will endure," he states. t1t may cost blood, but it is God ordained for a glorious purpose. We must never forget that the gospel message we bear to the world is to go forth to the world from this nation, and that gospel message can prosper only in an atmosphere of freedom.

We must maintain and strengthen our freedom in this blessed land." For non-Mormon readers with strong Christian beliefs, Mr. Ben son's book seems conciliatory and gracious toward other religions. For religious skeptics who still follow libertarian principles, the book is a helpful guide to the political and social views of the Church's current leader. For anybody who is con cerned about this country's future, Mr. Benson's book is a welcome change from the religious doomsday literature that has been flooding the market. This nation does deserve to endure, despite its many faults and sins. ® ttlC Freeman VOL. 28, NO. 4 • APRIL 1978 Guilt, Responsibility and Western Prosperity Charles Dykes 195 A rising standard of living hinges on the elevation of spiritual, moral and educational standards. The Hidden Costs of Free Lunches Gary North 200 Free lunches, if legislated, are devastatingly expensive to the recipients.

Living Together Roger Donway 204 Concerning the bonds of sociability underlying the concept of laissezfaire. The Farm StrikeWill It Do More Harm than Good? Leland P. Cade 211 Is a cost-price squeeze sufficient reason to repeal the law of supply and demand? Levels of Discussion Hans F. Sennholz 215 All ideas must be submitted to the test of free discussion which is a reliable friend of truth. Is the Free Market Ethical? Fred E. Foldvary 220 A market free of coercion is on firm moral ground. World in the Grip of an Idea 16. Sweden: The Paternal State Clarence B. Carson 223 The curious notion of the paternal state could hardly have come from a careful study of history. What Price Control Really Means Lawrence W. Reed 235 The history of price control is the history of shortages, queues, and dissatisfied customers. Constitutional Restraints on Power Edmund A. Opitz 239 Government is the power structure that free men are obliged to restrain.

Book Reviews: 244 "Beyond Failure: How to Cure a Neurotic Society" by Frank Goble "A Critique of Interventionism" by Ludwig von Mises "Notes and Recollections" by Ludwig von Mises "On the Manipulation of Money and Credit" by Ludwig von Mises "It's No Sin To Be Rich: A Defense of Capitalism" by William Davis "The People Shapers" by Vance Packard Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding. ' @FreemanW A MONTHLY JOURNAL OF IDEAS ON LIBERTY FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson, N.Y. t0533 Tel: (914) 591-7230 Leonard E.Read, President Managing Editor: Paul L. Poirot Production Editor: Beth A. Hoffman Contributing Editors: Robert G. Anderson Bettina Bien Greaves Edmund A. Opitz (Book Reviews) Brian Summers THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of pri vate property, the free market, the profit and loss system, and limited government.

The costs of Foundation projects and services are met through donations. Total expenses aver age $18.00 a year per person on the mailing list. Donations are invited in any amount. THE FREEMAN is available to any interested person in the United States for the asking. For foreign deli very, a donation is required sufficient to cover direct mailing cost of $5.00 a year. Copyright, 1978. The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid: 3 for $1.00; 10 or more, 25 cents each. THE FREEMAN is available on microfilm from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "The Farm StrikeWill It Do More Harm than Good?" and "World inthe Grip of an Idea."

Charles Dykes Guilt, Responsibility ()1'\d Western Prosperity ONE of the great differences between ancient paganism and early Chris tianity was in their varying con cepts of responsibility. Responsibil ity has generally been defined as ~~the human sense of answerableness for all acts of thought and conduct."l The pagan, however, located respon sibility primarily in his environ ment-e.g., fate, the stars, the gods, and the like, whereas Christian faith insisted on individual moral responsibility. Orthodox Chris tianity was not then nor is it now ~~concerned with the pointless questions about heredity, environ ment, the stars, or any other like search for a cause." Rather the Christians perceived that Hthe pagan search for causes is a denial of the person and also of responsibil ity."2 Ours is a time when the pagan Mr. Dykes Is a businessman, freelance writer and enthusiastic advocate of the free market.

and Christian concepts of responsi bility are often curiously mixed in the same minds, resulting in a strange new doctrine wherein some men are considered to be the help less victims of environmental de terminism, while others are de clared to have a free will, albeit an evilone. In his analysis of egalitarianism, P. T. Bauer provides an example of this kind of thinking: ~~The poor are often envisaged as a distinct class at the mercy of the environment, with no will of their own, while at the same time they are denied the pri mary human characteristic of respon sibility. The rich are regarded as having a will of their own, but as being villainous. Poverty is seen as a condition caused by external forces, while prosperity, is viewed as the result of conduct, although rep rehensible conduct. The poor are considered passive but virtuous, the rich as active but wicked."3 195 196 THE FREEMAN April Thus in contemporary egalitarian demonology, the ~~rich" and their machinations have become the ~~stars," ~~fate," or other ~~causes"

which afflict the ~~poor." Search for Scapegoats This abiding human passion to transfer responsibility for one's own sin and failure to someone or some thing else can be illustrated by in numerable examples. Some years ago, G. K. Chesterton wrote of his encounter with anti-Christian books in days prior to his conversion. He noted that Christianity ~~was at tacked on all sides and for all con tradictory reasons .... " He con tinues, ~1 was much moved by the eloquent attack on Christianity as a thing of inhuman gloom. . . . They did prove to me in Chapter I. (to my complete satisfaction) that Chris tiani ty was too pessimistic; and then, in Chapter II., they began to prove to me that it was a great deal too optimistic." He was impressed by the argu ment that Christianity was weak, timid and cowardly with regard to fighting, then turned the page and ~~found that I was to hate Chris tianity not for fighting too little, but for fighting too much. Christianity, it seemed, was the mother of wars"

and ~~had deluged the world with blood. . . . The Quakers (we were told) were the only characteristic Christians; and yet the massacres of Cromwell and Alva were charac teristic Christian crimes."4 A few years later Ludwig von Mises was moved to say that ~~Noth ing is more unpopular today than the free market economy, i.e., capi talism. Everything that is consid ered unsatisfactory in present day conditions is charged to capitalism. The atheists make capitalism re sponsible for the survival of Chris tianity. But the papal encyclicals blame capitalism for the spread of irreligion and the sins of our con temporaries, and the Protestant churches and sects are no less vigor ous in their indictment of capitalist greed. Friends of peace consider our wars as an offshoot of capitalist im perialism. But the adamant nation alist warmongers of Germany and Italy indicted capitalism for its ~bourgeois' pacifism .... Sermonizers accuse capitalism of disrupting the family and fostering licentiousness.

But the ~progressives' blame capital ism for the preservation of al legedly outdated rules of sexual restraint."5 Thus Christianity and capitalism have often been the ~~scapegoats" on which the sins and shortcomings of many have been laid. More recently, the wealth of Western nations-a product of Christian capitalism has been attributed to u neo colonialism," the indictment put forward by socialists of all stripes that the nations of the Western 1978 GUILT, RESPONSIBILITY AND WESTERN PROSPERITY 197 world (the Hhaves") derive a large and essential part of their affluence from exploitative investments in the underdeveloped nations (the ~~have-nots"). President Julius Nyerere of Tan zania put it this way: ~~I am saying it is not right that the vast majority of the world's people should be forced into the position of beggars .... In one world, as in one state, when I am rich because you are poor, and I am poor because you are rich, the trans fer of wealth from the rich to the poor is a matter of right; it is not an appropriate matter for charity .... "6 Here we have not only the accusa tion that the rich nations are re sponsible for the poverty of the poor nations, but also the claim that the rich have a moral responsibility to redistribute their ill-gotten gain to the masses of undifferentiated poor.

Accusations of the West Like the critics of Christianity and capitalism, the Third-World apologists really get carried away. According to Dr. Lewis H. Gann, Hthe hated American plotters, like the Elders of Zion in the Nazi polemics of old, can do no right. If they invest overseas, they exploit foreigners. If they do not. invest abroad, they are guilty of boycotting other countries. . . . If capitalists earn profits, they impoverish the masses. If they· do not earn profits, they prove that capitalism must be decadent. If American entrepre neurs try to preserve indigenous customs in the Third World, they promote ~dysfunctional' forms of tribalism. If they disrupt indigenous customs, they are guilty of cultural genocide. The list can be extended indefinitely."7 Dr. Gann concludes: ~(The real or assumed machinations of foreign capitalists supply a uni versal excuse for the political and economic failures of the Third World."8 Accusations that the West in gen eral, and capitalism in particular, has caused the poverty, hunger and backwardness of the Third World, are totally without foundation.

There are able studies which set forth the truth,9 but the urge to masochism remains strong, espe cially among Western intellectuals and churchmen. P. T. Bauer and B. S. Yamey cite a leaflet put out by a student organi zation in Cambridge, England: ~~AI most all of us in this country belong to the small minority of those who made it to prosperity. But we climbed on the shoulders of the rest-the ones we left behind abandoned to disease, poverty, and unemployment. We took the rubber from Malaya, the tea from India, raw materials from all over the world, and gave almost nothing in return." The truth, according to Bauer and Yamey, is that ~~Western governments and enterprise 198 THE FREEMAN April brought rubber to Malaya and tea to India which were not indigenous to these countries."lO Why the Difference? Given the obvious economic supremacy of the West vis-a-vis the rest of the world, and given the equally valid, if not so obvious, fact that this supremacy has not been achieved at the expense of the rest of the world, why is the West-and especially America-prosperous, while the remaining two-thirds of mankind are part of the world's hungry billions? We cannot give a detailed explanation here, but can indicate, several conditions that were essential in preparing the way for the affluence we now enjoy.

First, one need not be a believer to notice that the poor nations are those where Christianity has had little influence or has not taken strong root. On the other hand, the rich nations, those where agricul tural surpluses are a chronic prob lem, are those where the dominant formative values have been Christian-and in particular, Protestant Christian. Cattle and monkeys thrive in India because they are considered sacred; no Hindu would kill a cow because he is afraid of offending his god, nor are cattle and monkeys usually driven away from crops, even when they are consuming food desperately needed by the starving. Here we see false religion leading directly to bad farming. Second, the Reformation gave to Europe a new understanding of using and enjoying the material world. The older asceticism was es sentially rejected and a new work ethic emerged which provided the dynamic for the economic explosion that was to follow over the next four centuries. Third, the Puritans as sisted mightily in the development of modern science and encouraged men to master their material envi ronment. ll (It is not well known, but of 68 men on the original list of the Royal Society for whom information on their religious orientation is available, 42 were Puritans.)12 They were instrumental in bringing the Scientific Revolution, which pro vided the theoretical and technical foundation for the Industrial Revo lution.t 3 We should, moreover, not forget the influence of Puritanism on education. Universal education is an inheritance directly traceable back to the Reformers, and their heirs, the Puritans. 14 And finally, as Irving Kristol has reminded us, ~~the Founding Fathers intended this nation to be capitalist and regarded it as the only set of economic arrangements consistent with the liberal democracy they had established."15 The above represents, of course, only some of the more important historical antecedents making for 1978 GUILT, RESPONSIBILITY AND. WESTERN PROSPERITY 199 Western prosperity. In relating this back to present conditions in the Third World, are we not justified in believing that if they are ever to appreciably raise their material standard of living, they must first raise their "spiritual, moral, and ed ucational standards. Only by achieving a society com.m.itted to individual responsibility and moral accountability for both persons and institutions will they approach the material well-being of the West.

Is it any surprise that the de veloped nations not only have the most productive economies but that their citizens enjoy the greatest de gree of freedom? As Friedrich von Hayek has stated: ((What strikes one above all is the general achievement . . . of practically all developing countries which have embarked on the road of consistent market econ omy to pull themselves out of the mire of poverty. What also strikes one is the hopelessness of those who have tried the road of socialist methods."16 @ -FOOTNOTESIDavid Fyffe, "Responsibility," in James Hastings, editor: Encyclopedia ofReligion and Ethics, Vol. 10, p. 739. Scribners, 1908-1922. 2R. J. Rushdoony, Revolt Against Maturity, p. 89, Fairfax, Va.: Thoburn Press, 1977. 3IrvingKristol & Peter T. Bauer, Two Es says on Income Distribution and the Open Society, pp. 17, 18. Los Angeles: International Institute"for Economic Research, 1977.

4G. K. Chesterton, Orthodoxy, pp. 84, 85, 87. Garden City: Image Books, 1959. 5Ludwig von Mises, Planned Chaos, p. 17, Irvington, N.Y.: FEE, reprinted 1972. 6Julius Nyerere, African Affairs, pp. 242-50. April 1976, quoted in P. T. Bauer & B. S. Vamey, Commentary, ((Against the New Economic Order," p. 27. April 1976. 7Lewis H. Gann, Neo-Colonialism, Im perialism, and the 'New Class', p. 10. Menlo Park, Ca.: Institute for Humane Studies, Inc., 1975. 8Ibid., pp. 4, 5. 9See P. T. Bauer, Dissent on Development, Cambridge: Harvard University Press, 1972. lOp. T. Bauer & B. S. Yamey, Commentary, "Against the' New Economic Order," p. 27, April 1976. uSee R. Hooykaas, Religion & the Rise of Modern Science, pp. 135-149, Grand Rapids: Eerdmans, 1961. Also Christopher Hill, The Century of Revolution, pp. 92-4, 179-81, New York: W. W. Norton, 1961. 12R. K. Merton, Social Theory and Social Structure, p. 584ff., New York: The Free Press, 1967.

13Kurt Mendelssohn, The Secret of Western Domination, New York: Praeger, 1976. 14See Hans J. Hillerbrand, The World of the Reformation, p. 212 f., New York: Scribners, 1973. Also Harold J. Grimm, The Reformation Era: 1500-1650J p. 592 f., New York: Macmil lan, 1954. 15Irving Kristol, The Public Interest, "On Corporate Capitalism in America," number 41, Fall 1975, p. 124. 16Quoted on the editorial page of the Wall Street Journal, 6 January 1976.

Gary North THE HIDDEN COSTS OF FREE LUNCHES 200 ffA distinguished economist . .. offers us the verity that there is no free lunch-to which I, a non-economist, reply: But of course there is! If you have too much provision and I not enough, then when you yield a little, I may indeed have a free lunch." -Irving Howe, New York Times, Nov. 27, 1976, p. 23. * * * This seems like such a clever re sponse to the most universally agreed-upon principle of economics, namely, the doctrine of scarce re sources. After all, if the person with ((too much provision" does yield some or all of his lunch to the other individual, the lunch is free of charge to the recipient, isn't it? He has had to give up nothing in return, right? Wrong. Let us consider the case of a charitable donation. The person who has had access to a lunch earned by his own labors or capital may be willing to share part of it with some one else. The recipient may prefer to think of his share of the lunch as something that was worthless to the sharing benefactor. In short, that he really had (~too much provision," so the extra portion was really free.

Dr. North Is editor of Biblical Economics Today, available free on request: P.O. Box 8567, Durham, N.C. 27707.

THE HIDDEN COSTS OF FREE LUNCHES 201 But the decision concerning whether or not the donor had too much food had to be made by the donor. He alone could determine his appetite, not the recipient. It is possible that the donor would have thrown the food away anyway. Instead, he gave it to someone in need. At the time of thQ gift, thQ donor may have re garded the extra portion as a free good-something of no earthly bene fit to him, the donor. The donor paid for the lunch. It was not free of charge to him. Next time he may decide to order a small er portion and pay less for his lunch. He may decide even to skip a meal, if the first one has drained his resources. As the economic actor, he may have regarded the extra food as a free good in his value scale, so he was willing to give it away. But men have an incentive to reduce their purchases of goods and services that they think will prove excess to their needs. To avoid waste, they conserve resources. This means that the sup ply of free lunches will always be limited. Rare is the case of a truly free lunch, meaning a lunch that has zero value to the owner. Such lunches involve prior waste, and the market pressures all participants to reduce waste by making better pre dictions about their need for a par ticular resource in the future, in cluding the immediate future. We tell children not to take more food than they can eat. ~~your eyes are bigger than your stomach," we say.

When children start paying for their own meals, their eyes get smaller. Even a zero-value (to the owner) lunch involves cost. Ownership al ways involves responsibility for the use of any resource. If a man has an extra lunch in front of him, he has to makQ a decision. Should he throw it away? Should he offer it to the high est bidder? Only if there are no bid ders at any price, is the lunch truly of no value to the owner. Should he give it away? To whom should he give it away? Who is most deserv ing? There is no such thing as zero responsibility ownership, whatever the costs of lunches may be. The recipient of charity then faces a choice. Should he say thank you to the donor? Should he thereby ac knowledge his status as a benefi ciary of another man's wealth, even if the form of that wealth was use less to the donor? Should the recipi ent be grateful? Should he be resent ful at the other man's wealth? He has placed himself in a position of subordination. There are many peo ple who resent their position as ben eficiaries. Jealousy (wanting another man's goods) and envy (wanting no one to have such goods) spring up in the hearts of recipients.

They find themselves eaten up spiritually by either or both of these two forms of resentment. They find, in short, that the lunch was not free. They had to give up something in 202 THE FREEMAN April order to get it: pride, self-confidence, a feeling of independence, or peace of mind (in the case of the resentful). Coercive Redistribution The idea that the person who has ~~too much provision" ought to be forced to ~~yield" the excess portion transforms the whole idea of the hypothetical free lunch. A legal ob ligation, like the signs that say ((yield to pedestrians," has been created. But we are all pedestrians from time to time, and we all pay the taxes to operate the streets, so we do not pass class-conflict legislation when we propose street safety signs. In the case of free lunches, we act in terms of a philosophy of economic class and class antagonism. The person who wants the free lunch arbitrarily asserts that the lunch is unnecessary to the owner.

He then uses political force to con fiscate the lunch, either for himself, or for those who can benefit him (e.g., voters), or for those who will esteem him highly for being so generous with somebody else's re sources. He receives some sort of benefit from the act of confiscation. Was the lunch really free? Cer tainly, it was not free for the origi nal owner. Even if he really re garded it as a zero-value resource, he probably does not regard his right to do what he wants to with his resource as something of zero value. The act of confiscation infringes on the right of ownership-if nothing else, with his right to give away the lunch to that person whom he re gards as most deserving. But the argument does not concern itself with the costs borne by the original owner. It is aimed at the hypotheti cal zero-cost lunch in the life of the recipient. What has he really given up? First, and most important, he has given up his personal commitment to an ideal, namely, the right of each person to the fruits of his labor.

Second, he has given up a portion of his own future. If he should some how become a person with an earned lunch of his own, he will not be so certain of the protection which .the law will provide him when he wants to make decisions concerning the use of his lunch. He has compromised his own confidence in the law of property protection. Third, he has guaranteed the reduction of supply in the lunch market of the future. Those who have earned lunches for themselves will not be equally happy to continue to produce the resources necessary to buy lunches and then see them confiscated. The modern interventionist may have faith that the lunch ·producers and lunch buyers of the world will go on forever, like the goose that laid the famous golden· eggs. HIf we just re frain from cutting the goose's neck, we can get free golden eggs forever," they argue. The trouble with such 1978 THE HIDDEN COSTS OF FREE LUNCHES 203 logic is that other, less rational, more greedy people will not listen to words of restraint once the egg con fiscation philosophy has taken hold of a voting population, and even if everyone were to show restraint, golden egg-laying geese are not im mortal. Those who rely on the con fiscated productivity of others make themselves dependent on the future supply of free lunches. They have gained free lunches at the cost of self-reliance.

Self-esteem is not a zero-value re source. It is not talked about in the textbooks advocating free lunches, or partially subsidized lunches, or attacking class-exploiting lunch pro duction methods. Nevertheless, the talk of Hwelfare rights," and the shouts of ~~legal obligation," and the sophisticated speculations concern ing ~~entitlement" cannot successfully evade the effects of the loss of self esteem inherent in any system of freelunch politics. The recipients are like those little boys who have their big brothers beat up other lit tle boys to take away their snack money. The older brother always wants payment in one way or the other, and the little brother has dif ficulty in working up a sense of pride in what he has accomplished. Then, too, the other little boys may have big brothers-much bigger brothers. Self-esteem is exchanged for a free lunch and a lot of fear concerning the future.

The Bottom Line What has happened to our hypothetical free lunch? It has cost the recipient self-confidence, as well as his confidence in legal insti tu tions. It has cost him his self-esteem. It has made him partially dependent on those who produce lunches, for they have less incentive to produce lunches in quantities sufficient for all those who want to be recipients of free lunches. The politics of free lunches unleashes the forces of jealousy and envy, showing people that both evils can be put into law with impunity. Free lunches, if legislated, are de vastatingly expensive to the recipi ents. If you think otherwise, try to find thankful beneficiaries of the United States' foreign aid programs. The lack of gratitude should be ex pected; we have promised men free lunches, and we have extracted a terrible price. Why should we expect applause from those who have be come dependent on us as never be fore? The price of self-esteem has been discounted far too much by the advocates and administrators of the politics of free lunches. The recipi ents have made more accurate esti mates of the costs of legislated free lunches. @ Roger Donway LIVING TOGETHER Is laissezfaire an unsociable sys tem? Indifferent to cooperation?

Hostile to fellow-feeling? From the abuse laissezfaire receives, one would certainly suppose it was all these things. Indeed, one might suppose laissezfaire to be something of an ultimate in unsociability. I have seen it asserted, as an obvious truth, that under laissezfaire the major~ty of people would be reduced to a subhuman levelas though free dom were a type of anti-personnel weapon. And that was from a Centrist's point of view. Further Left, they take off the gloves. One popular rad ical economist speaks unhesitat ingly of the ((ruthless amorality of laissezfaire," and insinuates that Mr. Donway deals as a freelance student and writer with the social implications of certain philosophical issues. 204 even a moderate capitalist must number Al Capone among his heroes. Really, it is an extraordinary state of affairs. The system whose very name proclaims a policy of ((hands off' is attacked as a system whose hand is against every man.

Yet the idea of laissezfaire seems simple enough to be understood even by those who disagree with it. Essentially, there is only one opera tive principle to be grasped: laissez faire forbids aggressive coercion be tween people. That is almost all there is to it. It is just the consistency with which laissezfaire applies this pro hibition that distinguishes it from other systems of civil order. The use of force, other than defensively, is forbidden under laissezfaire to all citizens, including public servants. The result of practicing such conLIVING TOGETHER 205 sistency some call ~~liberty ," and some call ~~freedom." Kenneth Boulding has suggested we should call it ~~peace," because the ban on coercion is similar to international nonaggression. Liberty Is Peaceful That may be a bad idea, because of the differences between liberty and international nonaggression. But the suggestion does express this one root truth: that liberty is peaceful. It functions by guaranteeing safety from constraint.

Now why would anyone consider that unsociable? What connection is there between forswearing harm and forswearing humanity? Not to shanghai one's neighbor, not to rav age his land, not to expropriate his property may be less than the last word in fraternity, but it is a start. And in motive, it is more than a start. If there is any hostility to commu nity, surely, it lies with those who reject the principle of laissezfaire. Their refusal to accept an armistice is somehow unsettling. When a moderate speaks in favor of this freedom or that, he is certain to say, ~~Of course, I'm not advocating laissezfaire," and he means to be reassuring. But where is the reassurance? If his auditors took him seriously, I should think, they would leap from their seats and rush the exits. For he has said, in effect, that he accepts no standing rule about dealing peaceably with peace able citizens. Not knowing his rules for dealing violently with peaceable citizens, his listeners should hardly feel safe in his presence. Perhaps he is inclined to reject laissezfaire when he spots a pocket of poverty in his trousers.

Obviously, things do not work like that. Yet they do almost work in reverse. People really do shrink from an advocacy of laissezfaire as though it were an advocacy of bar barism. They actually hear, in a call for freedom, a cry for havoc. How has so mad a reversal been ac cepted? The charge against liberty cannot be like the straightforward charge against a coercive state-that it pushes people around. That much, at least, the explicit ban on coercion spares us. Yet somehow the impres sion is being given that liberty does, virtually, mean being pushed around, and much worse besides. Garry Wills, for instance, calls laissezfaire Hthe law of the jungle," and it is a common enough descrip tion. But it is also a curious description-of laissezfaire, to say nothing of jungles. For if laissez faire is the jungle's law, it is a jungle where the overriding rule is ~~Thou shalt not use force," and where vio lence is the forbidden means of sur vival. It is a jungle where the lamb can lie down with the lion.

206 THE FREEMAN April Surely, that is unpromIsIng ground for the enemies of freedom. From such politics, not even the most resourceful could construct a feral image for liberty. How Will Free People Behave? In consequence, the attack on ccan_ tisocial" freedom generally begins with the nonpolitical side of a free society. It starts with a hypothesis about how free people will use their freedom in their everyday lives. The hypothesis is usually a wild one, as it happens, made without reference to the historical behavior or actual attitudes of free people. But nevertheless, the hypothesis, or guess, is made. And how will free people behave? The guess is: Not well. The accusa tion of cJungle law" implies that free people will deal with one another as warily and as meanly and as un cooperatively as they can. It sug gests they will be as vicious as the law allows, and perhaps a little more.

A citizen living under freedom is expected to suffer all the noncoer cive evil his fellow citizens can in flict on him, and to enjoy as few of the benefits of cooperation as they can arrange. The majority of people will be reduced to a subhuman level, and so forth, and so on. The obvious question is: Why should free people behave like this? And the typical answer is clear. According to those who make the charge, there is an attitude that gives rise to freedom, and this at titude is at bottom antisocial. More specifically, the ethos be hind liberty is said to take life as a competition for survival, and win ning that competition as the highest value. From this,. the internecine fray is inferred. That is the slander, and appar ently it is effective. How it can be effective, though, is something of a mystery. The odds against the slan der's even surviving, I should think, are overwhelming.

After all, the ethos of liberty that actually gave rise to liberty has not been lost in oblivion. The conception of a free community that actually gave us free communities can still be learned. One would imagine that documents recording these things might, on any day, give the lie to accusations about freedom's un sociabili ty. Shared Reason and Goodwill To take a simple example: the Declara tion of Independence does not begin with a premise of battle royal. It begins with a decent respect to the opinions of mankind as its self-proclaimed motive; which is to say, it begins with an assumption of shared reason and goodwill. The writings of John Locke, too, are not antisocial. They do not as sume that people will be at each 1978 LIVING TOGETHER 207 other's throats. As a matter of fact, they assume that free people will generally associate in HPeace, Good Will, Mutual Assistance, and Pres ervation."

That the charge of unsociable lib erty has survived in the face.of this history is a wonder, but that it has survived the scrutiny of common sense is a marvel. For the allegation of ~~f~ral freedom" is unbelievable on its face. The first part of the charge, re member, says that free men consider themselves to be engaged in a war of all against all. And the second part says that, consequently, they place a total ban on coercion. Why would people fighting a life-or-death struggle do that? Why would they enforce greater decorum than pre vails at the average sporting event? Just psychologically, it is not a plausible sequence of action. Yet no one seems to notice. I think we should ask why no one notices. The allegation is a smear, undoubtedly. But if it were a smear only, the smear would have been exposed long ago. The charge is so outlandish that it could not survive without help, and especially without inside help from its victims. Unfor tunately, such help is easy to find.

To begin with, a notion of univer sal competition was once adduced in behalf of freedom, by the Social Darwinists of the late nineteenth century. It can be said that their idea of competition was v~ry differ ent from the savagery depicted by the enemies of freedom. It can be said that the Social Darwinists were not the true heirs, philosophically, of those who authored our freedom. Nevertheless, they did tie freedom to universal competition, even as charged. And perhaps that tie is still made, here and there. A few apologists for sharp practice, I suppose, still use the phrase ~~competition for survi val" as a dodge and an excuse. But if these are things that cannot be changed, they are at worst minor difficulties. They are the kind of aid that can be 'dragged up in support of any straw man. A second type of aid is much more dangerous, and it is also given to the enemies of freedom. Probably, it is the most dangerous sort of aid that can be given to one's detractors, for according to an old rubric it actually implies consent. This aid, of course, is silence.

A Weak Defense Defenders of liberty have simply not avowed some of the things that go with freedom, like sociability, co operation, and goodwill. It is a com mon habit among defenders of free dom merely to recommend the pro hibitions against .coercion without mentioning what sort of society those prohibitions govern. By way of example, that was 208 THE FREEMAN April exactly the approach used above here to recommend laissezfaire. What can a listener make of such a presentation? How can he weigh a political ethic that says nothing about the tenor of its proposed soci ety? Will his fellow citizens, in this proposed society, treat him as an ally, or as an enemy, or will they treat him with total indifference? It is a matter of legitimate curiosity. But commonly, a person who is asked to accept freedom cannot tell in the least what sort of existence he is being asked to accept. Is he being asked to join with peaceful produc ers, or harmless nomads, or pacified flower children? If you are going to live with people, the differences are important. The ~~look" of a free soci ety, surely, must be part of the ar gument for a free society.

If it is not, if such details are not filled in, the enemies of freedom will fill them in for us. In what manner, we have seen. Before discussing the free soci ety's ~~look," however, an objection to any such discussion must be noted. It is a simple and worthy objection. A free society, after all, is a tolerant society. It does not prescribe its citi zens' peaceful behavior. How then can we depict any general patterns of such behavior? Evidently, the answer must lie in the context of freedom. We should know, for we have only too much occasion to see, that liberty does not grow anywhere, anyhow, under any conditions. It has emerged, when it has emerged, from a fairly definite attitude toward man and society. It has been rooted in an outlook, and it has waned with the waning of that outlook. Attitudes and Beliefs The enemies of freedom are right in this regard, and they have grasped what few defenders of laissezfaire have grasped. There is an ethos that gives rise to liberty, and it does tell us something about free people. By noting the attitudes and beliefs that generate freedom, we can know something about the attitudes and actions of free people in their everyday lives.

The question is, therefore: what outlook gives rise to liberty, and what does it tell us? How does it suggest free people will behave? Specifically, can we say with any confidence how free people will view one another, and what use they will make of their fellows? Obviously, I think we can. A few general facts about man and society, variously expressed at various times, have been the groundwork of freedom. To put it simply, we might say that freedom is based on three commonplace be liefs. The first of these holds that human life is at bottom individual. To live-to discover what man needs 1978 LIVING TOGETHER 209 and produce it-is something done by a person. It is a problem for the mind, and the mind is individual. The point must be stated care fully, for it is easily misrepresented. Few of us could live outside society, and fewer of us would want to try. But the reason why is important. It is not, as some collectivists think, that man exists like an ant, only as a member of his group. In fact, it is not a problem of what we are at all.

It is only a problem of what the task is, namely, Herculean. Strip away the aid, the arts, and the artifacts of civilization, and what remains is a brutal struggle, if indeed anything remains. The second belief, then, is equally commonplace: human association is the greatest of all the tools that can be used to make Iiving easier. Thrnugh the division of labor, through the accumulation of knowl edge, and through the accumulation of capital, human association can act as an enormous lever on the energies a man devotes to his at tempt to live. And the results are obvious, attested by the presence of some four billion people. In society, survival is merely a man-sized task. Friendship and Love Nor is productive cooperation the only benefit of society. To the mate rial aid that arises from association, we may add all that can be said about friendship, camaraderie, loyalty, and love. These, too, make liv ing easier and are part of society's promise.

In short, if we want to live, with each other is the way to do it. Living is the task, ((with each other" is the tool. And the tool is practically in dispensable. The third belief of liberty builds on this. It is: that association must not be turned against an individ ual's attempt to live. The tool must not be turned against its purpose. To observe this is not to disparage as sociation, but to care for it. It is to insist that association not be per verted from its ends. Admittedly, the task of ensuring that association does not turn against life can be a difficult job, and it becomes more difficult as society becomes more complex. Yet one principle remains perspicuous throughout the complications. We cannot allow anyone to constrain another from acting on his own judgment. That, we can say, under cuts the attempt to live at its source; and above all, it undercuts the at tempt to live together. If we are going to live together, in the full sense of both terms, we must insist on living peaceably.

The consistent application of this principle is laissezfaire. When one understands freedom as emerging from such beliefs, one un derstands in addition how much can be fairly said about the look of a free 210 THE FREEMAN society. It is by no means the closed book it is sometimes considered. We can see, for example, what sort of mutual admiration is likely to bind people in a free society. As liberty is rooted in the problem of living, esteem is likely to follow pro ductiveness, and the great produc ers, who make our lives qualita tivelyeasier, will obviously tend to be major figures. The Jeffersonians, we know, gave great honor to those who discovered practical knowledge, and· that estimate will probably be part of the Jeffersonian outlook whenever it reappears. Again, by understanding the roots of liberty, we can see why a free society is a generous society. Alexis de Tocquevilleremarked on this as pect of liberty. He said of the free citizen, vis-a-vis his fellows: HAs he sees no particular ground of animos ity to them, since he is never either their master or their slave, his heart readily leans to the side of kind ness."

And at that, Tocqueville was thinking of freedom only as ((live and let live," as being neither slave nor master. When we think of free dom as ((living together," with each of our fellow citizens an actual or potential ally, how much more our hearts must lean toward kindness. But most of all, by seeing the ground of freedom, we can see how intensely sociable it is. The idea that liberty is based on a competition for survival becomes ludicrous. Liberty is based on a cooperation for survi val. Even the specific economic phenomenon of competition exhibits this cooperativeness. For economic competition is essentially the strug gle to be chosen as a trading part ner. And, as trade is mutually bene ficial, economic competition is thus essentially·a competition to cooper ate. It is a struggle to reach what is mutually beneficial. So finally we see, by looking at the roots of liberty, what a shame it is that· defenders of freedom are silent about·this sociability. Proponents of a system that is based on coopera tion ought not wince at the word ((society," whose origins are in the notion of an alliance. People who understand how humans can truly live together should not be shy of conviviality.

Great evils, undoubtedly, have been committed in the name of community and fraternity. The words have been used to damn the individual's attempt to live, and they have been used to cover all manner of coercion. But it is terms of association that have been used precisely because, in proper context, those terms stand for great values. These values of community should be reclaimed for liberty, not only because the coercive state perverts them, but because the free state does not. , Leland P. Cade The Farm StrikeWill It Do More Harm Than Good? THE current farm ttstrike" is an ex pression of frustration over low farm prices. No doubt about it, farm prices are low, farm expenses are high and the result is desperation .. Economic security is flimsy, unpre dictable, as changeable as the weather. All of agriculture is now on front and center stage as the strike makes headlines in magazines and news papers and on TV and radio. The 200 million plus audience wonders what is going on, what is causing all the concern. If viewers are impressed, the strike could turn out to be a plus; if viewers get disgusted, the strike could turn out to be a liability for all of agriculture.

This article is reprinted by permission from the January 5, 1978 issue of the Montana Farmer Stockman, of which Mr. Cade is Montana Editor. Participants hope for results in the form of better prices. But is there a chance of this happening? And if the whole incident turns out to be a badly engineered dream, to where does the credibility of the American farmer go? Meetings around Montana have been emotional. Very little has been presented in the form of basic ques tions or of basic answers. Since the strike strategy is so new for agricul ture, there are many questions that should be faced squarely. Strike leaders want 100 per cent of parity and their focal point is President Carter and Secretary Bergland. And the questions start coming. Since when is Uncle Sam in a position to determine the full price of a commodity-and pay it too? Since when is Uncle Sam to serve as 211 212 THE FREEMAN April a substitute for the market place?

How does the message from the strikers to Congress and the Presi dent compare to the message of the farm organizations which have been concerned for years and years about farm prices? One leader in Montana agricul ture asked the writer recently, ttWhere were these people when we needed them?" Presumably everyone involved in agriculture believes in private enterprise, which exists on the as sumption that opportunity and risk go together. Are strikers asking for government to take the risk, but leave the opportunity to individual hands? Will the result be one step closer to government taking over all of agriculture? Another agricultural leader com mented to the writer, ttWhat ever happened to the right to go broke?" Is there a possibility that the focus of the strike is on the wrong topic -at the wrong time? Could it be that excesses of the federal government are the real culprit, and just now we are forcing a late payment out of the farm sector?

Excesses of the federal govern ment have been enormous and con tinuing right up to the farmstead office where the books are main tained. The list of excesses is long and frightening. \Ve are now a half trillion dollars indebt-$60 billion more this year alone. Before elec tion, candidates talk about balanc ing the budget-but they never get serious after election. The Social Se curity system is a rip-off of the first magnitude because it is basically a welfare program. There is abso lutely no proof that the past government farm program, or the present farm program, will help ag riculture one tiny bit, yet govern ment continues to give this impres sion. Government is out of control with all of its controls-the new federal estate tax law is considered by many an outright fraud-it is far worse than the old law, yet was enacted as ttreform." Could it be that the problem is really the federal government with all its excesses, and that the real problem is being"bypassed, ignored, not recognized?

More questions. If the strike movement is successful in getting $5 wheat, then who gets to sell? And who-doesn't? And what then will be the price for the individual who doesn't get to sell? If $5 wheat reduces consump tion-and a higher price always does-then what price for additional bushels that might be produced? American agriculture has an enor mous capacity to respond to higher prices. The price of grain right now is without a doubt a direct result of 1978 THE FARM STRIKE 213 the last time wheat went to $5. Even at the present $3, the market doesn't want all that grain. How much less will the market want at $5? And then what is the price of grain when some is sold at $5 and some not at all? If picketing actually stops the flow of agricultural commodities, could the situation be made worse instead of better? For example, assume that picketing stops the flow of beef, a very perishable product. Producers will keep the beef off the market at an increased cost. Sooner or later the beef will have to enter the mar ket with a rush. Every farmer knows that a rush on the market means lower prices.

Or take grain. Suppose the strike prevents wheat from getting into export channels. Buyers don't have to buy their grain from us; there are other sources. So they go elsewhere. Which leaves more, not less, grain in the U.S. without a market. Could the strike, if effective, make matters worse instead of better? Has the law of supply and demand been repealed? Some strike leaders say the law isn't working now. If it isn't working, then how can it be that as more bushels of grain are produced the price goes down? Or, as demand increases, as it did when the price went to $5, the price went up? Or as the beef supply increased, the price went down? Or as there was a demand for animals a few years ago, that the price of beef went way up? Some get the idea that the law of supply and demand is working as it should for agriculture, but that it isn't working in other segments of the economy. Not so.

Headline -~~25,000 steel workers out of work because foreigners will produce it for less." Headline - HForeign cars take a greater share of the market." Headline -nFewer Americans now belong to unions." In some situations, the law works slowly, in some more rapidly. But as far as anyone knows, the law has not been repealed, and is still working. More questions: Is it to be as sumed that the market must take all of the production of an industry at a stated price whether it wants it or not? If striking farmers can somehow cause the market place to take their products at 100 per cent of parity, then do the same rules apply to producers of toothpicks and fenc ing pliers? If Rule A states that in private enterprise the market has to take all of a commodity at 100 per cent of parity, then presumably, it would apply to both farmers and producers of toothpicks and fencing pliers. Or is the market place the best place to determine how much of a commodity should be produced?

The farm strike has all the ear marks of (1) assuming that the law 214 THE FREEMAN of supply and demand has been re pealed, (2) asking government to take over agriculture even though this is not the view of many produc ers, (3) ignoring the basic purpose of the market place which determines, through price, how much of a com modity will be produced, (4) making the situation worse instead of better by ignoring so many of the basic forces at work. The selling price of farm com modities is the problem that stares the farm bookkeeper in the face. But it isn't the basic problem. The basic No Special Privileges problem is the excesses of the fed eral government that has over-spent and promoted rapid inflation; de ceived the farm population into thinking that government can do things it can't do; legislated an economy with unfair advantages and disadvantages. Legislators in Washington should be hearing the reason for low farm prices, not just the story that prices are low. Sooner or later the bills have to be paid, and American agriculture is now paying the bills for the past excesses of the government. @ IDEAS ON LIBERTY IN the limited government society, where government gives no special privileges or subsidies, but confines itself to defending personal freedom and the right of private property, men will naturally form voluntary associations where group effort is more efficacious than solitary action.

Voluntary associations do, then, indeed make prodigious contributions to the progress of mankind. They diversify, enrich, harmonize, and stabilize society. In a regime of unlimited government, however, strong private associations expend their effort in a quest for special privilege and advantage. Disguised anarchy, large-scale power structures, and chaos are the necessary long-run consequences. The fundamental duty of the state in a free society is to prevent any person or group from infringing on the rights of others. Failing to perform this task-and our government is today failing to perform it-the modern state is guilty of the most profoundly damaging derelic tion of duty. Instead of being the servant of the community, it becomes a co-conspirator against the community. Instead of waging unceasing war against the enemies of society, it joins with them in a league of mutual assistance against society.

SYLVESTER PETRO, "The Perversion of Pluralism"

Hans F. Sennholz LEVELS OF DISCUSSION THE NOVICE· in economic and social thought is bewildered by the great variety of competing philosophies, ideologies and doctrines that vie for his support. In desperation about the apparent confusion, he may shun the social sciences altogether and seek other know ledge. As a young student, Albert Einstein de spaired about economics and turned his great intellectual powers toward physics. Many others of lesser talent may just imbibe the brand of thought that is fashionable· at the moment. Or they may readily accept that which is available at their par ticular institution of learning. Others may temporarily suspend their judgment until they have Dr. Sennholz heads the Department of Economics at Grove City College and is a noted writer and lecturer on monetary and economic affairs. thoroughly analyzed the various schools of thought. As students, they may be sitting at the feet of the great scholars anywhere in the world until, after much deliberation and research, they are prepared to take a position of their own.

For the scholar who soberly and deliberately pursues knowledge, there is a shortcut to the issue. He may simply judge the level of scien tific discussion in which each of the contending schools is engaged. The level may range from the most exact ing dispassionate analysis of a sub ject matter to the most primitive emotional exchange of debate tricks that negate any pretense of schol arship. The latter may be very popu lar with the masses of people who prefer entertainment over en lightenment. The seeker of truth 215 216 THE FREEMAN April has no choice but to listen to serious scientific discussion. Many years ago Eugen von Bohm-Bawerk, Austria's foremost economist and statesman at the turn of the century, described his search for knowledge. In his critique of the writings of Marx and Rodbertus he was looking at the exploitation theory ~~with its best foot forward." He tried to adhere to what we today would call ((a policy of equal oppor tunity for all contending doctrines."

In the language of the Continental aristocrat: ((He who would be vic torious on the field of scientific re search, must allow his adversary to advance in all the panoply of his armor and in the fullness of his strength."! The great writings that have passed the test of time reflect this calm confidence in the ultimate vic tory of truth over error. Surely they recognize that man is a creature of impulse and emotion and that he is perpetually swayed by his interests, passions and vices. But man was also given his power of reasoning which makes way for revelation and know ledge. Reason is the candle in man's hand which enables him to explore and discover. Popular writings may appeal to passions and emotions. But the taste for emotion is a very fickle taste that changes continually and fatuously. lCapital and Interest (South Holland, illinois: Libertarian Press, 1959), Vol. I, p. 250. The writers who, for the applause or gratuity of the moment, appeal to such tastes are riding the waves of human folly that will swallow them in the end.

Jokes and Insinuations Most contemporary writers on so cial matters, even the most illustri ous among them, are merely skillful surfboard riders whom the next wave may engulf. They entertain their readers with wit, jest and jocu larity, carefully avoiding any seri ous discussion with knowledgeable opponents. They may ignore their critics entirely or, if this can no longer be done, shoot at them with malice and hatred. A poor joke may take the place of a rational reply. Paul A. Samuelson, the vocal spokesman for post-Keynesian polit ical economy and Nobel laureate in economics, mostly ignores the writ ings in defense of individual free dom and the private property order. In his Economics, the textbook for millions of American students, he brushes them aside Has conservative counterattacks against mainstream economics." He neither defines nor describes these counterattacks, but having announced them in a bold face title he demolishes them with a four-line gesture of disgust. With selfishness, ignorance, and malice ((there is not much intellectual argu ing that can be done." (10th ed., p.

847) 1978 LEVELS OF DISCUSSION 217 He devotes half a page to ((Chicago School Libertarianism" of men like Frank Knight, Henry C. Simons, Friedrich Hayek, and Mil ton Friedman. He lumps them together under a cryptic label and rejects them as ((provocative negations." His favorite target, Milton Fried man, is dispatched with an ugly joke. ((IfMilton Friedman had never existed, it would have been neces sary to invent him." (p. 848) But the champions of all-round government ownership or control in the means of production are treated with utmost courtesy and respect. He devotes eight pages of text supplemented by eight pages of ap pendix to ((eminent," ((competent," and ((eloquent" advocates of radical economics from Karl Marx to John G. Gurley. He quotes extensively from their writings without refuting any of their arguments. To Samuel son, Karl Marx ((was as much a philosopher, historian, sociologist, as a revolutionist. And make no mistake. He was a learned man." (p.

855) In fact, Samuelson echoes En gels: ((Marx was a genius ... the rest of us were talented at best." (p. 853) Samuelson is riding the high waves of fashionable folly. It does not speak well for the American Academe to have made his writings the best sellers of our time. And depend on it, a society that builds its policies on such thought faces mis fortune and calamity. The writings of J. K. Galbraith are as popular with bureaucrats and politicians as Samuelson's work with academicians. It is true, Gal braith abstains from crude personal attacks on authors who disagree with him. He merely ignores them. He is utterly unaware of the sub jective-value theory and its impor tant ramifications. In his own book on Money (Houghton Mifflin Co., 1975) he does not deal with a single monetary thought of the Austrian writers. But he mentions Joseph A. Schumpeter, Friedrich von Hayek, Ludwig von Mises, Gottfried Haberler, Fritz Machlup and Oskar Morgenstern, composing ((the world's most distinguished coterie of conservative economists." Having lived through Austrian inflation they all shared ((a profound mistrust of any action that seemed to risk inflation along with an even greater distaste for anything that seemed to suggest socialism." (p. 186) This is Galbraith's only reference to a school of thought that for more than a century has spearheaded the sci entific discussion of money and the systems of social organization.

Galbraith is a clever phrase maker. Almost instinctively he uses figurative or metaphorical terms that are favorable to his contentions and unfavorable to those of his cri tics. Pre-Galbraith economic knowl edge is ((conventional wisdom" which is ((obsolete" and ((pessimis218 THE FREEMAN April tIc'." After that rhetoric so brilliantly flavored with the spices of intellec tual omniscience, who would have the courage to identify. with ~~ con ventional" and ~~obsolete" knowl edge? Who would care to join ~~the coterie"? For Galbraith any further discussion is redundant. Talking To The Audience Most academic writers do not painstakingly analyze the theories and arguments with which they dis agree. Ittakes great effort and labor to reach beyond a familiar body of thought and wade through the ar mory of a different school. Indeed, it is much easier to talk to one's own audience and seek its applause. The Keynesian writers are scribbling for their followers, the ~~radical economists" for theirs.

Where a particular assertion is in need of verification and support, they may appeal to authority rather than rely on their own reasoning. They may cite another writer of similar persuasion, a member of their own school of thought. Samuelson may quote Solow and Solow, Samuelson. Neither of them knows, or cares to know, what Mises and Hayek have written about the subject matter. The great writers whose works survive the test of time reach be yond their particular audiences and seek truth regardless of its popular ity. They analyze doctrines and theories; they do not psychoanalyze their opponents. They refute errors and fallacies, they do not malign the person who errs. They do not engage in propaganda, they search for truth no matter where it should be found. In the interests of science they pur sue the truth even if society should dislike and reject it. They do not primarily teach that which they know, but endeavor to discover that which they do not yet understand.

To seek for the truth, for the sake of knowing the truth, is their first ob jective. Human understanding is always liable to error; infallibility is denied to man. Therefore, error needs to be exposed and corrected. This is the proper function of scientific critique. But it must not just destroy and pull down, it must direct attention to the excellent and positive. Emphasize the Positive Error must not be permitted to run its course and work its harm. It must be confronted and refuted in order to make way for truth. But it is difficult to decide 'which fallacy should command our attention and effort, and which one should be ig nored. Ludwig von Mises considered it an important task for young scholars to confront and explode popular fallacies. To recognize error and refute it was a minimum requirement for doctoral candidates and prospective economists.

1978 LEVELS OF DISCUSSION 219 Leonard Read built his creative efforts on the observation that ~~ac tion that is wholly against must lead to inaction as soon as it is success ful." In all his writings and the ac tivities of his Foundation, he and his associates are emphasizing the posi tive, bringing to light that which is right. They are convinced that only positive views of truth show the way and can lead to action. For this rea son they try to avoid the arena of heated debate and criticism, and in stead, proceed on the steady course A Cage of Apes of learning and explaining the free dom philosophy and its miraculous results. And yet, all findings must be submitted to the test of free discus sion which is a reliable friend of truth. Trickery and emotion in ar gument betray a conscious weak ness of the cause and often signal despair. Indeed, we may be able to judge our adversaries, as they may judge us, by the levels of dis cussion. @ IDEAS ON LIBERTY BLIND conformity, regimentation, and loss of the individual in the mass are both national and individual suicide. When we have reduced the world to a cage of apes, each imitating the other, we may be perfectly sure that we will be apes and nothing more. For leadership does not develop in an atmosphere that provides no opportunity for change, growth, and self-determination.

God gave you legs on which to stand, and may He forgive you if you use them only as something with which to run away from reality. Yet he who takes a stand on anything today is in danger of being torn to pieces by those who run with the pack. Do you dare to be different? Despite all interpretations of the Constitution to the contrary, man still has innate and inalienable rights. One of these is the right to be an individual. But this right is also a responsibility. If you refuse the responsibility, as so many people today are doing, you will be deprived of the right-as has happened in almost every other country in the world. The hour calls for people who dare to be individuals in a world where it is fast becoming improper to be anything but apes. KENNETH W. SOLLITI, "Do You Dare to Be Different?"

Fred E. Foldvary Is the Free Market Ethical? FREE-MARKET economists have amply demonstrated and docu mented the fact that free enter prise is the most efficient and pro ductive way to provide for people's economic needs and desires. The simple but powerful logic of supply and demand is irrefutable, and even the critics of the free market ac knowledge that the ~~invisible hand" of self-interest can produce and dis tribute goods and services without any need for central planning and control. Yet, the pervasive critics and op ponents have succeeded in convinc ing much of the world that there is something sinister or immoral about the free market and private enter prise. Even when they acknowledge its efficiency, they claim that free Mr. Foldvary does freelance writing and is a sys tems analyst at the Educational Testing Service in Berkeley, California. 220 enterprise is somehow unfair or in herently exploitive. Even when they agree that the free market is pro ductive, they argue that it produces the ~~wrong" goods, too much adver tising, for instance, or too many luxury goods, and not enough ~~pub lic goods" such as education.

The opposition to free markets, then, is often not so much an economic claim as a moral one. Marxists, for example, claim that profit is the taking away from the workers part of the value which they put into their products, a value that, in their view, rightfully belongs to the workers. Less radical advocates of government planning claim that though the free market may be effi cient, it does not produce the goods tha t people ~~really need," such as health care, or that the inequalities of wealth resulting from free market forces are for some reason wrong.

IS THE FREE MARKET ETHICAL? 221 When one speaks of what people should consume, or what a worker should earn, these cCshoulds" are moral considerations. These are moral attacks on the free market, which must be answered by moral arguments, since they are based on goals and values rather than facts about how an economy works. So let us examine the question, is the free market ethical? In order to answer that question, we must first ask, what exactly is a free market? Assuming we know what a ccmar _ ket" is, the question hinges on the word C(free."In the context of society, C(free" means free from the coercion of others. More specifically, it means an absence of coercive harm, which includes coercive restrictions. A per son is free when he can buy, pro duce, and sell whatever commodity or service he desires, with noarbi trary interl'erence from others. Thus, the market is free when all the indi viduals in it have this freedom.

In a free market the transactions are voluntary. A market is unfree to the degree that people are forced to produce according to some decreed method, or trade at a dictated price or quantity, or give up their earn ings and profits to finance some politically chosen ((good works." Opponents of free markets often criticize the inequalities of wealth that may result from it. One premise which they will generally agree with is the moral equality of man, that all human beings are equal in human rights. Moral equality im plies that no one may claim to be morally superior to others, and that no one may impose his beliefs, val ues, and desires on another, for those. of one person have equal standing with those of anyone else. This means that if one person be lieves that certain goods cCshould"be produced, he has no moral right to force another to comply with this personal belief. Each person has his own unique personality and his own needs and desires, and moral equal ity implies that each person has the equal right to decide how he should live, including how he will work and what he shall buy and sell.

Thus, the basic moral principle compatible with moral equality is that no one may impose his personal will on another. One may use force only in self-defense. Otherwise, coercion is morally wrong, and that implies that people have the right to do whatever does not coercively harm others. Actions which do not coerce others are morally right, or at least not wrong, from society's point of view. For example, if someone sells cigarettes, he could be accused of selling something harmful to health, but since their purchase is voluntary, it is not coercive, and thus not wrong. Since a free market is, by defini tion, one that is free from coercion, it 222 THE FREEMAN follows that the free market is ethi cal; without coercion there is no moral wrong, from society's view point. If some people do not like the allocation of goods in a particular free market, they are entitled to their opinion and personal ethical beliefs, but not entitled to impose their values on others by force. Even if they are in the majority, oppo nents of the free market who feel that profits are nasty or that in equalities of wealth are wrong have no right to inflict these personal opinions on others, just as they have no right to force others to adhere to their religious beliefs. So, not only is a free market ethical, but any other economic arrangement is inherently unethical, since it must involve coercion!

In a free market, goods and ser vices are worth what people believe they are worth and are willing to pay for. The free market, and only the free market, allows people to act on their individual desires. Moral equality is not the equal right to the good produced by the economy, but rather the equal right to be free from the coercion of others. Government interference in the free economy is not only wasteful and unnecessary; it is also wrong ethically, just as wrong as theft, kidnaping, and trespassing are when committed by private individ uals. Of course, markets can also be coercive without government involvement. Slavery, for example, is not a free-market institution, since the slaves are not voluntary work ers. But slavery and other coercive practices have generally been com mitted with government sanction. State monopolies, such as the post· office, and industries ((protected" from free competition, such as transportation, are coercive not only in taxing us to support the ineffi cient and superfluous bureaucracies and pay higher prices, but in violat ing our rights to peacefully pursue our own business.

Those who oppose free markets and use the power of government to enforce their personal doctrines are imposing their views on everyone else as though they were somehow morally superior to the rest of us. A free economy is part of a free society, one in which each person may live by his own values. A free society has a free market for the same reason it has free expression and the freedom to choose one's lifestyle: because people have the right to be free from coercion in any area of life. Not only are the oppo nents of free markets wrong, in their moral arguments; their proposed al ternatives are inherently immoral since they are coercive. The case for the free market exists on firm moral ground: the free mar ket, free from coercion, is the only ethical market. @ ·W)rld ':t ".... th.'.'.\o,~ In 8 g«p9fan Iae~ ·ClarenceB.Carson 16. Sweden: The Paternal State ONE of the most curious notions of our era is that of the paternal state.

Not that it lacks antecedents; it even has a history, of sorts, going back into the dim past of which there is little record. Nor is it curi ous because we ordinarily refer to it as the paternal state, for we do not. Ordinarily, it is called the welfare state, or, by some of its proponents, the social service state. It is a notion only. in the sense, then, that it is the idea which underlies the practices In this series, Dr. Carson examines the connection between ideology and the revolutions of our time and traces the impact on several major countries and the spread of the ideas and practices around the world. we have come to associate with something that is called the welfare state. The' welfare state notion does not strike most people as odd or curious, so far as we can tell. Clearly, if politicians can run for office and get elected on the basis that they will provide a great variety of goodies, the idea is widely accepted. That it should be so accepted, however, does not mean that it lacks curiosity; it is rather testimony to the fact that when an idea becomes sufficiently familiar, no matter how peculiar it is, it can become a part of the perspective from which we see things. Then it will seem strange 223 224 THE FREEMAN April that at other times and places people did not see or do it that way.

The paternal state notion is curi ous, in the first place, because it misconstrues the character of the state. The state is not something that can be likened to a father. It does not beget, as a father has done. Nor is it a provider, as the father is supposed to be. The state, or gov ernment, is begat, but is itself sterile, sexless, and forever barren. It has no means of its own and is incapable of producing any. It is, so to speak, an abstraction. Whatever the state bestows, it must first take from those who have produced it. Unlike a real life father, it cannot look after us; we must first look after it. In the second place, the paternal state is a curious notion when viewed in the light of most of history. Those who have governed have usu ally been the possessors of such os tentatious wealth as was abroad in the land. They have usually been in possession of the finest residences, the best clothes, the most servants, the finest conveyances, and what ever happen to be the going trap pings of office. Far from being mate rial benefactors of the people, they have usually been beneficiaries of an unwilling largess from the peo ple. They have entangled their peo ples in dynastic wars, taken their substance in order to realize the personal ambitions of rulers, and all too often played havoc with the lives and goods of the people. Far from being father-like-seeking the good of their children-, they have all too often been robber-like and jailor-like. It is greatly to be doubted that the notion of the paternal state would ever have arisen from an em pirical study of history.

Family Ties Even so, government, or the state, may have arisen on analogy with paternity or as the paternal state. Historians have been generally of the view that government may have come into being as rule over the extended family. The organization is usually referred to as the clan. The clan was ruled over by the oldest male, or the male from whom all traced their lineage. If the orienta tion was maternal, or if allowance was made for maternal rule, the ruler might be the oldest female. The bounds of the state would be the lands claimed by the clan. Such an arrangement would, no doubt, be a paternal state. Nor would its character change greatly if it were enlarged to include several clans and these should be ruled by a coun cil of elders. Family ties, at least within clans, would make it still fundamentally paternal. Undoubt edly, the task fell upon the elders of providing for and looking after those in their care.

The rudiments of this idea can be 1978 SWEDEN: THE PATERNAL STATE 225 discerned in hereditary monarchy and similar arrangements. The king was not literally the father of his people, of course, but he could be thought of in that way. Some monarchs have been described as ~~father," or ~(litt1e father." The council of elders might survive, too, under various names. (The Witan was· some such council in England, for instance, as is the surviving House of Lords.) The Roman Catholic Church uses language drawn from paternity to describe many of its clergy. The hereditary feature of monarchy must derive from the paternal concept. While we may doubt that the paternal state could rightfully be applied to monarchies, it does trace its roots to the same idea. Anathema to Socialists What is curious here, however, is that socialists should produce and champion a paternal state. Virtu ally every idea in it has been anathema to socialists. They have ever been ideologically opposed to monarchy. They have been, in all instances, convinced and committed republicans. The paternal state is a conservative idea. Modern socialism stems from the time of the French Revolution, when the emphasis was upon individual rights, when fam ily, tradition, and the whole paraphernalia from the past were in question. Custom and age were losing veneration. Mechanical concepts were replacing ancient ties of flesh and blood.

Moreover, conservatives have played a role in advancing the pa ternal or welfare state. Disraeli in England, a leading conservative of the latter part of the nineteenth century, took a hand in introducing welfare measures. Even more im pressively, Otto von Bismarck, a re puted conservative and Germany's leading political figure of the latter part of the nineteenth century, brought welfarism to Germany. As one history says, ((Between 1884 and 1889 gigantic welfare schemes, the first of their kind in the modern world, provided health, accident, and disability insurance, pensions for widows, orphans, and the aged, giving workers greater security and better living conditions."! It is not uncommon to read that conserva tives enacted welfare measures in Sweden. However, writers often ascribe this penchant for welfare legislation in conservatives to untoward mo tives. Bismarck, it is sometimes said, was end-playing the socialists.

He may have been, of course, but we have no way of being certain of his motives. In any case, conservatives are as entitled to a presumption in favor of the purity of their motives as anyone else. And for politicians to seek advantage through their acts only appears strange to those who 226 THE FREEMAN April can imagine large numbers of self less people, something that is possi ble in the imagination but unlikely in the real world. In short, if conser vatives have, with some consistency, advanced welfarism the answer should be sought in conservatism, not in something they share with everyone else. And there is an explanation within conservatism. One of the facets of conservatism is pater nalism. The role of the father as head of the household is an ancient and venerated practice. In an ex tended fashion, the role of the elders within the community as providers and carers for those in need is of long establishment. That those who-have ought to reach out toward and lend assistance to those-who have-not is one of the deepest springs of conservatism. Thus are the bonds of community knit to gether and the common humanity of those within it confirmed. Conserva tives in power in a sta te have a tendency to devise and support the paternal state.

The Conservative Element This may be somewhat confusing to many of those who think of them selves as conservatives in the United States. Many thoughtful American conservatives are not in the least sympathetic with governmental paternalism (though there are those who are). Indeed, it can be argued that to be conservative in America is to be opposed to governmental paternalism. There is an historical explanation for this. A strenuous effort was made at the founding of the United States to delimit pater nalism. The doctrine of limits per vades our constitutional arrange ments. Whatever arrangements a father wished to make for his household was left to him. Associa tions of men were in like manner left to their devices to form com munities and do within them what they would, so long as in so doing they avoided doing some civii or criminal injury. Such arrangements required, of course, that the force of government be denied to any and all in effecting their ends.

Itis commonly said that there is a separation of church and state in the United States. The matter runs even deeper than this. Though it is nowhere formally stated, there is a separation of parenthood and the state. At the founding of the United States the individual was released from the tutelage of the state, so to speak. A profound distinction was made between what is the affair of individuals and what are affairs of state. That is the essence of con stitutionalism in America. To de fend those arrangements became political conservatism in America. Paternalism may have been aug mented in America, but it was a paternalism divorced from politics.

1978 SWEDEN: THE PATERNAL STATE 227 European conservatism has a dif ferent flavor to it. The separation between parentage and the state that occurred in America did not occur generally in Europe. An American and a European conserva tive may share similar values, but the import of these values is altered by differences of perspective. The dangers of the state were not so obvious to European conservatives as to Americans. Indeed, those who hold and wield power are unlikely to be impressed with the danger of it, for men do not ordinarily consider themselves dangerous. The paternal stance is, after all, ego flattering, and European conservatives kept it within the makeup of their perspec tive. Itis not my point, however, that the animus to the creation of the welfare state came from conserva tives. That is about as likely as that sow's ears come from silk purses. Socialism provided the yeast for the welfare state; the people provided the dough; and conservatism pro vided its intricate patterns. To put it another way, the paternal or welfare state is the end product, thus far, of socialist equalitarian prescriptions when they have been winnowed through the overlay of conservatism in society. The distributive thrust is socialist; the shifting bubbles are populist; and the paternalism is con servative.

As if all this were not irony enough, this strange blend is often referred to as liberalism, not only by American writers but by those in other parts of the world as well. Historic liberalism was not in the least paternal. Its main thrust in the nineteenth century was to limit government, to free the individual, to permit trade without let or hin drance, to expand the suffrage and popular government. The equality that animated liberals was one that held that no man having reached seniority ought to be under the tutelage of another. In the quest for this condition, liberals relied rather heavily on extending the vote and establishing or maintaining popular government. Now, however, we have the paternal state which is widely proclaimed as liberal. Propo nents of the welfare state have gone far toward co-opting the available intellectual positions. The Paternal Role The topic at hand, of course, is Sweden and the paternal state.

Since Sweden does not proclaim it self to be a paternal state, and since the phrase is by no means generally employed, some proof of the proposi tion is in order. What is a paternal state? It is, in brief, a state which takes over and performs the functions of a father, or those of the dominant parent. Since some may have forgotten the role of the father and the grounds for it, it 228 THE FREEMAN April may be helpful to recall it. It is on the father's physical initiative that the act is begun by which conception takes place. Since the male's physi cal condition is unaltered by the ensuing pregnancy and since, in any case, he is larger and stronger, it is his responsibility and function to provide for the female and the un born infant during the period of pregnancy. It is his task, of course, to make provision for the delivery of the child. A newborn infant is helpless, or very nearly so, having only the abil ity to breathe and the capacity to take nourishment. In this situation, the main task of the father is to protect infant and mother and pro vide food, clothing, and shelter.

Since the human child does not be come large or strong or sufficiently well developed to look after himself for several years after birth, both parents perform assorted functions for him. They not only provide for his basic material needs but also such medical care as he requires, for instruction (education) in their cul ture, for his moral indoctrination, and for such training as may fit him for becoming an adult. To the father particularly belongs the instruction and training of a son, and to the mother that of a daugh ter, assisted as they may be by the surrounding community. As the child grows toward manhood, he takes on more and more the role of the adult and becomes less and less dependent on his parents. As the parents grow old and lose their pow ers the time arrives for the child to attend them in their declining years. Cultural Prescriptions In practice, of course, it does not always happen that way. The father can terminate the relationship at any stage that he will. Nor does it necessarily occur that mother and offspring will perform in the way described. Hence, there have usu ally been cultural prescriptions, re ligious sanctions, and, mayhap, legal enactments to insure the per formance of these roles. The roles are themselves founded in nature, but the support of them is cultural.

~~Paternal" is descriptive of and derives from the normal role of the father during the formative years of the child. A paternal state is one which assumes or imitates this role. Sweden was one of the first and may be thought of as the model of the paternal state. Until a more thoroughgoing one is devised, Swe den is the paternal state. A qualification is in order. Human fathers have not been entirely re placed in Sweden. But a major shift of the functions of paternity from the father to the state has taken place. To wit. There may be a gleam in the prospective mother's eye before 1978 SWEDEN: THE PATERNAL STATE 229 conception ever takes place, a gleam aroused by the hope of reward. At the birth of an infant, the state steps forth and awards the mother over one thousand kronor (the Swedish monetary unit). Sometimes, a human father who was especially pleased has bestowed gifts on the new mother. The paternal state in Sweden has removed the element of chance; it is established by law and as sure as taxes.

Enter, the State As incubation begins, the state stands by to perform vital paternal functions. There are ~~free" mater nity clinics for expectant mothers and their unborn children, and Papa State will pay three-fourths of the cost of dental care. Should custom or remote location lead to the use of a midwife, the state will pay the fee. If the expectant mother needs trans port at her appointed time, the pa ternal state will pay for the cost of the taxi, even if the infant should be born therein. Should they be so for tunate as to make it to the hospital, the service there is ~~free." If the new mother has been remuneratively employed, she need have no anxiety about her job. The state has estab lished that she may have up to a total of six lllonths leave which may be taken in any combination of prior to, during, and after the birth of the child. There is one fly in all this ointment, however; in multiple births, the mother receives only one-half the award (only some 500 kronor) for each child above one.2 Having taken such pains thus far, it is hardly to be expected that the paternal state will abandon mother and child at the hospital. It will, of course, supplement the cost of hous ing for mother and child and, should the human father deign to live with them, for him as well. Should the mother be a ~~single parent," Le., in a situation in which no wedding has preceded the birth, the. state offers special attention and care. The state has caused to be built and set aside for their special use apartments for unmarried mothers. (As yet, no ~~swinging single" apartments have been built for unwed fathers.) There is also a category known as a ~~one parent family," in which the parent may be either male or female, and the state offers aid to them in their undertaking.

Naturally, the paternal state pro vides support for each child regard less of the parental status of those with whom he dwells. The allowance to the mother for each child is 900 kronor per year. This particular payment ceases at the age of six teen. In addition, if one of his par ents dies, the child receives a ~~pen sion" of 1300 kronor. If both parents should die, the amount is increased to 1820 kronor. These payments stop at the age of sixteen also. Espe230 THE FREEMAN April cially needy families can apply for and get additional supplements for each child. Mothers who grow weary of attending children can apply to the paternal state for a holiday grant. The grant pays not only for travel to and fro but also for the costs while at the rest home. Of course, there is industrial insurance to protect workers from injury or disease when they are at their employment (paid for by the em ployer as required by the state), but compensation takes into account the value of housework lost as a result of being harmed on the outside job.

Child Care and Education The paternal state has not ne glected to provide day nurseries for small children, although such facilities are said to be in short sup ply. There are nurseries where chil dren may be placed for the day. There are also afternoon homes for children in school who can come to them after school and be looked after and fed while the mother is at work. It should come as no surprise that the paternal state in Sweden pro vides for the formal education of the children. Of course, the schools are ~~free," as are schoolbooks, dental care, and such psychological atten tion as the child may require. Col lege and university students are as sisted by various loans and grants. Nor is there any need for parents to concern themselves about the character or quality of education, for that has been determined by the state. Of late, there have even been two sorts of school in the land, one of which was initially somewhat ex perimental.

Children are sometimes sick and afflicted in Sweden as elsewhere, as are also adults. All treatment in Swedish hospitals and clinics is ~~free." If, however, a physician is called to the home, he must be paid by the patient who can then turn in the receipt and get a refund of about three-fourths of the amount of the bill. Taxis to and from hospitals must also be paid on the spot, but the cost can be reclaimed by the presentation of the receipt. Once the child has grown up and is ready to marry, or at least set up housekeeping on his own, the fatherly state is on hand to make the transition easier. The state does not quite provide a dowry; it is rather more like a combination of loans and aids. There are housing loans avail able, and the state will come forth with up to 15 per cent of the collat eral value of the house. In some circumstances, a rent subsidy may be forthcoming if that path is fol lowed rather than purchase. A home furnishing loan can be obtained from the state also, with a maxi mum of 5000 kronor to those in the greatest need.

Just as natural parents are re1978 SWEDEN: THE PATERNAL STATE 231 lieved of much of the responsibility for their children, so does the pater nal state relieve children of the necessity for caring for their parents in old age. An elaborate system of old age pensions is established. HThe idea is to provide every wage earner, on retirement, with a sub stantial pension directly related to-in practice about two-thirds of-his or her earnings in his or her prime. There are upper and lower limits to qualifying incomes, that part of the income lying outside these lines not counting for the cal culation of supplementary pension. The eligible sum is termed the pension-bearing income, and it is a percentage of this amount ... which is payable by the employer in pre miums. Self-employed persons must pay their own."3 If an old person is not living in suitable accommoda tions, he can apply for housing in blocks set aside for old people. If, because of some debility, he should need occasional· assistance this can be provided in his home. If he is no longer able to look after himself, he can go into an old peopie's home or into hospitals for the chronically ill.

Why No Baby Boom? Now here is an anomaly. It might be supposed that with much of the burden of the child hearing and rearing removed from natural par ents there would be a great baby boom. Moreover, an additional thrust in this direction has been provided by removing every stigma from bearing children out of wedlock (if one may employ so dated a term). But it has not turned out that way. As one writer says, ((Sweden is ex traordinary in its low birth rate and low rate of population increase."4 As a matter of fact, the lump sum pay ment to the mother on the birth of a child was devised· many years ago with the specific purpose of spurring an increase in births. To no avail. For some time now, Sweden has been encouraging immigrants to come in to augment the declining. work force. Cause and effect in human action is more complex than we may think. It takes place within a context much broader than man's simple legisla tion. and piddling interventions.

There is a law in physics that ((For every action there is an equal and opposite reaction." (Italics added.) The working of the law may be illus trated in this fashion. When some one fires a gun there will be a kick from it; The kick from the gun is the equal and opposite reaction to the action of the bullet being fired from the gun. Reverberations (or repeti tions) of action and reaction con tinue until the stock of the gun is still and the bullet has come to rest. The implications of this law are far reaching, and we are justified in supposing that they extend to all happenings on this planet.

232 THE FREEMAN April Muted Reaction What will be the equal and oppo site reaction to the action of a pater nal state conferring benefits on some portion of the population? No answer can be made to such a ques tion in the abstract. One might as well ask how strong a kick a hunter will receive from firing a gun. The recoil of a weapon is, of course, in direct proportion to the size of the explosion which propels the bullet from the gun. The size of the explo sion is determined by the amount of the charge in the shell. There is no meaningful limit to the potential variations in the charge. On the other hand, the expression of the recoil depends upon the mate rials used and the design of the gun. In some guns, the recoil comes out in the rise of the barrel. In others, it is felt in the stock of the weapon. In some, there is no perceptible kick, owing to weight distribution in the gun. There are even what are called ~~recoil-Iess" weapons, by which we understand not that the law of com pensation has been abridged but that the equal and opposite reaction has been so cushioned and dispersed that it can no longer be detected. All this is by way of saying that the character of the equal and opposite reaction is determined by the vari ables of the context within which the action occurs. It is, so to speak, a conditioned effect.

It is, then, the conditions in Sweden that determine the reaction to the actions of the welfare state. By many outward appearances Sweden is still a traditional land. There is the monarch, the royal family, the established church, and a govern ment with roots deep into the past. Long observed festivals are re enacted, and folk songs and dances are performed as of yore. Much of the legislation which has brought forth the paternal state has a con servative cast to it. It is conservative to encourage young people to go out on their own and have their own housing. It is even more conserva tive to encourage marriage and the founding of families. The nurture and caring for children and seeing that they are housed, fed, clothed, and educated has about it a conser vative aroma. That people should be looked after in their old age is of similar vintage. The sound is not· to be taken for the substance, however. Sweden is a profoundly different land from what it was at the beginning of this cen tury. A traditional overlay survives; but beneath it, surrounding it, and now overwhelming it, is something quite different. Sweden is under the sway of the idea that has the world in its grip. Those who think of Swe den in terms only of a modified socialism with certain economic policies have not begun to grasp the extent of the change.

The great change has come in the 1978 SWEDEN: THE PATERNAL STATE 233 rooting out of the moral, spiritual, and cultural foundations of the soci ety. The established church is still there; old churches still stand sometimes and many new ones have been built. But attendance is ex ceedingly slim. Individuals are in the church registers, but such a status requires nothing by way of religious observance, and littl~ is done. Marriages often take place in churches but the frequent divorces saw the bonds of ties in civil sur roundings. A new ((morality" has arisen, a morality without founda tion in transcendent sanctions. Gradualism has slowly devoured what formerly existed and replaced it with something else. A major tenet of the idea that has the world in its grip is that govern ment shall concert all efforts and bring about a collective unity. The power over affairs is shifted from individuals and families inwardly directed by custom, tradition, and morality to a state driven by goals proclaimed for the future. The ac quisi tion of this power comes by way of the promises which add up to a paternal state.

Motives Involved What human motives are engaged from the populace in this shift of power to the state? Freud said that man wishes to return to the womb. Whether this is so or not, the pres ent writer cannot profess to know. But it is clearly the case that there are aspects of childhood to which we would like to return if we have left or to retain if we are still there. Perhaps the most prominent one is freedom from responsibility. The child, the small child anyhow, ever has his material needs provided by someone else: he is suckled, dia pered, warmed, and watched over by others. As he grows a little older he can arise at will, play until he is tired at whatever amuses him, and rest until he has recuperated. His is a life without the nuisance of re sponsibili ty and bounded only by the aggravations there may be in the exercise of external authority over him. The paternal state grows on the tacit premise of restoring and main taining an irresponsibility which has its roots in the childhood experi ence, then. It shifts the burdens of the adult to the state and, in hope, provides a perpetual childhood for the citizenry.

Within this framework it can be seen why the equal and opposite reactions to the actions of the pater nal state are not what might be supposed. Why, when the paternal state has relieved so many of the burdens of parents and even pro vided rewards, is there not a baby boom in Sweden? Because-to put it in its simplest terms-the state has not relieved all the burdens, and that is the underlying promise and 234 THE FREEMAN the expectation which its actions arouse. Because expectant mothers grow large and unwieldy, have ttmorning" sickness, and their feet and legs are apt to swell on them. Because an infant is still brought forth in pain and suffering, even if the ttfree" taxi makes it to the ttfree" hospital. .Be cause children still require a great deal of attention, however much as sistance the state may provide. Be cause the bearing of children has its ultimate meaning within the' framework of extended family, community, and moral and spiritual overtones. Because beaming grand parents are the human reward for a newborn child. Because the gather ing of friends and relatives to in spect and ttooh" and ttah" over the infant is a normal incentive. Be cause Divine injunction supports re plenishing the earth with children.

Because the normal consequence of aroused sexual passion is concep tion. Because socialists in devising the paternal state have tampered with and cut away the framework of bear ing and nurturing of children and the purpose of the family. Because the idea of a perpetual childlike carefree existence would require that there be no children for whom to care. Because contraceptives and abortions are in accord with this idea rather than the bearing of chil dren. Because the paternal state substitutes a cold and impersonal mechanism for the warmth that arises from the freedom and respon sibility of normal human action. Be cause for every action there is an equal and opposite. reaction, though the opposite reaction is the appro priate reaction to the action. Because, in the final analysis, the paternal state is an anomaly. It is of the same character as the notion that there can be a rifle without recoil. The paternaL state is a notion born of and promoted by hiding the consequences as the, ttrecoil-Iess"

rifle is an appearance achieved by design and materials. The state is an abstraction. Unlike a human father it neither toils nor spins. All that the state hands out as benefits must first be taken from those who labor. It is time now to look at the carefully concealed. other side of re ality hidden by socialist rhetoric. @ Next: 17. Sweden: Tightening the Screws. -FOOTNOTESlEugen Weber, A Modern History of Europe (New York: W. W. Norton, 1971), p. 813. 2These figures were taken from Paul B. Austin, The Swedes (New York:Praeger, 1970) and should be considered as illustrative rather than final, since the amounts do change from time to time. 3/bid., pp. 84-85. 4Donald S. Connery, The Scandinavians (New York: Simon and Schuster, 1966), p. 392.

Lawrence W. Reed What Price Control Really Means ttIn the great chessboard of human society," observed the eighteenth century Scot philosopher and economist Adam Smith, ttevery piece has a principle of motion of its own, altogether different from that which the legislature might choose to im press upon it." The belief that individuals are pawns to be pushed about by central planners is not new, as this state ment by Smith clearly indicates. In deed, socialism-the controlled society-has its roots in the actions of primitive man. When the first cave man clubbed his neighbor to expropriate the food his neighbor had gathered, he gave blunt, physi cal expression to the essence of socialist society. Mr. Reed is an instructor in economics at Northwood Institute, Midland, Michigan. Two centuries after Adam Smith penned his eloquent defense of the right to be free from coercion, coer cion is again in the ascendancy. It is seen by many as the ttquick fix," the answer to chronic problems, a panacea that will bring order out of chaos. In 1795, James Madison de scribed this phenomenon as ttthe old trick of turning every contingency into a resource for accumulating force in goverment."

The issue of price control provides an excellent illustration. Invariably, as prices rise due to an expanding money supply, talk is heard that government must impose controls. The fact that such talk is becoming more and more prevalent these days may be a warning that price controls loom on the horizon. Therefore, it is absolutely essential to the debate 235 236 THE FREEMAN April that all be made aware of the true implications of government price fixing. Just what is it that control of price by central planners means? What are we abandoning when we embrace the idea? Forcing People to Conform The object of price control is really not the control of trillions of num bers and dollar signs in the econ omy. Price control is merely an ex cuse to coercively dictate the terms of trade between people. The penal ties for violating price control edicts are levied on individuals. Jails and fines are made for people, not for prices. In Revolutionary France, those individuals who dared to trade at prices not in conformity with the ~~Law of the Maximum" paid a visit to the guillotine.

When government fixes price, coercion is substituted for voluntary exchange. Price is no longer deter mined peacefully in the market place of free and willing trade. Economic consequences must follow and they are easily discernible in light of the two functions of price. One function is to allocate scarce resources. When anything is scarce, as all economic goods are, it must be rationed. Supply must somehow be equated with demand. If the market place be imagined as a huge auction, the problem becomes one of who shall get what quantity of the goods to be auctioned. Do we draw straws, or beat each other up until the num ber of survivors equals the number of goods? Would it make sense to line everyone up, fire a gun, and declare that the fastest runners shall re ceive the goods? The economic way to ration scarce resources is through the price sys tem. By way of the ~~market price," supply and demand meet, the mar ket is cleared, and scarce resources are allocated. In so doing, chronic shortages and surpluses are avoided, the productive process is left unharmed, and peaceful exchange becomes the reigning principle. It is a perfectly natural process; all that is required for it to take place is for men to be left alone to pursue their own desires and abilities.

Price also directs production, its second function. Businessmen are professional price-watchers. If con sumer demand for a product in creases, consumers are willing to pay more for that product. This puts pressure on price to rise, which raises profit margins. In order to take advantage of this profitable situation, businessmen increase their production. The process works in the other direction too: declining consumer demand will mean falling price and falling profit margins. In that case, price will ~~signal" produc ers to abandon that line of produc tion and enter another where the demand is more urgent. In the free economy, it is not necessary for the 1978 WHAT PRICE CONTROL REALLY MEANS 237 governmen t to issue an edict to the farmer, ttGrow wheat; the people want bread." It is not necessary for the government to instruct a man ufacturer, HMake televisions; the people want entertainment." The marvelous mechanism of price does the job far better than the noblest and wisest politician.

Economic Disruption The economic consequence of gov ernment price control is economic disruption. A controlled price will still allocate resources, but not in accordance with supply and de mand. Likewise, a controlled price will still direct production, but not in the same directions as consumers, by their voluntary purchases, would have dictated. The signals are fal sified and distorted by fixed prices. The history of price control in America and everywhere else has been the history of shortages, queues, and popular disaffection. The economic effect is but one aspect of price control. A moral question is also involved. By what right does any party coercively dic tate the terms of trade between others? By what twisted principle of justice is one penalized for trading with another at a mutually-agreed upon price? Price control is a form of public theft. In the name of ttthe public good," the authorities are empow ered to force their particular values on others. The victims are all those deprived of the opportunity to trade or to trade on terms which they regard as satisfactory. Price control breeds a spirit of lawless ness, a network of spies and infor mers,. and is unmistakably a hallmark of an immoral society.

To those who are committed to price control, these arguments perhaps will not be sufficient to dis suade them. They may reply that whatever evils price control might produce can be corrected at the bal lot box. The people can supposedly use their political liberty to coun terbalance their loss of economic liberty. To make this assumption is to ignore the manifest threat to political liberty that price control poses. It is no exaggeration that the economic order determines the politi cal order. If people are so controlled economically that their every move is subject to scrutiny by the State, then they can be effectively silenced by the State. ttControl of a man's subsistence is control of his will," wrote Alexander Hamilton. It is in conceivable that economic freedom can be lost while political freedom remains intact. A brief glance at history confirms what theory teaches. In the mercantilist period, roughly 1500 to 1800, the State con trolled the economy. The subjects did not elect their kings and queens.

238 THE FREEMAN In the thousand years of feudalism, the State controlled the economy. The serfs did not vote their masters to power. In modern-day Russia, the State controls the economy and two hundred fifty million Russians are governed by a single political party. In similar fashion, it is no coinci dence that Adam Smith's ideas of economic liberty nurtured ideas of political liberty in the nineteenth century. Because price controls emClosing the Market power the government to establish a vital command post over the econ omy, they would sow the seeds for the loss of political liberty as well. Will Americans endorse a policy of price control? If they have lost fai th in the free society they more than likely will. If the power of price is delivered from the market place to the politicians, surely ignorance of the grave implications will be the proximate cause. @ IDEAS ON LIBERTY To TRADE is to exchange one item for another, as butter for coal. Each party to any trade is both a buyer and a seller, and a person must be satisfied in that dual capacity before he will trade voluntarily.

When the government intervenes to force a change from the free market price, the theory is that one of the parties to the trade will gain at the new price. The idea usually is to help the underdog, whether it be the poor consumer and his family, or the poor farmer, or the poor infant industry, or the poor employee, or the poor Defense Department of the government, or whatever. But the theory is false. It still takes two to make a trade. To arbitrarily change a price for the benefit of one party to the bargain necessarily means a change to the other party's disadvan tage. And it is always that forgotten other party who will not bear the attempted charge. If the government raises the price of butter above its free market level, the owner of coal will not voluntarily trade as much as before. He doesn't want less butter for more coal. So, instead of helping the presumed underdog, the government intervention only drives from the market some of the chances for the underdog to get what he wants through trade.

PAUL L. POIROT, "More than the Traffic Will Bear"

Edmund A. Opitz Constitutional Restraintson Power AMERICAN political institutions pre suppose certain convictions about human nature, the worth and pre rogati ves of persons, the meaning of life, the distinction between right and wrong, and the destiny of the individual. The Colonists came to their understanding of these mat ters as heirs of the intellectual and religious heritage of Christen dom-the culture whose shaping forces sprang from ancient Israel, Greece, and Rome. Given the consensus of two cen turies ago-which regarded man as a sovereign person under God-it was only logical to structure government so as to· expand oppor tunities for the exercise of personal The Reverend Mr. Opitz is a member of the staff of the Foundation for Economic Education, a seminar lecturer, and author of the book, Religion and Capi talism: Allies, Not Enemies. freedom. The Constitution is clearly designed to maximize each individ ual's equal right to pursue his own peaceful goals and enjoy the benefits and responsibilities of ownership.

The Declaration of Independence put into words what nearly everyone was thinking, that personal rights and immunities are ours because we are created beings, that is, we man ifest a major purpose and intent of this universe. This implies a firm rejection of the alternative, which is to assume that we are the mere end products of natural and social forces, adrift in a meaningless cosmos. For if the universe is meaningless, then no way of life is any more meaning ful than any other; in which case Power has no limits. Our forebears had firm convic tions about the purpose of life, and knew that in order to achieve life's 239 240 THE FREEMAN April transcendent end Power must be limited: ((Resistance to tyrants is obedience to God," they declared. If life is viewed in these terms, how shall we conceive the proper scope and competence of government? What is its role in society? What functions should we assign to it?

Government is the power struc ture of a society. This is the first and most important fact about the politi cal agency, that it has the legal authority to coerce. The second thing is to inquire whether the power wielded by government is self-sprung, or delegated by a more comprehensive authority than the merely political. Does government rule autonomously or by divine right; or is the real power located elsewhere and merely loaned to gov ernment? The Constitution is clear on this point; the power is in the people to lay down the laws which Power must obey. They set it up; they tell it what to do. ((We, the People of the United States," reads the Preamble, ((do or dain and establish this Constitution for the United States of America." Specific Limitations The people empower an agency to do certain things for them as a na tion, but if we isolate the provisions they laid down to limit govern ment the prevailing intent or con sensus which made the Constitution its political tool becomes clearer.

The powers not delegated to the United States by the Constitution, nor pro hibited by it to the States, are re served to the States respectively, or to the people. Amendment X The people, furthermore, possess a body of rights by native endowment above and beyond those mentioned in the Constitution. The enumeration in the Constitution of certain rights, shall not be con strued to deny or disparage others re tained by the people. Amendment IX These sovereign people shall be free to worship, speak, and publish freely. Congress shall make no law respecting an establishment of religion, or pro hibiting the free exercise thereof. Amendment I Congress shall make no law . . . abridging the freedom of speech. Amendment I Congress shall make no law ... abridging the freedom ... of the press. Amendment I Voluntary association is the corol lary of individual liberty, and this is emphasized, as well as the right of petition.

Congress shall make no law ... abridging . . . the right of the people peaceably to assemble. Amendment I Congress shall make no law abridging ... the right of the people ... to peti tion the Government for a redress of grievances. A mendment I The old world divisions of mankind 1978 CONSTITUTIONAL RESTRAINTS ON POWER 241 into castes and orders of rank are to be no more. No title of nobility shall be granted by the United States. Article I, 9 Every citizen shall have a right to participate in the processes by which the nation is governed; and, should he desire to run for public office he shall not be put to a creedal test. The right of the citizens of the United States to vote shall not be denied or abridged .... Amendments XV and XIX No religious test shall ever be required as a qualification to any office or pub lic trust under the United States. Article VI Freedom to Trade; No Special Privilege Commerce makes for a free and prosperous people, so restraints on trade shall be removed.

No tax or duty shall be laid on articles exported from any State .... Article I, 9 No preference shall be given by any regulation of commerce or revenue to the ports of one State over those of another. Article I, 9 Progressive taxation violates the principle of equal treatment under the law-penalizes ability, and low ers productivity, so it is forbidden. No capitation, or other direct, tax shall be laid, unless in proportion to the census. . . . Article I, 9 The public treasury shall be inviol ate; government shall not confer economic privilege on some at the expense of others. No money shall be drawn from the Treasury, but in consequence of ap propriations made by law. Article I, 9 Personal privacy shall be respected and jealously guarded. The right of the people to be secure in their persons, houses, papers, and ef fects . . . shall not be violated. Amendment IV Conflict is a built-in feature of human action, and when collisions of interest do occur in society, the rights of the individual must be maintained.

No person shall ... be deprived of life, liberty, or property, without due proc ess of law. Amendment V Nor shall private property be taken for public use without just compensation. Amendment V Strings on the Military In some nations, the civilian life is a mere appendage to the military. This will not happen here because civilians control the purse strings. No appropriation of money (to raise and support military and naval forces) shall be for a longer term than two years. Article I, 8 As a further safeguard against any future militarization of this nation, the civilian sector must have the means for defending itself.

242 THE FREEMAN April The right of the people to keep and bear arms, shall not be infringed. Amendment II In some countries, criminal proceed ings are used to entrap citizens, whose guilt is assumed; the burden of proof is on them to show their innocence. Here, the innocence of the accused is .assumed, until his guilt is proved. The law shall not reach backward to designate as criminal an action which until then was innocent. No ... ex post facto law shall be passed. Article I, 9 There shall be no Star Chamber proceedings. No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury. Amendment V Protecting the Accused The accused is protected against il legal imprisonment, and must be informed of the charges against him. The privilege of the write of habeas corpus shall not be suspended. Article I, 9 Punishment shall fit the crime; it shall not mean extinction of civil rights, forfeiture of property, or penalties against kin.

Nobill of attainder ... shall be passed. Article I, 9 The accused is entitled to be tried by his peers. . . . the right of trial by jury shall be preserved. Amendment VII There is to be no -forced self incrimination. Nor shall [he] be compelled in any criminal case to be a witness against himself. Amendment V The rights of the accused are sum marized: 1. ... a speedy and public trial, by an impartial jury; 2. Within the district wherein the crime shall have been committed; 3.... to be informed of the nature and cause of the accusation; 4. . . . to be confronted with the wit nesses against him; 5.... to have compulsory process for obtaining witnesses in his favor; 6.... and to have the assistance of counsel for his defense. Amendment VI Even when found guilty, the accused is protected. 1. Excessive bail shall not be re quired; 2. Nor excessive fines imposed; 3. Nor cruel and unusual punish ments inflicted. Amendment VIII Treason Treason is a crime against the na tion, so serious that it must be de fined with special care.

Treason against the United States, shall consist only in levying war against them, or in adhering to their enemies, giving them aid and comfort. Article III, 3 1978 CONSTITUTIONAL RESTRAINTS ON POWER 243 The person judged guilty of treason is personally responsible for his crime, and therefore his family and kin shall not be punished. No attainder of treason shall work corruption of blood. Article III, 3 Impeachment is a special case. The Senate shall have the· sole power to try all impeachments ... and no person shall be convicted withouf the concurrence of two-thirds of the mem bers present. Judgment . . . shall not extend fur ther than to removal from office, and disqualification to hold any office of honor, trust or profit under the United States. Article I, 3 A blind spot in the original Con stitution is corrected. Neither slavery, nor involuntary servitude, except as punishment for crime. . . Amendment XIII No state shall ... deny to any person within its jurisdiction the equal pro tection of the laws. Amendment XIV The separate states are not wholly sovereign.

No state shall enter into any treaty ... coin money ... pass any law impairing the obligation of contracts. Article I, 10 The Method of Freedom There is a strong pen chan t in human nature which impels people who feel strongly about something-a good cause, say-to group their forces and use the power of government to fasten their panacea on those they've been unable to per suade. The Constitution is a prime example of the limitations placed upon governmental power so that people with a cause to advance must resort to education, persuasion, and example only. This is the method of freedom, and a people committed to the method of freedom find the Con stitution still an apt instrument for structuring a society which maximizes freedom and opportunity for all persons. It was designed to establish a national government in ternally controlled by checks and balances between the separate pow ers. And government was to be further limited by the federal struc ture itself, in which the centripetal power of Washington was to be offset by the centrifugal powers of the separate states. It was not a perfect document, but it carried the means of its own correction, and it did embody the consensus of the people for whom freedom was the prime political good. It was work able. And it will work again when ever a significant number of people have the force of intellect to com prehend sound ideas, and the force of character to make them prevail.@ A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN BEYOND FAILURE: Howto Curea NeuroticSociety FRANK GOBLE, author of Beyond Failure: How to Cure a Neurotic So ciety (Caroline House Books, Green Hill Publishers, Inc., Ottawa, Il linois 61350, $10, foreword by Henry Hazlitt), has a great vision.

He wants to establish what he calls a People's Project, a Hnational mobilization of resources to solve human problems using the same ap proach that placed astronauts on the moon." The ideas which he hopes to disseminate are based on the so called Third Force psychology of Dr. Abraham Maslow, who revolted against both Freudianism and Be haviorism on the ground that they are ~~cripple philosophies" which ig nore whole stretches of human his tory and endeavor. What Mr. Goble has to say about the ~~cripple philosophies" is perfectly true, but 244 his theory that one can apply the moon-shot approach to the solution of social problems ignores a host of difficulties. History is always a rag ged process, and great changes never come about overnight. Putting men on the moon was a purely physical process. Once the money had been approved to carry it out, a ~(task force" approach became feasible. The problem was to provide astronauts with oxygen to breathe and food and water to sustain them selves while riding a ballistic arc to a celestial destination. The technol ogy of rocket-launching was already in place when the task force tackled its mission. The personnel was ready: World War II had produced a resourceful air force whose adven turous pilots were yearning for something challenging to do. The HOW TO CURE A NEUROTIC SOCIETY 245 rest was simple, and its ac complishment involved little con troversy once it had been accepted as a national objective. Whether people should have been taxed for the job is, of course, another story. It was easy, however, compared to en gineering a big change in society.

Some Vital Adjustments as Prelude to Reform Before a task force could be as sembled to rout the devils of Freud and Behaviorist John B. Watson, not to mention B. F. Skinner, and to re-establish the Natural Law ideas of our Founding Fathers in the schools, a political sea-change of massive proportions would have to be brought about. The National Ed ucation Association would have to be deprived of its grip on American teachers. The big labor bosses would have to accept a formula for relating wage-increase demands to a well understood productivity standard. Congress would have to withdraw subsidies from a thousand angry pressure groups. And our Washing ton bureaucrats would have to abandon the Nanny approach to the institutions they are supposed to regulate. As for regulation itself, it would have to be dispensed with, sa ve in the few clear instances where the public health is involved.

Meanwhile, our educators would have to rehabilitate the American Ethic. They would have to begin teaching history again. Naturally, all of this would involve skirmishes on a thousand fronts, not a single dedication to a moon-shot-type ~~people's project." Mr. Goble is faced with the problem of setting in mo tion a Fabianism-in-reverse on a wide front before he can hope to see a fin~d victory. for what he calls Responsibility Theory. When he desists from his moon shot and Manhattan Project analogies, Mr. Goble talks eminent and inspiring common sense. His book is first-rate analysis. As he says, Freud erred by confusing neurotics with normal people: not everybody is bedeviled by aggres sive instincts or is helpless to control his libido. According to Richard LaPiere, a Stanford sociologist, the Freudian ethic resulted in the idea Hthat man cannot and should not be expected to be provident, self reliant, or venturesome, and that he must and should be supported, pro tected, socially maintained." The American Ethic, as defined by the Founding Fathers, had entirely op posite presuppositions, and it worked for several generations be fore Freud was ever heard of in this country.

"Responsibility Theory" The Maslow-Goble Third Force idea rejects Freud and the anti-free will Behaviorists in favor of Respon sibility Theory which assumes that 246 THE FREEMAN April human babies are born with socially constructive instincts that are con ducive to the survival of their species unless they are mistaught by permissive theorists to expect to have things handed to them on a platter. It is permissiveness, according to Goble, that has ruined our educa tional system. Where there is no truth, anything goes. The idea that science must be value-free or value-neutral has resulted in a preoccupation with averages. The ((well-adjusted person" won't quarrel with the average. The well developed person, on the other hand, will reject the idea that he must settle for mediocrity. He will insist on having values of his own. What our educational system should do, according to Maslow-Goble Respon sibility Theory, is to inculcate the idea not of Hadjustment," but of Hself-actualization," which is de scribed as ((the full use and exploita tion of talents, capabilities, poten tialities." Instead of studying the worst of humanity, as the Freudians do, Responsibility Theory would concentrate on ((the less than one percent of society that had achieved self-actualization." Dr. Maslow pre ferred to have his students read about Hpeak experiences" in the lives of heroes such as Lincoln, J ef ferson, William James, Albert Schweitzer, Jane Addams and, oddly, Eleanor Roosevelt.

Character Education There are the elements for a good Fabianism-in-reverse in the U.S., and Mr. Goble mentions a few. He tells about the Character Educa tion Projects sponsored by the American Institute for Character Education in San Antonio, Texas. One of these projects, at Public School 63 in Indianapolis, Indiana, has been active for six years and has restored both school and individual pride while reducing vandalism to a minimum. Such projects would have a bigger chance in private schools, where there would be less apathy to over come, but Mr. Goble presumably doesn't want to get into the public versus-private school fight. He wants to work through ((existing in stitutions." He hopes to see a non profit People's Project Corporation formed to push his ideas. The Cor poration, by ((mass-marketing" edu cational and motivational programs to existing institutions whether pub lic or private, would, he thinks, act as a catalytic agent to reduce costs of government, inflation, unemploy ment, crime, drug abuse, illegiti macy, welfare rolls and ((other de structive problems."

It is a grand idea, but since there aren't enough Gobles to go around, wouldn't it be more realistic to take a one-community-at-a-time ap proach? After all, nothing succeeds like one good example.

1978 OTHER BOOKS THREE NEW BOOKS by Ludwig von Mises Reviewed by Henry Hazlitt 247 NOTES AN'D RECOLLECTIONS by LUdwig von Mises (Libertarian Press, South Holland, Illinois) 181 pages. $9.95 WHEN Ludwig von Mises died on October 10, 1973, at the age of 92, even his· most devoted readers, and those privileged to know him per sonally, assumed that everything he had written, in German or English, had already been published. But his widow Margit now reveals that im mediately after they emigrated to this country in August 1940, Mises set to work on a manuscript that he turned over to her at the end of the year, with the simple instructions to ((take good care of it." It was not until some time after his death, thirty-three years later, that she remembered it. It turned out to be the present remarkable combination of autobiography and critique of the intellectual milieu in Mises' native Austria in the years when he was growing up.

He was ((devouring" articles on history when he was seven years old. When he graduated from high school he decided to study .law . But he was also reading in economics. In the German-speaking world Schmoller was then ((adored as the great maste'r on (political economy.' " But when Mises was still in high school, he tells us, he ((noticed a contradiction in the position of the Schmoller circle." When he entered the university he, too, he confesses, ((was a thorough statist. But in contrast to my fellow students I was consciously anti-Marxian. . . . When I finally engaged in an intensive study of the important works of Marx, Engels, and Lassalle, I was provoked to con tradict them on every page. It seemed incomprehensible to me that this garbled Hegelianism could exert such an enormous influence." Yet he continued to bean ardent interventionist and ((reformer" until one of his professors induced him to research housing conditions and another suggested he study the legal 248 THE FREEMAN April changes regarding domestic ser vants. (1t then dawned on me that all real improvements in the condi tion of the working classes were the result of capitalism; and that social laws frequently brought about the very opposite of what the legislation was intended to achieve."

In 1913 Mises was admitted to the faculty of law at the University of Vienna as an unsalaried lecturer, and in 1918 he received the title of Associate Professor. But that was as far as he was destined to go there. ((A university professorship was closed for me," he writes: HThe uni versities were searching for inter ventionists and socialists." He did receive a position in the Vienna Chamber of Commerce, however, and from there he began to exert his real influence. At his of fice, every two weeks, he conducted a small seminar consisting of 20 to 25 students. It was from this small group that such famous economists were to emerge as F. A. Hayek, the Nobel laureate, Gottfried Haberler, Fritz Machlup, Oskar Morgenstern, and Eric Voegelin. The "Austrian School" The great intellectual influences in Mises' own development were, of course, the founders of the HAus trian school," Carl Menger and Eugen von Boehm-Bawerk. Mises arrived too late at the University of Vienna to have Menger as a teacher, but he recalls that around Christ mas, 1903, he read Menger's Princi ples of Economics for the first time: HIt was the reading of this book that made an (economist' of me." Fortu nately, Mises was able to attend the seminars of the great Boehm Bawerk.

Mises' own outstanding contribu tions included his work on money, which finally unified monetary theory with economic theory in gen eral, his demonstration that socialism must fail because it cannot solve the problem of ((economic cal culation," and his recognition that economics is merely a part, though by far the greater part, of a wider science of Human Action. He was beyond question the foremost economist of his generation. Yet this is in the main a sad book. As Mises matured intellectually, he came to recognize that Austrian thought and culture were already in decline. Menger and Boehm-Bawerk were still alive; but they were being succeeded by mediocrities who failed to grasp their revolutionary in sights. Menger was Hdiscouraged" and ((silenced." ((The evening of Boehm-Bawerk's life was darkened by his fears for the future of Austria and its culture." He died a few months after the outbreak of World War I. Mises got the news when he was with his artillery battery at the front.

There was more misfortune to 1978 OTHER BOOKS 249 come. Mises lived to see the rise of Hitler. Driven from Vienna by the threat of a Nazi takeover, he spent six comparatively happy years as a professor at the Graduate Institute of International Studies in Geneva. But the outbreak of World War II made it seem to him once more ad visable to emigrate, this time to the United States, in August 1940... In the months when he was writing the present book, he had no knowledge of the future he would have in his new country. That future too, in its early years, was to prove full of anxiety and difficulties. With the help of Ameri can friends, he was finally, in 1945, appointed Visiting Professor at the Graduate School of Business Admin istration of New York University. Even then his salary did not come from-the university's own general funds, but had to be provided by friends and foundations.

Some of us may regret that Mises' great personal reticence kept him from telling ~ore about his early childhood and his emotional life, but we can still count ourselves fortu nate to have this important addition to his legacy. The book is preceded by the short Foreword by Margit von Mises, and followed by an admirable Postscript of thirty pages, describing Mises' later years and works, by his friend and student, and translator of this volume, Professor Hans F. Sennholz. A CRITIQUE OF INTERVENTIONISM by Ludwig von Mises (Arlington House, New Rochelle, New York) 164 pages. $8.95 Essays collected in A Critique of Interventionism were written in the early 1920's, and published in Ger man in 1929. They are now issued for the first time in an English translation by Professor Sennholz. The English title almost exactly fol lows the German-Kritik des Inter ventionism us. The American reader familiar with Mises' other work will find no ideological surprises. But what will probably impress him most is pre cisely this-that as early as the mid-1920's Mises' economic philoso phy, and his main conclusions, were already formed. He was astonish ingly immune from the then almost universal fashion in respectable economic circles, which rejected both laissezfaire capitalism and outright socialism, in favor of a so called ~~middle road," which accepted only qualified property rights, sub ject to overriding government inter ventions and controls.

In the 1920's Mises was not only keeping abreast of all the major out put on economics in Europe, but paying tribute to the contributions 250 THE FREEMAN April of such American writers as John Bates Clark, Taussig, Fetter and Davenport. But he had little pa tience with the work of the self styled American Institutionalists and he was unsparing, for example, in his dissection of the fallacies of such advocates of ~~social control" as John Maurice Clark. The main theme of this book, as its title makes clear, is not only the needlessness, but the immense harm done by government interven tion in economic affairs. He defines intervention as «a limited order by a social authority forcing the owners of the means of production and en trepreneurs to employ their means in a different manner than they otherwise would." More briefly, he defines interventionism as Uthe hampered market order." And he goes on to show why, in the long run, it can never achieve the objectives which the authorities aim to achieve.

All interventions consist of a pro hibition or compulsion or a combina tion of both. Among the outstanding examples are price controls and wage controls. What are usually prescribed are price ceilings or minimum wages. Price Controls,and Where They Lead In dealing with price ceilings, Mises begins by pointing out that the constellation of prices at .. any time is not haphazard or accidental, but has been determined pre cisely-or at least within narrow limits-by the interrelations of sup: ply, demand, costs, and similar, fac tors. But those who believe that the formation of prices is purely arbi trary easily arrive at the conclusion that they should be fixed by external regulation. When prices are held down by government edict, however, two. re sults inevitably follow. More of the price-fixed goods are bought, and less are produced. To limit consump tion, the government must resort to rationing. To restore profit margins and production, it must fix the price also of raw materials, and eventu ally wage rates, and force busi nessmen and workers to produce and labor at these prices.

In short, the government must proceed step· by step to comprehen sive control over labor and produc tion. But this was not what it started out to do. It wanted the buyers to enjoy the goods at lower prices, not to deprive them of the opportunity to buy the goods at all. When, on the other hand, gov ernment tries to fix minimum wages, it forces an increase in costs of production and also in prices. Either profit margins are wiped out or fewer goods are sold, and as a re sult workers are laid off. If the laid off workers are then paidunemploy ment compensation, the government 1978 OTHER BOOKS 251 creates a permanent body of un employed. In addition to interventionism properly so called, one or two of the essays in this book discuss such top ics as socialism, Marxism, anti Marxism, and the nationalization of credit. But the reasoning through out leads to the conclusion that in terventionism must disorganize production, and that in the long run there is only one alternative for economic organization: either capi talism or socialism. ((There is no third road."

ON THE MANIPULATION OF MONEY AND CREDIT by LUdwig von Mises (Free Market Books, Dobbs Ferry, New York) 296 pages. $14.00 We come now to the volume On the Manipulation of Money and Cre dit. In 1912 Mises published in German the first edition of The Theory of Money and Credit. There he first developed what has since become known as the ((Austrian" theory of the trade cycle. In 1928, he elaborated and perfected this theory in an essay of more than 100 pages. This essay is the main single item now for the first time translated into English and presented together with three other newly translated items. These are an article on ttStabiliza tion of the Monetary Unit" (1923), one on HCauses of the Monetary Crisis" (1931), and one published in 1933 on the then existing state of business cycle research. The trans lations are by Bettina Bien Greaves, and the book is edited with an Intro duction and an Epilogue by Percy L.

Greaves, Jr. Readers sufficiently acquainted with the work of Mises that has hitherto been available in English will already be familiar with the general outline of his business cycle theory. Even under a (fractional re serve) gold standard, governments and central banks permit or encour age an artificial lowering of bank interest rates. This stimulates the demand for bank loans beyond the amount of real savings available for lending. The increasing demand for bank loans is then met by inflation ary increases in the quantity of money and credit. The first recipi ents of the newly-created funds use them to launch or expand business ventures for which the required real factors of production must be with drawn from the particular pattern of production that would otherwise have been preferred by consumers. In other words, the pattern of pro duction becomes distorted and mis directed, and increasingly so the longer the credit expansion con tinues, until the boom ends in an inevitable bust and depression.

252 THE FREEMAN April Mises elaborated his. trade cycle theory both in subsequent editions of The Theory of Money and Credit (e.g., 1953) and in Human Action (1949). He also presented elsewhere much of the substance of the other papers translated in this volume. Nevertheless, Mises never repeated himself mechanically or by rote. Whenever he came back to the same problem he addressed it afresh, al most as if he were solving it for the first time. As a result each exposi tion threw its own special illumi nation on the problem, or supplied some connecting link that his other expositions may have omitted to make quite so explicit or clear. This the present trade cycle essay notably does. Consequently we owe the present translator and editor our gratitude for making these impor tant contributions at last available in English. * * * In spite of his great gifts for ex position, Mises' contributions were much misunderstood during his lifetime, and are still often mis understood today. A recent example is an article on Wilhelm Roepke by Patrick M. Boarman in the Autumn 1977 issue of The University Book man. Roepke, writes Boarman at one point, ~~remembered von Mises saying that if only the principles of free trade had been followed from the beginning, World War II might never have happened. I don't re member Roepke's exact reply to this, but he was, in effect, struck dumb.

And he remarked to me that it was incredible that anyone with a fair know ledge of German or of Euro pean history could reduce the Ger man question-the darkest and most sombre question of the age, with myriad roots reaching back hundreds of years-to a mere set of economic arrangements." Yet Mises was right. If free trade were a sort of isolated accident, Roepke might have been warranted in being ~~struck dumb." But free trade is a result of a state of public opinion within the country that has adopted it. It means that the people generally recognize the advantages of international trade (particularly of imports) and recognize equally the advantages of international co operation. In such an atmosphere the fanatic and belligerent nation alism that leads to war is very un likely to exist. To resume the quotation from Boarman: ~~For Roepke, this kind of economic determinism, though employed in defense of capitalism, is just as fallacious as the Marxian version of economic determinism, directed to the justification of the dialectic."

Equating Mises with Marx is something new. Mises was merely reasoning from cause to effect. Only in this sense were his remarks ~~de1978 OTHER BOOKS 253 terministic." But all science is ((de_ terministic" in this sense. Marx's economic determinism was of a dif ferent sort. It was mystical. It was a one-way determinism in which the ((material productive forces" deter mined everything else-even the ideology of the people-but it was it self not explained by any preceding cause. As Mises himself once pointed out-for he was, among other things, Marx's most devastat ing critic-nIt never seems to have occurred to Marx that the produc tive forces are themselves a product of human thought, so that one merely moves in a circle when one tries to derive thought from them." @ Editor's Note: Each of the above three vol umes is available, at prices listed, from The Foundation for Economic Education, Irvington-on-Hudson, New York 10533 IT'S NO SIN TO BE RICH: A DEFENSE OF CAPITALISM by William Davis (Thomas Nelson, Inc., 407 Seventh Ave., S., Nashville, Tenn. 37202) 264 pages • $8.95 Reviewed by David A. Pietrusza WILLIAM DAVIS is well known in the United Kingdom as an influential financial editor and columnist and as the sprightly editor-in-chief of the famed humor magazine, Punch. He combines economic expertise with an eye for the absurd to provide a self-confident, breezy, often anec dotal look at modern economic thought, focusing on the prejudices which bias the public attitude against achievement, success, and private profit in business.

Ironically enough, he opens his counterattack by quoting Marx himself on the value of the capitalist in history: ~~The bourgeoisie has been the first to show what man's activity can bring about. It has ac complished wonders far surpassing Egyptian pyramids, Roman aque ducts and Gothic cathedrals . . . the bourgeoisie ... draws all nations ... into ... civilization it has created enormous cities and thus rescued a considerable part of the population from the idiocy of rural 254 THE FREEMAN April life . . . the bourgeoisie, during its rule of scarce one hundred years, has created more colossal productive forces than have all the preceding generations together." Davis rips apart the myth ofwor sening conditions at the beginnings of the Industrial Revolution, dis sects the glaringly inaccurate pre dictions of Marx and Engels in re gard to the inevitable crumbling of capitalism, scores the results of Marxist theorizing in both its Com munist and Socialist offshoots, and even ventures so far as to heartily defend the nineteenth-century Cap tains of Industry that today are popularly derided as ((Robber Ba rons."

In most countries of the world today business is under attack; it must propitiate the politically pow erful in order to survive. Black mailed by officials, it pays protec tion money and is accused of brib ery. Davis does not excuse or con done bribery, but merely describes the situation in which certain businessmen find themselves. He quotes an oil company executive as saying, ~(I would like to ask some of the people who are becoming close to sanctimonious humbugs just what they would do if they had two hundred million dollars invested in a country, and a politician, with a death warrant in his pocket, came along and said, (give me ten million or else'-and the (or else' can take several forms. Would they pay it or would they refuse to pay it? And if they did pay, would they say it was a bribe or would they not call it by its proper name-extortion?" Then there is the menace of unionism in Davis' Britain. Eng land's labor movement fanatically attempts to wring the last remain ing shilling out of that nation's in dustrial establishment, while dis claiming any responsibility for the country's economic health or even its survival. Through compulsory unionism, big labor's grip on even the highly-individualistic profession of journalism grows more vise-like every day. Strikes have shut down the printing trades and thus en dangered press freedoms: but also, incredibly, unions have gained con trol of access into the reportorial and editorial fields themselves.

~(An eighteen-year-old beginner," says Davis, ((however talented, now has little or no chance of joining a national newspaper. The closed-shop system, as applied in the seventies, deliberately prevents many poten tially good journalists from getting into the profession-and keeps many bad ones in it. It also presents a quite genuine threat to the free dom of the press. It is intolerable that editors should no longer be permitted to employ the best avail able talent and equally intolerable that the opinions ofjournalists-and cartoonists-should be subject to the 1978 OTHER BOOKS 255 censorship of trade-union mili tants." Like an efficient and personable tour guide, Davis touches all major points of interest, provides new in sights, and yet maintains a leisurely and amiable pace. It's No Sin To Be Rich provides a sturdy defense of the diversity, prosperity, and freedom that a market economy makes possible.

THE PEOPLE SHAPERS by Vance Packard (Little, Brown & Company, 200 West St., Waltham, Mass. 02154, 1977) 398 pages. $12.50 Reviewed by Th9mas L. Johnson IN order to win a battle one must know the enemy and understand his tactics. This is just as true of the battle for freedom as for any other struggle. This book describes ~~the enemy's" various techniques of people-control: Skinnerian be havioral conditioning, brain washing and reprograming, mood managing, hypnosis, imprinting, person ali ty altering via brain surgery or electric shock, and others. A well-known psychologist is quoted: ~~We can choose to use our growing knowledge to enslave peo ple in ways never dreamed of before, depersonalizing them, controlling them by means so carefully selected that they will perhaps never be aware of their loss of personhood." It is a startling and frightening ac count. Some of·these techniques are al ready in use, to a far greater extent than generally realized. Packard cites Science Digest as his authority for saying that an estimated 500,000 to 2,000,000 school children have been put on amphetamines or Rita lin in· order to drug these children into a more passive state. And ~~in some cases, there appears to have been a clear element of coercion: threats to hold back a child or put him in some class with a disabled label" if parents refused to allow hinl to take the recommended drug.

Packard reminds his readers that schools are institutions of govern ment and then asks: ~~Are schools in general exerting, however subtly, any kind of governmental pressure to get children on behavior-modify ing drugs?" Good question, and one which would be answered in the affirmative by certain parents who are currently involved in a lawsuit in which they contend that, for some children, the taking of Ritalin was made a condition of attending public school. The author goes on to describe forced drugging in other societal in256 THE FREEMAN April stitutions such as prisons, mental institutions, homes for the aged, and the like. Part II of The People Shapers dis cusses the many and varied techniques, mainly biological, which are being used now or will be used in the near future in order to reshape man. This section reads like science fiction except for the fact that it reveals many possibilities, such as that of cloning man or resetting his biological clocks, that are on the verge of happening.

Packard ends his enlightening, thought provoking, and sometimes shocking book by discussing some new trends that can enhance indi vidual self-direction, and how it may be possible to control the would-be controllers. One may not agree with some of his suggestions for im provement or for safeguarding indi vidual rights, but the reader is cer tainly prodded into thinking about many difficult and serious matters that every believer in liberty will want to ponder. @ HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $3.00 Order from: THE FOUNDATION FOR ECONOMIC EDUCATION, INC. IRVINGTON-ON-HUDSON, NEW YORK 10533 ttle Freeman VOL. 28, NO. 5 • MAY 1978 The Free Lunch Myth E. C. Pasour, Jr. 259 Why the individual should beware of all offerings of "free lunches." Walking into a Trap Gary North 265 How business and professional groups are baited to become victims of regulations and control. Inflation in One Page Henry Hazlitt 276 Printing money to cover government deficits is curable: slash spending to balance the budget.

World in the Grip of an Idea 17. Sweden: Tightening the Screws Clarence B. Carson 278 Socialism operates under the cloak of democracy to undermine the freedom of the individual. Risk and Profit versus Security Kenneth McDonald 291 The search for security gives rise to taxes and drives away the risk which accompanies creativity. Government Regulation and Business Management John Semmens 297 The State's invasion of managerial prerogatives has occurred on all fronts. The Idea of Equality in America L. John Van Til 303 That every man shall have an equal chance-that every man shall be free to become as unequal as he can. Book Reviews: 318 "The Future That Doesn't Work: Social Democracy's Failures in Britain" edited by R. Emmett Tyrrell, Jr. Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

the ' @FreemanW A MONTHLY JOURNAL OF IDEAS ON LIBERTY FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson, N.Y. 10533 Tel: (914) 591-7230 Leonard E. Read" President Managing Editor: Paul L. Poirot Production Editor: BethA. 'Hoffman Contributing Editors: Robert G. Anderson Bettina Bien Greaves Edmund A. Opitz (Book Reviews) Brian Summers THE FREEMAN is published ,monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion ofpri vateproperty, the free market, the profit and loss system, and limited government. The' costs of Foundation projects and services are met through donations. Total expenses aver age $18.00 a year per person on the mailing list. Donations are invited in any amount. THE FREEMAN is available to any interested person in the United States for the asking. For foreign delivery, a donation is required sufficient to cover direct mailing cost of $5.00 a year.

Copyright, 1978. The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid: 3 for $1.00; 10 or more, 25 cents each. THE FREEMAN is available on microfilm from University Microfilms International, 300 North ZeebRoad, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "World in the Grip of an Idea," "Risk and Profit versus Security," and "The Idea of Equality in America."

The Free Lunch Myth THE conventional wisdom about scarcity has changed dramatically in recent years. Only a few years ago, a fashionable view held that we had reached or were nearing the end of the age of scarcity. According to this view, popularized by Professor Galbraith, our affluent society was approaching a time when all our ~~basic needs" could be met. Today, the pendulum has swung in the op posite direction. A series of events including the ~~environmental crisis," the ~~energy crisis," and the ~~world hunger crisis" have made clear to most people that scarcity is and will remain a fact of life. Gover nor Brown of California describes our era as an ~~age of limits." Dr. Pasour is Professor of Economics at North Carolina State University at Raleigh. E. C. Pasour, Jr. Although the public conception of scarcity may change, scarcity is a basic enduring reality and an inher ent fact of life. Every age is and must be an age of scarcity. Scarcity of any good or service means that it has an opportunity cost. That is, in order to obtain more of any good or service other goods or services must be given up.

Scarcity is a fact of life for individ uals as well as governments. Yet, in spite of ample evidence that all use ful goods and services involve a cost, the myth persists that Hfree lunches" are attainable. The economic concept ~~free lunch" means that an individual or group can be provided a good or service at no cost to the individual receiving the bene fit or to anyone else. Scarcity means 259 260 THE FREEMAN May that the Hfree lunch" is and must remain an illusion. Consumerism and the Free Lunch The Hfree lunch" myth has been responsible for much of the Hcon sumer" and environmental legisla tion of recent years. Ralph Nader and other consumer advocates led us to believe that automobiles could be made safer at little or no cost to the consumer. The results of this myth are now apparent, being reflected in higher auto costs. The mandatory air bag requirement when im plemented will further increase the price of a new car by several hundred dollars.

The purported ttfree lunch" in the case of mandated safety regulations has been found to be quite expen sive. Some people may prefer to pay a higher price as a way of reducing risk. More important, however, is that for most of us the supposedly ttfree lunches" turn out to be entrees which we didn't order and don't even wish to eat when served! Auto air bags, seat belts, shoulder harness and the interlock safety system are good examples. Public reaction against the interlock system for seatbelts was such that Congress repealed this safety requirement. Much of the support for consumer safety legislation of recent years has been based on a lack of recog nition by the public about the ulti mate incidence of the legislation. People will desire to reduce risk as long as the expected benefits exceed the costs. Public support for safer automobiles, drugs, lawn mowers, and the like has been overstated where consumers are led to believe that safety can be increased at no cost to them. Politicians contribute to this confusion with demogogic statements that any relaxation in a safety standard is a ~tsellout" to the industry involved, that manufactur ers should always be responsible for safety in the use of products sold, that only drugs which are com pletely safe should be sold, and so on.

Implicit in such rhetoric is the ttfree lunch" myth that risk can be re duced without cost to consumers. Pollution and the Free Lunch The ttfree lunch" myth is also re sponsible for much of the impetus behind the environmental move ment. We are told that clean water (or clean air) is ((priceless"but we are not told what the costs will be of obtaining the clean water (or clean air). The so called t~Muskie clean water bill" of 1972 declared a na tional goal to end the discharge of pollutants into the nation's water ways by 1985. This amounts to a national goal to achieve a zero level of water pollution. The cost of at taining such a standard, even if technically possible, would be as tronomical. In this case, the t~free lunch" myth 1978 THE FREE LUNCH MYTH 261 takes a slightly different form. The consumer is misled into thinking that a good or service will be pro vided free to him at the expense of the industries providing consumer goods and services. If the apparent cost is less than the actual cost, demand will be overstated. Indeed, the fact that costs to the public were perceived to be unrealistically low is almost certain to have been respon sible for much of the public support in the case of the Muskie clean water bill.

Excess Profits and the Free Lunch Another interesting variant of the ~~free lunch" myth arises in the case of proposals to roll back oil prices or to tax ~~excess profits" of the oil in dustry. As President Carter, Senator Jackson and other politi cians castiga te the excess Cobscene") profits of the oil indus try, the erroneous idea is promoted that profits of the oil industry can be taxed away without affecting the domestic supply of petroleum prod ucts. In other words, the public is led to believe that there is a nfree lunch" invol ved in the sense that oil prices can be ~~rolled back" or profits re duced without affecting producer in centives and long-run oil produc tion. (It isn't denied, of course, that this would reduce income of the pro ducers.) Economic theory suggests that roll backs in price or profits will not affect production only if producers are completely unresponsive to prod uct price (Le., if supply is perfectly inelastic). The Carter Administra tion's contention that price ceilings on oil and natural gas will not affect future production is a good example of the idea that production is unre lated to price. Producers of oil and natural gas, however, are similar to producers of other products. They do respond to economic incentives. This means that more oil and natural gas will be produced the higher the price.

Legislation which effectively re duces price {or profits) to producers will inevitably reduce output. If ((ex cess profits" are defined (consistent with the freelunch myth) as profits which do not affect output, there are no excess profits. There are no prof its which can be taxed away with out affecting future production. Thus, the relevant issue is not whether ~~excess profits" should be taxed away. Instead, the relevant policy issue concerns how much higher taxes or lower prices will affect output both in the short run and in the long run. The (~obscene profits" rhetoric obfuscates the basic issues and, indeed, serves to per petuate the ~~free lunch" myth. World Hunger and the Free Lunch The Hfree lunch" myth also plays a prominent role in current discus sions relating to world hunger and 262 THE FREEMAN May poverty problems. The freelunch myth is involved in several ways. A New International Economic Order (NIEO) has been approved by the UN to redistribute income from the United States and other industrial countries to the less developed coun tries. The NIEO involves a wide range of interventionist schemes ranging from price-raising cartels for major products sold by the less developed countries to increased foreign aid by the developed coun tries. The NIEO is fundamentally anti-market in mentality and as sumes that arbitrarily redistribut ing income from the West to the less developed countries will have no important effect on production. Yet, there is ample evidence that indi viduals in the U.S. as well as other countries respond to economic in centives. Thus, there is every reason to expect that action taken to force fully redistribute income between countries will adversely affect out put. There is no ~~free lunch" in volved.

Individuals in the West are en couraged to reduce waste in the use of food, gasoline, electricity and other energy sources. Citizens in the United States and other highly de veloped countries are told that they should change their life style, reduc ing consumption to the amount ac tually ((needed." The concept of waste implies that consumption can be reduced without any adverse effect on consumer welfare, i.e., that there is a ((free lunch." There are two problems with this proposed ((free lunch" approach of reducing consumption as a way of alleviating world food problems. First, a reduction in food eaten by a U.S. citizen doesn't mean that more food will be available for the world's hungry people. Even if the food is given as food aid, we can't assume that the effects will be favorable. In some cases, (e.g., Tanzania) food aid permits the government to engage in collectivist social experiments which are a major cause of food problems.

Need, Waste and the Free Lunch The second problem with the ap proach of reducing our consumption to the amount ~(needed" is that the concept of ~(need" is meaningless as a guide to our daily activities. How much beef, housing, gasoline, heat ing fuel, or clothing do we ~~need"? We as individuals respond to rela tive price changes and consume rel atively less of those goods whose prices increase. The higher the price, the less of any product we consume-whether it be food, cloth ing, gasoline, heating fuel, or hous ing. The concept (~waste" implies that there is some minimum amount of a product which is ((needed" regard less of price and that larger amounts of the product provide no additional 1978 THE FREE LUNCH MYTH. 263 satisfaction (Le., that demandis per fectly inelastic). If this were the case, amounts of the product above this minimum level could be re moved at no loss in satisfaction to the consumer and would, in fact, be a cCfreelunch." Can any of us give up expenditures in food, clothing, travel, and so forth without feeling a loss in satisfaction? It is easy for us to find such CCwaste" only in the consumption habits of other people!

The use of the family car provides an interesting example of the im possibility of identifying waste. It is often alleged that the typical motorist wastes gasoline by using the auto more than is cCneeded."We observe that a neighbor Jones drives his own car to work each day when he could form a car pool; drives his car on short trips when he could walk or ride a bicycle; takes vaca tion trips out-of-state when vaca tions could be taken instate (or at home); and uses the car for a host of other cCnon-essential" purposes. Yet, there is no basis for us or any other outside observer to conclude that any of these uses of the auto by Jones are CCwasteful" in any mean~ ingful sense. The problem is that the concept ((need" has little if any meaning. We, as motorists, respond to relative prices in deciding where to live, how to get to work, where to vacation, and so on. Virtually everything we do could (and would) be donein some other way if relative costs changed.

The attempts to get people·to change driving habits are likely to have little effect so long as relative prices remain unchanged. On the other hand, if gasoline prices were to dou ble, no one would have to encourage consumers to economize in the use of gasoline. Conclusion: Beware All Free Lunches Undoubtedly the world would bea quite different place if the cCfree lunch" were fact not myth. However, it is a world difficult even to im agine. We would not be constrained by problems of scarcity to the extent that this were, in fact, the case. Then,. we could provide more food, more energy, cleaner air, cleaner water, and the like without cost, i.e., without sacrificing anything valu able. In this case, there would be no need for the Sierra Club to lobby for environmental issues, for Senator Hatfield to lobby for the world's hungry, for President Carter's worry about the CCenergy crisis," or for Ralph Nader to protect us from un safe cars and other consumer prod ucts.

The individual consumer can de termine and support the kind of legislation he desires only if he knows the cost of alternative courses of action. A necessary first step is the realization that the cCfree lunch" idea is a myth. In the energy, envi264 THE FREEMAN ronmental, and safety areas, a great deal of legislation has been enacted under false pretenses. All such legis lation involves increases in cost. Much of this legislation would have not enjoyed public support if the costs had received equal billing with the benefits. The fact that government fre quently enables some people to ben efit at the expense of other people is apparent in this age of transfer payments. Yet, the possibility of the use of the state to enrich everyone at the expense of everyone else is no less an illusion today than at the time of Bastiat. The individual should also be wary of proposals to 0 btain ~~free lunches" by reducing ((waste." ManConscienceless Coercion dated reductions in use of energy sources including gasoline and elec tricity always involve a cost to the consumer. The consumer who is forced to use less electricity, gasoline or any other good is worse off even though price remains the same. Mandated reductions are fun damentally different from voluntary reductions in use induced by price increases. Rationing through the price system permits much more flexibility in catering to a diversity of individual tastes and circum stances.

In summary, the individual should be skeptical of all nfree lunch" proposals. He should be espe cially wary of those designed for him. @ IDEAS ON LIBERTY IT must be remembered that 95 per cent of the peace, order, and welfare existing in human society is always produced by the conscientious practice of man-to-man justice and person-to-person charity. When any part of this important domain of personal virtue is transferred to government, that part is automatically released from the restraints of morality and put into the area of conscienceless coercion. The field of personal responsibility is thus reduced at the same time and to the same extent that the boundaries of irresponsibility are enlarged. Government cannot manage these fields of human welfare with the justice, economy, and effectiveness that are possible when these same fields are the direct responsibility of morally sensitive human beings.

This loss of justice, economy, and effectiveness is increased in the proportion that such governmental management is centralized. CLARENCE MANION, "Legalized Immorality"

WALKING INTO A TRAP There is some justification at least in the taunt that many ofthe pretend ing defenders of rrfree enterprise" are in fact defenders of privileges and advocates of government activity in their favor rather than opponents of all privilege. In principle the indus trial protectionism and government supported cartels and the agricul tural policies of the conservative groups are not different from the proposals for a more far-reaching direction of economic life sponsored by the socialists. It is an illusion when the more conservative interven tionists believe that they will be able to confine these government controls to the particular kinds of which they approve. In a democratic society, at any rate, once the principle is admit ted that the government undertakes responsibility for the status and posiDr. North is editor of Biblical Economics Today, available free on request: P.O. Box 8567, Durham, N.C. 27707.

Gary North tion of particular groups, it is inevi table that· this control will be ex tended to satisfy the aspirations and prejudices of the great masses. There is no hope of a return to a freer system until the leaders of the move ment against state control are pre pared first to impose upon them selves that discipline of a competitive market which they ask the masses to accept. -F. A. Hayek 1 The idea that businessmen are strong defenders of the free enter prise system is one which is believed only by those who have never studied the history of private enter prise in the Western, industrial na tions. What businessmen are paid to IF. A. Hayek, Individualism and Economic Order (University of Chicago Press, [1948] 1963), pp. 107-08. This is taken from Hayek's address to the Mont Pelerin Society in 1947. 265 266 THE FREEMAN May worry about is profit. The problem for the survival of a market economy arises when the voters permit or encourage the expansion of govern ment power to such an extent that private businesses can gain short term profits through the interven tion into the competitive· market by state officials. Offer the typical businessman the opportunity to es cape the constant pressures'ofmar ket competition, and few of them are able to withstand the temptation. In fact, they are rewarded for taking the step of calling in the civil gov ernment.

The government's officials ap prove, but more to the point, from the point of view of the busi nessman's understanding of his role, shareholders and new investors also approve, since the favored enter prise is initially blessed with in creased earnings per share. The business leader has his decision con firmed by the crucial standards of reference in the market, namely, rising profits and rising share prices on the stock market. No one pays the entrepreneur to be ideologically pure. Almost everyone. pays him to turn a profit. This being the case, those within the government possess an extremely potent device for expanding political power. By a comprehensive program of direct political intervention into the market, government officials can steadily reduce the opposition of businessmen to the transformation of the market into a bureaucratic, regulated, and even centrally directed organization. Bureaucracy replaces entrepreneurship as the principal form of economic planning.

Bureaucrats can use the time honored pair of motivational ap proaches: the carrot and the stick. The carrot is by far the most effec tive device when dealing with profit-seeking businessmen. Those individual enterprises that are expected to benefit from some new government program have every short-run financial incentive to promote the intervention, while those whose interests are likely to be affected adversely-rival firms, foreign enterprises, and especially consumers-find it expensive to or ganize their opposition, since the adverse effects are either not recog nized as stemming from the particu 1ar government program, or else the potential opponents are scattered over too wide an area to be organized inexpensively. The efforts of the po tential short-run· beneficiaries are concentrated and immediately prof itable; the efforts of the potential losers are dispersed and usually in effective.

The expansion of political power in the market process has been going on in the West for about a century, at least in the modern form of interventionism, starting with the social security legislation of 1978 WALKING INTO A TRAP 267 Bismarck's Germany in the 1870's. Governments have evolved a strat egy by which whole industries or professions are captured by the bu reaucratic state. While this strategy is not the only one used, in peacetime it has proven enormously successful. (Nothing, of course, favors political centralization more than war.) I have outlined this strategy by means of the following analogy: 1. Baiting the trap 2. Setting the trap 3. Springing the trap 4. Skinning the victim Baiting the Trap Extra-Market Benefits The politicians enter an otherwise competitive market situation with an offer to promote certain indus trial or professional programs. Tax payers' money is used to finance this program, but it is rare for the poten tial short-run beneficiaries to reject the offer on these grounds. Cer tainly, a majority of those who are to be the recipients of the special favor gladly accept it. They see their goals as being part of the public interest, and they view an offer of govern ment aid as being only natural.

They see it as their due. Those who refuse to take the special favor risk lower profits in the immediate fu ture, since competitors in the indus try or professional association will take the favor. The general attitude is this one: ttlf I don't take it, some body else will." As a statement of fact, rather than principle, it is abso lutely correct. Somebody else will. There are several possible forms in which the aid may come. Indus trial groups may receive tariff pro tection, which is a tax levied on consumers on both sides of a border over which trade had been carried on or over which it might be carried on in the future. Consumers pay higher prices on both sides of the border. There can be no grants of government economic benefits with out someone or some group bearing the costs. A tariff is a tax. For professional groups, another approach is offered. It is usually in the form of licensing, which is a grant of monopoly rents to those inside the protected profession. The profession elects representatives who sit on government boards, or who actually make up the whole board. They can police entry into the profession's ranks by unqualified competitors, meaning those who have not passed certain educational and/or skill requirements estab lished by the board. Most profes sionals believe that such restrictions on entry are entirely natural for the sake of preserving the present-day standards of practice that the ma jority of the profession accepts. Like the businessmen, they see these benefits as normal, natural, and al together beneficial to the public. Re268 THE FREEMAN May sult: higher fees and fewer choices.

Another way to buy off almost any industry or professional association is by means of direct grants of money. The government may simply buy products from a company. It may establish government research grants. It may subsidize certain in dustries directly. In the case of the great railroads in the United States which were built in the 1860's and 1870's, the government offered mil lions of acres of land to the railroad companies as an incentive to begin and complete construction. Perhaps the most popular form of subsidy is tax relief Certain occupa tions, companies, or organizations receive tax breaks. In an era of growing taxation, this approach has been one of the most effective; the higher the tax level, the more ad vantageous is tax exemption. The American oil industry was the recip ient of multiple tax breaks until quite recently, and they are still substantial. All of these special favors are adopted in the name of the general welfare of the public. All of them involve the financial incentives for private individuals and firms to con form themselves to the goals set forth by the sponsoring agency, the government. All of them involve the transfer of wealth from consumers and taxpayers to the beneficiaries.

All of them involve a temporary suspension of market forces and a redirection of those competitive pres sures. All of them necessarily in volve a reduction of the sovereignty of the recipients, since they become partially dependent on the govern ment for continued 'benefits. In short, the bait is most tempt ing. Setting the Trap Extra-Market Costs The government is a political or ganization. Its justification is that it is an agency of the popular will, an agent of the public in its political capacity. It is therefore an agency of public defense. The general public is to be protected from adversaries, in cluding domestic adversaries. In a limited-government system, this means that those who use fraud or violence against their neighbors are to be penalized. In modern interven tionist states, the concept of public defense is much broader. The government cannot lawfully make grants of power or money to any group unless it is in the public interest to do so. In short, the state must police those who are subsidized by the state. The money cannot be used exclusively for the benefit of private citizens. The long arm of the law is at the end of the strings attached to every grant of monopoly power or special favoritism. In theory, every dollar spent by the government must be accounted for, to make sure that the public's inter1978 WALKING INTO A TRAP 269 est is upheld in each expenditure.

The result, among others, is an end less proliferation of forms. The state grants a particular group special favors. But it cannot do so randomly. It must have a pur pose, officially and unofficially. The official purpose is not nearly so im portant as the unofficial purpose. The official purpose is offered to calm the public (which must finance the grants) and to make sure that the judiciary does not intervene. The unofficial purpose is almost uni ver sally this one: the expansion ofpolit ical power at the expense of private associations. Once the grant has been made, the beneficiaries use it for their pur poses. The money is spent. Parkin son's Law takes over: expenditures rise so as to equal income. But ex penditures are always difficult to reduce, especially in large, bureau cratic organizations. The firms be come used to the higher income. The income becomes part of annual forecasts. Managers expect it to con tinue. After all, they are all agreed that such subsidies are in the na tional interest. Would the nation (the politicians) revoke their trust?

Never! The organization is hooked. It has become dependent on the con tinued favors, meaning the con tinued favor, of the state. Inevitably, one firm or some indi vidual begins to take advantage of his position. He exercises the monopoly grant of power which the state provided for him. He charges a bit too much. He starts running a ~~factory." Or the firm or individual cuts quality. In short, someone ac tually begins to milk the system. The Patterned Response Some of us have become cynical over the years. We have so often seen this pattern, and the govern ment's equally patterned response, that we have been inclined to come to a startling conclusion, namely, that the government establishes the system in order that some beneficiary will milk i~. That is a primary pur pose of the system of government favors. Once the pattern of ((exploitation" is detected by citizens or govern ment officials, not to mention bu reaucrats at any level of govern ment, the response is politically in evitable. Someone calls for the gov ernment to do something about the unfair use which is being made of the government's trust. Some firm or some professional must be stop ped, and stopped now. The industry or guild must be policed. The con sumer must receive protection from the unscrupulous.

The industry leaders naturally re sent this intrusion into the semi-free market. They resent the fact that someone is milking the system. That person, for one thing, is trying to get more than his ((fair share" of the 270 THE FREEMAN May booty. Also, he is making the gov ernment angry. He is threatening the continuation of the subsidy. He is violating professional standards. This appeal to professional stan dards is very important. The gov ernment knows what appeals to make, and this is a good one. (The industrialist is not nearly so alert to such violations, since the agreed upon standards are not so clear.) The ethics of the professional as sociation are at stake. They must be defended. Yet it is extremely expen sive to enforce standards on a col league. Friendships are at stake. Careers are at stake. And counter suits are at stake. Yet a small per centage of incompetents (usually said to be about 3 per cent by every representative of the professional association) threaten the semi autonomy of the group. (There is no real autonomy if the government has granted some sort of favor.) Need for Policing The government demands that the industry or professional group police itself. The market as a policeman has been compromised by the original grant of power or money. This compromised police man-the consumers-cannot en force its decisions inexpensively, given the government grant. So the government calls on the group to police itself, and it draws up certain standards that should be met. The ((partnership" between government and professionals grows strained. So the industry or professional group elects (or more likely accepts) cer tain spokesmen who will Hwork with" the other partner. This sup posedly will insure that the inter ests of the government and the fa vored group will mesh, and that the group will continue to receive its favors. On this point, I can do no better than to quote Enoch Powell, the former M.P. in Great Britain. He makes quite clear what the industry can expect.

They start more than half-beaten, by the very fact that they are, or claim to be, the spokesmen and representatives. It has been their pride and occupation to ((represent" industry to the Government. Yet the safest posture for an industry confronted by Socialism would be not to have an organization or spokesmen at all. Instead of being able to coax, brow beat or cajole a few ((representative" gen tlemen into cooperation, the Govern ment would then, unaided and at arm's length, be obliged to frame and enforce laws to control, manage or expropriate a multitude of separate undertakings-the true picture of private enterprise-with no means of getting at them except the policemen. Powell is here speaking of an indus try which is not on the receiving end of major government favors. If gov ernment has the industry on a string, it need not have to resort to the policeman. All it needs to do is to cut off the subsidies, and the whole 1978 WALKING INTO A TRAP 271 industry is put into a financial crisis. The existence of the subsidies calls forth the ~~industry' s spokes men." And to quote Powell, ~~As soon as ~our President, Lord So-and-So' is in a position to talk about what such and-such an industry ~wants' or ~thinks', that industry is on the road to the scaffold .... The Association of these, the Federation of those, pre sent just that one neck to the Socialist garrotter ."2 Once the gov ernment uses the bureaucratic gar rotte to strangle the representative of the industry who stands in place of all the members, there is no way out except to repudiate the com promiser who stuck their collective necks into the garrotte. If they do not pull out their own necks, they will suffer the same fate.

The professional. guild is perhaps the most vulnerable, since the very nature of the (~bait," namely, a monopoly position based of guild policed licensure, creates the very policing organization necessary for the government to impose its will at lowest cost. They can be appealed to on the basis of professional .stan dards and the guild's responsibility toa vaguely defined public, irre2Enoch Powell, Freedom and Reality (Lon don: Batsford, 1969), p. 46. It must be under stood that Powell is discussing the traditional response of so-called establishment guilds. He does not deny that breakaway splinters from these established guilds might be able to create a minority resistance on the basis of ideology and long-run self-interest. spective of the individual profes sional's ability to satisfy the needs of specific members of the public. Springing the TrapExtra-Market Crisis More cheaters are discovered. The guild waffles. The cheaters continue to operate. The press scents blood and headlines. Politicians scent blood and votes. Whenthey look into the actual operation of the industry, they find more examples of men or firms that have gouged the public, meaning people who are taking ad vantage of the very system that the government created-an eminently exploitable system. So the reports of cheating and fraud continue. The reports continue, but no prosecu tions are begun by the government, since nothing specifically illegal has been detected .•The guild is power less, obviously, for the same reason.

This means that the reports are going to continue. The guild will still be under pressure to do some thing to stop the causes of there ports. Finally, new laws are called for to clean up the industry, since the 'industry is seemingly incapable of policing itself. For professional associations, this is a disaster . Members have been led to believe that there are standards of practice within the profession. Yet these reports keep hitting the front pages. Their self-esteem is challenged. They begin to wonder 272 THE FREEMAN May what has gone wrong. Maybe the reports are correct. Maybe the gov ernment needs to do something-not anything drastic, of course, but enough to clean up the temporary mess and let honest men continue to practice. They miss the point: the government's task is to alter the prac tice of the honest men. The govern ment wants to set all standards and enforce them. There will then be no doubt about who the senior partner is. Bureaucrats want control.

The crisis is not created by the negative reaction of consumers. Businessmen do not find that one morning sales are down 30 per cent because the public has decided to walk away from the fraudulent segments of the industry. Profes sionals do not find their offices empty for weeks on end. In short, it is not the market which drives home the message to the supposedly crisis-bound industry or profession. The critics come from outside the market, probably from those who seldom use the products or services involved, or if they do, who find the products or services quite adequate in their particular cases. But· the crisis is no less real, for the public and even members of the associ a tions perceive it as a crisis. This means that the crisis is real politi cally. CCPolitically"is what counts in an era which is socialist or interven tionist in its economic outlook. What about the representatives of the industry? Will they co-operate?

Powell answers straightforwardly: You bet they will. They are afraid not to. They are afraid of being pilloried by the Government and its political suppor ters as ((unpatriotic" or simply (damning word) uunco-operative." They feel that the eye of the public will be upon them, and they do not like the adjectives which they foresee would be liberally used in side and outside Parliament-and will be, anyhow, before the end of the day. Of course the line of true patriotism would be the opposite to the one they are going to take. It would be to protest, by all means in their power, short of breaking the law, against every kind of error and nonsense as it comes along, and to oppose in their own industry any measure which does not commend itself to their knowledge and experience. But they shrink from this because, although they have no seats to lose and no voters to offend, it takes courage of a special kind-political courage-to outface au thori ty and the popular cry of the hour.

These men have commercial courage, and no doubt physical courage too; but facing the political music is something they have neither been trained nor vol unteered for. So they play along with the search for an incomes policy, or export incentives, or whatever else it may be. And, as Powell points out, clThe ef fect is doubly damaging; for it also hamstrings any politicians who are prepared to raise their voices in pro test." The public thinks it strange that industry representatives have not protested the accusations by the government. Apparently, the lead1978 WALKING INTO A TRAP 273 ers approve of the government's policies. HThus the co-operators ef fectively expose the flank of the anti-Socialist opposition and compel it to fall back on positions which are better protected."3 But not much bet ter protected, he might have added. Once the crisis is admitted to exist by the leaders, though of course on a much reduced scale-3 per cent of our members, not 20 per cent-the battle is pretty well lost. To clean up that 3 per cent, the government will alter the entire foundation of financ ing, policing, and pricing of the in dustry's services. The corruption will escalate, but now it will be a government problem, to be met by even more intervention. More laws can be passed, more penalties handed out, more regulations en forced: the government expands its control relentlessly. The trap has been sprung.

Skinning the Victims Extra-Market Bankruptcy There are any number of ways that the government can see to it that the former subsidies now be come the strait jacket for the former beneficiaries. The most obvi ous method of control over profes sional groups is the establishment of government control boards that will enforce standards and price. The government begins to finance 3Ibid., p. 47. the guild more directly. The former monopoly grant now becomes direct payments. But these payments have no strings attached; they are ropes, or even chains. The government sets fees, allocates equipment, and as signs consumers (clients). The gov ernment directs the operation of the association through its captive agents, the profession's representa tives. Members of the profession are told what they will be paid, the kind of service to be offered, and the quantity of service to be dispensed. The government also establishes some sort of quality-control stan dards. These are enforced by quality-control boards made up of compliant members of the profession and representatives of the public (pressure groups) and the govern ment (bureaucrats). These quality control boards do exactly that: con trol quality. If quality, meaning cost, starts going up, then they step in and control it. They ration equip ment. They set lower standards of care, especially in government hos pitals or clinics. They make sure that costs are held down, since the government, not the consumer, is paying the bill. No matter what guild is involved, the government makes sure the ttirresponsible qual ity" is avoided, meaning irresponsi bly high quality.

The government forces industries to operate at a loss. The classic example in economic history is the 274 THE FREEMAN May American railroad system. Created by government subsidy, controlled in the name of protecting the con sumer, the railroads in the North eastern part of the U.S., as well as the Midwest, have been strangled to death. The Interstate Commerce Commission was the first Federal regulatory agency in the United States, established in 1887. It was established in the name of protect ing the consumer, but as the New Left historian Gabriel Kolko has argued, along with free market economists like Milton. Friedman, the result was a freezing out of new competition, since the ICC estab lished rate floors as well as ceilings. So the railroad barons were already in trouble by the late 1880's, despite the millions of dollars in subsidies. The ((protection" became a stranglehold, and by the late 1950's, the passenger-carrying railroads were in trouble. By the early 1970's, they were bankrupt. (Long-haul freight railroads are still able to compete.) The government now owns and mismanages many of them (Amtrak, Conrail).

The incomes of the members of the industries and professions that are now directly financed and/or di rectly policed by the government necessarily fall. Envy is loose in the land. The popular press and televi sion reporters have accomplished their goal. The public will not per mit ((profiteering." The politicians will not permit it. Prices, wages, and fees are controlled, and work loads increase. Regulatory agencies each claim a piece of the action, and the multiplication of paperwork is end less. The formerly independent pro ducers, who answered directly to the formerly independent consumers, now answer to a multitude of bu reaucrats and enraged customers who detect the collapse of product iv ity on the part of the now-controlled suppliers. Most suppliers lose, most consumers lose, and a real crisis is produced. Conclusion: Avoid·the Bait, Rely on .Principle The answer, philosophically, is to avoid sniffing at the bait. This must be done on principle. It would help if businessmen. understood the chain of events which follows ·from the acceptance of a government subsidy.

Yet even if this chain of events is not understood, men should still be able to recognize a violation of basic moral principle when they see it. They should understand that the coercive power of the state should not be used to benefit one group at the expense of another. Such power is inevitably misused, if not im mediately, then ten years or fifty years down the road. The precedent is evil; the results following it will also be evil. The problem, as indicated by 1978 WALKING INTO A TRAP 275 Hayek's statement which intro duced this paper, is that busi nessmen like the seeming safety of a government-restricted market, at least in the early stages, when they are given some power to set stan dards and direct production. Busi nessmen can make very good bu reaucrats, too. The market is relent less. It forces men to meet the de mands of a fickle public. Busi nessmen think they can find an es cape in some sort of governmentbusiness partnership. That is the grand illusion.

Those who are offered the subsidy must say no very early. There are strings attached to government money or power, and they become chains if the subsidies are allowed to continue. It is easier to say no before the addiction process begins, before costs rise to meet income levels. The longer a violation of principle con tinues, the more difficult the Uwith drawal" process becomes. ® IDEAS O~ LIBERTY As Government Activity Expands HISTORY is full of examples of healthy national communities that gradually shriveled up, lost vitality, and perished as the people were bribed by the will-o'-the-wisp of state handouts and fell more and more into the meshes of an all-encompassing bureaucracy. It is one of the best established laws of history that, as government activity expands, individual activity and enterprise contract, until what was once a vigorous, self-reliant society becomes a hollow, bureau cratized shell, easily cracked by external attack or internal decay. This whole drama of rise, growth, decay, and ultimate fall has been played on many stages in world history, the most dramatic being that of ancient Rome....

Ever higher taxes, an ever-increasing bureaucracy, the growth of an omnipotent state, the paralysis of local initiative, a growing reliance on a faraway central authority that started with some features of the welfare state and ended with full-fledged totalitarianism-here are some very obvious forces making for the decline and fall of Rome. Does it require much exercise of the imagination to see in our own country and our own time some germs, at least, of these ultimately fatal diseases? WILLIAM HENRY CHAMBERLIN, "How State Help Destroys Self-Help"

276 Henry Hazlitt INFLATION in One Page A correspondent, heading a group of r7nflation Fight ers," recently sent me a onepage typewritten summary of their case against inflation, and asked for my opinion of it. The statement was sincere and well-intentioned, but as with the great bulk of what is being written about infla tion, it was confused in both its analysis and its recom mendations. I wrote approving his effort to rrdo something," and approving also his idea oftrying to state the cause and cure for inflation on a single page, but suggested the following substitute statement: Cause and Cure of Inflation 1. Inflation is an increase in the quantity of money and credit. Its chief consequence is soaring prices. Therefore inflation-if we misuse the term to mean the rising prices themselves-is caused solely by printing more money. For this the government's monetary policies are entirely responsible.

2. The most frequent reason for printing more money is the existence of an unbalanced budget. Unbalanced budgets are caused by extravagant expenditures which the government is unwilling or unable to pay for by raising corresponding tax revenues. The excessive expen ditures are mainly the result of government efforts to redistribute wealth and income-in short, to force the productive to support the unproductive. This erodes the working incentives of both the productive and the unpro ductive.

INFLATION IN ONE PAGE 3. The causes of inflation are not, as so often said, ((multiple and complex," but simply the result of printing too much money. There is no such thing as ((cost-push" inflation. If, without an increase in the stock of money, wage or other costs are forced up, and producers try to pass these costs along by raising their selling prices, most of them will merely sell fewer goods. The result will be reduced. output and loss of jobs. Higher costs can only be passed along in higher selling prices when consumers have more money to pay the higher prices. 4. Price controls cannot stop or slow down inflation. They always do harm. Price controls simply squeeze or wipe out profit margins, disrupt production, and lead to bottlenecks and shortages. All government price and wage control, or even ttmonitoring," is merely an attempt by the politicians to shift the blame for inflation on to producers and sellers instead of their own monetary policies.

5. Prolonged inflation never t(stimulates" the economy. On the contrary, it unbalances, disrupts, and misdirects production and employment. Unemployment is mainly caused by excessive wage rates in some industries, brought about either by extortionate union demands, by minimum wage laws (which keep teenagers and the unskilled out of jobs), or by prolonged and over-generous unemployment insurance. 6. To avoid irreparable damage, the budget must be balanced at the earliest possible moment, and not in some sweet by-and-by. Balance must be brought about by slashing reckless spending, and not by increasing a tax burden that is already· undermining incentives and pro duction. @ Reprints available: 10 for $1.00; 100 for $3.00. 277 Clarence B.·Carson 11 Sweden: Tightening the Screws THE LOSS of liberty is quite often subtle under evolutionary socialism. So also is the loss of private prop erty, or control over it. Under revo lutionary socialism only the purblind can fail to grasp the as sault on property and the onset of confinements of the population. The brutality of the attack is too blunt and persistent to escape detection by any except those who resolutely will to ignore it. By contrast, evolutionIn this series, Dr. Carson examines the connection between ideology and the revolutions of our time and traces the impact on several major countries and the spread of the ideas and practices around the world.

278 ary socialism is intruded in such a way, particularly under long established parliamentary govern ments, that its restraints, confine ments, and erosions of the ground of liberty and property are not so read ily seen. This is so in part because as the paternal state takes shape the focus is upon benefits to be conferred rather than the price to be paid, both monetary and in individual rights. There is a broader reason than this, however. It is that the population, or a considerable portion of it, has been induced in advance of the measures to accept certain underlying ideas SWEDEN: TIGHTENING THE SCREWS 279 which make the intrusions appear plausible and, perhaps, even inevi table. One of the leading ideas is that of the desirability of distributive equality. This is joined, of course, with the notion that all should work together in collective harmony for the general good. When these ideas are linked to the belief that govern ment is the ·instrument by which this should be achieved the way has been prepared for. the introduction step by step of socialism.

The mechanism by which evolutionary socialism has been ad vanced is democracy. Herein lies a paradox. As popular control over government has increased the con trol by people over their own lives and affairs has declined. The paradox is more apparent than real. That anyone should find it strange that people's control over their lives declines as their participation in government increases is the result of one of the most impressive selling jobs in all of history. In the latter part of the nineteenth and in the twentieth century a tremendous selling of democracy took place. Democracy was advanced as the great cure for the ills of the world: if all peoples of the world would only adopt and practice it, a worldwide prosperi ty, harmony, and peace would ensue. The massive bloodlet ting which is now known as World War I was even described as a war to make the world safe for democ racy. Democracy would then, it was claimed, make the world safe from wars.

Coincidental Developments These ideas· gained plausibility from the fact that the development of democracy occurred more or less simultaneously with other develop ments in the nineteenth century. Such causal connection· as the spread of democracy had with these other de velopments was almost certainly ac cidental, but it did. not appear so at the time. The other nineteenth century developments to which I al lude were consti;tutionalism, the establishment of individual liberty, the casting off of feudal restrictions and the securing of private property, and the tendency to negotiate agree ments among nations rather than going to war to settle disputes. Under these conditions trade ex panded greatly, industries de veloped on an unprecedented scale, population increased dramatically, and prosperity began to become more general than ever before. It was under these conditions that Sweden became an industrial and prosperous country, as noted earlier.

In retrospect, there appears to be little enough reason to connect these developments with the spread of democracy. True, these develop ments occurred first generally in countries which had representative 280 THE FREEMAN May or popular government, that is, in Western Europe and America. And, there was undoubtedly a temporal connection between representative government and the other develop ments. It was this. The thrust to remove feudal and mercantile re strictions, to extend liberty, and to restrain and limit government was generally expressed through parli aments (legislatures, congresses, or whatever they might be called). This was especially so of the elective branches of parliaments. As a result of this, representative government began to be thought of as the cham pion of liberty. The connection was temporal, as I have said. For the historical mo ment, as it were, representative governments curtailed the power of kings and limited government. The foundation of liberty was in con stitutionalism which was itself based on the natural law philosophy. The practical defense of Iiberty lay in the separation of powers within gov ernment, a separation that would have the tendency to restrain and limit government. Popular or repre sentative government can, at best, only reflect the prevailing mood among the populace, whatever that may be. If that mood is libertarian, representative government may act upon it; if it is totalitarian, repre sentative government can do little more than be its agent.

Even so, the thrust toward democracy got a tremendous boost from this temporal, and temporary, con nection. Champions of democracy pressed to have governments more and more representative, to extend the franchise ever more broadly, and to having all political decisions made on the basis of popular sup port. The practical effect of this was to concentrate all power in the legis latures and to negate the restraints upon government that rested upon a separation of powers. In limited monarchies, such as Sweden and England, the monarch became more and more limited, as did the hereditary nobility generally, and the representative portions of parli aments triumphed. Democracy Is Mob Rule The champions of democracy ig nored the fundamental nature of democracy, a wealth of historical experience with it, and a two thousand-year-old reasoned argu ment against it. They made it an unquestioned good and a thing to be desired above all else.

Whatever the merits of represen tative government, they do not ex tend to a thoroughgoing democracy. It is an ancient insight that democ racy is mob rule. True, the mob-rule feature is moderated so long as the populace acts through representa tives; but representation is an inhibi tion on democracy, not a part of its essential character. It was Greek 1978 SWEDEN: TIGHTENING THE SCREWS 281 democracy which sentenced Soc rates to exile or death. It was the mob which shouted to Pontius Pilate that Christ should be crucified. It was the Roman mobs who turned their fickle support from one con quering general to another that aided and abetted the horrors of the Roman Empire. ttDemocratic" New England was the most intolerant locale in the American colonies. Democratic socialism has attempt ed to legitimize a modified mob rule. It has done so by attributing to democracy virtues it does not pos sess and ignoring its implicit vices.

If democracy were not modified by representation and rules which hold it in check it would be tyrannical. As it is, it is a compelled conformity, a conformity which takes away indi vidual liberty and intrudes upon pri vate property. It is ironic that so many intellec tuals should have championed social democracy (or democratic socialism or collectivized democracy, what ever describes it best). Modern intel lectuals developed an early distaste for social conformity. Ralph Waldo Emerson said that society is at war with every one of its members. His meaning was that society is trying to settle us into a groove-make us conform-that is contrary to what each of us as an individual would wish to be. Society became and re mains the villain for many intellec tuals. It operates upon the basis of tradition and bids those within its ranks, so to speak, to conform or suffer rebuke, ostracism, or what ever punishments are within its power. And conformity has been the bete noire of intellectuals.

Yet many of the same intellectu als who have condemned conformity to society have been vigorous pr~o moters of democracy, even demo cratic socialism. They have pro moted a compelled conformity by the use of government power over the conformity induced by influence of society. They avoided the onus of this by attributing goodness to de mocracy and claiming to identify society with government by way of democracy. If conformity were the evil, it might be supposed that com pulsory conformity would be worse than elective conformity. Conformity to Their View Actually, most intellectuals are no more opposed to conformity than are the generality of people. Each of us harbors in his breast the desire to have others conform to his will. What has troubled most intellectu als has not been conformity but rather kinds of conformity to which they are opposed and over which they have no control. Conformity to society, its norms and prescriptions, has been, in their view, irrational and backward. By their lights, they would substitute for conformity to tradition a conformity to reason, a 282 THE FREEMAN May reason that by their conceit they are uniquely equipped to divulge. The idea that has the world in its grip is a vision of just such a conformity.

The role of democracy in this needs also to be grasped. The theory of democracy holds that democratic government would actuate the will of the people. If this were the case, it is difficult to see how government action would· be brought under the control of intellectuals. What is more likely, however, isthat there is no such thing as a ~~will of the peo ple." True, majorities can often be obtained, either for men, or on one side or another of issues, especially if there is only one choice to be made. But the getting of a majority depends on how the issues are stated and the personal appeal' of candi dates. In short, the statement of is sues and the formulation of the can,. didate's opinions are crucial. These are pressure points for manipulat ing decisions in democracies.· They are the points occupied by intellec tuals. Democracy, then, is the means by which intellectuals. would exer cise control over and produce the kinds of conformity they desire.

It has been made to appear that, by voting, the individual increases his control over his affairs. This is only the case, however, ifhe success fully votes to reduce government in volvement in his affairs. If he. votes to increase government action, as he does if he votes for the programs of gradualist socialism, he votes to di minish his own control over his life and affairs. He may be induced to do this by the promise of benefits, bene fits which will free him from many of his individual responsibilities. But when he does this he is only voting himself greater responsibil ity for others and less control over how it will be exercised. Democracy in Sweden Sweden is one of the most demo cratic countries in the world. Not only is there universal suffrage but' also a great variety of consultative and mediative mechanisms by and through which people may express themselves. There is even an official known as an Ombudsman who has the power to penetrate and hold the bureaucracy to account. No group, at least organized group, is apt to be ignored when some decision is made which would affect its interests. Col lective decisions are a la mode in Sweden, and the Swedes have applied their passion for orderliness to see that as little as possible is done without consulting the collec tivity. All of which is just another way of saying that the Swedes have lost much of their individual liberty and control over their Iives and property. The screws on the indi vid ual which make him conform to the collective will are continually being tightened.

One of the most obvious ways in 1978 SWEDEN: TIGHTENING THE SCREWS 283 which Swedes individually have lost much of their control over their af fairs is by way of taxation. On the average, Swedish workers work over forty hours per week. According to reports, they work hard when they work; and pay in much of industry is on a piece work basis, which is cer tainly conducive to productivity. Local and national income taxes take away about a third of their pay on the average. Taxes rise sharply on those with higher incomes and go to as much as 71 per cent. The well to-do also pay a ((wealth" tax on top of the regular income, but there is, mercifully, a ceiling of 80 per cent on the combined national and local taxes on income. A general sales tax of 10 per cent on the cost of items bought prevails. In addition, unusually high taxes are levied on gasoline, liquor, beer, cigarettes, and chocolates, among other things. Technically, the pen sion fund is financed by employer contributions. In fact, of course, this payment is a wage cost and is a reduction of employee wages or em ployer income or both. This last aside, however, it is not uncommon for a workman to lose 50 per cent of his pay to direct taxes. Then there is the ubiquitous and invisible tax gatherer-inflation-, and Swedes have been hard hit by it as have most other peoples. Of course corpo ration profits are taxed, taxed, that is, if they are not placed in an investment fund, taxed at a rate of up to about 53 per cent of combined national and local levies.

It should be clear that the indi vidual loses personal control over all his money taken by taxation, whether direct or indirect. According to so cial democratic theory, the control over that portion lost by the individual passes over to the collectivity. The matter is not so simple, however, for so long as there is a choice people are by no means united as to how or whether the money should be taken and spent. For example, in the late 1950's, a major controversy de veloped in Sweden over the proposal by the Social Democrats for a sup plementary pension program. Fol lowing a national election in which the program was a major issue, the legislature passed the measure by a vote of 115 to 114. This was surely not the expression of a collective will but the imposition of a measure on the whole populace by the narrowest of majorities. The Housing Shortage Probably the best known infelicity of Social Democratic Sweden is its housing shortage. It is a good exam ple, too, of how the Swedes have lost effective control over their affairs and are thwarted in their aims by government policy. There are two aspects to the housing shortage. One is that there is a shortage of housing in places where it is wanted. The 284 THE FREEMAN May other is that the dwellings available are remarkably small. The majority of city dwellers live in apartments, and these generally run to 2% rooms each. One-fourth of urban dwellings have but one to two rooms.

Both kinds of shortage are a result of government practice and policy. Rent controls over many years have kept rents below what they would be in a free market. Hence, private builders have seen little advantage to be gained from building places for rent. A remoter reason for the short age of h0uses has been the rapid industrialization in the twentieth century. As a result more than 75 per cent of Swedes now live in towns and cities. There is reason to believe that this industrialization and ur banization has been accelerated by government policy which favors cap ital expenditure. It looks, too, as if the government were deliberately going about creat ing a housing shortage. Much urban housing has been demolished, under the claim that slums were being cleared away, but a goodly amount of this housing was quite habitable and much more commodious than the housing built to replace it. In any case, government determines what housing is provided. As one writer says, ((The government and local authorities erect a third of all new dwellings, and almost all hous ing projects are backed by govern ment loans. It is the government that decides on the number of hous ing starts each year, enforces build ing standards, and subsidizes pen sioners and low-income families to about 25 per cent of their rent."!

It is a result of government policy that apartments are so small. One aim of this policy is egalitarian, to see that every Swede has a ((quality" dwelling. To put it another way, if everyone cannot have a large house, then no one should have one. But the matter goes deeper than that. The government has, after painstak ing calculation and consideration, decided what sort of housing people need. It has decided what size and what components a kitchen should have. It has decided that central heat, double glazed windows, and garbage disposal chutes are needed rather than more space for rooms. It has set the kind of limitations on what is to be included so as to make it expensive to build very small ac commodations. Large families are almost unthinkable in the postage stamp houses, and Swedes must long for summer when they can get out of the stifling atmosphere of their houses into the open spaces.

Declining Population Sweden is in a squeeze from the make-up of the population, and no relief is in sight. The basic problem is that a larger and larger percent age of the population is reaching retirement age. The low birth rate is 1978 SWEDEN: TIGHTENING THE SCREWS 285 not replenishing the population. In consequence, a smaller and smaller work force is having to carry the burden of feeding and caring for that portion of the population that is re tired. The increase of productivity per worker might make it possible to continue for a while, but it should be noted that this could only be ac complished by denying to the work ers any benefits from the increased producti vity. Moreover, if earlier analysis is correct, government policies already encourage much wasteful capital spending, spending which may in deed increase the productivity of workmen but which requires much more work to replace the equipment being retired. About the only area in which the Swedes could move to enhance their productivity would be to use all the time that goes into social planning, consultation, negotiation, and other such ac tivities for productive purposes. But if they were to do so it would be to abandon democratic socialism.

The Swedes have invested a great deal of intelligence, ingenuity, and determination into making their va riety of socialism work. Of this, there should be no doubt. They have done so under as near optimum con ditions as are likely to be found on this planet. They have avoided par ticipation in wars that would have cost so much and returned so little of a material character. They had a homogenous population which should be ideal for collectivism. They have benefited much from international peace. They have avoided internal revolution, or any thing approaching it. They have modernized with great vigor, taken advantage of specialization of labor, and promoted capital accumulation and investment with a will. A Mechanical System The result of this effort and in genuity is this: The Swedes have probably come as close to creating a materialistic and mechanical sys tem as it would be possible to do.

Does it work? It works as well, and as ill, as a materialistic and mechanical system is likely to do. It works to inhibit the able and adven turesome and to reward the less tal ented and least venturesome. It works to produce a modernistic sameness which may have sweep to it as viewed from a distance but is stifling from inside. Office space is determined by the amount reckoned to be enough to keep the worker from being overcome by claus trophobia. It works to stifle every grain of idealism that ever was raised by socialism. The Swedes are a proud and stub born people. They have labored for a lifetime to establish their variety of socialism and to make it work. If they are aware of the loss of liberty, they are not given to admitting it, or 286 THE FREEMAN May that they miss it. If loss of control over their property troubles them, they do not make much over it. Businessmen are acclimated to the manipulations by which it is often possible to operate in a thoroughly politicized economy.

Is the natural progression of gradualist socialism toward tyr anny? One way to answer this question is to say that from its out set it is in one sense tyrannical. It is tyrannical in that it makes the indi vidual conform to the majority or collective will. It is tyrannical in that it forces the individual into the mold of experts, social planners, and the lowest common denominator of the popular will. It forces the individ ual to· deny himself and to bow to the will of others. It forces the indi vidual into a life of continual com promise, compromise between the way he would do something and what the law requires, compromises between what he wants done and what others who have managed to get behind them the power of gov ernment want done. Denial of Conscience The tendency of democratic socialism is to make the individual deny himself in all those ways in which he is unique, different, or peculiar. It may be the worst tyranny of all, for it denies the indi vidual conscience, denies it by not allowing it room for operation in the ordinary warp and woof of life. To be forced to yield to the collective will in the ordinary decisions of life is to deny to the individual a significant portion of his humanity.

The shift from Iiving under the social influence of tradition to living under the compulsions of collec tivism may occur so gradually that the individual is hardly aware of it. It is a crucial part of the theory and practice of gradualism that this should be so. This has been espe cially the case in a country like Sweden where the outworks oftradi tion have been preserved while their inwards have been eroded away. The church still stands, of course, but it stands for very little. The home has not been outlawed, but many of its functions have been sub sumed by the state. The moral and spiritual dimen sions of life have been severed from their roots in social democratic Swe den. This has not been done by out lawing them; Swedes have substan ti ve religious freedom and may spend about as much time as they will contemplating the domain of the spirit. It is rather that an order of priorities has been estabIished priorities that are material in character-which leaves little room for the development of moral and spiritual beings.

Some of the most sensitive Swedes have given expression to the other wise stifled longing for a spirituality 1978 SWEDEN: TIGHTENING THE SCREWS 287 to life. Dag Hammarskjold lived an outward life that conformed well to social democratic prescriptions, suppressing, it may be, his deep spirituality. t1t was only after his death that it was revealed how much . . . the quietly competent, serenely self-confident diplomat, was really a mystic who had worked out a personal philosophy about the idea of life as a sacrifice." His post humously published diary, Markings, which became an international best seller, was, by his own account, tt a sort oftwhite book' on my delibera tions with myself-and God."2 He left no doubt of what he lacked and longed for when he said, (1 ask the impossible that life shall have a meaning. I fight the impossible that life shall have a meaning."3 Good vs.Evii Ingmar Bergman is surely the best known of Swedish film makers.

He enjoys an international reputa tion. But there is a dark and morbid character to his films, depressingly so, it is fair to say. Bergman chooses to bare the souls of his characters, and to have them troubled with the ancient problems, such as those of good and evil. Bergman has attri buted these preoccupations to the fact that he grew up as the son of a minister. HWhen one is born and reared in the home of a minister," Bergman has said, ~lone has a chance at an early age to catch a glimpse behind the scenes of life and death. Father conducts a funeral, father officiates at a wedding, father performs a baptism, acts as a mediator, writes a sermon. The devil became an early acquaintance, and, in the way of a child, it was necessary to render him concrete .... "4 Probably it was Bergman's child hood background that acquainted him with his themes, but his near obsession with them as an adult almost certainly stems from the spiritually deprived character of Swedish life.

In any case, he has given us a hint in his account of his youth of what social democratic Sweden has very nearly smothered. Birth, baptism, marriage, and death, these are great events of life which ancient religious ritual celebrated in their spiritual dimensions. It is most difficult to know God for those who have not known a human father in all his dimensions. It is· difficult to know love for those who have not experi enced the sacrificing love of a mother. It is difficult to separate the sacred from the profane for those who have not actively participated in the communion of a religious con gregation. It is difficult to know con cern and care if one has not wit nessed it evinced in the help extended from neighbor to neighbor. It is dif ficult to develop morally if one is denied individual choices and saved from responsibility for such as he 288 THE FREEMAN May makes. It is these things that the paternal state eviscerates or deacti vates.

Broken Relationships The paternal state tends to mechanize and diffuse basic human relationships. It is doubtful that the baptism of a newborn infant can compete with a check from th~ state awarded to the mother. Marriage is an inessential relationship to the Swedish state, for if there is no reg istered father of the child the state will make special provision to take care of it. The paternal state be comes a kind of surrogate father of all children. So far as the state can do so, it removes the element of sacrifice, if not love, from mother hood. Neighborhood and community lose meaning by being nationalized and administered by a bureaucracy. State appropriated money replaces compassion and concern. Morality and spirituality survive in a virtual vacuum; their functions have been taken over by the omnipresent state. Socialism diffuses concern so broadly, so far from the natural re lationships of kinship and proximity as in neighborhoods, that the bene fits the state hands out take on the abstract character of rights rather than being suffused with warm human concern. Care for aged par ents may indeed be a burden for children, but it is not less so for being nationalized. It is only that when it is nationalized it is bereft of much meaning as it had. The birth of every child is a cost to the tax payer. The retirement of any person is a burden to the working popula tion. All this without benefit of being warmed by a baby's smile or recalling the tender moments of childhood with one's own parents. It is cold, mechanical and devoid of any but the relics of humanity.

But let us return to the question of tyranny. Will gradualist socialism proceed to other and more easily recognized forms of tyranny? Al though there is little enough histor ical evidence on which to base a conclusion, there is reason to believe that it may, though how it will come is still a matter of contingency. One way it may come is by way of the onset of barbarism to which socialism tends. Liberty, in practice, depends upon an underlying respect for the rights and private realm of others. It is just this that collec tivized democracy is continually as saulting. Barbarity is a logical re sult of the dehumanized relation ships discussed above. A Displaced Concern Care in equal measure for all the people of a nation posits a godlike concern which is beyond most mor tals. When parents cease to care for their own children, and children for their aged parents, they do not ex tend that displaced concern to all 1978 SWEDEN: TIGHTENING THE SCREWS 289 children and to all aged parents.

Much more plausibly, they are not much concerned about any children or old people. The trend toward bar barity is already apparent in loss of concern for unborn babies and in the shunting of old people into special ((homes." Neither life, liberty, nor property are apt to be much pro tected when concern and respect are sufficiently and widely lost. There is another way in which democratic socialism may prepare the way for a broader tyranny. So cial democrats know how to deal in a variety of ways with recalcitrant in dividuals. They can arrest them, levy penalties against them, deny them favors, send them to prison, or even put them in mental institu tions. But they have only one ap proved way of dealing with groups or collectives, whether these be na tions, labor unions, youth organiza tions, or retirees. That approved way is negotiation. The gradualist state does not negotiate with indi viduals. It makes them conform or suppresses them. But groups are not to be suppressed; concessions are to be made to them, and they are to be brought somehow into amiable ac cord with other collectives.

Sweden is the example, par excel lence, of this penchant of socialism to negotiate peace among groups. The country enjoys an unusual amount of labor peace. Despite the fact that unionization is widespread, and that employers are organized as well, strikes are rare. (All these or ganizations are so closely regulated, however, that there should be doubt as to the extent to which they are free.) In international relations, the Swedes have both promoted interna tional negotiations and maintained a posture of neutrality. Swedish dip lomats have long been famous for serving as mediators. Revolution Dominates Revolutionary socialism, particu larly communism, poses a con tinual threat to evolutionary social ism. While communists do some times negotiate, their methods in general are not such as are con ducive to mediation. Far from pro fessing to mediate differences among classes, they seek to suppress most classes. They accept warfare among classes as the norm until such time as all ((exploiting" classes are put down. Moreover, revolu tionary socialists stand ready at all times to build upon the inevitable frustrations of evolutionary so cialism.

It has been noted already that idealism can hardly survive socialism. The reason for this is that once socialism is in power it bogs down in compromises and in the continual pressures of groups for economic advantage. Revolution holds out the prospect of a quite dif ferent scenario, of an end to the 290 THE FREEMAN struggle, of a final victory of the righteous, and of an eventual perfect justice. The social democratic bent to mediate and negotiate among groups unfits it for dealing with revo lutionaries. It does not will to sup press them, and given this weakness the time arrives, or may arrive, when it cannot. In any case, the love of liberty is a diffuse thing. There is much evi dence to support the view that peo ple are as readily enamored of free dom from responsibility as they are of individual liberty joined to per sonal .responsibility. They can be and have .been enticed to support measures which reduce everyman's To Do Good for the People liberty by collectivizing responsibil ity. That way lies tyranny, of one sort or another, perhaps all sorts.

Sweden represents but one vari ety of evolutionary sQcialism. It is time now to examine' another, one much nearer home. @ Next: 18. The United States: A Re public and Gradualism -FOOTNOTESIDonald S. Connery, The Scandinavians (New York: Simon and Schuster, 1966), p. 296. 2/bid., p. 290. 3/bid. 4/bid., p. 436. IDEAS ON LIBERTY WHEN a person gains power over other persons-the political power to force other persons to do his bidding when theydo not believe it right to do so-it seems inevitable that a moral weakness develops in the person who exercises that power. It may take time for this weakness to become visible. In fact, its full extent is frequently left to the historians to record, but we eventually learn of it. It was Lord Acton, the British historian, who said: ((All power tends to corrupt; absolute power corrupts absolutely." Please do not misunderstand me. These persons who are corrupted by the process of ruling over their fellow men are not innately evil. They begin as honest men. Their motives for wanting to direct the actions of others may be purely patriotic and altruistic. Indeed, they may wish only ((to do good for the people." But, apparently, the only way they can think of to do this ((good" is to impose more restrictive laws.

BEN MOREELL, "Power Corrupts"

Kenneth McDonald RISK AND PROFIT versus SECURITY FROM the moment of birth, life is a risky business. The search for secu rity is instinctive. Where the par ents sought it in religion the chil dren seek it in the state. Because they do, the state has grown, its growth fueled by reve nues that increase every year. The transfer of wealth from individual hands, which created it, to public hands which merely redistribute it, achieves another kind of redistri bution: the number of consumers is increased; the number of pro ducers diminished. The process is cumulative. Tax funded services which people regard as ~~free" are partaken of liberally on Mr. McDonald is a Toronto writer on economic and political subjects. This article is reprinted, by permission, from the Winter 1977 issue of The Business Quarterly pub lished by the School of Business Administration, the University of Western Ontario, London, Canada. All rights reserved.

that account. Nor are they recog nized as an element of compensa tion. Rather does the mounting tax deduction from the pay packet cause demands for more pay. But pay must come from wealth, the sum of which is declining. Underlying the whole process is the most insidious tax of all: infla tion. The lack of political courage to tell the truth, to reveal the absence of a free lunch, impels politicians either to borrow money or to enlarge the amount of it in circulation. Whichever device is resorted to often both at the same time-the future is mortgaged to pay for the present. Indexed pensions, whose projected growth to astronomical figures alarms every self-respecting ac tuary, are sops to a people whose currency inflation must destroy. At 7 per cent annual inflation, 291 292 THE FREEMAN May 1977's modest $15,000 salary would grow to $58,000 in 1997 on cost of living allowance alone. If a further 7 per cent were added each year for merit payor fringe benefits, it would grow, by 1997, to $201,000. Not wal lets, but wheelbarrows.

As more and more power-the power to distribute wealthis transferred to the state, people look increasingly to the state as a source of investment. State Ownership in Britain An advanced stage of the process may be witnessed in Britain, where a state-owned National Enterprise Board was formed in 1975 to rescue major enterprises that had fallen into decline as a result of the state's encroachment. How insidious the process may be judged by the fact that The Economist, hardly a radical journal, records the development with a perfectly straight face. A report in the issue of May 7, 1977, concludes with this sentence: ~~Intervention leads to ownership but much of it-inevitably under any government, let alone one eager to save jobs at almost any price-is riskier than a commercial company should be expected to undertake." Risk, upon which was founded the commerce that took Britain to greatness, is now, in her decline, too risky to undertake.

The welfare state, which seeks to conceal the reali ties of death and misfortune, must cushion the risks that attended the creation of the wealth it has dissipated. Canada, which is said to be trail ing Britain by a scant five years, is scattering the seeds of a National Enterprise Board of its own. Ven ture Investment Corporations pro mise rain to end the equity drought. Not that VICs are bad in them selves. Within a too-pervasive state they offer investors the incentive of relief from the state's tax burden. But it is because the state has in truded too much that the relief must be offered. VICs are a palliative, not a cure. The vehicle their initials remind us of will not carry us very far. Just as a compost heap turns a garden's residue into food for more produce, so must the wealth creat ing process turn its own residue to the creation of more wealth. Its residue is profit. How profit is used, and of what it consists, are bones of perennial con tention. Politicians of every stripe have worried them to death. For special interest groups who would shift the blame for their own depre dations, profit is the scapegoat.

Some are prone to regard it as a surplus, as a bag of money that the owner of a business takes away to spend on him-or herself-while the wage earners count out their pen nies for bread. Others look at a business in isola1978 RISK AND PROFIT VERSUS SECURITY 293 tion. The financial results for one year, or one quarter, are pasted on the wall like specimens in a labora tory. It is as if they had stopped a film on one frame and were trying to determine, from that frame, what had happened before and what would happen next. But (except by going out of busi ness) the business cannot be stop ped. Every minute of the twenty four hours, seven days a week, it is ticking away. Interest costs on borrowed finan cial capital (bonds and debentures); dividends on equity capital(shares of common stock); costs of wages, of vacation pay, of future pensions for those working and of past pensions for those retired; costs of machinery that is wearing out and must one day be replaced; costs of raw material or other supplies needed to make the product; costs of transpor tation, of heat and light and power; costs of telephone and mail; costs of accounting; costs of interpreting and adhering to government regula tions; costs of calculating and pay ing out taxes to three levels of gov ernment; costs of research into bet ter ways of making the product and of developing new ones; costs of ad vertising and sales. It never stops.

The Urge to Be Independent Think of the process as a film, with people working in offices, or operating machines, or standing before drawing boards, or selling the product to customers, and there is no sequence where someone walks out the door carrying a bag marked ttsurplus." Yet there is a residue, something left over, a margin of some sort. Otherwise the process would stop. Does everyone engaged in the business-owners, employees, investors-give a little more than they get back? In away, they do. They give energy, and initiative, and ingenuity and, no doubt, some enthusiasm. They provide part of the economic energy that keeps the film turning, the business going. But not all of it. Where did the rest come from? It stemmed from the urge to be independent that is present in every person who has the idea for a busi ness. Call him or her Smith. Smith was convinced the idea would work. Whether a product or a service, it could be sold. There was a niche for it in the market.

To get it to market, Smith needed money (the financial capital) in order to acquire the office and office equipment, or the buildings and machinery (the productive capital) to start the thing off. Smith was prepared to take a risk, but not many Smiths have either enough savings of their own, or enough of anything in the form of collateral to borrow the money-the risk capital.

294 THE FREEMAN May Banks are not in the business of taking risks. They have a responsi bility to their depositors. Govern ments are not supposed to take that sort of risk, either, because they have a responsibility to taxpayers. Unfortunately that does not always stop them from trying. Someone, or a number of people, had to be found who would be will ing to put up the risk capital to get Smith started. From their own ex perience in business they would ex amine Smith's idea and if they thought it would work, and if they thought Smith was a sensible per son, they would put up the money. We are back at risk. Knowing that out of ten chances eight might fail and only two suc ceed, they must be assured of suffi cient return from the two successes to make up for the failures. The return may be a long time coming. The function of equity money is to carry the risk during the critical period from conception through business plan and start-up to profit able operation. During that period the equity investors get no return on the money they risk. But they have one vital quality which no chartered bank or government department or indeed government agency could in ject: it is their own money at risk and they have a very intimate and personal reason for wanting the business to succeed. That quality is balanced by another: a readiness to cut losses and stop, which govern ments lack because there are always political reasons for pouring good money after bad.

A curious feature of new ventures is that the instigators-the Smi ths-turn to debt financing rather than equity. Possibly they feel more comfortable dealing with a bank. Banks are in the business of making people feel comfortable about borrowing from them. No doubt that is why they inhabit such splendid buildings. But to secure a loan there must be collateral. Usually it is the building, or the machinery, or both-the pro ductive capital that the business needs to function. Later, the busi ness will need more money to tide it over between getting the orders, making the products and getting paid for them. It is at that critical point, when there is no more collat eral, that many businesses either fail, or are taken over by an esta b lished competitor. Yet the reason many owner man agers give for preferring debt over equity is a reluctance to surrender, or even to share, ownership. Risk-Taking by Individuals A Dying Art But the people who are willing to take a chance on backing them-the equity investors-must also be as sured of at least an even chance of a return on the money they're pre1978 RISK AND PROFIT VERSUS SECURITY 295 pared to risk. Otherwise they won't risk it. That is the crux of our prob lem. The misconception of profit has become so widespread, and the sup porters of government planning have been so influential, that risk taking by individuals is a dying art.

Instead of risk-taking being en couraged, it is discouraged. In -an age when the schools and colleges are training Canada's young people for pensionable jobs in public or pri vate bureaucracies, anyone who takes risks is regarded as a freak. The atmosphere, the social pres sures, not least the tax· system, all are opposed to risk-taking. Without equity, the main source of creating wealth and jobs is drying up. Those who advocate central plan ning -of the economy are drawn by the mirage of state-fed security. Central planning and risk-taking are poles apart. The more the state plans, the harder it is for individuals to make plans of their own. To make them, they need to know, in advance, what the ground rules are. Smith, and the equity investors who would put up the money, need to know, in advance, what the 'costs will be during the crucial period between starting up the business and reaching the break-even point at which revenue draws level with expenditures and begins to draw ahead. That period might be as short as one year or as long as five depending on the size and complexity of Smith's business.

In a time of stable prices, of low taxes and, consequently, of a low level of state intervention in the economy, estimating costs during that period would be relatively straightforward-little more than a projection of current costs against the estimated rise in business vol ume. Today, however, prices are un stable. Quality and availability of labor are serious problems, taxes are high-all resulting from state intervention. Worst of all is the un certainty. Clearance Procedures So many powers have been dele gated to regulatory boards and commissions of one kind or another that it is impossible to forecast. One thing is certain. Smith's planned ac tivity would have to be cleared with planning boards in any or all of the three levels of government. At each step the decision would be based not on broad rules laid down by parlia ment but on variable rules which, in the opinion of the inspectors or commissioners or regulators, were appropriate to the circumstances at the time of application.

Even if Smith and company over came the first field of hurdles, quite likely they would find themselves opposed by environmentalists or other publicity-seeking special interest groups, often subsidized by 296 THE FREEMAN the state, whose ambition is to oc cupy center stage at every opportu nity. If profit is both spur and fuel, if profit is to supply the economic energy to keep the system going, it must be open to all comers. Other wise its essential ingredient-the limitless supply of human inge nuity-will be shut out. Yet what do we find? Profit is recycled within a closed system. The banks and other financial institu tions which depend on a safe return to protect their depositors' and their own investments will invest their funds safely, i.e. in the country's leading, well established enter prises. Most of them are regulated, to varying degrees, by the state. Their return is limited by taxation and inflation. If it should appear to rise above a ttreasonable" figure in anyone period the enterprises will be attacked from all sides.

What Pulls Up Wages The Final Security Institutional investors, the enter prises they invest in and draw re turns from, the governments which control them both-all three are engaged in a ritual dance from which the individual investor is excluded. At those modest rates of return he cannot afford to enter the game. But without his contribution of energy, of enthusiasm, of willingness to risk and to wait, the game will slow down, as it has slowed down, until it is not a game at all, but a funeral procession. Death, which shares its certainty with taxes, is also the final security. The search for security, which gives rise to taxes, drives away the risk which accompanies all creation. The generation of risk capital is no different from any other genera tion. It must come from its own kind. @ IDEAS ON LIBERTY THOUGHlabor is a commodity, the price of which is subject to supply and demand, it is a unique commodity. It enters into every kind of produc tion, and as productivity increases, the workman shares in the increase.

The hope of profit in new and growing industries forces employers in those industries to bid up for labor. This force has caused them to bid millions of people from off the farms, from out of depressed areas and out of domestic service, and even from across the Atlantic. The best and the most new jobs are normally found with the most optimistic employers who have the strongest hope of profit. And it is such labor markets that over the decades have steadily lifted wages. HAROLD M. FLEMING, The American Achievement © Government Regulation and Business Management John Semmens A ttmanagerial revolution is now underway, a silent bureaucratic revolution, in the course of which much ... of the decision-making in the American corporation is shifting . . . from the professional manage ment selected by the corporation it self to the vast cadre of government regulators who are influencing and often controlling the key manage rial decisions of the typical business firm."!

The State's invasion of manage rial prerogatives has occurred on virtually every conceivable front. The government has not shied away from deciding what shall be pro duced (Le., tobacco shall be proMr. Semmens is an economist for the Arizona De partment of Transportation and is studying for an advanced degree in business administration at Arizona State University. duced, even subsidized, but cigarette commercials shall not), how it shall be produced (i.e., electricity shall be generated by burning coal, though a few years ago power companies were induced to switch from coal to oil for environmental reasons), who shall produce it (i.e., between firms via monopoly franchise grants and within firms via affirmative action programs), where it shall be pro duced (i.e., by granting offshore leases in the Gulf of Mexico, but not off the Atlantic Coast), and even why a product shall be produced (i.e., air bags for automobiles shall be produced for passenger safety re gardless of whether the consumers want them or not).

This invasion has not come as the result of one massive onslaught. Rather, it resembles more a war of 297 298 THE FREEMAN May attrition in which business has been gradually surrounded, its perimeter growing smaller by degrees. Perhaps if the government lunge into capitalist territory had been concentrated and overt, the business comm uni ty could. have devised a better defense. Instead, like the frog that never jumps from water brought slowly to a boil, business management has been unable to de cide at what point the destruction of managerial options will be fatal to the business enterprise. Unbounded Authority The power of the federal govern ment to regulate business derives from the U.8. Constitution. 2 This provision allows the U.S. Congress to regulate commerce between the states as well as between the United States and foreign entities. The scope of this interstate commerce authority is broad enough to cover virtually any economic activity. In a famous case in 1942, Wickard versus Filburn 3 , the distinctions between commerce and manufacture or ag riculture and between intra-and in terstate were dissolved when the Supreme Court determined that any goods or services which might be in competition with goods and services actually crossing state lines, were subject to federal regulation.

These powers of regulation are exercised primarily by executive agencies which in many cases have taken on a life of their own. Con gress's authority to delegate such broad powers was upheld by Su preme Court decisions in 1939.4 (It may be a matter of significance that the~e key court decisions were ren dered in agricultural· disputes. Cor porate business showed little. resis tance to the increasing role of gov ernment in economic matters.) .This delegated authority is typically a carte blanche grant of power to do all things necessary to insure that the regulated environment is (Just and reasonable."5 In case any loopholes are left in the federal reg ulatory net, most states have estab lished supplemental regulatory agencies of their own. In Arizona, for example, the State Corporation Commission is empowered to ((do all things ... necessary and conve nient" in exercise of its regulatory mandate. 6 Institutionalized Incompetence Theoretically, the expanding power of government regulations ought to be making the tasks of business managers easier. The con solidation of decision-making power within government agencies capable of perceiving the broader require ments of the national interest has, indeed, been one of the selling points of the regulatory philosophy. Fol lowing the grand plan of the central government ought to be a simple matter for business managers.

1978 GOVERNMENT REGULATION AND BUSINESS MANAGEMENT 299 Such, however, is not the case. Regulatory guidelines have been unclear. The (Just and reasonable" dictum has proven so elusive that the courts in reviewing regulatory actions have dispensed with the necessity to define the phrase 7 , that the determination of what is (Just and reasonable" is completely at the discretion of the regulatory agency8, and that the ((burden of proof' is a matter for the regulators to decide on a case-by-case basis. 9 Erratic changes in regulatory pol icy defy prediction. Inflexibly en forced conformity robs the business system of its ability to plan for the future and adjust to changing cir cumstances. As a consequence, the economy is beset by a continuous series of crises, of crash projects, dri ves attempting to cope with the most immediately observable or fashionable problem. Such a man agement technique is, according to Peter Drucker, Han admission of in competence."lO Induced Indolence Nowhere has the cost of this sys tem of mismanagement been more dramatically portrayed than in the rates of return on investment. The governmentbusiness collaboration (or partnership, as some are wont to call it) has succeeded in increasing economic uncertainty, raising the cost of meeting consumer wants, and consuming scarce resources.

Uncertainty is, of course, an ines capable circumstance of any dy namic environment. In a business sense, uncertainty exists in varying degrees based upon the nature of the firm's source of income. High levels of uncertainty mean increased risk. Increased risk means that the en terprise must yield higher returns in order to justify taking that risk. Competent management will seek to reduce risk born of uncertainty. This is accomplished primarily through superior planning that at tempts to anticipate future re quirements and conditions and to compensate for them. Management foresight is, however, frequently frustrated by regulatory interventions. The entitlement program of the Federal Energy Administration effectively removes managerial incentives to secure supplies of crude oil at favor able prices by removing the gains that would have been enjoyed by firms whose managements had ob tained longer term commitments of crude oil at low prices. The Federal Energy Regulation Commission's curtailment procedures routinely reward profligacy while penalizing conservation. Like the fabled ant who labored in the summer that he might survive the winter, firms which show the initiative to line up additional sources of supply to offset the predictable shortages of natural gas are likely to find themselves 300 THE FREEMAN May candidates for further curtailment.

Meanwhile, the grasshoppers who fiddled away the summer are the more frequent beneficiaries of extra allotments, since the regulators seek to equalize suffering, not op portuni ty .11 Eating the Seed Grain As the incentives of managerial perspicacity and planning are eroded, the tendency to await gov ernmental decrees in lieu of inde pendent action will undoubtedly grow. This lapsing of the business system into the management by crisis syndrome has not gone un noticed by the investment commu nity. This rising indolence of man agement is reflected in the greater apprehension with which the pro viders of capital view the elements of business risk. The most heavily regulated indus tries have experienced significant increases in their cost of capital. Interest rates on corporate debt have tripled in the last 20 years. 12 Earnings have been unable to keep pace. As a consequence, many American businesses have been con suming their capital. The foolhardi ness of such a practice is obfuscated by all manner of excuses from both government and industry. The cur rent administration's position on energy seems to imply that it would be ~(unfair" for consumers to bear the full cost of the services they enjoy. The power industry's position, to judge from a number of their comments, seems to be that it is impractical to require that consum ers bear the full cost of the services they consume. 13 This viewpoint has been implemented via extensive borrowing of funds. Apprised of this method's close resemblance to a Ponzi scheme, one power company official placed his trust in the hope that the impending collapse could be postponed to a distant future when some miracle of technology might save the day.14 The fact of the matter is that U.8.

industry in aggregate has been un able to generate sufficient cash flow to cover its investment since 1965. 15 Contrary to popular myth, increased costs brought on by government regulations are not all passed on to the consumer. In recent years great amounts of the increased costs have come out of profits. Real corporate profits peaked in 1966. Corporate management has been unable to maintain them save through ac counting methods that transform capital into phantom earnings. The Enemy Within The erosion of investment capital does not speak well of manage ment's performance of its responsi bility as conservator of the owners' assets. Capital is the pillar upon which the modern industrial society is founded. It is the repository of 1978 GOVERNMENT REGULATION AND BUSINESS MANAGEMENT 301 stored effort which has enabled hu mani ty to obtain more and more by way of less and less direct labor. We have been, for the last decade or more, embarked upon a course bound to dissipate this capital.

This dissipation has received its crucial impetus from government intervention into the conduct of business activity. Management can hardly be faulted for obeying the law. However, the role of business management in the attenuation of the entrepreneurial system is more than that of an unwilling victim. Time after time, the initial agitation for government intervention has come from business itself. From the very beginning of the so-called Pro gressive Era, it has been at busi ness's invitation that the govern ment has imposed regulation. 16 The corporate community was a willing and active participant in the New Deal NRA-a program of govern ment-directed cartellization of in dustry.t 7 Today, business invita tions for government collaboration grace the pages of our newspapers almost every day. Prices of sugar down? The indus try is quick to demand subsidies, tariffs, and controls. Steel industry beset by hard times? Management is vociferous in its demand for special relief and import quotas. Possibly the most galling example of man agement's tunnel vision occurs in the oil industry. At the very moment that the chief executives are be moaning President Carter's attack on their integri ty, the oil lobby is simultaneously pushing for deregu lation of prices and imposition of tariffs on imported petroleum prod ucts.

In its quest to have the best of both worlds, business has gone a long way to~ard the establishment of the worst of all worlds. Manage rial latitude has been severely cir cumscribed. Corporate leadership seems anxious to abdicate and many executives are well on the way to ward becoming mere bureaucratic functionaries. The Death of Managerial Enterprise The key element in making man agement work is the entrepreneur ial nature of the private enterprise system. Its gradual transformation into a quasi-public enterprise via increasing regulation dilutes the motivating elements and introduces a greater measure of irresponsibil ity. Bureaucrats can be urged or exhorted to produce better results, but the reality is that they bear little, if any, of the consequences (good or bad) of their managerial decision-making. 18 A final piece of evidence that the growing reliance upon and domi nance of regulation has eviscerated managerial vision and ambition comes from one of the participants 302 THE FREEMAN in the federally supported Wesco Coal Gasification Project: ((federal loan guarantees are necessary be cause of the large amount of capital required, but more importantly be cause coal gasification, on the scale proposed by Wesco, has never been attempted in the U.S."19 The belief that government back ing is imperative for great under takings is not the same spirit of enterprise that made American business the envy of the rest of the world. @ -FOOTNOTESIG. T. Bowden, uBook Review: Business, Government, and the Public," The American Spectator (December 1977), pp. 37-38.

2U.S. Constitution, Article I, Section 8, paragraph 3. 3317 U.S. 111, 1942. 4United States v. Rock Royal Cooperative, 307 U.S. 533; and Hood and Sons v. United States, 307 U.S. 588. 5U.8. Code 49-1. 6Arizona Revised Statutes 40-202. Performing the Task 7City of Chicago v. Federal Power Commis sion, 1971, 458 F2d 7?1. 8Pennsylvania Railroad v. U.S., CA, Pa. 1963, 315 F2d 460. 9Commonwealth of Pennsylvania v. U.S., D.C., Pa. 1973, 361 F. Supp. 208. lOPeter Drucker, The Practice of Manage ment (New York: Harper & Row, 1954), pp. 62-65, 126-129. llUGas Regulation Stymies Planning," Pur chasing (June 17, 1975), p. 13. 12Alexander Paris, The Coming Credit Col lapse (New Rochelle: Arlington House, 1974), p.82. 13Correspondence with Southern California Gas Company (November 4, 1977), Arizona Public Service (November 2, 1977), and Transwestern Pipeline Company (November 16,1977). 14Conversation with Arizona Public Service (November 11, 1977).

15Paris, op. cit., p. 88. 16Gabriel Kolko, The Triumph of Conser vatism (Chicago: Quadrangle Books, 1963). 17Ronald Radosh, uThe Myth of the New Deal," A New History ofLeviathan (New York: Dutton, 1972), pp. 146-87. 18Armen Alchian, Economic Forces at Work (Indianapolis: Liberty Press, 1977), pp. 127 150, 227-257. 19Correspondence with Southern California Gas Company, op. cit. IDEAS ON UBERTY WHEN A WORTHWHILE TASK is to be performed, there are individuals who can and those who cannot; those who will and those who will not. The task is performed to the extent that there are those who both can and will. When government is permitted jurisdiction over the task, a third distinction is created: those who may and those who may not. Under these circumstances the best that can be hoped for is that those who may, includes all who can and will. Since this is rarely the case, the end result is usually the creation of another category; those who must!

LEWIS STEARNS, "Braiding the Lash"

The Idea of Equality in America L. John Van Til ApOSTLESof reform in our time have convinced millions of Americans that the good life for all is finally possible, that Americans are about to .enter the ((promised land." All that must be done, they say, before the good life can be achieved is to have us bow down before the sacred idea of equality. Thinking in materialistic terms, the apostles of reform believe that the good life can be provided for all if only we use the power of the central government to distribute the ~~fruits of industri alism" equally. These well-in tentioned reformers argue that we have most of the programs legisDr. Van Til heads the Department of History and is Chairman of the Social Science Core Program at Grove City College, Pennsylvania. He is the author of several books and articles and is active as a speaker. Further rights to this article are retained by him.

lated and in operation, thanks to the efforts of the proponents ofthe Great Society. Richard Nixon preached this message, with some modifica tion, and Jimmy Carter has em braced this doctrine of reform as well. Contemporary reformers believe that programs like Affirmative Ac tion and the Occupational Safety and Health Administration (OSHA) will right all wrongs in the market place, mellow evil hearts, elevate the downtrodden, and distribute the benefits of an affluent society to all. In the name of equality all sorts of programs are proposed, programs to guarantee a minimum income, pro vide ~~free" medical service to every citizen, and much more. The Walter Mondales and Joseph Califanos of our time demand programs too 303 304 THE FREEMAN May numerous to list, and they make their demands in the name of equal ity. Today's Gospel of Reform The apostles of reform today, the men of good will who cut their social and political teeth in the nursery of Franklin D. Roosevelt's New Deal or in Lyndon Johnson's Great Society, dream about every American hav ing the same Hrights," the same privileges, the same benefits, the same status, and all of this guaran teed to them by the central govern ment. Unfortunately, most Ameri cans have not stopped to ponder the implications of this new gospel of reform. Indeed, most of the apostles of reform themselves have not thought about the implications of their demands. Millions of Ameri cans have been captivated by the prospects which the new social pro grams seem to offer. They believe that these programs may ~~give"

them something, not remembering that ~~there is no such thing as a free lunch." It is time to pause in the headlong rush down the path beaten by the proponents of equality. It is tj'lle to pause and inquire into the meaning of their claims that the good life can be achieved through the use of gov ernmental power to achieve equality of conditions. As will be evident in the pages that follow, the new pro grams depend upon a very different concept of equality than was in tended in the Declaration of Inde pendence when it stated that ((all men are created equal." Perhaps it is even more important to note how the apostles of reform today intend to achieve their new and expanded concept of equality. Unlike the Founding Fathers of the American Revolution, today's reformers be lieve that full use of all of the mas sive power of government is neces sary and morally acceptable in the drive to achieve their new society, no matter that this would stifle in dividual initiative and creativity, and ultimately slaughter the economic goose that has laid the golden egg of prosperity.

In the pages that follow two paral lel themes will be traced. One is the idea of equality itself. Where did it come from? How did it enter Ameri can social thought? How was it used in the Age of the American Revolu tion? How was it used in the heyday of social change, in the Era of Re form (1830-1860)? What brought about the change in meaning of equality in our time? The second theme, crucial to an understanding of the development of the idea of equality, is the concept of reform itself. How did Americans conceive of social change in the early days? In the Revolution? In the nineteenth century? How are these views of social change, or reform, different from that used by today's reformers?

1978 THE IDEA OF EQUALITY IN AMERICA 305 These and other questions must be examined on the way to an apprecia tion of the radical nature of the contemporary impulse to reform all of society in the name of equality. Equality in the Age of the American Revolution When Thomas Jefferson wrote that Hall men are created equal," he did not mean that all men were equal in all respects. In other places he wrote with conviction about the existence of a natural aristocracy among men, based upon virtue and talent. Yet, many today quote Jef ferson as though he intended to state that all men ought to be made as equal as possible. This is to speak of equality of condition, a position rejected by Jefferson and all politi cal thinkers in the Age of the Ameri can Revolution. It was rejected be cause even a cursory examination of human nature reveals ineradicable differences among men. If we are to understand the idea of equality in American society we must begin with an examination of its use in the mind of the Founders, tracing their view into subsequent developments in American history.

Much has been written on the his tory of equality, especially in the twentieth century. Yet, most of what has been written does not help much to clear up the confusion that surrounds the term, confusion aris ing, for example, from the fact that Jefferson could state his belief in both equality and inequality with out a sense of contradiction. How did the idea of equality come to be part of the intellectual baggage of the mind of the American Revolu tion? The concept of equality. was not an invention of the Founders them selves, rather it was absorbed by them from the intellectual climate created by the Enlightenment and from colonial experience. The typi cal philosophe argued that since sovereignty in political society rests wi th the people, a certain sense of equality follows. Yet this sovereignty was delegated, the philosophe argued, to the crown or to other rulers. But the notion that equality could be part of society at all was part of their theoretical or mythical claim that equality had to be part of the State of Nature.

Enlightenment Thinkers Voltaire observed that equality must have been part of the State of Nature, yet it was something that men give up when they enter human society. Montesquieu agreed, but stressed the fact that since only a very limited degree of equality was possible in human society, men are left to ponder how they may reduce the inequalities. Sanford Lakoff has pointed out in his definitive study of equality in political theory that ~~the philosophical champions of en lightenment in the eighteenth cen306 THE FREEMAN May tury were for·· the most part less anxious to propose equality than to denounce extreme inequalities."! The most powerful and most di rect influence on American thinking about equality was John Locke. His Treatise on Civil Government had considerable impact on the de velopment of political theory in America. In it he argued that each man is born according to the rights and privileges of the law of nature ((equally with any other man or number of men in the world."2 Locke's view of equality appears to be a corollary to his belief that man comes into the world with the mind a blank slate. Distinctions among men were the result of what experi ence wrote on the tablet. In his scheme these differences and in equalities were, therefore, not from nature, but rather artificially wrought. Locke concludes, like the philosophes, that in nature there is equality though in society there are inequalities. But, importantly, in his scheme it was possible to change some of the ((artificial" inequalities into conditions that were more equal. Locke himself did not explain how society should be changed in this regard.

In some respects his view of equal ity is qualified by his concept of Rea son. Though he observes that ((all men are by nature equal," he also states that ((I cannot be supposed to understand all sorts of equality." By Reason men may establish certain political practices which will assure ((that equal right that every man hath to his natural freedom." By this he means to guarantee that none should be ((subjected to the will or authority of any other man."3 Lakoff concludes that Locke did not intend equality to be an instrument for .leveling in any area of society except in politics. Colonial Experience In addition to the· theoretical un derstanding of equality provided by Locke and the Enlightenment think ers, the Founding Fathers were heirs to a practical understanding of the idea based upon colonial experi ence. The colonies were far distant physically and psychologically from England and Europe, and thus, far removed from the pretensions of aristocracy. Equally important were the facts of life in the wilderness.

Frederick Jackson Turner stated this point clearly when he said that ((the .wilderness. stripped the gar ments of civilization" from a man, confronting him with the Indians, starvation, disease, and other hazards of the frontier. The settler was on an equal footing with his fel lows, for the frontier life would kill the son of an earl as readily as the son of a cooper. Further, life on the frontier with the lack of fixed social organization made men free and equal in a visible 1978 THE IDEA OF EQUALITY IN AMERICA 307 sense. In this condition one could change his social position very rapidly; hence, there was no need for a person to feel inferior to his neighbor. These conditions prompt ed Tocqueville to remark, ~~The soil of America was opposed to a territo rial aristocracy," concluding that the equality forced upon Americans by the conditions of their existence was the most compelling fact about the quality of life in America. 4 Colonial experience elicited one common reaction from people, a de sire for equal opportunity, the most forceful element in the equalitarian tradition in America. This was the motivation for most who came to these shores. Wealthy and success ful Englishmen, for the most part, did not come because they had no need to improve their condition.

Those who did come were in search of a way to improve their lot, disad vantaged people, middle-class squires who hoped to become landed gentry, and others. Tocqueville saw this and observed, ~~The happy and powerful do not go into exile, and there are no surer guarantees of equality among men than poverty and misfortune."5 The Reformation Tradition The central cluster of ideas that were used in the era of the American Revolution had their tap roots in the Reformation tradition as modified by Puritan experience. This is evident in the concern the Founders had for liberty. It was to preserve liberty that the American Revolu tion was fought. True, there were other concerns, but it was to pre serve religious, economic, and polit icalliberty that the Americans ral lied in the 1770's. Preservation of liberty was a concern that ran deeply in colonial and English ex perience. Roger Williams made this point when he left Massachusetts Bay and formed Rhode Island. Lib erty of conscience, Williams said, is the most precious freedom that man has and he must protect it with his life if necessary.6 Williams was carrying on the fight that had begun in England, and had been fought for in the En glish Civil War. Freedom, by the 1770's, was the most fundamental idea in the American mind. Free dom in this sense was a corollary of the Protestant Reformation. The Re formation in England resulted in the Westminster Standards, one of which declared, ~~God alone is Lord of the conscience and hath set it free from the doctrines and command ments of men." Man through con science was free in relation to other men. It was this idea that informed the American experience between the days of the early settlements and the time of the Revolution. In this sense the American Revolu tion's principal ideas were rooted in a Reformation base. 7 308 THE FREEMAN May Perhaps a consideration of the dif ference between the American and the French Revolutions will help to make the point more obvious. Men act in important events upon what they conceive to be the most funda mental authority. The trauma of the moment is relieved if one appeals to the most secure authority possible.

Since this is true, we may look at these revolutions from the point of view of what they conceived to be authoritative for them as they acted out their revolutionary aims. Authority, for the Americans, was rooted in the God of Revelation in Scripture, or in the laws of nature that He had created. True, some of the leaders of the American Revolu tion stressed the laws of nature, but even this emphasis presupposed a transcendent God who limited and defined the actions of men. In con trast, the men of the French Revolu tion, products of the Enlightenment mind all, enshrined Reason as their authority. Reason, when viewed in this way, is not subject to a trans cendent God; rather, it becomes whatever the mind of man makes it. The result for France was a revolu tion which knew no bounds but human imagination. Liberty meant whatever one wished. Indeed, liberty among the French came to mean license. Equality was part of the French Revolution's ideology, too.

But in the context of Reason, equal ity turned out to bea radically leveling concept, unchecked by any Bib lical notions of the social order. It would be incorrect, therefore, to argue that the mind of the American Revolution was the product of the Enlightenment, although some of its principles were absorbed into the thinking of some of the leaders of the American Revolution. Here an important distinction must be em phasized. In a Context of Freedom VVhen the Founders spoke of equality, they did so in light of colo nial experience, and to some degree from Enlightenment influence. But all discussion of equality was within the context of a more basic principle, namely freedom. Stated another way, freedom as developed in the Reformation tradition was the fun damental, constitutive principle in the American Revolution, while equality was a secondary and inci dental concept. VVith these matters in mind we are in a position to survey some of the Founders' expressions about equality. Thomas Paine had no diffi culty with the concept when he said that ((the unity or equality of man is one of the greatest of all truths."

Fisher Ames objected to Paine's un qualified endorsement of equality, calling it the ((pernicious doctrine" of demagogues. Joel Barlow, in his Vision of Colurnbus (1787) wrote, ((Equality of right is nature's plan, 1978 THE IDEA OF EQUALITY IN AMERICA 309 and following nature is the march of man." Franklin, an instinctively practical man, commented. that ((Time, Chance, and Industry" created distinctions among men. He also believed that all men were fun damentally equal in ~~the important ends of society, and the personal securities of life and liberty."8 By far the most extensive and reflective comments on the place of equality in the American scheme of things came from Jefferson and Adams, especially in their exchange of letters after both were in retire ment. Both agreed that equality was a law of nature, but what did it mean beyond that? Adrienne Koch, a recognized student of Jeffersonian thought, states that Jefferson did not mean an arithmetical equality which reduces all men to the same level of talent, ability, and moral virtue. Rather, she observes, he was talking about the essential traits of the species. 9 Adams took the same view. It is, he said, nothing more than the fact that men ~(are all of the same species, and this is all that equality of nature amounts to.... Nature has ordained that no two objects shall be alike, and no two perfectly equal."

For Adams equality most certainly did not mean what some of its more extreme proponents said it did: ((Equal rank and equal property can never be inferred from it, any more than equal understanding, agility, vigor, or beauty." Then Adams came to the heart of the matter: ((Equal laws are all that can ever be derived from human equality." Adams had no intention of denying equality. His concern was to define correctly its limits. Clearly he rejected what has been called ~(equality of condi tion."lo Jefferson believed that equality was a gift of God through nature; it was a self-evident, natural right that society could neither give nor take away. Thus, it guaranteed all men perfect equality of human privilege (life), political and reli gious prerogatives (liberty), and personal opportunity (pursuit of happiness). Limited in this way, equality did not extend to physical, moral, intellectual, or other aspects of human existence. ll Equality in the Life of the New Nation To understand the character of American society in the life of the new nation, in the period between 1789 and 1869, some consideration must be given to the way this era has been interpreted by historians in our time. The reason for this is the fact that this period has been an intense battleground between advo cates of a neo-Marxist view of his tory and more conventional views.

Once the effect of this dispute has been outlined, it will be more clear what the true state of affairs con310 THE FREEMAN May cerning social theory actually was. Led by Charles Beard, historians in the twentieth century have viewed American history as primarily a struggle between social classes, between the rich and the poor, those in power and those who exercise no power. Virtually every textbook in the past forty years assumed this point of view as it covered the early life of the new nation. Obviously there were differences between peo ple in American society, differences in wealth and in power. The Found ing Fathers saw such differences in their time, but they understood that such differences were natural and unavoidable. Unlike the Founding Fathers, Beard and his followers have taken the point of view that social differences are wrong and should be eliminated; therein, they follow the thinking of Marx and other socialists.

The assumptions of the En lightenment and French Revolution were always present in America as an option for Americans to embrace. In general, it is true that these prin ciples were not adopted in toto by Americans during the Revolution and during the nineteenth century. But circumstances changed as the twentieth century began. Increas ingly, the intellectual climate was ripe for the acceptance of the ideas of the Enlightenment and the French Revolution, mediated, in some re spects, by Marx. Indeed, it may be stated that as the influence of this tradition grew in America, it did so in proportion to the decline of the influence of the Reformation tradi tion as expressed in the principles of the American Revolution. In other words, by the end of the nineteenth century intellectuals were disposed to accept humanistic standards rather than Biblical ones, whether the humanistic standards were sci entific or in some other form.

Economic Class Conflict Anyone with a know ledge of American history writing knows that Beard, Carl Becker, James Harvey Robinson, J. F. Jamison, Ar thur Schlesinger, and many other lesser lights in the field were de voted to writing history from the point of view of economic class con flict. They have been succeeded by a generation of disciples who followed their lead slavishly. Together these writers have shaped the image of the American past into a picture which is dominated by the principle of class conflict. Two generations of Americans have grown up on history written from this point of view. The result has been that most Americans as sume that soon after the Revolution, if not in the Revolution itself, American society began to be domi nated by a conflict between those with wealth and power and those without it. The hidden assumption 1978 THE IDEA OF EQUALITY IN AMERICA 311 in this interpretation is the notion that the Revolution instituted the principle of equality of condition.

The class conflicts that are said to have taken place were aimed, in this view, at achieving equality of condi tion. One of the main areas of impact of this revisionist view of American history has been in interpreting pre-Civil War society. Of course that era was a time of very rapid change in American society as it began to make the transition from an agra rian base to an industrial one. But the question is how to evaluate these changes. Is the fact that many people were able to climb the social ladder evidence of class conflict? Contemporaries did not view it that way. Many could build better houses, save money, take trips, and more, but such social development does not imply class conflict. The class conflict writers have imposed their bias upon the evi dence from the period to create their own vision of society. These writers are a product of their age, a time when it was intellectually respect able to reject the Protestant Ethic, to reject the philosophy of the Found ers, and to embrace leveling con cepts in the tradition of the French Revolution and in the tradition of Marx.

Turn now to Douglas Miller's comments on the problem in his Jacksonian Aristocracy. Though Miller's purpose in writing was rnerely to correct some errors of other writers in the class conflict tradition of interpretation, he does establish the point we wish to em phasize. Miller states, ~~To write of the rise of aristocracy in Jacksonian America is to contradict traditional beliefs and interpretations." Con scious of his disagreement with some in the class conflict school, he continues, HPolitically this was the age of democracy as historians have repeatedly emphasized." Noting the main theme of those he criticizes, Miner states, HMostpolitical studies of the Jacksonian era have implied that democracy was victorious not only in the political realm but so cially and economically as well." Coming to the heart of his argu ment' Miller concludes: This study does not deny that repre sentative political institutions based upon nearly universal white manhood suffrage were the rule from the Jackson ian era to the Civil War. Politics is given very minor consideration here.

What is questioned, however, is the as sumption that throughout this period democracy meant social and economic equality as well as equal political rights. 12 Equal Opportunity Social and economic equality was not a constitutive principle of the American system created in the Rev olution and embodied in the Con312 THE FREEMAN May stitution. Inequalities in America did exist, but they were not based upon a feudal hereditary nobility as they were in Europe. Inequalities were obvious in such things as Uwealth, rank, manners, dress, speech, family, and intellect," Miller observes. Of these, says Miller, HWealth was the outstanding crite rion for high social standing, and as long as inequalities of wealth were comparatively slight ... it was easy for Americans to associate political democracy with equality." Concerning equality, Miller ob serves further that ~~the concept of equality itself had a meaning pecu liar to America. As a belief it did not imply that the rich should be re duced to the level of the poor." Here, it must be pointed out, we see one of the principal differences between twentieth-century equalitarianism and the ideas of equality in the nineteenth century. Equality was not a device to be used for erasing of social distinctions. Continuing, Mil ler captures the essence of the idea in that age when he notes that ~~equality meant that each person should have an equal chance to out strip his neighbor and become rich himself." 13 The point Miller is making needs to be emphasized. He argues that while there was great interest in the idea of equality in this age, it was defined in a way very different from that in a later age. Equality was tied to opportunity and in this sense it was closely related to the fundamen tal concept of the American Revolu tion, namely, freedom. In this age each man wanted to be free to seek a better life, he wanted to have an equal chance to rise on the ladder of well-being. Americans could see the expansion of economic wealth around them and they wanted to be free to gain part of it for themselves.

Miller states this another way when he says, ~~The most important single factor in shaping and sustaining American equality and democracy was this accessibility of wealth."14 Others have found what Miller has noted concerning equality in this era. Alan Grimes states that ~~to the extent that there was an underly ing and unifying theme to the Jack sonian movement, it existed in an emphasis on equality." The Jackson ians did not believe that men were equal in talents or capacities, or that they ought to share equally in property, according to Grimes. J acksonianism, broadly conceived, was a reaffirmation of the principles of the Declaration, especially that portion that spoke of an equal right to pursue happiness. Most foreign travelers observed these qualities in America, some times being confused by them. Michel de Chevalier, traveling in 1833, observed that the democratic spirit was infused into all the habits and customs of society, and it ~~beset 1978 THE IDEA OF EQUALITY IN AMERICA 313 and startled" the foreigner who had his every nerve and fiber steeped in European aristocratic ways. A Bri tish sea captain noted in his diary in 1839 that ~~among the ad vantages of democracy the greatest is that all start fair," by which he meant that all have an equal oppor tunity.15 Politically Equal J ames Fenimore Cooper also commented on the question of equal ity in this era. Though Cooper was suspicious of much of the hubbub of day-to-day politics, he gave thought ful considerations to the place of equality in the reform movements of that day. He made it clear that equality meant neither reducing all men to the lowest level of mediocrity nor raising all men to the highest level of superiority. Democracy, a much discussed topic at the time, meant an equal right to participate in community affairs. Equality was a matter of civil and political rights in his view; not an equality of talent or property. In short, Cooper em braced a view of equality like that of the Founders. 16 Benjamin Franklin had pointed out long before that there was an incon sistency between the claims of the Declaration and a system that ex tended freedom and equality to only part of the human race. This incon sistency came to haunt American society in the early. decades of the life of the new nation. The fact that slaves in America were black was convenient for those who wished to avoid extending freedom and equal opportunity to them, for it could be argued that it was their color that made them different, thus a rationale for enslavement. But this argument merely put off the day when American society would have to face up to the inherent inconsis tency that Franklin had pointed out.

The fact is, however, that the deeply held commitment of Americans to equality of opportunity was the basis for the Abolition Movement that was so prominent in the life of the new nation. In time, the inequal ity of opportunity for Blacks became a principal political issue in the life of the nation, leading to the Civil War and the Emancipation Procla mation. Lincoln, though believing that Negroes were inferior in some ways, found a way to explain why they should not be slaves. The writers of the Declaration of Independence meant, he said, to include all men in their declaration of human equality, but they did not intend to declare all men equal in all respects. They did not mean to say that they were equal in color, size, intellect, moral developments, or social capacity. They defined with tolerable distinctness in what respects they did consider all men created equal-equal with certain inalienable rights, among which are life, liberty, and the pursuit of 314 THE FREEMAN May happiness. This they said and this they meant. They did not· mean to assert the obvious untruth that all were then enjoy ing that equality, nor yet that they were about to confer it immediately upon them. In fact, they had not power to confer such a boon. They meant simply to declare the right, so that the enforce ment of it might follow as fast as circum stances should permit. They meant to set up a standard maxim for free society, which should be familiar to all, and re vered by all; constantly looked to, and even though never perfectly attained, constantly approxima ted. 17 He spoke of the same problem in one of his debates with Douglas when he stated: I agree with Judge Douglas that he is not my equal in many respects certainly not in color, perhaps not in moral or intellectual endowment. But in the right to eat the bread, without the leave of anybody else, which his own hand earns, he is my equal and the equal of Judge Douglas, and the equal of every living man.... If the Negro is a man, why then my ancient faith teaches me that ~~all men are created equal," and that there can be no moral right in connection with one man's making a slave of another. 18 Here Lincoln tied the issue of equal ity to the traditional view of natural rights, as expressed in the Declara tion. Next he proposed equality of opportunity as an integral part of his argument, applying both of these to the question of slavery. Typically, Lincoln gave evidence of thinking clearly' about a question that few others saw very well.

Equality<~inPost-Civii War America In the years after the Civil War the dominant intellectual change was in the direction of acceptance of the Darwinian assumptions about the nature of man and society. On the one hand, the descent of man implied a common origin, in a way that the Creation account had not. On the other hand, the claim that the fit survive seemed to support an emphasis upon inequalities, indeed, that inequality was a law of nature. Evolutionary views valued superior ity more than they did equality; the strong and the weak were unequal, and nature intended it that way. And there was, in the evolutionary mind, a great emphasis upon na ture; devices, such as government programs which altered nature's ways were viewed with suspicion. Huxley wrote, ~~Men are not all equal under whatever aspect they are contemplated, and the assump tion that they ought to be considered equal has no sort of a priori founda tion."19 There was a sense in this era that a proper understanding of equality was at last possible. Wrote William Graham Sumner, ~~The doctrine that all men are equal is graduaUy being dropped, for its inherent absurdity."

Nicholas Murray Butler's True and False Democracy stated that the 1978 THE IDEA OF EQUALITY IN AMERICA 315 ~~cornerstone of democracy is natural inequality, its ideal the selection of the most fit." Barrett Wendell ar gued that the doctrine of equality was alien to the American tradition and derived from the untrustworthy philosophic ~(vagaries of Eighteenth-Century France." Lothrop Stoddard stated that ~~the idea of natural equality is one of the most pernicious delusions that has ever afflicted mankind." Further, he said, ~(N ature knows no equality. The most cursory examination of natural phenomena reveals the pre sence of a Law of Inequality as univ ersal and inflexible as the Law of Gravity."20 These writers did not intend to deny completely the notion of equal ity as stated in the Declaration. Rather, they intended to emphasize equality of opportunity as opposed to equality of condition. True equality, said Sumner, ~(sets each man on his feet and gives him leave to run." It would be a mistake to go beyond this conception, he argued. Lester Frank Ward agreed when he suggested that ~~equality of opportunity is the only means of determining the de gree of merit" among individuals. 21 Equality of opportunity must be viewed in practical functional terms, they believed. Equality at law, equality in voting, and equality of economic opportunity were the principal concerns of these commen tators.

"Looking Backward" In this age there were dissenters from this view, namely, that equal ity meant equality of opportunity. Some, like Edward Bellamy, author of the best selling Looking Back ward, argued for equality of condi tion. In this, Bellamy may be viewed as taking the first step in the cre ation of ((New Style" Progressivism. Bellamy wrote in his novel Eq uality (1897) that he intended to prove that ~~equality is the vital principle of democracy," of American society. ~~What is an equal right to life, but a right to the equal material basis for it?" he asked as narrator in the book. (~The cornerstone of our state is economic equality, and is not that the obvious, necessary, and only adequate pledge of these three birthrights-life, liberty, and hap piness?" In this Bellamy was giving equality a new meaning. In fact, he was arguing for equality of condi tion. All men, he thought, should have an equal state in life's race.

They must be provided with cloth ing, shelter, food, health, education, and all else necessary to life. Then men would really have an equal opportuni ty, argued Bellamy. 22 We have argued that equality in America has traditionally meant equality of opportunity in the sense that the men ofthe Revolution viewed it. We noted, further, that due to a growing influence of the En lightenment tradition, equality has 316 THE FREEMAN May now come to mean equality of condi tion, that is, that everyone must live in conditions that are as nearly equal as is possible. Yet, we miss much of the meaning if we do not realize that equality of condition has become a Hgoal" of reformers in our time, and realize that they intend to achieve this goal through the ~~agency" of governmental power. Is this not what is taking place with programs such as Affirmative Action and OSHA? All too obviously such programs are based upon the massive power of the government for the achievement of their goals.

Are not the goals of such programs aimed at achieving ~~equality of con dition"? Surely, Affirmative Action seeks to level society into one in which all citizens are as nearly equal as is possible. Surely such a program is a classic example of the reform tradition which believes that the good life· will be achieved only through the use of governmental power to insure equality of condi tion. But what. happens to freedom in this scheme of reform? Where are the rights and liberties which the Founding Fathers fought for and sought to preserve in the Constitu tion? Can anyone doubt the fact that these freedoms are seriously eroded by programs of reform that have equality of condition as their goal? What is the future of American society when it continues to be dri ven by the philosophy of reform which advocates equality of condi tion achieved through the agency of government? Where will it lead?

Americans should ponder the possi bility that following this plan we can arrive at conditions which George Orwell described in his Animal Farm when he said ~~All animals are equal, but some are ~~more equal than others." Who are the ones in society who are ~~more equal than others"? We cannot avoid the conclusion that this class of people is the well-intentioned em ployees of the government who de sign and enforce government pro grams aimed at establishing equal ity of conditions. 23 The Alternative There is an alternative to the con tinued growth of government pro grams aimed at creating conditions of equality. The American people still have the means to arrest this process. They can object to their Congressmen. They can protest against government programs in the Courts. They can complain about government intrusion into their lives in the public press. Most im portant, however, Americans can re turn to their senses and realize that most of these programs are the re sult of an alien perspective, alien to the tradition of the Founders.

The Founders spoke of limited government and of freedom because they thought and acted in the Re1978 THE IDEA OF EQUALITY IN AMERICA 317 formation tradition. In this tradi tion, men know that all conditions of life cannot be changed, much less changed by the power of govern ment. In this tradition, men know that some conditions can be changed only when there is a change in the hearts and minds of people. Kier kegaard had this in mind when he said of equality: Leveling, after all, was only the final phase of a long and ill-conceived effort to solve in worldly ways problems which could only really be approached reli giously.24 Without an appreciation of this view, without an appreciation of the tradition of the Founding Fathers, it will, no doubt, not be long before the drive to achieve equality of condi tion in America results in the cre ation of a brave new world in the country that once was the land of the free and the home of the brave. @ -FOOTNOTESISanford A. LakofT,Equality in Political Phi losophy (Cambridge, 1964), p. 89.

2George L. Abernethy, The Idea ofEquality: An Anthology (Atlanta, 1959), p. 137. 3Ibid., p. 138. 4Russel B. Nye, The Almost Chosen People: Essays in the History of American Ideas (East Lansing, 1966), includes a chapter entitled "American Society and the Idea of Equality," which is most provocative. I am indebted to Professor Nye for this discussion of colonial influence on the idea of equality in America. See pp. 312fT. 5Ibid., p. 312. 6L. John Van Til, Liberty of Conscience: The History of a Puritan Idea (Philadelphia, 1972), p.58. 7Ibid., p. 86. 8Nye, p. 316. 9Adrienne Koch, Power, Morals, and the Founding Fathers: Essays in the Interpretation of the American Enlightenment (Ithaca, 1961), p.26. l°Nye, p. 317. llIbid., p. 318. 12Douglas T. 'Miller, Jacksonian Aristocracy: Class and Democracy in New York 1830-1860 (New York, 1967), pp. vii-x. 13Ibid., p. ix. 14Ibid., p. 19. 15Nye, p. 319.

16Ibid., pp. 322-323. 17Ibid., p. 332. 18Ibid. 19Thomas Henry Huxley, ~~On the Natural Inequality of Man," Nineteenth Century CXLV (Jan. 1890), p. 8. 2°Nye, p. 334. 21[bid. 22Ibid., pp. 336-337. 23L. John Van Til, The Promise of American. Life Revisited: An Essay (Grove City, 1976), p. 6. 24LakofT,p. 177. IDEAS ON LIBERTY The Indispensable Condition THE true end of man-not that which capricious inclination prescribes for him, but that which is prescribed by eternally immutable reasonis the highest and most harmonious cultivation of his faculties into one whole. For this cultivation, freedom is the first and indispensable condition. WILHELM VON HUMBOLDT A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN The Future That Doesnt Work OLE-JACOB HOFF, a Norwegian de votee of Leonard Read's ttfreedom philosophy" who is a frequent speaker at Mont Pelerin Society meetings, has a recurrent bad dream. He sees his country becom ing wealthy on State-owned North Sea oil. The income, he fears, will be used by the government to buy the controlling shares of what is left of free enterprise in an already heavily socialized country.

It's a sobering thought, but maybe Ole-Jacob Hoffs nightmare about Norway's future will also come true in a slightly different way for Eng land. Leslie Lenkowsky, a con tributor to a fine little book, The Future That Doesn't Work: Social Democracy's Failures in Britain, that has been edited by R. Emmett Tyrrell, Jr. (Doubleday, 245 Park Avenue, New York, N.Y. 10017, $6.95), raises the possibility that North Sea oil may make ttsocial 318 spending" in England ttas manage able as it was a decade ago." If this is to happen we will have more confu sion. For, on Lenkowsky's own evi dence, ttsocial spending" even where it seems to be working is accom panied by a channeling of energies into Hless productive endeavors." Thus, to bail Britain out in its cradle-to-grave welfarism would do Britons themselves a vast disser vice. Oil may postpone the day of reck 0ning in Britain, but Mr. Tyrrell's contributors have no illusions about mitigating circumstances when it comes to Britain's future. The trou ble with British welfarism is that it destroys the incentive that is needed to create the surplus to pay doctors and teachers, to provide for insur ance, and to renovate deteriorating physical plant. As Mr. Tyrrell, who is the bright editor of The American Spectator, notes in his introduction, THE FUTURE THAT DOESN'T WORK 319 the whole business of wei far ism, when it beco~es a matter of State guarantee, must result in 'a con tradiction in terms. Britain has paid for its cradle-to-grave security with high inflation, a straitened rate of productivity, high unemployment, and a steadily increasing crime rate.

The ironies connected with the British drive for equality are deli cious. Instead of supporting a landed aristrocracy, or a funded upper mid die class, Britons are now support ing the ((new lads on top"-i.e., an overweeningly arrogant bunch of trade union leaders. Peregrine Worsthorne describes the new labor aristocracy for Mr. Tyrrell in some chortling prose that recalls H. L. Mencken at his best. The British trade unions ((have a cause that ex cuses excess . . . just as Popes in the Middle Ages got away with murder, claiming to be doing God's work, so today do trade union leaders enjoy a comparable kind of immunity and protection, because they are doing the modern equivalent of God's work." .Dull-Dogs of Fabianism ((Liberal squeamishness," says Mr. Worsthorne, lets the union boss es get away with it. Colin Welch in another essay, traces this squeamishness back to ~(dull dogs like Sidney and Beatrice Webb, Harold Laski, John Strachey, R. H.

Tawney and Anthony Crosland." These ((dull dogs" did not ~(see pov erty and toil as the natural or origi nal state of affairs, in which capital ism found nearly everybody and from which it has rescued many." No, they were profoundly ignorant of their forebears' ((struggles, skills, services, and achievements." The dull dogs of Fabianism thought the wealth had been there just for the taking, and all they could contribute was a guilt complex that tried to explain their ancestors' enterprise as simple expropriation, not as plain hard work. Welch is just as amusing as Peregrine Worsthorne in the ways he lays about him. His ((dull dogs," the intellectuals, are wide open to the charge of hypocrisy. George Bernard Shaw, for example, was a ((vast and greedy acquisitor." John Strachey, a ((Stalinoid Marxist" be fore he simmered down and became a Labour Minister, was ((rich throughout." The patrician Tawney Hsneered at the common vulgarity and -bad manners of businessmen, though when shopgirls were rude he applauded."

None of the Fabian intellectual pioneers was capable of ((grasping the role of risk-taking and profit-or loss-making in the maintenance of economic efficiency and above all in innovation." The Fabian ideal was to substitute for the enterprising in dividual a society dominated by ((swarming hives of bureaucrats and 320 THE FREEMAN busybodies and experts, their snowstorms of paper, their echoing wastes of gassing and boredom, their pandemonium of ceaseless but sterile controversy." Powell's Law Aneurin Bevan, who piloted the National Health Service legislation through Parliament, was neither a dull dog nor a hypocrite, but his handiwork has misfired. Harry Schwartz, in his contribution to Mr. Tyrrell's symposium, leaves no doubt about that. ~~The potential demand for care," says Mr. Schwartz, ~~can bankrupt any nation that attempts to provide it free of charge." Mr. Schwartz says Aneurin Bevan never understood that ~~if pa tients need not pay directly for med ical care, they will resort to it for the trivial indisposition as well as for the serious illness." Enoch Powell formulated it in HPowell's Law"

when he said the ~~demand for ~free' medical care" must quickly outrun ~~any possible provision for it." The consequence of ~~Powell's Law" is that England now has 26,000 doc tors trying to administer to tens of millions of patients. The waiting time for surgery has steadily lengthened, and the chances of get ting a hospital bed in an England that has ceased to build hospitals diminish year by year. Instead of producing a more moral society, welfarism has encouraged envy, grabbing and a cheap exalta tion of Robin Hood as a national hero. James Wilson, in his contribu tion to the Tyrrell volume, notes that the crime trends in London, while they are not comparable to the in crease in violence in American cities, are nonetheless ~~ominous." Muggings in London went from 674 in 1968 to 1,544 in 1972. The totals, by American standards, may be small, but the increase, in a society celebrated for its respect for the per son, is nonetheless disconcerting.

Are we about to have a conserva tive revival in England? The intel lectual atmosphere would suggest that the day of the Fabians is done. The Worsthornes and the Colin Welches are doing the most vigorous polemical writing in contemporary London. But the ~~British disease," sometimes known as ~~Englanditis," hangs on. Irving Kristol, in the final essay in Mr. Tyrrell's book, writes an nobituary" for the idea of socialism, but he still sees the ~~dead idea" of the Fabians as something that ~~has to be removed and buried." Only liberal capitalism, says Kristol, can perform the funereal task. The trouble is that liberal cap italism regards such a task as an essentially ~~private affair." It will have to change its attitude if the death of socialism is to' mean some thing more than ~~general disinte gration." @ ttle Freeman VOL. 28, NO.6 • JUNE 1978 Humane Values and the Free Economy Edmund A. Opitz 323 How well does a free economy serve our higher ends?

You Cannot Get Even Hans F. Sennholz 335 That I have been taxed does not entitle me to restoration by taxing others. What Is Happening to Old-Fashioned Charity? Wesley H. Hillendahl 339 Comparing the results of "social welfare" versus voluntary giving. The Road to Jericho Hal Watkins 346 The story of the Good Samaritan and its lessons for us today. World in the Grip of an Idea 18. The United States: A Republic and Gradualism Clarence B. Carson 349 Concerning obstacles governments have thrown in the way of private enterprise. Who Killed Cock Robin? John C. Sparks 363 The demand for political welfare measures destroys job opportunities. The Silver Panic Lawrence W. Reed 366 How government price maintenance of silver under bimetallism led to the panic of 1893. Book Reviews: 378 "Vision" by Leonard E. Read "The War Against the Automobile" by B. Bruce-Briggs Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson, N.Y. 10533 Tel: (914) 591-7230 Leonard E. Read, President Managing Editor: Paul L. Poirot Production Editor: Beth A. Hoffman Contributing Editors: Robert· G.·Anderson Bettina Bien Greaves Edmund A. Opitz (Book Reviews) Brian Summers THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of pri vate property, the free market, the profit and loss system, and limited government. The costs of Foundation projects and services are met through donations. Total expenses aver age $18.00 a year per person on the mailing list. Donations are invited in any amount. THE FREEMAN is available to any interested person in the United States for the asking. For foreign deli very, a donation is required sufficient to cover direct mailing cost of $5.00 a year. Copyright, 1978. The Foundation for Economic Education, Inc. Printed in U.S.A.

Additional copies, postpaid: 3 for $1.00; 10 or more, 25 cents each. THE· FREEMAN is available on microfilm from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "You Cannot Get Even" and "World in the Grip of an Idea."

THE average American is in favor of freedom and he'll tell you so in no uncertain terms. He wants Church and State separate, he would object if government were to censor the press, he doesn't want some bureau craf dictating to professors what they should teach. But at the same time he wants government to con trol and regulate business; he thinks industry and trade need to be policed in order to protect the con sumer from the wolves. Warming up to his subject he proceeds to catalogue the wickedness of people engaged in commercial activity, and especially the sins of Ubig business." Strange to say, these tum out to be the same old sins one finds in The Reverend Mr. Opitz Is a member of the staff of The Foundation for Economic Education, a seminar lecturer, and author of the book, Religion and Capi talism: Allies, Not Enemies. every walk of life. Some men in the business world are wicked, no doubt; but so are some ministers, some pro fessors, some publishers, some en tertainers, and even some television commentators. There's no reason for singling out businessmen--except to provide a specious rationale for saddling economic life with ever more bureaucratic regulations and controls. This has adverse economic effects, of course, adding to the costs of doing business and making all of us poorer, but that's not the worst of it. When economic enterprise is not free every other freedom is in jeopardy.

Human liberty is a precious and a fragile thing. Human liberty can not be won, or even sustained, on the economic level alone; but it can be lost on that level, and it is being lost there. Control the economic life of a 323 324 THE FREEMAN June people and you control every other aspect of their lives as well. ~~Power over a man's subsistence amounts to a power over his will." The truth of this ancient maxim has been pounded home in our time by the conditions of life behind the Iron Curtain. Now, it is true that business is not the only sector of our society under fire. Our whole civilization western civilization-has been under siege for several generations; and because our culture so largely embodies bourgeois values, the at tack against business is reinforced by the revolutionary Communist thrust to unseat the bourgeoisie. The bourgeoisie are the middle class-townspeople engaged in indus try and trade-and their emergence in the modern period was opposed by the aristocracy, whose values were quite different. Few of us live next door to counts, dukes or lords: the nobility is distant in time and space, glowingly enshrined in romance and myth. ~~The nobleman has cour age, spends without counting, de spises petty detail. There is a great ait of freedom and unselfishness about the nobleman. He will throw his life away for a cause, not calcu late the returns. That is the noble idea. In reality, he lives by the serf dom of others, and he broadens his acres by killing, and taking other people's land-~the good old rule, the simple plan. That they should take who have the power, and they should keep who can.'" These are Jacques Barzun's words.

Dr. Barzun continues, HThe bourgeoisie opposed such noble free-handedness and supported a king who would replace ~the good old rule' by one less damaging to trade and manufacture-and to the peas ants' crops. But the regrettable truth is that there is no glamour about trade. Trade requires regular ity, security, efficiency, an exact quid pro quo, and an exasperating attention to detail. . . . There is nothing spontaneous, generous or large-minded about it. Man's native love of drama rebels against a scheme of life so plodding and re sents the rewards of qualities so niggling." ~~What a convenient word is bourgeois!" Barzun observes. ~~How expressi ve and well-shaped for the mouth to utter scorn. And how flexi ble in its application-it is another wonderful French invention!" The Working Class The free enterprise system-or what is popularly called ~~cap italism"-has a special affinity for the type of man we'd call bourgeois or middle class. Industry and trade have never been the preoccupation of any aristocracy, which dislikes to sully its hands with ordinary work. Most of the world's work today is done by those 1978 HUMANE VALUES AND THE FREE ECONOMY 325 who have risen from the ranks, largely by their own efforts, in societies which have no rigid caste barriers to prevent upward mobility.

The emergence of the busi nessman during recent centuries was not a solitary adventure; the freeing of the business sector of western society went hand in hand with the expansion of other liberties we cherish. The story is a familiar one, and it begins with the religious revolution of the 16th century which led eventually to the separation of church and state, and freedom of worship. Free speech and freedom of the press were parts of this liberat ing movement, and eventually-as Mercantilism gave way before the current of ideas released by Adam Smith, Edmund Burke, and others-economic enterprise was freed from political regulations and controls, and came under consumer guidance. Consumers-by our millions of daily decisions in the market place to buy this or not buy that-project a pattern; and these buying habits of ours give entrepreneurs the clues they need to direct production into this channel or that, in an effort to please customers. In the free econ omy the consumer is sovereign. You may regard your product as the best gismo available anywhere at any price, but if the consumers don't like it they buy elsewhere and you go out of business. You, as an entrepreneur, have no power over customers except your ability to persuade and the quality of your product. This is the free market economy, and it is an integral part of the free society.

Everyone's Business Freedom, we hear it said, is everyone's business, so each of us really does have a stake in freedom in-general. To the extent that any one's freedom is lost, everyone's freedom is in jeopardy. But there are particular freedoms, and when a particular freedom is attacked you'd expect those directly involved to rush to its defense. And this is what you do find in most instances. When religious liberty is threatened, ch urchmen unite to oppose the threat. When freedom of the press is imperilled newsmen band together. Any impairment of academic free dom is challenged by teachers, and intellectuals do battle on behalf of free speech. And when freedom of economic enterprise is being throt tled by governmental controls busi nessmen and business organizations mobilize to resist the attack. Right? Wrong! Businessmen, all too often, are unwilling to speak out vigorously, even in self-defense-as the cele brated economist, Joseph Schumpe ter, has scathingly pointed out: ((Perhaps the most striking feature of the picture is the extent to which the bourgeoisie, besides educating 326 THE FREEMAN June its own enemies, allows itself in tum to be educated by them. It absorbs the slogans of current radicalism and seems quite willing to undergo a process of conversion to a creed hos tile to its very existence .... This is verified by the very characteristic manner in which particular capital ist interests and the bourgeoisie as a whole behave when facing direct at tack. They talk and plead-or hire people to do it for them; they snatch at every chance of compromise; they are ever ready to give in; they never put up a fight under the flag of their own ideals and interests-in this country there was no real resistance anywhere against the imposition of crushing financial burdens during the last decade or against labor legislation incompatible with the ef fective management of industry."

I can imagine an ideal society where each sector was alert to rebuff threats to any other sector; where clergymen would go to bat whenever freedom of the press was threatened, and publishers jealously guarded academic freedom, and professors fought for freedom of medical prac tice, and doctors resisted every bu reaucratic jnvasion of the market place, and businessmen cherished freedom of religion. In real life, however, things do not happen this way. It is partly the fault of business itself that the freedom most gravely threatened right now is the freedom of the economy, on which not only our prosperity depends, but much else besides. Those immersed in the grubby details of the market place often lose sight of the big picture; the head of a business worries about falling sales and how to meet the next payroll, but here, in this serene academic environment, we can sit back and theorize.

Better Understanding, The Best Defense The best defense of ~l1e free econ omy is a better u~erstanding o~ the free economy, shared by more people. So let's put capitalism to the test. Put aside, for the moment, any opinions you may entertain about the free enterprise system we now have, and let's draw up some plans for an ideal economic order. If we were starting from scratch what requirements would we lay down for an economic order that would meet with our approval? I'm going to sug gest that there are four major de mands we should make of any economic system, and after we have spelled these out a bit each of us can decide for himself whether our pres ent system falls short and how it might be strengthened and de fended. A good economic system has four characteristics: 1. A good economy produces goods and services efficiently.

1978 HUMANE VALUES AND THE FREE ECONOMY 327 2. A good economy allocates re wards equitably, to all partici pants. 3. A good economy broadens the scope for individual free choice. 4. A good economy functions in harmony with religious and moral values. There's no argument on the first point; our present economic system does deliver the goods, as even its enemies admit. The American econ omy has never been wholly free; it has operated under various political restraints from the very beginning. But compared to the politically planned economies of other nations our relatively free economy has been a paragon. Producing and exchanging in a largely free country has bestowed a pro~perity upon America that the world envies. Americans started poor. There was little per capita wealth two hundred years ago; but our forebears had an abundant faith in the nation's future under God, a strong belief in themselves, and they practiced the Puritan work ethic. This was the land of opportu nity, and millions of the poor and oppressed of other nations migrated here to make their own way in this Uland of the free." By and large they succeeded; never have so many ad vanced so far out of poverty in so short a time.

There have been evils in Ameri can life, and some are there still; along with errors, shortcomings and blindspots. But what other nation is entitled to cast the first stone, or the second, or the third? If the American Dream has faded, if there is tarnish on our idealism, where lies the fault? The Church and the School are the institutions charged with the responsibility for things of the mind and spirit, and if we have lost that vision without which the people perish, if our value system is in disarray, we surely can't blame business and industry-which merely reflect the consensus. The Goals of Life The goals of human life, the ends appropriate for creatures such as we, are the primary concerns ofreli gion and education. The increase of material well-being may be the means for achieving the good life; it is certainly not the end for which life should be lived. The economic order has the modest role of supplying our creaturely needs efficiently so that we may have the leisure to pursue our personal goals. In America the economy has performed its role commendably. It is not to be blamed for the failures of other institutions.

The relatively free economy we have enjoyed in America has brought unparalleled prosperity, but an affiuent society is not neces sarily a just society. And so we come to the second test we wish to put to the free ente.rprise system: Does it 328 THE FREEMAN June allocate the rewards fairly and equitably? In a free society everyone of us is rewarded by his peers according to the value willing buyers attach to the goods and services he offers in exchange. This is the market in ac tion. This market place assessment is made by consumers, and we all know that consumers are ignorant, venal, biased, stupid; in short they are people very much like us! This does seem to be a clumsy way of deciding how much or how little of this world's goods shall be put at this or that man's disposal. Isn't there an alternative? Yes, there's an alternative, and it occur red to people more than two millen nia ago. We'll invite the wise and the good to come down from Olym pus to sit as a council among men, and we'll appear before them one by one, to be judged on personal merit and rewarded accordingly. Then we'll be assured that those who make a million really deserve it, and those who are paupers belong at that level; and we'll all be contented and happy. What lunacy! The genuinely wise and good would not accept such a role, and I quote the words of the highest authority de clining it: ((Who made me a judge over you?"

The market place decision that this man shall earn twenty-five thousand, this one ten, and so on, is not, of course, marked by supernal wisdom; no one claims this. But it is a million miles ahead of the alterna tive, which is to recast consumers into voters, who will elect a body of politicians, who will appoint bureaucrats, who will divvy up the wealth-by governmental legerde main. This mad scheme backs away from the imperfect and lurches into the impossible! There are no perfect arrangements in human affairs, but the fairest distribution of material rewards attainable by imperfect men is to let a man's customers decide how much he should earn; this method will distribute economic goods unequally, but equitably. We do live in an affluent society, and the fact is that the prosperity generated by our relatively free in stitutions has been widely shared by the American people. There are the rich, there are the less well to do, and there are still some poor; but this allocation of rewards represents the choices of people themselves-as reflecting their buying habits. But the question still remains; do we have a lopsided society in which a handful of people have accumulated the bulk of the wealth produced in our economy? Dubious statistics are offered to demonstrate that 10 per cent of the people own two-thirds of the wealth, or three-quarters, or 90 per cent, or whatever. Is there any truth in such figures, or do they tell a lie?

There's a fairly simple way to 1978 HUMANE VALUES AND THE FREE ECONOMY 329 check this out for yourself. Take home ownership. Is it a fact that a handful of people own the homes most of us live in? To the contrary; 45 million homes are owned by the families that occupy them. Assum ing the family uni t to consist in father, mother and one child this accounts for 135 million persons. Millions of other Americans can -af ford to own their homes, but choose instead to rent an apartment or a house. Take automobile ownership: 82 million people own their own cars and 33 million own two or more cars. There are 130 million licensed driv ers in the country. Eighty-three million housing units have electric refrigerators; there are 125 million television sets, 55 million of them color; 70 million hOlll;.eshave washing machines; and there is a radio for every man, woman and child in the country. And as for food, we are the only nation in history whose number one medical problem is overeating! I do not know who 'concocted the first share-the-wealth scheme. It was ages ago, and it was a pipe dream from the beginning. It is a pipe dream still for most of the world's people. But in America that dream has come true-in large measure.

Capitalism-the free economy-has produced material abundance, and the benefits of our prosperity are enjoyed by almost every man, woman, and child in the country-as well as by millions of people around the globe. Let me pursue this point through one more stage. Most people, when they reflect on the matter,. agree that there is no concentration of ownership in everyday things like houses, automobiles and food. But when they get into the arcane world of the corporation, they are easily misled by those who have twisted Hbig business" into a four-letter word; they have been led to believe that the industry of this country is owned by a handful of stockholders. Widespread Ownership Pick anyone of the giant corpora tions and examine its annual report. I picked Exxon, a fairly large outfit. The 1976 Annual Report reveals that Exxon is owned by approxi mately 700,000 shareholders; that's roughly 5~· times as many owners as employees, and it's about as many people as live in the whole state of Delaware. That's a lot of people, but there's more to come.

Note the large number of stock holders who are not individuals but institutions. Every major church body owns shares of stock in indus try, but in some statistics a denomi nation counts as but one stock holder. Several thousand colleges own stock, but each is counted as one stockholder. Your local Bank and Trust Company is a stockholder on behalf of its thousands of depos330 THE FREEMAN June itors; every insurance company owns stock on behalf of its millions of policy holders; every pension fund is invested in stocks. Pension funds, including labor union funds, now own about one-third of the total val ue of all the stocks listed on the New York exchange. The unions have come to own so large a share of American industry that Peter Drucker refers to this phenomenon as ~~pension fund socialism." In short, nearly every American owns a chunk of the corporate wealth of America! Now, it is true, of course, that there are some enormously rich peo ple in this country. What do they do with their money? Some of them spend their money foolishly, just as you and I would do if we were in their shoes. But any millionaire who wants to preserve his fortune and pass it along to his children and their children, has no choice but to invest it in industries which produce the incredible variety of goods which flood the market places of America soliciting the patronage of the masses of consumers. No other soci ety has ever allocated its rewards as generously, or so equitably.

Our present economic system, the system of free enterprise, has met our first two requirements; it has made us an affluent society produc ing over and above our own needs, an abundance that we have gener ously shared with the world; and every person who has participated in the production of goods and ser vices shares equitably in the fruits of his production. The third test has to do with an aspiration deeply rooted in human nature; we want to' be free; we want the freedom to choose. We want to be free to worship in the church of our choice, to choose our own schools, to read freely and speak our minds. We want to be free to be ourselves, even if this is to practice what others regard as our harmless eccen tricities. We want to be free to choose our profession or place of employment. We want solitude when we choose to be alone, and we want the freedom to choose our associates-which includes the right to dissociate. These are some of the demands of human nature itself, this is how God made us. As J effer son put it, ~~The God who gave us life gave us liberty at the same time."

Therefore, the third demand we make of an economic order is that it .manifest, in its operations, a crea ture who is a freely choosing being. By Acts of Choice Man's will is uniquely free.· All other creatures-birds, beasts, fish, and so on-obey the laws of their nature willy-nilly. Only man has the capacity to disobey the deep mandates of his being. Ortega, the great Spanish philosopher, re marked that the tiger cannot be de1978 HUMANE VALUES AND THE FREE ECONOMY 331 tigered but the human being is al ways in danger of being de humanized. It is by acts of will, by acts of choice, that man is hu manized; and this decision pro cess, in the nature of the case, must be engineered by the individual concerned-by an act of inner re solve. Each person is self-con trolling, he is in charge of his own life; and if a person refuses to as sume responsibility for himself no one can exercise this role by proxy, from the outside.

The free society is our natural habitat; freedom accords with human nature, and the tactic of freedom as it applies in the economic sector is capitalism, the market economy. The economy is free when the productive activities of men re spond sensitively to the needs of consumers, as these needs manifest themselves in people's buying habits. It is true, of course, that when people are free to spend their money as they please they will often spend it foolishly-other people, that is! They'll make mistakes. But isn't that one of the important ways we learn in life, by being free to make mistakes, picking ourselves up every time we fail and standing a bit taller every time we succeed? The biggest mistake of all is to persuade ourselves that we can avoid the little mistakes people make in a free society by adopting a planned economy. A centrally planned nation is necessarily a command society. Individual per sons are no longer free to make their own decisions, their private plans must be cancelled whenever they conflict with the overall political plan. This is a giant step along the road to serfdom.

No Guarantees To have economic freedom does not, of course, mean that you will be assured the income you think you deserve, or the job to which you think you are entitled. Economic freedom does not dispense with the necessity for work. Its only promise is that you may have your pick from among many employment oppor tunities, or go into business for yourself. And as a bonus the free economy puts a multiplier onto your efforts, to enrich you far beyond what the same effort returns you under any alternative system. The American economic sys tem-free enterprise, capitalism, the market economy, call it what you will-has never been as free as the believer in the free society would wish. But it aspires toward freedom, as do most citizens of our country; and our economy has indeed been freer than the economies of other nations. But despite the restrictions and controls, our relatively free economy has (1) delivered goods and services efficiently; it has (2) allo cated rewards equitably; and (3) it 332 THE FREEMAN June does expand opportunities for per sonal choice in society.

There is one final point. Ameri cans are basically a religious people who try to bring moral values to bear on the issues of public life. Does a person have to put aside his reli gious and moral values while en gaged in the sordid business of mak ing a Iiving-as some misguided voices declare? Or is there, as I be lieve, a vital relationship· between market place and altar? No man's judgment can rise above his under standing of the facts; and as I have pointed out, there is gross misun derstanding of the nature of busi ness and the economy-especially, it seems, among those given to pro nouncing moral judgments! Biblical religion has at least three important and relevant criteria for judging social policy: (a) the idea of justice voiced by the Old Testament prophets; (b) the New Testament ideal of the sacredness of persons (Le., Rights endowed by the Creator); and (c) the Protestant emphasis on the importance of personal deci sion-..you are closed to God's grace until you decide to open yourself up.

Put these ingredients together in the proper proportions-justice, the sacredness of persons, and the necessity of choice-and you have the free society. The political struc tures of a free society are designed to assure the inviolability of every per son. They maximize his opportunity to pursue his personal goals, and they cultivate an economic order that is guided by consumer demand. This was the social goal envisioned by the eighteenth-century Whigs, the men we refer to as the Founding Fathers. What they founded was prepared for by eighteen centuries of tutelage in biblical religion. Questions Concerning the Morality of Capitalism This may sound good, the critic tells us, but doesn't the psychology of capitalism take the wraps off greed, and doesn't capitalism ele vate money~making to the chief end of man? And didn't Jesus condemn wealth? The answer to all three questions is No. As my first witness I call upon the eminent sociologist, Max Weber, and quote from his celebrated book, The Protestant Ethic and the Spirit of Capitalism. ~~The impulse to acquisition, pursuit of gain, of money, of the greatest possible amount of money, has in itself noth ing to do with capitalism. This im pulse exists and has existed among waiters, physicians, coachmen, art ists, prostitutes, dishonest officials, soldiers, nobles, crusaders, gam blers, and beggars. It should be taught in the kindergarten of cul1978 HUMANE VALUES AND THE FREE ECONOMY 333 tural history that this greed for gain is not in the least identical with capitalism, and is still less its spirit." Greed is a human frailty, to be condemned where found and overcome if possible. It is not the exclusive vice of any class or occupa tion. In any event, it has nothing to do with the efficient production of goods and services in the capitalist order and their equitable distribu tion.

My second witness is the eminent theologian, Reinhold Niebuhr. Late in life, after being converted .away from Socialism, Niebuhr made a sage comment on the profit motive. Even the minister is economically motivated, he wrote, Hwhen he moves to a new charge because the old one did not give him a big enough parsonage or a salary adequate for his growing family." We can better understand Jesus' attitude toward material posses sions if we contemplate a seeming paradox: Jesus had harsh things to say about the three R's; the three R's in this case being Religion, Righ teousness, and Riches! We learn from the Gospels that something which resembles religion, but which is ritualistic and external, may im munize us against the real thing, which is inward and spiritual. Which of us does not feel, at times, the exasperation which caused a member of Parliament to blow his top and say: ((Thank God for the Church of England; it's all that stands between us and Chris tianity!" And by the same token, perfunctory righteousness-Phar isaism-may harden the heart and beget an uncharitable spirit.

Riches, too, may pose a peril; but this is a matter of degree only, for it is just as common to be infected with a false philosophy of material pos sessions by a thousand dollars as by a million. Avarice is a common trait in all cultures and at every economic level. There are misers everywhere, and a miser is one who puts his trust in riches, and in so doing he treats means as an end. This is the point of Jesus' parable of the rich man whose crops were so good that he had to build bigger barns. This good fortune was the man's excuse for saying, ((Soul,thou hast much goods laid up for many years! take thine ease, eat, drink, be merry." There is a two-fold point in the parable; the first is that nothing in life justifies a man in assuming this attitude; we must never stop growing. It has been well said that we don't grow old, we become old by not growing. The second point is that a material windfall may tempt a man into the error of quitting the struggle for the real goal of life.

Jesus condemned the man who put his trust in riches, who (flayeth up treasure for himself and is not rich toward God." Which is not the same as condemning material possessions 334 THE FREEMAN per se, or wealth held under proper stewardship. Life is probative; our three score years and ten are a test run. As St. Augustine put it, uWe are here schooled for life eternal." And one of the important examination ques tions concerns the economic use of the planet's scarce resources and the proper management of our material possessions. These are the twin facets of Christian stewardship, and poor performance here will result in dire consequences. As Jesus put it, uIf, therefore, you have not been faithful in the use of worldly wealth, who will entrust to you the true riches?" Material Rewards Economics, the science of means, needs religion, the science of ends. To inflate a means into an end is idolatry. In sober truth, no economic system can be anything more than a means. The ends for which life should be lived take us into another dimension, into the domain of our moral and religious life. As created beings we are designed to achieve a transcendent end: ~~Thou hast made us for Thyself, and our hearts are restless until they find rest in Thee."

But if we are to live as we should live during this life, we must be free; and one of the imperatives of the free life is freedom of economic enterprise. @ IDEAS ON LIBERTY IT SEEMS TO ME one of the great merits of a free society that material reward is not dependent on whether the majority of our fellows like or esteem us personally. This means that, so long as we keep within the accepted rules, moral pressure can be brought on us only through the esteem of those whom we ourselves respect and not through the allocation of material reward by a social authority. It is of the essence of a free society that we should be materially rewarded not for doing what others order us to do, but for giving them what they want. Our conduct ought certainly to be guided by our desire for their esteem. But we are free because the success of our daily efforts does not depend on whether particular people like us, or our principles, or our religion, or our -manners, and because we can decide whether the material reward others are prepared to pay for our services makes it worthwhile for us to render them.

F. A. HAYEK, "The Moral Element in Free Enterprise"

YOU CANNOT GET EVEN GOVERNMENT affects individual in comes by virtually every decision it makes. Agricultural programs, vet erans' benefits, health and labor and welfare expenditures, housing and community development, federal expenditures on education, social insurance, medicare and medicaid programs, and last but not least, numerous regulations and controls affect the economic conditions of every citizen. In fact, modern gov ernment has become a universal transfer agency that utilizes the political process for distributing vast measures of economic income and wealth. It preys on millions of victims in order to allocate valuable goods and services to its beneficia ries. With the latter, transfer pro grams are so popular that few public Dr. Sennholz heads the Department of Economics at Grove City College and is a noted writer and lecturer on monetary and economic affairs. Hans F.Sennholz officials and politicians dare oppose them.

The motive powers that drive the transfer order are as varied as human design itself. Surely, the true motives are often concealed, and a hollow pretext is pompously placed in the front for show. And yet, man is more accountable for his motives than for anything else. A good motive may exculpate a poor action, but a bad motive vitiates even the finest action. Conscience is merely our own judgment of the right and wrong of our action, and therefore can never be a safe guide unless it is enlightened by a thorough understanding of the im plications and consequences of our actions. Without an enlightened conscience we may do evil thor oughly and heartily. An important spring of action for the transfer society is the desire by 335 336 THE FREEMAN June most people to get even in the redis tribution struggle. UI have been vic timized in the past by taxation, in flation, regulation, or other de vices," so the argument goes, ttthere fore I am entitled to partake in this particular benefit." Or the time se quence may be reversed: ttI'll be vic timized later in life," pleads the col lege student, uand therefore I want state aid and subsidy now."

This argument is probably the most powerful pacifier of conscience. It dulls our perception and discern ment of what is evil and makes us slow to shun it. After all, we are merely getting back ttwhat is right fully our own." With a curious twist of specious deduction the modern welfare state, which continually seizes and redistributes private property by force, is defended by the friends of individual liberty and pri vate property. ttMan is entitled to the fruits of his labor," they argue, ttwe are merely getting back that which is rightfully and morally our own." They borrow the arguments for the private property order to sus tain the political transfer order. Surely getting back that which is rightfully and morally our own is a principle that is rooted in our ina lienable right to our lives. It is a property right that springs from our human rights and from the right to life itself. It is the right to restora tion of the fruits of our efforts and labors of which we are deprived by deceit, force, or any other immoral practice. It is a specific right to re covery or compensation from those who are wronging us or have injured us in the past.

This right to restoration does not beget the right to commit the very immoral act from which we seek restoration, to imitate others in act ing immorally, or to seek revenge against the trespassers or innocent bystanders. But this is precisely what the Uget-even" advisors urge us to do. In an unfortunate automobile ac cident we are hurt or injured, or our vehicle may be damaged, because of the negligence of another driver. This gives us the right to demand restoration and compensation from the guilty party. But it does not give us the righ t to seize another car parked in the neighborhood, or re turn to the road and injure another driver. Or, our home is burglarized and we suffer deplorable losses in personal wealth and memorabilia. This does not bestow upon us the right to do likewise to others. But thettget-even" advocates are draw ing this very conclusion. He who is desirous of ttgetting even" in the politics of redistribu tion longs to join the army of benefi ciaries who are presently preying on their victims. They would like to get their ttmoney back" from whomever they can find and victimize now.

1978 YOU CANNOT GET EVEN 337 Like the victim of a burglary who becomes a burglar himself, they are searching for other victims. But in contrast to the new burglar who may be aware of the immorality of his actions, the ~~ get-even" advocate openly defends his motives while he is pursuing his political craft. We cannot get even with those individuals who deprived us of 'our property in the past. They may have long departed this life or may have fallen among the victims them selves. We cannot get even with them by enlisting in the standing army of redistributors. We merely perpetuate the evil by joining their forces. So we must stand immune to the temptations of evil, regardless of what others are doing to us. The redistribution must stop with us. The redistributive society has vic timized many millions of people through confiscatory taxation, infla tion, and regulation. Government, acting as the political agency for coercive transfer, seized income and wealth from the more productive members and then redistributed the spoils to its beneficiaries. Although many millions of victims and benefi ciaries were involved, which often obscures the morality of the issue, the forced transfer took place be tween certain individuals. It is true, the beneficiaries, who used political force to obtain the benefits, cannot easily be recognized in the mass process of transfer. But even if we could identify them, and establish a personal right to restoration, our property has been consumed long ago. A vast army of beneficiaries, together with their legions of gov ernment officials and civil servants, consumed or otherwise squandered our substance. There is nothing to retrieve from the beneficiaries who probably are poorer than ever be fore, having grown weak and depen dent on the transfer process.

When seen in this light, the get even argument is nothing more than a declaration of intention to join the redistribution forces. It may be born from the primitive urge for revenge against government, state or soci ety. But it is individuals who form a government, make a state and con stitute a society. By taking revenge against some of them for the injuries suffered from the hands of others, I am merely reinforcing the evil. Revenge is a common passion that enslaves man's mind and clouds his vision. To the savage it is a noble aspiration that makes him even with his enemies. In a civilized soci ety that is seeking peace and har mony it is a destructive force which law seeks to suppress. But when the law itself becomes an instrument of transfer, the primitive urge for re venge may burst forth as a demand for more redistribution. It becomes a primary force that gives rise to new demands or, at least, reinforces the popular demands for economic 338 THE FREEMAN transfer. The common passion for revenge, no matter how well con cealed, undoubtedly is an important motive power of social policy that leads a free society to its own de struction.

No wealth in the world and no political distribution of this wealth can purchase the peace and har mony so essential to human exis tence. Peace and harmony can be found only in moral elevation that reaches into every aspect of human life. A free society is the offspring of morality that guides the actions and policies of its members. To effect a rebirth of such a society is to revive the moral principles that gave it birth in the beginning. It is individ ual rebirth and rededication to the inexorable principles of morality that are the power and the might. The example of great individuals is useful to lead us on the way, for nothing is more contagious for greatness than the power of a great example. To spearhead a rebirth of our free society let us rededicate ourselves to a new covenant of redemption, which is a simple restatement of public morality. In the setting of our age of economic redistribution and social conflict it may be stated as follows: • No matter how the transfer state may victimize me, I shall seek no transfer payments, or accept any.

• I shall seek no government grants, loans or other redistributive favors, or accept any. • I shall seek no government orders on behalf of redistribution, or accept any. • I shall seek no employment, or accept any, in the government ap paratus of redistribution. • I shall seek no favors, or accept any, from the regulatory agencies of government. • I shall seek no protection from tariff barriers or any other institu tional restrictions of trade and commerce. • I shall seek no services from, or lend support to collective institu tions that are creatures of redis tribution. • I shall seek no support from, or give support to associations that ad vocate or practice coercion and re straint. We do not know whether our great republic will survive this century. If it can be saved, great men of convic tion must lead the way-men who with religious fervor and unbounded courage resist all transfer tempta tions. The heroes of liberty are no less remarkable for what they suffer than for what they achieve. @ Wesley H. Hillendahl JUST what is happening to old fashioned charity and why? Perhaps we can gain an insight by looking into current economic and political trends.

In preparing for a discussion of subjects such as philanthropy and charity, which are outside my prin cipal field of economics, I find it informative to go to the dictionary. For ((charity" Webster offers ((love" as one of the synonyms. Love-a most personal concept. Continuing, Webster offers ((kindness" and ((help for the needy or the suffering." This definition describes charity as a Mr. Hillendahl is Vice President and Director of the Department of Business Research, Bank of Hawaii. This article is from an address of October 22, 1977, at the 101 st Annual Meeting of the American Humane Association, Honolulu, Hawaii. most personal, individual, and vol untary concept. Turning to Hphilan thropy," Webster offers ((the active effort to promote human welfare." Note the change in emphasis. The term ((welfare" in turn is defined as ((goodfortune, happiness, well-being or prosperity." Philanthropy moved up a notch from needy and suffering to well-being and prosperity. This concept conveys benevolence, and to a certain extent, individual and vol untary, but tends to be impersonal and a lot less urgent.

In reviewing the first 150 years of this country's history, I would say that Americans could be charac terized by terms such as ((industri 0us' productive, self-reliant, inde pendent, humane, kind and charita ble." 339 340 THE FREEMAN June The Freedom Ethic Americans operated under what has been called the freedom ethic: the freedom to choose, the freedom to try, the freedom to sell, to buy, and even the freedom to fail. Being a . compassionate people, they built thin cushions into the system to prevent absolutes. Absolute failure was guarded against through vari ous forms of personal charitable aid. Today, however, we seem to be faltering; we seem to be confused. In a misdirection of compassion we are substituting for the «freedom to" philosophy, a coercive «freedom from" system. Not only must we prevent people from failing, they must not be permitted to be under privileged. So we are adopting a series of ((freedoms from." For fail ure we have substituted social wel fare, or freedom from insecurity. For buying, we have substituted con sumerism, or freedom from exploita tion, real or imagined. For sell ing, the substitute is regulation, or freedom from competition; and for trying, is the freedom from striving which is at the root of the welfare state.

In their compassion, politicians have become adroit at gaining favors for special interest groups. They are fattening the cushions against failure, using taxpayers' money to the point where increasing numbers of people are preferring to fail. For example, compared to a tax-free unemployment or welfare income of $120 a week, a worker's income of about $255 a week is re quired to break even after deducting withholding taxes, the cost of trans portation, parking, clothing, and all the various items which must be paid in order to work. So if a person can't find a job at $255 a week, why work? Increasing numbers of people are choosing idleness. Why not, when one can make more money by failing? The ability to fail in com fort, of course, requires a bureauc racy to enforce the collection and disbursement of tax money from the workers. The Welfare Ethic This is the welfare state in action. The welfare state is commonly ac cepted today as the preferred form of government throughout much of the world. England, France, Sweden, the United States, and to an increas ing extent Germany and Japan are prime examples. Webster defines the welfare state as one in which the state assumes responsibility for in dividual and social welfare of its citizens. Note the change in struc ture. The welfare state bureaucracy enforces a cold, impersonal, involun tary, forceful redistribution of wealth.

Many economists see the welfare state as society in transition. Lud wig yon Mises and Nobel laureate Friedrich 'Yon Hayek, for example, 1978 WHAT IS HAPPENING TO OLD-FASHIONED CHARITY? 341 have pointed out that such a society must eventually dissolve into a to talitarian command society. You may wonder why they take such a position. They would agree that in contrast to a constitutionally re stricted republic wherein the gov ernment can do only that which is spelled out in the constitution, under the welfare state there are no constitutional restraints and we can make the government do what we want it to do virtually without limit. This form of government encourages pressure groups to form in society, each seeking a piece of the action. There are endless causes around which pressure groups can rally. The point is that the process only ends when everything is under the control of the bureaucracy which passes out the loot from the public treasury.

As background to the question as to what is happening to charity, once government takes· over a par ticular responsibility, it is a matter of record that the individual citizens are relieved of that responsibility. Individuals are only too glad to re linquish responsibilities so they can devote more time and money to their other responsibilities. Take for example OSHA legislation which administers industrial safety. In Washington last year, a member of the President's Council of Economic Advisors told me the CEA had just completed a study of the impact of OSHA on industrial accidents. They found the program to be contra productive; the accident rate was increasing. Why? After years and years of decline, industrial accidents were increasing because industry was turning over the responsibility for controlling industrial accidents to the government. Business, just like an individual, is only too happy to relinquish responsibilities, in cluding accident prevention.

This is precisely what is happen ing to old-fashioned charity. The welfare state is crowding out charity and philanthropy by systematically taking over responsibilities from in dividual citizens. Let's look at the record of private philanthropy in the United States over the last 15 or 20 years. The statistics are meager, but during the period between 1960 and 1976 total voluntary contributions in the United States are reported to have increased from about $8.9 bil lion to about $29 billion. The total has been growing in recent years at a rate of about 7 per cent annually, a little more than the current rate of inflation. Over the same period, total personal income in the United States has been expanding at around 9 per cent a year. Seven doesn't keep up with nine by a con siderable· amount when comparing compound growth rates. It is clear that the growth in pri vate philanthropy is lagging behind personal income in the United 342 THE FREEMAN June States. The same is true of Hawaii.

The Aloha United Way has in creased from $3.8 million in 1968 to $6.9 million last year, for an aver age annual growth rate of about 7.5 per cent. Personal income in Hawaii has been growing at 10.5 per cent. United Way giving is lagging 3 whole percentage points behind the growth in personal income. These comparisons are significant because individuals account for almost 80 per cent of the contributions to charitable organizations. Social Welfare vs. Voluntary Giving Comparing reported private philanthropy with government pro grams in the United States, social welfare payments have risen from a total of about $24 billion in 1950, to $286 billion in 1975, and are cur rently increasing at almost 15 per cent a year. Such payments have accounted for more than half of fed eral outlays and almost two-thirds of state and local outlays over the last 15 or 20 years. Compared with total personal income in the United States, which has been increasing at 9 per cent annually, welfare pay ments are skyrocketing. In 1950, total social welfare payments ac counted for about 10 per cent of personal income payments in the United States. They now account for close to 25 per cent of personal in come, and continuing another 15 years at the same rate will account for 50 per cent of personal income.

This means that the government will payout 50 per cent of the in comes of individuals who are work ing to individuals -who are outside the workforce. Presently, one can readily account for some 60 million people who are receiving some form of state, county or federal aid. How do the social welfare pro grams compare with the voluntary programs? In 1950 philanthropy represented almost 20 per cent of the total welfare payments. Today, philanthropy accounts for a little more than 9 per cent. Continuing these trends another 10 to 15 years, the share will drop to 3.5 per cent. Individual charity and philanthropy are clearly being crowded out by the welfare state. Morality at Stake Of prime importance is the impact of these trends on individual moral ity. What is happening to the moral ity of the individual welfare recipi ent, and the compassionate social welfare worker who advises ways for the recipient to cheat on welfare?

What's happening to the self-reliant individual who was in the mainstream of the American way of life 50 to 100 years ago? Illustrative of the transformation, Community Action Programs actively promul gate the doctrine that an individual is legally and morally entitled to 1978 WHAT IS HAPPENING TO OLD-FASHIONED CHARITY? 343 receive welfare today. It has become one's legal and moral right to accept legal plunder. On the other hand, unless one is willing to accept jail or penalties, the taxpayer is forced to pay his or her taxes. In contrast to the voluntary payments of an ear lier period, taxes today are collected coercively. As the level of taxes and spend ing by government approaches 50 per cent of the total income of work ing people, what effect do we observe the tax and welfare burden is hav ing on the attitudes of individuals toward voluntary giving? Indiffer ence and apathy. After all, if the government is taking care. of the problem with our tax dollars, why should one bother to contribute to Aloha United Way? At a 10-to-1 ratio, the government is vastly out performing the private organiza tions, and with the people's own tax dollars.

Roots of the Problem An examination of the root causes of the problem would start with the underlying economy which consists of millions of individuals each try ing to produce a service or product taken to market to sell to a buyer. In the process, savings or profits are generated, the combination of which are the lubricators of the economic system. These profits go into finan cial institutions, such as banks, sav ings and loan associations, and insurance companies. Savings and profits are transformed into loans for houses, and plant and equipment where people can live and work. Some of these savings and profits become charitable contributions. The amount depends to a large ex tent on the level of taxes for opera tion of the various levels of govern ment. In 1900, taxes paid to federal, state and county governments amounted to only 9 per cent of per sonal income, leaving 91 per cent for people to spend as they chose. Indi viduals had a great deal of latitude as to where they·· could spend or invest their incomes. Today, gov ernment. takes almost half of the earnings of the working people.

That leaves only half to spend. The effect on savings and profits should be obvious. Savings and profits are being taxed away. As a result, com panies can't retain enough profits and they are forced to borrow. Inter est rates have risen in the face· of the shortage of capital. This makes it difficult for an individual to buy a house when he has to compete with General Motors and all the other industrial borrowers. Yet, many in their ignorance are prone to call ttprofit" a dirty word. Their ignorance is compounded by the appearance that there is an abundance of money all around. This in turn gives the appearance of an adequate flow of savings and pro344 THE FREEMAN June fits. The apparent abundance of money is made possible by the na ture of the central bank or the Fed eral Reserve System, which in effect has a license to print money as a substitute for genuine savings. When it prints money faster than the expansion of goods and services in the market, the excess money competes with money and credit al ready available. The result is a dilu tion of purchasing power in the form of rising prices. This is what we call price inflation. The accelerating in flation in recent years is clear evi dence that savings and profits are too low and the Federal Reserve is being forced to make up the deficit by printing money at accelerating rates.

Continuation of present trends would result in a tax level which will eventually confiscate all of the income of the workers and redistri bute it to those on some form of welfare. At some point the system would collapse as more and more workers would refuse to work or pay taxes. The imposition of government controls would become necessary and would likely spell the end of private philanthropy. Money Mania In order to avoid such an eventu ality, these trends must be reversed, if not for ourselves for future gener ations who must live in the after math of the economic and political collapse. We must first identify the problem and then select a course of action. Charles Mackay wrote Ex traordinary Popular Delusions and the Madness of Crowds 135 years ago. A chapter describes what he called ~~money mania" in France in the 1720's, the classic example of modern inflation. John Law had a prescription to make France prosperous. His pre scription was a central bank which could issue paper money. His pro posal was enthusiastically accepted, and for a few years France pros pered. However, the bank inflated the money supply to accommodate the speculative Mississippi Bubble.

The inflation and bursting ~~bubble" spread ruin throughout Europe. Again, during the 1790's im mediately following the violent French Revolution, the French as signat was printed in unlimited quantities with the idea of restoring prosperity. For a second time ~~money mania" led to an inflation which bankrupted France and led to the takeover by Napoleon in 1799. In the early 1920's the destruction of the German middle class through monetary inflation brought about the Third Reich. A total transformation of the economy and political structure oc curred each time monetary inflation was attempted. Today, Hmoney mania," a disease of the last three centuries, is running rampant not 1978 WHAT IS HAPPENING TO OLD-FASHIONED CHARITY? 345 in just one country as earlier, but is sweeping the world. ((Moneymania" is at the core of the prevailing notion that government can pass laws, increase the money supply endlessly, and spend tax dol lars to solve all of society's problems.

A Return to Freedom The Critical Choice Since government has demon strated that it compounds every problem it has ever undertaken to solve, the choice is obvious: tum away from this madness and return to the freedom philosophy where in dividuals are free to solve their own problems. The resultant tax reduc tion would expand consumer de mand to the point where even those reluctant to work would find chal lenging opportunities. While a rem nant of a free society remains, we have a choice. Once the total welfare If We Need Laws ... state is imposed, we will no longer have the choice. So the time to choose is now. The job of restoring the freedom philosophy seems difficult, but the alternative is unthinkable-history abounds with the record of failures. Success will provide the opportunity to gain the kind of moral and economic prosperity experienced only in brief periods of history. The release of the creative spirit from its present bondage would carry society to a productive level where the need for charity and philanthropy would become minimal. By the same to ken, resources would be so bountiful that problems of charitable fund raising would become inconsequen tial. Such was the faith and dreams of our Founding Fathers. Let each of us start to do his part to insure that this faith is preserved. Let's start now! Ii IDEAS ON LIBERTY IF WE NEED LAWS to make people treat men of other faiths and races as friends; if we need the police power of the secular state to take money from men for human need; if it is believed that the only hope ofa city of God is to seek the alternative of a collectivized mass leveled to the lowest common denominator of mentality and ability-if all this be the limit of our hope for mankind, then even such activity is sheer futility, for even if such an effort could be achieved it would have no meaning at all for mankind. This rejection of personal responsibility would prove only that it is possible to make men live like whipped dogs, and the proving of it would be hell.

RUSSELL J. CLINCHY, "Charity, Biblical and Political"

Hal Watkins ONE of the most famous stories Jesus told is the parable of the Good Samaritan as recorded in Luke 10:25-37. It concerns a tragic inci dent on the road from Jericho to Jerusalem, a distance of about 20 miles. Part of the road was very steep and rugged; some of it was quite smooth. It illustrates the common road over which all of us must travel; sometimes it is steep and rugged, and other times it is quite smooth. It's every man's road. A number of characters appear on the Jericho road, just as they do on the road of life. By examining them we will be able to identify with some of them and perhaps learn some les sons. The Reverend Mr. Watkins edits and publishes The Printed Preacher, a monthly gospel message, 303 North Third, Dayton, Washington 99328. 346 The first to demand our attention is the lone man. By common consent the road was open to the public, so this lone man had every right to be on it without fear or hindrance.

Each .of us has a God-given right to travel the road of life without being hindered or molested. Even though we enjoy various types of compan ionship along the way, in a sense we are traveling the road of life alone. We will be influenced more or less by family, church, school, co workers" business, government and some predators, but the final deci sions, for the most part, devolve on each of us individually. As a lone man I have a right to expect non-threatening treatment from all my fellowmen. If any other man finds himself in a circumstance where he feels he must act toward THE ROAD TO JERICHO 347 me, he should do only that which helps rather than hinders. This, of course, is also my obligation toward him. A lone man (woman or child) is vulnerable to harm of various kinds, and also to help. The next characters to appear in this drama of life are the cruel men, the robbers who recognized no God but their animalistic desires. They took advantage of the lone man, stealing his goods, his time and his well-being. The motivation in the hearts of these men was the Satanic principle that ((might makes right,"

or ((what's yours is mine-if I can get it." Such evil men add nothing of value to the lives of the people they contact along the way, but they will take everything they can get by fair means or foul. Their own advantage is their only consideration. They wound, bruise and rob. It may be money, reputation or even char acters-they don't care. The thieves in the parable proba bly ambushed the lone man as he came around a blind corner, but some of their counterparts are more sophisticated or subtle in our day. They might feign distress along the freeway, beg a ride to the next town and rob the benefactor en route. Or, they might put out a plea in favor of the Hdisadvantaged" and ask the government for help, but since the government has nothing to give, it must first steal the funds from its taxpayers. This might even involve a conspiracy between those desiring the aid, the group pleading their cause and the government agents (legislators, etc.). The whole prob lem may become difficult to sort out, trying to determine just who are the sincere agents and who are the thieves. But the apparent difficulty should not be allowed to obscure the problem: the lone man has been rob bed; his freedom and his very life have been threatened. In what we like to call a ((free society," can we shrug it off by saying that each man will have to hire his own army or police force? Perhaps we would do better to examine a system that threatens and crushes the individ ual and rewards thieves and their accomplices.

On the road of life, within the framework of a ((Christian" society, there surely must be some protec tion for the lone man from the de predations of thieves, the ((minus" men who would live solely at the expense of others. On the road to Jericho there were also other men, selfish men who saw the plight of the abused traveler but had no concern for him or the prob lem. They were religious men too, but their religion-at least as they practiced it-did not consider the misfortunes or even the rights of their fellow human being. They, of course, would never steal from a 348 THE FREEMAN lone traveler in the manner prac ticed by the bandits, but they didn't want to get involved. ~~Tough ex perience for the poor devil. Should have known better than to be travel ing alone. Hope someone moves him ofr-the road." True Christianity is in the world today, but there are many counter feits. Many of the alleged followers of Christ occasionally express con cern for the plunder taking place along the road of life, but they don't lift a finger to expose or solve the problem. The New Testament writ er, James, is quite blunt in his description of them: ~~To him there fore that knoweth to do good, and doeth it not, to him it is sin" (4:17).

The attitude of these ((zero" men is: ~~We were not robbed, so it's no con cern of ours. What we have we will keep." Fortunately, on the road to Jericho, there came another man who was not a disappointment but rather a delightful surprise. He had a pure Christian philosophy: ((What is mine is yours, and in your misfor tune I will share it." He gave of himself and his means. He was the compassionate, unselfish man. This type is also on the road of life today. Not only would he steal nothing from his fellows, but he adds much to their general welfare. The Good Samaritan did not wait beside the stricken traveler until another victim came along, beat and plunder him, then give the proceeds to the first victim. He was not a first-century Robin Hood who robbed others to help the poor, but he gave of his own means. He didn't run for political office as a cover to conduct his robbery ((legally," then give to the poor. Jesus certainly pic tured him as a concerned man, one who was not content to pass by on the other side as though nothing had happened. He saw a fellow human being in distress, and he visualized himself as part of the solution to the problem. This was a mandate from his conscience to DO SOMETHING.

He was not a ((minus" man, or even a H zero" man. He was a ((plus" man. And Jesus forced his hearer to admit that the Samaritan was motivated by love. Within the Christian context we are not here to wound, crush, rob or even to ignore. We are here to heal, lift, encourage and contribute of our talent and energy to the end that others too may, if they so desire, enjoy the same blessings we have. This truth has been around long enough to be axiomatic, and Jesus said, ~~Ye shall know the truth, and the truth shall make you free" (John 8:32). ® V\6rld inthB g«I?Qfan Iae~ Clarence B. Carson 18. The United States: A Republic and Gradualism IF saying so made it so the United States would today be the strong hold of capitalism and the citadel of free enterprise. Many intellectuals who deplore this state of affairs nonetheless proclaim it to be so. The notion crops up frequently in writ ings about America by Europeans.

There are even Americans who say they favor free enterprise and who declare that the United States is the prime example of it in the world. They may be right in their judgIn this series, Dr. Carson examines the connection between Ideology and the revolutions of our time and traces the Impact on several major countries and the spread of the ideas and practices around the world. ment, but if they are it should give more than a little pause as to the state of freedom of enterprise in the world. There should be no doubt that the United States was long considered as and was in fact a land of opportu nity. Immigrants poured into America from other lands in in creasing numbers after the first third of the nineteenth century. They came, in part at least, because they hoped for and often found greater opportunity than in the lands from which they came. There are still opportunities in the United States today. Many of the oppressed peoples from around the world still 349 350 THE FREEMAN June try to gain entry to this country.

They are oppressed as a result of the idea that has the world in its grip. But they must surely discover when they arrive here that the idea has its grip on the vaunted land of opportu nity as well as on other lands. How free is enterprise in the United States? No one has, to my knowledge, devised a means for making the kind of measurements which would give a precise answer to the question. Computers have now been made that can provide swift, almost instantaneous, an swers to all sorts of questions, but the most sophisticated computer would be unable to tell us how free enterprise is. This is the case mainly because there is no way to quantify the obstacles that government puts .in the way of enterprise, but there is also no way to take into account the ways human ingenuity will discover for overcoming or getting around these obstacles. Even so, the ques tion can be answered with sufficient exactitude to show that enterprise is being stifled, choked, throttled, lim ited, and restrained in America, and that there is a well established trend in this direction. And government restriction is in some way a limita tion on enterprise, and restrictions abound today.

Perhaps the best way to test how free enterprise is in America would be to survey the obstacles that stand in the way of someone contemplating going into business today. No brief survey can hope to cover all the obstacles; indeed, they may now be so numerous that a lifetime would be too short to learn them. Some of the obstacles are of such complexity that anyone contemplating going into business in a particular locale would need expert legal advice from those familiar with the local situa tion. But a survey of the obstacles can show the character of many of the limitations and the trend toward increasing them. The Need for Capital The first need of anyone going into business will almost certainly be some capital reserves, since vir tually all undertakings require cap ital of greater or lesser amount. To get capital it is usually necessary either to save it oneself, borrow it from others, or get them to invest in the enterprise. The greatest obstacle to individual saving today is infla tion, and inflation is a direct conse quence of government monopoly of the money supply and continual in crease of it. Inflation discourages saving: it even introduces doubt as to the merits of it. Inflation reduces the value of money saved because as the money supply is increased prices rise. This means that the saver could have bought more with the money at the time that he first re ceived it than he could at a later date, if the inflation continues over 1978 THE U.S.: A REPUBLIC AND GRADUALISM 351 a long period of time. Inflation has been almost continual in the United States since the early 1930's and shows no signs of abatement.

The graduated income tax is another deterrent to capital ac cumulation. Not only does the United States government have such a tax but so also do most states. The more one makes the larger proportion of it is taken by govern ments. Proponents of the graduated income tax often talk about it is as if it were a means of taking from the tthaves." It is better understood in its most devastating effects· as taking from those who are ttgetting," for the tthaves" can sometimes avoid it en tirely. At any rate, progressive taxa tion limits and obstructs enterprise by making it difficult to accumulate investment capital. Social Security payments are another inhibiting tax on those who would save to start an enterprise, and this tax has mounted precipit ously in recent years. Social Secu rity payments might be conceived as a system of forced saving, but they hardly qualify as savings at all. All that is paid into it is forfeited by the individual, forfeited as far as any control over it is concerned. He can not draw the money out in order to make investments. He cannot use it to take· advantage of greater oppor tuni ties as they come along. In short, so far as saving for starting an enterprise is concerned, Social Security payments are just so much money lost to taxation.

Borrowing offers hardly more freedom from obstruction by gov ernment than does saving for the would-be enterpriser. Banks are the most readily available sources of loans, but they are also probably the most severely regulated undertak ings in America today. National banks are chartered by the United States government, and state banks by the states, thus limiting the number and variety of such institu tions. Bank Regulation The federal government regulates the activities of all national banks and all those which are members of the Federal Deposit Insurance Cor poration, which is to say virtually all of them. State laws regulate all banks within their bounds as to such matters as branch banking and interest rates. Most states have usury laws which place limits on the percentage of interest to be charged. This latter restriction is particularly obstructive to new en terprisers, for all enterprises are risky and new ones especially so.

Banks are loath to take such risks when they can charge maximum interest on insured and government guaranteed loans. Moreover, state and federal regulations discourage or prohibit certain types of long term loans, and government comp352 THE FREEMAN June trollers look carefully at the type of collateral pledged to secure loans. Then, too, federal, state, and local governments are competitors with private individuals for the money that is available for lending, and they enjoy some decided advantages in this competition. The federal gov ernment requires and/or encourages the banks to have some proportion of their investments in government se curities. Municipal bond proceeds are exempt from federal taxes. Banks are much more likely to be able to help a new enterpriser by discounting any paper he holds from his customers than they are to put money directly into the enterprise. The frustrated enterpriser may look hopefully toward incorporation and the selling of shares in his pro jected business. But he will discover quickly enough that if he decides to go upublic" with his offering gov ernments have erected obstacles here as well. The Securities and Ex change Commission keeps a wary eye on stock offerings, and the more recently set up consumer protection agencies may be no less alert to what he is doing. The SEC is more than a little dubious as to the valid ity of any claims that might be made about the future prospects of the business. Should the shareholders lose for one reason or another, the new enterpriser may find himself the object of civil, or criminal, suits by various government agencies.

An Array of Obstacles People somehow manage some times to overcome the great variety of obstacles in the way of it and get together sufficient capital to go into business. But in trying to decide what business to go into they en counter another impressive array of obstacles. In contemplating the pos sibilities, anyone will discover, if he did not know already, that many sorts of enterprise are very nearly or entirely closed to him. The coining or issuing of money has been a monopoly of the United States gov ernment for so long that hardly any one would conceive of it as a poten tial field for enterprise. The other most general monopoly of the United States government ofa possible business undertaking is that over the carrying of mail, espe cially first class mail. In earlier times, even with the government occupying the dominant position, there were many opportunities for entrepreneurs to engage in mail transport and even, sometimes, de livery. Star routes, as they were called, were serviced by individuals and private companies; trains, boats, and busses transported mail.

Now, most of those opportunities have been foreclosed. The United States Postal Service maintains its own fleet of trucks; and privately owned airlines are the only remain ing private domestic transporters of mail of any consequence.

1978 THE U.S.: A REPUBLIC AND GRADUALISM 353 There are other monopolies by the federal government, but they are not so extensive in scope. There is the monopoly of merchandising on military posts by the Post Ex changes. There is the monopoly of the generating and sale of electricity in some regions such as the Tennes see Valley. The Panama Canal Zone has long been the most thoroughgoing monopoly of the United States gov ernment. ~~Private parties are not allowed to own any land in the Zone and private businesses do not oper ate there. Therefore, the many other businesses in the Zone other than the Panama Canal are maintained and operated by the Panama Canal Company. These businesses include a steamship line between New York and the Isthmus of Panama; a rail road across the Isthmus,· the cargo docks and piers and harbor terminal facilities on the Isthmus; a coaling plant for ships; an oil-handling plant; commissary stores ... ; a printing plant; restaurants, the aters, bowling alleys," and so forth.!

If Communists do take over the Canal Zone they will find their basic work has already been done. rrhe federal government now virtually monopolizes intercity rail passenger transport by way of AM TRAK and is extending its sway into freight hauling by way of CONRAIL. State governments have also established various monopolies. The most dramatic of these may well be that over the sale of liquor and cer tain other alcoholic beverages. About one-third of the states have a monopoly of the sale of at least some of the alcoholic beverages. Where there are state liquor stores, those who are considering going into some legal business must put this area of potential opportunity out of mind. But even where states do not own and operate the stores, there are usually strenuous restrictions upon entry into such undertakings. Although neither the federal nor state governments monopolize the manufacture of spiritous liquors, their laws and prohibitions are such that in effect they secure a monopoly to a select few domestic and foreign manufacturers. During much of American history no single under taking, besides farming, had so many entrepreneurs as distilling, and many farmers supplemented their income with the product from their ((stills." These distillers have now become an endangered species as a result of decades of relentless search for and pursuit of them by ((Revenuers."

States generally have a variety of monopolies. For example: The state of New York has long main tained a system of barge canals 525 miles in length, which it operates at public expense, charging no tolls. The Commonwealth of Massachusetts, since 354 THE FREEMAN June 1918, has operated the transit system of Boston and neighboring cities and towns. Harbor facilities at ocean ports wharves, docks, warehouses and the like-are usually owned by state gov ernments. At New Orleans a State Board of Port Commissioners, formed in 1896, operates grain elevators, coffee termi nals, banana conveyors, cranes, derricks, a belt line railway, a canal, and a free trade zone.... 2 Local governments generally have several monopolies which ex clude private enterprise. Munic ipalities frequently monopolize trash and garbage collection, water distribution, sale of electricity, distribution of natural gas, and bus or other street and subway systems.

At one time, virtually all local transportation systems werepri vately owned and operated, but price and service restrictions be came such a handicap that cities took them over. Indeed, the whole field of trans portation is now very nearly closed to enterprisers. Railroading was so regulated by the Interstate Com merce Commission that it ceased to be a growth business. Nowadays, a would-be enterpriser would be as likely to think of building a railroad as he would to go into manufactur ing buggies. City transport is not a viable opportunity, and it is being made less so by massive government grants for the building of rail sys tems. It is possible to go into trucking, but the obstacles to doing so are such that only the most intrepid enterpriser would venture into the field. Taxis are so regulated in most cities, and the privilege of operating one·so restricted that opportunity in this field is limited. Entry into the air transport business is hampered by the Civil Aeronautics Board, and it sometimes takes years for estab lished carriers to get authorization to provide new service to some city or locale.

Government Schools The field of education has never been a particularly good arena for private enterprisers, and it is gener ally becoming less so today. Laws requiring school attendance for young people have taken that facet of education out of the realm of economic goods, that plus the fact that ~~free" public schools are pro vided. Such private schools and col leges as exist are usually subsidized by gifts and tax-free contributions, hence making it difficult for anyone to enter the field in the hope of profit. On the fringes of education, e.g., teaching various skills such as auto repairing or barbering, there used to be considerable opportunity for enterprisers to found and operate schools. These are being hard pressed today, however, by vocational courses in the public high schools and by the vocational emphasis in many government funded trade 1978 THE U.S.: A REPUBLIC AND GRADUALISM 355 schools and community colleges.

Governments are well on their way to monopolizing education by using their taxing powers to exclude competitors. Many hospitals were once pri vately owned and operated, but such hospitals are rare today. The Hill Burton Act brought large doses of federal money to hospital building and gave encouragement to gov ernment owned and operated hospi tals. It would be exceedingly dif ficult today to raise the capital necessary to provide the expensive equipment necessary to compete with government owned hospitals. Governments at all levels are vig orous competitors in providing rec reation facilities. This is particu larly true for parks, zoos, golf courses, swimming pools, lakes, and waterways. Many buildings in which recreation activities take place-e.g., auditoriums, ball parks, civic centers-are now being built with tax funds. Not only does the prospective enterpriser find his po tential savings taken away in taxes to support such undertakings but also his entry into such enterprises made difficult by government com petition.

Research and Information The federal government is in the research and information business in a big way. The Government Printing Office is enormous, and keeps busy printing numerous pam phlets, making available research reports, publishing agricultural treatises, and providing information for businessmen. A United States Senator pointed out a while back that the Commerce Department gathers around 100,000 research and development reports each year, and that the government spends ap proximately $10 billion each year on research. 3 Although governments have not pre-empted the informa tion field, they have made great in roads into it. There are, of course, enterprises that can be started in which there is little direct competition from gov ernment, but there are obstacles to be overcome in going into any of these. A minimum requirement in almost any locale is to get a license. Beyond that, many undertakings require a charter or franchise from some one or more governments.

Many kinds of undertaking have special training or knowledge or moral requirements. For example, barbers may have had to have spent a specified length of time in training in a state recognized school, nurses to have undergone a particular reg imen, teachers to have taken cer tain education courses in order to be certified, real estate salesmen to have passed a written examination, plumbers to have served an appren ticeship, saloon-keepers to have con formed to certain moral standards, 356 THE FREEMAN June and so on. Lawyers usually have to pass the bar examination in the states in which they wish to prac tice. It may be instructive in getting some idea of how far this goes to look at this partial list, in one state, of those agencies charged with over seeing certain undertakings: State Board of Accountancy, State Board for Examination, Qualification and Registration of Architects, Commis sion for Auctioneers, State Board of Examiners for Speech Pathology and Audiology,.State Board of Bar bers, Board of Chiropractic Exam iners, State Board of Cosmetology, State Board of Dentistry, State Board of Electrical Contractors, State Board of Engineers and Land Surveyors, State Board of Registra tion for Foresters, State Board of Funeral Service, State Board of Reg istration for Professional Geologists, State Board of Hearing Aid Dealers and Dispensers, Board of Landscape Architects, Board of Physical Therapy, State Board of Private De tective and Private Security Agen cies, State Board of Examiners for Sanitarians, Commission of Struc tural Pest Control, Board for Regis tration of Used Car Dealers, State Board of Registration for Used Motor Vehicle Parts Dealers, Motor Vehicle Dismantlers, and Motor Vehicle Rebuilders. The list is not complete by any means, but the point perhaps emerges.

Anyone going into business has to have some place from which to oper ate, i.e., land, buildings, or offices. If he needs land, he will find himself in competition-though that hardly seems to be the right word-with federal, state, and local govern ments for the dwindling supply of land. Governments were once the great sellers of land in America, but they have now reversed the field and become major buyers-perhaps Hcondemners" would be more descriptive-: for military installa tions, for parks and forests, for highways, for urban renewal proj ects, for hospitals, for lakes and dams, for schools, and so forth. As one writer puts it, the federal gov ernment ~~is the biggest landlord on earth, aside from the communist countries."4 Restrictions on Land Use and Building Of course, the land and building will have to be selected with care if one is going into business. There are increasing restrictions on land use in the United States. Zoning laws have been around since the 1920's, though they get ever stricter, and they are now being supplemented with land use laws in many states for rural areas. But lately the United States government has gone into comprehensive land use control, or very nearly that, under the aus pices of the Environmental Protec1978 THE U.S.: A REPUBLIC AND GRADUALISM 357 tion Agency. The government has asserted its sovereignty over land use to protect water, air, endangered species, and what have you. Anyone thinking in terms of operating a factory or manufacturing estab lishment must undertake the dif ficult task of assuring state and fed eral agencies, by way of surveys and tests, that he will not significantly harm the environment within which he locates.

Although the above are only a partial listing of the obstacles which a would-be enterpriser must over come, let us suppose now that our enterpriser has managed to set him self up in business. However improb able it may seem, however much of at least a minor miracle it surely is, some men are actually able to begin new enterprises in the United States. They manage to accumulate the savings necessary despite the inflationary thrust, the progressive income taxes and the burden of So cial Security or manage to borrow the money despite restrictions that make this difficult, or even succeed in selling stock in a corporation so as not to arouse the ire of the SEC. They select an undertaking that is not monopolized by government or that government competition has not effectively foreclosed. They get franchised, certified, licensed, au thorized, permitted, qualified or whatever, find some land on which to locate in which their kind of undertaking is allowed, and satisfy the authorities that they will live in harmony with the environment.

A Senior Partner Such an enterpriser is by no means out of the woods, however, simply because he has managed to open his doors for business. Indeed, it would be more correct to say that many of his troubles have just be gun. The man who enters business discovers rather soon, if he did not know it already, that he has a Senior Partner-government. More precisely, he has a committee of Senior Partners, composed of fed eral, state, county, and, depending upon the locale, township and municipal authorities. These Partners may have thrown any number of obstacles in the way of his going into business in the first place; they may be in competition with him; they may have made low inter est loans to his competitors or even granted them special privileges which he does not enjoy. They will rarely have invested anything in the business themselves. Yet once he opens his doors these Partners join the firm, so to speak.

In the first place, the Senior Partners require the businessman to be a tax collector. If he sells to con sumers, he will generally be ex pected to collect federal excise taxes and state and local sales taxes. If he employs other people he will be ex358 THE FREEMAN June pected to withhold federal and prob ably state and local income taxes from their wages. Under most condi tions, he must collect the workers' Social Security taxes by way of payroll deductions. Some cities have employment taxes which he may have to collect. No matter how small his business may be, the Senior Partners will require that the businessman keep extensi ve and precise records of his various transactions. He will need records, of course, of the taxes he has collected from others, and records for his own income and Social Secu rity taxes. The Senior Partners are not par ticularly mollified by getting the first fruits from any income and having the businessman collect taxes for them. They take an active role in determining how the busi ness should be run. If he sells to consumers, various federal and state consumer agencies may take the side of his customers against him and haul him into court on their behalf or because he has not com plied with one or more of the mul titude of laws governing these rela tionships. In like manner, the Senior Partners stand ready to in trude in a great variety of ways on behalf of his employees against the businessman employer. They have, of course, generally specified that he cannot employ those who have not attained a certain age. They prescribe mInImum wages, maximum hours, time and a half for overtime, and have long been solicitous of female employees.

Of late, federal and state govern ments have exerted themselves to see that employers do not discrimi nate in hiring because of race, sex, age, color, religion, or country of national origin, among other things. In order to prove that he does not do so, an employer is often bidden to take Affirmative Action to assure that he has the proper ((mix" of ,minorities amongst his workers and be diligent in promoting such of these as he has assembled to the better positions he has available. If his employees should decide to organize themselves into a labor union, the National Labor Relations Board has laid down all sorts of rules to which the businessman em ployer must comply. Should he be judged to have failed to comply he may well find himself saddled with back wages to pay and employees on his payroll whom he would prefer to do without. Safety and Health The Senior Partners concern themselves, too, with the safety and health of the businessman's employ ees. To that end, OSHA, a federal agency, promulgates all sorts of rules and standards for safeguard ing the health of employees. Should an employer fail to comply with 1978 THE U.S.: A REPUBLIC AND GRADUALISM 359 these standards he is subject to po tentially heavy penalties.

Particular industries are subject to their own kinds of regulation. For example, the powers of the Federal Power Commission over producers and sellers of electric power show the extent to which the interference of a Senior Partner may go. It exer cises the following powers: Prescribes and enforces a uniform sys tem of accounts for privately owned pub~ lic utilities engaged in the transmission, or sale or wholesale of electric power in interstate commerce; determines the original cost and accrued depreciation of facilities for the generation and trans mission of such energy; investigates and regulates the rates, charges and services for such energy; passes upon application of such utilities for authority to issue securities, to dispose of, merge or con solidate facilities, to interconnect facilities, or to acquire securities of other public utilities; passes upon applications of persons seeking. authority to hold in~ terlocking positions; evaluates applica tions for and, when in the public interest, issues permits for the construction, oper ation, maintenance or connection of facilities at the borders of the United States for the exportation or importation of electric energy; passes upon applica tions for authority to export electric energy for the United States. 5 The Senior Partners are also po tential customers of the busi nessman. The federal government is today the largest purchaser of goods and services in the country. When it is joined by states and local govern ments, the role of government as purchaser is an immense one in deed. Needless to say, these gov ernments extend additional author ity over anyone from whom they buy goods or services. A seller does not just offer his custom in the market to government; government uses the leverage of a buyer to further con trol the businessman's business.

The above only scratches the sur face of government intervention in the economy today, but perhaps enough has been told to warrant a conclusion. Enterprise is not free in the United States today. It is ham pered, obstructed, restrained, con strained, restricted, limited, compel led, and otherwise confined by a multitude of regulations, require ments" and .government competi tion. And there is a well established tendency to increase the interven tion more and more over the years. Occasional ~~deregulation" is over matched by restrictions introduced from other directions. For example, farm crops are not controlled as much now as they were twenty years ago, but land use restrictions are being introduced into rural areas. Gradual Intrusions Thirty or forty years ago there was considerable debate over whether the United States should have a planned economy.or not. The 360 THE FREEMAN June issue was not resolved by the debate, but it has been largely resolved in practice by step by step intrusions into the economy. By government's regulatory powers, control over the money supply and hence over credit and banking, over education, over the communications industries, over transportation, over labor, over the environment, and so forth, planning is widely established today. In most of the United States today, no struc ture can be erected without permits, inspections, compliance with set back ordinances, zoning laws, and other such restrictions. Government subsidies to cities and regions de termine the character and direction of developments in those areas.

A broader conclusion is war ranted, too. The United States is under the sway of the idea that has the world in its grip. Whatever the merits or demerits of any or all of the government interventions dis cussed, one assumption underlies and powers them all: namely, indi viduals and voluntary associations of men cannot be trusted to provide for themselves and others by pursu ing their own self-interest. They must be directed and controlled in their activities by an interest that is outside of and above them as indi viduals. Self-interest of individuals must be contained, restrained, and redirected-ultimately rooted out-, and for it must be substituted what is supposedly in the common interest. The instrument for imposing this common interest is government. That is the idea. Under the sway of the idea, gov ernment has asserted its power into virtually every area of American life. Government has grown mighty and the individual weak and lim ited. How did this state of affairs come about? It is certainly a rever sal of the idea on which these United States were founded. The United States was founded as a republic.

Both the United States and the state governments operate under the aus pices of written constitutions. The idea that informed these constitu tions was that governments should be limited in order that individuals might be freed-freed to pursue their own interests in order to fulfill themselves as best they could and according to their own lights. Keeping the Peace It is, of course, the end of govern ment that those within its jurisdic tion shall be protected in their life, liberty, and property from harmful intrusions by others. To that end, governments were empowered to legislate, to use force, and to resolve disputes which threatened the peace in order that men might go about their affairs undisturbed by malefactors. But beyond the granting of powers believed necessary to maintain gov ernments which could keep the 1978 THE U.S.: A REPUBLIC AND GRADUALISM 361 peace, put down domestic insurrec tion, and repel foreign invaders, the main efforts of the constitutions were to limit the governments they authorized. It was for this purpose that bills of rights were incorporated in them. It was to this end that the powers of government were sepa rated into three branches. The list ing of powers granted was supposed to constitute an inherent limit upon government. Even the dispersion of power into federal and state juris dictions was thought to act to limit the exercise of power. If this was not the aim and purpose of the United States Constitution then those who successfully argued for its adoption were themselves either deceived or engaged in deceiving others.

Among the opponents of ratifica tion of the Constitution of 1787 (the United States Constitution), not one could be found who did so because the government lacked power. On the contrary, it was the fear that it would become powerful and oppres sive that animated them. A goodly number of men in that day took the time and made the effort to study the history of governments. One conclusion stood out among all the others that they drew: All govern ments tend to become oppressive. Few would have dared to rise in the conventions in those days, amidst the displays of historical erudition, to proclaim that men vested with the power of government have been so transformed that they could be trusted with determining what is for the well-being of those in their jurisdiction. On the contrary, it was settled opinion that those who gov ern will pursue power to the detri ment of the well-being of their fel lows if they are not deflected from the course. Limited constitutional government offered the best means they could conceive for delaying, if not ultimately preventing, the ap pearance of the oppressive tendency of government.

How It Happened How, then, did this reversal take place? How were many of the con fines on government removed and did government begin to confine the individual more and more? A por tion of the answer is not difficult to find. It came about gradually, and step by step. Probably, none en visioned that when national banks were given a monopoly of the issue of bank notes in the 1860's by plac ing a prohibitive tax on state bank notes that in the 1960's virtually all concrete limitations on the money supply would be removed and that such powers as remained over the money supply would be under the control of the federal government. Yet the stage was being set for this course of events, not with malice aforethought but by a process of accretion of power. Another point can be asserted 362 THE FREEMAN here; it has been written about and documented elsewhere, and the present theme precludes discussion of it in detail. The point is this, Americans, or a significant portion of them, came under the sway of the idea that has the world in its grip.6 That is, they came to believe that when individuals pursue their self interest it is detrimental to the gen eral welfare, that the supports to the individual should be removed and the individual confined, and that government was the proper instru ment to perform these undertak ings. Although the idea generally goes by the name of socialism, most Americans never consciously be came socialists and, of those who did, few avowed it. The attack upon the American system and the intru sion of government was done piecemeal. Yet when the develop ment is viewed whole, it makes sense only in terms of thepreva lence of the socialist idea.

It is important, however, to delve somewhat into the methods by Moral Sickness which government power has been concentrated and unloosed. The dis persion of power by which these United States began had to be over come and evaded. How this was ac complished needs now to be told. i Next: 19. The United States: The Concentration of Power. -FOOTNOTESIHarold Koontz and Richard W. Gable, Pub lic Control ofEconomic Enterprise (New York: McGraw Hill, 1956), pp. 684-85. 2Clair Wilcox, Public Policies Toward Busi ness (Homewood, Illinois: Richard D. Irwin, 1960), pp. 805-06. 3William Proxmire, Can Small Business Survive? (Chicago: Henry Regnery, 1964), pp. 99-101. 4Koontz and Gable, op. cit., p. 695. 5Cornelius P. Cotter, Government and Pri vate Enterprise (New York: Holt, Rinehart and Winston, 1960), pp. 227-28. 6The present writer has discussed this in detail in The Fateful Turn (Irvington, New York: Foundation for Economic Education, 1963) and The Flight from Reality (Irvington, New York: Foundation for Economic Educa tion, 1969).

IDEAS ON LIBERTY A SWELLING is one of the infallible signs of a sickness underneath, and the swelling of government in America today merely evidences the moral sickness of the people under it. Big government is for little people. The better the people, the less necessity there is for government. This simple, vicarious relationship between the citizen and his government is obscured today in the fog of our confused political councils. CLARENCE MANION, "Cause of Corrupt Government"

WHO KILLED COCK ROBIN? THE community was in shock. Its largest employer, a steel company, had announced the closing of a plant and a permanent reduction of five thousand jobs. This would also mean cutbacks at numerous supporting businesses in the community. Steel company offic'ials tried to explain tha~ obsolete equipment, costly wage rates and fringe bene fits, and prohibitive ecological requirements of government agen cies had forced their unhappy deci sion' But many people were angry. Their villain was a large corporation, and the victims were thousands of hourly workers and their families-a ((cause" made to order for politicians, union leaders, Mr. Sparks, now chairman of the Board of Trustees of The Foundation for Economic Education, is an executive of an Ohio manufacturing company. John C. Sparks and even clergymen, with their var ious schemes to save jobs but with little appreciation for the process of job-creation and, thus, little under standing of events that had led to the demise of job opportunities at this closed plant.

A job, in the economic or market sense of the term, is an opportunity to serve customers who are willing to buy products or services at a satis factory price level. There are many factors involved in creating a job. A steel mill job, for instance, requires a vast accumulation of capital-sav ings in the form of plant and equip ment-as well as the managerial initiative and ingenuity to combine scarce and valuable resources in a way that customers will approve. The price customers are willing to pay for steel determines whether the 363 364 THE FREEMAN June company shows a profit or a loss after paying market rates of interest on invested capital, market wage rates to employees, and market prices for raw materials consumed in the production process. Unless management can efficiently and successfully compete in the market place, it cannot long provide jobs. Other than Market Costs There are further costs of produc tion operative outside, or above and beyond, the market place. Two come to mind, and both relate to govern ment. One is the cost of being governed-taxation. Those who wish to freely enter the market for peaceful purposes of production and trade may reasonably expect to share the costs of maintaining the peace and policing the market to keep it open-lawful defense of the property and the lives of peaceful traders. This is part of the cost of producing steel, or whatever, a cost that must be recovered in prices paid by customers if the business is to successfully meet competition.

Governors, however, are seldom self-inclined to limit their activities to the basics of preserving the peace. Nor is it unusual for citizens to pledge their votes in return for vari ous ~~protections"-a process of trad ing political powers for special privileges, not in open market com petition, but all at the expense of taxpayers. Thus has the U.S. welfare state grown and fed upon itself-and taxpayers-until a fourth to a third of the productivity of the nation is being shunted into these extra-market redistributionist programs. Businesses in general, and large corporations in particular, are sorely taxed until eventually a business fails or a plant is closed and jobs are lost. If the price of steel, or whatever, is obliged to reflect a portion of the cost of the farm sub sidies, or the public school pro grams, or the domestic transporta tion and urban renewal and foreign aid bills, or the unemployment and social security and multiple other welfare and relief measures, then eventually even the cost of steel, or whatever, from a given U.S. pro ducer may come to be more than the consumer is willing to bear.

The second major cost, reflecting governmental rather than volun tary market conditions, stems from the inordinate power that special laws allow labor unions over the owners of business. And this union power to claim higher than market wages hits especially hard at the steel industry. Most vulnerable are the older plants, with older workers at highest wages, and with the old est and least efficient production equipment. The result? Any major weakness in demand for steel forces these older plants to bow out of competition. No matter the argu1978 WHO KILLED COCK ROBIN? 365 ments used to obtain exorbitant wages. Forcing employers to pay wages higher then can be recovered in prices from customers results in plants closed and jobs lost. Berating Business It may be self-gratifying to berate corporate officials for their failure to feed the world's hungry masses, their failure to meet every union demand for wages and fringes, their failure to purify all the air and water of the nation, their failure to build more safety than service ability into every company prod uct-yes, these, and more, and above all, their failure to keep open a plant that can no longer be profit ably operated. But instead of berat ing the efforts of businessmen to meet competition, should not each of us be asking himself where he stood when government regulations, con trols, privileges and subsidies were being laced into the cost of products of industry? The question is not so much who is to blame as it is a question of what ideas and actions are responsible for the closure of a plant and the loss of jobs.

In a sense, the question is not who killed Cock Robin, but what killed Cock Robin? The culprit is the fail ure to understand why it is best to have people freely and peacefully making their own economic deci sions. Such misunderstanding spreads from person to person, ac cumulates until another previously profitable business is washed down the drain. Then we grieve. So let us now, in our grief and pain, resolve to question our own past actions and attitudes. Have I been one who seeks special privileges at the cost of other per sons? Have I used my power to in timidate others who prefer to make decisions different from mine? Have I sneered at profits? At private own ership? At free enterprise? Have I been willing to vote to tax others for my benefit? When one can honestly ask and intelligently answer such questions regarding economic and political policy, then he may deserve a new type of leader in government, in business, in his labor union, in the schools, in the churches-a leader ship that will not resort to coercion and violence but rather look to open competition in the market as the solution to the problems perennially facing mankind. But while we lack such faith in freedom, while we per sist in our demand for political welfare measures and special privileges, we must expect many more plant closings and lost job opportunities. ® Lawrence W. Reed THE SILVER PANIC (History is little more than the reg ister of the crimes, follies, and mis fortunes of mankind," in the opinion of historian Edward Gibbon. While it may be argued that there are numerous triumphs in human af fairs to write about, Gibbon's obser vation seems to be true. If the typi cal history text were to be stripped of any mention of war, depression, famine, coercion, tragedy, genocide, scandal, rivalry, and mayhem, the remains could probably be reprinted in a leaflet.

Strangely, the awesome Panic of 1893 seems to have escaped the careful scrutiny and exhaustive re search of historians. Though it oc curred only eighty-five years ago, it remains an obscure episode in American history. It signaled the beginning of a deep depression. Businesses collapsed by the thousands. Banks closed their doors in record numbers. Unemployment soared and idle millions roamed the Mr. Reed is an instructor in economics at Northwood Institute, Midland, Michigan. 366 streets and countryside seeking jobs or alms. And the country witnessed a spectacular display of political fireworks, now all but forgotten. For the believer in the free econ omy, the story of the Panic of 1893 offers a treasure chest of empirical support. The lessons of this tragedy add up to a compelling indictment of government's ability to «manage" a nation's money. Charles Albert Collman observed that «Money trouble was the man ifest peculiarity of the long, drawn out Panic of '93."1 Indeed, a break down of the monetary system and national bankruptcy were narrowly averted in that year. But money is that great invention which permits the development of a modern ex change economy. How could some thing so vital to commerce become so troublesome?

Everyone knows that fingerprints are a great aid in placing a suspect at the scene of a crime. The distin guishing characteristics of each in dividual's skin patterns make this THE SILVER PANIC 367 possible. In the case of the Panic of 1893, the tragedy is smothered with the fingerprints of politicians. HI deem it proper at the outset to state," wrote Charles S. Smith in the October, 1893 North American Re view, ((that the recent panic was not the result of over-trading, undue speculation or the violation of busi ness principles throughout the coun try. In my judgment it is to be attri buted to unwise legislation with re spect to the silver question; it will be known in history as (the Silver Panic,' and will constitute a re proach and an accusation against the common sense, if not the com mon honesty, of our legislators who are responsible for our present monetary laws."2 Early Interventions Contrary to popular impression, government· in America has never been totally aloof from the monetary scene. Article I, Section 8, of the Constitution grants Congress the power ((to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures." In the century preceding 1893, Congress experimented with two central banks, a national bank ing system, paper money issues, and fixed ratios of gold and silver.

America's first cyclical depression occurred in 1819, after three wild years of currency inflation caused by the Second Bank of the Uni ted States. When that ((money monster" was eliminated by hard money man Andrew Jackson, the economy slumped into depression again and all the maladjustments of the Bank era had to be liquidated. In 1857 the economy had to retrench after a de cade of credit expansion on behalf of state governments that had forced their obligations on the state bank ing systems. In 1873 the post-Civil War readjustment finally corrected the excesses of the government's rampant greenback inflation. The background of the 1893 debacle is equally interventionist and has some uniquely interesting features which give rise to the label, ~~The Silver Panic." Gold and silver rose to promi nence as the monies of the civilized world through a process of free and natural selection in the marketplace of exchange. Both circulated as money, though gold was far more valuable. The market ratio between the metals had been roughly 15 to 1 (15 ounces of silver trading for 1 ounce of gold) for centuries. Gold was preferred for large transactions and silver for small ones. The free market had established ((parallel standards" of gold and silver, each freely fluctuating within a narrow range in relation to market supplies and demands. Before long, though, government decided it would ((help out" the market by interfering to ((simplify" matters. The result was 368 THE FREEMAN June another of the many well intentioned blunders imposed on a populace by force of law: the official ~~fixing" of the gold/silver ratio. This became the policy of bimetallism.

Under the direction of Alexander Hamilton, the federal government adopted an official ratio of 15 to 1 in 1792. If the market ratio had been the same and had stayed the same for as long as the fixed ratio was in effect, then the fixed ratio would have been superfluous. But the market ratio, like all market prices, changed over time as supply and demand conditions changed. As these changes occurred, the fixed bimetallic ratio became obsolete and uGresham's Law" came into opera tion. Gresham's Law Gresham's Law holds that bad money drives out good money when government fixes the ratio between the two circulating monies. HBad money" refers to the money which is artificially over-valued by the gov ernment's ratio. uGood money" is the one which is artifically under valued. Gresham's Law began work ing soon after Hamilton fixed the ratio at 15 to 1, as the market ratio stood at, roughly, 15th to 1. This meant that if one had an ounce of gold, one could get 15th ounces of silver on the bullion market, but only 15 ounces for it at the govern ment's mint. Conversely, if one had 15 ounces of silver, one could get an ounce of gold at the mint but less than an ounce on the market. So silver flowed into the mint and was coined while gold disappeared, went into hiding, or was shipped overseas.

The country was thus put on a de facto silver standard, even though it was the declared policy of the government to maintain both met als in circulation. Congress in 1834 changed the ratio to 16 to 1, but the market ratio had not changed much, and this time gold was over-valued and silver under-valued. Gold flowed into the mint, silver disappeared, and the country found itself on a de facto gold standard. With the end of the Civil War inflation, and subsequent readjust ment in the depression of 1873, the story of the Panic of 1893 begins to unfold. It opens with the inflationist agitation of the 1870s. In 1875, the newly-formed Na tional Greenback Party called for currency inflation. The proposal at tracted widespread support in the West and South where many farm ers joined associations to lobby for inflation. They demanded at first that the government balloon the paper money supply in the belief that such a policy would guarantee prosperity. It was a demand that finds a less shrill but no less potent voice among many economists to day. An eloquent refutation of the 1978 THE SILVER PANIC 369 idea that the printing press can create economic wealth can be found in the words of Benjamin Bristow, President Grant's Secretary of the Treasury. In his annual message of 1874, Bristow declared: The history of irredeemable paper cur rency repeats itself whenever and wher ever it is used. It increases present prices, deludes the laborer with the idea that he is getting higher wages, and brings a fictitious prosperity from which follow inflation of business and credit and excess of enterprise in ever increasing ratio, until it is discovered that trade and commerce have become fatally diseased, when confidence is de stroyed, and then comes the shock to credit, followed by disaster and depres sion, and a demand for relief by further issues. . . . The universal use of, and reliance on, such a currency tends to blunt the moral sense and impair the natural self-dependence of the people, and trains them to the belief that the Government must directly assist their individual fortunes and business, help them in their personal affairs:, and ena ble them to discharge their debts by partial payment. This inconvertible paper currency begets the delusion that the remedy for private pecuniary dis tress is in legislative measures, and makes the people unmindful of the fact that the true remedy is in greater pro duction and less spending, and that real prosperity comes only from individual effort and thrift. 3 The greenback inflation of the Civil War era left an indelible im pression on many Americans. They were suspicious of plans to revive a policy of deliberate paper money ex pansion on behalf of any special interest group. In 1875, Congress passed the Specie Resumption Act, declaring it the policy of the gov ernment to redeem the Civil War greenbacks at par in gold on January 1, 1879. It was regarded from this point on that in order to protect the redemption of the green backs, the Treasury would be obliged to maintain a minimum of $100,000,000 in gold on reserve. The most that the inflationists got was a government pledge not to cancel the greenback& once redeemed, but to reissue them so that the total num ber outstanding would remain the same.

Turning to Silver The attention of the inflationists was then directed at another medium: silver. Robert F. Hoxie, in the Journal of Political Economy in 1893, wrote that the inflationists focussed their demands on a silver inflation as a matter of expediency. ttThey had no love for silver as such," revealed Hoxie, ttbut it was the cheapest and most abundant substance for which they could gain support, its use would result in more legal tender currency, and its metal lic character would in a measure shield the advocates from being stigmatized as inflationists."4 The inflationists now became ttsil_ 370 THE FREEMAN June verites" and their rallying cry be came UFree Silver at 16 to 1." Their influence was sufficient to secure passage of the Bland-Allison Act in February, 1878-the first of the acts putting the government in the busi ness of purchasing quantities of silver for coinage. The Act provided for the purchase by the Treasury of not less than two, nor more than four, million dollars' worth of silver bullion per month, to be coined into dollars each containing 371%: grains of pure silver (which coincided with the lawful ratio of16 to 1, since the gold dollar still contained 23.22 grains of pure gold). These dollars were to be legal tender at their nom inal value for all debts and dues, public and private. Paper silver cer tificates were to be issued upon de posit of the bulky silver dollars in the Treasury.

The free silver forces were dissat isfied with Bland-Allison because it did not go far enough-it did not provide for the free and unlimited government purchase and coinage of silver at 16 to 1. The only silver to be coined would be the two to four mil lion dollars' worth that the govern ment purchased each month, and the Treasury, while the law was on the books, rarely bought more than the minimum amount. Silver producers in particular had a vested interest in the state of af fairs, for the market price of silver had begun a long-term decline in the 1870s. Securing a government pledge to buy silver at a higher price than could be obtained in the free market was an obviously lucrative arrangement. As the marke't ratio of silver to gold steadily rose above 16 to 1, the profit potential became enormous. Bland-Allison Passed Over President's Veto Bland-Allison was passed over the veto of President Rutherford B.

Hayes. The president, in his veto message, noted that minting silver coins at the ratio of sixteen ounces of silver to one ounce of gold would drive gold out of circulation. The decline, of the market price of silver had raised the market ratio at the time of passage of the act to nearly 18%: to 1. If the mint. offered to pay one ounce of gold for just sixteen ounces of silver, then only silver would be minted and the country would be on the road back to a de facto silver standard. In Hayes' be lief, ~~A currency worth less than it purports to be worth will in the end defraud not only creditors, but all who are engaged in legitimate busi ness, and none more surely than those who are dependent on their daily labor for their daily bread."5 When money is left to the free market, its supply is restricted by its scarcity and costs of production. Its value is thus preserved. The declin ing price of silver on the free market 1978 THE SILVER PANIC 371 would have erased the profitability of many mines and hence would have prevented a drastic increase in silver currency. But when the gov ernment stepped in and bought large quantities of silver bullion for coinage, and paid more for it in gold than was offered in the market, it forced the quantity of the white metal in circulation to exceed its true demand. The government does much the same thing today when it subsidizes peanuts or wheat. The result of this political interference is a chronic surplus of these com modities.

The silverites' drive for favorable legislation culminated in the Sher man Silver Purchase Act of 1890, which replaced the Bland-Allison Act. The Sherman Act stipulated that the Treasury had to purchase 4.5 million ounces of silver per month, or roughly twice the amount the Treasury had been purchasing under Bland-Allison. Payment was to be made in a new legal tender paper currency, the so-called Treas ury notes of 1890, redeemable in either gold or silver at the discretion of the Treasury. The 4.5 million ounces of silver mandated by the law represented almost the entire output of American silver mines. This continuing subsidy to silver producers meant that the govern ment was engaged in a full-blown force-feeding of the American econ omy. It was only a matter of time before the patient would suffer the pangs of indigestion. u.s. Out of Step The action of the United States government in 1878 and 1890 with respect to silver was especially peculiar in light of world monetary events. Germany, immediately after the Franco-Prussian War in the early 1870s, had withdrawn her silver from circulation and adopted a single gold standard. France, Bel gium, Switzerland, Italy, and Greece followed by first restricting the coinage of silver and then eliminating it altogether. Denmark, Norway, and Sweden adopted the single gold standard, making silver subsidiary by 1875. In that year, the government of Holland closed its mints to the coinage of silver. A year later, the Russian government sus pended the coinage of silver except for use in the Chinese trade. In 1879, Austria-Hungary ceased to coin silver for individuals, except for a special trade coin. This rapid worldwide transition from silver to gold prompted the United States Treasury Department in 1879 to note that «since the monetary dis turbance of 1873-78 not a mint 'of Europe has been open to the coinage of silver for individuals."6 Yet the United States government, at a time when the value of silver was falling dramatically and when the nation's trading partners were abandoning 372 THE FREEMAN June the white metal, stepped· in to pro mote silver against gold at the un realistic ratio of 16 to 1!

One way of looking at silver's de preciation is to consider the annual average market value of the 37114 grain silver dollar. In 1878, the bul lion value of that much silver was about 89¢; by 1890 it dropped to 81¢; by 1893, it was worth60¢; and by 1895 it plummeted to a mere 50¢. A climate of uncertainty pervaded the world of finance. As Professor J. Laurence Laughlin wrote, ~~No one could know that contracts entered into when a dollar stood for 100 cents in gold might not be paid off in silver which stood for 50 cents on a dollar. That was the predicament in which every investor found himself who had an obligation payable only in ~coin' and not in gold."7 In an article entitled ~~Thou Shalt Not Steal," Isaac L. Rice penned an eloquent repudiation of the govern ment's silver coinage policy. His ar gument evoked the moral side of the question and eighty years later is still a forceful indictment of monetary dishonesty: Of the various classes of crime that come under the category of theft none is more odious and despicable than the use of false weights and measures. Stamping a coin containing 37114 grains of silver as of the weight of one hundred cents, while in truth it is of the weight of fifty-three cents, is a falsification of weights morally not distinguishable from stamping any other kind of weight as of two pounds which in truth is only of one pound. Only the methods by which fraud is to be made are different. The thievish individual depends upon secret deceit, the qualities of the sneak thief; the Government on coercion, the qual ities of the highwayman. s In accordance with inexorable economic law, the Bland-Allison and Sherman Acts caused a drain of gold from the Treasury and an inflow of silver. This tampering with the fix ity of the standard threatened the Treasury's declared policy of re deeming greenbacks and other gov ernment obligations in gold. And, the disappearance of gold from cir culation and from the reserves of the nation's banks threatened the sanc tity of all contracts made in gold.

Professor Laughlin observed that no producer ~~could feel so entirely sure of the standard of payments that he could, without fear or hesitation, make his estimates a few years ahead."9 The Flight of Capital The silver purchases noticeably affected the confidence of foreigners in the American economy. Many British and French investors ex pected devaluation of the dollar at the least, with complete financial collapse predicted by some. Capital flowed out of the country as these foreigners sold American securities. Even Americans, in increasing numbers after 1890, began export1978 THE SILVER PANIC 373 ing funds for investment in Canada, Europe, and some of the Latin American countries, all of which seemed stronger than the United States. The inflationary impact of the Bland-Allison and Sherman Acts was particularly important in pav ing the way for panic and depres sion. A. D. Noyes, writing in Politi cal Science Quarterly, stated that ~~The coinage of over-valued silver dollars since 1878, and the issue of Treasury notes on silver bullion since 1890, have actually increased the country's silver and paper circu lation, between 1879 and 1894, by seventy-five per cent."lO W. Jett Lauck, in his study enti tled The Causes of the Panic of 1893, found that the Sherman Act infla tion produced an ~~absence of the usual stringency in the New York money market" in the fall of 1891.

Call loans ranged from two to four per cent, a significant decline from earlier levels. ll In 1910 the National Monetary Commission requested O. M. W. Sprague to report on the nation's finances since the Civil War. In his authoritative report, History of Crises Under the National Banking System, Sprague found that from January, 1891 to June, 1893, ~~there was an increase of $68,000,000 in the ~stimated amount of money in circulation." The effect on bank cred it was typical of any ~~easy money" policy: ~~During 1892 the low rates for loans were a clear indication that the banks would have been glad to lend more than the demand of bor rowers made possible." The· classic symptoms of currency inflation were evident, a situation which Sprague found to be unsustainable. He felt that ~~a situation which demands in creasing credits to prevent collapse is certain to arrive at that state in any case, and delay can hardly be expected to improve matters."12 End of the Boom The economy, drugged by easy money, was showing outward signs of prosperity. Unemployment, which had been above 5 per cent in 1890 and 1891, fell to 3.7 per cent in 1892.

Crop failures in Europe coupled with exceptional harvests here in the United States boosted agricul ture. President Harrison told Con gress, ~~There has never been a time in our history when work was so abundant, or when wages were as high."13 The boom was, however, only temporary. The twin evils of inflation and uncertainty as to the fixity of the standard were eating at the vitals of the nation's commerce. Late in January, 1893, prices of staples such as wheat and iron, pre viously on the rise, began to recede. Price declines across the board foreshadowed a general cyclical con traction. ~~General business activ ity ," accordin~ to Charles Hoffman, 374 THE FREEMAN June ((suffered a severe check that was recognized at once in the business journals. The stock market gave ominous signs of falling prices be fore any sharp drop took place."14 Banks became apprehensive over the Treasury's loss of gold (as well as their own) and began to contract the pyramid of credit. Loans declined almost 10 per cent from Fe~ruary to the beginning of May. An article in the February, 1893 issue of Forum spoke of ((a dangerous state ofuneas iness in financial circles," and warned that ((Fear is an element in monetary conditions which may be as serious in its effects as reason."15 A dramatic event took place on February 20. The Philadelphia and Reading Railroad, a chronic invalid which nonetheless had paid its usual bond dividend the month be fore, collapsed into bankruptcy.

((Whenthe end came," writes Rendigs Fels, ((it had a floating debt of $18.5 million compared to cash and bills receivable of little more than $100,000."16 The failure of the Philadelphia and Reading, a firm supported by powerful Wall Street financial houses, caused many busi nessmen to question the conditions of other railroads and the financial institutions behind them. When President Harrison left of fice on March 4, 1893, the Trea sury's gold reserve stood at the his toric low of $100,982,410-an eyelash above the $100 million minimum deemed necessary for pro tecting the redemption of green backs. Merchants increasingly re fused to accept silver in violation of the law and ugly threats of strikes echoed in the nation's factories. On April 22 the Treasury's gold reserve fell below the $100 million minimum for the first time since the resumption of specie payments in 1879. Bankers and investors realized that the Treasury could not indefinitely continue drawing upon the remaining gold reserve to re deem the Treasury notes of 1890 in the attempt to maintain their value.

Banks had to brake their easy money habits and began calling in their loans at a frantic pace. More and more investors began to fear that before securities could be sold and realized upon, depreciated silver would take the place of gold as the standard of payments. By Wednesday, May 3, tension in the commercial community triggered a massive wave of selling on the stock market. The New York Times recorded the events the next day: Not since 1884 had the stock market had such a break in prices as occurred yesterday, and few days in its history were more exciting. In the industrial shares particularly, there was a smash ing of values almost without precedent. In the last thirty minutes the brokers on the floor of the Exchange found the quotations on the board of little use.

1978 THE SILVER PANIC 375 Figures posted at one moment were val ueless the next. In the industrials which were receiving the most punishment prices were dropping a point at a time. The crowds trading in them were made up of shouting men, who struggled about the floor like football players in a scrim mage. 17 The Panic of 1893 had begun! On May 4 a stock market favorite, Na tional Cordage Trust, went into re ceivership. Shortly before the panic, Cordage common stock had sold for $70 per share. The plunge was pre cipitous, as Charles Albert Collman vividly explains: In. the Cordage Trust circle of the New York Stock Exchange, hats were being smashed, coats torn, cravats ruined. Here was an agony that meant financial life or death to many. Cordage common had gone off 18 points. The preferred had lost 22. Suddenly howls went up from the floor. Those who could distinguish the words, heard the ominous cry: ltNineteen for Cordage!"

The shares, a few moments later, went down to $12.18 The Cordage Crash The Cordage crash was taken as, in Collman's words, ~~some occult signal for the halting of enter prise."19 Plants closed their gates and went quickly into receivership. Unemployment rocketed to 9.6 per cent before year-end, nearly three times the rate for 1892. In 1894, an estimated 16.7 per cent of industrial wage-earners were idle. From January to July, 1893, mer cantile failures totaled a remark able 3,401, with liabilities totaling $169,000,000. The bulk of the losses came after the first week of May. O. M. W. Sprague revealed that the ~~failures exceeded both in number and in amount of liabilities those which had occurred in any other period of equal length in our his tory."20 Bank failures and suspensions were the greatest on record. Most occurred in the South and West, where the evils of a vicious currency expansion had taken root far more extensi vely than in the rest of the country.

The economy was going through the pains of liquidation. The malin vestments fostered by the Bland Allison Act and Sherman Act infla tion were being sloughed off. The threat to the de facto gold standard was a factor which no doubt compli cated things, heightened uncer tainty, determined the timing of the panic, and exacerbated the depres sion, but the chief responsibility for the crisis rested with the attempted force-feeding of the nation's money supply by government policy. The Commercial and Financial Chroni cle said as much on July 8, 1893: The country is struggling with dis turbed credit and the general derange ment of commercial and financial affairs which a forced and over-valued currency has developed .... Nothing but corrective 376 THE FREEMAN June legislation which shall remove the dis turbing law, can afford any measure of real relief. 21 With the economy in depression, the necessity for eliminating the legislation. which precipitated the.

tragedy became increasingly appar ent. On June 30, President Grover Cleveland called for a special ses sion of Congress to repeal the Sher man Silver Purchase Act of 1890. HThe present perilous condition," he declared, ~~is largely the result of a financial policy which the Executive branch of the government finds em bodied in unwise laws which must be executed until repealed by Con gress."22 The ensuing debate in the Congress was a splendid contest, pitting the forces of sound, honest money against the forces of infla tion, in which the sound money men calmly answered the question ~~What would you put in place of th~ sil:er purchases?" with the single, solItary word, ~~Nothing!" Cockran Favors Repeal On August 26, Congressman Bourke Cockran of New York rose to deliver a memorable address in favor of repeal. The speech has been called the most eloquent and schol arly of the entire debate. The con gressman advised his colleagues: I think it safe to assert that every commercial crisis can be traced to an unnecessary inflation of the currency, or to an improvident expansion of credit.

The operation of the Sherman Law has been to flood this country with paper money without providing any method whatever for its redemption. The cir culating medium has become so redun dant that the channels of commerce have overflowed and gold has been expelled. 23 Cockran proceeded to trace the history of coinage in England and explained how debasing the cur rency led to recurrent depressions. James McGurrin, Cockran's biog rapher, believes that the subsequent vote in the House of Representatives in favor of repeal ~~was due in no small measure to Bourke Cockran's matchless eloquence and sagacious leadership."24 The repeal bill passed the House on August 28 by a wide margin. President Cleveland's forceful lead ership prompted the Senate to do likewise in October. The New York Times heralded the occasion: HThe Treasury is released from this day from the necessity of purchasing a commodity it does not require, out of a money chest already depleted, and at the risk of dangerous encroach ment upon the gold reserve."25 An indispensable precondition to recovery was accomplished with the repeal of the Sherman Silver Pur chase Act. The derangement of the nation's money was a big step closer to solution, though the road to re covery was long and hard. Not until 1897 did depression give way to re1978 THE SILVER PANIC 377 vival and prosperity. Repeal of the Sherman Act was, by any measure, an act of congressional repentance.

Indeed, it was an open admission that the Silver Panic was the off spring of a profligate, overbearing, and irresponsible government. His torian Ernest Ludlow Bogart sum marized the lessons of the Panic of 1893: It must be said that the net results of this experiment of a ~~managed cur rency," that is, one in which the govern ment undertakes to provide the neces sary money for the people, were disas trous. For the maintenance of a suitable supply the operation of normal economic forces is more reliable than the judgment of a legislative body.26 @ -FOOTNOTESlCharles Albert Collman, Our Mysterious Panics, 1830-1930 (New York: Greenwood Press, 1968), p. 88. 2Charles S. Smith, "The Business Outlook," North American Review, October 1893, p. 386. 3James A. Barnes, John G. Carlisle, Finan cial Statesman (New York: Dodd, Mead and Co., 1931; reprint ed., Gloucester, Mass.: Peter Smith, 1967), pp. 32-33.

4Robert F. Hoxie, "The Silver Debate of 1890," Journal of Political Economy 1 (1892 1893): 561. 5Herman E. Krooss, ed., Documentary His tory of Banking and Currency in the United States, vol. 2 (New York: Chelsea House Pub lishers, 1969), pp. 1921-1922. 6/bid., p. 1934. 7J. Laurence Laughlin, The History of Bimetallism in the United States, 4th ed. (New York: D. Appleton and Co., 1900), p. 274. 8Isaac L. Rice, uThou Shalt Not Steal," Forum 22 (September 1896-February 1897): 1. 9Laughlin, p. 269. lOA. D. Noyes, "The Banks and the Panic of 1893," Political Science Quarterly 9 (No.1): p. 15. llW. Jett Lauck, The Causes of the Panic of 1893 (Boston: Houghton, Mifflin and Co., 1907), p. 80. 120. M. W. Sprague, History of Crises Under the National Banking System (Washington, D.C.: Government Printing Office, 1910; re print ed., New York: Augustus M. Kelley, 1968), p. 158. 13Robert Sobel, Panic on Wall Street: A His tory of America's Financial Disasters (New York: Macmillan Co., 1968), p. 243.

14Charles Hoffman, The Depression of the Nineties: An Economic History, Contributions in Economics and Economic History, no. 2 (Westport, Conn.: Greenwood Press, 1970), p. 107. 15GeO. Fred Williams, uImminent Danger From the Silver Purchase Act," Forum 14 (September 1892-February 1893): 789. 16Rendigs Fels, American Business Cycles: 1865-1897 (Raleigh: University of North Carolina Press, 1959; reprint ed., Westport, Conn.: Greenwood Press, 1973), p. 185. 17"Industrials Were Hit Hard," New York Times, 4 May 1893, p. 1. 18Collman, p. 164. 19/bid., p. 165. 20Sprague, p. 169. 21Hoffman, p. 229. 22((Congressto Meet August 7," New York Times, 1 July 1893, p. 1. 23James McGurrin, Bourke Cockran (New York: Charles Scribner's Sons, 1948), p. 135. 24/bid., p. 138. 25"Need Buy No More Silver," New York Times, 2 November 1893, p. 1. 26Ernest Ludlow Bogart, Economic History of the American People (New York: Longmans, Green and Co., 1937), p. 693.

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN VISION IN his twenty-third book, Vision (Foundation for Economic Educa tion, $6.00), Leonard Read speaks deprecatingly of himself. There is nothing in his striving for foresight and insight, he says, that is original ((except the phrasing." By the stric test of standards, Mr. Read may be right about himself: morality was pretty well covered in the Ten Commandments, the Sermon on the Mount was preached some 2,000 years ago, and Aristotle, Thomas Aquinas and John Locke, the fathers of political science, have had their thousands of glosses, including those of James Madison and Alex ander Hamilton. But there can be an originality in combinations that goes beyond questions of mere phrasing, and Leonard Read need not apologize for his ability to put things in unique perspective. 378 Surprisingly, in his Vision, he comes through as a journalist of great perception. The other day, in the course of tracking down infor mation for a column which I sup posed would be original with myself, I interviewed a visitor from Argen tina. I had been listening to the complaints of American libertarians who are convinced that there will be no place of refuge if the United States is to go all the way to collec tivism. My own hunch is that the southern hemisphere has seen the worst of its misadventures in socialism. Australia, which has had its labor governments, has been moving back from socialist extremes under the enlightened conservatism of Prime Minister Fraser, who be lieves in linking labor agreements to productivity. In Chile, the Pinochet government listens to VISION 379 economists who were trained at the University of Chicago. As for Argen tina, I had heard rumors that it was staging a comeback from the tyran nies and terrorism associated with Peronism.

My Argentinean informant as sured me that the rumors were true. Where the Argentine rate of infla tion under the dictatorship of Pe ron's widow had been 900 per cent, it has now been cut to 120 per cent, and is going lower. The present gov ernment has been waiving taxes and is about to transfer control of schools and hospitals to the provinces. And all those enterprises that had been seized or ((intervened" by the Peronistas are now being restored to private investors. This is being done by a public tender that, in the words of my informant, will be ((totally and irrevocably" under way by the end of 1978. The trade statistics, as offered by the Argentinean Minister of Econ omy, Martinez de Hoz, are particu larly eloquent. Where there was a deficit balance in 1975, there is now an annual export surplus running close to two billion dollars. Lessons from Afar I thought I had something of a scoop in a column that suggested the southern temperate zone might be a haven for libertarian spirits if Washington, D.C., succumbs to ((worst-case" socialism. But the second essay in Leonard Read's Vision, called ((Lessons from Afar," shows that Mr. Read was there first. With Dr. Benjamin Rogge of Wabash Col lege, he spent a week in Buenos Aires in June of 1977. What he and Ben Rogge saw ((startled" their imaginations. Never had they ob served better dressed people. The stores were ((aglitter with splendid merchandise and excellent service."

The food was excellent-and when Mr. Read, a cordon bleu chef on his own account, says this, it really means something. Shoes cost less than in the U.S. Mr. Read and Dr. Rogge had not sought their speaking engagements in Argentina. They found the local hunger for the freedom philosophy to be quite fantastic. The army and navy officers, far from entertaining ideas about military control of the economy, were all for a divestiture that would be satisfactory to even the most exacting Austrian economist. We have heard of tyran nical ((colonels" governments in Greece, in Egypt and in Peru. But in Argentina, as in neighboring Chile, the ((colonels" want to get out of the business of directing the energies of the citizens as fast as they can. Konosuke Matsushita Mr. Read continues his reportorial enterprise in his essay on Konosuke Matsushita, the man who developed the biggest and the most profitable 380 THE FREEMAN June business in Japan's history. Mat sushita .. explicitly forbade the pur suit of profit as the motive of his enterprise. Instead, he set his goal as the production of better products at lower and lower prices. Profitabil ity came as the by-product of man agement efficiency. Good tennis players who concentrate on the next stroke without worrying about the outcome of the game will tell you that the Matsushita formula is psychologically sound. Matsushita was, of course, picking up where the original Henry Ford left off. It is ironical that the Argentineans and the Japanese should now be doing things that the U.S., in its passion for the ((planned chaos" of socialism, is forgetting.

The ((lessons" that Mr. Read is concerned about do not all come from ((afar." Many of them come from his own library. A great reader, Mr. Read excels at relating the separate thoughts of a wide va riety of sages to a central idea that clamors for illumination coming from all directions. Thus, in asking the question, ((Why Not Separate School and State?," Mr. Read begins with.Andrew Dickson White's work on Paolo Sarpi, a Venetian priest who was the first to fight Rome on the issue of separating church and state. Venice, the great world trad ing center of the sixteenth century, was tired of the pretensions of the popes to temporal as well as spiritual power. There had been popes that were secret murderers and patrons of pomographical plays that would have shocked the most hardened of modern sensibilities. Sarpi's ((brilliant reasoning" led eventually to a separation of church and state. This makes Sarpi one of the world's great statesmen.

Absolute Power Is Poison By relating Sarpi to Lord Acton and Hayek, Mr. Read concludes that there is just as much danger from a government monopoly of education as there ever was from a compulsory state religion. (Absolute power over the mind is poison when, as Hayek has noticed, the ((worst get on top.") As a matter of fact, state control of education usually ends by control ling religion by indirection. By ab sorbing most of the funds available for teaching, the state effectively keeps most parents from sending their children to church-supported schools. The result is a forced sec ularization of young minds-which leads to a general inculcation that the state itself is God. To be ~~neu tral" on the religious question, then, the state has no more business in running schools than it has in pre scribing an official mode of worship. Mr. Read finds support in the most unlikely places. As a chef and gourmet, he has enjoyed dining in Bresse, where he savored Poularde de Bresse en Creme, one of Brillat1978 OTHER BOOKS 381 Savarin's best recipes. He was de lighted to discover that Brillat Savarin, as a supporter of the French Revolutionary orator Mirabeau, called attention to the natural law that subjected the paper assignats to rapid depreciation. It tickles Mr. Read to think that it takes a good cook to know about money.

THE WAR AGAINST THE AUTOMOBILE by B. Bruce-Briggs (E. P. Dutton, 201 Park Ave., S., New York, New York 10003) 244 pages. $10.95 Reviewed by Allan C. Brownfeld SLOWL Y, it has become clear that a key element in the fight of the envi ronmentalists, the ecologists, and others against the growth of the American economy is essentially an elitist effort to stop things where they are-with those calling for such a stoppage simply being those already at the top. In a sense, such elitists constitute an American ~~new class" not radically different from the one in Communist states de scribed so well by Milovan Djilas. Among the crusades being entered into by this new class is a mounting battle against the Ameri can automobile. It is charged that the auto highway system discriminates against the poor, minority groups, and the elderly. It is said that high ways have destroyed American cities, that cars have created conges tion, and that the automobile is un safe. Beyond this, it has been said that auto exhausts are poisoning us, that Detroit deliberately murdered mass transportation and that the auto is devouring irreplaceable energy resources.

This is, of course, a serious indictment-and it is used by those who urge the federal government to fund mass transit systems and who have sponsored legislation which has altered automobile manufactur ing in a number of serious-and expensive-ways. Such critics, if they have their way, would sharply curtail ownership of cars in the United States. Individual freedom, some declare, does not involve the freedom to own and drive such a vehicle. Against this indictment, B. Bruce-Briggs, an historian, ur banologist and policy analyst who has served with the Hudson Insti tute, has provided a thoughtful and effective response. Beyond this, he counterattacks, arguing that what is at the root of the hostility to the automobile is an elitism which seeks 382 THE FREEMAN June to Hrationally plan" the entire American transportation system. The individual charges against the automobile, he states, are just rationalizations for the real pur poses of the assault.

((Thewar against the automobile," the author declares, ((and the myths of· mass transportation are merely one campaign in an upper-class struggle against the standard of liv ing, individual freedom, and pride of the great mass of the American peo ple." Americans use the automobile rather than some other form of transportation, Mr. Bruce-Briggs writes, because· it best fits their needs. He notes that, ttThe commu ter railroad, the elevated railroad, the subway, the trolley, the bicycle, the motorcycle, and the bus all fought in head-to-head competition with the automobile, and all lost. The reason is not at all difficult to understand-the automobile was the superior system. Noone planned that the car should dominate. . . . The automobile is, so far, the most perfect method of intraurban per sonal transportation yet devised ... by the criteria of economy, speed, comfort, convenience, and always most important of all, point-to-point delivery, the automobile was, is, and will be far superior."

Americans also like the auto mobile because it permits them to maximize their individual freedom-eomplete with all of the eccentricities which such freedom permits, a notion which is always anathema to those who seek ra tional homogenization of society rather than the ((chaos" which re sults without it. The author writes: (tIn the automobile, you go where you want when you want, you stop when you want, you eat when you want ... and select your own route .... All costs considered, the car is cheaper than train or bus It gives personalized flexibility you have control over your own mobility. There are few things in our society, and fewer with each passing year, that offer us so much individual freedom." To the charge by Ralph Nader and others that auto makers have been indifferent to safety, Mr. Bruce Briggs responds that, (tDetroit has not talked much about safety, to be sure ... but their engineers and de signers have been continuously im proving the safety of their products.

... The windshield improved visibil ity, as did the windshield wiper and washer. Headlights are an obvious safety device, as are running lights, brake lights, and turn signals. So are effective suspension systems that permit the driver to retain con trol in emergency conditions, and brakes, which have been steadily improved. The best safety devices are those that prevent accidents . . . but most safety texperts' have con1978 OTHER BOOKS 383 centrated on reducing injury after an accident has occurred." Concerning Mr. Nader's much discussed volume, Unsafe at Any Speed, the author states that, ((not even its most devoted apologist would describe it as a serious work. It is a polemic against the au tomobile expressed in demagogic language .... The bias of Nader's book is apparent from his omission of obviously important facts-that the fatality rate had been steadily declining and that several auto manufacturers had attempted safety campaigns to sell cars (Kaiser in 1.952 and Ford in 1956), and these efforts had flopped. . . . Perhaps the most revealing aspect of Nader's ap proach to automobile safety was his claim that the Corvair was more dangerous than other cars. Yet he did not present one scrap of com parative data indicating this was so."

Washington, beginning in the early 1960s, began a serious effort to reverse the choice of individual Americans for the auto and to get people out of their private cars and back into collective ((public" trans portation. This has involved huge outlays for federal aid to mass transportation which, once con structed, as in San Francisco, re mains largely unused. Mr. Bruce-Briggs does not blame the government bureaucracy: ((Even had they been the most creative and competent analysts and managers, their efforts were doomed to failure. By undertaking to get the public out of cars they sought to turn back history What BART [San Francisco mass transit] has done is to substitute an incredibly expensive and inefficient rail transportation system for a relatively cheap and efficient bus transit system ... citi zens have paid $2 billion down and $300 million. a year-just to transfer 100,000 prosperous commuters from buses to BART.... The alleged benefits of mass transportation are specious. The federal government has spent $6.5 billion on (mass transportation' in the last 15 years, an amount more than matched by state and local government. Conges tion has not been relieved, pollution has not been alleviated, mobility has not been improved."

It is not the excesses of the au tomobile which its critics oppose, but the automobile itself. The offi cial who wrote New York City's transportation control plan stated: ((My plan was a tool for social change. Very few people grasped that. My crusade is not air pollution: it's the automobile .... " And Ralph Nader clearly stated that, ((I'm in favor of zero automobile growth." Mr. Bruce-Briggs also charges that ((new class" elitists have been joined in their war upon the automobile by ((downtown business interests" in some cities. He writes that, ((While 384 THE FREEMAN June their fiscal and economic difficulties are grossly exaggerated ... the problems are real, and these cities are no longer as healthy as their suburban areas. There are vast vested interests in these cities-in banks, in real estate, and depart ment stores; ~suburban sprawl' threatens these investments. . . . Small wonder that newspapers howl about the evils of suburbanization and its vehicle, the automobile after all, it is obvious that the move to the suburbs has been made possi ble by automobiles and highways ....

Among these decaying northeast ern cities are Boston, the academic capital of the country; New York, the media capital; and Washington, the political capital. The problems and interests of these cities are thus imposed upon the nation." The elite which condemns the au tomobile charges the car with using HANDSOME BLUE LEATHERLEX too much energy . Yet, this same group urges a policy in the energy field which would prevent the de velopment of new coal, natural gas, and petroleum resources. They are on top, the author argues, and care little for the fate of the classes below-classes they believe they have been ordained to control through the making of government policy-((for their own good." Mr. Bruce-Briggs understands the forces at work in the American soci ety all too well. In this book, he has carefully examined the current crusade against the American au tomobile' and has placed it in its proper perspecti ve. Perhaps if we understand the motivation of the enemies of economic growth and the' I free market we will be in a position to better counter their political crusades. In this sense, the current volume is invaluable. ® FREEMAN BINDERS $3.00 Order from: THE FOUNDATION FOR ECONOMIC EDUCATION, INC.

IRVINGTON-ON-HUDSON, NEW YORK 10533 the Freeman VOL. 28, NO. 7 • JULY 1978 We the People Ralph Bradford 387 Concerning each person's responsibility if we are to preserve freedom and prosper. A Christian View of Labor Unions Gary North 394 Why a compulsory monopoly has to have victims on the outside. What Government Officials Cannot Know Brian Summers 399 Changing values and expectations of individuals are reflected in market, not governmental, actions. The Future Is Purchased Today Hans F. Sennholz 406 Instant gratification through political means betokens a short and brutal life. Survival of the Species Ben MoreeU 410 The key to the survival of civilization is human liberty. The Mystery of Inflation Harry C. Knickerbocker, Jr. 420 The distinction between commodity money and paper substitutes. World in the Grip of an Idea 19. The United States: The Concentration of Power Clarence B. Carson 425 Concerning the centralization of political power and its manipulation at crucial pressure points by intellectuals.

Ideas that Serve Willie E. Nelms 437 How business is built through serving customers-and lost when they are no longer satisfied. The Law Also Is Polluted Robert E. Hood 441 Respectable law is upheld largely through moral conviction rather than at the point of a gun. Book Reviews: 445 "The Totalitarian Temptation" by Jean-Francois Revel "Two Cheers for Capitalism" by Irving Kristol Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson, N.Y. 10533 Tel: (914) 591-7230 Leonard E. Read, President Managing Editor: Paul L. Poirot Production Editor: Beth A. Hoffman Contributing Editors: Robert G. Anderson Bettina Bien Greaves Edmund A. Opitz (Book Reviews) Brian Summers THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of pri vate property, the free market, the profit and loss system, and limited government. The costs of Foundation projects and services are met through donations. Total expenses aver age $18.00 a year per person on the mailing list. Donations are invited in any amount. THE FREEMAN is available to any interested person in the United States for the asking. For foreign deli very, a donation is required sufficient to cover direct mailing cost of $5.00 a year. Copyright, 1978. The Foundation for Economic Education, Inc. Printed in U.S.A.

Additional copies, postpaid: 3 for $1.00; 10 or more, 25 cents each. THE FREEMAN is available on microfilm from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "A Christian View of Labor Unions," "The Future Is Purchased Today," and "World in the Grip of an Idea."

Ralph Bradford WE THE PEOPLE WHEN our fathers put themselves to the task of devising a fundamental law for the brand new nation they had created, they displayed great unity of purpose and breadth of vis ion. They did not, in class-conscious fashion, ask, What can we do for the benefit of agriculture? Or, How can we help labor? Or, What will be best for industry? No, their sights were on an altogether different sort of target-and they expressed the es sence of it in the first three words of the Constitution they were so care fully and laboriously drafting: ~~We, the people." Today, at a time when we are beset on all sides by the demands of this and that special interest, it would be fine if the leaders and exponents of all such groups would take a minute to read the one short paragraph that forms the preamble to that Constitution. In passing, it is of interest to note that in a period of rather florid rhetoric the Founders restrained themselves remarkably at the really crucial moments. The Decla ration of Independence, to be sure, is not an example of such reticence; but then, it was really a public rela tions production-a propaganda document, designed to tell the world why a certain action had been ta ken. It was prepared out or~a decent respect for the opinions of man kind." It had to go into considerable detail.

But the ~~action paper," the thing that did the trick, was a little 47 word resolution introduced by Richard Henry Lee, which asserted quite simply that the American col onies were, and of right ought to be, free and independent states. And it was so with the Constitution. Of course many words were required to spell out all its articles and sections; Mr. Bradford, of Ocala, Florida, is well known as a writer, poet, speaker, and business organization consultant. 387 388 THE FREEMAN July but when it came to setting down just what the basic law of the new nation was all about, the Founders laid it out fully in that one short paragraph. They said it was to form a more perfect union; establish justice; in sure domestic tranquility; provide for the common defense; promote the general welfare; and secure the blessings of liberty for themselves and their posterity. That was it. That's what they said it was all about-and it ought to be required reading to offset somewhat the recurrent proposals for the addi tion of this or that million-dollar bureau to bring this or that alleged billion-dollar ~~benefit" to this or that group-or for the creation of this or that agency to regulate and control the minutiae of our lives.

And I now suddenly realize that the paragraph I have just written contains an example of the kind of compulsion I'm given to complain ing about! Okay-so I will let it stand for that reason. Look: rrlt ought to be required reading." I know, I know-that's a common con versational stereotype, but its use illustrates the innate attitude toward compulsion that is at the root of supergovernmentalism. I think, or my particular elite group thinks, that the preamble is important-therefore everybody should be required to read it! But to return to the Founders, in addition to being sure of their aims, they were very conscious of the source of their ap.thority. When they set down a principle, or even a pro cedure, they knew who, ultimately, was speaking. It was ~~we, the peo ple." Of course the great issues of statism versus freedom were not posed to our colonial forebears in the explicit terms of privilege and pref erence such as we now hear. But the Founders were not ignorant of either history or human nature.

They knew that a time would come when there would be demands for governmental favors, preferences, largesse; and they made no place for them, except inadvertently, per haps, in the much-tortured gen eral welfare clause; and the antici pated demands for such extensions of government were answered once for all by Jefferson's simple phrase: ~~The best governed are the least governed." The Growth of Bureaucracy History shows that it is the seem ingly ineradicable tendency of men to vacillate between the extremes of government-from Jeffersonian simplicity to the imagined benefits (and inevitable restrictions) of com plete statism. It is not argued in these paragraphs that we can return to the simple governmental forms that sufficed for our colonial and agrarian periods. Weare a vast and 1978 WE THE PEOPLE 389 complicated aggregation of aims, interests, economic problems, politi cal processes and social respon sibilities. But through the years we have erected in Washington and throughout the states a bureaucrat ic monstrosity that is devouring our savings, crippling our economy, and stifling our initiative.

To some extent the cost and re pressions of such overextension of government were felt in colonial times, and they aroused the anger of our sires, perhaps even more than the British denial of representative government had done. Jefferson himself was testy about it. As a philosophical statesman he was con cerned about life, liberty and the pursuit of happiness; but as a tax paying citizen he was both con cerned and angered because the London bureaucracy had nsent hither a swarm of officers to harass our people and eat out their sub stance." What does that sentence signify in terms of present-day American ex perience? Well, wholly apart from the several vast and ramified De partments of the Federal es tablishment-State, Commerce, Labor, Justice and so on-there are now sixty-one so-called Independent Agencies, plus seventy Boards, Committees and Commissions, that have been created by the Congress. I have no figures on the number of people employed in them, but it is of course very large; and for the gov ernment as a whole, not counting those in the several mili tary ser vices, there are now very close to three million people on the Federal payroll!

A Costly Army No question is here raised about the efficiency of those people, or their honesty and devotion. They are citizens, employed to do work projected by the Congress. But they do, tteat out our substance." They do cost money-millions, billions of it in the aggregate. And they do con tribute to the accumulation of a debt that now exceeds the utterly incom prehensible figure of 600 billion dol lars. Who owes that debt, and must finally pay it, one way or another? The government? Not really. The ultimate debtor: We, the people! But the materiality of such dollar-statistics is really not what I am reaching for. Rather, I am trying to express the proper relationship of the citizen to his government and vice versa; and that relationship is not expressible ideally in terms of dollars or the cost of bread. To be sure, man does live by bread and the nutrients it symbolizes-not alone, of course, for there is a higher nourishment; but food and shelter are important needs, and even our moments of purest philosophy and warmest philanthropy are influ390 THE FREEMAN July enced and modified by the shape and size-and cost!-of our physical and political environment. Pseudo social scientists who envision the Superstate as the Mother-Father image of the future seem happily unaware that a shattering blow can be dealt to both economic and politi cal theorizing by such a crass bit of realism as the price of beans!

It is a far cry, from our present day, Washington-centered politico economic set up, back to the ideals of the Founders. It is the fashion these days in leftward circles to assume that the vast spate of so-called social legislation, and the resultant e.nor mous cost and sprawling bureauc racy, is all in keeping with the ~~rev olutionary" ideas of the men who wrote the Constitution. Especially during these past two or three years, when we were in a Bicentennial euphoria, we have heard a lot of cant about the ~~radicals" and ~~revolu tionaries" who sparked the Ameri can War for Independence and de vised the American form of govern ment. A great deal of this maudlin output was either grossly overdrawn or flatly and ludicrously false. What, after all, was the aim of those men who directed the Ameri can destinies for some years before, and during, that fateful summer of 1787 when the Constitution was being drafted? Certainly it was not ~~revolution" in the modern sense of the term. Indeed, that word does not occur in the Declaration of Indepen dence; and so far as I can discover, it was little used in the literature and oratory of the period. Even Patrick Henry's impassioned plea was not for revolution, but for liberty. And when the term ~~revolution" was employed, it referred not so much to the act of separation from the mother country, as to the evolution of thinking among the American people-as when John Adams, years later, wrote that ~~the Revolution was in the minds and hearts of the people." No, the Founders were not aiming at revolution, but reason; they were not out to destroy, but to build.

They had reluctantly fought an unwanted war-a war which, judged either by logic or logistics, they hadn't a chance of winning. In that desperate gamble they were well served by the tenacity, cunning and superb generalship of the man from Mount Vernon, plus the wiles of Benjamin Franklin in luring France into the conflict. But now that was all past. Now they were on their own in the big world of nations. The makeshift, ramshackle machinery of the old Confederation, which had haltingly enabled them to ride out the war years, was a totally in adequate craft for the waters upon which they were now embarked. They started out, first of all, with a healthy fear of the very institution they were charged with 1978 WE THE PEOPLE 391 creating-namely, government. Recognizing the imperative need for it in the regulation of human affairs, they were nevertheless fully aware of its potential threat to the self same liberties it was designed to preserve. They were, for the most part, men of considerable schol arship, versed in history and famil iar with the writings of social and political philosophers like Locke, Montesquieu, and Blackstone.

Moreover, Adam Smith's longawaited Wealth of Nations had been published in 1776, and by the sum mer of 1787, when the Constitution was being hammered out in Philadelphia, the Scotchman's mas terpiece had been widely read in America, as it had in England and on the Continent. The framers of the Constitution were almost certainly familiar with its major premises. They were not all paragons of wis dom and virtue. They could and did play politics, quarrel, impute mo tives, take advantage. Bitter wrangling developed between those who represented the smaller states like Delaware, Maryland and New Jersey and their opposite numbers from such big commonwealths as New York, Pennsylvania, Mas sachusetts and Virginia. In other words, they were a convention of men. But they were enlightened men; and with all their differences they were devotedly committed to the task of making a nation. They knew first of all that gov ernment, of some kind, is necessary.

The ideal thing would be for men to live together in harmony, without need of control or direction. Indeed, one of the delegates was soon to express this, in the so-called Federalist papers, published to win support for the Constitution. ~1fmen were angels," he wrote, ~~no govern ment would be necessary." And he went on: ~~In forming a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the gov ernment to control the governed; and in the next place, oblige it to control itself." Limited Government But men, alas, are not angels; and even if they were, conflicts might arise-witness Lucifer's revolt, as chronicled at considerable length by John Milton. But let's not be face tious. Men being fallible creatures, we confront the simple fact that they need to be protected-first of all, from one another! Also the mechanics of their civilization, as they have matured through the cen turies, layer by layer and culture by culture, on the several world stages-those mechanics, or rather mechanisms, require to be guarded, protected from abuse, and, to a min imal degree, regulated. Hence gov ernment.

Once in a whimsical moment I 392 THE FREEMAN July fabulated in verse the origin of one such civilizing mechanism. In my fable a primitive hunter, back from a wearying chas~ with a haunch of venison over his hairy shoulder, was downcast because he had shattered his last flint-head spear, and must spend much time and effort to fash ion another. But his neighbor, a cripple who could not go afield to hunt, had several flint heads all chipped out-but no meat in his cave. So, in a great flash, it came to them that they could swap and each be the gainer. Thus trade was born; and I summarized its essence in two lines: Each gave the thing he least required, And gained the thing he most desired! It was that simple principle, applied across the broad spectrum of man's physical needs, which de veloped into the socioeconomic mechanisms that came to be known by such names as the division of labor, specialization, craftsmanship, industry, exchange, money-in short, the implements of trade, the Great Civilizer.

For it was not alone to physical comforts and necessities that the principle of exchange was applied beneficially. If it could enable the hunter, the fisherman, the tanner, the spinner, the weaver and a hundred other specialists to develop and ply their crafts through the trading of skill for skill as ex pressed in product, it could also make possible a like extension in things of the mind. It could and did lead to the development of science and art and literature. The great principle of exchange, like a shuttle in the loom of time, helped weave the fabric of civilization. Remove the Restrictions By 1783 the American Colonies were, of course, heavily involved in all the ramifications of a commer cial, industrial and agricultural economy. Under the restrictive British bureaucracy the rights of the Colonials in all these areas had often been impeded and at times ruthlessly restricted. Those charged with devising the new government were aware that the greatest possi ble spirit of individual enterprise and initiative should be en couraged-not by subsidy from public funds, nor by the relaxation of vigilance in upholding necessary laws, but by the removal or non imposition of all unneeded restric tions.

They wanted, it seems clear, a government under which Americans could pursue their respective inter ests through peaceful production and exchange in the open market buyers and sellers, producers and consumers, suppliers and customers, in a beneficial interchange.

1978 WE THE PEOPLE 393 Freedom! That was what they were after; not just relief from whimsical bureaucratic restrictions, but freedom to make, produce, trade, sell, buy, invent, invest, build, save, spend-freedom, in short,. to Iive the sort of life that is natural and nor mal to an industrious, inventive, adventurous and acquisitive people. Acquisitive? Whoa there a mi nute! Better be careful here. Better tread softly. You see, to acquire is to get; and in certain over-delicate cir cles acquisition is equated with something like social piracy, as though ~~getting" anything is always done at someone else's expense. And indeed it sometimes may be done so-and that's where the State, represented by the Law, comes in. In a negative sense, that's what the State is for. But while Webster's says that to acquire is to gain ~~by any means," it adds, ~~usually by one's own exertions." And in that sense we have indeed been an ac quisitive people-and three rousing cheers for it! Home ownership, com petence, security, stability, indus try, application, independence these are at once the products and the motivation of acquisition. They are also the foundation stones of responsible government.

By creating a governmental envi ronment favorable to personal in itiative, the Founders laid the foun dation for our greatness as a nation. Despite the drain of several warsthe long-felt burden of debt from the War for Independence itself, the ghastly toll of the Civil War, and the staggering outlays for the first and second World Wars-despite these colossal burdens, the nation grew, expanded and developed into the globe's greatest power. And at the same time it exceeded all others in the material welfare of its people. The big question now is: Where do we, the people, go from here? No account has been taken in these paragraphs of our more recent per formances on the world stage and in our domestic economy, nor of the added debt, bitterness and loss of prestige that have resulted. That is an article-a book, a library! -in it self. The American problem today is not what we do about the world, but what we do about us, the people, and about us, the nation. Shall we re sume our travels on a path of destiny-travels that have made us great and strong and useful in the world? Shall we rid ourselves of smothering debt through sufficient self-denial? Shall we once again be solvent as well as sovereign? Shall we halt the march to national bank ruptcy? Shall we avoid the killing inflation that wipes out savings, de stroys credit, and brings chaos?

If we do, who will benefit? If we do not, who will pay? To both questions the answer is: We, the people. @ Gary North A Christian View of LaborUnions WHY should we speak of a Christian view of labor unions? The best rea son is that almost all Christians have some opinion on the place of work in the life of a Christian. Max Weber, the German social scientist, wrote an important book at the turn of the century, The Protestant Ethic and the Spirit of Capitalism, in which he argued that the idea of the calling-one's vocation-was a cen tral feature in the attitudes of Prot estant laymen who helped lay the foundations of modern production methods and organization. If the idea of work is central to the Chris tian tradition, and this tradition led to the creation of modern capitalism, Dr. North is editor of Biblical Economics Today, from which this article is reprinted by permission. Biblical Economics Today is available free on request: P.O. Box 8567, Durham, N.C. 27707.

394 then we ought to pay attention to a related topic, the labor union. Labor unions are not the major part of the total American labor force, contrary to popular opinion. They are important in the large in dustries such as autos, steel, and television, but only about 25 per cent of the American labor force belongs to any union, and many of these are weak, rather insignificant organizations. As I hope to demon strate, it is almost impossible for trade unionism ever to control over half of a nation's labor force in a democratic country, and where unions control more than this, labor mobility will be reduced markedly. Do unions raise wages? Unques tionably they do. Do monopolies in business raise prices? Unquestion ably they do. Labor unions raise A CHRISTIAN VIEW OF LABOR UNIONS 395 wages in exactly the same way that a business monopoly raises prices: by artificially restricting the supply of a particular resource. Over the long run, with rare exceptions, no monopolist can keep prices raised in this fashion apart from direct gov ernment interference into the mar ket. If the government keeps out competitors, then it is possible for monopolists to keep prices above what they would have been in a free market for years or even decades. In the case of diamonds, the DeBeers oligopoly has kept diamond prices up throughout the twentieth cen tury, but it takes the collusion of the South African government to main tain this monopoly (or at least it took such collusion originally).

Monopoly Pricing The economics of monopoly pric ing is the foundation of all modern trade unionism. This is either not understood by the supporters of trade unions, or else it is rejected as irrelevant. You will search your days in vain trying to find a support er of trade unions who is also a supporter of business monopolies, yet the economics of each is identi cal. The labor union achieves higher than market wages for its members by excluding non-members from ac cess to the competition for the avail able jobs. In other words, those who are excluded must seek employment in occupations that they regard as second-best. They bear the primary burden in the marketplace; they are the ones who pay the heaviest price for the higher than market wages enjoyed by those inside the union. How can unions exclude outsiders from the bidding process? There are many ways, all used effectively by unions over the decades. Firs~, there is raw power. They beat up their competitors. They throw paint bombs (paper bags filled with paint) at the homes of their competitors.

They threaten the children of their competitors. Their children exclude the children of the competitors from social actiyities at school, meaning public (government) school. They shout ~~scab" from their picket lines. (Strange, isn't it, that those who defend labor unions seldom shout ~~scab" at Ford salesmen who are challenging the so-called monopoly of General Motors?) Second, and most effective, trade unionists have been able to convince legislators to enact legislation that excludes non-union workers whenever 50 per cent plus one worker vote to choose a particular labor union as the sole bargaining agent in a plant or industry or pro fession. The skilled trades were the first to get state governments to pass such legislation, and im mediately blacks in the South dis appeared from the skilled trades. Then professional associations got such legislation passed, most nota396 THE FREEMAN July bly lawyers, physicians, and den tists. Then, in 1935, the Wagner Act was passed at the national level. It established the National Labor Re lations Board (NLRB), a consis tently pro-union bureaucratic Fed eral agency. As far as the favored unions are concerned, 75 per cent of all workers are potential ttscabs,"

and the NLRB keeps them in their second-choice jobs. ·There is a third, less evident, means of insuring labor union monopoly pricing. This is the minimum wage legislation. This legislation is always supported by trade union officials, whose mem bers are always earning wages higher than the proposed min imum wage. This legislation sees to it that regions that have less developed unions, such as the South-in fact, primarily the South-cannot attract industry so easily from the more heavily unionized Northeast. The minimum wage was the primary means of war fare by unions against non-union workers after World War II until very recently. It still may be the primary weapon. The primary loser is, of course, the urban teenage male black, who cannot get into the Northern union, or migrate to the South, or offer services to employers that are worth the minimum wage. Employers pay higher wages than the market would have dictated when their labor force is unionized.

Of course, employers outside union domination pay lower wages, since they are not compelled by competi tive market forces to bid away labor from unionized firms. Since 75 per cent or more of all workers are not in a union, they cannot gain legal ac cess to the labor markets where 25 per cent of the workers are employed. They have to work else where. Thus, non-unionized em ployers are granted a subsidy from government: lower priced workers. When was the last time you heard a supporter of labor unions argue tha t the reason why unions are wonderful is because they grant a subsidy to the employers who employ 75 per cent of the American labor force? Yet this is precisely the economic effect of compulsory government-enforced trade union ism. The Law of Market Competition ttBuyers compete against other buyers. Sellers compete against other sellers." Not that difficult a concept, right? Apparently it is the most difficult concept in economics, if we are to judge by the arguments people use in favor of increased gov ernment intervention into the free market.

Buyers of labor services compete against other buyers and potential buyers of similar (substitutable) labor services. This means that em ployers are in constant competition 1978 A CHRISTIAN VIEW OF LABOR UNIONS 397 against other employers in the labor markets. They are forced to bid up the price of labor until the point that they can no longer afford to hire any more laborers, or, in the case of the most successful bidder, until all the competition has dropped out of the field. This is the explanation for the curious phenomenon that labor unions subsidize non-unionized in dustries that are buying labor' ser vices from those excluded by law from competing for jobs in unionized industries. The buyers of labor in unionized industries have been compelled by law to depart from the ~~labor auction" in which 75 per cent of American workers are offering their services to the highest bidder. On the other hand, sellers com pete against sellers. This means that those who are harmed by trade unionism are those excluded from union membership. They are denied the right to compete for jobs in cer tain segments of the economy. They have been denied their right to bid, just as the employers in the unionized markets have been de nied their right to bid.

The biblical view of man is work oriented. It affirms that man was placed on the earth to subdue it to the glory of God (Gen. 1:28; 9:1-7). It is not each man's right to work. It is his duty to work. What is his lawful right is his right to compete for the job he wants, his right to compete for the labor services he wishes to purchase. No one has a right to my job, including me. Anyone should have the right to compete for my job, including me. And I have the right to compete for his. Strikes The striker argues that he has the right not to work, but his employer does not have the right to hire someone to replace him. Modern compul sory trade unionism is based on the wholly immoral premise that the worker owns his job (can exclude others from the position) even though he refuses to work for his employer. To add insult to immoral ity, most trade unionists also want government food stamps, un employment benefits (tax-free), and other forms of taxpayer-financed benefits while they are striking. The consumer is supposed to finance his own funeral, and the coercion of law then becomes total.

Obviously, nobody inside the union could reap monopoly wages if everyone were in the union who wanted to compete for the available jobs. The union would then become superfluous. It is only because of the artificial barriers set up against other workers that the union members reap their monopoly gains. This is the reason why, economically speaking, the trade union move ment in its present, coercive form will never be more than a minority movement. The union needs the ma398 THE FREEMAN jority of workers outside the union movement, since the union member ship has to have victims among the working class in order to reap its monopoly returns. Once a man's contract has ex pired, he should hitve the right to walk off the job if he wants to. He should not have the right to keep his employer from hiring a replace ment. Similarly, any employer should have the right to fire a worker, once the contract has ex pired. But he should not have the right to exclude that worker from competing in other labor markets.

Trade unions deny both these prem ises. Voluntary unionism is lawful, so long as the civil government does not do more than enforce the con tracts agreed to by employers and Let the Market Decide laborers. A union can help to spread information of better wages or bet ter jobs, thereby helping its mem bers to keep alert to the true value of the services t~ey are offering for sale. Unions can be self-help societies. But when compulsory, under coercive civil law, they are immoral. They must be recognized as such by orthodox Christians. @l For further reading, see Prof. Sylvester Petro's many books, including Labor Policy of the Free Society, Power Un limited: The Corruption of Union Leadership, The Kohler Strike, and The Kingsport Strike. Also of interest: W. H. Hutt, The Strike-Threat Sys tem. IDEAS ON UBERTY IF YOU BELIEVE that the state should not intervene in dealings between employers and employees, then that means not only no Wagner Acts, but no rightto-work laws and no administrative review of wage settle ments as well. Yet we seem to be headed for ever more intervention by the state in dealings between employers and employees, in the in ternal affairs of unions, and in the wage-price relationships in industry.

Having created our Frankenstein, we are now going to break him to our will. In the process the state is almost certain to undertake to dictate decisions about matters that should be left to the market place, and to create authoritarian patterns of action that will be degrading and de bilitating to employers and employees alike. BENJAMIN A. ROGGE, "The Labor Monopoly"

Brian Summers WHAT GOVERNMENT OFFICIALS CANNOT KNOW As GOVERNMENT grows ever larger, it is perhaps wise to ask if there are limits to the knowledge of govern ment officials. If there are limits, and if government has grown be yond these limits, then government officials are intervening in matters ofw hich they are necessarily ignorant-can have no knowledge. Let us concentrate on a basic form of ignorance familiar to all: igno rance of what other people are thinking. In particular, consider what a government official can and cannot learn about the preferences, expectations, and plans of his fellow men. Using our results, we can sketch some areas in which govern ment officials cannot know what they are doing. Mr. Summers is a member of the staff of The Foun dation for Economic Education. What can be learned about another person's preferences? Sup pose we see Mr. Smith buy rye bread for one dollar. This tells us that at the time of the purchase he valued the rye bread more than the dollar.

If there was pumpernickel on the next shelf, and if we assume that he noticed it, we can also conclude that at the time of the purchase he pre ferred rye bread over pumpernickel. But will he prefer rye bread to a dollar tomorrow? What about his tastes in other goods? How about all his other preferences? And did he really notice the pumpernickel? To find out, we can ask. But what a person says he would prefer in a given situation is often different from what he actually prefers when the time comes to choose. There are several reasons for this. First, a per399 400 THE FREEMAN July son's preferences may change be tween the time he is questioned and the time he faces a given choice. Second, when a person faces a situa tion he may find that it is different from what he had imagined it would be when he was questioned. In addi tion, he may not completely under stand the questions, be in a rush to complete the questioning, give less than truthful answers, or simply have no idea of what he would prefer at some later date.

Thus, the only way to be sure of a person's preferences is to observe his choices. And even then we can only learn a person's past preferences, because the next time he might choose differently. Suppose now that, instead of hav ing the dollar available to buy rye bread, Mr. Smith had paid the dollar in taxes. Then we can never know what Smith would have done with the dollar, had he been free to use it as he saw fit. If the government gives the dollar to Mr. Jones, we can, of course, observe what Jones does with it and thus learn some thing about his preferences. But, be cause Smith no longer has the dol lar, we can never learn the use he would have preferred. Thus a government official, in re distributing wealth, cannot know how the taxpayers would have pre ferred to use the money they paid in taxes. But doesn't the government, in redistributing wealth, help poor Mr. Jones more than it harms rich Mr.

Smith? That is, doesn't the redis tribution cost Mr. Smith less than it benefits Mr. Jones? No Way to Know We have seen that a dollar has gone from Smith to Jones. How much did this dollar benefit Mr. ,Jones? We can observe what he does with it, but what does that tell us? If he spends it for eggs, we know that at the time of the purchase he valued the dollar less than. the eggs. But this tells us nothing about the value he placed on the dollar compared with the value Mr. Smith placed on the dollar. In fact, because Smith no longer has the dollar, we cannot even learn what he would have done with it. Smith himself may not even know, because who knows what he will ultimately do with every dollar? Thus, there is no way to know if the redistribution of wealth bene fited Jones more than it cost Smith. In fact, there is no way to know if any government intervention yields benefits which are greater than the costs.

This is because costs and benefits cannot be measured. In our exam ple, the redistribution cost Mr. Smith whatever he would have done with the dollar. There is no way to measure how much he valued this lost opportunity. In fact, the value he placed on the dollar probably 1978 WHAT GOVERNMENT OFFICIALS CANNOT KNOW 401 changed over time-as his income changed, prices changed, and other circumstances changed. Similarly, the value Mr. Jones placed on the dollar, and thus the benefit he ac quired in receiving it, also probably changed over time. If a government official cannot know how much an intervention costs one individual and how much it benefi ts another individ ual, he certainly cannot add unknown costs and benefits to find ~~social costs" and ~~social benefits." Costs and ben efits have meaning only to individ uals and can be known only by the individuals directly involved. In particular, we cannot assume that a ~~uniform" intervention, such as a uniform tax of $1000, imposes the same costs on every person, because we don't know the value each person places on $1000-nor can we assume that these values are constant. Simi 1arly' if everyone must wait half an hour to buy price-controlled gas, we cannot assume that waiting imposes equal costs on every perSOll.

Consider, for instance, the costs of a volunteer army versus the costs of a conscripted army. It is often as sumed that because a volunteer army requires higher military pay than a conscripted army, that a vol unteer army ((costs" more. This is an unwarranted assump tion. We cannot know the true costs of the higher taxes needed to attract volunteers because we cannot measure the value each taxpayer places on the money he pays in taxes. In addition, we cannot know the costs that conscription imposes on draft ees. We can assume that draftees would rather be civilians, otherwise they would have volunteered. But no one can measure the value each draftee places on a return to civilian life. In short, there is no way to com pare the costs borne by taxpayers versus the costs borne by draftees. Cost-Benefit Analysis Conscription is an example of the error in trying to place a dollar fig ure on the costs and benefits of gov ernment intervention. ~~Cost-benefit analysis" cannot be used to justify government intervention because no one can measure the true costs and benefits.

In fact, cost-benefit analysis can be used to argue against all inter vention. If someone wants some thing enough to bear the costs, he will voluntarily take appropriate ac tion. If he believes that the benefits do not exceed the costs, he will ab stain from such action. Government intervention tries to force people to bear costs that, as those people see it, exceed the corresponding bene fits. Public goods are another example of intervention based on ignorance. It is argued that government must provide services such as welfare, parks, public schools, public hous402 THE FREEMAN July ing, and public television because, although ~~everybody wants them," no one is willing to pay for them except if all his neighbors are taxed to help pay the bill. This is a peculiar line of thought. We are told that people want some thing, though they won't voluntarily pay for it! Not only is this absurd, it assumes that. the proponents of pub lic goods know how people would use their money ifit didn't go for taxes.

As we saw earlier, the only way to know how a person prefers to use his money is to stand back and let him use it. Antitrust is another area where government is intervening in igno rance. At the root of antitrust legis lation is the assumption that, under certain conditions, a firm can raise its asking prices, sell less, and make more money than if it sold more items at lower prices. In theory, this may occur. But no one knows if it actually happens or when it happens. Suppose, for instance, that Na tional Motors is the -only manufac turer of a unique sports car and produces a limited supply which all sell at a ~~high" price. Did they make more money than if they manufac tured more of these cars and sold them all at -lower prices? No one knows. We know that each buyer, at the time of purchase, pre ferred the sports car over the money it cost him. But we don't know how many people would have bought such a car at a lower price. That is, we don't know how many sports cars could have been sold at lower prices so we don't know if National Motors made more money selling its limited-edition at ~~high" prices.

No one knows if National Motors reaped ~~monopoly gains." Measuring Expectations Let us now consider what can be learned about another person's ex pectations. Although observing a person's actions yields limited in formation about his preferences, it tells us nothing definite about his expectations. The most we can say is that a person is acting ~~as if" he expects something. A man carrying an umbrella may be acting as if he expects rain, but he may just be returning it to a friend. The prob lems involved in asking about pref erences carryover to asking about expectations, with a new twist asking about a person's expectations may change his expectations. For example, a temporary in vestment tax credit may be used to try to stimulate investment. The first time such a tax credit is intro duced it might come as a surprise and produce the desired results. But if the stimulant is used again and again, businessmen may learn that a lagging economy is likely to be followed by a tax cut. If they expect a tax cut, they will. tend to postpone 1978 WHAT GOVERNMENT OFFICIALS CANNOT KNOW 403 investment until after the tax credit is enacted. Thus, the expectation of a tax credit may reduce, rather than stimulate, investment. And clearly, if a government official asks a busi nessman if he expects a tax cut, the businessman may suspect that one is forthcoming.

A similar situation occurs with price controls. If businessmen expect price controls, they may prepare for them by raising their list prices and offering discounts, free delivery, better guarantees, and other im proved terms of sale. When the con trols arrive, and the government continues to inflate the quantity of money, the improved terms of sale will tend to disappear. Thus, the anticipation of price controls may increase, rather than decrease, list prices. The lack of knowledge of expecta tions is especially evident in mone tary policy-the government's tam pering with money and credit. For several decades, Keynesian economists have told us that the cure for unemployment is for the government to inflate the quantity of money so as to keep ahead of union wage increases-based on the assumption that union leaders would not anticipate inflation. But, as years have passed, it is clear that unions have learned to anticipate inflation and now demand raises plus cost of living clauses. Govern mental ignorance of personal expectations has been an important factor in producing our current high rates of inflation and unemployment which according to Keynesians should not occur together.

Controlled Inflation The Monetarists prescribe another form of monetary intervention that the government inflate the quantity of money at a fixed rate so that everyone could better antici pate changes in the ((price level." In this way, it is held, economic booms and busts could be avoided. But, changes in the ((price level" are not the cause of booms and busts. Rather, booms and busts are the result of government manipula tion of money and credit. For example, suppose the gov ernment tries to stimulate the X industry by pumping in money and credit. This creates a boom in the X industry, as prices tend to rise in that industry, and natural re sources, labor, and capital goods are drawn into it. But the increased bid ding for natural resources, labor, and capital goods causes their prices to rise and the X industry experi ences increased costs. The increased costs spell the end of the boom, and if the government doesn't continue pumping money into the X industry at a faster rate than is generally anticipated, costs catch up with prices and the X industry suffers a depression.

404 THE FREEMAN July Clearly, the situation is only wor sened if the government tries to stimulate more than one indus try-or the entire economy. Thus, it is unanticipated injec tions of new money at specific points in the economy that create booms, and unanticipated increases in costs that end the booms. To avoid these booms and busts it is not sufficient to inflate the quantity of money at a fixed rate so that people could sup posedly better anticipate changes in the ~~price level." Rather, booms and busts can be avoided in an interven tionist economy only if everyone correctly anticipates where the new money will be injected, when it will be injected at each particular point, and how the prices of specific factors of production will react-clearly an impossible task. The only way to end economic booms and busts is to end government tampering with money and credit. In sum, unavoidable ignorance of expectations can make a shambles of government attempts to quarter back the economy.

Other People's Plans Let us finally consider what can be learned about another person's plans. As with preferences and ex pectations, asking a person yields nothing definite about his con stantly changing plans. The most we can say is that a person is acting ~~ as if' he has certain plans. But even this yields nothing definite. Ifwe see someone cutting down a tree, are we to conclude that he' is doing it to clear a field, for firewood, for logs to build a cabin, to sell to a sawmill, or just for the exercise? Or is it for a combination of reasons? We can con tinue watching and see what he does after the tree is felled, but what he does after is not necessarily what he planned to do before. Having no certain know ledge' of other people's plans, a government official cannot know how an interven tion changes their plans. In particu lar, he cannot know what plans they would have carried out were it not for the intervention. For instance, no one knows how entrepreneurs would carry letters were it not for the government's postal monopoly.

Other examples abound. For in stance, we know that an increase in the minimum wage is a disincentive to employ workers with low produc tivity. But no one knows how many people would have planned to hire workers were it not for the minimum wage. The minimum wage disemploys workers, but no one knows how many-so no one can defend the minimum wage be cause he uknows" the resulting number of unemployed will be small. Similarly for all other interven tions. We know that unions tend to scare labor and capital from certain industries, but no one knows how 1978 WHAT GOVERNMENT OFFICIALS CANNOT KNOW 405 much. Rent control scares away new housing, but no one knows how much. Social Security reduces the means and incentive to prepare for retirement by making productive investments, but no one knows how much investment is lost. And on and on. Government officials have no way to measure the damage caused by interventions because no one' can measure how interventions change people's plans.

Having shown how the limits of know ledge can be used to argue against government intervention, a few words should be said about the absence of intervention-the free market. In the free market, prices are determined by the· preferences, expectations, and plans of everyone in the market. Thus, although we still possess very little direct knowl edge of the preferences, expecta tions, and plans of others, market prices convey them to us indirectly Individualism in highly condensed form. For in stance, consumer preferences are expressed in the selling prices of consumers goods, expectations are expressed in stock market prices and futures prices, and entrepre neurs' plans are expressed in the prices of capital goods. If a busi nessman acts in harmony with these preferences, expectations, and plans, he earns profits; otherwise he suffers losses. Thus, the free market profit and loss system tends to coor dinate businessmen's decisions with the preferences, expectations, and plans of their fellow men.

When government intervenes in the market, prices are distorted and thus no longer convey the prefer ences, expectations, and plans of others. When government com pletely controls the economy, ((prices" lose their meaning, and we are governed by ignorance. @ IDEAS ON UBEHTY WHAT INDIVIDUALISM TEACHES US is that society is greater than the individual only in so far as it is free. In so far as it is controlled or di rected, it is limited to the powers of the individual minds which control or direct it. If the presumption of the modern mind, which will not re spect anything that is not consciously controlled by individual reason, does not learn in time where to stop, we may, as Edmund Burke warned US, Hbe well assured that everything about us will dwindle by degrees, until at length our concerns are shrunk to the dimensions of our minds." F. A HAYEK, Individualism and Economic Order Hans F. Sennholz THERE is something thrilling and exalting in the thought of the fu ture. It elevates human nature and makes man happier and better. The present does not satisfy; man reaches out to the future with its intimation of eternity and immor tality.

Man does not have a knowledge of things to come. And yet, his blind ness to the future does not deter him from preparing for it. Standing firm in the world of daily tasks, he is making preparations in all his aspi rations, be they religious, cultural, social, or economic. In the sphere of business all future-oriented activity is often Dr. Sennholz heads the Department of Economics at Grove City College and is a noted writer and lecturer on monetary and economic affairs. This article Is reprinted by permission from the May 1978 Issue of Private Practice. 406 The Future Is Purchased Today called ((speculation." The business man who is building a plant or store speculates on future business condi tions that will hopefully permit him to retrieve his investment. The mer chant who places a purchase order for future delivery speculates on fu ture demand for his merchandise. Even the young physician who chooses to settle in a certain com munity to build his practice specu lates on the economic future of his community and the demand for his services. They all lack the knowl edge of things to come, but are hope ful that future changes and developments will reward their present decisions. And they all are taking various measures of risk that flows from the uncertainty of the future.

And yet, all such future-oriented activity has come under a dark cloud THE FUTURE IS PURCHASED TODAY 407 of suspicion. It is more popular to and specula ti ve acti vi ty. Preoc live in the present for instant cupied with the present, and chroni gratification of wants and desires. cally poor and always unprepared, Public policy promises benefits and they tend to suspect all those indi services now-even at the expense viduals who differ in outlook and of the future. He who steadfastly lifestyle. keeps his eyes on the future faces censure and condemnation as a Speculation also upsets those ~(speculator." In a strange twist of politicians and officials who would terminology the ~~now-generation" like to guide and direct society. They questions his motivation and de-are eager to direct the destiny of all, nounces him as a ~~self-centered," which they call ((central planning." ~~greedy" monster seeking profits When some individuals shape their from changes. Countless laws and own plans and act independently of regulations aim to seize his rewards the central planners, it is ~~selfish and restrain him from searching for speculation," (~unplanned," (~atomis the future. tic," ((harmful," and ((chaotic." When The conflict is as old as man him-central planning fails dismally and self. It arose on his first day on earth inflicts great harm on countless vic when he became aware of tomorrow. tims, the blame is laid invariably on Was he to allocate his labors to the ~(speculators." When the stock mar urgent needs of the moment or to the \ ket crashes and economic depression demands of tomorrow? The answer seizes the country, the speculators to this question provides an impor-caused it. When the U.S. dollar falls tant explanation of wealth and pov-in purchasing power and sinks to erty. Present-oriented societies lower levels in world money mar linger in perpetual poverty always kets, the speculators sold it. When living from hand to mouth, while central planning creates an energy future-oriented societies soon pros-crisis, the political planners de per and multiply. It also gives rise to nounce the speculators and impose great differences in individual in-more stringent controls on individ come and wealth, which in turn ual initiative. In fact, the speculator breed envy and covetousness and is depicted as the personification of bring forth countless schemes and all human vices and failings.

policies toward a new redistribution. Such diatribes merely reveal the It makes the successful entrepre-great schism·that separates the two neur a favorite target of envy to conceivable systems of economic and present-oriented· individuals who social organization: the private fail to comprehend entrepreneurial property order with its individual 408 THE FREEMAN July freedoms, and the command system with its political coercion in many aspects of social life. Man always must choose between these two modes of organization. For long periods of time he chose the com mand system under such labels as feudalism, mercantilism, fascism, socialism, or communism. But occa sionally Western man chose to be free and independent, unconfined by political limitations and controls. The history of the United States provides a splendid example of such an order. The free order is also a future oriented order inasmuch as it per mits its members to save and invest for a better future. It liberates man from ancient restraints and limita tions that shackle his initiative and creative energy. In a free society the future takes the deepest root, and is most discernible, in the plans and aspirations of the great entrepre neurs and geniuses of enterprise.

Through their actions and provi sions for the future they greatly af fect the daily lives of their fellow men. Their names and exploits are familiar to most Americans. John D. Rockefeller, Andrew Carnegie, J. P. Morgan, and Henry Ford were dra matic leaders, bold and original, with visions of change and a better future. Under their leadership and that of many other exceptional men the U.S. had become the most pro ductive country on earth by 1893, and American wage rates and stan dards of Iiving soared to the highest levels in human history shortly be fore World War I. And yet, these men have become important symbols of an economic order that stands condemned in the eyes of many of our contemporaries. Textbook writers utilize them to illustrate personal greed and lust for power that allegedly characterizes the period of Hunbridled capitalism." Contemporary literature censures them for the poverty and misery of their workers from whom the great fortunes allegedly were taken.

We need not dwell here on the great achievements of those excep tional men who affected the economic Iives of so many Ameri cans. Nor need we analyze the mo tive powers that drove those men to such performance. Their motives probably did not differ from those of most other men in other ages and places. But we need to be mindful that their very appearance presup posed a climate of individual free dom that is so rare in human his tory. Surely, they were Hunbridled" with political edicts and controls, confiscatory taxation and regula tion, and many other manifestations of the command order. They were left free to try and experiment, to save and invest for a greater future. No matter what we may think of them as individuals, we must ad1978 THE FUTURE IS PURCHASED TODAY 409 mire the society that set them free and let them pass unencumbered by the strictures of envy and the de mands of the moment.

Present-day Americans would never tolerate the exceptional man who creates new industries on the ruins of old production. There can be no Henry Ford in the present cli mate of our political economy. Under the influence of ancient ideologies modern man is suspicious of individual freedom that gives rise to economic inequality. He uses his political apparatus of coercion to maintain and restore some measure of equality. His tax collectors seek to extract the lion's share of H un earned" individual income and wealth. And his numerous officials in a host of regulatory agencies seek to restore equality and provide equal opportunity through stringent supervision and control. Under the influence of old suspi cions and prejudices modern man prefers to rely on political action rather than on voluntary coopera tion. In the command order every individual is a wheel in a giant polit ical machine and every sphere of his social life is politicized. And even where modern man has retained some democratic institutions, poli tics plays an important role in his life. Parliaments, which were origi nally set up to limit the profligacy of the rulers, are incurring huge expendi tures on behalf of the electo rate. To be the favorite of an envious multitude, a politician must be on their level. He must desire what they desire, yield to their prejudices and substitute them for principles.

Instead of enlightening their errors, he must adopt them. As a political leader he merely furnishes the sophistry that will defend and prop agate those errors. When he must choose between the needs of the moment and the de mands of tomorrow, modern man opts for instant gratification of his wants and desires. He wants social benefits and services now through political redistribution and transfer. He preys on the richer members of his society, and when such revenues no longer satisfy him, he embarks upon massive deficit spending. That is, he consumes the savings of his more provident members. And fi nally, when their means no longer suffice to meet his insatiable de mands for present benefits, he may consume his economic substance. In economic parlance, he may consume his productive capital, which previ ous generations created and left for him, and thus diminish the ap paratus of production at the expense of future generations.

The future is purchased today. We have a number of choices. But all sales are final. @) The key to the survival of civilization is human liberty. When our liberty is gone-whether because some aggressor takes it from us by force, or because we ourselves willing ly vote it away-civilized man will die. SURVIVAL OF THE SPECIES Ben Moreell WHEN Charles Darwin's book, On The Origin of Species, appeared in 1859 it was strongly condemned by those who believed that his theory of evolution contradicted the thesis that man is a creature of God. But now that Darwin's theory has been amended and corrected it is gener ally accepted that evolution is not a contradiction of God's designs for mankind. Well worth reviewing is Admiral Moreell's address before the National Association of Purchasing Agents at Cleveland, Ohio, June 13, 1950. He was then Chairman of the Board and President of Jones & Laughlin Steel Corporation .. As Chief of Civil Engineers of the Navy, he was noted for the incredible exploits of his Navy Construction Battal·· ions, the Seabees, during World War II.

410 Today I want to discuss with you not the origin of species, but the survival of species; and I want to discuss this subject in terms of faith in my fellow man,which stems from a faith in God. I might have chosen a shorter title-a single word liberty. For I believe that the key to the survival of civilization is human liberty. When our liberty is gone-whether because some ag gressor takes it from us by force, or because we ourselves willingly vote it away-civilized man will die. Men will become robots, machines with out minds, controlled and driven by godless masters. I believe that God intended men to SURVIVAL OF THE SPECIES 411 be free to make their own decisions and to be responsible for the conse quences of those decisions. Thus it seems to me that it is an act against God for men to pass laws which destroy individual liberty; which deprive persons of the responsibility for their own acts or for their own welfare. Such laws are advocated by persons who lack faith in God and in their fellow men!

It seems to me that there is con vincing evidence to support my be liefs on this subject. And the basic evidence is found in the fact that no person is physically or mentally or morally identical to any other per son. For example, everyone knows that the fingerprints of all persons are different. And these dif ferences-these individualities, these inequalities-carry through all the physical, mental, and moral characteristics of mankind. It seems to me that if we have faith in God, we must realize that He had a pur pose in designing us so that no per son is like any other person; that is to say, so that each person is an individual. Let us examine this God-given individuality of men and speculate upon its relationship to liberty and responsibility and survi val. The Right to Choose It must be obvious that liberty necessarily means freedom to choose foolishly as well as wisely; freedom to choose evil as well as good; free dom to enjoy the rewards of good judgment, and freedom to suffer the penalties of bad judgment. If this is not true, the word ~~freedom" has no meaning. Yet there are persons in America who wish to pass laws to force people to do only ~~good," or at least their concept of what is good.

These would-be dictators are not content with a preventive law which punishes a person who deliberately chooses to injure his neighbor; a law which prevents any person from forcing his viewpoint upon any other person; a law which penalizes the person who interferes with the lib erty of others. On the contrary, these persons who arrogate to them selves the functions of God demand a positive law to compel others to do as they wish them to do. And-for some reason which I cannot under stand-these same people use the words ~(liberty" and Hdemocracy" to justify their plans to deprive other men of freedom. These proposed laws are fre quently justified on the ground that there are physical and mental in equalities in the world; that those inequalities result in economic in equalities; and that the primary function of government is to pass laws that will tend to equalize such inequalities. Is not this concept of government a rather brazen in dictment of God? Is not this an acceptance of the communistic 412 THE FREEMAN July theory of using force to take ((from each according to his abilities" and to give ((to each according to his needs"? It is true that no two per sons are equal; and that some per sons receive more pay for their ser vices than do other persons. But my faith in God makes me insist that there is a logical and good reason for this fact.

The Source of Progress This inequality among persons is a law of nature, a law which is just as unchangeable and just as neces sary to understand as is any other natural law , as, for example, the law of gravity. This particular law is known as the ((law of variation"; and from the unrestricted operation of this law of nature comes all human progress. The law of variation permits chil dren to be different from their par ents. It permits brothers to think differently and to act differently. It permits the existence of both misers and philanthropists; saints and sinVariation and Change The" higher" the form of life or of non-life composition, the more complex its variation and the more rapid the expected change that follows from crossing two of them. As the com plexity increases, the "offspring" become less and less pre dictable. In chemistry, for instance, combinations of the differ ent basic elements can result in innumerable compounds; possible mixtures of different possible compounds, in turn, magnifies beyond our capacity for comprehension the num ber of possible results. It is similar for the complex living organisms, like persons, where differences combine in the biological process into innumerable and wide differences.

That is why persons differ so widely in their capacity to do different things, to comprehend different things, or to con tribute to progress. Out of this change comes "progress." And the greater the variation, the more rapid the progress can be. It makes no difference, so far as the opportunity for progress is concerned, whether the change is induced by the Unseen Hand of evolu tion, or by conscious choice as in the selection of a mate, or by learning from someone who is more informed, or by simply patterning one's acts after those who know better how to do a thing. F. A. HARPER, Liberty: A Path to Its Recovery 1978 SURVIV AL OF THE SPECIES 413 ners; rich and poor. It permits in-Master Minds at Work ventors to invent, managers to In this process they deny to every manage-and purchasing agents to person the right to dispose of the purchase. It permits each person to products of his own labor as he seek a job or profession which is chooses. On the contrary, it must be most suited to his inherent talents as they, the ((master minds," decree!

and his desires. It encourages a vol-These so-called ((do-gooders" and untary division of labor, with result- ((benevolent" legislators deny this ing maximum efficiency and greater right of choice to the producer be prosperity for all. cause they fear that other people will Without· this variation-this un-spend their earnings in a pattern equalness-our social structure different from that which they would be similar to that of an anthill would plan for them. They have no or a beehive, where each member is faith in the voluntary decisions of born to do a certain predetermined free persons! job which he does with blind al-For example, the person who legiance to his society and with no earns the money might want to consideration of personal interests endow a college or a hospital or a or preferences. summer camp for poor children; but Unfortunately there are many the planner wants to take the money persons in the world who hate varia-away from him and use it to sub tions and inequalities, who admire sidize ((cheap" electricity for the the type of society developed by the people who live in Tennessee or in ants and bees. These people see that the Pacific Northwest.

variation among human beings has The person with a good income allowed one person to produce more might want to spend some of his than another, with resulting differ-money for a trip around the world, ences in material possessions and but the planner calls this ((social comforts. And then these self-ap- inequality," and he proposes a law pointed supervisors of human des-whereby the government may take tiny, who cannot tolerate variation, the individual's money, by force, and begin to agitate for a law to take use it for some so-called ((socially away from the high producer and useful" purpose like encouraging give to the low producer. They want the growth of surplus potatoes, for to use the force of government to which there is no market, in order repeal the law of variation; to rede-that they may be destroyed. sign mankind; to force their con-Or the planner may propose to cepts of morality and economics on deprive the producer of his money all other persons. and apply it to some alleged ((social 414 THE FREEMAN July good" like government ownership of housing, or a government steel plant, or government-controlled ed ucation, or some similar project which gives to government the power to tell the people what they must or must not do; how they must or must not live.

Enemies of Liberty I am willing to concede that· the do-gooder may have the best inten tions in the world. But it cannot be denied that the laws he proposes always involve more government, more government ownership and operation of the means of produc tion, more government interferences in the distribution of what individ uals have produced, more power for government and less freedom of choice for individuals. I hold that the people who advo cate these positive laws against freedom of choice are-knowingly or unknowingly-the enemies of free dom and progress. They themselves have lost all faith in liberty and in the ability of free persons to care for themselves and voluntarily to ex tend a helping hand to their neigh bors in need. Thus they band to gether to advocate laws antagonistic to humanity; laws which restrain liberty, thwart variation, belie in equalities, and defy God's design!

Against the background of my many years of service in the Navy, I make this declaration: I do not fear the Russian Army, or the atom bomb, or the hydrogen bomb, nearly so much as I fear this concept of using the law to relieve individuals of the responsibility for their own welfare and to deprive them of their freedom of choice. We can all see the danger of a military threat to our freedom. If we are attacked we will fight, and we will win! But few of us appear to understand this insidious process whereby we use our own laws and our own government to destroy our own liberties just as surely as if some foreign conqueror had power over us. Here is an example of how we are decei ving ourselves: Let us suppose that some foreign power could con fiscate the incomes of persons in America; and let us suppose, further, that this foreign power were to confiscate 89 per cent of the in come of our most efficient producer.

Would this producer continue to produce abundantly under such cir cumstances, or would he not soon relax and begin producing only enough to subsist himself and those dependent upon him? This sit uation is easy enough to under stand when we visualize the confis cator as a foreigner. But we do not seem to understand it when the con fiscator is a combination of fellow citizens. For we ourselves have voted to confiscate 89 per cent of the income of our best producers! When will this confiscation of an 1978 SURVIV AL OF THE SPECIES 415 individual's income rise to 100 per cent? Do you believe that ambitious men who are hungry for power would stop short of this complete communism if, by going on, they could achieve their aims? Let us consider this question: Just how much liberty does a person really have when more than half of his earnings are taken from him with out his consent and are spent for purposes distasteful to him?

The End of the Road as Liberties Slip Away It makes one wonder whether we are deliberately trying to destroy oursel ves. All along this course our liberties begin to slip away from us. In the beginning this happens slowly and almost unnoticed. The Hemergency" and ~~temporary" re strictions and compulsions by gov ernment are not generally recog nized as lost liberties. But the end result of this procedure-a pro cedure that always comes neatly wrapped in the American flag and labeled Hsocial justice"-is complete government control, conlplete loss of liberty, and the extinction of civilized man as we know him. Why should this confiscation-a percentage of our production that even a conqueror would not dare to take-be called liberty? Why should the word ~(freedom" be used to de scribe these government compul sions and restrictions? Certainly the founders of this republic had no such concept of freedom.

Now I know that those who dis agree with me will say that this is a democracy and that we can vote for anything we please; that, in fact, we can vote to turn all industry and all income over to the government, if we so desire. That is true; but consider this: It is also true that we could vote to re-establish slavery in America. Would that make slavery «right" or ((democratic"? We could democrat ically vote to have a state religion and to force everyone to conform to the majority decision; but that would make a mockery of democracy and the right to vote. We can demo cratically vote to print enough money to give every person a million dollars; but would such exercise of the franchise help anyone except those who wish to destroy America? All these measures-and others of a similar nature-could be enacted legally and democratically under the concept of majority rule. But would any person be so foolish as to say that they should be enacted?

Will any thinking person say that a law is «right" merely because a ma jority has voted for it? We must al ways remember that our Constitu tion was designed to protect the free dom of the smallest possible minority -one person -against the demands of the greatest possible majority -all other persons com416 THE FREEMAN July bined. That single idea of inalien able rights of the individual person is-or, at least, was-the fundamen tal spirit of the American tradition of government. And if we lose that concept of government, by force or by our own votes, the American dream of liberty will be ended. I am very glad that we have a form of government that requires voting, because so long as this condi tion exists, there is nothing to pre vent us from voting against these immoral laws that are leading the American people into bondage to their own government. It is still pos sible to turn back; and it is not yet too late to turn back. If we really want to face the responsibility, to pay the price, of a return to freedom, we can still have it.

How to Destroy Progress Let us speculate on the price which we must pay for liberty. First and foremost, all so-called ((welfare" schemes must go; for dependence upon government will destroy prog ress and production in two ways: First, the high producers will not continue to do their best if most of the product of their labor is taken from them. Second, the low produc ers will not be eager to work harder if they know that government will guarantee to them the security of housing, food, medical care, old age benefits, and the other necessities of life. If we continue along this path to the misnamed ((welfare state," we must soon find ourselves in the posi tion of our Reservation Indians, who have had a system of government guaranteed ((security" for the past hundred years. The inevitable result of such Hsecurity"-to the Indians or to any other people who try it-is dramat ically told in a report from R. J.

Rushdoony, a former missionary to the Indians on one of our American reservations: One of the surest consequences of a government of ((welfare" and ((security" is the rapid decline and death of respon sibility and character. Whatever the pre-reservation Indian was, and his faults were real, he was able to take care of himself and had a charac ter becoming to his culture and religion. He was a responsible person. Today he is far from that. The wretched security he has had, beginning with the food and clothing dole of early years, designed to enforce the reservation system and de stroy Indian resistance, has sapped him of character. The average Indian knows that he can gamble and drink away his earnings and still be sure that his house and land will remain his own, and with his hunting rights, he can always eke out some kind of existence. Government men too often hamper and impede the man with initiative and character. This is because their program inevitably must be formulated in terms of the lowest common denominator, the weakest Indian. In addition, the provi sions of the government for the ((welfare"

and ((security" of the Indians remove the 1978 SURVIVAL OF THE SPECIES 417 consequences from their sinning and ir responsibility. The result is a license to irresponsibility, which all the touted government projects cannot counteract. And I believe the results would be no better for the best hundred or thousand persons selected from any society, after a generation or so of the same kind of Hwelfare" and Hsecurity" government .... Slavery in America Let us look at another example from our own history. Here is a statement from an article called Wards of the Government by Dean Russell: The constitutions of former American slave states generally specified that the masters must provide their slaves with adequate housing, food, medical care, and old-age benefits. The Mississippi Constitution contained this additional sentence: ((The legislature shall have no power to pass laws for the emancipation of slaves .... (except) where the slave shall have rendered the State some distinguished service;"

The highest honor that Mississippi could offer a man for distinguished ser vice to his country was personal respon sibility for his own welfare! His reward was freedom to find his own job and to have his own earnings, freedom to be responsible for his own medical care, freedom to save for his own old age. In short, his reward was the individual opportunities-and the personal re sponsibilities-that have always dis tinguished a free man from a dependent. What higher honor can any govern ment offer? But many present-day Americans are trying to avoid this personal responsibil ity that is freedom. They are voting for men who promise to install a system of compulsory, government-guaranteed Hsecurity"-a partial return to the old slave laws of Georgia that guaranteed to all slaves ((the right to food and raiment, to kind attention when sick, to mainte nance in old age .... " And the arguments used to defend this present-day· trend toward the bondage of a Welfare State are essentially the same arguments that were formerly used to defend the bond age of outright slavery.

For example, many of the slave holders claimed that they knew what was ((best for the slaves." After all, hadn't the masters ((rescued" the slaves from a life of savagery? The advocates of government-guaranteed ((security" also claim that they know what is best for the people. Many of them argue in this fash ion: HAfter all, haven't the American people conclusively shown that they are incapable of handling the responsibility for their own welfare?" Many of the slave-holders sincerely believed that the ((dumb, ignorant slaves" would starve to death unless their welfare was guaranteed by the masters. And the advocates of compul sory ((security" frequently say: ((Are you in favor of letting people starve?" But as proof of the fact that personal responsibility for one's own welfare brings increased material well-being, consider the emancipated slaves. Among them there were old and crippled and sick people. They had no homes, no jobs, and little education. But-most precious of all-the former slaves were· responsi blefor their own welfare. They were free.

418 THE FREEMAN July They had the privilege of finding their own security. Now compare the remarkable progress of those former slaves to the lack of progress of the American Indians who were made wards of the government; who were given state-guaranteed «secu rity" instead of freedom with responsibil ity. In 1862, most American Negroes were slaves. Today they are about as self-supporting and responsible as other American citizens. Meanwhile the In dians as a group have become less self supporting and more dependent on gov ernment aid. It has been claimed that many thousands of Indians will actually die of starvation unless the government feeds them. If this is true, why is it so? ... How to Destroy a Person To those two reports on the results of government-guaranteed ~~secu rity" I desire to add this thought: If I should want to destroy you, I would try to relieve you of the responsibil ityfor your own welfare and to make you dependent upon me for food, clothing, housing, medical care, and the other necessities of life. After a few years of such dependence you would be helpless, subject to my every commandin effect, a slave.

But in spite of the two cases I have noted above, and many similar ones which can be cited from the long record of history, there are well-in tentioned but misinformed persons who still insist that unless govern ment supports its citizens they will be ill~clothed, ill-housed, and ill-fed. This belief is often expressed by the question: ((Would you let them starve?" Do the people who utter such non sense understand the meaning of their proposals? In effect they are saying that a free person in a free society cannot support himself; that a free American cannot or will not support his own family; that free Americans will permit their less for tunate neighbors to starve; that our American doctors will not aid a sick person who has no money; that per sons with freedom of choice will choose to let homeless people sleep in the streets; that a free people will reject their responsibilities to their fellow men; and that we have re nounced Christ's commandments on love and charity.

I refuse to concede that we Ameri cans have sunk so low. If we have, then liberty is dead, and we are taking part in its interment. If we cannot and will not accept the re sponsibilities of liberty and a volun tary society of free men, then indeed is civilized man at the end of his rope. If I had any thought that this is the case, I would not be speaking to you today. For I believe that we Americans want liberty, and that we are willing and able to pay the price for it. The Price of Liberty This price which we must pay is the abolition of all special laws for 1978 SURVIV AL OF THE SPECIES 419 all special groups and interests. Subsidies to businessmen as well as to farmers must stop. Special privileges and preferences for able bodied veterans must be ended. There must be an end to special laws which exempt labor groups from the consequences of their actions. The special tax privileges for producer and consumer cooperatives must be repealed, or extended to all corpo rate business. The law which gives tenants special treatment at the ex pense of home owners must be abolished.

Whatever the sacrifice, our gov ernment must live within its in come; and the amount of that in come which is taken from the people must be drastically reduced. We must abolish all privileges and ask of government the only equality which can possibly exist-equality before the law. In short, we must demand that government confine it self to the primary functions of pro tecting the life, liberty, and property of the individual-all individuals. Then each person will be free to do as he pleases so long as he does not interfere with the right of any other person to do as he pleases. Then each person will enjoy as much equality and security as it is possible for him to have in a world of admitted in equality and insecurity. I am aware that this price for liberty may seem high to some peo ple. I know that those groups and persons who now enjoy those special privileges will do all in their power to keep them-and to extend them.

Even so, I have faith that the vast majority of the American people want liberty and are willing to ac cept the personal responsi bili ty which liberty requires. I believe that the only requirement for the return to liberty is an understanding of what it is. I believe that we will understand it and that we will then return to it. I have this faith in my fellow Americans because I believe they will know that upon liberty and upon liberty alone -depends the survival of the species! @l ~~Survival of the Species" is from a two-volume paperbacked collection of Admiral Moreell's speeches and artic1es-The Ad miral's Log-timely, yet timeless commentaries dedicated to re storing and preserving freedom. The set is available for $1.00 from The Foundation for Economic Education, Irvington-on Hudson, New York 10533.

The Harry C. Knickerbocker, Jr. '>e Mysteryof 20° Inflation RECENTLY, as I read the Sunday edi tion of a major metropolitan news paper, I counted nine columnists whose subject of the day included explanations of inflation. The only clear-cut fact that emerged fr~m this scatter shot of expert opinion was a common failure to deal with the cause of inflation. Rather, they were talking about price increases. This confuses cause and effect and ignores the fact that some responses to inflation do not include price increases-in fact, in some in stances, prices actually decline. Re ductions in production costs arising out of new technologies can alleviate-and conceal-the fact that inflation is under way. Other Harry Knickerbocker is a veteran writer and public relations counselor who presently employs his skills as a consultant on effective free enterprise advo cacy. 420 concealments can include producers' reduction in the quality and/or size of their goods or services, reduction of consumer demand with resultant suppression of price increases, and a myriad of other variables and un knowns.

A tool for measuring inflation's effects may never be available and, despite a certain usefulness that such measurements might have, to seek such a tool implies acceptance of inflation as a natural phenom enon-something to be measured, harnessed and put to proper use. With recognition that this conception of inflation is fallacious can come the realization that the objec tive is not to use it, but to eliminate it; not to quantify it, but to be able to detect its presence. Indispensable to the achievement of these objectives is a clear, accurate grasp of the real THE MYSTERY OF INFLATION 421 nature of inflation, its origins and its cause. Inflation consists of enlarging a nation's money supply by the addi tion of something other than real money, i.e., something other than the money metals, gold and silver. It became possible to make such addi tions in substantial quantities with the introduction, acceptance and use of paper money.

Money Substitutes Paper Umoney"-and, of substan tially less significance, token coins-is the only money that most of us have ever known. It came into use as a substitute for real money that had been placed in storage for safekeeping. Originally, bank notes were warehouse receipts for stored gold, and checks were written orders from owners of the gold instructing warehousemen to pay specific amounts of gold to the persons named in the orders. Confident that one another's re ceipts were readily redeemable for gold, traders quickly found that transacting business with money substitutes was more convenient than using gold-which would have to be withdrawn from storage by the buyer and then redeposited by the seller. From the outset, most depos itors left their gold in storage and paid for purchases with either re ceipts or checks. Confidence and convenience notwithstanding, it was only in the role of substitute that paper currency could gain acceptance among trad ers to perform the functions of real money. For these paper substitutes had not progressed through the bar ter process which gives a commodity the capacity to function as money.

Barter, the exchange system characteristic of primitive societies, imposes severe limitations on its participants. Each has to try to match his wants with things wanted by other producers. As in the tradi tional example, the community's wheat grower might want candles at a time when the candlemaker wanted cloth, the weaver wanted shoes, the cobbler wanted a hat, the hatter wanted beaver skins, the trapper wanted pork, and so on. For any two traders simultaneously to want exactly what each other of fered and to be satisfied with the amounts each was to give and get in exchange would be very unlikely. To get the candles he needed, the wheat farmer might have to make a series of less than satisfactory trades to obtain cloth to offer the candle maker. Meanwhile, the market's other traders would be experiencing the same difficulties. As such a process-crude, time consuming and inefficient-labor iously plods along, one commodity is likely to emerge as easier to trade than other goods. As it does, it gains an additional value. It is demanded 422 THE FREEMAN July not only for its commodity value but for its usefulness as a medium of exchange. Gradually, all producers seek to trade their wares for this commodity because, with it, they can trade directly for any item they want.

As this commodity becomes ex changeable for any good offered in the market, exchange rates are estab lished between it and each of the other goods. These rates are, of course, prices, and the ability to ex press prices is the identifying prop erty of money. This is the only way that money can originate. Any attempt to origi nate money by arbitrarily designat ing officially approved certificates (or any other items) as the medium of exchange would fail. Being of fered for trade as a commodity is the inescapable starting point from which an item must begin enroute to becoming the easiest-to-trade com modity. Although real money must origi nate as a commodity, the ability to function as money can be trans ferred to money substitutes. Trans fer of the· money function from stored gold to subsidiary coins, checks and deposit receipts repre sented a refinement, a further streamlining of the exchange pro cess. Unfortunately, inherent in the refinement was an opportunity for misuse with disastrous conse quences.

Fractional Reserves With the use of substitutes enjoy ing such strong acceptance among traders, the amount of gold that con tinued to circulate-to be with drawn and redeposited-was never more than a fraction of the total in storage. Noticing that the value of receipts presented for redemption consistently amounted to only a fraction of the deposited gold, some warehousemen conceived of an in novative scheme for creating a new business. They wrote receipts for several times as much gold as actu ally was stored in their vaults. Then with the ((extra" receipts, the im aginative warehousemen went into the lending business. This created claims for several times the amount of gold deposited, but warehousemen expected no problems because the extra receipts were simply on loan and would be returned when borrowers' notes came due. The lenders failed to realize that the extra receipts in the market would set in motion a pro cess that would make a money crisis inevitable.

The net effect of issuing receipts for amounts of gold several times the actual deposits was tantamount to a sudden, miraculous multiplica tion of the amount of gold without cost or effort. At first, this would create an illusion of instant, unlim ited prosperity. Business would boom, but the illusion would quickly 1978 THE MYSTERY OF INFLATION 423 fade because the purchasing power of gold-its value in relation to other goods and services-would plummet. And, so it was with the flood of ((extra" receipts. Members of the community en dured the frustration of rising prices until someone remembered one price that couldn't rise. Each receipt stated a fixed amount of gold pay able to the bearer on demand. The ensuing rush to withdraw gold (a frequent necessity which eventually became known as a ((run" on the bank) confronted the ware housemen-bankers with an insolu ble dilemma: they could not demand payment of borrowers' notes until the future dates specified in the notes. On the other hand, the bank ers' warehouse receipts were de mand ((notes." Receipt holders could demand immediate payment of their gold. Only a fraction of the receipts could be redeemed. The fractional reserve banks had no hope of meet ing their obligations.

Given the clearly fraudulent na ture of lending claims to nonexistent property, it is reasonable to expect that the practice was outlawed. His torically, however, when depositors have tried to protect themselves from the fractional reserve method of theft-when depositors have presented their receipts and de manded their gold-governments have usually granted the banks immunity from their obligations and from retribution. Eventually, governments and their central banks (Federal Reserve System in the U.S.) assumed control of the is suance of unbacked notes. Persistently refusing to acknowl edge the fallacious nature of frac tional reserve banking's basic prem ise, governments and their experts have derived a succession of modifi cations each of which has been ex pected to make the system ((work." Among the most basic of these was the forcible demonetization of gold and the establishment of govern ment sanctioned paper money as the exclusive medium of exchange.

Outlawing Gold Gold's function as money was halted in the U.S. in 1933 when Americans were prohibited from owning the money metal and from requiring payment of obliga tions in gold. Federal Reserve Notes were designated as ((legal tender." By denying the freedom to choose gold in preference to inflatable frac tional reserve money, government clearly stood ready to prevent note holders from protecting themselves from inflation's theft. From the fractional reserve bank ing point of view, the prohibitions and restrictions have been very suc cessful. By 1975, when Americans' right to own gold had been restored, and by 1977 when it again became legal to specify payment of obliga424 THE FREEMAN tions in gold, decades of enforced disuse had long since divested gold of its ability to express prices. Passage of the Gold Clause Bill (P.L. 95-147) in late October, 1977 permits lenders to specify either ~~legal tender" or gold for repayment of their loans. This gives gold some chance to regain its money function, but in circumstances much different than the barter conditions in which it initially achieved status as the most easily traded commodity.

For gold, remonetization means competing with what was once its substitute but is now the estab lished, accepted medium of ex change. As shaky, unreliable, and disaster-prone as fractional reserve money is, it is still open to question whether or not Americans will be willing to take the trouble to reinstate gold. The decision is likely to be influenced by our perception of the harm that inflation is doing. In this regard, it may be useful to ob serve certain important distinctions. Production of gold money requires an investment, an input of actual, real, existent resources. The resul tant money is equally real and con stitutes value added to existing val ues. To be sure, as with any com modity, overproduction of the money metal could diminish its value vis a-vis other goods and services; but the consequent losses to the pro ducer would quickly terminate or curtail production. Owners of gold would have no fear of seeing the value-the purchasing power-of their medium of exchange swept away in a limitless flood of gold.

In sharp contrast, production of fractional reserve money requires little more than making a book keeping entry. credi ting a borrower with an agreed upon sum and issu ing a deposit receipt in this amount. Where in one instant there had been nothing-literally-in the next in stant there is ((money." Whereas production of gold money added value to the economy, money created out of thin air acquires its value by taking it from existing val ues without giving anything in ex change. Today, all production of additional money is inflation. The ((Fed" (Fed eral Reserve) has several ways of increasing the money stock, each of which creates money out of thin air. When the powers of government de termine that more money should be spent than can be collected in taxes (more than taxpayers will tolerate), government simply borrows non existent money from the Fed. As it is spent, the new money flows into deposits in commercial banks. There it becomes the frac tional reserve for a much larger amount of money created out of nothingness by virtually the same loan scheme devised by the original warehousemen-bankers.

That, in brief, is inflation. @ ~rld inth8J gUR9fan IaefL Clarence B. Carson 19. The United States: The Concentration of Power POLITICS, it has been said, is the art of compromise. But compromise is not the object of politics; it is only a method. The end of politics is to gain and maintain control over the in struments of power over people. Politics is, then, the art of the strug gle for power, any kind of power, but above all the power residing in gov ernment. There are other ways of gaining political power, of course. The most common way, historically, has been to inherit it. Another way In this series, Dr. Carson examines the connection between Ideology and the revolutions of our time and traces the Impact on several major countries and the spread of the Ideas and practices around the world. has been by conquest. The coup d'etat has also been used, but this usually involves some combination of the methods mentioned earlier.

But in modern day democracies, the approved way of gaining and main taining power is by politics. That is certainly the case in the United States. The primary task of those who wished to introduce socialism in the United States was to get control of political power. There were a con siderable variety of such socialists in the latter part of the nineteenth century. There were anarchists, syndicalists, Marxists, nationalists, unionists, and other sorts of social425 426 THE FREEMAN July ists. They made what political splash they made, at the outset, with inflationist schemes of one sort or another. In the early twentieth century, the Socialist Party, under the leadership of Eugene Debs, emerged and gained considerable following as a minor party until the end of World War I. It continued to exist thereafter but ceased to grow. Indeed, it went into a decline from which it has never recovered. The Communist Party, under the leader ship of William Z. Foster and others, had even less political success.

But even before the 1920's many of those who were inclined toward socialism had concluded that they could not attain power in America by professing to be socialists. Most Americans simply would not buy the package of socialism. when it was wrapped in that way. The best way to move toward socialism would be by way of the established political parties and by gaining footholds in governmental and other institu tions. There was no need to call par ticular programs socialistic and to describe their adoption as a move ment toward socialism. In fact, it would be counterproductive to do so. Much better to advance them as cures for particular problems and as made necessary by changing condi tions. The Fabians in England had pointed the way, and the American socialists modified their tactics to fit their own conditions. A Surreptitious Movement The movement toward socialism in the United States has been sur reptitious, even sneaky, and infil trative in character. Even so, it has not been directed by some master plan conceived by some planner, or planners. Nor has it been advanced, by and large, by a conspiracy. It would be easier to understand if there were a master plan and a well-organized conspiracy. But the evidence does not warrant the draw ing of any such conclusion. A conspi racy is, after all, an agreement be tween two or more people to do something illegal. Whereas, the dis tinctive feature of gradualist socialism is that it will achieve its goals legally. (Communists have, of course, often engaged in illegal· acts, been under the control of foreign powers, and been parts of con spiracies. However, communism is an adjacent movement to the main thrust toward socialism in America and has never been in control of it.) Moreover, the movement toward socialism is not done by a plan in the United States. It is not a plan but a method. There is an objective: It is to gain control of political power and transform America. The method is to employ those means which, at any given time, give the greatest pro mise of producing the desired re sults. This method is called prag matism, and its practitioners pride themselves on their lack of 1978 THE U.S.: THE CONCENTRATION OF POWER 427 commitment to any overall plan or strategy. Pragmatists feel their way toward their objective, thrusting through at weak spots and turning aside when resistance becomes so great as to threaten failure.

Though the goal of the gradualist socialist movement in America is power-political power-, it is not, as such, a political movement. It is, at bottom, an intellectual move ment, a movement aimed at con trolling what men think, or at the least establishing a subtle authority over what men say. Those who per sist in thinking of it as a political movement will ever have difficulty in grasping how it could maintain a coherent direction without a master plan and planners. Once it is under stood as a set of ideas, an ideology, this difficulty disappears. The cohe rent direction derives from the ideology. Anyone who is to any extent under the sway of the ideology can perceive which proposals for the use of government power are most in keeping with it. Those who do not subscribe to the ideology are disci plined by denying them the advan tages that stem from adherence to the prevailing ideology. It requires no conspiracy to carry out the punishment or ostracism; it does re quire the concurrence of true believ ers in the ideology. In addition to the concurrence of true believers, the thrust toward socialism is accomplished in America by the desire of many to be in keeping with what they believe to be intellectual fash ion or their fear of flouting it.

A great deal more could be said on this head, but only so much need be said as will put at naught the notion that what follows is an account of action by an organized conspiracy. Viewed in retrospect, the thrust to ward socialism in America-or, for that matter, in the world-may ap pear to follow a pattern, a pattern such as events have when they are planned and directed by some body of men. This pattern arises from two sources: one, there is a direction, of sorts, to the course of development; two, the historian organizes them for the telling so that the events have a greater coherence than they had in reality. At any rate, what follows is an effort to explain how the thrust toward socialism gained momentum and power over the American people. Powers Dispersed The United States government was deliberately designed to thwart the efforts of anyone man or group of men from gaining any continuing control over it. To that end, the powers of the federal government were separated into three branches, as were those of the states. Further, the powers of government were dis persed by granting certain powers to the general government and reserv428 THE FREEMAN July ing others to the states. In addition, some powers have been specifically denied to the general government and others to the states. Some of the other safeguards against the con centration of power were: staggering the terms of Senators so that only one-third of the Senate is to be elected at anyone time, having Congressmen elected for two-year terms and the President for four, and providing for an appointed judiciary. The states have generally dispersed their powers by having them exercised by municipalities, counties, and other local govern ments. All these arrangements tended both to prevent the concen tration of power and its use by any faction for its own purposes.

Anyone conversant with devel opments in government in the twentieth century knows that these obstacles to concentrating power and its regular use by a faction-a faction under the sway of the idea that has the world in its grip-have been largely overcome or circum vented. How it has come about does, however, need to be explained. It has not come about, not to any sig nificant extent, by amendments to the United States Constitution. The separation of powers among the branches still formally exists. The reserve of powers to the states has been only slightly altered by amendment. The constitutional pro tections of life, liberty, and property can still be found stated in the ca dences of eighteenth-century rhetoric. But much of the substance has been drained away while the forms still stand. In the broadest terms, here is what has happened. Power in the United States is today concentrated where it is least subject to popular control and most amenable to man ipulation by intellectuals and intel lectual fashion. More specifically, it is concentrated in the executive branch, the courts, and the bureau cracy. Preceding and accompanying this has been the concentration of power in the federal government.

The federal government is the most amenable of governments to ideolog ical influence brought to bear by the press, national magazines, televi sion, book publishers, and other media of communication. In a simi lar fashion, the executive branch, the courts, and the bureaucracy are readily swayed by these ideological influences. Lack of Popular Control Over Federal Government Vast political power is exercised today by those in the federal government over whom there is lit tle or no popular control. This state of affairs came about gradually over the better part of a century. Indeed, in the case of the Federal courts the potential was there from the begin ning. Federal judges were always 1978 THE U.S.: THE CONCENTRATION OF POWER 429 appointed by the President subject to the approval of the Senate. Their tenure in office is for life or during good behavior. But the ~~good be havior" requirement early became largely a dead letter because of the failure of Congress to persist with impeachments. Thus, the courts have ever had but a tangential rela tion to popular control.

This was by design, of course. The idea was that the judiciary should be independent, independent of politics so as to make their determinations according to law. This was a noble concept and was reasonably work able so long as judges believed themselves to be bound by the Con stitution, by precedent, and by rea son. But a subtle change began to occur in the latter part of the nine teenth century. Legal realism, as it is sometimes called, began to re place the concept of fixed and im mutable laws. What was the law began to be thought of as something that was changing, relative, and subject to continual mutation. This set the stage for a judiciary that was not only independent of politics but independent also of the received law. To an amazing extent, the Su preme Court became a law unto it self, upsetting and ignoring prece dent and ruling by pronouncements which were considered binding upon th~ lower courts.

Popular control over the bureau cracy declined as Civil Service reform made headway. The idea of having a body of civil servants who would be professionals free from the shifting political tides had broad appeal in the latter part of the nineteenth century. It got much impetus from the fact that President James A. Garfield was assassinated by a disappointed job seeker. Thereafter, a tenured civil service began to be created. Over the years, more and more employees came under it. Tenured Civil Service Having a tenured civil service did not matter so much as long as the sway and activities of the federal government were limited. But in the twentieth century, as the federal government intervened in more and more matters and began to touch and control the lives of Americans in an ever greater variety of ways, the effect of having an independent and ten ured civil service became some thing else again. So far as the bureaucracy was the government, they were controlling the lives of people but were themselves subject to very little popular (political?) con trol.

Another significant development in cutting government loose from popular control and concentrating power was in the authorization of independent commissions. The Interstate Commerce Commission was the first of these bodies. It was created in 1887 and given limited 430 THE FREEMAN July powers over the railroads but has since had its powers greatly aug mented and extended over other forms of transportation. It has since been joined by a goodly number of other such organizations, among them the Federal Reserve Board, the Federal Power Commission, the Civil Aeronautics Board, and others. Only a tenuous control over these organizations is maintained by the elective branches of the govern ment. They are authorized by Con gress, their members approved by the Senate after nomination by the President, and after that they pro ceed more or less on their own. Gen erally, they combine in single bodies powers of government that were separated by the United States Con stitution. That is, they legislate create a body of administrative law by their decisions; execute-carry into effect their rulings; and adjudi cate-hold hearings and make deci sions which often have the effect of law.

Not only do these independent commissions concentrate powers within the federal government but they also have tended to claim large new powers for the federal govern ment. By way of them, the federal government exercises extensive powers over transportation, electric ity, money and banking, basic fuels, and labor relations. Nowadays, by way of their sway over energy and the environment, the federal government reaches through to the most basic undertakings of Ameri cans. Presidential Power The growth of power vested in a bureaucracy was long paralleled by and even was an augmentation of presidential power. Presidential power began to dominate the other branches during the administra tions of Theodore Roosevelt and Woodrow Wilson. It became pre eminent during the three terms plus a fraction of another of Franklin D. Roosevelt. These Presidents pro ceeded to dominate the legislative branches by setting forth pro grams-descri bed respectively as the Square Deal, New Freedom, and New Deal-which they undertook to push through Congress. Once these programs were enacted into legisla tion, the executive branch was usu ally given many new powers and more extensive ones.

After the death of Franklin Roose velt, three Democratic Pres idents-Truman, Kennedy, and Johnson-attempted to advance similar broad programs under the rubrics of the Fair Deal, the New Frontier, and the Great Society. Truman, however, faced increasing opposition to his programs, and Kennedy was assassinated before he managed to translate much of his program into legislation. (In fact, until the media transformed Ken1978 THE U.S.: THE CONCENTRATION OF POWER 431 nedy into a folk hero following his assassination, he had made little mark on government.) In the wake of Kennedy's assassination, Presi dent Johnson was able to get a mul titude of laws passed, though there have been no prophets to proclaim that the Great Society emerged from it. But before he had served out the term to which he was elected on his own Johnson had become so unpopu lar, at least among radical elements, that he grew fearful of making pub lic appearances and declined to run again.

It is now possible to conclude that following World War II the tide began to turn against presidential power. Democratic Presidents, the main architects of the surge of pres idential power, were repeatedly drawn into actions which placed them at odds with some of the most vocal of their constituents in the intellectual community. As Wood row Wilson had written long before he came to the presidency, the major constitutional opening for the in crease of presidential power is in foreign affairs. Nor can it be doubted that Presidents reached the peak of their hold on power during wars. After World War II, the United States was confronted with expan sive communist powers, became em broiled in a Cold War with them, and there were two hot wars, Korea and Vietnam. Anti-communism, however, was not popular with many Democrats, and particularly not with intellectuals. Moreover, those Americans who were anti communists were hardly inclined to support Presidents who conducted lukewarm and increasingly limited wars in Korea and Vietnam. In con sequence, Presidents were unable to rally many members of their own party behind them and alienated much of the rest of the populace by their conduct of the wars.

There have been many indications that the tide has begun to run against presidential power. There was, of course, a Constitutional amendment, the 22nd, ratified in 1951, limiting Presidents to two terms. There have been congres sional efforts to restrain Presidents in foreign engagements. There were the weakened positions of both Truman and Johnson in their last years as President. There was the forced resignation of Vice-President Agnew and the even more dramatic resignation of President Nixon under the threat of imminent impeachment. The attacks on the FBI and· CIA, and subsequent limi tations placed on them, have had the effect of limiting the President. Moreover, President Carter was the first Democrat elected to the office in the twentieth century who did not run on the basis of some program name such as New Deal, Fair Deal, or the like. Nor has Carter thus far succeeded in getting much of his 432 THE FREEMAN July proposed legislation through Con gress.

None of this should be interpreted to mean that there has been any lessening in the trend toward concentration of power in the gen eral government. On the contrary, that has gone on at an accelerated pace even as presidential power was being restrained. While Johnson was being made virtually impotent by critics of the Vietnamese War, the Department of Health, Educa tion and Welfare was expanding its powers into more and more fields. Even as Nixon was approaching dis grace, the Environmental Protec tion Agency and OSHA were ex tending their reach into every nook and cranny of America. Vast grants made from the federal government to states and cities during Nixon's presidency concentrated decision making power in Washington and continued the process of making state and local governments ad ministrative arms of the federal government. Rather, the relative decline in presidential power should be inter preted as a further decrease in popu lar control over this vast govern ment with its concentration of power. The executive branch, i.e., the bureaucracy, increases in power as the powers of the Chief Executive decline. The Congress, historically the branch over which there has been the most direct popular control, does not, and cannot, exercise effec tive control over the bureaucracy and the independent commissions.

Congress has failed for several de cades now to restrain the judiciary, though there are ways it could do so. Presidents exercise only the most tenuous control over the bureau cracy. How Bureaucracy Functions The determinative role of bureaucracy is well described in this story which appeared in the Atlanta Constitution, March 26, 1978: Almost nobody has heard of Joe Sher man, a $47,500-a-year federal civil ser vant. He commutes quietly to Washing ton every morning from a modest brick home in suburban Alexandria, Va. His work is seldom noticed by the press or the public. But Joe Sherman may have an enor mous impact on the everyday lives of Americans for years, even generations, to come.... Sherman and his staff at the Depart ment of Housing and Urban Develop ment are devising energy standards for building construction that are likely to alter the appearance, shape, or inner workings of every office building, hospi tal, school, factory, and private home in the United States after February 1981.

The process is much like that by which thousands of other small but important decisions are made throughout the gov ernment. The decisions influence the type of food that people eat, the clothes they wear, the kinds of loans they get, the construction of the cars they drive.

1978 THE U.S.: THE CONCENTRATION OF POWER 433 The process is usually followed very closely by the specialists with a financial and a professional stake, but the public mostly learns little until it comes time to pay the bill, use the product and learn to live-and maybe suffer-with the re sults .... This is the story of how one law is being carried out. It began in 1976 when Congress passed the Energy Conserva tion Act. A little-noticed provision, heavily influenced by lobbyists for ar chitects, ordered the administration to draw up Hperformance standards for new residential and commercial buildings which are designed to achieve the maximum practical improvements in energy efficiency and increases in the uses of nondepletable sources of energy." Congress often leaves laws vague like that and allows the bureaucracy to work out the details. It is people like Joe Sherman who must figure out just what Congress meant by ((maximum practi cal."

The standards, which are expected to be incorporated into building codes all over the country, will for the first time require that all buildings be designed to meet an ((energy budget" -that is, they should be built to operate without using more than a specific amount of energy per square foot of space, depending on the purpose of the building and the cli mate where it is situated. The vast accretion of governmental power involved in this should not go unnoticed, either. The Department of Health, Edu cation and Welfare may be most correctly conceived as a sort of independent kingdom or fiefdom set up within the bounds of the United States and being charged with or assuming authority over some of the most sensitive areas of American life. When it was founded during Eisenhower's presidency it brought together a hodge-podge of bureaus which theretofore had modest pre tensions. Its activities and sway burgeoned with the spurt of legisla tion during the first two years of the Johnson administration. Congress and Presidents might have con ducted diplomatic relations with it during most of its lifetime if they could have discovered who, if any one, was in charge of it.

If the bureaucracy, the indepen dent commissions, and the courts the organs of the concentrated power of the federal government are not under the effective control of the elected representatives of the American people, who does control them? One way to answer the ques tion is to say that nobody does. And that answer is correct so far as it goes. The President does have some little residual power over them; the Congress does have potential power; and pressure groups do sometimes modify their actions. But nobody controls or directs them in the ordi nary conduct of their doings. Yet it would be incorrect to suppose that each bureaucrat or commissioner or judge simply decides his course of action, letting his conscience be his 434 THE FREEMAN July guide, and doing as he will. It may sometimes happen, but it is not characteristic. As indicated earlier, the bureau cracy, the commissions, and the courts are ruled, by and large, by intellectual fashion. It is not usually called fashion; more commonly it has been thought of as the zeitgeist, spirit of the times, intellectual milieu, or reigning ideology. These latter terms and phrases may be more precise or comprehensive, but ~~fashion" captures better the way in which the ideas work on individuals and groups.

The Ebb and Flow of Fashions Intellectual fashion changes even as do fashions in women's clothes. One year it is environmentalism, another consumerism, another the eradication of poverty, another the menace of big business, another in vestigative journalism aimed at purifying. politics, and so on. These intellectual fashions appear, de cline, virtually disappear, and recur much as do fashions in men's jack ets, say . Just as padded shoulders in jackets become fashionable, then not, then again, so do fashions in prevailing ideas; the. abolition of poverty was prominent in the 1890's, 1930's, and 1960's. The purification of politics was a major theme in the early twentieth century and then again in the 1970's. Intellectual fashion is determined in much the same manner as fash ions in clothes. Just as there are leading clothes designers, so there are leaders in setting forth what becomes intellectual fashion. For in tellectual fashion, there have been such thinkers as John Kenneth Gal braith, Ralph Nader, Michael Har rington, and the like. Just as among clothes designers, there is competi tion for whose notions will prevail among intellectuals. And just as in clothes design, the more radical ideas are for the Haute Coterie. Be neath these, those who conform to the fashion do so in less drastic and, hence, more popular formulations.

Underlying and supporting this shifting intellectual fashion is an ideology which does not change. Ideology informs· the continuing thrust to change, providing its direc tion and substance. What is in fash ion at the moment is the leading wedge of the drive toward transfor mation. American intellectuals and politicians generally pride them sel ves on their pragmatism, but they are pragmatic only in changing emphases with the fashions. Control over American govern ment and increasingly over the lives of Americans is exercised by intel lectual fashion and the underlying ideology. It is thus that the United States has been brought under the sway of the idea that has the world in its grip. This was made possible by the concentration of power in the 1978 THE U.S.: THE CONCENTRATION OF POWER 435 central government and its further concentration in those areas of government most remote from popu lar control. More and more people vote, but they have less and less control over the government and their own affairs and lives.

The Concentration of Power The greater the concentration of power the more readily can it be manipulated by intellectual fashion under the subtle control of ideology. It is easier to influence one man than several, to influence the Presi dent, say, than the nine justices of the Supreme Court. In like manner, the Supreme Court may be more readily influenced than can 100 Senators, and the Senate more read ily than the House of Representa tives. It should be equally clear that one general government can be swayed more easily than can fifty state governments. Influence may not be the right word; what often develops may be more correctly understood as pres sure. Leaders of intellectual fashion exert pressure on government, exert pressure until they get action quite often. Some examples may make the process clearer. In the 1960's, Ralph Nader wrote a book entitled Unsafe at Any Speed. He charged that American auto makers were turning out unsafe cars, failing to incorpo rate features that would save lives, and thus making auto travel precarious. In consequence of his charges a campaign to change all this emerged, laws were passed, and in the course of time various safety devices became mandatory for all automobiles. The impetus from this and similar works provoked two much broader campaigns: con sumerism in general and safety requirements by governments in general. Hence, a Federal Office of Consumer Affairs was authorized, and most states followed suit with their own offices or bureaus. Also, the federal government set up an Occupational Safety and Health Administration (OSHA) which began to promulgate thousands of rules and restrictions affecting the safety of workers. As for the gov ernmental intrusion into the auto mobile business, a newspaper re ports that more vehicles were re called because of defects in 1977 than were sold in that year.

Some years back, the late Rachel Carson came out with a book enti tled Silent Spring. This was the in tellectual opening for the environ mentalist campaign which got underway in the late 1960's. Environmentalism swiftly became the fashionable cause, horror stories spread of how we were destroying the environment with chemicals, threatening the oxygen supply, making the air poisonous to breathe, the water hazardous to drink, and making our surroundings desolate.

436 THE FREEMAN Protective legislation was, of course, forthcoming, and a new branch of the bureaucracy was created to see to the well-being of the environ ment. Where does this pressure come from? It comes from those who deal in one way or another with ideas, with opinion making and the spread of ideas, those in the grip of the idea of transforming man and his universe. They are mostly intellec tuals, or have intellectual preten sions: they are professors, students, teachers in general, journalists, writers, preachers, publicists, and what have you. How do they exert the pressure? They do so by the holding of key positions in the media of communication and by their suc cess in purveying the approved at titudes. Mere Presidents must be continually wary of them, lest a thoughtless word will ruin their chances for re-election. Generals who voice unapproved attitudes are likely to be hounded out of the ser vice, denied promotions, or buried in some administrative office in the Pentagon. Judges who hope for promotion must take care that they have never harbored opinions, or at least spoken or acted upon them, which will bring them to the unfa vorable attention of media spokes men.

There are numerous examples of what horrendous things can happen to those who provoke the wrath of media spokesmen, but no more dra matic one has yet occurred than that of the resignation of President Nixon in the wake of Watergate charges and revelations. Ordinarily, however, the power of intellectual fashion directed by those under the sway of the idea that has the world in its grip is not demonstrated by the destruction of men in high places. It evinces itself, rather, in the day to day pressures on politicians and others to take approved positions and advance their enactments. It makes certain courses of action unthinkable and those that are approved largely un questioned. It is a subtle and effec tive tyranny over thought. The con centrated power of government is wielded by those who dare not op pose this intellectual fashion. There are enough victims strewn along the wayside to serve as cautionary examples for those who consider any other course.

The power of government is wielded both directly and indirectly. We are all aware, more or less, of how control over our lives is wielded directly. It may be instructive, then, to examine into one of the promi nent indirect ways government wields power. @ Next: 20. The United States: Business as an Instrument of Politi cal Power.

Willie E. Nelms Ideas that Serve ONE FEATURE of the free market which is seldom completely ap preciated is the close relationship between innovation and the meeting of consumers' needs. In a market environment, the entrepreneur must be both a man of ideas, who has vision to foresee ways of produc ing goods and services more effec tively, and a man of action, who can implement these ideas. Many people believe that consum ers are at the mercy of producers, who have a captive audience to buy whatever they offer. Individuals sharing this view do not realize that the businessman's innovations must cater to the desires of consumers, or he will not prosper. The market encourages innovaMr. Nelms is a professional librarian in Virginia. ALEXANDER TURNEY STEWART tion, yet it rewards only those who meet the demands of consumers. When the entrepreneur loses the creative spark or when he ignores the wishes of his customers, he risks his business life. Where entry in the market is free, there will always be competitors willing to move ahead and provide for demands.

An excellent case study of this principle is the business empire built by Alexander Turney Stewart during the comparatively free mar ket of nineteenth-century America. Today, Stewart's name is unknown, but in the early and mid-1800s, he pioneered the development of what became the department store. Stewart was born in 1803, in County Antrim, in the north of Ire land. When his father died soon after his birth, young Alexander 438 THE FREEMAN July was placed in the care of his mater nal grandfather. A bright, intelli gent youth, he was at first pledged to the ministry. While still in his teens, Stewart visited New York and soon decided to enter the business world. Al though he had no experience as a merchant, he was captivated by the hustle and bustle of the New York business world. Deciding to import and sell Irish lace, he opened his first store in the summer of 1823. The shop was on Broadway and con sisted of a twelve-by-thirty-foot room filled with the wares he planned to sell.

From the beginning, Stewart demonstrated the creative genius and hard work that would prove to be his trademarks. He opened his store early and closed it late, he cultivated personal politeness to ward customers, and he carried quality merchandise. 1 His canniness in business encouraged him to open another store. When he outgrew it, still a larger building was acquired, so that by 1850, he had the largest retail business in the city. "Ten Per Cent and No Lies" Stewart's success and the growth of his concerns were a direct result of his hard work and innovative ef forts. In a day when most merchants believed in marking up prices very high on each item, Stewart under sold his competitors and reaped the benefits of selling large quantities at a small margin of profit. His slogan of ttten per cent and no lies" shows the connection between his mark-up on merchandise and the manner in which he insisted his products be represented to the pub lic. He abhorred misrepresentation to customers and insisted that his salesmen not make false claims for the material they sold.2 This prac tice was counter to the conventional business wisdom of the day, but it won Stewart a reputation for hon esty and reliability which he con verted into new sales.

Another feature of Stewart's business was the establishment of uniform pricing. Most of his compe tition arrived at prices for merchan dise by haggling with customers. To simplify his operations, he estab lished uniform prices, which applied to all customers. The success of this policy was huge, and eventually his competitors were forced to follow suit. 3 The variety of material and ser vices provided in Stewart's store also added to his sales. His innova tion of a single complete building, where shoppers were free to roam at will and view the merchandise, greatly simplified business. The at mosphere was pleasant and conve nient. In addition to a wider variety of merchandise than was available elsewhere, Stewart's offered several fringe benefits. These included writ1978 IDEAS THAT SERVE 439 ing desks for customers, a library, a delivery service, and toilet facilities for women. In the mid-1800s, even the latter convenience was consid ered innovative in the retail trade.

Customer Services Another important feature of the store was the unrestricted right of customers to enter, inspect and de cide on purchases without interfer ence by company personnel. Today such action is taken for granted, but at the time, patrons of retail estab lishments were seldom left unat tended to select material. 4 Very early in his career, Stewart adopted the practice of allowing merchandise returns for exchange or cash refunds. In general this was not an accepted practice of the period. Most merchants viewed each sale as final. Stewart's policy al lowed for many satisfied customers to remain in that category by being allowed to return unwanted items. 5 Sales were another feature of the Stewart business enterprise. He held a variety of them, ranging from fire sales to remnant sales. Needless to say, these brought great benefit to his many patrons and equal discom fort to his competitors, who did not follow suit. 6 The success of the Stewart enter prise is considerable, even by today's inflated standards. His business grew to the point that by the 1860s he had 2,000 people employed in his enterprises. By 1865, his total retail sales were $8,000,000 per year. This grew to more than $12,000,000 by 1873. By comparision, R. H. Macy's store did not reach $1,000,000 an nual volume until 1870, and it was not until 1896 that John Wanamaker became the second American drygoods merchant to sell $10,000,000 worth of retail items in a single year.

Unworthy Successors Other examples of Stewart's busi ness success can be seen from the records showing that 10 per cent of all imports at the Port of New York during the 1860s came to him. He was the greatest single taxpayer in the United States, and he owned more real estate than anyone in New York, except the Astors. 7 At his death in 1876, the Stewart estate was said to be worth $60,000,000, which included numerous factories in Europe. The Stewart empire was built on hard work and innovative thinking which met the demands of consumers. Un fortunately, the executor of his es tate, Henry Hilton, did not demon strate the same characteristics. Hil ton failed to keep pace with the business trends of the time and al lowed personal prejudice to affect his decisions. An example was Hilton's closing of the Grand Union Hotel in Saratoga, New York to Jews. This 440 THE FREEMAN action, taken just two months after Stewart's death, resulted in much bad publicity for the business. In addition, over a hundred promi nent merchants withdrew their wholesale trade from the Stewart drygoods store. 8 Where Stewart was able to stay one step ahead of his competitors and correctly anticipate customers' demands, Hilton was able to do neither. Through mismanagement and a lack of response to customers' needs, Hilton reduced the Stewart estate to a shambles. The large re tail store was sold and the fortune dissipated in less than twenty-five years. 9 The story of the Stewart empire illustrates how creative genius and hard work in the free market envi ronment can lead to success and benefi t both consumers and mer chants. Stewart's enterprise was a model of retailing in its time. But the Stewart story also illustrates how the market treats lack of creativity and a failure to accurately meet consumers' needs. Stewart's successor showed neither the will ingness nor the ability to meet the competition of the department store movement. As a result, Stewart's business empire is unknown today.

This case should serve as an example to anyone who charges that entrepreneurs in a free market need not worry about meeting the desires of customers. It illustrates the re wards that can occur when in genuity is combined with hard work, and the problems that result when these two assets are missing. @ -FOOTNOTES1"Alexander Turney Stewart" in Dictionary of American Biography, Edited by Dumas Malone, Volume IX, part 2 (New York, 1958), pp. 3-4; Edwin P. Hoyt, The Idea Men (New York, 1966), pp. 20-24. 2"Alexander T. Stewart," Fortune (January, 1975), p. 70; Harry E. Resseguie, llAlexander Turney Stewart and the Development of the Department Store, 1823-1876," Business His tory Review, Vol. 39 (Autumn, 1965), pp. 307 309. 3 llAlexander T. Stewart," Fortune, p. 70; Res seguie, llAlexander Turney Stewart," pp. 309 310. 4Ibid., pp. 310-312, 321. 5Ibid., pp. 311-312. 6Hoyt, The Idea Men, pp. 30-31.

7Ibid., p. 45. 8Ibid., pp. 46-47. 9Ibid., pp. 48-49. IDEAS ON LIBERTY Isaac Newton IF I have ever made any valuable discoveries, it has been owing more to patient attention than to any other talent.

Robert E. Hood THE LAW ALSO IS POLLUTED SOMEONE once suggested that the ultimate test of character would be to ask yourself what crimes, if any, you would commit if you could be absolutely certain that you would not be caught or even suspected. Obvi ously there are many people who, assured of such immunity, would take advantage of the situation people who would otherwise be law-abiding citizens. A few might choose to harm or even kill someone they particularly dislike. Some would perhaps destroy the property of another. There are many who would be inclined· to steal an enor mous sum of money in order to in sure a comfortable or even luxurious life style. Some might limit their greed to stealing one particular item or art object they have always co veted. Mr. Hood Is a businessman In Meredith, New Hamp shire. The possibilities are infinite but one thing is shared in common by all who would succumb to this gift of legal license by either stealing or otherwise infringing on the rights of someone else. They generally stay within the law not because they live by a rational moral code but simply because they are deterred from crime by fear of apprehension and punishment. They are the amoral pragmatists among us and their number is legion.

Obviously, the reality of the situation makes it unlikely that anyone would ever really be con fronted with this test of character. It is nonetheless intriguing to specu late on this hypothetical opportu nity to commit a crime and get away with it, each of us calling upon his values and moral code in arriving at a decision. The first time I consid ered it I quickly concluded that I was guided by moral values and 441 442 THE FREEMAN July respect for the rights of others; therefore, detection and punishment were not the primary deterrent for me. Later it occurred to me that I was not being asked if I would in fringe on the rights of another. The question is: What ~~crimes" would I commit? A crime is: ~~An act or omission forbidden by law and punishable upon conviction." Hence, there is not a single human action or thought which could not conceivably be a Hcrime." The most moral of human activity has only to be declared il legal by either a legislative body or a dictator and we have the potential for more crime. Therefore, crime be comes relative to the time and place in which we find ourselves. Had I lived as a serf in feudal Europe, there were probably a great many ~~crimes" I would have committed if assured immunity. Had I the misfor tune to be born in contemporary Russia or anyone of the many dic tatorships, I would surely be a ~~criminal" under such a system, especially if I were certain I could get away with it.

Two Kinds of Law We find ourselves today in a con stitutional republic. Ours is a gov ernment by law rather than by dic tatorial whim. There was a time when ours was largely a govern ment by moral law and therein lies the perplexing situation which must be considered when applying our test of character today. I expect that there are literally hundreds of laws which I would prefer breaking if guaranteed immunity, ~~crimes" no one of which infringes on a single right of a single other individual. If I decided to alter or build an addition to my home, I might pro ceed without so much as a by-your leave from the local planning board, zoning board, building inspector, electrical inspector, plumbing in spector, or other official. In fact, I probably wouldn't even refer to local building codes and such. If I made my Iiving in one of the many licensed trades or professions, I would probably choose not to renew a license which has little if any bearing on my professional ability.

If I were an employer I might choose to hire someone for less than the minimum wage if the prospec tive employee were agreeable. Or, I might even allow an employee to work hours in excess of labor law standards. I probably would have a great deal more time to devote to constructive and creative efforts than my competitors because I might devote no time at all to bu reaucratic paper work. I might even hire a 17-year-old high school stu dent to mow the lawn with a power mower or clear the parking lot with a snow blower, in flagrant violation of a law that frequently is over looked.

1978 THE LAW ALSO IS POLLUTED 443 If I were in the trucking business I would on occasion consider trans porting goods beyond the borders restricted to me by state and federal franchise limitations and I might even try to snatch a little business from my competitors by offering lower prices and better service. If I were a farmer in one of the many restricted areas of agricul ture, I might plant whatever I wanted on as many acres as I could plow, sow, maintain, and reap, and I would sell the harvest for the best price I could get. All of this with unconscionable disregard for laws intended to nprotect the public interest" but which in reality pre vent my serving the public. The Tax Dilemma There are many taxes which I would certainly prefer not to pay, my premise being that property earned by honest effort cannot right fully be expropriated by government however lofty the intended use. I must admit that I pay my taxes only because I fear the consequences of not doing so. I am not in the least motivated by a philanthropic love of Washington.

Thus, as moral individuals, if we are to test our character by this hypothesis in today's society we in evitably are confronted with a sig nificant dilemma. If we are to pre serve our semi-free system in the hope that right ultimately will prevail, then we must uphold the law. It is not our option as individuals to pick and choose the law which suits us, although we do obey many of them only through intimidation rather than in conformity to our personal moral code. That we are forced to obey many laws which, in fact, violate moral law may lead to the root of our dilemma: the pollu tion of our law. There is moral law, the purpose of which is to protect the life, liberty, and property of every individual with complete equality. And there is immoral law which seeks only to expropriate the rights and property of some for the supposed benefit of others. One is no less ~~the law" than the other but clearly there is an enormous difference in their treat ment of the rights of individuals.

One secures these rights; the other expropriates them. One is justice; the other injustice. Moral law (justice) is simply the codification of the natural right of self-defense-the right of each indi vidual to protect his own life, lib erty, and property. ~~It is the sub stitution of a common force (gov ernment) for individual forces," ac cording to Frederic Bastia t. ~~ And this common force is to do only what the individual forces have a natural and lawful right to do: to protect persons, liberties, and properties; to maintain the right of each, and to cause justice to reign over us all."

444 THE FREEMAN Bastiat applied this simple test to distinguish one type of law from the other: ((See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the ex pense of another by doing what the citizen himself cannot do without committing a crime .... If such a law is not abolished immediately, it will spread, multiply, and develop into a system." Prophetic words from well over a century ago, for we surely have developed such a system. Justice or Plunder? The vast majority of people make no attempt to distinguish between justice and injustice within the law. It is a vast gray area of an obscure process whereby the severest injus tice acquires an aura of respect sim ply by its enactment into law. We are all, including the most undis cerning among us, the victims of this pollution of our law. When the law ceases to be an instrument of justice it inevitably becomes less re spected. It should come as no sur prise that the laws of the United States are held in such low esteem today; not just immoral law, but all law, since most persons fail to dif ferentiate.

Bastiat warned us that, HIt is im possible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder. What are the consequences of such a per version? . . . it erases from everyone's conscience the distinc tion between justice and injustice. No society can exist unless the laws are respected to a certain degree. The safest way to make laws re spected 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." To respect the law today is to subjugate moral values to the irra tional whims of legislative bodies. To respect our natural right to life, lib erty and property and to live by that moral standard is to disrespect con temporary law. This poses a dif ficult, if not impossible, choice-a ucruel alternative," as Bastiat phrased it. But choose, we must. We can pursue our present course of law pollution with the result that we ultimately will be forced to pick and choose the laws we will obey; the course which inevitably leads to anarchy and dictatorship. Or, we could begin to devote as much effort and energy to cleaning up the law as we have devoted to cleaning our rivers and air. We could re-establish a government of morally pure law with the result that the law would be upheld largely by moral convic tion rather than at the point of a gun. ® A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN & MllJD)JD)LIE W&vcrp JEAN-FRANCOIS REVEL, one of France's sharpest critics of Com munism, including ((Euro-Com munism," thinks of himself as a democratic socialist. In a tantalizing book, The Totalitarian Temptation, he opposes what he calls the ((unoffi cial Stalinists" and the ((pidgin Marxists" from a middle ground of ((pluralist democracy" without ever quite realizing the connection be tween the property right and pluralism. He is willing to take capi talism in preference to the collec tivist state, and he is not cowed when Communists call him ((reac tionary," but in fighting the ((ex_ cesses" that crop up in the average socialist's critique of capitalism he betrays a yearning for something that he is unable to put into words.

The best he can do is to say that ((socialism," by which he means some undefined ideal thing, H can only take root in capitalism and de velop by outgrowing-not destroy ing-capitalist civilization, while preserving its two cornerstones: the capacity to produce, and political, individual and cultural freedoms." The Totalitarian Temptation by Jean-Francois Revel. Pub lished by Doubleday & Co., 245 Park Avenue, New York, N.Y. 10017, $8.95 Such a sentence I find very puz zling. Isn't Revel trying to tell us that he is a voluntarist who wants to build a cooperative world on a base 445 446 THE FREEMAN July of private property and free associa tion? The word (socialism," with the connotations it has gathered, hardly covers Revel's desire. Oddly enough, Revel's ((socialism" seems to be very much the French equivalent of the Hneo-con servatism" that Irving Kristol ac cepts in his witty Two Cheers for Capitalism. Unlike his French brother, Kristol disdains to use the word ((socialism," saying that the socialist doctrine is dead but as yet unburied. But he is still a socialist in the Revel sense when he puts in a plug for a ((conservative welfare state." The idea of a welfare state, he says, ((is in itself perfectly consis tent with a conservative political philosophy-as Bismarck knew a hundred years ago."

Two Cheers for Capitalism by Irving Kristo!. Published by Basic Books, 10 E. 53rd Street, New York, N.Y. 10022, $10.00 Bringing Bismarck, the Prussian junker who prepared the soil for Hitler, into the picture I find just as confusing as Revel's attempt to root ((socialism" in capitalism. The terms of the argument get unbearably fuzzy. Actually, Kristol is not for a welfare state; he is for a welfare society, which is something quite different. He is willing to let the state define the uses to which people shall put their own money during a sort of Fabianism-in-reverse transi tion to a cooperative world built on a base of pri vate property and free association. This is a tactical com promise, not a philosophy of the ((conservative welfare state" as such. Fabianism in Reverse I feel a certain kinship with both Revel and Kristol, for I have person ally been through the evolution that they have, in my judgment, only half-completed. To have a pluralist society using democratic methods of government, there must be the property base. It's a matter of physics, as Isabel Paterson ex plained long ago. The free man must have something to stand on. He can't have free speech unless he can own his own sources of woodpulp and his own printing press. (If he wants to make that free speech oral, he must be able to hire his own hall in the market place.) If the state has the power to conscript one's income, thus preventing the acquisition of private property, the possibility of pluralism and democracy tends to disappear as the government pushes its power toward the totalitarian ex treme.

Yet, in deference to Irving Kristol, we must acknowledge the tactical necessity of getting from ((here to there" in a Fabianism-in-reverse movement back to the voluntary so1978 A MIDDLE WAY? 447 ciety. Kristol is full of ingenious suggestions: he wants to move away from state social security and state medicine by letting individuals take their voluntary insurance payments to pension funds and Blue Cross and Blue Shield schemes as wholly tax deductible items. He wants to see the Republican Party build itself anew on a program of offering ((in centives for the citizen to provide for his own welfare." No Sense of Direction The difficulty of working from the Kristol-or the Revel-position is that, when one becomes engaged in the game of Fabian compromise, it becomes increasingly hard to keep one's .sense of direction. To get a compromise in a libertarian, volun taristic direction, you need some muscularity and conviction in your preference for, say, private educa tion versus the public school. There must be a determined opposition in society to the idea of state support of education in order to provide the leverage to fight for even the mild est Fabianism-in-reverse voucher system for parents who might prefer private schools. The question comes down to the polarities of pluralism.

Where,and on what, do you take your stand? Polarities are created in society before they send their representa tives to the legislature. Mr. Kristol sees this point at times. He attacks what he calls the ((new class" for its greed for controlling the levers of power that are operated from a polit ical base in Washington. The ~~new class" sets itself up as an elite with a mystical call to use the common man's tax money-and the inflation ary paper dollar-to set the stan dards for society. With its support in the media, the new class has no compunctions about using compul sion to get its way. It wants no part of pluralism. Kristol supports some regulation, but in his evolution to nneo conservatism" he is having second thoughts about putting fetters on individuals and private organiza tions. He is worried about the bu reaucratization of society that re sults from ((new class" management of the people's tax money. The wel fare state, he says, is on a collision course with a working class psychol ogy which, while not rejecting any of the benefits of welfarism, feels vic timized by it. It turns out that it isn't much fun to be managed by the elite ~~new class" sons and daughters of the old middle class.

An Ugly Battle over the Question of Power In his progress from a quasi socialism to neo-conservatism, Kris tol has discovered ~(a dirty little se cret." The new elite talks about the ((redistribution of income." But it wants the income to be handed over 448 THE FREEMAN to the state, with the elite assuming the prerogatives of dishing it out. The battle is over the question of power. It is an ugly battle. So Mr. Kristol has become a tax rebel. He would force the rich to bequeath their money to heirs in small amounts, but for the living he advocates letting them keep their money. He still chides capitalists for not Hthinking politically." But in his own mind he considers the world has become too politicized. He ends as he begins, by giving ((two cheers" for capitalism on the grounds that the alternatives to it supported by the new elites range from the ((hideous" to the ((merely squalid." Com munism, socialism and fascism have all turned out to be illusions or frauds. So let us have a political order that allows men and women a private life, using their energies as they themselves may choose. @J HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $3.00 Order from: THE FOUNDATION FOR ECONOMIC EDUCATION, INC.

IRVINGTON-ON-HUDSON, NEW YORK 10533 the Freeman VOL. 28, NO.8. AUGUST 1978 One Currency for the World? Henry Hazlitt 451 Look not to international agreements for a money as good as gold. Inflation-What It Is and What It Does Bettina Bien Greaves 455 Government creation of additional dollars discourages saving, hampers production, and denies individual self-reliance. Gourds and Dollars Ralph Bradford 460 From gourds to gold as money in Haiti. World in the Grip of an Idea 20. The United States: Business as an Instrument of Political Power Clarence B. Carson 463 Government control over business makes business the instrument of government control of consumers. Keep Off the Grass Gary North 475 Observations concerning the nature and the impact of central planning. Robert Louis Stevenson: Champion of Liberty Bob Stevenson 481 A biographical sketch of the libertarian views of the famed storyteller.

The Day After ToMorrow Robert Louis Stevenson 489 An early and accurate foretelling of the state of society under socialist rule. The Success of Failure Thomas W. Hazlett 498 Differences between governmental and market attitudes toward fai lure and success. Time for Truth-Time to Act William H. Peterson 505 An article review of the new book by William E. Simon. Book Reviews: 509 "Two Philosophies of Money: The Conflict of Trust and Authority" by S. Herbert Frankel "Economics: Principles and Policy from a Christian Perspective" by Tom Rose Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson, N.Y. 10533 Tel: (914) 591-7230 LeonardE. Read, President Managing Editor: Paul L. Poirot Production Editor: Beth A. Hoffman Contributing Editors: Robert G. Anderson Bettina Bien Greaves Edmund A. Opitz (Book Reviews) Brian Summers THE FREEMAN is published monthly· by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of pri vate property, the free market,.the profit and loss system, and limited government. The costs of Foundation projects and services are met through donations. Total expenses aver age $18.00 a year per person on the mailing list. Donations are invited in any amount. THE FREEMAN is available to any interested person in the United States for the asking. For foreign deli very, a donation is required sufficient to cover direct mailing cost of $5.00 a year. Copyright, 1978. The Foundation for Economic Education, Inc. Printed in U.S.A.

Additional copies, postpaid: 3 for $1.00; 10 or more, 25 cents each. THE FREEMAN is available on microfilm from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "World in the Grip of an Idea."

Henry Hazlitt ONE CURRENCY FOR THE WORLD? HNeeded: A Common World Curren rency." So asserts the title of an article in the May issue of PHP. PHP is a monthly magazine published in To kyo, by a dominantly Japanese editorial staff. It is in English, how ever, and aimed at a worldwide au dience. The title initials stand for ((Peace, Happiness and Prosperity." The author of the article is Konosuke Matsushita, founder of the international electric and home appliance industry, Matsushita Electric. The hope that Mr. Matsushita ex presses is one that has been voiced by reformers for more than a cen tury. His arguments for it are per suasive. He refers to the wild fluctuHenry Hazlitt, noted economist, author, editor, re viewer and columnist, is well known to readers of the New York Times, Newsweek, The Freeman, Bar ron's, Human Events and many others. The most recent of his numerous books is The Inflation Crisis, and How to Resolve It.

ations in international exchange rates in the last few years. He points out that at the beginning of 1977 it took 290 yen to buy a dollar, but by the end of the year only 240. He reminds his readers that in De cember 1971 The Group ofTen coun tries met in Washington to set up a new international currency system, known as the ((Smithsonian" agree ment, hailed at the time as Hthe most important monetary agreement in history"-and that it broke down in a year or so. After that the world entered a ((floating currency" era. But this means that every day the exchange rate of every national currency fluc tuates in terms of every other. It means that no one can foresee what any given currency will be worth in terms of any other a year from now, or even tomorrow. And so it means that every man engaged in import or export trade, or in any international business whatever, is forced to some 451 452 THE FREEMAN August extent to become a gambler. Deplor ing all this, Mr. Matsushita con cludes: We need to integrate the wide variety of currencies we have now. In other words, I suggest we agree on the use of one currency that will be common in all the countries of the world .... I am fully aware of the numerous problems that would be involved, such as national pride, differences in economic level and so on. However, if we want to continue our community life on this planet, we're going to have to integrate our currencies at the earliest possible date ....

I suggest the United Nations or the International Monetary Fund take up the problem, seek to overcome the dif ficulties which lie in the way by eliciting the cooperation, effort and wisdom of every country, and therefore achieve an integration of the world's currencies for the peace, happiness and prosperity of the world. I find Mr. Matsushita's article en couraging in one respect but dis heartening in others. It is encourag ing as a sign that leading interna tional businessmen are beginning to call for an end to the present intol erable chaos in the foreign ex change market, and are willing to set aside national prejudices to achieve a return to order. But it is disheartening as a sign that these businessmen-probably the ma jority of them-still do not under stand the basic causes or suspect the basic cure for the world currency chaos. Balance of Payments Mr. Matsushita seems to think that the basic cause of the changes in the yen-dollar and other ex change rates was changes in the ((balance of payments" between in dividual nations. He does not seem to realize that these wide fluctua tions in the balance of payments were themselves in large part the result of different rates of inflation within the respective countries, and consequent shifts in the relation ships between internal and external prices. His article nowhere mentions the enormous increase in the paper-money issuance of individual countries. And it nowhere mentions gold.

The truth is that the world once did have a common currency, in ev erything but name. It had such a currency roughly from the last third of the Nineteenth Century to 1914. It was known as the gold standard. The majority of leading currencies were tied together not because they were tied to each other but because each of them was tied to gold. Each was directly convertible on demand into a specified weight of gold. The British pound was worth $4.86 be cause it was convertible into 4.86 times the weight of gold that the dollar was. The French franc was worth approximately 19.3 cents for similar reason. True, as an international system this had a few shortcomings. It 1978 ONE CURRENCY FOR THE WORLD? 453 would have been far simpler and made calculation easier if each na tional currency had been made con vertible into precisely the same weight of gold, or at least into a round relationship to other currencies-if, for example, the British pound had been convertible into exactly five times the weight of gold as the dollar, the dollar into exactly five times the weight of gold as the franc, and so on.

Fractional Reserve Gold Standard A more serious shortcoming, how ever, is that the various national currencies were not on a full gold standard but only on what is known as a fractional reserve system. That is, the gold reserve they were obliged to keep was not equal to the full amount of their outstanding paper currency, but only to a frac tion of it. And as time went on, and individual countries experienced no excessive runs on their gold supply, they yielded to the temptation to increase their credi t and currency issues more and more. Their gold reserves, in consequence, tended to become a constantly smaller and more hazardous fraction of their credit and currency issue. The fractional-reserve gold stan dard, moreover, even while it was preserved, suffered from a chronic defect. In good times, one country after another was tempted to expand its volume of money and credit. But when one country expanded faster than its neighbors, its internal prices increased relative to theirs. It became a better place to sell to and a poorer place to buy from. Its balance of trade (or payments) became ~~un favorable." Its currency went to a discount on the foreign exchange market; and if that discount passed ~~the gold point," the country began to lose gold. To stop the outflow, it had to raise its interest rates and contract its issuance of credit and currency. It was this that caused the recurring business cycles, the alter nation of boom and bust, that were considered by its critics to be inher ent in capitalism itself.

Even the fractional gold standard was abandoned in Europe in 1914. The belligerents feared to lose their precious gold reserves, and in any case they wanted to be free to ex pand their currency and credit. Gold Exchange Standard When the war was over the world went back, not to the old gold stan dard, but to a ~~gold-exchange" stan dard. This was something quite dif ferent. The gold-exchange standard meant that the majority of coun tries, instead of keeping their cur rencies directly convertible into gold, kept them convertible only into some ~~key currency" -for example, the British pound or the American dollar-which was sup454 THE FREEMAN August posed to be directly convertible into gold. As formalized at Bretton Woods in 1944, the gold-exchange standard became still more attenuated. The other participating countries agreed only to keep their currencies pegged to the American dollar; the dollar alone was convertible into gold. But even then, dollars were not, as for merly, convertible by anybody who held them, but only by foreign cen tral banks.

The effect of this relaxation of discipline, combined with the growth of the Keynesian ideology, was increasing and almost universal inflation. The American monetary managers, under successive Admin istrations, did not seem to have the slightest realization of the weight of responsibility they had assumed in agreeing to make the dollar the an chor currency for the world. They continued to inflate until, when other countries finally became more importunate in their demand for ac, tual gold, President Nixon officially suspended gold payments on August 15, 1971. A profound irony in Mr. Mat sushita's proposals is that he wants to turn over the problem of curing the world's currency ills to the International Monetary Fund. But the International Monetary Fund is the problem. It was set up at Bretton Woods, chiefly under the leadership of Lord Keynes of England and Harry Dexter White of the United States, to make inflation and de valuation easier, smoother, and re spectable. Instead of letting each country suffer the full consequences of its own inflation, the IMF used the stronger currencies to support the weaker. The long-run effect was only to weaken the stronger curren cies. One of the Bretton Woods' ob jectives from the beginning was to ((phase gold out of the system." One of the first steps in any real currency reform would be to dismantle the IMF.

Mr. Matsushita forgets that the meeting that drafted the Smithso nian agreement, to which he refers, came only three months after the United States suspended gold pay ments; that the Smithsonian agreement was thought necessary because of this suspension; and that it broke down so soon because gold convertibility was not restored. There is simply no substitute for gold convertibility. No international organization can wave a magic wand, or draft a magic formula, that will bring a sound nworld" currency. Each nation must bear full responsibility for its own currency. It can make it sound only by making it convertible into gold. And it can make and keep it conver tible only by strictly and constantly limiting the quantity of that cur rency.

1978 ONE CURRENCY FOR THE WORLD? 455 Because of the dismal recent rec ord of practically all countries in swindling their own citizens, the re turn to an honest convertible cur rency may now be difficult and re mote. Individual nations can begin by strictly limiting any further ex pansion of their credit and currency issue. Meanwhile they can grant the right to their own citizens to coin gold privately and even to issue gold certificates against their coins. When governments are ready themselves to return to a gold stan dard, it would be well if this time they kept a 100 per cent gold reserve behind their paper currency and so removed the expansionary tempta tions of a fractional-reserve system. And it would be an excellent thing, also, if their new currency unit were fixed as a definite round weight of gold, say a gram, and were called simply a goldgram-instead of a dol lar, franc, mark, peso or what not and if at least the leading countries could agree on the same gold weight for their unit. Then the world would really have, for all practical pur poses, the ((single" and common cur rency that Mr. Matsushita would so much like to see. @ Bettina Bien Greaves Inflation What It Is and What It Does WHENEVER we act, we want our ac tions to be successful. It always helps to take stock of the past and to try to foresee the future. As all of us are buyers of some things and sellMrs. Greaves Is a member of the senior staff of The Foundation for Economic Education, author of the two-volume Free Market Economics published by the Foundation in 1975, and translator of LUdWigvon Mlses' On the Manipulation of Money and Credit, Percy LGreaves, Jr., editor (Dobbs Ferry, N.Y.: Free Market Books, 1978).

ers of others, the more we can know about what is likely to happen to prices the better. Nowadays, more and more people complain of the higher and higher prices· asked for practically all the things they want to buy and they expect prices to keep on rising further. Many· say these higher prices are (~inflation." Then, because most producers and sellers of goods and services raise their prices· fre456 THE FREEMAN August quently, people blame them for uin flation." They blame businessmen who are asking higher prices, labor unions who obtain higher wages for their members, the international oil cartel (OPEC) when it raises the price of petroleum, farmers who ask more for beef, manufacturers who raise steel prices which add to the costs of producing many other items. Then, when the higher prices of U.S. manufactured goods discourage for eigners from buying, they blame the declining ubalance of payments" due to fewer sales abroad. The list of culprits blamed for Hinflation" is almost as long as the number of persons offering goods on the mar ket.

Usually ignored in these discus sions is the one thing all prices have in common-the fact that they are expressed in dollars. Because prices are dollar prices, it would seem ob vious that the number of dollars must have something to do with higher prices and ~~inflation." Certainly people with more money will be able to spend more than those with less. They will gen erally be willing-and able-to offer higher prices for any particular item they want. Thus, when higher prices are not only being asked, but are actually being paid, for many or most goods and services on the mar ket, it must mean that many people have more dollars to spend. There fore, an increase in the number of dollars may be the real culprit to blame for higher prices. Perhaps the increase in the quantity of money itself is the real ~~inflation." Let us look at the situation. Do People Have More Dollars? In this country, only the national government, the Federal Reserve, and the banking system are now legally permitted to create U.S. dol lars. If you and I were to manufac ture dollar bills, this would be ucounterfeiting." But the U.S. gov ernment and the banks may add to the money stock without fear of penalty. And they do just that. This expansion is carried out primarily by monetizing Federal debt, by Fed eral Reserve ~~open market opera tions" and by credit expansion through commercial bank loans to private borrowers. In other words, the Federal Reserve System, with the aid and support of the U.S. gov ernment, is responsible for the number of dollars in existence.

The official estimate of U.S. dollars is reported regularly by the Federal Reserve. Their figures show that the stock of money has been increased tremendously in recent decades, especially since World War II. It was almost doubled during the War from about $64.5 billion at the end of 1941 to $132.5 billion by the end of 1945. Since then the number of U.S. dollars has mushroomed during Republican and Democratic 1978 INFLATION-WHAT IT IS AND WHAT IT DOES 457 administrations alike. From a figure of $620 billion in January 1975, the money stock (currency plus private checking deposits plus commercial time and savings deposits) rose to $806 billion at the end of 1977. With so many new dollars being created is it any wonder that many people are spending more than ever before? As a matter of fact, the increase in the number of dollars is inflation. It is this increase that accounts for the higher prices we all must pay for most of the things we buy.

Who Spends the Newly Created Dollars? Who spends the newly created dol lars? And for what? That depends on the choices and actions of those who receive them-(a) the U.S. govern ment, (b) the banks expanding cred it to make loans and (c) those who receive the funds created. When the U.S. government is the beneficiary, the newly created dollars go into the general ((pot" and are drawn on for various expenses. When the new dollars are issued by the banks in the form of increased loans, the banks determine to whom they are lent and each borrower decides how to use his borrowed money. From October 1, 1976, through September 30, 1977, the federal government spent $406.4 billion, only $358.3 billion of which were covered by its receipts from various sources-taxes, bonds sold to private persons, revenues paid for services rendered, and the like . Newly created money and/or credit made up the difference of $48.1 billion.

When the government spends these newly created dollars, they go for its various programs. No one knows who is getting old dollars earned in production and paid to the govern ment in taxes and who is getting new ones. The tax funds and the newly created money all look alike and all go into the same U.S. gov ernment ~~pot" from which it pays its expenses. However, we can be sure that these additional dollars enable the federal government to spend more freely and to support more non producers than it otherwise could. And such federal programs, trans ferring wealth from producers and taxpayers to others who earn little or nothing themselves, have been growing fast. In 1975, Roy L. Ash, formerly director of the federal gov ernment's Office of Management and Budget, estimated that the U.S. government's ~~transfer payments" such as Social Security, payments to retired railroad and government employees, for Medicare and Medicaid, for welfare and social ser vices, for food stamps, for veterans benefits and for the unemployed then comprised one-half of federal expenditures-up from only 20 per cent in 1950 (Wall Street Journal, July 28, 1975).

458 THE FREEMAN August Multiplying Effects Not surprisingly, those who bene fit under these government ~~trans fer" programs are more willing and better able to pay higher dollar prices for the things they want than if they had to rely on their own resources. Their greater willingness to spend enables those who sell to them to ask for, and to receive, higher prices for these particular items. And these sellers must ask for more, if they want to stretch out their available supplies to meet the new demand from ~~transfer pay ment" recipients. Thus, the pressure toward higher prices increases. Then step by step, as the newly created money travels from one sell er to another, it begins to affect other prices also. When the new dollars come on the market in the form of bank loans to private consumers and business firms, the new borrowers are in a position to offer higher prices than before for whatever they want.

Whether they spend their borrowed funds for consumers' goods, to hire workers, to purchase raw materials, to build factories, to expand or to start new production, those offering these particular goods or services on the market soon learn that these new borrowers will pay more than most. previous customers had been ready to pay. Then they too begin to raise their asking prices in response to this newly stimulated demand. This helps to stretch out the avail able supplies to meet the increased demand. It also serves to spur pro ducers to expand production or to embark on new projects to satisfy their new customers. Then again, step by step over time, as the newly created money is traded from person to person the higher prices paid by beneficiaries of this credit expansion influence other prices also. Certain Consequences What are the effects of creating new dollars? One effect of creating additional dollars, i.e., of inflation, as we have seen, is generally higher prices. However, they are only one effect. And they are not the most serious effect of inflation at that.

Increasing the number of dollars leads to shifts in wealth and income. As prices rise, more dollars are needed to buy things. The dollar's purchasing power goes down. As a result also the value of the dollar declines in the minds of people. Anyone who has been holding dol lars and/or somebody's promise to pay dollars, suffers the loss of a part of their value. After a time when he spends his dollar savings, he en counters higher prices then pre vailed when he was' working and saving. Without going near his wal let, ((piggy bank" or savings deposit, the inflaters have deprived him of a part of his wealth. The beneficiaries of the inflation and those who re1978 INFLATION-WHAT IT IS AND WHAT IT DOES 459 ceive unexpectedly higher prices for their goods and services gain ttwindfall profits" at the expense of the previous owners of dollars and assets fixed in dollars. Increasing the number of dollars discourages saving. Certainly if new dollars are being created in large quantities, holding dollars offers no real assurance of having anything like the same purchasing power ia ter. Why work hard and save if the purchasing power of any dollar saved is expected to fall? Better spend one's entire pay check, enjoy life today and hope for the best to morrow.

Increasing dollars spent on rrtrans fer payments" helps to keep non producers dependent on government handouts. With respect to one form of Htransfer payment," the great free market economist Ludwig von Mises (1881 .. 1973) described unemploy ment relief in 1931 as ((one link in the chain of causes which actually makes unemployment a long-term mass phenomenon." By paying peo ple not to work, tttransfer payments" help keep non-producers idle. Thus they tend to weaken self-respect and individual responsibility. At the same time, the cost of paying more and more non-producers becomes an increasingly heavy burden on those who continue working and produc ing. If the programs are not discon tinued taxes must be increased again and again. Or government of ficials, who believe sincerely in the nneed" for continuing Htransfer payments," are likely to resort to further inflation. Higher taxes and more inflation are serious drags on production.

They distort prices, alter the pattern of production, shift wealth from sav ers to spenders, discourage savings and investment and hamper indi vidual effort, initiative and in genuity. Destroys Hope for Security and Independence Perhaps the most demoralizing ef fect of inflation, however, is that it discourages the desire and the hope of people for financial security and economic independence. It first de stroys the value of the dollar so as to weaken the incentive to save. Then by holding out the hope of governmen t-guaran teed sec uri ty from retirement to the grave, gov ernment undermines one of the most powerful reasons to strive for finan cial independence. Self-respect, in dividual responsibility and family ties are bound to suffer. Thus, the end result of inflation is to dampen ambition, industry, the desire to save and invest, and pride in per sonal accomplishment and indepen dence-all traits on which the fu ture freedom and welfare of this country must rest. , Ralph Bradford WHEN Jonah sat in the shade of his heaven-sent vine he was no doubt unaware (as he was of some other important things) that a time would come when the fruit of his shade vine would play an important, if transitory, role in the field of high finance.

The time, to be sure, was far down the centuries from Jonah's day, and did not arrive till 1807. The place was a steamy but beautiful little island of the Caribbean. By that time the original Caribs had long since perished, and were replaced by Europeans, especially by Spanish in the east and French in the west and by black slaves all over the place. Slavery, of course, is always hate ful and cruel; but there are degrees to the degradation it imposes; and the planters who had settled in the Artibonite Plaine of Saint Domin gues had brought its horrors to a Mr. Bradford, of Ocala, Florida, Is well known as a writer, poet, speaker, and business organization consultant. Gourds and Dollars new depth of savagery. At long last came the inevitable explosion. Sud denly the whole countryside was in flaming revolt. And the slaves had able leaders: Oge, Boukman, Chavannes, and others of lesser fame-all of whom were soon killed. And then came three compelling figures, former slaves all, whose names were to be inscribed, quite literally, in blood: Toussaint, Dessalines, Christophe.

Toussaint was nicknamed L'Ouver ture because as a general he always seemed able to H open" things up for victory-or for escape. His two great lieutenants were: Jean-Jacques Des salines, unlettered and ferocious, but a great battle tactician; and Henry Christophe, a physical giant with the gift of leadership. Christophe was born, it is be lieved, on the British island of St. Kitts, which at that time was still called Saint Christopher. This may account for his last name, and also for the fact that though he was French in speech and name and senGOURDS AND DOLLARS 461 timent, he always spelled his first name with the terminal English ~~y" instead of the French ni." Most likely he pronounced it Dnree, but he spelled it Henry. So much for the main actors. In a few swift and bloody years the dark drama of the tragic little black na tion moved to its denouement. Tous saint was tricked, captured, and al lowed to die miserably in a frigid French prison. Dessalines, after a grotesque brief masquerade as ~~Emperor ," was murdered by his own people. That left the towering Christophe, who became head of state, and who finally made himself king. But the king business came later.

In 1807 this ex-slave stable boy and sometime waiter was named President of the newly-created Re public of Haiti. It was a moment of glory for the dignified man who, as a menial, had been slapped and treated to other indignities. But it was also a moment of great prob lems and sharp decisions. For one thing, he headed a com pletely bankrupt government. The land had been· laid waste by the ravages of the revolt against the landed proprietors, the revolution against France, the wars with the Spaniards on the eastern end of the island, and by their own internecine butcheries. There was no currency system, and Christophe had no money and no reserves of any kind. Needless to say, he could secure no credit abroad. But Christophe was both a re sourceful military leader and an able administrator. He could not read, but he knew the absolute necessity of a workable currency system. And he knew something else-namely, that the people he governed relied greatly on the homely gourd vine in their domestic economy, using its fruit, when dried and free of seeds and pulp, to make all kinds of household utensils bottles, decanters, bowls, saucers, cups, even spoons and plates. The gourd, indeed, was about the nearest thing to a constant and general necessity in the simple life of the Haitian peasants. And the gourd utensils wore out quickly, broke eas ily, and had to be replaced often.

As Christophe ascended to power a green crop of gourds was ripening. So he issued an edict that all gourds were the property of the state. He sent out collectors to seize them, and in a short time they had brought in and ~~deposited" the year's crop at Cap Francois. That became the (~re serve" in Christophe's ((treasury," and he put an arbitrary value of 20 sous on each gourd, which estab lished the ratio of five gourds to the French Franc. Then he waited a while.! lSee pages 108-9 of John Vandercook's excel lent book, Black Majesty, Harpers, 1928.

462 THE FREEMAN Gourds to Coffee to Gold Soon the important coffee crop ripened. Coffee, along with cane for sugar, were the money crops of the island. But there was little sugar as yet, because the sugar mills had all been burned down in the wars. When the coffee beans were brought to market, Christophe bought them-and paid for them with the gourds he had previously expro priated, sometimes from the coffee growers themselves! Then he resold the coffee to foreign traders-for gold; and before long he had a sub stantial metal reserve and could put a gold-supported currency into cir culation. As one result of this re markable adventure into sophis ticated governmental finance, after 170 years the unit of currency in Haiti is still called the gourde. More significantly, the Christophe technique had become a potent, if unrecognized and unacknowledged, fixture in that form of fiscal legerdemain known today as deficit financing.

Not many Americans raise gourds these days, and converted cucur bitaceous shells have little impor tance in our national economy. But the gourds of Christophe are sym bolic of other possessions of ours that are systematically diverted from their normal use by a modern and deadly version of the Christophe process. Those possessions are the dollars which we have earned and tried to save and invest, but which are taken away from us by the hidden and insidious seizures of debt-created in flation. No analogy is here intended or implied between the Haitian trea sury dilemma of 1807 and the mul titudinous, mountainous, and worldwide profligacies of our own government. We are not here con cerned with those balance-of-pay ment problems occasioned by our many international involvements, but with the simple arithmetic of a perpetually unbalanced national budget, and the resultant gnawing away of our substance by the steady and relentless debasement of our money in relation to the things we would purchase with it.

Henry Christophe seized the peo pIe's gourds to underwrite his money. That was the law less proce dure of a dictator, a piece of hard fisted brigandage. But it was a one time expedient to meet an emer gency, and was never repeated. Even so, it was an illegal act of ruthless seizure. And yet ... And yet . . . as between two methods of expropriation, the one lawless but visible and not con tinued, the other legal but hidden and ruinously perpetuated-maybe there is something to be said, after all, for Christophe and his gourds! , \\GrId inthe gURQfan Iuea, Clarence B. Carson 20. The United States: Business as an Llnstrumentof PoliticalPower BRIDLES for horses are equipped with blinkers. They are flaps on both sides of the horse's head at the level of the eye. Horses are skittish animals, and the purpose of the blinkers is to shut off peripheral vision so that the horse will not attend to or be startled by some thing seen out of the corner of the eye.

Modern man is provided with blinkers, too. These are intellectual In this series, Dr. Carson examines the connection between Ideology and the revolutions of our time and traces the Impact on several major countries and the spread of the Ideas and practices around the world. blinkers provided by the prevailing ideology . Under the sway ofthe idea that has the world in its grip, intel lectuals blinker or blind us by de termining what are the issues and in what terms they are to be dis cussed. Our intellectual vision is narrowed to take in only what we are supposed to see. True, there are those who persist in seeing more than is prescribed, but they are usu ally denied any·forum from which to dramatize their viewpoint. The prevailing ideology holds that ~~business," defined as an interest group, is in a continuing opposition to government intervention and 463 464 THE FREEMAN August regulation. The antecedents of this notion are in ideology. Marxist ideology proclaimed that a class struggle was in progress. The main antagonists in this struggle were the capitalist class and the pro letariat class. Gradualists have wa tered down this doctrine considera bly' softened it at the edges, and made it less pronounced. But as they have instituted their reforms and regulations in the United States, they have clung to a subtle variation of the class struggle notion that cap italists are the enemy. On this view, businessmen favor laissez faire and oppose government intervention, while government intervenes on be half of Hthe people" to hold obstreperous businessmen in line.

These are the terms in which the issues must be discussed, if intellec tual fashion is to be observed. The Marxist notion that capital ists constitute a class vigorously de fending· their interests against all challengers is about as valid as would be the notion that all females eligible for marriage constitute a class pursuing the common aim of marriage. The fact is that eligible females are in competition with one another for the available swains, if matrimony is their object. In their own way, businessmen are in com petition with one another. They compete for custo~ers, for mate rials, for workers, and for whatever they conceive would be advantageous to them. True, some business men oppose regulation as a matter of principle; and a goodly number oppose regulations when it is expe dient to do so. It is also the case that businessmen are more apt to denounce regulation than are, say, journalists or teachers-regulation of business, that is.

Be that as it may, it is a grotesque distortion of what is happening to look at the matter this way. There is every reason to believe that businessmen spend vastly more in genuity, energy, and money to get regulations construed so as to be able to live with or take advantage of them than they do in opposition to intervention. If this were the issue, however, there would be room for it as an issue in the framework of the prevailing ideology. There has been much discussion over the years about how the regulated manipulate the regulators. Those favoring gov ernment restraint of business have deplored it, while those more favor ably disposed toward the needs of business activity have been more charitably inclined toward some thing they consider inevitable in any case. Businesses Collect Taxes But what is happening most prominently is of a different order. The grip of the idea is being fastened on America by using business as an instrument of political power. Much 1978 THE U.S.: BUSINESS AS AN INSTRUMENT OF POLITICAL POWER 465 of the force of government power reaches the individual today indi rectly by way of his employer and the other business and financial in stitutions with which he is involved.

Some of this instrumentation of business by government for its own ends is well known and needs only to be alluded to in order to be accepted. Businesses collect most of the taxes from individuals and pay them into local, state, and federal treasuries. This has already been discussed in connection with restrictions on en terprise, but it needs further elab oration in the context of government use of business to extend political power. Employers collect most in come taxes, both state and Federal, by withholding them from salaries. They also collect Social Security taxes in the same way. Stores and other retail outlets collect sales taxes. On budget type mortgages, the mortgage company collects one twelfth of the projected real estate taxes by way of the regular monthly payment. Telephone, electric, and gas companies add whatever taxes there may be upon their services to their bills, and when the bills are paid, the tax amounts are set aside to be paid into governments. Service stations collect the taxes on gasoline, tires, and other automobile accessories. There are also a considerable variety of hidden taxes on businesses which are generally passed on in the price of the product.

The most extensive of these, though it is not usually referred to as ~~hid den," is the tax on corporations. Businesses collect these taxes, of course, because they are required by law to do so and would be subject to punishment if they did not. The col lection of them, the keeping of rec ords, and the other costs associated with it, are generally a cost of doing business. The consumer pays these costs as well, though it is only fair to observe that he would no doubt pay them, and they would probably be higher, if government collected the taxes directly. However that might be, it should be clear that government has em powered businesses to perform the bulk of one of its most disagreeable functions-the collection of taxes. This does not mean that people usu ally blame businesses for the taxes, though they are apt to blame them for high prices when, in fact, much of the price is attributable to taxes.

The main impact of this use of busi ness by government is somewhat more subtle. When business collects the taxes the individual loses his ability to contest paying them. He can only prevent income taxes from being withheld by quitting his job. He can only refuse to pay the sales taxes by declining to buy what he wants. The normal route for taking a case to court is denied him because of the difficulty in refusing to pay. The individual's economy is in466 THE FREEMAN August tertwined with the power of government over him. Enforcement of Labor Laws Business becomes an instrument of government, too, as the main ex ecutor of the government's labor and employment policies. The individual is the pawn in the midst of the complex rules by which government activates its policies through busi ness. Whether he can get a job at all, whether he will have to join a labor union, how long he will work for how much, among other things, are determined by government policy.

Wages and hours legislation has been around for forty years now. Government prescribed minimum wages determine practically whether.a person may be employed or not. If a person is·unskilled, hand icapped,or slow, he may not be suf ficiently productive to be employed for· a job because of the mandatory wage. The inexperienced are at a particular disadvantage, because a prospective employer has no way of knowing how long it will take or even whether an applicant may be come productive enough both to earn the minimum wage and repay the expense. of training him. Union wages and other rules and restrictions are often an extension of government policy over business. The National Labor Relations Board, an arm of the federal government, establishes the framework, though it may not be known, sometimes, in advance of a ruling, within which company-union rela tions are to be carried on. Once a company recognizes a union, it tends to become an instrument of union policy-collecting dues, hir ing through a union hall, requiring union membership of those it employs, maintaining seniority rules, and paying a union wage. The individual is at the mercy of the NLRB, the labor union, and the company when they act in concert.

Fair employment practices, as they are called, and Affirmative Ac tion are prescribed by the federal and many state governments. Thus, the hiring and promotion practices of business become an instrument of government policy. To avoid litiga tion or government penalties many firms undertake joint ventures with minority owned companies, estab lish what are in effect quota systems in hiring and promotion, and con duct searches for minority personnel to fill vacancies. To the extent that political prescription is substituted for business judgment, a business becomes an instrument of political power. Many of the regulations, restric tions, and restraints under which we live are imposed by way of business. For example, automobile safety equipment and emission controls come by way of requirements on auto makers. Safety belts, shoulder 1978 THE U.S.: BUSINESS AS AN INSTRUMENT OF POLITICAL POWER 467 harnesses, interior design, struc tural strength, and so on, have made their appearance not from customer demand but by way of legislation.

Buzzers, filters, and an assortment of other devices are attached to the vehicles by government fiat. An in dividual who wishes to have his ve hicle divested of any of this im pedimenta must either do it himself or find a wayward mechanic to do it for him. Housing Regulations Most of the housing available to us has its quality and character de termined by building companies and financial institutions acting as in struments of government. Most of the financing of homes comes from privately owned institutions. How ever, their lending policies are heavily influenced and widely de termined by government policy . VA and FHA guarantees undergird a considerable portion of the loans made to individuals. Athough the money comes from private sources, VA and FHA lay down standards for and determine much about the houses so financed. Many savings and loan associations are federally chartered and make their loans in terms of these government charters.

Builders impose, as it were, the numerous requirements of local, state, and federal government on buyers, such things as zoning re strictions, set-back ordinances, distances of buildings from property lines, structural standards, sanita tion and electrical prescriptions, the paving of streets, and so on and on. Real estate agents, if their services are to be used, impose the rules governing them upon their custom ers. Examples could be multiplied of businesses as instruments of government, but perhaps enough has been told to establish the point. Virtually every business in America (if there is an exception, it has es caped my notice) acts as an arm of government in one way or another and to a greater or lesser extent. While the evidence to substantiate much of this must be familiar to most of us, the implications and re sults of it may not be so readily apparent. The matter is more complex than the above would indicate. The examples thus far could be inter preted as being simply a case of government imposing rules upon business which they in turn, how ever reluctantly, impose on their customers. Undoubtedly, that is the way it is often enough. But that is hardly the whole story. Government and business are so intricately in tertwined today that many busi nesses have taken on the character of governments. I would like to back into an explanation of the how and why of this development with a sim ple story.

468 THE FREEMAN August Banking Policies Some years back I lived in a state which had a tax, imposed annually, on checking accounts in banks. This tax came to my attention one day when I was going over my monthly bank statement. There was a deduc tion from my account to pay this tax. This struck me as highly imperti nent behavior by the bank. My understanding of the agreement I had with the bank was that when the spirit moved me I would deposit money with them. Then, when, as, and if I decided to do so I could order all or some portion of it to be paid out by writing checks on the ac count. They were trustees, so to speak, of such money as I deposited with them and were only to disburse it on my order. It seemed to me they had violated that trust by paying out my money without my knowl edge or consent. With that understanding in mind, I placed a call to the highhanded bank in question. (I am now older and wiser and therefore know in advance the futility of such calls, although I still make them some times just to prove· that I am alive.) When I had finally been connected with someone sufficiently high up in the bank to deal with so exalted a question, I made inquiries about their behavior. 1 was assured that the bank had acted in accord with state law, something I had never for a lnoment doubted. But, I asked, has the law been challenged? He did not know, as best I can recall, nor, so far as I could make out, care.

My thought was that this manner of taking my money was in violation of the Fourteenth Amendment to the United States Constitution, which prohibits states to take the property of their citizens without due process of law. Moreover, it seemed to me that the bank had strong incentives to challenge such a law. After all, the bank wanted deposits from cus tomers, and one of the best argu ments for using their services was the security they provided for your money. It happened, too, that the bank was ideally situated to chal lenge this law, for it could do so by refusing to pay the tax, an option not available to me. In addition, the bank probably had a prestigious law firm on retainer to protect its inter ests, since this particular bank was one of a large chain spread over the state, there being no law in that state to prohibit branch banking. My reasoning was not so much faulty as incomplete. True, banks have the incentive to reassure and protect their depositors. But I was ignoring something so basic as that the state government was probably one·.of the .largest depositors. in the bank. Indeed, the likelihood. is so great as to amount to virtual cer tainty that the ·tax money taken from mine and other accounts did not even leave the bank; it was just 1978 THE U.S.: BUSINESS AS AN INSTRUMENT OF POLITICAL POWER 469 shifted to the state's account. That, however, might not have been determinative if it were all that was involved.

I was ignoring the more trenchant fact that banks are creatures of gov ernment, that their very existence by charter depends upon government, that their privileges arise from the state, and that banks can be har assed, audited, have their charters revoked, or be closed down. That being the case, banks are about as likely to take on an adversary relationship to the state over some paltry tax as an unemployed spin ster is to sue her parents with whom she Iives over the lack of variety in her breakfast. Besides, the tax could hardly harm this chain of banks if all other banks in the states had to collect it too. Laws applied to a whole industry become merely a condition of doing business. Is this an indictment of business? No, it is a description of what is happening in America as the con centrated power of government tightens its grip on people. The idea that has the world in its grip only permits what is called private busi ness to exist on sufferance. It can exist only to the extent that it serves the ends of the idea as determined by those who control or manipulate government. Businessmen know that as a rule they cannot even sur vive, much less prosper, if they adopt an adversary relationship with government. Both politicians and businessmen sometimes speak as if they were adversaries. No great harm results. The ideological view of the relationship is affirmed, and each is given an opportunity to vent his spleen. But beneath the surface something quite different is going on.

The Ties that Bind Business and government are in tricately intertwined. Businesses generally depend upon government for charters, for licenses, for con tracts, for subsidies, for guarantees of foreign investments, for favors for their particular industry, and so on, and on. Business serves government in the ways that are specified, be comes an instrument of government, in order to continue to function and, hopefully, make a profit. Airlines seeking new routes, continued pay ment for carrying the mail, and favorable rates are not about to con test the regulations on smoking that they apply to their passengers. Home builders hoping for some new government subsidy program to en ablethem to sell more houses have the incentive to work with rather than oppose government. Public utility firms seeking higher rates can hardly afford to object to being tax collectors. Whether unwillingly or not, business acts as a partner with government in imposing politi cal power on Americans.

470 THE FREEMAN August You cannot play with fire without getting burned, of course. The more closely business becomes in tertwined with government, the more like government it becomes. The object of politics is power. The aim of business is profit. The method of business is attraction and persua sion. The method of government is force. As business becomes politi cized, it does not forgo its aim of making profits. What it does do is begin to seek to use the force of government to increase its profits. Power and profit are linked together as government and business become intertwined. The Energy Crisis This development may b~st be il lustrated by an example. In the early 1970's a gasoline shortage oc curred. It was a shortage engineered by politicians, of that there should be no doubt. The governments of several major oil producing coun tries declared an embargo and pro ceeded, thereafter, to raise the price of oil drastically. The shortage evaporated and was no more, though prices of gasoline were much higher than before. Nonetheless, American politicians proclaimed that we were in the midst of an· incipient energy crisis. What the politicians had dis covered was something known to economists for at least two hundred years, and to most other folks con siderably longer, namely, that the sources of energy are scarce. Indeed, it is the very scarcity of fuel that makes it costly at all. We shall not, of course, run out of energy-not, that is, until the sun grows cold or this planet is wrenched away from its favorable location to the sun but different sources may have to be tapped to get it.

Nonetheless, having misconstrued permanent scarcity as incipient and worsening shortage, some politicians went into their ~~sky is falling" rou tine, made a national problem out of it, and began to bring forth pro grams to solve it. Not surprisingly, these programs involved various sorts of government intervention. What may have been surprising, however, was the way in which fuel suppliers joined into this hue and cry. Full-page advertisements be gan to appear in newspapers, ads paid for by oil companies, electric power and gas companies, and such like, urging the conservation of energy and describing the efforts they were making to deal with the shortage. Power and gas companies began to include tips on conserva tion of energy in the envelopes containing their bills. Business in strumented itself swiftly to political policy. For years, electric companies had urged their customers to use more and more electricity. They had. ex tolled the virtues of electric appliances over all others.

1978 THE U.S.: BUSINESS AS AN INSTRUMENT OF POLITICAL POWER 471 Moreover, they had encouraged greater use by giving customers lower rates as the amount used in creased. Indeed, there did not ap pear to be anything odd about this earlier behavior. It was what adver tising was for, to encourage use of a product. It was in keeping with what is economic. There are economies of scale in production. In the case of electricity, this means that when the investment in machinery has been made, the more that is pro duced with it, the less it costs to produce each unit. In order to sell this electricity, the company would promote greater use by reducing the rate as more was· used. And then, overnight, as it were, electric power companies stopped advertising their product and began propagandizing for conservation, adopting the same· line as the gov ernment. Utility commissions began to approve what are called CCinverted rate structures." What these rate structures do is penalize heavy users of electricity, by .charging higher rates for greater amounts of electric ity. The model for this rate structure must have been the graduated in come tax.

Why would a power company stand still for such a rate structure? After all, it still got the advantage of economies of s(:ale whether there was 'an energy shortageoT not. Moreover, it costs little, ifany, more to get the electricity to a home using 1500 kilowatts per month, say, than one using 500. The meter has to be read only once each month regard less of how much electricity is used. It costs as much to bill the user for 500 as for 5000 kilowatts, and the same expenses attend processing either account. There are two answers which help to explain this otherwise strange power company behavior. One is that the. power company was serving the source of its monopoly government. The other is that the company was being well served, at least temporarily, by the utility commission. Undoubtedly, a power company could be greatly enriched if it could enjoy economies of scale and charge even more for this elec tricity than that bought by small scale users.

Most .likely , such a policy would, in the .long run, be harmful to· the power company, for profits would surely dwindle as use declined. But in the short run-before those who had all-electric homes could convert to other power sources,. before alter native sources of power have been developed, before people changed their life styles to reduce the con sumption· of· electricity-the com panies should reap .a windfall of profits. Of course, high profits would bring ··them to· ·the unfavorable at tention of utility commissions who had approved the rates in the first 472 THE FREEMAN August place. Except that some power com panies have already been foresight ed enough to forecast a need for a vast amount of capital to increase production to meet demand. It ap parently does not matter that the demand they are forecasting is based upon a projection of increases in the past, increases which took place when the use of electricity was being vigorously advanced by adver tising and lower rates for heavy us ers. What the present policies will lead to is uncertain. Meanwhile, the intertwining of government and business has produced some strange uneconomic policies.

The Customer Loses The final stage of business as an instrument of government will al most certainly be that business will be transformed into government, or be so much like it that we will have a distinction without a difference. The most basic distinction between business and government is this: Business serves; government com mands. That distinction has been breaking down for years. One way it has broken down is that government has provided many services itself: education, parks, electric power, mail deli very, garbage collection, and so forth. The other way is that many businesses have been granted monopolies and special privileges so that they become more like govern ments than businesses. Government regulation of busi ness is almost always advanced as a way of restraining or inhibiting business. But it does not necessarily work that way. Government regula tion limits and restrains business in serving customers. If a business is only permitted to stay open during certain hours, that limits its service to those hours. If rates are regu lated, this may appear to limit the businessman, but it also limits the way in which he can serve. But most importantly, as the businessman is more closely regulated he shifts from serving to enforcing the condi tions under which he will serve. He comes to resemble the policeman more than a businessman.

Public utilities are apt to be as in flexible in enforcing their rules as any government. The telephone in staller will not install the telephone unless the householder is at home. The utilities will not begin service, ordinarily, until the person wishing to be served has made his way to their offices, put up a deposit, pro vided whatever information they require, and otherwise satisfied them that he is responsible. Hospi tals are notoriously rule-ridden places, and many a nurse appears to be a frustrated prison matron. (It should be noted in this connection that hospitals are generally heavily subsidized by government and are coming under ever more strenuous regulation and controls.) 1978 THE U.S.: BUSINESS AS AN INSTRUMENT OF POLITICAL POWER 473 From Service to Compulsion Every organization must have internal discipline over its employ ees, of course. That is not at issue here. What is at issue is the shift of business from service to compulsion.

It is, no doubt, a natural tendency of those who live under rules to shift the weight of the rules from them selves toward those whom they are supposed to serve. There is a correc tive to that in the open market under competition. The customer does not like to be ordered around, and he goes elsewhere. He gives his business to those who wish to serve him rather than command him. Any rules that he perceives that apply to him had best be kept to the minimum and be unobtrusive. When government steps in, that changes. So long as the rule applies to all in the industry, competition is no longer a factor in whatever is involved. The business no longer has to serve in that particular way; it needs only to do whatever the law requires. When rates are regulated, the business need no longer compete in that way. If some of the rates are not particularly profitable, those in the industry will discourage that particular custom, providing only the bare minimum of service that the law allows. Indeed, the burden of obtaining the service is often shifted to the customer. For example, when long-term interest rates for home buyers has been set below the market rate, the borrower usually has had to pay for the loan by what are called ((points" and other advance charges. In addition to that, the con ditions to be met in order to obtain the loan are usually quite exacting.

Long waits for loan approval are common. The lender is not gladly serving; he is emphasizing the commanding position he occupies. Evolutionary socialism advances grad ually and step by step in America. The inroads are usually made under the guise of controlling, regulating, and taxing business and the sources of capital. On the sur face, this does indeed occur. But be neath the surface government and business become intertwined. Busi ness becomes an instrument of gov ernment, willing or not. Business becomes politicized. Business begins to serve its master, government, in stead of or in addition to the con sumer. Business begins, unwittingly perhaps, to adopt the posture of compulsion rather than of service. According to the lore of our time there is a public sector and a private sector in the economy. But where is the private sector? Does it consist of privately owned companies such as those of the auto makers? What is private about mandatory seat belts and shoulder harness? What is pri vate about mandatory emission con trols? What is private about being forced by government to recall mil lions of automobiles annually to re474 THE FREEMAN place parts? What is private about having to pay union wages and submit to union requirements rein forced by the National Labor Rela tions Board? Rather than referring to this as the private sector, it would be accurate to refer to it as the politicized sector of the economy.

But which ~~sector" is not? Some are more, some are less, but all are being politicized. The Political Framework The deeper significance of this de velopment needs to be clearly un derstood. To understand it, it is necessary to see it in terms of the appropriate theory. Much has been written about the impact of inter vention in terms of economic theory. This is enlightening and informa tive. But when business becomes an instrument of government, econom ics becomes secondary, for the framework and the 'determinative element is no longer economic. It is political, and political theory must provide the framework from which it is to be understood. Political theory has to do "with how effectively to govern and how government may be restrained and limited. The greatest work on politi cal theory in the United States was The Federalist. It was written as an exposition and defense, of the '.Con stitution of the United States :and, more specifically, to urge its ratifi cation. The great principles set forth there are those of constitutionalism, of representative government, of the dispersion of power in a federal sys tem, of the separation of powers into three branches-all of which they argued would provide an energetic and strong but'limited government.

The reason for limiting govern ment was clear to the Founders of these United States. Government is dangerous. It differs from other or ganizations in that it has the power and authority to use sanctions. In a word, it is empowered legally to use force. Unlimited government means unlimited use offorce. In practice it means that all institutions and or ganizations are' permeated by force. The end result is tyranny. No better prescription for tyranny could be written than to make busi ness an instrument of government. Every businessman and every em ployee of businessmen becomes a servant of government. Every con sumer, each one of us, is at the mercy' 'of politicized business. The usual" argument' against interven tio11 is that it is harmful -economic restraint of goods 'and services busi ness can-and would provide. There is a more telling' argument. It is that government control over business is inevitably government control over consumers, and the instrument of that control is business. @ Next: ' 2L' The' United Stdtes: 'The Thrust to Transformation Gary North KEEP OFF THE GRASS I travel to a lot of colleges and uni versities. I give lectures, or visit friends, or just wander through li braries. A library is to me what a security blanket is to Linus. So I always enjoy seeing a new college.

There is an almost universal phenomenon that I observe on col lege campuses. Almost everywhere I go, I find lovely green lawns. Stu dents are given a truly lush envi ronment to use as they pursue their studies or whatever. It costs a lot of money to keep these lawns watered, trimmed, and in healthy shape. Laid out in the midst of every lawn is a system of concrete or asphalt walk ways that connect buildings and other key meeting spots. Dr. North Is editor of Biblical Economics Today, available free on request: P.O. Box 8567, Durham, N.C. 27707. A walkway is an important item. It directs students and visitors. It allows them to keep their feet dry most of the time, or free from mud. It keeps freshly cut grass off their shoes. Most of all, it keeps them moving along prescribed paths. Sometimes. The odd fact tht I invariably notice is this: every campus will have at least one lawn where the students have wandered from the straight and narrow. Some new route has captured their fancy, and you can see squashed grass along odd routes, or sometimes even hard-packed earth where no grass can grow. The sight of these ~~user developed" walkways is usually of fensive because of their lack of symmetry with· the lay-out of the other walkways. No architect de signed. them, nooverarching plan 475 476 THE FREEMAN August integrated them, and no amount of pleading from the administration could remove them (if administra tions ever pleaded about anything but money these days).

From the point of view of aesthetic considerations, these alternative paths are eyesores. They challenge the rationality of the architectural design. They are an affront to the planner who carefully laid out the lawns, buildings, and walkways. They are irrational from the point of view of some planning committee. All the committee's work in seeing to it that walkways were provided in rational locations is being challenged by people who do not show proper respect for aesthetics or organiza tion. Yet students are an independent bunch, at least when confronting administrative authority. They really are not concerned about the costs that went into designing pathways across campus. What they care about is the fastest way to get from Psych 109 to Chern lab. Or from History 7A to English lA. And as popular classes are moved from one room to another, with other popular .classes at preceding or suc ceeding hours producing very differ ent populations flows, the best-laid plans of architects are buried under the packed soil of the alternative routes.

The larger the cam pus, or the older, the more alternative pathways you will find. If new buildings are constructed, you can count on some new paths of ruined grass. People make rational decisions con cerning the use of their time and effort, and the grass reflects their estimations. The cost of preserving lovely grass panoramas untouched by human foot proves too much to bear. So much for expensive ar chitects. Designed to Serve If I were a campus architect, I would recommend to the adminis tration of a newly designed school that they put in no walkways at all. Maybe one, between the parking lot and the main building, since it doesn't take a crystal ball to forecast that route's popularity. But it would be far better to let the grass grow and the students wander. Let the students get their feet wet, or grassy, or muddy for a semester or two. Then, when the pathways ap pear in response to student decision-making, the cement mixers could be called in, and the rational walkways installed. This would do a great deal to reduce the number of unplanned paths around the cam pus.

But if the administration were to demand respect, and put signs around the lawns telling students to keep off the grass, they would alien ate students, create hostility, risk constant violations, and reduce the 1978 KEEP OFF THE GRASS 477 benefits students receive through sitting on the grass. To defend the logic of the central planning agency, the administration would convert the grass into a purely ornamental resource-one which might be re sented by students who were being forced to use less efficient pathways to get from class to class. The interesting thing to consider is the fact that paths require plan ning. The nicely laid-out paths re quire an architect, or committee, or at least a team of cement-laying craftsmen. But the other paths also require planning. The planning is individualistic. A student wants to save some time to get from here to there. He makes a decision to cut across campus by way of a particular lawn. He may be imitated by other classmates who see the wisdom of his pathbreaking innovation. Or he may be a lone wolf who takes very odd classes at peculiar hours, so no one follows his lead. But in any case, students make decisions. ~~Can I risk the mud to save two minutes? Will my shoes get covered with cut grass if I cut across? Are my friends going along the prescribed concrete path?

Should I stick with tradition?" Then they make a decision. What we might say, then, is that the unofficial pathways are the prod uctof human reason but not the product of human design. They are the product of human action, but no central planning agency ever met to consider the logic of the routes. They are reasonable, efficient, and pre ferred by those using them, but they are only randomly integrated into an aesthetically pleasing design. They meet the needs of the users, though not the preferences of trained, certified, professional de signers. Is it any wonder, then, that de signers prefer rules keeping people off the· grass? Is it any wonder that they would prefer to keep their de sign intact at the expense of those unprofessional, untrained users who would mar the coherence of a grand design merely for the sake of saving 30 seconds between classes? How can planners protect their creations from those who care nothing for beauty and everything for conveni ence? Simple; they get the au thorities to enforce the rule: HKeep Off the Grass."

Market Parallels Isn't the attitude of the profes sional lawn designer similar to that of the professional economic· plan ner? Only the planner is not dealing with anything so simple as design ing a few pathways between a hand ful .of .buildings in a limited geo graphical area. The modern central economic planners haveto deal with millions of citizens who are· capable of making an almost infinite num ber ofallocation decisions with their scarce economic resources. The task THE FREEMAN478 of the central planner is astronomi cally large, or worse; for people, un like the orbs of space, keep changing their minds and wandering down forbidden, unpredictable paths. Why is it that as society has grown more and more complex, de fenders of the idea of central plan ning argue that we need even more central planning? We see on campus that rational designers cannot foresee the responses over time of a few thousand students. Yet the economic planners would have us believe that they, when given access to computer print-outs, can adminis ter a comprehensive rational plan embracing the lives and hopes of millions of people. What we can see with our own eyes does not work very well over time on campus, we are expected to believe with respect to an entire economy.

The planners of an economy need the resources available to men for their comprehensive plan. It is not an aesthetic' inefficiency that con cerns them; it is the smooth func tioning of the collective plan. Those who choose to use scarce resources in unpredictable ways are a far greater threat to the planners and their plan than students who only rearrange the paths on some local college campus. The economic plan ners are unwilling to tolerate this threat to their design. They are un willing to consider the logic of those who prefer production and distribui AugJst I I tion to be handled through a market. The market was never 4e signed; like the unofficial pathw~ts, it was the product of human actipn but not human design. So its ratiqn ality is not accepted as ~~true rati~n ality" by those who define reasonlin terms of a central plan made by! a staff of certified professionals. To jbe rational, the results must be t~e product solely of design, by defipition. I I Controls for Protecting I the Grand Design I This creates an enormous inc~n tive for central planners to restr~ct the (~random wanderings" of Hunptofessional" decision-makers who ffie not aware of the grand design. he planners have laws passed keepi g men from making certain kinds of exchanges, or exchanges above or below an approved, designed, (~ta tional," just, fair price. No one isl to gather too many resources under ~is control, for this would be monopoVs tic. No one must sell (or buy) gOtdS or services that are not of the 0 n cially approved quality. Noone i ;to bring in resources from across a bbr der, since in order to bring in ~e sources, one must send out ot,er resources-and these may be im 1 r tant to the smooth functioning of he central plan. One never can be q ite certain, so it is better to prohibit he exchange. So the economy beco ~ es littered with signs that are Ihe !

1978 KEEP OFF THE GRASS 479 economic equivalent of ((Keep Off the Grass." But what is the grass for? What are the resources for? Are they for the enjoyment of central planners, designers, and allocators? Or are the resources for the enjoyment and use of those who use them? Who is bet ter able to decide? Must efficiency be sacrificed on the altar of central planning? Must people's assess ments of the best use of their re sources be thwarted by the deci sions of a central planning commit tee far removed from the daily lives of individual decision-makers? Why should we have faith in such a dis tant board of experts? Who Owns the Grass? The college, through its board of trustees, owns the grass. The stu dents use it as guests of the college. So the administration has the right to put up signs if it prefers to do so. But the students also have the right to transfer to a more congenial col lege. And college budgets being what they are today, most adminis trators are prepared to put up with a few unauthorized dirt paths through the grass. They face competition.

A central planning committee also owns the ((grass." This is the meaning of ownership. The central committee can use the economy's resources as it, the committee, sees fit. The meaning of ownership is simple: the owner has the right to disown the property. If he cannot sell it or dispose of it as he sees fit, then he is not the ultimate owner. The modern State asserts the claim of ultimate ownership over the as sets within its borders. The modern State says that it owns the grass. But unlike college administrators, the modern State faces no legal, di rect competition. It is expensive to ((transfer" to a new ((campus." And where central planning is fully en forced, or enforced beyond the will ingness of its citizens to endure vol untarily, the modern planning State puts up barbed wire and guards and electronic sentries along its borders. The ((workers' paradises" all seem to have this ((transfer" problem. They have to put up the barbed wire in order to make certain that their citi zens cannot go to a place where there are very few signs reading, ((Keep Off the Grass." They do not want their citizens to experience the joys of ownership, where the citizen owns his own grass and can put up a sign to all others, including State officials, saying, ((Keep Off My Grass."

Make Your Own Path The free market allows us to buy another man's lawn, or lease access across another man's lawn for a price. It allows us to put up signs or to let anyone use our property. It allows others to bid for ownership, thereby placing a cost on our con480 THE FREEMAN tinued planting of our uKeep Off My Grass" signs. We then forfeit income by keeping others off our grass, so we have to count the costs of our restrictions, daily. The free enter prise system allows us to buy our way across a wilderness or another man's front yard. It lets us put in our preferred pathways as we see fit, to use as we like or to sell to others who will offer us what we regard as better opportunities, better pathways. Some may follow us. We may follow others. Or we may strike out on our own. The point to bear in mind is this: we can buy our way across another man's lawn if we offer him his price. And if he won't sell, perhaps some other lawn-owner will. We buy re sources and use them to construct our own pathways, to use as we see fit. They may be geared to beauty, or they may be ttmerely" efficient. If men are allowed to do this, some will come up with designs that are both efficient and beautiful. Others may come up with plans that are ineffi cient and ugly-in their neighbors' Underlying Ideas eyes. But at least their neighbors can bid on the eyesores and possibly buy the right to improve them.

When the planners own all paths, and there is no open, legal market for control, the pathways are sure to displease many. And there won't be legal alternatives available for those who are displeased. So men must be resigned to keep ing off their neighbors' grass if that is what their neighbors prefer. The alternative is the use of force, di rectly or indirectly (politically), and the result of violence is the transfer of all grass to the State's central planners. The State asserts its rights of ownership to ttsolve" the problem of envy and violence. Then we will live our lives in a world of lawns that are filled with signs, uKeep Off the State's Grass." And if history reveals anything, we can safely predict that the grass will be overgrown with weeds and the pathways will be cracked and stained. No one wants to maintain and improve somebody else's lawn. @ IDEAS ON LIBERTY INSTITUTIONS and laws are but the outward manifestation or outcome of the underlying ideas, sentiments, customs, in short, character. To urge a different outcome would in no way alter men's character-or the outcome.

GUSTAVE LE BON Bob Stevenson Robert Louis Stevenson: Championof Liberty ~~At the sight that met my eyes, my blood was changed into something exquisitely thin and icy. Yes, I had gone to bed Henry Jekyll, I had awakened Edward Hyde." Litera ture buffs instantly recognize who wrote these words: Robert Louis Stevenson, one of the all-time great Champions of Liberty. ~~Super storyteller, I'll agree; but, Champion of Liberty?" you wonder. Precisely! For this beloved author of Treasure Island, Strange Case of Dr. Jekyll and Mr. Hyde, and other master pieces also penned the following: No man can settle another's life for him. It is the test of the nature and courage of each that he shall decide it for himself. 1 In fact, Robert Louis Stevenson's writings are replete with such say ings extolling the virtues of selfMr. Stevenson 18 a freelance author from Fullerton, California. responsibility. That this is so be comes understandable when we study RLS's life, a tale more inspira tional than any he wrote.

Robert Louis Stevenson was born November 13, 1850 in Edinburgh, Scotland to Margaret and Thomas Stevenson. Louis, as his parents called him, was Margaret and Thomas's only child. As a youngster, Louis suffered from one serious ill ness after another-bronchitis, gas tric fever, and so on. The times he hovered near death were innumera ble. But, the boy held on; two major factors were responsible for this. First, Thomas Stevenson was a suc cessful engineeer who could afford the best medical care for his son. Second, Louis's extraordinary nurse, Cummy, constantly lavished the child with love and attention. Cummy's impact on Stevenson's life cannot be overemphasized. She 481 482 THE FREEMAN August kept Louis's mind off his misery, the dreariness of lying in bed day in and day out, by continually reading to him. Nowadays RLS's nurse might have turned on the TV, and consid ered her job done. But, would Stevenson-without Cummy-have developed into the remarkable writ er he later became?

Because of his poor health, which plagued him most of his life, Louis didn't enter school until he was seven years old. The school was a private school, kept by a Mr. Hen derson. As for Louis, he didn't know yet how to read! It's easy to imagine how current-day educationalists would respond to Stevenson's case: they'd immediately throw him in a special audio-visual class for slow learners (a program massively funded by the federal government, of course), while at the same time prosecuting his parents under the truancy law for ~~gross neglect" and ~~intentional withholding" of their son from the public school system. Fortunately, Stevenson grew up in a more humane environment. Whenever the family was away from Edinburgh on vacation, or Louis was too sick to attend school, Margaret and Thomas brought in tutors to hel p instruct their son. As a result, the boy's ~~reading disability" soon disappeared; in fact, he became an over-reader! How come the big turn around? The answer clearly rests in the educational philosophy Stevenson's parents put into prac tice. Margaret and Thomas always had Louis enrolled in private schools or learning from tutors. One tutor, described by RLS's mother as ~~a disappointment," either resigned or was dismissed-it's unclear which.

Still, the incident illustrates the flexibility contained in a system that places primary responsibility for the child's education in the par ents' hands. The child learns at an optimum pace; and parental pride, manifested in the form of loving prodding and careful selection of school and instructor, generally en sures that the pace is brisk. As Louis grew older, literature increasingly became a passion with him. He sometimes skipped classes so he could walk through town or the countryside and write down his impressions. On his own Stevenson struggled to master his eventual trade. He realized there were no shortcuts to attaining excellence. The old farmer Gottesheim, in Prince Otto, reflects this belief of Stevenson: HI have been fifty years upon this River Farm, and wrought in it, day in, day out; I have ploughed and sowed and reaped, and risen early, and waked late; and this is the upshot: that all these years it has supported me and my family; and been the best friend that ever I had, set aside my· wife; and now, when my time comes, I leave it a better farm than when I found it. So it is, if a man works 1978 ROBERT LOUIS STEVENSON: CHAMPION OF LIBERTY 483 hearty in the order of nature, he gets bread and he receives comfort, and what ever he touches breeds."2 Interestingly, Stevenson's father did not consider writing to be a suit able occupation for his son. Thomas tried to interest Louis in becoming an engineer like himself; when that failed, he made his son attend law school. RLS passed the bar, but he cared nothing for a career as a lawyer. A writer, young Stevenson proclaimed, he would be!

This decision, made at age 24, did not go over well with Thomas. Even so Louis's parents aided him in his attempt to make a name for himself as a writer; however, the financial support was hardly generous. Com pared to the welfare benefits our present government would bestow on Stevenson, it rated a pittance. But, the Hbudget plan" financial backing RLS received from his folks was one of the best things that hap pened to him. It made him strive all the harder to perfect his art and produce a best seller; for Louis was accountable to people he loved. As he wrote in his essay entitled ((Beg gars": We should wipe two words from our vocabulary: gratitude and charity. In real life, help is given out of friendship, or it is not valued; it is received from the hand of friendship, or it is resented. 3 Stevenson obviously felt obligated to turn his parents' assistance into a winning investment. He wrote to his mother: Money.-I am much obliged. That makes £180 now. This money irks me, one feels it more than when living at home. I think of all this money wasted in keeping up a structure that may never be worth it-all this good money sent after bad. 4 One wonders how many similar letters of gratitude the local Welfare Office has ever received. Stevenson's best sellers were still a few years away, but he did manage to get many of his early works published.

This meant he required less and less support from his parents. RLS's first published book was An Inland Voy age, written when he was 26. In it he firmly contended that one, over the long run, could not get something for nothing: There is nothing but tit for tat in this world, though sometimes it be a little difficult to trace: for the scores are older than we ourselves, and there has never yet been a settling-day since things were. You get entertainment pretty much in proportion as you give.s In 1879 when he was 29 Steven son crossed the Atlantic and the United States to marry Fanny Van de Grift Osbourne. His travelmates during the trip happened to be emigrants whose Socialist bent and poor grasp of reality Stevenson thought little of. He recorde? t~e emigrants' simplistic opinions In hIS book The Amateur Emigrant: 484 THE FREEMAN August At bottom, as it seems to me, there is but one question in modern home poli tics, though it appears in many shapes, and that is the question of money; and but one political remedy, that 'the people ~hould grow wiser and better. My work men fellow-passengers were as impa tient and dull of hearing on the second of these points as any member of Parlia ment; but they had some glimmerings of the first. They would not hear of im provement on their part, but wished the world made over again in a crack, so that they might remain, improvident and idle and debauched, and yet enjoy the com fort and respect that should accompany the opposite virtues; and it was in this expectation, as far as I could see, that many of them were now on their way to America. But on the point of money they saw clearly enough that inland politics, as far as they were concerned, were re ducible to the question of annual income; a question which should long ago have been settled by a revolution, they did not know how, and which they were about to settle for themselves, once more' they knew not how, by crossing the Atlantic in a steamship of considerable tonnage. 6 Lasting Improvements Unfortunately ,we still see this same muddle-headedness today in our Congressmen and much of the public. As they say, what else is new? For dearly, the lesson man kind most frequently forgets is this: the only valuable and long-lasting improvements' are those which are made for the individual by theindi vidual, himself Stevenson lived by this code, and devoted more than his fair share of time trying to impress it on others. He believed one of the lowest levels of moral degradation was that of an otherwise healthy person living off the labors of another.

Fanny Stevenson noted of her husband: ~~While he could see no royal road for others, the path for himself showed plainly enough be fore him, and it was his duty to swerve neither to the right nor the left. He believed he had no rights, only undeserved indulgences. He must not eat unearned bread, but must pay the world, in some fashion, for what it gave him-first, mate rially, then in kindness, sympathy, and love." As RLS observed in his essay, ttLetter to a Young Gentleman": To give the public what they do not want, and yet to be supported: we have there a strange pretension, and yet not uncommon, above all with painters. The first duty in this world is for a man to pay his way; when that is quite ac complished, he may plunge into what eccentricity he likes; but emphatically not till then. Till, then, he must pay assiduous court to the bourgeois who carries the purse. And if in the course of these capitulations he shall falsify his talent, it can never have been a strong one, 'and he will have preserved a better thing than talent--character. 7 In 1883 Stevenson completed Treasure Island. The public in1978 ROBERT LOUIS STEVENSON: CHAMPION OF LIBERTY 485 stantly fell in love with the story, and Louis had finally made his mark. Publishers vied for his works.

RLS's literary output from this point on provided all the income his fam ily required; he no longer needed any financial support from his par ents. Personal Achievement There are many reasons why Stevenson became the favorite au thor of many. That his literary tal ents were unsurpassable, and his works the product of genius, critics readily acknowledge. But, the main theme of his stories-the theme that through personal initiative and courage anyone can achieve his goal-seems to explain best why he captured the hearts of his readers. In Treasure Island, Kidnapped, and most of RLS's other novels we see the elements of danger and adven ture uppermost. The hero usually has to overcome several misfortunes and death-defying experiences be fore capturing the grand prize: trea sure, a wife, wealthy estate, or the like. Jim Hunter in Treasure Island and David Balfour in Kidnapped both beat long odds on their own, albeit with a touch of luck here and there.

The year 1886 saw publication of The Strange Case of Dr. Jekyll and Mr. Hyde, one of Stevenson's two best short stories.RLS wrote all 60,000 words of Dr. Jekyll and Mr. Hyde in 6 days-and while seriously ill! During these 6 days, according to his wife, ((he was suffering from con tinual hemorrhages, and was hardly allowed to speak, his conversation usually being carried on by means of a slate and pencil." Yet, Steven son, with incredible determination, produced a masterpiece. One year later, in 1887, Steven son's essay ((The Day After To Morrow" was published. In it RLS denounces the Socialistic trends of his time, and speculates on what awaits future generations who put thei"r faith in collectivism. The prophecies appearing in ((The Day After ToMorrow" have come about so unerringly, Stevenson must be ranked alonside Tocqueville as one of the 19th Century's most outstand ing possessors of prevision. At one point Stevenson states: Once eliminate the fear of starvation, once eliminate or bound the hope of riches, and we shall see plenty of skulk ing and malingering. Society will then be something not wholly unlike a cotton plantation in the old days; with cheerful, careless, demoralised slaves, with elected overseers, and, instead of the planter, a chaotic popular assembly.s The world we live in today could not be better described. In any occu pation deadbeats now seem the rule rather than the exception. Save for the work force of a few bastions of free enterprise-notably Taiwan, Ja pan, and Korea-modern day job486 THE FREEMAN August holders display proficiency and en thusiasm for but one task: punching in and out the time card.

In another section of ~~The Day After ToMorrow" Stevenson issues a warning similar to that contained in Frederic Bastiat's famol,1.s tract, ~~What Is Seen and What Is Not Seen": The landlord has long shaken his head over the manufacturer; those who do business on land have lost all trust in the virtues of the shipowner; the profession als look askance upon retail traders and have even started their cooperative stores to ruin them; and from out the smoke-wreaths of Birmingham a finger has begun to write upon the wall the condemnation of the landlord. Thus, piece by piece, do we condemn each other, and yet not perceive the conclu sion, that our whole estate is somewhat damnable. Thus, piece by piece, each acting against his neighbour, each saw ing away the branch on which some other interest is seated, do we apply in detail our Socialistic remedies, and yet not perceive that we are all labouring together to bring in Socialism at large. A tendency so stupid and so selfish is like to prove invincible; and if Socialism be at all a practicable rule of life, there is every chance that our grandchildren will see the day and taste the pleasures of exis tence in something far liker an ant-heap than any previous polity.9 ~~The Day Mter ToMorrow" forms qne of the crown jewels of classical Libertarian thought. But, what in spired Stevenson to write· it? Some clue is found in RLS's essay, ~~Crabbed Age and Youth," written when he was 25. In this essay Ste venson admits that he had once been ~~a red-hot Socialist with a pan acea of my own." But, he proclaimed he wasn't ashamed of his past, for ~~if St. Paul had not been a very zealous Pharisee, he would have been a cold er Christian." Stevenson concluded his discussion of why he changed from a Socialist into what he called a ~~Conservative" by stating: I seem to see that my own scheme would not answer; and all the other schemes I ever heard propounded would depress some elements of goodness just as much as they encouraged others. 10 To the South Seas Thomas Stevenson, who had been in declining health for years, died in 1887. Louis, to his own physical det riment, had stayed in Scotland and England much of this time so he could be near his father. With Thomas's death RLS no longer had to stay and endure the cold, damp British climate. A friend had sug gested to Stevenson several years before that he move to the South Seas; the islands, the friend assured, would give him robustness and vi tality. Louis finally acted on this wise counsel. After making many stops at various island groups, Stevenson and his family, in Oc tober, 1890, made their home in Samoa on the island of Upolu.

1978 ROBERT LOUIS STEVENSON: CHAMPION OF LIBERTY 487 True to his friend's prediction, Stevenson's health dramatically improved. His daily routine at Vai lima (RLS's estate) usually con sisted of 10 hours devoted to liter ary projects, which were sandwiched around garden work and lengthy discussions with the Samoan chiefs. On top of this, it was not unusual for Stevenson to write upwards of 30 letters a day. Critics maintain RLS's literary output during this period constitute his most maturely expressed and crafted works. Although it hardly seemed possible, Stevenson, now in his 40's, was improving as a writer! With the creation of The Beach of Falesa, a short story unrivalled in suspense and characterization, RLS reached· the summit of literary per fection. In achieving this, however, Stevenson did not forget to. promote his Individualist convictions. In one part of The Beach ofFalesa he casti gates those who cut corners in life: They talk about looking for gold at the end of a rainbow; but if a man wants an employment that'll last him till he· dies, let him start out on the soft~job hunt.

There's meat and drink in it too, and beer and skittles, for you never hear of them starving, and· rarely see them sober; and as for steady sport, cock fighting isn't in the same county with it. l1 Stevenson, in this quote, refers to the numerous beachcombers he had seen on his travels in the South Seas. These freeloaders had both fascinated and sickened him with their moral shallowness. Steven son's book, The Ebb-Tide, is a fic tionalized account of the beachcomb ing scene; but, the major point RLS makes in The Ebb-Tide-that the end of the line or rope eventually greets those who duck honest work-falls in the non-fiction cate gory. Political Activity Stevenson, when he settled in Samoa, immediately immersed him self in local politics. At the time the Germans, English, and Americans were wrestling with one another for control over Samoa. Stevenson's loyalties, though, rested with the fourth faction-the natives! The white men, meanwhile,. so bungled their home government's plans to make Samoa into a colony, one didn't know whether to laugh or cry.

Stevenson certainly must have done both;. he also did everything. in his power to assist the Samoans in·their battle to retain theirliberty. For example, he gave liberal sums of money to the Samoan chiefs to help finance the resistance; he wrote letters to The Times exposing the Great Powers' ludicrous machina tions in Samoa;·and finally, Tusitala (Teller of Tales), as the Samoans fondly. called. RLS, ~ompiled all the grubby details intQ a book, A Foot note to History. As often happens 488 THE FREEMAN with people who vigorously ad vance the doctrines of liberty and self-determination, Stevenson found himself in hot water with the au thori ties. The High Commissioner in Fiji nearly charged him with sedi tion; fortunately, the Home Office in London interposed, thereby letting Stevenson off the hook. That Stevenson's efforts on behalf of the Samoans were appreciated by them would be an understatement.

In September, 1894 several chiefs were released from prison. These men did not at once return home; instead, they went straight to Vai lima and began work on the road that led from Stevenson's house to the public way. Tusitala had helped them when they were in prison, and this is how they wished to repay him. Stevenson was extremely moved by this gesture, for as he described it, ttit is road-making-the most fruitful cause (after taxes) of all rebellions in Samoa."12 He was well aware of the unpopularity of road-making to Samoans. In October the road was com pleted, and Stevenson thanked the chiefs in the most stirring speech of his life. RLS was to die suddenly two months later on December 3, 1894 of a stroke, an event which occasioned tremendous grief in Samoa and around the world; but, his untimely departure is not the thing to re member Stevenson by. Rather, we should recall his irrepressible spirit by pondering the ringing words the Teller of Tales delivered to the road-workers.

And who is the true champion of Samoa? It is not the man who blackens his face, and cuts down trees, and kills pigs and wounded men. It is the man who makes roads, who plants food trees, who gathers harvests, and is a profitable ser vant before the Lord, using and improv ing that great talent that has been given him in trust. That is the brave soldier; that is the true champion; because all things in a country hang together like the links of the anchor cable, one by another: but the anchor itself is indus try. 13 i -FOOTNOTES1Robert Louis Stevenson, otLetter to Trevor Haddon," The Works ofR. L. Stevenson, Vol. 21 (New York: Charles Scribner's Sons, 1923), p. 123. 2Ibid., Prince Otto, Vol. 5, p. 350. 3Ibid., otBeggars," Vol. 12, p. 280. 4Ibid., otLetter to Mrs. Thomas Stevenson," Vol. 20, pp. 224-25. 5Ibid., An Inland Voyage, Vol. 1, p. 127. 8Ibid., The Amateur Emigrant, Vol. 2, pp. 312-13.

7Ibid., otLetter to a Young Gentleman," Vol. 12, p. 352. 8Ibid., uThe Day After ToMorrow," Vol. 4, p. 459. 9Ibid., pp. 453-54. l°Ibid., "Crabbed Age and Youth," Vol. 2, pp. 70-71. llIbid., The Beach ofFalesa, Vol. 15, p. 325. 12Ibid.,otLetter to Sidney Colvin," Vol. 23, p.. 430. 13Ibid., uAddress of R. L. Stevenson to the Chiefs on the Opening of the Road of Gratitude, October, 1894," Vol. 23, p. 475.

Robert Louis Stevenson THE DAY AFTER TOMORROW HISTORY is much decried; it is a tissue of errors, we are told, no doubt correctly; and rival historians ex pose each other's blunders with gratification. Yet the worst histo rian has a clearer view of the period he studies than the best of us can hope to form of that in which we live. The obscurest epoch is to-day; and that for a thousand reasons of inchoate tendency, conflicting re port, and sheer mass and multiplic ity of experience; but chiefly, perhaps, by reason of an insidious shifting of landmarks. Parties and ideas continually move, but not by measurable marches on a stable course; the political soil itself steals forth by imperceptible degrees, like a travel ling glacier, carrying on its bosom not only political parties but their flag-posts and cantonments; so that what appears to be an eternal city founded on hills is but a flying is land of Laputa. It is for this reason in particular that we are all becom ing Socialists without knowing it; by which I would not in the least refer to the acute case of Mr. Hyndman 1 and his horn-blowing supporters, sounding their trumps of a Sunday within the walls of our individualist Jericho, but to the stealthy change that has come over the spirit of En glishmen and English legislation.

A little while ago, and we were still for liberty; uCrowd a few more thousands on the bench of Govern ment," we seemed to cry; ttkeep her head direct on liberty, and we can not help but come to port." This is over; laisser-faire declines in favour; our legislation grows authoritative, grows philanthropical, bristles with new duties and new penalties, and casts a spawn of inspectors, who now lEditor's Note: Henry Mayers Hyndman (1842-1921) was the founder of British Socialism. He was considered proud and domi nant in his manners, intellectually intolerant, and resentful of criticism or disagreement. 489 490 THE· FREEMAN August begin, note-book in hand, to darken the face of England. It may be right or wrong, we are not trying that; but one thing it is beyond doubt: it is Socialism in action, and the strange thing is that we scarcely know it. Liberty has served us a long while, and it may be time to seek new altars. Like all other principles, she has been proved to be self exclusive in the long run. She has taken wages besides (like all other virtues) and dutifully served Mam mon; so that many things we were accustomed to admire as the bene fits of freedom and common to all were truly benefits· of wealth, and took their value from our neigh· bours' poverty.·A few shocks of log ic, a few disclosures (in the jour nalistic phrase) of what the freedom of manufacturers, landlords, or ship owners may imply for operatives, tenants, or seamen, and we not un naturally begin to turn to that other pole of hope, beneficent tyranny.

Freedom, to be desirable, involves kindness, wisdom, and all the vir tues of the free; but the free man as we have seen him in action' has been, as of yore, only the master of many helots; and the slaves are'still ill fed, ill clad, ill taught, ill housed, insolently treated, and driven to their mines .and workshops· by· the lash of famine. So much, in· other men's affairs, we have begun to see clearly; we have begun .to· despair of virtue in. these other men, and from our seat in Parliament begin to discharge upon them, thick as arrows, the host of our inspectors. The landlord has long shaken his head over the man ufacturer; those who do business on land have lost all trust in the virtues of the shipowner; the professions look askance upon the retail traders and have even started their co operative stores to ruin them; and from out the smoke-wreaths of Bir mingham a finger has begun to write upon the wall the condemna tion of the landlord. Thus, piece by piece, do we condemn each other, and yet not perceive the conclusion, that our whole estate is somewhat damnable.

Thus, piece by piece, each acting against his neighbour, each sawing away the branch on which some other interest is seated, do we apply in detail our Socialistic remedies, and yet not perceive that we are all labouring together to bring in Socialism at large. A tendency so stupid and so self ish is like to prove invincible; and if Socialism beat all a practicable rule of life, there is every chance that our grandchildren will see the day and taste the pleasures of existence in something far liker an ant-heap than any previous human polity. And this not in'the least. because· of the voice of Mr. Hyndman or the horns of his followers; but by the mere·glacier movement of the politi1978 THE DAY AFTER TOMORROW 491 cal soil, bearing forward on its bosom, apparently undisturbed, the proud camps of Whig and Tory. If Mr. Hyndman were a man of keen humour, which is far from my conception of his character, he might rest from his troubling and look on: the walls of Jericho begin already to crumble and dissolve.

That great servile war, the Ar mageddon of money and numbers, to which we looked forward when young, becomes more and more un likely, and we may rather look to see a peaceable and blindfold evolution, the work of dull men immersed in political tactics and dead to political results. Parliaments on Trial The principal scene of this comedy lies, of course, in the House of Com mons; it is there, besides, that the details of this new evolution (if it proceed) will fall to be decided; so that the state of Parliament is not only diagnostic of the present but fatefully prophetic of the future. Well, we all know what Parliament is, and we are all ashamed of it. We may pardon it some faults, indeed, on the ground of Irish obstruc tion-a bitter trial, which it sup ports with notable good-humour. But the excuse is merely local; it cannot apply to· similar bodies in America and France; and what are we to say of these? President Cleve land's letter may serve as a picture of the one; a glance at almost any paper will convince us of the weak ness of the other.

Decay appears to have seized on the organ of popular government in every land; and this just at the mo ment when we begin to bring to it, as to an oracle of justice, the whole skein of our private affairs to be unravelled, and ask it, like a new Messiah, to take upon itself our frailties and play for us the part that should be played by our own virtues. For that, in few words, is the case. We cannot trust ourselves to behave with decency; we cannot trust our consciences; and the rem edy proposed is to elect a round number of our neighbours, pretty much at random, and say to these: ~(Be ye our conscience; make laws so wise, and continue from year to year to administer them so wisely, that they shall save us from ourselves and make us righteous and happy, world without end. Amen." And who can look twice at the British Parlia ment and then seriously bring it such a task? I am not advancing this as an argument against Socialism: once again, nothing is further from my mind. There are great truths in Socialism, or no· one, not even Mr.

Hyndman, would be found to hold it; and if it came, and did one tenth part of what it offers, I for one should make it welcome. But if it is to come, we may as well have some 492 THE FREEMAN August notion of what it will be like; and the first thing to grasp is that our new polity will be designed and adminis tered (to put it courteously) with something short of inspiration. It will be made, or will grow, in a human parliament; and the one thing that will not very hugely change is human nature. The Anar chists think otherwise, from which it is only plain that they have not carried to the study of history the lamp of human sympathy. Given, then, our new polity, with its new waggonload of laws, what head-marks must we look for in the life? We chafe a good deal at that excellent thing, the income-tax, be cause it brings into our affairs the prying fingers, and exposes us to the tart words, of the official. The offi cial, in all degrees, is already some thing of a terror to many of us. I would not willingly have to do with even a police constable in any other spirit than that of kindness. I still remember in my dreams the eye glass of a certain attache at a certain embassy-an eyeglass that was a standing indignity to all on whom it looked; and my most disagreeable remembrance is of a bracing, Repub lican postman in the city of San Francisco. I lived in that city among working-folk, and what my neighbours accepted at the post man's hands-nay, what I took from him myself-it is still distasteful to recall.

The bourgeois, residing in the upper parts of society, has but few opportunities of tasting this peculiar bowl; but about the income-tax, as I have said, or perhaps about a pat ent, or in the halls of an embassy at the hands of my friend of the eye glass, he occasionally sets his lips to it; and he may thus imagine (if he has that faculty of imagination, without which most faculties are void) how it tastes to his poorer neighbours, who must drain it to the dregs. In every contact with author ity, with their employer, with the police, with the School Board officer, in the hospital, or in the workhouse, they have equally the occasion to appreciate the light-hearted civility of the man in office; and as an ex perimentalist in several out-of-the way provinces of life, I may say it has but to be felt to be appreciated. A Golden Age of Officials Well, this golden age of which we are speaking will be the golden age of officials. In all our concern it will be their beloved duty to meddle, with what tact, with what obliging words, analogy will aid us to im agine. It is likely these gentlemen will be periodically elected; they will therefore have their turn of being underneath, which does not always sweeten men's conditions. The laws they will have to administer will be no clearer than those we know to day, and the body which is to regu1978 THE DAY AFTER TOMORROW 493 late their administration no wiser than the British Parliament. So that upon all hands we may look for a form of servitude most galling to the blood-servitude to many and changing masters-and for all the slights that accompany the rule of Jack in office.

And if the Socialistic programme be carried out with the least fulness, we shall have lost a thing in most respects not much .to be regretted, but, asa moderator of oppression, a thing nearly invaluable-the news paper. For the independent journal is a creature of capital and competi tion; it stands and falls with mil lionaires and railway-bonds and all the abuses and glories of to-day; and as soon as the State has fairly taken its bent to authority and philan thropy, and laid the least touch on private property, the days of the independent journal are numbered. State railways may be good things, and so may State bakeries; but a State newspaper will never be a very trenchant critic of the State officials. But again, these officials would have no sinecure. Crime would perhaps be less, for some of themo tives of crime we maY$uppose would pass away. But if Socialism·. were carried out .with any. fulness, there would be more contraventions. We see .already new sins springing. up like· mustard-School Board sins, factory sins, Merchant Shipping Act sins-none of which I would be thought to except against in particu lar, but all of which, taken together, show us that Socialism can be a hard master even in the beginning. If it go on to such heights as we hear proposed and lauded,. if it come ac tually to its ideal of the ant-heap, ruled with iron justice, the number of new contraventions will be out of all proportions multiplied.

A Society of Ants Take the case of work alone. Man is an idle animal. He is at least as intelligent as the ant; but genera tions of advisers have in vain rec ommended him the ant's example. Of those who are found truly inde fatigable in business, some are mi sers; some are the practisers of de lightful industries, like gardening; some are students, artists, inven tors, or discoverers, men lured for ward by successive hopes; and. the rest are those who lived by games of skill or hazard-financiers, billiard-players, gamblers, and the like.· But in unloved toils, even under the prick of necessity, no man is continually sedulous. Once eliminate the fear of starva tion,once eliminate or bound the hope .of .riches, and we shall see plenty ofskulking and malingering. Society will then be something not wholly unlike a cotton plantation in the .old days; with cheerful, careless, demoralised slaves, with elected 494 THE FREEMAN August overseers, and, instead of the planter, a chaotic popular assembly.

If the blood be purposeful and the soil strong, such a plantation may succeed, and be, indeed, a busy ant heap, with full granaries and long hours of leisure. But even then I think the whip will be in the over seer's hand, and not in vain. For, when it comes to be a question of each man doing his own share or the rest doing more, prettiness of senti ment will be forgotten. To dock the skulker's food is not enough; many will rather eat haws and starve on petty pilferings than put their shoulder to the wheel for one hour daily. For such as these, then, the whip will be in the over seer's hand; and his own sense of justice, and the superintendence of a chaotic popular assembly will be the only checks on its employment. Now, you may be an industrious man and a good citizen, and yet not love, nor yet be loved by Dr. Fell the inspector. It is admitted by private soldiers that the disfavour of a sergeant is an evil not to be com bated; offend the sergeant, they say, and in a brief while you will either be disgraced or have deserted. And the sergeant can no longer appeal to the lash. But if these things go on, we shall see, or our sons shall see, what it is to have offended an in spector.

This for the unfortunate. But with the fortunate also, even those whom the inspector loves, it may not be altogether well. It is concluded that in such a state of society, supposing it to be financially sound, the level of comfort will be high. It does not follow: there are strange depths of idleness in man, a too-easily-got suf ficiency, as in the case of the sago eaters, often quenching the desire for all besides; and it is possible that the men of the richest ant-heaps may sink even into squalor. But suppose they do not; suppose our tricksy instrument of human na ture, when we play upon it this new tune, should respond kindly; sup pose no one to be damped and none exasperated by the new conditions, the whole enterprise to be finan cially sound-a vaulting supposi tion-and all the inhabitants to dwell together in a golden mean of comfort: we have yet to ask ourselves if this be what man desire, or if it be what man will even deign to accept for a continuance.

It is certain that man loves to eat; it is not certain that he loves that only or that best. He is supposed to love comfort; it isnot a love, at least, that he is faithful to. He is supposed to love happiness; it is my conten tion that he rather loves excitement. Danger, enterprise, hope, the novel, the aleatory, are dearer to man than regular meals. He does not think so when he is hungry, but he thinks so again as soon as he is fed; and on the hypothesis of a successful ant-heap, 1978 THE DAY AFrER TOMORROW 495 he would never go hungry. It would be always after dinner in that soci ety, as, in the land of the Lotus eaters, it was always afternoon; and food, which, when we have it not, seems all-important, drops in our esteem, as soon as we have it, to a mere prerequisite of living. Incentives Needed That for which man lives is not the same thing for all individuals nor in all ages; yet it has a common base; what he seeks and what he must have is that which will seize and hold his attention. Regular meals and weather-proof lodgings will not do this long. Play in its wide sense, as the artificial induction of sensation, including all games and all arts, will, indeed, go far to keep him conscious of himself; but in the end he wearies for realities. Study or experiment, to some rare natures, is the unbroken pastime of a life.

These are enviable natures; people shut in the house by sickness often bitterly envy them; but the com moner man cannot continue to exist upon such altitudes: his feet itch for physical adventure; his blood boils for physical dangers, pleasures, and triumphs; his fancy, the looker after new things, cannot continue to look for them in books and crucibles, but must seek them on the breathing stage of life. Pinches, buffets, the glow of hope, the shock of disappointment, furious contention with obstacles: these are the true elixir for all vital spirits, these are what they seek alike in their romantic enterprises and their unromantic dissipations. When they are taken in some pinch closer than the common, they cry, ((Catch me here again!" and sure enough you catch them there again-perhaps before the week is out. It is as old as Robinson Crusoe; as old as man. Our race has not been strained for all these ages through that sieve of dangers that we call Natural Selec tion, to sit down with patience in the tedium of safety; the voices of its fathers call it forth.

Already in our society as it exists, the bourgeois is too much cottoned about for any zest in living; he sits in his parlour out of reach of any danger, often out of reach of any vicissitudes but one of health; and there he yawns. If the people in the next villa took pot-shots at him, he might be killed indeed, but so long as he escaped he would find his blood oxygenated and his views of the world brighter. If Mr. Mallock, 2 on his way to the publishers, should have his skirts pinned to the wall by a javelin, it would not occur to him-at least for several hours-to ask if life were worth living; and if such peril were a daily matter, he 2Editor's Note: William Hurrell Mallock, 1849-1923, was an English theological and sociological writer whose works included Is Life Worth Living?

496 THE FREEMAN August would ask it nevermore; he would have other things to think about, he would be living indeed-not lying in a box with cotton, safe, but im measurably dull. The Glory of Contest The aleatory, whether it touch life, or fortune, or renown-whether we explore Africa or only toss for halfpence-that is what I conceive men to love best, and that is what we are seeking to exclude from men's existences. Of all forms of the aleatory, that which most commonly attends our workingmen-the dan ger of misery from want of work -is the least inspiriting: it does not whip the blood, it does not evoke the glory of contest; it is tragic, but it is passive; and yet, in so far as it is aleatory, and a peril sensibly touch ing them, it does truly season the men's lives. Of those who fail, I do not speak -despair should be sa cred; but to those who even modestly succeed, the changes of their life bring interest: a job found, a shilling saved, a dainty earned, all these are wells of pleasure springing afresh for the successful poor; and it is not from these but from the villa dweller that we hear complaints of the unworthiness of life.

Much, then, as the average of the proletariat would gain in this new state of life, they would also lose a certain something, which would not be missed in the beginning, but would be missed progressively, and progressively lamented. Soon there would be a looking back: there would be tales of the old world humming in young men's ears, tales of the tramp and the pedlar, and the hopeful emigrant. And in the stall fed life of the successful ant heap-with its regular meals, regu lar duties, regular pleasures, an even course of life, and fear excluded-the vicissitudes, delights, and havens of to-day will seem of epic breadth. This may seem a shallow observa tion; but the springs by which men are moved lie much on the surface. Bread, I believe, has always been considered first, but the circus comes close upon its heels. Bread we suppose to be given amply; the cry for circuses will be the louder, and if the life of our descendants be such as we have conceived, there are two beloved pleasures on which they will be likely to fall back: the pleasures of intrigue and of sedition.

In all this I have supposed the ant-heap to be financially sound. I am no economist, only a writer of fiction; but even as such, I know one thing that bears on the economic questionI know the imperfection of man's faculty for business. The Anarchists, who count some rugged elements of common-sense among what seem to me their tragic errors, have said upon this matter all that I could wish to say, and condemned 1978 THE DAY AFTER TOMORROW 497 beforehand great economical polities. So far it is obvious that they are right; they may be right also in predicting a period of communal in dependence, and they may even be right in thinking that desirable. But the rise of communes is none the less the end of economic equality, just when we were told it was beginning. Communes at War Communes will not be all equal in extent, nor in quality of soil, nor in growth of population; nor will the surplus produce of all be .equally marketable. It will be the old story of competing interests, only with a new unit; and, as it appears to me, a new, inevitable danger. For the merchant and the manufacturer, in this new world, will be a sovereign commune; it is a sovereign power that will see its crops undersold and its manufactures worsted in the market. And all the more dangerous that the sovereign power should be small. Great powers are slow to stir; national affronts, even with the aid of newspapers, filter slowly into popular consciousness; national loss es are so unequally shared that one part of the population will be count ing its gains while another sits by a cold hearth. But in the sovereign commune all will be centralised and sensitive.

When jealollsy springs up, when (let us say)· the commune of Poole has overreached the commune of Dorchester, irritation will run like quicksil ver throughout the body politic; each man in Dorchester will have to suffer directly in his diet and his dress; even the secretary, who drafts the official correspondence, will sit down to his task embittered, as a man who has dined ill and may expect to dine worse; and thus a business difference between com munes will take on much the same colour as a dispute between diggers in the lawless West, and will lead as directly to the arbitrament of blows. So that the establishment of the communal system will not only rein troduce all the injustices and heartbumings of economic inequal ity, but will, in all human likeli hood, inaugurate a world of hedge row warfare. Dorchester will march on Poole, Sherborne on Dorchester, Wimborne on both; the waggons will be fired on as they follow the high way, the trains wrecked on the lines, the ploughman will go armed into the field of tillage; and if we have not a return of ballad literature, the local press at least will celebrate in a high vein the victory of Cerne Abbas or the reverse of Toller Por corum.

At least this will not be dull; when I was younger, I could have wel comed such a world with relief; but it is the New-Old with a vengeance, and irresistibly suggests the growth of military powers and the founda tion of new empires. ® Thomas W. Hazlett The SUCCESS of failure WITHOUT FAILURE we'd be ip big trouble. uLearning from our mistakes" is far more than a worn cliche, it is the gateway to an enormous truth about our entire economic system. Only by allowing our failures to run their due course may we ever chance to come by better ways of providing for our desires. So much of the discussion of ~~fail ure" has turned to the mere ex changing of shibboleths. Everyday discourse is loaded with paeans to braving the chances for failure, ac cepting great challenges, the noble nature of ~~sink or swim," and warn ings that ~~nothing ventured, nothMr. Hazlett Is pursuing graduate studies In econom Ics at the University of California In Los Angeles, where he Is on the staff of the International In stitute for Economic Research.

498 ing gained." There seems to be an instantaneous acceptance that indi viduals .must, in their private af fairs, be willing to risk something to make a showing in life. Not many would hedge on the idea that, if you take away the chance to flop, you simultaneously withdraw the oppor tunity to soar. Yet, in extending this simple morality to larger spheres, there looms a dichotomy. While the chal lenge of life's game is hearty for the individual soul, the goal of social institutions is to demolish all possi ble exceptions to a pre-programmed ((success." Security, the professed aim of scores of government pro grams, seeks to place a prohibition on all deviations from the politically-determined ~~success norm."

THE SUCCESS OF FAILURE 499 Now, from the individual's perspective, security is a decent sort of thing to strive for and a happy one to achieve. People who are far from being millionaires take reasonable measures to enhance their own se curity by purchasing insurance, get ting an education (read: income se curity), joining a union, working on a contractual basis, getting married and, let's not forget, having children (could we call this a form of genetic social security?). The distinctive characteristics of ~~private" security are that a person acts either to ~~pool" his risks volun tarily with others, as in buying in surance, or he takes positive action to lessen the uncertainty surround ing his circumstances, as in gaining an education. ~~Public" security will be pursued from a diametrically dif ferent angle: simply shifting the burden of failure from one group to another. Forcibly Shifting the Burden If we look at any government bureaucracy we can see the nature of the problem. When the govern ment establishes ~Job security" via tenure rules (accompanied by cost of-living escalators) the government is not ~~pooling" the risks of the workers nor is it taking positive action to reduce the uncertainty con fronting the work force. It is forcibly transferring risks of failure from one group (government workers) to another group (private sector work ers).

Now, from a moral view, this is a nasty break for the latter; the so called civil servants are neither very servile nor very civil for inflicting this injustice. But this is only the visible damage of the deal. The most pernicious effects are to be found in the economic results of this redis tribution of risk. Just as a man can only find suc cess by winding his way through and past-failure, an economic sys tem must depend on its failings to signal its path of success. This pro cess is certainly more important for our system as a whole for, whereas a man may follow the examples of those who have gone before, a sys tem has no model to emulate. It must break its ground in darkness. Economic failings include many distasteful possibilities: people get ting fired or laid-off, companies or individuals going bankrupt, product lines being discontinued, capital lying idle, stock equities falling in value, ad infinitum. All such distur bances are the result of some mis calculation in the plans of the econ omy's agents. People, businesses and governments cannot foresee the future, and so every unexpected change in our circumstances-even if it is, on the whole, a very favor able one-will cause some people to end up in less fortunate conditions than they had anticipated.

500 THE FREEMAN August Change May Be Painful Even when our society eagerly greeted the innovation of the au tomobile, for example, there were the poor blacksmiths being thrown out of work. And, in a recent movie, Woody Allen reminisces about an entire family that was wiped out by the introduction of automatic pin setters. And, just as we pray for the cure for cancer, we know that, when it comes, we will see some bad economic news for the cobalt radia tion industry. These economic Ufailings" are tremendously important clues that, far from being swept under the rug, should be utilized as efficiently as possible for the value they contain. This value is both informational and motivational. It is the economic failure that allows us to see our mistakes and motivates us to correct them. Failures are the ((symptoms" of the economic organism. As the body of any living thing locates and cures its maladies by responding to its itches, aches and throbs, so the economy must behave to adjust to its unemployments, malinvestments and inefficiencies. Professor Axel Leijonhufvud discusses this organis tic parallel by citing a biologist's description of a biological system: An organism is an integrated unit of structure and functions. In an organism, all molecules have to work in harmony.

Each molecule has to know what the other molecules are doing. Each molecule must be able to receive messages and must be disciplined enough to obey or ders. How has the organism solved the problem of intermolecular communica tion? Professor Leijonhufvud suggests that, in the above passage, we sim ply substitute the word ((economy" for ((organism" and the word Htrans actors" for ((molecules." Re-read the passage this way. Thus, do we arrive at the essence of the coordination problem. Adjust or Perish If a living organism attempted to ignore certain biochemical signals it would soon degenerate into mul titudinous plagues and perish. And when an economic· system fails, as Prof. Leijonhufvud is fond of saying, to Hmend its ways" in response to signs of ill health, it will likewise degenerate into economic anemia and witness economic diseases im mensely greater in magnitude than the initial symptoms.

The ease with which our society has let this helpful analogy slip past is demonstrated by the single statis tic that, for all of 1977, for all of the federal government, just 223 work ers were fired. Out of two million federal job-holders, that represents about one out of every ten thousand employees. You'd probably have a better chance of being assaulted by a lightning bolt in Palm Springs or of 1978 THE SUCCESS OF FAlLURE 501 recei ving Sophia Loren's phone number from Computer Date. More than the lack of individual failure in government is the absence of any way for departments and agencies of government to fail. When a public bureaucracy falls short of some assigned goal it is not driven to a cheap merger or bank ruptcy as in the ((ruthless" competi tion of the market place. Indeed, gross failures on the part ofparticu lar bureaucracies often send out enormously beneficial signals for the individual bureaucrats.

Witness the incredible failure of the Federal Energy Administration. Founded as a ~~temporary" agency to cushion the effects of the Arab oil embargo in 1973-74, the Agency was given the goal of Project Indepen dence. The idea was to lessen oil imports over the years until, by 1985, we were to be completely and patriotically-self-sufficient in energy. The FEA went about this goal in rather bizarre fashion. It promptly slapped a ((crude-oil equalization" tax on domestic producers, and used the resultant revenues to subsidize oil imports. But, let us not quibble over methodology, let us simply look at the results. When the FEA was born in 1973, the U.S. imported Ys of its oil; today we import lh; By 1976 the President's Task Force on FEA Regulations was led to conclude: FEA regulations, as they now exist, confer few if any benefits upon the pub lic.... In return for this lack of benefits and sense of false security, the American businessman, the taxpayer, and the pe troleum consumer, must incur higher costs than might otherwise be the case.

Indeed, continuation of the present regu latory mechanism will result in long-run inefficiencies for the American economy. Failure may not come-in a more plainly marked wrapper than the Federal Energy Administration. So how does the government cleanse us of the FEA burden? By exponential expansion! Bureaucratic Growth In 1977 the FEA opened its new offices with ~~Department of Energy" on the marquee. It has now attained full cabinet rank and boasts 20,000 full-timers ~ceconomizing" our energy with a ten billion dollar budget. Apart from its institutional successes, FEA officionados have scored well. The Agency's first direc tor went on to become Secretary of the Treasury, the second has gone on to an esteemed academic post, and the third and present director, now a cabinet member, sits at the right hand of our President. In contrast to the artificial seren ity of the public sphere, there were over 200,000 bankruptcies, individ ual and corporate, in 1977 and sev eral millions of workers were forced to switch jobs in the private sector.

502 THE FREEMAN August As much as we would like to minimize such disruptions and fail ures (particularly the bankruptcy figures which are influenced by laws extremely generous to defaulters), we do not want to eliminate real errors of judgment and competence by «assuming them away." We want to Hbleed" our system, purge the failing, and find a better way tomor row. Government bureaucracy has de livered a Brave New World to its protected clients: do not fear the future for it contains no failure. The job security of the public sector pre cludes any adjustment process whereby we purge the bad and try something new. HGovernment, with out failure" can only bring about Hinstitutions without success." Upon reflection, when was the last time that a government bureaucracy was closed and cleared away due to its failing to meet the needs of the consumers? The private market place displays a veritable barrage of such leapfrogging, with bankruptcies, mergers·, corporate takeovers and shake-ups, proxy fights, «inside information" and all the «ravages" of Hdog-eat-dog" com petition. Yet it is this constant, re lentless panic to discover today's failure and to gobble it up at a bargain price that promotes an in cessant tendency toward most effi ciently reaching for the consumer's dollar.

The Test at the Market To illustrate the respective mechanisms of the market and the bureaucracy, it is interesting to re view the Wall Street Journal on any given day. Look at the incredible information just on the stock mar ket alone. Here we have the rela tive values, as judged by millions of traders, of the earning power of thousands. of companies. A mistake (or unsolici ted disaster) accruing to any of these firms reflects itself to the entire market in the price of the stock in a matter of-amazingly seconds. No government study. No environmental impact statement. No six-year lawsuit. A private com pany can flunk the market test in seconds. Look around the rest of the J our nal. Articles on quarterly earnings reports, new product lines, man agement personnel shuffles, changes in corporate profit strategies, in technologies, in mar keting techniques. All are based on the quest of private persons to meet the challenge of market competi tion, to best deliver the stockholders the highest sales at the lowest cost.

In other words, to avoid flunking that market test. And here there is no room for pontification. Speech writers don't produce profit state ments-accountants do. The state has no room, no need, and no desire for a competitive test of its economic programs. Its moti1978 THE SUCCESS OF FAILURE 503 vation is to gain political efficiency, and this brand of activity takes on characteristics quite distinct from those required for economic effi ciency. The appeal of the market solution is that, in the famous words of Adam Smith, each individual Hneither intends to promote the pub lic interest, nor knows how much he is promoting it ... he intends only his own gain and he is in this ... led by an invisible hand to promote an end which was no part of his inten tion. By pursuing his own interest he frequently promotes that of soci ety more effectually than when he really intends to promote it."

The Political Test Conversely, the drive for ·politica{ efficiency can result in the most wasteful and fraudulent of activities and may foster the emergence of regimented, bureaucratic systems which are totally unresponsive to the public and which suffocate our spontaneous forces for creativity. As Professor Milton Friedman com ments on the inverse of Smith's eco nomic ((invisible hand": The invisible hand in politics is as potent a force for harm as the invisible hand in economics is for good. In politics, men who intend· only to promote the public interest, as they conceive it, are llled by an invisible hand to promote an end that was no part of their intention." They become front-men for special inter ests they would never knowingly" ~erve. They end up sacrificing the public inter est to the special interest, the interest of consumers to that of producers, the interest of the masses who never go to college to that of those who attend col lege, the interest of the poor working class saddled with employment taxes to that of the middle class who get dispro portionate benefits from social security, and so on down the line.

The rewards of success can only be fully effective where the risks from failure are real. Success and failure must be two sides of an indivisible coin. And it is only when we toss this coin fairly, without precluding the chance it may come up tails, can we gain the knowledge to steer our selves toward a better way of doing things. The game of life is, natur ally, a trial and error process, and only by allowing ourselves to face our failings and to correct our bear ings will we move progressively. How Protectionism Betrays and Destroys the Individual Some of our best emotions nudge us to fudge. We want to do whatever ((must" be done to cover up the downside risks of contemporary so ciety. But if we are loyal to these ((best emotions" when it comes to our public institutions we may well be tray our ((bestjudgment." There is a most compelling argument against such state action to directly outlaw social problems. For by such ((protec tionism" we seal ourselves off from -504 THE FREEMAN the phenomenal dynamism of indi vidual initiative that will, when all is said and done, still be the attri bute of man that brings home the bread. As F. A. Hayek reveals: To the ambitious and impatient re former, filled with indignation at a par ticular evil, nothing short of the com plete abolition of that evil by the quick est and most direct means will seem adequate. If every person now suffering from unemployment, ill health, or in adequate provision for his old age is at once to be relieved of his cares, nothing short of an all-comprehensive and com pulsory scheme will suffice. But if, in our impatience to solve such problems im mediately, we give government exclu sive and monopolistic powers, we may find that we have been short-sighted. If the quickest way to a now visible solu tion becomes the only permissible one and all alternative experimentation is precluded, and if what now seems the best method of satisfying a need is made the sole starting point for all future de velopment, we may perhaps reach our present goal sooner, but we shall proba bly at the same time prevent the emer gence of more effective alternative solu tions. It is often those who are most anxious to use our existing knowledge and powers to the full that do most to impair the future growth of knowledge by the methods they use. The controlled single-channel development toward which impatience and administrative convenience have frequently inclined the reformer and which, especially in the field of social insurance, has become characteristic of the modern welfare state may well become the chief obstacle to future improvement.

At bottom, the price of synthetic success today will surely be the loss of opportunity for authentic success tomorrow. @ IDEAS ON LIBERTY Legislated Security Is Bondage THERE has never yet come down from any government any substantial improvement in the conditions of the masses of the people, unless it found its own initiative in the mind, the heart, and the courage of the people. Take from the people of our country the source of initiative and the opportunity to aspire and to struggle in order that that aspiration may become a reality, and though you couch your action in any sympathetic terms, it will fail of its purpose and be the undoing of the vital forces that go to make up a virile people. Look over all the world where you will, and see those governments where the features of compulsory benevolence have been established, and you will find the initiative taken from the hearts of the people.

SAMUEL GOMPERS, from an address to union members, December 5, 1916 William H. Peterson Time for Truth Time to Act Item: In 1977 Congress voted to increase Social Security payroll taxes. In 1978 this very same Con gress seeks to roll back at least part of the increase. Item: The Interstate Commerce Commission had on its books about 400,000 tariff schedules and 40 tril lion rates telling the transportation industry what it might charge cus tomers. Item: A listing of all the new U.S. rules and regulations set in 1976 over business required 57,027 pages of fine print in the Federal Register. Item: From 1955 to 1965 the money supply had grown at an an nual rate of 2%·per cent. Since 1965 the money growth rate has averaged almost six per cent. The cost of livDr. Peterson Is the Burrows T. Lundy Professor of Philosophy of Business at Campbell College In Buies Creek, North Carolina. ing in each period, as measured by the Consumer Price Index, roughly rose apace.

Item: Government has long been usurping funds needed for private investment. Such investment in the U.S. in recent years, as a percentage of GNP, was the lowest of all indus trialized nations, including the United Kingdom. At the same time approximately 70 per cent of the long-term capital funds available in private money markets was being borrowed by the Federal govern ment and 80 per cent by government at all levels. And so on ad infinitum. This situation of government gone-haywire-devastatingly de tailed in William E. Simon's re markable new book, A Time for Truth (Reader's Digest Press [McGraw-Hill Book Company, 1221 505 506 THE FREEMAN August Avenue of the Americas, New York, N.Y. 10036] $12.50)-brings to mind the observation of Thomas Paine that ((government, even in its best state, is but a necessary evil; in its worst state, an intolerable one." A time for truth? Indeed, and a time to act. Former Treasury Secre tary Simon, now president of the John M. Olin Foundation, chairman of the National Energy Foundation, vice chairman of Investin-America National Council, and a trustee of Lafayette College and Georgetown University, tells why he came to write of America's descent into what Mises called ((planned chaos": It is my intention in this book to com municate the wider perspective that I acquired so traumatically in Washington . . . the reason for discussing economic issues is not to inspire a national passion for bookkeeping, but to inspire ana· tional awareness of the connection be tween economic and political freedom.

The connection is real and unbreakable. To lose one is to lose the other. In Amer ica we are losing both in the wake of the expanding state. The dual question posed by Mr. Simon is: How did we get into this mess, and how do we get out? He's in a good position to answer the question. William Simon saw government at the highest policy making level from the inside. He served as Secretary of the Treasury from 1974 to 1977. He also served as Deputy Secretary of the Treasury, 1973-74, and as chairman of the Economic Policy Board, the Federal Energy Office and the East-West Foreign Trade Board. So, how does government act? Well, from this ((Inside Washington" view of things, consider how gov ernment responded to the energy crisis, in particular to the Arab oil embargo in the wake of the Yom Kippur War in October of 1973. Suddenly America was cut off from Arabian oil. The crisis was real. Typically, the government didn't act as much as it reacted. Congress demanded action. A centralized oil allocation process was quickly put together (Mr. Simon terms it a ((dis aster"). Oil price controls, already in place under President Nixon's ((New Economic Policy" of generalized wage-price controls, were tightened (thereby compound ing the crisis).

As head ofa newly created Energy Policy Office, President Nixon ap pointed Colorado Governor John Love. But Governor Love on a weekend early in the crisis decided to go quail hunting with Interior Secretary Rogers Morton. Washing ton flipped. How could an energy czar attend to his pleasure when America was in dire straits of fast running out of oil? President Nixon dropped Governor Love like a hot potato and named William Simon as the new energy czar .

1978 TIME FOR TRUTH -TIME TO ACT 507 Mr. Simon's free enterprise pro clivities were manifest all right, but like King Canute he was unable to stop the interventionist tide. For example, in the face of media and political pressure for rationing, the President ordered rationing stamps printed and held in reserve. ~~Maybe that will shut them up," he told his energy czar. But it didn't shut them up. Pres sure increased for formal rationing, which the price-controlled oil starved oil companies and gas sta tions practically resorted to anyway, pretty much without any specific government directive (though some states such as Oregon directed that motorists with even-numbered plates shop for gas on certain days of the week, and motorists with odd numbered plates shop on other days). Gas lines lengthened into two, three, four-hour waits. The cen tralized allocation system Hkept fall ing apart." Parts of New Jersey suddenly went dry, for example, while other parts had plenty of gas.

Palm Beach ran out of gas, while stations ten miles away were well supplied. Tempers frayed across the nation, while domestic supplies and exploration lagged (and lag still) in the face of price lids and environ mentalist harassment, which con tinue to this hour. In a domestic interlude, Mr. Simon tells how his wife Carol reacted to public criticism during the Arab embargo. She did not want to be recognized. She stopped using charge plates that carried the name William E. Simon. She skulked around in a shawl and dark glasses. One night when Mr. Simon came home late, Carol Simon, normally a loving and cheerful woman, sprang at him and shouted: ~~Do you know how long I waited in the line? You have to do something!" Energy czar Simon groaned, ~~Et tu, Brute?" Mr. Simon admits that he was ~~a rotten bureaucrat," that he played the philosophically preposterous role of ((William E. Simon, Invisible Hand," that Congress displayed ~~ex traordinary irresponsibility" in serving as supposedly selfless all wise economic planners.

He holds that today there is pre cious little public awareness of our flight toward destruction, toward what Mr. Simon calls Hthe New Despotism." Is there a way out? Yes. A widespread reaffirmation of freedom and free enterprise is the Simon way, i.e., a return to the reli gion of human liberty, a broad-based adherence to a set of guiding princi ples. Mr. Simon lays down those principles, one after the other: • The overriding principle to be re vived in American political life is that which sets individual liberty as the highest political value.

508 THE FREEMAN • There must be a conscious philosophical prejudice against any intervention by the state into our lives, for by definition such inter vention abridges liberty. • The principle of ~~no taxation without representation" must again become a rallying cry of Americans. Only Congress represents American voters, and the process of transfer ring regulatory powers-which are a hidden power to tax-to unelected, uncontrollable, and unfireable bu reaucrats must stop. • A critical principle which must be communicated forcefully to the American public is the inexorable interdependence of economic wealth and political liberty. • Bureaucracies themselves should be assumed to be noxious, authori tarian parasites on society, with a tendency to augment their own size and power and to cultivate a parasit ical clientele in all classes of society. • Productivity and the growth of productivity must be the first economic consideration at all times, not the last. That is the source of technological innovation, jobs, and wealth.

• This means that profits needed for investment must be respected as a great social blessing, not as a social evil, and that envy of the ~(rich" cannot be allowed to destroy a pow erful economic system. • The concept that Hwealth is theft" must be repudiated. • Conversely, the concept that the absence of money implies some sort of virtue should be repudiated. • Similarly, the view that govern ment is virtuous and producers are evil is a piece of folly, and a nation which allows itself to be tacitly guided by these illusions must lose both its liberty and its wealth. • The Hethics" of egalitarianism must be repudiated. Achievers must not be penalized or parasites re warded if we aspire to a healthy, productive, and ethical society. • The American citizen must be made aware that today a relatively small group of people is proclaiming its purposes to be the will of the People. That elitist approach to gov ernment must be repudiated.

With a preface by Milton Fried man and a foreword by F. A. Hayek-both Nobel Laureates-this book is a roadmap charting a route away from tax-and-tax, spend-and spend, cradle-to-the-grave insecur ity. William E. Simon points the way to a critically needed American Renaissance. @J A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN TWO PHILOSOPHIES OF MONEY S. Herbert Frankel's book, Two Philosophies of Money: The Conflict of Trust and Authority (St. Martin's Press, 175 Fifth Avenue, New York, N.Y., 10010, 164 pp., $14.95), tells it all in the subtitle. It sounds simple, but the ~~all" it tells about involves nothing less than the whole subject of what is and what is not inaliena ble about individual human rights. This means that Professor Frankel is forced, willy nilly, into transcend ing ordinary economic categories. He deals with money as a symbol of deeper psychological and social at titudes. The nature of money is de Pendent on the nature of man, and at a time when men, over most ofthe earth's surface, aren't sure they have any rights of ownership at all, it is hardly cause for wonder that money, as a medium of facilitating exchanges of ownership, is subject to the most cavalier whims of politi cians on the make.

Professor Frankel, in his introduction, quotes Henry Simons, who wrote some forty years ago that ~~we cannot get along . . . without some moral sanctions and mandates which politicians must obey in mat ters of finance." Since Simons' time the ~~moral sanctions and mandates" that were once taken for granted throughout Christendom have, along with the gold standard, been lightly tossed aside. But the attitude of the politicians toward money has been merely symptomatic of the change in the relationship of west ern Peoples to government itself. If People really held to what Leonard Read calls the ~~freedom philosophy" (pri vate property, free trade and carefully limited government) our money troubles would be largely confined to the difficulty of earning it, not with its integrity as a com mercial lubricant and dependable store of value. Our nineteenth-century forebears might have indulged in arguments 509 510 THE FREEMAN August about the relative value of gold and silver as backing for the printed forms of money, but they were gen erally agreed on the proposition that something hard, tangible and desir able in itself should be available to people if they were to transcend the awkward limitations of a .barter economy. Remembering the days qf Victorian stability, it is easy to say that we should go back to a metallic standard. So we should, but it is Professor Frankel's point that, even in the days of gold, there was a whole world of trust in which the metallic standard operated.

An Orderly Universe Our nineteenth-century ancestors held predominantly to Lockean be liefs. They held that rights came from God as part of the natural order. The right to life presupposed the right to own property as a base for the cultivation of life-sustaining skills and for the provision for sup port in one's old age. And, in turn, the right to property involved the idea of contract, by which trading from a base, both for the short and the long term, could be made safe. Naturally the right to property ex tended to disposal and acquisition rights. Money was needed to intro duce mobility into the Lockean sys tem, and, for the sake of consistency, it was naturally assumed that money should be as subject to con tractual stability as anything else. The Lockean world involved trust in an order, with Ten Command ments morality taken for granted. Money was part of that order. When the order fell apart, money fell apart with it. Gold was repudiated only after men had ceased to believe in their Lockean rights.

Professor Frankel has discovered a far-seeking student of the moral basis of monetary order in the ne glected figure of Georg Simmel, a German philosopher and sociologist whose Die Philosophie Des Geldes, or Philosophy of Money, appeared at the turn of the century. Simmel held that it was an illusion to suppose that money could stand outside the activities of people in ~~an empire of its own." It was nothing ~~outside the objects, services or rights to which it gives access." It had the power of being ~tincorporated in any future use that its possessor may desire to put it," but the ttfuture use" presup posed the continuation of the moral order in which both the money and its contract-writing owner existed. Simmel, one gathers from Profes sor Frankel's exposition of some concepts that are cloudy in their Hegelian formulations, believed in the liberation that came with the Lockean .order. Men's possessions involved an extension of their indi viduality. Since money is ttthemost mobile of all kinds of properties,"

there is t~a close interrelationship between the development of a 1978 TWO PHILOSOPHIES OF MONEY 511 money economy and the growth of the role of the individual and recog nition which is given to him." An Expression of Trust As the guarantor of mobility and freedom, money, in its gold form, could hardly be called nbarren." It was an expression of a society that held the individual in a certain re gard. The individual, as a member of a society based on trust, was entitled to keep government, .as his agent, at some distance. The distinction be tween society and the State, in the days which Simmel celebrated, was clear. The State did not create money, it merely functioned as the policeman who guaranteed that the people's gold or silver coins were of a certain weight and fineness. Money was a social product, dug in the original instance by individuals who got together to do the prospecting and to work the mines. The credit reared on the metallic base was a social expression of trust in people's promises to .Perform services, or to settle at agreed-upon moments in cash if that was desirable.

The Keynesians, with their flat belief that money is a creation of the State, have misread history. Unfor tunately, they have succeeded in selling their fallacious idea to political majorities all through the west ern world. The majorities supinely accept the idea that money is simply a government-created tool of State action. This is a complete negation of the older idea, expressed by Sim mel, that money is a symbol of social trust. ((The two conceptions," says Professor Frankel, ttare incompati ble." The Keynesian conception makes money the ttcapricious and uncer tain . . . prey to conflicting and varying political objectives." There can be no ttsocial trust" when the money supply is subject to the com mandments of politicians seeking to further pet projects at the expense of wildly unbalanced budgets. Such budgets result in pyramids of un backed government debt-tokens that, in tum, are ttmonetized" to the detriment of price levels throughout the economy.

The sour joke, is, of course, on the Keynesians.When price and wage controls come, the politicos may think they can force their ideas of value on people. But, short of bayonets on every street comer and spies in every shop, this is impossi ble. The .State's fiat can only go so far-€ven the circulation of inflated paper money depends on some rem nant of Lockean trust. When the last remnants of trust are withheld, the Keynesians depart. Then the Leninists take over, money is abolished save as tokens of accoun tancy .in State rationing, and the mobile society of the Lockeans gives way .to the serfdoms that already encumber most of the world.

512 THE FREEMAN ECONOMICS: PRINCIPLES AND POLICY FROM A CHRISTIAN PERSPECTIVE by Tom Rose (Mott Media, Box 236, Milford, Michigan 48042, 1977) 380 pages $9.95 Reviewed by Brian Summers THIS is an introductory text in eco nomics written from a fundamen talist Christian point of view. The style is very readable, as the author explains basic economic concepts and uses them to defend the free market profit and loss system. If there is a criticism to be made of Professor Rose's book, it is his ten dency to view economics as an em pirical science-despite his refer ences to Ludwig von Mises. He also relies somewhat on mathematical demonstrations, of the sort cur rently favored in academic circles. This is particularly evident in his chapter on competition, which he views in terms of market structure, rather than as a process taking place over time. On balance, however, this book has much to offer, especially to those involved in Christian schools. i HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $3.00 Order from: THE FOUNDATION FOR ECONOMIC EDUCATION, INC.

IRVINGTON-ON-HUDSON, NEW YORK 10533 the Freeman VOL. 28, NO.9. SEPTEMBER 1978 "Affected with a Public Interest" Ridgway K. Foley, Jr.· 515 The law has made a distinction that lacks economic and moral justification. 525Ralph BradfordThe Golden Age Not in the past, or future; now is the time. What's In It for Us? P. Dean Russell 528 Helpful suggestions on how to promote the free market. Energy in a Changing World Bettina Bien Greaves 531 An overview of "the crisis" and suggested ways to cope. What the Interventionist Overlooks Sheldon Richman 542 A vital distinction between governmental force and market transactions. World In the Grip of an Idea 21. The United States.: The Thrust to Transformation Clarence B. Carson 548 The communications industry as an alien force to transform society. Law of the Jungle vs. the Jungle of Law John Semmens 558 The laws to eliminate risks only confront us with additional un certainties.

Some Thoughts on Taxation George C. Leef 581 To avoid injustice, let taxation be based on the principle: You pay for what you get. Book Reviews: 570 "Textbooks on Trial" by James C. Hefley "Welfare: The Political Economy of Welfare Reform in the United States" by Martin Anderson Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson, N.Y. 10533 Tel: (914) 591-7230 Leonard E. Read, President Managing Editor: Paul L. Poirot Production Editor: Beth A. Hoffman Contributing Editors: Robert G. Anderson Bettina Bien Greaves Edmund A. Opitz (Book Reviews) Brian Summers THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of pri vate property, the free market, the profit and loss system, and limited government. The costs of Foundation projects and services are met through donations. Total expenses aver age $18.00 a year per person on the mailing list. Donations are invited in any amount. THE FREEMAN is available to any interested person in the United States for the asking. For foreign deli very, a donation is required sufficient to cover direct mailing cost of $5.00 a year. Copyright, 1978. The Foundation for Economic Education, Inc. Printed in U.S.A.

Additional copies, postpaid: 3 for $1.00; 10 or more, 25 cents each. THE FREEMAN is available on microfilm from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "World in the Grip of an Idea."

Ridgway K. Foley, Jr. "AFFECTED WITH A PUBLIC INTEREST" JURISTS often weave erratic seams in the legal fabric we call jurispru dence. Once rooted in the law, error seems to possess all the tenacity of crabgrass; aided by the concept of stare decisis (stand by previous deci sions) and the juridical tendency never to undo what has once been accomplished, error takes suste nance and proliferates, until a whole body of normative rules wells up and covers the terri tory. This article deals with just such a concept: the doctrine that govern ments can regulate and control business enterprises ttaffected with a public interest." In varying guises, this postulate with its myriad tentaMr. Foley, a partner in Souther, Spaulding, Kinsey, WIlliamson & Schwabe, practices law In Portland, Oregon. cles has strangled freedom for al most a century, although its antece dents can be discerned in earlier Anglo-American reports.

The American birth of the rule took place in 1876 in a decision by the Supreme Court of the United States entitled Munn v. Illinois, 1 the most important of the so-called HGranger" cases presented to the Court at the same time. The Su preme Court of the United States upheld a Minnesota law which re quired grain warehouses to secure a license and to comply with price restrictions in order to operate as a business. The rationale of the court: grain warehouses were Haffected with a public interest." In 1933, during the throes of de pression occasioned by government interventions into the economy, the 515 516 THE FREEMAN September doctrine received impetus to strangle all manner of economic concerns in the case of Nebbia v. New York 2 which prohibited price reductions in enterprises cCaffected with a public interest." The lack ofjudicial understanding of economic and moral values ap pears in the following statement: The court has repeatedly sustained curtailment of enjoyment of private property,· in the public interest. The owner's rights inay be subordinated to the needs of other private owners whose pursuits are vital to the paramount in terests of the community.3 A wiser decision, and one justified by sound reason of political economy and morality, permits anyone to en gage in any business at any time unless he initiates aggression or practices fraud upon another.

The overweening coercion emanating from, and justified by, Munn v. Illinois and Nebbia v. New York impels us, even at this late stage, to examine the foundations of the doctrine. What does cCaffected with a public interest" really mean? All Businesses Which Survive Serve the Public What businesses are cloaked with a public interest? A better inquiry: what enterprises are not affected with a public interest? Upon exami nation, one finds that he can make an equally good case for the public interest in all endeavors, and not just grain warehouses, wharves and taverns. The only business not af fected with a public interest is one which fails to serve the public. The sole business I can conceive of which does not serve the public is one which sinks into bankruptcy. Once again, we discern a judicial decision which fails to accord with sound principles of economics and human action. The majority in Munn v. Illinois could not perceive that the only reason for the exis tence of any business enterprise is to create and transfer goods or services to willing recipients.

A successful business is one which satisfies enough consumers or customers at a high enough price so that the enterprise returns a profit to those individuals who have con tributed to the entrepreneurial ac tivity. An unsuccessful business is one which does not attract and satisfy sufficient customers at a suf ficient price to generate a profit and encourage maintenance of the necessary capital investment. To the extent that customers ex press satisfaction in a product or a service, in continued purchases, the producer serves the cCpublic inter est." To the extent that no customers seek the creations of a business, there exists no ccpublic interest." Thus, we can say with some cer tainty that Edsel Motor Division of Ford Motor Company was not a business Hclothed with a public 1978 CCAFFECTED WITH A PUBLIC INTEREST" 517 interest." On the other hand, any individual or corporate business which does attract and hold custom ers is, at least to that extent, CCaf_ fected with a public interest."

All Interests Are Truly Private But the problem demands deeper consideration: How should we define ((public interest"? What is the pub lic? In a very real sense, all inhabit ants of a given community or terri tory constitute that particular pub lic, for a public refers to a commu nity or populace at large in their common, nonprivate characters and capacities. As with other terms, however, the phrase ((public interest" has under gone a certain corruption at the hands of the illiberal element. Cur rently the words seem to convey a belief that the public interest over rides any personal or individual interests. Yet, all interests derive from persons. In that sense, all interests are private interests, at least at their genesis. You like ballet; you band with others to form a civic ballet associa tion to promote the art. Seminally, the communi ty interest in ballet existed as a wholly private interest: yours. As you gain adherents, does the interest take on an altered character, or does it remain a dis tinctly individual undertaking? If the private interest changes into a public interest, do we measure such dynamism by the number of supplicants or the character of the interest, or in some other manner? In other words, what is it which trans mutes a purely personal individual value or desire into one of such overpowering essence and force that it can be termed a ccpublic inter est" and justify the limitation upon the freedom of individuals?

Private and Public Interests Are Not Susceptible to Differentiation ..The difficulty in responding to these rhetorical questions lies not in the answers but in the inquiries themselves. It is a difficult task to state a question neutrally, and these particular questions rest on a pre sumption that we can define and differentiate private and public interests. In truth, we cannot do so. As commonly used, a private interest may be defined as a value 4 held by an indi vidual. Since each man is a unique and discrete being, each man possesses a separate set of values or interests. I may be in terested in baseball, you may prefer ice hockey. I may enjoy picking a guitar and singing; you may con sider my renderings anything but musical. Each person, by his ideas, his words, and his conduct, holds and expresses these values which make up his private interests. He seeks to advance these interests, to enjoy them, to introduce others to them. Nonetheless, these interests 518 THE FREEMAN September never lose their individual private character.

The True Meaning of Public Interest: Coercion Writ Large On the other hand, no such thing as a public interest exists, despite continual use of the phrase. 5 When one utters that pair of words, he means to' convey a thought most aptly derived from Munn v. Illinois: he means that some private, per sonal, individual interest or value of one or more persons is, in the speaker's subjective opinion, of such overwhelming importance that all members of society should embrace it as eternal verity and that if any other private, personal, individual interest or value conflicts with the advancement of the first interest, the conflicting interest must be shunted aside, depriving the holder or holders of that second interest of their liberty or right to enjoy and advance the second interest. In plain language, the ((public interest" represents a power tool to coerce those who disagree with the idea or sub jective value advanced by the statist.

Consider this definition in analysis of some of our ear Her examples. My pleasure in baseball may exist side by side with your interest in ice hockey; each private interest receives and satisfies its own followers. Should too few per sons share my interest in baseball, and refuse to patronize supporting advertisers and to buy grandstand seats, my favorite home team may move away to Spokane, for the owner has a private interest in mak ing a return on his capital invest ment. If he does not make a return in Milwaukee, he will move to At lanta; if he makes an insufficient return in the latter city, he may travel elsewhere or he may reinvest his remaining capital in an entirely different venture, one which at tracts and pleases more people. Now notice what will happen if I am able to convince the government that baseball is an enterprise ((affected with a public interest." I may attend the games because they ac cord with my personal, private, in dividual interest. You, however, prefer to spend your earnings on the hockey games. If you and others who do not share my interest in baseball preponderate, the owner and operator of the team will lose money . Yet, if his business is uaf_ fected with a public interest," he cannot move the team to the most fa vorable location, or raise his prices, or take any other ameliora tive steps. Instead, he must either remain captive and lose money (de struction of his capital), sell to someone else who will remain and lose money, or secure a subsidy or other favors from the government.

Most ((public enterprises" follow the latter course.

1978 ((AFFECTED WITH A PUBLIC INTEREST" 519 Subsidy and monopoly inevitably lead to regulation and disallocation of economic goods. One common re sult: increased taxes for all members of the community to support the team in the upublic interest." I might well be willing to pay extra taxes to advance my private interest turned public, but chances are, I would rather mulct my neighbors, thinking that this endeavor repre sents the greatest good. In any event, you will be deprived of your capital (which you would ordinarily use to support the hockey team) against your will, and you will be compelled to watch your privately and justly earned funds spent on an endeavor you dislike, an endeavor which cannot carry its own weight in the free market. Let Each Support His Own, Without Forcing Others The only fair method of allocating scarce resources between numerous activities commands each man to support that which he values with that which he has created, and to compel no other man to act contrary to his desires. Justifiable societal action consists of the coercive pre vention of force and fraud and the preservation of a system of settling disputes, and no more. Myriad ac tivities can take place concurrently, with no forced adherence to any par ticular one. If any endeavor lacks supporters, it must pass from the scene until new support appears.

When this concept replaces the doc trine of ((public interest," when the ((public interest" shibboleth reveals its true nature, freedom regains its exalted place. As demonstrated earlier, any business not in bankruptcy is uaf_ fected with a public interest" in the sense that some customers (the ((public" of that enterprise) find satisfaction in the products supplied. Mr. Justice Field recog nized this a century ago when he declared: The public is interested in the man ufacture of cotton, woollen, and silken fabrics, in the construction of machinery, in the printing and publication of books and periodicals, and in the making of utensils of every variety, useful and or namental; indeed, there is hardly an enterprise or business engaging the at tention and labor of any considerable portion of the community, in which the public has not an interest in the sense in which that term is used by the court in its opinion. . . .8 Thus, the.phrase not only connotes a coercively imposed choice by some adherent of a cause, but also de scends into meaninglessness. It be comes a catch-phrase employed by courts to justify the unseemly result of depriving someone of his liberties, a juridical make-weight. Of course, the community possesses the naked power to pilfer and destroy. That is not to say that looting and coercion 520 THE FREEMAN September is justified, nor can one honestly credit a grain warehouse or a milk seller with cloaking their enterprise with a public interest. Such a state ment reminds one of a robbery vic tim pilloried by the community for owning property of interest to the miscreants.

No entrepreneur cloaks his busi ness with a public interest. Each person evaluates his talents, creates capital, and plunges into an enter prise which he believes will satisfy the public and produce a subjec tively acceptable rate of return. Employing the jabberwocky of the Supreme Court, one cloaks his busi ness with a public interest when he serves the public well. The Concept Extended; Public Utilities Venturing forth from the holding of Munn v. Illinois, the courts in the past one hundred years have jus tified all manner of regulation of, and intrusion into, the private af fairs of those businesses denomi nated upublic utilities." A public utility has been defined as a busi ness regularly supplying the public with a particular commodity or ser vice of upublic consequence or need."7 In simple terms, a public utility supplies a product which some of the public believes that all must have.

The mere statement of the defini tion expresses the ambiguous and tautological nature of the phrase, similar to that encountered in defin ing ttpublic interest." Anything and everything can fit the definition, de pending on the values of the speaker. Early inroads occurred in medieval England in the realm of food, drink and lodging. 8 Inadver tent poisonings occurred with some frequency and the traveler often found himself at the mercy of the innkeeper. Because sustenance and lodging formed the ttnecessities" of life, those who supplied these goods and services soon came to be labeled as ttaffected with a public interest" or some such nebulous phrasing sig naling a limitation upon the suppliers' freedom. Of course, laws preventing coercion and misrepre sentation amply protect the consumer. In subsequent centuries, all man ner of businesses fell in and out of the category of a ttpublic utility,"

depending on the current whims and fads of those in power. Companies supplying water, fuel, power, energy, and transportation quickly come to mind. In almost every in stance, the so-called public utility supplied goods or services which were greatly in demand; this factor seems to make one of the two dis tinctions between upublic utilities" and other endeavors. The other ap parent criterion for speaking of a particular business as a public util1978 UAFFECTED WITH A PUBLIC INTEREST" 521 ity appears to rest on the fact that, while many individuals seek the goods or services provided, only a relatively few producers choose to offer such wares. These two reasons require analysis in order to determine if any veraci ty resides in the rule singling out some·businesses as ((public" and limiting their freedom of action. We have already discerned that the mere attribution of the term ((pub lic" to a business presents an exer cise in banaH ty, since all businesses which sell goods or offer services demanded by someone else serve that portion of the ((public." Never theless, is there any reason why we should treat some activities differ ently because (1) many persons de sire the product or (2) few persons supply the product?

Universality of Demand First, consider the universality of desire. Economics considers the dis tribution of scarce goods, not free (abundant) goods. This science posits, as a first principle, the prop osition that human wants are insat iable and competing, and economic goods (the subjects of those wants) are scarce. Values, being subjective, vary from person to person. Some desires crop up more frequently than others: the need for food, cloth ing, shelter, transportation. Yet the mere universality of these wants af fords no rational basis for treating the supplier with disdain or coer cion. Let us accept the postulate that man requires food to survive. It does not logically follow that the pro ducer of grain, a farmer, must be restricted in his liberty merely be cause others gain sustenance from the grain. Suppose the farmer de sires not to sell; he created the value (grain)-he should be able to eat it, hoard it, destroy it, do with it as he pleases. Such a right accords with justice and with the axiom that each man owns the absolute right to live his own life and to choose his own destiny without interference from any other human being, so long as the actor does not coerce or defraud another individual.

The farmer does not coerce or de fraud the would-be consumer by holding onto his grain. The con sumer retains the choice to eat beef, or olives, or jello, or to purchase grain from another farmer. Or, if he really wants the first farmer's grain, he will pay the price which repre sents the concatenation of values between farmer and producer. After all, grain is a perishable commodity and the first farmer will not want to store his crop forever lest he lose his entire capital investment. And, the first farmer cannot exist on grain alone; he requires a balanced diet, shoes for his children, blankets for his bed, tobacco for his pipe, books for his pleasure, and countless other 522 THE FREEMAN September items which grade from necessity to luxury, depending upon the particu lar set of values held by the actor. One may urge that individuals cannot survive without food and drink and, therefore, these products demand special dispensations. True, persons cannot survive for long periods without food and water; that fact does not justify restriction upon the liberties of others, so long as the others do not employ force or fraud.

We might conjure up a hypotheti cal example where a cruel creature hoarded food while others starved. Yet those who desire the food pos sess no moral right to take from the producer that which he has created. One need not evidence much percep tion to discern that few persons, if any, will fit the hypothetical mold of evil, and that other citizens abound who possess sufficient food and bev erage to alleviate any impending starvation and who display a will ingness to do so. Sympathy etches the character of the free man. The supposition that one miscreant would and could corner the supply of food and drink (or any other prod uct) and sit idly by while others go without sustenance remains the wildest sort of whimsey, wholly· out of union with reality. The Apparition of Monopoly9 Second, consider the possible monopoly of production. Those who employ the concept of upublic util ity" fear the concentration of power Competition Assures Efficiency It is apparent that a change in transportation costs, production technology, management, or any other cost factor can upset a monopolistic position.

Also, a concentration beyond the optimum point is an invitation to failure, for the unit costs of production tend to increase again. The monopolist who disregards this fact invites potential competitors to invade his field and reduce him to his optimum size. There is no need for government to break up a giant enterprise; if it were too large, the competitors would reduce it. ... . . .Of course, it is most unnatural and unlikely for a businessman to rise to eminence through product improvements and lower prices, and then sud denly to turn toward output curtailment and price increases. But if he should act in such a manner, which is conceivable, he practices self-destruction. HANS F. SENNHOLZ, "The Phantom Called Monopoly"

1978 HAFFECTED WITH A PUBLIC INTEREST" 523 over the supply of a given product in one or a few men. 1O If a concentra tion appears, history proves it likely to be ephemeral. ll If one man pro duces goods or services so much in demand that he makes a profit, other entrepreneurs will follow him into the field and reduce the cost to the consumer. If only a few supply the many, it is simply because those few are the only ones who freely desire to invest their capital in the enterprise, probably because the po tential return lacks sufficient at traction to other enterprising ven turers. Proponents of the public utility concept often tender a collateral ar gument: public utility monopolies justify on the basis not only of the need of the public (demonstrated heretofore to be sham), but also on the preservation of capital. This con tention assumes that competing public utilities would duplicate ser vice and thereby act uneconomically because of the extensive capital in vestment commanded. Such a sug gestion raises the immediate in quiry of whether, assuming the truth of the argument, such facts really justify the destruction of free dom.

More saliently, however, every producer competes with myriad others, both for the entire consumer dollar and for that part of the con sumer dollar normally expended on such products. To this extent, each producer duplicates investment with others, yet no one decries the competition between Montgomery Ward and Sears, Roebuck, or be tween Albertson's, Fred Meyer, Safeway, and A & P. Indeed, those most vociferous in favor ofcCcompeti tion" as a goal often inconsistently acclaim virtue for monopoly in the Hpublicutility" arena. If two power companies serve the same area, and duplicate transmis sion lines, so what? Each will re main ensconced in business only so long as it provides a satisfactory service to its customers. Indeed, in creased competition inevitably leads to better service at a lower cost, with ultimate benefit to the purchaser. If one of the power companies cannot compete effectively, it will leave the industry and convert its capital to other, more favorable uses.

Competition no more destroys capital here than in any other busi ness milieu; if capital is wasted or destroyed, that amounts to one of the costs we must be willing to pay for freedom. If one of the competing power companies leaves the field, the public utility proponents ap prehend the increased cost to the cCpublic" of this cCnecessary"service. Of course, the cCpublic"possesses the ultimate wea:p.on: it can refuse to purchase the service and thus drive the producer out of business (even if the service constitutes a cCnecessity," substitutes generally exist). Or, 524 THE FREEMAN more likely, a competitive producer, attracted by profit, will enter the field and offer the same service for a lower price. Thus, we perceive that reason en titles no enterprise to the appella tion ((public utility" or the special advantages and regulations which attend such a designation. No busi ness can be truly said to be ((affected with a public interest" in the sense that such an endeavor should be subjected to special rules. Equal treatment should be the bench mark of statelbusiness relations.

Persistent repetition of the ((pub_ lic" concept of business enterprises permeates the past century of American history, rendering the hypothesis of almost universal ac ceptance. One can only pray that succeeding generations will visit the issue with precision and clarity of analysis and not be betrayed by the hoariness of age. Old myths die hard, but pass away they must if freedom is to become enthroned. One can pierce the fiction of a ((pub_ lic" business by recognizing that no business possesses ((public" func tions; the only business of business is business, the supplying of the best possible goods and services at the highest possible return to the greatest number of customers. If any business performs this function, it will amply serve the public interest. i -FOOTNOTES194 U.S. 113, 24 L. Ed. 77 (1876). "Nebbia v. People of State of New York, 291 US 502, 54 S. Ct. 505, 78 L.Ed. 940 (1934).

3Ibid., 291 U.S. at 525. 4The concept of value provides a separate topic of discussion beyond this essay. sODemay wonder ifman can conceiveofthat which does not exist. Unicorns on the moon and the vagaries of science fiction should·dis pel this question. Man seems destined to con ceive, and act upon, political and economic fantasies. 'Note 1, op. cit., 94 U.S. at 141. 7SeeGulf States Utilities Co. v. State, 46 SW 2d 1018, 1021 (Tex Civ App 1932);Black's Law Dictionary (4th Ed., West Publishing Com pany, St. Paul, Minn., 1957) 1395. sOne should not lose sight of the fact that English law, while possessing similar roots, differs markedly from the American experi ence, the latter stressing human liberty and the free market to a greater degree. 9See Note 1, op. cit., 94 U.S. at 130-132, where Mr. Chief Justice Waite stresses the ttmonopoly"aspects of grain warehouses. IOHow singular that most of these theorists express no concern over the concentration of monopoly power of coercion (government) in the hands of the few and the incompetent, yet quake with the thought of free market concen trations.

I1Better minds than mine have exposed the illusions which pockmark the chimera of monopoly. See, e.g., Sennholz, Hans F., tThe Phantom Called Monopoly," VII Essays on Liberty 295-317 (Foundation for Economic Ed ucation, Inc., Irvington-on-Hudson, New York 1960); Armentano, Dominick T., The Myths of Antitrust (Economic Theory and Legal Cases) (Arlington House, New Rochelle, New York, 1972); Rogge, Benjamin A., tlWill Capitalism Survive?" III Imprimis No.5 (May 1974), dis cussing Joseph Schumpeter's Capitalism, Socialism and Democracy (1942).

Ralph Bradford The Golden Age No MATTER how far afield we may grope, our more serious speculations seem to follow a pattern that arises from the conditioning of our lives. That conditioning, in its starkest simplicity, is that we enter the world of the living, we exist in it for a period-and then we pass on. Therefore we are concerned with where we came from, what· we are doing and why, and where we are going. All the philosophies of man kind have been built about these three questions; and it is significant that we are always more interested in looking backward and forward reliving the past and projecting the future-than we are in understand ing, using, and enjoying the present. It is sad that we spend so much Mr. Bradford is well-known as a writer, speaker, and business organization consultant. He now lives in Ocala, florida. time and energy, both physical and emotional, in retrospect and antici pation, and so little in the conscious savoring and utilization of the pres ent moment. Some scholars explain this by citing the legend of the Golden Age-the concept of a far distant time when all mankind was happy, and of a future day when they shall be happy again. Thus the Garden of Eden, the Expulsion, and the hope of Paradise Regained. Thus the Heaven and Hell of nearly all religions.

Some other psychologists have their own explanation, which they call the theory of intra-uterine bless edness. They argue that the only time of perfect peace and comfort known to man is the period spent within the warm, protecting, nourishing body of his mother. That period, they say, was the Golden 525 526 THE FREEMAN September Age, and all our groping toward a future state of bliss-toward tomor row's happiness-is but the vague hope of attaining once more the per fect contentment of the prenatal period. Th~y have a point. Facing the Present The poet Swinburne, in one of his better moments, penned a signifi cant phrase: uFrom hope and fear set free." In it he came close to the understanding of our constant backward-and-forward looking. If the demands of rhyme and meter had permitted him to add uregret" he might have completed the trilogy of emotions that keep our minds away from the present. For we re gret only that which is past. We fear only that which may happen tomorrow-or this afternoon. And we are not hopeful about the pres ent, only about the future-whether it is to be ten years or ten minutes hence.

But we live now, in this present moment. To be sure, the bit of exis tence called unow" extends infinitely across time, both into what we call the past, and into what we term the future. Warm memories of the past are pleasant things; hopeful antici pation of the future is part of our soaring optimism. But today, this hour, this instant-that is the mo ment of living. If it has its dark side, it comes usually from either regret or fear. But regret is of yesterday; fear is of tomorrow. Neither can touch today, save as a man thinketh in his heart. Of course it is only the rare soul that can set itselffree (as Swinburne phrased it) from hope and fear. It is only the near-to-God who are re leased from regret. Yet it is in the attainment of these perfections, or the close approach to them, that we come nearest to perfect peace. But in the external, practical sense, there is another ,reason for being concerned about the present.

There is much talk these days about the future of our country. Air waves and news columns are full of it. What about the dollar-is it safe? What about education-is it adequate? What about Social Security-is it solvent, and indeed, Hsecure"? What about our long continued inflation? The increase of crime? Juvenile delinquency? Drug addiction? What of our relations with the rest of the world-NATO, SEATO, OAS? What are we going to do about ... ? Going to do! Future action! Actu ally, it is what we are doing now, today, this minute" that will deter mine our fate, rather than what we are planning to do. We are charting the future, not in our plans for it, but in our present actions. Man, said Emerson, is where he is by repeated choice. The present is explicitly the result of the past. Society, like life, is a continuous flow. Every act and 1978 THE GOLDEN AGE 527 decision of today will determine our tomorrows.

To put it concretely, if we want to have an economy and a society that is based on freedom, we shall have to begin now to talk and think in terms of freedom, rather than in the cliches of continued and increasing statism, for the one is the negation of the other. Political candidates who profess to favor a free society and a free economy will have to talk and think about insuring freedom, rather than bidding for votes by promising first one and then another segment of society that each will be given special benefits and privileges not accorded to others, but paid for out of the common trea sury. Businessmen who proclaim themselves as being for the free market philosophy will have to learn what underlies and under girds such freedom, and stop saying, in effect, CCI'm for freedom-but .... " Today Sets the Future Plans for the future are fine if they are based on the concept of freedom. But the best laid plans of today may not be important when they are finally (if ever) brought to completion. But what is done, now, what is done now-this will deter mine what the future will be like.

And surely no crystal ball or par ticular prescience is needed to pre dict a future that is based on insolvency-on a long-continued program of spending each year more than is taken in, going constantly in debt through borrowing, and print ing more and more paper money on the basis of the artificial credit thus created. The history of nations tells the story. And if disastrous inflation should come, as it has elsewhere in the world under similar conditions, the first to suffer would be the people of small means and limited income, for whose imagined Ubenefit" most of the big-spend programs are sup posed to be initiated! If present-day legislators and other political lead ers continue to pile debt on debt, with no thought of how that debt is to be discharged or even reduced, and if the weight of that debt, hang ing over the economy, continues to undermine the value of our money-who will have benefited?

Is there a connection between the vision of a safe and beautiful future and the dwindling value of our money? Yes! Repeat ... yes! And this is not to put a dollar tag on happiness or security or any of the other c~human" values that are so glibly recited-and so little understood. Man does not live by bread alone, but the price of bread can be of great symbolic and practical importance. Ask any el derly German who remembers the bleak period between the wars when, because of inflation, a loaf of bread cost a million marks or more.

528 THE FREEMAN September Ask any citizen of Argentina who has had the value of his life savings wiped out by the inflation that coun try experienced as a result of big spend-never-pay policies. We can and should ((live in the past" to the extent that we are will ing to study history and profit from its lessons. We can and should ((live in the future" to the degree that we understand it to be only an exten sion of the present, profoundly in fluenced by what we do today. But NOW is the moment of life. Paradise may indeed be lost through the sins of ignorance, selfishness and indifference. It can be regained through sacrifice and self-denial and the exercise of wisdom. But it is better not to regret a Paradise that is lost, or anticipate one that is to be regained. Just as there is something of God in every person, so there is something of Paradise in every mo ment, if only it can be realized and cherished.

Today, this hour, this momentthis is the Golden Age. @ P. Dean Russell WHAT'S IN IT FOR US •THE retiring board chairman of Sears, Roebuck and Company plans to devote a considerable amount of his time to explaining business problems to college students and teachers. ((It is important that we dispel some of the erroneous and mis guided thinking about the American Dr. Au...III. Prof••sor of Managem.nt, Unlv.rslty of Wiscon.ln at La Cro••••Thl. artlcl. I. from hi. lectur. note. for a cour.e In "Bu.ln •••Communica tion•." business system," said Arthur M. Wood, uand that we communicate our viewpoint to faculty members as well as students." I wish him luck. And, since I've devoted many years to precisely the same task, perhaps Mr. Wood will consider an idea or two on communi cations I've picked up along the way. First it's necessary to understand why Sears beat all its competitors last year, with sales of $17 billion and profits of $900 million. I'm quite 1978 WHAT'S IN IT FOR US? 529 sure that the retiring chairman un derstands that their success was due solely to their ability to produce what we consumers want at prices we are willing to pay. Please note that I said Uthey produce what we want," not necessarily what we need or should have for our own good.

That's the key to success: give us what we want in retailing, politics, or any other area where consumers have a choice. I've observed the frustration of scores of successful business manag ers in their sincere efforts to ((make a contribution to America" after they retire. They are usually unsuc cessful. They forget that we pa tronized them in the past only be cause they gave us what we wanted. Suddenly they decide to become statesmen instead of market men, and to give us what we need and should have for our own good. If~hey had followed that policy as busi nessmen, they would have failed there just as they will now surely fail in their efforts to sell us the idea that business and profits are good for the nation. Why Should We Change? If Mr. Wood wants to change our antibusiness attitude, he's got to explain what's in it for us. Why should we change? After all, those fat-cat capitalists are ripping us off and making enormous profits at our expense, aren't they?

If that's not so, then Mr. Wood should offer us some specific (and persuasive) examples of how we un derlings also are better off when business is profitable. If that ap proach appeals to him, here are a few possible examples he might use. According to Professor Peter Drucker, the actual owners of our largest corporations are the pension funds of employees, teachers, and similar groups. For example, both of my teacher retirement funds (pri vate and state) own billions of dol lars of the common stock and bonds ofFord Motor Company and various other· industrial giants. The presi dent of General Motors is not the owner of that company, as so many of us seem to believe. He's an em ployee. We common stock owners (mostly persons who hold the stock for retirement purposes) hired him to manage our company for us. He mayor may not own any GM stock himself; it's not relevant to his posi tion as president.

The size of the retirement pension of teachers, teamsters, and GM em ployees is directly dependent on how much profit the president of that company (and others) makes for the owners. To cite another company in the same way, if Kodak makes high profits, my pension check from both of my teacher retirement funds will be bigger. But if Kodak con tinues to make small profits, I'll just have to work longer than I have in 530 THE FREEMAN mind. That same cCpension connec tion" exists for the overwhelming majority of all of us. According to the American Coun cil of Life Insurance, most of the cost of my insurance is not paid by my premiums but by the profits earned on the ownership· shares of com panies the insurance agencies have invested in. If the industrial giants make no profits, the Council esti mates that my insurance premiums could increase by 65 per cent. How Profits Serve Me The higher the profits of Ameri ca's big businesses, the more money I get when I retire and the less I now have to pay for insurance of all kinds.

That's why I'm in favor of profits-high profits-Mr. Wood. I don't care much about the alleged fact that big business needs bigger profits to buy more machines and equipment. And I can't get real ex cited about how much money is be hind every job in America. Statistics bore me. Anyway, isn't that the sort of stuff we owners hire professional managers to handle for us? We pay them well-in fact, extraordinarily well-to keep our facilities intact and things like that. My concern is a dependable source of funds when I retire. And I'm well aware that it can't come from any source other than the profits of big business. That's why I become unhappy when profits fall off and the stock market goes down. That's when I begin thinking about new managers for u my companies" -and also for my country. I'm also opposed to the current double tax on profits-you know, about 50 per cent when the company first earns the profit, and then about 25 per cent more when I get what's left in dividends. This strange method of taxation increases my in surance premiums and decreases the size of my retirement check.

Don't try to tell me that this double taxation is bad because it cuts down on needed capital formation. I don't really understand (or much care about) that. All I know, Mr. Wood,is that if you had used that dull, academic approach as the top manager of Sears, I'd have closed out my account with you and opened one with Wards. While you were at Sears, you gave me what I wanted, and you always told me what was in it for me. Please continue to follow that sound rule in your explanations of competitive en terprise as the business system most likely to give all of us what we most want. We may not always believe what you say, but you are sure to attract our attention when you tell us what's in it for us. @ Bettina Bien Greaves Energy in a Changing World FEW PEOPLE have the vision to con ceive new ideas. Most of us wear mental blinders and can only visu alize conditions continuing more or less as they are.

Early in the Industrial Revolu tion, short-sighted men predicted a fuel shortage. When the forests of England had been laid bare, there would be no more firewood for pri vate homes and the small factories springing up across the land. Such short-sighted men again expected a fuel shortage in the middle of the 19th century. Large numbers of whales were being slaughtered and whale oil, used for illumination, was becoming scarcer. Also, the indus trial demand for coal was overtakMrs. Greaves Is a member of the senlorstaft of The Foundation for Economic Education. She Is the au thor of Free Market Economics (2 volumes, Syllabus and A Basic Reader, 1975). ing the quantity that could be read ily mined. Even the noted economist, William Stanley Jevons warned CCthat we cannot long main tain our present rate of increase of consumption; that we can never ad vance to the higher amounts of con sumption supposed ... that the cost of fuel must rise, perhaps within a lifetime, to a rate injurious to our commercial and manufacturing supremacy; and the conclusion is inevitable, that our present happy progressive condition is a thing of limited duration." (The Coal Ques tion, 1865/1866) All such cCdoomsters"wear mental blinders. Those who predicted dire consequences when England's firewood was gone reckoned without the development of huge water wheels to harness the energy in riv ers and streams. They did not 531 532 THE FREEMAN September foresee the use of coal and the inven tion of the steam engine. Thus, they could not anticipate the factory sys tem and large scale mass produc tion. Nor could 19th century doomsters foresee the development of electricity and the new era in production and transport that was to be ushered in with the discovery of oil in 1864 in western Pennsylvania and soon thereafter in Texas. Step by step producers began to shift from coal to oil as their primary source of energy. Then, with the disruption of traditional trade channels during World War I, oil became a major fuel worldwide.

Those who have prophesied doom in the past have their modern coun terparts. Many persons today foresee the exhaustion of domestic oil fields and catastrophe as a result. They also fear our continued depen dence on oil imports and believe we should become self-sufficient in the field of energy. They believe we must explore every possible new energy source, even by using exotic and presently uneconomic methods of production. They urge extraordi nary means to encourage the domes tic development, production and dis tribution of energy. They caution consumers to conserve in every pos sible way. They say we may have to learn to live with fewer automobiles and less electricity. Impatient with their failure to persuade others to their view by peaceful means, many persons now advocate strong government action. They propose to use tax funds to spur the development of new energy sources, to stimulate domestic pro duction, to plan distribution and to discourage consumption. Many a self-respecting politician today feels he is ill-prepared to hold office un less he can offer some proposal for a ucomprehensive" energy program.

Federal Government Intervention Prior to World War I, the U.S. government had little to do with the development of energy and the pro duction and distribution of power. But since then, countless energy related programs have been enacted. Each was designed to cope with some particular situation that seemed urgent at the time. The Fed eral Power Act (1920) set up the Federal Power Commission (FPC) which now regulates and controls interstate aspects of electrical power, petroleum and natural gas. In 1935 public utilities holding com panies were brought under the Se curities and Exchange Commission. The U.S. government is now up to its neck, so to speak, in the energy field. Through the interstate com merce provision of the Constitution, it deals with major energy users such as the railroads, buses, airlines and shippers of fuel. The Natural Gas Act of 1938 gave ~he FPC au1978 ENERGY IN A CHANGING WORLD 533 thority to regulate the ((sale in in terstate commerce of . . . gas for resale." In 1954, the Supreme Court clearly held (Phillips Petroleum Company v. Wisconsin) that the in terstate sale of natural gas came under FPC jurisdiction. As natural gas and oil are often found together, by fixing the. price of natural gas artificially low, the FPC created a bottleneck in oil production also.

Legal distinctions have led to differ ent prices for gas and oil sold in terstate and intrastate. When price ceilings discouraged the production of oil, a two-tiered price system was introduced to spur new production. Higher prices for ((new oil" were allowed, to the disadvantage of (Cold oil" producers. Labor legislation and safety regu lations have involved the govern ment in coal mining and many other energy-related industries. The fed eral government has built dams and reservoirs, developed and distrib uted hydroelectric power through such agencies as the Tennessee Val ley Authority, the Bonneville Power Administration, the Southwest Power Administration, and the like. Among other energy-related gov ernment agencies there are the Of fices of Oil and Gas, Coal Research, Water Resources Research, Land Use and Water Planning, Energy Data and Analysis, the Bureau of Mines, the Mining Enforcement and Safety Administration, the St.

Lawrence Seaway Development Corporation, and various adminis trations-Federal Aviation, Federal Highway, Federal Railroad, Urban Mass Transportation, and so forth. Attempts to coordinate all these energy-related programs have led to various federal government offices-the Energy Policy Office (June 29, 1973), Office of Petroleum Allocation (November 27, 1973), Federal Energy Office (December 4, 1973) and the Federal Energy Ad ministration (May 27, 1975). Then last year the Federal Energy Ad ministration was converted into a full-fledged department with cabinet status. In the hope that the patchwork quilt of energy-related government programs could be shaped into one comprehensive con sistent and efficient scheme, the De partment of Energy was officially established on August 4, 1977-with a $10 billion annual budget, several hundred million more than is spent in a year on drilling and exploring for oil.

Actions Have Far-Ranging Consequences We must remember that no action has just a single consequence. Mak ing one choice means forgoing others. And the effects of an action taken and of choices forgone may be substantial and widespread. When Congress levies a tax, regulates pro duction, tries to control prices or to 534 THE FREEMAN September stimulate certain industries with special privileges, it does much more than it intends. If Congress imposes a legal ceiling on fuel prices, for instance, it may force the nominal price of fuel down temporarily. But at the same time it encourages consumers to buy more, to be less provident and more waste ful of fuel. It also discourages inves tors and producers in the fuel indus try. In the attempt to compensate for these effects, Congress may then pass other laws to subsidize fuel production. These may spur produc ers to special effort for a time. But other consequences will soon become apparent as extra costs appear--- higher taxes, inflation and/or credit expansion. In time almost everyone is contributing to the costs of the governmen t programs through taxes and higher prices of every thing including fuel.

The manipulation of costs and prices also has repercussions abroad. If the domestic price of fuel is kept artificially low, less will be available on the domestic market. Both foreign and domestic producers will look elsewhere for markets where they can sell at higher prices. If the domestic price of fuel is kept artificially high, imports will rise if not prohibited. Yet, such increased international division of labor and trade, though beneficial to consum ers, is now considered contrary to the government's professed goal of energy ((independence." Every government intervention is bound to have some unexpected and unwanted effects. To cope with each problem in turn, one government intervention after another is pro posed. One government agency is erected on top of others. Yet the goal the legislators are pursuing continually eludes them. They find it im possible to manipulate prices and production so as to keep the prices consumers pay down, while at the same time keeping the prices pro ducers receive up enough to cover their costs and induce them to stay in business.

Ideas + Savings = Production Not many centuries ago men had little energy available except what they produced from their own labor, that of a few animals, running water and the wind when it blew. And effective use of these energy sources was thwarted by primitive technol ogy and lack of capital. Only about a thousand years ago did people find a way to harness horses so they would not be choked when pulling heavy loads and a means to protect the hooves of horses and oxen on rocky ground. Large windmills or water wheels were not developed until 400 to 500 years ago because there was no call for them; the poor state of the roads limited both the quantities of raw materials a mill could obtain 1978 ENERGY IN A CHANGING WORLD 535 and the distances the finished goods could be shipped. UntH fairly recently men pushed, pulled and pounded as best they could with their own muscles and elbow grease. They dug and scratched the earth using simple tools that soon dulled. At times, they had help from beasts of burden. But gradually men with ideas and vision made changes. They found ways to fashion more and better tools. They saved, accumulated capital gradu ally, until they could take time to build more elaborate tools and en gines that produced more power.

They found better ways to use old fuels and they discovered new sources of energy. In this way, inno vations, often very simple ones, en abled men step by step to improve their tools and use· of natural re sources and increase their produc tion of consumable goods. All the things we have today are products of ideas and vision plus savings. As the firewood of England was approaching exhaustion, men with ideas and vision turned to coal. As transportation by land and water improved production and savings increased, they devised larger waterwheels to run their mills. When entrepreneurs were looking for ways to increase the output of their small factories, several inven tors came up with designs for en gines that could convert coal to steam power. Even as economist Jevons was warning in the 1860s that the increasing inaccessibility of coal would force British producers and consumers to cut back, huge supplies of petroleum were being found in the United States. Neces sity, as the proverb says, is the ((mother of invention" -if, and only if, men with ideas and vision are free to follow through.

Energy Developments Since World War II Few people can conceive of the ingenuity producers will show-if free to try and to profit-when chal lenged by a scarcity of raw materials and a rising demand from consum ers. Millions of natives had roamed the Middle East without realizing the potential wealth in oil that lay underfoot. Large scale production of oil in that part of the world has been primarily a post World War II de velopment. Companies, employing men with ideas and vision, foresaw a rising demand throughout the world for products that require the consumption of energy. With the aid of savings and large accumulations of capital, they explored and de veloped the oil fields of the Middle East. They often constructed com plete cities to house and supply their workers in that harsh, desert cli mate. At first local officials were fairly cooperative. Production boomed. However, the spirit of nationalism 536 THE FREEMAN September was on the rise. The Arab nations soon began to impose higher and higher taxes and to threaten confis cation or nationalization. Oil com panies also became alarmed at the threat of serious conflict between Israel and the Arab nations which could disrupt shipments of oil from there to the United States. Yet, they anticipated that the energy de mands of consumers throughout the world would continue to rise. So they sent geologists to other parts of the world.

The Alaska Pipeline In 1968, representatives of the At lantic Richfield Company found oil on the northern slope of Alaska, near Prudhoe Bay. Before long it appeared that this was an extremely rich source of oil. In 1969, several U.S. firms bid more than $900 mil lion for drilling rights. Their next concern was how to transport oil from the northern slope of Alaska to consumers in the lower 48 states. By land or by sea? In 1969, Humble Oil Company, with Atlantic Richfield and BP Oil Corporation participating, dis patched the S. S. Manhattan, a thousand-foot oil tanker, to search for a northwest passage connecting the Atlantic and Pacific oceans. This tanker pounded through the ice and finally succeeded where explorer Henry Hudson had failed, reaching the oil fields of Prudhoe Bay. Thus, men with ideas and vision demon strated that oil could be transported to the rest of the world by oceango ing tankers-if the cost were not prohibitive. At the same time, the oil companies were investigating the construction of a pipeline run ning southward from Prudhoe Bay to Valdez on Alaska's southern shore. This pipeline route soon ap peared the more feasible and economic way to ship the Alaskan oil. As arrangements to extract the oil proceeded, so did plans to con struct the pipeline. But work on the pipeline was soon halted.

For 10 or 15 years, conser vationists had been pointing out that energy-using producers and consumers are continually polluting the environment. In 1969, at their urging, Congress had enacted the National Environmental Policy Act, effective January 1, 1970. The Council of Environmental Quality and the Environmental Protection Agency were set up, with certain powers to compel business firms to clean up waste products and refrain from polluting the waterways and the atmosphere. Conservationists also persuaded Congress to pass a law to protect plants and animals that might be threatened with ex tinction because of industrial de velopment. In 1970, three environmental groups-the Wilderness Society, the Environmental Defense Fund and 1978 ENERGY IN A CHANGING WORLD 537 Friends of the Earth--claimed that the National Environmental De velopment Policy Act required the U.S. Department of Interior to file an ttenvironmental impact state m.ent" before granting a permit for the construction of the oil pipeline in Alaska. The warnings of environ mentalists were strengthened by several well-publicized oil spills notably that from the tanker Torrey Canyon off England in March 1967 and the January 1969 leakage offshore near Santa Barbara, California. Thus, the permit for con struction of the Alaskan pipeline was withheld for several crucial and costly years-out of concern for the environment, the permafrost and the wildlife. Also delayed as a result was the delivery of oil from the new fields to consumers in the lower 48 states. Not until Congress passed a special enabling act, signed by Pres ident Nixon on November 16, 1973, could the pipeline construction be resumed.

During these years, 1970-1974, many problems materialized which the oil firms had anticipated and for which their employees with ideas and vision had tried to prepare by expansion, research, exploration and development. The energy de mands of consumers rose. Conflicts continued in the Middle East. Oil shipments from there became ever more uncertain. The Arab nations, with other oil producing countries, set up the Organization of Petro leum Exporting Countries (OPEC), a cartel to enhance their bargaining position and raise the selling price of their oil. Confiscation The oil companies' fear of confis cation or nationalization was borne out. In 1973, Libya took over the properties of several foreign oil companies. Rather than nationalize directly, some OPEC nations levied confiscatory taxes and fees on firms with facilities within their ter ritories. Then in October 1973, the OPEC nations imposed an outright embargo on oil shipments. Through out the world, wherever oil prices were flexible, they rose sharply.

Wherever oil prices were regulated by governments, serious shortages and dislocations developed, with many cold homes, plant closings and long waiting lines at gas pumps. The lifting of the OPEC embargo in March 1974 alleviated the im mediate crisis, but the wide-ranging effects of countless energy-related government regulations and con trols persisted. To further compli cate the international oil situation, the facilities of foreign oil companies in Venezuela were nationalized as of January 1, 1976. During the years when the Alaska pipeline was delayed, most govern ments throughout the world were inflating their currencies, i.e., in538 THE FREEMAN September creasing the quantity of their money in circulation. This led inevitably to higher prices for almost everything needed to construct the pipeline and seriously complicated the necessary economic calculations. When gov ernments are inflating, it is espe cially difficult for any business firm engaged in a long-range, time consuming, large-scale project, re quiring huge accumulations of capi tal, to calculate potential costs and selling prices. Projects such as the development of oil fields, the con struction of a gigantic pipeline of sophisticated technology and the coordination of all these activities with those of oil shippers, warehousers and retailers through out the world, call for huge savings and very complex economic calcula tions that are difficult or impossible in a world of volatile prices.

In addition to the uncertainties created by the delay, the Alaskan pipeline's cost rose substantially be cause of inflation. Its final cost was about $7.7 billion. Interest alone on the construction loans has been es timated at $1.1 billion. Also, if work had been permitted to continue as scheduled, the pipeline might well have been in operation before the 1973-1974 OPEC oil embargo. How ever, it was the summer of 1977 before the Alaskan oil began flow ing. The development of nuclear energy was actively encouraged and subsidized by government in the early years following World War II. Yet in the 1960s nuclear power plants became a special target of environmentalists. Legislation permitted them to adopt various de laying tactics. Often disregarding the property rights of others, they picketed, petitioned for delays and instituted suits. They widely exag gerated the environmental impact and potential risk of explosion of nuclear facilities.

Environmentalists succeeded in postponing for more than ten years FPC approval of Con Edison's nuclear-powered Storm King Project on the Hudson River. Approval was finally granted March 14, 1973-too late to be in operation when the OPEC embargo was imposed. Then actual construction was halted four months after it began-by court in junction still in effect as of this writ ing, pending study of the Project's effect on fish in the Hudson River. During these years of delay, brown outs and blackouts have been fairly frequent in the New York area. The most notable occurred November 9, 1965, when just at the evening rush hour the entire northeastern part of the country was blacked out for twelve or more hours. This is one instance when persons of vision and foresight, attempting to meet an an ticipated rise in demand, have been frustrated by government interfer ence and delays.

1978 ENERGY IN A CHANGING WORLD 539 Interventions Have Unwanted Effects As pointed out, we must re member that no action has just a single consequence. This lesson is amply illustrated by our experience with recent government energy pro grams. Even the best intentioned legislation, whether designed as a piecemeal measure to cope with a special contingency or as a com prehensive program to encompass and coordinate all related activities, is bound to have unwanted results its advocates failed to foresee. For instance, laws to safeguard the environment have required costly anti-pollution devices scrubbers on power plants and catalytic converters on cars-which consume still more fuel, in violation of the goal of energy conservation. Subsidies to encourage consump tion or to support oil prices on the U.S. market tend to attract addi tional imports, in violation of another professed goal, energy inde pendence. If imports are then legally restricted, the consumption of domestically produced oil may rise, hastening the depletion of existing domestic oil fields.

Dismemberment of the big oil firms, as some persons have sug gested, would inevitably increase oil prices to consumers. Smaller firms could not take advantage of the same mass production methods or maintain facilities in other lands where resources may be more read ily accessible, easier to extract and so available to consumers at lower prices. Advocates of this proposal apparently do not realize that busi ness can become big and earn profits in a free market economy only by developing economies of scale and serving many customers better and cheaper than do their competitors. Government officials are ill equipped to plan the development and distribution of any good or ser vice. They cannot be specialists in every field. In proposing to regulate and control the development and distribution of any good or service they are short-sighted. Their vision of the economy is limited by mental blinders. They may recognize that adding a new tax or tariff to the market price of a good or service will prevent consumers from buying as much as before. They may realize that an offer of subsidies to produc ers, or consumers, will spur them to increase production, or consump tion, of the good or service con cerned. But they cannot see the other consequences of such legisla tion, because they cannot know what people will think or do.

They cannot know how producers and consumers will try to adjust to avoid unwanted side effects of the laws. They cannot know j~st how producers and consumers will re spond to higher, or lower, prices. They do not know what is going on 540 THE FREEMAN Septembf}': in the-minds of individuals inventors, entrepreneurs and consumers-who are always looking for ways to do things more easily, cheaply or better. They can never know what innovations may be de veloped that will prove to be the wave of the future. With respect to energy, government legislators and administrators cannot know what new production techniques, new ways to use old fuels, or sources of new fuels will be developed. Energy Production in the Future The provision of energy in the future will depend on the ideas, ac tions and savings of countless indi viduals. Just who will make impor tant contributions no one can know in advance. Therefore, government should refrain from imposing re strictions that might hamper incen tive. Individuals like those who con ceived of the wheel, the harness and the steam engine, should be free to pursue their ideas, use their prop erty as they wish, to save and invest and to try to improve present energy techniques.

Today's methods of energy pro duction were developed by countless men of ideas and vision, each famil iar with some particular aspect. Countless such individuals helped to develop oil in Texas, offshore Louisiana and California, Alaska, the Middle East, the North Sea and elsewhere, as well as to discover the as yet unproven fields in Mexico and off the United States eastern sea board. The ideas, vision and savings of countless persons have made it economic to extract oil from far be neath the seas and coal from depths economist Jevons never dreamed of. Elaborate designs for the de velopment and distribution of energy have been devised. These ideas plus huge accumulations of capital have made· possible the con struction of extremely productive tools and equipment-propellers, furnaces, motors, turbines, batteries transformers, computers, oil drill ing rigs, refineries, long distance pipelines, deepwater platforms, supertankers, offshore oil terminals with buoy moorings and pipelines direct to storage tanks on shore, gigantic power plants, high power transmission lines, and the like.

Now on the drawing boards are po tential schemes for deriving energy from waste, hydrogen, sea water, geothermal plants, satellite solar power stations, and so on. We cannot know just how energy will be de veloped and distributed in the years to come. But we can know that energy production in the future will depend on cooperation between sav ers and men of ideas and vision. Whether the energy of future gen erations comes from the atom, the wind, the sun, the seas, the rivers, the earth, plants or some other still unrecognized resource must be left 1978 ENERGY IN A CHANGING WORLD 541 to those whose ideas and actions pave the way. We cannot expect any one in a legislative assembly and government office to plan success fully for the development of new energy sources or for adapting tools and machines to new fuels. No gov ernment program can provide for the satisfaction of future energy needs as well as individuals will if left to their own devices. If individ uals are free to pursue their own ideas and vision, the energy demands of the future will be taken care of from day to day. Each inventor, saver, investor and entrepreneur will adapt and adjust to changing conditions in the course of daily liv ing and working in the field of his special interests. And if the consum ers of the future are also free to choose, each will decide how much energy to consume, and for what, on the basis of market prices prevailing then and the urgency of his various wants and goals. i -BIBLIOGRAPHYBeckmann, Petr, The Health Hazards of NOT Going Nuclear (Boulder, Colorado: The Golem Press, Box 1342, 1976).

Bruce-Briggs, B., The War Against the Au tomobile (New York, N.Y.: E. P. Dutton, 1977). Harrison, George Russell, The Conquest of Energy (New York, N.Y.: William Morrow & Co., Inc., 1968). Helms, Robert B., Natural Gas Regulation (Washington, D.C.: American Enterprise In stitute for Public Policy Research, 1974). Institute for Contemporary Studies, No Time to Confuse (San Francisco, California: Insti tute for Contemporary Studies, 1975). Knowles, Ruth Sheldon, America's Oil Famine (New York, N.Y.: Coward, McCann & Geoghegan, Inc., 1975). La Force, J. Clayburn, The Energy Crisis: The Moral Equivalent of Bamboozle (Los Angeles: International Institute for Economic Re search, 1978). MacAvoy, Paul W. (ed.), Federal Energy Ad ministration Regulation (Washington, D.C.: American Enterprise Institute for Public Policy Research, 1977). Mead, Walter J., Energy and the Environment: Conflict in Public Policy (Washington, D.C.: American Enterprise Institute for Public Policy Research, 1978).

Miller, Roger LeRoy, The Economics of Energy: What Went Wrong (New York, N.Y.: William Morrow & Co., Inc., 1974). Mitchell, Edward J., U. S. Energy Policy: A Primer (Washington, D.C.: American Enter prise Institute for Public Policy Research, 1974). Nash, Gerald D., United States Oil Policy (Pittsburgh, Pa.: University of Pittsburgh Press, 1968).

Sheldon Richman WHAT THE r(\Ol'\S1 \l'1E.",~tI OVERLOOKS How MANY TIMES has a detailed de fense of the free market ended with a show of incredulity on the part of the advocate of interventionism? A typical case might go like this: You have just argued that the mar ket process and the principles of human action make it impossible for there to be long-term, mass, in voluntary unemployment or infla tion or depression or any of the evil attributed to capitalism, but actu ally caused by government tinker ing. The astonished defender of socialism inevitably will smile and say something like this: ttDo you expect me to believe that all of these problems are caused by the govern ment? That none of them is the Mr. Richman Is a Journalist and tree-lance writer from Newark, Delaware. 542 result of capitalism; and that if we just got the government out of the market these problems wouldn't exist? Come on! It's too simple, too pat. Life isn't that easy. Wake up to the real world."

To a young libertarian just begin ning to study the workings of a free society, a criticism like that can be devastating. After all, isn't it too pat? Isn't it too easy to blame the government for all these problems? Isn't it simplistic? A brief reflection on the subject reveals that while it may be simple, it is far from simplistic. Simplicity, a forgotten rhetorical virtue, is hardly an indictment of an argument. When faced with such criticism, the defender of the market would do well to remind his opponent of what's being discussed. The market, absent of force and fraud, is a short hand term for a group of individ uals cooperating in the pursuit of various goals. Striving after differ ent values, working to realize diver gent plans, possessed of diverse stores of knowledge, these individ uals go their chosen ways, trading only when it is to mutual advan tage. Without intending it, such actions by individuals-their acceptance and non-acceptance of goods and services at market prices-generate a complex system in which all the diverse knowledge of the separate individuals is put into a form that is WHAT THE INTERVENTIONIST OVERLOOKS 543 usable by all the market's partici pants. It is a system in which all people are left free to pursue their plans without constraint; where the wealth of information contained in market prices offers all the opportu nity to rationally adjust those plans when appropriate ..In short, the sys tem that spins out of the actions of free human beings offers them the only peaceful, efficient way to deal with an uncertain future. (In this regard, see F. A. Hayek's Law, Legislation and Liberty, Vols. 1 and 2.) Now, what is government inter vention and what does it do to this process? Government intervention, when it comes down to it, is the power of the gun. It is brute force, pure and simple. Motives here are irrelevant. Whether the government is full of benevolent bureaucrats or pernicious politicians is of no conse quence. If a seller charges more than the government-imposed price ceil ing allows, he will be jailed or de prived of his property. The same fate befalls anyone who violates gov ernment edicts.

The opportunities of the market participants to make and attempt to realize their plans have been stymied. The system that makes the harmonizing of divergent plans pos sible has been distorted into one of inevitable clash due to government distribution. Hayek writes, cCThe spontaneous order arises from each element balancing all the various factors operating on it and by adjusting all its various actions to each other, a balance that will be destroyed if some of the actions are determined by another agency on the basis of different knowledge and in the service of different ends." Hayek here points out the in teresting and crucial fact that the market is resilient and flexible re garding forces generated from within, but is easily thrown. out of whack by forces from without, that is, political forces. Is it any wonder that government intervention (read force) creates un desired consequences? Hardly. In fact, to argue that the free market is the only road to peace,prosperity and freedom ought to be a recog nized truism. What could be a more obvious statement? It's like saying peace is peaceful or free people are free. That this is not grasped by most people illustrates how far our culture has departed from the lib eral thought that characterized the late 18th and 19th centuries.

But the interventionist doesn't see it that way. Granting, for the sake of argument, that his motives are pure, he will insist that freedom, peace and prosperity can only be obtained by regulation. We must prevail upon him to explain this apparent contradiction.

544 THE FREEMAN September He will usually fall back on the ueconomic power" argument. In es sence, he will say, ((Okay, it is true I am advocating the use of govern ment power. But only because in the free market some people will wield excessive economic power. There fore, it is a choice of who should wield power for which purpose: economic power for private purposes or government power for public pur poses." A subtle-and hopelessly con fused-argument. First, the distinc tionbetween public and private purposes is an illusion. The public is simply a group of private persons. So, all purposes are private. Simi larly, all interests are nspecial." And what is this ueconomic power" to which it refers? It can only be the power to produce things con sumers desire. How can this be ex cessive? Our earnest interventionist is likely to reply that it becomes excessive when the provider is able to sell at an uexcessive price." He becomes less earnest when re minded that (a) no one is forced to buy a good if he thinks the price is too high and (b) no one has ever bothered to define ((excessive price."

Perhaps an excessive price is one that consumers wish were lower. In that case, is there any price that is not excessive? (Incidentally, every day of the week people decide prices are excessive for them in their special circumstances. And they turn down the products in question.) Backed up against the wall of re ality, the interventionist reveals his confusion about two other items: consumer demand and the pricing system. If a consumer cannot afford a pro duct, it is argued, his rights have been violated. But it cannot be true that a consumer has a right to another's product, for that would make the producer his slave. There would be an inequality of freedom. Our interventionist may then take the ((created needs" tack. This is the argument, popularized by J. K. Gal braith, that producers use advertis ing to create consumer need for their products. Is it fair to create needs, then make the product too expensive for the consumer to afford?

This, too, is an illusion. No one can create a need. A person may learn to desire something and may expect to continue having it. But that is the result of his choice. All a producer can do is to inform a poten tial consumer about a product. He cannot create a need. This would be obvious if the interventionist would think of all the things he doesn't buy, despite frequent advertise ments. Or is he the only one immune to Madison Avenue brainwashing? ((But people have to eat!" says the interventionist. ((The seller is wield ing power over us by charging us too much for food."

1978 WHAT THE INTERVENTIONIST OVERLOOKS 545 It is true that people have to eat and use other goods to live. But this is not the fault of producers. It is a condition of nature that mortal men need to produce certain values to maintain their lives. Does it make sense to blame this condition on those who produce those values? Does it make sense to criticize them for not doing more than they have done? Does it make sense to attack them for not offering to become serfs? This is an ill-considered posi tion for sure. It also ignores the fact that no one has ever controlled or could ever control all the food production re sources and the further fact that all products have substitutes. The up shot is that no one, not even the alleged monopolist, is immune from market competition. The ignorance of the pricIng mechanism is even more profound. The interventionist believes that prices are arbitrary. To be more pre cise, he thinks that prices begin at some point above ttcosts," and that any particular price is arbitrarily set by the seller.

ttHe can charge any price he wants," sums up the attitude. Well, it's true that a seller can ask any price he wants. But that doesn't mean he can get it. Prices are not arbitrary and they are not determined by Ucosts."They are set by the intensity of consumer demand for the existing supply. If an apple pie that costs $3 to produce can command a price of only $1 on the market, no seller is going to hold out for $3 or more if his interest is profits. The fact that it costs $3 to produce is of no interest to consum ers. Their concern is whether the satisfaction the pie will render is greater than what they are being asked to give up for it. The seller's costs are irrelevant. According to the subjective theory of value, the value of an item exists in the mind of the person who would use it. Far from costs determining prices, it is really the other way around. The costs of factors of pro duction will be determined by the price producers expect the final good to command in the market.

What all this means is that con sumers have as much control over prices as do producers. Each has the ability to say ttno." The foregoing demonstrates that the interventionist prefers the power of government to impose its arbitrary will to the power of people to produce for the satisfaction of consumer desires. Well, that's his choice to make. But please let's make certain he knows what he's advocating. One cannot make claims to rationality by advocating force to achieve peace, restraints on production to achieve prosperity, and slavery to achieve freedom. , W)rld inthB grfI?<2fan Iae~ Clarence B. Carson 21. The United States: The Thrust to Transformation THE OCCASION was, a civilized one, very nearly formal, 'and certainly decorous. Military personnel in their dress uniforms presented the colors. The well dressed audience, many of the women in full-length evening dresses, stood for the singing of the Star Spangled Banner. A multi coursed dinner was served by male waiters, well trained in those flour ishes which add to the decor of an occasion. A goodly number of promi nent people were present, and the In this series, Dr. Carson examln~s the connection between Ideology and the revolutions of our time and traces the Impact on several major countries and the spread of the Ideas and practices around the world.

546 main speaker was the lieutenant governor of the state. The audience was well mannered, polite, and con scious of doing the right thing by applauding at all the places where it seemed to be indicated. Civility was an unannounced guest of honor at the occasion. For a brief span of time in the midst of the proceedings, two men entered the room. Their attire was only a slight improvement over that of ranch hands returning from a long cattle drive. One of the men wore a cap which remained on his head for the whole time they were there. One man was a photographer, and the other was his lighting assistTHE U.S.: THE THRUST TO TRANSFORMATION 547 ant. They went about their picture taking with no apparent regard for the audience or participants, stand ing between some of the audience and the dais, moving about at will, shining bright lights here and there, and making it difficult for all others there at the high point of the pro ceedings.

Undoubtedly, the photographers were invited to come to take pic tures. Undoubtedly, too, they were going about doing so in the most direct way. My point, however, is that they were an alien element in our midst. Their attire and manner would have been little different if they had been photographing hogs wallowing in their mire. Our man ners, our customs, and our purposes could hardly have concerned them less if they were invaders from Mars. My larger point is this. There is an alien force in our midst, a force (or pervasive influence) which is alien to our manners, customs, tra ditions, morality, and institutions. We are all familiar with it in its most obtrusive form, that of the newsman or reporter. We have all seen such reporters, .at least on tele vision, crowding about some person, pushing for attention, shoving mi crophones in his face, blinding him with flashbulbs, and insistently de manding answers to questions which are none of their business. It is a good analogy to think of them as wolves, baying at some prey they have surrounded, preparing to strip his garments away and render him helpless before them.

The Communications Industry Reporters are, however, only the most colorful of a much more exten sive alien element. It holds sway in a whole vast industry, or, more pre cisely, a congeries of industries. In its lesser dimension, it is often referred to as the communications industry, the opinion industry, or, simply, the media. In its broader dimensions, however, it embraces much more: the entertainment industry, the in formation and education industry, and a vast assortment of other busi nesses which lie on the periphery of these. It includes records, tapes, books, magazines, movies, radio, television, newspapers, much of live entertainment, schools, a portion of organized religion, the world of fashion-clothing, hair styling, adornment-and so on. In terms of impact, it might best be called the Lifesty Ie Industry. In terms of its thrust, it should be called the Trans formation Industry.

If it be considered a single indus try, it is a huge industry, and much of it is highly profitable. The pub lishing industry alone is so vast and profitable that large corporations have bought old houses in order to diversify and become more profitable. The ownership of a television sta548 THE FREEMAN September tion is the nearest thing there is to a franchise to, print money in the United States. Although the Life style or Transformation Industry in cludes activities that are generally not profitmakers, ,such as schools, those who work in them are often well rewarded. Despite the size, sway, and prof itability of much of this industry, a strange and apparently contradic tory development has been taking place over the last decade. As busi ness in general has been ever more closely regulated and controlled, as much of business has been turned into an instrument of government, the Lifestyle or Transformation In dustry has been breaking loose from such regulations and controls over it as there have been. An ever wider arena of freedom from either social or political control for those in this industry is being carved out. The tendency is for the Lifestyle Indus try neither to be controlled by gov ernment nor to be an instrument of government. Its thrust is rather to ward the control and use of govern ment and to assume for itself the role of society.

Much of the great tradition of lib erty in the United States has been pre-empted by the Transformation Industry and instrumented for its specialized purposes. The industry relies mainly on the First Amend ment to the Constitution to expand the boundaries of its uncontrolled activities. The Amendment reads, in part: CCCongress shall make no law ... abridging the freedom of speech or of the press; ..." It has long since been stretched far beyond the mean ing which could be deduced from its language to include all governments and is widely used to inhibit any criticism of things spoken or writ ten. The battle cries of cCcensorship" and cCacademic freedom" are employed to deter any control over the press and schools. Liberty into License Freedom, it has been said, is like a seamless cloth. Those who point this out have been most often inclined to argue that you cannot have freedom of speech, press, religion, and politi cal activity without the correspond ing freedoms entailed in private property, trade, enterprise, and managing your own affairs. The theory supporting this view is well established, and much historical evidence can be adduced which tends to prove it. But there is another aspect of this principle which is not usually noticed. It is that partial liberty tends to degen erate into license.

When does liberty become license? Or, when does the exercise of liberty become licentious? One way to an swer the question is to say that liberty becomes license when its exercise intrudes upon the realm of other people and becomes abusive.

1978 THE U.S.: THE THRUST TO TRANSFORMATION 549 Another way is to note that liberty tends to become license when it is cut loose from that to which in its proper exercise it is responsible. The p~inciple can be stated more di rectly: Unrestrained liberty tends to become license. Partial liberty, en joyed by some portion of the populace only, that is unrestrained not only becomes licentious but tyrannical. Freedom without re sponsibility is indistinguish.able from tyranny. Those who claim that everything must be regulated are correct. (The fact that we have come to identify regulation with something that gov ernment does in our day should not mislead us on this point.) The prin ciple may be most readily grasped by a mechanical illustration of it. Every automobile is equipped with a generator or alternator and battery. The battery is for storing electricity, and the generator is for replenishing the supply. However, the electricity cannot go directly from the generator to the battery. Between the two is a voltage regulator, a device which keeps the voltage en tering the battery within a tolerable range and prevents the battery from being overcharged and destroyed.

All transmitted electricity requires similar regulation. In a like manner the amount of fuel going into an engine must be regulated. The driver of an au tomobile regulates the fuel by depressing or releasing pressure on the accelerator. It is impractical, however, to regulate the amount of fuel going into all engines this way. For example, power mowers need more or less fuel depending on the height, thickness and toughness of the grass that is being cut. Lawn mowers are equipped with gover nors to provide regulation in ordi nary circumstances. Without them, lawn mower engines would either be continually stalled or run dan gerously fast most of the time. Market Pricing Price is regulated in the free mar ket by supply and demand. The de mand is kept within the confines of supply by variations in the price. Price is held down and supply is kept up by competition. It happens, too, that so far as the quality of material goods and physical services is concerned, better quality gener ally sells for a higher price and poorer quality at a lower price, other things being equal. (With fruit and vegetables, the time of year or sea son must be taken into account, of course. High quality tomatoes are usually less expensive in summer than are the poorest quality in winter.) But the laws of economics are al most entirely ineffective in regulat ing quality by price in the intellec tual and spiritual realm. It costs no more to reproduce the words in the 550 THE FREEMAN September Bible than it does those in the most scabrous pornographic novel. Once the recording has been made, it costs no more to make copies of Mozart's harmonic symphonies on records or tapes than it does of the outrageous noise of the Sex Pistols. Supply, de mand, ,and competition still regulate price, but the market haS"no device for registering spiritual and intel lectual quality.

The market, as the late Ludwig von Mises was fond of pointing out, is democratic in tendency. It tends to provide the greatest number and va riety ofgoods to the greatest number of people. It responds to the most widespread and urgent demands. The market, as such, has no values, no standards, no morality, except such as are fed into it by buyers and sellers. The market is, let us face it, a potential monster, catering to the most debased taste, the most de praved yearnings, and ready to pro vide the perverted with the means fOf practicing their perversion. There is, normally, a corrective to and inhibitor of this monstrous po tentiality of the market. Normally, the free market does not exist and function alone and in splendid isola tion; it is an integral aspect of free dom and responsibility within the society generally. The free market is a part of the seamless cloth of the free society.

The market may be democratic, but society is, by nature, aristocratic. The market, as such, may be value free, but society is value la den, ever sifting in a timeless way the wheat from the chaff. The mar ket is a mechanism of society. Soci ety is the normal regulator of the market, insisting upon quality as well as quantity, inhibiting what may be bought and sold there, bring ing standards, values, taste, judg ment, and morality to bear on what takes place there. RegUlations Abound This brings us to what has hap pened and what is happening in the United States. There should be no doubt that the fabric of liberty is tom. There is not a free market in general. The market is hampered, restrained, controlled, planned, and intervened in by government. Meanwhile, a limited aspect of the market, that which offers fare for the soul and mind, is being given ever freer rein. It is not possible to buy an automobile without seat belts, but every sort of depravity is luridly described in books and magazines readily available. Diabet ics may not be able to buy substi tutes for sugar, but there is none so depraved that his tastes are not freely pandered to in the market.

More, society cannot effectively maintain its taboos today. It cannot bring to bear a discriminatory taste, judgment, the weight of custom and tradition, and morality upon what is 1978 THE U.S.: THE THRUST TO TRANSFORMATION 551 sold in the market. Its prescriptive powers have been largely deacti vated. Society is wounded and crip pled where it is not entirely dis abled. The regulator has been re moved from that portion of the mar ket that is free. How this has come about is too large a story to tell in all its detail. It is much too complex to do more than call attention to the outlines of the process here. One thing should be clear: It has come about largely as a result of government interven tion in and inhibition of society. So ciety wields its influence and main tains its prescriptions by a great variety of customs, institutions, tra ditions, and organizations. The most basic institution of society is the family. The basic tasks of the family are the nurture and upbringing of children, the provision for those in their midst who are unable to take care of themselves, and the looking after aged relatives. To accomplish these tasks, authority must be exer cised, and divisions of responsibility must be maintained.

Paternalism Government has now assumed much of the role of the family. Com pulsory school attendance and gov ernment prescription of what must be taught relieves parents of much of their responsibility for the chil dren and authority over their up bringing. Welfare and Social Security payments eroded dependence upon the family. When dependence is gone much authority is lost as well. The tendency of government intervention has been to reduce the family to an affectional unit, to re move much of its disciplinary au thority, and to make it no stronger than the fickle ties of affection. The authority of employers has been drastically reduced by gov ernment intervention. Every gov ernment prescription of wages, of hours, of working conditions, and of employer-employee relations re duces the authority of the employer. A spirit of litigation afflicts Americans today. Patients are suing physicians, students suing teachers, employees suing employers, wives suing husbands, women suing men, blacks suing whites-even children suing parents. What this signifies, when it becomes rampant, is the breakdown of society, the substitu tion of force for persuasion, and the intrusion of government into every nook and cranny of life. It is a state of covert civiI war superintended largely by federal judges. Those who bring suits may not realize it, but every suit invites, even requires, that the force of government be brought to bear to bring the parties into line.

What has all this, and much else of similar character, to do with the largely uninhibited onslaught of the Lifestyle or Transformation Indus552 THE FREEMAN September try upon us? It has everything to do with it. Society enforces its prescrip tions mainly by approval or disap proval of acts. Public decorum, mor ality, and civility is maintained be cause the individual seeks the ap proval of others around him. In a similar fashion, good taste and high standards depend upon the desire people have for the good opinion of others. It seems natural to many of us to wish to be in good standing with those with whom we come in con tact. But for the generality it needs to be reinforced by exigent social ties. One seeks the good will of an employer, above all, to keep a job. Children obey parents, in the final analysis, because their livelihood de pends on them. Men have a care to their language, observe the taboos, behave themselves not only because they wish to be well thought of but also because their well-being in general depends upon it. When these financial and familial sup ports are cut away, social prescrip tions lose their bite.

The stage has been set, then, for the transformation of society. The social regulator which links freedom to responsibility has been discon nected. Business, in general, is ever more severely controlled and regu lated. The Transformation Industry, by contrast, is enlarging its arena for freedom of action divorced from responsibility for the consequences. The media has assumed much of the prescriptive authority once exer cised by society. It proclaims, often subtly, approved attitudes, reward ing those who conform and ignoring or punishing those who do not. Gen erals cower before the lash of en raged media-men, resign their posi tions' and retire to obscurity. But the media is not society; it is, in stead, one of the alien etements thrusting toward social transforma tion. The Urge to Transform The Lifestyle or Transformation Industry is alien to American soci ety in so far as and to the extent that it is bent upon transforming it.

Some qualification is in order here. There is nothing inherent in jour nalism, in book publishing, in music making, or any other of these under takings that would bend them to ward transformation of society. Magazines may as readily defend as attack the existing social order. Ed ucation is, by nature, a conserv'ative process whose main purpose has usually been imbuing the young with their culture and heritage. Un doubtedly, too, there are magazines and schools that have as no part of their purpose obstructing or trans forming the social order. Almost any newspaper will have a considerable variety of material in it, much of which will have little or nothing to do with social transformation. Some 1978 THE U.S.: THE THRUST TO TRANSFORMATION 553 television programs may lovingly portray aspects of our culture and heritage. Be that as it may, for a considera ble while now a major thrust of the media, education, the information industries, and entertainment has been toward social transformation.

Intellectual fashion has prescribed social transformation as a desirable goal. The idea that has the world in its grip has held sway in the United States as elsewhere. Intellectuals bent on transforming have often pic tured and thought of themselves as being an embattled minority. That is a misconstruction of the actual situation. They are a majority, or at least determine much of the course of things, in the intellectual realm. But they are alien to the society and, as such, do occupy a potentially pre carious position. The fact that they are continually attacking and un dermining the received social ar rangements makes them aliens. To grasp what has been happen ing it will be helpful to get in mind as clearly as can be what a society is. A society begins to be formed when two or more people begin to interact on a regular basis. What we speak of as society emerges from the modes that are tacitly agreed upon and accepted for interacting with one another. The society consists of those who accept these modes of be havior. The modes consist of man ners, morals, conventions, customs, taboos, and traditions. Amongst civilized peoples, social prescrip tions not only facilitate intercourse but tend to protect indIviduals in the enjoyment and use of what is theirs.

(Those prescriptions that are amen able to it are often formalized as law.) Social Conventions Man was made for society, wise men have said, and there is no end to the advantages which follow from social cooperation. Indeed, the ad vantages of association and coopera tion are so obvious and great that societies will continue to be formed so long as there are people. Social arrangements exist for the purpose of enabling people the better to en rich themselves by interacting with one another. However, there is a nether side to the relations between people. All interaction between people is poten tially abrasive, fraught with dan geJiS of abuse of some persons by others, and sets the stage for every harmful act that can occur. Society exists for the specific purpose of pro viding means for keeping relations among people smooth. The more in timate the relations among people the more potentially dangerous the situation.

Taboos take shape especially to govern and restrain intimate rela tions. Since sexual relations are the most intimate of all relations, it is 554 THE FREEMAN September not surprising that taboos often are strenuously applied in this area. There is, for example, a near univer sal taboo against incest-a taboo which serves not only to abate the dangers of inbreeding but to protect the close family unit from the con flicts that would arise within it from sexual rivalries. Social conventions tend to change with the passage of time. Some times, society gets religion, so to speak, professes very high stan dards, and is purified somewhat of its dross of accretions over the years. Social prescriptions change to deal with new conditions and new oppor tunities and dangers. Positive law often arises from social prescription, as well it should, but law is fre quently too gross, precise, and in flexible for the complex and shifting shades of social prescription. But social change must be gradual, otherwise it is disruptive and con fusing, thus failing to facilitate in teraction or to protect individuals within it. A certain comfort within and accord with the rules of society is essential to the working of society.

Breaking Tradition Socialists regard the received social arrangements as a major det riment to their undertakings. Rev olutionaries require that they be de stroyed. Evolutionary socialists attempt to change them gradually by law so as to merge government with society. At any rate, both agree that the whole complex of distinc tions which society maintains must be broken down before man can be collectivized, communized or social ized. The received institutions, cus toms, and traditions. provide a pro tective shield for the individual, a shield which must be broken before he can be melded into a mass. The most drastic experiments with forced collectivization did not occur in Stalin's attempt to collectivize agriculture. They occurred in Soviet forced labor camps and in Nazi con centration camps. They were al luded to earlier in this work. They involved especially the uninhibited use of obscenities, profanity, and inducing the individual to violate various taboos. Alexander Dolgun, an American who spent years in Soviet prisons and labor camps, tells how when he was first put in prison he was subjected to a physical examination by a woman doctor who gave special attention to his private parts. This surely was not acciden tal, for it fit the general pattern of trying to break him down by remov ing the normal expectation of ob serving the social mores.

The most dramatic thrust of the Transformation Industry in recent years has been to break down or through the social prescriptions that have to do with the use of language and sex. Rampant public expression of obscenities became commonplace 1978 THE U.S.: THE THRUST TO TRANSFORMATION 555 in the 1960's. Novelists began to lard their works with just about every vulgar expression imagina ble. Underground newspapers printed the theretofore unprintable. Magazines, even some of general circulation, began to do likewise. Even more profound in its impact was the use of obscenities in the speech of characters in movies. After all, reading is usually a private un dertaking. But movies have public showings as a rule, and are usually made for that purpose. Nowadays, profanity and obscenities are regu lar fare in movies designated PG (meaning acceptable for the admis sion of children but parental guid ance suggested).

Many sexual taboos have been ig nored and violated with impunity. The most intimate matters are now publicly discussed, written about, and portrayed in picture magazines and movies. Many restrictions are still observed in family newspapers, television, and radio, but they are being broken down there as well. Explicit descriptions of sexual inter course were only available in brown covers to discreet patrons a genera tion ago. What was not then con ceived as properly printable is now shown in technicolor on wide screens in movies. If present trends continue, in a few years the family can gather round to watch vivid por trayals of bestiality, necrophilia, and incest, with some orgies thrown in, on their home television sets. Such fare is already available on closed circuit television in hotels and motels. Human Dignity Denied Decorum is the condition of peace ful public assembly. Good manners are the clothes the civilization wears. By the clothes we wear we signify our respect for the sen sibilities of others as wen as our own dignity. Propriety in the use of lan guage preserves the communion in volved in communication. Custom, tradition, and morality are not merely the ornaments, they are the lineaments of society.

My point is this. What occurred as concentrated dosage in Soviet pris ons and forced labor camps and Nazi concentration camps is now being done in a much iess concentrated manner on a national scale by the Lifestyle or Transformation Indus try. The defenses of life, liberty, and property are being removed by the hammer blows on our sensibilities. The right to life depends upon the prohibitions against murder. Sensi bility for others is the foundation of the taboo against murder. There are religious sanctions against murder, but the acceptance, observance, and ~ppreciation of these depends upon sensibility as well. Obscenity, vul garity, and depravity publicly dis played are indications of a profound loss of respect for man. Liberty for 556 THE FREEMAN September such a man is no more than opening the gate and turning the beast out to forage at will. Such a man is no more worthy of property than would be a jackal.

The Collectivizing of Man The Transformation Industry is bent toward collectivizing us. It is stripping away from us our civility, our decorum, our good manners, our taboos, our customs, our traditions, and our individuality. Man must be reduced to be collectivized, his lan guage reduced to guttery curses, his body reduced to its respective and undistinctive parts, and his culture to its meanest remains. The process may be observed most directly by attending a Disco. What made dancing civilized is almost en tirely missing: the breaks from song to song, the dance patterns changing with the number, the couples danc ing together. The music, or noise, is continuous at the Disco; colored lights flash in psychedelic fashion; the music is devoid ·of almost any thing except blare and beat; and couples are not easy to discern. It is an orgy of dancing. It is, at once, each individual alone and the whole a collective mass driven to a frenzy directed by the disk jockey.

It is easy enough to believe that many of those in the Transformation Industry know not what they do. Since much of the industry is highly profitable, there is reason to suppose that many of those engaged in the business are not doing anything much but making money, at least so far as they are concerned. There is money to be made in pandering to man's baser desires, nor is there anything new about it. It is also true, however, that it is not neces sary for those under the sway of an idea to know it. There is a kind of demonic urge to the egalitarianism implicit in the idea that has the world in its grip. Women must be the same as men, children the same as adults, all races the same, and each no higher than all others. And, to prove it, we must all be disrobed. Here is a parable for our time, a parable that is factual, if the columnist, Bob Greene, who re ported it, be accepted (Atlanta Con stitution, May 19, 1978, p. 7-B). It seems that a photographer has put together a collection of his photo graphs which he calls ((Dallas Nude." Cha,rles R. Collum, the pho tographer, says that he took three and a half years on the project.

UMy idea," he says, u was to show the city through its nude people. Dallas had the reputation as an up tight, conservative, banker religious-middle-of-the-Bible-Belt city. I think that reputation was wrong. My pictures show Dallas being happy, innocent, exuberant, full of freedom." He accomplished this by' photographing people from all walks of life-librarians, dental 1978 THE U.S.: THE THRUST TO TRANSFORMATION 557 assistants, optometrists, nurses, bank tellers, and so on-in the nude. UThe soul of a city," Mr. Collum is quoted as saying, cCis in its people. And people without their clothes on are more expressive than people who are dressed." Mr. Collum is so impressed with what he has done with, or to, Dallas, that he is eager to do the same for other towns and cities in the United States. Indeed, he has in mind an even more ambitious project, Greene reports, and has approached the State Department about it: I want to go to Russia and do ccMoscow Nude." We were brought up to think that the Communists were bad people, were our enemies. But on a one-to-one level, I think the Russians are just as warm and wonderful as the people of Dallas. I think that ccDallas Nude" and cCMoscow Nude" would go great together. To gether, their message would be ccPeace on Earth, good will toward men."

Why would such a notion strike anyone as plausible? Indeed, where would anyone get such an idea? Ac tually, the antecedents of Mr. Col lum's idea are not difficult to trace. They are the progeny of Jean Jac ques Rousseau, the spiritual god father of our age. Strip away the cultural raiment, and man will emerge as a Noble Savage, Rousseau informed us. Man in the nude will be his natural, good self. This idea has worn a groove into the mind of an era. It is not necessary to read Rousseau to discover it; it is enough to breathe the fu~es that emanate from the intellectual cli mate. The idea that has the world in its grip holds that man is naturally good but that he is deformed by his culture. Divest him of his culture, and the goodness will shine forth. The Transformation Industry is under the sway of this idea. This is the demonic urge which impels its assault upon society, culture, man ners, mores, and civility. There are quite an assortment of ways to go about it. A George Bernard Shaw comedy could go about it with style and verve. Nudity is a relatively innocent approach. The more power ful weapons are profanity, obscen ity, vulgarity, and the vivid depic tion of perversions. The record thus far shows that when the protective cover of culture has been removed, we are exposed to the more drastic forms of political power. It is a cru cial part of the process of collectivi zation. , Next: 22: The United States: A Be mused People.

John Semmens LAW OF THE JUNGLE Vs. THE JUNGLE OF LAW THE PROBLEM of uncertainty is en demic to any business venture. The more uncertainty there is, the greater the risk for the would-be entrepreneur. A rational response to such uncertainty is to seek to reduce it through either an improvement of one's knowledge about, or an in crease in one's control over, the con ditions pertaining to a prospective field of endeavor. This urge to rationalize the va garies of the business environment has frequently been manifested in a resort to law as a means of control ling uncertainty. With laws to regu late the prices and supplies of a good or service and with the vast information-gathering resources of the government at hand, the num ber of uncontrolled or unknown var iables in the uncertainty equation ought to be reduced. Reasoning like this inspired the Mr. Semmens Is an economist for the Arizona Department of Transportation and Is studying for an advanced degree In business administration at Arizona State University.

creation of the Federal Power Com mission (FPC) in 1930. Its objective was to control various aspects of the energy industry and thereby promote business prosperity and so cial justice. The agency was given a broad grant of authority to insure its capability for a flexible response to changing conditions~ Its rulemaking was restricted only by the proviso that its actions be (Just and reason able." With all this ulogic" going for it, it should come as no surprise that the government's venture into energy regulation has been a disaster. Rather than the certainty promised by the imposition of deliberated pol icy upon the erstwhile fluctuations of free market (Jungle," the resort to regulation has piled confusion on uncertainty with a result that is often incomprehensible. If the market treats you H un fairly," there's not much you can do about it. If you can't make a profit in your present trade, you change your occupation. You don't petition to LAW OF THE JUNGLE VS. THE JUNGLE OF LAW 559 have the law of supply and demand set aside. Such impersonal ((injus tice" has no remedy. One might as well complain about the law of grav ity. However, let the Hinjustice"

come at the hands of an agency of the government such as the FPC and we have a whole new ballgame on our hands. The ((injustices" made by law can be unmade by law as well. The av enues open to the ttvictims" in these instances include recourse to all three branches of government. First, the ((wronged" party can go to the legislature and get the law changed. This is, at best, a long-range option. While it cannot be neglected, it is not as promising as efforts to influ ence the decisions of theCommis sion itself. This may prove more effective on a costlbenefit basis, but it, too, is future-oriented. The most immediate avenue to relief is our third option: appealing the decision to the next echelon of government officials, in this case, the courts. Reliance upon the judicial system to Uright" the ttwrongs" of the FPC has been largely misplaced. The er ratic gyrations of the Commission's attempts to grapple with forces of supply and demand have been matched by judiciary inconsistency.

The jurisdictional issue, to take just one area of concern for those inter ested in what to expect in the way of energy regulation, has been ttde_ cided" three different ways since World War II. In 1946, the court settled on concurrent federal and state jurisdiction.! By 1963 the courts had shifted to a position up holding a doctrine of federal su premacy. 2 It was only two years later that the whole question was unsettled once and for all by a decla ration that the precise boundaries between state and federal jurisdic tion could only be adjudicated on a case-by-case method. 3 This unfortunate course of events has effectively multiplied the uncer tainties faced by business firms at tempting to deal in services regu lated by the FPC and various state agencies. Whenever the rules prom ulgated by these competing regula tory authorities differ, the prospect of litigation in order to resolve the jurisdictional boundary is virtually inevitable.

The potential for confusion is by no means limited to disputed juris diction. The history ofjudicial inter pretations of FPC powers is not of a nature to relieve business anxieties over what rules will be applied even in situations clearly within the realm of federal control. As the law now stands, the FPC may (1) modify existing contracts when it deems such action to be in the public inter est, 4 (2) make rate revisions retroac tivelY,5 (3) change its policy at its own discretion, 6 (4) define the phrase t)ust and reasonable" in dif ferent terms on different occasions, 7 560 THE FREEMAN (5) decide who shall bear the burden of proof in any given case,s (6) re quire individual companies to suffer losses.9 It should be apparent by now, that the attempt to supplant the ttchaos" of the unregulated market with a system of Hjust and reasonable" man-made rules has produced dis concerting consequences for busi nessmen' investors, and ultimately consumers. In the less than 50 years since the creation of the FPC, the courts have bestowed their blessings on at least eleven different pricing formulas for natural gas.

None of this has been very helpful in solving our energy uproblem." In place of the law of supply and de mand (which a court declared non binding on FPC policies 10), we have instead a shifting collage of rules and regulations. Far from reducing the number of uncontrolled vari ables in the uncertainty equation, this collage has added new dimen sions of unpredictability to the basic task of meeting consumer needs with scarce resources. The ambiguity of the initial enabling legislation must bear some of the blame for the resultant mess. The vague grant of power bounded only by the undefined structure that its exercise be tJust and reasonable," is an invitation to contentious wrangling. A more fundamental error, though, is the mistaken belief that the problems of material sustenance can be overcome by legislative fiat. The energy problem is the product of, on the one hand, resource scar city and the technical difficulties of coping with such scarcity, and, on the other hand, the usefulness of energy products in satisfying ever increasing human wants. In short, it's the same old supply and demand problem that has confronted man kind from the beginnings of the species. The only way it has been adjusted to our satisfaction has been through production. And, disappoint ing as it is, the invention of law isn't, hasn't been, and never will be a substitute for hard work. @ -FOOTNOTESlMemphis Natural Gas Company v. McCan less, 194 S.W. 2d 476.

2Northern Natural Gas Company v. State Corporation Commission of Kansas, 83 S. Ct. 646. apeopleof the State of California v. Lo Vaca Gathering Company, 85 S. Ct. 386. 4United Gas PiPeline Company v. Mobile Gas Service Corporation, 1956, 76 S. Ct. 373 5Mississippi River Fuel Corporation v. Fed eral Power Commission, 1960, 281 F 2d 919. 6Atlantic Seaboard Corporation v. Federal Power Commission, 1968, 404 F 2d 1268. 7City of Chicago v. Federal Power Commis sion, 1971, 458 F 2d 73l. 8Commonwealth of Pennsylvania v. U.S., D.C. Pa. 1973, 361 F Supp. 208. 9Federal Power Commission v. Texaco, D.C. 1974, 94 S. Ct. 2315. lOSouthernLouisiana Area Rate Case v. Fed eral Power Commission, CA Tex, 1970,428 F 2d 407.

George C. Leef SOME THOUGHTS ON TAXATION WITH the exception of the weather, probably no subject is more com plained about than taxation. Almost everyone feels that our tax system treats him unfairly, for one reason or another. The poor say that wealthy persons and businesses should pay more than they do, and the latter argue that the taxes they al ready pay are economically coun terproductive. Politicians are forever promising tax cCreforms"and legislative bodies debate the desira bility of an endless variety of deduc tions, credits, exemptions and rates. The overall tax scheme which re sults is not predicated upon any principle, but rather is capricious, Mr. Lee'.. a recent graduate of Duke Unlveralty Law SChool, Is now employed by MRIlken a Company, Spartanburg, S.C. based only upon the respective suc cess of each interest group in in fluencing the political process. This, I submit, is an undesirable state of affairs. In pace with the rise of mass democracy, our tax system has become an institution for plun der, prodigality, and the gratifica tion of envy. Many a shrewd politi cian has taken the easy road to power of promising the voters gov ernmental services or subsidies paid for in the main by somebody else.

The one discernible principle of our tax system, that of cCprogressivity," is inherently .unjust, as it compels some to subsidize others' use of gov ernmental services. What we have is the ugly specta cle of a societal gang war, each group attempting to manipulate 561 562 THE FREEMAN September government so as to enrich itself at the expense of the others. This is possible-indeed, inevitable-be cause our tax system is not rooted in principles of justice (as are, e.g., our property and tort law). But it need not be so. There is, I believe, one principle, and only one principle, upon which taxation could be based which avoids injustice to any citi zen. It is the same principle which underlies all market transactions: You pay for what you get. The Rights of Man The view one takes of man's rights will inform his judgment on the moral defensibility of a system of taxation. I do not propose here to argue at length for the position I take, as that has been ably done elsewhere.!

Individuals have rights. Locke distilled the fundamental rights to these: life, liberty, and property. Each person has a right to be the master of his life, the only life he has. It may not be taken from him, and neither may it be made the tool of others. That property which justly comes into his possession is his to do with as he pleases-consume it, save it, exchange it, or give it away. The dominion of an individual over property excludes any rightful claim to that property by another. As ProIThe reader may wish to consult in this regard F. A. Hayek, The Constitution of Lib erty, especially chapter 2. fessor Nozick writes, cCThe particu lar rights over things fill the space of rights, leaving no room for gen eral rights to be in a certain mate rial condition."2 This concept of man's rights is deeply embedded in our religious heritage, and was embodied in the earliest forms of the common law.3 Let us agree that man has a right to enjoy the fruits of his labor. Can there coexist with this right such alleged rights as the CCrightto decent housing" or the nright to an educa tion"? The answer is no. As soon as an agent of compulsion, usually the state, takes any part of the fruit of one's labor from him in order to give effect to these other so-called rights, the primary right is violated. Then we can no longer say that man has a right to enjoy the fruits of his labor, but only that man· is permitted to enjoy that which the state does not demand be put to purposes of its choosing. The degree of the taking does not matter. The right is vio-Anarchy, State and Utopia, p. 238. The author cannot recommend this brilliant work of political philosophy highly enough.

3Interestingly, early Anglo-Saxon criminal law was actually tort law in nature. That is to say, the state demanded that restitution be made by criminals to those who had suffered at their hands, but itself exacted no punishment. One may wonder whether the contemporal'y state deprives the victims of crime of a prop erty right when it incarcerates those who have committed offenses against their persons or property, thus making restitution difficult or impossible.

1978 SOME THOUGHTS ON TAXATION 563 41fhe National Endowment for the Arts re cently awarded a $6,000 grant to the producer of a film showing large rolls of crepe paper being tossed from an airplane and floating back to earth. This vicariously generous bit of artistic patronage earned Senator Proxmire's "Golden Fleece of the Month" award. See National Review, Sept. 30, 1977, p. 1090. Many other fantastic boondoggles are recounted in Donald Lambro's The Federal Rathole (Arlington House, 1975). Taxation and Morality First, our tax system is immoral because it compels some individuals to purchase government services which they do not desire. For exam ple, many Americans contribute in voluntary support to public schools even though neither they nor any children of theirs make any use of these facilities. There are also many citizens who drive very little or not at all, yet have no choice but to help underwrite the costs of our highway network. And there are those who, although they do not care for such things, are patronizing the fine arts through governmental subsidies. 4 In this, their rights are violated be cause they are deprived of the free dom to choose how they will dispose of their property.

Secondly, if taxation requires us to purchase services we do not want (or want less than other things we might have bought), a corollary is that we are compelled to subsidize lated whenever an owner is com-use of resources, but I wish to focus pelled to part with any portion of his on the reasons why it is immoral. property against his wishes. The Nature of Taxation Taxation is the price we pay for government services. Government takes (or keeps) from us an amount of property (money), calculated by various formulae, each year. During that year, government does certain things for (or to) its citizens. Each of these services has a cost per citizen, although some would be difficult to account for with certainty. Under our present tax system, however, there is no necessary relationship between the size of one's tax bill and the cost of the government services he has used. If you go to get a haircut, the price you pay reflects the costs of the barber's time, his tools, rent on the shop, and so forth. It is deemed just that the recipient of the haircut should pay for these costs incurred on his behalf. Compare this with our tax system. Taxes are computed on the' basis of income, wealth, pur chases, and other measures. There is no attempt whatever to charge the costs of government to those people for whom they were incurred. Un avoidably, some taxpayers must pay more than the value of the govern ment services they received while others pay less (or not at all). This system is undesirable for a number of reasons having to do with efficient 564 THE FREEMAN September services used by others, and this too is immoral. Payments for services we do not use, or use only to a small degree, usually go to reduce the amount that more extensive users need pay. For instance, those of us who make considerable use of public libraries are relieved of paying the full cost of our usage because of the tax dollars taken from occasional and nonusers which go to defray the expense. It is a violation of those rights which we posited above to compel someone to support another's desires or. even needs, yet our tax system is a hopeless maze of invol untary subsidizations of some by others. The most obvious example of how the tax system is used to com pel one person to make purchases for another is the phenomenon of transfer payments. Here, there is no governmental service at all, merely the taking of money from one person thought not to need it, and giving it to someone else. Such acts of robbery by indirection can occur only because our tax system does not link payments to bene fits received.

Neither of the above objections to the morality of our tax system de pends upon the existence of a ttpro gressive" rate structure. If the gov ernment merely figured its costs and divided them equally among all tax payers, we would object for the rea sons given above. Progressivity IS a separate issue, and must be regarded as a third indictment against our tax system. We have had it drummed into us for so long that taxation should be based upon ~~the ability to pay" that this axiom is hardly ever ques tioned. (We might call it the Willie Sutton principle of taxation-~~Why do you rob banks?" ~~Because that's where the money is.") Yet, upon examination, it cannot stand under our view of the rights of individuals. When we say that taxation should be based upon ttability to pay," we are saying that two persons who use the same governmental services, and in the same amount, should pay different amounts of tax if their in comes are different. To illustrate the point, imagine two potters who live next door to each other. They place identical demands on governmental services in 1977 (use of roads, schools, national defense, etc.) and both pay the same amount of tax because they sold the same number of pots. Then, in 1978, one of the potters gets ambitious and produces and sells 15 per cent more pots than in the prior year. His neighbor pro duces the same number as he did in 1977. Their lives remain the same except that the ambitious potter now buys steak more frequently than hamburger and drives a new car instead of an old one. Oh yes, and he also has to pay the govern ment more in taxes. But why should he have to? Why should he now 1978 SOME THOUGHTS ON TAXATION 565 have to pay, let us say, $1.10 per unit of service while his neighbor still pays only $1.00 per unit? There is no defensible ground for the dis crimination. If the government was previously extracting a proper amount from our ambitious potter to cover the cost of the services he used, it now is taking too much; it is demanding more than the services are worth. That is unjust. I conclude that ttprogressivity" is a bad princi ple of taxation in that it charges different p~ople different prices for the same service.

A Neutral Principle We have seen that our present tax system is unjust in that it violates the rights of many citizens. What we desire is a tax system which will require the government to respect the rights of each, to remain neutral among taxpayers. I submit that such :a system can be based upon this, and only this principle: The amount of tax one pays should equal the cost of providing the services he uses. In the market, there is only one price for a good or service, not·a sliding scale based upon some notion of abil ity to pay, and no one is required to buy things he does not want. Gov ernment should be constrained to follow this principle in charging for its services. How could this be put into prac tice? Wherever possible, govern ment should finance its operations through user fees rather than taxes. A good, though not perfect example of what I have in mind is found in the U.S. Postal Service. (Of course, a large part of its budget comes from taxes and to that extent is immoral in compelling some people to subsi dize others' use of the service, but we will ignore that. Ignore also the fact that there is no reason why the government should deliver the mail.) The price of a stamp is the same for each buyer, regardless of income. If you do not send any mail, you do not have to buy any stamps.

Thus, this method of .financing the service closely resembles a market transaction. Other services could be treated similarly. Roads could be paid for through tolls and other forms of user fees, and schools (if we must have public education) could be paid for solely out of funds collected from those who use them. If put to the task, man's ingenuity would be able to devise means of accurately ac counting for the costs of government-provided services and charging them back to those who caused them to be incurred. There are, however, many ele ments of a government's budget which relate to administration and enforcement of the law rather than the provision of a service per se, and these create analytical difficulties. Ho~,-for instance, do we allocate to each citizen his just share of the cost 566 THE FREEMAN September of the Presidency, the Congress, or the Defense Department? Do we as sume that everyone benefits equally from these expenditures and divide them accordingly? Or do we assume that persons with higher incomes or greater wealth benefit more from these expenditures, and therefore charge them more? To a considera ble extent, these expenditures relate to the protection of property, and the proper analysis would seem to focus on how the market would handle analogous services. Premiums for property insurance contracts are largely a function of the value of the property covered. Therefore, an allo cation of costs based upon wealth might be optimal. I do not claim that no better formula is possible, but propose the wealth tax idea merely to demonstrate the nature of the analysis which should underlie our approach to the just allocation of tax burdens.

The largest item of governmental spending in this country would be dramatically affected by the adop tion of this principle. The item is transfer payments; they would cease. To see why, look to the princi ple. You pay for what you get. To get a dollar from the government, you would have to pay a dollar, plus administrative overhead. Obvi ously, there is no point in doing that. Many will think it unspeakably cold-hearted to suggest that the government not give anything to the needy, but it must be answered that the best policy is to rely upon indi vidual charity and never allow the idea that the level of one's income is a matter for political consideration to gain a foothold. Bastiat was cer tainly correct when he wrote in The Law that governm~nt should not be allowed to do any act which would be a crime if done by an individual citizen. We do not permit even the neediest to steal. Neither should we permit the government to play Robin Hood.

The Free Rider Argument Some will object to my analysis on the ground that since most people benefit in some way from govern mental expenditures, it is not unjust to require them to pay for these benefits. For example, it is said that everyone benefits from the system of public education in this country be cause better-educated people im prove society as a whole. I contend, however, that the free rider argu ment does not justify compulsory tax support for services one does not use. In the first place, it is just too easy to assume that everyone is better off as a result of the provision of some governmental service. S Who among us is so all-knowing that he can SRegarding the supposed benefits of public education, the reader should consider (or re consider) E. G. West's article, ttThe Perils of Public Education", in the November, 1977 Freeman, p. 681.

1978 SOME THOUGHTS ON TAXATION 567 make the judgment not only that everyone benefits from some service, but what the extent of that benefit is in each case? No one, I answer. Secondly, we should be extremely hesitant to allow the making of unilateral contracts. Even if you clearly benefit from an expenditure by someone else, we should prefer that you not be compelled to help defray the cost. Allowing others to direct in some measure how you spend your money by making you pay for Ubenefits" for which you have not contracted might very well deprive you of funds you need for things of greater value to you. It is true that an elderly couple might derive some benefit from public edu cation, but requiring them to pay for that benefit for which they had not contracted deprives them of money needed to pay medical or utility bills. Everyone has his own hierar chy of values, and it is wrong for the government to demand that its hierarchy take precedence over the individual's.

Finally, people usually do pay for services rendered by others, albeit indirectly. Assume for a· moment that public education does yield a benefit to all of society. How does each person benefit from this in crease in erudition? Presumably, by the better products and ideas which educated people can produce. But unless one lives his life as a self sufficient hermit, he will eventually pay for the educational component of the products he uses and ideas he absorbs, through the operation of the price system. Ph.D. chemists do not work for free-their salaries, part of which is a return on their educational investment·, are re flected in the price of the things which their research makes possi ble. Thus, there is no free ride, and this objection fails. Some Advantages Not only is a system of taxation requiring citizens to pay taxes only to the extent of benefits received consonant with man's rights, but it would yield us some significant tan gible advantages as well.

One benefit would be that no longer could government use taxa tion as a tool for social engineering or economic tinkering. The dense pages of the Internal Revenue Code are full of deductions and credits for use of money which the state wishes to encourage. 6 Since government is to be the servant ofthe populace and lIt has been persuasively demonstrated that federal tax policies are in large measure re sponsible for the plight of the large northern cities. The investment tax credit has encour aged fums to build new plants in uncrowded southern and western states, and their move ment has been facilitated by the expansion of the interstate highway system, paid for in the main with tax dollars taken from the already-developed areas in the Northeast and Midwest. See, "How Federal Policies are Hurt ing the Cities", Business Week, December 19, 1977, p. 86.

568 THE FREEMAN September not its master, it is wrong for it to attempt to direct how we spend our money. Moreover, such interfer ences lead to inefficient use of re sources. The deductibility of mortgage interest unjustifiably en courages home ownership; the de ductibility of bond interest unjus tifiably causes corporations to favor debt financing over equity. These interferences would be at an end if government had to link taxes to the provision of services, rather than to income or some other irrelevant measure. For instance, ubusiness expenses" (lunches, travel, enter tainment, etc.) would be immaterial to a company's tax bill if it were taxed on the basis of the cost of governmental services it used; thus, there would be an incentive to economizeon these currently deduct ible items. Another benefit would be that it would tend to get government out of the business of providing services appropriately left to the market. If people had to pay the full cost of using government services, they would quickly see how inefficient government is, and would tum to (or demand to be allowed to tum to) alternatives.

Finally, and perhaps most impor tantly, taxation based on benefits received would eliminate the gov ernment's motive for inflating the currency. Inflation is governmental additions to the money supply. (Rising prices are a consequence.) Gov ernments resort to inflation because they desire to spend money in excess of the amount they dare to collect in taxes. Now suppose that govern ment were operated as a service company, requiring all who partook of its services to pay for what they had used. Inflation would be impos sible because government would have to balance its expenditures and receipts. With each person paying only the cost of providing him with services, there would no longer be any need, or motive, for government to resort to money creation to bal ance its books. Conclusion Freedom would be greatly ex panded in this country if govern ment could not compel us, through the tax system, to devote our money to services we do not want, and to subsidize services used by others.

These annoyances frequently are part of a deliberate plan to redistrib ute wealth, which is inherently im moral; but even in the absence of redistributionist schemes, a tax sys tem which does not base the amount of tax one pays on his use of gov ernment services is unavoidably un fair to some citizens. The only tax system which would require government to treat each citizen neutrally-not forcing any one to act as a tool for someone else more favored by the government-is 1978 SOME THOUGHTS ON TAXATION 569 one which embraces the concept that one should pay only for the cost of those services he actually uses. It is wrong to force one ·person to pur chase government services for another, just as it is wrong to force him to purchase anything else for another. If a wealthy person is to pay more tax than a poor person, it should be because he causes the government to incur larger expenses on his behalf, and not simply be cause he has more money.

When people make purchases in the market, they expect to pay for what they get. They have no expec tation that others will pay part or all Progressive Taxation of the cost for them. If it is just that each person pay the full cost of a haircut or movie ticket, then it is also just that he pay the full cost of those services which the govern ment provides him. Others should not be expected to pay his way. Our present tax system is unjust in that it often compels one person to sub sidize the government used by another. Government would have to remain neutral among its citizens if we taxed strictly on the basis of the benefits received by each person. Any other system becomes a breed ing ground for injustice and social strife. i IDEAS ON UBERTY PROGRESSIVE TAXATION of income by the federal government, which is currently practiced in the extreme, provides, first, that many voters of small income are either exempted entirely from paying, or pay very Iittle, and, secondly, that successive increments of larger incomes are taxed at progressively increased rates that become confiscatory.

There is no justification in morals or in the principles of individual liberty for progressive taxation. It is the simple looting through law of the more productive by the more numerous but less productive. Its appeal is demagogic, and its result is communism, which in turn is but a transitory stage in the evolution away from liberty into dictatorship. The endorsement of progressive taxation is, knowingly or unknowing ly, the endorsement of communism, and sincere endorsement of pro gressive taxation, motivated often by generosity, is unwittingly one of the worst forces undermining individual liberty in America. BRADFORD B. SMITH, "Liberty and Taxes" (1947) A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN TEXTBOOKS ON TRIAL IT was a case of tta little child shall lead them." Mel and Norma Gabler, living in Texas where Mel worked in the oil business, were quite happy with the public school system. They trusted the textbooks used by their three sons ttalmost as much as they did the Bible." But one day Jim, their oldest boy, brought a copy of Our Nation's Story, by Laidlaw Brothers, home and handed it to his dad. There was nothing in the book about restrictions on the federal government, and nothing about rights and freedoms retained under the Constitution by the people and the states. It was as if the Bill of Rights had never been written.

That set the Gablers off on a hunt. They looked into other history texts used in the Texas schools. It distres sed them to see George Washington downgraded and Patrick Henry 570 CtGiveme liberty or give me death") ignored. In three of the economics textbooks which Mel Gabler duti fully read there was no effort to present fairly the American free en terprise system. The questions in most of the economics texts seemed designed to ttsubtly move the think ing of the student to the left." Textbooks on Trial by James C. Hefley. Foreword by former Congressman John Conlan. Published by Victor Books, 1825 College Avenue, Wheaton, Ill. 60187, $6.95. The Gablers had played a part in the local Parent Teachers Associa tion, but it was ttritual" work. Be lieving that school personnel ttknew best," they had not questioned the TEXTBOOKS ON TRIAL 571 work of the Texas Education Agency in recommending appointees to the State Textbook Committee. When they asked about parents' rights in the matter of influencing textbook choices, they were told they might appear before an investigating committee in the State capital at Austin. Norma went to Austin and made a speech, her knees ~Jellied"

and her voice quavering. When son Jim, who had accompanied her, asked for the right to uspeak as a student" who had been aftlicted with the questionable texts, he caused a commotion. The legislator in charge of the hearing uttered a ~~Well, uh, we've never had a student speak before." Jim was put off for a week, but he returned and presented his analysis of a book that had left him with the impression that, in the American Revolution, uWashington did little more than Baron von Steuben or Benedict Arnold." Repor ters described Jim as a ~~gum chewing East Texas kid," and quoted liberally from his remarks. When the Gablers first took their cause to the investigating commit tee in Austin, they didn't know they were embarked on what was soon to become a lifetime crusade. There were so many school books to read, and nobody seemed to care very much that it took the tenacity of a leech to get early copies of the texts from the ttsystem" that was debating their acceptance for use. The job of questioning the assumptions gov erning the recommendations of texts involved a thousand subtleties.

The Supreme Court interpreta tion of the Constitution forbade the teaching of religion in the schools. How, then, to acquaint students with a national heritage that stems, in. good part, from the eighteenth century acceptance of the Christian ethos? The right of parents to over see the moral training of their chil dren would seem to be incontestable. This would justify parental objection to the use of pornography in the classroom. But when is literature pornographic, and when is it simply realistic? And what about Usituation ethics"? How is one to teach a stu dent to think if he is not to ask questions about the absolute and the relative? Darwin is part of scientific history, and evidence for evolution is written in the rocks. How to square this with the fact that there are gaps in the assumed evolution ary sequence? Even though the Biblical story of Genesis may be questioned in detail, the Cre ationists have not been routed. In deed, evolution may very well be the Creator's way. But how do you give the theory of Creation, whether it be special or evolutionary, an equal standing in school biology courses without mentioning God, which gets us back to the Supreme Court's rul ing that religious instruction in the schools is verboten.

572 THE FREEMAN September Fairness and Objectivity In pushing their crusade for better textbooks in the public schools, the Gablers have had to rely on good taste and common sense. They have combined humor and persistence. In telling their story in Textbooks on Trial, James C. Hefley has caught the essence of their personalities. They are neither dogmatic nor fanatical. They don't expect mira cles. They would be satisfied with a balance. Norma, speaking to Mel, put it this way: (CIt's our children, our tax money, and our government ... If textbooks can't teach Christian principles, then they shouldn't teach against Christianity." As for eco nomics, the Gablersthink it is again a question of fairness and objectiv ity. They expect the Keynesians to have their say, but when a single textbook, McGraw-HilI's Economics for Our Times (1963), came out with ((onepage on the free enterprise sys tem, six pages on socialism and Communism in which it defends lib eral socialism, and two chapters on Big Government," it seemed that ((objectivity" was getting the worst of it.

For years the evaluation of textbooks was an after-hours moon lighting proposition for Mel Gabler. Norma had to do the traveling and the public speaking. But now, with his early retirement from the oil business, Mel has turned to fqll time work with Norma in running their foundation, Educational Research Analysts. Their main business con tinues to be with Texas school boards and the Texas Commissioner of Education, but they do advisory work for concerned parents everywhere. During the controversy in West Virginia over textbooks they helped the embattled citizens of Kanawha County present their case for texts that would not ttdemean, encourage skepticism, or foster dis belief in the institutions of the United.States of America and in the Western civilization." Although the country may have gotten the im pression that a bunch of West Vir ginia hillbillies were trying to ttcen_ sor" good literature in the mountain schools, the truth is that the West Virginia parents had a good case.

Time-tested Iiterary classics had been crowded out in favor of books whose obscenities appalled har dened newspaper editors when they were asked to print some samples in a full-page advertisement. A Vexing Problem Philosophically, the Gablers might favor private schools over public. But in Texas, which is where the Gablers were fated to live, they were confronted with the fact that there are few private schools. For their own three sons the Gab lers had a choice: they could teach them at home, or they could fight what they call ttthe self-anointed 1978 TEXTBOOKS ON TRIAL 573 system of secular humanism" in the public schools. If, like the late Frank Meyer, they had chosen to teach their own children everything from reading to mathematics, they would probably have made a success of it. But this would not have solved the problem for other Texas parents. Although the state, in public edu cation, is not to be trusted, Mel and Norma Gabler think the pendulum is swinging their way. Says Norma, ttdisgusted parents" are calling everywhere for ttgoing back to the basics-learning skills, traditional math, phonics, morality, patriotism, history that is really history, science that is science, and fair play for free enterprise economics."

The question is how to sustain embattled parents in their Hdis gust." Mel and Norma Gabler are giving it a good try, but what they really need is a wide revival of pri vate schools to provide a competition that will force the public educators' hands. i WELFARE: THE POLITICAL ECONOMY OF WELFARE REFORM IN THE UNITED STATES by Martin Anderson (Hoover Press, Hoover Institution, Stan ford University, Stanford, Calif. 94305) 251 pages. $10.00 Reviewed by Henry Hazlitt A FEW OF us, over the last dozen years, have attacked the proposal of the guaranteed income and the Unegative income tax" in its many guises; but it has remained for Mar tin Anderson of the Hoover Institu tion to devote a whole book to the subject, and to do such a thorough job of theoretical and factual analy sis that it would seem hereafter im possible for anyone with a candid and open mind to read it and still take the guaranteed income serious ly. Dr. Anderson's book can now stand as the definitive refutation.

Anderson brings to his task a tri pIe advantage. He is first of all a first-rate academic economist. Sec ond, he was himself once a bureau crat. He was Special Assistant to President Nixon and a consultant to President Ford in the development of the Family Assistance Plan and the Income Supplementation Plan respectively. He knows how bureau crats work, propagandize, and com pile their data. And finally, what is so rare among 574 THE FREEMAN September academic economists, he writes clearly, simply, incisively and with flavor. Frequent sentences relieve the tension of following his close analysis, such as: ((In the sea of dark gray and blue that surrounded Nix on, Moynihan, in his cream-colored suit and red bow tie, gleamed like a playful porpoise." The Arguments Assembled and Fully Documented Anderson goes about demonstrat ing his case carefully and systemati cally. Each of his eight· chapters is preceded by a like-numbered ((thesis," which he then proceeds to demonstrate in almost Euclidian fashion.

His first thesis is that the ((war on poverty" that began in 1964 has been won; that the growth of jobs and income, combined with an ex plosive increase in government spending for welfare and income transfer programs, has virtually eliminated poverty in the United States. In showing this, he is obliged to refute the influential findings of the Bureau of the Census that in spite of the hundreds of billions of dollars thrown at the poverty prob lem, there were 26 million persons, or 12 percent of the population, still below the poverty level in 1975 almost as many as when the «war on poverty" began. With the help of his own analysis, and of expert testi mony, Anderson shows that the Census estimates are wildly inaccurate one reason among others being that the Census estimates completely ig nore transfers in kind. ((People are not even asked," he writes, ((if they received food stamps, live in public housing, or are eligible for Medicaid." Over $40 billion a year, Anderson points out, is spent by the federal government alone on such programs.

His second thesis is that the vir tual elimination of poverty has had costly side effects-the most impor tant of which has been the almost complete destruction of work incen tives for the poor on welfare. In many cases families make almost no financial gain when the breadwin ner works instead of staying on wel fare. To cite a single instance, a Tennessee father who is eligible for food stamps and the unemployment insurance maximum gains only $4 a week by taking a part-time job pay ing $75 a week. As even the Joint Economic Committee of Congress pointed out in 1972, current gov ernment programs discourage work by imposing ((the equivalent of con fiscatory tax rates" on the resump tion of work. Spending Cuts Advocated Anderson's third thesis, based on various opinion polls, is that the overwhelming majority of Ameri cans favor welfare programs for those who cannot care for them1978 WELFARE: POLITICAL ECONOMY OF REFORM 575 selves, while at the same time favor ing large cuts in welfare spending because of their strong belief that many welfare recipients are cheat ing. A guaranteed income is flatly opposed by a two-to-one margin.

His fourth thesis is that the clamor for radical welfare ((reform" comes essentially from a small group of committed ideologues who want to institute a guaranteed in come under the guise of welfare re form. His fifth thesis is that the institu tion of a guaranteed income will cause a substantial reduction perhaps as much as 50 percent-in the work effort of low-income work ers, and that such a massive with drawal from the work force would have the most profound social and economic consequences. His esti mate of this withdrawal from work is based not only on theoretical con siderations, but on what happened historically (in the Speenhamland period of 1795 to 1834 in England, for example), and what various fac tual studies show has already been happening today. His sixth thesis is that any vari ety of a guaranteed income is politi cally impossible; that no radical wel fare reform plan can be devised that will simultaneously yield minimum levels of welfare benefits, financial incentives to work, and an overall cost to the taxpayers that are politi cally acceptable. Anderson's elegant demonstration that when any two of these three basic elements of radical welfare reform are set at politically acceptable levels, the remaining element becomes unacceptable, is perhaps his most original contribu tion in this book.

A Debatable Point His seventh thesis is that practi cal welfare reform demands that ((we build on what we have" -that we reaffirm our commitment to the philosophical approach of giving aid only to those who cannot help them selves, while abandoning any thoughts of radical welfare reform plans that will guarantee incomes. This is the only thesis in Anderson's book about which this reviewer would have some reservations. I agree entirely that we should aban don the ((guaranteed income"-the unconscionable idea that all citizens have the right to be supported by the government, regardless of any effort they mayor may not make to sup port themselves. But I think that Dr. Anderson neglects or underesti mates the grave· problems we have already created for ourselves by the mixed, haphazard, duplicative, and extravagantly costly relief system we have now built up. Anderson's final thesis deals with President Carter's welfare reform plan, which he first presented in May of 1977, accompanied by state ments that it would add only $2.8 576 THE FREEMAN billion to previous welfare costs.

Anderson finds that the program would add nearly 22 million more Americans to the welfare rolls (mak ing the ultimate total some 66 mil lion); that the federal cost of welfare would actually increase by about $20 billion a year, and that most of that added money would go to families with incomes above the poverty level. It would act as a seri ous disincentive to work. Though presented as a cCsimplification,;' it would be far more complex, require more welfare workers, and be more difficult to administer than the cur rent welfare system. CCIt is a potential revolution of great magnitude that could result in social tragedy." In an appendix Dr. Anderson lists and spells out in detail no fewer than ninety-one social welfare pro grams operating in 1974. Nobody knows exactly how many more have since been added. I have been able to give only the sketchiest outline of the wealth of theoretical and factual analysis to be found in this book. But if one conclusion emerges above all others, it is that would-be reforIl)ers must abandon completely their search for any utopian solution to welfare problems. , HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $3.00 Order from: THE FOUNDATION FOR ECONOMIC EDUCATION, INC.

IRVINGTON-ON-HUDSON, NEW YORK 10533 the Freeman VOL. 28, NO. 10 • OCTOBER 1978 How to Break up OPEC Carlos Henkel and Robert Poole, Jr. 579 The availability of natural gas in the U.S. depends on a natural (market) price. How Safe Is Your Bank? Hans F. Sennholz 589 Some of the major banks face serious problems of malinvestment as inflation rages. World in the Grip of an Idea 22. The United States: A Bemused People Clarence B. Carson 593 The deliberate breakdown of social standards and norms leaves the individual confused. Liberty for Older Americans Perry E. Gresham 603 The opportunity to grow gains importance as one grows older. A Decision Against Meritorious Achievement Anne Wortham 611 Special favors can hurt, as do laws which discriminate against us. The Ideology of Underdevelopment Manuel F. Ayau 616 If a false ideology is the problem, explore the case for freedom at the highest intellectual level.

The Individual in Society Ludwig von Mises 624 The importance of restricting government to the preservation of economic freedom. Book Reviews: 632 "The Crime and Punishment of I. G. Farben" by Joseph Borkin "The Antitrust Paradox" by Robert H. Bork "The Inflation Crisis, and How to Resolve It" by Henry Hazlitt Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

tt1e I A E!~~N~~~N LIBERTY FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson, N.Y. 10533 Tel: (914) 591-7230 Leonard E. Read, President Managing Editor: Paul L. Poirot Production Editor: Beth A. Hoffman Contributing Editors: Robert G. Anderson Bettina Bien Greaves Edmund A. Opitz (Book Reviews) Brian Summers THE FREEMAN is ·published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of pri vate property, the free market, the profit and loss system, and limited government. The costs of Foundation projects and services are met through donations. Total expenses aver age $18.00 a year per person on the mailing list. Donations are invited in any amount. THE FREEMAN is available to any interested person in the United States for the asking. For foreign delivery, a donation is required sufficient to cover direct mailing cost of $5.00 a year.

Copyright, 1978. The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid: 3 for $1.00; 10 or more, 25 cents each. THE FREEMAN is available on microfilm from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "How Safe Is Your Bank?" and "World in the Grip of an Idea."

Carlos Henkel and Robert Poole, Jr. HOW TO BREAK UP OPEC Myths and Realities of Gas Deregulation DEREGULATION of the price of nat ural gas has been this year's hottest energy issue. Despite a campaign pledge to abolish federal price con trols, President Carter subsequently urged Congress to extend the con troIs to the unregulated intrastate market. He also called deregulation a ~~rip-off" of consumers, and urged Congress not to be swayed by oil and gas industry lobbyists. Yet the facts about natural gas are so much at variance with the impression one gets from politicians and television commentators as to be almost unbelievable. The fact is that there are vast quantities of gas Carlos Henkel received an M.S. in radiochemistry from the University of Buenos Aires, and currently works as a radiochemist and scientific translator. Robert Poole, Jr., holds an M.S. in mechanical en gineering from MIT. He edits Reason Magazine and does consulting on public policy issues.

available in the United States enough to break the back of the OPEC cartel-if only regulations did not prevent its being produced. And deregulation will very likely end up costing consumers less than any of the alternatives now being considered. Congress-and the TV commentators-continue to discuss the issue as if these facts were not available. Yet, as we hope to show in this article, all the necessary infor mation is, and has been, readily available. Regulations and their Consequences Natural gas availability first took on the air of a ucrisis" during the deplorable shortages of the winter of 1976-77. We say deplorable for sev eral reasons: not only the human misery that resulted from a lack of 579 580 THE FREEMAN October heat, but also the loss of jobs, pro duction, and income (which means a decrease in the standard of living for all of us). Most of all, it's deplorable because it wasn't really necessary.

In 1974 the Federal Power Com mission (FPC) warned that, other things being equal, the United States was in danger of running out of natural gas. 1 Gordon K. Zareski, chief of planning and development at the FPC's Bureau of Natural Gas, has pointed out that while drilling almost doubled in four years, from 22.6 million feet in 1971 to 41.9 million feet in 1975, additions to reserves remained below annual consumption every year. Part of the problem is that deeper wells must now be drilled to obtain gas. Wells three miles deep are now common in Texas and Oklahoma. It costs $3 million to drill a 20,000-foot well in West Texas. Offshore wells, though averaging only $1 million to drill, take five to six years to get into production. Fewer large gas fields are being found these days, and pro duction peaked at 23 trillion cubic feet (tef) in 1974, falling to about 19 tcf in 1977. The key measure in any discus sion of gas supplies is ~~reserves."

Proved reserves are estimates of what is available from developed reservoirs, assuming present prices and current technology. Several con clusions follow directly from this definition. First of all, reserves are, by defini tion, dependent on the price at which gas can be sold. This is easy enough to see. Amounts of gas in deposits currently being exploited can be sent to the pipelines at cur rent prices. But what about gas de posits that are harder to get at, or those reasonably assumed to exist but not yet being exploited? Obvi ously, to deliver this gas to the pipeline will cost more than deliver ing gas already in production. And if the cost exceeds the price the gov ernment allows the producer to charge, then that excess cost must either be absorbed by the producer (and his stockholders)-or, more likely, that gas will simply not be produced, at current prices. Second, if ~~current prices" are al lowed to increase, then ~~proved re serves" immediately increase. Why?

Because those gas deposits too ex pensive to exploit before can now be produced at a profit. No matter what your opinion of producers might be, a second-grader could tell you there is no profit in selling lemonade at 5¢ a glass if it costs you 7¢ to make it. Third, development of new technology is expensive. Without adequate incentives, a producer may spend some funds on developing new technology, in the hope that in the long run a better or cheaper produc tion method will result. But when everyone from the President to the corner girlwatcher is shoutin~ 1978 HOW TO BREAK UP OPEC 581 ~~crisis" then ~~in the long run" is not good enough. The development of new technology should receive high priority when price and tax incen tives are being discussed. No other incentive will generate the capital investments required, because new capital is not going to flow to sub sidize enterprises that must sell below their cost. If new capital did this, our country would be out of capital in a very short time.

And just to put to rest another myth, who is it that defines what amount of proved reserves exist? The producers, trying to force higher prices, as most people believe? No, these estimates are prepared by the American Gas Association, which is an organization of distributors, not producers.They are people who pay the wellhead price, not those who charge it. The AGA Qommittee on Natural Gas Reserves is made up of eight representatives of pipeline and distribution companies, three from major oil companies, and represen tatives of the Department of the Interior, the Bureau of Mines, the FPC, and the Federal Energy Ad ministration. How Controls Disrupt The present structure of price con trols produced its most serious effects-thus far-in the winter of 1976-77. But the area most in jeopardy now appears to be California. In that state 55% of all nonvehicular energy requirements are met by clean-burning natural gas.

Distribution systems for fuels other than natural gas are com pletely inadequate. Even if alter nate fuels such as coal or oil could be distributed instead, pollution in the Los Angeles basin would become unbearable. 2 Already a shortage of natural gas exists in California, and is getting worse. FPC figures showed a 22% supply shortage for the winter of 1976-77; the figures were 18% in 1975 and 14% in 1974. Thus, unless expensive liquified natural gas (LNG) is imported (at approxi mately $3.50 per thousand cubic feet compared with $0.70 for the average pipeline gas price) the alternatives are: either demand is left unsatis fied and the economy suffers (loss of jobs and income) or the demand is filled by alternate fuels like oil and the environment suffers. The price of the shortage has al ready been substantial in Califor nia. A study by SRI International shows that since 1971 over 76,000 California jobs have been lost be cause of reduced gas supplies. The same study estimates that by 1981 the loss will have risen to 800,000 jobs, just due to gas shortages.

The outlook for California indus try is more of the same. Joseph R. Reusch, president of Pacific Light ing Corporation (parent of Southern California Gas Company), warns 582 THE FREEMAN October that gas curtailments will acceler ate. At Kaiser Steel's huge Fontana mill Pacific Lighting will curtail gas boiler fuel on about 200 days this year. The alternative is low-sulfur fuel oil, which is about 1.67 times as expensive, per BTU, as natural gas. Lockheed Aircraft Corporation's six plants suffered gas curtailments only a few days in 1974 and 1975, but reached fairly heavy cutbacks in 1976, and 60% cutbacks in 1977 with no gas at all in 1978. According to Harry Winston, head of Lock heed's energy program, the com pany is turning to diesel fuel, two and a half times as expensive as natural gas. Diesel fuel will become short, too, because of limited West Coast refining capacity. ((By 1980 we'll be running tight on overall product demand," predicts Edward J. Cahill, economist with Standard Oil of California.

Agriculture Affected So much for industry. What about agriculture? At one end, the fer tilizer industry is concerned about receiving enough gas feedstocks at a price that .will permit staying com petitive. At the other end, canneries are being cut off and are having to convert to diesel oil, at about $500,000 per plant, according to Tri-Valley Growers, Inc. Executive vice president Harvey A. Proctor of Pacific Lighting pre dicts cuts to firm customers by the winter of 1978-79 and warns that many of Southern California Gas Company's 12 million users will lose their jobs if a solution is not found. He points out that, attempting to remedy some of the shortage prob lems, Pacific Lighting negotiated to buy the rights to 4.2 trillion cubic feet of gas from ARCO, in return for $327 million to finance additional development of Alaska's North Slope. The plan was first approved, then vetoed, by the California Pub lic Utilities Commission.

Meanwhile, production continues to drop. Edward Najaiko, vice presi dent of EI Paso Company, whose pipeline delivers a lot of gas to California, says, ((In the past few years we've been using twice as much gas as has been found." De spite the addition of the Prudhoe Bay deposits in 1970, U.S. natural gas reserves went from 292.9 trillion cubic feet in 1967 to 228.2 tcfby the end of 1975, a decrease of 22%. An nual production decreased from 22.6 tcf in 1973 to 19.4 tcf in 1977.3 Yearly consumption is about 19 tcf. Short-Term Prospects What, then, is the outlook? How much gas do we have left? Surely some agreement can be found in this area? Actually, not. As we noted before, it all depends on what gas price you are talking about. Let's look at some of the reported figures and estimates.

1978 HOW TO BREAK UP OPEC 583 In 1977 a study was performed by some 70 people at the Energy Re search and Development Adminis tration (ERDA). The study, titled MOPPS (Market Oriented Program Planning Study), provided three es timates of natural gas reserves, based on a number of assumptions. 4 According to the most pessimistic estimate, the potential reserves at $3.25 per thousand cubic feet* are double those at Congress's proposed $1.75 ceiling. And this includes only conventional sources of natural gas. The most optimistic estimates in clude unconventional sources (more on those, below), and estimate over 600 tef at prices below $3.25. If we consider that the closest competitive substitute for natural gas is No. 2 fuel oil at an equivalent of $3.00, the good people at ERDA have just told us that deregulation of gas prices could break up the OPEC cartel. It is that simple. It also appears that nobody in high places was listening~r that this information is being deliberately ignored.

When the MOPPS study speaks of deregulation, it is not bringing up a new issue. Economists have been urging that gas prices be decon trolled for at least the past decade. In the February 14, 1977 issue ofBusi ness Week Anthony J. Parisi rec ommended immediate deregulation *Gas prices subsequently quoted are at the rate per thousand cubic feet. of the price of new gas supplies. 5 Parisi pointed out that free market prices have not been allowed to in terstate pipeline companies for over 23 years. Intrastate prices and supplies, meanwhile, were allowed to follow the laws of supply and demand. As a result, the average price of gas within Texas is $1.80 about four times the average price of all interstate gas, and only 10% below the world oil price, on a BTU-equivalent basis. < Across State· Lines Due to interstate price controls, reserves committed to big interstate pipelines have dropped drastically: in recent years they have secured only about 15% of all new gas sold, coming mostly from offshore fields in federal waters .. (And these are dedicated by law to the interstate market.) Parisi points out that de regulation would permit interstate buyers to compete with intrastate buyers for new gas sources. As a consequence, a greater percentage of gas coming on stream each year would go to customers in distant states. Also, many as yet uneconom ical offshore gas fields would become economically viable and more virgin sites would be drilled. And, as gas bills increased, demand would di minish, especially industrial de mand. Currently, industry pays less than homeowners and thus uses gas in lower priority applications.

584 THE FREEMAN October Charles L. Blackburn, executive vice president in charge of explora tion at Shell, states, ((There are lots of prospects in the Gulf that every body knows have gas. These fields could be exploited and developed." James Murphy, president of Va-quero Petroleum in Houston, thinks that liberating just new gas prices would add two billion cubic feet to the current Gulf area production of nearly 10 billion cubic feet per day. This would not solve the shortage, since freeing only new gas would affect only 10% of the gas in current interstate commerce. ((The other 90% will continue to sell at long term contract prices of less than $0.30 per thousand cubic feet equiv alent to crude oil at $1.80 a barrel," says A. V. Jones, Jr., president of the Independent Petroleum Associa tion of America. How Much Gas Is Really There? The U.S. Geological Survey (USGS) estimates gas reserves as follows: 228.2 trillion cubic feet in proved reserves, 201.6 tcfin inferred reserves (including Alaska and offshore deposits), and anywhere from 322 to 655 tcf as undiscovered but recoverable reserves. These fig ures are less than 50% of what USGS estimated as recently as 1974. Julian Martin of the Texas Independent Producers and Royalty Owners (wildcatters) estimates un discovered reserves at approximately 700 tcf, and considers this a conservative estimate, since others have mentioned anywhere from 350 to 4000 tcf.6 But all these estimates apply only to conventional sources of natural gas. Besides these, there are at least four ((unconventional" sources of gas-mostly methane-that could eliminate any gas shortage for hun dreds of years. All four sources would be exploitable-at less cost than LNG or exotic coal-to-gas con versions-if price controls on gas were removed.

The first such source is the huge ((geopressurized zone" of the Gulf coast. The USGS estimates that geothermal hot salt water under Texas and Louisiana contains 24,000 tcf of methane. 7 In this re gion large aquifers at 8,000 to 25,000 feet depth, at a temperature of 150°C. and high pressures, con tain up to 45 cubic feet of gas per barrel of water. s Estimates of the total amount of methane gas in on shore aquifers vary. Bill Rise of Louisiana State University esti mates 3000 tcf; the USGS, as men tioned, says 24,000 tcf; and Paul H. Jones of LSU projects 49,500 tcf (about a 2600-year supply!). And simi lar amounts are expected in offshore deposits. Production costs would be high, and because of subsidence, only about five percent of the water in the aquifers could be removed. Thus, using the most conservative 1978 HOW TO BREAK UP OPEC 585 estimates of onshore and offshore gas supply, this would mean 300 tcf of recoverable gas-more than doubling current proved reserves.

Using the USGS estimates leads to a figure of 2400 tcf of recoverable gas-a 126-year supply, at present rates of use. Methane in Coal Beds According to the National Re search Council Forum on Potential Resources of Natural Gas, methane in coal beds would be the cheapest and easiest new source to exploit. All coal deposits contain trapped methane. This gas is hazardous to coal mining, and is currently being vented to the atmosphere, because gas prices are too low to make it economical to recover. The average methane content is 247 cubic feet per metric ton of coal. Thus, known U.S. coal deposits contain at least some 300 tef of methane. Another source is gas in Htight sands." Tight sands are layers of clay, chalk, and sandstone in shale that sometimes contain gas. The USGS estimates that there are some 600 tcf trapped in the Fort Union and Mesaverde reservoirs in the Rock ies, and similar amounts else where. Recovery requires extensive fracturing of the shale. Nuclear fracturing has been tried, without too much success, but hydraulic fracturing looks promising. If gas prices were to rise to only $2.00 per thousand cubic feet, the Rocky Mountain basin could be producing almost a trillion cubic feet per year within seven years, according to Lloyd E. Elkins of Amoco.

A fourth unconventional source is gas in Devonian shale. Found in the eastern and midwestern United States, shale contains from 22 to 33.5 cubic feet of trapped gas per metric ton. The USGS estimates that approximately 494 tcf of gas could be found in this type of shale. Such gas has already been produced locally in eastern Kentucky. The wellhead cost for shale gas is ap proximately $2.00, according to Wil liam Morse of Columbia Gas Transmission Corporation. Together, these four sources could provide an additional 3794 tcf-17 times more than existing proved re serves and equal to the highest es timates of remaining undiscovered gas from conventional sources. The 3794 tcf is equivalent to a 200-year supply, at present consumption rates. This gas w ill be produced if prices are allowed to rise to between $2.00 and $3.00. It cannot be pro duced at today's controlled prices or even at the proposed new ceiling of $1.93.

What About Your Gas Bill? About 30% of all gas used goes to residential customers. The rest goes to industry, as we have seen, at lower rates. How is the gas price to 586 THE FREEMAN October the consumer arrived at? The Wall Street Journal recently provided an illuminating case study.9 In Brook lyn, New York only 20% of the bill goes for the gas itself; the other 80% goes· to pay for pipeline costs. This immediately tells us that the well head price of gas-the only factor in the deregulation controversy-will have comparatively little effect on your gas bill. Today's average well head price is $0.45. What does Brooklyn Union Gas charge its resi dential customers? $3.38 for heating and cooking, or $5.78 for cooking only. In 1973, when the wellhead price was $0.25, the company charged $1.72 for heating and cook ing gas, and $3.42 for cooking only. Clearly, most of the four-year in crease was not due to the increase in the wellhead price. To what then?

Pipeline costs. Pipeline amortization plusoperat ing costs plus profit are estimated long in advance per cubic foot car ried. In 1973 the pipeline was full; it was halfempty in 1977 and the price doubled. To anticipate your next question:. pipelines are not allowed to pay higher wellhead prices to keep the lines full and thus keep costs down-that's what the price controls prevent. A 1975 study by Arthur Young & Company showed that without new· supplies from de regulation, by 1980 Brooklyn Union Gas would have to sell its gas at $4.45. If the pipeline were kept full with a wellhead price even as high as $2.50-a 5.5-fold increase-the price to consumers would be $3.98. At a wellhead price of $1.50, gas would retail at $3.31 with a full line. This is actually cheaper than today's $3.38 with a halfempty line and a wellhead price of $0.45! For other locations the actual figures would vary, but the point remains the same: the price to the consumer de pends primarily on pipeline costs, and is less when the pipeline can be kept full by abundant supplies of (more expensive) gas.

Conclusions What can we conclude from all this? We realize that for many peo ple this information must be some what confusing, because of its tech nical nature and the many· figures involved. But the subject is inher ently complex because of its nature, and thus must be presented in a fairly technical manner in order to be understood. Many of our elected officials take advantage of this com plexity, counting on their listeners being too naive to understand what's really going on. Thus, the cries of ((profiteering" and ((ripoffs" tend to be taken at face value, rather than being dismissed as ob fuscation of the real issues. It is worth keeping in mind, also, that even if some of the figures in this article were not completely accu rate, even if some were off by 100%, 1978 HOW TO BREAK UP OPEC 587 Competition Serves Consumers PRIVATE enterprisers are constantly trying to find new materia.ls and new uses for known resources, always looking ahead to see which ones will be available and how efficiently they can be utilized. Pick up any trade journal and note the articles on how to cut costs, utilize waste materials, be more efficient. Because the government told them to? No. The hope of profits acts as a powerful compulsion to be efficient, to improve, to conserve. The following examples show how private enterprisers eliminate waste and utilize natural resources to meet the needs of the consuming public.

Until natural gas was known to be useful as a fuel, petroleum producers burned it to get rid of it. Until ways were found of storing and transporting gas with safety, it had only local use. Competition forced the search for further uses and wider markets, and profits rewarded those who best served consumers. As ways were found to handle gas beyond local markets, consumers elsewhere gained a wider choice of fuel, and other fuels were thereby conserved. RUTH SHALLCROSS MAYNARD "Who Conserves Our Resources?" the basic conclusions would still be the same. Some of these conclusions are as follows. First, we have, if not a crisis, certainly a gas shortage. FPC data tell us that reserves were decreasing even while drilling almost doubled. In fact, we'll have a five-year gas shortage even if we get deregula tion. An MIT computer study found that there will be a five-year lead time to eliminate the shortage, once prices are set free. 10 Kevin Lloyd of MIT's Energy Lab reports that if the price were to rise immediately to $2.00 we would see only a five per cent production increase the first year. By 1980 the shortage would be reduced to 5-10% of demand, from the current 25-30%. At the $2.00 price level, all demand, old and new, would be filled by 1982.

The severe effects of the shortage in winter 1976-77 were very expen sive: up to 1.5 million jobs lost, and a 32% increase in oil imports over 588 THE FREEMAN 1976. These effects could have been prevented by allowing gas prices to reach free-market levels. On an energy content (BTU) basis, unregu lated intrastate prices are only 10% below oil prices on the world market. And the MOPPS study showed that reserves of conventional sources of natural gas would double if the price were to reach $3.25. The analysis in that study took place in 1974. But nothing has been done. Those who projected the effects of deregulation found that it would solve the problem in a matter of a few years. If interstate gas were to rise above $2.00, it would be able to compete with intrastate gas. This would help to keep pipelines full, leading to lower retail prices to con sumers, other things being equal. Even a very dramatic increase in the wellhead price of natural gas would not affect domestic gas bills proportionally: this is because only about 20% of the bill is due to the cost of the gas, with the bulk of it accounted for by pipeline costs.

From these findings we cannot escape the conclusion that we could literally break up the OPEC oil car tel if we developed our unconven tional gas resources and expanded conventional ones. If intrastate gas at $2.00 is only 10% below intemational oil prices on a BTU basis, then OPEC has a very limited fu ture. At $2.50 or $3.00 the United States would be awash in natural gas, and the price of oil, as a less desirable fuel, would be forced down. We believe it is in the interest of all of us to reduce our dependence on foreign sources of energy, when this can be done at such a relatively minor cost. @ -FOOTNOTES1"1974 Report Warned of Possible Gas Crisis," Robert Gillette, Los Angeles Times, Feb. 7, 1977. 2"The Natural Gas Shortage," Business Week, Sept. 27,1976. 3"Misconceptions About the Gas Shortage," Alan Reynolds, First Chicago World Report, April 1977, plus telephone update. 4"Jimmy Carter on the Run," Wall Street Journal, June 14, 1977.

5<tNeeded More than Ever: Realistic Gas Pricing," Anthony J. Parisi, Business Week, Feb. 14, 1977. 6"Drillers Say Natural Gas Abounds-Deep Down," Nicholas C. Chriss, Los Angeles Times, Feb. 3, 1977. 7"Fizz from a Dead Well," Bill Crider, As~ sociated Press, June 20, 1977. S"Natural Gas: U.S. Has It, If the Price Is Right," Thomas H. Maugh, II, Science, Feb. 13, 1976. 9"Cheap Gas for Brooklyn," Wall Street Journal, June 21, 1977. 10"Five Year Gas Shortage Seen Even With Price Increase," Los Angeles Times, Feb. 3, 1977.

Hans F. Sennholz HOW SAFE IS YOUR BANK? THERE was a time when Americans wondered about the safety of their bank. In depressions the banks used to close their doors by the hundreds. From August 1931 through Feb ruary 1932, 2,000 banks with liabilities of over $1.5 billion sus pended operations. Many others barely escaped bankruptcy by hurriedly-negotiated mergers. All were forced to curtail their opera tions sharply. When the depositors were thoroughly scared, they rushed to withdraw their deposits, which forced even more banks to close their doors. To find a reliable, solid bank used to be a difficult task. Today, most depositors don't seem Dr. Sennholz heads the Department of Economics at Grove City College and is a noted writer and lecturer on monetary and economic affairs. This article is reprinted by permission from the July 1978 issue of Private Practice. concerned over the solvency of their bank. Bankers and government regulators have succeeded in con vincing the public that most banks are sound. There is careful govern ment supervision of all banking .op erations, and federal deposit insur ance is said to cover nearly all de posits.

These arguments alone should trigger an instant alarm. In all its regulating, government usually makes matters worse. When politi cians and bureaucrats invade an in dustry and regulate it along political and social lines, service is likely to deteriorate and solvency may be endangered. Why should banking be different from medical care, educa tion, or welfare? When the New Deal government undertook to reorganize the Ameri can banking industry in 1933, the 589 590 THE FREEMAN October system deteriorated. What used to be an occasional irritant for some became a fatal disease for all. Rush ing to the rescue of the hard-pressed banks, the government seized their gold reserves and replaced them with paper money that has been depreciating ever since. How Banks Fall Prior to 1933 a few banks had failed to make payment on demand when an economic depression had caught them by surprise, inflicting painful losses on depositors. Since the New Deal rescue action, all depos itors have lost at least 80 percent of their savings through inflation, and probably will lose the balance in the not too distant future. The banks are still functioning, seeking deposits and extending credit. But they are prevented by law from protecting their depositors from the ravages of inflation. They must make pay ments in Political paper money only, that is depreciating at accelerating rates, and must invest their assets in depreciating monetary claims.

The depositors are victimized every step of the way. The new monetary order did make it much easier for the banks to stay liquid and solvent. It was more manageable to maintain a reserve of legal tender Federal Reserve money, or to keep on hand a reserve of U.S. Treasury obligations eligible for Federal Reserve discounting, than to maintain a gold reserve for all payment obligations. What used to be a difficult banking function, to safeguard the reserves in gold, be came a simple task of compliance with government regulations to make paper payments. The depos itors thus were led to believe that their money was safe in banks as sisted by the Federal Reserve Sys tem and supported by the Federal Deposit Insurance Corporation. And yet the American banking system today is as vulnerable to crisis as it was in the early 1930s. To hundreds of commercial banks the simple obligation to make prompt payments in paper money, which is available in such abundance, has become as onerous and embarrass ing as the gold payment obligation of the past. According to Federal Reserve reports, only 66 percent of the banks it supervises are in satis factory condition. Roughly one-third have some payment problems. A few have already failed and many more were saved from default by reor ganization and refinancing.

It should not surprise us that the cancerous monetary order has fi nally infected banking. The rapid increase in Federal Reserve money in recent years convinced many bankers that there would always be an abundance of easy money and credit, of which they were deter mined to get their share. When their deposits did not keep pace with their 1978 HOW SAFE IS YOUR BANK? 591 desire for expansion, they borrowed the money themselves. They sold certificates of deposit, commercial paper, and borrowed in the Eurodol lar market. The larger city banks especially learned to rely on ((pur chased money," which may account for more than 50 percent of their deposit liabilities. Unsound Policies of Many Big City Banks The precarious banking situation of today differs from that of the early 30s in one important respect: then it was the small rural banks that faced payment difficulties when their farm loans defaulted, because American agriculture suffered from the deepest depression. Now it is the big city institutions with their ((go go" bankers that shed all caution in order to partake of the easy-money and help stimulate the national economy. Seeking ever new chan nels for investment, they often ig nored the rudimentary rules of banking soundness.

Many big city banks are over-ex tended, badly exposed, thinly capitalized, and short on liquidity. With U.S. government blessing and prodding, they loaned more than $20 billion to underdeveloped countries in Africa and Asia. Many of these debtor countries have neither the economic capacity nor the political stability ever to repay their loans. Some would not be able to pay the interest if the banks would not lend them the money. Guided and prompted by the monetary authorities, the banks made many other mistakes from which they may eventually recover. They lent over $11 billion to real estate investment trusts which own vacant hotels and motels, commer cial office buildings, and con dominiums still looking for tenants. They lent $6 billion to oil tanker owners whose ships sit idle in the shipyards. However, the dollar in flation and depreciation can be ex pected to rescue the debtors and their bankers as the loans depre ciate and the assets appreciate in price. Once again the depositors will be the ultimate victims.

The New York City banks lent $6.5 billion to the governments of New York State and City. Other urban banks throughout the country extended multibillion-dollar credits to their over-extended spendthrift local governments. New York State and City would have long since de faulted, and their creditors as well, if the federal government had not come to their rescue with billion dollar loans and guarantees. It makes no sense to blame the bank ers for having made such dubious loans. How could they have resisted the political pressure and public demand for ((socially desirable" funds and projects? Even in the face of imminent default the political 592 THE FREEMAN oratory for more bank loans is deafening. It is impossible to foresee the out come of this banking dilemma. The banking authorities are doing ev erything in their power to hide the situation from the American public. The Federal Reserve reassures us again and again that it will be the lender of last resort to n sound"

member banks, by which it means all those banks who carefully follow its regulations. It stands ready to supply liquidity, that is, loans, to meet bank liabilities in exchange for temporarily illiquid, but hopefully ~~sound," assets. But how sound are New York City bonds or the billion-dollar obligations of Zaire? Financial Statements Financial statements by banks are very difficult to interpret, as they violate the most important principles of honest accounting. To hide investment losses, for instance, a bank balance sheet may show the costs of an investment rather than present market value. But financial statements may be useful in finding the problem banks. If bank assets are ~~classified," i.e., if they are not disclosed, the asset values listed can be eXPected to be grossly overstated, reflecting neither current values nor liquidation values. According to cus tomary evaluation methods, a bank with classified assets of over 65 per cent of capital is worrisome. As they exceed this conventional limit the danger of banking failure grows ac cordingly. When seen in this light, some of the big city banks may close their doors at any time.

And yet, we are confident that no lasting harm will come to these banks. The effects and repercussions of a banking collapse would be catastrophic to the U.S. and the world economy. What must not be will not be-as long as the federal government can avoid it. It can postpone the unspeakable temporar ily. Admittedly, it has no asset re serves of its own, no wealth, no in come that could be used to fill the hole. In fact, it admittedly owes the world at least $800 billion and is suffering huge current deficits. But it has the sovereign power of creat ing more dollars. It can inflate and depreciate our currency at ever fast er rates. Therefore, if Zaire should default or New York go bankrupt, the federal government can be ex pected to come to the rescue of the beleaguered banks. Of course, such a rescue by the very policy responsi ble for the sad condition would further· enhance federal power and subject the banks to more controls.

And the dollar flood that is released for the rescue would inundate us all. i ~rld inthE; grfpQfan Iae(L Clarence B. Carson 22. The United States: A Bemused People THERE is a public service advertise ment that appears on television from time to time. One scenario has everyone in it moving around in wheel chairs except one person who walks about normally. Everything is arranged for the convenience of people in wheel chairs, which poses dangers and inconveniences for anyone afoot. In the other scenario, everyone is blind except one person. He opens a book but sees no words in it. He asks if there are any books In this series, Dr. Carson examines the connection between ideology and the revolutions of our time and traces the impact on several major countries and the spread of the ideas and practices around the world. with words in them in the library. They assure him that the books they are using have words in them. Since the person who can see cannot read in Braille, the others assume he cannot read.

The point of the advertisement is, in part at least, to arouse sympathy and understanding for the handi capped. So far as that is its purpose, there is nothing exceptional about it. To sympathize with and have concern for the less fortunate is in keeping with the highest concept of charity. Moreover, to put oneself in the place of others, by way of the imagination, is laudable. However, the method used to do 593 594 THE FREEMAN October this in the advertisement is ques tionable. The method entails a re versal of the norms. The handi capped, because of their implicit normality, have changed from being subjects worthy of sympathy and concern into threats to those who have been normal. What is conven ient to their condition becomes the way things are to be arranged. This emerges as a threat because the people who have been handicapped show no sympathy or understanding for erstwhile normal people.

Reversing Normality The transformation that has been going on in the United States pro ceeds by reversing normality. In ef fect, new norms are created, and the old established norms are aban doned. This change is impelled by the idea that has the world in its grip. Just as in the above scenario, what was normal becomes excep tional and unusual, or, at least, not distinctively normal. What was formerly rare or unusual takes its place among the expected and· nor mal. The process by which this trans formation occurs should be familiar, for the pattern has been established by constant repetition and by ex pansive application into more and more areas. The change is advanced by relativistic arguments. In its bluntest formulation the argument goes something like this. What is normal? Who can say what is nor mal? At the ordinary level of dis course, these are unanswerable questions. They are difficult to an swer, in the first place, because we are unprepared to defend our con cepts of normality. We may be con vinced that we know what is nor mal, but proof is quite another mat ter.

There is good reason for this. In quisitive children usually learn at a fairly early age that questioning the norms is a fruitless and unreward ing undertaking. Far from being commended for being brilliant, they are apt to be maligned for their stupidity. After all, what kinds of questions can be raised about norms? Why do we walk on our feet instead of our hands? Why do we drive on the right instead of the left? Why do women have babies and men have hair on their chests? In most cases, no satisfactory answers can be given. Hence, children are discour aged from raising such questions. The best answer we can make in many cases is simply, UThat is just the way things are." And what we are apt to think after saying it a few times is: ~~If you weren't so stupid, you would have figured it out for yourself." There is yet another reason for our usual inability to make an apol ogy for our norms. One of the pri mary concerns of society is to main tain the norms. All social function 1978 THE UNITED STATES: A BEMUSED PEOPLE 595 depends upon norms and their gen eral acceptance. Take them away, or abandon them, and society disinte grates. All acts lose their meaning, and everything is unexpected and strange. To debate the validity of norms is to debate the validity of society. That is, of necessity, a de bate for which there are no rules, and one which society cannot toler ate. Society's business is to discover, preserve, and maintain the norms, not to challenge them.

That is not to say that norms are not well grounded. On the contrary, many of them are grounded in na ture. Where that is not the case where they arose as custom, for example-they have been instilled by nurture and have become second nature by usage and veneration. Our very social existence is grounded in norms. Their reason for being, if there is no other reason, is the smooth functioning of society. It is a sound instinct that resists dis carding a norm because we do not perceive its reason for being, for experience teaches that if we probe deep enough. we may discover rea sons we did not even suspect. None of this is acceptable to socialists, of course. The received norms stand athwart the path which both revolutionary and evolutionary socialism must tread. Socialism re quires that all efforts be concerted toward the achievement of human felicity on this earth. The great strength of the idea that has the world in its grip lies in that very conception. Its weakness lies in the conception, too, as well as elsewhere. The irony of it is that the achievement of human felicity, so far as is practicable, is a social norm.

More, the purpose of society is to provide the framework for achieving such felicity as is possible for man. But society does not define human felicity. That is left, in the main, to individual decision. In the same manner, individuals are left to a great variety of devices and means for achieving their own ends. This is anathema to socialists. They would transform society from a framework into the determinant of the content of felicity and the means by which it would be achieved. The individual would be confined and society politicized. Social norms would be come whatever appeared to be use- . ful in controlling the individual and politicizing society. Norms have to become what is decreed as normal by the political power. Gradualists, however, have no such absolute power as yet. In the United States, the communications industry has made forceful strides in determining what is normal. Breaking Down Distinctions The first stages of socialism are concerned mainly with breaking down the distinctions on which the norms are based. The breakdown of 596 THE FREEMAN October the norms proceeds along two lines.

One is intellectual, and the mode is relativism. The tendency of re lativism is to discredit all norms. Norms are, according to this line, simply matters of opinion. The au thority for them becomes either ma jority opinion or simply whatever is done by large numbers of people. Normality in America has become indistinguishable from the average, or better still, the lowest common denominator of behavior. The logic of such an approach is that if norms are relative there are no norms. There is only what happens to pre vail at the moment. The other line is to pose contin ual challenges to the established norms. Journalism is particularly well suited to this undertaking. There is an old saw to the effect that if a dog bites a man that is not news, but if a man bites a dog that is news. That is a way of saying that journalists focus on the odd, strange, curious, different, and unusual. But when journalism becomes pervasive, as it bids to do in America today, it be comes a continual assault on the norms. This is especially the case when the odd, strange, and curious are not presented as odd, strange, and curious but as commonplace and normal. It happens over and over again that radicals are interviewed in such a way as to make them appear normal.

The technique by which this is done is easy enough to discern. Let us suppose that an advocate of com munalliving arrangements is being interviewed. The act is cleaned up for television, for instance. There is no obscenity or profanity. The inter viewee is likely to be well enough dressed, be clean, well brushed, and reasonably neat. The impression prevails that he is different in one respect only-that is, that he be lieves the ~~nuclear family" is out moded and new and extended families are emerging. New norms are taking shape before our eyes, as it were, painlessly and with no ap parent wrench to a whole body of belief and practice. The odd, strange, and curious-the shifting and unsettled relationships in some sort of communal arrangement-are presented as an emerging norm. Individuality Assaulted Why is this assault on the norms made necessary by the idea that has the world in its grip? The reason is not difficult to grasp. There is one norm that must be wiped out if the idea is to prevail. It is the norm that individuals can, do, and will pursue their self-interest as they perceive it, ordinarily and generally. The pursuit of self-interest is the apple of discord in the socialist visionary Garden of Eden. It is the unpardon able sin, the source of man's fall, and the continuing obstacle to harmony and beatitude on this planet. So long 1978 THE UNITED STATES: A BEMUSED PEOPLE 597 as it remains normal, the vision of socialism is only a will-of-the-wisp.

On the face of it, the socialist problem would be easy enough to solve. All that would have to be done would be to get people to abandon the individual pursuit of self interest and devote themselves to the common good. Isolate self interest, pillory it, make it unac ceptable, and people will abandon it. There have been attempts to do this, of course. But the solution is not that easy. Self-interest is not a norm existing in splendid isolation from all other norms. Instead, it is in tertwined in the warp and woof of the whole fabric of the received normality. Socialists have generally understood this well enough and have grasped at least some of the dimensions of the problem confront ing them. The whole system of private prop erty buttresses and supports--even rewards-the pursuit of self-interest by individuals. Free enterprise in vites individuals to prosper by labor ing to advance themselves. The norm that a man should receive the fruits of his labor places a premium on the pursuit of self-interest. The family is an enclave of self-interest or at least limited interest seeking.

Members of the family are bidden to look after the family interest primarily. The institution of private property is so developed and con ceived that it is tied up with .the limited family interest-with in heritance, with wills, with shares for members of the family, and so on. Even religion has been generally entangled with individual self interest. (Indeed, Marx believed that organized religion was at the apex of the whole structure of capi talism.) The individual is bidden to take care of his interest in eternal beatitude in the hereafter by getting right with his Maker. The Hope of Heaven is, after all, a Hope primar ily for individual salvation. On the socialist view, then, the received norms are honeycombed with supports for and enticements to the individual to pursue his own self-interest. The pursuit of self interest is a norm, as they see it, because the whole fabric of normal ity makes it appear to be so. In order to cut away the pursuit of self interest, the whole structure of normality must be replaced. Those under the sway of the idea differ about means and, perhaps, about how drastic the surgery must be, but they basically agree over the prob lems presented by the received norms.

A Political Movement to Effect Economic Change There have been two major thrusts of socialism in the United States in the twentieth century, with many more smaller and inter related developments. The first 598 THE FREEMAN October thrust evinced itself primarily as a political movemeI\t aimed at bring ing about economic changes. This political thrust has gained momen tum several times, but it was most successful in making headway in the 1930s. Roosevelt' s New Deal succeeded in passing legislation which seriously altered the framework of economic normality and morality. The use of government power to redistribute the wealth was estab lished as a principle during the de cade of the 1930s. The Social Secu rity enactment turned out to be the centerpiece of the distributionist legislation. By means of it money was taxed from earners and distrib uted after retirement to those who had paid into it. It was, and is, redistributionist because benefits do not depend upon amount paid in; they are determined by Congress according to formulas which have been revised over the years.

Redistribution was also the opera tive principle in many other New Deal programs. The farm subsidy programs redistributed wealth. The government put its weight behind labor unions, and hence the use of coercion by unions to get higher wages and shorter hours. Subsidized houses and government supported loans were also redistributionist in character. The graduated income tax which, along with Social Secu rity, undergirds redistribution, had already been used, but it was much extended under the New Deal. New distributionist programs have been enacted over the years. The most notable, and notorious, have been the welfare programs. Less well publicized, but more ubiquitous, are the numerous sub sidies to everything from airports to local police to school lunch pro grams. The Federal hand is not only in every pocket but the Federal handout is extended in every direc tion. Monetary and Spending Policies to Achieve Control That government power should be used to control and direct the econ omy was also established as a prin ciple in the 1930s. Manipulation of the money supply was one of the earliest and main instruments of this control. Another major instru ment is government spending and it is linked with taxation to direct economic action. Government has so long concerned itself with employ ment and unemployment that for most people it must appear as legitimate a government function as is the apprehending and punishing of criminals. All these ways of con trolling and directing the economy have been steadily expanded and extended since that time.

The other major thrust to socialism came in the 1960s and has continued apace since. Although it, 1978 THE UNITED STATES: A BEMUSED PEOPLE 599 too, is political, the primary aim is not so much economic as social. This thrust is toward social transforma tion. It emerges as an effort to over turn the established norms as a means of changing the existing or der. Legislation is mainly a framework only for this transforma tion. Every norm is grist for the mill in this transformation. Indeed, it is not clear, in general, that overturning one norm is more important than another. Since all norms support the existing order, they must all be overturned or transformed. It hardly matters whether what is involved is sex, marriage, the family, the role and position of the husband, educa tion, military authority, the author ity of the President, ownership and control over property, or whatever. Every norm overturned weakens the authority of all norms.

In this sense, priority for destruc tion of norms may best be given to those most deeply entrenched. It is from this angle that the assault on sexual norms may be understood. Sexual norms have been long estab lished, and would appear to be most difficult to alter. Indeed, many ofthe sexual norms are rooted in nature, and some of them have been sur rounded by taboos. It is also the case that some of the most fundamen tal inequalities are sex related. It is reasonable to suppose that if the sexual norms could be destroyed, all other norms might fall in their wake. The attack on sexual norms has been blatant in recent years. Male dominance and authority have been under consistent assault. The norm has been that the male is dominant in male-female relationships-that his opinion is deferred to, his deci sion final, and that he is the fiscally responsible partner in the house hold. This norm is supported by cus tom and tradition, and has been supported by religious authority. A portion, at least, of this norm has a natural basis. Normally, men are taller, heavier, and stronger than women. Women are the child bearers by nature, and many of the skills and abilities which they have developed have been related to that role. The nuclear family, as monogamous marriage has been lately dubbed, is founded in the na ture of parental responsibility, and the desirable conditions of child bearing. The norms are threatened by what is called female liberation.

Aggressive homosexuality threat ens the whole concept of normal ity. If homosexuality is ((normal" there are no norms in sexual rela tionships. The male dominance takes on only a symbolic, and en tirely relative, significance. Par ental responsibility has no founda tion in homosexuality. The distinc tion between male and female is obliterated. Normal is cut loose from 600 THE FREEMAN October its foundation in nature. The whole framework of norms entailed in mar riage, the family, property inheri tance, loses its meaning when homo sexuality is accepted as normal. The Impact on Society: A Chaos of Relationships The reversal of the norms has a devastating impact on society. Norms are to society what the fixed points of a compass are to naviga tion. It can be argued that norms are relative, that some of them are even arbitrary, which they may be. In a similar fashion, it can be argued that the directions on a compass are relative, as indeed they are in some senses. But it is absolutely essential to agree upon and accept them else charts become worthless, and no definite course can be plotted to go from one place to another. The func tioning of society is equally depen dent upon agreement upon and ac ceptance of a set of norms. Norms are the foundation of privileges, po sitions and functions within a soci ety. When they are overturned, a chaos of relationships results. No one can any longer be sure what function he is to perform, or who has the right or authority to make any decision or perform any act.

Every body must have a head. Every household must have a head. Every undertaking involving two or more people must have someone who is in charge. Constructive act ivity depends upon each person know ing what he is to do. When the norms are overturned, constructive activity declines and debates and contests over authority ensue. Force tends to replace voluntary coopera tion, and the strongest or most de termined assert what is often enough entirely arbitrary authority. That is what is happening in large in the United States. The norms may not have been overturned in many instances, but they have been so seriously questioned that their val idity is in doubt, and there is no longer universal agreement upon and acceptance of them. Those who insist upon traditional male-female roles are denounced as ~~male chauvinist pigs." Those who are af fronted by open homosexuality are accused of being intolerant. Those who exercise firmly the authority of thei_r positions are charged with being dictatorial. Students would determine the content of their courses and formally evaluate their teachers. Prison inmates attempt to organize politically in order to run the prisons. Unions negotiate and enforce work rules.

What a man may do with and on his property is in such doubt that experts must be called upon to set matters right. The courts are bur dened down with litigation as civil suits burgeon. Court cases are in creasing in length and complexity, and no decision ever seems final as 1978 THE UNITED STATES: A BEMUSED PEOPLE 601 appeal follows upon appeal from whatever decision has been ren dered. Interminable hearings pre cede all sorts of undertakings. De bates and contests over who has the right and authority to do what supersede the constructive activity by which it might be accomplished. Rampant Confusion The American people are be mused. The word has two rather distinct meanings. It means ~~confused, muddled, stupefied" and it means ~~lost in thought" or ~~preoc cupied." Americans have every rea son to be confused. They have been repeatedly confronted and affronted by scandalous behavior that has gone unreproached. They have wit nessed in a span of little more than a decade the breakdown of social re straints as in the case of the public use of profanity and obscenities.

They have seen the breakdown of the proprieties as they apply to female behavior. On the day before four students were shot down by the National Guard at Kent State, teenage girls roamed the campus making lascivious invitations to the guardsmen, shouting unprintable obscenities at them, and otherwise behaving like tramps. People have witnessed the loosening.of all sorts of restraints and have felt powerless to do anything about it. The symbols of political authority-the military and the police-have been defied with impunity and subjected to ver bal and physical assault. Why would not people be confused? And, whether lost in thought or not, the American people have been preoccupied. Better, they have in creasingly occupied themselves with their own affairs and closed their eyes to what is going on with soci ety. It is understandable that they should. The disintegration of society means that the individual can no longer rely on support in bringing reproach and discredit on those who flout the norms and proclaim their disdain for social prescription. The disintegration of society means, too, that the individual had best look to his own protection and well-being.

But it also means that force will be brought to bear in more and more areas of life. The breakdown of au thority is not the prelude to libera tion, it is rather the precondition of the restoration of some sort of au thority by the exercise of force. Force Fills the Vacuum Today, that force evinces itself as government intruding ever more deeply into our lives. It manifests itself as the loss of control over our own affairs to those who hold the reins of political power. The New Deal type intervention has con tinued apace in conjunction with the assault on the norms. But in those areas where society is impotent, government is just about equally 602 THE FREEMAN impotent. Thus, the authority of government declines even as society disintegrates. The idea that has the world in its grip would replace the pursuit of self-interest by a pursuit of the common good. There is no evidence that this has resulted as yet. True, politicians and spokesmen in the communications industry speak a rhetoric of the common good. But the most obvious development thus far has been the disintegration of society and the decay of civilized behavior-the very instruments of the promotion of the common good.

There is much verbal evidence that the American people have lost con- ' fidence in government as an in strument of the general welfare and for the promotion of the common good. But in their bemused state, they do not readily grasp or believe in an effective alternative. Of course, the United States does not exist in a vacuum. The hold of the idea upon America is an integral part of its hold on the people and governments of the world. It· is ap propriate now to turn to an exami nation of it in that perspective. , Next: 23. The Cold War: Revolu tionary versus Evolutionary Social ism. Individualism Maximizes Freedoms FREEDOM,being an alloy of idealisms and realisms blending concep tions with actualities, challenges definition; even in the sense our Founding Fathers cited Liberty as a Right to freedom we have seen "freedoms from" obliterating "freedoms to" and "freedoms for," seen emphasis on freedom's idealisms displacing freedom's ac tualities and vice versa, even the pursuit of equal freedoms for all destroying the freedoms of all.

"Freedom" then, like itor not, has become a code word that is sub ject to abuse, while on the other hand individualism is something to which we can all relate. Where respect for individualism is maximized is where all i'ndividuals enjoy the maximum of freedoms, including among them the maximum freedoms of thought, speec,h and deed. J. KESNER KAHN ••••••••••••••••••••••••••Perry E. Gresham Liberty for Older Americans OLDER AMERICANS are in a serious identity crisis. Many of the norms for aging are not appropriate for bright and active older people. The norms are changing which adds to the problems of identity. The ac ceptable role for ~~grandparents," ~~senior citizens," and ~~older Ameri cans" is anything but clear; but even when it is clarified, it turns out to be objectionable to any person who has a mind of his own. One cannot fit the stereotypes that have accumulated through years of misunderstanding.

Now that I am in my seventies, I have sensed in American life a sort of contempt for the old. I have tried hard to make allowances for any hypersensi tivi ty or personal idiosyncracies. The stark fact of con tempt still remains. Old people are regarded as a sort of nuisance. The prevailing attitude seems to be, ~~Get out of the labor force and leave room Dr. Gresham, President Emeritus and Distinguished Professor, Bethany College, Bethany, West Virginia, here reveals, In part, his plans for those bUSy years ahead. for the young," (~get off the highway and let the young people who wish to go somewhere, go," ~~these things cannot possibly mean anything to you so get out of the way and let us enjoy them." I have noticed a look of irritation and contempt when I must ask some mumbling young person to repeat a sentence because I do not clearly understand what he is saying. When a young person spills his coffee, it is just a mistake; but when I spill mine, it is because I am shaky and the person at hand may be irritated.

The doctors say, ~~At your age you should not undertake this kind of treatment," or an onlooker will say, (~Just look at the old fool trying to be romantic." Once it was said of children, ~~they should be seen and not heard." This same attitude of contempt has now been transferred to older people. The attitude seems to be, ((Shut up, Dad. Things have changed since you had anything to do with them." This attitude does not always 603 604 THE FREEMAN October have a hostile edge. It may be a benign compassion which increases the intensity of the sting. It is easier to face contempt than such an at titude as, ~~Oh, there, there now; of course you feel that way because you are old." A person who is pitied is diminished in self-respect far more than a person who is scorned. Mem bers of one's own family may be swept up in the conventional attitudes toward aging to the extent that they feel a condescending at titude of pity toward anyone past sixty-five. What could be more in furiating to a highly competent sep tuagenarian than to have one say, «How remarkable. You still drive a car?" or Hyou are in your seventies.

Do you still give lectures?" There are times when those of us who are old need sympathy and pity and we do well to accept· it with grace and gratitude; but there are other times when we deserve respect and we resent being exposed to the so-called ~~compassion for the old" which is about the most obnoxious attitude anyone could hold for us. When we are capable and qualified people, we should be regarded as equals where this is appropriate, superiors where we deserve it, as inferiors when the appraisal is just; but in every case, we have the right to stand on our own feet and be honorable, respected people. The young people I know, of course, reflect none of these attitudes, but this is a personal mat ter. My students regard me as a contemporary. The contempt ap pears only in impersonal relation ships. A little bit of common sense will tell any reflective person that many people have a whole new surge of vitality, interest and ability in their sixties. This is particularly true for people in public life, people in busi ness, professions and in finance. The stereotype of the spent old person at sixty is about one hundred per cent wrong. Yet older people face major discrimination when they attempt to market their talents. I have been shocked by my contemporaries in law and medicine who are still ac tive in their professions who say to me, ~(Oh, at your age, I do not think you should take on anything else."

Here are intelligent people who would not give up their own respon sibilities for anything, advising their patients and clients to live by the distorted norms. These norms, however, are chang ing. Once the old people in America were few, but now we are many. With the increase in life expectancy and the interesting configuration of population growth, old people have come to be a powerful political force. Now eleven per cent of the Ameri can people are past sixty-five. As the numbers have been increasing, so have the skills and methods of polit ical clout. Many old people have 1978 LIBERTY FOR OLDER AMERICANS 605 come to be self-conscious exponents of a minority seeking a voice in public affairs. The large associations of people in their sixties or older are as numerous and active as any as sociations in America. Certainly I cannot speak for other people who have lived six or seven decades; but I can speak for myself and, by conversation, insight and study, reflect the attitudes and opin ions as well as the needs and inter ests of many contemporaries. Some of the points that I make here may be widely disputed, as I find myself disputing some of the most vigorous attempts of some aging activists to get special interest legislation ap proved by the Congress. The privilege of differing viewpoints is certainly an earned prerogative of the mature. When I say we want these things, I really mean that these are the things that seem to me paramount for those of us who have reached the sixties and beyond.

Liberty Who has earned the right to per sonal and political freedom more than a person who has lived through six or seven decades? Some people do not like liberty and some have be come so inured to tyranny that it seems comfortable. Taking all this into account, I am still convinced that I speak for my contemporaries when I say we dislike all these so called Hmandatory" programs that affect our lives. We dislike the arbi trary nature of Social Security, but after we have paid the tax, we resent the unfair discrimination with re gard to earning power . We resent the unjust discrimination written into the income tax law which de nies older professionals deductions for activities needed to preserve their professional image and self esteem. Nothing could be more dis tasteful than a law requiring a per son to work, or not to work, until a certain age regardless of what that age might be. What is wanted is freedom to work as long as one wishes and for as long as anybody wishes to employ him.

This same resentment against the loss of individual liberty holds for such things as the consumer move ment as it bears on senior citizens. No self-respecting old person prefers decisions out of Washington to those of his own taste and inclination. It should be my privilege to choose the food I wish to buy. Nothing could infuriate me more completely than to pay taxes, against my will, to employ some pretentious ass to sit at a desk in Washington and tell me what I should purchase. I find the whole idea revolting and many of my contemporaries feel the same way. I keenly resent being told what kind of car I can drive, when I can drive it and how fast, assuming of course that I stay within the bounds of propriety or what is right and 606 THE FREEMAN October decent and safe for everybody in volved. Even more keenly, I resent being told what drugs I am free to pur chase. It is the duty of government to require clear labeling and to vig orously prosecute those who, by force or fraud, misrepresent any product. It is most certainly not the function of the government to forbid me the use of saccharin, for exam ple, when I have been told what is involved in using it. The paternal uPapa knows best" attitude of the Food and Drug Administration is beginning to infuriate all of us who have been around for awhile.

I greatly admire Maggie Kuhn and her astonishing success in or ganizing the Gray Panthers. I could not aw-ee with her more with regard to ((those rotten myths" about old people. We are not all alike. We are not all crotchety, with shriveling brains and diminishing gender. However, I have far less faith in government to solve our problems than has she. I see her pressing for a consumer movement with a new government bureau for consumer advocacy. This will only produce another layer of bureaucracy and consequent inflation and thereby damage all of us who are aging. I long for individual liberty; not benign regimentation that robs me of my livelihood by enlarging the government until I am taxed into penury. I believe that many of my contemporaries feel the same way. The only march against the gov ernment I could lead would be one which bears a placard, ((Get off our backs." We would be perfectly able to solve our own problems if we had some liberty and could get some re lief from inflation.

Inflation, the Enemy of the Old By all odds, the most horrendous threat to old people in America is inflation. The word is poorly under stood by most people, even though it has a very simple origin. The word ((inflation" simply means inflation of the money supply whether it be by printing press or credit. The result of increased supply is higher prices and wages. The reason governments all over the world turn to inflation is that they find it more palatable to increase the available money than to increase taxes when they need additional revenues to pay for ex pensive government projects. At one time, the amount of money governments could make available was limited by some kind of stan dard such as gold or silver. When these standards were abandoned, governments felt free, when pressed, to increase the money supply at will with absolutely ruinous economic consequences in some cases-such as once happened in Germany, Brazil and even France. Inflation is worldwide and has been going on for a long time. The rise in wages, for 1978 LIBERTY FOR OLDER AMERICANS 607 example, is dramatically shown by the nursery rhyme: She shan't have but a penny a day Because she can't work any faster.

Since Elizabethan times, prices and wages have risen consistently even though there were periods of deflation and falling prices. In my own boyhood, the standard wage for help on the ranch was a dollar a day, room and board. There was a com mon chuckle about the Irishman who was so pleased with his new wage of a dollar a day that he boasted, Hlf I work a million days, I'll have a million dollars!" The re cent settlement of the United Mine Workers strike left some of my friends who work in the mines dis appointed because they did not quite get the one hundred dollars a day they were requesting. An increase in wages from a dollar a day to one hundred dollars a day in less than a century suggests the impact of infla tion. Most of this impact has come in the recent past. I have called inflation the greatest enemy of old people because it is a thief that takes away the living earned by a lifetime of hard work.

Economists have made the word ~~in flation" so complicated that many old people do not understand it even though they are robbed by it.What they do understand are the sky rocketing prices that inflation has brought about. Not long ago, a retired couple could go out for dinner for less than ten dollars for a first class meal including refreshments and gratuities. Now the same couple may face a check of twenty-five dol lars minimum to more than one hundred dollars in some places. A car that fairly recently cost four thousand dollars is now selling for eight to ten thousand dollars. A loaf of bread, which once cost ten or fif teen cents is now pushing up toward seventy-five cents or a dollar. Everyone understands the meaning of skyrocketing prices when one's hard-earned retirement income is frozen at a previous level. The re tirement income that once meant a life of ease and plenty now means a life of poverty. and anxiety.

It is time for those of us who are older to understand what powers these rising prices. The principal villain in all inflation is the gov ernment itself, since it is the sole source of the money supply. That money supply gets out of hand be cause the government needs more and more money to carryon more and more projects. Politicians are enamored of voting more money to pay for projects to assist or please people, since this is the way for a politician to get votes when running for public office. Bureaucrats are eager to increase their position and power by developing larger and larger organizations to carryon big ger and more exciting programs.

608 THE FREEMAN October Wartime Spending When an uncontrollable catas trophe such as a war comes along, inflation simply goes wild. Prices and wages rise and the people in government, for very good reasons from their standpoint, do not let them come down when the war is over. People in business or industry likewise look with disfavor on fall ing prices. Nobody likes to see his wage reduced. One round of infla tion follows another and all of us are robbed. The dollar today will purchase just over half what it would have ten years ago. All of us are going broke at an alarming rate of speed. I feel sick at heart when I hear my friends talk about bringing inflation down to six or seven per cent. Think of an old person with his money in a savings bank at five per cent and losing one or two per cent of his capital every year and realizing no true income whatever on his money. To be sure, he has a dollar and five cents at the end of the year, but the purchasing power of that has fallen below his original investment.

Adding to the problem of rising prices' is the additional problem of increasing taxes. Rising prices and increasing taxes are the jaws of the vise in which all of us are caught. These taxes rise because special interest groups ask more and more from government. Alan Meltzer, my cherished colleague who teaches economics at Carnegie Mellon Uni versity, has pointed out that gov ernments grow because benefits are concentrated and costs are diffused. This is a brilliant way of saying that when some special interest group, such as those of us in education, ask for a government subsidy, the sub sidy means a lot to us but does not cost anybody very much when it is spread over the entire nation. The people who have no interest in edu cation are not inspired to mobilize against the program. When those of us who are in edu cation push hard enough, everybody else goes along and we have an addi tional government program. Every body gets into the same kind of an act. Depressed industry demands help; labor unions demand help; minorities demand help; environ mentalists demand help; safety crusaders demand support, the mili tary requires more and more, and those of us who are older get into the act with a series of new requests.

Layer after layer of government bureaucracy is added and the costs of government build to the point where more and more taxes must be levied. Even this will not suffice and the money supply is increased to cover the expense of new projects not covered by tax revenues. The vise thus squeezes the old person until he is forced onto welfare. This, in turn, increases the burgeon ing costs of government.

1978 LIBERTY FOR OLDER AMERICANS 609 Mobilize for Less Government What can we do about this vicious situation? The answer is that we can mobilize for less government instead of more, for less taxes instead of more benefits. There is a rising re volt against the taxes that are rob bing old people of their homes. Everywhere a person turns, he is taxed: he pays sales tax, he pays a tax on gasoline and any number of specific items, he is taxed on most of the services, taxed on the theater, at the restaurant, at the hotel. He pays tax on his property, his travel, his federal income tax which may be almost confiscatory to many old people. In most places, he pays state income tax and sometimes local tax in addition. It is time for us to let the world know that there can be no (( goodies" from the government without taxes that come out of the hides of the people. Many of us are enchanted today with such expensive government programs as come to us from those crusaders who want to protect the environment, the consumers, the minorities, the schools, the cities, the railroads and all of the many services that are proclaimed as highly useful and required of any socially responsible nation. Many of these are good and necessary, but some of them we must learn to do ourselves rather than create expen sive government bureaucracies that will drive old people into ruin and poverty in the next few years unless some remedy is found. Old people, more than anyone else, should know that somebody has to pay into the government before the govern ment can pay anything out to any body.

The great challenge for those of us who are past middle age is that we bring some kind of compelling in fluence to bear against our enemy which is inflation. Since govern ment is the principal factor in volved, we must let our politicians know that we need less government instead of more, less intervention, and less meddling in our lives. We can no longer afford the luxury of being taxed to death on the one hand and inflated to death on the other. We do not look with favor on becom ing destitute wards of the state when we know that the state, itself, is on the way to bankruptcy. We seem to have no satisfactory alter native to an all-out fight against inflation. The best people in the government realize the predicament and may even help our cause. If I could speak to the appropriate people in the government in behalf of my contemporaries, I would say, treat us with respect, give us an opportunity to work and to learn, protect us from crime and, beyond that, as much as possible reduce public expenditures and pursue monetary policies that will reduce inflation. The things we lose by the 610 THE FREEMAN robberies of criminals are nothing in comparison to the amount we lose when we are robbed by our own government. Inflation is an insidi ous form of robbery. Anyone who has seen his fixed income dwindle at such a rate as to threaten his liveli hood has most certainly been robbed.

I am not content to join with my contemporaries in a most pleasant game, mentioned by Dr. Eric Berne, called UAin't it Awful?" We love to gather round the watering places and discuss public affairs. One men tions his taxes and we all say, ttAin't it awful?"; another mentions infla tion and we all say, ttAin't it awful?"; another mentions crime and we all say, HAin't it awful?". And God knows we have fun but we get nowhere. We would do well to give up the game and go to work. Make Your Own Climate I have said that the social and political climate in America is not fair to the aging and this is true. This does not imply that the aging fare any better in Western Europe. For the most part, they are much worse off. There are some cultures where old people are venerated but this, too, is a distortion of justice. I call to my contemporaries to rise above the difficulties that confront old people today and to make some thing of the rest·oftheir lives just as I intend to make something of mine.

The most inspiring story can be told of aging people who earn enough and invest wisely enough to with stand inflation; people who are strong enough to overcome all the stereotypes; people who are public spirited enough to exercise some in fluence on public opinion; people who have put the lie to those who say ttold people can't do anything." All around me are people who have experienced the surge of the sixties and are having the best time of their lives. It is much easier to sit around and complain than it is to perform. Any body who lives in America has suffi cient liberty to make something of his own life. Retired people have the best opportunity of all. They can learn something and thereby dis prove a stereotype; but, even more, enjoy the thrill of discovery. They can create poetry, music, sculpture, history, ax handles, jigsaw puzzles, gardens, cuisine, clothing, gadgets and a whole multitude of things that bring profit as well as joy. People differ in talent. Some are best fitted to lead while others prefer to be good followers. Both are important. Older people have an opportunity to exer cise true leadership in government, community, religion and secular af fairs. There is no time like now for an aging person to make his life count for something. Old age is not merely golden years, but golden op portunity. @ A Decision Against Anne Wortham Meritorious Achievement ANY fair-minded person ought to applaud the recent Supreme Court decision to uphold the California Supreme Court's ruling that Allan P. Bakke should be admitted to the Medical School at the University of California at Davis on the basis that ethnic and racial quotas are uncon stitutional according to the 14th Amendment. But one would have to be quite concerned that, in reversing that part of the California Court's ruling to prohibit the university from establishing future affirmative action programs that take race into account, the Supreme Court did not rule affirmative action unconstitu tional. It was apparently in that spirit that during the following week the Court refused to review After 13 years as an Information researcher for local and national media corporations in New York City, Anne Wortham is now a doctoral candidate in Sociology at Boston College. A number of her arti cles have appeared In The Freeman since 1966.She serves on the board of directors of Citizens for Limited Taxation in Massachusetts.

the American Telephone and Tele graph (AT&T) affirmative action plan of goals and timetables for hir ing and promoting women and minorities. Under the plan, if hiring targets are not met the company may pass over job candidates with greater seniority or better qualifica tions in favor of those in the under represented groups. By declining to hear the case the Court confirmed the legitimacy of the AT&T plan and thereby under scored a separate majority opinion, as written by Justice Brennan, that uGovernment may take race into ac count when it acts not to demean or insult any racial group, but to rem edy disadvantages cast on minor ities by past racial prejudice, at least when appropriate findings have been made by judicial, legislative or administrative bodies with com petence to act in this area. . . ." It seems that the Justices hold the widespread opinion that one is de611 612 THE FREEMAN October meaned or insulted only when he is discriminated against because of race; but there are those of us who are insulted, if not demeaned, when we are discriminated in favor of be cause of race or other equally irrele vant classifications. As a member of both the racial and gender groups so favored, I reject the opinion that preferential treatment of racial minorities should be allowed if it serves a social good. There is noth ing humanitarian in a policy that uses racial classifications to nfurther a compelling government purpose,"

as the Justices put it. Any govern ment purpose which must be served in such a manner may be suspect as having sinister motives. It may in crease the numbers of those employed from underrepresented groups in industry and education, but at what price? HWhat affirmative action has done is to destroy the legitimacy of what had already been achieved, by mak ing all black achievements look like questionable accomplishments, or even outright gifts," writes black economist Thomas Sowell in the April 1976 issue of The Public Inter est. ~~Here and there, this program has undoubtedly caused some indi viduals to be hired who would otherwise not have been hired-but even that is a doubtful gain in the larger context of attaining sel~ respect and the respect of others." For blacks like me, the supreme irony of having to contend with af firmative action measures is that we grew up in a tradition which pre pared us for precisely the opposite-that tradition which mea sured achievement in terms of merit as evidenced by one's skill, know l edge, experience, interest and at titude. It was, we were told, ~~the American way"-the practical ex pression of our culture's devotion to human individuality. Now, we are told that virtue lies not in such aspi rations as color-blindness and meritorious achievement, but in the social good of implementing race conscious programs to remedy the effects of racism.

As I contemplate the Bakke deci sion, my mind is crowded with re minders of all that went into my adherence to ~~the American way." I hear my father's repeated admoni tions to his five children that we grow up to be independent, self supporting citizens. I see him work ing long hours and sacrificing to provide for our education, deter mined that he would do so despite Jim Crow and without outside assis tance. I hear this self-educated man, who at one period made a salary of only $50 a week, telling us that our education was his investment in the future. nl don't want my girls to work as domestics or my boys to be ditch diggers," he would say. And always there was the reminder we 1978 A DECISION AGAINST MERITORIOUS ACHIEVEMENT 613 hear from him to this day: ((Re member, your record follows you." The society he was preparing me for was one in which merit was the basis of achievement. It was also one in which racial discrimination and prejudice were prevalent; but in ad dressing this issue, black fathers like mine taught their children a rule of thumb taken from the words of Booker T. Washington: Any individual who learns to do some thing better than anybody else-learns to do a common thing in an uncommon manner-has solved his problem, re gardless of the color of his skin ....

In the long run, the world is going to have the best, and any difference in race, religion, or previous history will not long keep the world from what it wants .... Such was the simple but noble faith in the just rewards of quality with which these fathers and their fathers before them sent their chil dren to colleges and universities across the country. We went forth lured by the American dream and willing to pay the price of being twice as good as our white counter parts in order to compete with them. But we wanted nothing to do with tokenism-that despised practice which A. Philip Randolph once called ((that veneer of acceptance masquerading as democracy." How could one have any pride in being the ((windowdressing" of some white man's conscience? We wanted no favors, no double standards, only justice and the freedom to create our opportunities in our own way. This tradition, though not always prevalent in certain sectors of the black community in the country, was nevertheless as potent a force among blacks as it was to any New England Yankee. Writes Sowell: ((When people ask why blacks can not pull themselves up the way other oppressed minorities did in the past, many white liberals and black (spokesmen' fall right into the trap and rush in to offer sociological (ex planations.' But there is nothing to explain. The fact is that blacks have pulled themselves up-from further down, against strong opposition and show every indication of con tinuing to advance."

It is true, as Sowell notes, that the advance of blacks ((accelerated at an unprecedented pace in the 1960s, once the worse forms of discrimina tion had been outlawed and stig matized." But as the 60s evolved into the 70s it was in the interest of liberals and black spokesmen to ig nore that part of the advancement of blacks which is the product of gen erations of struggle-without anti discrimination laws. It was with this onesided view of black history that Lyndon B. Johnson told the 1965 graduating class at Howard Univer sity: You do not take a person who for years has been hobbled by chains and liberate him, and then say, t(you are free to com614 THE FREEMAN October pete with all the others," and still justly believe you have been completely fair .... Thus it is not enough to open the gates of opportunity. All' our citizens must have the ability to walk through those gates. Johnson challenged those who might offer the counterclaim that if other Americans could overcome their disadvantages without special equality-of-result legislation, so could Negroes. He cited a long list of statistics indicating the gap be tween the opportunities of Negroes and whites and said: The Negro, like these others [white minoritiesl, will have to rely mostly upon his Qwn efforts. But he just cannot do it alone. For they did not have a cultural tradition which has been twisted and battered by endless years of hatred and hopelessness, nor were they excluded-these others-because of race or color-a feeling whose dark intensity is matched by no other prejudice in our society.

This distorted view of black his tory supported by biased research, statistical uexplanations," and a great deal of ignorance has now been made ((official" by the 1978 Supreme Court. With the memory of past discrimination so fresh in my mind, I am profoundly resentful that I, along with every other American, must bear the burden of this new stereotype of my race-that I cannot overcome the circumstances of my forefathers on my own and in my own way; that the only way I can compete with a white person is by weighing him down with penalties for the sins of his race and the gov ernment against my race. What an insult to me-and, oh what injustice to the innocent white person! Neither of us is responsible for the cultural heritage that stretch~s across the centuries behind us; yet both must be burdened by it. I am branded as incapable of walking through the gates of opportunity on my own, and he is branded as the source of my incapacity.

But I protest! It was not legisla tive decree but my parents who brought me to the starting line of a life of productivity, achievement, liberty and happiness. Oh, the rich ness of that which was handed to me and to other black children of an earlier time-that time of discrimi nation and prejudice and segrega tion. I recall my mother, a child of the Depression, teaching me how to read and write; I recall those hours I spent at an old Underwood typewrit er learning ((a trade," as my father put it; I recall those domestic jobs I took at $3.00 a day to purchase clas sical recordings or a new dress; I recall my father making my brothers take newspaper routes so they could ulearn how a dollar is made." I recall the teachers who encouraged me and those I admired. And I recall those special occasions, such as Negro History Week, when I 1978 A DECISION AGAINST MERITORIOUS ACHIEVEMENT 615 sang with the school choir the ((Negro National Anthem," written by the Negro poet James Weldon Johnson in commemoration of Lin coln's birthday: Lift every voice and sing Till earth and heaven ring, Ring with the harmonies of Liberty; Let our rejoicing rise High as the listening skies, Let it resound loud as the rolling sea.

Sing a song full of the faith that the dark past has taught us, Sing a song full of the hope that the present has brought us, Facing the rising sun of our new day begun Let us march on till victory is won. I recall being voted by my classmates· as uThe Most Likely To Succeed." And I recall the honor of being placed on the Danforth Foun dation's I-Dare-You Honor Roll and receiving an inspiring little book written by William H. Danforth, founder ofRalston Purina Company, who cared enough about young peo ple to say to them: ttl dare you!" I shook hands with the challenge in Danforth's list of dares and took off in search of excellence, wisdom and greatness. In those days, we really believed in such things. Any body could believe them, regardless of his race, color, gender, class, or national origin. Now I find that I was fueled by the spirit and meaning of those aspira tions only to have the Supreme Court stamp my racial identity as the symbol by which my fellowmen are to judge my achievements as gifts from the State. Fortunately, there have been enough intervening years between my high school years of the fifties and today for me to have acquired that record of perfor mance and authentic achievement my father was so insistent that I establish. But I shudder to think of the credibility robbed from those younger than I who do not have the benefit of an educational or employment history prior to the es tablishment of affirmative action in 1965. How are they to contend with the new prejudice against blacks who, because of their race, are sus pected of being recipients of ((con_ ferred benefits"?

There can be no greater insult than to free a man, then tell him that according to the statistical pro file of his racial group and interpreta tions of his cultural heritage, he will not be allowed to exercise that free dom in his own way, but must be spared the risks of competition, treated ((preferentially," and doomed never to know whether he could have advanced alone. Whites could not be more mistaken than to think that such a policy will im prove race relations. And blacks could not be more self-deceived than to look upon such a policy as having anything remotely to do with their liberty and self-respect. ® Manuel F. Ayau The Ideology of Underdevelopment WHAT should we do? Where begin? Where invest our limited time and resources in the most effective way? Those are the questions a small group of us in Guatemala were ask ing ourselves when we decided to face up to the problem of under development. How could we get the best possible leverage for our efforts to raise the level of living in our country?

Perhaps this example will help illustrate the problem we faced. A group of doctors were concerned about the lack of medical facilities in our rural areas. And they wanted to start a medical school. But they seemed oblivious to the fact that the people of the rural areas lacked the economic resources to support a doc tor's practice. They failed to see that medical service, at bottom, is an economic problem. This is why one may find Ph.D.'s driving buses in 616 underdeveloped countries. And this is precisely what we wanted to avoid-the well-intentioned but wasteful investment of our human and material resources. Our studies led to the conclusion that underdevelopment is primarily an ideological problem, that un sound ideas inhibit the increase of wealth and well-being. This is what brought us to the founding of Uni versidad Francisco Marroquin in Guatemala in 1972. If the develop ment of individuals and of a country depends upon a better understand ing of economics, of individual rights, of the political, ethical and social theories that make up the philosophy of freedom, then the most efficient use of our scarce re sources would be to teach these val ues at the highest possible intellec tual level. Thus, we chose the uni versity as a means to change the THE IDEOLOGY OF UNDERDEVELOPMENT 617 ideological view of the world which seemed to be the root cause of pov erty in our country.

We do not expect this to bring an instant victory for common sense. Our little university faces stiff com petition from well-known professors of prestigious universities and from well-financed international organi zations prescribing solutions to pov erty that are based on a false ide ology, though the proponents claim to be objective, neutral, and strict ly scientific. Unsoundly Motivated Let us assume that the people entrusted with policy and adminis tration of the World Bank, the United Nations, the International Labor Organization, the Alliance for Progress, and so on are well meaning and reasonably intelligent people. So the question is this: Why have they failed so dismally in spite of the enormous resources at their disposal? The explanation might well be that their ideological posi tion is unsound. And if their diag nosis is faulty, their remedies are not likely to help, but rather may aggravate, complicate, and make chronic the disease. So let us exam ine some of the notions that guide them.

It is held, for instance, that coun tries that are rich are rich due to their natural resources. Whereas any owner of a natural resource is Manuel F. Ayau of Guatemala is a community leader in the best sense of the term. Trained as an engineer, he actively manages or participates· in the management of several production and market ing enterprises. He has served as a Deputy of the Guatemalan Con gress and advisor in political af fairs.ln 1958 he founded the Cen ter for Economic and Social Studies to disseminate in Gua temala the ideas of the freedom philosophy. He was instrumental in the founding of Francisco Mar roquin University in Guatemala City in 1972 and continues, while serving as President of the uni versity, to teach the principles of freedom and market economics to a student body now in excess of 1100. This article is slightly con densed from a paper delivered before Trustees and guests of The Foundation for Economic Education at a dinner meeting in Tarrytown, N.Y., May 15, 1978.

wealthier with it than without it, this does not prove that natural re sources are a necessary condition to wealth. There are many countries without appreciable resources, such as Switzerland and Holland and J a pan, that are rich. There are various other countries that have been generously endowed by nature but most of their people are im poverished. Also untenable is the premise of a uvicious circle of poverty," the no tion that the poor stay poor because 618 THE FREEMAN October they cannot accumulate savings to generate the capital necessary to substantially increase productivity. The fact that there are rich coun tries denies the very idea. Were not the rich poor at one time? Were not Germany and Japan quite im poverished as recently as thirty years ago? Their rapid reconstruc tion was not accomplished by exploiting colonies, for they had none. And that explodes another of the notions utilized to explain poverty-that o;ne nation grows rich by exploiting another.

Historical facts also refute the fal lacy that to have economic growth the economy must be planned. Who planned the economic development of the U.S., of England, of Japan, of postwar Western Germany or of Argentina up until the onset of the destructive ideology of central plan ning? The economic history of those countries proves to anyone not blinded by ideology that govern mental planning is no necessary condition for economic development. Indeed, one could even relate the decrease in the rate of wealth cre ation to the extent that countries have undertaken governmental planning of their economies. Another prevalent historical error is that we-in Latin America-are poor because in the past capitalism did not work for us. I ask: When and where did we have a free market capitalistic economy? And I answer: In those few places where for a brief time it was tried, the results were outstanding. The problem is pre cisely that we have not had the com petitive capitalism that is blamed as the cause of our poverty.

Exploited by Whom? It is also held that we, the so called banana republics, were exploited by the United Fruit Com pany. I recall a conversation I over heard at a party, where a friendly communist was explaining how the United Fruit Company had taken out of Guatemala millions of dollars. A person who had worked with the fruit company in his youth re sponded that to his knowledge the company never took a penny out. of Guatemala; the only thing they took out were bananas. They brought money in--capital-to draw labor ers from lower wage occupations to their banana plantations. Neverthe less, people continue to ignore the obvious and believe that we were exploited. We are not poor because our laborers are· inept, or fall below the quality oflaborers in other countries that have prospered. In general, I would say workmen in Guatemala are above average in learning and working ability, when conditions demand it.

Nor are we poor because we lack technical know-how. Technical knowledge now is available to any1978 THE IDEOWGY OF UNDERDEVELOPMENT 619 one who wants to obtain it. And we have the additional advantage that to reach a modern level of produc tion, we do not have to wait for better technology than already exists in the market, or invent it, or spend millions for research. All the know-how we need for the most sig nificant advances already is avail able to us from developed countries. What we lack are two things: first, a system that is conducive to effi cient economic allocation of human and material resources and to the generation of capital; and second, more capital to increase productiv ity and create wealth. The system, of course, is capital ism, and it is there waiting to emerge all the time. So why is it rejected and deliberately prevented from emerging? Incidentally, it is, as we know, the only system that promotes and builds the qualities of individual character that are most conducive to progress: self-reliance, frugality, responsibility, and respect for the rule of law.

Capitalism Maligned So why is it rejected? On one hand, there is a practical objection to allowing individual freedom of production: Capitalism is considered wasteful, inefficient, and in any case, too slow: we cannot afford, we hear, politically speaking, to go slow, and so we cannot just let things happen when and if they happen. We must make progress. Not just let it happen. On the other hand, there is an ethical objection: it is thought cruel and unjust because it results in economic differences called inequalities. The first objection as to the im.. practicability of the market system in Less-Developed Countries (LDCs) has greatly disturbed me because the scientific refutation is available to all. After all, the market system is not someone's invention. It is what goes on naturally if it is not prevented deliberately. And economic theory is nothing more than an explanation of how it does work, how resources are allocated through the price system. We are at liberty not to like the way the world is, but lamentations are utterly use less and will not change the world.

The only argument which would de serve serious consideration would be the proposal of an alternative sys tem. But, as far as I have been able to determine, no one has yet pro posed an alternative system for allo cation of resources. Marx did not. Oskar Lange, in the thirties admit ted it, and today it constitutes the ~~unspoken" problem of central plan ning or socialism. No one knows, in theory, much less in practice, how this alternate system would work. The authorities lack the criteria, in the absence of private property and free exchange, to establish a substitute for the price 620 THE FREEMAN October system. Such a substitute is needed to permit them to compare alterna tive methods of production so as to use each resource in the way that makes the maxim urn contribution to consumer satisfaction. This is most certainly not the system socialist countries use today-they simply copy prices of the outside semi capitalist world.

Until such an ingenious mech anism is incorporated into plan ning schemes, we can state correct ly that socialism-as a system of social organization-has not yet been proposed. Yet the people of the world are killing each other, some in favor of socialism, others against it, but both assuming that it has al ready been proposed as a system, and therefore it is a tenable system of social organization. When this senseless tragedy is recognized I be lieve it will become, to historians, the distinguishing characteristic of this century: People killing each other over something neither side could describe. Planning Without Prices! The question, of course, is not how you plan when you do have prices available from outside the system; the question is how do you arrive at prices without any reference to prices that have come about through free exchange,i.e., from ·the exis tence of private property.

Unless that is explained, a planner cannot know what he is doing, he can't compare values of inputs with outputs. And if the method cannot be described, socialism is just a gleam in the eye of the frustrated. So, from a strictly practical point of view, we know that whereas the market does not produce instant wealth, it eventually can and does produce it. And so far we've been offered no clear alternative to even consider. Of course, if the market is prevented deliberately from work ing, it will not produce. And unfor tunately, not only is it being pre vented from working, but it is being blamed for not working. There is really nothing original or unique in the ideology of under development.Most of the notions are imported from countries that should know better; and they are being imported by way of programs that are, ironically, implemented with the intention of generating de velopment.

One of the characteristic differ ences between developed and underdeveloped countries, however, is that whereas it will take a great deal of debate for the government of the U.S., for instance, to take over one railroad company (a piecemeal and eroding process), when an LDC decides overnight to go into the rail transport business it takes it all at once. When it decides that although electric power is a desirable com modity, it should be a nonprofit 1978 THE IDEOLOGY OF UNDERDEVELOPMENT 621 activity, it thereupon decrees that it is against the law to peacefully manufacture and voluntarily dis tribute this desirable commodity. It takes over all power production notwithstanding all the productive and desirable activities that, from then on, cannot be economically done for lack of competitively priced power to industry. Governments in LDCs do not just put a power plant here and there. First they prohibit profitmaking power generation, whether they are in a position to provide it or not.

An Illogical Barrier This procedure is not logical. It is irrational to prohibit activities con sidered desirable on grounds that because they are desirable the gov ernment ought to provide them. Logic and consistency would de mand that if an activity is consid ered so important that the govern ment must step in to perform. it, it should not be made illegal for some one else to contribute voluntarily to the same ends. The policy is not logical or economic; it is ideological. And because of it, power costs are extremely high, reducing the com petitiveness of all industrial ac tivities in LDCs. It is inconceivable today that any one would consider going voluntar ily into the electric power business. That disincentive alone is sufficient to maintain underdevelopment, and generally, the same applies to all communication activities: air and ocean transport, ports, telephones. Whereas such a venture once consti tuted a business opportunity, it is no longer even a possibility. This is not due to economic factors. It is the result of ideology. How can desirable activities become illegal acts other than as a result of ideology?

Hampering Education Consider education. Everyone re gards it a desirable activity. Parents generally want their children to be better educated than themselves. There is plentiful evidence that they will make great sacrifices to this end. But their children cannot get the education the parents think they need. A high government official in my country remarked that our edu cation programs are not well oriented because they tend to pre pare everyone for college whereas most will never go, and in fact should not go, to college. And yet, he did not disagree with the policy of setting a maximum tuition charge for private schools, low enough to drive many out of business (even though private high schools serve 50 per cent of the student population and in many cases offer better and more pertinent education than the government can provide). The imposition of maximum legal tuition rates is obviously ideologi cal. But there are more serious ef622 THE FREEMAN October fects of the ideological confusion of the elite in education: their confu sion actually prevents, to a very large extent, proper education. In the social sciences, ubook burning,"

in a figurative way, is prevalent for a very natural reason: in any hierarchical organization it is only natural that the competence of the personnel hired to teach, and the suitability of the books used, be de termined by their agreement with what the hiring authorities think is valid or true. When the uniformity of thought required in the hierarchical organi zation is entrenched, its members cannot afford to have their compe tence questioned; they instinctively or deliberately exclude theories that might expose members of the hier archy as incompetent. Thus, the ideology of their expertise is pro tected, and competitive ideologies are excluded. Interfering with Wages Consider this example of labor legislation adopted through the offi cial recommendations of the Inter national Labor Organization: Work ers get severance pay when fired for any cause not attributable to them. If the company goes broke or loses a contract, the cause is not imputable to the worker, so he must be paid ..

Severance pay is calculated on the basis of his last wage, multiplied by the number of years of employment. The object is to create job security and supposedly avoid injustices. Naturally, as workers accrue severance pay they lose their mobil ity, because the cost of leaving ajob voluntarily is to lose one's severance pay. Thus, there is no incentive for an employer to raise wages, whether to hold present workers or to attract new ones. As a result, the worker has no bargaining power. The lack of mobility of the labor force pre vents relocation into more produc tive jobs and thus lowers the output of the whole economy and decreases everyone's real income. The im plementation of much of this type of legislation in LDCs has cost the U.S. taxpayer many millions of dollars through the financing of ideologi cally impoverishing institutions such as the ILO or the United Na tions. The ideological hostility to the market system has also caused most countries to practice an economi cally isolationist tariff policy. In order to understand the impoverish ing effects of obstructing the inter national division of labor, one must have a clear understanding of the law of comparative advantage. It is necessary to understand why, in a free exchange, both parties gain, and that some people's wealth is not the cause of others' poverty. In other words, there is no such thing as exploitation in a free exchange. Ob viously, the recognition of this fact 1978 THE IDEOLOGY OF UNDERDEVEWPMENT 623 alone would utterly shatter collec tivist philosophy and so the truth must be suppressed. The result is isolationism, underdevelopment.

Capital accumulation, the most important factor in development, is heavily taxed and inhibited, when not destroyed, for ideological rea sons. One can trace directly the de structive attitude toward foreign in vestment, energy policies, mining policies, and so forth to its ideologi cal source. Changing the Ideology to Open the market The hostility to the market sys tem which exists all over the world in varying degrees is especially pre valent in LDCs. Many LDCs that have tried the welfare state have· had to start again from scratch, usually with the only type of government that does not consult the people: dictatorship. Dictators are not necessarily unpopular, and many govern with the wholehearted sup port of the majority of their people, as in Chile and Argentina. The rea son is not hard to find. If what was supposed to become a democratic welfare state destroys prosperity and the security of life and property, people will welcome a savior even if he becomes a dictator. He doesn't raise welfare expectations; he prom ises law and order. If he pursues the welfare course, conditions deterior ate, and this opens the opportunity for his rivals to overthrow him. We have seen this happen over and over again. Many dictators become op pressive and ruthless in order to stay in power longer, but sooner or later, their rivals muster enough support to take over. This support is forthcoming when people feel they are becoming poorer in real terms or relative to unrealistic expectations, and when disorder is increasing.

Therefore, a socialistically inclined government is inherently unstable. Until this destructive socialistic ideology is exposed as false and dis placed with an appreciation of the capitalistic market economy, there is no chance for a people or a nation to develop. This is why we founded the Universidad Francisco Marro quin in Guatemala. And the inter vening seven years of operation strengthen our conviction that we chose the most effective way to reach our objective. ® IDEAS 0;,\ Wisdom * THE ESSENCE of the past is experience; the essence of the future is L1BEHTY opportunity; and the essence of wisdom is to properly connect the two. JACKSON D. PEMBERTON Ludwig von Mises The Individual •In Society THE words freedom and liberty sig nified for the most eminent repre sentatives of mankind one of the most precious and desirable goods. Today it is fashionable to sneer at them. They are, trumpets the mod ern sage, Hslippery" notions and CCbourgeois"prejudices.

Freedom and liberty are not to be found in nature. In nature there is no phenomenon to which these terms could be meaningfully applied. Whatever man does, he can never free himself from the reIn the tradition of the Austrians Carl Menger and Eugen von Bohm-Bawerk, Ludwig von Mlses (1881-1973) did more than any other to develop and bring to world attention the science and system of economics applicable to the purposive individual as he acts in the real world. This article is extracted from his book, Human Action (Yale University Press, 1949; Regnery, 1966). 624 straints which nature imposes upon him. If he wants to succeed in act ing, he must submit unconditionally to the laws of nature. Freedom and liberty always refer to inter hum an relations. A man is free as far as he can live and get on without being at the mercy of arbi trary decisions on the part of other people. In the frame of society everybody depends upon his fellow citizens. Social man cannot become independent without forsaking all the advantages of social cooperation.

The fundamental social phenom enon is the division of labor and its counterpart-human cooperation. Experience teaches man that cooperative action is more efficient and productive than isolated action of self-sufficient individuals. The natural conditions determining THE INDIVIDUAL IN SOCIETY 625 man's life and effort are such that the division of labor increases out put per unit of labor expended. These natural facts are: (1) the in nate inequality of men with regard to their ability to perform various kinds of labor, and (2) the unequal distribution of the nature-given, nonhuman opportunities of produc tion on the surface of the earth. One may as well consider these two facts as one and the same fact, namely, the manifoldness of nature which makes the universe a complex of infinite varieties. The division of labor is the out come of man's conscious reaction to the multiplicity of natural condi tions. On the other hand, it is itself a factor bringing about differentia tion. It assigns to the various geo graphic areas specific functions in the complex of the processes of pro ductIon. It It:lakes some areas urban, others rural; it locates the various branches of manufacturing,mining, and agriculture in different places.

Still more important, however, is the fact that it intensifies the innate inequality of men. Exercise and practice of specific tasks adjust indi viduals better to the requirements of their performance; men develop some of their inborn faculties and stunt the development of others. Vo cational types emerge, people be come specialists. The division of labor splits the various processes of production into minute tasks, many of which can be performed by mechanical devices. It is this fact that made the use of machinery possible and brought about the amazing improvements in technical methods of production. Mechanization is the fruit of the division of labor, its most beneficial achievement, not its motive and fountain spring. Power-driven specialized machinery could be employed only in a social environ ment under the division of labor. Every step forward on the road to ward the use of more specialized, more refined, and more productive machines requires a further specialization of tasks.

Innate Inequality Within Society Seen from the point of view of the individual, society is the great means for the attainment of all his ends. The preservation of society is an essential condition of any plans an individual may want to realize by any action whatever. Even the re fractory delinquent who fails to ad just his conduct to the requirements of life within the. societal system of cooperation does not want to miss any of the advantages derived from the division of labor. He does not consciously aim at the destruction of society. He wants to lay his hands on a greater portion of the jointly pro duced wealth than the social order assigns to him. He would feel miser able if antisocial behavior were to 626 THE FREEMAN October become universal and its inevitable outcome, the return to primitive in digence, resulted. Liberty and freedom are the con ditions of man within a contractual society. Social cooperation under a system of private ownership of the means of production means that within the range of the market the individual is not bound to obey and to serve an overlord. 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 re ceivers. He exchanges goods and services, he does not do compulsory labor and does not pay tribute. He.is certainly not independent. He de pends on the other members of soci ety. But this dependence is mutual.

The buyer depends on the seller and the seller on the buyer. Self-Interest The main concern of many writers of the nineteenth and twentieth cen turies was to misrepresent and to distort this obvious state of affairs. The workers, they said, are at the mercy of their employers. Now, it is true that the employer has the right to fire the employee. But ifhe makes use of this right in order to indulge in his whims, he hurts his own interests. It is to his own disadvan tage if he discharges a better man in order to hire a less efficient one. The market does not directly prevent anybody from arbitrarily inflicting harm on his fellow citizens; it only puts a penalty upon such conduct. The shopkeeper is free to be rude to his customers provided he is ready to bear the consequences. The con sumers are free to boycott a pur veyor provided they are ready to pay the costs. What impels every man to the utmost exertion in the service of his fellow man and curbs innate tendencies toward arbitrariness and malice is, in the market, not com pulsion and coercion on the part of gendarmes, hangmen, and penal courts; it is self-interest. The member of a contractual society is free because he serves others only in serving himself. What restrains him is only the inevitable natural phenomenon of scarcity. For the rest he is free in the range ofthe market.

In the market economy the indi vidual is free to act within the orbit of private property and the market. His choices are final. For his fellow men his actions are data which they must take into account in their own acting. The coordination of the au tonomous actions of all individuals is accomplished by the operation of the market. Society does not tell a man what to do and what not to do. There is no need to enforce coopera tion by special orders or prohibi·tions. Non-cooperation penalizes it self. Adjustment to the require ments of society's productive effort and the pursuit of the individual's own concerns are not in conflict.

1978 THE INDIVIDUAL IN SOCIETY 627 Consequently no agency is required to settle such conflicts. The system can work and accomplish its tasks without the interference of an au thority issuing special orders and prohibitions and punishing those who do not comply. Beyond the Market, Compulsion and Coercion Beyond the sphere of private property and the market lies the sphere of compulsion and coercion; here are the dams which organized society has built for the protection of private property and the market against violence, malice, and fraud. This is the realm of constraint as distinguished from the realm of freedom. Here are rules discriminat ing between what is legal and what is illegal, what is permitted and what is prohibited. And here is a grim machine of arms, prisons, and gallows and the men operating it, ready to crush those who dare to disobey. It is important to remember that government interference always means either violent acti9n or the threat of such action. Government is in the last resort the employment of armed men, of policemen, gen darmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and im prisoning. Those who are asking for more government interference are asking ultimately for more compul sion and less freedom.

Liberty and freedom are terms employed for the description of the social conditions of the individual members of a market society in which the power of the indispensa ble hegemonic bond, the state, is curbed lest the operation of the market be endangered. In a totalitar ian system there is nothing to which the attribute ((free" could be attached but the unlimited arbitrar iness of the dictator. There would be no need to dwell upon this obvious fact if the champi ons of the abolition of liberty had not purposely brought about a semantic confusion. They realized that it was hopeless for them to fight openly and sincerely for restraint and ser vitude. The notions liberty and free dom had such prestige that no prop aganda could shake their popular ity. Since time immemorial in the realm of Western civilization liberty has been considered as the most pre cious good. What gave to the West its eminence was precisely its con cern about liberty, a social ideal foreign to the oriental peoples. The social philosophy of the Occident is essentially a philosophy of freedom.

The main content of the history of Europe and the communities founded by European emigrants and their descendants in other parts of the world was the struggle for lib erty. ((Rugged" individualism is the 628 THE FREEMAN October signature of our civilization. No open attack upon the freedom of the individual had any prospect of suc cess. New Definitions Thus the advocates of to talitarianism chose other tactics. They reversed the meaning of words. They call true or genuine liberty the condition of the individ uals under a system in which they have no right other than to obey orders. They call themselves true liberals because they strive after such a social order. They call democ racy the Russian methods of dictato rial government. They call the labor union methods of violence and coer cion ((industrial democracy." They call freedom of the press a state of affairs in which only the govern ment is free to publish books and newspapers. They define liberty as the opportunity to· do the ((right"

things, and, of course, they arrogate to thems~lves the determination of what is right and what is not. In their eyes government omnipotence means full liberty . To free the police power from all restraints is the true meaning of their struggle for free dom. The market economy, say these self-styled liberals, grants liberty only to a parasitic class of exploiters, the bourgeoisie; that these scoun drels enjoy the freedom to enslave the masses; that the wage earner is not free; that he must toil for the sole benefit of his masters, the em ployers; that the capitalists appro priate to themselves what according to the inalienable rights of man should belong to the worker; that under socialism the worker will enjoy freedom and human dignity because he will no longer have to slave for a capitalist; that socialism means the emancipation of the common man, means freedom for all; that it means, moreover, riches for all.

These doctrines have been able to triumph because they did not en counter effective rational criticism. It is useless to stand upon an alleged ((natural" right of individuals to own property if other people assert that the foremost ((natural" right is that of income equality. Such disputes can never be settled. It is beside the point to criticize nonessential, at tendant features of the socialist pro gram. One does not refute socialism by attacking the socialists' stand on religion, marriage, birth control, and art. A New Subterfuge In spite of these serious shortcom ings of the defenders of economic freedom it was impossible to fool all the people all the time about the essential features of socialism. The most fanatical planners were forced to admit that their projects involve the abolition of many freedoms peo1978 THE INDIVIDUAL IN SOCIETY 629 pIe enjoy under capitalism and ((plutodemocracy." Pressed hard, they resorted to a new subterfuge.

The freedom to be abolished, they emphasize, is merely the spurious ~~economic" freedom of the capital ists that harms the common man; that outside the ((economic sphere" freedom will not only be fully pre served, but considerably expanded. HPlanning for Freedom" has lately become the most popular slogan of the champions of totalitarian gov ernment and the Russification of all nations. The fallacy of this argument stems from the spurious distinction between two realms of human life and action, the ((economic" sphere and the ((noneconomic" sphere. Strictly speaking, people do not long for tangible goods as such, but for the services which these goods are fitted to render them. They want to attain the increment in well being which these services are able to con vey. It is a fact that people, in deal ing on the market, are motivated not only by the desire to get food, shelter, and sexual enjoyment, but also by manifold «ideal" urges. Act ing man is always concerned both with Hmateriai" and Hideal" things.

He chooses between various alterna tives, no matter whether they are to be classified as material or ideal. In the actual scales of value, material and ideal things are jumbled to gether. Freedom, as people enjoyed it in the democratic countries of Western civilization in the years of the old liberalism's triumph, was not a pro duct of constitutions, bills of rights, laws, and statutes. Those documents aimed only at safeguarding liberty and freedom, firmly established by the operation of the market econ omy, against encroachments on the part of officeholders. No government and no civil law can guarantee and bring about freedom otherwise than by supporting and defending the fundamental institutions of the market economy. Government means always coercion and compul sion and is by necessity the opposite of liberty. Government is a guaran tor of liberty and is compatible with liberty only if its range is adequately restricted to the preser vation of economic freedom. Where there is no market economy, the best-intentioned provisions of con stitutions and laws remain a dead letter.

Competition The freedom of man under capital ism is an effect of competition. The worker does not depend on the good graces of an employer. If his em ployer discharges him, he finds another employer. The consumer is not at the mercy of the shopkeeper. He is free to patronize another shop if he likes. Nobody must kiss other people's hands or fear their disfavor.

630 THE FREEMAN October Interpersonal relations are busi nesslike. The exchange of goods and services is mutual; it is not a favor to sell or to buy, it is a transaction dictated by selfishness on either side. It is true that in his capacity as a producer every man depends either directly, as does the entrepreneur, or indirectly, as does the hired worker, on the demands of the con sumers. However, this dependence upon the supremacy of the consum ers is not unlimited. If a man has a weighty reason for defying the sovereignty of the consumers, he can try it. There is in the range of the market a very substantial and effec tive right to resist oppression. No body is forced to go into the liquor industry or into a gun factory if his conscience objects. He may have to pay a price for his conviction; there are in this world no ends the attain ment of which is gratuitous. But it is left to a man's own decision to choose between a material advantage and the call of what he believes to be his duty. In the market economy the individual alone is the supreme ar biter in matters of his satisfaction.

Consumers Choose Capitalist society has no means of compelling a man to change his oc cupation or his place of work other than to reward those complying with the wants of the consumers by higher pay. It is precisely this kind of pressure which many people con sider as unbearable and hope to see abolished under socialism. They are too dull to realize that the only al ternative is to convey to the au thorities full power to determine in what branch and at what place a man should work. In his capacity as a consumer man is no less free. He alone decides what is more and what is less important for him. He chooses how to spend his money according to his own will. The substitution of economic planning for the market economy removes all freedom and leaves to the individual merely the right to obey. The authority directing all economic matters controls all aspects of a man's life and activities.

It is the only employer. All labor becomes compulsory labor because the employee must accept what the chief deigns to offer him. The economic tsar determines what and how much of each the consumer may consume. There is no sector of human life in which a decision is left to the individual's value judgments. The authority assigns a definite task to him, trains him for this job, and employs him at the place and in the manner it deems expedient. As soon as the economic freedom which the market economy grants to its members is removed, all political liberties and bills of rights become humbug. Habeas corpus and trial by jury are a sham if, under the pretext 1978 THE INDIVIDUAL IN SOCIETY 631 of economic expediency, the author ity has full power to relegate every citizen it dislikes to the arctic or to a desert and to assign him ((hard labor" for life. Freedom of the press is a mere blind if the authority con trols all printing offices and paper plants. And so are all the other rights of men.

A man has freedom as far as he shapes his life according to his own The Guaranteed Life plans. A man whose fate is deter mined by the plans of a superior au thority, in which the exclusive power to plan is vested, is not free in the sense in which the term Hfree" was used and understood by all peo ple until the semantic revolution of our day brought about a confusion of tongues. ® Reprints available, 10 for $1.00. IF the millions of workingmen in this country who are patiently paying their social security dues could glimpse the bureaucratic absolutism which that act presages for themselves and their children they would repudiate the whole monstrous and dishonest business overnight. When a government takes over a people's economic life it becomes absolute, and when it has become absolute it destroys the arts, the minds, the liberties and the meaning of the people it governs. It is not an accident that Germany, the first paternalistic state of modern Europe, was seized by an uncontrollable dictator who brought on the second world war; not an accident that Russia, adopting a centrally administered economy for humanitarian rea sons, has arrived at a tyranny bloodier and more absolute than that of the Czars. And if England does not turn back soon she will go the same way. Men who are fed by their government will soon be driven down to the status of slaves or cattle.

MAXWELL ANDERSON, Written in a preface to Knickerbocker Holiday A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN A PERVERSION OF TECHNOLOGY IN 1856 an eighteen-year-old En glish chemistry student, William Henry Perkin, thought he might find a source of synthetic quinine in coal tar. But serendipity, which has been defined as the faculty for mak ing important discoveries by acci dent, took over in his test tube. In stead of quinine, Parkin evoked from his coal tar a bright purple solution that was the first of the aniline dyes. Perkin tried to market his product in his own country, but the English went right on using berries, barks, flowers, eggs and insects for their dyestuffs. It took the Germans, with their genius for turning garbage into wealth, to build a fantastic chemical industry on Perkin's lucky mistake. What began in the Perkin test tube was to have momentous conse quences for the world, both for good and for ill. It was on dyestuffs that 632 I. G. Farben, the great German chemical cartel, grew to such tremen dous proportions. The bright reds and yellows and the subtle blues that came out of the German laboratories were profitable but harmless. But dyestuff science and technology and the funds they generated-had other, and more important, spin offs.

It is the story of the spin-offs that fascinates Joseph Borkin, a Wash ington attorney who once worked for Thurman Arnold's antitrust divi sion in the U.S. Department of Jus tice. The spin-offs-nitrates from the air, gasoline, oil and rubber from coal-have a tremendous potential for good. Synthetic nitrogen fertiliz ers, coming when they did, put the ghost of Malthus back in its shroud for a considerable stay, and the hy drogenization process of getting gasoline from coal may be the an swer to the so-called energy crisis if A PERVERSION OF TECHNOLOGY 633 oil and natural gas ever do run out. But highly dangerous explosives can be made from nitrogen; and when gasoline from coal was comman deered by the Nazi state, it almost succeeded in making Hitler's Thousand-Year Reich a horrifying reality. It is the perversion of chemistry and technology to political ends that is the subject of Mr. Borkin's The Crime and Punishment of I. G. Far ben (The Free Press-Macmillan, 866 Third Avenue, New York, N.Y.

10022, 250 pages, $10.95). The car tel idea is menacing enough in itself, but when a great cartel and a truly imperial state with pretensions to world rule combine in unholy mat rimony the results, as we know from the experience of two world wars, can be devastating. In a lean and disciplined prose that drives straight to the heart of the matter, Mr. Borkin offers us both an excit ing action story and a warning fable. This is the Faust legend in modern dress. And in the telling Mr. Borkin makes note of some tremendous ironies. Patriotic Intentions The biggest irony of all is that the companies that were combined in I. G. Farben were started by good men. Fritz Haber and Carl Bosch, who together worked out the Haber Bosch process for getting nitrogen out of the air, were good patriots. Haber, a Jew, had ideas about feed ing the world with his nitrogen fix ing discoveries, and' Bosch, though he believed in industrial combina tion, always resisted the politiciza tion of his company. The Nazi man ias were furthest from their thoughts as they went about the patriotic business of freeing the Kaiser's Germany from dependence on mined nitrates from Chile.

If it hadn't been for the Farben laboratories and factories, World War I would have ended without the protracted slaughters of trench war fare. The German Schlieffen Plan was to wheel through Belgium and take Paris in a month. Stored ni trates from Chile would be enough to carry the Schlieffen Plan to a quick success. But the French taxicab army stopped the Germans at the Marne, and, with both sides digging trenches like mad, the Schlieffen Plan was dead. The Kaiser had to face up to the appalling fact that his army didn't have enough gunpowder to last a year of trench warfare. So it was up to the German chemi cal industry. Fritz Haber and Carl Bosch leaped into the breach. When it became apparent that there would be a ticklish gap in time between the disappearance of gunpowder made from imported Chilean nitrates, now cut off by the British blockade, and the free flow of Haber-Bosch factory-produced nitric acid, Fritz Haber was confronted with a moral 634 THE FREEMAN October crisis. Chlorine gas was in plentiful supply in the dyestuff plants, and it could be used at the front as a sub stitute for gunpowder. The chlorine that killed or wounded 15,000 Allied troops at Ypres was a desperation weapon, and could have been jus tified as such. But when Haber, still wrestling with his conscience, went along with a decision to use poison gas in the Russian East, his wife, Clara, committed suicide.

The price of patriotism came high to Fritz Haber, who was forced out of I. G. Farben to keep the Nazis from proclaiming it a uJew company." He died in exile in Switzerland, a bro ken man. Bosch's fate was to be sidetracked after he made the mis take of telling Hitler to his face that the Nazi campaign against the Jews would set German chemistry back a hundred years. In dismissing Bosch Hitler roared, ((Then we'll work a hundred years without physics and chemistry ." Slavery and Murder There were others in I. G. Farben who decided, some of them eagerly, some out of prudence, to hunt with Hitler to the end. Without Farben made gasoline from ·coal and a bun~ rubber substitute from the same source, the Nazis could not have embarked on the conquest of Europe. One compromising thing led to another, and I. G. found itself building a huge industrial complex next door to the Nazi death camp at Auschwitz. The decision to build at Auschwitz was dictated by a plenti ful supply of water, which was needed in abundance for chemical processes. But Auschwitz also of fered I. G. Farben an unending sup ply of slave labor. The company plumbed its own depth of depravity when it set up its own concentration camp, with a gallows to remind workers that hanging could be the penalty for even the most innocent disruption of shop routine.

For their crimes in abetting Hit ler's murder policies and plunder ing the chemical companies of France and Poland, key I. G. Farben officials got off lightly enough. Bor kin strains to be objective in report ing the sentences-uguilty of . . . slavery and mass murder, sentenced to imprisonment for six years." The excuse of some of the convicted offi cials could have been ((duress," but if the Farben high command had cho sen another site in preference to Auschwitz would the Nazis have in tervened? It was not uduress" that had the company casting sheep's eyes at a source of cheap labor that could be literally worked to death. Mr. Borkin leaves no doubt that there was considerable hanky panky about the return of I. G. Farben-owned property, both inside Germany and in the United States, to German owners after both the big wars. Some mighty big names were 1978 A PERVERSION OF TECHNOLOGY 635 involved in deals that, in retrospect, seem more than faintly discredit able. Bribes were passed after World War I to shady hangers-on in the Harding Administration. And an ef fort was made to use a relative of the Kennedys to regain General Aniline and Film, seized by the U.S. during the second war.

The return of Farben properties after World War I had disastrQus consequences to the allies during the Hitler years. We have been luck ier in our post-World War II relin quishments. But Mr. Borkin won ders about the precedents we have set. THE ANTITRUST PARADOX by Robert H. Bark (Basic Books, Inc., 10 E. 53rd Street, New York, N.Y. 10022, 1978) 388 pages. $18.00 Reviewed by Melvin D. Barger WHEN it passed the Sherman Act in 1890, the U.S. Congress set the gov ernment on a new course attempting to control the size and market influence of business or ganizations. The other early mile stones in antitrust legislation were the Clayton Act and the Federal Trade Commission Act, both passed in 1914. Clayton involved the government in pricing decisions and was reinforced by the Robinson Patman amendment in 1936, while the Federal Trade Commission Act mandated the setting up of an ad ministrative agency to regulate competitive business practices. Ex cept for occasional subsequent tin kering and threats, Congress has stayed out of the antitrust field, and antitrust policy has really been shaped by a series of landmark Su preme Court decisions.

According to Robert H. Bork,· a large number of these Supreme Court decisions have been wrong, resulting in an antitrust policy that is at war with itself. Judicial per formance on key antitrust decisions has been both inept and contradic tory, seriously impairing business efficiency and imposing heavy penalties on the American con sumer. The original purpose of anti trust legislation was the promotion of ((consumer welfare," but any such ideal has long since been diluted by a complex chain of court decisions aimed at reaching various other so cial and political goals. The Antitrust Paradox is a well organized, well-written study ofjust how this happened, with some final thoughts about the general problem. Mr. Bork brings impressive creden tials to this task. A full-time profes sor at the Yale Law School, he is a former Solicitor General of the United States and more recently 636 THE FREEMAN October was a resident scholar at the Ameri can Enterprise Institute. Highly re garded in the legal profession, he is emerging as one of the new dissident intellectuals who can find some good things to say about the American business system. Like Milton Friedman and Irving Kristol, Mr.

Bork is not a purist libertarian, but he is heavily oriented in free market principles and his writings clearly call for considerable freedom in business. Mr. Bork opens his argument with some powerful comments about the current crisis in antitrust. We learn something about the antitrust en terprise, the lawyers, judges, economists and legislators who work unceasingly in antitrust to impose a complexity of rules ·on business. ((Generally, these rules ignore the obvious fact that more efficient methods of doing business are as valuable to the public as they are to businessmen," Mr. Bork writes. ((In modem times the Supreme Court, without compulsion by statute, and certainly without adequate explana tion, has inhibited or destroyed a broad spectrum of useful business structures and practices. Internal growth to large market size has been made dangerous. Growth by merger with rivals is practically im possible, as is growth by acquisition of customers or suppliers. Even ac quisitions for the purpose of moving into new markets have been struck down, as the law evolves a mythol ogy about the dangers of conglomer ate mergers." There are other ques tionable Court positions: against cooperative ventures by indepen dent businesses, against manufac turer control of product distribution, in favor of pricing behavior that actually leads to higher prices.

But even this unpleasant state of affairs may be only temporary. The current populist hostility to busi ness makes it easy to blame every hardship on the major corporations, paving the way for further antitrust assaults on business. Indeed, there are a number of antibusiness people who might admit that antitrust has some intellectual problems but is a good idea because it keeps busi nessmen on the defensive. And among those professionally con cerned with antitrust, Professor Bork says, there is disagreement about two basic questions: (1) the goals or values the law may legiti mately and profitably implement; and (2) the validity of the law's vi sion of economic reality. Professor Bork obviously feels that consumer welfare should be the primary goal of antitrust, and he takes issue with much of the economic theory that guided many of the antitrust land mark decisions. A large part of the problem is that any antitrust legislation requires making severe tradeoffs. If the an titrust policy is aimed at maintain1978 OTHER BOOKS 637 ing a certain number of producers in an industry, it may be at the cost of business efficiency and hence con sumer welfare. Professor Bork does not pretend that a free market will always allow for a certain num ber of rivals to survive in an indus try, but he does show that most successful firms become dominant largely through efficiency rather than as a result of predatory be havior. Again and again, however, this business success has been penalized by the courts simply be cause the judges failed to focus on the single· goal of consumer welfare or used an unsound basis for economic reasoning.

While the goal of consumer wel fare has its drawbacks, it would at least give the business community fair warning about the probable legal ity of its operations, it would tend to place intensely political and legisla tive decisions in Congress instead of in the courts, it would maintain the integrity of the legislative process, it would require more realistic economic reasoning, and it would avoid arbitrary or anticonsumer rules, Mr. Bork writes. But with antitrust policy pursuing many so cial and political goals, none of these things are being achieved. Mr. Bork then goes on to analyze, case by case, the landmark Supreme Court decisions that led to the cur rent crisis. Writing in a brisk, highly readable style, he dissects these important decisions in such a way that the ordinary layman can understand them. There was the famous United Shoe Machinery de cision, for example, which under mined machinery leasing practices without really determining whether the firm was being efficient or pre datory. In the Brown Shoe case, a merger was ruled a threat to compe tition even though the acquiring firm and the firm being acquired had, respectively, only 4 and 0.5 percent of the nation's shoe output!

And in one of the most well publicized decisions of all, the Su preme Court ruled against Procter & Gamble's acquisition of Clorox on the grounds that Procter had advan tages in advertising and promotion which would be anticompetitive. Professor Bork mentions or analyzes about 80 cases which relate to the key topics of his book, and the effect is one of brilliant revisionism. He knocks down first one well established argument and then another, demonstrating that in case after case the courts systematically destroyed consumer welfare while pursuing goals aimed at preserving competition, ~~protecting" the small businessman, or eliminating bar riers to entry. The conclusion is in escapable that many of the antitrust landmark decisions which formed antitrust policy have been disasters for the consumer, as well as being destructive to business freedom.

638 THE FREEMAN October In his Summation (what other term could a lawyer use for closing remarks!), Professor Bork calls for a sweeping reform of antitrust policy based on making consumer welfare the only policy goal. He specifies several forms of behavior that should continue to be proscribed by the law, but he goes on to argue that many of the practices that are now prohibited should be permitted, in cluding agreements on prices, ter ritories, refusals to deal (with cer tain qualifications), small horizon tal mergers, all vertical and con glomerate mergers, vertical price maintenance and market division, and many other actions which most corporation lawyers now regard as off limits. Moreover, he does not feel that antitrust should be concerned with any firm size or industry struc ture created by internal growth or by a merger more than ten years old. Professor Bork also acknowledges, in his final thoughts, that current antitrust policy was influenced by something deeper than erroneous reasoning. ~~To study antitrust at length, to wonder at the manifold errors of economics and logic dis played, to see that the errors move the law always in one direction, is to begin to suspect that a process much deeper than mere mistaken reason ing is at work," he writes. ~~It seems as though the intellectual terrain is regarded as important not in and for itself but as a field of action upon which the political order moves against the private order."

Mr. Bork leaves no doubt that his sympathies also move in one direc tion, at least much of the time. He wants to protect and preserve the good in the private order and the free society. Most of the time, the private order loses in the antitrust struggle. But with heavyweight de fenses such as The Antitrust Paradox, the private order may have a fighting chance. ® THE INFLATION CRISIS, AND HOW TO RESOLVE IT by Henry Hazlitt (Arlington House Publishers, New Rochelle, New York) 192 pages • $8.95 Reviewed by Mark Spangler NOW ADA YS people from every walk of life are concerned about in flation. What actually is inflation? Is it inherent in a free market economy? Who or what is the cause-unions, government regulations, merchants, federal deficits, or middlemen? Can inflation be stopped, and how? What to do? Most people are des perately confused and searching for answers. Society is facing nothing short of a crisis. In answer to this 1978 OTHER BOOKS 639 grave situation comes Henry Haz litt's latest book, The Inflation Crisis, and How to Resolve It. As Mr.

Hazlitt himself begins the book, uNo subject is so much discussed today-or so little understood-as inflation." Henry Hazlitt estimates that a dollar of today is worth less than 25 cents of a 1940 dollar, and certainly no one has to be told that a dollar continues to buy less and less. Yet, how many people realize that since 1940 the federal government has increased the money stock by well over a thousand percent? Hazlitt re ports that at the end of 1939 the total number of dollars in the econ omy was 63.3 billion, and at the end of 1977 that figure stood at 806.5 billion. Anyone who is aware of these events should surely sense a logical connection between con stantly rising prises and a continu ous expansion of the money supply. Mr. Hazlitt points out. that there are two sides to every price: HA ~price' is an exchange ratio between a dollar and a unit of goods. When people have more dollars, they value each dollar less. Goods then rise in price,not because goods are scarcer than before, but because dollars are more abundant, and thus less val ued." He clearly explains that the present predicament of ever-soaring prices results from a deliberate gov ernment policy to flood the economy with more and more dollars simply by Hprinting" them, so to speak.

In fact, the term ((inflation" origi nally meant increasing (inflating) the money supply. Today the term is commonly used to mean the most evident consequence of creating money, generally rising prices. So, nothing at all is mysterious about inflation; it is government in tervention pure and simple. Why, then, do government' leaders con tinue to inflate and why do the Uprinting presses" go undetected by the general public? Inflation serves the immediate interests of· vote-seeking politicians. Most office seekers promise scores of handouts in return for being elected, but the federal budget has become so ominous that financing by direct taxation is politically im possible. The federal government resorts to printing money to help cover any deficits, and that is done in a very complicated way through the Federal Reserve and commercial banking system so as to hide the process from most people.

Henry Hazlitt devotes a great deal of The Inflation Crisis to discussing government spending, deficit financing, and the fallacies in gen eral of a government-managed monetary system .. In addition, he explains the benefits of a market determined gold standard. His text ranges from presenting simple principles of money and in flation to refuting sophisticated 640 THE FREEMAN Keynesian doctrines, especially the notion that monetary expansion is necessary to employ idle workers and resources. Equally important, Hazlitt analyzes policies of monetarists, generally led by Chicago School economist Milton Friedman. The distinction between monetarists and other advocates of free enterprise is often muffled. Henry Hazlitt makes plain that monetarists are infla tionists, who advocate a certain an nual rate of monetary expansion by government officials: «The central flaw· of the Monetarist proposal is its extreme political naivete. It puts the power of controlling the quan tity, the quality, and the purchasing power of our money entirely in the hands of the State, that is, of the politicians and bureaucrats in of fice." A consistent free market economist, on the other hand, would argue to let individuals, voluntarily acting in the marketplace, choose what commodity they will accept as money.

Hazlitt cautions about using false remedies to combat inflation. PAt tacking rising prices with wage and-price controls misses totally the heart of the problem. They do noth ing to halt the monetary expansion. Moreover, the controls themselves have the disastrous consequences of creating shortages, discouraging production, and moving ever toward a complete command economy. Mr. Hazlitt also explains how in flation disrupts production, inhibits economic calculation, distorts inter est rates, malemploys workers and resources, and consumes capital. Just as serious as the economic disruption are the social conse quences of inflation. It destroys thrift, promotes gambling, disheart ens the spirit to work, and breeds social unrest, envy, and crime. «Under inflation ... only a handful of people realize clearly what is going on. The majority tend to blame their plight, not on govern ment, but on those of their neighbors who appear to be prof iteering from inflation."

From the standpoint of economics, the cure for inflation is simple-stop it! Stop the politicians from printing money to pay for their spending pro grams; but herein lies the difficulty. The problem of inflation extends be yond economics, as Henry Hazlitt concludes, «A major part of the solu tion . . . will be how to get the monetary system out of the hands of politicians. Certainly as long as we retain our nearly omnipotent redis tributive State, no sound currency will be possible." @ Editor's Note: The Inflation Crisis, and How to Resolve It is available at $8.95 from The Founda tion for Economic Education, Irvington-on-Hudson, N.Y. 10533.

the Freeman VOL. 28, NO. 11 • NOVEMBER 1978 Perspectives on Hunger in the World John A. Sparks 643 The history of famine and its causes, and how to combat them. The Social Responsibility of Business Brian Summers 652 Business profit comes from the efficient use of scarce resources to best serve consumers. Those Mayflower Ecologists Ralph Bradford 654 A satirical approach to some ancient and recurring problems. Do You Believe in Freedom? Sharon B. Mulwitz 659 Each must extend and defend for others the freedom claimed for himself. World In the Grip of an Idea 23. The Cold War: Revolutionary vs. Evolutionary Socialism Clarence B. Carson 661 The distinction between principled and tactical opposition to communism. Labor In a Free Society Timothy Eshleman 674 How the free market serves the laborer and those who want his services. The Rise and Decline of a Welfare State Sven Rydenfelt 677 This report from Sweden explains that we are suffocating for lack of freedom.

Book Reviews: 685 "The Machinery of Freedom: Guide to Radical Capitalism" by David Friedman. A Literature of Freedom 688 Brief reviews of books listed for sale by FEE. Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

tt1e I A E~L~~N~~~N LIBERTY FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson, N.Y. 10533 Tel: (914) 591-7230 Leonard E. Read, President Managing Editor: Paul L. Poirot Production Editor: Beth A. Hoffman Contributing Editors: Robert G. Anderson Bettina Bien Greaves Edmund A. Opitz (Book Reviews) Brian Summers THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of pri vate property, the free market, the profit and loss system, and limited government. The costs of Foundation projects and services are met through donations. Total expenses aver age $18.00 a year per person on the mailing list. Donations are invited in any amount. THE FREEMAN is available to any interested person in the United States for the asking. For foreign delivery, a donation is required sufficient to cover direct mailing cost of $5.00 a year.

Copyright, 1978. The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid: 3 for $1.00; 10 or more, 25 cents each. THE FREEMAN is available on microfilm from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "World in the Grip of an Idea."

THE ATMOSPHEREin which problems of world hunger are discussed today is charged with emotion. Formerly there were those who quite properly called our attention to hunger in the world and advocated voluntary Christian charity as a response. But, increasingly, there is a harsher sound to the ((hunger rhetoric." Some large and influential groups, for instance, are advocating the cre ation of a new ((right to food." Others disdain talk of rights but they do make accusations ascribing ((world hunger" to the existence of an Haffluent West." What causes hunger in the world? Are matters getting worse today or better? What should be our perspectives on hunger in the world? Dr. Sparks Is Associate Professor of History and Director of the Institute on Public Policy and Private Enterprise at Grove City College In Pennsylvania. John A. Sparks Famine, the severe shortage of food in a wide geographic area, has been the rule rather than the excep tion throughout most of history. Bib lical accounts frequently mention famine. A vast famine sent Abra ham and then Joseph's family to Egypt. Famine sets the stage for much of the book of Ruth; famine occurs during King David's reign.

There are at least a doze~ other references in the Bible to famine. In more recent periods, observers report that there were ten famines in what we call Europe during the 10th century and twenty-six famines in the 11th century.! In the 13th cen tury famine occurred in England and Ireland at the beginning of the era (1203) and again in England only six years later (1209). During the English famine of 1239, there were reports· of people eating their 643 644 THE FREEMAN November children. Other serious famines dur ing the 13th century were reported in Germany (1243), Sicily (1268), Poland (1281) and Scotland (1297).2 An analysis of the 14th century produces a similar picture of fre quent famine. One historian sum marizes it this way: ttBy 1300, al most every child born in western Europe faced the probability of ex treme hunger at least once or twice during his expected 30 to 35 years of life."s More particularly general famine was reported in France in 1304, 1305, 1310, 1315-1317, 1330 1334, 1344, 1349-1351, 1358-1360, 1371, 1374-1375 and 1390.4 There were many more local famines. Dur ing this century in which Europe suffered so many food crises, it is well worth noting that India was no better off. Her worst known famine occurred iIi 1396 and lasted for 12 years. 5 General famine was the rule rather than the exception during century after century of his tory.

In the 19th and 20th centuries the pattern of famine w~s altered. Ag ricultural economist D. Gale Johnson says that famine has de creased in the two most recent cen turies both as a percentage of the world's population affected by seri ous hunger and in terms of absolute numbers of persons dying from hunger. 6 Put another way, in parts of the world which previously faced famine decade after decade, hunger is no longer a problem. Yet food disasters continue to occur in other parts of the globe. Why was famine so prevalent in past centuries and why does it continue in some parts of the world today? War and Political Instability Famine often follows war. The reason is not difficult to understand. War creates grave, continuous dis ruption of agricultural endeavors. It is no coincidence that the hungry European 14th century parallels the ttHundred Years War" (1337-1453), that long series of clashes between France and England. Food produc tion was set back then because the soldiers scorched fields, destroyed the few farming tools in existence, and burned mills, barns, manors, vineyards and orchards. 7 Fearing for their lives, farmers frequently fled to the towns. Economists say that such military actions brought food hardships because capital goods, those implements used in further production of food, were de stroyed. Moreover, labor was frightened away from the necessary site of production. 8 Though farmers could easily return to the land when the danger had passed, the replace ment of capital goods-draft ani mals and barn-especially in the medieval economy, was slow and painful. Consequently, agricultural production was badly hurt im mediately and for decades to come.

1978 PERSPECTIVES ON HUNGER IN THE WORLD 645 In the most recent centuries food shortages of various magnitudes have accompanied great wars. But in addition, the threat of famine has flourished in the economic turmoil produced by modern internal revolu tions. Observing the French Revolu tion in 1791, Carlyle wrote: u ••• bread, always dear, is getting dearer ."9 Referring to the year 1793 in France another historian ob served that: ttThe people were weary of being dragged from crisis to crisis. Industry was in ruins, famine menaced the cities."lo Those modern revolutions which are heirs to the French Revolution have produced similar effects on ag riculture. For example, Mao's ((Great Leap Forward" (1958-1960), a revolutionary effort to CCpurify" Chinese Communism and release it from the control of Soviet Com munism, had a deleterious impact upon food provision. Chinese peas ants were forced by the revolution to accept the commune system, relin quish their small private plots and take work assignments in nonag ricultural production. As a result, there is reliable evidence that a famine of considerable size occurred in China in 1959. The Great Leap forward was actually a giant step backward for Chinese food produc tion.

Unceasing revolutionary disrup tions have caused food scarcity in many South American republics, in Asia, and most recently in Mrica. The atmosphere necessary for de pendable food production is not re lentless revolutionary strife, bloodshed, burning and war, but peace, order and liberty for the indi vidual producers. Institutionalized Envy in Less Developed Countries Among the causes of famine is one described by Eric Wolf as ((in stitutionalized envy."l1 Such in stitutionalized envy exists in the tribal and village cultures of many of the less developed countries envy nourished by social practice. Institutionalized envy's impact upon all forms of economic production can be grave indeed. Sociologist Wolf reported some years ago that in cer tain South American villages a farmer who raised crops superior to those of his neighbors would be the object of intense envy. Because he feared such social ostracism, he would make every effort not to «stand out" above the rest, that is, not to produce above the average.l 2 Consequently, social attitudes helped to restrain the successful, in novative, or energetic agricultural producer. Similarly, another ob server recently reports that Guatemalan Indians who manage to achieve high relative incomes often secrete their wealth because they fear the charge that they are becom ing ((Latins," that is, like the 646 THE FREEMAN November Spanish speaking, non-Indian popu lation. 13 One does not know how many others eschew successful pro duction or higher incomes in order to avoid the resentment of their fel low Indians.

Among Northern Rhodesian tribes, a prosperous person may be suspected of black magic. A good crop yield, for example, may be at tributed to the fruitful farmer's evil use of a magical crow which it is alleged stole seed from the fields of neighbors and thereby produced a good crop for the high-yield farmer .14 Though such an explana tion is logically deficient by Western standards, natives will go to great ends to avoid such charges. Tribal and family claims can have a simi lar discouraging effect upon the pro ductive. S. Herbert Frankel tells the story of a hapless Ghanaian tribal chief whose abilities earned him a posi tion in the offices of a European exporting firm. Whenever his rela tives thought he had accumulated any savings they met him outside the bank to apply ~~the thumbscrews of family obligation."15 Frankel says that in West Africa it was common for unscrupulous relatives to covet and demand the wealth and income of more productive family members, thus increasing the difficulty of sav ing and reducing the capital avail able for urgently needed agricul tural investment.

Governmental Policies Ill-considered governmental policies have increased the likeli hood of famine. The imposition of price controls gives a common example. Economists agree that a shortage of a particular good can certainly be contrived by fixing the price of the commodity below what its normal market price would have been. When such a policy is fol lowed, less of the commodity will be produced and more will be de manded. The resulting shortage will continue as long as the unwise gov ernmental price control remains in effect. Quite understandably, price controls are often found in the midst of famine. Consider the food crisis about which most Americans have knowl edge, the famine during 1973 in the African region known as the Sahel. Western television beamed news re ports about the food hardship in the six West African countries of Mauritania, Senegal, Mali, Upper Volta, Niger and Chad. A severe drought, it is true, helped to precipi tate the mass famine. But here is the additional sad, irrational fact the governments of the Sahel had followed the practice of keeping the prices of farm produce artificial ly depressed in order to keep food prices low for urban dwellers. 16 The abnormally low prices increased the dearth of food by making it un economical for food to be produced 1978 PERSPECTIVES ON HUNGER IN THE WORLD 647 locally or imported except on illegal, cumbersome ((black markets." Only the response of Western nations through relief agencies kept famine deaths as low as 100,000.

In like manner the government of India, the country which contains within its borders nearly one half of the world's food problem, has irra tionally thwarted the progress of food production in that food-hungry land. The government has generally held farm prices for rice below mar ket prices. As a result, the new high-yield varieties of rice have not been adopted as rapidly as was hoped for.17 Another governmental policy which inhibits food output is strict opposition by the state to the private ownership of property. Private own ership of personal and real property provides strong natural incentives to produce which cannot be .dupli cated by those economic systems which deny property rights. The food disasters of bygone centuries were made more intense and fre quent by the hobbling effect on pro duction of communal land own ership. The Soviets have had to live with the harmful effects of ((collec tiveownership," namely, poor crop production on state farms, and at the same time, the embarrassing fact that disproportionately large amounts of farm produce are raised on the small, privately owned plots farmed by the peasantry in their ((spare time." Less developed coun tries which embrace state operated agriculture as ((the only way to'in sure food progress" will reap, not food, but a whirlwind of misery and death.

Saving and Hunger Even in those less developed coun tries where political stability is maintained, where ownership rights are protected, and where there are no coveting social attitudes, the key to agricultural productivity will de pend upon the steady accumulation of capital savings. This pool of savings-money capital-finances the creation of production increasing capital goods, that is, tools, machinery and equipment. In the less developed world, where basic food demands are great, the capital goods made possible by exist ing savings are likely to take the form of farm equipment or storage barns. In turn, the use of these capi tal goods will make greater food production possible. However, the accumulation of capital savings from the resources of native savers is a slow and painful process. When personal incomes are low, then saving is, at first, halting. Pre-industrial Britain is a case in point. There the slow internal for mation of capital took place over a period of 150 years before more rapid growth occurred.

Developing countries in the 19th 648 THE FREEMAN November century (like the fledgling United States) did not have to rely alone upon the limited savings of their own citizens. The American com mon weal th grew in part because foreign capital came to its shores. English and Scottish investors sank millions of dollars into agricultural ventures in the American West, for example. In 1883 there were 21 major British cattle companies in the West developing land, drainage and cattle raising. One, the Prairie Cattle Company ranged 100,000 cattle over 1 million acres-a capital investment of $2.5 million. Total Scottish investment in U.S. cattle at the same time is estimated at $25 million. 18 Fortunately, today the people of less developed countries do not have to finance those capital im provements which would expand their food production out of their own meager savings. Capital is available for such purposes in West ern capital markets. All that less developed countries need do to at tract such savings is to demonstrate that they will be good hosts to foreign investors by maintaining a climate of safety for ventured sav ings. Unfortunately, as many times as not, the less developed countries have driven away foreign capital by their insistence upon expensive in vestment prerequisites and policies of seizure. As a result, three-fourths of U.S. foreign investment is made today in already developed countries-Canada, Europe, Japan and Australia-not in the less de veloped world.

False Explanations Food hardships are fostered by political instability, destructive so cial attitudes, and governments that work against saving and production. Nevertheless, current ~~world opin ion" does not encourage the people of poor nations to see the true folly of their own national policies and ways. Instead, the poor and hungry are urged to believe that it is the prosperous West which is to blame for their plight. The gigantic, con tinued success of American capital ism must be at the expense of the world's less fortunate, it is in sinuated. According to anticapitalis tic ideology, plenty for U.S. citizens is purchased by the poverty of Third World peoples. None of these Hexploitation theorists" understands very much about economic reality. But, they commonly make two charges that deserve analysis. First, they say that the colonialism and im perialism of the past gravely harmed the national economies of the underdeveloped world (includ ing their ability to produce food) while at the same time bolstering the capitalistic West. Noted au thorities on economic development disagree.

1978 PERSPECTIVES ON HUNGER IN THE WORLD 649 Professor Peter T. Bauer says that although it cannot be shown conclu sively that past colonial presence brought with it an increase in mate rial well-being, ff •••it is highly probable that over the last century or so the establishment of colonial rule in Africa and Asia has pro moted, and not retarded, material progress."19 Continues Bauer, ff ••• the colonial governments estab lished law and order, safeguarded private property and contractual re lations, organized basic transport and health services, and introduced some modern financial and legal in stitutions."2o In addition, colonial rule opposed conditions that were inimical to material progress such as frequent ((civiland tribal war and the prevalence of slavery .~'21 Colo nialism did confer certain enduring benefits upon the colonies. In answer to the charge that the West could not have advanced ex cept at ruinous costs to underde veloped nations, Bauer firmly sum marizes: ((Theprosperity of the West has been generated by its own popu lation and not achieved at the ex pense of Africa or other underde veloped countries."22 Today economists are forced to admit that Britain and France obtained virtu ally nothing in net economic bene fits from their colonial possessions.

Empire was unprofitable to the im perialist. 23 Private French and British investors, as often as not, found better investment oppor tunities outside their nation's col onies rather than within them. 24 Portugal, which clung to its col onies for 400 years, longer than any other European nation, can only show for it the. lowest per capita income in all of Europe. 25 Further more, if substantial Hsubservient colonies" are really a necessary in gredient for the success of Western capitalism, how can the extraordi nary growth of the United States be explained? True, America experienced a ((brief moment of imperial fervor." But, the U.S. did not gain its limited ((colonies" until the late 1890s at a point in time when it had already achieved a full century of remark:' able economic development without colonial possessions. Moreover, how can such Western market-type economies-Canada, Australia, Switzerland, and Scandinavia which have had no ucolonies to exploit," and yet have prospered, be fit into the neat· explanation that capi talistic economic progress de pends upon regress elsewhere in the world? The formula which claims to demonstrate that the West fattens itself on the world's hunger is based upon a strained Marxist-Leninist ideology which is plair~.ly refuted by reality.

The other indictment returned against the U.S. is that it is consum ing too large a percentage of the 650 THE FREEMAN November Price Controls In France, 1789·1793 "The arguments in the convention relative to the matter ran the whole gamut from the principles of economic liberty advocated by the economists of the day to the radical abstractions of Robespierre and his followers, who swept commerce aside by maintaining that 'the food necessary to man is sacred as life itself,' and 'The fruits of the earth like the atmosphere belong to all men.' "One of the most interesting of the many suggestions made in the convention was that of Barbaroux who advocated 'a plan to form local associations to collect and circulate information about the crops. In other words, for coercion he would substitute cooperation, believing that the French citizens, farmers and merchants included, would not turn a deaf ear to an appeal for common action against the oncoming peril' (famine). Price fixing finally became one of the characteristic features of the Reign of Terror, and when Robespierre and his councilors passed through the streets of Paris in the carts of the executioners the mob jeered saying,' 'There goes the dirty maximum.' "

HENRY E. BOURNE, "Food Control and Price Fixing in Revolutionary France," Journal of Political Economy, February and March 1919 ((world's grain supply." U.S. citizens today do consume per. person as much as five times the grain (includ ing grain fed to livestock) eaten by persons in some developing na tions. 26 However, two things should be noted well. First, per capita grain use in the U.S. actually· declined between 1909 and 1971 due, primar ily, to the substitution of mechanical for animal power.27 Second, far from being something ominous, the American's ability to partake of abundance is incontrovertible evi dence that free, capital-equipped workers produce more and therefore can demand more of all goods, in cluding grain products. Some observers who' are economi cally naive believe that all that is needed to assure the world of enough food.is for Americans to cut their grain consumption drastically.

Apparently, the hamburgers and hot dog buns forgone will somehow be transformed into more grain for the impoverished, worldwide. What these opponents of the current level of consumption fail to realize is that were such a curtailment in grain 1978 PERSPECTIVES ON HUNGER IN THE WORLD 651 demand to occur, U.S. grain produc tion (supply) would soon decrease as well. There is no convincing proof that the hungry in the rest of the world would be beneficiaries of such a reduction in U.S. consumer grain demand. What the poor countries of the world really need is not a lower standard of living for U.S. citizens, but a higher one for themselves. Conclusion Christi ani ty teaches its adherents that Faith should be completed by works ofcharity. The hearts of those who have been blessed with the God-given gifts of orderly societies, of protection for legitimate economic undertakings, and of a social atmos phere where envy does not domi nate, ought to respond to those who suffer, with corporate and individual giving. But, at the same time, the reasons for continuing food hard ships ought to be proclaimed. For families worldwide could be receiv ing untold benefits which they, themselves, their ways, and their governments have made, as yet, unattainable. @ -FOOTNOTESlE. P. Prentice, Hunger and History (Con stitution and Free Enterprise Foundation: New York, 1939), p. 24.

2Ibid., pp. 24, 25, and 26. 3Harry A. Miskimin, The Economy of Early Renaissance Europe, 1300-1460 (Prentice Hall, Inc.: Englewood Cliffs, N.J., 1969), pp. 26-27. 4Ibid., p. 26. 5E. Washburn Hopkins, India Old and New (Charles Scribner's Sons: New York, 1902), p. 236. 8D. Gale Johnson, World Food Problems and Prospects (American Enterprise Institute: Washington D.C., 1975), p. 17. 7Miskimin, p. 52. 8Miskimin, p. 53. 9Thomas Carlyle, The French Revolution, Vol. II (Thompson & Thomas: Chicago) p. 71. lOHenry E. Bourne, The Revolutionary Period in Europe (The Century Co.: New York, 1914) p. 194. 11Helmut Schoeck, Envy (Harcourt, Brace & World, Inc.: New York, 1966), p. 46. l2Ibid., p. 47. l3James Luenberger, "Guatemala" (unpub lished presentation), Grove City, Pa., April, 1978. l4Schoeck, p. 49. l5Schoeck, p. 60. l8J. W. Sewell & L. M. Street, Is the Sahel a Wasteland? (Overseas Development Council: Washington D.C., 1976).

l7Johnson, p. 75. 18Roger V. Clements, "British Investment and American Legislative Restrictions in the Trans-Mississippi West, 1880-1900" in T. C. Cochran & Thomas B. Brewer, Views of American Economic Growth (McGraw-Hill Book Co.: New York, 1966), pp. 163-164. 19P. T. Bauer, Dissent on Development (Har vard University Press: Cambridge, 1972), p. 149. 20Ibid. 2lBauer, p. 149. 22Bauer, p. 169. (Italics added) 23Kenneth E. Boulding & T. MukeIjee, eds., Economic Imperialism (University of Michi gan Press: Ann Arbor, 1972), p. xiii. 24Mark Blaug, "Economic Imperialism Revi sited," The Yale Review, 50 (March, 1961), pp. 341-342. 25Boulding, p. xiii. 26Johnson, pp. 35-36. 27Johnson, p. 37.

Brian Summers The Social Responsibility of Business THE current debate over the social responsibility of business can perhaps be clarified by focusing on what society and business are-and what they are not. Society is a collective concept des ignating a group of people. It is an abstraction, not an entity. Society has no body, no soul, no conscience, and no responsibilities. Only indi viduals have these attributes. Business is also an abstraction, not a separate being. A business has no goals; businessmen have goals. A business has no responsibilities; businessmen have responsibilities. Instead of speaking of the «social responsibility of business," it is more accurate to speak of the ((personal responsibilities of businessmen." What, then, are the personal reMr. Summers Is a member of the staff of the Foun dation for Economic Education. 652 sponsibilities of businessmen? It is almost presumptuous to even ask such a question, since no one has more than a vague idea of another person's responsibilities. However, we can make a few general com ments pertaining to the busi nessman's status as an owner or as an employee.

We can say almost nothing about the responsibilities of an individual proprietor, except that he should pay his bills, live in a civilized man ner, and obey the rules of common decency. Beyond that, what he does with his business is just that-his business, not ours. It is somewhat different with cor porate executives. Unlike a pro prietor, an executive is not working with his own investment; he is working with the investments of the corporation's stockholders. Thus? he THE SOCIAL RESPONSIBILITY OF BUSINESS 653 is responsible to the stockholders. If the stockholders tell him to use cor porate funds to support education, hire the handicapped, establish youth centers, combat drug abuse, and aid community development, it is his responsibility to do so. But if the stockholders tell him only to earn profits, that is his sole corporate responsibility. However, this does not completely preclude corporate involvement in commu nity affairs. Company-sponsored community programs can improve worker morale, engender good will, and thus aid the executive in fulfill ing his responsibility to the profit seeking stockholders.

The executive is responsible for his stockholders' investments, both over the short term and the long term. Thus, he must ask if, over the long run, he is endangering their capital investments by sponsoring programs inimical to capitalism;- He must ask whether, in the long run, it will pay to advertise in antibusiness media. And he must consider whether the corporation should sup port institutions that are working to preserve what is left of the capitalist system. Our Duties IDEAS O;\; Such a program of limited corpo rate responsibility will fail to satisfy many critics of capitalism. Perhaps this is because they fail to under stand the operation of the free mar ket profit and loss system. In a free market, profit seeking performs a vital social function. Businessmen cannot arbitrarily set asking prices; competition leaves them little choice but to charge whatever the market will bear.

Thus, the prime source of profits is the efficient use of scarce factors of prod uction-conservation. The businessman earns profits by using as little as possible to provide con sumers with as much as possible. The more a businessman cuts his costs of production, the more factors of production he leaves for other people to use. And the more he strives for profits, the more he must ignore his prejudices and deal with people solely on the basis of what they can contribute to the business. The profit-seeking businessman tries to give consumers the most for their money while making the most efficient possible use of scarce re sources. What is irresponsible about that? ~ L1BEHTY OUR duties towards ourselves and towards our social environment coincide. Indeed, there is only one duty, namely to grow mature. FRITZ KUNKEL Ralph Bradford THOSE MAYFLOWER ECOLOGISTS THE SOUL of America was stirred to its depths in recent months by the awful implications of the world shaking Snail Darter Case. Perhaps no event of recent times has pro vided at once such a severe testing of our composite character, and such a clear indication of our national des tiny.

Recall the situation: A big dam, designed to impound certain waters for the dual purpose of flood control and water conservation, was stopped in its tracks, so to speak, when somebody discovered that, if com pleted, the dam's rising waters would seriously discommode a small colony of fishlets called Snail Dar ters. Mr. Bradford, of Ocala, Florida, Is well known as a writer, poet, speaker, and business organization consultant. 654 Nobody had ever heard of them except a handful of ichthyologists concerned with marine esoterica, but no matter. The reaction was prompt and fearless. No more con vincing example could be found, I suppose, of our concern for the wel fare and safety of minorities. It should make us take heart. Our con cern is not alone for the whales, sharks and tuna, but for the small est of nature's children! The Snail Darters are about two inches long, and they exist in sev eral types, or families. Those living in the area of the dam in question number, I believe it is estimated, at perhaps ten or fifteen thousand. The immediate problem was that these little creatures like shallow, active water; and the pressure and relative immobility of the impounded water THOSE MAYFWWER ECOLOGISTS 655 might well be their undoing.

Clearly, it was a tragic situation, a dramatic confrontation. On the one hand, here were sev eral thousand minnow-sized fish, about to have their native habitat radically changed and their lives imperiled, if not terminated. On the other hand, below the dam and for miles around there were a large number of human beings who had been led to believe that the dam would protect them from floods and fu~nish them with plenty of water for irrigation. Clearly there was a confliCt of interest. Clearly also, no person of conscience and compassion would let the rights and needs and conveniences of men and women take precedence over the comfort and safety of a colony of fish, be they big or little. After all, the fish were here first! Certain relevant observations may be made here. First,· the Snail Darters are entitled to life, liberty and the pursuit of piscatorial happi ness. What right has Man, in his quest for safety, and in his relentless chase after things material, to inter fere with the schedule of life which the Snail Darters have established as their own? Clearly, these little fish have a prior claim on the sym pathies of all reasonable. and com passionate creatures.

However, one's indignation begins to lose pressure at this point, when one reflects that the same observation might be made with respect to another species. This one, indeed, is much better known than the Snail Darter was until recently. I mean those fascinating little inverte brates called Lumbricus Terrestris -namely, the Earth Worms. They too have been cruelly and shame fully treated. What right has a member of the human species to dig them up from their cozy moist bur rows, impale them upon cruelly barbed hooks, and utilize their squirming death agonies for another ignoble and barbarous purpose namely, to lure innocent fish to the fatal indignity of the torturing hook, and the slow suffocation of the wa terless creel? Questions of Propriety It might also be noted that the Earthworms have another timely claim just now on our sympathy and understanding. You see, being her maphrodites, they do not follow the normal patterns of sexuality-a life-conditioning that should win them great sympathy among those people who are now so militant about the ((rights" of sex deviates.

But that,after all, is an aside. Apart from questions of moral and social propriety, there is also the question of what business the fed eral government has meddling in such matters in the first place whether in the life pattern of worms and snail darters, or in the damming 656 THE FREEMAN November and artificial distribution of water. But I suppose only a human troglo dyte, attached mentally to the Dark Ages, would raise such a point. However, a nice incidental· ques tion might be injected, namely, what of the waters themselves? They are things of nature, wild and free, cas cading from mountain heights to lower levels, and finding haven at last in the mothering bosoms of the Oceans. In the matter of freedom, let's be logical. What right does a government have to say to one sparkling stream, Go yonder in freedom, and to another, Stay here in sluggish damnation? Fortunately, such questions· occur less frequently these days than they might otherwise have done except for what· was surely an act of pre ventive Providence. And that brings us to those Mayflower Ecologists, a small group of heroic souls that have been, alas, unknown and neglected.

Much has been made, of course, of the freedom-loving independence of the Mayflower passengers as a whole-how brave they were, and adventurous; how willing they were to work and starve and sacrifice in the name and for the sake of free dom. And this is altogether fitting and proper. It is especially gratify1978 THOSE MAYFLOWER ECOLOGISTS 657 ing, I may add, to those who can discover a patronym and possibly an ancestor among them. All glory to their memory! But among them was the small group of seers that has been denied the credit and recognition it de serves. Indeed, their names are not even mentioned in the history books, which goes to show the in gratitude we often display toward our true benefactors, and our callous insensitivity to what they have done for us. What Might Have Been But the Snail Darter Case has helped correct this long-standing in justice. Sensitive souls realize at last how fortunate it is for us that among those Mayflower adventur ers there was a small but militant and fearless group of ecologists and environmentalists. Their names will never be known, but without their influence, and that of their spiritual descendants, dire things might have happened to our country.

Take that headstrong Governor Clinton, for example, who proposed to dig a canal across New York Sta te, from the Hudson River to Lake Erie. He had visions of long strings of barges, bearing freight and even passengers, and encourag ing commerce and industry, not only in the Mohawk Valley but along the Lake shores. He had the quaint no tion that it would, as the booster's phrase went, ttopen up the West." What nonsense! It would only have frightened the deer and disturbed wild life generally. Fortunately the project was killed in time, thanks to a devoted and fearless band of envi ronmentalists who saw through the crass commercialism of the whole plan. Then there was the crazy WeIland scheme for a canal around, of all things, Niagara Falls. The theory was that freight could be carried by low-cost water transport, through locks around the Falls, without dis turbing their beauty, and tp the great benefit of economic and social development. There was more promotional nonsense of similar kind. Fortunately it was killed in time and the Falls were saved.

But of course society still had to deal with those silly people up at what was known as the Soo, with their zany idea of connecting Lakes Huron and Superior for ship travel, with alleged economic benefits to the Minnesota, Michigan and Wis consin northwest areas, and indi rectly to the whole national econ omy. That scheme, too, got nipped in the bud-an environmental and ecological triumph that was no doubt greeted with enthusiasm by the otters, and which probably pre vented great by-pass inconvenience to the migratory Canadian geese. Worst of all, perhaps, there was that fantastic scheme to connect the 658 THE FREEMAN two great oceans by means of a canal across the Panamanian isthmus. How fortunate that the far-sighted ecologists were "ableto stop that one! Otherwise, there's no telling what might have happened. Such a vast ditch might have lowered the water tables of both continents, with disas trous effects" upon the health and happiness of bothm uskra ts and frogs. The toads might not have minded, being amphibians; but sheer disaster might have struck at Full Use of Potentialities sea, where the outflow of Pacific water might have altered the mat ing habits of the giant Galapagos turtles. This would have been tragic indeed.

So thank heaven for the Snail Darter Case, which served to bring these and some other matters into better perspective. And thank heaven also for those unknown Mayflower ecologists and their sociological heirs! , IDEAS ON LIBERTY IF the goal of mankind is to realize the potentialities of the species to the fullest, it becomes necessary to insure to all men the fullest possible personal freedom. Confining freedom of action to a few, in the totalita rian way, is simply unintelligent-not to mention its immorality; for such a limitation arbitrarily confines the quantity and quality of service to society which might otherwise be forthcoming. John Stuart Mill put the case for personal freedom-and for the free enterprise system-in its ultimate form when he said: HThe only constant and unfailing source of progress is liberty, for by it there are as many centers of improvement as there are individuals." Compulsion may force men to produce as much as their masters insist upon. I say tt may ," for it is doubtful that unfree men or slaves ever produce as much as their masters wish, even under the lash. But what is not doubtful at all is this: compulsion will not make men produce more and better things than the master themselves wish.

The theoretical maximum of production in an unfree society, there fore, is limited by the imagination of the few who are in control. SYLVESTER PETRO, ((Freedom and the Nature of Man"

Sharon B. Mulwitz Do lOu Believe •In Freedom? Do you believe in freedom? That question should be easy to answer. But it is a commitment that de serves some thought. One aspect of freedom is the right of an individual to make choices how he wants to live, spend his money, and the like. An integral part of this right of choice is the privilege and responsibility of ac cepting the results of that choice, taking the bad along with the good if we would retain the right to make decisions. By using government aid as an ueasy out" for problems that con front us, we encourage government to tax us to pay for its uhelping hand." The government operates on Mrs. Mulwltz, a housewife In Paris, Tennessee, here shares some of the ideas on liberty gleaned as a participant In a recent weekend seminar conducted by the Foundation for Economic Education. our tax monies. What appears to be free is only an illusion. It comes immediately, or will eventually come, from your pocket and your neighbor's pocket. When you accept government's helping hand, you lose your freedom of choice as to the use of scarce and valuable resources.

Money that you could have spent as you wished will become tax money over which you have no control. When we accept government aid, we give up our decision-making power in another way. Government does not extend its ((helping hand" without making certain regulations. As we become more and more de pendent on this aid, we subject our selves to more and more regulations. We can look around and see the results of this in our everyday lives. Note, for instance, the great number of state and federal regulations 659 660 THE FREEMAN applicable in such heavily sub sidized areas as schooling, housing, transportation, health care, and the like. Another aspect of freedom is the right of each person to live his life as he sees fit. Most of us feel that we should be allowed to live as we please. But how often do we consider our neighbor's rights? All too often we defend our rights and work to pass laws that take away the rights of others. Our neighbor's lifestyle may be contrary to our own; but if we are to maintain a free society we must tolerate our differences. Too often we are tempted to stamp out any beliefs contrary to our own. BeA Mutual Concept ware. Let us remember that others may be just as anxious to stamp out our beliefs. The only way to preserve freedom is to defend each person's right to his way of life.

Do you believe in freedom? Do you believe in freedom enough to make your own choices and take the re sponsibility for your deeds, and to allow your neighbor to do the same? Do you believe in freedom enough to defend a man's right to a lifestyle that you personally feel is wrong? Those who truly understand the di mensions of freedom will realize that none of us can be free if we do not allow our neighbor his freedom. @ DEAN RUSSELL, ttMy Freedom Depends on Yours" IDE,\S O;\; L1BEHTY FREEDOM is destroyed between two persons to whatever extent either one uses violence or the threat of violence to impose his will or viewpoint upon the other. Regardless of who is the aggressor and who is the victim-or whether the violence is legal or illegal-freedom is still infringed. If you have rendered me helpless by throwing me to the ground and sitting on top of me, everyone understands clearly that my freedom has been severely curtailed. But what is not generally understood is that your freedom is also curtailed as long as you must spend your time and effort to hold me down. You thereby restrict your own progress and improvement just as you do mine.

Freedom is a reciprocal relationship based on voluntary agreements and actions. This applies in all human relationships, even though they are seldom as clear and dramatic as person-to-person violence. The only real possibility for complete freedom for yourself as an individual is for you to refrain from initiating violence or the threat of violence against anyone else. This is the vital first step toward a condition of mutual nonmolestation-a step that anyone of us can take as soon as he is ready.

W)rld inthB glfI?Qfan IoefL Clarence B. Carson 23 The Cold War: RevoUtionaryva EvoIutioncr'ySocialism THE UNITED STATES emerged from World War II as the pre-eminent military power in the world. That pre-eminence was symbolized by the development of the atomic bomb, two of which were dropped on Japanese cities inducing that coun try to surrender. The great world powers of the interwar years had either been crushed or were very nearly impotent. Germany had been as absolutely defeated as possible. About all that remained to make the In this series, Dr. Carson examines the connection between Ideology and the revolutions of our time and traces the Impact on several major countries and the spread of the ideas and practices around the world. devastation complete would have been to sow the bombed-out cities with salt. Japan saved a shred of honor by being permitted to keep its emperor. The weakness of France had been decisively demonstrated by the Nazi conquest. Only the swaggering and 'boasting of Musso lini had made Italy appear to be a great power. Britain emerged vic torious in the war but was shortly reduced to minor power potential by the nationalizing zeal of the Labour Party, China faced, as it had, incip ient civil war and was hardly in position to play the role of a major power.

The Soviet Union, too, emerged 661 662 THE FREEMAN November victorious in World War II. How that empire would rank as a mili tary power is still a controverted question. The devastation wrought by the German armed forces on that country had been great. Stalin had so disrupted agriculture with his ef forts at collectivization that produc tion was far from adequate for the population. Forced industrialization had succeeded only in getting pro duced what the political powers con sidered most urgent. But the Soviet Union had something beyond ordi nary military powers; its leaders had the will and know-how to use terror. Terror was used both in the subjection of the peoples of Eastern Europe and probably more exten sively than ever the peoples within the Soviet Union. The combination of military power, terror, and decep tion made the Soviet Union a major power in effect. At any rate, most of the powers that had been were no longer major powers. Western Europe was largely a power vacuum, as was the Far East. This had repercussions in many other parts of the world, for the former great powers had carved much of the rest of the world into spheres of interest and colonies.

Many of these colonies broke away or were turned loose to fend for themselves. The British Empire hardly deserved the name any longer after a few years of Labour rule. The United Nations was supposed to fill this power vacuum, or at least, to stand guard while old nations re covered and new nations took shape and emerged. It did not work out that way. Such authority as the United Nations had was vested in the Security Council. The perma nent members had a veto power over any action, and the Soviet Union began quickly using this power to forestall unwanted action. This was especially disruptive be cause, as it turned out, the major threat to the peace was the Soviet Union and the international com munist movement it spawned. Wherever they could, Soviet leaders fomented civil war to advance Communist Party takeovers any where the opportunity occurred. Some Moments of Doubt The world was not as clearly in the grip of an idea at the end of World War II as it has since become.

The defeat of Nazism and Fascism discredited those particular var ieties of revolutionary socialism. West Germany and Japan were not only freed from the control of to talitarian regimes but also given great impetus by the occupying forces to adopt institutions more in accord with freedom. It is true that the United Kingdom went headlong toward socialism for a few years after the war and that India's lead ers were under the spell of socialism, 1978 THE. COLD WAR: REVOLUTIONARY VS. EVOLUTIONARY SOCIALISM 663 but the course of many countries was unusually uncertain. The United States bent away somewhat from the collectivist path of the 1930s-not for long, no doubt, but enough to illustrate the pos sibilities. Television had not yet taken hold as the shaper, molder, and decider of opinions. The sway of the intellectu als was still largely dependent upon the influence they could wield upon poli,ticians. College education had not become so common a possession, and it is perhaps the single most important way that intellectuals fasten their ideas upon people. Intel lectuals were still marginal in many lands, and the lines between ideologies rather more clearly drawn than in a later day. Many people still lived mainly by custom, tradition, and within the framework of family and religion, a much larger percentage, at any rate, than would so live thirty years later. It is dif ficult to grasp how drastic the changes have been, facilitated by technology and guided increasingly by ideologies.

It will be helpful to keep this in mind as we explore the impact of the Cold War. There was a time, at least for Americans, when the Cold War appeared to be simple enough and readily understood. The world was divided in two, or so we were told. One world was communist, and the other was free. The two worlds were engaged in an ongoing conflict which was not out-and-out war, but was not peaceful either. (The con flict was also often described as be tween communism and democracy.) The United Nations became the verbal battleground of this conflict, and nations were aligned there with one side or the other. Bench marks in the conflict were such events as Churchill's ((Iron Curtain Speech" at Fulton, Missouri, military aid to Greece and Turkey, the revelations of Soviet atomic spies, the fall of China to the Communists, the North Atlantic Treaty Organization, and the Korean War, among others.

The Cold War Reinterpreted What was once clear and distinct, however, has since become fuzzy and indistinct. What was called a Third World emerged in the late 1950sand in the 1960s, aligned with neither side. The Soviet Union and Com munist China became embroiled in their own ideological conflict. Re visionist historians began to rein terpret the Cold War. The more rad ical of these declared that the con flict was all a product of American hysteria, that communism had not so much fomented it as been vic timized by it. Communism, in this view, was a bugaboo invented by Americans so far as its aggressive ness and threat to world peace was concerned. While such revisionist history is 664 THE FREEMAN November sorely out of touch with reality, it may at least open the way to revi sion that is needed. The nature of the conflict has indeed been mis construed, perhaps not so much as it was originally represented to be but as it turned out. The tyrannical character of communism has rarely, if ever, been exaggerated. Nor would it be easy to overstate the imperial aims of Soviet Communism. An international conspiracy has existed as long as the Soviet Union, and there are several of them now. That this movement has engaged in sub version, espionage, and terrorism is well-established fact. Whether it has posed an immediate threat to the United States, or what the na ture of the threat was and is, may be open to debate, although there is no conclusive answer available.

Most of the misconstruction of the Cold War, however, has been over the nature, character, and tendency of the opposition. That the opposi tion has been between communism, on the one hand, and freedom, on the other, is certainly doubtful. This is not to question that there are many who are opposed to communism or that there are those who stand for freedom. It is rather to question that they have generally been in control of or directed the actual conflict. The actual events of the Cold War come into much clearer focus when we conceive of it as a conflict between revolutionary and evolutionary socialism. This takes into account the actual tendencies in the so called Free World as well as the thrust of developments within the Cold War. Varied Opposition to Communism There are undoubtedly many an gles from which communism may ~ opposed. Indeed, they may be as numerous as have been the abuses of power and atrocities of communist rulers. Some have opposed com munism because the rulers do not permit freedom of speech and of the press and suppress dissenters.

Others, because there is no freedom of religion but rather religious per secution. Some find it objectionable tha t there is no freedom of migra tion' and they are apt to see the Berlin Wall as the symbol of what they oppose. The slave labor camps have been more than many people can stomach. There are even those who find most deplorable the prohi bition of jazz and experimentation with the arts in general. The ubiquitous bureaucracy has its ar ticulate opponents. There are those who focus mainly on the economic wrongs-of communism: the confisca tion of private property, the state planning, and the absence of the free market. But all opposition to communism that amounts to anything can be reduced to two headings. One is what will here be called Metaphysi1978 THE COLD WAR: REVOLUTIONARY VS. EVOLUTIONARY SOCIALISM 665 cal Opposition to Communism, and the other Tactical Opposition to Com"munism. These can be employed in such a way as to sub sume virtually every level and kind of opposition.

Metaphysical Opposition The use of the term «metaphysi cal" may appear to be a poor choice of words. It is certainly the case that in the last century or so many have used the term as if it were synony mous with mystical, superstitious, something vague and imaginary, or evanescent. These are, however, misuses of a most valuable word for which there is no ready replace ment. Metaphysics is the study of and refers to that underlying order in the universe which gives form and regularity to things and rela tionships. It is the source of natural law a-nd normality in beings. If it is mystical it is so only in the sense that our sensual know ledge of this realm is indirect. Metaphysics is ac tually the foundation of precise knowledge. Without it, we are left only with a poor substitute statistics-whose precision is achieved only by distortion. It may be objected, however, either that my phrase does not take into account religious opposition to communism or that what I am really referring to when I call it metaphys ical is religious. An explanation of the meaning of Metaphysical Opposition to Communism should make it clear that neither of these objections is valid. I mean that the opposition to communism is based upon fixed and immovable positions, on the be lief that communism cannot and will not work, that it can only be tyrannical and destructive. Why?

Because it requires the transforma tion of human nature, something that is fixed and immutable. Be cause it requires the abridgement of the natural order of things, some thing that has not occurred and so far as we know cannot and will not occur. Because it requires that indi viduals no longer pursue their self interest, that they abandon what is essential to their survival. In brief, these things consti tute the metaphysical opposition to com munism. More Philosophic than Religious It should be clear that this is not a religious opposition to communism. It is a philosophic or, mayhap, scien tific opposition. True, there is reli gious opposition to communism, and for good and sufficient reason. Communism is atheistic and com mitted to wiping out all independent theism. But when the religious op position is examined carefully it will be discovered that so far as it is a fixed and immovable position it is based on a metaphysics-like posi tion' namely, that God is the same yesterday, today, and tomorrow, 666 THE FREEMAN November that He has implanted in us our immutable human nature, and that He has ordained an order for things and for men. Take away the concep tion of God as Creator and man as Creature, with all that is implicit in this, and the religious opposition to communism tends to melt away. In short, the firmness of the religious opposition to communism has a metaphysic-like base. For any who might have difficulty accepting the above formulation, let· me put the matter another way: Metaphysics provides sufficient ground for an un altering opposition to com munism.

It still may be objected, however, that there are those who are appar ently immovably opposed to com munism who know naught of metaphysics. This is an objection, fortunately, which involves only semantics. For example, there are those who oppose communism on the grounds that it is contrary to human nature. This position, and others like it (the economic arguments, for instance), are metaphysically founded, whether those who use them are aware of it or not. Igno rance of philosophic terminology does not alter in the least the philosophic base of a position. Even so, it may be useful to broaden somewhat those that might be included among the metaphysical opponents of communism. There is a sense in which all who are inalterably committed to an opposition to communism-as, for example, those who would maintain that if it would work they still would not want it, for whatever reasons-are metaphysi cal opponents. It is permissible to use the word in this way, for by so doing we embrace all metaphysic like positions, Le., all that are firm, hard, rock-like, and underlyingly immovable.

Tactical Opposition Tactical Opposition to Com munism is of a quite different order. It is opposition to communism on the ground that one or more or many of its tactics or methods are wrong. (Those who oppose it on metaphysi cal grounds might be expected to find the tactics objectionable also, and they usually do. They may even make arguments against com munism in terms of methods, but that is not the final ground of their opposition.) The position amounts to this: If communists would uclean up their act," they would be acceptable. If they would grant free speech, not persecute religion, provide due pro cess of law, permit migration, allow opposing political parties, abolish slave labor camps, and so on, they would no longer be objectionable. When they oppose communism, evolutionary or gradualist or demo cratic socialists are by the necessity of their position tactical opponents. Twentieth century liberals (who 1978 THE COLD WAR: REVOLUTIONARY VS: EVOLUTIONARY SOCIALISM 667 vary in the extent to which they are socialists) are also generally tactical opponents of communism when they oppose it. Communism-in-power has been a source of great embarrass ment to other socialists. Indeed, it has been an embarrassment or much worse, to many communists as well. The violence, the terror, and the drastic action have raised doubts as to the validity of the socialist enterprise.

It is worthwhile to note that the most vociferous opposition of socialist intellectuals is class-like. They object most strenuously indeed, many reserve their objec tions-to the persecution of intel lectuals. Thus, Stalin's most hein ous crime for many of them was the Purge of the late 1930s. Millions of peasants and Kulaks could be persecuted and die with never a whimper from Western intellectu als. But when a few thousand intel lectuals came under the gun, many socialist intellectuals began to ques tion Soviet Communism. The same play is still being enacted today, though the scene has changed. A few intellectual dissidents in the Soviet Union can bring the glare of public ity to bear on their persecutors, thanks to Western intellectuals, but the other persecution goes largely unnoticed. However that may be, socialist opponents of communism have usu ally had to try to balance themselves on a razor's edge. On the one hand, they have opposed communism. In its own way some of this opposition has been real enough. That is, evolutionary socialists do believe, often enough, that the revolutionary way is the wrong way, that drastic measures are harmful and unneces sary. Moreover, they may be as op posed to Soviet or Chinese or Cuban Comm unist expansion as anyone else. In fact, evolutionary socialists may go to war against communists, albeit reluctantly and limitedly.

But the anti-communism of gradualists must always be re strained. It must stop short of being or becoming Metaphysical Opposi tion to Communism. If it should be come metaphysical in character it would be tantamount to a repudia tion of socialism. Another way to say it is to formulate it this way: Opposi tion to communism must not trace communist practice to the socialist idea-to the idea that has the world in its grip. Deplorable communist practice must be ascribed to an ex cess of revolutionary zeal, to evil men, such as Stalin (once he had passed from the scene), to persecu tion of communists and inhibition of their legitimate aims by others. It has been a most difficult task for evolutionary socialists to oppose communism, one that has fre quently been made necessary by the communists but unpalatable at best. If communism would just become 668 THE FREEMAN November another political party, the diffi culty would vanish, for evolutionary socialists could oppose it without any danger of the opposition becom ing metaphysical. But that can only happen where communists have not come to power or have not consoli dated their power.

The Opposition Performs a Double Reverse One way that evolutionary socialists (which generally includes liberals in the United States) main tain their balance on the razor's edge is to focus their efforts on op posing anti-communism. Techni cally, they oppose communism, but this position can be made largely harmless by rigorous attention to the methods by which communism is to be opposed. The method that is generally proscribed in the United States and Western Europe is what goes by the name of McCarthyism (which takes its name from the late Senator Joseph McCarthy of Wis consin). One dictionary defines McCarthyism as tt1. public accusa tion of disloyalty, esp. of pro Communist activity, in many in stances unsupported by proof or based on slight, doubtful or irrele vant evidence. 2. unfairness in in vestigative technique. 3. persistent search for and exposure of disloyalty ..." Indeed, ttMcCarthyism" is the unpardonable sin in the American liberal ranking of evils. It ranks alongside if not above (tRed Scares"

and ttwitch hunts" for communists. Tactical Opposition to Com munism turns into tactical opposi tion to anti-communism. The threat of communism is transmuted into the threat of anti -communism. This is an easy shift for evolutionary socialists to make, indeed, a shift difficult to avoid. The reason is that opposition to anti-communism has a metaphysical base or, if anyone pre fers, an anti-metaphysical base. All socialism is premised on the possi bility of transforming human na ture. Metaphysics is the level at which this is found to be impossible. Hence, revolutionary and evolution ary socialists are at one at the metaphysical, or anti-metaphysical, level. They are irreconcilably op posed to metaphysical anti communism. I do not deduce this from the phenomenon of ttMcCarthyism," of course. It is deduced, so far as it is deduced, from the philosophical, or ideological, premises of socialism.

But there is a great body of evidence which is explained by and supports this conclusion. When ttMcCar thyism" or a HRed Scare" is under way these occupy the center stage of tactical opposition. But once they have abated, then virtually any tac tic by which communism might be opposed comes under fire. In the final analysis, all metaphysical or tthard core" opposition to com1978 THE COLD WAR: REVOLUTIONARY VS. EVOLUTIONARY SOCIALISM 669 munism is intolerable to socialists, though tactical opposition is permit ted except by uhard core" com munists. Differences Not Understood The depth of this division has not been generally admitted, if it has been understood. There are many practical reasons for not dramatiz ing or for not recognizing it. Evolutionary socialists cling to or at least profess many of the common values which derive from Western Civilization, such as representative government (which they tend to telescope into democracy), religious toleration, free speech and press, free elections, and so on. By their very evolutionary method they at tempt to avoid arousing a metaphys ical opposition to themselves. Anti communists, too, have hoped to en list them in a common cause against communism. Some anti-communists have portrayed social reformers and liberals as dupes of communists, as taken in by them. (Indeed, this was the general view of the matter as held by anti-communists in the 1950s.) They may have been, indeed may be, but if the above analysis is correct the affinity between them is not something skin deep as such a construction implied.

In any case, it is what has hap pened when common cause against communism has been made by metaphysical opponents and tactical opponents. The contest has been called the Cold War. The main con test has been between the United States and its allies on the one hand and the Soviet Union and its allies and satellites on the other. Com munist China was formally excluded from the Cold War most of the time but was nonetheless a sub ordinate part of it. The contest was carried on in many ways-by diplo macy, by propaganda, by subversion and espionage, and in actual wars-but the examination of it here will be restricted to three levels: war, foreign aid, and espion age. No Chance for Alliance If the preceding analysis is cor rect, it is unlikely that evolutionary socialists and metaphysical anti communists could make common cause against communism. They cannot effectively wage war, either hot or cold, against communism.

They cannot, that is, if evolutionary socialists are to maintain their bal ance on the razor's edge. To wage war effectively the enemy must be clearly identified, support for the war must be mustered, and force brought to bear sufficient to over come the enemy. It is not possible to do this from a razor's edge; it re quires a broad base rather than a tenuous position. It may well be that the animus behind the Cold War came-from 670 THE FREEMAN November metaphysical anti-communism. The provocation came from the com munists, of course. But the Cold War strategy was largely shaped by Democratic Presidents. Between 1933 and 1969 there was only one Republican President-Eisenhower. Nixon worked vigorously to defuse the Cold War, so he was not an architect of it, not as President any way. The main outlines of the Cold War were shaped by President Tru man. Eisenhower and Dulles con tinued it, as did Kennedy and Johnson.

It is significant in the context that Democrats were the main strategists. The Democratic Party has been by far the more deeply infected of the two major parties by evolutionary socialism. Liberal in tellectuals have· had their greatest infl uence .within the Democratic Party, though they have exercised considerable influence on Republi cans as well. The domestic programs of the Democrats since 1913 have been in the direction of centralizing power in the federal government, manipulating the money supply, regulating and controlling business, managing the economy and redis tributing the wealth. True, they have only limitedly pushed for gov ernment ownership and have taken the route of control instead. But that has come increasingly to be the method of evolutionary socialism for the past several decades. Democrats have tended to get the United States embroiled and en tangled in international affairs in the twentieth century. Beyond that, they have tended to get us into wars.

There is no particular mystery as to how this should be explained. Democrats have been enamored with the use of government power. Whatever they have been con fronted with, they have inclined to the view that the solution lay in the exercise of political power. In inter national relations, this tends to lead to war or to involvement in what ever conflicts are taking place. Hot Spots in the Cold War Twice during the Cold War, the United States became extensively involved in an armed conflict: first in Korea and then in Vietnam. Pres ident Truman gave the order which brought Americans into combat in Korea. President Kennedy got the United States armed forces increas ingly embroiled in Vietnam, and President Johnson made the war primarily an American responsibil ity. The main point here is the kind of wars these became, not whether American involvement was justified or who was to blame for them. In both cases, they were what came to be called limited wars. Under Gen eral Douglas MacArthur's com mand, American forces, along with such allies as they had, mainly 1978 THE COLD WAR: REVOLUTIONARY VS.EVOLUTIONARY SOCIALISM 671 South Koreans, were close to over running and defeating the North Korean army. At that juncture the Communist Chinese intervened with massive ground forces. Mac Arthur proposed the bombings of the Chinese access, but he was re fused permission to do so. When he persisted by criticizing the policy behind the scenes, he was relieved of his command. The war· zone was restricted to Korea, and the war was eventually ended without a de cision having been. reached.

In Vietnam, no American military commander attempted to win the war by invading North Vietnam. Even the bombing of North Vietnam was restricted, and major ports were not shelled by sea. The justification of the conflict, where any was given, was so narrow and subtle, with infi nite attention given to subtle niceties, that Americans were con fused and baffled by the whole af fair. After MacArthur's dismissal, no grand strategy was devised to achieve victory at arms. None was ever inaugurated in Vietnam. The justification offered was that the war might be vastly expanded by any aggressive action. Actually, this might have been a sound argument for never becoming involved in the conflicts at all. After all, it was cer tainly possible to foresee that China might intervene in Korea. North Vietnamese intervention in South Vietnam was a fact, and Chinese or Russian intervention a distinct pos sibility from the outset. What the enemy might do is hardly ever a foregone conclusion.

Why a No-Win Policy? The deliberate limitation of these wars needs a better explanation than those that were offered. The framework has been supplied for a better explanation. It is this. Evolutionary socialism must pre vent, even at very high cost, the opposition to communism from be coming metaphysical. Any all-out war-any war to be fought through to victory-will become metaphysic like because of the ideological char acter of the conflict. Once the gener al opposition to communism be comes metaphysical, all of socialism is likely to be indicted. Undoubt edly, the motives that inhibited American leaders were complex. What persuaded anyone of them to the limited war concept cannot, of course, be known. But that an ex tensive apology for limited warfare was prepared and disseminated by American intellectuals, aided and abetted by their counterparts in other lands, cannot be doubted.

That these same intellectuals have bent their energies over the years to forestall the arising of an artic ulate metaphysical anti-communism can be demonstrated ad nauseam.

672 THE FREEMAN November Intellectuals have worked dili gently over the years to turn the Cold War into an internecine con flict between revolutionary and evolutionary socialism. A concerted effort was made to do that in Viet nam. They kept up a continual clamor over the alleged undemo cratic character of the government of South Vietnam. Similar, though not as vociferous, charges were leveled at the South Korean gov ernment. That many South Viet namese continued to pursue their individual self-interest economi cally was considered shameful by these intellectuals. Efforts were made to turn the American army into a combination of Red Cross and Little Sisters of the Poor. They were set to the task of rebuilding Viet namese villages, tending the sick, and feeding the hungry. Only if evolutionary socialism (usually de scribed as democracy) could demon strate its superiority to the claims of communism (revolutionary social ism) would the American involve ment be justified, presumably.

A Smoke-Screen for Communism My purpose in discussing these matters is to describe the role that the Cold War has played in spread ing the idea and fastening its grip upon the world. The initiative be longs to international communism. Communist lands are generally closed to foreigners except on a limited and supervised basis. Massive efforts have been made over the years to shield the rest of the world from the reality of communism. In effect, the attempt has been made to have communism known only as an ideal system. This ideal is spread around the world by whatever propa ganda outlets communist powers have. The reality in other lands is measured against the communist ideal, to its detriment, as a rule. Evolutionary socialists tend to take these criticisms seriously as, in a sense, they must. They are, after all, of a competing brand of socialism and must constantly dem onstrate the superiority of their way. Hence, communist pressure is turned into a necessity for pushing socialist measures by the other camp. In short, anti-communism be comes pro-socialism at the hands of evolutionary socialists.

This was nowhere better illus trated than in the foreign aid pro grams. When the foreign aid pro grams got under way under Presi dent Truman they were billed as an effort to stop or contain Soviet ex pansion. As such, military aid had top priority. Very soon, other kinds of aid became increasingly impor tant. It became, in the course of time, a major international device for propping up socialist regimes in many lands. Actually, the above chronology is not quite correct. Some foreign aid programs propped 1978 THE COLD WAR: REVOLUTIONARY VS. EVOLUTIONARY SOCIALISM 673 up floundering socialist regimes from the beginning. In England, the Labour Government was in deep trouble by 1947, within two years of its installation, and was appealing, with success, to Washington for aid. The European Recovery Program was from the outset a venture in promoting collective efforts among nations. But foreign aid must be given closer examination later on.

The Points Summarized The points here are rather general ones. They are: 1. That the Cold War, whatever its origins, was turned into a contest between evolutionary and revolu tionary socialism. 2. The conflict between these two varieties of socialism is over means not ends. 3. To prevent their common end from becoming apparent, as well as the probability that they would not ultimately differ much from one another, the whole attention must be focused upon methods. 4. The common cause between Metaphysical Opponents of Com munism and Tactical Opponents could not and did not survive the trial by fire. Truman's conduct of the Korean War disenchanted those who deeply opposed communism. Foreign aid was subjected to withering criticism over the years by both sides. American intelligence and se curity agencies have now been sub jected to such exposure and curtail ment that it is doubtful they can perform any function successfully.

5. In the conflict between evolutionary and revolutionary socialism, evolutionary socialists advance their own variety of socialism. 6. Communists are thus enabled by their criticism to push toward more and more socialist policies in the world. In brief, the Cold War provided the occasion for the spread ing of socialist ideas, even though it was supposed to contain com munism. This is the general framework from which the Cold War is to be viewed. It serves as a transition, too, from the more detailed examination of the application of the idea in a few countries to its general spread to countries around the world. It has been spread both by international communism and from country to country as socialism, liberalism, the welfare state, social democracy, or whatever. First, we will deal with the spread of communism. Ii Next: 24. The Cold War: The Spread of Communism.

TimothyEshleman .LABOR INA FREE SOCIETY LIFE is full of desires and wants. From birth until death one strives to satisfy many needs and desires. Labor is the process by which a worker obtains the goods and ser vices needed for survival and de sired for enjoyment. In a free society, an individual is free to labor as he wishes. The es sence of the free society is to ~~leave everybody totally free to act crea tively as he pleases, to let anyone and everyone exchange their goods and services with whomever they choose on whatever terms can be mutually agreed upon, to let the fruits of one's labor be one's own, and to limit gO\1ernment-society's agent of force-to the protection of This article first appeared in the May 1978 Issue of The Entrepreneur published by students of the De partment of Economics at Grove City College In Pennsylvania. 674 everyone equally in these free doms."l As a worker is free to labor accord ing to his talents and wishes, his interests and those of others are advanced. Who in society-the indi vidual or the state-can better de termine what is in the best interest of a worker? Naturally, each indi vidual alone can determine what his best interests are and should be free to act accordingly.

A worker, free from restraints against his productive energies, may develop new skills. One per son's ability may make possible for him accomplishments not equally attainable by others. Each person may develop an area of expertise or specialization for which he is best suited. The division of labor, resulting from expertise and specialization, LABOR IN A FREE SOCIETY 675 requires cooperation and joint effort on many tasks. The cooperative ac tion of those with varying proficien cies is more efficient and productive than the isola ted action of self sufficient individuals. Just as a myriad of tasks to be performed exists, there are workers with vary ing skills to perform them. Furthermore, the division of labor makes possible technological im provement. As the division of labor becomes more advanced, observant and inventive men notice that cer tain identical, repetitive tasks may be performed by precision machines.

Such machines allow these tasks to be completed more effectively and efficiently. Everyone, in an unhampered market economy, is free to accept the best opportunity available. One seeking work may choose the job which provides the best return for the services he offers. A prospective employer may choose those workers who offer the best services for the wages he has to pay. What a worker receives for his labor will be determined by what others are willing to exchange for it. Competition among workers en sures that no one is paid too much, while competition among employers makes sure that no one is paid too little. Exploitation of one individual by another, in a free system, is impos sible . No person or group could monopolize any activity so long as there is freedom for all to enter the market. Where there is free entry there is competition and this compe tition, among both those who de mand labor and those who supply labor, would make exploitation im possible.

However, should an individual or group be granted legal monopolistic powers in the labor market, coercion and exploitation would then be pos sible. If the suppliers of labor-the workers-are granted monopolistic power, i.e., through labor unions, they would be in a position to com mand benefits greater than those they would receive in free exchange. If the demanders of labor-em ployers-obtain monopolistic power then the workers could be exploited. In a free society, involuntary un employment is inconceivable. There is always more work to be done than workers are able to do. Full employment occurs when an em ployer is able to exchange the wage he has available to pay for the ser vices offered by a worker. The terms must be mutually beneficial or no deal will be made. If no deal is made, unemployment will result; but this is voluntary unemployment in that one party has chosen not to accept the other's offer.

However, when the market is not permitted to function freely, un employment must result. ((Un employment is a phenomenon of the 676 THE FREEMAN partially rigged market."2 As gov ernments and unions interfere with the market, artificially raising the cost of labor higher than the price normally set by the market, i.e., higher than employers are able to pay, fewer workers will be hired, even though their services are still needed. Even when technological advance makes possible increased production with less labor, workers will not be left idle. While initially displacing some workers, technology reduces the cost of goods. With their in creased spending power, resulting from lower costs, consumers may demand other commodities which, previously, they had been unable to afford. The displaced workers, after readjustment, may find employment in the production of goods the de mand for which has now expanded.

The free economy provides work for all who want to work while providJobs for All ing a greater supply of goods and services. But for this to occur, labor mobil ity is needed. If pressure groups or the state restricts workers' freedom of entry into labor markets, un employment must again result. The workers displaced by technology are prohibited from entering new areas of work. For the free society to endure, all individuals must be free to labor as they choose. All must be at liberty to creatively explore and perfect their abilities. Only as men are permitted to labor freely may they realize their greatest potentialities. ® -FOOTNOTES1 Leonard E. Read, Let Freedom Reign (lrvington-on-Hudson: The Foundation for Economic Education, Inc., 1969), p. 46. 2Leonard E. Read, Government-An Ideal Concept (Irvington-on-Hudson: The Founda tion for Economic Education, Inc. 1954), p. 78. IDEAS ON L1BEHTY By forcing some wages above free market rates, some unions now get higher wages for their members than such workers would receive in a free society. But these forced higher wages for some mean that others must accept lower wages or unemployment (unless the government resorts to inflation). These lower wages and unemployment (as well as this pressure for inflation) would disappear if every man, including the unemployed, were free to compete for every job. As long as some of men's wants remain unsatisfied, there will be enough jobs to go around.

PERCY L. GREAVES, JR.

Sven Rydenfelt The Rise and Decline of a Welfare State THE economic trials of recent years, according to a growing number of competent commentators, have nothing to do either with business cycles or structural long range changes. The sickness of the seven ties is much more severe and goes to the roots of our industrial civilization-the market economy. In many western countries markets presently are in ruin. All of us apprehend that the un precedented wealth and living stan dard we enjoy is a product of the industrial system. But not so many are aware that the prime mover of this system in the western world has been the market economy in an air of freedom-a system now threatDr. Rydenfelt Is Professor of Economics at The University of lund, Sweden. ened by suffocation for lack of free dom. As a matter of fact, we are living on fortunes inherited from the past, consuming a heritage created and built by free enterprise and free en trepreneurs. Unless we fundamen tally change the economic policies that have brought us into the pres ent situation, we cannot hope for relief.

The Road to the Welfare State Since the 1930s-see the famous book Sweden the Middle Way by Marquis Childs in 1936-Sweden has been the leading country on the road to the welfare state. It is a road sloping downhill, and once the wagon had started, you could not prevent it from rolling on faster and 677 678 THE FREEMAN November faster. In Sweden, government suc cessively has taken over more and more of the responsibilities for the citizens' life and welfare from the cradle to the grave. And welfare is like a drug-greater and greater doses are needed. The pressure for greater doses has been so strong that no government so far has been able to resist. But welfare is expensive and has to be paid for. So taxes had to be raised all the time. In 1960 taxes in Sweden took 30 percent of GNP, a share that in 1977 had increased to 53 percent. Generous minimum standards of living, guaranteed to the citizens by the State, mean that a great many Swedes in the lower income brackets enjoy the same standard whether they earn a living or not. As a mat ter of fact, most Swedes are getting social allowances of different kinds, tested according to needs. Such al lowances combined with the highest tax rates of the world mean that, after an income rise, you will be hit not only by extremely high margin al tax rates but by losses of social benefits, too. Most Swedes are vir tually allowed to dispose of no more than 5 to 10 percent of an income rise, which means that incentives for working overtime or working hard to get promoted are very weak.

Sweden, as a matter of fact, is halfway socialized. But as all politi cal parties have backed the ((nationalizations," they never use the word ((socialize." Very important sectors such as education and medical care are nearly totally socialized, as is the postal service, telegraph, rail way and air communications and public utilities in local communities. The Swedish State Church means that a major part of religious service is socialized with the staff wholly integrated into the ordinary bureaucracy. The buildings are im posing but attendance extremely low. Sweden Hard Hit A few years ago only 5 percent of manufacturing industry was ((na tionalized," but because of the crisis and threatening bankruptcies a lot of big enterprises-shipyards, steel mills and textile factories-have been socialized in late years. The present share may be about 10 per cent. But this low figure is highly de ceptive. Actually, there is no free enterprise in Sweden at present.

And as for private enterprise, its freedom area is so restricted by gov ernmental regulations that in prac tice it is half socialized. Liberties and incentives for private entre preneurs are in short supply. Sweden by wide margin holds the position as the number one welfare state of the world. And among all developed industrial countries it was most severely struck by the 1978 THE RISE AND DECLINE OF A WELFARE STATE 679 present economic crisis. This is not mere coincidence, as we shall see. Since 1974 production in man ufacturing industry has been declin ing. Housing construction since 1970 has been halved, while cement consumption in the same period shrank 40 percent. The 550 biggest Swedish companies reported aver age profits declining from 8 percent in 1974, 5 percent in 1975, 2 percent in 1976 to 0 in 1977. And in a country with 30 percent of the labor force in public sectors (where GNP is calculated from expenditures, not from revenues) GNP in 1977 fell 2.5 percent. And while 7 percent of the merchant marines of the world in 1977 were idle, the Swedish figure was 27 percent idle. If Swedish pro duction figures since 1974 have been extremely low, inflation figures, on the contrary, have been extremely high (1977 = 14%).

If Sweden was most severely struck· by the economic crisis, other countries did not escape their fate, either. Many people were puzzled by the simultaneous emergence of troubles in different countries, but this widespread occurrence is of cen tral significance for the analysis. According to most competent judges the trials of the seventies are effects-primary and secondary from governmental policies. And as similar and simultaneous causes will produce similar and simultane ous effects, the simultaneous emergence of troubles in different countries may, most easily, be ex plained as effects of similar govern mental policies. As a matter of fact, the same thing was true in the de pression years of the 1930s. And there certainly are conspicuous similarities in economic policies of different countries in the same periods, rather independent of the political color of the governments. Imitation and fashion behavior are to be found not only in garments but in policies, too.

Free enterprise is a system strong enough to endure certain amounts of bad treatment-State restrictions and regulations. But there are boundaries you cannot cross without severe consequences. In the 1970s many industrial countries have, ob viously, passed beyond these limits, with adverse repercussions. And Sweden as the most advanced explorer of welfare territories, also suffered the worst repercussions. Creative Powers of Entrepreneurs In the economic world everything is started and kept going by individ uals. And as machines are kept going by fuels, human beings are kept going by incentives. The strength of the incentives decides the performance. In all business the entrepreneurs are key persons. Their skills and talents determine the success or the failure of the enterprise. And high 680 THE FREEMAN November qualities as leaders of production and personnel do not suffice. More important are ideas and imagina tion, capabilities of developing new and better produ~ts and methods.

Above all, an entrepreneur must be creative. No outstanding creative work can be done without freedom. Therefore, all restrictions, all commandments and guidances, all fetters and chains, check and impede creations. In all countries under political dictatorship the freedom of the creators is strictly limited, and not only in arts and literature. For that reason, extremely few real innova tions have been born in the Soviet Union since 1917. Almost every thing in science and technology has been imported and copied from the West. Like all creators, entrepreneurs need freedom. If they are given freedom-in societies with law, or der, and infrastructures-they will start and develop enterprises with miraculous growth potentials. Under such conditions of economic freedom in the era of the industrial revolution, a fantastic development started in England in the 18th cen tury. There were the miracle periods of West Germany and Japan after World War II, and the two ~~golden"

decades (1950-1970) in other west ern industrial countries after the postwar ~~disarmament" of central regulations. Also notable in recent decades are such enclaves of economic freedom (not always polit ical!) as South Korea, Taiwan, Hong kong and Singapore. Periods of economic freedom economic miracle periods-always were lucid intervals in history, periods of relatively short duration. Sooner or later a system of State regulations was built that checked and impeded development. In the 1970s began a new era of uninhibited governmental interven tion, restricting entrepreneurial freedom. And those in power could exploit all the potentials of Big Gov ernment armed with modern com munications, electronics, and com puters. According to a Swedish study (by Professor Kurt Samuelsson in 1975) the number of new laws regulating industry and working life was greater during the 5 years from 1970 to 1975 than during the 85 years preceding 1970.

In 1973 Sweden got 80 new laws threatening entrepreneurs with jail or fines. In 1974 the number was 127 and in 1975 no less than 180. An interesting coincidence was observed in this context-as the pro duction of new laws accelerated, production of commodities and employment decelerated propor tionally. This flood of economic regulations meant that the freedom of entrepre neurs was restricted more drasti1978 THE RISE AND DECLINE OF A WELFARE STATE 681 cally than it had been since pre industrial times. The entrepreneurs are treated by their new political masters not like free men, but more like slaves. Thus are more and more entrepreneurs so disheartened and discouraged that they lose fighting spirit, capitulate, and leave their positions prematurely. Wage Earners and Consumers in Power Kings and emperors in power are seldom willing to accept the results of free markets. When universal suf frage transmits political power to the great majorities of wage earners and consumers, they also reject the market.

All citizens are consumers and hate price rises on food, housing, and the like. One cannot reasonably expe~t them to abstain from using the powerful State regulation ap paratus at their disposal. The result is governmental price regulations price controls, rent controls, cur rency controls, and so on. Adult citizens are voters, too, most of them forming strong pres sure groups} demanding social bene fits and-in times of crises extensi ve relief actions from gov ernment. And as few governments are able to resist such demands, State budgets are bound to be deficit budgets. The Swedish deficit in 1977 was no less than 20 percent of budget (almost 10 percent of GNP). Big deficits mean big inflation, and the result in Sweden in 1977 was a price increase of 14 percent. Most adult citizens want jobs. A job means not·only income but social respectability, too. Especially in slowdown periods with few job op portunities, the bankruptcy of a firm often means severe hardships for the employees. In that case, employees of the firm (including representa tives of their unions and. their local governments) will form very strong pressure groups, desperately de manding relief actions. Very few governments are able to resist such demands for State subsidies. Often very large amounts are required.

In all market transactions two parties, seller and buyer, are in volved. In free markets there is a power balance between the parties. Neither party is able to force upon the other conditions he is not willing to accept voluntarily. All transac tions occur as the result of free bar gaining. The central quality of a free market is the absence of coercion non-violence. But as soon as one of the parties in a market is able to use the powerful State apparatus (with laws, courts, prisons, policemen, soldiers, executioners) the balance of power is distorted. The party disposing of the apparatus is always able to force upon the other party conditions the latter would not accept voluntarily. So it is that wage earners and 682 THE FREEMAN November consumers, by means of price con trols, rent controls, currency con trols, extensive state subsidies and high taxes, are busy undermining the foundations of free markets. The prime movers of free markets, the entrepreneurs have been neu tralized in strait jackets, woven from hundreds of governmental regulations.

The Penalties for Oppression Must Be Paid Those in power have fulfilled this umurder of the market" with good conscience, firmly convinced of the soundness and righteousness of their policy, as has always been the case of those in power. But oppression and exploitation hurt not only the oppressed and exploited but the oppressors and exploiters as well. So one of the most fundamental ethical laws of history may be formulated: The penalties for such crimes have to be paid. There was a time in history when entrepreneurs and ttcapitalists" used the State apparatus to oppress and exploit wage earners and consum ers. Adam Smith and Karl Marx, among others, rightly criticized this exploitation. Now the power pen dulum has swung from the one ex treme to the other. But no matter who is the exploiter or the exploited, exploitation always works like a poison on the productive powers of a society.

In Sweden production has been falling since 1974. In spite of enor mous borrowing from abroad (50 bil lion Swedish crowns 1975-1977) the living standard could not be pre vented from falling in 1977, and it must continue to fall as long as this paralyzing policy is continued. What about job security and the power of the wage earners, these Hrights" extorted from entrepre neurs and guaranteed by State laws? The answer must be: These securities and' powers are built on illusions. The more of these laws we have, the worse for the wage ear ners, because such exploitation of the entrepreneurs checks and im pedes production. The result is a society with much unemployment and job opportunities in short sup ply. In such a society no government can guarantee living standards, real wages or employment. The truth is that securities and powers of wage earners nowhere are greater than in a free market with high-speed production, full employ ment and labor in short supply. In the highly competitive labor market-the sellers' market-there are lots of chances and choices for the job seekers. In such a market the wage earners have the trumps. In such a market only the more effi cient and generous employers can get the manpower they need. Other employers soon have no personnel and no enterprises.

1978 THE RISE AND DECLINE OF A WELFARE STATE 683 Secondary Effects of State Subsidies In slowdown periods with job op portunities in short supply, the bankruptcy of a firm most often means severe hardships for the em ployees. Because of the economic crisis, the Swedish Government in 1977 was pressed to pay more than 30 billion Swedish crowns to a num ber of threatened big companies, in cluding 14 billion to the shipbuild ing industry. At the same time the government acted to nationalize major parts of the shipbuilding and the steel industries and a minor part of the textile industry, on grounds that the relief sums were so enor mous they could not reasonably be given to private concerns. The shipyards were among the first plants severely hit by the crisis. Many of these plants obviously were superfluous and had to be closed. But which plants? In a free enterprise system the market would have passed sentence.

The high-cost plants would have been doomed, and so the survival of the fittest would have been guaran teed. But the pressure from employees and communities was so desperate that governmental resources were mobilized, subsidies paid and the threatened plants saved. Soon all orders had been filled; yet produc tion went on. Ships that nobody wanted or needed were built, ships to be stockpiled at anchor in shel tered bays and fiords. Still, the com peti tion for new orders grew more and more desperate. As Government paid the losses, prices far below costs were accepted. The biggest Swedish shipyard, the Kockums in Malmo, from the begin ning had a much stronger position than the big yards in Gothenburg a result of good management-and therefore proudly refused the sub sidies. But eventually they too were obliged to accept prices below costs to obtain new orders. But no private enterprise can exist for more than short intervals under such circumstances; sooner or later it must capitulate. And so, in the last months of 1977, even the Kockums had to surrender and ac cept governmental relief.

Governmental subsidies start chain reactions, distorting the com petitive balance and undermining even well-managed and sound en terprises. Subsidies, like drugs, re move pains for the moment but with severe secondary effects upon the body~ In recent years, for instance, the Swedish Government has paid 30 percent of the prices of new ships buH t in Sweden. The Norwegian Government, however, refused to grant import licenses for those ships, as such subsidizing according to DEeD rules meant dumping. Shipping companies buying new ships at prices far below costs-and 684 THE FREEMAN far below earlier price levels-of course were able to underbid com panies that had bought their fleet in earlier periods. Because of such un derbidding, freight rates in 1978 often cover no more than one third of total costs in old established com panies. In Sweden the biggest ship ping companies-the Brostroms and the Salens-as a consequence went bankrupt and had to be saved by Government.

As a matter of fact, lots of enter prises in Sweden-and in other countries, too-are kept going by means of State subsidies. And thanks to the subsidies they can sell and do sell below production costs, which means dumping. And while dumping transactions formerly were exceptions, they have become more and more the rule. Governments cannot ignore this development. If they don't protect domestic enterprises against such unfair practices, numerous efficient and sound firms will be ruined and have to close. One may deplore this development, this H new mercan tilism," but should recognize that dumping-and protectionism-is nothing but the last link of a chain, the inevitable secondary effect of extensive State subsidies. It is important to distinguish be tween firms that are able to compete with low prices because of State subsidies (dumping) and firms that are able to compete with low prices be cause of efficiency and low costs. In recent years countries like South Korea, Taiwan, Hongkong and Sin gapore have often-because of their competitive powers-been charged with dumping. But such charges were mostly unjustified. Their com petitive prices were, more probably, the natural outcome of a highly effi cient free enterprise production sys tem.

The Tide is Turning as Freedom Wanes In the last decades of the 18th century when economic freedom re leased powers that started the in dustrial revolution, the tide was turning. Since then in the western world we have been living in a mar ket economy, capable of producing higher and higher living standards. And we have been so integrated into this system that we take it for granted and look upon it as natural and normal. But from a historical perspective all such happy periods are lucid intervals of limited duration. To all appearances we are now in the last stage of such an interval. Once more the tide is turning-the market economy threatened by suffocation for the lack of freedom. i A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN RADICAl CAPITAlism THE anarchists and the anarcho capitalists have a seductive position. Who would not wish to be free of government? You pay your income tax, and the next day you read in the papers that the Department of Health, Education and Welfare has kicked away $7 billion in fraud and waste. The fines levied by your town dog warden for your straying animal are on a progressively incremental basis-and in vain you plead that if your dog can't run free the wood chucks eat up both your own and your neighbors' gardens. When it comes to taxes and often niggling coercion you get it from both ends of the scale, whether federal or local.

Since the State is so incompetent and so oppressive in many ways, there should be a built-in audience for David Friedman's The Machin ery of Freedom: Guide to a Radical Capitalism (Arlington House, 165 Huguenot St., New Rochelle, N.Y. 10801, 240 pages, $10.00). This is an enlarged version of an earlier work by Mr. Friedman, and not all of its statistics have been brought up to date. Its information about the ex pansion of the libertarian move ment, however, is current, and the arguments presented by Mr. Fried man for his case mesh with the lively material that is now being presented month by month by a dozen or so new libertarian publica tions. We have reached a point where Mr. Friedman can call The Freeman ~~an old-line conservative libertarian magazine," which can he taken, not as a put-down, but as a tribute to a pioneer who is suddenly surrounded by a host of new settlers. Mr. Friedman, who happens to be the son of Milton Friedman, would presumably call himself a radical libertarian rather than a conserva tive. His ((radical capitalism" would bring practically every thing schools, roads, the police, firemen into the scope of free market opera685 686 THE FREEMAN November tions. A conservative libertarian (such as myself) would go along with him on the subject of schools. The conservative libertarian can follow Mr. Friedman absolutely on the de sirability of ending the government first-class mail monopoly. Mr.

Friedman's plans for higher education-((Adam Smith Univer sity"-include a provision to let students pay the professors direct ly. The success of the Berlitz schools in teaching languages would argue that the direct payment for a mar ketable pedagogic commodity is fea sible. As for free immigration I can only say that I follow Mr. Friedman in my failure to worry about Mexican wetbacks who come to California and Texas to take jobs which nobody else wants to do. My only objection to opening the old Ellis Island gates indiscriminately relates to the idea, now enshrined in New York law, that the welfare rolls must be open to every indigent on an immediate basis. Mr. Friedman would take care of this by denying automatic welfare to any immigrant for fifteen years. He would also exempt immigrants from minimum wage requirement or, even better, repeal the minimum wage outright. Courts and Police It is when Mr. Friedman suggests that our police, our courts and the law itself can be turned over to the marketplace that he begins to get on marshy ground. It is possible, as he says, for two contracting parties to provide for arbitration when they draw up contracts. The justice com ing from private arbitration can be swift by comparison with the lag gard proceedings of government sys tems. As for the police, the tremen dous growth of private security or ganizations is evidence that protec tion can be bought and sold. The Wackenhut Corporation, for exam ple, provides central station alarms, screens passengers in air ports, and patrols the Trans-Alaska Pipeline.

Mr. Friedman is entirely plausi ble in making a case for the exten sion of private arbitration and pri vate protection. But he is not at all clear on what might happen if a contracting party were to go on strike against the decision of a pri vate arbiter. He suggests that any one who might welsh on an arbitra tion agreement could be blacklisted by the business community. But who would have the power to enforce the blacklist? When, in the days of the so-called McCarthy terror, cer tain screen writers were blacklisted they simply changed their names and went on providing moving pic ture scripts for studios that were willing to pay for a good product no matter who originated it. The ((mar ket" cares nothing for blacklists. Mr. Friedman envisages a society 1978 RADICAL CAPITALISM 687 in which there might be many courts and even many legal systems. Everybody would be entitled to his own protection agency. The pairs of protection agencies involved in a case would agree in picking a court.

Ah, yes. But what if a murderer didn't like the court that had been chosen for him? Could he fire his protection agency at will? And what about appeals from a verdict? The whole concept of free market legal systems, competing in the same ter ritory, is too nebulous for my grasp. National Defense When it comes to national de fense, even Mr. Friedman boggles a bit. How, when nuclear submarines and intercontinental ballistic mis siles cost billions, could they be fi nanced by what would amount to charitable contributions? What if the contributions were insufficient to protect the whole country? Would New York, having contributed more per capita than Philadelphia or At lanta, be entitled to better protec tion? The idea of letting private in surance companies finance national defense with money from their cus tomers also runs into difficulties: some people might consider them selves to be insufficiently menaced to take out insurance. Mr. Friedman also rejects Ayn Rand's idea of financing national defense by hav ing the government charge for the use of its courts. As long as a monopoly court system exists, it would be coercive taxation for the government to collect rent from anybody who is compelled to use the courts. Mildred Adams has sug gested that voluntary taxation might pay for national defense. The citizen would pay his defense tax in return for getting the right to vote.

But this would make the citizen part of a government, and how could any good anarchist accept that? In the end, Mr. Friedman admits he has a baffiing problem on his hands. If the free market cannot provide enough anti-aircraft de fenses and cruise missiles, Mr. Friedman is prepared to make one exception to his anarcho-capitalist credo. ((In such a situation," he says, ttl would not try to abolish that last vestige of government. I do not like paying taxes, but I would rather pay them to Washington than to Moscow-the rates are lower." Anyway, he says, ttl said, near the beginning of this book, that I thought all government functions should be divided into two classes those we could do away with today and those we hope to be able to do away with tomorrow." This makes David Friedman the realistic son of his father-and brings him closer than he thinks to the ttold line con servative libertarians" who accept the limited government theory of Adam Smith and James Madison.' A LITERATURE OF FREEDOM Besides The Freeman and its articles, The Foundation for Economic Education publishes or otherwise stocks for resale a number of books of other publishers concerning the free market, private property, limited government concepts and the moral and spiritual principles underlying freedom. These titles and prices are listed in an annual catalogue-order form distributed with the November issue ofNotes from FEE. Additional copies of that catalogue are available on request.

Several readers have asked for more descriptive reviews of these books than the catalogue affords; hence, the following abstracts. This list by no means includes all the authors or books worth studying in the field, but it will suggest the various areas and ideas on liberty to be further explored. BALLVE, FAUSTINO Essentials of Economics This is a primer of economics for the intelligent layman by a great Spanish authority. It deals lucidly with the basic concepts of economics and puts economic thought into historical perspective. It is a positive presentation of the principles of economics. BASTIAT, FREDERIC Economic Harmonies It has been the great work of economics to discover the natural harmony that 688 results when men are free to pursue their interests in their own way and prevented from using force and fraud. By contrast, socialists find discord, dishar mony, and exploitation when men are free. Bastiat reaffirms and reasserts harmony in this his most extensive ex position of economics.

Economic Sophisms This is Bastiat's most delightful book. It is devoted almost entirely to exposing the fallacies of protectionism and as sociated policies. His method is the logiA LITERATURE OF FREEDOM 689 cal extension of their ideas to the point that their absurdities become apparent. Bastiat bemoaned the necessity of going deep, but his writings are so luminous that the reader can stand safely on the shore and survey the depths. The Law The law, it has been said, is nothing more than the will of tyrants. ·So it has been many times in history. But just laws depend upon a law which underlies the law passed by legislatures or de clared by rulers. It is a law which pro vides the framework of lIberty. Emanci pation from the doleful theories of the compulsive state awaits discerning read ers of this brief treatise. Selected Essays on Political Economy The discovery of economics by Bastiat conferred a great boon on the world. For through him a delightful way was pro vided for every literate person to dis cover economics. It was Bastiat's insight that all schemes of government inter vention are more than somewhat ridiculous. It was his gift to present them in such a framework that others could see them in the same light. His essays on political economy hold the state up to the bright glare of the light in such a way that none who have read it should ever again be fooledby the fraudulent claims of the benefits of the use of political power.

BOHM-BAWERK, EUGEN VON Capital and Interest Anyone interested in being upresent at the creation" of the modern structure of economics, even vicariously, will find it exciting to read Bohm-Bawerk's studies. He may have been moved to some extent by his desire to refute the socialists, but it was even more important to him to get economics on a solid foundation. His Iucid explanations may make it appear that the task was easy, but in this mas sive work, he was struggling manfully to nail the edifice of economics to a founda tion that would hold it in place. The Exploitation Theory of Socialism-Communism The Labor Theory of Value was the foundation of Karl Marx's theory of exploitation, as well as that of many other socialists. Bohm-Bawerk here sub jects the theory to careful analysis and exposes its fallacies. The impact of this demonstration is to cut the foundation from under Marxism.

Value and Price Marx claimed that the price goods bring is determined by the labor that goes into making them available. The Austrians developed a counter theory to that of Marx. Value was their crucial concept in this theory. In this extract from a larger ~ork, Bohm-Bawerk makes the seminal formulation of what he called uthe sub. jective theory of value." By way of this theory, the buyer in the market place assumes his important role in determin ing price. BROWN, SUSAN LOVE and others The Incredible Bread Machine Most history textbooks are filled with bias against private enterprise, and in favor of government intervention. A group of young people assembled mate rials that counter that bias. In clear and provocative language they have de scribed the doleful impact of government 690 THE FREEMAN November intervention in the economy. They have, by so doing, uttered an articulate cry for freedom. The young may have their eyes opened by reading it; older readers may find hope in the appearance of such thoughtful young writers.

CARSON, CLARENCE B. The American Tradition Is the libertarian position incompatible with conservatism? Somewhere, perhaps, but in the United States, NO! This becomes clear in this careful and illuminating work on the American tra dition. In the United States, a great tradition took shape that was protective of and in harmony with liberty. This book describes, too, how the tradition has been distorted and is being undermined. The Fateful Turn from Individualism to Collectivism Most histories ascribe the massive gov ernment intervention of the 20th cen tury to changing circumstances. In this pathbreaking work, Clarence Carson shows that it was changing ideas which really underlay the movement. The case for individual liberty is set in a philosophical framework freed from materialism and determinism. The Flight from Reality We live in a world of cause and effect. Predictable consequences follow from ac tions because there is an order in the universe that makes it so. Reformist in tellectuals have emerged in· our era who ignore this order, and this enables them to visualize a new order of their· own creation. The result is spreading disor der, with tyranny in the wings. Theirs is the flight from reality.

The Rebirth of Liberty Liberty has been all too often stillborn in the revolutions of our era. The promises of freedom were but deceitful allure from would-be tyrants. One revolution was different, however; it was the American Revolution. How the promise was turned into reality is the subject of this contem porary study of the great men and events of that revolt by Americans from English rule. Throttling the Railroads The railroads drew the American people into an economic union. Even before they had succeeded in doing that, however, governments began preying upon them, regulating, disrupting, and inhibiting their activities. This book tells the story of that regulation and its debilitating impact on a once great industry. CHAMBERLAIN, JOHN The Enterprising Americans Those who are used to seeing American business pilloried for its warts will be pleasantly surprised-and relieved-by this study. True, businessmen have faults, even as do the rest of us. But they deserve to have their achievements memorialized without ideological bias.

John Chamberlain has performed this service admirably and in accord with the canons of good scholarship. The Roots of Capitalism The connection .between economic thought and practice is a vital one. In similar manner, the precondition of pri vate property to the effective use of capi tal is essential. Chamberlain has woven these and other threads together to tell 1978 A LITERATURE OF FREEDOM 691 the modern story of freedom and produc tion. CURTISS, W. M. The Tariff Idea No notion has been more persistently held in our era than the one that obsta cles ought to be placed in the way of goods entering a country. Even today auto stickers proclaim ~~Every foreign car imported cost 10 jobs for Ameri cans". W. M. Curtiss has exposed this fallacy in this brief, easy-to-read and hard-to-put-down booklet. The case for freedom is clearly and forcefully made. DIETZE, GOTTFRIED In Defense of Property What is the role of private property? Is it theft, as Proudhon proclaimed? Is it sim ply a means by which the individual pursues his selfish interests? Professor Dietze presents a quite different view in this erudite study. Property is the linch pin of civilization. It is essential to the determination and maintenance of what is proper. When the protections of it are removed, the civilization disintegrates.

The Federalist: A Classic on Federalism and Free Government It is generally conceded that The Federalist was the greatest American contribution to political thought. It fol lows that a clear understanding of these papers and the thought of the men who wrote them is vital both to thinking about politics and to an understanding of the United States Constitution. Profes sor Dietze has provided invaluable aids to doing this in his seminal work on The Federalist. FRIEDMAN, MILTON Capitalism & Freedom There is an unavoidable nexus between government and economics. The art of governing is entangled with economy. It is at the junction of the two that Milton Friedman brings his searching analyti cal mind to bear in this book. He realizes that the hope for freedom lies in reducing the role of government and extending the freedom of the individual. He makes not only some statements of general principles but also some interesting con crete proposals.

GARRETT,GARET The People's Pottage Something happened to the character, kind, and quality of American govern ment in the 1930s. That the New Deal was the engine of the change none can doubt. Garet Garrett tells what hap pened and how it happened, clearly, vig orously, and with a horrified fervor. Above all, it happened in the kind of necessary order and under such a cloud cover of confusing l'anguage that it had to constitute a coup d'etat. GREAVES, BEnlNA B. Free Market Economics, 2 volumes: A Basic Reader and A Syllabus Economics has been described as the dismal science. Some students may even think of it as a dreary study with its endless charts, graphs, and statistics. But free market economics is not that way. It is a hopeful science. These selected readings and accompanying study guide make it as delightful as man thinking, discerning, and setting forth in the most attractive way his best ideas.

692 THE FREEMAN November GREAVES, PERCY L., JR. Mises Made Easier Professor Ludwig von Mises wrote within the framework of the great intel lectual debates of the past century. Also, in his greatest work, Human Action, he wrote with fine precision, choosing just the word that expressed his exact mean ing. For these reasons, a glossary of the most important concepts, and most dif ficult, is a great aid to those who would understand his writings. Percy Greaves has provided such a glossary written in familiar language. Understanding the Dollar Crisis The dollar is declining in value. There have been several official devaluations, and there is a continual day-to-day de cline in its value. Why is the dollar falling in value? What is the cause of it? How can the situation be changed? In a series of lucid lectures, Percy Greaves answered these questions in Argentina, and they are now available in book form.

HALL, VERNA M. The Christian History of the Constitution of the United States The Constitution of the United States was founded upon the conception of a Higher Law. The Higher Law concept is itself founded in the belief in the laws of God. Vema Hall has collected and ar ranged in a single volume the evidences of the Christian foundation of our Con stitution. HAMILTON, ALEXANDER and others The Federalist Serious students of government, and particularly American government, may well begin with these papers written by John Jay, Alexander Hamilton, and J ames Madison. It is the most brilliant justification and explanation of the Con stitution that has been made. The prin ciples of effective government and lib erty are set forth in this great work! HARPER, F. A. Why Wages Rise Do real wages depend upon the growth of labor unions? The pumping of money into the economy? Higher minimum wage laws? Increased unemployment benefit payments? In this study of the trend of real wages in the United States since 1860, Dr. Harper traces their rise to the saving and investment of produc tive capital in open competition in a free market.

HAYEK, FRIEDRICH A. Capitalism and the Historians (edited by Hayek) Did working conditions worsen with the coming of the industrial revolution? Did pre-industrial man lead a simple, unhur ried, and gracious life? Have our histo rians presented an accurate picture of the economic past? Or were they all too often presenting distortions to promote political programs? The authors included in this anthology present some startling charges and support their allegations with a convincing array of evidence. The Constitution of Liberty Every party claims to favor freedom in our day. Yet this cannot be so, as Hayek points out, because some of their policies and practices result in the loss of liberty. The time has arrived to get a fresh hold on the meaning and implications of lib erty. By his superb exposition, Hayek 1978 A LITERATURE OF FREEDOM 693 has drawn the domain of liberty so that those who will read him may survey it whole. More, he applies his theories to policies he would recommend.

The Road to Serfdom What are the effects of economic plan ning by government? Is there a real choice between liberty and security? What happens to the rule of law under socialism? What happens to morality under socialism? Hayek answered these and other related questions about social ism during World War II. What has hap pened since has further confirmed Hayek in his belief in the superiority of freedom and the correctness of his analysis. HAZlITI, HENRY The Conquest of Poverty What is poverty? How may it be reduced? What are or would be the effects of most proposed efforts? Of minimum wages? Of a guaranteed wage? Of a Negative In come Tax? Of forced employment? Of land redistribution? Mr. Hazlitt has taken up these and numerous other pro posals and shows how ineffective they are, or would be. This is a sure-handed analysis of what is wrong with the pro grams that are supposed to help the poor.

The Critics of Keynesian Economics (edited by Hazlitt) Much of the world is in the throes of an inflationary binge the like of which has never before been experienced on this scale. John Maynard Keynes provided a theoretical justification of this inflation in his General Theory, published in 1936. It is eye-opening then to read what many leading economists have had to say about the Keynesian theory. Economics in One Lesson Does the destruction of buildings and equipment make for prosperity? Can government provide more employment? Do farmers need cheaper credit? Do jobs need to be spread around? Do protective tariffs benefit everybody? What is the impact of a government decreed minimum wage? Henry Hazlitt asks these and dozens of other questions and provides the answers-clearly, simply, directly, and persuasively. The Failure of the "New Economics" Was John Maynard Keynes' General Theory internally consistent? Was his HPropensity to spend" theory even factu ally based? Were his formulas really supported by any proofs? Why were the obscure theories of Keynes so popular?

Henry Hazlitt has exposed the whole pretentious mess for what it is-a call for political action supported by a facade of economic obfuscations. The Foundations of Morality Utilitarian ethics has a modern, and gracious, spokesman in Henry Hazlitt. The spirit of conciliation runs through this his magnum opus. Those who dis agree in some measure with what is persuasively argued here will nonethe less benefit from reading such an able exposition of it. The Inflation Crisis, and How to Resolve It In this 1978 updating and expansion of What You Should Know About Inflation, Hazlitt lays bare the facts about the New Inflation and analyzes problems the media scarcely skim, if they notice them at all. He shows how to protect yourself from the worst ravages of inflation, and 694 THE FREEMAN November shows how simple it would be to turn the tide-if we can develop the political will to do it. What You Should Know About Infla tion What is Inflation? What causes it? What are the effects of inflation? Is a deflation desirable? Can government control an inflation? How can government be made responsible in its fiscal policies? Henry Hazlitt answers these momentous ques tions and answers them simply, directly, and with no unnecessary qualifications or complications.

HUTT, WILLIAM H. (edited by Svetozar Pejovich and David Klinga man) Individual Freedom: Selected Works of William H. Hutt Among the most tangled issues of this era are: state power and individual rights; how to restrain the state to free the individual; what to do about private groups (such as labor unions) who exer cise coercive power; and whether a free market works or not. William H. Hutt sheds light on these with his precise thinking and careful scholarship. JUNG, C. G. The Undiscovered Self A great psychiatrist speaks here out of a lifetime of experience to what is needed in the world today. There is one thing, he says, that can successfully stop collec tivization. There is something stronger than the mass. It is the individual,-the unique, different, and exceptional indi vidual. When the discovered self replaces the undiscovered self, such an individual emerges. KIRZNER, ISRAEL M.

Competition and Entrepreneurship The market is surely the key concept in economics. The tendency toward equilib rium is one of the concepts that is an offshoot of market theory. However, a good deal of mischief has resulted from a failure to grasp the entrepreneurial role and its contribution to competition. Pro fessor Kirzner brings careful analysis to broaden our understanding of what hap pens in the market. The Economic Point of View What is economics? Does it consist of a department of human affairs? Or does it deal with an aspect of human action? Can there be a science of economics? How must it begin and what must be excluded from it? These are the basic questions which Kirzner examines in his fundamental study of the emergence of economics. KOOIMAN, HELEN Walter Knott: Keeper of the Flame According to a famous historical treatise, the frontier ended in 1890. The frontier was understood to be a symbol of oppor tunity in America. If Walter Knott en countered this notion, he certainly did not believe it. The story of his life is a refutation of any such notion. His life is a testimonial, too, to the importance of freedom.

LOVE,ROBERT How to Start Your Own School A school which follows the guidelines of the freedom philosophy is an exciting undertaking. It treats parents and stu dents as customers, education as a com1978 A LITERATURE OF FREEDOM 695 modity, the headmaster as a business man, and the teacher as a producer. Wichita Collegiate School has followed these guidelines, Robert Love maintains. The results are well worth examining. MACKAY, CHARLES Extraordinary Popular Delusions and the Madness of Crowds Those who are enamored of the supposed wisdom and sagacity of the people might profit from reading this book. Any who suppose that the number who believe or participate in something tells us any thing of its validity will find a healthy corrective. Doing what everyone does loses its attraction in the perspective of this marvelous history of mass delusions, whether the delusion was John Law's inflationary scheme, or witchcraft, or in fatuation with thieves, or what not.

MANION, CLARENCE The Key to Peace Those who think that the American way can somehow be evoked· by a vague and general term such as HDemocracy" should be especially interested in this booklet. With great economy, Clarence Manion covers the key ideas in the De claration of Independence and describes the basic institutions and practices. It reawakens pride in America and respect for the heritage. MILL, JOHN STUART On Liberty Is individual liberty of value only to the individual? Can liberty be endangered by majority rule? What is the purpose of life? What is the connection between this and liberty? Where should the power of society end and the liberty of the individual begin? These are the questions which Mill asks and to which he provides illuminating answers ·in these essays. MISES, LUDWIG VON The AntiCapitalistic Mentality Why do so many intellectuals hate capi talism? Why is it possible to get the approval of so many people for measures to restrain and penalize businessmen? A gifted scholar brings his vast learning and intuition to bear on the subject. He even explains the popularity of the de tective story from this angle. American readers will find this study particularly illuminating.

Bureaucracy Bureaucracy is neither good nor bad in itself. It is an appropriate technique for the conducting of administrative agen cies such as the police department. How ever, when bureaucracy enters the field of economic activities, the result is disre gard for the interests of consumers and disastrous rigidity and stagnation of the economy. A Critique of Interventionism The economic principles that Mises ex pounded in these six essays during the 1920s have endured the test of time. The names and places have changed, but the same tired statist notions prevail. Mises' incisive criticisms are as pertinent for Americans today as they were for the Germans of the Weimar Republic. Human Action Al though Mises wrote many books, this one is his magnum opus, the distilla tion of all his thought and learning. Although it is a broadly philosophical work and deals incisively with many 696 THE FREEMAN November branches of knowledge, all this is brought to bear on its object, economics.

It is an indispensable work for those who would master the study of man acting economically. Notes and Recollections Written in 1940, this is the story of the European economist who valiantly de fended European civilization against the ltSocialists of the Chair" until that civili zation had vanished in the darkness of World War II. This was the prelude to his second life of writing and teaching in the United States from 1940 until his death in 1973. Omnipotent Government: The Rise of the Total State and Total War Whence the penchant for total war in the twentieth century? How is this related to economic theory and practice? What was the demonic urge behind the rise of the Nazis to power? In essence, what did Nazis and Communists have in common? In this work, Mises brought his master ful powers to bear on the phenomenon of the total state. On the Manipulation of Money and Credit Translated by Bettina Bien Greaves and edited by Percy L. Greaves, Jr., are these earlier writings of Mises concerning political attempts to stabilize the pur chasing power of money and eliminate the undesirable consequences of the ~~trade cycle." Also included is a bibliog raphy of the works of Mises on money, credit and banking.

Planned Chaos The destruction of liberty in America as elsewhere has been accomplished both by private violence and by the near ir resistible force of the modern state. This ~~easy, bloodless and non-violent" transi tion to socialism is the subject ofPlanned Chaos. Professor Mises tells why the popularity of this policy is not a safe test of its soundness, why it fails in its avowed purposes, and what it does to nations which pursue it. Planning for Freedom Mises was one of the major theoreticians in the enduring principles of economics. These theories he was quick to apply to various of the controversies of his time such as ~~excess" profits, inflation, cen tral planning, unemployment, and so forth. Mises took sides courageously and argued dispassionately and well. Socialism Is economic calculation possible under socialism? What does socialism do to society? How do capitalist countries prop up and enable socialist countries to.sur vive? What is the crucial difference be tween interventionism and socialism? In this work, Mises used his great analyti cal powers to dissect the various aspects of socialism, to subject the ideas to the test of reality, and to expose their fal lacies.

Theory and History Whence came Marxism? What is the intellectual framework of socialism? How dia European thought come to re duce so much of reality to history? This is a wide-ranging philosophical work on the great issues of our age. Follow a great mind as it wrestles through delu sions to truth. The Theory of Money and Credit What people know, or think they know, 1978 A LITERATURE OF FREEDOM 697 about money and credit isn't necessarily so. For example, can government decree what is to be money in a society? Mises demonstrates decisively that this is not what governments do. In his careful scrutiny of every aspect of money and credit he brings new insight and preci sion to the handling of the subject. MISES, MARGIT VON My Years with Ludwig von Mises Ludwig von Mises was very much the formal man in public. To know his writings and hear his lectures was not to know him personally. This gives especial value to these glimpses be hind the scenes by the one who knew the greatest economist of the twentieth century best, his wife, Margit von Mises.

MOREELL, BEN The Admiral's Log Ben Moreell towered above most twen tieth century Americans. Not because of his height-though he was above the average-not because of his ac complishments, though they were outstanding-prominent engineer, Ad miral in the Navy, leading industrialist, writer, speaker, and statesman-but be cause of his courage, his integrity, and the high principles for which he stood. The best way to get to know him is through his' speeches, some of the most important of which are included in these selections. NOCK, ALBERT JAY Cogitations from Albert Jay Nock (Robert M. Thornton, editor) There is a specific medication to purge the system of the disease of statism. Its name is Albert Jay Nock. True, the medicine is addictive if taken in large doses but the addict is only much freer of the thrall of statist cant. This booklet serves only to introduce Nock, but every thing has to begin somewhere.

NORTH, GARY An Introduction to Christian Eco nomics Is there a ttChristian" economics? Indeed, is there an economics that does not have its foundations in Christianity? Do economic laws have ultimate sanctions? Dr. North has tackled these questions head-on and come up with revealing an swers. Indeed, the answers are a part of Christian Revelation rightly inter preted, he insists. Christians will want to know what is said here; others need to know. OPITZ, EDMUND A. Religion and Capitalism: Allies, Not Enemies Does Christian Socialism make sense? What are the ultimate foundations of freedom? What is the ultimate source of values and ends? Where does economics fit within the framework of philosophy? Is theism simply a convenient premise? An outstanding clergyman brings 'care ful analysis and concern to bear on these enduring questions which are particu larly important now. READ, LEONARD E.

Accent on the Right There are ways of looking at things that make it nearly impossible to decide any thing. Leonard Read invites us to ask some questions that can be answered, to 698 THE FREEMAN November focus our attention in such a way that we can draw conclusions. He shows us how to work our way out of the darkness by following glimmers of light. That is the meaning of accent on the right. Anything That's Peaceful If Leonard Read simply announced that he favored anything that was peaceful, what man of good will could disagree with him? But he does not leave it there. He goes on to name and demonstrate that a great many things we are doing do not make for peace. He shows that the peacemakers are greatly outnumbered by the aggressors. The core of his philos ophy is set forth in this book. Awake for Freedom's Sake Leonard Read's mission has been to stand in awe at the wonders about him-wonders both natural and man made-and to open our eyes to their marvelous character. He has preferred the journey to the destination, curiosity to the knowledge, the imagination to the static condition, and freedom to security.

It amazes him that so many should serve him in the market, unbeknownst to them, and he pauses to acknowledge what they do. Those who read this lyrical book may wish to join him in a chorus. Castles in the Air What is the secret to productivity? How may man's lot be bettered? Capital ac cumulation is not the answer. Tools are not the answer. These are valuable ad juncts in the effort to improve our mate rial well-being. But there is a way to improve our moral, spiritual, and mate rial well-being. First, there must be cas tles in the air. But for these to lead to anything, certain conditions must be present. Leonard Read sets them forth in this book. Comes the Dawn To humbly recognize and daily count our blessings is a vital first step toward that faith in freedom which will allow it to burst forth and overcome the darkness of socialism. Only then may we hope to bequeath to our children the foundations· of liberty we inherited.

The Coming Aristocracy Society must be shaped and influenced by aristocrats. Not hereditary aristo crats. Not aristocrats who lord it over other people. But aristocrats who are superior to others, who will be examples of what they teach, who will be followed because they so obviously know better. Leonard Read has some thoughts on how such aristocrats may emerge. Deeper Than You Think How do you measure growth? What is the effect of machines on our lives? What is the origin of the numerous ~~Problems" we hear so much about today? The an swers, Leonard Read says, lie deeper than you think. They can be found only by getting things· into a proper perspec tive. He demonstrates how it can be done with a number of telling examples. Elements of Libertarian Leadership A leader of mass men is one thing; a leader of free men is another. First it is necessary to know the difference. Then it is necessary to go to work changing and improving the one person who is avail able for the effort. Leonard Read ex plains why and how this is to be done.

The Free Market and Its Enemy Who are the enemies of the· free market?

1978 A LITERATURE OF FREEDOM 699 Is it the state? Is it the government? Is it ignorance? Is it thinkers? Leonard Read here sets forth an answer that is start ling in its simplicity, yet covers the field of all the particular enemies. There is much else in this brief book, but the character of the enemies is the central point. Government-An Ideal Concept Some vital questions for those concerned with liberty. Is government necessary? Is government an evil? Is taxation a proper use of government power? What about conscription? What are the improper and illicit uses of political power? Leonard Read employs his basic-premises and practical understanding to come forth with answers. Having My Way If there are macro problems in the world, Leonard Read thinks, they are probably reducible to micro problems. More specif ically, the great problems are really problems with individual dimensions. They are of this order: How can I im prove myself? What should my attitude be? How can I become the sort of person that other people would want to be with and consult? The answers to these and other such questions turn out to be won drously in accord with the freedom phi losophy.

Instead of Violence Violence, Leonard Read suggests, is the way to destruction. It is the easy way just as it is easier to destroy a structure than to build one-with the hard results. It is the way to inhibit creative activity and to foreclose opportunities. There is another way. Here is his rhapsody in tribute to that way. Let Freedom Reign Every man wants to be free himself, although he may not be so enthusiastic about the responsibilities entailed. But freedom for others-that is another mat ter. It is all too easy to imagine how this would threaten us. One of Leonard Read's great insights is how potentially beneficial to all of us is the freedom of others to create. This book focuses upon that insight and unfolds it in a variety of ways. The piece de resistance is ttThe Miracle of a Meal." But each essay con tains its own special tribute to freedom. Liberty: Legacy of Truth In contemplation of his 80th birthday, Leonard Read counsels that one's ambi tion in every laudable endeavor should be nothing less than an ever-improving excellence. Out of perpetual inquiry, the wooing of truth, comes the understand ing and practice of the liberty on which our lives depend.

The Love of Liberty What is liberty? Why love it? How does love of self merge with the love and concern for others? Out of a lifetime of commitment to liberty, Leonard Read speaks with authority on the burning issue of our day. He grasps the concept of liberty at its center and unfolds its numerous aspects for those who will to see. Talking to Myself It is commonly believed that people who talk to themselves are at least slightly ttoff." On the contrary, Leonard Read holds that it may well be our most re warding undertaking. True, it is not necessary to talk aloud, but the inward dialogue is itself essential. It may be that 700 THE FREEMAN November we will be ready to communicate with others when we have talked it out with ourselves. The method that Read rec ommends is clearly set forth here. Then Truth Will Out The problem, Leonard Read says, is fun damentally moral and spiritual. Under standing is important, and economic un derstanding is essential. But where there is greatness there must be great individuals. When men of virtue emerge, they will be followed. The aim of this book is to awaken the dormant spiritual ity within us.

To Free or Freeze Leonard Read has the knack of putting into everyday words the conclusions of many great thinkers. In this book he does that for some basic economic ideas. Others may explore in intricate detail the framework of economics. For him it is enough to go from premise to conclu sion in as short a fashion as possible so that the connection is not lost. He pre sents some of the great economic and po litical issues of our day in such a way as to make a choice possible. Vision UWhat is man that thou art mindful of him?" Leonard Read tells us that he is a creature of limitless potentialities. How can those potentialities be realized? What will free them for our benefit and enjoyment? Well, first there must be vision. But to have vision, there must be hope. In this volume, Leonard Read has not so much supplied us with his vision as told us how we can have our own. Who's Listening?

It is a fact of life that when you learn a new word you begin to see and hear it often. Whereas, before, you cannot even recall having encountered it. You have become ready for that word. Read's Law of Readiness comes into play. You are listening. This is a book for those who are willing to be ready. ROCHE, GEORGE CHARLES III American Federalism What is the essence of the American system of government? Is it a centralized democracy? Maya majority rightfully do whatever it pleases? What roles do the states play in our system? In this suc cinct study, George Roche covers the past, the present, and offers some thoughts for the future of federalism. Education in America Is education, and more education, a good thing? Does everyone need the same amount of education? What sort of edu cation is wanted? George Roche answers these and related questions. He presents many of the current criticisms of educa tion and presents sound advice for get ting education headed toward the target.

Frederic Bastiat: A Man Alone Bastiat's ideas were in many ways time less. His critique of protectionism will be relevant so long as there are those who use government to secure for them or to protect their vested interests. Yet he lived at a particular time in history, at a time when most of the heterodox ideas which are still besetting us were formu lated. George Roche has provided the setting which helps to clarify and il luminate Bastiat's writings. Legacy of Freedom Freedom is not simply something that can be conceived and discussed. To know 1978 A LITERATURE OF FREEDOM 701 it is not just to know an idea, ideology or philosophy. It has a history, a background, and a tradition. It has taken shape within the warp and woof of societies. Dr. Roche has here evoked and described that great tradition. Power The extensive use of political power has two general impacts. One is the restric tion of individual liberty. The other is the disruption of society. George Roche explores both of these effects here. He also provides a synoptic history of ef forts to limit power.

ROTHBARD, MURRAY N. America's Great Depression What caused the depression that fol lowed upon the stock market crash in 1929? Did it signify the failure of the capitalistic system? Was it the result of under-consumption? What part did gov ernment intervention play in setting off the depression? Professor Rothbard brings the analytic tools of an economist and the descriptive powers of the histo rian to the task of solving these riddles. His conclusions are unusually valuable for understanding both the past and the present. The Essential von Mises Those who have never heard of the Aust rian School of economics will find here a stimulating introduction to it. Those who are well acquainted with it can see the whole movement in perspective. Rothbard brings the movement and the men-particularly the man, Ludwig von Mises-alive in this stirring account. Man, Economy, and State Perhaps the most distinctive contribution of the Austrian School has been to restore man to the economic equation, not, it should be noted, sentimentalized man but man acting, man thinking, man making choices among means to achieve his ends. Murray Rothbard has inte grated this insight into a statement of economic principles. The result is a dy namic view of economics which provides the guidelines for economic and political action.

What Has Government Done to Our Money? Money is supposed to be a most difficult subject. It may be, but none would ever guess it from reading Murray Rothbard on the subject. He explains the in tricacies of money in clear and simple language, easy to follow and fascinating. Nor does he leave any doubt that gov ernment has wrought havoc with our money. RUSSELL, DEAN Frederic Bastiat: Ideas and Influence Devotees of freedom who have not dis covered Bastiat have a treat in store. After reading his devastating critiques of various government interventions, it becomes important to know the man be hind the polemics and what he did about his ideas. Professor Russell provides a valuable guide to the man, his ideas, and his actions. SENNHOLZ, HANS F. Death & Taxes What are the individual and social ef fects of taxes on estates? Is it true that inheritance taxes are painless? What general impact on capital does the tax and methods of evading it have? Profes702 THE FREEMAN November sor Sennholz provides a well thought out manual for those who want light rather than emotional verbiage on the subject.

Gold is Money (edited by Sennholz) Economists who do not talk sense about money do not talk sense for very long. That is because economics has to do mainly with exchanges of goods, and money is the medium of exchange. The authors of the essays in this book talk sense about money. It is, therefore, an inval uable foundation for anyone trying to understand economics. Inflation, or Gold Standard? Much of the debate about money as sumes that there are all sorts of mone tary possibilities. Professor Sennholz maintains the contrary. The live choice is between inflation or a gold standard. Experience and theory support this con clusion. SENNHOLZ, MARY Faith and Freedom J. Howard Pew was a distinguished en trepreneur, Christian layman, and philanthropist. He brought a similar zeal to each of these. undertakings. His busi ness career was a tribute to free enter prise and his greatest concern, next to advancing the Christian religion, was the expansion and preservation of indi vidual liberty. The story of his life emerges in the words of Mary Sennholz and the account of his beliefs is in Mr.

Pew's own words. SMITH, ADAM The Wealth of Nations Before the publication of this work, there was no branch of knowledge deserving of the name of economics. True, there were some works published about how some people could get ahead at the expense of others. It was Smith's great achievement to perceive an order within which each man's efforts benefited all. Smith's economics is firmly grounded in self interest, and a basis is established for the general improvement of mankind. SOWELL, THOMAS Race and Economics Thomas Sowell has ploughed new ground in writing about race and eco nomics. Much moralizing has of course been done on the subject, but all too little careful analysis. The author of this en lightening book brings both a knowledge of economics and the history of races and ethnic groups in the United States to his discussion. Those who would replace sen timent and prejudice with learning need to consult and study this book.

SUMNER, WILLIAM GRAHAM What Social Classes Owe to Each Other What does one owe to another? What rights do the poor have? What duties especially fall on the rich? Do the indus trious and economic have obligations to the lazy and profligate? When are ills natural and when do they arise from bad laws? William Graham Sumner pon dered these questions deeply and an swered them lucidly and forcefully in a manner applicable to all times and peo ples. WEAVER, HENRY GRADY Mainspring of Human Progress For centuries men sought the philosopher's stone--a ke~ that would 1978 A LITERATURE OF FREEDOM 703 unlock the mysteries of the universe. It has never been found. But there. is a key to progress and prosperity. In his best selling book, Henry Grady Weaver de scribes the key in pithy language illumi nated with fascinating details from man's experience. WHITE, ANDREW DICKSON Fiat Money Inflation in France What is inflation? What causes it? What is its pattern of development? What are its inevitable consequences? Andrew Dickson White composed and published a work in 1876 which became a classic on the subject. Revolutionary France was the particular locale for the study, but inflation anywhere and everywhere is its subject.

WILLIAMS,·ROGER J. You are Extraordinary Many of the most striking benefits of science have come by focusing on univer sal cause and effect sequences. Hence, scientists often have a bias in favor of uniformities. This creates a distorted picture when applied to man, Roger Wil liams tells us. We are individuals, he says, unique, different, and even one of a kind. And he proceeds to present, in a readily understood manner, impressive evidence for it. Government intervention is repressive because of our individ uality, or made more so. @ HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $3.00 Order from: THE FOUNDATION FOR ECONOMIC EDUCATION, INC. IRVINGTON-ON-HUDSON, NEW YORK 10533 by BETTINA BIEN GREAVES, of the senior staff at FEE A textbook in two Volumes, each 81/2" by 11" Here is a unique opportunity, at small investment, to get the concepts of the free market into the hands and minds of those who can best make use of them. When you've had a chance to study and use your set, you'll doubtless think of many friends with whom you'll want to share it-or provide with a copy of their own.

Order from: THE FOUNDATION FOR ECONOMIC EDUCATION, INC. Irvington-on-Hudson, New York 10533 ttle Freeman VOL. 28, NO. 12 • DECEMBER 1978 Glory Be! Leonard E. Read 707 True glory consists of the service of truth and freedom. The "Invisible Hand" or the Heavy Hand? John Montgomery 711 A timely reminder of the dangers we face if we allow controls to close the market. Are Successful Businessmen Just Lucky? Brian Summers 719 Not by pure chance, but by the foresight of businessmen, are consumers served efficiently. Government Spending Must Be Cut Hans F. Sennholz 721 Meaningful tax reform hinges on the moral strength to resist special privileges government may arrange. World in the Grip of an Idea 24. The Cold War: The Spread of Communism Clarence B. Carson 725 Communism is less a political theory than a set of claims and promises-justifications-for holding and exercising power. Native Pottery Only William L. Baker 739 A study of the harmful effects of "protectionism," as applied during the Civil War-or today.

Austerity, Waste, and Need E. C. Pasour, Jr. 743 In the absence of market signals, the regulator faces severe in formation problems-and consumers suffer needlessly. A Human Action Taxonomy Dale Haywood 753 We interact in society voluntarily or coercively-and the consequences make all the difference. Book Reviews: 756 "Adam Smith and the Wealth of Nations" edited by Fred Glahe "Adam Smith: Man of Letters and Economist" by Clyde E. Dankert "Government by Judiciary: The Transformation of the Fourteenth Amendment" by Raoul Berger Index for 1978 761 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

tt1e ®A E~L~~N~~~N LIBERTY FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson, N.Y. 10533 Tel: (914) 591-7230 Leonard E. Read, President Managing Editor: Paul L. Poirot Production Editor: Beth A. Hoffman Contributing Editors: Robert G. Anderson Bettina Bien Greaves Edmund A. Opitz (Book Reviews) Brian Summers THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of pri vate property, the free market, the profit and loss system, and limited government. The costs of Foundation projects and services are met through donations. Total expenses aver age $18.00 a year per person on the mailing list. Donations are invited in any amount. THE FREEMAN is available to any interested person in the United States for the asking. For foreign delivery, a donation is required sufficient to cover direct mailing cost of $5.00 a year.

Copyright, 1978. The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid: 3 for $1.00; 10 or more, 25 cents each. THE FREEMAN is available on microfilm from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "The 'Invisible Hand' or the Heavy Hand?," "Government Spending Must Be Cut," "World in the Grip of an Idea," and "Austerity, Waste, and Need."

Leonard E. Read True glory consists in doing what deserves to be written; in writing what deserves to be read; and in so living as to make the world happier and better for our living in it. -Pliny, The Elder The Roman naturalist, Pliny, The Elder, was born in 23 A.D. When he passed away at the age of 56, he had written 37 books on the nature of the physical universe-including geography, anthropology, zoology, botany and other related subjects. Pliny did, indeed, leave the world happier and better for having lived in it. His scientific findings have been far surpassed, as we would ex pect. And if we live our Iives aright-in freedom-the miracles of the future will surpass our findings, as ours have his! He lived every moment of his life with zest enthusiasm-perhaps the greatest stimulus for noble works. Wrote Emerson: UEvery great and com manding movement in the annals of the world is the triumph of en thusiasm. Nothing great was ever accomplished without it."

True glory consists in doing what deserves to be written; it consists in noble deeds worth recording. This is to be distinguished from blatant notoriety. History presents far more writings of the latter sort than the former. Alexander the Great, Char lemagne, Napoleon, Hitler, Stalin, and countless other great destroyers loom too large in written history. 707 708 THE FREEMAN December Why these lopsided recordings? It is the bad, not the good, which attracts the public eye. Observe today's media and the preponderance of re porting that does not deserve to be either written or read, spoken or heard. The following is an attempt to think through and to understand Pliny's three parts of True Glory. If even partially successful, I will make a small contribution to the displacement of that which should be neither written nor read. • True glory consists in doing what deserves to be written-In my study of writing that deserves to be writ ten, I've been surprised that most of the world's great writers-past and present-never kept a daily journal.

Obviously, they had other disci plines that brought out their re markable writings. We are all dif ferent in all respects. As for me, I have kept a journal for nearly 27 years without missing a day capturing every thought that comes to mind or that I have learned from others-a rewarding experience. What a discipline-writing such en tries for nearly 10,000 days! Recently I came upon my entry of August 11, 1955, long since forgot ten: If it were not for the gravitational force pulling us down, there would be no such concept as ttup ." If there were no darkness, we would have no sense or apprecia tion of light. If there were no evil, we would have no awareness of virtue. If there were no ignorance, we would not know intelligence. If there were no troubles, there would be no pleasures. If there were no obstacles, there would be no aspirations. If there were no insecurity, we would not know of security.

If there were no blindness, we would not be conscious of percep tion. If there were no poverty, we would not experience riches. If no man ever imposed restraint on others, there would be no striv ing for liberty and the term would not exist. I now recall discovering, just a few days later, while reading Runes' Treasury ofPhilosophy, that around 500 B.C. Heraclitus was saying the same thing: ttMen would not know the name of justice if there were no injustice." This made me laugh at my Horiginality" and brought to mind Goethe's assertion: ttAll truly wise ideas have been thought al ready thousands of times." Assuming the above observations to be valid, then ttdoing what de serves to be written" is learning how to cope with and overcome life's 1978 GLORY BE! 709 countless obstacles. It is an observed fact that the art of becoming human development-is composed of acts of overcoming. Gravitation, for instance, is a physical force drawing all and sun dry toward the earth's center. What else accounts for physical ascen dancy! Were there no such force, there would be no ladders or airplanes or rain or snow-indeed, no life!

Obstacles are assuredly the source of aspirations. Human frailties which lead to such things as gov ernmental interventions of the kind that destroy creative activities inspire their own overcoming. Why, then, do errors have their value? Their overcoming leads to evolution-human Liberty! A Latin proverb: ~~Nothing is too often repeated that is not suffi ciently learned." This encompasses an enormous realm, including every thought that reveals truth repeating it over and over again, seeking improvement. Learning how to overcome may very well rank first in what deserves to be written! • True glory consists in writing what deserves to be read-There are countless thousands of books, arti cles and commentaries that deserve to be read. The vast majority of these writings are known to a mere handful of people. I shall refer to only one that is an inspiring and instructive example: You Are Extraordinary by Roger J. Williams.!

Professor Williams, a noted biochemist, became convinced that his wife's death was caused by the doctor treating her as ~~an equal," rather than as an individual. This led the Professor to his first study in human variation, having to do only with the variation in taste buds in different people. The findings, pub lished in Free And Unequal, are fan tastic. 2 Having an unusually inquiring mind, he began an investigation into ever so many other forms of variation. The findings appeared in 1956: Biochemical Individuality, somewhat technical for lay readers. 3 Nevertheless, I read it with avidity, because it contained an important key to the freedom philosophy. It was this book that led to my ac quaintance with the author. We corresponded, and after an swering a question of mine he added that he had just written a book, to be entitled You Are Extraordinary, de signed, he said, for lay readers. The manuscript was enclosed.

Professor Williams is extraordi nary. So are you and so am I and so is each human being. Indeed, no one is the same as a moment ago. Varia tion is a rule of all life-plant, ani mal and man. lYou Are Extraordinary, Pyramid Books. 2Free And Unequal, University of Texas Press. 3Biochemical Individuality, Wiley.

710 THE FREEMAN Why does You Are Extraordinary deserve to be read? It makes the case for liberty. Wrote William Gifford: Countless the various species of mankind; Countless the shades that sep'rate mind from mind; No general object of desire is known, Each has his will, and each pursues his own. Once variation is recognized as a fact of life, there can be no endorsement-none whatsoever-of know-it-alls controlling the creative actions of you or me or anyone. Au thoritarianism dismissed as utter nonsense! We would witness our 16,000,000 public officials reduced to a mere fraction thereof. All but a few would return to that wonderful status of self-responsible citizens America's miraculous performance on the go again. • True glory consists in so living as to make the world happier and better How do we live to make others hap pier and better? Here are a few guidelines, mostly gleaned from others: A desire to stand for and staunchly to abide by what is be lieved to be righteous-seeking approval from God, not man.

Strive for that excellence in the understanding and explanation of freedom which will cause others to seek one's tutorship. This brings happiness to both the striver and the seeker-and the world! Live with zest and enthusiasm. Nothing great was ever ac complished in the absence of such spirit. Be optimistic. This does not mean a blindness to dictocrats lording it over us. Rather, it is self assurance that a turnabout is in the offing. The world is not going to the dogs as the prophets of doom proclaim. Optimism in creases happiness for it is conta gious. If we would make the world hap pier and better, we might well heed these words by Albert Camus when accepting the Nobel Prize in 1957: ~~In all the circumstances of his life, the writer can recapture the feeling of a living community that will jus tify him. But only if he accepts as completely as possible the two trusts that constitute the true nobility of his calling: the service of truth and the service of freedom."

To serve truth and freedom is as high as we can go. When more of us than now attain this intellectual and moral height, the path toward glory will open: Glory to God in the highest, and on earth peace, good will toward men.

John Montgomery The "Invisible Hand" or the Heavy Hand? IT WILL COME as no surprise to read ers of the Freeman that the national debate over inflation, recession and unemployment rests on a more fun damental issue-what kind of economic system will work best for America? Should it be a continua tion of the free-market, capitalistic system which meant unparalleled growth and wealth in the past, or a centrally planned economy directed by government? There is a superficial plausibility to the argument for central plan ning. The public is generally in clined to leave problems of national scope to government and to assume that centralized authority is either desirable or inevitable. Looking on the surface of things, people generMr. Montgomery is a newspaperman and writer on socioeconomic issues who lives in Closter, N.J. ally think no further than the im mediate effects and short-term bene fits of government action. Beset and buffeted by· the workings of the marketplace, they are taken in by the promise of ideal government ac tion to correct the shortcomings of the market, and they forget that government promises often exceed the results.

In contrast, economic thinking shows that there is good reason to believe that government action can be counterproductive. Economic thinking goes beyond the im mediate, visible impact of a policy to foresee the longer-range, secondary effects. And it can recognize the real as opposed to the promised results of a government policy which is based on a misunderstanding of the work ings of the market economy. For example, government711 712 THE FREEMAN December imposed price controls would seem to offer protection against inflation. But powerful economic forces come into play and cause widespread shortages. Then, government must intervene again. Rationing is im posed. The result of that is the rapid growth of black markets. What's more, there is a conflict between successful politics and sound economic policy. Politics can work to serve the interests of power ful pressure groups rather than the general public.

An Invisible Hand Two centuries ago the first great economist, Adam Smith, explained the operation of the free market by saying it was as though there were an invisible hand directing the ef forts of everyone-even though each was pursuing his own gain-in a way that promoted the interests of soci ety as a whole. And that is essen tially what the advocates of a free market are saying today, leaving themselves open to the charge that they are clinging to an archaic no tion which no longer applies in mod ern times. Smith's great work, The Wealth of Nations, came out in the watershed year of 1776. The industrial revolu tion was just under way and it was a time of pervasive regulation of pro duction and trade by the king and Parliament. Smith was arguing for a laissezfaire, hands-off policy by government. But it wasn't that he thought the invisible hand was tug ging on puppet strings to guide each producer, merchant and trader.

Smith believed that economic affairs were self-regulating, that internal order was inherent in the competi tive market process to the extent that it was free of government in tervention. He saw an order which, in the words of his contemporary Scottish philosopher, Adam Fergu son, was the Hresult of human action but not of human design." In the two hundred years since Adam Smith, economics has de veloped in many directions. But for our own time only the economists of the so-called Austrian school, named for the place of its beginnings a century ago, have contributed much to that concept of Smith's. In particular, Friedrich Hayek, Nobel Prize winner and dean of the Aus trian economists of today, has drawn on the work of his great teacher, Ludwig von Mises, to address the idea repeatedly over the past 40 years or more. Mises, Hayek and younger ~~Austrians," mostly in the English-speaking world, have built on Smith's concept in fundamental ways to show how it can apply to the vastly more complex economy of to day.

In attempting to describe some of those ideas here, largely from Hayek's writings, only the essence of the market process will be focused 1978 THE ~~INVISIBLE HAND" OR THE HEAVY HAND? 713 on. Major forces and mechanisms will go unmentioned and the picture will be somewhat abstract and idealized. But if the advocates of central planning can rhapsodize over the economic utopia to be realized if their designs are carried out, then there would appear to be good reason to portray the workings of a truly competitive market econ omy, free of the distortions and con straints imposed in these times of big business, big labor and, most of all, big government. Hayek restates Smith's concept by saying that the coordination of indi vidual efforts in society is the result of an immensely complicated mechanism which exists, works and solves problems but is not the result of deliberate regulation. Or, as he puts it, ~~The spontaneous interplay of the actions of individuals may produce something which is not the deliberate object of their actions but an organism in which every part performs a necessary function for the continuance of the whole, with out any human mind having devised it."l General Rules of Order The ~~ordering forces" in such so cial formations are the general rules for the behavior of individuals in a society. Not that these rules are laid down by the architect of a master plan, or that the rules dictate what each person must do. Rather, the rules are largely negative, prohibi tions against certain forms of be havior. Each person knows what he must not do but is left free to choose what he will do from all the remain ing alternatives. What these com mon rules give rise to are patterns of human behavior, a certain range of actions and an overall order in so ciety.

Such common rules have come down through the ages, passed on in the cultural traditions of human societies, and represent the accumu lated experience of mankind. They have shaped the spontaneous order in human affairs which is now widely recognized in such social in stitutions as language, law, morals, writing and the use of money. In these cases it is no longer argued that they are the work of inventors, legislators or bodies of wise men. 2 In certain ways the idea of central economic planning dates back to Mercantilism, which was dominant in the 17th Century and then went on the decline as capitalism began to take shape. Its economic assump tions were finally put to rout by Adam Smith, but not before Eng land's Mercantilist policies had goaded the American colonies to re volt. Mercantilism held that the purpose of economic life in a nation was to serve and advance national power; accordingly, it was the right of government to control economic affairs. Throughout that period, the 714 THE FREEMAN December trading nations of western Europe were engaged in commercial war fare with each other, in the struggle drawing on the resources of their colonial possessions without regard to the interests of the colonists and native inhabitants. The most in tense international rivalry was in foreign trade, which yielded gold the source of national wealth and power.

In mobilizing its assets and people in the international struggle, each nation tried to promote a forced growth of its domestic economy, par ticularly in the small-scale man ufacturing of the time and the pro duction of goods and commodities for export. Despite the embryonic state of economic knowledge, each nation resorted to a planned economy, which gave rise to an overgrown thicket of regulations, trade re straints, currency manipulation, impoverishing controls over wages and the movement of labor, grants of monopoly privileges, and subsidies to favored industries. The similarity of the extensive intervention in the economy by the modern welfare state in pursuit of its social goals has suggested the name of neo Mercantilism. Utopian Socialism But it is not so much that today's advocates of central planning want a return to Mercantilism. Their sus taining vision came along a bit later, early in the 19th Century. And it was a vision which has had enor mous influence, inspiring genera tions of social scientists, writers and intellectuals to this day. Its patron saint was an impoverished French nobleman, the Comte de Saint Si mon. His followers and successors generated the major part of what came to be known as Utopian socialism. Observing the great ac complishments of the physical sci ences in 18th Century France, they sought to develop a social science of society in which everyone in it would be directed by an elite group of philosophers and scientists using their know ledge for the common good.

Then, not long after and building at least in part on their ideas, came Marx and Engels who foresaw the downfall of capitalism in the revolt of the workers of the world to take over the means of production from the capitalists who had exploited their labor. But Marx was far from a mere social visionary. Starting with certain flaws in the classical eco nomics of the time, he built his own system which continues· to exert a powerful influence on many economists. This influence can be seen in the insistence by many that cen tral planning is necessary to compensate for «inherent" and (structural" weaknesses in the capi talistic system. There are other reasons for the 1978 THE ((INVISIBLE HAND" OR THE HEAVY HAND? 715 continuing resistance to the idea of a self-regulating economy. For one thing, it took a long time for man to concede that any system with order, function and apparent purpose was not of human design; the belief in central planning may be the last vestige of that reluctance. But, most important for politics and policy to day, Keynesian economic theory which has been so dominant since the Thirties plus the development of mathematical models and statis tical data which can be fed into a computer seem to offer ways that the economy can be managed.

Too Complex for Planners Ina recent article, Hayek re sponded to that idea by saying that ((the very complexity which the structure of modern economic sys tems has assumed provides the strongest argument against central planning. It is becoming progres sively less and less imaginable that anyone mind or planning authority could picture or survey the millions of connections between the ever more numerous interlocking sepa rate activities which have become indispensable for the efficient use of modern technology and even the maintenance of the standard of life Western man has achieved."3 But, then, if central planning cannot cope with such complexity, how would the free market do any better? It would, of course, have to serve such basic economic functions as the allocation of resources, the organization of production, and the distribution of goods and services. But these things cannot occur in a vacuum. Information is required: about the availability of resources, about how production is progressing and whether adjustments are called for, and about what goods and ser vices people want, and how much, of each.

The crux of the matter, as Hayek puts it, is that the necessary knowl edge and information does not exist in concentrated or integrated form but solely as dispersed bits of in complete and frequently contradic tory know ledge possessed by differ ent individuals throughout the economic system. Market Pricing So, how is this dispersed informa tion to be conveyed to the decision makers, who are also scattered about the system? And how are the decision makers to know what in formation of potential use to them is out there somewhere, beyond their purview but available for the ask ing? In this connection, Hayek has another observation: knowledge comes in two kinds. First, there is the scientific knowledge vital to an advanced technological society. That knowledge would be easily commanded by the experts, and 716 THE FREEMAN December would even be manageable by the central planners. But then there is the second kind, that important but unorganized knowledge which has to do with the particular circum stances of time and place. Of this latter kind, nearly every participant in the market system possesses knowledge which is unique to his job and location. And, in view of this expertise, who better should make the decisions that that knowledge mandates?

To illustrate the difference be tween these two kinds of informa tion, Hayek points out how much there is to learn on a new job even after completion of scientific or technical schooling, and how impor tant to any job is the knowledge of the people involved, of local condi tions and special circumstances. Response to Change And then there is the problem of change. The market must respond with dispatch to change which can occur anywhere in the economic sys tem: a transportation tie-up in and out of Chicago, a craze for sky blue jeans on the East Coast, and so on. Again, decisions are required where the change has occurred and where the knowledge of possible responses is to be found. It is the man on the spot who must decide and take action. But he needs to know more than the facts of his immediate surroundings. He must know something of the big picture, what is going on out there in the rest of the economic system-so that he can dovetail with the other decision makers and fit in with the workings of the whole system. 4 If there were no change, at least one of the insoluble problems con fronting the central planners would be done away with. They could draw up long-range plans with precise and detailed instructions for the un derlings throughout the system to carry out. There would be no need for adjustment to unforeseen events, for adjustments to eventualities which had not entered into their calculations. But, among other things, there would still be the prac tical impossiblityof obtaining and distilling the enormous quantity of information reflecting local condi tions in all the interacting sectors of the economy.

Returning to the market economy, it is not enough that know ledge and the ability to act on it be dispersed throughout the economic system. A mechanism for communicating that knowledge is needed. And there is such a mechanism: the price system. Prices are a numerical index which determines the value of each thing considered for purchase rela tive to all other things available to each potential buyer, whether pro ducer, consumer or middleman. Thus he can rank the urgency of his needs as a basis for his decisions 1978 THE ((INVISIBLE HAND" OR THE HEAVY HAND? 717 without being overwhelmed by all of the information which might con ceivably be brought to bear on his choices. Price fluctuations reflect change wherever it has occurred in the market system. The numerical index of prices communicates suf ficient information in condensed and distilled form for the market as a whole to be coordinated.

Guidelines to Follow Hayek illustrates how the price system works as follows: ((Assume that somewhere in the world a new opportunity for the use of some raw material, say, tin, has arisen, or that one of the sources of supply has been eliminated. It does not matter for our purpose-and it is significant that it does not matter-which of these two causes has made tin more scarce. All that the users of tin need to know is that some of the tin they used to consume is now more prof itably employed elsewhere and that, in consequence, they must economize tin. There is no need for the great majority of them even to know where the more urgent need has arisen, or in favor of what other needs they ought to husband the supply. If only some of them know directly of the new demand and switch resources over to it, and if the people who are aware of the new gap thus created in turn fill it from still other sources, the result will rapidly spread throughout the whole economic system. This influences not only all the uses of tin but also those of its substitutes and the sub stitutes of these substitutes, and so on. . . . The whole acts as one mar ket, not because any of its members surveys the whole field, but because their limited individual fields of vi sion sufficiently overlap so that through many intermediaries the relevant information is communi cated to all. The mere fact that there is one price for any commodity-or rather that local prices are con nected in a manner determined by the cost of transport, etc.-brings about the solution. . . .

((We must look at the price system as .such a mechanism for com municating information. . . . The most significant fact about this sys tem is the economy of know ledge with which it operates, or how little the individual participants need to know in order to take the right ac tion. In abbreviated form, by a kind of symbol, only the most essential information is passed on, and this is passed on only to those concerned. It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their acti vities to changes of which they may never 718 THE FREEMAN December know more than their reflection in the price movement. ~~ ... The marvel is that in a case like that of a scarcity of one raw material, without an order being is sued, without more than a handful of people knowing the cause, tens of thousands of people whose identity could not be ascertained by months of investigation, are made to use the material or its products more spar ingly; that is, they move in the right direction. . . ."5 The Entrepreneur's Role Austrian economist Israel Kirz ner, citing the work of Mises, fills in another part of the picture of the market process. He describes three types of market participants: con sumers, entrepreneur-producers and the providers of productive re sources, including labor. Again, the key to the process is information, with the market participants start ing out in ignorance of each other's intentions and thus unable to join in exchanges as buyers and sellers.

Prices estimated and offered are far apart but move closer together as the market process goes on. From the information derived in the pro cess about each other's expectations, the market participants change plans and set new courses. The entrepreneur is the driving force in the process. It is he who is on the alert for places in the economy where conditions for exchange exist and who seeks profit in the creation of new business, new production methods and new products. And in his activities he conveys informa tion in the form of successive price offers and estimates, nudging the plans of the market participants into closer and closer alignment until an exchange is achieved. In so doing, he exploits and creates change in the discovery of new re source sources, new technical oppor tunities and new consumer tastes and preferences. And he exploits such possi bili ties by changing prices, product specifications and selling effort. Impelled by the goad of competition, he seeks to close a deal, secure a resource or penetrate a market sector before his rivals.

The result is growth in business activity, in income and employment, and in the supply of new goods and services. 6 StUltifying Bureaucracy There is no place in the centrally planned economy for the entrepre neur in search of profit. Bureaucrats are after job security and power in the hierarchy. The search for profits is risky and the bureaucrat must play it safe. Besides, he knows the profits are not for him to keep. Thus, another signal required by the self regulating economy, profit as indi cator of the viability of a business enterprise and guide to the use of resources, is forgone.

1978 THE cCINVISIBLEHAND" OR THE HEAVY HAND? 719 And there is no place in the free market system for the central plan ners whose inflexible designs would stifle the free movement and initia tive of those who make it work. Paraphrasing Hayek, planning in a society consciously directed from the top could never begin to utilize all the knowledge and energies bound up in the countless individuals who make up the community. Human resources will waste away while all await their marching orders. @) SOME PEOPLE contend that free en terprise is nothing more than a game of chance-that business prof its and losses are purely a matter of luck. Is this true? Are successful businessmen just luckier than the rest of us? Consider a simple example. Sup pose a businessman has net earn ings of $35,000 in a given year. Is that $35,000 all profit? Not neces sarily. If the businessman put his Mr. Summers Is a member of the staff of The Foun dation for Economic Education.

-FOOTNOTES1F. A. Hayek, uThe Trend of Economic Thinking," Economica, May 1933, p. 130. 2Hayek, ((Kinds of Order in Society," Insti tute for Humane Studies reprint, Menlo Park, Calif., 1975, pp. 6-11. 3Hayek, Morgan Guaranty Survey, January 1976. 4Hayek, (The Use of Knowledge in Society," Institute for Humane Studies reprint, Menlo Park, Calif., 1977, pp. 5-13. 5Ibid., pp. 13-15. 6Israel Kirzner, Competition and Entrepre neurship (Chicago: Univ. of Chicago Press, 1973), chapters 1 and 6. Brian Summers Are Successful Businessmen Just Lucky? own labor into the business, and if he could have earned $20,000 work ing for someone else, the business cost him, in terms of lost salary, $20,000. If he has $100,000 of his own capital invested in the business, and the market rate of interest is 10 per cent, his business cost him $10,000 in lost interest. The busi nessman made $35,000 by passing up the opportunity to make $30,000.

His net profit was $5,000. Was his $5,000 profit caused by good luck? If he had earned only 720 THE FREEMAN $25,000, would his $5,000 net loss have been due to bad luck? Profits and losses could be attrib uted to luck only. if they were the results of completely random processes-such as the roll of dice. If businessmen randomly selected products and factors of production, we could say that profits and losses were purely a matter of luck. But if businesses were operated in a completely random manner, there would be no tendency for busi nessmen to emulate successful com petitors. Businessmen would never tend to enter a profitable industry, bid up production costs, and reduce selling prices through increased outpu t. If businessmen depended en tirely on luck, they would never adopt the methods of profitable competitors-they would just keep rolling dice. In the real world, of course, busi nessmen don't depend on luck. They observe competitors and try to learn from their successes and failures.

Successful businessmen are not gamblers; they are alert followers of market trends who use their specialized knowledge to anticipate future trends. The First Principle IDEAS ();'\; But what about innovators who tryout new products and new techniques? Aren't they gamblers? Even the boldest innovators don't randomly select products and factors of production. They know that to make profits they must please con sumers while minimizing costs. Thus, they study the market, per form marketing research, and try to reduce costs by conserving labor, capital, and scarce resources. If they fail, the losses are theirs. If they succeed, consumers enjoy a better standard of living. Businessmen succeed by correctly anticipating consumer preferences and effi ciently using resources to satisfy these preferences. Luck is a factor only when events are beyond our control. In a free market each person controls his own property, thereby minimizing the importance of luck. When govern ment intervenes in the economy, however, luck becomes more important-because with property subject to government regulation, economic success becomes less de pendent on personal initiative and more contingent on the vagaries of politics. , L1BEHTY THE FIRST and fundamental principle, therefore, if one would undertake to alleviate the condition of the masses, would be the inviolability of private property.

POPE LEO XIII Hans F. Sennholz THE CASE for lower taxes is clear and compelling. Projected· federal ex penditures total nearly $500 billion in fiscal 1979 and the budget deficit is expected to exceed $50 billion. Government spending has risen to the point where its burden is felt throughout the American economy. The three sources of government revenue clearly reveal the strain: 1. For many taxpayers the levies are higher than ever before, giving encouragement to tax evasion and outright rebellion. 2. The capital markets show signs of utter exhaustion from government Dr. Sennholz heads the Department of Economics at Grove City College and Is a noted writer and lecturer on monetary and economic affairs. This article Is reprinted by permission from the September 1978 Issue of Privete Practice. demands, causing interest rates to rise and security prices to fall. There is moaning among stockholders and bondholders, whose savings have been devastated in recent years. But in the body politic they are outnum bered and outvoted and, therefore, constitute no threat to the politicians in power.

3. Inflation, the favorite technique of deficit financing, is accelerating again, reducing the real earnings and savings of millions of people. It is potentially more dangerous to the deficit spenders who are resorting to currency and· credit expansion in order to finance their favorite pro grams. But the spenders continue to hide behind the wall of public ignor ance that permits them to put the blame for rising prices on merchants 721 722 THE FREEMAN December and industrialists, on physicians and dentists, on anyone and anything making the news. The Burden The public is aware, however, that the tax burden continues to grow. Some taxpayers are saddled with levies that are greater than ever be fore. They are pleading for tax relief and, in many cases, are organizing for tax protest and rebellion. Many victims have reached the limit of their endurance. Others are sub merging in the Hsubterranean econ omy," where economic transactions are financed by cash and earnings remain unreported. According to some estimates, more than $175 bil lion of annual income, or $3,000 per family, are ,escaping the IRS bite.

And this amount is expected to grow as inflation lifts everyone's income into progressively higher income tax brackets. Moral Strength Surely, we feel with the countless victims of government spending that consumes more than one-third of national income. We understand their anguish and sense the endur ing morality of the cause of self defense and man's right to the fruits of his labor. But we doubt that their cause embodies the moral strength for-overcoming the spending aspira tions of contemporary society. It is haunted by self-interest and projects self as the central figure on the cause of tax rebellion, while gov ernment spending continues to draw its political strength from a loud concern for the poor and under privileged. Progressive income taxation in it selfis an objective of policy in search of social and economic equality. But it is also an inevitable consequence of a social order that bestows expen sive benefits on millions of benefi ciaries. After all, government has no sources of income and wealth of its own. It depends entirely on its abil ity to extract the means from its subjects. It must find victims in order to satisfy the clamor for social benefits and programs, government functions and services.

The tax rebellion is a viable polit ical force, but it can become a moral force only with a simultaneous re nunciation of the claims to benefits. The public agitation for lower taxes found powerful expression in the overwhelming acceptance of Propo sition 13 by California voters-a ref erendum slashing real property taxes. The California voters gave new life to many other campaigns to secure reduction in federal and state tax rates. But such campaigns skirt the real issue if they focus exclu sively on tax reductions. An essen tial ingredient of genuine relief and a truly successful tax rebellion is a reduction in the size of government. Without it, a tax rebellion could 1978 GOVERNMENT SPENDING MUST BE CUT 723 merely result in changes in form that in the end lack substance. It merely would shift the burden of government from some taxpayers to other victims. Tax Cuts or Spending Cuts?

Some campaigns focus on the po tential for increasing government revenue as a result of tax cuts. The Kemp-Roth proposal seems to sug gest that no spending reduction is needed as a companion to tax cuts. Its advocates hold out the hope that their particular tax cuts will revive the economy, cause it to expand, compensate for the. loss of revenue with new revenue, and simultane ously reduce the relative size of gov ernment. They are promising relief for taxpayers, more jobs to workers, higher profits to businessmen, and more revenue to social spenders. It may well be true that cuts in certain tax rates would spur economic activity and generate in creases in revenue despite the tax cuts. A reduction in the capital gains tax, corporate income taxes, and other levies on capital and busi ness undoubtedly would stimulate economic production. But it is un likely that the relative burden of government would be permitted to shrink. The temporary loss in tax revenue would immediately be offset by revenue from the capital market, causing interest rates to rise and business activity to contract, or from currency expansion, that is, inflation, causing prices to rise. If, nevertheless, the net effect should be expansionary, govern ment, too, will expand. It may even grow faster than the private sector if the deficit is financed by inflation.

Would the political forces pushing for economic redistribution and more government acquiesce in a smaller share of national income? They managed to extract their pres ent share of benefits from a stag nant economy. Is it not likely they would want an even larger share from an expanding economy? There is no easy escape from the consequences of an ideology of economic transfer· and social con flict. A tax cut as a stimulant ad ministered by government surely does not weaken the position of gov ernment. It does not even question the transfer function, but instead adds the role of economic stimulator. A tax cut that is accompanied by a spending cut does effectively reduce the burden and size of government. Therefore, explicit limits on gov ernment spending are needed to lend substance to a proposal for tax reduction. The Root of the Evil It takes great political courage to confront the root of the evil: the appetite for government services and benefits. Most Americans still believe that government owes them 724 THE FREEMAN certain favors, such as income secu rity, public housing and urban re newal, free education and medical care, and so forth. Their call for benefits is an implicit demand that financial means be seized from others. They would not be asking for social programs if they were expect ing to cover the costs in proportion to benefits.

Few Americans seek no govern ment favors, and even fewer openly reject them on moral grounds. It is much more popular to seek and ac cept the benefits of redistribution while objecting to the taxation that covers their costs. Most people freely partake in the economic redistribu tion, but loudly oppose the necessary allocation of costs. Most professors, for instance, live comfortably on government funds from state col leges and universities, seek federal grants and scholarships, send their children to public schools and col leges, while all along bemoaning their income taxes. They consider the things government does for them as social progress, but decry their tax burdens as oppression and abuse. Similarly, most physicians applaud their own benefits as social justice, but lament their tax burdens as social injustice. They accept the principle of redistribution and en deavor to get ((their share" of bene fits, but bitterly oppose their allo cated share of costs.

Social Conflict A political society that engages in economic redistribution is torn by social conflict. The beneficiaries seek to impose even more levies and restrictions on the victims, who in turn clamor for their share of bene fits and lament their obligations and charges. The bitter struggle is waged in the political arena with ever shifting forces and alliances. Victories or reverses are merely temporary, to be followed by n~w offensives and counter-offensives in a perpetual war for social benefits. To restore social peace and effect a rebirth of freedom, we must cease from preying on each other through government. @ IDEAS ON L1BEHTY The Power of the People THE PRESCRIPTIONS in favor of liberty ought to be leveled against that quarter where the greatest danger lies, namely, that which possesses the highest prerogative of power. But this is not found in either the Executive or Legislative Department of the Government, but in the body of the people, operating by the majority against the minority.

JAMES MADISON Clarence B. Carson 24. The Cold War: The Spread of Communism THE IDEA that has the world in its grip is not as it is billed or the way it is made to appear by those who favor it. It is not fundamentally an economic idea or theory, though that is the guise that it often assumed from the outset. It is not basically a political theory, although it often appears to be, and there is consider able temptation for those who op pose it to treat it in that way. In stead, it is in essence a power theory or idea, a mode for attaining and In this series, Dr. Carson examines the connection between Ideology and the revolutions of our time and traces the Impact on several major countries and the spread of the ideas and practices around the world. exercising power. All its claims and promises are, in the final analysis, but justifications for holding and exercising power. That is not to say that the attainment or exercise of power is the motive of those who subscribe to or advance the idea. It mayor may not be, but that is irrel evant. Rather, the attainment and exercise of power are the unavoida ble consequences of the triumph of the idea. Power unlimited is the destination of the victorious idea.

The power motif is implicit in the formulation of the idea that is being used here. Ther-e are three parts of the formula: 725 726 THE FREEMAN December 1. To achieve human felicity on this earth by concerting all efforts toward its realization. 2. To root out, discredit, and discard all aspects of culture which cannot otherwise be altered to divest them of any role in in ducing or supporting the individ ual's pursuit of his own self interest. 3. Government is the instru ment to be used to concert all efforts behind the realization of human felicity and the necessary destruction or alteration of cul ture. It is, of course, the use of govern ment which makes it a power theory. But that only becomes clear by further examination of the idea. The idea that has the world in its grip is not an economic idea. Some of the best economic minds of our era have gone to great lengths to expose the fallacies of Karl Marx. On a lesser scale, some thorough economists have examined in detail, and found wanting, the work of John Maynard Keynes. They did so· for good reason, no doubt, because the economic thought of these men was having great impact in the world of affairs.

Despite the fact that Marx en gaged in a goodly amount of economic analysis, or economic-like analysis, he was not grappling with the problem of economics. The prob lem of economics is scarcity, and Marx denied the validity of the prob lem, at least in the context within which he wrote. He and Engels wrote these words, in The Com munist Manifesto: ~~In these crises there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity-the epidemic of overproduction. . . . And why? Because there is too much civiliza tion, too much means of subsistence, too much industry, too much com merce."l No more did Keynes perceive the problem as being one of scarcity, at least not scarcity of consumer goods. So far as there was a problem it was a problem of insufficient money with which to fuel demand. Hence, his involved and intricate analysis in support of inflation. The Use of Political Power to Distribute Wealth John Kenneth Galbraith, an American Keynesian, of sorts, de nied the validity of the problem of scarcity in advanced countries. He put his position bluntly: ~~Given a sufficiency of demand, the respond ing production of goods in the mod ern economy is almost completely reliable. We have seen in the early chapters of this essay why men once had reason to regard the economic system as a meager and perilous thing. And we have seen how these ideas have persisted after the prob lem of production was conquered."2 1978 THE COLD WAR: THE SPREAD OF COMMUNISM 727 The point is this. The formulators and advocates of the idea that has the world in its grip changed what had once been conceived as an economic problem into a power prob lem. The problem of production had been solved, they alleged; what re mained was a problem of distribu tion. To solve this problem required the use of political power.

It might be supposed, then, that the idea with which we are dealing is a political theory. It is not. Marx had no political theory at all, cer tainly not one worthy of the name. He had a power theory to explain what government had been in the past. It had been a means for par ticular classes to wield power over the masses. When the revolution had broken the power of the classes and there remained only the one class-which is to say no class-the state would wither. Talk of rule by an elite or dic tatorship of the proletariat does not constitute a political theory. In any case, this was to be only a transi tional phase before the state with ered away; no theory had to be con structed for how the power would be wielded. Lenin and Stalin (and Mao) enthroned the state, apparently perpetually, but their political theory can be reduced to a sentence. Power in the hands of an elite is exercised for the working classes; it requires no restraint so long as it is wielded for the masses. But this, too, is a power theory, not a political theory.

Faith in Gradualism Gradualists, evolutionary social ists, social democrats, twentieth century liberals, or whatever they should be called, often appear to have a political. theory. On' closer examination, however, it turns out that what they have are the residues of earlier political theories and a political faith. By the nature of their methods, gradualists must give at least lip service to the residue of political beliefs in their countries. If they Iive in a land that has a monarch, they must profess their loyalty to him. If there is a separa tion of powers, they may give lip service to this arrangement. But they will be observed always to be working to remove these as obsta cles to the exercise of power. Monarchs are reduced to ceremonial nonentities. The separation of pow ers is evaded by the creation of in struments which bypass the princi ple, or those powers which obstruct are made of little or no effect.

What gradualists have, in the final analysis, is a political faith. Their faith is in an ideologized de mocracy, which is best called social democracy, though Americans are not much used to the phrase. To be more specific, their faith is in de mocracy which entails much more than simply the process by which 728 THE FREEMAN December those who are to govern are chosen. It involves also what the ends of the government shall be. Only that gov ernment is democratic, according to their faith, which is moving toward distributive or substantive equality. While they ostensibly favor popular or democratic government, only that government which is socialistic in tendency is truly democratic. Otherwise, it has come to power on too narrow a base or has succeeded in misleading ((the people" (by cor ruptly acquiring campaign funds from wealthy patrons, for example). Therefore, it does not legitimately hold ·power.

This is a power theory, not a politi cal theory. The means by which those who govern are to be selected has been so entangled with the ends for which government is to act that they have become indistinguishable. The will of ((the people" has been determined in advance of any elec tion; it is none other than what has been ideologically· predetermined is for the good of the people, Le., fur ther redistribution of the wealth, greater direction by government of the life of the people, and more restraints on all independent ele ments working in any other direc tion. If an election should turn out differently, it must be because the will of ((the people" has somehow been thwarted. Such a theory is a program for the acquisition and ex ercise of power. It is doubtful that there can be effective political competition with the idea that has the world in its grip. (The full import of this must await discussion at another point.) If it were a political idea among other political ideas this would not be the case. But it is not. It is a power idea wedded to a seductive and most at tractive vision. Political competition gets turned into a contest for power to realize the vision by different va rieties of means. It becomes a contest over who could use the power most effectively to realize the vision.

In lands where gradualism holds sway, all political parties tend to be drawn into the contest to administer the programs by which a country is drawn into the maws of socialism. Who can best exercise the power by which the people are controlled is the issue. In communist lands, there is only one political party; hence, the issue becomes a contest between in dividuals as to who shall exercise the power. The Promises of Socialism Power, however, wi thin the framework of the idea, is only a means. It is not the quest for power that makes it so difficult, if not im possible, to compete politically with those advancing the idea. All poli tics is a contest over who shall exer cise power. It is the promises that make competition so difficult. How does one compete with the idea that 1978 THE COLD WAR: THE SPREAD OF COMMUNISM 729 all things shall be made right, that justice, peace, prosperity, and felic ity shall follow upon their policies?

And-and this is the clincher those who have wronged us from time immemorial shall have their property and wealth taken from them and divided among us. Gradualists attempt to will out of sight the power by which this is to be accomplished. They do so by try ing to hide from us, and perhaps from themselves, the use of force by mesmerizing us into believing that when it is done democratically sig nificant force is not involved. The communists are much blunter. They revel in power but identify it with the people. Theirs is a kind of mes merism, too, for the personal charac ter of the exercise of power is hidden behind a variety of facades, the most important being that of ideology. But even the explicit promises do not convey the sweep of the vision that stems from the idea that has the world in its grip. The sweep may not be readily apparent from the opening phrase characterizing the idea, namely: To achieve human felici ty on this earth by concerting all efforts toward its realization. Yet it is there, however implicit, and it entails a vision the like of which has rarely, if ever before, been conceived by mortal man. True, the vision of wor ld conquest is not new to our era; it has even been very nearly ac complished within the limited framework of earlier times. But this vision is in significant ways differ ent from and much more than the vision of an Alexander the Great or Julius Caesar.

The Temptation of Jesus It may be best approached by con ceiving it as the vision which Jesus rejected when he underwent the temptations prior to his ministry. According to Matthew, following his baptism Jesus went into the wilder ness. He fasted for forty days. Then, he underwent a series of tempta tions. The culminating temptation is the one that concerns us here: Again, the devil taketh him up into an exceeding high mountain, and sheweth him all the kingdoms of the world, and the glory of them; And saith unto him, All these things will I give thee, if thou wilt fall down and worship me. Then saith Jesus unto him, Get thee hence, Satan: for it is written, Thou shalt worship the Lord thy God, and him only shalt thou serve. 3 The conventional interpretation would be that Jesus was tempted to become an earthly ruler, an emperor over all the earth. But it was surely more than that. Given the circum stances, it does not seem likely that to be an earthly ruler would have been much of a temptation. And we are to believe that Jesus was temp ted, was drawn toward the idea. His mood could hardly have been such 730 THE FREEMAN December that being an emperor as such things are understood would have appealed to him. He had spent forty days in fasting, in contempla tion and preparation for fulfilling his mission. How he was to proceed was surely a live question. The temptation was to use power to ac complish his mission, not the mis sion of kings and emperors, but his mission.

His mission was to draw all men unto him, a holy, divine, and good mission. Would it not be appropriate to use power-the great force resid ing in government of an empire-to accomplish his purpose? Why not use the glory of all the kingdoms of the world to draw all men into lov ing fellowship with one another and union with God? There was a catch, of course. First, he would have to fall down and worship Satan, which is to say, he would have to worship and serve power and force, even as it must be served by those who would use it. Jesus answered him, ~~Get thee hence, Satan: for it is written, Thou shalt worship the Lord thy God, and him only shalt thou serve." Those who will may learn somewhat of God from that. The Temptation Revived The vision which Jesus rejected has been revived in our time. Like the vision which Jesus rejected it is not simply a vision of a world empire or even of world conquest. We misunderstand it when we read it into the framework of ancient empires, or modern ones either. Momentous changes have occurred in the world since the times of such empires, and since the time when Jesus was tempted. The most obvious of these are the great changes in transporta tion and communication.

Not only is the whole world now known, but its furthest reaches are available within a few hours by jet airplane, and within moments by radio, telephone, and by television signals transmitted by satellites. A vast array of inventions have made available a technology such as has never before been available to man. There have been developments in thought, too, which have changed the complexion of things. Ofparticu lar importance are those in psychol ogy, sociology, and economics. Men once conceived of ruling empires; today it is possible to conceive of total control over the peoples of the world. What can be, and has been, con ceived is a vision of all the instru ments of the world brought under a single power, or concert of powers, of all the possibilities known for or ganizing men to be centrally con trolled. That is the end toward which all who embrace the idea that has the world in its grip are driven.

Communists press toward that goal bluntly, crudely, and, from the out set, oppressively. Gradualists move 1978 THE COLD WAR: THE SPREAD OF COMMUNISM 731 toward it circumspectly, with great outward show of benevolence, and pragmatically. The instruments are there, and the struggle to grasp and control them, and through them all men, is well advanced. An Idea Activated Communism was once only an idea. In its Marxian formulation, it was only one idea amongst a goodly number of other socialist notions. But a momentous event occurred in the fall of 1917. The communist idea was joined to power in Russia. The power which Jesus rejected was seized and embraced by Lenin and his fellow Bolsheviks. At that juncture, communism ceased to be an idea only, or even mainly, and became a reality. Those who persist in thinking of communism as an idea will find difficulty in grasping this point. Those who think in this way are inclined to ponder such questions as these. Is Soviet Com munism true Marxism? In wha t ways did Lenin, or Stalin, or Khrushchev alter Marxism? When will the Soviet system pass from socialism to communism?

They are idle questions, of course. They have the same practical import as the question of how many angels can dance on the point of a pin. Lenin put the matter bluntly: ((Soviet power plus electricity is communism." It rnight be better to put it this way, since people get hung up on his reference to electric ity in the equation: At this stage in history, Soviet power is com munism. Communism is whatever those in power in the Kremlin, or Peking, or Havana, or wherever, de termine that it is. Those who do not Iive in those lands are free, of course, to discuss such questions as those above; those who do live in them have no such happy options. Communism is what the powers that be say it is. But such discus sions do not alter the reality which is proclaimed as communism. My meaning might be clearer if put this way. Prior to November of 1917 communism was only a fan tasy. When the Bolsheviks seized power, the fantasy became a reality.

A change, big with future portent, occurred. The fantasy produced a new reality, the reality of com munism in power. Communism in power became, for all practical pur poses, communism. If Soviet power is communism, the reverse is also the case, and it may be phrased this way: Communism is power. Not yet the only power in the world, but the intention becomes clear when we understand that the aim is for com munism to become all power, and the only power. The idea is the driv ing force toward total power, but it is not something distinct from the power, not in Marxian terms; it has become power. Power is central to communist 732 THE FREEMAN December thought and action. ((The scientific concept of dictatorship," Lenin said, ((means neither more nor less than unlimited power resting directly on force, not limited by anything, nor restrained by any laws or any abso lute rules."4 ((When the idea enters the mind of the masses," Marx said, ((it becomes a power."5 World Conquest From the outset, it was the aim of Soviet Communist leaders to extend this power over the world. Lenin declared that ((the existence of the Soviet republic side by side with imperialist states for a long time is unthinkable. One or the other must triumph in the end. And before that end supervenes, a series of frightful collisions between the Soviet repub lic and the bourgeois states will be inevitable."6 Stalin said, ((The vic tory of socialism in one country is not an end in itself, it must be looked upon as a support, as a means for hastening the proletarian victory in every other land. For the victory of the revolution in one country ...

is likewise the beginning and the continuation of the world revolu tion."7 In an even more famous statement, Khrushchev blustered, ((Our firm conviction is that sooner or later capitalism will give way to socialism. No one can halt man's forward movement, just as no one man can prevent day from following night .... Whether you like it or not, history is on our side. We will bury yoU."8 Although the entry of Red China has brought about some differences in the communist camp, the Central Committee affirmed its commitment to the overall aim in these words: The Chinese Communists firmly be lieve that the Marxist-Leninists, the pro letariat, and the revolutionary people everywhere will unite more closely, overcome all difficulties and obstacles, and win still greater victories in the struggle against imperialism and for world peace and in the fight for the revolutionary cause of the people of the world and the cause of international communism. 9 The spread of communism around the world is one of the most remark able, if not the most remarkable, developments of the twentieth cen tury. Communism has now spread into every country in the world. I do not mean simply that communist ideas have been spread in every country in the world. That is obvi ously the case. There is surely not a major library in the world that does not have some books or compen diums of the teachings of Marx, Le nin, Mao, or others. It would hardly be possible to teach a course on twentieth century history without summaries of and probably quota tions from various communists, and the same goes with greater or lesser validity for philosophy, economics, political science, and sociology. Nor 1978 THE COLD WAR: THE SPREAD OF COMMUNISM 733 is it simply the case that educated people must be in some degree ac quainted with communism. It is also the case that amongst those who are illiterate, or barely literate, there must be few who have not picked up and embraced some of the com munist doctrines.

A Universal Movement Ideas know no boundaries, and there is enough within Marxism that is universal to assure us that almost everyone holds or has en countered at least some of the no tions that have place in the ideology. In any case, twentieth century transportation and communication make it almost inevitable that all sorts of things are spread around the world, quite often with great rapid ity. Something much beyond the spread of ideas has taken place. Communist power has spread around the world and into every country in the world. That is what is remarkable. The Bolshevik seizure of power in Russia was the prelude to the extending of the tentacles of that power into every land in the world. The meaning and import of this is not readily grasped. Our modern notions of diplomacy, of na tional sovereignty, of international relations, and of political theory provide no categories with which to conceive it. Even the conception that communist power extends itself by a conspiracy to take over the govern ment is much too confined and nar row a concept. For when I say that communist power has already spread into every land, I mean to convey the understanding that it is already there and operating, not that it may some day overturn the government. The presence of com munist power in every land has al ready reduced national sovereignty and is contesting over the monopoly of that power.

Secret Pollee as the Arm of Soviet Power The manner of the spread of com munist power may be best explained by the description of the power mechanism of the Soviet Union. It is ' true that today there is a communist power independent of the Soviet Union-Red China-but the Soviet Union has much the longer history and has served as the model for all communist exercise of power. (In deed, the ideological struggle be tween the two has been highlighted by differences over Stalinist tactics, championed by the Chinese, and downgraded by the Russians.) Soviet power is 'exercised by and concentrated in the secret police. The secret police have been called by many names over the years CHEKA, GPU, NKVD, MGB, and KGB-, but their role has remained constant since the beginning. Today, the KGB is supplemented by the 734 THE FREEMAN December GRU, which is the military branch of the secret police. John Barron has described the role of the KGB this way: ... In everything it does, within the Soviet Union and without, the KGB thinks of itself as being the ((Sword and Shield of the Party," and this is probably its best single definition. For the KGB serves not so much the Soviet state as the Communist Party and, more particu larly, the small coterie of men who con trol the Party. It is the sword by which Party rulers enforce their will, the shield that protects them from opposition. The characteristics of the KGB which distin guish it from other clandestine organiza tions, past and present, all derive from the inordinate dependency of the Party oligarchy on the force and protection it provides. Because preservation of their power depends so on the KGB, the Soviet leaders have vested it with resources, responsibilities, and authority never be fore concentrated in a single organiza tion. 10 The secret police serve not only as the arm of Soviet power within Rus sia but also around the world. They are present in all countries of the world, always undercover, on em bassy staffs, in legations, or engag ing in any number of other opera tions. The gathering of intelligence from foreign countries is one of their major activities, of course. But be yond that, they use whatever means are available and necessary to en force the will of the Kremlin on all who fall under the sway of communism. They are the invisible mechanism of communist power.

The Role of the Party The visible mechanism of com munist power in any land is the communist party. Its presence in any country is the sign that the revolution has begun. Its task is to proclaim the revolution, to arouse discontent, to draw into its fold ad herents who can be trained and dis ciplined, and, when the time comes, to provide the personnel for taking over the power of government. Al though much party activity is undercover, and party membership is usually kept secret, the party is itself a cover. It is a cover for the foreign character of the communist intrusion. It provides what appear ance there can be that communism is a native movement. Yet these communist parties have generally been captive parties, instruments of foreign powers who controlled them. Elizabeth Bentley, who was for several years a communist espio nage agent in the United States, says that Earl Browder, then head of the American Communist Party, was fearful before and but a figurehead for the Soviet powers. 11 The size of a communist party is not usually a crucial factor . No party anywhere has ever come close to including a majority of the elec torate. Nor would such a large, un wieldy, and undisciplined party be 1978 THE COLD WAR: THE SPREAD OF COMMUNISM 735 considered desirable. Not politics but power is the object of com munism. Leverage is the principle on which communists gain and oc cupy power. If a majority were to vote for a communist candidate or for a party slate, leverage would be gained by a small minority, usually within the party.

In any case, conditions are sup posed to provide the setting for communists to come to power, not numbers. To Marx, the conditions were supposed to be provided when capi talism had reached a certain stage. For Lenin, and his successors, the conditions were right at any time when a government became sufficiently irresolute, weak, or di vided and confused in its counsels. Any number of things can produce such conditions: military defeat, military conquest, civil war, politi cal elections, terrorized officials, and so on. It is at this juncture that the resolute and disciplined party plays the decisive role at the forefront of revolution. PostWar Expansion In the countries of eastern Europe the conditions for a communist takeover were right by way of mili tary defeat and the presence of the Red Army after World War II. Soviet leaders had carefully nur tured the communist parties of these nations during the war, had even provided a place of exile for them in the Soviet Union. Although there were variations from land to land, Hugh Seton-Watson says that in general the takeover went through three stages: In the first phase government was by a genuine coalition of parties of left and left centre. The coalitions in all cases included communist and socialist par ties ....

In the second phase government was by bogus coalition. Several parties still nominally shared power and possessed independent organisations: but their leaders were in fact chosen not by them but by the communist leaders, and the policies of the coalitions were deter mined by the communists .... In the third phase the bogus coalitions were transformed into what the com munists like to call a ((monolithic block." The communist leaders not only laid down the lines of policy" but centrally controlled the organisation and disci pline of the noncommunist groups that were still left in the governments. Socialist parties were forced to Hfuse" with communist parties. No more politi cal opposition was tolerated in parlia ment, press or public meeting. 12 How this power was seized is par ticularly instructive: Already in the first phase . . . the communists seized certain key positions. The most important of these was the Ministry of Interior, which controlled the police.... The Ministry of Justice, con trolling the formal judicial machinery, was considered less important, but was held by communists in certain cases.

Control of broadcasting was seized at an 736 THE FREEMAN December early date. Great efforts were made to control and to create youth and women's organisations. In industry, communists were placed in key positions in the man agement of nationalised factories and in trade unions. 13 These were, as Seton-Watson says, the ((Levers of Power." Indoctrinating and Training the Communist Cadres Sometimes within the secret police, sometimes within the par ties, but always the strength and power of communist organizations are what are called the ((cadres." The term ((cadre" is taken from mili tary usage, where it refers to those who are assigned the task of indoc trinating, training, and disciplining military forces. They are the dedi cated communists, those who have been most thoroughly molded, trained to absolute obedience to the powers over them. ((The ideal type of the Com munist," Frank Meyer said, ((is a man in whom all individual, emo tional, and unconscious elements have been reduced to a minimum and subjected to the control of an iron will, informed by a supple intel lect. That intellect is totally at the service of a single and compelling idea, made incarnate in the Com munist Party: the concept of History as an inexorable god whose ways are revealed (scientifically' through the doctrine and method of MarxismLeninism."14 The ((cadres" consist of all those who have been most thoroughly molded into this pattern.

It is the cadre, not the formal party, Meyer pointed out, that is compe tent to the task that Stalin assigned the party, namely, ((the only organi zation capable of centralizing the leadership of the struggle of the pro letariat, thus transforming each and every non-Party organization of the working class into an auxiliary body and transmission belt linking the Party with the c1ass."15 These, then, are the main instru ments for applying power. Applying power on what? In answering this question we come to the heart of communism as power. So far as communism is a power theory, it is a theory of the exercise of power by a tiny minority over the whole of peo ples. How is it done? It is done by occupying pivotal positions in or ganizations. It is important to un derstand that any organization will do for the purpose, any organization that has people under its control in any way: police, armies, churches, corporations, businesses, clubs, political parties, governmental units or whatever. Those who think of ((communist front" organizations as only facades mistake the principle.

They may be facades and covers so far as the ultimate purpose is con cerned. But they are as important to communism as they would be if they revealed their purpose completely, 1978 THE COLD WAR: THE SPREAD OF COMMUNISM 737 for they are instruments of the revo lution in progress. The Organizational Structure The spread of communism pro ceeds, then, by the creation, penetra tion, and infiltration of organiza tions. Otto Kuusinen, one of Stalin's men, described a part of the process this way in 1926, ~~We must create a whole solar system of organizations and smaller committees around the Communist Party so to speak, small er organizations working actually under the influence of our party. •••"16 Willi Muenzenberg, considered somewhat of a theoretical genius on communist movement by way of or ganization, declared: ~~We must penetrate every conceivable milieu, get hold of artists and professors, make use of cinemas and theatres, and spread abroad the doctrine that Russia is prepared to sacrifice ev erything to keep the world at peace.

We must join these clubs ourselves. . . ."17 The eventual aim can be de duced: it is either to destroy or to control all organizations within a society. It is only when there is no longer an independent organization, or an independent person, that the triumph of communism is complete. An analogy may help in grasping the mode of the spread of com munism. From where I sit, I can see across the road to a field covered with Kudzu. Not so many years ago most of the area covered by Kudzu was a cultivated field. I do not know how the Kudzu got started there. How it got started in this part of the country is not a mystery, however. It was deliberately set out. If memory serves, it was recommended by ag ricultural experts as a means of stopping soil erosion. (The govern ment may even have provided the seedlings without charge, or for a nominal price.) It does stop soil ero sion in those areas to which it spreads, but it does much more than that.

Kudzu is a vine, for the informa tion of those unacquainted with this ubiquitous plant. It is a perennial on which large leaves grow in season. Indeed, Kudzu is a pretty enough plant, such a vine as an innocent person might set out to provide shade over an arbor. But it has a mon strous trait. It spreads. And spreads. And spreads. It can only be stopped from spreading by uprooting it, al though it will not directly cross a well traveled road. And it chokes out all plant life over which it spreads. The cover of leaves is so thick during the season that plants depending on the sun to carry out photosynthesis, which is to say all non-parasitic plants, must succumb. Even large trees in its path must eventually be overcome by it. No independent plant life can coexist with it. Being across from it on a well traveled road is no protection, how ever. Kudzu produces seeds which 738 THE FREEMAN can be blown across the road by the wind. That must have happened al ready to my neighbor, for some sturdy vines have taken root there.

If it is not nipped in the bud, so to speak, it will spread over that land, and from thence to wherever it can, covering and crushing out all plant life as it goes. Kudzu is a power plant, as it were, and moves re lentlessly to become the only power. Communism is analogous to Kudzu in its spread over the world. But communism is not a plant; it is an idea. It is idea joined to power. It is spread not by the wind but by terror. That aspect of it needs now to be examined. ® Next: 25. The Cold War: Terror izing Many Lands. -FOOTNOTESlEugen Weber, The Western Tradition (Bos~ ton: D. C. Heath, 1959), p. 609. 2John K. Galbraith, The Affluent Society (Boston: Houghton Miffiin, 1958), pp. 319-20. 3Matthew 3:8-10 (KJV). 4John Barron, KGB: The Secret Work of Soviet Secret Agents (New York: Bantam, 1974), p. 2. 5Frank S. Meyer, The Moulding of Com munists in Omnibus Volume 3 (New Rochelle, N.Y.: Conservative Book Club, copyright Har court, Brace and Co., 1961), p. 25.

8Quoted in M. Stanton Evans, The Politics of Surrender (New York: Devin-Adair, 1966), p. 26. 7/bid. 8/bid., p. 27. 9John W. Lewis, ed., Major Doctrines of Elbert Hubbard IDEA.~ ON Communist China (New York: Norton, 1964), p.279. lOBarron, op. cit., pp. 9-10. USee, for example, Elizabeth Bentley, Out of Bondage in Omnibus Volume 6 (New Rochelle, N.Y.: Conservative Book Club, copyright Devin-Adair, 1951), pp. 125-26. 12Hugh Seton-Watson, From Lenin to Malenkov (New York: Frederick A. Praeger, 1953), pp. 248-49. 13/bid.,p. 255. 14Meyer,op. cit., p. 15. 15Quoted in ibid., p. 14. 18Quoted in Eugene Lyons, The Red Decade (New Rochelle, N.Y.: Arlington House, 1970), p.47. 17/bid., p. 48. LIBERTY THE weaknesses of the many make the leader possible-and the man who craves disciples and wants followers is always more or less of a charlatan. The man of genuine worth and insight wants to be himself; and he wants others to be themselves, also.

THE CIVIL WAR had just begun. The nation's new President, Abraham Lincoln, had received the news of the bombardment of Fort Sumter with a great deal of trepidation. Now it was his turn to act. But what to do? How best to meet this chal lenge to the armed migh t of the United States of America? Shortly after the news of Fort Sumter reached Lincoln, he had closeted himself in conference with the ven erable hero and Chief of Staff, Gen eral Winfield Scott. As usual, Scott had some answers. One of Scott's solutions particu larly struck home with the new president. During the course of their meeting, General Scott had re peatedly emphasized the necessity of forming a naval blockade of all the Southern ports in order to iso late the fledgling Confederacy and cut off their foreign trade. And, while this would be an expensive Mr. Baker teaches in the school system in Lubbock, Texas. William L. Baker Native Pottery Only maneuver involving hundreds of ships and thousands of men, it would be ess~ntial in weakening and curbing as quickly as possible the armies of the rebellion.

The reasoning behind this was very simple: besides being the oldest tactic in military history-tried, tested, and proven-it stood to rea son that the fewer imports a nation (or city) receives from outside sources the worse off it becomes economically and, thus, militarily. Military experts had always realized tha t trade and commerce were the lifeblood of a nation and that the sooner it could be stopped the better it was for the opposing side. Such a blockade, Scott realized, would spell doom to the enemy. So on April 19, 1861, Abraham Lincoln, along with General Win field Scott, devised the blockade that would be put into effect as soon as possible. This plan, which later be came known as the ((anaconda plan," was to prove instrumental in crush739 740 THE FREEMAN December ing the life out of the vibrant South ern economy. In no time at all Ad miral Porter of the Union navy had put the paper plan into effect. He would make the South writhe and groan until they would eventually have to sue for peace. In later years the Supreme Court declared the ((anaconda plan" as the official be ginning of the War Between the States.

As the Union ships were engaged in the vital task of squeezing the enemy dry, what were the President and the Congress doing back home? Why nothing other than devising elaborate and prohibitive tariff schedules in order to keep the Hinva sion" of ((foreign" products out of the Union! Imports would surely destroy the Northern cause, they reasoned. What the North needed most of all was ((protection." So while Union ships blockaded the South by sea, the honorable Congress was doing the same thing to the North at home. What Southern sea captains could never once accomplish in four years of war, the Congress did for them in a matter of weeks by politi cal action. The Blockade of the North Barriers to trade rose higher than ever before in the attempt to ((pro tect" the North. Confederate ships were therefore freed to prowI the lanes further out on the high seas since the boys in Washington were doing such an admirable job without them. They could now have more leisure to ferret out those few mer chantmen who were officially al lowed through the lines. They could also find more of those who simply chose to bear the risks of smuggling goods into Yankee ports and ham lets. In this respect Confederate ves sels actually found themselves as enforcers of the Congressional man date of restricted trade! Confederate raiders made no distinction be tween ((legal" or ((illegal" trade.

What is often neglected in the history of the Civil War is not the ((blockade runners" of the South who have received plenty of plaudits for their daring exploits, but the ((block ade runners" of the North who had their work cut out for them by at tempting to slip the blockade of the Northern coast by Northern ships and customs agents that their own Congress had imposed upon the country at the very beginning of the war. Apparently the logic of the situa tion never once dawned upon the President or the Congress that acted so hastily to put his economic plans into effect. If the North was Hprotecting" Union industry from the evil effects of international trade by Congressional action, wasn't it doing the same by anchoring war ships off Southern ports for better than three thousand miles? The story of Haman, who unknowingly 1978 NATIVE POTTERY ONLY 741 built his own gallows, could not have been more ironic!

And when the tariff blockade seemed to be developing leaks, Con gress merely tightened the garrote a bit tighter around the North's windpipe, thus choking off needed manpower and supplies which Europe had to offer. All the while this little tragi-comic charade was going on, there were actually Union leaders who felt that more warships were needed to blockade the South in order to catch the blockade runners who were slipping through the net. What the Congress should have done in order to be consistent with their own untenable economic doc trines would have been to recall every Union ship, scrap the block ade, and let -the South kill itself from the Hinvasion" of ((foreign" goods which would surely ((glut" the domestic market, thus Hflooding" the Southern economy with products which would destroy business and bring the war to a hasty conclusion! Fortunately for the North, the Union navy was more efficient in destroying the Southern trade than the Congress was in choking off Union supplies. But try as they might, the politicians in the capital could not outshine the navy on the high seas. It is true that the solons inflicted incalculable damage upon the Northern market during the course of the war. But the few Northern ships that were assigned to blockade the Northern coast sim ply could not inflict the kind of dam age to Union-bound shipping that their more numerous colleagues as signed to block the Southern coast could inflict upon the South. As a result, the North floundered along without the full benefits of trade with a Europe that was more than willing to provide the materials so desperately needed to terminate the war.

Continuing War on Trade Most historians dwell at great length upon the comparative advan tages of the North over the· South during the Civil War. That which usually receives the greatest em phasis is the higher productivity and resources of the North. And while all this is true, it fails to consider the resources and produc tivity that could have been available had free trade been allowed. In ef fect it is not so much the pounding that the South gave the North dur ing the war, but rather the pounding which Congress gave the North, by depriving itself of the benefits of free trade, that deserves more attention. Today warships continue to prowl the coastlines and to ply the lanes of commerce in order to ((shield" the nation from the ((invasion" of Au stralian beef, Japanese steel, and so forth. Even in this modern age the old trade-is-war doctrine continues 742 THE FREEMAN to guide national policy. The United States continues to look at t(foreign"

goods as a calamity to be avoided at all costs. Recent broadsides against the market prove that the spirit of tyranny and war still lives in the hearts and the minds of the (tplanners" and policymakers. These bom basts seem to come ever closer to the waterline of the market and its functions. Yet, in spite of it all, the market continues to operate-if at a much reduced level of efficiency. This attempt to bring the econom ics of warfare to the market has resulted in untold misery for all of mankind who stand to benefit from the cosmopolitanism of the free market. This perpetual assault on trade and the well-being it brings has offered, instead of a vast cor nucopia of wealth, the specter of the pale horse and the pale rider of war and man-made famine. The doctrine of (tprotectionism" has never re suI ted in anything other than planned chaos. Nor is this a doctrine that has sprung up full grown from the ashes and motivations of the War Between the States. As far back as the days of the Greek Herodotus in the fifth century B.C. we are told that it was against the law for any thing that was of Athenian origin to be brought into a certain Greek temple. Only ttnative" pottery-would do. ttprotectionists" were alive and well in his day too.

It is no different in our day. We still hear arguments about the (tevils" of ttforeign" products, argu ments which were exploded by economists generations ago. We still hear preached as official ideology the tragedies and horrors of allow ing the market to t(flood" us with a ttglut" of ttcheap" goods which the international (foreign) market has to offer. We see farmers blocking roads on the Mexican border, at tacking trucks as policemen stand by and sympathetically witness the carnage. We see organizations of such men who call themselves ((sol diers" (in the true spirit of warfare) pleading for ((sympathy and un derstanding" from their fellow citi zens. We hear the neat little cliches that are intended to take the place of ideas and intelligent thought. We hear the martial strains of prop aganda telling us to (trally round the flag." After all it is ttOur Ameri ca." The tones and pleas of the petty provincialists of trade restriction have not changed one bit over the eleven decades since the Civil War.

Neither have the effects of their policies which continue to be a blight upon men and an assault on intelligence wherever and whenever such doctrines are implemented. The war on the market-and thus civilization-goes on. Native pottery only, please! ® AUSTERITY, WASTE, and NEED IN recent years U.S. citizens have been encouraged to waste less and adopt a more austere life style. We have been chastised for our energy intensive habits. We eat meat in stead of cereals; we drive large cars, drive when we could walk, keep our homes warmer than needed, and en gage in many other ~~wasteful" prac tices. More generally, U.S. citizens have been criticized for the use of luxury goods and for using a dispro portionate amount of the world's re sources. There is a great deal of concern about the ability of reserves of fossil fuel and other resources to support projected levels of population. Ex trapolation of current trends in re source use in the Limits to Growth Dr. Pasour Is Professor of Economics at North Carolina State University at Raleigh.

This article first appeared in the Winter-Spring ·1978 Issue of The Intercollegiate Review, 14 South Bryn Mawr Ave., Bryn Mawr, Penn. 19010, and Is here reprinted by permission. E. C. Pasour, Jr. and other HDoomsday Models" lead to the specter of the world grinding to a halt within the next century or" so as currently known resources are depleted. What should be our pos ture toward the use of energy in the production of agricultural and in dustrial commodities? What is the appropriate approach to take toward legislation mandating mileage standards for automobiles, mandat ing insulation standards for home and office buildings, banning the use of cereals for livestock feed, and so on? Conventional wisdom holds that we should eliminate waste in the use of gasoline, electricity, and other resources. The concepts ~(need"" and ~(waste," however, are far more com plicated than the widespread use of these terms suggests. The philoso phy of austerity rests on an insecure basis and leads to measures that are harmful and contradictory. This essay explores the meaning of 743 744 THE FREEMAN December ~~waste" and ~~need" and compares the effects of market and non market rationing procedures.

Waste and Need During the energy crisis following the OPEC oil embargo, individuals were encouraged to reduce waste in the use of food, energy, and other raw materials. The same pleas were heard again in the winter of 1976-77 during the fuel crisis. If individual citizens are to respond intelligently, they must be able to identify waste. The concept ~~waste," however, has little or no objective content and appears to be closely related to the term ~~need." Furthermore, the con cept of ~~need," is meaningless as a guide in determining one's con sumption pattern. It is impossible to define objectively the goods and ser vices we ~~need." How much meat, housing, heating fuel or gasoline, for example, do we ~~need?" The concept ~~need" implies that, regardless of price, there is some minimum amount of meat, housing, heating fuel, or gasoline (or any other good or service) that is essential to our livelihood. We observe, however, that people reduce consumption when relative price rises for any good or service including gasoline, coffee, meat, and housing.

The amount ~~needed" of any good depends on the price of that good relative to the price of other goods. The ~~need" of Jones for coffee depends on his subjective valuation of coffee and coffee substitutes. It is an illusion of bureaucrats and con sumerists that the U.S. Congress, the Federal Energy Administration, or Ralph Nader can determine our individual ~~needs." Even we as in dividuals can only determine our own needs in the sense that we de cide how much we prefer at given prices. When the relative price of a good changes, however, our Hneeds" change in the sense that we prefer to purchase more or less of the good. There is no known example of any good where the quantity purchased remains the same when there is a large change in its price relative to the prices of other goods. The concept ~~waste" implies that amounts of a product which exceed our ~~needs" level provide no addi tional satisfaction. If this were in fact the case, amounts of the product above this ~~needs" level could be removed at no loss of satisfaction to the consumer. When we investigate commonly cited examples of ~~waste," however, we find that the goods presumably wasted are, in fact, contributing to consumer welfare. If the goods alleged to be wasted were providing no satisfaction, coercion would not be required to reduce use.

The use of the family auto pro vides a good example of the point being made. It is frequently alleged that the typical motorist wastes gasoline by using his auto when it 1978 AUSTERITY, WASTE, AND NEED 745 isn't ~~needed." We observe that peo ple drive their car when they could walk, ride a bicycle, or form a car pool. This fact that people use their car when alternatives are available doesn't mean that the use of gasoline used in this way is ~~wasted." There is no denying the fact that auto users could get by with much less use of the auto. The· fact that motorists could reduce auto use however, does not imply that it is in their interest to do so. Each motorist will act in the way which is most beneficial to him given the costs and benefits of various alternatives as they are perceived by him. Consum ers respond to relative transporta tion costs in deciding where to live, how to get to work, where to vaca tion, and the like.

We observe that motorists economize in numerous ways when costs of auto travel increase. As gasoline prices increase, for exam ple, there is substitution in favor of smaller autos, more bicycling, more car pooling, shorter vacation trips, and so forth. The fact that less gasoline is used when price in creases does not mean that the larger amount used at the lower price was ~~wasted." One might, to the contrary, argue that at a lower price larger numbers of consumers are able to benefit from a particular good or service, and therefore a lower price is an efficient means of effecting a widespread distribution of some item of value. People economize in the use of scarce resources in responding to their own self-interests. This does not mean that all people respond to a change in prices in the same way. We expect individuals to make dif ferent accommodations to any change in relative prices reflecting their own unique situation and pref erences.

The preceding discussion implies that there is no objective basis by which an outside observer can de termine the amount of gasoline any particular motorist ~~needs." If ~~needs" cannot be objectively de termined, decisions made to limit use through administrative controls must be arbitrary and capricious. Relative Prices vs. Need It has become fashionable in re cent years to suggest that people in the U.S. and other highly developed countries should base their con sumption not on relative prices but on ~~need." The problem as indicated above is that need and waste con cepts apart from relative prices pro vide no operational criterion by which the consumer can make choices. What do we ~~need," for example, in the way of clothing, electricity, gasoline or food? It has been shown that a nutritious minimum cost diet can be formulated for people as is done for livestock. Such a diet would 746 THE FREEMAN December enable U.S. families simultaneously to have a more nutritious diet and to reduce food expenditures to less than one-half their current level! Is this the food budget we CCneed?"Can all food expenditures in excess of this minimum cost nutritious diet properly be considered waste? Few of us will agree to sacrifice all palatability considerations and rely solely on cost considerations in choosing our diet.

The same problem arises in the use of gasoline, electricity, and in fact, all goods and services. How does one decide what size car to drive, amount of electricity to use, temperature to set the home ther mostat? We, as consumers, respond to changes in relative prices in de ciding what to eat, where to live, how to travel to work, heat our homes, and so forth. Each of us would do virtually everything we do in some other way if changes in relative costs were sufficiently large. Attempts to get people voluntarily to change consumption habits are unlikely to have much effect so long as relative prices remain un changed. On the other hand, when relative prices change, no one has to encourage consumers to make ad justments in the mix of goods consumed-regardless of whether the good is coffee, beef, gasoline or heating oil. In recent years, as rela tive prices changed, we have observed pronounced changes in size of auto, in meat consumption, in coffee consumption, in use of electricity, and the like. Market price will effec tively ration goods when prices are not held down by administrative de cree. There is no known example of a shortage persisting over time where price was relied upon as the ration ing mechanism.

Problems of NonMarket Allocation Methods Few people who suggest that con sumers should make choices related to food, gasoline and other products on the basis of some criterion other than price recognize the problems to be overcome when the market mechanism is-abandoned or market signals are ignored. Price in a mar ket economy provides signals to both consumers and producers. The mar ket is a highly useful mechanism for determining_ and transmitting in formation between all persons in the market. If the market is not permit ted to coordinate the decisions of consumers and producers, central direction must be used. However, there is no way for the central plan ner to obtain all the information which enters into any real world market transaction. Knowledge about no good or resource exists in concentrated form or in a single mind. The economic problem, as Hayek has long stressed, is to secure the best use of our resources utiliz1978 AUSTERITY, WASTE, AND NEED 747 ing the knowledge of all members of society for ends whose relative impor tance only these individuals know.

In the absence of market signals, the regulator faces severe informa tion problems. When the market is abandoned, the planner has no way to determine the information neces sary to coordinate supply and de mand. Consider the problem of de termining the ~(appropriate" temperature setting, for example, where energy use is to be restricted not by price but by restricting fuel use. The regulator must not only predict the amounts which will be used at vari ous settings, but also the amount which will be produced at the price level which is arbitrarily held below the market-clearing level. Mandatory allocation or rationing schemes cannot be based on individ ual preferences and must be arbi trary and capricious. ~~N eed" has no objective content as a guide to allo cation, and in the absence of price signals there is no way for the cen tral planner to make an allocation which reflects the subjective consid erations of all persons in the mar ket.

Problems are also created for the individual consumer who unilater ally adopts austerity measures and does not respond to market signals. Attempts by a single individual to reduce consumption of food, energy, and other raw materials beyond the level dictated by relative prices will serve little or no useful purpose. If an individual, acting alone, reduces the level of consumption, the effect on total consumption will be negli gible. For example, consider the effect of a decision by one ~~socially aware" person to reduce gasoline use. The effect on total gasoline usage will be negligible but the inconvenience to that individual can be quite large. If the individual is in business such a decision will increase costs and under competitive conditions will seriously decrease profits or bank rupt the entrepreneur attempting to (~do good." Appeals for Group Action What are the possibilities for group action? If large numbers of consumers reduce consumption be low the level dictated by relative prices, producers receive incorrect signals. Consider, for example, the effect of consumer boycotts of beef, coffee and other goods. A reduction in demand will decrease price, given the level of supply. The decrease in price resulting from the boycott is likely to reduce future supply and cause future prices to be higher than they would otherwise be. Unless the product is effectively monopolized, there is no way for group action by consumers to reduce the long run price of the product.

What do these comments imply about moral suasion as a method of rationing and reducing resource 748 THE FREEMAN December use? Pleas to reduce use may be effective for a limited period of time when the situation is deemed to be urgent by a large part of the popula tion. The problems enumerated above which arise when market sig nals are ignored are not eliminated by moral suasion. Moral suasion is also subject to another set of prob lems. First, there is the free rider prob lem common to all voluntary group activity. These activities confer ben efits on people who cannot be made to pay for the benefits they receive. When the demand for gasoline is reduced by everyone except Jones, the price is decreased. Jones as a free rider will benefit through the lower price and use more gasoline. Moral suasion may be effective for a limited period of time but it cannot solve the free-rider problem as sociated with pleas to reduce gasoline use, lower thermostats, and otherwise reduce resource use below the level dictated by market prices.

Second, moral suasion to reduce resource use to one's ttneeds" or to reduce ttwaste" is subject to all the problems associated with identify ing ttwaste" and ttneed" discussed above. There is no objective basis upon which the ((socially concerned" citizen can determine the proper level of energy use. Consider, for example, the natural gas shortage during the winter of 1976-77 and the pleas to reduce ttwaste" in home heating. Upon what basis can the ttsocially concerned" homeowner de cide whether to heat his home to 68°F, 65°F, 60°F, 55°F (or even lower)? Third, even if moral suasion is effective and all citizens fully com ply with, say, a request that ther mostats be set at 62°F, the impact will differ greatly from person-to person. Such a policy as in the case of mandatory restrictions assumes that everyone has similar circum stances. In reality, people differ greatly in their preferences for heat and in their preferred tradeoffs be tween heat and other sources of ex penditure including size of house.

The differential impact of any re striction in use of any good or re source is greatly magnified if an attempt is made to indicate the ap propriate amount to use, e.g., 10 gallons of gas per car per week or 1000 KWH of electricity per month. The circumstances of time and place vary greatly from person-to-person. Conservation and Rationing A great deal of effort has recently been devoted to reduce ttwaste" of natural resources. The effects of such efforts, however, may be incon sistent with other closely related goals. First, consider-action to reduce waste of renewable resources. En vironmen talists and consumerists have been active in promoting recy cling of paper in recent years as a 1978 AUSTERITY, WASTE, AND NEED 749 way of conserving trees and protect ing forests. Moves to reduce ((waste" by reducing the use of paper and other wood products will be counter productive for people who desire large amounts of forests for their esthetic value since such action will reduce the number of trees being grown. Tree producers respond to economic incentives just as other producers do. Thus, the more wood products used, the more trees will be produced. The more trees produced, the more land required for tree pro duction and the larger the forest acreage. People who like to see trees growing are working against their own self-interest when they dis courage the use of forest products.

Another simplistic solution, bans on the use of cereals in feeding live stock or forced reductions in meat consumption, will likewise not ac complish the intended goal. Jean Mayer, the famed nutritionist, has suggested, for example, that America could release enough grain to feed 60 million people by reducing meat consumption by 10 percent. Measures to reduce grain fed to live stock or to reduce meat consump tion, however, are unlikely to be effective in providing food to the world's hungry people. The ham burger not eaten in the United States will not miraculously appear in the hands of a hungry person in another land. How about the use of nonrenewable resources including oil, coal, and the like? It is in the own er's interest at any point in time to exploit these resources in such a way as to maximize the wealth, or value of these resources. As non renewable resources are used, in creasing scarcity will be reflected in two ways. First, the price -will be bid up as the resources become progres sively scarcer. When this happens consumers are induced to economize on the use of the resources. The market provides an effective system of rationing scarce resources both at a given time and over time.

Shortages Created When prices are arbitrarily held down by government as in the case of natural gas, a shortage is created or exacerbated. The natural gas crunch in January 1977 can be traced directly to current and past government price controls. These price controls have kept prices arti ficially low and have given incorrect signals to gas producers and con sumers. Low consumer prices have encouraged the ((wasteful" use of gas by discouraging the use of home insulation, alternative fuel sources, lower thermostat settings, and so on. Low producer prices, at the same time, have reduced the incen tives of suppliers of natural gas and served to decrease production. In addition to involving less gov ernment intervention and red tape, 750 THE FREEMAN December price rationing provides a far more predictable method of restricting energy resource use when con trasted with administrative decrees such as mandatory standards for home insulation and auto mileage.

When price increases, people will economize in different ways depend ing upon their own subjective evaluations. If the price of home heating fuel increases, for example, some people will reduce the temper ature in all rooms, some will apply more insulation, some will close off rooms, and so forth. When mandatory conservation standards are imposed, on the other hand, there is little latitude left for individual ingenuity. Everyone is forced to meet the same standard even though people having different tastes and preferences would economize in different ways if left free to do so; or alternatively, indi vidual ingenuity is now channeled to the circumvention of the mandat ory standards rather than to the solution of the problem for which those standards were allegedly im posed. There is no way mandatory stan dards can cater to the diversity of individual tastes or take into ac count the differences existing in lit erally millions of different circum stances. The fundamental inequity of treating people in unequal cir cumstances the same way is ig nored. Why, for example, should the homeowner with children now away from home be forced to insulate his entire house though heating and using only half the house? In this and numerous other examples it is easy to see how the individual homeowner can make an accommo dation much easier to higher prices than to mandatory standards which cannot reflect different tastes and circumstances.

As nonrenewable resources are exhausted, increasing scarcity is re flected in a second way. As price is bid up, the development of substi tute resources is encouraged. The cotton price support program insti tuted in the 1930's, for example, encouraged the development of nylon and other substitutes none of which were predictable when cotton prices were increased. Similarly, in creases in prices of fossil fuel will serve to increase the development of new energy sources. Higher fossil fuel prices serve both to make al ternative fuel sources currently available more profitable and to en courage the development of energy sources not currently available. Conflicts Minimized Finally, the market mInImizes conflicts when compared with non market rationing methods. The market is based on voluntary ex change so that all parties gain when a market transaction takes place. There is little basis for concern or 1978 AUSTERITY, WASTE, AND NEED 751 antagonism when everyone can pur chase all of a product he desires at a specified price.

The situation is much different when rationing is performed by nonmarket methods. The creation of antagonism and conflict is inher ent in nonmarket rationing proce dures since more of a product is de sired than is available at the price arbitrarily held below the market clearing level. In such a situation an individual can legitimately feel that he is in competition with other con sumers for the product whose price is controlled. The equity problems endemic in nonmarket rationing procedures were discussed above. Allegations of antisocial conduct frequently arise where nonmarket allocation procedures are used. Each person has a vested interest in re ductions in consumption by other people when there is a shortage. Individuals consuming more than they cCneed" as perceived by the out side observer are alleged to be wasteful. Since Hwaste" is in the eye of the beholder, efforts to reduce waste must be authoritarian in na ture. Such efforts must be based on the values as perceived by the state and not on the values of individual decision makers.

Blaming Producers Nonmarket allocation procedures also give rise to will-of-the-wisp attempts to determine whether pro ducers are holding back production and whether costs of production are excessive. There will always be a perceived conflict between produc ers and consumers when production is subject to price controls. Consider the action by the Secretary of the Interior in February 1977 to deter mine whether producers of natural gas were cCholdingback production." The allegation was made that pro ducers might be acting against the cCpublicinterest" by holding back on production under the expectation that future prices might be higher. Thus, a producer who reduces the amount of natural gas available for immediate consumption is C(holding back" and is thereby ((antisocial," but a consumer who reduces im mediate consumption practices cCconservation"which is cCsociallydesirable." If a producer were restrict ing production anticipating higher future prices, would such conduct be antisocial? If producers do not follow market signals, they have no way to make production decisions including how much to produce or when to produce.

There are only two ways to allo cate goods and resources-the mar ket and central direction. The mar ket permits people to choose on the basis of relative prices. Since each party gains under voluntary ex change, conflicts are minimized. When economic goods are rationed 752 THE FREEMAN by nonmarket methods, conflicts are inevitable. Since more is desired than is available at the controlled price, measures must be taken to reduce consumption. Austerity mea sures with pleas to eliminate Uwaste" and reduce consumption to the ((needs" level are endemic in nonmarket allocation procedures. Mandatory ((conservation" measures mean that consumers are made poorer by being forced to do without. Conclusions How then ought choices be made in a world of ((finite resources?" Con flicts will be minimized when the rules of the game are such that the marketis mainly relied upon to ra tion goods and the individual citizen bases his decisions on his prefer ences and on relative prices. Admon itions to satisfy essential needs, forego waste, and live in austerity are unlikely to have the effect of feeding the hungry or sheltering the homeless throughout the world.

Forced austerity works against peo ple's willingness to work. If people are prohibited from buying the goods they desire, they will work less and take more of their real income in the form of leisure. What does this mean about the level of living for us as individuals? The attitude that consumers should not be prohibited from acquiring the ((luxury" goods they desire does not mean that we as individuals should follow a pattern of conspicuous con sumption. The question of what goods and services each of us con sumes' is a matter which must be answered by each of us as individ uals. One person cannot identify ((waste" in consumption by another individual except by imposing his own standard of values. There is little question that many of us could benefit from a more austere life style. Yet, moves to impose life styles upon us are at variance with the tenets of a free society. @) IDEAS O;\; LlBEHTY The Ongoing Cost of Liberty THE SEARCH for the maximization of human well-being is a continuing one. Like the search for food, it never ends. We eat today but we will hunger again tomorrow. The cost of liberty is an ongoing cost. It is never paid in full. We achieve some measure of liberty today but we must strive again tomorrow.

Were a totally libertarian society to emerge today, we would have to strive for it again the next day. ROBERT LEFEVRE, Lefevre's Journal, Summer, 1978 Dale. Haywood A HUMAN ACTION TAXONOMY A TAXONOMY is a technique of classification. The zoologist, for exam ple, uses the categories phylum, class, order, family, genus, and species to classify animals. This system of classification makes the zoologist's study more manageable, thus enabling him to ~~peg" correctly any given member in the entire animal kingdom. The student of liberty may also find it useful to have a taxonomy, a taxonomy of human action. In his book, The Law, Frederic Bastiat provides just such a system for classifying human action. With knowledge of this taxonomy, the student of liberty can readily ~~peg" any human action and thus distinguish between actions that promote liberty from actions that erode liberty. I have tried to extract the essence of The Law and put that essence in the form of a diagram-my human action taxonomy.

Self-sufficin Individuals. Interacting Freedom Force Illegal Legal Reading the diagram from left to right, the starting point is the individual. All human action ultimately reduces to the actions of specific individuals. The individual is the most important element in society. 753 754 THE FREEMAN December The individual may choose to be self-sufficient or to interact with others. At least theoretically, an individual can go it alone in life. However, at this stage in history, it is practically impossible to be self-sufficient. Realistically, we find ourselves on the ((Individuals Interacting" branch of the diagram. There are alternative ways of interacting. We may interact with others freely, voluntarily, peacefully. Individuals interacting with others voluntarily are motivated by the prospect of profit, by the prospect of gain for all parties to the transaction. Thus, it seems logical to try to maximize the number of voluntary human actions.

Alternatively, we may interact with others forcefully, under coer cion or the threat of coercion. When an individual interacts with others under compulsion or the threat of compulsion, not all parties gain. The predator may gain; the individual preyed upon certainly loses. Thus, it seems logical to try to minimize the number of human actions rooted in force. Note that ((Force" has two branches in the diagram. The upper branch is ((Illegal." From time immemorial, some types of human action have been generally condemned. Actions such as theft, rape, and murder are examples of illegal, forceful interactions of individ uals. Since most people are alert to such actions and since there is widespread agreement that these actions are reprehensible, these constitute a relatively small percentage of all human action. It is doubtful that the greatest perils to civilizations come from this category of human action.

We come now to perhaps the most instructive part of the diagram, the ((Legal" branch of ((Force." Government subsidies are examples of legal, forceful interactions of individuals. It is obvious that subsidies are legal, being duly sanctioned by law. Although the force in subsidies may not be so obvious, it is there nonetheless. Subsidies are financed with taxes such as federal personal income taxes. I pay income taxes partly in fear of forceful reprisals if I do not. Tens of thousands of other citizens of the United States reason and act the same way I do, I surmise. So it is from the threat of force that at least some of us pay income taxes, from which subsidies are paid. Thus, it seems to me, subsidies are an example of legal, forceful interactions of individuals. There is a feature of legal, as opposed to illegal, forceful interactions of individuals that makes this category of human action a special 1978 A HUMAN ACTION TAXONOMY 755 threat to our welfare. Since the federal government of the United States was founded, in part, to ~~establishjustice," I suspect we may be lulled into thinking that all of the federal government's activities are consistent with this objective, i.e., that all such activities are just.

Thus, legal, forceful human actions may insinuate themselves into a society of inattentive, uncritical individuals. But the fact that actions rooted in force are implemented by a government designed to Uestab lish justice" leaves such actions still rooted in force. Recall that in transactions rooted in force, the predators may gain but those preyed upon certainly lose. Those preyed upon are necessar ily the producers in society. Surely as predators prey upon producers, the producers will become less inclined to produce. True, if the producers have accumulated output from the past and if they are currently very productive, they may endure considerable predation with no apparent harm to society for a while. But if the amount of predatory human action keeps growing and growing, the producers will, sooner or later, become less inclined and then disinclined to produce no matter how well off they are at the outset. With predation waxing and production waning in a society, that society is surely doomed.

It is not inevitable that this destructive process continue. By increasing the proportion of their voluntary, mutually profitable transactions, any group of individuals can invigorate, or reinvigorate, their society. Equipped with this human action taxonomy, the propo nent of liberty can readily ~~peg" any human action and thus decide which actions he will take or support, and which actions he will reject or oppose. I trust that others may find this human action taxonomy helpful in the cause of human liberty. @ Mr. Haywood is associate professor of business and finance at Northwood Institute, Midland, Michigan. This article Is from a speech at Northwood's 1978 summer seminar on "Freedom in Third Cen tury America."

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN Ethics and Economics ECONOMICS did not begin as the ((dismal science." It began, in Adam Smith's The Wealth of Nations, as a grand essay on the consequences of human choice, sometimes statisti cally predictable, sometimes not, in a field that presumes a framework of law, culturally determined habits, and common notions of justice and morality. Smith, whose first interests were ethics and jurisprudence, knew that an economist must use deductive logic as much as arithmetic and algebraic thinking if he is to make sense of his subject. It was for a very sensible reason that Ludwig von Mises, reverting to the Smith prac tice, put his own study of economics into the wider, and eminently Smith ian, perspective of (thuman action," a subject of such vast scope that it brings everything from ethics to 756 physiology, psychology and politics into the picture. The good economist must be a learned man, versed in general history as well as statistics, and with a wary eye for what judges, legislators and bureaucratic ad ministrators do to hobble or direct the choices of millions of marginal bargainers they have never seen.

Smith, the learned Eighteenth Century man par excellence, backed into his study of economics by way of ethics and jurisprudence, which were the general substance of many of his lectures and of his book on the theory of the moral sentiments. It was the ((policeman's" duty, he ob served, to provide cleanliness, safety and a cheap access to economic good~ to the members of a society. (By ttpoliceman" Smith meant the politician, or the statesman.) It was only as an afterthought, which came ETHICS AND ECONOMICS 757 to him when he observed the work ings of the mercantilist system of state intervention, that Smith de cided the proper way for a policeman to provide for Hplenty" or cCopulence" was to get out of the way of the producer. Natural Liberty Force was necessary to the happi ness of human beings when it came to providing for the safety of the realm, and for preventing plagues. Force was necessary to restrain human viciousness-hence the de sirability of the common law and a court system. But force, in the mar ketplace, was an inhibiting thing.

cCNaturalliberty" was the key to the Uwealth of nations." The Eighteenth Century mercantilists, who persisted in using the state to coerce traders, were anti-plenty-and therefore morally delinquent in their approach to the third duty of the policeman to see that people were as affluent and well-nourished as their industry and aptitudes could make them. The ethical cast that Smith gave to his economics colors most of the bicentennial essays, assembled by Fred R. Glahe for his book, Adam Smith and the Wealth of Nations (Colotado Associated University Press, Boulder, Colorado 80309,172 pp. 1978, $12.50). For one example, James M. Buchanan of Virginia Polytechnic Institute is preoccupied with CCthe justice of natural liberty." If a man's aptitude is for driving a truck or a taxicab, Buchanan asks, is it just to exclude him from com peting for the trade of carrying goods or human beings from here to there? The answer must be that excluding men from markets is im moral. Naturalliberty implies equal liberty, and if the Hpoliceman"-Le., the State-is arbitrary in prescrib ing licensing processes it must in deed be called unjust.

In his essay on cCSmith Versus Hobbes," Joseph J. Spengler of Duke University observes that, in theory, justice may flourish under the ideal collectivist state or under a free economy cCbuttressed in a minor de gree by collectivist supplementation when pronounced externalities are involved." But in reality, so Speng ler avers, when the state mixes into economic matters those who control the government apparatus get the cream while the underlying popula tion must be content with the thin nest of skim milk. This is palpably unjust. The market system is much more just in that it tends to promote a high degree of correspondence be tween individual performance and reward. Two Views of Man The difference between Smith's view of human nature and Hobbes' view is rooted in a theory of man. Hobbes thought the uncoerced human being would soon revert to 758 THE FREEMAN December the law of the jungle. He therefore supported the leviathan state as a restraining influence. But Smith, according to Thomas Sowell of the University of California in Los Angeles, another contributor to the Glahe book, thought that man, though a striver for self-interest, could be counted on to be held in check by public opinion, the law, and other representatives of moral ity. The Smith view leads to the limited state as the just state, with the ~(policeman" exercising his Hob besian nature only in fighting crime and in defending the realm at its borders.

Another Glahe contributor, Pro fessor William J. Baumol of Prince ton and New York University, deals with ~~Smith Versus Marx on Busi ness Morality and the Social Inter est." Curiously, Smith had a much lower opinion of the morality of businessmen than Marx, who tended to see the capitalist as an individual beyond good and evil who served something called the ~~his toric process." Smith trusted the market mechanism to keep the businessman from achieving the monopoly for which his greed might hunger. The Hinvisible hand," in providing for competition, dictated a moral outcome despite the natural propensi ty of some businessmen· to conspire to limit the market and raise prices. Marx, who thought monopoly was inevitable, was not concerned with individual morals. His ~~invisible hand" worked through classes, and the end-the seizure of the monopolies by the proletariat-was decreed in the stars no matter how individual capi talists behaved.

The Morality of the Market Leonard Billet of the University of California. in Los Angeles endorses James Buchanan's ethical choice of subject by calling his contribution ~~J ustice, Liberty and Economy." What particularly impressed Billet about Smith's The Wealth ofNations is its concern with the immorality of Britain's treatment of its North American colony, where the ~~rights of Englishmen" were ignored by the mercantilists of London working in cahoots with a stupid government. Smith's economic principles, says Billet, ~~are fundamentally moral principles. They are favorable neither to robbers nor to barons." Ethics plays a less prolninent part in the essays contributed to Glahe by Milton Friedman, Harry G. Johnson and Ronald Max Hartwell. Friedman writes eloquently about the relevance of Adam Smith to the modern day . Johnson is less im pressed with Smith's value to mod erns now that the ~(corporation in its internal acti vities is organized in a nonmarket, bureaucracy-like fash ion, with decision-making by com mittee and consensus procedures."

1978 ETHICS AND ECONOMICS 759 As for Ronald Max Hartwell, he is primarily interested in Smith's rela tion to the industrial revolution, which was hardly begun in 1776. Whether Smith foresaw the economic effects of the steam engine seems to Hartwell to be beside the point. Smith certainly knew that the England and Scotland of his time were in a take-off phase in growth. Man of Letters and Economist Adam Smith was not only a moralist, he was also a man of let ters, an educator, and a clubbable man in a clubbable society. In a fascinating book, Adam Smith: Man ofLetters and Economist (Exposition Press, Hicksville, New York 11801, 297 pp., $10.00), Clyde E. Dankert deals, among other things, with Smith as a literary stylist. He re marks in particular on Smith's fondness for triplicates, such as the ~~butcher, baker, and brewer" and the tendency of man to ~~truck, bar ter, and exchange." The triplicates not only achieved balance, they pro vided for nuances. Dankert also notes Smith's ability to combine in dignation and elegance of diction, as when he spoke of ~~that insidious and crafty animal, vulgarly called a statesman or politician." Always the ethical man, Smith believed in ~Just indignation," which he sometimes tempered with humor and some times did not.

GOVERNMENT BY JUDICIARY: THE TRANSFORMATION OF THE FOURTEENTH AMENDMENT by Raoul Berger (Harvard University Press, 79 Garden Street, Cambridge, Mass. 02138) 483 pages. $15.00 Reviewed by L. Edward Robbins RAOUL BERGER, renowned constitu tional historian, charges that the United States Supreme Court-a presumed fount of constitutional wisdom-is itself acting unconstitu tionally by sitting as a ((continuing constitutional convention," revising the Constitution at will. Such action transforms our government from one of several coordinated branches, each equally capable of checking abuses by the others, to a govern ment by the judiciary. The consequences are ominous. Judges are no less fallible than other men, no less ambitious for power. Their unchecked authority is as antithetical to liberty as that of anyone. Originally, judicial review was ~~divorced" from policymaking. It was merely a process through which the Court might void legislative or executive action deemed unconstitu tional, and the Constitution's mean ing was determined not by judicial whim or fancy but by looking to the intent of its framers.

760 THE FREEMAN Judicial review has now become a power through which the Court par ticipates actively in policymaking. The question posed by the Court on review is no longer whether a par ticular policy is consti tu tionally permissible, but whether such policy corresponds to judicial notions of societal Uoughts." Such review in fringes the democratic prerogatives of this nation. Revisionists cry that the Con stitution must be continually mod ified to meet the exigencies of gov erning a changing nation such as ours. Berger replies that liberty can be enjoyed only through a fixed Con stitution which places specific limi tations or nchains" on ambitious, self-interested individuals. Further, the Constitution provides expressly for its amendment as exigencies demand. Revisionist interpretations render these provisions a nullity. Thus recourse to amendment is both sufficient and mandatory.

Berger builds his case against re visionism through a detailed analysis of the Fourteenth Amend ment. Drawing extensively on legislative history, he argues that the amendment was originally intended to compel the states to secure, through the privileges and im munities clause, only those rights traditionally understood as c~funda mental" or ~~absolute," excluding such matters as legislative reappor tionment and school desegregation. He then traces the imposition by the Court of these and other unintended measures through a misplaced em phasis on the equal protection clause. Needless to say, Berger's work has not endeared him to many of his onetime liberal fans who relied heavily on his Executive Privilege: A Constitutional Myth (1974) and Im peachment: The Constitutional Prob lems (1973). They would have pre ferred that a more lenient standard be applied to the judiciary. But Berger's scholarly integrity pre cluded such duality. He has judged the executive and judiciary by the same standard-the framer's intent-and found them both wanting. ® Keep your 1978 Freeman in an attractive blue leatherlex FREEMAN BINDER.

Price: $3.00 Order from: The Foundation for Economic Education Irvington-on-Hudson, New York 10533 Index THE FREEMAN-Volume 28, January-December 1978 Prepared by BETTINA BIEN GREAVES of the Foundation staff NOTE: In page references, the number preceding the colon designates the month, those following refer to pages. All articles have at least three entries-author, subject, and title-except in a few cases when title clearly in dicates subject matter. Books reviewed are listed on page 768. A ADVERTISING What the interventionist overlooks (Richman) 9:542-545 "AFFECTED with a public interest" (Foley) 9:515-524 AFRICA Perspectives on hunger in the world (J. A. Sparks) 11:643-651 AGRICULTURE Farm strike-will it do more harm than good? (Cade) 4:211-214 Perspectives on hunger in the world (J. A. Sparks) 11:643-651 Tyranny of minorities (Shannon) 1:17-20 ALL these rights (Goodman) 1:9-16 ARE successful businessmen just lucky? (Summers) 12:719-720 AUSTERITY, waste and need (Pasour) 12:743-752 AWAKE or asleep? (McMunn) 3:184-187 AYAU, Manuel F.

Ideology of underdevelopment, The. 10:616-623 B BAKER, William L. Native pottery only. 12:739-742 BAKKE. See U. S. Supreme Court BANK, how safe is yours? (SennhoIz) 10:589-592 BARGER, Melvin D. See Book reviews (Benson; Bork) BASTIAT, Frederic-ideas of Law also is polluted. (Hood) 7:441-444 BECHARA, Dennis Market for labor, The. 3:137-143 BRADFORD, Ralph Golden age, The. 9:525-528 Gourds and dollars. 8:460-462 Making sense out of the world. 3:179-183 Those Mayflower ecologists. 11:654-658 We the people. 7:387-393 BROWNFELD, Allan C. See Book reviews (Bruce-Briggs; Morley) BUSINESS, government regulation of Government regulation and business management (Semmens) 5:297-302 Risk and profit versus security (McDonald) 5:291-296 Some ideas about business (Russell) 2:67-72 Walking into a trap (North) 5:265-275 World in the grip of an idea, 18 & 20 (Carson) 6:349-362 and 8:463-474 BUSINESS, social responsibility of (Summers) 11:652-653 BUSINESSMEN, successful, are they just lucky?

(Summers) 12:719-720 c CADE, Leland P. The farm strike-will it do more harm than good? 4:211-214 CANADA Risk and profit versus security (McDonald) 5:291-296 CARSON, Clarence B. World in the grip of an idea (serialized): 13. World War II: the socialist conflagration. 1:38-50 14. World War II: the bitter fruit of ideology. 2:102-115 15. Sweden: the matrix of tradition and gradualism. 3:150-162 16. Sweden: the paternal state. 4:223-234 17. Sweden: tightening the screws. 5:278-290 18. The United States: a republic and gradualism. 6:349-362 19. The United States: the concentration of power. 7:425-436 20. The United States: business as an instrument of political power. 8:463-474 21. The United States: the thrust to transformation. 9:546-557 22. The United States: a bemused people. 10: 593-602 23. The cold war: revolutionary vs. evolutionary socialism. 11:661-673 24. The cold war: the spread of communism. 12: 725-738 761 762 THE FREEMAN December CHAMBERLAIN, John. See Book reviews CHARITY Hidden costs of free lunches (North) 4:200-203 Road to Jericho (Watkins) 6:346-348 What is happening to old-fashioned charity?

(Hillendahl) 6:339-345 CHRISTIAN view of labor unions (North) 7:394-398 CHRISTIANITY, monastic No continuing city: paradox of a Christian society (Opitz) 2:73-84 COERCION Hidden costs of free lunches (North) 4:200-203 Human action taxonomy (Haywood) 12:753-755 See also: Government ... ; Taxes COMMUNISM See Carson; Socialism COMPETITION, consumer sovereignty Consumer's role (Essock) 3:131-136 Ideas that serve (Nelms) 7:437-440 Individual in society (Mises) 10:624-631 See also: Prices/pricing CONFLICT, social, political medicine breeds (Sennholz) 3:175-178 CONSERVATION Austerity, waste and need (Pasour) 12:743-752 CONSTITUTIONAL restraints on power (Opitz) 4:239-243 CONSUMER boycotts Austerity, waste and need (Pasour) 12:743-752 CONSUMER's role (Essock) 3:131-136 CRIME and punishment Who guards the guardians? (McDonald) 1:32-37 o DAY after tomorrow (R. L. Stevenson) 8:489-497 DECISION against meritorious achievement (Wortham) 10:611-615 DO you believe in freedom? (Mulwitz) 11:659-660 DONWAY, Roger Living together. 4:204-210 DYKES, Charles Guilt, responsibility and western prosperity.

4:195-199 E ECONOMIC development/progress Ford is not a mango (Nystrom) 1:3-8 Guilt, responsibility and western prosperity (Dykes) 4:195-199 Ideology of underdevelopment (Ayau) 10:616-623 Ten rules for understanding economic development (Higgs) 3:163-168 ECONOMIC production, efficiency Austerity, waste and need (Pasour) 12:743-752 Awake or asleep? (McMunn) 3:184-187 Farm strike-will it do more harm than good? (Cade) 4:211-214 Labor in a free society (Eshleman) 11:674-676 No continuing city: paradox of a Christian society (Opitz) 2:73-84 Social responsibility of business (Summers) 11:652-653 What the interventionist overlooks (Richman) 9:542-545 See also Entrepreneurial ... ; Profits/losses ECONOMIC reasoning Levels of discussion (Sennholz) 4:215-219 Reasoning in economics (Facey) 1:59-61 EDUCATION, high school debate Medical care and malpractice insurance (Greaves) 1:21-31 ENERGY in a changing world (Greaves) 9:531-541 ENERGY, production and regulation of Austerity, waste and need (Pasour) 12:743-752 Free lunch myth (Pasour) 5:259-264 Government regulation and business management (Semmens) 5:297-302 How to break up OPEC (Henkel & Poole) 10:579-588 Law of the jungle vs. jungle of law (Semmens) 9:558-560 Regulation and energy transport (Semmens) 2:90-97 ENTREPRENEURIAL actions/decisions Future is purchased today (Sennholz) 7:406-409 Ideas that serve (Nelms) 7:437-440 "Invisible hand" or heavy hand? (Montgomery) 12:711-719 Who killed cock robin? (J. C. Sparks) 6:363-365 See also Profits/losses ENVIRONMENTAL protection (parable) Those Mayflower ecologists (Bradford) 11:654-658 ENVY Perspectives on hunger in the world (J. A. Sparks) 11:643-651 EQUALITY idea in America (Van Til) 5:303-317 ESHLEMAN, Timothy Labor in a free society. 11:674-676 ESSOCK, Cyd The consumer's role. 3:131-136 ETHICAL, is the free market? (Foldvary) 4:220-222 F FACEY, Edward C.

Reasoning in economics. 1:59-61 FARM strike-will it do more harm than good? (Cade) 4:211-214 FEDERAL Power Commission How to break up OPEC (Henkel & Poole) 10:579-588 Law of the jungle vs. jungle of law (Semmens) 9:558-560 See also Energy FEDERAL RESERVE & FDIC How safe is your bank? (Sennholz) 10:589-592 FLYNN, John T. To be forewarned. 3:149 1978 INDEX 763 FOLDVARY, Fred E. Is the free market ethical? 4:220-222 FOLEY, Ridgway K., Jr. "Affected with a Public Interest." 9:515-524 The problem with power. 3:169-174 FORD is not a mango (Nystrom) 1:3-8 FREE lunches, hidden costs of (North) 4:200-203 FREE lunch myth (Pasour) 5:259-264 FREEDOM, do you believe in? (Mulwitz) 11:659-660 FREEDOM and cooperation Human action taxonomy (Haywood) 12:753-755 Humane values and the free economy (Opitz) 6:323-334 Individual in society (Mises) 10:624-631 Living together (Donway) 4:204-210 Problem with power (Foley) 3:169-174 Survival of the species (Moreell) 7:410-419 FUTURE is purchased today (Sennholz) 7:406-409 G GALBRAITH, John K.-ideas of Levels of discussion (Sennholz) 4:215-219 GAS deregulation, myths & realities ofhow to break up OPEC (Henkel & Poole) 10:579-588 GERMAN Nazism World in the grip of an idea, 13 & 14 (Carson) 1:38-50; 2:102-115 GLORY be! (Read) 12:707-710 GOLDEN age (Bradford) 9:525-528 GOODMAN, Charley All these rights. 1:9-16 GOURDS and dollars (Bradford) 8:460-462 GOVERNMENT planning Future is purchased today (Sennholz) 7:406-409 "Invisible hand" or heavy hand? (Montgomery) 12:711-719 Keep off the grass (North) 8:475-480 Success offailure (T. W. Hazlett) 8:498-504 What government officials cannot know (Summers) 7:399-405 GOVERNMENT regulation and business management (Semmens) 5:297-302 GOVERNMENT regulation/control/intervention Awake or asleep (McMunn) 3:184-187 Consumer's role (Essock) 3:131-136 Energy in a changing world (Greaves) 9:531-541 Fann Strike-will it do more hann than good?

(Cade) 4:211-214 Government regulation and business management (Semmens) 5:297-302 How to break up OPEC (Henkel & Poole) 10:579-588 Law of the jungle vs. jungle of law (Semmens) 9:558-560 Regulation and energy transport (Semmens) 2:90-97 Walking into a trap (North) 5:265-275 We the people (Bradford) 7:387~393 What price control really means (Reed) 4:235-238 What the interventionist overlooks (Richman) 9:542-545 World in the grip of an idea, 18, 19 & 20 (Carson) 6:349-362; 7:425-436; 8:463-474 GOVERNMENT, role of Individual in society (Mises) 10:624-631 GOVERNMENT spending must be cut (Sennholz) 12:721-724 GOVERNMENT spending/subsidies/welfare Do you believe in freedom? (Mulwitz) 11:659-660 Inflation-what it is and what it does (Greaves) 8:455-459 Liberty for older Americans (Gresham) 10:603-610 Medical care and malpractice insurance (Greaves) 1:21-31 Rise and decline of a welfare state (Rydenfelt) 11:677-684 To be forewarned (Flynn) 3:149 You cannot get even (Sennholz) 6:335-338 GREAT BRITAIN Medical care and malpractice insurance (Greaves) 1:21-31 Prince replies to Machiavelli: Philip of England on the erosion offreedom (West) 2:116-122 GREAVES, Bettina Bien Energy in a changing world. 9:531-541 Inflation-what it is and what it does. 8:455-459 Medical care and malpractice insurance. 1:21-31 GRESHAM, Perry E.

Liberty for older Americans. 10:603-610 GUATEMALA Ideology of underdevelopment (Ayau) 10:616-623 GUILT, responsibility and western prosperity (Dykes) 4:195-199 H HAITI Gourds and dollars (Bradford) 8:460-462 HAYEK, F. A.-ideas of "Invisible hand" or heavy hand? (Montgomery) 12:711-719 HAYWOOD, Dale Human Action Taxonomy, A. 12:753-755 HAZLETT, Thomas W. Success of Failure, The. 8:498-504 HAZLITT, Henry Inflation in one page. 5:276-277 One currency for the world? 8:451-455 See also Book reviews (Anderson; Mises) HENKEL, Carlos and Poole, Robert, Jr. How to break up OPEC-myths and realities of gas deregulation. 10:579-588 HIDDEN costs of free lunches (North) 4:200-203 HIGGS, Robert Ten rules for understanding economic development. 3:163-168 HILLENDAHL, Wesley H. What is happening to old-fashioned charity? 6:339-345 HOOD, Robert E. Law also is polluted, The. 7:441-444 HOUSING MARKET, zoning laws, and ripple effect (Lee!) 1:51-58 764 THE FREEMAN December HOW safe is your bank? (Sennholz) 10:589-592 HOW to break up OPEC (Henkel & Poole) 10:579-588 HUMAN action taxonomy (Haywood) 12:753-755 HUMANE values and free economy (Opitz) 6:323-334 HUNGER, perspectives on (J. A. Sparks) 11:643-651 IDEA of equality in America (Van Til) 5:303-317 IDEOLOGY of underdevelopment (Ayau) 10:616-623 IDEAS that serve (Nelms) 7:437-440 IDEAS/ideologies Golden age (Bradford) 9:525-528 Guilt, responsibility and western prosperity (Dykes) 4:195-199 Making sense out of the world (Bradford) 3:179-183 Who killed Cock Robin? (J. C. Sparks) 6:363-365 See also Carson IDEAS/innovations/inventions Energy in a changing world (Greaves) 9:531-541 Ideas that serve (Nelms) 7:437-440 Through the eyes of a Connecticut Yankee (J. C. Sparks) 2:98-101 See also Entrepreneurial ...

INDIANS, American Survival of the species (Moreell) 7:410-419 INDIVIDUAL in society (Mises) 10:624-631 INDIVIDUAL actions/rights/responsibilities "Affected with public interest" (Foley) 9:515-524 All these rights (Goodman) 1:9-16 Guilt, responsibility and western prosperity (Dykes) 4:195-199 Inflation-what it is and what it does (Greaves) 8:455-459 Keep off the grass (North) 8:475-480 Living together (Donway) 4:204-210 Road to Jericho (Watkins) 6:346-348 Some thoughts on taxation (Leef) 9:561-569 Who guards the guardians? (McDonald) 1:32-37 You cannot get even (Sennholz) 6:335-338 INDIVIDUAL differences, individuality Decision against meritorious achievement (Wortham) 10:611-615 Do you believe in freedom? (Mulwitz) 11:659-660 Glory be! (Read) 12:707-710 Survival of the species (Moreell) 7:410-419 INFLATION in one page (Hazlitt) 5:276-277 INFLATION-what it is and what it does (Greaves) 8:455-459 INSURANCE/security Medical care and malpractice insurance (Greaves) 1:21-31 Some ideas about business (Russell) 2:67-72 What's in it for us? (Russell) 9:528-530 See also: Security ...

"INVISIBLE hand" or heavy hand? (Montgomery) 12:711-719 IS the free market ethical? (Foldvary) 4:220-222 J JEREMIAH'S job (North) 3:144-148 JERICHO, road to (Watkins) 6:346-348 JOHNSON, Thomas L. See Book reviews (Packard) K KEEP off the grass (North) 8:475-480 KEMMERER, Edwin Walter To be forewarned. 3:148-149 KNICKERBOCKER, Harry C., Jr. Mystery of inflation, The. 7:420-424 KNOWLEDGE, division of "Invisible hand" or heavy hand? (Montgomery) 12:711-719 Success of failure (T. W. Hazlett) 8:498-504 L LABOR in a free society (Eshleman) 11:674-676 LABOR, labor unions Christian view of labor unions (North) 7:394-398 Market for labor (Bechara) 3:137-143 Who killed Cock Robin? (J. C. Sparks) 6:363-365 LAND use Zoning laws, housing market and ripple effect (Leef) 1:51-58 LAW is also polluted (Hood) 7:441-444 LAW ofjungle vs.jungle of law (Semmens) 9:558-560 LEEF, George C. Some thoughts on taxation. 9:561-569 Zoning laws, the housing market and the ripple effect. 1:51-58 LEVELS of discussion (Sennholz) 4:215-219 LIBERALISM, defined Individual in society (Mises) 10:624-631 LIBERTY for older Americans (Gresham) 10:603-610 LIBERTY, champion of-Robert Louis Stevenson (B. Stevenson) 8:481-488 LIVING together (Donway) 4:204-210 LUCK Are successful businessmen just lucky? (Summers) 12:719-720 M MACHIAVELLI, a Prince replies: Philip of England on the erosion offreedom (West) 2:116-122 MAKING sense out ofthe world (Bradford) 3:179-183 MARKET for labor (Bechara) 3:137-143 MARX, Karl-ideas of "Invisible hand" or heavy hand? (Montgomery) 12:711-719 No continuing city: paradox of a Christian society (Opitz) 2:73-84 Real exploiters (Palmer) 2:85-89 1978 INDEX 765 McDONALD, Kenneth Risk and profit versus security. 5:291-296 Who guards the guardians? 1:32-37 McMUNN, Earl W.

Awake or asleep? 3:184-187 MEDICAL care & malpractice insurance (Greaves) 1:21-31 MEDICINE, political, breeds social conflict (Sennholz) 3:175-178 MERCANTILISM "Invisible hand" or heavy hand? (Montgomery) 12:711-719 MINORITIES, racia1'religious/privileged All these rights (Goodman) 1:9-16 Decision against meritorious achievement (Wortham) 10:611-615 Tyranny of minorities (Shannon) 1:17-20 MISES, Ludwig von Individual in society, The. 10:624-631 MONEY, inflation Gourds and dollars (Bradford) 8:460-462 How safe is your bank? (Sennholz) 10:589-592 Inflation in one page (Hazlitt) 5:276-277 Inflation-what it is and what it does (Greaves) 8:455-459 Liberty for older Americans (Gresham) 10:603-610 Mystery of inflation (Knickerbocker) 7:420-424 One currency for the world? (Hazlitt) 8:451-455 Silver panic (Reed) 6:366-377 To be forewarned (Kemmerer) 3:148-149 MONOPOLY "Affected with public interest" (Foley) 9:515-524 Christian view of labor unions (North) 7:394-398 See also Competition; government regulation MONTGOMERY, John The "invisible hand," or the heavy hand? 12:711-718 MORALITY, religious principles Guilt, responsibility and western prosperity (Dykes) 4:195-199 Humane values and the free economy (Opitz) 6:323-334 Is the free market ethical? (Foldvary) 4:220-222 Jeremiah's job (North) 3:144-148 Law also is polluted (Hood) 7:441-444 Road to Jericho (Watkins) 6:346-348 MOREELL, Ben Survival of the species. 7:410-419 MULWITZ, Sharon B.

Do you believe in freedom? 11:659-660 MYSTERY of inflation (Knickerbocker) 7:420-424 N NATIVE pottery only (Baker) 12:739-742 NELMS, Willie E. Ideas that serve. 7:437-440 NO continuing city: paradox of a Christian society (Opitz) 2:73-84 NORTH,Gary Christian view of labor unions, A. 7:394-398 Hidden costs of free lunches, The. 4:200-203 Jeremiah's job. 3:144-148 Keep off the grass. 8:475-480 Walking into a trap. 5:265-275 NYSTROM, Vaughn C. A Ford is not a mango. 1:3-8 o OLDER Americans, liberty for (Gresham) 10:603-610 ONE currency for the world? (Hazlitt) 8:451-455 OPEC, how to break up (Henkel & Poole) 10:579-588 OPITZ, Edmund A. Constitutional restraints on power. 4:239-243 Humane values and the free economy. 6:323-334 No continuing city: the paradox of a Christian society. 2:73-84 p PALMER, Scott D. The real exploiters. 2:85-89 PASOUR, E. C., Jr. Austerity, waste and need. 12:743-752 Free lunch myth, The. 5:259-264 PERSPECTIVES on hunger in the world (J. A. Sparks) 11:643-651 PETERSON, William H. See Book reviews (Simon) PHILIP of England, a prince replies to Machiavelli (West) 2:116-122 PIETRUSZA, David A. See Book reviews (Davis) POLITICAL medicine breeds social conflict (Sennholz) 3:175-178 POOLE, Robert, Jr. (co-author) See Henkel POWER, problem with (Foley) 3:169-174 PRICES/pricing Austerity, waste and need (Pasour) 12:743-752 Free lunch myth (Pasour) 5:259-264 "Invisible hand" or heavy hand? (Montgomery) 12:711-719 What price control really means (Reed) 4:235-238 What the interventionist overlooks (Richman) 9:542-545 See also Competition ...

PRINCE replies to Machiavelli: Philip of England on the erosion of freedom (West) 2:116-122 PRIVATE property Future is purchased today (Sennholz) 7:406-409 Some ideas about business (Russell) 2:67-72 Some thoughts on taxation (Lee£) 9:561-569 PROBLEM with power (Foley) 3:169-174 PROFITS/losses Are successful businessmen just lucky? (Summers) 12:719-720 Risk and profit versus security (McDonald) 5:291-296 766 THE FREEMAN December Some ideas about business (Russell) 2:67-72 Success of failure (T. W. Hazlett) 8:498-504 What's in it for us?(Russell) 9:528-530 See also Entrepreneurial ... PROPHECY Jeremiah's job (North) 3:144-148 PUBLIC interest, affected with (Foley) 9:515-524 R READ, Leonard E. Glory be! 12:707-710 REAL exploiters (Palmer) 2:85-89 REASONING in economics (Facey) 1:59-61 REED, Lawrence W. Silver Panic, The. 6:366-377 What price control really means. 4:235-238 REGULATION and energy transport (Semmens) 2:90-97 RICHMAN, Sheldon What the interventionist overlooks. 9:542-545 RISE and decline of a welfare state (Rydenfelt) 11:677-684 RISK and profit versus security (McDonald) 5:291-296 ROAD to Jericho (Watkins) 6:346-348 ROBBINS, L. Edward See Book reviews (Berger) RUSSELL, P. Dean Some ideas about business. 2:67-72 What's in it for us? 9:528-530 RUSSIA World in the grip of an idea, 13 & 24 (Carson) 1:38-50; 12:725-738 RYDENFELT, Sven Rise and decline ofa welfare state, The. 11:677-684 s SAMUELSON, Paul A.-ideas of Levels of discussion (Sennholz) 4:215-219 SAVINGS and investment Energy in a changing world (Greaves) 9:531-541 Ford is not a mango (Nystrom) 1:3-8 Ideology of underdevelopment (Ayau) 10:616-623 Perspectives on hunger in the world (J. A. Sparks) 11:643-651 SECURITY, government-guaranteed Day after tomorrow (R. L. Stevenson) 8:489-497 Survival of the species (Moreell) 7:410-419 SELF-improvement Making sense out of the world (Bradford) 3:179-183 Glory be! (Read) 12:707-710 SEMMENS, John Government regulation and business management.

5:297-302 Law of the jungle vs. the jungle oflaw. 9:558-560 Regulation and energy transport: an unnatural disaster. 2:90-97 SENNHOLZ, Hans F. Future is purchased today, The. 7:406-409 Government spending must be cut. 12:721-724 How safe is your bank? 10:589-592 Levels of discussion. 4:215-219 Political medicine breeds social conflict. 3:175-178 You cannot get even. 6:335-338 SHANNON, Russell Tyranny of minorities, The. 1:17-20 SILVER panic (Reed) 6:366-377 SLAVERY Survival of the species (Moreell) 7:410-419 SMITH, Adam-ideas of "Invisible hand" or heavy hand? (Montgomery) 12:711-719 SNAIL darter Those Mayflower ecologists (Bradford) 11:654-658 SOCIAL conflict Government spending must be cut (Sennholz) 12:721-724 Political medicine breeds social conflict (Sennholz) 3:175-178 SOCIAL cooperation See Freedom ... SOCIAL responsibility of business (Summers) 11:652-653 SOCIALISM Day after tomorrow (R. L. Stevenson) 8:489-497 See also Carson; Communism; Welfare state SOME ideas about business (Russell) 2:67-72 SOME thoughts on taxation (Lee£) 9:561-569 SPANGLER, Mark See Book reviews (Hazlitt) SPARKS, John A.

Perspectives on hunger in the world. 11:643-651 SPARKS, John C. Through the eyes of a Connecticut Yankee. 2:98-101 Who killed Cock Robin? 6:363-365 STEEL Who killed Cock Robin? (J. C. Sparks) 6:363-365 STEVENSON, Bob Robert Louis Stevenson: champion of liberty. 8:481-488 STEVENSON, Robert Louis Day after tomorrow, The. 8:489-497 SUCCESS of failure (T. W. Hazlett) 8:498-504 SUGAR Tyranny of minorities (Shannon) 1:17-20 SUMMERS, Brian Are successful businessmen just lucky? 12:719-720 Social responsibility of business, The. 11:652-653 What government officials cannot know. 7:399-405 See also Book reviews (Rose) SURVIVAL of the species (Moreell) 7:410-419 SYNDICALISM Market for labor (Bechara) 3:137-143 SWEDEN Rise and decline of a welfare state (Rydenfelt) 11:677-684 1978 INDEX 767 World in the grip of an idea, 15, 16 & 17 (Carson) 3:150-162; 4:223-234; 5:278-290 T TAXES/taxation Government spending must be cut (Sennholz) 12:721-724 Liberty for older Americans (Gresham) 10:603-610 Some thoughts on taxation (Lee£) 9:561-569 Survival of the species (Moreell) 7:410-419 What government officials cannot know (Summers) 7:399-405 What is happening to old-fashioned charity?

(Hillendahl) 6:339-345 Who killed Cock Robin? (J. C. Sparks) 6.363-365 TAXONOMY, human action (Haywood) 12:753-755 TEN rules for understanding economic development (Higgs) 3:163-168 "THIRD world." See Economic development; Underdeveloped countries THOSE Mayflower ecologists (Bradford) 11:654-658 THROUGH the eyes of a Connecticut Yankee (J. C. Sparks) 2:98-101 TO be forewarned (Flynn) 3:149; (Kemmerer) 3:148-149 TRADE, international Native pottery only (Baker) 12:739-742 Real exploiters (Palmer) 2:85-89 TRANSFER payments Free lunch myth (Pasour) 5:259-264 Government spending must be cut (Sennholz) 12:721-724 You cannot get even (Sennholz) 6:335-338 See also Government spending/subsidies TWAIN, Mark Through the eyes of a Connecticut Yankee (J. C. Sparks) 2:98-101 TYRANNY of minorities (Shannon) 1:17-20 u UNDERDEVELOPED countries Guilt, responsibility and western prosperity (Dykes) 4:195-199 Ideology of underdevelopment (Ayau) 10:616-623 Real exploiters (Palmer) 2:85-89 See also Economic development U. S. CONSTITUTION, principles of Constitutional restraints on power (Opitz) 4:239-243 We the people (Bradford) 7:387-393 World in the grip of an idea, 18 & 19 (Carson) 6:349-362; 7:425-436 U. S. HISTORY Idea of equality in America (Van Til) 5:303-317 Native pottery only (Baker) 12:739-742 Silver panic (Reed) 6:366-377 Survival of the species (Moreell) 7:410-419 World in the grip of an idea, 13, 14 & 23 (Carson) 1:38-50; 2:102-115; 11:661-673 U. S. SUPREME COURT (Bakke, 1978) Decision against meritorious achievement (Wortham) 10:611-615 v VAN TIL, L. John Idea of equality in America, The. 5:303-317 w WALKING into a trap (North) 5:265-275 WATKINS, Hal Road to Jericho, The. 6:346-348 WE the people (Bradford) 7:387-393 WELFARE state Government spending must be cut (Sennholz) 12:721-724 Prince replies to Machiavelli: Philip of England on the erosion offreedom (West) 2:116-122 Rise and decline of a welfare state (Rydenfelt) 11:677-684 To be forewarned (Flynn) 3:149 What is happening to old-fashioned charity?

(Hillendahl) 6:339-345 Who guards the guardians? (McDonald) 1:32-37 World in the grip of an idea, 16 (Carson) 4:223-234 WEST, E. G. A prince replies to Machiavelli: Philip of England on the erosion of freedom 2:116-122 WHAT government officials cannot know (Summers) 7:399-405 WHAT is happening to old-fashioned charity? (HillendahD 6:339-345 WHAT price control really means (Reed) 4:235-238 WHAT the interventionist overlooks (Richman) 9:542-545 WHAT'S in it for us? (Russell) 9:528-530 WHO guards the guardians? (!\1cDonald) 1:32-37 WHO killed Cock Robin? (J. C. Sparks) 6:363-365 WORLD in the grip of an idea. See Carson WORTHAM, Anne A decision against meritorious achievement. 10:611-615 y-z YANKEE, Connecticut, through the eyes of a (J. C. Sparks) 2:98-101 YOU cannot get even (Sennholz) 6:335-338 ZONING laws, housing market and ripple effect (Leef) 1:51-58 768 THE FREEMAN BOOK REVIEWS (Reviewer's name in parentheses) ANDERSON, Martin. Welfare: the political economy of welfare reform in the United States (Hazlitt) 9:573-576 BENSON, Ezra Taft. This nation shall endure (Barger) 3:191-192 BERGER, Raoul. Government by judiciary: the trans formation of the fourteenth amendment (Robbins) 12:759-760 BORK, Robert H. The antitrust paradox (Barger) 10:635-638 BORKIN, Joseph. The crime and punishment of 1. G.

Farben (Chamberlain) 10:632-635 BRUCE-BRIGGS, B. The war against the automobile (Brownfeld) 6:381-384 DANKERT, Clyde E. Adam Smith: man ofletters and economist (Chamberlain) 12:756-759 DAVIS, William. It's no sin to be rich: a defense of capitalism (Pietrusza) 4:253-255 FITZPATRICK, James K. Builders of the American dream (Chamberlain) 1:62-64 FOUNDATION FOR ECONOMIC EDUCATION. Lit erature of freedom (Book catalogue, annotated) 11:688-703 FRANKEL, S. Herbert. Two philosophies of money: the conflict of trust and authority (Chamberlain) 8:509-511 FRIEDMAN, David. The machinery offreedom: guide to a radical capitalism (Chamberlain) 11:685-687 GLARE, Fred (ed.) Adam Smith and the wealth of nations: 1776-1976 bicentennial essays (Chamber lain) 12:756-759 GOBLE, Frank. Beyond failure: how to cure a neurotic society (Chamberlain) 4:244-246 HAZLITT, Henry. The inflation crisis, and how to resolve it (Spangler) 10:638-640 HEFLEY, James C. Textbooks on trial (Chamberlain) 9:570-573 JOHNSON, Paul. Enemies of society (Chamberlain) 3:188-190 KRISTOL, Irving. Two cheers for capitalism (Cham berlain) 7:446-448 MAZLISH, Bruce. The revolutionary ascetic: evolution of a political type (Chamberlain) 2:123-125 MISES, Ludwig von. A critique of interventionism (Hazlitt) 4:249-251 . . On the manipulation of money and credit (Hazlitt) 4:251-253 ____ . Notes and recollections (Hazlitt) 4:247-249 MORLEY, Felix (ed.) Essays on individuality (Brownfeld) 2:126-128 PACKARD, Vance. The people shaper's (Johnson) 4:255-256 READ, Leonard. Vision (Chamberlain) 6:378-381 REVEL, Jean-Fran<;ois. The totalitarian temptation (Chamberlain) 7:445-446 ROSE, Tom. Economics: principles and policy from a Christian perspective (Summers) 8:512 SIMON, William E. A time for truth (Peterson) 8:505-508 TYRRELL, R. Emmett, Jr. (ed.) The future that doesn't work: social democracy's failures in Britain (Chamberlain) 5:318-320