===== PAGE 1 ===== IDEAS ON LIBERTY NOVEMBER 1956 Some Observations at the Iron Curtain . . F. A. Harper 2 The Myth of Capitalist Colonialism . . . Hans F. Sennholz 7 A Case of Corruption . . . . . . . Frank Chodorov 15 Self-Help . . . . . . . . . . . Somuel Smiles 20 The Tax Collector. . . . . . . . . Frédéric Bastiat 22 Excessive Taxation . . . . . . . . Paull. Poirot 26 OnBoomsand Busts. . . . . . . . Anthony M. Reinach 28 l Politics in the MarketPlace. . . . . . Edmund A. Opitz 30 | Of Manand Masses. . . . . . . . EvelynF. Brines 38 Practical Philosophy . . . . . . . . Ben Moreell 40 Why Wages Rise: 9. Losing Pay through Fringe Benefits . F. A. Harper 43 International Commodity Agreements . . Adam K. Stricker, Jr. 51 A Reviewer's Notebook. . . . . . . John Chamberlain 55 " Well Worth Reading. . . . . . . . 60 Letters . . . . . . . . . . . . 61 THE FOUNDATION FOR ECONOMIC EDUCATION, INC. 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AIRCRAFT, THOMPSON DOMESTIC BERVICE SALES and TOLEDO STEEL PRODUCTS COMPANY OO SCTaReD i TAPER Gime, ===== PAGE 3 ===== Government is no place for... “LEMONADE ECONOMICS” + {| PARCELPOST | Most children make money on Government departments, nor do lemonade stands— ‘profits’ are they include annual interest high and prices are low. That’s chargesontheaccumulated deficit because lemons, water, sugar, ice, of $1.2 billion from parcel post and utensils come from mother’s operations, kitchen and are not included in Commercial customers of this the cost. “lemonade stand’’ operation nat- But that’s hardly the way to urally find Government’s services operate our Government’s parcel ‘‘cheaper.” That’s why they seek post system which, by law, issup- to perpetuate and even extend posed to pay its own way. It not their special advantage at every- only competes unnecessarily and one else’s expense, unfairly with private carriers but There is something that can be requires taxpayers to make up done about it. the difference between low rates The Hoover Commission, along and higher costs. with many others, has recom- Post office reports do not in- mended legislation to Congress clude annual costs in excess of which would require parcel post $43 million attributable to 4th shippers to pay all the costs that class mail which are paid by other are properly chargeable. For a free copy of an informative booklet, “The Truth about Parcel Post,” address The Public Relations Division RAILWAY EXPRESS AGENCY, INC. 219 East 42nd Street, New York 17, N. Y. NS A PRIVATE ENTERPRISE IN THE PUBLIC SERVICE ===== PAGE 4 ===== Some Observations At the Iron Curtain F.A. Harper Here one may compare life in the planned society with that of comparatively free people. BERLIN, GERMANY, AUGUST 31 — certainties of the single top com- Today I visited East Berlin. And mander of the entire system are there hangs an interesting and substituted for and prevail over tragic story, in the opinion of this the whims and uncertainties of in- observer at least. dividuals operating their own lim- The trip was made with ease and ited and separate affairs in a free seeming safety. Occasionally we society. It is a simple fact that any would be greeted, in passing, by a one person is less predictable than Russian soldier on guard, but little an average of many persons — a more. At least I was not invited to principle by which insurance com- be a “guest” for twenty-five years panies operate. or so in the salt mines of Siberia. And so the great danger of a Anyone can tour East Berlin if visit to East Berlin seemed to be he chooses. The real danger in pass- that one might enter without re- ing beyond the Iron Curtain is the straint at 1:00 p.m., intending to extreme unpredictability of a return, likewise without restraint, planned society and of the police several hours later, but that the state. This may seem to be a para- rules might be changed while he is dox. For the proponents of a there. Due to this universal unpre- planned society claim that fore- dictability of a planned society, sight and planning will bring sta- there is therefore the risk that the bility, security, and the removal of orders might be changed at 2:00 all those uncertainties they charge p.m. while one is still there, thus against a free society. preventing his return for some rea- On the contrary, in a command son he could not have foreseen. society of this sort where authority That is the risk one must take in is centralized, the whims and un- such a visit. Dr. Harper is a member of the staff of the Foundation for Economic Education. 2 ===== PAGE 5 ===== 1956 SOME OBSERVATIONS AT THE IRON CURTAIN 3 For the first time in my life I ceive of a setting more threatening clearly felt this sort of uncertainty of continuous conflict. It would which permeates everything in an seem like a house divided within it- extremely planned, authoritarian self, in the worst sense, with a di- society—the “ordered society.” One vision that is political. What was does not know at 1:00 o’clock what previously an integrated whole so will be “planned” for him at 2:00 far as trade, transportation, and o'clock. And if such a constant communication are concerned, be- threat be security, I do not know comes one oriented around chronic what the word means. conflict with a rigid separation geo- graphically. The Division of Berlin Speaking only as one private per- An Exhibit of the Planned Society son, unofficially and admittedly But perhaps one may find some without all the facts which then usefulness in what seems to be the confronted the Allied High Com- tragedy of this division of Berlin, mand, the division of Berlin always for here is an interesting experi- seemed to me to be a tragedy of the ment. In East Berlin we have a first order. Visiting both the East sector ruled by a regime that is and West Zones of the city and presumed to be devoted to the wel- making observations at first hand fare of ‘the common man.” It is the further confirms that opinion. kind of society which the socialists Imagine, if you will, attempting claim will free the ordinary person to resolve a conflict between the from the insecurity and poverty of Marxian socialists and the lovers the “dog-eat-dog” world of a free of traditional liberalism in the City society. He is to be secured against of New York by dividing the east the alleged evils of a competitive from the west—say at Fifth Ave- economy of private enterprise and nue. The east sector would be given personal ownership of property. to the Marxians and the west sec- The political rule of East Berlin is tor to the anti-Marxians. claimed to be a “liberation” of the To make the parallel more ac- people from the insecurities and curate, one must assume that the ‘robber economy” of laissez faire. political administrations of the two Across the line in West Berlin, sectors had recently been in mortal on the contrary, there prevails to a combat; that suspicions, distrust, high degree the free economy with and antipathy were still acute be- its incentive system of free mar- tween the two regimes. kets. These are the so-called evils Try as I may, I can hardly con- of a free society, against which ===== PAGE 6 ===== THE FREEMAN November East Berlin is supposed to protect the common man. Against this background, please note these significant facts: To- UI ¢ lll} d ll day’s Der Tagesspiegel newspaper reports that during the past month a 15,200 persons officially migrated from East Berlin to West Berlin. This is 1,000 more than in August A MONTHLY JOURNAL | 1955. During the first eight months of OF IDEAS ON LIBERTY 1956 the total was 115,000 persons. This compares with 85,000 during the same months of 1955, or an in- THE NOVEMBER 1956 VoL. 6, No. 11 crease of one-third. There is only a slight movement from West to East. Additional copies, postpaid, to At this rate, the equivalent of one address: Single copy 50¢; 3 | the entire population of East Ber- for $1.00; 25 or more, 20¢ each. lin would go to West Germany in Permission is hereby granted to | Seven and one-half years. Such a anyone to reprint any article in rate must be something of histor- whole or in part (providing cus- ical note for any area other than in tomary credit is given). the throes of active combat. Not all of the migrants, of course, were from East Berlin originally. Many came from elsewhere in East Ger- many, simply using East Berlin as the best gateway to be found along is oublished monthly by th the long border between East Ger- THB FREEMAN is pu monthly by the Foundation for Economie Education, Inc., many . and West Germany. Irvington-on-Hudson, N. Y. Anyone may It is to be noted that these fig- receive the journal regularly upon written | yres include only those arrivals request. who register officially in West Ber- Accepted as controlled circulation publi- : 4: - cation at Irvington, N. Y. with additional lin. An unknown additional num entry at New York, N. Y. ber do not register, so the figures Copyright 1956. The Foundation for Eco- | understate the total migration. nomic Education, Inc. Printed in U. S. A. The crucial question is this: If socialism by such an authoritarian Any article will be supplied in reprint form if there are enough inquiries to justify the cost of printing. ===== PAGE 7 ===== i 1956 SOME OBSERVATIONS AT THE IRON CURTAIN b design really accomplishes its claim thusiasm which this hope brings. of benefiting the common man and In East Berlin, generally, there protecting him from the cruel haz- is relatively little reconstruction ards of a relatively free society of going on. The people are living in private ownership and free ex- the ruins as best they can, with- change, why is this intense migra- out evidence of an attempt to im- tion occurring? Why, if it works prove their plight under their own out that way, is not the migration hopeful initiative. In West Berlin, moving in the opposite direction— on the other hand, there is a bee- from West Berlin to the heaven of hive of reconstruction activity of “welfare of the common man” in all sorts. East Berlin ? Can it be that 172,500 I have three distinct impressions persons yearly are so ignorant and of what I saw in East Berlin, so far foolish as to migrate to less wel- as structures are concerned. First, fare, when the two are accessible from the standpoint of luxury of side by side and can be viewed by structure and appearance, was the anyone who wishes to take a look? colossal War Memorial. It was lined They can all talk daily with the with monumental structures in- common people in both parts, as a scribed with quotes from Stalin, basis for their decisions. and the like. One may be full of . i sympathy, of course, for the vic- A Dying Half City tims and their families who suf- The unbelievable destruction of fered. privation and death for a central Berlin extends into both cause some of them doubtless dis- sectors. But it is in East Berlin favored, or who may have been where one has the feeling of travel- following their duty as they saw it. ing through an urban corpse. Few But beyond that is a dominant feel- people are wandering around ing that the motivation for the among the ruins there, in sharp design of this War Memorial was contrast to the bustling activity the glorification of the Authoritar- across the line in West Berlin. The ian State itself and its dictatorial migration figures verify the clear leaders. How otherwise explain "impression one gets in visiting the why these luxurious marble struc- two parts. tures were built instead of using In East Berlin the appearance of the materials and effort to provide the people reflects a hopeless and housing and food for the common pointless existence, whereas in the man? West sector there is evidence of ~~ Second was the rather impres- some real hope and the driving en- sive front of the structures along ===== PAGE 8 ===== 6 THE FREEMAN November one street down which we passed, ated by the seeming tragedy of di- namely, Stalinallee. Lining both viding Berlin. It is a city divided sides of this street are fine masonry between a relatively free half and buildings several stories high. On a slave half, between the incentive the ground floors there commonly of private initiative as against the are stores. They are all State “security” of an authoritarian so- stores. Only occasionally were peo- ciety. It gives the feeling of what ple seen doing business in these it would be like to view a person stores. Since things are rationed who had applied a “welfare salve” strictly and since incomes are so to half of his body, causing it to rot low relative to the rationed neces- and waste away, while the other sities of bare existence, how can half continues in health and vital- the “protected common man” buy ity. anything? He just doesn’t have My sympathies are deeply with use for this fine appearing line of the victims of the half that is a stores, except as a place to stand ‘society for the common man.” One outside, yearning. is reminded of the several commu- Lastly, immediately behind this nist communities started in many facade facing Stalinallee, and al- parts of the United States a cen- most everywhere else, we saw only tury or more ago, which have all the dull, distressing remnants of failed due to the errors of their destruction. Little was being done theories of welfare. They served as except in places some of my friends fine educational experiments for came to call “Showallee” (Stalin- those outside to wateh and ponder. allee). It brought to mind the jok- In a like manner, all the world ing accusations about a farmer in should view this experiment of our community when I was a boy. Berlin and ponder its lessons, It was said that the farmer spread thoughtfully and prayerfully. For all the fertilizer along the few feet we must all live on performance of crops adjoining the road. He rather than on promises, on bread seemed more concerned about cre- and meat rather than on words ating untypical impressions of his about security from politicians. farming ability among the passers- A divided Berlin and the conclu- by than about the appetites of the sions of those in the experiment— wheat and corn plants in the un- the 172,500 migrants yearly at the lucky rows located more than a present rate, and all others who few feet from the road. must be packing their migratory Such are the impressions of one bags — should be evidence above observer of the experiment cre- doubt. ===== PAGE 9 ===== The Myth of Capitalist Colonialism Hans F. Sennholz The exploitation of colonial possessions is inconsistent with the concepts of competitive private enterprise and voluntary exchange. HEN the Egyptian govern- nial rule.” Since 1946 about 680 ment seized the Suez Canal million people in Asia and Africa Company’s property, the American have in fact achieved national in- public again became aware of the dependence. world-wide movement of anti-colo- This world movement has all the nialism. The eyes of the West, characteristics of a synthesis of so- usually fixed on the Iron Curtain, cialism and nationalism. It is so- now suddenly turned to the dark cialist by way of its governmental clouds over Suez. controls over the national economy In the past few years the govern- and its gradual abolition of private ments in nearly all underdeveloped property in the means of produc- areas have attacked the political tion. It is nationalist insofar as it and economic position of the West. militantly advocates national inde- Discriminatory controls have been pendence and incites hostility imposed upon Western trade and toward foreign influence. investments. Whole industries Both ideologies had their early built and owned by American or roots in European soil. In count- European businessmen have been less incidents the governments of seized and confiscated. The West European nations nationalized im- was just recuperating from the portant industries or seized them shocks inflicted by Iran’s oil na- through a multiplicity of controls. tionalization and Indonesia’s re- And nationalism in Europe ran pudiation of her debt to the Neth- rampant, leading to a number of erlands, when Egypt nationalized aggressions and wars. Having the Suez Canal. demonstrated repeatedly the seem- The anti-Western movement of ingly unlimited power of collectiv- trade restriction, debt repudiation, ist governments, the white man and nationalization of private now reaps the whirlwind of his property is accompanied by strong own making. In this respect the agitation for “freedom from colo- Western nations bear full respon- Dr. Sennholz is Professor of Economics at Grove City College, Pennsylvania. ===== PAGE 10 ===== 8 THE FREEMAN November sibility for the revolt of the black, foreign to most dependent nations the brown, and the yellow peoples that their uprising meant only the against the white man’s world or- displacement of the established or- der. Their uprise merely signals der by an even less desirable order. complete adoption of the prevailing Present-day American sympathy Western ideologies. for the new countries and their eco- nomic policies mainly stems from two other sources. Our welfare planners are enthusiastic about The American public is confused every new scheme of central plan- and bewildered by the present train ning on the part of any govern- of events. Consideration for our ment. Full moral and economic European alliances demands that support from Washington is as- we befriend the European nations, sured to every government that an- or at least do not oppose their vital nounces central plans of “construc- interests. On the other hand, Amer- tion” and “development.” Thou- icans entertain great sympathy for gands of young Americans are colonial nations in their drive for being sent out to foreign govern- national independence. This dis- ments to advise and instruct them cord of American feeling often in the “science of central plan- finds its reflection in our uncertain ning.” foreign policies. Finally, the present sympathy Our sympathy for the colonial for the new nations partially stems peoples and our hostility against from the American search for new colonialism stemmed originally friends and allies in our opposition from our liberal conception of the to world communism. Many bil- natural rights of all men. Liberty lions of dollars of American tax and independence were precious funds were poured into the laps of ideals worth every sacrifice to gain governments of underdeveloped and defend. areas in the hope for gratitude and But the nineteenth century lib- friendship in return. But with a erals often committed tragic blun- few notable exceptions the new ders by encouraging liberation Asian and African countries are movements which in fact were na- stanchly neutralist and oppose any tionalist movements toward the regional defense agreement with substitution of one collectivist or- the West. They demand and take der for another. The concepts of American aid, but continue to flirt individual liberty and the inviol- with the Kremlin. ability of property rights were so Echoing the communist leaders American Sympathy for Backward Nations ===== PAGE 11 ===== 1956 THE MYTH OF CAPITALIST COLONIALISM 9 in their attacks on the West, they though these nations retained their level the charge that Western colo- political independence. The latter nialism has kept the economically stage often is labeled “capitalist backward nations subjugated for imperialism.” more than two centuries. Western The very premise of “capitalist capitalism tortured and exploited exploitation” is an absurdity. colonial people, they say, until they Where the price of labor is deter- began to free themselves from the mined through the operation of de- strangling grip of capitalism. mand and supply in a free labor market, exploitation is impossible. The Marxian Interpretation Only where the mobility of labor is of Colonialism impeded through government de- This is by no means a new creesand regulations can labor pos- charge. The writings of the arch sibly be underpaid. Indeed, true ex- communists, Marx and Lenin, are ploitation may be observed in all . full of expositions on colonialism. socialist and communist economies. From London and Zurich they Equally untenable is the commu- made their famous observations nist contention regarding Ameri- which then were spread through can financiers and their imperialist communist propaganda channels endeavors. By investing their capi- into all literature. Today there is tal funds abroad they increase the hardly a textbook on recent history productivity of the backward that is not perverted in one form areas. They attract the services of or another by Marxian and Lenin- foreign labor not by brute force, ian ideas on capitalist colonialism. but through higher wages and bet- What a communist conceives to ter living conditions. Of course, be “colonialism” is in the words of their incentive is the possibility of V. I. Lenin “the territorial expan- profits to be derived from the new sion of the system of exploitation wealth created through their ini- of labor by capital.” New human tiative. capital is drawn into the orbit of wage slavery through colonial con- Colonies Acquired under quest. Once the world was divided Mercantilism and Nationalism among the colonial states of West- The existence of colonies, i.e. ern Europe, finance capital —espe- underdeveloped territories depend- cially from America—then became ent on a ruling power, is not a phe- the decisive power of subjugating nomenon of capitalism, as its ene- whole countries and nations to the mies so ardently contend, but of capitalist profit greediness, even the very absence of it. The colonial ===== PAGE 12 ===== 10 THE FREEMAN November empires of the Western nations The hostile attitude of the fath- were built in periods of mercantil- ers of capitalism toward the exist- ism or rising nationalism. During ence of colonies can easily be rec- the short intervening age of capi- ognized by the role they played in talism, colonies were considered in- the American War of Independ- herited burdens to be disposed of ence. They were the friends of the sooner or later. “Our colonies are colonists and insisted that colonial millstones around our necks,” said independence should be granted the British stateman, Disraeli, in and maintained even after the War 1852 when Great Britain was about of 1812. Furthermore, has there to embark upon her famous open- ever been a more devastating cri- door policy. tique of colonialism written than During the seventeenth and the one by Adam Smith in his fa- eighteenth centuries England, Hol- mous Wealth of Nations? To at- land, France, and Spain were the tach colonialism to capitalism is an foremost colonial powers. That was obvious absurdity. the age of mercantilism. And mer- cantilist ideas led governments to acquire dependent territories. British Empire Every nation endeavored to be self- Around the 1820’s England was sufficient through tariffs, other im- practically the only colonial power. port restrictions, and acquisition The Spanish and Portuguese col- of colonies. The balance-of-trade onies had become independent and theory prevailed and the notion the remaining French and Dutch that one nation’s prosperity is an- possessions depended on the grace other nation’s loss and misery de- of the British Navy. But England, termined international relations. at this time, refrained from fur- Europe was always fighting or pre- ther expansion of her empire be- paring to fight. cause British liberalism had begun The adherent of capitalism need to shape Britain's foreign policies. not defend the acts of mercantilist Capitalism fundamentally began to governments, for capitalist philos- transform the British Empire into ophers and economists have ex- a market economy. ploded and opposed the doctrines of By the middle of the nineteenth mercantilism since the beginning century the British overseas set- of the eighteenth century. Even to- tlers were virtually independent— day they are the bitter enemies of enjoying a dominion status, All the modern expressions of mer- other territories dependent on cantilist international relations. British rule were governed accord- Capitalism Transformed the ===== PAGE 13 ===== 1956 THE MYTH OF CAPITALIST COLONIALISM 11 ing to open-door principles. Brit- Expansion of Colonies under ishers, foreigners, and natives Nationalism were treated alike. The British Empire became a vast free-trade During the last three decades of area in which the British govern- the nineteenth century the colonies ment merely undertook to maintain of the Western nations experienced law and order. an unprecedented expansion. Complete evacuation of all for- France vastly expanded her empire eign territories would have been in Africa, and Germany acquired . the logical solution for British lib- dependent territories in Africa and eralism. But such a step in almost Polynesia. Also Russia, Japan, and all cases would have brought about the United States occupied new anarchy, civil war, and famine in territories in various parts of the the colonies evacuated. India, for world. In all these cases of colonial instance, would most likely have acquisition adventurous govern- disintegrated again into a con- mentsunder various pretextsseized glomeration of maharaja states foreign territories against the in- fiercely fighting each other. The terest and advice of business and natives themselves, therefore, ap- finance in order to reap cheap proved of British rule. This is glories and advantages for their clearly attested to by the fact that own administration. tiny occupation forces sufficed to Take the example of German maintain peace and order among colonial acquisition. There is abun- natives outnumbering them im- dantproof thatthe Germanbankers mensely. and businessmen opposed as sense- And yet in spite of her most less every single occupation of beneficial administration, England colonial territories. Even after the today is reaping the bitter hos- Imperial Government had assumed tility of natives because of her pol- their administration and estab- icies of racial segregation. The lished protection and benefits for British civil servants in their ex- colonial trade, German business re- alted positions among the natives mained disinterested. At the out- seldom withstood the temptation break of World War I less than for social snobbishness and racial one-half of one per cent of Ger- pride. This grievance on the part many’s foreign trade was con- of hundreds of millions of Asians ducted with her own colonies. And undoubtedly contributed to the dis- fewer than 25,000 Germans, most solution of the British Empire in of whom were civil servants and Asia. their families, lived in the German ===== PAGE 14 ===== 12 THE FREEMAN November colonies extending over one million France was a republic. But the square miles. Almost every major military debacles of the Franco- city in the world had a bigger Ger- German War of 1870 severely hurt man settlement than existed in all the pride and self-confidence of the her colonies combined. French Army. It urgently needed The German colonies were ac- new fields of activity from which quired by an interventionist gov- to feed again its pride and glory ernment which constantly dispar- and display its fighting morale to aged capitalism, and loved the itself and the world. And it found display of its own political and a welcome opportunity in the cam- military strength. To accuse capi- paigns against the natives of talism for the existence of German North Africa. In these adventures colonies acquired by the Iron the French Republic was greatly Chancellor Bismarck and his encouraged by Bismarck who hoped Kaiser is founded on neither fact that the French would then forget nor reason. the Franco-German War and the In the case of territorial acquisi- provinces Alsace-Lorraine ceded to tions by Japan and Russia the po- Germany. The following expansion litical conditions were similar. Om- of the French colonial empire thus nipotent governments under their was the outcome of diplomatic con- absolute sovereigns embarked upon siderations and feelings of military colonial conquest under various glory and pride. The French gen- pretexts. No matter what their erals fighting in the passes of the stated reasons, Japan and Russia Atlas Mountains wanted war with did not invade foreign countries the natives, not trade relations. because of pressure by conspiring Also, the American acquisitions businessmen, or to improve the lot of dependent territories following of their capitalists whom they de- the Spanish-American War of 1898 spised and taxed, and whose prop- Were clearly the doings of an am- erty they nationalized. Neither the bitious administration. We need Czar nor the Mikado was a stooge not enter into the question of who of his subject bankers and mer- started the war. But we must bear chants. Had they been advised by in mind that the Spanish posses- their businessmen, they would have sion, Cuba, was a subject of Ameri- learned that prosperity results can concern for most of the nine- from voluntary exchange, not from teenth century. President Grant suppression and plunder. even made an unsuccessful offer to During this period of nationalist buy Cuba. and interventionist colonization President McKinley's ultimatum ===== PAGE 15 ===== 1956 THE MYTH OF CAPITALIST COLONIALISM 13 to Spaindemanded that Spain evac- world trade and aggravation of uate Cuba; but in the peace treaty international relations through signed in Paris eight months later, more trade barriers. Spain had to evacuate not only Cuba, which became independent under U. S. supervision, but also But toward the end of the nine- Puerto Rico, Guam, and the Philip- teenth century the spirit of inter- pines, which became colonial ter- ventionist colonization also came ritories of the U. S. A. Now what to Great Britain. It was the time economic interests could American of the Fabians and the growth of bankers and businessmen possibly social conflict through socialist and have had in Puerto Rico, Guam, neo-mercantilist ideas. “To solve and the Philippines? Even today the social conflict and to spare Eng- American trade and investments in land a murderous civil war, we these territories remain insignifi- colonial politicians must acquire cant. To blame American bankers new territories which are to re- and brokers for the conquests of a ceive our surplus population.” This political administration that looked was Cecil Rhodes’ excuse for his to Europe for guidance, is an out- colonial conquests in South Africa; right misrepresentation of facts. and his reasoning was socialist, if Throughout this period England not Marxian. A liberal philosopher continued to conduct her open-door or economist finds no social conflict policies. While the other colonial in capitalism, rejecting the Marx- powers more or less severed their ian doctrine of proletarian revolu- territories from the unhampered tion and denying the possibility of world market through tariffs and exploitation in capitalism which, other trade restrictions, England according to all our experience, im- clung to free trade. At the outbreak proves the living conditions of the of World War I, Great Britain and workers. He knows that capitalist her colonies were practically the countries are the desired targets only unhampered part of the world of immigration; not emigration, market. Several times during this as Rhodes believed. period Britain expanded her ter- Today the British Common- ritorial control over underdevel- wealth isa “system of cooperation” oped areas merely to safeguard the in which the member nations have world market and its international pledged to grant each other “pref- division of labor. Occupation by erential treatment” as to their pro- any other colonial power would tective tariff barriers. In this age have meant further destruction of of numerous trade restrictions the Britain Follows Suit ===== PAGE 16 ===== 14 THE FREEMAN November British nations grant each other They despise and sneer at the 10 to 15 per cent relief from their Western concepts of individual tariff restraints. But tariffs are the liberty and capitalism. Encouraged least important means of restric- by the West’s own abandonment of tion at the disposal of modern gov- capitalism and by the slogans of ernment. The British Empire in- communism, they hate and abuse deed has become an area of mutual the very system that offers the only trade barriers with insignificant solution to their poverty. To them, tariff preferences for member political independence offers an states. And with every new trade opportunity to confiscate and na- restriction the dissolution of the tionalize prosperous industries, to Empire follows step by step. destroy their own currencies, to It is a sad fact that the Asian further disrupt the international and African nations who have division of production, and to in- gained, or sooner or later will gain, troduce other anti-capitalist meas- their liberation and independence, ures, The inevitable outcome of are animated by ideas of national- such a philosophy must be oppres- ism and other forms of collectivism. sion, anarchy, and disaster. A Costly Monopoly 3 1 HE MONOPOLY of the colony trade, therefore, like all the other mean and malignant expedients of the mercantile system, depresses the industry of all other countries, but chiefly that of the colonies, without in the least increasing, but on the contrary diminishing, that of the country in whose favour it is established... . To propose that Great Britain should voluntarily give up all authority over her colonies, and leave them to elect their own magis- trates, to enact their own laws, and to make peace and war as they might think proper, would be to propose such a measure as never was, and never will be adopted, by any nation in the world. No nation ever voluntarily gave up the dominion of any province, how trouble- some soever it might be to govern it, and how small soever the revenue which it afforded might be in proportion to the expence which it occa- sioned. Such sacrifices, though they might frequently be agreeable to the interest, are always mortifying to the pride of every nation, and what is perhaps of still greater consequence, they are always contrary to the private interest of the governing part of it. ... ADAM SMITH, The Wealth of Nations ===== PAGE 17 ===== = CHODOROV — Sees It A Case of Corruption IONYSIUS, the storied tyrant money, returned to the owners of Syracuse, was a consum- many more drachmas than they mate financier. His gift stood him had been obliged to turn in. No in good stead on the day he found doubt the Syracusans were de- himself in bankrupt condition, hav- lighted by the operation; their ad- ing borrowed from the citizenry . vances to the tyrant were paid up more than he could repay. He in full and their non-monetary as- might have increased taxes and sets had suddenly doubled in price. satisfied his creditors with their He was probably praised for this own money, but he did not because, financial feat. presumably, his levies had reached In twenty-two centuries men do the point of diminishing returns; a lot of thinking and out of this an increase could have discouraged cerebration come new ways of do- production, or caused a flight of ing old things. Like Dionysius, lat- capital, and thus dried up the ter-day politicians — that is, that source of his income. That would segment of the population to whom not do. And yet, the debts had to the behavior of the rest is en- be met, because repudiation would trusted — sometimes find them- have blemished his reputation and selves without the wherewithal impaired the national credit; no needed to defray the costs of glori- one would have lent him a plugged ous adventures and, having Syracusan dime thereafter. stretched taxation to the breaking In this predicament, Dionysius point, resort to borrowing. They worked out a scheme that has come convince the citizens that not only to the rescue of national profligacy will their savings be spent in ways ever since. He called in all the coin that will redound to their benefit, of his realm, known as drachmas, but that they will be rewarded for restamped them so that each drach- their faith with annual increment. ma became two, and, after paying To back up the latter claim, the off his debts with the revalued lenders receive imposingly printed 15 ===== PAGE 18 ===== 16 THE FREEMAN } November receipts for the amounts loaned, professors of economics to explain bearing a solemn promise that the to the public how inflation improves holder will receive interest pay- abundance in their pantries. ments at regular intervals. Now, in one way or another, these re- Ix EVERY AGE political power has ceipts become monetized, and So- lent itself to purposes that are un- ciety is deluged with new coin of economic and antisocial; it has the realm, even as were the Syracu- never hesitated to purchase sup- sans when their drachmas were re- port with confiscated property. For stamped. Everybody is “enriched.” the ancients it may be said that This modern financial wizardry is they conducted the business in a a vast improvement on Dionysius’ forthright manner, unadorned with method in that it is more devious. moralism; the Caesars did not in- Evidently, Dionysius had not voke an ideology to cover up the thought of this receipt business; real objective of “bread and for if he had, he would never have games.” Today, political prefer- found himself in the aforesaid pre- ment and the augmentation of po- dicament. He would never have litical power is accomplished in the been faced with bankruptcy. For, same way — with subsidies of all among its other advantages, this sorts, paid for by taxpayers—but modern receipt bears a maturity the business is conducted under a date, usually falling in the next panoply of rectitude. Our politi- generation, to the relief of the im- cians do not purchase votes, they mediate borrower; furthermore, advocate ‘social’ programs. It through refinancing and funding comes to the same thing. methods this date acquires the History is replete with illustra- unique capacity of extending itself tive matter, and the temptation is into eternity, so that the loan need strong to adduce examples showing never be repaid. On the other hand, that only in forms and details have the lender or his offspring can al- the confiscatory practices of politi- ways be sure of receiving interest, cal power undergone change. But, since as a taxpayer he provides the considering the character of au- funds. thority, what else can it do? Politi- We have no doubt that Diony- cal power is not a factor in produc- sius’ ministers fortified him with a tion; it cannot contribute a single learned dissertation on the virtues loaf of bread or pair of shoes to the of his restamping scheme. His market place; the things that sat- modern counterpart not only has isfy human desires result from the ministers to advise him but also application of labor to raw mate- ===== PAGE 19 ===== 1956 A CASE OF CORRUPTION 17 rials, and in that process political power is put under the microscope power is out of its element. The of analysis, its incorrigible pen- best it can do to promote produc- chant for predation becomes un- tion is to maintain a climate of derstandable. For then one sees tranquillity. When it undertakes to that political power is not “in the intervene in the market place, it is nature of things,” but in the nature equipped for nothing else than tak- of man. It is not, like the force of ing what it finds. The more it takes, gravity, self-operating and inexor- the less there is for Society to get able, but is an expedient devised by along on, and the depletion causes man to facilitate his urge for ac- an attitude of dependence on the quiring satisfactions with the least confiscatory power. This attitudeis expenditure of labor. In essence, enhanced when selected groups be- political power is the physical come beneficiaries of the confisca- power, or the threat of it, that one tion; they are then beholden to po- man or a group of men may bring litical power for their welfare, and to bear on other men to effect be- support and adulation of the bene- havior. It may originate in a body factor is a natural reaction. Politi- of social sanctions, but it is hardly cal power thrives on confiscation. political power until these sanc- tions are implemented with a police A COMPARISON between the early force. In any case, it is exercised American political establishment by human beings, and therefore and the present one brings out the must be related to the all-pervasive point. When in 1789 the economy law of human action, the drive to of the country was largely agricul- get the most for the least. tural and its total wealth was meas- Since all human beings are dom- ured in millions, the scope of polit- inated by this inner drive, politi- ical authority was sharply delim- cal power is always subject to com- ited. Its interventions increased in petition, and one-man domination number and in extent as the pro- of the group is possible only when ductive energy of the people ex- the group is small enough for one panded, and now that the wealth of man to intimidate. In a real sense, the nation is measured in many bil- there cannot be an absolute mon- lions, the hand of authority is felt arch of a nation; political power in every private endeavor. Itsinter- must have a base broad enough to ventionary powers are made possi- support the pinnacle, and rulership ble by its appropriation of one- which seems to be identified with third of all that is produced. one man's will is in fact exercised ‘When the nature of political by an oligarchy or a bureaucracy. ===== PAGE 20 ===== 18 THE FREEMAN November Political power must have allies, analysis, the doctrine boils down to men who support it because it isto the idea that each voter holds in their interest to support it. Wil- his hands on election day a small liam of Normandy consolidated his piece of the power that once cen- conquest of England by dividing tered in a king. But, even as the its land among his favorites, so king thought of power in terms of that they could live well on the his prerogatives and perquisites, produce of vassals and serfs. Fora so is the voter, in casting his bal- similar reason modern politicians lot, influenced by his material con- have granted special privileges. In dition or expectation of improve- all cases the beneficiaries of politi- ment. He assumes that his personal cal power have been won over to economy is tied in with the politi- its support. cal power of distribution, not with It is this need of a broad base his own productive capacity, and that accounts for the predatory the assumption seems valid enough practices of political institutions. when he observes that some of his The crown rests uneasily on the fellow voters do well at the public royal brow until it is held firmly in trough. Yet, his minuscule piece of position by the loyalty of subjects power is by itself unable to push who partake or hope to partake of him into a favorable position, es- the substantial privileges at his pecially as it is in competition with disposal; and an elected official like- millions of others of like value. It wise needs the votes or campaign is necessary for him to add his contributions of constituents who vote to many others so that the expect to profit by his elevation to combined total will achieve the sov- power. What manner of fare can he ereign divinity of fifty-one per cent. possibly spread before them? Only Thus comes the pressure group sys- what he can extract from the larder tem of utilizing political power for of production. He has nothing else. acquiring pecuniary advantages. But, what is the profit in ruler- Tie ADVENT of popular suffrage ship? What does the wielder of po- did not change the nature of politi- litical power—also a human—hope cal power nor affect its practices. to gain from the bargain he makes The doctrine on which suffrage with those who put the scepter in rests is that sovereignty—which is his hands ? That depends on the val- protocol for power—resides in the ues of the individual politician, but voters, as a permanent possession, taking the breed as a whole into and that they merely loan it for a consideration, the desires that time to their selected rulers. Upon drive them to seek office are exactly ===== PAGE 21 ===== 1956 A CASE OF CORRUPTION 19 those that motivated Charle- ter Abel's hide and property, lest magne: the perquisites and pre- human life go the way of the dino- rogatives attendant thereto. What saur. There cannot be a Society un- else can one derive from political til there is a market place, and labors? Putting aside the perquis- there cannot be a market place until ites, including the crude bribe and security of possession is assured. the more sophisticated and legal Without that assurance the indi- methods of participating directly vidual will not strive to improve his or indirectly in the economic ad- circumstances, and production will vantages he grants his favorites, drop to the level of mere subsist- he measures his gain in the satis- ence; man will be little better than faction of a desire that is often an animal, a status against which stronger than the yearning for his primordial compulsions revolt. creature comforts. . It is for that reason that he sets up Just as some people find more a machinery for the protection of pleasure in music than in food, life and property, even against more satisfaction in climbing a himself, a machinery to which he high mountain than in luxurious gives the name of government. living, so do others find their sum- “To secure these (inalienable) mum bonum in the pomp and cir- rights (to life, liberty, and the pur- cumstance of political life or in the suit of happiness),” says the best sense of self-importance that the phrasing of the subject, ‘“‘govern- exercise of power stimulates. It is ments are instituted among men.” an ego-profit that one derives from It follows that if there were some the making and administration of way of securing these rights with- rules that others must obey, and out government, men would not in- with many of us this is of inestim- stitute it. And it also follows that able value. Otherwise, how account when government employs its mo- for the unseemly strife for office nopoly of coercion for purposes that men with pretensions to char- which violate these rights, it ceases acter engage in? “Long live the to be government. It is some other king” is the upholstery of the kind of concern, even as a mer- throne. chantman that turns to piracy can- So, the predatory political insti- not be classified as a merchantman. tution that emerges when Society When the committee in charge of reaches the capitalistic stage is the power of compulsion uses it to compounded of vanity and cupidity. confiscate property, it cannot lay But, there must be some means claim to the name of government. of restraining Cain from going af- It is a power-fed corruption. ===== PAGE 22 ===== Self-Help Samuel Smiles EAVEN helps those who help by their own conduct. Hence the themselves” is a well-tried value of legislation as an agent in maxim, embodying in a small com- human advancement has usually pass the results of vast human ex- been much over-estimated. To con- perience. The spirit of self-help stitute the millionth part of a Leg- is the root of all genuine growth in islature, by voting for one or two the individual; and, exhibited in men once in three or five years, the lives of many, it constitutes the however conscientiously this duty true source of national vigor and may be performed, can exercise but strength. Help from without is of- little active influence upon any ten enfeebling in its effects, but man’s lifeand character. Moreover, help from within invariably invig- it is every day becoming more orates. Whatever is done for men clearly understood that the func- or classes, to a certain extent takes tion of Government is negative and away the stimulus and necessity of restrictive, rather than positive doing for themselves; and where and active; being resolvable prin- men are subjected to over-guidance cipally into protection—protection and over-government, the inevit- of life, liberty, and property. Laws, able tendency is to render them wisely administered, will secure comparatively helpless. men in the enjoyment of the fruits Even the best institutions can of their labor, whether of mind or give a man no active help. Perhaps body, at a comparatively small per- the most they can do is to leave him sonal sacrifice; but no laws, how- free to develop himself and im- ever stringent, can make the idle prove his individual condition. But industrious, the thriftless provi- in all times men have been prone to dent, or the drunken sober. Such believe that their happiness and reforms can only be effected by well-being were to be secured by means of individual action, econ- means of institutions rather than omy, and self-denial; by better hab- Though trained as a physician at Edinburgh, Samuel Smiles (1812-1904) was best known as an author. Self-Help, ‘with illustrations of Character, Conduct, and Perseverance,’”’ was published in 1859 and translated in 17 languages. The book grew out of a series of lectures before a group of young men gathered for mutual improvement: “Those who knew a little taught those who knew legs—improuing themselves while they improved the others.”’ Presented here are selections from Chapter I of the book. 20 ===== PAGE 23 ===== 1956 SELF HELP 21 its, rather than by greater rights.... mere changes of masters or of in- If this view be correct, then it stitutions; and so long as the fatal follows that the highest patriotism delusion prevails, that liberty and philanthropy consist, not so solely depends upon and consists in much in altering laws and modify- government, so long will such ing institutions, as in helping and changes, no matter at what cost stimulating men to elevate and im- they may be effected, have as little prove themselves by their own free practical and lasting result as the and independent individual action. shifting of the figures in a phan- tasmagoria. The solid foundations I: MAY BE of comparatively little of liberty must rest upon indi- consequence how a man is governed vidual character; which is also the from without, whilst every thing only sure guaranty for social se- depends upon how he governs him- curity and national progress. John self from within. The greatest Stuart Mill truly observes that slave is not he who is ruled by a “even despotism does not produce despot, great though that evil be, its worst effects so long as indi- but he who is the thrall of his own viduality exists under it ; and what- moral ignorance, selfishness, and ever crushes individuality 7s des- vice. Nations who are thus enslaved potism, by whatever name it be at heart can not be freed by any called.” SSS There Is No Public Mind F OR IN THE LAST.ANALYSIS, the thought and conscience of the indi- vidual man are the only thought and conscience there are. We talk about the state as if it were a single organism with a mind and will of its own: for the most part this figure of speech serves well enough, but it is a mere analogy, and at this point it fails. There is, in literal truth, no public mind: there are only the minds of the persons composing the public. There is no public conscience; there are only their several consciences. Dry these functions up, or bind the life out of them, and all the mental and moral life of the public is stopped at its source. WILLIAM ERNEST HOCKING, The Lasting Elements of Individualism Yale University Press, 1937 ===== PAGE 24 ===== Frédéric Bastiat Frédéric Bastiat (1801-1850), French economist, statesman, and author, was quite as perturbed by the demands of the nineteenth century tax collector as are many citizens today. SCENE: A wine cellar in France CHARACTERS : Jacques Bonhomme, Vine-grower M. Lasouche, Tax Collector L. You have secured twenty tuns —What good do I get from it of wine? now? J. Yes, with much care and —The satisfaction of saying: sweat, How proud am I of being a —Be so kind as to give me six Frenchman of the best. When 1 behold the triumphal —Six tuns out of twenty! Good column! heavens! You want to ruin me. If —And the humiliation of leav- you please, what do you propose Ing to my heirs an estate burdened to do with them? with a perpetual rent. Still one —The first will be given to the must pay what he owes, no matter creditors of the State. When one how foolish a use may have been has debts, the least one can do is made of the money. That accounts to pay the interest. for one tun, but the five others? —Where did the principal go? —One is required to pay for —It would take too long to tell. public services, the civil list, the A part of it was once upon a time judges who decree the restitution put in cartridges, which made the of the bit of land your neighbor finest smoke in the world; with wants to appropriate, the police- another part men were hired who men who drive away robbers were maimed on foreign ground, while you sleep, the men who re- after having ravaged it. Then, pair the road leading to the city, when these expenses brought the the priest who baptizes your chil- enemy upon us, he would not leave dren, the teacher who educates without taking money with him, them, and myself, your servant, which we had to borrow. who does not work for nothing. 22 ===== PAGE 25 ===== 1956 THE TAX COLLECTOR 23 —~Certainly, service for service. —And what would happen were There is nothing to say against he to vote for a reduction of the that. I had rather make a bargain army and your military establish- directly with my priest and my ment? schoolmaster, but I do not insist —Instead of being made a Mar- on this. So much for the second shal, he would be retired. tun. This leaves four, however. —Do you understand now that —Do you believe that two you yourself have — would be too much for your share Let us pass to the fifth tun, of the army and navy expenses? I beg of you. —Alas, it is little compared with what they have cost me already. They have taken from me two sons whom I tenderly loved. —The balance of power in Eu- rope must be maintained. —Well, good heavens! the bal- ance of power would be the same if these forces were everywhere re- duced a half or three-quarters. We should save our children and our money. It needs only to be under- stood. —7Yes, but it is not understood. — That is what amazes me, For for Mussulmans, but for good every one suffers from it. Christians who spend their days in — You wished it so, Jacques Barbary. —What can they do there which —That goes to Algeria. —To Algeria! And they tell me that Mussulmans are not wine- drinkers, the barbarians! I have often asked myself whether they are ignorant of claret because they are infidels, or, which is more likely, whether they are infidels because they are ignorant of claret. Be- sides, what services will they give me in exchange for this ambrosia, which has cost me so much labor? —None at all; it is not intended Bonhomme. —You are jesting, my dear Mr. will be of service to me? Collector; have I a vote in the legis- —TUndertake and undergo raids; lative halls? kill and be killed; get dysenteries —Whom did you support for and come home to be doctored; dig Deputy ? harbors, make roads, build villages, — An excellent General, who will and people them with Maltese, Ital- be a Marshal presently, if God ians, Spaniards, and Swiss, who spares his life. live on your tun, and many others — On what does this excellent which I shall come in the future to General live? ask of you. —My tuns, I presume. —Merey! This is too much, and ===== PAGE 26 ===== 24 THE FREEMAN November I flatly refuse you my tun. They —That is but too true. Cursed would send a vine-grower who did weakness! It seems to me that I such foolish acts to the madhouse. was unwise in making him my Make roads in the Atlas Mountains, agent; for what is there in common when I cannot get out of my own between the General of an army house! Dig ports in Barbary when and the poor owner of a vineyard? the Garonne fills up with sand every day! Take from me my chil- dren whom I love, in order to tor- ment Arabs! Make me pay for the houses, grain, and horses, given to the Greeks and Maltese, when there are so many poor around us! —You see well that there is something in common between you, were it only the wine you make, and which, in your name, he votes to himself. —Laugh at me; I deserve it, Mr. Collector. But be reasonable, and leave me the sixth tun at least. The interest of the debt is paid, the civil —Oh, yes, by sending after them list provided for, the public service to Algeria the money which would assured, and the war in Africa per- cnable them to live here. petuated. What more do you want? —But then you lay the basis of —The bargain is not made with a great empire, you carry civiliza~- me. You must tell your desires to tion into Africa, and you crown the General. He has disposed of your country with immortal glory. your vintage. —The poor! Exactly; they free the country of this superfluity. —You are a poet, my dear Col- —But what do you propose to do lector; but I am a vine-grower, with this poor tun, the flower of my and I refuse. stock ? Come, taste this wine. What . . a mellow, full-bodied, velvety qual- —Think that in a few thousand ity! years you will get back your ad- Co vances a hundredfold. All those —Excellent, delicious! It will who have charge of the enterprise suit D , the cloth manufactur- say so. er, admirably. —At first they asked me for one —D , the manufacturer! cask of wine to meet expenses, then What do you mean? two, then three, and now I am —That he will make a good bar- taxed a tun. I persist in my refusal. gain out of it. —1It is too late. Your represent- —How? What is that? 1 do not ative has agreed that you shall give understand you. a tun. —Do you not know that D——— ===== PAGE 27 ===== 1956 THE TAX COLLECTOR 25 has started a magnificent estab- goes into a foolish enterprise, he lishment very useful to the country, wastes his capital, and if he extorts but which loses much money every from me wine or grain enough to year? make good his losses, and even to —1T1 regret it with all my heart. make him a profit, it is called a gen- But what can I do about it? eral gain! —The Legislature saw that if —Your representative having things went on thus, D—— would come to that conclusion, you have have the alternative of performing no choice but to give me the six better or closing his factory. tuns of wine, and sell the fourteen —But what connection is there that I leave you for as much as between D ’'s bad speculations possible. and my tun? —That is my business. —The Chamber thought that if —For, you see, it would be very it gave D a little wine from annoying if you did not get a good your cellar, a few bushels of grain price for them. taken from your neighbors, and a —1I will consider it. few pennies cut from the wages of —For there are many things the workingmen, his losses would which the money you receive must change into profits. procure. —This recipe is as infallible as —1I know it, sir. I know it. it is ingenious. But it is shockingly —1In the first place, if you buy unjust. What! Is D to cover jron to renew your spades and his losses by taking my wine? plowshares, a law declares that you — Not exactly the wine, but the must pay the iron-master twice proceeds of it. That is what we call what it is worth. a bounty for encouragement. But —Ah, yes; does not the same you look amazed! Do you not see thing happen in the Black Forest? what a great service you render to —Then, if you need oil, meat, the country? cloth, coal, wool, and sugar, each —You mean to say to D——7? one by the law will cost you twice —To the country. D asserts what it is worth. that, thanks to this arrangement, —But this is horrible, frightful, his business prospers, and thus it abominable. is, says he, that the country grows —What is the use of these hard rich. That is what he recently said words? You yourself, through your in the Chamber of which he is a quthorized agent— member. —Leave me alone with my au- —Tt is outrageous! What! A lout thorized agent. I made a very ===== PAGE 28 ===== 26 THE FREEMAN November strange disposition of my vote, itis will not re-elect him, if I do not true. But they shall deceive me no want to. more, and I will be represented by —But you will want to, and you some good and honest countryman. will re-elect him. —Let him come here and try. He —Bah, you will re-elect the will see whom he will have to settle worthy General. with, —I? I re-elect the General to —We shall see. Good-bye. I take give away my wine to Africans and away your six tuns, and will pro- manufacturers? ceed to divide them as the General —You will re-elect him, I say. has directed. : : ‘Le Precepteur’” first appeared in 1845 in —That is a little too much. I Sophismes Economiques, First Series. Excessive Taxation Paul L. Poirot ROM widely divergent sources that all things change over time — comes recognition that taxes even religion. Originally, the 8th have grown excessive, The gradu- Commandment — “Thou Shalt Not ated income tax has been soundly Steal”—was unqualified. But today, denounced in theory and in prac- most social planners are willing to . . go along with a slight modification: tice by former Commissioner of pi hal : ou shalt not steal outside the Internal Revenue, T. Coleman An- framework of the democratic proc- drews. Among countless other ex- 557 Of course, it still is not con- pressions in similar vein, two bear gsidered “right” for A to go over and repeating here. rob B, his rich neighbor. But it is One, from the September 1956 quite “right” for A to organize a issue of Economic Intelligence pub- group of cohorts into “government,” lished by the Chamber of Com- levy a tax based on ability to pay merce of the United States, is en- (and who can better afford to pay i “ than rich B?) and then proceed to andment vs, titled, The Sth Lom iman ment vs collecet from B and redistribute the wealth among A and his henchmen— Students of theology will recognize “expenses of government.” To insure Dr. Poirot is a member of the staff of the Foundation for Economic Education. ===== PAGE 29 ===== 1956 EXCESSIVE TAXATION 29 that everything is truly ‘“‘demo- to reduce considerably or abolish en- cratic,” B may even be invited to tirely this hateful legislation. vote on Whether or not he should be A libertarian must feel certain so taxed. It’s all legal, but some “hard-shell diehards” will wonder if Sratification when spokesmen for it is ethical. employers and for employees, The other is a resolution intro- Packed by a former tax-collector, duced by New York Typographical Stand so united against excessive Union No. 6 at the 1956 Conven- taxation. Perhaps it is a vital first tion of the New York State Feder- Step toward correction to have rec- ation of Labor: ognized that a given condition — WHEREAS, the income tax as pres- the prevailing tax situation — is a ently constituted has become an disastrous drain upon the produc- overwhelming burden on the peo- tive capacity of individuals. ple of the United States, and But a vital second step, then, is WHEREAS, this iniquitous legisla- to understand that taxation is the tion has contributed immeasurably consequence rather than the cause to “juvenile delinquency” by forc- of the excessive governmental in- ing the mothers of our youth to {eryention that plagues our econ- abandon the home for the office and omy. Taxes are but the price that actory, an must be paid for the still widely rigged market and the Welfare ublicly condemned the terrific traffic H human labor, and State. And the charge that taxes WHEREAS, every working citizen are excessive is simply an admis- is compelled to devote one day’s Sion that this compulsory interven- labor per week to foster the ex- tion is not worth the cost. travagant wastes, “boondoggling,” Real progress back toward free- and downright wantonness in- dom will be evident when numer- volved in the distribution of this ous individuals and groups wel- “easy money” by thousands of one- come the risks and the opportuni- world-do-gooders, and ties of open competition and stop WHEREAS, only an aroused citi- cooking special privileges at the zenry can put a halt to this never- expense of someone else. When in- ending evil, therefore, be it dividuals become more reasonable RESOLVED, that this convention of ; in their demands for governmental the New York Ctate Federation of i . Labor emphatically endorse a man- Protection and service, then 8ov- date to both major parties to incor- ernment tax claims against indi- porate within the framework of their viduals will diminish accordingly political platform a definite promise — and automatically. ===== PAGE 30 ===== On Booms and Busts Anthony M. Reinach OOMS are often identified with likely to obscure the comparatively inflation, and BUSTS with de- simple economic forces at work. flation, but the extremes of eco- The more general kind of boom, nomic activity that are called currently known as ‘“‘good times,” booms or busts are frequently the usually starts as a result of an ar- result of sheer emotionalism. Most tificial increase in the monetary booms start slowly and pick up supply by government. Prices of speed as more and more people certain goods and services start to grasp the happy but insane notion rise. Then trade increases, because that trade (which is increasing) prudent people begin to realize that will continue to increase indefi- tomorrow an item will cost more nitely. In its latter stages, a boom and had therefore better be pur- may be fueled by propaganda chased today. spread by the few psychologically The initial moderation soon sophisticated persons who intend mushrooms into a buying spree. to profit from the frenzy. Goods and services are bid to un- Such special booms as the tulip- realistic prices, even in terms of mania in seventeenth century Hol- the increased monetary supply. The land, the Florida real estate boom briskness of trade permeates so- in the 1920's, and the recent Davy ciety with the delusion of “good Crockett boom in the world of chil- business.” dren are commonplace in every After buying and prices have generation. Among children, the reached a peak, a bust inevitably bust that followed the Davy Crock- follows, no matter what controls ett fad resulted in no more than government may attempt to apply. the discarding of outdated toysand There is an abrupt let-up in general costumes—with hardly a tear be- trade, and on its heels comes a con- ing shed. In the world of adults, dition known as a business “reces- however, busts bring despair, and sion” or a business “depression,” ruined lives and fortunes. the difference being the degree of The imagery applied to booms unemployment. At such times some and busts is so colorful that it is economists allege that ‘“overpro- Mr. Reinach is a financial consultant. 28 ===== PAGE 31 ===== 1956 ON BOOMS AND BUSTS 29 duction” of goods has resulted in But when he charged 22¢ for a loaf, “surpluses.” he found that unbought bread grew Why after a bust must a man be stale on his shelves. plagued for years with a seeming The barber, like his all too-hu- “surplus” of goods, services, and man friend, was also a bit stubborn. labor? He could not quite comprehend why The law of supply and demand his service, which had recently com- furnishes the answer. Take, for manded 80¢, should now be worth example, the baker and barber who only 40¢. He tried to “hold the line” every week have been trading two by charging 50¢. But a good many loaves of bread for one haircut. of his customers went to other During the boom, loaves of bread barbers, or got fewer haircuts, or went from 25¢ to 40¢ apiece, while even trimmed their own hair, He the price of a haircut advanced partially disemployed himself. from 50¢ to 80¢. The baker and the Admittedly, not every business barber continued their weekly venture can survive a depression transaction. Not even the frenzy of by simply cutting its own selling the boom incited them to barter prices. Some will be saddled with two haircuts for four loaves of contracts and commitments that bread every week. preclude continuous production. Then came the bust, the panic, Thus, there will be business stop- the depression. Haircuts declined page and unemployment unless to 40¢; a loaf of bread to 20¢. Still, wage contracts and other costs are trade between the baker and the also repriced in line with the new barber kept its usual pace. market situation. Even in a panic, With respect to each other, the “unemployment,” “overproduc- two acted as sane men would. But tion,” and “surplus” as such do neither was that rationalinhisdeal- not exist. There are only unemploy- ings with customers who pay cash. ment at a price, overproduction at The baker tried not to cut his price. a price, and surpluses at a price. Trus came a collapse in manufacturing and commerce just as... in all countries where men have tried to build up prosperity on irredeemable paper. ... The merchant was forced to add to his ordinary profit a sum sufficient to cover probable or possible fluc- tuations in value, and while prices of products thus went higher, the wages of labor, owing to the number of workmen who were thrown out of employment, went lower. ANDREW DICKSON WHITB, Fiat Money Inflation in France ===== PAGE 32 ===== Politics in the Market Place Edmund A. Opitz UMAN EXISTENCE has always bust of 1929. If we grant the been precarious. Man is al- premise that political action can ways exposed to natural calami- make the economy depression- ties—including other men. Fam- proof, it becomes easy to accept ines and epidemics have recurred the conclusion that it is the duty with appalling frequency during of government to shore up the history,and entire populationshave economy at every critical point. been ravaged from time to time. But is the premise sound? “Prob- There cannot be, in the nature of ably not,” is the conclusion forced things, any guarantee that a man upon us by an analysis of the will reap where he has sown. economic and political factors in Drought or flood may ruin his the situation. crops, or some other man may raid , the harvest. The producer is con- [) HE MARKET PLACE is the corner- stantly threatened by a forcible stone of society. The human com- transfer of his wealth—effected munity does not flower except as on a small scale by robbery, and men are able to exchange their on a large scale by war. Men have surplus energies voluntarily as never learned to live comfortably goods, services, and ideas. If in- with the all-pervading uncertainty dividuals were completely self- of life, and they have grasped at sufficient, society would be unnec- every straw which promises to in- essary, if not inconceivable. A so- troduce a reasonable security into ciety is impossible unless there be it. some exchange, and it is rich and It is economic uncertainty which complex in the degree to which makes the modern man most nerv- exchanges multiply; and on every ous. The Great Depression of the level exchanges multiply naturally 1930's is kept so fresh in his mind unless they are sabotaged. The that he is willing to allow a lot of quality of goods, services, and political intervention by the fed- ideas exchanged will depend, of eral government because he be- course, on the endowment and lieves that there is no other way enlightenment of the people who to prevent a recurrence of the big do the exchanging. When economic The Reverend Mr. Opitz is a member of the staff of the Foundation for Economic Education. 30 ===== PAGE 33 ===== 1956 POLITICS IN THE MARKET PLACE 31 exchanges are voluntary, there is front end of an economic process a market economy; if the ex- requiring an exchange of the changes are politically controlled fruits of specialization for its or directed, we have a planned completion, The benefits of spe- society or collectivism. cialization result from the energy Collectivism contains its own thus conserved, but the benefits cure in the long run; the looting are dissipated to the extent that of the market place on which it exchanges are inhibited. The con- thrives gradually dries up produc- venient label for multiple volun- tion. The producer will not con- tary exchanges is “the market,” tinue to produce when he realizes personified by buyer and seller, that the fruits of his labor are and a duality of interest is intrin- systematically taken away from sic to their relationship. him. He will tend toward a hand- The seller wants to get a high to-mouth existence. Too many par- price for his goods and services, asites will kill the host. whereas the buyer wants to pay a But it is not collectivism, a com- low price. Buyer and seller hag- pletely socialized economy, which is gle over price; and if a sale takes today the real problem for many place, it means that each man feels people. Socialism has been given its he got the best deal the market chance in several major countries offered him at the time. Buyer and has been unable to redeem its and seller both feel that exchang- promises. Political intervention- ing at the mutually acceptable ism, or a middle-of-the-road pol- price is better than any available icy, for the sole purpose of “mak- alternative—such as not exchang- ing capitalism work” is the present ing at all. Buyer and seller must position of those who distrust the each have gained at least 51 per working of a free market system. cent satisfaction or the transac- The boom and bust cycle is in- tion would not have jelled. Thus it herent in the market economy, may be true to say that a cloud of they believe, and so they would discontent always hangs over the correct what they regard as the market, but the human situation faulty operation of the economic is not all sunshine. The market order by political action. is an imperfect device, merely be- cause it consists of people in ac- D vision oF LaBoR, or specializa- tion, but it is by far the best of tion according to skill — the foun- all possible alternatives for carry- dation of any human grouping en- ing on the business of society. titled to be called a society—is the On occasion, a paralysis seems ===== PAGE 34 ===== 32 THE FREEMAN November to settle on the market. Exchanges not getting together despite their diminish in number, and produc- powerful affinity for each other. tion, in consequence, dries up. Is What’s keeping them apart? there something in the market Unless land, labor, and capital process itself which is so self- can get together, there is no pro- stultifying that an outside force duction.Economicactivity,in which must intervene to unshackle it? these three factors are joined, is In other words, is an industrial a consequence of human wants, stagnation a free market phe- needs, and desires which cannot be nomenon? Or is it the cumulative satisfied except out of production. effect of political interference These wants and needs are, nor- with the market? Analysis points mally, the stimuli that drive a inexorably toward the latter. man into productive activity. If man were a creature without wants, or if his wants could be sat- Ios MEN, idle factories and ma- isfied by wishing, he would not chines, idle fields and mines be- work, and economic activity would token an economic depression. The decline toward zero. But this is not major feature of a depression, as it the problem posed by a depression. strikes the public eye, is mass un- In such a depression as this country employment. Factories are closed, suffered from 1929 to 1939, eco-' business stagnates, and millions nomic activity underwent a steep who want jobs can’t find them at decline in spite of pressing human their price. As the depression needs. The urgent unmet needs lengthens or deepens, human suf- and wants which are the natural fering increases. Unmet human initiators of the productive proc- wants and needs intensify, but a ess by which they can be met, sort of paralysis seems to prevent somehow failed to get produc- these wants and needs from being tion going. Land, labor, and cap- met in the only way they can be ital stayed apart even though met—by economic activity. Eco- urgent human needs exerted their nomic activity is, basically, the ap- strong pressures to bring these plication of human energy to na- factors together. Something must tural opportunities, aided by tools, have counteracted these pressures. i.e., capital. To say that there is The three factors of production mass unemployment is only normally join forces in response another way of saying that the to human needs. If there are ob- three primary factors of produc- vious economic needs and no pro- tion—land, labor, and capital—are duction results from them, the ===== PAGE 35 ===== 1956 POLITICS IN THE MARKET PLACE 33 clear inference is that some force ing. Periodically he outgrows his is at work to keep the three clothing or else it wears out and factors apart. There is a monkey he needs new. In brief, there are wrench in the machinery; if we moments when the economic urge could identify and remove it, ebbs, and in those moments it is perhaps the machinery would natural for land, labor, and cap- start up again. This monkey ital to lie idle. But shortly, the wrench is not to be found among self-starting cycle gets under way economic forces or factors. Thus again naturally as satiety wears we are forced to ask: Is it not the off and recurring wants and needs intrusion of a noneconomic ele- reach a certain urgency. This ur-. ment which tends to paralyze the gency overcomes the natural desire productive process? to loaf and take one’s ease, and man goes back to work. That is to War IS economic activity? If say, he picks up his tools and we carry this question back to its starts to dig. In more sophisti- basic level, we are confronted with cated societies he has a wider var- the facts of biology. Man, as a bio- iety of choices; he may perform logical organism, cannot survive functions or render services that unless he can meet his creaturely appear remote from labor in or needs from the products of human upon the earth. But unless someone labor — his own or some other does the farming and foresting, the man’s. When these needs are satis- mining and fishing, no one will stay fied, man becomes something more long in the professions or the serv- than a mere biological organism, ice occupations. and another set of needs comes Economic activities are im- into play. In his efforts to satisfy mensely varied, but they are all these, man engages in the disinter- interrelated. And they are an al- ested pursuit of truth, in the quest most automatic response to the for beauty, and in worship. These nagging demand of human wants activities are normal to man, but which cannot be satisfied except they are not primarily economic by the fruits of human labor. activities. “But this,” someone may object, On the economic level, human “is Robinson Crusoe economics. It desires are not constant but re- is obvious that Crusoe is not . curring. A person eats to the point bothered by unemployment be- of satiety, but soon he will be cause he is his own market. He is hungry again. He builds a shelter, steadily employed because his very but after every storm, it needs fix- survival depends on it. But in a ===== PAGE 36 ===== 34 THE FREEMAN November complex society the situation is energy. We have learned that our quite different.” But is the situa- wants find their fullest satisfac- tion so different? tion in the context of the volun- In a simple economy the pro- tary and reciprocal exchanging ducer satisfies his own needs di- of goods and services, which are rectly ; he is his own consumer. A always in short supply. Everyone complex economy, on the other wants more goods and services hand, derives from the discovery than he now has, and thus there is that each individual can achieve a constant demand to produce maximum satisfaction for his own them. Goods and services are the needs and desires by guiding his result of applying human energy production according to the con- to the earth’s resources, and the sumer demands of other people. context in which they are pro- That is to say, he produces for the duced is a job. The insatiable de- market, and as a result of this mand for goods and services, then, specialization there is more of is equivalent to an endless supply everything for everybody. This re- of jobs to meet the demand for sults in economic progress—the economic satisfactions. An endless steady transformation of luxuries supply of jobs means a chronic into necessities. shortage of labor and the prospect The wants and desires of each of continuous employment. person are virtually limitless, and human ingenuity continues to de- Ox THE BASIS of economic consid- vise better ways of satisfying erations alone it is difficult to them. Each person in this inter- see how there could be a shortage relation thus constitutes an insati- of jobs. On the level of produc- able demand for the goods and tion and exchange, how can we ac- services produced by the labor of count for unemployment in the any other person or combination, face of unsatisfied economic de- and any-other-person-or-combina- mands? To say this is not to deny tion is therefore faced with all the the fact of depressions; it is work he can cope with, and more. merely to suggest that economic Presumably every person would paralysis must have noneconomic like to possess a magic formula causes. for satisfying his wants and needs Is there some element which is without work, but most of us have frequently found in association learned that the world is not so with economic factors but which constructed as to yicld up its bears no intrinsic relation to goods without the expenditure of them? The answer is: Yes, gov- ===== PAGE 37 ===== 1956 POLITICS IN THE MARKET PLACE 35 ernment. There is always politics people put upon various items by in the market place, for reasons recording the amount of energy deeply rooted in human nature. they will expend to get them. Nor Men being what they are—crea- is there any assurance that gov- tures who seek to satisfy their ernment will not be perverted. needs and desires with a minimum Some men comprising the polic- of effort, the market place is sub- ing establishment are not long in ject to raids on it by those who discovering that they are in a try to take something out of it strategic position for conducting without putting anything com- predation, and that predation mensurate into it. This being so, seems to pay better than policing. the market place needs to be de- In conducting this operation they fended in order to maintain the rarely go it alone; they need the energy exchanges which form the partnership of nonpolitical per- matrix of society. The natural el- sons who do not wield political ements which compose the market power but who benefit by the ex- place—goods, services, and ideas ercise of it—at the expense of the set in motion by men seeking var- other members of society. In this ied satisfactions—need a social operation these men are but fol- element to defend the men who lowing the mandates of a natural engage in the exchange. This ele- urge to seek satisfactions in the ment is government, and thus easiest manner; they have per- economics becomes involved with suaded themselves that predation political action. is a labor saver—however im- There are few guaranteed re- moral it might be. sults in human affairs. There is no assurance that the extra en- I: IS this deep-rooted human de- ergy which the market bestows sire to live at the expense of some- upon people will not be used one else which, in the first place, wrongly and become real evil. Re- gives rise to government as the lease a man from drudgery and producer's means of defending he may explore the furthest himself, and in the second place, reaches of human thought, or he causes government itself to go may sink to the depths of degrada- sour and overstep its proper tion. The market place is a blank bounds. Unless human beings live page. It has no character of its a hand-to-mouth existence, this own, but it does respond sensi- desire cannot be starved out. As tively to human evaluations, and soon as men produce a relative it does reflect the real appraisal abundance, as they will if they ===== PAGE 38 ===== 36 THE FREEMAN November are free to produce and exchange, has deep roots in the past; it is the abundance attracts the pred- ignorance of a proper theory of ator, leaving the producer no government which would detail the choice but to protect himself di- reasons for establishing govern- rectly or hire a policeman to pro- ment in the first place and set tect him. The obvious benefits of forth the precise moral norms by specialization result invariably in which it is properly bounded. This the selection of the latter method, demands a clear understanding in the employment of an agency the domain of the private and per- which keeps the peace by restrain- sonal, as sharply distinguished ing peacebreakers. The political from the other-personal; the dis- agency cannot be dispensed with tinction, in short, of what is mine unless society is dispensed with, from what is yours. It is right and so the essence of the political my duty to exercise control over problem is the difficult art of keep- what is mine; but it is a moral ing government brass-bound and evil for me to attempt to exercise copper-riveted within the norms control over what is yours. It is of morality. the great defect of much political But our contemporaries view thought that this distinction is so the political problem in a different feebly made. light. Every advanced country to- day is operating on the fallacious Tue HISTORY of political theory is belief that free men left to their largely an account of the means own devices cannot take care of whereby some men are able to con- their creaturely needs, with the trol and direct the lives of other corollary illusion that it is gov- men, as the word “govern” itself ernment which organizes society, bears witness. The word is derived directs and channels energy ex- from the Latin word meaning “to changes, and provides an object in steer” and the Greek word for the service of which men and wom- “rudder.” The new departure in en may realize themselves. This political thought is to be the devis- dubious ideology is collectivism. ing of arrangements by which per- Collectivism elevates government sons are left free to govern them- to a role where it usurps functions selves. that belong to other institutions or The second reason for the can- to individuals. cerous growth of government is Government has enjoyed a can- the miraculous material productiv- cerous growth in modern times for ity of modern times. Popular ig- two reasons. One of these reasons norance of the proper functions of ===== PAGE 39 ===== 1956 POLITICS IN THE MARKET PLACE 37 the political agency has every- no concerted effort on the part of where resulted in the use of the a large number of people to live by agency to sabotage the market predation in the form of a contin- place for the supposed benefit of uous levy on current production. some at the expense of others. It has been only within the last This evil has been kept pretty well century or so that conditions have in check throughout history by the arisen which would sow the notion almost universal poverty of man- in some minds that production is kind. Until modern times, there such a never-failing and healthy has only rarely been sufficient stream that it could withstand be- goods in the market place to war- ing tapped and bled at numerous rant the trouble of setting up the points and still continue to flow. political machinery to siphon them These are the basic premises of off. It is only in modern times, as collectivism: that there is a vir- a result of inventions and the rel- tually automatic source of produc- ative freedom of the Liberal Era, tion, which will go on and on like that material goods have spewed the sorcerer’s mill, and that the forth in such abundance as would problem resolves itself into tap- warrant construction of the politi- ping the flow successfully for the cal machinery to systematically right people. But this operation and legally loot the market place. puts an increasing pressure on the Predation is not resorted to un- goose which lays the golden eggs legs it is thought to pay; and his- and eventually kills it. There torically when looting has taken comes a time when producers re- place, it is an accumulation of fuse to go on being victimized. wealth that has been looted. To cite It has been pointed out that eco- but three out of thousands of ex- nomic transactions have, from the amples: the Mongol invasion of beginning, been involved with poli- China, the Spanish conquest of tics, ostensibly to keep predators Peru, the English conquest of In- out of the market. If we know that dia. In each of these instances, a political action has always played civilization which had accumulated a role in economic affairs, and if great wealth was subjected to at- we eliminate economic action as a tack and invasion for the primary cause of depressions, then we are purpose of looting that wealth. in a position to examine objective- This was the only kind of preda- ly the theory that improper politi- tion worth-while in past ages. Ex- cal action is the culprit behind cept on a comparatively minor boom and bust. scale in chattel slavery, there was Collectivism is a poison, and the ===== PAGE 40 ===== 38 THE FREEMAN November thing to do with a poison is to ism. But because they are pre- avoid it altogether — not take it mised on a complete misunder- in small doses under illusion that standing of the market economy, it has curative powers. Collectiv- they actually sabotage it and thus ism in small doses is what we are drive us closer to the state social- offered in such nostrums as Key- ism they hope to avoid. Free mar- nesianism, the Welfare State, and ket capitalism doesn’t have to be the middle-of-the-road policy. made to work; it works naturally, These fragments of socialism are by itself, within the framework of sold to us on the promise that they the proper moral and institutional will make the market economy guarantees to life, liberty, and work and keep us out of collectiv- property. Of Man and Masses Evelyn F. Brines T'S a purely personal view but all individual thought and person- my dander gets up quickly when- ality. ever I hear people referred to as I hear it frequently, and whether the “masses” or the “common peo- the people who use it do it deliber- ple.” ately or have merely borrowed the We may be short, tall, good or phrase in thoughtlessness, it is bad, fat or lean, but we are not a equally bad. I protest particularly blob of putty to be molded into any hearing leaders use the term. If the one size, shape, or viewpoint. There individuals who hired, elected, or areabout 167,000,000 people in this appointed them are a faceless country and no two sets of finger- ‘blob,” then not much inspired prints are alike; and I view with leadership will result. suspicion anyone who takes the I heard one of the very highest view that any or all of the millions labor leaders refer to his union of individuals are “masses.” It is membership again and again in an insulting reference, writing off this fashion. He meant no offense, Mrs. Brines is a secretary and editorial assistant in the offices of the Jasper County Farm Bureau Co-operative Association, Rennselaer, Indiana. Her article first appeared in the August 1956 issue of The Farm News of Jasper County. ===== PAGE 41 ===== 1956 OF MAN AND MASSES 39 I am sure, because he is highly re- build their name. Politicians know spected by people outside the union. how important a name is. Surveys Nevertheless, the term defaces peo- show that people want not only ple and their personalities. It robs money for their jobs—they want them of being John Jones or Har- recognition equally as much. old Brown, with their individual In all our contacts with others, marks of personality. we meet.as individuals. To the fill- I think it’s dangerous to be ing station attendant you are not thought of so impersonally by peo- a “mass.” You are someone with a ple in positions where they are re- a name and personality, perhaps a sponsible for the welfare of large little cranky sometimes. To you, the numbers of people, It is not easy to attendant is Bill Smith who does be impersonal about John Jones, the job with a smile, and that’s the name and the man, but it’s easy where you go when you want gas. to miss his viewpoint when he is You like him. You are You. Nobody “the masses.” else can be. The term is against one of the basic human feelings, the urge to Anyone using such an indiffer- feel important. Ask any performer ent and careless term as “the how important it is to be a “name.” masses” should be promptly and Entertainers work for years to firmly corrected, albeit politely. The Nature of Enterprise I: 1s of the nature of enterprise that shop around if we are to live as free the businessman judges for himself people at all. Freedom of enterprise, what human beings want and how as seen from the businessman’s point badly they want it, and that he ac- of view, is the same thing as freedom cordingly organizes matters so that to shop, as seen from the consumer's human beings can get what they want point of view. The central conclusion for themselves. In any society fit for of economic thought, as I understand human beings to live in, they must be it, is that only through freedom to free to decide what they want, and shop can we get the maximum of the how much they want one thing more things we want most. In other words, than another thing. If freedom to free enterprise secures maximum want things, and to decide among Production all around. In this conclu- them, is to be of any use to us, we sion lies the whole case for freedom must be free to shop around for what to shop and freedom of enterprise. HART BUCK, Statistician we want. In fact we must be free to Toronto Dominion Bank ===== PAGE 42 ===== Practical Philosophy Admiral Ben Moreell rNHE BUSY MAN demands that communism and the Nazis. The a book be more than a mildly Second World War, fought in the diverting exploration into the name of the Four Freedoms, made higher reaches of so-called “pure us for a time an ally of commu- intellectualism.” He is always on nism and left us with the atom the lookout for books which supply bomb. We have never achieved him with practical working guides such victories, such power, and so to more purposeful living. Such a little security. Now we are seri- book is The Human Venture by ously planning to annex the moon, Gerald Heard (Harper and Bros., while ‘iron curtains’ keep coming New York, 1955. 310 pp. $4.00). down all over our own world.... In his searching analysis of the Our civilization is not collapsing history and meaning of man’s so- ... it is exploding.... We may be journ on earth, Mr. Heard brings blown to pieces if we do not learn into sharp focus the applicability to handle the explosives. . . . In of his findings to the solutions of short, the history of man is two- current problems. Here is a work fold. There is the outward story of which can be used to advantage by economics and physical inventions, all who have an interest in and/or of science, technology, and manu- a responsibility for the conduct of facturing. But parallel with it is important affairs in today’s the inward story of man’s under- troubled world. standing and ordering of his own Mr. Heard introduces his work life, and this is essentially the his- by asking these two challenging tory of religion in the deepest questions: “What is the meaning sense of the word.” of the present world situation?” Mr. Heard then conducts the and “How can we make sense of reader on a tour which might well what is happening to us these last be called a personal exploration of years?” He goes on to state: “The human history, in the course of First World War ‘to make the which he unfolds the “inward story world safe for democracy’ led to of man’s understanding and order- Admiral Ben Moreell, Chairman of the Board of Jones and Laughlin Steel Corporation, was war- time Chief of the Bureau of Yards and Docks and Chief of Civil Engineers of the Navy. During World War II he organized the Navy's famed SecaBees. He recently served as Chairman of the Second Hoover Commission Task Force an Water Resources and Power. 40 ===== PAGE 43 ===== 1956 PRACTICAL PHILOSOPHY 41 ing of his own life.” And from Heard states, “human coherence this story, he undertakes to deduce’ must be built up from that inner- the answers to those two vital most circuit; otherwise, it will re- questions propounded in the pref- main skeptical of all its other find- ace, and to a third one, which is ings.” But (he implies), with this implied in his statement, “Man firm foundation, man can meet the needs power over himself and un- problems of the Where am I? and derstanding of his own nature, far the What am 12, the challenges of more than he needs power over science and of social relations. his environment. He needs to know “Once man resolves to construct how to hold himself together.” The such a frame, he shall have for the implied question is this: How can first time the capacity to sustain man achieve that power and un- the dynamic richness of human ex- derstanding without which he will perience and the expansive power surely blow himself to bits? of the human mind. Then only will Mr. Heard defines the problem it be possible to have a peace that by asking three questions which is not coercion but consent, and a must be answered before man can civilization which is the great progress along the path of the community and not the giant human venture: state. ... 1. Where am 1? What is the char- “Such is the hope for mankind. acter of the natural setting in Its very greatness makes the wary which I must live? side of man’s mind fear that he 2. What am 1? How am I related to may never achieve it. On the other other men with whom I must hand, its promise is so truly at- learn to live? tractive to the human heart that 3. Who am I? What is the nature it may be an inherent part of hu- of my consciousness and what is pan nature.” its final destiny? Mr. Heard shows that the third E ~ouen has been written here question can be answered by means to indicate that this book holds of what he calls the “psychological promise of a rich store of knowl- revolution, the realization that the edge which could point the way to basic problem is the riddle of con- the solution of many contemporary sciousness. . . . By discovering that problems. But this deposit cannot ....they have discovered, also, that be mined easily, from the surface. the answer to Who am 1? involves The important values lie well be- the answer to What am I? as well low and will have to be dug out by as Where am I? Hence today,” diligent study and contemplation. ===== PAGE 44 ===== 42 THE FREEMAN November My interest in Gerald Heard The American businessman was first aroused when I was told prides himself on being a ‘“practi- that in two little books which he cal” fellow. I suppose this is in- wrote I might find the answers to tended to mean that the things he some questions on religion which does are directed toward the fulfill- were puzzling me. These were en- ment of immediate human needs, titled The Creed of Christ, a for which service he expects to be unique study of the Lord’s Prayer, paid a reasonable fee. I have no and The Code of Christ, a study of quarrel with that thesis. But the the Beatitudes. These two books question arises: By what stand- whetted my appetite for more in- ards does he appraise “immediate formation about Heard. I learned human needs”? Unless he has a that he was born and educated in highly developed sense of percep- England, took honors in history at tion of true values, his appraisal Cambridge University, and did is likely to be faulty, especially postgraduate work in philosophy when he attempts to arrange hu- and the philosophy of religion. He man needs in order of importance. came to the United States in 1937 Without perceptive capacity, he and since then has been lecturing cannot be truly “practical.” Prop- and writing. er perception requires that he be One of my friends who has spent able to synthesize facts and mean- much time in the study of Heard’s ings; to understand and integrate works has written: “There are the lessons of science (i.e., the thirty-three books to Heard’s finding of facts) with the lessons credit in the fields of history, an- of religion (i.e., the finding of the thropology, philosophy, and reli- meanings of those facts). gion, including six novels, an allegory, and two collections of In short, here is a “practical” short stories. His mind has ranged book which can and should be used through all branches of ancient as a working tool to serve the best and modern knowledge, including interests of our civilization and to the sciences. He is at home in the further the progress of the human religions and philosophies of both venture. I commend this and other West and East. In his books he works of Gerald Heard to my has integrated this vast accumu- many friends, in government, in lation of knowledge and brought it the professions, and in business, to bear upon the personal and so- who may wish to make a contri- cial problems of man in the mod- bution of value to these important ern world.” objectives. ===== PAGE 45 ===== } Why Wages Rise: : 9. LOSING PAY THROUGH FRINGE BENEFITS F. A. Harper The previous article discussed the worth of a free hand in the spending of one’s own wage income. When you can’t use your income for things of your choice, its worth is lessened to you. It was shown how this applies to the costs of governing our- selves. The rise in taxes over the last half century has cut more and more into wages, absorbing about half of our increased capacity to produce. From a cost of three minutes out of each hour of work fifty years ago, taxes now take 19 minutes. The greatest opportunity now for a quick increase in the worth of wages is to reduce the cost of governing ourselves so that more of the wage can be kept. Then you can spend it for things of your own choice and preference among the multitude of things available — goods and services. A dollar saved this way is as good as a dollar earned by working harder. The present article deals with another aspect of free choice in the spending of wages, by which it is possible to raise the worth of wages even further. HE communists-socialists have pline of reality rules over hopes a plan for society that goes like that can’t be hatched. this: “From each according to his The catch is twofold. First, as a ability, to each according to his member of a communist-socialist need.” society you shall not be allowed the This communal blueprint is ap- privilege of pursuing the release of pealing enough on the surface. your abilities at a task which seems Each of us wants to do the best he best to you. A central authority can according to his ability. And will decide this for you and for who among us doesn’t yearn to everyone else. He will do this in have his needs fulfilled? So this order to keep a workable ratio be- slogan sounds like Heaven before tween the persons on the stage and the hereafter. in the audience at the opera; in The barb in the bait lies con- order to have passengers who will cealed beneath the pleasant dreams ride the trains instead of all being of a utopia. For the brutal disci- engineers; in order to have some- Dr. Harper is a member of the staff of the Foundation for Economic Education. 43 ===== PAGE 46 ===== 44 THE FREEMAN : November one who will take care of the sew- can’t possibly come even close to age, and the like. The Commis- your version of your needs. sioner of Opportunities to Work And even though the Commissar will command you to work at the chanced to know your wishes, his job of his choice, not yours. You job is to ration acutely scarce may neither strike nor quit nor things, labeling them “your needs.” change to another job more suited Production is low under such a —asg you see it—to your abilities. system. And whatever its amount, even with all his power he can’t provide for any needs beyond what The second catch in this slogan is produced, less a heavy handling is that your official allotment fee. “according to need” will have no Under the communist regime necessary relationship to your there is another side, too, to this hopes and expectations. For it is matter of providing for your needs. the central authority, not you, who He will also prohibit you from hav- decides on your needs. And so the ing what he thinks you don’t need. Heaven of your dreams turns into This, in fact, becomes a main part a sorrowful reality. Even a child of his task under the poverty of knows this important distinction, communism. such as the difference between the A punster once remarked that soda he needs and the soda his life in a communist country means father proclaims he doesn’t need. that everything not compulsory is Under communism, the central forbidden, And in like manner, the authority decides whether it is communist-socialist slogan should bread or cake you “need.” If he probably be reworded as follows: thinks you need boogie-woogie in- “From eachaccording to his ability, stead of Beethoven music, or vice and keep from each what he does versa, that is what you will get. not nced.” The education he decides you need Complete and thorough commu- will be acutely attuned to an under- nism has been rare in the world standing of the reason why your because it is a highly perishable welfare is supposed to depend on system. Rebellion constantly arises his staying in power. All these out of the biological, mental, and “needs” will be decided with a cold, spiritual nature of man. So the inhuman arbitrariness. Since the dictator's policies must be “real- Commissar of the Pcoples’ Needs istic,” i.e., they must be moderate never met you — probably doesn’t enough to enable him to stay in even know you exist—his decisions power. A certain amount of free- Needs—In Whose Opinion? ===== PAGE 47 ===== 1956 WHY WAGES RISE 45 dom of choice must be allowed. where some persons are employed The less-than-complete patterns by others and paid with money of communism which exist in vari- wages. ous nations go by another name. Wages have no worth except as They have become known as Wel- one can buy with them something fare States. he wants, including the investment We need not look afar to some of savings. So no matter what the foreign country or ancient society rate of pay or the form of pay- to find this communist policy in ment, there is no way to pay wages operation, in a lesser degree. We making it possible to have some- have it in our own nation, in wide- thing this year that is not to be spread forms and instances, Prob- produced until next year or the ably each of us is a victim of some year after.’ of this same type of authoritarian The simple economic law that control that we criticize severely wages follow can be seen most when we see it being practiced in clearly by the life of an isolated Russia or Britain or elsewhere. So pioneer. He has what he can pro- perhaps a little soul-searching is duce, and no more. His “wages” are in order. limited by the amount of his pro- We need especially to review the duction. growing pattern of wage payments What is produced is likewise the which incorporates some of the “total wage” of an isolated com- same idea — “according to need.” munal society, or of anation having There is growing up in our midst a balance in external trade. Pro- what might be called corporate duction rules the wage limit even welfare states in miniature, or in a society otherwise controlled by union welfare states. Their effect an iron-fisted communal dictator. on the real worth of wages is what No matter who cuts the economic will mainly concern us here. pie, it can’t be cut into pieces which combine to a total that is more than itself. If cut so that one piece In order to see the nature of is larger, another piece or pieces these miniature welfare states in must be correspondingly smaller. relation to wages, it is first nec- The only way one piece can be made essary to recall that there isnoway larger without penalizing the oth- to consume this year something to ers is by increasing the size of the be produced next year or the year after. ‘This remains a simple truth ‘Seo “Why Fags Bis 2, Dodetivity,” The even in an economy like our own Freeman, April 1956, pp. 36-39. The Total Wage Concept ===== PAGE 48 ===== 46 THE FREEMAN November pie — increasing productivity and price, in effect, becomes your wage. total output. Let us say that last year you But we are not here discussing ‘produced products of the average such matters. We are, instead, amount for a United States family starting with the assumption that about $6,000 worth. Taxes took this problem of dividing the total about $2,000, leaving $4,000 net of production in a given year has after all types of taxes.* This already been resolved satisfactorily money can be spent by you for for the individuals involved. whatever you want most. What you choose to buy is not at he Pi Your Share of the Pie all the same as the choices of the Now let us look at your share of 1.1 who works next to you in the the pie, the part you have produced. same plant. This can be seen by It is yours by rights, because you comparing notes with him as to have produced it. And your em- what, precisely, each of you did ployer recognizes and accepts it as with your last pay checks — every yours. cent, even down to the brand of He will let you take what you bread you prefer or where you produce in that exact form, if you + on your vacation. If any so desire. But you don’t. Perhaps g,,4 stil) remains, compare the you make castings for trucks; you choices of hats and dresses your can’t eat them or wear them your- ,.... po, ght with some of the self. Or you may make caskets; you money. The techniques of mass surely don’t want them—at least ,.,quction and standardized as- not more than one, and not yet. Or sembly lines do not carry over into perhaps you teach; what teacher what employees want to buy with wants to be paid a wage composed their wages. of listening to his own teaching? Suppose I take your $4,000 and So you want to be paid the money spend it for you. This means that I equivalent of what you produce, gpa spend it for what I think you not what you produce in fact and in need, not for what you think you kind. You do not want to peddle the need. In other words, I'l probably products you make, yourself. You spend it for the same things I want them to be sold by the special- o.14 buy for myself if it were ized and efficient sales setup of mine, because that is what I am your employer, which is much to your advantage. Then the sales What you can spend is the net after payin taxes, which last year took about one-third of _— the pay from each hour of work, in both direct 2See “Why Wages Rise: 3. Dividing the Pie,” and indirect taxes. The Freeman, October 1956, The Freeman, May 1956, pp. 27-32. pp. 34-39. ===== PAGE 49 ===== 1956 WHY WAGES RISE 47 most likely to consider to be your precisely of this sort. They have greatest need. I’ll have to deduct been a major objective of union a sort of commission for my trou- leadership, and have been increas- ble, of course. ing more and more over the years. What does your $4,000 become The term has even been adopted by worth to you if I handle it that employers, journalists, and essen- way ? Remember that I am going tially everyone else. Yet the term to subtract a commission for hand- “benefit” implies the opposite of ling its spending for you; then the fact, in most such instances. with what is left, what would you What, really, are fringe bene- pay for what I select for you? The fits? They are of two types: resulting figure—what you would One type of “fringe benefit” is pay for it—is all that your $4,000 the spreading of your pay, which wage would be worth to you under was earned while working, over such a plan. That figure can be periods when you do not work. Let compared with your $4,000, which us say that you actually work on the you might have taken yourself to job a total of 1,800 hours in a year spend for your greatest needs as -—an eight-hour day, five days a you saw them rather than to give it week, forty-five weeks a year. You to me to spend for you. might be paid your $4,000 of yearly Assume, for instance, that you earnings after taxes in one check say my purchases are worth -only at the end of the year; or in forty- $3,000 to you. This would mean fifths at the end of each week you that a wage of only $3,000 to be actually work; or some other simi- spent by you is as acceptable as lar way. Or, if you prefer, the total $4,000 which I spend for you. yearly amount could be paid in There would have been a $1,000 twelfths at the end of each month, loss, or one-fourth of your $4,000 or in twenty-sixths at the end of wage. It means that the real worth each fortnight, or in fifty-seconds of your wage became only $3,000, at the end of each week—including instead of the nominal figure of the weeks and days when you did $4,000. Your share of the pie—the not work. However it is done, the part due you because of your hav- total will still be $4,000 after taxes. ing produced that much — would Some of your earnings may even have shrunk by one-fourth. be paid to you in your old age, af- i ter you have retired. Fringe Benefits The way you are paid, in this Fringe benefits, as they are sense, is a benefit to you only as it called by prevailing jargon, are may be a convenience to receive ===== PAGE 50 ===== 48 THE FREEMAN November your $4,000 at certain times rather money due you as pay—out of your than at others, It has nothing to do $4,000. It reduces the amount left with how much you are paid. It is to be paid to you as a cash wage, not a way to get more pay than you that you may spend on your great- have earned—more pay than the est need as you see it. It is some- worth of what you have produced thing that someone else thinks you —and so it is not really a benefit at need. all, in this sense. The other type of so-called fringe benefit includes all sorts of things Most schemes of this sort are not which became substituted for really benefits at all. Employees money pay, which you may spend would be better off, by their stand- for things of your own choice. In- ards of need, if they could have stead of getting your entire $4,000 the money instead. Then they could as a money wage, you may get some buy something worth more to them of it in the form of specified goods than any common package, more or presumed services. All sorts of than any uniform communized things become substituted for “need” that could be devised. Per- money pay. They range all the way haps you don’t want any of your from better toilet facilities in the $4,000 spent on a golf course be- plant to golf courses for members cause you do not want to play golf. of the families of employees—per- Perhaps you do not want part of haps even help in building a church your $4,000 used to help build a of some denomination in the com- church of a faith that is not yours. munity. It may be more company And similarly for other so-called picnics, or a Christmas party, or fringe benefits, imposed alike on all insurance of one sort or another, employees. You may not want them or a pension for old age—all sorts at all in your current budget, or if of things. you do want them you may not Sometimes these ‘fringe bene- want them under this plan because fits” are the result of employee you may be able to make a better pressure, either through the union deal elsewhere. or without any union. But often To illustrate, let us say that for they are initiated by management; every dollar taken out of your in- a “company plan” is put into effect. come for a “fringe benefit” by However they come about, someone else’s idea of your need, “fringe benefits” of this type have you get something worth only 756 one aspect in common. In each in- cents to you. Then it would have stance its cost comes out of the been worth one-third more to you Fringe Detriments ===== PAGE 51 ===== 1956 WHY WAGES RISE 49 to have gotten the dollar instead— in size and where one can move for a dollar’s worth of purchases as away from it is still an evil, not a you appraise them. For anyone to good. It is still of the essence of speak of a loss of 25 cents out of communism - socialism, wherever the dollar as a benefit is a strange and to whatever extent it operates. use of the word, indeed. Rather, it So in conclusion, I would say that is a negative fringe benefit. one way to raise wages is to repeal My dictionary says that the op- all these fringe detriments and to posite of a benefit is a detriment. set up no new ones; to return full So instead of being a fringe bene- choice, in the spending of the worth fit, these kinds of things are really of what he has produced, to each fringe detriments. Even then, they individual employee; to give him are not on the fringe of your wel- his wage in the form of money, to fare; they are as much at the heart be spent on what he most considers of your welfare as any other dol- to be his need and wherever he can lar of your pay. get the best deal. It is common for these so-called If several persons want exactly fringe benefits of all types to what is offered in the package of amount to as much as 10 to 20 per fringe detriments, they may still cent of the pay in many corpora- obtain them in the market for tions now. This amount should be goods and services. They may still a major item of concern among em- get the full worth of their incomes ployees, since it is both large and in that way, without imposing increasing. their desires on all other employ- : ees as a “fringe benefit.” It is all the others who do not get their dol- A friend of mine speaks of them lar’s worth. Their income dollar as little, corporate welfare states. becomes clipped by these fringe And, to be sure, they are just that detriment schemes, in a manner — if we mean by a welfare state like the clipping of the coins by the the centrally controlled spending rulers in days of old—for their per- of the people’s income for what sonal gain. those in control decide is the need The worth of wages can in this of the people. way be raised at once, anywhere A small welfare state is perhaps employers and employees decide to better than a large one, of course. do so. It need not await the slow And it is best to have it where one process of increasing productivity. may move away from its grasp as In fact, this is necessary if we are - easily as possible. But an evil small to gain the full benefits possible Little Welfare States ===== PAGE 52 ===== 50 THE FREEMAN November under our increased capacity to have only if he stays where he is. produce. He does not follow opportunity And as a final point, these where it leads. “Once a coal miner, schemes of so-called fringe bene- always a coal miner,” is its effect. fits often are a serious threat to This sort of freezing tends back our continued progress. Ostensibly toward the old European caste sys- their purpose is to reduce turnover tem, and could bring an end to the of labor and stabilize employment. traditional American growth of But they tend to freeze a worker in welfare and increasing wages. his job. He does not leave for a more productive job because he So “fringe benefits,” rather than would then lose his seniority status coming from pie in the sky, come and the “accumulated benefits” out of wages—out of what could which he cannot take with him. So be paid as money wages. And fur- he keeps his “security,” which the thermore, they comprise a serious union or the company allows him to threat to our progress. x) The Mobility of Labor Some PERSONS want to abandon the which in many instances have grown competitive system of bargaining be- out of a perversion of the free mar- cause they say there is not “perfect” ket. Both management and labor have competition. They fear for the work- been guilty of thus abandoning the men, because they say there is not a market method of wage determina- “perfect” mobility of labor. And it tion, and now the critics want to dis- certainly is true that some persons do card the competitive system com- not move as quickly as do others in pletely because of those perversions. response to an opportunity for higher They forget that the market system, wages. Home and family and church even in the absence of perfect mo- and community and all sorts of tics bility has afforded individuals in influence any decision to move. There America a greater freedom to move may be a loyalty to one’s present job than others have ever known under which isn’t measurable in dollars and any other system. Some of those other cents. And there may be other bar- systems allow the “workers” no riers to mobility, such as seniority choice at all. privileges and tied-up pension rights, PAUL L. POIROT, Bargaining ===== PAGE 53 ===== International Commodity Agr eements Adam K. Stricker, Jr. S LONG as we maintain a free price mechanism, consumers will guide the economy by the countless transactions which they initiate every day. Their actions maximize the use of available re- sources. For many years there have been groups in other countries who have advocated government schemes to control the production and the prices of basic materials. In the 1920’s the export of rubber from the Malay States, the Straits Set- crude rubber in the United States tlements, and Ceylon was under in 1917 but had dropped to less strict control by the British under than 20 per cent in 1922. In 1927 the Stevenson Plan. The price rose and 1928, its use once more equaled from 15¢ per pound in August 1922 50 per cent that of crude rubber in to $1.01 per pound in November the United States and almost one- ...the free play of competi- tive forces set in motion by your day-by-day decisions over the long run will be more successful in insuring that the world’s resources are put to their most productive use than the decisions of well- meaning bureaucrats. 1925. third of world new crude rubber Opposition to the Stevenson Plan consumption. became marked in the United The British Colonial Secretary States under the enormously high announced the decision to abandon prices of 1925. Among other restriction on November 1, 1928. things, some consideration was He said this decision was made be- given to the possibility of promot- cause it was difficult to influence ing rubber production in tropical prices with a reduced proportion areas in the Western Hemisphere. of output under British control and More important was the renewed the prospect of losing a still larger use of reclaimed rubber. The use part of the market to the Nether- of reclaimed rubber had amounted lands Indies, where planting had to more than one-half that of new been stimulated and where produc- Mr. Stricker is a member of the Business Research Staff of General Motors Corporation. 51 ===== PAGE 54 ===== 52 THE FREEMAN November ers not only had lower costs than we assist the underdeveloped coun- in restriction areas but also every tries by our demands on the world inducement to use new develop- markets for primary commodities. ments such as seed selection and This is our greatest opportunity to bud grafting. He also reported op- help others while helping ourselves. position to the scheme in Ceylon, During the course of World War smuggling, and the corruption of II, a group within the State De- native staffs. partment drafted proposals to Another control scheme which guide the world economy during also failed to stabilize production the postwar period. The results of or price was the Brazilian coffee their work were embodied in a doc- valorization plan. The controls ument known as “Proposals for Ex- broke down, and instead of stabil- pansion of World Trade and Em- izing prices, the price was lower ployment,” issued in November than ever. The most spectacular de- 1945. One of the proposals provided velopment in Brazilian policy re- for intergovernment commodity garding coffee was the burning of agreements designed to meet the enormous amounts; from 1931 to recurrent problem of stabilizing 1938 Brazil destroyed 65 million the prices of raw materials. This bags, or 8,600 million pounds, the proposal was sponsored by our gov- equivalent of total United States ernment to aid countries such as imports for five years. those we have just mentioned. The State Department believed We ARE SYMPATHETIC with the that it had improved upon the ear- problems of countries whose na- lier control schemes by providing tional income and well-being are for government representation involved with the markets for a from countries with important con- few basic commodities. Indonesia suming interests on the intergov- and Bolivia depend on exports of ernment control board for any com- tin, Brazil of coffee, Chile of cop- modity. This was an improvement per for necessary foreign ex- over the earlier plans such as the change. There are numerous other Stevenson Rubber Act. However, a examples that readily come to conference of government repre- mind. Experience, however, does sentatives sitting down around the not hold any promise that these table is quite different from a free countries will prosper from govern- market in which buyers and sellers ment control schemes. If we can adjust the supply-demand relation- maintain a high level of gross na- ships through the operation of the tional product in our own economy, price mechanism. Any such scheme ===== PAGE 55 ===== LY56 INTERNATIONAL COMMODITY AGREEMENTS 53 of necessity implies government the birth of an extracurricular or- controls over price and production. ganization: namely, the Interna- The United States proposals tional Materials Conference. It had were referred to the Economic and the power to make recommenda- Social Council of the United Na- tions to governments on the alloca- tions. They ultimately were incor- tion of critical materials. This or- porated in a charter for the Inter- ganization, sponsored largely by national Trade Organization our own State Department, was es- adopted by an international con- tablished outside of the United ference which convened at Havana, Nations structure in view of the Cuba, in November 1947. difficulties involved in operating an The commodity agreements pro- organization with such powers if posals were Chapter VI of the Russia and her satellites had a Charter. The Havana Charter was voice in all its decisions during the submitted to the Congress by Korean conflict. former President Truman in 1949. The International Materials The House Committee on Foreign Conference actually allocated cop- Affairs conducted hearings during per, nickel, sulphur, cobalt, tung- the spring of 1950 but failed to sten, molybdenum, zinc, and news- - report the resolution and it died print to all the nations of the Free in Committee. Pending adoption World in accordance with what it of the resolution, the United Na- called a country’s “entitlement for tions attempted to establish the consumption.” The allocations were Charter, chapter by chapter. The implemented in the United States implementation of Chapter VI was by using the Defense Production through an organization known as Act with its material and price con- the Interim Coordinating Commit- trols: As the IMC began to hamper tee for International Commodity seriously many industries in the Arrangements. Although the Ha- United States, Congress made its vana Charter is dead, we are still own examination of this organiza- operating in the Interim. tion and amended the Defense Production Act in 1952 restrict- Wine THE INITIAL thinking on ing the powers of the IMC over commodity agreements was direct- our economy; and in addition, it ed toward the problem of surpluses provided that no funds appropri- and the stabilization of prices, the ated to the State Department could Korean emergency presented anew be used to pay any of the expenses set of problems involving short- of operating the IMC. This organi- ages. This eventually resulted in zation was disbanded in 1953. ===== PAGE 56 ===== 54 THE FREKMAN November In the meantime, another effort fact that the United States has not was made by countries largely de- participated in its work. pendent upon the production of At the present time, our govern- raw materials to establish another ment is a party to two international group within the United Nations commodity agreements, the Inter- with powers to deal with commod- national Wheat Agreement and the ity problems. A report released in International Sugar Agreement, November 1953 entitled “Commod- both established many years ago. ity Trade and Economic Develop- We are not a party to the Interna- ment” became the basis for a res- tional Tin Agreement, and we are olution submitted to the Economic not participating in a proposed new and Social Council in the spring of Coffee Agreement. 1954 providing for the establish- ment of a Commission on Interna- Certainly our experience with tional Commodity Trade. wartime price and allocation con- The United States representa- trols within the United States, tive to the United Nations Eco- with the rubber and coffee schemes nomic and Social Council opposed I have described, with our efforts the establishment of this Commis- to stabilize domestic agricultural sion, particularly in view of its incomes, and with the Interna- very broad terms of reference. tional Materials Conference, does They included provisions to estab- not give us a basis to expect gov- lish “just and equitable” relations ernment controls to be superior to between the prices of raw materi- free markets. als and manufactured goods. The No one can foretell the future. United States representative However, in my opinion, the free voiced our unalterable opposition play of competitive forces set in to any such proposal involving com- motion by your day-by-day deci- plete regimentation of the world’s sions over the long run will be more economy. successful in insuring that the In spite of United States oppo- world’s resources are put to their sition, the Commission was estab- most productive use than the deci- lished in 1954. The Commission has sions of well-meaning bureaucrats. produced a number of statistical The truth of the matter is that studies, but it has been unable to none of us is smart enough to plan do anything more in view of the a regimented world economy. ===== PAGE 57 ===== A REVIEWER'S NOTEBOOK = John Chamberlain UDWIG VON MISES is never capitalism. True, the totally un- one to beat about the bush. hampered operation of laissez faire When he says he is against social- has never persisted for very long ism and government intervention anywhere in the West. But there in the economic process, he really has been enough of it to “absorb” means it. Therein he differs from the hindrances created by such ninety-nine out of a hundred econ- things as uneconomic wage rates omists and politicians who say they enforced by political action, or gov- are for the free market, but who ernment subsidies, or tariffs, or make exceptions for such things the “wage tax” out of which so- as farm prices, or compulsory so- cial security is supposed to be paid. cial security, or government hous- Decade by decade, the capital ing, or federal aid to education. equipment available to the indi- The ‘‘yes-but’’ economists may vidual worker in the West, partic- think they are for freedom, but to ularly in the United States, has Dr. Mises they all partake, at least increased, thus adding to the unit to some degree, of the fatal dis- productivity of wage earners who ease of our time. That disease is would otherwise be condemned to clinically and coldly anatomized in static standards of living. None of Dr. Mises’ The Anti-Capitalistic this has been done by mirrors, or Mentality (D. Van Nostrand, $4). by politicians; it has been done by Like Dr. Mises’ other books, The saving, by the march of depositors Anti-Capitalistic- Mentality makes to the banks with their pennies, the incontestable point that the nickles, and dollars. The sum total West owes its tremendous eco- of productivity might, indeed, have nomic development, its machine been pushed much higher if the technology, its inventiveness, its high tax philosophy of modern high standards of living, its many governments had not intervened. amenities, its surging populations, In pushing up the average man’s its low death rates, its good medi- standard of living modern capital- cal care and its nonfatalistic out- ism has “exploited” nobody. As Dr. look to the rise of laissez faire Mises says, under laissez faire the 55 ===== PAGE 58 ===== 56 THE FREEMAN November consumer is king. The only way a A ccornine to Dr. Mises, the chief capitalist can become richer is by reason why capitalism is hated is selling to the masses. He must that it deprives incompetents of lower the unit price of his goods easy excuses for their failures. in order to widen his markets and Under feudalism, the underling make more money. And he must could explain his lack of riches or pay high wages in order to attract a privileged position by his birth; the most efficient workers. The after all, nobody could be blamed capitalist’s riches depend on mak- for his father’s failure to be a ing everybody richer in terms of duke. But under capitalism, which goods, services, and wages. There awards people according to their is thus no inherent “class war” accomplishments, the underling under laissez faire; the “system,” must either face up to his own in- so-called, is all of a piece. The rich effectiveness or else lie to himself merely grind their own faces when — and to others. Dr. Mises says they attempt to grind the faces of that capitalism creates inferiority the poor. complexes in people who haven't The strange thing about it, how- the moral stamina to fight against ever, is that the more capitalism the sins of envy, malice, and hatred. succeeds in augmenting the indi- At the very dawn of laissez faire vidual’s blessings, the more it is capitalism a German, Justus libeled and hated. Not even the Moser, wrote that life in a society stupendously obvious failure of so- in which success would exclusively cialism in Russia, or the apathetic depend on personal merit would tincture of life in the so-called simply be unbearable. The unsuc- “welfare states” of England and cessful, said Moser, would feel Scandinavia, has done much to mit- themselves insulted and humili- igate the hatred. This paradoxical ated. They would go hunting for state of affairs was first noted by scapegoats. Dr. Mises evidently Professor Schumpeter of Harvard, doesn’t think much of Moser’s bias who surmised that capitalism against the merit principle, but he would probably kill itself out of a does credit Moser with a brilliant surfeit of success. Dr. Mises, pick- insight into psychology. A hun- ing up from where Schumpeter dred and fifty years of history in left off, has made himself a pathol- which envious intellectuals have ogist of the queer, thoroughly ir- agitated the masses by inveighing rational hatred which is engen- against “management,” “capital,” dered by the good tidings of plenty ‘Wall Street”—and, most recently, which capitalism brings. “Madison Avenue” — have only ===== PAGE 59 ===== 1956 A REVIEWER'S NOTEBOOK 57 served to enhance Moser’s reputa- tality. What he sets down to envy, tion as a prophet. or to a personal unwillingness to The ‘““anti-capitalistic’”’ front face the truth about one’s own in- which specializes in spreading lies competence, is, in many instances, and delusions about capitalism in- nothing more than a simple failure cludes artists, writers, professors, to think in terms of true causes people of stage and screen, and and true effects. Much of the op- the “idle rich” whom Dr. Mises position to capitalism stems from calls “the cousins’’—i.e., the rela- the “post hoc, ergo propter hoc” tives of those who do the actual fallacy: people see the facts of work of running greatenterprises. personal failure and attribute them These people are the leaders in the to the antecedent fact that capital- attempt to manipulate the envious- ism has been the “going” system ness of the average man to the end of production. They lack the logi- of leading him into the blind alley cal capacity to dig beneath the of socialism. Dr. Mises heaps mag- surface of events to the true in- isterial scorn on leftward-looking wardness of capitalism’s largesse. “intellectuals” who obviously have When they have suffered enough no intellects, and upon wealthy under the high taxes and the infla- ‘people of “position” who haven't tion required to operate a Welfare the brains to come in when it rains. State, they may use “post hoc” Much of his book is devoted to thinking to turn the rascals of flaying these characters alive for State Welfarism out. This happy their suicidal stupidity. They do consummation won’t necessarily not even seem to realize, he points come about because of any im- out, that under communism they provement in the average man’s would be the first to be liquidated. logical faculties; it will merely be a swing-of-the-pendulum thing. Wire DR. MISES’ fundamental But in this case the “post hoc” thesis, that people misread their mentality will be right by accident. hands when they oppose capital- Maybe, some day, an educated ism, I have no quarrel. And I am choice will replace the accidental. by no means blind to the role Another reason besides envy for which envy and malice play in the the failure of capitalism to sustain creation of socialists and interven- itself is the short-term cupidity of tionists. But Dr. Mises makes a capitalists who, while they know mistake, I think, in sticking to that market freedom is a most de- glaring primary colors in his anal- sirable thing, think they can get ysis of the anti-capitalistic men- away a little bit longer with a sub- ===== PAGE 60 ===== 58 THE FREEMAN November sidy or a tariff or some other bit of malice or hatred that causes the government-created monopoly or farmer to ask for price supports special privilege. Added together, or the business man to seek a tar- the many seemingly innocuous iff; it is simply the universal de- drives for personal exemption from sire for a handout. Indeed, the market forces act as a terrible people who take the handouts are drag on the performance of capi- frequently capitalism’s loudest sup- talism. It isn’t necessarily envy or porters in the abstract. Much of what Dr. Mises thinks is anti-capitalist venom is merely . cupidity set forth in the most Any book reviewed in this Book Section plausible terms which a subsidy- (or any other current book) supplied by secker can think up. The farmer return mail. You pay only the bookstore knows he can’t justify a fixed Fre ron Ce rr ml price for his cotton or his wheat [HE BOOKMALLER, Box 101, New York 16 | OY Saying he wants more money without working for it. He has to make his cause seem noble by say- ing something high-flown, such as “the stability of the economy de- Small Town Newspaper pends on a prosperous agricul- FOR SALE, $3,000 ture.” Fox River Grove-Cary News However, if Dr. Mises errs in Fox River Grove, Illinois his analysis of human psychology by his addiction to primary colors, he is eternally right in his general economic principles. As he says, it is silly to blame the bad taste of SX Christmas Gift Idea our civilization on capitalism, for, In the December FREEMAN quite obviously, the capitalist is you'll find a descriptive listing of willing to provide the best that all books and other publications people will pay for. If people want available through the Foundation better designs, more effective color cellent list from which to choose harmonies, sounder literature, and gifts for thoughtful friends. more honest journalism for their THE FOUNDATION FOR money, all they have to do is to ECONOMIC EDUCATION say the word. 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THE FounpaTioN For Economic EpucaTtion, Inc. 30 South Broadway, Irvington-on-Hudson, New York ===== PAGE 62 ===== 2 WELL WORTH READING Yay: JD The Great Emancipation: Slavery until slave labor became economical- has been regarded as a necessary ly inefficient. Slaves couldn’t com- and normal institution in nearly pete with machines, so they were every settled society known to his- emancipated. Quite a lesson here for tory. There is a certain amount of the simple moralist! unpleasant drudgery involved in A fascinating part of this story is keeping alive; and if there are not given in “The Engineer's Greatest slaves to do it, however will it get Achievement” by Crosby Field, the done? The pre-engineer world could Towne Lecture presented before a not answer this question. In that meeting of the American Society of world “human slavery dominates the Mechanical Engineers. A free copy relationship of nation to nation, of this scholarly lecture, including class to class, man to man, man to an extensive bibliography on the woman, creditor to debtor, master to subject, is available to any FREEMAN servant, employer to employee, hus- reader upon request to Crosby Field, band to wife and children. It formed Flakice Corporation, 360 Furman the principal commodity of trade, so St., Brooklyn 1, N.Y. valuable that it was also the princi- pal cause of war. It darkened not That Manifesto! In 1848 the com- only the acts, but even the thinking munists announced their ten-point of statesmen, politicians, philoso- program for world revolution. The phers, humanitarians, and religious Party may be out of favor, but people leaders.” still like its ideas, as Admiral Moreell Since the time of the Stoics, and has shown in his To Communism . . . perhaps earlier, the West has tried wie Majority Vote. (Copy on request, to live with a moral code which has from THE FREEMAN). Now comes a no room for slavery. Nevertheless, succinct 16-page analysis of the Man- slavery existed until the nineteenth ifesto by Peter Steele, Blueprint for century. True, many men released World Revolt. Contains a bibliog- their slaves on grounds of con- raphy and a four-point counter-pro- science, and a revulsion against the gram. For a free copy write to institution grew more widespread Associated Industries of Missouri, with each passing century. But slav- 2031 Railway Exchange Bldg., St. ery was not eliminated from society Louis 1, Mo. 60 ===== PAGE 63 ===== EXCERPTS FROM CORRESPONDENCE OF INTEREST TO LIBERTARIANS LIBERTARIAN DILEMMA are compelled — if ‘we would live — QUESTION: We have just moved to accommodate ourselves to the onto a small farm and need advice piiuation bo which Social forces as to the proper conduct for a liber- ve commitied us, our pre nees tarian farmer in relation to the |OLVithstanding. many and varied governmental We must trade in the market that farm programs. exists if we are to trade at all. We If I let my conscience be my guide should not refuse to produce and I would ignore all except those re- trade simply because gover nmental quired by law. This would set me intervention has been introduced back financially not only to the ex- into the economic system at numer- tent of any subsidy or conservation ous points. I hold, therefore, th al payments but also the “fringe it is no offense to libertarianism benefits” of government bulletins, for you to accept a subsidy o I some . , . other government “benefit,” though county agricultural agents’ advice, . . . such programs certainly violate lib- farm plans, maps, and such. . . ertarian principles. If I were to Dear Mr. R: take a position contrary to this, The question you raise has and remain thoroughly consistent, troubled many libertarians. My I would not entrust the delivery of own answer tothis perplexing prob- this letter to the socialistic, sub- lem falls into three parts. sidized government post office. First: One of the prime duties Further, we would have to return of man is to live out his earthly your generous contribution to this destiny. If one chooses to live —a Foundation and accept not a penny choice I recommend — then one from anyone. For our money—the must live today. A free market, economic bloodstream — has been which libertarians prefer, does not inflated to finance government wel- exist in the U.S.A. or elsewhere. We fare programs such as the subsidy are living in a partially rigged or offered in partial payment for some controlled market. Therefore, we of your production. Our money is 61 ===== PAGE 64 ===== 62 . THE FREEMAN November infected with socialism, just as is tively that anyone who listens will TVA or a government golf course. be drawn away from socialism and Second : Having conceded that it toward libertarianism. is no offense against libertarianism Anyone, like you, whose con- for you to accept a subsidy, I would science is bothered by government urge you and all libertarians to “benefits” has the basic ingredient partake of government pap as little for becoming a skilled, accom- as possible. The purpose of life on plished libertarian. this earth, as I see it, is self-de- LEONARD E. READ velopment : individualization,emer- gence, continuance of the evolu- FREEDOM tionary process, rising to higher AND GOVERNMENT stages of consciousness, realization of those creative potentials pecul- DEAR PROFESSOR G: iar to one’s person, self-responsi- I fully agree with you that it is bility. a good thing to bring people more To have another take over the enlightenment and more knowledge responsibility for self — whether and to fight the sinister forces of the caretaker be the government ignorance, obscurantism, and su- or whatever or whomever — is to perstition. As this is what you have invite atrophy; it is to negate life’s in mind when asking for more purpose. A libertarian resents the education, I am delighted to estab- assumption by another of the re- lish the fact that we do not differ sponsibility for his welfare more in our opinions concerning the keenly than he would resent the benefits derived from the spread of denial of any other cherished right. knowledge. I would much rather have the au- Where we disagree is this: You thoritarians take away my right to infer that because education is vote than to relieve me of the op- good, it ought to be an objective of portunity to look out for myself! government action. Your conclu- Third: Good libertarianism re- sion implies that everything that is quires primarily that we sponsor good is to be done by the govern- no socialism, for we must be in- ment, i.e. the social apparatus of timately acquainted with its eco- coercion and compulsion that by nomic and moral fallacies; that we the employment of constables, pris- understand and can explain the on guards, and executioners forces free market, private property, lim- people to comply with the laws. ited government concepts so com- This is a non sequitur. petently, persuasively, and attrac- In arguing as you do, you do not ===== PAGE 65 ===== 1956 LETTERS 63 leave any sphere open to the spon- die in the electric chair. This is taneous action of the individual how the hangman comes into the citizens. If the mere fact that some- picture. thing is good is a sufficient reason There are, as is reported by re- to assign its execution to the gov- liable people, in the big country ernment, only the performance of Atlantis some counties in which it what is bad is left to the individ- is generally assumed that a man uals. But bad actions have to be guilty of havingkilled a “revenuer” prevented by the government any- will not run any serious danger. In way. Thus your philosophy leads to these districts, it is assumed that the conclusion that the individuals the District Attorney will not be in ought to be deprived of the free- a position to find in cases of such dom of choosing between various murders witnesses for the prosecu- modes of action. They ought in tion and that the juries will always every regard to be subject to orders render a verdict of not guilty. The issued from and enforced by the result is that the “revenuers” are authorities. This is the creed of the rather cautious in their attempts total State, of totalitarianism. to collect the tax on liquor and that Now, you go on saying, it is not the price of whiskey is lower than true that the taxes required to fi- in other parts of Atlantis. This nance government expenditure are example shows clearly how essen- collected by the threatening co- tial in the collection of taxes is the operation of the “hangman.” This alertness of policemen, prison is a superficial way to look upon guards, and also of hangmen to affairs. Many people, perhaps most interfere if need be. people, comply with the laws, e.g., Society cannot exist without a the laws concerning taxation, only social apparatus that by violence because they want to avoid the un- or the threat of violence prevents pleasant consequences of disobedi- domestic gangsters and external ence. A man who does not behave enemies from actions detrimental as the law orders him to behave to the peaceful conduct of the citi- would be beaten into submission zens’ lives. This social apparatus by the police, would be sentenced of compulsion and coercion, the by the penal courts and imprisoned. State or the government, is not an If he tries to resist effectively the evil, but an indispensable human armed officers of the government device. It is the most beneficial in- and succeeds in this effort by kill- stitution of civilized nations as ing one of them, he would be sen- long as it does not overstep the tenced to capital punishment and sphere in which its activity is nec- ===== PAGE 66 ===== 64 THE FREEMAN November essary and salutary. It turns into theories of geology and biology. the worst of all evils if it becomes There is the conflict between the totalitarian and aims at subjecting ideas of the Declaration of Inde- every aspect of human endeavors pendence and the American Con- to the discretion of the rulers. stitution, on the one hand, and You want to nationalize educa- those of the Communist Manifesto, tion. I suppose that you do not be- on the other hand. There is the con- lieve that government education flict between those for whom pri- should be limited to the teaching vate property is the primary foun- of reading, writing, and arithmetic. dation of civilization and those for But as soon as you go beyond these whom it is the most abominable of narrow limits, you enter fields in all frauds. What should govern- which there prevails fundamental ment education’s stand on all these dissent among scholars as well as and many other issues be? You among laymen. There is, e.g., the cannot reconcile Milton’s and Jef- conflict between the Bible and basic ferson’s ideas on liberty with those of Lenin in whose eyes liberty was “a bourgeois prejudice.” You can- not teach history without choosing between the interpretation of the NOW and FOREVER libertarians and that of the com- munists. A ROMANY tiled room is Government education necessar- so expressive of rich qual- ily involves the power of the gov- ity and good taste, you will always be proud of your selection. And, it is wear ernment to determine what should be taught. It is the negation of all proof—it will never need those ideals that from time im- ’ replacement. memorial have guided the intellec- Your beautiful ceramic tual and moral effort of mankind. walls will be stain proof, It means the substitution of a rigid fade proof and flame proof. dogmatism for the unobstructed No other surface is as easy search for truth. to keep sparkling clean. This is what I referred to in say- A complete range of colors ing that government interference to meet every desire. means ultimately more compulsion UNITED STATES CERAMIC TILE CO. and less freedom. Canton, Ohio LUDWIG VON MISES Visiting Professor of Economics, New York University ===== PAGE 67 ===== COAST FEDERAL SAVINGS Offers Savings Investors ® MAXIMUM RETURN on your investment with SAFETY, through progressive, yet conservative management — plus insurance on each account, ® AVAILABILITY of funds when needed due to high liquidity position. ® LEGAL INVESTMENT for trust funds. ® PROMPTNESS in all transactions assured by use of Air Mail. (We pay postage both ways). ® RESOURCES over $225 million, RESERVES over $21 million. ® VARIETY of accounts, Individual, Joint, Trust and Corporation, “LET'S GET ACQUAINTED” — Write today for this booklet and financial statement, to: COAST FEDERAL SAVINGS, DEPARTMENT H, 9th AND HILL LOS ANGELES 14, CALIF. Member Federal Home Loan Bank—Federal Savings and Loan Insurance Corp. eH cs neon ens | const FEDERAL SAVINGS qe JOE CRAIL, PRESIDENT ===== PAGE 68 ===== FROM A LIBERTARIAN’S LIBRARY No pousr all the trees in the forest fundamentally have equal rights and privileges. But they don’t all grow to the same height, and it would seem rather foolish to cut the tall trecs down to the level of the lesser ones to satisfy the theoretical demands of an unnatural formula. And it would seem just as preposterous ruthlessly to pull the short trees up to the height of the tall ones. If we did, it would mean their uprooting — they would wither and dic, as all things do unless they grow up by themselves from their own roots. And so, to those who would like to climinate differences among men, it should be said that if it were possible to do so, progress would cease. Equality cannot therefore mean to bring all men low. It must mean opportunity for cach man to rise to those heights to which his encrgies and abilities will take him — “and allow all men the same privilege” — to the end that progress may continue, and that thereby all will find benefit. Equality which means less than this is not equality at all — it is slavery. From an article by Richard L. Evans in Essays on Lib- erty, Vol. II. Foundation for Economic Kducation, Irvington-on-Hudson, N. Y. 442 pp. 60¢ paper, $2.50 cloth