===== PAGE 1 ===== THE [eel dll AUGUST 1957 Government and Business . The Exception Makers . The Irrational Foundation of Statism Positive Employee Relations “Built-in Maid Service’ The Moors’ Proverb Administrative Law in Great Britain . Manpower Migration The Business of Education . Ethics and the Executive . Decreasing Value of the Dollar . An Exception Maker's Fate Other Books IDEAS ON LIBERTY Emerson P. Schmidt 4 Leonard E. Read 10 Hans F. Sennholz 14 Herbert E. Markley 19 Herrell DeGraff 32 : John Murray 39 George Winder 42 Colm Brogan 49 Oscar W. Cooley 51 Wayne G. Broehl, Jr. 54 ; Livingston Keplinger 58 John Chamberlain 59 . . 62 THE FOUNDATION FOR ECONOMIC EDUCATION, INC. Irvington-on-Hudson, New York ===== PAGE 2 ===== WHAT'S WRONG WITH THIS PICTURE? Far-fetched, you say? Why should vately operated transportation facil- the government be in the automobile ities are more than adequate. business? It shouldn’t. .. but. .. In the spirit of fair play and of Why should the government be in America’s free enterprise system, we the shipping business? Its. . . through should not permit the government to the handling of commercial trafficin be pressured into expanding its com- the U. S. Government Parcel Post mercial shipping business where pri- system. vate enterprise firms are equipped Unfair competition? Yes. Private to perform the service. As the Hoover firms fully capable of handling com- Commission reports say, “The pri- mercial traffic are forced to compete vate enterprise system is the basis of with the government in this field. the military strength of this Nation Established primarily tosupply trans- and of its unparalleled standard of portation facilities in rural areas, living.” parcel post now transports a great For a free copy of an informative volume of commercial traffic be- booklet, “The Truth About Parcel tween cities and towns where pri- Post,” write to: The Public Relations Division of RAILWAY EXPRESS AGENCY, INC. 219 East 42nd Street, New York 17, N. Y. A PRIVATE ENTERPRISE IN THE PUBLIC SERVICE ===== PAGE 3 ===== 7 MAXIMUM RETURN A on your investment with SAFETY, through progressive, yet conservative manage- ment — plus insurance on each account. FEDERAL | AVAILABILITY SAVINGS eae due to high Offers LEGAL INVESTMENT for trust funds. Savings | investors <. PROMPTNESS in all transactions assured by use of YA Oo PER ANNUM Current Rate N Air Mail. (We pay postage both ways). RESOURCES OVER ONE QUARTER BILLION DOLLARS R ES E R V E 3 over $24 million. “LET'S GET ACQUAINTED"— Write today for this booklet and financial statement, to: | COAST FEDERAL SAVINGS | VAR | ETY DEPARTMENT H h of accounts, Individual, Joint, Trust and 9th and HILL Corporation. LOS ANGELES 14, CALIF. NAL P Member —Federal Home Loan Bank—Federal Savings and Loan Insurance Corp. Const FEDERAL SAVINGS JOE CRAIL, PRESIDENT ===== PAGE 4 ===== My, how his arms grew when he went to Washington! EFORE a man becomes a bureau- how about the part that’s earmarked crat, he looks like anyone else. for local improvement? A good share But after he gets to Washington, his of that money goes for “administra- arms suddenly become long enough tion”, bureaucratic salaries, red tape to let him reach into every part of and paper clips. the country to try to take federal tax We can put an end to a lot of this money from the pockets of people waste by taking the initiative for our like you. You're never sure what oop ocal improvements. Who's in happens to the money after that. a better position to know what needs Sure, some of the money goes for .to be done—local citizens or Wash- legitimate federal functions like de- ington bureaucrats? Why not let your fense, the F.B.1., the Post Office. But, Congressman know how you feel? ~The Timken Roller Bearing Company Canton 6, Ohio ===== PAGE 5 ===== BACK TO SCHOOL FREEMAN REPRINTS n September The following articles from recent issues are THE IDEAS Mr. Cooley offers concern- available as reprints. Order from THE FREEMAN, ing “The Business of Education” (pp. Irvington-on-Hudson, New York 51-53) will be further examined in . ) . 8-page reprints 10 for $1.00; 100 for $6.00 the September issue by Miss Bettina Compulsory Insurance Baker Bien of the Foundation staff. In ad- High Cost of Unionism Freier dition to her regular work with high Law of the Land in England Bissantz school and college students on na- Let Anyone Deliver Mail Read tions and problems of concern to Penalty of Surrender Read Socialism at Its Best Poirot students of liberty, Miss Bien is tre- mendously interested in the history and development of the business of Two Ways To Develop a Country ~~ Russell Why Wages Rise (review) Chamberlain education in the United States. In Single page — 1 side 1¢ each this forthcoming article, she ex- Most Dreaded Enemy of Liberty Madison amines the role the government has The Risk Within MacArthur assumed in educational affairs and Why the President Said No Cleveland offers some suggestions well worth ) ; . Single page — both sides 2¢ each considering with respect to the pre- A Clergyman's Security Mahaffy vailing school situation. 1-Man Pressure Group Burgess mr ew in tv mm = om mma vm wm oa a wm maw = [PR THE [eed A MONTHLY JOURNAL OF IDEAS ON LIBERTY August 1957 Vol. 7, No. 8 The Freeman is published monthly by the ‘Foundation for Economic Education, Inc., irvington-on- Hudson, N. Y. Anyone. may receive The Freeman regularly upon written request; an annual sub- scription-donation of $5.00 or more is a suggestion—not a requirement. i Accepted as controlled circulation publication at frvington, N. Y. with additional entry at New York, N. Y. Copyright 1957, The Foundation for Economic Education, inc. Printed in U. S. A. Additional copies, postpaid, to one address: Service,” “The Moors’ Proverb,” ‘Manpower Single copy, 50¢; 3 for $1.00; 25 or more, Migration,” “fthics and the Executive,” and 20¢ each. Permission is hereby granted to any- ‘Decreasing Value of the Dollar.” Any current } one to reprint any article in whole or in part article will be supplied in reprint form if there (providing customary credit is given), except are enough inquiries to justify the cost of “Positive Employee Relations,” ‘'‘Built-in Maid printing. Mem a a em mA Lm mh tm i oma Am am mm mmm om am mmm nm mim ame mm = mma ee. - ow. ===== PAGE 6 ===== What the government loses in business ventures could help balance many budgets. EMERSON P. SCHMIDT Government and ow moo mons ares [31 ST IOGS As recently as 1954, total federal, state, and local tax and nontax presses harder on the tax re- government receipts came to $89.6 sources of the state and local gov- billion. In 1956, the figure reached ernments. This makes them appear $107.6 billion. In 1956, our na- less and less able to carry on their tional income stood at $343 billion. activities. A few days ago, the Thus, nearly one-third of the na- press reported that a delegation tional income is channeled through of seven mayors called at the government. We are approximately White House protesting a $75 one-third socialized. If the gov- million cut in a $250 million slum ernment sector continues to grow, clearance program. Perhaps they as it has since 1929, in fifty years did not realize their ludicrous pos- 99 per cent of our economy will ture; here they were demanding be socialized and only one person that the U. S. Treasury raise that out of 100 will be privately em- extra cash, taking a due propor- ployed. Perhaps no one expects tion out of their own cities, haul- this trend to continue, but there ing it to Washington, taking out is nothing in sight at the moment the usual Washington brokers’ that is stopping it! fees, and then returning the re- Just as human wants are unlim- mainder to their communities. ited and insatiable, it appears that We've seemingly become incapable the pressure for government in- of distinguishing between national tervention and ‘expenditures is un- problems and nationwide problems. limited and insatiable. More than half the funds col- As the central government takes lected by the government of the on new activities and functions, it State of New York are returned Dr. Schmidt is Director of Economic Research, Chamber of Commerce of the United States. This article is from an address before the Mortgage Bankers Association, New York City, April 16, 1957. 4 ===== PAGE 7 ===== 1957 GOVERNMENT AND BUSINESS 5 to the local communities in the What Does it Add Up To? form of various grants-in-aid. The _. It is shocking to see how slow central government, in Washing- our economic progress has been in ton, now has 54 grants-in-aid pro- the last decade. Our per capita grams; and, according to Senator real income has increased only Byrd, 13 new ones are in the cur- $182 since 1946, or approximately rent budget for fiscal 1958. This $18.00 per year per capita. Per- includes one for assisting the sonal per capita disposable income states in planting trees. A federal has increased only $137 in the ten- program to combat juvenile de- year period since 1946 or $13.70 linquency is proposed. One won- per capita per year. Both in gov- ders if we have taken complete ernment and private enterprise all leave of our wits! sorts of busy work, paper work, Thus, we are establishing a vast public relations, and other “nones- network of bureaucracy at the sential essentials” are absorbing local level, at the state level, at the our time, resources, and dollars. regional level, and at the national We are wont to boast about level. An enormous amount of pa- American industry, American ef- per work, filing, and investigation ficiency, American productivity. is involved. Much traveling, talk- But our gains in real terms are .ing, conferring are taking place. not impressive. These rather small When government sets aside the per capita gains indicate that, per- free market as the guide to pro- haps, we are not as good as we duction and prices, it invites utter thought we were. This makes it chaos. After a generation of legis- important that we emphasize more lating for agriculture, the agri- and more investment in product cultural problem is as far from and marketing technique, new solution as at the beginning in the product development, more invest- 1920’s — if not more so. Taking a ment in plant and equipment in look at what Congress has done to order to raise our productivity. We agriculture, one might gain the im- need to take a solid look at our pression that its sponsors were ut- “social overhead costs.” ter economic idiots — if one didn’t’ With the tax laws as they are, know better. And now, powerful placing a terrific burden on the forces are at work in Washing- innovative sectors of our economy, ton to set up another vast pro- our growth rate has not been what gram of federal aid to depressed it could be under more favorable areas — a sort of super WPA for tax treatment and less debilitating business. regulations. ===== PAGE 8 ===== 6 THE FREEMAN August Federal Taxes for Local Schools Washington almost on a daily basis President Eisenhower, in de- in routine fashion. Here there manding federal aid for school exists a basic organized drive construction, has made it clear against the free market system, that he wants no control over text- and few see the implication for a books, teachers, or educational free economy. There is good rea- content. Furthermore, he argues son to believe that a free economy that this is a one-shot affair for and, indeed, human freedom are a limited program to have definite impossible unless there is also a terminal dates. Virtually noone in flexible money market. This is an Washington is sufficiently naive to idea almost never discussed in the believe that once the federal gov- economic literature or the popular ernment gets its economic finger press. in the educational pie that it ever If the interest rate is driven will withdraw. Indeed, there are downward by artificial forces, that other bills pending providing for drives the demand for capital ever supplements to teachers’ salaries; upward and generates pressures and it’s only a matter of time un- for government intervention on a til this will be done, once the door geometric scale. is opened. Argument has already" Lord Keynes during the depres- been made that the Federal Treas- sion of the 1930’s wanted to drive ury and the Congress, highly solic- the interest rate to zero — “the itous of the building industry to euthanasia of the ‘rentier’ class.” buy bricks and mortar for school- He has had many followers in rooms, are neglecting the teachers. Washington. They are regimenters Human values are subordinated to and totalitarians — whether con- property, it is already said. But sciously or not. To make the point Dr. Milton S. Eisenhower, presi- clear: Interest-free perpetual dent of Johns Hopkins University, loans, for example, would be the has strongly warned against fed- equivalent of making capital a eral support for private colleges free gift. When things are free, and universities. there is no possible limit to the “demand for them. Monetary Controls Similarly, government guaran- In the field of money and bank- tees of loans and easier and easier ing, we have had a steady growth borrowing arrangements, with in- of intervention in government. terest rates forcibly depressed be- Criticisms of the alleged tight low market levels by law or by money policy have emanated from fiscal and monetary policy as prior ===== PAGE 9 ===== 1957 GOVERNMENT AND BUSINESS 7 to March 1951, likewise drive the to understand the anatomy of demand for capital through the money, credit, commercial and cen- roof. This puts the economy under tral banking, and the function of constant inflationary pressures and a flexible interest rate, we may creates political pressures for di- drift by default into the regimen- rect government lending, direct tation and controls which have controls, and regimentation. It gripped other nations. must finally lead to capital invest- C. Canby Balderston, vice-chair- ment rationing, compulsory sav- man of the Federal Reserve Board, ing, price and wage controls, profit made it clear that every attempt controls, the allocation of labor to to create a preferred position for specific assignments —a regi- any group concentrates, in a full mented economy. In 1956, the employment economy, the strin- President’s Economic Reporturged gencies on the balance of the that the Executive and the Con- economy that much more fiercely. gress study the question of direct He put it this way: control of installment credit. Such The alternative to free markets is controls would further reduce hu- ¢, resort to government subsidies, man freedom and create more guarantees, and tax benefits. These “social overhead” in the form of may shelter preferred groups and laws, regulations, policing, bu- meet apparent social needs, but we reaus — on and on. must not forget that each time we This set of ideas on economic use them we subtract from the interrelationships has been inade- credit, materials, and labor available quately discussed in the United to others who must rely upon the States by those who favor human free market. The greater the amount freedom and a free economy. of special shelter provided by gov- . ernment, the more difficult becomes Opinion polls have found that i . for more than a decade a vast ma- the situation of those not So pros . . tected. In a free society, it is axio- jority of persons consistently have | ii. that not everyone can be said “Yes” when asked: “Do you gheltered. It is understandable, favor price controls?” What they therefore, that free markets should actually want is lower or reason- be looked upon as tke central feature able prices. They see or under- of our private enterprise system. stand only one way to get such prices, namely, price control. And interest is the price of money. It is common to argue that the Unless more individuals in whom people demand all these interven- the people have confidence come tions and services from govern- Where Does the Pressure Come From? ===== PAGE 10 ===== 8 THE FREEMAN August ment. This is almost 100 per cent count votes. In fact, H. L. Mencken hokum and buncombe. once said that if a politician found The Evening Star, Washington, that he had cannibals among his D.C, (February 21, 1957) carried constituents, he would promise this headline: “Pressure Sought them missionaries for their Sun- on Congress for Basin Funds.” A day dinner. The news story went on to say There are still a lot of naive that “the emphasis on getting people in Washington and in busi- funds to complete the Engineer ness who believe that the demands Corps’ study as swiftly as possi- and the pressures for all these ble stems from the remarkable spending programs and interfer- display of public apathy. When the ences with the free market come Engineers asked Congress for from the people. This delusion is money to start the survey on the the result of domestic brainwash- north branch last year nobody but ing. Lord Keynes had a good deal the Engineers showed up to argue to say about the nature of ideas for it.” and their origin and how they are This is an excellent illustration set in motion. He said, for ex- of the fact that the demands for ample: legislation, appropriations, and The ideas of economists and polit- new government programs do not ical philosophers, both when they come from the people. As a matter are right and when they are wrong, of fact, the masses never demand are more powerful than is commonly anything — except when their po- understood. Indeed, the world is sition is suddenly reversed ruled by little else. Practical men ’ who believe themselves to be quite exempt from any intellectual influ- do i fron ences are usually the slaves of some Where, then, do ideas come from defunct economist, some mad men in for new programs? New expendi- ,,thority who hear voices in the air, tures? They come originally, pri- who are distilling their frenzy from marily, from the intellectuals, re- some academic scribbler of a few searchers, writers who make their years back. living by digging up new ideas If we are to preserve human lib- and new programs. Once these erty and freedom, we cannot leave programs get to a certain stage of it to the politicians, their paid conversation and discussion, the agents, and government bureaus. politicians latch on to them and We must leave it to the people who make them their own. Politicians are students of liberty and free- are, by definition, people who can dom, who understand that liberty Origin of Ideas ===== PAGE 11 ===== 1957 GOVERNMENT AND BUSINESS 9 is indivisible, who understand that people in the local community to the free market not only in ideas meet their own problems in their but the free market in goods and own ways, unfettered by outworn service, including the money mar- business practices and archaic ket, are integral parts of a free laws and regulations. society. Nor is it too late to do more — This calls for dedicated spokes- on all fronts. The basic drift of men who will allocate several hours thought among the intellectuals per day to the study and analysis throughout the Western world is of the philosophy and the litera- toward more conservatism. Now is ture of liberty. Every organization the time to capitalize upon this dedicated to this philosophy has a drift by working with intellectu- literature of its own. als, by nominating and electing Business is not blameless for better legislators and supporting the social-political drift of the them once elected —at all levels times. Much more could have been of government — local, state, and done, for example, to remove the national. If we each begin some- archaic building codes, improve where at the local level, within a the property transfer laws, correct few years we can change the socio- the obsolete mortgage lending ar- political climate in the direction rangements in the 48 states —in of greater productivity and more general, to make it easier for the freedom for all. oe 00 | 15660 ON SICAL | Who Are Our Competitors? Our competitors do more for us than our friends. Our friends are too polite to point out our weaknesses, but our competitors go to great expense to tell of them. Our competitors are efficient, diligent and attentive. They make us search for ways to improve our products and our services. Our competitors would take our business from us, if they could. This keeps us alert to hold onto what we have. If we had no competitors, we might become incompetent, inattentive, and possibly lazy. We salute our competitors; they have been good to us. We need the discipline they enforce upon us. God bless them all. ANONYMOUS ===== PAGE 12 ===== YES, but - + - YES, byt . . YES, but. -- YES, but. ES: put. YES bys LEONARD E. READ HE BACKBONE of socialism in I favor the market economy but the United States gets all of TVA has my endorsement. its starch from the inconsistencies I subscribe to the principles of of countless Americans, most of limited government but it is quite all whom believe in freedom every- right for the State to prescribe and where except in the case of their enforce minimum wages and maxi- own pet projects. They say they mum hours of work. want universal freedom, “but this is neither the time nor the place....” Or, stated in another way, our rapidly growing social- ism has nothing to sustain it ex- cept the alarming aggregate of ness firms we would like to see a nearly every person’s ‘but. The equction in federal expenditures exception maker is socialism’s herever possible, it seems to us that You bet I am for the American way of life but we must have a foreign aid program to protect it against communism. Besides, it helps our prosperity. Although. in common with all busi- only ally! this is scarcely the place to begin. A few examples of the exception (A book publisher arguing against maker’s “but”: a cut in the government’s rural I am for free enterprise but I library program.) favor federal aid to education. Similar declarations by the ex- I believe that each person has the ¢ePtion makers could be cited end- right to the fruits of his own labor lessly. My point is that socialism but 1 am for compulsory social se- rests on nothing more than these curity. inconsistencies — aggregated. I stand four-square for private Intellectually, every tenet of property but we need subsidized Socialism has been demolished; navigation in order to obtain cheaper practically, the beheaded corpse coal for our steam plants. shows a frightening vitality. Its Mr. Read is President of the Foundation for Economic Education. 10 ===== PAGE 13 ===== 1957 THE EXCEPTION MAKERS 11 intellectual demise is reflected in the money for the material, the the fact that neither Marxist. nor tools, and the labor. And, this sys- other socialistic schemes are any tem was successful. It resulted in longer defended as consistent more square feet of housing per theoretical systems; instead, they person than otherwise existed in are relied upon merely as practical any country at any time in all politics or devices of sabotage. history. This writer does not believe there “Ah,” imply the exception is a consistent supporter of social- makers, “we can have all of this ism inside or outside of the Iron and heaven, too.” And they pro- Curtain. This statement, however, ceed forthwith to apply coercive needs explanation. force as the means of attaining what to them are worthy ends. They use government — the organ- Socialism, the brand here dis- ized police force — forcibly to take cussed, the kind that is the enemy some of everybody's income in of society, can be defined as the order that they may give it, in the government ownership and control form of housing, to those they rate of the means of creative activity as needy. The point is plain or production. Its essential ingre- enough: Remove the coercive dient is coercive force. Be it fed- force, and there can be no such eral aid to education, subsidies to thing as government housing or farmers, grants-in-aid, TVA, so- any socialism at all, as here de- cial security, foreign aid, the rural fined. library program, government housing, or whatever, the attain- Degrees of Intervention ment of the objective calls for Now no person consistently be- coercive force. lieves (100 per cent) in coercive Government housing is as use- force as a means to creative or ful for illustrative purposes as productive accomplishments. No any other of the socialistic items. one believes that initiative should There was a time when we relied be dispensed with entirely. No one entirely on voluntary exchanges to believes in total enslavement. No supply our housing. First, we re- one believes: lied on the person who wanted a The greatest principle of all is that house; second, on the one who body, whether male or female, competed to construct it; and should be without a leader. Nor third, on the one who saw some should the mind of anybody be habit- advantage to himself in loaning uated to letting him do anything at Socialism Means Coercion ===== PAGE 14 ===== 12 THE FREEMAN August all on his own initiative; neither out real significance when one realizes of zeal, nor even playfully. But in that the wherewithal to sustain war as well as in the midst of peace )ife ig an integral part of life itself. — to his leader he shall direct his Remove the right to sustain life, eye and follow him faithfully. And and the right to life is meaning- even in the smallest matter he should less stand under leadership. For ex- . ample, he should get up, or move, or The TVA exception . makers wash, or take his meals...only if have succeeded in removing from he has been told to do so....In a the realm of initiative, from free- word, he should teach his soul, by dom of choice, a fraction of every long habit, never to dream of acting citizen's income. Other exception independently, and in fact, to become makers with their successes at utterly incapable of it. other politically extorted pittances are responsible for the grand total Shouldn’t Happen to a Dog of socialism in America today. Nothing else is to be blamed. Even this country’s leading so- cialist is not a consistent believer in coercive force as a means of creative or productive accomplish- ment. He is on record as saying, “There is room... for individual ownership and individual effort.”2 Indeed, no one believes that the above “greatest principle of all” should apply even to dumb ani- mals, let alone to human beings. Yet, the sponsor of legal plunder — from each according to his abil- ity, to each according to his need and by coercive force — goes Dbe- vond this. He doesn’t attempt to persuade by this sponsorship that Dictators Also Make Exceptions we should merely train ourselves Marx, Lenin, Stalin were glar- to become abject followers; he ing examples of exception makers. would compel us to be servile by Their “buts” were simply more coercive force. Does this sound pumerous than the “buts” of most farfetched? Well, it isn’t at all. Americans. Proof of this is Sta- Said sponsor insists that we khanovism, introduced into the should exercise no initiative what- Soviet Union in 1935, a plan which ever over that portion of the ,pproved piecework, reward ac- fruits of our own labor which his ¢ording to merit, higher wages for particular government grant-in- greater individual production. The aid would require. This takes on —_—— *Thomas, Norman. Democratic Socialism. Plato of Athens. A satirical statement, New York: League for Industrial De- no doubt. - mocracy, 1953. pp. 27-28. ===== PAGE 15 ===== 1957 THE EXCEPTION MAKERS 13 Kremlin crowd — exception makers continue to believe in and insist all — differ from American excep- upon a little coercive force provid- tion makers only in degree, not in ing it seems to help them or gives kind. the appearance of gaining ends Most exception makers would they think good. Short of aware- cease and desist if they were ness, they will favor coercive be- aware that their “buts” give the haviors in particular instances evil principle of coercive force as while vigorously condemning the a means to creative ends the only general practice of the destructive backing it has and if they knew principle. that these little drops of corrod- Russians are much less our ing action were the stuff that is Nemeses than are the “buts” in destroying ‘‘the last best hope of the belfry of Americans who more earth.” However, until they gain or less prefer freedom to coercive this awareness, they no doubt will force. eo 0 We Are For Competition, But. .. TO ASK AN AMERICAN BUSINESSMAN — whether he be grocer, baker, or candlestick maker — if he believes in competition is almost like asking for a sock on the nose. Of course, he believes in competition — and he raises his voice to add emphasis to his answer. But, after he has cooled off a bit from your question, you may find that he has his own definition of competition. For example, let’s walk with him down the street toward the grocery store of which he is the proprietor. Across the way in a window of one of his competitors is a large sign: “Sugar, X cents per pound.” You call it to his attention and at once his brow knits. “That’s unfair competition,” he says. “That so-and-so has cut his price again to attract my customers.” I remind him that he believes in competi- tion. “Why, ves,” he replies, “but not unfair and ruthless compe- tition.” And, if you then ask him, “But why is it unfair for a competitor to cut his price?” he will explode, “Why, any darn fool knows that it is unfair to sell sugar for X cents. You can’t make any money at that price. There ought to be a law in this state against such practices.” CHARLES F. PHILLIPS, Competition? Yes, But... ===== PAGE 16 ===== Fr 3: CHT {fers a FE HE IDEOLOGY of statism that with all authority, some people be- sways the minds of most people ing better informed than others. ¢ is built on a denial or neglect of Because of greater inherent intel- ¢£ reason. Many people believe what lect or more industrious applica- « they like to believe, not what cold tion, some have superior insight and sober reasoning leads them to into complicated political and eco- believe. Prejudice and passion — nomic issues. But we must always each rooted in a common distrust feel free to question their wisdom of reason — seem to determine e the and their decisions as reflected in course of our age. the following examples. We feel helpless as we confront There is hardly a field in which mass conformity, and our own authority is more readily accepted comprehension seems so fruitless than in the matter of labor associa- in the struggle for recognition by tion. Millions ‘of union members the various bodies of political and unhesitatingly accept as truth the economic ideas. With only one bal- claims of their leaders. lot and one voice among many mil- Ask a union member why his lions, our individual search for wage amounts to as much as it truth seems to be without practical does, and he most likely will give bearing or consequence. And many - credit to his labor union. He does of us abandon the search for truth not reason his: way to the conclu- simply because we can see no prac- sion that his labor has a price tend- tical application of it. We begin to ing to coincide with the value of rely on others, that is, on author- his own productive contribution. ity, as a convenient substitute for The competition among millions of our own effort to comprehend and actual or potential employers will understand. always tend to push his wage to Of course, we cannot dispense this very point. Dr. Sennholz is Professor of Economics at Grove City College, Pennsylvania. 14 ===== PAGE 17 ===== 1957 THE IRRATIONAL FOUNDATION OF STATISM 15 Few union members will ques- enjoyed the greatest financial aid tion their leaders’ claim that col- by the United States are today lective bargaining raises wages, or gravely undermined by socialism: that the strike as the workers’ ul- Great Britain, France, and Italy. timate method of coercion leads to higher wages and greater benefits. Traditional Beliefs Whenever the leaders announce a Authority as a substitute for strike, thousands, if not hundreds reason can also take the form of of thousands of members, will obe- appeal to tradition or traditional diently follow and blindly trust the beliefs. Because our ancestors em- economic wisdom of their leaders. braced certain ideas or carried out Or take an example from the certain policies, many people re- field of political authority and lead- frain from questioning their deci- ership. The President proclaims sions. Tradition, they say, is the that multi-billion dollar spending cumulative wisdom of hundreds of on foreign economic aid is essen- years. tial for the security of the United It is true, we all begin with a set States. Then hundreds of congress- of traditional beliefs. But when we men and many millions of citizens learn to apply our reason, we often unquestioningly accept his procla- find that tradition may be based on mation as political truth and wis- error, for our ancestors were hu- dom. They do not bother to delib- man and often erred. erate on the whence and where of Take the following examples the funds or their alternate uses if where tradition based on error left in the pockets of the American shackles our present freedom of taxpayers. action. They do not reflect on the harm For some hundred odd years the that is done to the ideas and the U.S. postal service has been a na- system of capitalism. Billions of tionalized industry. Year after . funds are taken from our capitalist year all other industries have been economy and spent by foreign so- taxed in order to cover the grow- cialist governments on the consoli- ing losses of the post office. Run dation and expansion of their nu- by politicians and operated accord- merous anticapitalist programs. ing toantiquated principles of busi- We temporarily rebuild national- ness and accounting, it constitutes ized industries abroad with funds, a permanent drain on the economy. the raising of which weakens our And yet, in spite of the conclusive own enterprises. It is no coinci- evidence of waste and inefficiency, dence that the countries that have few question the wisdom of our an- ===== PAGE 18 ===== 16 THE FREEMAN . August cestors in nationalizing the serv- with their own experience. In re- ices of the Pony Express, Adams ality what they are mostly voicing Express, Wells Fargo, and other is nothing but old hardened theo- private companies that helped to ries and once prevalent notions. open the West. Most people reiter- An ardent New Dealer, for in- ate our ancestors’ errors: They stance, tells in dramatic fashion point to the growing volume of about his experiences during the postal business and assert that pri- great depression. He points at the vate enterprise could never handle millions of unemployed, the bread it. But the same persons may make lines he helped to man, or the ap- a hundred telephone calls through ples he sold. According to his “own a private company for each letter experience” the old capitalist order they mail through the U.S. postal broke down and the New Deal service. Or private companies may, state was ushered in. within a few hours after produc- It is obvious that he reiterates tion, bring them many quarts of the dogmas of the Welfare State. milk from places hundreds of miles His own personal experience was away before the postman delivers limited to the bread line and the a single letter. sale of apples. The rest of his as- Or consider the examples of the sertions constitute fashionable in- American tariff legislation and the terpretation and New Deal theory. regulation of railroads. Because Cold and sober application of his our ancestors adopted these meas- reason, however, could have told ures of government interference him that it was interventionism with business, most people unhesi- that broke down. Innumerable tatingly continue to support them. measures of government interfer- They refuse to see the maladjust- ence in the form of disastrous ment and the inefficiency that tar- money and credit policies, tariff, iffs bring about or the harm that and labor legislation fathered the government interference does to great depression. rail transportation. The same man may tell us about } the working conditions and wages Experience vs. Reason of his youth. He may point to long Another powerful substitute for hours of work, low pay, and poor the exercise of reason reigns under sanitary conditions. He then gives the guise of experience. Again and full credit to labor legislation or again people brush aside theories his labor union for better condi- and assertions based on reasoning tions today. because these allegedly conflict Of course, his explanation mere- ===== PAGE 19 ===== 1957 THE IRRATIONAL FOUNDATION OF STATISM 17 ly constitutes a popular theory. He favorite convictions and prejudices mistakes temporal sequence for from the scrutiny of reason. The causal consequence. Reasoning plea for instinct and common sense would immediately convince him undoubtedly is the favorite device that working conditions and wages of escape from the necessity of depend on productivity. Today’s logical justification. driver of a truck powered by a 300 You may have had the following h.p. motor undoubtedly produces experience. You are describing the more, and consequently earns more dangers of the steady socialization than yesterday’s driver of a team of the human mind. You are offer- of horses. ing conclusive evidence of the pro- Anyone believing in the benefi- gressive collectivization of Amer- cial effect of labor legislation or ica and demonstrate in a way union policies should ponder the which you think is irrefutable that following: What prevents unions the ultimate outcome of this proc- from doubling or tripling wages ess must be the destruction of now? Why do countries that em- America. Suddenly your listener barked upon these policies a cen- brushes aside all your arguments tury ago have much lower wages with the simple intuitive asser- and poorer working conditions tion: It cannot happen in America! than the United States which The primitive certainty of his “adopted them only recently? If la- cherished view flies in the face of bor legislation and collective bar- reason. gaining account for our prosperity, Logical reasoning informs us why cannot our labor leaders that certain actions lead to certain quickly alleviate the suffering in effects. If we conduct policies that underdeveloped countries? destroy individual initiative and consume capital, our prosperity and strength must vanish. And if Many irrational beliefs are ad- we destroy our economic system of vanced also under the pretext of individual freedom and free enter- intuition. In defense of hasty no- prise, not only democracy, but also tions and assertions many people our civilization must perish. For refer to their “innate” or “instinc- freedom is an indispensible foun- tive knowledge.” They shun logical dation of both. evidence and seek refuge behind the plea for self-evidence or “‘com- [Imaginary Worlds mon sense.” In reality, they often The final and perhaps most pop- are endeavoring to protect their ular substitute for the faculty of “Instinctive Knowledge’! ===== PAGE 20 ===== 18 THE FREEMAN August reason holds forth under the ambi- grasp of the theory of the market tious name of creative imagina- economy. tion. We like to reshape our actual It is true, life was not easy dur- world by adding to it or subtract- ing the early years of capitalism. ing from it. We call this “creative’” Our ancestors had to labor long and “constructive” while we read- and hard in order to earn a mea- ily reject sober reasoning as being ger living. But this was not due to merely “negative.” the system of individual freedom At times we all are imbued by and free enterprise, but to its very the desire for illusion. We indulge absence in the preceding centuries. in daydreaming and give free play Capitalism, by liberating the to our imagination. This play, Western nations from age-old however, loses its harmless charac- bondages of institutional restric- teristic as soon as it influences our tions and prejudices, year after actions or we endeavor to trans- year increased productivity and plant it to thoughts and actions of improved the living conditions of others. Imagination then may take the people. It allowed the popula- the form of irrationalism. tion to increase at an unprece- The imagination of the social dented rate with ever-rising stand- writers during the last one hun- ards of living. Uncounted millions dred years greatly contributed to of people in the West owe their the sway of irrational ideologies. lives to its tremendous benefits. Artists like Dickens, Shaw, Wil- We need not expound the conse- liam Morris, Wells, Zola, Anatole quences of the continuing revolt France, Gerhart Hauptmann, Tol- against reason. They surround us stoi, and many others freely em- * in the form of wars or danger of ployed their “creative imagina- wars, socialism, and many other. tion” to stir man’s revolt against methods of destruction. reason. They condemned human For the sake of our civilization vices and laid them on the doorstep let us hope that some day reason of capitalism. None of these liter- once again will prevail over its ary men showed the slightest various negations. oo 0 | IDEAS © LIBERTY Laissez-Faire Means: Do NOT MEDDLE; wait and observe. Do not regulate; study. Do not give orders; be-teachable. Do not enter upon rash experiments; be patient until you see how it will work out. WILLIAM GRAHAM SUMNER, The Forgotten Man’s Almanac ===== PAGE 21 ===== EMPLOYEE RELATIONS HERBERT E. MARKLEY T. F. PATTON, president of Repub- We have approached employee lic Steel Corporation has said: relations as we would any other “Management has learned that the problem; that is, to treat it posi- welfare of its employees is just as tively. First of all, we have in- important to the success of a com- sisted that no one — and I repeat, pany as making products and sell- no one — but management has the ing.” I believe we can assume gen- responsibility and the right to eral acceptance of that statement manage. That to us includes the in principle. How best to accom- obligation to consider and solve plish the optimum in employee problems arising in the employer- welfare may — and usually does — employee relationship, be they real lead to argument, or at least to or fancied. vigorous discussion. Second, we are convinced that There are some folks who think planning in this field must be just the approach of The Timken Com- as forward and as imaginative as pany to employee relations is un- in a sales program or in the de- orthodox. This fact suggests that signing and manufacturing of a I give an account or a case history product. This means that we have of our philosophy of employee re- to be looking years ahead and not lations and its application. I shall, just to the end of the next nego- for the most part, be concerned tiations. with that philosophy as it applies Third, we think our employees, to employee relations influenced their families, and the public must by unions. be informed about the results, im- I want first to express our phil- plications, and consequences to osophy of employee and public re- them of any course of action the lations, then describe some things company may follow either volun- we have done to implement this tarily, or from being forced by philosophy, and finally make a few a union. conclusions about its effect. The charge is often leveled Mr. Markley is Assistant to the President of The Timken Roller Bearing Company. This article is from a talk before the Northern Ohio Personnel and Executive Conference, Cleveland, Ohio, January 18, 1957. 19 ===== PAGE 22 ===== 20 THE FREEMAN August against us that we are against Employee vs. Labor Relations unions. We are not against unions This policy is observed to the nor are we out to break them, but letter. We know that the average we have no intention of handing employee in a factory may think our plants over to union leaders, he does not have the ability, the and we will continue to resist any knowledge, or the disposition to effort by anyone to emasculate the . present his case effectively. He may job of management. We have a want someone to look out for his written labor policy published and best interests, and if he feels that which ‘each new employee is re- a union is the best agency to-ac- quired to read which says: complish that job for him, we are Co perfectly willing to meet with his “With regard to Unions we are representatives to bargain on mat- neutral. We believe in and practice tepg affecting wages and working collective bargaining within the laws .,, ditions in the manner provided governing it. The Company _TECOB~ hy law. An employee in our plants " nizes labor’s right to bargain and is required, however, first to dis- Management’s inviolate right to . ap . cuss a grievance with his foreman manage. You can get and hold a alone job with the. Timken Company if Co you belong to a Union and receive We make a sharp distinction be- the same treatment and benefits tween employee relations and labor from the Company as any nonunion relations. The latter term is ap- man. The Company insists on the plied to relations with union of- right to hire the best qualified per- ficials and representatives within son for each job. Your opportunity the framework of collective bar- to advance is limited only by your- gaining. Employee relations, in self. Promotions are made on the our thinking, are represented by basis of your abilities, skills and the day-by-day exchange between seniority. When hired by the Timken employees and management. One Company you must become a mem- can correctly assume that our la- ber of the Union for a brief period. b lati trained at ti You then have the right to make or relations are strained at times. your own free choice to either stay You can also conclude, as I do, in the Union or get out.* In either that as employee relations get bet- case you may continue to hold your ter, in our mode of operations, job at the Timken Company without labor relations may worsen. I prejudice.” stress the semantics here in the —_— CL hope that you’ll believe me when *A variation from the usual “union shop” clause reached through negotia- I assure you our employee rela- tions with the Steelworkers’ union. tions are of a very high order. ===== PAGE 23 ===== 1957 POSITIVE EMPLOYEE RELATIONS 21 We believe discipline is part of spite of all efforts trouble still a foreman’s job. The practice of comes, it may be minimized if em- seeking the help of a union official ployees and the public have a com- to “straighten out” an employee is plete understanding of the circum- an abdication of management in stances. our opinion. A foreman is a boss, a title to be proud of, not apolo- [ndustry-wide Bargaining getic about. A good boss should We are against industry-wide act like one. I am chagrined that bargaining, a practice which pro- “Boss,” like “Capitalism” and motes the labor monopoly even “Profits,” has come to have a bad further. In addition, when all pro- connotation. ducers in an industry have the Another strong belief is that same contract, it’s very easy for the provisions of a contract are to management and unions to agree be observed as negotiated, written, on wage boosts greater than in- and signed — by the company, the creased productivity justifies, union, and the employees. We for- which wage boosts are then passed bid side agreements. To illustrate: on in ever rising prices. The pub- If a meeting is to be held within lic, of course, suffers. Qur prob- five days from a specified date, it’s lems differ considerably from held then or not at all. If an ap- those of the basic steel companies peal to the disposition of a griev- which set the pattern which, in ance must be made in ten days, it many respects, the union expects is no good on the eleventh. Swift our company to accept. We bargain action against breach is certain, with the Steelworkers, if I failed and expected. to say so; and we were really out- A further conviction which we raged this past summer when an have is that well-informed em- imported specialist of theirs ployees will act in a way which opened one of our negotiating ses- contributes to our mutual best in- sions by saying there was really terest. We intend to see they are nothing to discuss as to his spe- informed. The public is also in- cialty, since that part of the con- terested in what a large employer tract had already been agreed to in the community does. The in- on our behalf by negotiators in fluence of a neighbor on an em- New York. That, I can tell you, ployee cannot be discounted. Our was a lively session. A quick check hope is that trouble can be avoided with the “Big Steel” negotiators by expecting people to reason logi- revealed the statement to be com- cally if they have the facts. If in pletely false. ; ===== PAGE 24 ===== 22 THE FREEMAN August We are convinced an employee’s contracts provisions for joint safe- welfare is tied in with the best ty committees, joint pension operation of the company and that boards, joint job evaluation com- his interests and the company’s mittees, requirements of union ap- interests are compatible. We reject proval on schedules, and so forth. the idea that the two interests are In the most “modern” contracts diametrically opposed. It follows there are requirements that the then that, if by treating an em- union approve selling prices, prod- ployee as an individual and with uct designs, purchase of equip- dignity we can persuade him to ment, location of new plants, and identify his progress and welfare advertising campaigns, to mention with that of the company, it is a a few. So far we have successfully worthy aim. avoided committing this kind of We are quite aware that the management hara-kiri. better job we as management do, We are likewise repulsed by the more strained our labor rela- such things as furnishing union tions may become, a thought sug- stewards with offices, paying stew- gested a few minutes ago. This ards while on union business, or is so because a labor leader lives giving superseniority to union of- on strife. If there is none, there ficials and stewards. This all seems is nothing for him to do; he isn’t ridiculous to us. To refuse to pay needed; he must create problems. someone to put you out of busi- Now years ago labor leaders ness may be old-fashioned but, like were willing to confine themselves motherhood, it still has some to making sure employees received virtue. fair treatment and good wages and had good working conditions. Oppose Union Shop The modern labor leader in an era It should now come as no sur- of enlightened management would prise to you that we are unalter- have little to do. So to promote ably opposed to the union shop. himself, to make more jobs in the We are just as. opposed to the labor movement, to justify higher union shop as we were to the dues and more and heavier assess- ‘“‘yellow-dog” contracts of years ments, he had to expand his field ago. That dog now on a union -of operations. What offers more leash is just as yellow as when opportunity than, in the spirit of shortsighted employers pulled the brotherhood, to help management chain. manage? So labor pushed for and It would have been so much succeeded in getting into many easier for us in 1956 to have ===== PAGE 25 ===== 1957 POSITIVE EMPLOYEE RELATIONS 23 agreed to a union shop for new ment is near, management has an employees, as many steel com- obligation to go through the night panies did. For management to to avoid a strike. We have never contract to take away an employ- done it, and our record of time ee’s right to make a choice, or to lost in strikes will compare very make him support an organization favorably with those who follow not of his choosing without first the practice. The union inciden- fully explaining the consequences tally abides by that rule. At 12:00 of increased dues and of possible noon and at 5:00 p.m. a red light heavy and frequent assessments, flashes and a bell rings. School is would be a breach of faith. We out. did explain it and the results proved the wisdom of our efforts. Strike Violence Our new employees still have the One of the real outrages in freedom of choice. labor relations is the destruction One further thought. Negotia- of property and physical violence tions can begin sixty days prior which often occurs in a strike. We to expiration of a contract. That have had bombings, employees’ is ample time to reach a new agree- cars run off the road and physical ment if the parties honestly bar- beatings. When law enforcement gain in good faith. We have al- agencies would not or could not do ways questioned the wisdom of something. we decided on this: At around-the-clock bargaining which the beginning of any labor trouble, become endurance contests to we advertise that a $10,000 reward which neither the union nor man- will be paid for information lead- agement representatives can bring ing to the arrest and conviction of their best minds. We bargain from each person who threatens or ma- 8:00 a.m. to 12:00 noon and 1:00 liciously injures the person or p.m. to 5:00 p.m. five days a week. property or the immediate family We refuse to make employees of any of our employees because pawns in a game in which would- the employee works or attempts to be actors take advantage of minds work during the strike. Such in- numbed with fatigue to come to a cidents have become far less fre- dramatic conclusion at 3:00 in the quent. morning which could have been Following these comments about reached just as easily at 5:00 in our philosophy, what do we do in the afternoon. Some of my friends practice to promote positive em- who indulge in this kind of bar- ployee relations? We believe a com- gaining argue that when agree- pany must be a citizen in the com- ===== PAGE 26 ===== 24 THE FREEMAN August munity — a-good citizen. As a good the faith our employees placed in citizen, he should speak up when us in 1956. Employees must have anything threatens the best in- an opportunity to learn that man- terests of the community, directly agement is sincere and is not just or indirectly. For many years in engaging in a whirlwind campaign the newspapers, on the radio, and during a campaign year. To do it by direct mail to employees’ homes, only during a year of negotiation we have commented, among other makes the program less effective. subjects, on the evils of commu- Results accumulate just as they nism, the impact of high taxes, the do from sales promotion and ad- consequences of federal control of vertising. local projects, the need for good We go directly to the family citizens to understand and then to group. You have been admonished make their positions known to not to underestimate the power of elected representatives, the obliga- a woman. The influence of the tion to register and to vote, and wife is just as potent in the field the effects of union proposals. of employee relations as anywhere Co else. In fact, she deals in a very Continuous Education realistic way with the problems of To limit our discussion here to feeding and clothing the family. union programs we have explained We think she will take an objec- their effect on the jobs of em- tive stand if she knows what it’s ployees, the health of the company, all about. the economics of the community, It is possible to sell the company and the freedom of the individual. just as well as we sell products so This kind of approach cannot be- we reviewed our techniques. We gin just before negotiations. It have never been timid about tell- must go on continuously so that ing you as customers how good our employees learn to have confidence bearings are, so we reasoned that in what management says. They if we have a good place to work, must have a chance over a period why not say so? We adopted of years to verify company con- proved advertising approaches. clusions. For instance, what we Families are good copy. In one said in 1949 before and during series we select for each ad an the pension strike — when we ad- employee who has acceptance by vocated and offered a better pen- his fellow-employees and proclaim sion program than the Interna- that John is safer in our plant tional Union would allow the local than at his home. We show a pic- unions to accept — contributed to ture of John with wife, Emily, and ===== PAGE 27 ===== 1957 POSITIVE EMPLOYEE RELATIONS 25 the children in their home to- company executives in the com- gether with a statement that we pany dining room at which time have fewer accidents in our shops they could ask questions, with no than occur in homes for a com- holds barred. parable number of people. In the Visitors came by the thousands, series I have just mentioned we and they saw the effects of a get the support of the employee, company policy to take every job his family, his co-workers, and we can off the backs of men and friends for the attention we give to put it on machines. Our vice- him and at the same time we tell president in charge of engineering our safety story. has as his primary objective to We answer any untruthful accu- let machines do the work and let sations made by union leaders. It the men use their minds. To fore- is their practice as negotiations ap- stall a popular argument that ma- proach to make blast after blast chines are putting men out of ‘about the deplorable conditions in work, our employment has in- our plants. That doesn’t jibe with creased 500 per cent in the last 30 our advertising so we don’t just years in spite of tremendous mech- vell louder — we go into action. anization. Some guests were in fact downright astounded to see Community Open House mill operators sitting in uphol- Let me tell you what happened stered armchairs manipulating lev- this past year. With the 1956 ne- ers and crane operators sitting in gotiations coming up, the union air-conditioned cabs. They were began its usual conditioning by surprised to see women with well- proclaiming that we were operat- kept hair-dos, highly manicured ing a sweatshop. Now we consider nails, and nicely dressed in clean a sweatshop one in which long smocks. hours are worked at backbreaking These visitors also observed the tasks for very low pay. What could earnings of our employees. We set we do about a charge of this kind? up a huge board in which we Well, we invited every service club, placed actual bills and silver equal the clergy, the doctors, the law- to the average payroll for each yers, the barbers, the mailmen, employee. We broke this currency the police, the Urban League, the down and placed in one pile the Junior League, the Woman's amount that went into his pay Clubs, and anyone else who wanted check, another pile contained the to see, to take a tour of our plants amount that was withheld for followed by lunch or dinner with . taxes, and then other piles to show ===== PAGE 28 ===== 26 © THE FREEMAN August what was set aside for each of a of sweatshop conditions had been series of fringe benefits. To aug- eliminated in the company plants. ment the display we published The only changes made were the several times a week the actual visitations. earnings of specific employees selected from every department [nformation for Employees from sweepers to toolmakers, with Many years ago we learned that emphasis on the fringe benefits union negotiators do not report is- which everyone seems to want to sues accurately so about 10 years ignore but which are very much a ago we began to issue daily bulle- part of wages. Many visitors tins which were a digest of the learned that our employees were day’s negotiations. These digests making more than they were. This were factual. Originally they were took care of the low wages of a given to supervisors only, so that sweatshop. within hours after a meeting, em- It was common knowledge that ployees who came to them could no one worked more than eight receive accurate information. This hours a day. had the effect of employees asking A by-product came from this the foreman, rather than the union too. We encouraged visitors to ask steward, for information. They people in the shop. any questions found the steward could give only they wished. This was to keep any- a distorted report even though he one from charging we were giving might have wanted to give the cor- a slanted view. Our employees rect information. made sure our visitors got a good Later we installed a “Communi- impression, and the pats on the cator” on our telephone system so back which visitors gave didn’t that by dialing number 2 a sum- hurt either. mary up to three minutes in length After seeing no men chained to could be heard. We gave a report their machines and no exploitation immediately after a morning ses- of child labor, visitors came to the sion and immediately after an conclusion that what the union afternoon session. This permitted leaders were saying was untrue. a foreman .at any time during his That partially explains why there shift to catch up on the very latest was little sympathy for a strike in in developments. 1956. About two months after the In preparing for the 1956 nego- visitations were well under way, tiations we decided on an even the union newspaper stated it was more direct approach. About the happy to report that the majority same time the union was fouling ===== PAGE 29 ===== 1957 POSITIVE EMPLOYEE RELATIONS 27 its nest with its sweatshop propa- been to equipment or trade shows ganda we thought some of the up- where the best known companies coming issues should be high- were handing out to callers at lighted for employee and com- their booths some pretty corny munity understanding. We stuff. Why were they doing it? Be- stressed the often neglected fringe cause they thought it would help benefits. We wondered how much sales. Because the gimmick was a employees really wanted in more reason for an extra thought or fringes so we created Joe Fringe comment about their product or and made him a national figure. their company. Well, I see no dif- We had him reproduced on bal- ference —if a gimmick will sell a loons for the kids. Wooden nickels product, it will sell an idea. indicated what too many fringe benefits would do with respect to Prompt Reporting spendable earnings. Our numer- After this build-up of acquaint- ous ads and radio spots populariz- ing the employees with the issues, ing Joe gave rise to jokes which which went on for some months, we welcomed because all of this the time for negotiations actually was making people aware of the arrived, and we then decided to fringe benefit situation. We even give each employee and his family added a thirteenth month to some a digest of each day’s negotiations. of our company calendars around We also sent them to many friends the plant which showed Joe’s smil- in the community and in all seg- ing face along with the already ments of industry. As I said be- popular bevy of lovelies some of fore, these digests were factual you may know about. This thir- and were delivered by first-class teenth month had 59 days, the mail at the homes of employees by number of days a man had to work midmorning of the following day to earn his fringes or, to say it and gave the news to the family another way, the number of days’ before the news media had it. Em- earnings to equal the cost of fringe ployees looked and waited for each benefits. day’s digest. We were literally We try to say things in a lan- amazed: at the interest they guage familiar to our employees so showed. They went to union meet- at this same time we suggested ings and from what we heard, in- readers consider the yellow-dog stead of the meetings being con- aspects of the union shop. trolled by well-placed ‘“red-hots,” You think perhaps some of this the responsible employees got up is corny. Maybe it is, but I have and had their say with plenty of ===== PAGE 30 ===== 28 THE FREEMAN August support once someone broke the ¢. Too much of anything is bad, ice. they say To keep interest high and to More Fringe Benefits means less popularize company offers, ball- pay point pens began to show up in our You must agree it does make shop. A different color identified sense ~ Forget the Fringes — take 21 each new offer. These pens were cents in limited quantity — about one- half as many as there are em- ployees — to make them wanted. The distribution was informal. Each foreman had some and all other management personnel, in- cluding the president, carried a supply when in the shop. You see, all of our top manage- d. 3 more years of happy days 3 more years of regular pays Strike Loss 1956 - - 0 It is an event for Dad to say to Mom after work that the presi- dent, or the vice-president, or the ment spends some time on the shop factory manager, or his foreman floor during any day they are in &2V€ him a pen today. Most people the office. We think that’s a pretty 1D this country still respect ability good idea, too. Employees began and success and want to be identi- asking for these pens, and it was fied with it. We felt these efforts always an occasion for a comment 82V€ our employees a chance to or two, not necessarily about the feel closer to management. - labor situation, but many were. It We have always had a court did get employeés to talking about reporter pr esent at all meetings the proposition. The poets in our between the union and the com- Labor Relations Department got Pany. To complement the daily some practice in writing limericks. digests we also made available the Here’s what was on the pens: verbatim transcripts of negotiat- ing sessions to any employee who a. Your dough — not Joe’s wanted to read them. 16¢ — $25.00 - $30.00 a month We have used other approaches. To mention two briefly: Each day for one year, an executive invited b. Income Security Plan a small group of employees to have 16¢ added to your pay lunch with him in the company 5¢ more for a rainy day dining room. Any time lost was Why the delay — Get it today paid for, but attendance was Join the 21 Club purely voluntary. It’s yours — Speak up ===== PAGE 31 ===== 1957 POSITIVE EMPLOYEE RELATIONS 29 We wanted to do something for the best flannel board techniques each employee. So beginning we can devise. Then our Labor Re- several years ago on his birthday lations people are tuned in closely the employee received from his to top management thinking. Our supervisor a little gift. Two years director of industrial relations ago we gave each employee a very really works at his job. He spends fine hammer which uses our seam- long hours with not only the vice- less steel tubing in the shaft. The president in charge of that divi- employee’s name was etched on sion but with factory management the head. An informal survey has as well, to make sure there are no shown over half these hammers crossed signals. have never hit a nail — either the In the matter of safety we make steel kind or the thumb kind. The sure that no hazards in our plants man is so proud of it he displays are overlooked, and if we find it for visitors to see in his home. something wrong we take care of My own is kept in my library. Last it. We don’t feel a joint safety year we gave a sportsman’s axe, committee would contribute to the made in the same way, also with record we already have of the the employee’s name on the head. safest plants in our classification It isn’t possible to discuss each in the state. effort we have made; but there are Foremen are trained and ex- a number of others, including the pected to settle grievances on the employees’ magazine, the monthly floor. Co-ordination with labor re- letter from the president, reading lations is very close. A grievance racks, and bulletin boards. doesn’t go to arbitration if we are Co wrong. That’s why we have won A Convincing Performance approximately 90 per cent of them. Now it is difficult to sell a prod- It also explains why we have not uct if it fails to measure up to agreed in our contracts to have your claims for it. It is also true arbitrators appointed by the arbi- of employee relations. Manage- tration associations. We think that ment has to do its job and make arbitrators so appointed tend to unmistakably clear that it has the decide cases on “one for you” and ability to manage. To develop that “one for you” basis, or they decide ability, along with you we do a lot cases on compromise. Our feeling to train our foremen and try first is that if we are right, there is no to make our policies clear to them. such thing as dividing up awards Union contracts are thoroughly ex- nor is there any place for compro- plained, using among other things mise. ===== PAGE 32 ===== 30 THE FREEMAN August Looking Ahead now I would like also to express Is there a reason for positive my fears. employee relations? For taking a First, I am convinced increased firm, honest position and expect- efforts will be made by union ing your employees to support it? leaders to further hamstring man- I'll leave that to you. But I would agements. Eventually they hope to call your attention to two or three have equal voices on the boards of trends which make good employee directors of the corporations. relations desirable. We have Second, everyone knows of the agreed to the steel industry pat- drive to be made for a drastically tern on economic issues in a gen- reduced work week. Even “union eral way. Our employees haven't researchers say candidly that the always wanted the same things the shorter week is to provide more union has advocated. We fully ap- overtime, necessary to produce preciate that an employee of ours enough goods and services to meet represented by the same union the needs and desires of our popu- wants to receive as much as his lation. At this time then a shorter neighbor who works for another work week appears economically steel company. On other issues, unsound. When the day comes that which are often the real reason for we can produce sufficient economic a strike, we do not always go along goods in a shorter week, we’ll ac- with the steel industry. cept it. We remember the 60-hour Efforts to bolster a union weeks we once had and the leader’s hold or to enhance his prophets of doom when the 40- position as an individual, to create hour week came: But there must union jobs, to provide for union be some limit, or we can go to 0 participation in management, to hours and go home right now. develop a basis for harassment of Significantly, the unions have “the company or to do other things not explained how capital goods which have little or nothing to do- will be utilized efficiently. We have with our employees as such, are enough trouble now getting the strenuously resisted. kind of help needed to keep these These things on the horizon will tremendously expensive new ma- be accomplishments tomorrow if chines going. How we can do it by more companies do not develop working even fewer hours at labor programs designed to stop them. rates 25 per cent to 30 per cent Maybe some want them. We don’t. higher than today is something to Because some may agree with us, think about. . I have described our approach and Third, I am concerned about ===== PAGE 33 ===== 1957 POSITIVE EMPLOYEE RELATIONS 31 plans to unionize office employees, particularly engineers. Our indus- trial progress has been the result of fine engineering. I am having trouble visualizing continued gains in that direction by regi- mented, unionized engineers. But the effort will be a virile one, be- lieve me. Why do you think an officer of the United Steelworkers pleaded here in Cleveland last week for a 50-million-dollar slush fund? He needs it, he says, to pro- tect the members against em- ployers who will destroy them at the first opportunity. I think it more likely it will be used to in- tensify organizing efforts of sala- ried people, to build up strike funds, and to exercise more influ- ence on legislators to give em- ployers their lumps. He will have no trouble raising the money. He has the formula. First, he has the union shop in most places. Then dues were increased 66-2/3 per cent this year, maybe more next year, and the base has been laid - for assessments of any size. Now to conclude, has our ap- proach produced any results? We think it has. 1. Because we regard a contract as just that, we have not lost a day in wildcat strikes since 1946. 2. We avoided the industry strike of 1956 and the short one of 1955. Even in 1952 one of our unionized mills continued to work. 3. We have been able to keep out of our contract any kind of clause providing for union partici- pation in management decisions. 4. Our productivity has im- proved. "5. Employees and citizens in the community are now saying to us they are beginning to see the wis- dom of many of the things we have done where once they criticized. 6. We believe our program has helped to improve living standards of our employees and of others in the community who benefit indi- rectly. 7. Our new employees still have a choice of whether or not to be a union member. 8. Our customers have benefited by uninterrupted deliveries. 9. Our stockholders have bene- fited by reduction in work stop- pages and the profits made from increased sales to customers to whom deliveries were made with- out interruption. We also know we have rough roads ahead unless more em- ployers join us. A really few com- panies with the courage of The Kohler Company, to name one, and with a program of positive em- ployee relations can convince em- ployees that their interests are the same as those of management. This is not only a challenge, it’s an obligation of management. ® oo IA ===== PAGE 34 ===== Something new has been AM RERE RB ERE _ JR BBR _ added to the spread between - farm and consumer prices: service the housewife wants SERVICE” ...1s if really necessary? HERRELL DF ===== PAGE 35 ===== ~ N A RECENT FRIDAY EVENING I myself remembering the grocery did the week’s grocery shop- store of yesterday. ping with my wife. As I pushed A wheel of cheese was on the the cart up and down the aisles counter, an open box (or barrel) “for her convenience,” I noticed of crackers, another of prunes; a that something new had been add- barrel of molasses, another of vin- ed in our favorite store. Soft, egar (and you were lucky if there restful music was coming from was still not another of kerosene " several newly installed loud-speak- right alongside a bin of potatoes) ; ers. sugar in bulk, also coffee, tea, rolled I commented on it, and my wife oats, rice, and beans; and flour in said, “Yes, they’ve had it for a bulk sacks (nothing less than one- couple of weeks. I must stop and eighth of a barrel). tell the manager I like it.” Meat was at another store, The manager will be interested where the butcher cut to your that she likes it. But the real order — and you took what he had reason it has been installed is that that day. His store was often un- careful research has shown that heated in winter, out of considera- with such music the average cus- tion for the meat. He probably tomer will spend a few more min- had the only refrigeration in town utes in the store and leave a few — a room chilled with ice in sum- more cents in the cash register. mer. (And we bribed him to chill The increased sales far offset the a watermelon because there wasn’t cost of the music. any refrigeration at home, either.) Every service that is performed Now, picture the store of today! in the food industry has the same Perhaps not most noticeable, but reason and the same justification. a great change all the same — we No service that does not pay its have one-stop shopping. Long, re- way by building business can sur- frigerated cases of prepackaged vive in the intense competition of meats, mirrored displays of fresh the food industry. This is true of produce, another long refrigerated everything that happens to food dairy case, a battery of frozen from the time it leaves the farm food cases, and several thousand until a consumer buys it. items of canned, bottled, baked, Pushing the cart for my wife pickled, prepared, and even pre- and listening to the music, I found cooked foods. All are packaged — Dr. DeGraff is Babcock Professor of Food Economics, Graduate School of Nutrition, Cornell University. This article is condensed from a pamphlet first published by the Agricultural Research Department of Swift & Company, Chicago. 33 ===== PAGE 36 ===== 34 THE FREEMAN August in every conceivable size, shape, Gains for Producer and kind of package that highly What does all this mean to the competitive food processors can producer? devise to attract Mrs. Homemak- To begin with, let’s throw it all er’s attention. Nothing is in bulk away and see where we would be. anymore. If there were none of the present The store is big enough to house food-processing and handling serv- a dozen or twenty of yesterday's ices, agriculture as a whole would stores. It is brightly lighted — still sell (or barter) just about as neon outside and fluorescent in — much food per consumer as at comfortably heated in winter and present. comfortably air-conditioned in Of course, the American peo- summer. The door opens auto- ple would be eating a very differ- matically as you approach it— ent diet, and even the economic controlled by an electric eye. All life of the country would be very “the thousands of items are dis- different. But people would still played where the customer not eat — about as much quantity per only can see them but reach them day and per year as now. — without getting on her knees or This fact has led some people pulling a run in her nylons by to believe that our food marketing stretching. There are carts for activities at present are too ex- the toddlers to ride in, and clean, tensive and too costly. modern restrooms. There is a The answer is not that simple. whole battery of check-out sta- It is meaningless that agricul- tions where any one of the nimble- ture as a whole would sell as much fingered girls can ring up $20 be- quantity. fore you can get your money out. The reason is this: Agriculture And there is carry-out service (no is not a single-unit business. Agri- tipping, please), and pick-up sta- culture is not one business. tions where you drive up to have = Instead, it is composed of a the boy load in your groceries. large number of regional interests, Not a single gadget, not a single of many product interests, and of service is there because the store- about two million commercial keeper likes to spend money. It is farms. Each region, each product, all there because Mrs. Homemaker each farm is competing in various has been found to go somewhere ways with all others. Each is striv- else if she does not get the serv- ing to increase its relative degree ices she wants as well as the food of consumer acceptance. she wants. Note how true this is of prod- ===== PAGE 37 ===== 1957 “BUILT-IN MAID SERVICE” 35 ucts that may be directly substi- diversified, and much less efficient. tuted. The family that had chicken Such farms would not sell spe- for dinner by-passed pork. An- cialized products for national dis- other who had a meat substitute tribution. Without today’s food did not eat beef or lamb. Pro- processing and handling industry, ducers of each of these items have they would be producing diversi- an interest in getting their respec- fied products for local markets. tive products on more .dinner Production on such farms would tables. Livestock raisers want to be lower — both per acre and per have meat used —any kind —in man. Farm family earnings would place of competitive substitutes. be reduced, and the level of farm Their interest is to increase their living would be lower than it is share of the consumer’s food dol- today. lar — and this is true of the pro- So let’s not throw the food in- ducers of each different food. dustry away. Today’s farmer has Once the competition for the to have it in order to make today’s consumer’s dollar has begun, it farming possible. ends, of course, in all the new serv- ices, all the new packages, all the Prepacked Service ways to get sales that competition Now, how does the homemaker can devise. The good competitor look at all this? gets the business. The poor com- Almost one-third of the labor petitor loses out. force of the nation is women. More Today’s agriculture is highly than half of the women in gainful commercialized and specialized. employment are married women — This kind of agriculture could not homemakers as well as gainful even exist without the processing workers. For them to be in the and distribution functions that labor force, they must have maid carry the many products of spe- service in the home. This maid cialized farms through to con- service they cannot hire as domes- sumers’ kitchens. tic servants. Yet this does not Instead of the specialization that mean they do without it. They get brings us Midwest ham, Western a lot of it in the form of food beef, Minnesota butter, Wisconsin processing and preparation. In cheese, Arkansas broilers, Wash- this sense also, the services of the ington apples, Arizona vegetables, food industry are irreplaceable in Gulf Coast citrus — instead of this, our present economy. we would have much larger num- Food on the table involves cost bers of smaller farms, much more — some of it in money, and some ===== PAGE 38 ===== 36 "THE FREEMAN August manding their time, or with good incomes from their husbands’ jobs — are not going to devote this much time for this much wage. The evidence that they will not is their increasing insistence upon convenience foods. They will not draw a chicken. (Few less than 40 years old know how.) They will not slice their own more of it either in money or in meat. They are shifting more and time and energy. Which does Mrs. more food preparation from the Homemaker have in larger quan- kitchen back to the food industry. tity? With a regular job or with One of the most rapidly increasing a growing family, the answer is items in food sales is fully cooked not always time and energy. and frozen meat pies that only At what price can she sell her have to be heated in. the oven be- labor when she works in the kitch- fore serving. en? An efficient food industry may The kinds of foods that do not furnish her an attractive bargain. share in this trend are losing mar- A study by the Bureau of Home ket to those that do. Economics of U.S.D.A. showed Convenience foods — meats ready that a certain fully home-prepared for the pan, the oven, oven-ready family dinner cost $4.90 and took for the table — along with mixes, 5.5 hours of preparation. The meal prepared vegetables, and the like from partly prepared. foods in- are what Mrs. Homemaker increas- creased the cost to $5.80 but re- ingly is demanding. Food proc- duced the time to 3.1 hours. The essors must provide them in order meal from fully prepared, ready- to keep abreast of current trends to-cook foods cost $6.70 and re- and to assure farmers whose prod- quired 1.6 hours. ucts they handle that they will not Look again at the first and last lose out in the competitive race. sets of figures. The extra cost was Reasons given by consumers for $1.80. The time saved was 4 hours. preferring prepackaged and par- This means the homemaker worked tially prepared meats include: for 45 cents an hour when she did Time and labor saved all her own work. Millions of Less waste in buying American housewives — with jobs Economically and quickly served of their own, with youngsters de- Greater uniformity in quality ===== PAGE 39 ===== 1957 “BUILT-IN MAID SERVICE" 37 The demand for service is car- and the rancher. Even so, pro- ried sometimes to extremes. I ducers generally benefit. Their have seen a cute little bride return main interest is not the percentage to the meat counter with a canned they get of the retail price. The ham she had purchased. When she real question is whether they get opened the can, the meat was not more or fewer dollars. sliced — and she came back for Any service homemakers want, slicing service. ~ and will pay for, adds value to the Too much emphasis should not product. The extra cost of the be placed on her lack of familiarity service adds to the share of the with a knife, but the pertinent retail price that goes to pay for fact is that she, like other con- processing and marketing. But on sumers, will get the services she the same number of pounds sold, considers essential or she will the same number of dollars go serve some other food. back to producers. Services furnished by meat proc- If an additional service makes essors cost money — money that . the product more appealing to con- goes for wages, equipment, pack- sumers and thereby leads to in- ages, and the like. More service creased purchases, the additional with each pound of food means a démand actually means more dol- higher retail price. Mrs. Home- lars for farmers and ranchers who maker pays the price whenever raised the animals. she values the extra convenience Which food will win and hold more highly than she does the ex- consumer acceptance in greater de- tra money. It is precisely this at- gree — or, more accurately, which titude that already has shifted an food coupled with what services? amazing amount of food prepara- tion work out of the kitchen and back to the food industry. It prom- ises to shift still more. The trend has not yet run its course. Meeting Competition How does this trend affect the producer? More service costs built into a pound of food result in a smaller share of the retail food dollar go- ing back to the farmer, the feeder, ===== PAGE 40 ===== 38 THE FREEMAN August There was a time when pro- mean? Who ever “wanted” a safe- ducers could sell home-butchered ty razor or a television set until hogs directly to consumers and get he had seen one? Who “wanted” 100 per cent of the consumer dol- a wasteless, convenient canned lar — or to the home-town meat ham, in a size just suited to her market, and thus get closer to family, until she had tried one? consumers than they can today. “Want” .in this sense is what we What would present consumers, or will spend our money for in com- even today’s supermarket, do with petition with other uses for money. fat back or leaf lard as cut from “Want” is created by producing the carcass? How many of either something for which consumers are equipped to grind the sausage will spend freely. It is extremely or cure the hams and bacon? important to farmers and ranchers The packing industry has taken when services added by the pack- over these functions — just as fac- ing industry more than pay the tories have taken over soapmaking cost through increasing consumer and bakeries now do the baking — acceptance and expanding the total in order to provide homemakers demand for meat. with the products (product and services) they want. The What Next? is more remote from the consumer The producer of any food for than ever before — and there are today’s market should be asking more costs between him and the whether there are still other serv- consumer than ever before. The ices — more services or different share of the retail dollar going to services — that would increase the pay for processing and marketing sales of his product in competition is higher than it would be.if all with other foods raised by other these services were not performed. producers. But, because the services add val- He should ask this question ue to the product — because con- simply because different products sumers get precisely what they compete directly for the same place want — they pay more total dollars on consumers’ tables — for the for their purchases. There are same consumers’ dollars. In our more total dollars to be divided — highly competitive market the and more total dollars to go back food that most nearly satisfies Mrs. to farmers and ranchers for their Homemaker’s wants will increase animals. its share of consumer spending — When we speak of what the and something else will lose out in consumer “wants,” what do we proportion. oo 0 ===== PAGE 41 ===== “The Moors Proverb JOHN MURRAY The Moors have a saying about which is neither of these, indulges the man who being given milk to itself unduly in this; for it lacks drink straightway claimed prop- foresight of how the matter will erty in the cow. A true saying it turn out presently. By benefiting is, and true anywhere. Many men some in their temporary straits it readily presume on a gift or a draws them on to seek a long con- lucky chance to turn it into a right. tinuance of benefits, and things Some do this for themselves alone long continued persist strongly for and not for others, and their longer. And furthermore others, greedy error, being small, is toler- and very likely many others, will able, and the cow's owner besides seek to share in the beneficence, may subdue them. It is otherwise and when all or nearly all enjoy it, when it is done by great numbers the thing is past undoing, or may that act together to. persuade or well be judged so. The government compel the government, that has itself, very likely, will flinch from a great store, they think, of cows undoing it, especially in a democ- and milk. Yet the government is racy, for fear of inflaming its not blameworthy when it yields enemies and provoking gross and perforce at times to the sudden or hurtful conflicts that may en- great need of citizens, or some of danger the nation, and of setting them, and of its own grace and up a new and more lawless govern- charity, lest suffering and disorder ment in its place. set in. It looks seemly in the gov- The first evil step brings on all ernment to show considerateness the rest, just as a river receiving thus, as if it were the kindly father many tributaries grows to such a or patron of the needy and the flood as cannot be withstood. All stricken. But the government, these gifts and immunities and lav- Dr. Murray is now editor of Freedom First, from the Spring 1957 issue of which this article is reprinted. He was formerly a Member of Parliament, and served as head of University College, Exeter, from 1926 to 1951. 39 ===== PAGE 42 ===== 40 THE FREEMAN August ishness of the government come the cost whereof heavily burdens not from its own wealth or re- the government — the government sources, for it has none — neither first, and next all those from whom milk nor cow, but only from what it takes their money, if they are it takes first from citizens. Having alive, and their possessions, when the power thereto, it takes freely they die, from the heirs. This bur- from one and gives to another. If den, moreover, weakens the gov- only one man or woman were ag- ernment. If it met with any great grieved, this foolish error, as has and costly calamity such as a war, been said, would be tolerable, for how could it prevail against the all its injustice. But the evil is enemy, having wasted its goods in manifold; it grows and grows like the time of peace? And how could a river of tributaries, and more the citizens endure penury and suf- and more men come to favor it. fering in war after long wallowing The hope of sharing in the broad in the wasteful beneficence of the coursing stream of beneficence government, and how face the sways them corruptly, and will cor- wounds and death and downright rupt them more and more until the defeat after lying for long at ease government, that lacks resources in the soft warm bosom of the gov- of its own and has, by now, taken ernment? Truly, it is unsafe for from the citizens as much as can the government to give and give by any means be taken, stands and give — the milk and the cow forth a lying and cheating bank- herself and her progeny and what- rupt, and pays the penalty thereof, ever else is claimed falsely and cor- and is no better accounted than to ruptly as a right, as if the govern- have spread hardship and want in ment were indeed the creator and the nation. To provider of all things. . The worst of it is taking by laws, Their Money If Alive, Their Possessions hich differs very little from tak- When They Die ing by duress and robbery, from The Moors’ proverb can truly be some to bestow it on others. The said of ourselves nowadays, nay, citizens are thus divided and em- far more than ever before. The bittered against each other into government, for instance, has the two factions of the givers and “helped citizens in their need to buy the receivers, the one without the bread, or it may be milk for their blessing of charity and the other children, or medicines, or a house of gratitude. And the nation, as at a disproportionate price, or a has been said, is impoverished and thousand and one other easements, weakened, and sourness and greed ===== PAGE 43 ===== 1957 THE MOOR’S PROVERB 41 spread throughout. The Romans the commerce between it and those had a wise saying, “Principiis Ob- whom it would fain appease and sta,” and to resist at the very start satisfy, the milk-and-cow-men. The is the only remedy against those government is not purged by this who would take milk and cow and that at first considerateness, which all else. And if the continual taking is pardonable, misled it, if after- the goods of citizens by cruel laws wards it follows the broad path is a shameless wrong, the guilt of that leads downward to destruc- those who make such laws must be tion, and evil habit overmasters it exceedingly great. The government till it has neither strength nor itself becomes foully involved in freedom left to do right. ee 00 | IDEAS ®-0000ay7| Communism Is An Idea COMMUNISM IS NOT AN ARMY, nor even a dictatorship. Commu- nism is an idea. It is a belief that individual freedom, as a way of life, will not work; a belief that certain ordinary mortals like you and me, who, mostly by fortuitous circumstance, happen to occupy the seats of government for a short time, are far more capable of running your life than you are; it is a fear that if we, the people, are left free to manage our own affairs, most of us will go hungry and be cold; it is a repudiation of the free market, where willing buyers and willing sellers voluntarily arrive at a figure agreeable to both; it is a false thesis that employers and employees belong to different classes and are natural enemies; it is a process whereby some people use the power of government to make other people conform to their views and desires; it is a coerced debasement of the intelligence and integrity and dignity of the individual human being, who must bow his head in defer- ence to the views of political masters. BEN MOREELL, To Communism... via Majority Vote ===== PAGE 44 ===== Law and justice in the United States are so closely patterned after the British model that we dare not ignore the dangerous trend toward — Adminigtrative Law GEORGE WINDER in Gr eal Britain HE GREAT HERITAGE Digest of December 1952, con- 2 that ancient Rome densed from the Winnipeg Tri- 7 left to modern civ- bunal, the American lawyer, Karl __lilization was the Detyer, writes: “I am convinced N conception of the that British justice is fairer and ¥| Rule of Law. Per- faster than its American counter- haps the greatest part. Punishment of the guilty A Ried service that the is more certain, the innocent are British people have performed for more vigorously protected, and mankind has been to develop and public safety is better served.” He spread this heritage throughout gives, as his reason for this, the many parts of the world which complete freedom of the British have never known the sway of Courts from the machinations of Rome — including her own Domin- the politician. “No political influ- ions and, not least of all, the ence,” he writes, “direct or in- United States of America. direct, is tolerated anywhere in If there is one institution of the administration of British jus- which the British people are tice.” proud, and which, until a few This American lawyer’s opinion short years ago, possessed their accords with that of no less a man absolute trust and confidence, it than Voltaire, who, over 150 years is their legal system which, under ago, wrote that, in traveling from the aegis of the High Court, has France to England, he had passed evolved over many generations un- out of the realm of despotism into til it has become the admiration a land where the Courts might be of lawyers of many lands. harsh but where men were ruled In an article in the Reader's by law and not by caprice. Mr. Winder, formerly a Socilitor of the Supreme Court of New Zealand, now farming in Sussex, England, is perhaps best known for his writings on behalf of freedom in economic affairs. This article first appeared in the American Bar Association Journal, July 1957. 42 ===== PAGE 45 ===== 1957 ADMINISTRATIVE LAW IN GREAT BRITAIN 43 When the British legal system the ordinary Courts, the other a can be praised so highly, why has system of so-called administrative there lately developed concerning law applied by officers. The idea of it a measure of doubt, as yet like administrative law and.adminis- a cloud on the horizon but never- trative Courts was wholly repug- theless persistent in the minds of nant to Dicey. It implied that the some British lawyers? executive and the administration As far as the traditional British could be independent of the judi- Courts are concerned, the confi- ciary. Such an independence he dence of the people is as justified believed to be contrary to the Brit- as ever. The doubt lies in the fact ish conception of the rule of law. that, alongside these ancient in- There are strong reasons for be- stitutions, there is growing up a lieving that the unity of the Brit- new form of legal tribunal which ish legal system under the High is beyond the jurisdiction of the Court was due to the fact that, in High Court, and quite new to Brit- Great Britain, the State played ish legal principles. little part in the economic activi- ties of the people. The great work One Code for All of the Courts, apart from their Before 1914 —a year which criminal jurisdiction, was to see marks the end of so many accepted that the rights of individuals were ideas — the authority of the High enforced. As the State was seldom Court over the British legal sys- involved, it allowed the Courts tem was complete. No one could complete freedom from political be punished, no fine imposed, no pressure of any kind. Such admin- injury received, nor any tort in- istrative rules as there were — as, flicted, without the victim having for example, those under the Mer- the right to appeal to a British chant Shipping Act or the Factory Court of Justice. As that great Acts — being comparatively few, guide to the British Constitution, could be enforced quite easily by Professor Dicey, has pointed out, the ordinary Courts. the very basis of British justice The economic system of France, was the fact that the whole of on the other hand, had been sub- her legal system came under the ject, ever since the days of Louis one authority — that of the High XIV, to a wide system of control Court. exercised by the district Intend- The legal code was not split into ants, who took the greatest care - two parts as it was in France — that their exceptional jurisdiction one interpreted and enforced by should be continually extended. ===== PAGE 46 ===== 44 THE FREEMAN August These controls were one of the tion: It also provided that the primary causes of the French Ministers of the Crown and the Revolution, but as de Tocqueville officials responsible for enforcing pointed out, they survived to a the new legislation should have far greater extent under the Re- wide discretionary powers which public than is popularly supposed; were placed beyond the jurisdic- and, so that they might be effec- tion of the High Court. tively enforced, administrative law These new tribunals are so alien survived with them. to British ideas that their true nature is not yet fully recognized, Changes after World War | but there is no gainsaying the It was not until after World fact that they are able to inflict War I that ideas inimical to the very heavy fines on those who ap- free economy began to be exten- pear before them; and to enforce sively reflected in British legisla- those fines, they may sell the of- tion, and the powers of certain fender’s property. For the first Ministers of the Crown and their time in many generations, a Brit- officers were increased beyond ish subject can stand before such anything hitherto known in mod- a tribunal defenseless in that he ern times. Under the old system, is deprived of his ancient right of the sole concern of the British appeal to a British Court of Law. Courts was justice for the indi- vidual. Consequently, all their Milk Board Tribunals rules of evidence and procedure Perhaps the most typical ex- were evolved solely with that con- ample of the new kind of “adminis- sideration in view. It was never trative court” is provided by the conceived that they should have to Tribunal of the Milk Board. In deal with the thousands of regula- 1932 the British government de- tions necessary to administer an cided that the free contract sys- economy with speed and efficiency. tem should no longer apply to the "As a result, they were quite un- sale of milk, and that its distribu- prepared and unsuited to meet the tion from the farm to the con- changed conditions brought about sumer’s doorstep should be com- by economic planning. pletely within the control of the Parliament realized this, for state-created Milk Marketing with the new legislation, it pro- Board. The imposition of the nec- vided for forms of legal enforce- essary discipline upon farmers ment under tribunals, which were to effect this was not so very easily - quite new to British legal tradi- enforced. Shortly after the ===== PAGE 47 ===== 1957 ADMINISTRATIVE LAW IN GREAT BRITAIN 45 Board’s inception, it had to deal Judge Tobin, asked to sign such with farmers who undercut its an order, said: “Am I to under- fixed prices in the hope of increas- stand that certain of the King’s ing their sales. It is interesting to subjects can be fined by some kind speculate what might have hap- of tribunal sitting in a room to pened to these offenders had they which the public are not ad- been arraigned before the ordi- mitted!” On being assured that nary Courts, charged with the en- this was so, he added: “It seems tirely new crime of selling per- contrary to our law. I thought the fectly clean milk too cheaply. For- essence of British justice was tunately for the Board, it was able openness.” to bring such recalcitrants before However, the disapproval of its own tribunals. British judges was of no effect, These were made up of milk and it soon became evident that producers little inclined to bias in there was a new punitive body in favor of a rival who had undercut Great Britain, completely beyond the price of their product. After the reach of a High Court judge. listening to such a trial before such a tribunal, one lawyer has The State Can Do No Wrong described how he saw the accused To allay public suspicion, how- pronounced guilty and heavily \ ever, a Departmental Committee fined — on the unsworn hearsay under the chairmanship of Vis- evidence of the Board’s own serv- count Falmouth was set up to re- ants. He also pointed out that the port on this new legal procedure. Board acted as judge, prosecutor, In its finding supporting the tri- and recipient of the fines it in- bunals, the Committee stated: flicted. There is also a possibility that the Courts, either from imperfect un- Futile Protests derstanding of the schemes, or from It must not be thought that Brit- lack of sympathy with them, might ish judges were unconcerned at not inflict adequate penalties, par- this limitation of their jurisdic- ticularly in the case of such offenses tion. The Milk Board’s judgments as undercutting, where the interests could only be enforced by a Court of producers as a whole might ap- ae pear, on a short view, to be contrary order. When applications WETE to those of the public. Even in seri- made for such orders, some judges ous cases under the ordinary law, put up considerable resistance and these Courts do not usually impose attempted to review the reasons the maximum fines for offenses; in- for such judgments. deed, the expectation that smaller ===== PAGE 48 ===== 46 © THE FREEMAN August fines would be imposed by the Courts The difficulty of rendering these than by the Marketing Boards has terms into intelligible English, arises been used as an argument in favor from the fact that at no time in the of the former tribunal. Moreover, last two centuries of the History of undue leniency to offending pro- England has the executive adminis- ducers under the marketing schemes tration assumed a peculiar jurisdic- might cause such dissatisfaction to tion to itself, or removed its officers other producers, and so place a from the jurisdiction of the courts of severe strain on their loyalty, thus common law... .It will be seén that leading to a breakdown of the the ordinary jurisdictions of France schemes. have always been liable to be super- So the principle was accepted seded by extraordinary judicial au- that, when the judgments of the thorities when the interests of the Courts are unlikely .to suit the government or the responsibility of purposes of the State, then in the its agents were at stake. The arbi- name of expediency, a more com- rary Jurisdiction of . such irvegu. pliant tribunal should be ap- °F tribunals was, in fact, abolishe pointed in their place. So might in England in 1641 by the Act under Louis XIV have reasoned when he a the ih ure of Star Cham- promulgated the following decree: “It is moreover ordered by his De Tocqueville did not conceive Majesty that all disputes which that, many years after his death, may arise upon the execution of those irregular tribunals beyond this order, with all the circum- the reach of the High Court would stances and incidents thereunto be re-established in the country belonging, shall be carried before whose legal system he so much ad- the Intendant to be judged by him, mired. saving an appeal to the Council, and all the courts of justice and The Agricultural Act tribunals are forbidden to take After World War II, the ad- cognizance of the same.” vance of administrative law in De Tocqueville, who quotes this Great Britain continued apace. decree in his State of Society in The most outstanding addition to France before the Revolution of the new system was the Land Tri- 1789, also reminds his readers of bunal, set up under the Agricul- the unity of the British legal sys- tural Act. This Act provided for tem and the difficulty British the dispossession of farmers from people had of even conceiving an their land if Agricultural Commit- idea so alien to their thoughts as tees considered them inefficient. “Administrative Law’: Their age-old right of access to ===== PAGE 49 ===== 1957 ADMINISTRATIVE LAW IN GREAT BRITAIN 47 the ordinary Courts was denied field, as they are answerable only them, and instead, they were per- to the Minister under whose au- mitted to appeal to this entirely thority they have been set up. In new court, the Land Tribunal. his turn, the Minister may act The members of this body were with a wide discretionary power appointed by the Minister of Agri- completely beyond the reach of the culture himself, but as his serv- High Court. ants had initiated the proceedings against the farmer, this practi- cally made him the judge in his own case. When the Conservatives were returned to power, they amended the Agricultural Act by providing that appointments to the Tribunal were, in future, to be made by the Lord Chancellor instead of by the Minister. Otherwise, they left that the English system of a uni- the Act very much as it was versal jurisdiction has in reality passed by the socialist govern- broken down, with the result that ment. the entity which today wields the ] most real power — the Minister and Land Tribunals Above the Law his Department —is in England Although they have the power subject to a merely formal legal con- to inflict heavy fines and, in the trol, and is beyond all effective judi- case of the Land Tribunals, can cial supervision. recommend to the Minister that a Professor Hamson rather nos- man be deprived of his farm, all talgically recalls Dicey’s fears of these new administrative courts administrative law, but he believes are perfectly free to decide their that with the growing power of own rules for the conduct of the the State, the extension of such a cases before them. They can jurisdiction is inevitable. He sug- ignore those principles of proce- gests, as a remedy, that a special dure and evidence which, in the Court be set up to control the ac- ordinary courts, have grown up tivities of administrative officials. over the years with the sole aim He points out that this is the of protecting the rights of the function of the French Conseil individual. Their power is very d’Etat, and recommends that body nearly absolute in their particular as a model for a similar court in No Judicial Supervision C. J. Hamson, Professor of Comparative Law at the Uni- versity of Cambridge, has pointed out the danger to the British legal system arising from the new ad- ministrative tribunals. In his book, FEzecutive Discretion and Judicial Control, he writes: What we have to observe today is ===== PAGE 50 ===== 48 THE FREEMAN August Great Britain. Many concede that it was conceived by Rome and de- if an administrative jurisdiction veloped by Western civilization — must be accepted as a necessary has been completely destroyed. Its part of the planned economy, a place has been taken by the wide court with an overriding au- discretionary powers of the state thority such as Professor Hamson official. suggests, can be some check on In Great Britain, state economic arbitrary power. But was the planning as yet controls the pro- great Dicey wrong when he ducers only in a small section of praised British law for being free the total economy, but it is already from a separate administrative clear that the right of access of jurisdiction? these producers to the traditional Courts must be curtailed. If the Justice versus Welfare State planning of the economy is allowed The fact is that the British to extend into new fields, we can legal system, which reached its only conclude that the jurisdiction . highest development in the nine- of the High Court will be corres- teenth century, is the product of a pondingly limited; and Great Brit- civilization which based its eco- ain will have substituted for her nomic activities on the freedom of traditional legal system, concerned the individual. Its traditional only with justice, a new system Courts are concerned wholly with of law concerned primarily with the rights of the individual and the efficient working of the econ- not at all with the efficient work- omy according to the ideas of the ing of the economic system. They government in power. are, in consequence, unsuited to Dicey’s conception of the Rule enforce the vast accumulation of of Law, under the one centralized new regulations made necessary authority of the High Court, was by the modern ideas of economic perfectly sound; but it would ap- planning. pear that it is only applicable to a In Eastern Europe where the free economy. The question is: economic system is wholly planned Can the Rule of Law survive in a by the State, the Rule of Law — as state-planned economy? LI | ocas CN! 00060 | The Odds Against Justice Somebody claims to have figured it out that we have thirty-five million laws trying to enforce ten commandments. LOYD WRIGHT, President, American Bar Association, 1955 ===== PAGE 51 ===== CoLM BROGAN HE MOST REMARKABLE spectacle which London can offer to any visitor is a view of the crowds be- sieging the emigration offices of the Dominions. Toward the end of last year and the beginning of 1957, the number of people applying to go to Canada, Australia, New Zealand, and South Africa increased by sixfold. So far as can be discovered, the propor- tion of professional men and highly skilled technicians among the intending emigrants is ex- tremely high. These are the people Britain can least afford to lose, and their rush to get out is a cause of real and growing anxiety. Why do they want to go? The intending emigrants them- selves find it hard to explain why they want to say a long and last farewell to their native shores. But there can hardly be any doubt that Mr. Brogan is a well-known British journalist. Why the best British brains are quitting the Welfare State the biggest cause of the exodus can be summarized in one word: Egalitarianism. The young people of high skill and training, enterprise, and 1initi- ative can see no future for them- selves in the Britain of today. The social atmosphere is such that the man who gets ahead by his own efforts is more likely to provoke resentment and envy than respect and admiration. The machinery of government taxation is applied to make sure that any extra rewards he may make are taken back from him and distributed to the people who feel that the world in general and the government in particular owes them a living. Britain is waking up to the needs of a technological age and is beginning to spend fairly heavily on the training of technological experts. But roughly half of those who are carefully and expensively trained are leaving the country al- 49 ===== PAGE 52 ===== 50 THE FREEMAN August most as soon as they are qualified. are moving out. As Lenin said of In other words, the people of the Russian army in 1917, they Britain are paying for the train- have voted with their feet. The ing of highly skilled young people kind of life that Britain offers is who will add to the wealth and ef- not the kind of life they want to ficiency of the Dominions, the have. : United States of America, and But how much worse will the South America. kind of life be that Britain can of- It looks like.bad business. But fer when they are gone? That is you can’t have a society where the the question which should be vex- dull are declared the equals of the ing the soul of the British Social- clever, and the lazy the equals of ist party and be vexing even more the enterprising, and hope to hold heavily the soul of the “me-too” the minority who keep the major- section of the Conservative party. ity in their jobs — unless you put It is the biggest domestic ques- down an Iron Curtain and prevent tion that confronts Britain today; the best elements from getting and it may, one day, be the biggest away. domestic problem America will Britain is egalitarian, but have .to face if she continues to Britain is not totalitarian. The re- copy the British welfare state. ® o sult is that the dynamic elements By permission of Spadea Syndicate “If You Can Keep It” “We have given you a Republic, if you can keep it,” explained the aged Ben Franklin as he wearily hobbled from Independence Hall after the work of creating our Constitution was completed. President Eisenhower’s tremendous budget is the answer, 170 years later, as to how well we have cared for the Republic Franklin and his cohorts gave us. And our generation cannot reap much satisfaction from the results of our efforts to preserve the work of our ancestors. The truest measure of the march from freedom to dictatorship is the percentage of the national income taken for governmental purposes. Each year the percentage of our earnings taken by the federal government grows greater. The end result of this road can only be eventual confiscation, extin- guishment of human liberty and total dictatorship. H. B. BASS, in a privately circulated letter from Enid, Oklahoma, May 15, 1957 ===== PAGE 53 ===== HE FREE MARKET is the obvi- ously fair and mutually bene- ficial method of making exchanges. { Yet, in the vitally important field : of “marketing” higher education, y : this method has been largely L : abandoned, as C. J. Steiner, presi- | dent of the University of Detroit, ! } well points out in the article, “An Educational Challenge,” in the April FREEMAN. Few if any of our colleges and universities charge the student a tuition fee sufficient to defray the cost of the educational services which they render him, to say nothing of charging enough to make the transaction profitable to the institution. In the business world, this kind of exchange would lead to quick bankruptcy. In order to make up its deficit and to get capital for expansion, the college looks to foundations, ; - firms, churches, and individuals Le } : for gifts; and on more and more : occasions to the State for sub- re sidies. When free goods are distrib- uted, the word gets around and takers come from all quarters. : "OSCAR W. COOLEY s Mr. Cobley is Assistant Professor of College education being offered at Economics, Ohio Northern University. less than cost, it is not surprising i that more youths are knocking at fr the gates of our colleges than the I So latter can accommodate. £3 Tre. ===== PAGE 54 ===== 52 THE FREEMAN + August To hold back the freshman flood, tion for a sound business loan is some institutions are raising their that it enables the borrower to in- academic entrance requirements. crease his earnings by a sufficient But what of economic entrance re- amount to more than repay the quirements? The college that puts loan. A few thousand dollars a low price tag on its product loaned to a serious-minded youth should not be surprised if the to enable him to become an engi- buyers seek it without enthusiasm neer, or doctor, or professor, or and consume it lackadaisically. On businessman surely should qualify the other hand, the youth who as such a loan. Any youth who ob- sacrifices to pay his way through jects to obligating himself for college is not likely to be absent such a purpose would, by this act, from classes, to study just enough be placing such a low valuation on to “get by.” The college whose tui- a college education that he would tion schedule is set up on a break- seem to be a poor candidate to even business basis will get stu- receive one. dents who mean business. What college president would } » not consider himself fortunate if Education Pays Dividends his institution held the promissory To the complaint that many de- notes of former students for sums serving youth cannot afford to pay representing the cost of their edu- the full cost of a college education, cation, over and above what they it should be said that such an or their parents had paid in cash? education can and should enable The payments of principal and a person to make substantially interest on such notes would be more income, throughout his far more dependable income to the . working life, than he can make institution than the present without it. President Steiner says alumni gifts, most of which are it means an additional $100,000 in pittances received only after lifetime earnings. Is there -any strenuous asking. good reason why the institution which gives the student this earn- The Strain Increases - ing power should not be repaid In the next fifteen years, the in- with part of these extra earnings? crease in the number of students, Colleges which have loaned which is expected to double, plus money to students on a business the greater cost of operation per basis, charging interest,, have student, is bound to put a terrific found that these loans are in most financial strain on the independent cases repaid. The prime qualifica- colleges. Already college presi- ===== PAGE 55 ===== 1957 THE BUSINESS OF EDUCATION 53 dents are knocking with ever- than in a private institution. Al- growing insistence on the doors of ready, private colleges are asking foundations, corporations, and for state support. Legislation is wealthy donors. This is not eco- being drawn to provide federal nomic enterprise; it is charity in “aid” to higher education. The a frock coat but charity neverthe- time may not be far off when sub- less. Higher education in the stantially all our colleges and uni- United States is too big and im- versities will be financed — and portant a business to be operated controlled — by government. One on a charity basis. It should be hardly needs to point out that this operated, as other big business is will be the end of truly liberal edu- supposed to be, on a market basis. cation. If this is not done, the financing If this results, it will be because of higher education seems likely Americans failed to appreciate the to gravitate into the hands of the principle of the free market State, and this despite the fact enough to utilize it in the dispens- that it costs society more to edu- ing of their most important cate a youth in a state university “product.” oe 00 ; En on A Leveling Down Process ERT One of the things which are causing thoughtfu] Americans in- creasing concern is the growing pressure that is being exerted on our tax-supported colleges to throw open their doors — like the gates to a public park — to all who apply, without regard to in- tellectual abilities or personal aptitudes. In making higher educa- tion a pleasant experience for the mediocre, such colleges are neglecting the brilliant. It is a leveling down process, driving higher education in exactly the opposite direction from that in which it should be going. From Whatsover Things, a publication of Stetson University, October, 1955 ===== PAGE 56 ===== Ea thics and the & xeculive In the life of every executive, decisions involving basic ethical principles are frequent — and many of the situations are so casual that it is easy to overlook the moral judgments required. Yet many small slips will eventually undermine the executive's integrity — and give rise to a cynical attitude among employees, customers, and public. WAYNE G. BROEHL, JR. HE SUEZ CRISIS not only posed ownership and the wide use of the far-reaching political and eco- professional manager. nomic problems; it also brought * Certain case examples come to to the fore fundamental questions mind immediately, for their coun- of ethics and morality. That these terparts have been in the news con- questions should be high-lighted tinuously in recent months: with such clarity on the world + The board of directors of a scene is of more than coincidental textile company decides to close importance to the business execu- three mills in upper Massachusetts tive. For never before has the and New Hampshire. When and American business community how are the employees to be noti- been so deeply concerned about its: fied? moral responsibilities to individ- + The president of a machine uals and society. Today’s execu- tool concern is threatened with a tive is again and again putting proxy contest by insurgent inter- himself and his corporation ests apparently chiefly interested through a rigorous process of soul- in a spin-off for short-term finan- searching on these questions. And cial gain. He ponders whether to slowly but surely he is helping to attack the opposition on a per- evolve what Adolph Berle, in his sonal basis. provocative Twentieth Century + The labor-relations manager Capitalism, calls the -“‘corporate of a construction company is prom- conscience.” Almost unquestion- ised labor peace in exchange for ably this concern for the “moral under-the-table payments. decision” has been one of the * The sales manager of an air- key end-products of broader stock craft company is led to expect pref- Professor Broehl is at The Amos Tuck School of Business Administration, Dartmouth College. This article is reprinted by permission from Dun’s Review and Modern Industry, May 1957. 54 ===== PAGE 57 ===== 1957 ETHICS AND THE EXECUTIVE 55 erential treatment on a govern- with large-scale moral issues has ment bid if the company offers a further clouded another, and much certain government official a job. less easily discernible, ethical pit- fall. This lies in the executive’s One Thing in Common daily life; it is produced by his All these examples have one obligation 0 make hundreds of thing in common — they pose ques- small-scale decisions, none of them tions of considerable import. The catastrophic in themselves. But wrong answer in any of the four their cumulative effect is probably cases could have initiated a chain much greater than the results of of events that might have ruined one or two major decisions. the responsible executive or his An executive, whatever his func- company. We have, in effect, what tional area, deals with people. we might call a “catastrophic al- Further, his relationship with ternative.” these people is authoritative; he The executive facing such a sit- has, in a real sense, control over uation will quickly recognize the their destinies. importance of the problem; he can The moral implications of this be expected in almost every case fact are far-reaching. In small to perceive its moral and ethical, ways and over many, many minor as well as its economic and politi- incidents the executive exerts a cal, elements. fundamental impact on the charac- Of course, business will always ters of the people his influence offer opportunities for immoral touches. Often this impact is siz- acts, and every period has pro- able. An executive with a thor- duced a “robber baron” element. ough-going set of ethical values But the “age of the managers’ has will convey these values to people produced a climate of morality in throughout his organization; business that has never been sur- further, his influence will be felt passed; the incidence of robber in the host of external relations barons today is extremely low. that are among his responsibilities. And, while the exceptions may not Relationships with suppliers and be condoned merely because they customers, community and state are few, today’s business execu- officials, educators, labor union of- tives may well be, in matters of ficials, foreign businessmen — all the larger ethical issue, among the are influenced for better or worse most moral of the representatives by the executive's daily actions. of the world’s professions. Not only when a new product is But the introspective concern introduced or when purchasing re- ===== PAGE 58 ===== 56 THE FREEMAN August quirements are drastically revised key men must “voluntarily” ap- is there ethical and moral inter- proximate his schedule; one who play; a “routine” sales or purchas- does not is considered to lack in- ing conference, multiplied many terest in the company. His execu- times, will have a tremendous long- tives first chafe under his influ- run effect on both the executive ence, but soon they accept it and himself and those with whom he demand the same devotion from is dealing. } their subordinates. + President Y, one of the most influential men in his town because Unfortunately, the temptations of his company’s dominant posi- for minor slips in the value struc- tion in the area, becomes chair- ture are greatest at this “routine” man of his church’s finance com- level. A position of power often mittee. He himself contributes makes a person arrogant or pomp- generously and he gets substantial ous; successful administration of contributions from his friends. At a complex organization can readily church meetings he frequently give a feeling of infallibility un- makes known his belief that the justified by facts. church should become more of a A minor slip by a person in such “social institution’; the minister a position is rarely catastrophic; and many members disagree, but the ethical nature of the situation are reluctant to speak out. Finally usually goes unnoticed. But the the church’s character is funda- effect of such minor slips, un- mentally altered over the unvoiced fortunately, is cumulative. At last objections of many of its members. "the executive loses his perspective, » Vice-president Z prides him- and his aura of authority tends to. self on the executive development destroy the values of those whose program he instituted in his divi- lives he touches. sion. He attends most of the ses- Consider these examples: sions, often making known his + President X founded his com- own opinions. He asks the partic- pany 30 years ago and has made ipants in each conference to it one of the leaders in its field. evaluate the program’s worth His pride in this accomplishment afterward in a letter directly to is great. But he has expected equal him. The responses are uniformly pride from his key subordinates. favorable, with heavy emphasis on Childless, he continues to maintain the ideas he himself expressed. the killing schedule he followed Each of these three examples in the company’s early years. His shows certain “human relations” Temptations of Power ===== PAGE 59 ===== 1957 ETHICS AND THE EXECUTIVE 57 errors — the executive was failing fails to stress that they must be to communicate, was not associat- applied on the basis of a firm set ing himself with the group, was of personal values. A decision not “listening,” and so on. But based solely on momentary consid- even had he brought these out- erations or group pressure is ward manifestations under control amoral. — as he might have had he taken Everything an executive says human relations courses and prac- and does to subordinates, supe- ticed all the techniques well — he riors, and persons outside the com- would still have had an overriding pany, he does and says out of his duty to face up to the ethics of own mind and heart. Each action each question. is in a small way a decision in ethics, and the cumulation makes More than Techniques up his character. Current human relations Such a cumulation may look courses seem to hit hard on the widely different in different men. necessity to ‘‘work through But its essential qualities are people,” to gain “positive motiva- readily perceived. It is remarkable tion.” The executive is exhorted fo how quickly and intuitively sub- develop two-way — or three-way, ordinates can sense a man’s ethics. or even four-way —communica- Over the long run, humility, kind- tion, is told to ‘perceive the ness, trustworthiness cannot be totality.” : projected unless they are genuine. But little or nothing is said And firm and lasting human rela- about the set of personal values tions can be effected only through the executive is to speak out of in application of principles within an applying these principles. In the ethical framework. A man who final analysis, everything a person turns his human relations “princi- does or says manifests his own set ples” on and off at will is usually of personal values. One cannot found lacking over the long run. espouse ethics for catastrophic al- ternatives while resolving “small” What Do You Really Worship? issues amorally. And one great It would be presumptuous to set vacuum in the human relations forth a “handy list of personal field today is the result of its fail- values” that could be applied in ure to recognize the need for any situation; in fact, the tend- morality in small decisions; it ency to compile such lists is one of offers “principles” by which one the major weaknesses in human may achieve certain results, but relations training. ===== PAGE 60 ===== 58 THE FREEMAN August But perhaps we may say this sions will reflect their religious much: A man puts first that which base even if he tries to conceal it. he worships. If he worships power Since all religions have a common or influence, his day-by-day deci- ethical base, it does not matter for sions will invariably reflect that our case what his religion may be. fact, no matter how carefully he What does matter is that any de- wraps them in cloaks of selfless- cision, big or small, be made in the ness and service. And if he places conscious realization that it repre- first his religious faith, his deci- sents an entire value structure. e LIVINGSTON KEPLINGER OUR PRESENT TYPE of prosperity has risen 3 per cent, or 875,000; sustained by large annual military however, during the same period spending distorts normal compari- government workers have in- son between rise in prices and the creased 31 per cent, or 1,700,000. increase in physical production. Since 1940 the U. S. population This is so because such a prosper- has increased 29 per cent. Indus- ity. obscures the accelerating rise trial production increased 113 per in the cost of government. In all cent, but by contrast other values manufactured goods these costs have risen out of all proportion to are added to the selling price, so it production — gross national prod- becomes apparent that in addition uct up 310 per cent, U. S. govern- to military purchases the two ment expenditures up 634 per cent, major pressures from spiraling federal tax collections up 1,184 per wages and spiraling costs of gov- cent. ernment are pushing the total It seems almost incredible with economy into higher levels of {hese facts available that anyone prices and production without re- asks why prices are up instead of lation to normal civilian supply asking how much higher they will and demand. rise and — what is more important In the past ten years employ- — what can be done about halting ment in manufacturing industries the steadily decreasing value or Mr. Keplinger is President of the Steel Shipping purchasing power of the dollar. e Container Institute. ===== PAGE 61 ===== A REVIEWER'S NOTEBOOK AN EXCEPTION MAKER'S FATE JOHN CHAMBERLAIN | HE REPUTATION of Alexander Republic, was a self-proclaimed be- Hamilton has fallen on evil liever in “Hamiltonian means to days. The libertarians disown him Jeffersonian ends.” Regardless of because of his tariff views, which their views about Hamilton's eco- is perhaps to be expected. The nomics, these older thinkers of Welfare Statists (who have per- whatever school at least took Ham- verted Jefferson, the anti-Statist, ilton seriously as a patriot and as to their own ends) hate Hamilton a great historical figure. because of his concern for the To revive the Hamiltonian tra- “rich, the well-born, and the able.” dition, Louis M. Hacker, Dean of The unkindest cut of all, however, the School of General Studies at has come from the new breed of Columbia University, has written “conservative”— men “who reject a compact little book called Alex- Hamilton because he was a “mer- ander Hamilton in the American cantilist,” had an “obsession” with Tradition (McGraw-Hill, 284 pp. economics, and allegedly helped $4.75). It is Louis Hacker’s opin- deliver a young nation into the ion that the “new conservatives’ hands of a “plutocracy.” and the libertarians alike know All of this is singular when one little about the actual substance of remembers how Hamilton affected Hamilton’s thought. the “liberals,” ““ progressives,” and According to Dr. Hacker's inter- “conservatives” of an older gener- pretation, Alexander Hamilton was ation. In the late nineteenth cen- neither a ‘mercantilist” nor a tury William Graham Sumner, “lover of government by plutoc- who was as passionate a free racy.” He was, rather, a confirmed trader as one could wish, revered believer in the liberal economics of Hamilton as the chief architect of Adam Smith's Wealth of Nations, the young American Republic. The which, on evidence offered on many elder Henry Cabot Lodge, a “con- pages of Dr. Hacker’s book, found servative,” and Theodore Roose- itself paraphrased or even copied velt, a “progressive,” agreed on without benefit of quotation marks taking Hamilton as a model of the in many a passage of Hamilton’s correct public servant, and Her- reports on banking, currency, and bert Croly, founder of The New manufactures. 59 ===== PAGE 62 ===== 60 THE FREEMAN ) : August Dr. Hacker has been at great ton was thoroughly familiar with pains to disentangle Hamilton the whole natural-rights debate of from what successive generations the eighteenth century, and he have made of him. The picture, as could quote from Coke, Blackstone, it comes out, is a most attractive and John Locke as aptly as could one. Jefferson, John Adams, or anybody Hamilton, who was born out of else. wedlock in the Lesser Antilles, quite definitely had his way to Bounties for Infant Industries make in the world when he moved In view of what has been made to New York City on the eve of the of Hamilton’s economics, perhaps American Revolution. But he was the most interesting pages in Dr. no vulgar arriviste. Dr. Hacker Hacker's book bear on the “protec- presents him as a temperate and tionist” strain in Hamilton’s think- studious young man who had hab- ing. It is Dr. Hacker's opinion, its of thoroughness. He may have backed by copious quotation, that lacked Jefferson’s devouring curi- Hamilton was a firm supporter of osity about the wonders of the Adam Smith’s “simple system of natural world, but when he led his natural liberty’ even in matters company of volunteers to war in extending beyond national borders. 1776, he took with him the works True, Hamilton wanted to see of Demosthenes, Cicero, Plutarch, “infant industries” develop in the Bacon, Hobbes, and Rousseau, United States in order that the along with a number of histories young Republic might have the and Ralt’s Dictionary of Trade and basic security of a widely diversi- Commerce. “Only the last,” says fied economy. To establish these Dr. Hacker, “in all likelihood, was “infant industries” Hamilton was unfamiliar to Jefferson and Madi- prepared to pay a “short run” son.” ' price. But Hamilton, according to But, far from showing an “ob- Dr. Hacker, wished to use a sys- session’ with economics, the fact tem of temporary bounties rather that Hamilton was interested in than a protective tariff to help his such questions as the public debt, infant industries get on their feet. money, banks, and manufacturing Says Hacker, paraphrasing Hamil- made him a much more rounded ton’s own thought, “bounties, un- man than either Jefferson or Madi- like high duties, will not produce son who had the provincial “agrar- scarcity. Protective duties ulti- ian” point of view. Incidentally, mately lead to higher prices; in the on Dr. Hacker's showing, Hamil- short run, they discourage impor- ===== PAGE 63 ===== & 1957 AN EXCEPTION MAKER'S FATE 61 tations. ... unlike protective du- European enemy of Adam Smith — ties, bounties will promote exports, and, as such, he might justly be too.” called the creator of the school Even bounties, said Hamilton, which culminated in the theories should be terminated once their of Dr. Hjalmar Schacht, who put purpose has been accomplished. his “nationalist” economic princi- “The continuance of bounties on ples at the service of Adolf Hitler, manufactures long established,” he the totalitarian. said, “must almost always be of questionable policy.” Temporizing with Principle No doubt Dr. Hacker is on firm This is what happens when the ground in his attempt to number “practical” statesman temporizes Alexander Hamilton among the be- with a principle. In our own day lievers in the long-term value of we have seen the same thing hap- libertarian principle. But Hamil- pen to “Keynesianism.” John May- ton has paid the price which all nard Keynes himself was no be- state manipulationists, ewen the liever in “government spending” temporary ones, must pay. When as a universal cure-all; indeed, they invoke government to deal when “full employment” had been with a “short-run” problem in- achieved in Britain during World stead of relying on the principle War II, Keynes became a propo- of voluntary association to handle nent of high taxation and compul- it, they set in motion events which sory saving. But, having given go beyond their control. politicians the idea that govern- Thus, having given a protection- ment spending is a sure-fire way of ist cast to the American economy garnering votes, Keynes discov- at the very outset, Hamilton start- ered that it takes virtually a mira- ed a tradition which could not be cle to reverse the ‘“manipulation- reversed. Not only did he create ist” gears. Today England remains the “American system” which a State where Welfarist spending came to rely on the tariff, he af- is out of all proportion to the ac- fected the economic thinking of tual benefits accruing to indi- continental Europe. A German, viduals from such things as “free” Friedrich List, who lived in Amer- medicine and “rights” to old-age ica for a period in the early nine- protection. The “conservative” in teenth century, read Hamilton and Keynes has been eaten up by the returned to his homeland to ex- Keynes who was the radical ma- pound the doctrine of nationalist nipulationist, just as Hamilton, the economics. List became the prime disciple of Adam Smith, has been ===== PAGE 64 ===== 62 THE FREEMAN August eaten up by the protectionist Ham- might have been defeated in the ilton who was the forefather of key state of New York. The defeat Friedrich List. of the Constitution, so Dr. Hacker } asserts, would have been fatal to The Good He Did America, which.needed freedom-in- If Dr. Hacker cannot in the na- federation even to exist in a world ture of things rescue Alexander of wolves. Hamilton from the fate of all ma- Thus Hamilton certainly de- nipulationists, he does nonetheless serves the support and homage of clear the air about many things.- all believers in the American tra- Hamilton’s insistence that a gov- dition, whether they call them- ernment must be honest in all mat- selves “liberal” or “conservative” ters pertaining to money and or what-have-you. LI credit enabled the young American . ] Republic to find itself, and nobody = The Great Giveaway can ever take that away from him. The Realities of Foreign Aid. Furthermore, it is incontestable BY Eugene W. Castle. Chicago: that Hamilton was one of the chief Henry Regnery & Co., 183 pp. architects of the American Consti- $3.50. tution. Even though he did set the ANGRY, EVEN frenetic, writing has protectionist fallacy in motion on its uses. Its principal function is American shores, the good he did to get people stirred up to the in expounding the political princi- point where they will “do some- ples underlying a proper check- thing about it.” Restrained, and-balance system far outbal- thoughtful argument may carry ances his waywardness about eco- intellectual conviction, but that is nomic “bounties.” no substitute for Zola’s J Accuse Dr. Hacker thinks Hamilton or Tom Paine’s pamphlets during played a major part in saving the the American Revolution. In the American Revolution from an political arena, where the objec- equalitarian perversion of its true tives are always immediate, the libertarian origins. If it had not man who lashes out with passion been for Hamilton's action at the is more effective than the philoso- abortive Annapolis Convention, pher. there might have been no call for Take the case of The Great a Constitutional Convention." And Giveaway by Eugene W. Castle. if it had not been for Hamilton’s The obvious purpose of the writer political labors after the Constitu- is to make people aware of the tion had been written, ratification complete failure of our “foreign ===== PAGE 65 ===== 1957 A REVIEWER'S NOTEBOOK 63 aid” policy since its inception — mestic economy, that it is design- that is, failure to achieve the very edly inflationary, that it increases ends which its advocates claimed the burden of bureaucracy at for it. The $60 billion of American home and abroad, that it stems tax-money have not bought us de- from the Keynesian notion that a pendable allies, won friendship country can spend itself into pros- for us as a nation, stopped the perity. That is why the politicians march of communism, improved and large segments of American the economies of the recipient industry, to say nothing of Key- countries, nor done anything else nesian economists, have supported that its proponents advanced in the great giveaway. But, this at- support of donations. Mr. Castle tack on “foreign aid” calls for a rests his case on facts, drawn knowledge of economic principles mainly from his observations as and an exposition of the long-run a world traveler, without resort to effects of inflation. Mr. Castle is theory, and is uninhibited in his interested in immediate action and denunciation of the whole thing. therefore goes after “foreign aid” He wants “foreign aid” curtailed with hammer and tongs. and stopped, now. It is an effective book. It gets One cannot say with certainty one “mad.” The author makes no that his opinionated exposition pretensions to literary excellence, has had anything to do with the nor is he concerned with what present spontaneous revolt against place his book will attain in the the Eisenhower budget; but when future. He wants action now. Ap- one reflects that the letter-writing parently he has got some action; attack on it is largely directed at and if his book is widely read, it the continuation of “foreign aid” may have far more effect on the (as reported), one is inclined to discontinuation of the great give- believe that among these protes- away than the learned disserta- ters there must be a number of tions stimulated by this economic readers of this book. To that ex- monstrosity. tent the book is a success. FRANK CHODOROV Mr. Castle only touches on the underlying reasons for ‘foreign } 2 379 . Any book reviewed in this Book Section (or aid” which economists have been any other current book) supplied by return trying to expose in more thought- mail. You pay only the bookstore price. We ful essays and books — namely, pay the postage anywhere in the world. that the spending of our money THE BOOKMAILER, Box 101, New York 16 abroad is a hypodermic for our do- ===== PAGE 66 ===== —— . a w a Cy R iA © a To. \7 br Le » TL N . ~ . ll - . ’- . ‘oe . En bps a er K { Aad | ay Ren ad RE Phew n i TN ea RE a Ear PEL wk oearar a Tat ron ERLE Would you call this fair play? Number 5 has to take the high hurdles bills that you pay in yours. These —number 3 gets by with the low. are the people who get their electricity Would you call this a fair race? from federal government electric -sys- Hardly—but you face that same kind tems. Like runner number 3, they of unfairness every day as far as your enjoy lower tax hurdles while you taxes are concerned. Here's how: strain over the high ones. Part of every. dollar you pay for This kind of tax favoritism is a far electricity goes for taxes. But a strange cry from American standards of fair twist in federal laws exempts several play. That’s why we believe it should million families and businesses from be made widely known and given criti- paying all the taxes in their electric cal study. America’s Independent Electric Light and Power Companies* *Company names on request through this magarine ===== PAGE 67 ===== . “*Make yourself comfortable’... say the makers otf steel springs Your comfort is the constant goal of those who plier of quality-controlled steel wire for the make steel springs and of the manufacturers who spring-making industry is the Jones & Laughlin use them in their products. Most manufacturers Steel Corporation. J&L steel wire meets every of furniture, bedding and automobiles use steel specification for the forming of high-quality steel springs because springs do the cushioning job so springs—just as other J&L steel products meet well, last so long, yet cost so little. A major sup- specific needs in many other industries. Jones & Laughlin STEEL CORPORATION PITTSBURGH STEEL -.- a great name in steel ===== PAGE 68 ===== The Golden Rule and Utility Are Harmonious O When the time comes that all men shall freely enjoy the fruits of their own labor, then will willing exchange prevail; then will gov- ernment be inactive except as it impedes violence, fraud, and spe- cial privilege; then will all men be as prosperous as their abilities permit. Then will the era of the Golden Rule be ushered in, for, in such relationships, no one will be doing to others that which he would not have others do unto him. O Trying better to understand and searching for ways more clearly to explain the ideas and ideals of these relationships are the ob- jectives to which the Foundation for Economic Education is dedicated. O All who believe that this type of educational endeavor needs em- phasis at this time in our history are invited to lend their support. In so doing they may have the satisfaction of helping individuals “from all walks of life better to understand private property, free market, limited government institutions — the institutions that are four-square with the Golden Rule. DO For an explanatory brochure, address: THE FOUNDATION FOR ECONOMIC EDUCATION, INC. Irvington-on-Hudson, New York