===== PAGE 1 =====

MAY 1958

The Human Side of Human Beings
The Sheer Joy of Learning

Freedom of Opportunity

Wages, Unemployment, and Inflation
Inflation Is a Moral Problem .
Profits — Key to Prosperity
Organized Incentives Not To Work .
Reviving the Railroads .

The Measure of Success

Recipe for a Good Meal

False Gods

" Economy in Government

“Wage Push’ and Labor ’Pull”’
Other Books

yi
E

IDEAS ON LIBERTY

Sidney J. Abelson 3
M. L. Levy Nn
Darryl W. Johnson, Jr. 13
Ludwig von Mises 15
Christianity Today 23
William Henry Chamberlin 26
F. A. Harper 32
Ben W. Heineman 35

Bob and Ann Signor 4)

Leonard E. Read 46
Reginald Jebb 51
Arthur Kemp 56
John Chamberlain 59

63

THE FOUNDATION
FOR ECONOMIC EDUCATION, INC.

Irvington-on-Hudson, New York


===== PAGE 2 =====

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===== PAGE 4 =====

[recman A MONTHLY JOURNAL OF IDEAS ON LIBERTY

MAY 1958 Vol. 8 No. §

LEONARD E. READ President, Foundation for
Economic Education

PAUL L. POIROT Managing Editor

THE FREEMAN is published monthly by the
Foundation for Economic Education, Inc., a non-
political, nonprofit educational champion of private
property, the free market, the profit and loss system,
and limited government, founded in 1946, with offices
at Irvington-on-Hudson, New York. Any interested
person may receive its publications for the asking.
The costs of Foundation projects and services, in-
cluding THE FREEMAN, are met through volun-
tary donations. Total expenses average $12.50 a year
per person on the mailing list. Donations are invited
in any amount — $6.00 to $10,000 — as the means of
maintaining and extending the Foundation’s work.

Accepted as controlled circulation publication at Irvington, N. Y., with
additional entry at New York, N. Y. Copyright, 1958, The Foundation for
Economic Education, Inc. Printed in U.S.A,

Additional coples, postpaid, to one address: Single copy, 50 cents;
3 for $1.00; 25 or more, 20 cents each.

Permission Is hereby granted to anyone to reprint any article In whole
or in part, providing customary credit Is given, except ‘The Human

Side of Human Beings,” ‘Wages, Unemployment, and Inflation,’ ‘‘in.
flation Is a Moral Problem,” and ‘‘Reviving the Railroads.”

Fl'E Any current article will be supplied In reprint form If there are enough
Inquiries to justify the cost of the printing.


===== PAGE 5 =====

TH E BOUT 2,300 years ago Aristotle
described man as the uniquely
“political animal.” He went fur-
ther than this, of course, and
H U M A N elaborated the precise political
- and other arrangements which he
considered suitable for the human
SS | D E community. And in his scheme of
things he included human slavery
as a “natural” custom because “on
~ grounds of both reason and fact,
~ OF from the hour of birth, some are
- \ marked out for subjection, others

for rule.”
H U 'M A N Plato’s star pupil, for all his
- py brilliance, could not reason beyond
SE the limited biological data avail-
able to him. He did not know, for
B E | N G S example, that man is not the only
: species with a political and social
\ history which includes ‘natural
: slaves.” A nonhuman instance is
i that of the Polyergus, a species of
; ants which has been completely de-
pendent on a slave system through-
FOUNTAINHEAD out the millions of years of its
. / existence. Aristotle might have
/ / OF THE been impressed by the fact,
FR E E ECONOMY brought to light through modern
J research, that the Polyergus “from
PL the hour of birth... are born to
/ i SIDNEY J. ABELSON ) be masters.” Their jaws are like
Ford sickles, excellent for fighting but
| almost useless for manipulating
food in the tiny quantities they re-
quire. They need to be fed by other

: /The uniqueness of man is that sooner

: ‘Hoe .
/ 'or later he releases himself from the

shackles of an imposed routine and

/ or’ Mr. Abelson, editor, writer, and lifelong stu-
; strikes out for new adventures and dent of economic and social problems, is now
] . an executive in the copy department of Comp-
: progress toward some higher goal. (on Advertising, Inc.

J 7
f 3
JN


===== PAGE 6 =====

4 THE FREEMAN May

ants who are “from the hour of Of Ants and Men
birth . . . marked for subjection.” Ever since — and perhaps before
So they raid and subdue the ap- — King Solomon admonished slug-
propriate species and continue to gards that they “go to the ant . ..
perpetuate a neat social setup in consider her ways and be wise,”
which the higher-born perform the men have been practising the in-
noble arts of warfare and political triguing art of formulating anal-
management while the lower-born ogies between ant and human
toil at the essential chores of sus- societies. And, of course, they have
tenance — an arrangement not found in those analogies warnings
anatomically too unlike the social of impending human debacle and
system prevalent in Aristotle’s lessons for the reform of our own
time. Here was an example, taken social ways; for the ants are re-
from the unyielding and unalter- markably successful as social crea-
able rules of nature itself, which tures. Their unwavering industry
Aristotle could have pointed to as and unquestioning adherence to
a paradigm for his own contrived effective social customs have left
human system. Perhaps he would them free from the convulsions
have done so, for he did not under- and upheavals suffered by human
stand how wide and deep is the societies throughout the ages.

gulf between the meanest human The ants have no problems in
slave and the highest subhuman their interpersonal relationship.
animal. They undergo no internal social

The slave system of the Greeks cataclysms. They have no jails, no
— and of other advanced civiliza- corrective or psychiatric institu-
tions — came and went, while that tions. They are never bedeviled by
of the Polyergus still lives on, juvenile delinquency nor by any of
seemingly destined to continue in- the other personal and social dif-
definitely into the future. Why ficulties which have made social
should this be? Why should slavery work so urgent and important in
be a fixed custom among these the human community. Each mem-
social insects and a fluid one in the ber of each of the 1,500 or more
human community? We find the species of ants is born with a pre-
answer in elementary and elemen- determined place in the social
tal biological facts, facts which structure, and he keeps his place
are not often looked at sharply without complaints and without re-
enough to reveal their profound grets. By virtue of unremitting in-
significance for human social dustry and an unfailing capacity
thinking. to do exactly the right thing at the


===== PAGE 7 =====

1958 THE HUMAN SIDE OF HUMAN BEINGS 5

right time the ants build homes ited or definable physical and
and communities for themselves psychological abilities, but these,
that serve their purpose of sur- despite Aristotle, do not fix our
vival to perfection. And they have status or capacity for status in the
been performing these marvels of social organization. Even the most
social organization for millions of humble slave in ancient Greece
years, with every prospect of sur- had feelings and desires, poten-
viving in the same way for millions tial and actual abilities incompar-

of years to come. ably and irreversibly different from
} those of the ants — and from all
Fundamental Differences other subhuman creatures. No in-

The simple biological fact is that dividual human being is born to be
the ant society has an organic a plumber or a playwright, though
structure entirely unlike that of experience may show that one or
the human community. Each ant is, the other occupation may, indeed,
in a realistic sense, an organ of be the most rewarding possible in
the total group which in turn de- terms of aptitude and because of
pends for its survival upon the ef- environmental opportunity. But
fective functioning of its organs, that is the point: we cannot know
just as an individual body depends what a given human is best fitted
upon the functioning of its vital for until he has had the widest
parts. Though ants do have diverse possible opportunities to explore
habits and individuality, these his interests and test his capaci-
characteristics are limited in their ties. Moreover, we know now that
expression to performance of pre- heredity is not all-limiting; cul-
determined tasks. There is no so- tural situations often draw out un-
cial mobility in an ant community, suspected abilities, if not in a given
no opportunity to alter the bio- individual, often in his children.
logically established customs. Even A quite ordinary male and an even
if an especially talented ant were more ordinary female can — and
to arise, it could not reorganize did — become the parents of a Da
this rigid communal structure Vinci. Such an astounding change
without performing unimaginable in one generation is unthinkable
biological miracles. And in that and impossible in an ant society
case the ants would no longer be or among any other creatures ex-
ants. cept man.

Humans, on the other hand, ex- We can see, then, that Aristotle’s
hibit no such biological rigidity. concept of an ideal master-slave
We are born, it is true, with lim- society is inapplicable to humans


===== PAGE 8 =====

6 THE FREEMAN May

however much it may stand up as establish his remarkable unique-
descriptive of certain insect soci- ness in the world of living crea-
eties. The human being is biologi- tures. By comparison with man’s
cally unfit for a rigid social struc- achievements all human-like facul-
ture; in the very nature of his ties discovered in lower animals
total being he requires a plastic or are of the most rudimentary sort
fluid environment if he is to suc- and just barely measurable. How-
ceed in utilizing his potentials, ever, the cataloging of these evi-
potentials which are not even re- dences of man’s uniqueness is only
motely existent within any other a way of looking at effects. Why
species. does man improvise and accumu-

But what about the vast amount late? Why does he so restlessly
of evidence, adduced by modern keep changing his way of life?
investigators, which so definitely Why does he roam the world — per-
reveals a “human side of animals”? haps the universe! — forever alter-
Comparative psychologists and ing the face of natural things?
scientists in related fields have Questions such as these cannot
convincingly proved that apes have be finally answered until the mys-
thinking capacity, birds an aes- tery of existence itself is unveiled.
thetic sense, rats the ability to Yet we can answer them for prac-
learn, to mention just a few of in- tical purposes in terms of a ‘“‘me-
numerable such instances tending chanical” feature of man’s in-
to indicate that in the final sense herited equipment.

man is unique in degree rather Thus, Aristotle classified about
than kind. 500 separate and distinct species

of living creatures. Today, that
The Uniqueness of Humanity once formidable catalog has grown

Even if we accept the conclusion to include more than one million
that man is nothing more than species. And the enlightening fact
an advanced animal, the degree of is that man and man alone among
his advancement is so great as to all this vast array of creatures
put him beyond comparison with possesses an inborn need to satisfy
lower animals in terms of the new, cumulative, and accumulat-
scope and richness of life's op- ing desires not directly related to
portunities. It is only necessary to the maintenance of life itself. No-
repeat for the record that man’s where among the million or more
capacity for abstract thinking, his of man’s fellow creatures on earth
improvisation and accumulation of has this characteristic been dis-
culture, and many other features covered, even in rudimentary form.


===== PAGE 9 =====

1958 THE HUMAN SIDE OF HUMAN BEINGS 7

Desire for Change Man is not satisfied, except at
This implacable desire for the lowest levels and under extra-
change and variety is the inborn ordinary circumstances, with mere
motive force which puts man’s ad- survival. Like the lower animals
vanced brain capacity to work. It he must meet the vital, strictly
is the lever which has lifted biological, and primary needs of
humankind above the level of bar- keeping alive. But, for one thing,
barism. It is the necessity which he satisfies or attempts to satisfy
becomes the perpetual mother of these needs with extraordinary
invention. It is the irrepressible embellishments. For another, he
conspirator which contrives to looks upon them only as necessary
keep the cauldron of dissatisfac- chores required to establish a base
tions forever at a boiling point. It for true living. And the ambit of
is the magician which compels this truer or higher life includes
concepts like ‘“‘old-fashioned” and derived, acquired, and secondary
“out-of-date” to arise from no- needs, needs that are psychological,
where. It is the progenitor of bore- socially-invented, discretionary.
dom and, at the same time, the
counterforce of inertia. It is the Beyond the Bounds of Necessity
supreme artisan which has made This seeking of satisfactions
of the basic problems of biological that are outside the scope of neces-
survival — sustenance, sex, and sity comprises the essentially
threat of attack by other creatures human part of human beings. How-
— a means instead of an end. It is ever sharp may be the anatomical
the component of man’s biological and physical analogies between
inheritance, for all its mystery, man on the one hand and other
which has given him the incentive creatures on the other, however
and the power to overcome his intriguing may be human and sub-
physical insufficiencies and to out- human psychological similarities,
wit all other creatures and nature this drive remains to mark the
itself in the struggle for survival. startling uniqueness of human-
Without it man would be nothing kind. Wearying, imponderable,
more than a tricky sort of animal, often frightening, it is still ines-
capable of performing ingenious capable; we cannot turn our backs
but sterile mental feats, yet in- on it, we cannot attenuate it, we
capable of surviving the grim cannot live without it.
physical battle with other crea- There are, of course, social phil-
tures far superior in mass and osophies and religions which be-
muscle. little, or minimize, or seek to


===== PAGE 10 =====

8 THE FREEMAN May

deracinate this uniquely human the few. It is understandable that
characteristic. In the cause of under such circumstances economic
either peace or salvation of the and social theories would arise de-
soul they propose a life of denial signed to “spread the wealth” and
and rejection, a ‘return’ to simple assure a more decent survival for
ways in which bare physical sur- the many. Since survival as such
vival and minimum comforts sup- must precede development of the
posedly would provide an environ- refinements of human life, there
ment conducive to the develop- is no logical basis on which excep-
ment of a state of mind more in tion can be taken to this goal.

tune with man’s spiritual needs However, in seeking this goal
for this world or the next. But in the tendency has been to lose sight
the long run they are fighting a of the broader human horizons. In
losing battle: this strange and un- correcting the evils of an uninhib-
remitting drive manifests itself ited individualism there has been
in a way that will not be denied. a movement in the direction of for-
Where in the world today are there getting the individuality of each
more than feeble protests against of the mass of mankind. In con-
the onrushing advance of a tech- centrating on the common denom-
nological culture which promises inator requirements of survival,
an unpredictable flow of ‘better collectivistic theories have tended

things for better living”? to neglect consideration of individ-
ualistic needs and opportunities
Surplus for Progress required by the biological fact that

A more urgent problem in our each human being is an extraordi-
attitude toward the human side of narily unique member of the aston-
human beings is presented by col- ishingly unique human species.
lectivistic economic and social
theories. Until the technological The Unplanned Benefits
break-through of this century — It has been said before, but
accompanied or made possible by certainly can stand saying again,
the mass-oriented character of the that central economic planning,
American economy — the question however well-intentioned, can pro-
of survival itself was the most vide, if at all, only for minimum
pressing problem faced by the needs and commonly-shared essen-
great mass of mankind. The satis- tial services. Even this is a the-
faction of discretionary desires oretical matter. No collectivistic
and the enjoyment of refined com- economy thus far has proved its
forts were luxuries reserved for ability to accomplish this basic aim


===== PAGE 11 =====

1958 THE HUMAN SIDE OF HUMAN BEINGS 9

of assuring a decency level of sur- trivance of self-seeking men. Man
vival for its members. But in the does not really know what he
event such an economy should suc- wants. “This is a place of hope,”
ceed it could go no further, for the wrote Thomas Carlyle, “and man,
complexity and spontaneity of in- properly speaking, has no other
dividual human desires present a possession but hope.” Man “makes
calculus of permutations and com- up his mind” as he goes along,
binations beyond solution except placing great value on some desired
by individuals, each acting freely thing one day and calling it value-
on his own behalf. less the next. Some items he values
Ultimately, it is the unplanned for the utility of the moment;
benefits of an economy rather than others he treasures because they
the planned welfare which com- satisfy a vague craving. His life,
prise the area of man’s opportunity as an individual and as a species,
to transcend survival as such and is an experiment in searching for
fulfill his human potentials. Off- an undefinable denouement or
hand it might seem as if an ideal salvation.
economy could be improvised in
which survival needs were assured New Adventures in Living
by central planning in such a way In the course of the few thou-
as to leave the quest for nonvital sand years during which man’s
satisfactions in the hands of in- truly human side has asserted it-
dividuals. The difficulty here is self he has altered his way of life
that humans, unlike other animals, numerous times, accepting status
vary to an astonishing degree in and stagnation only when re-
their choices of items required to pressed by ignorance, fear, or force.
satisfy vital as well as nonvital But sooner or later he releases
needs. And the fact remains that himself from the shackles of an
the temperamental component of imposed routine and strikes out
humans which accounts for this for new adventures in living. The
situation is as much a part of their free economy is the manifestation
biological heritage as is the more of man’s biological need to seek
complex brain in which this tem- satisfaction of diverse and un-
perament has its seat. predictable desires and through
It is only necessary to look this process to make progress
closely at the biological nature of toward some higher goal. In ef-
man, temperamental as well as forts to escape from the uncer-
physical, to realize that the free tainties and burdens of his rest-
economy is not an incidental con- less nature man may — and obvi-


===== PAGE 12 =====

10 THE FREEMAN May

ously does — experiment with according to that character. In-
planned economies. Such economies stead of fearing and attempting to
bear within themselves the most reject and escape from his unique-
potent contradiction possible: a ness, man can utilize his spe-
conflict with the irresistible bio- cial brand of courage — moral and
logical necessity of their members. intellectual — to face his special
Barring an unthinkable reversal problem. He can accept his unique-
of the human make-up, they are ness for what it is, embrace it,
destined to fail. envisage its promises, and prepare
Does this mean that there is no himself to make those promises
possible solution of life’s problem realizable.
that promises stability, security, In any case, because the human
release from the pressure of pyra- side of human beings will not be
miding desires? It probably does. denied, in the long run the free
It does not mean, however, that economy, in one form or another,
man cannot achieve a high degree is here, if not to stay, at least to
of stability and security. However, return. This is a biological im-
it would have to be a stability perative which inevitably takes
based on recognition of his unique precedence over the transitory
character and a security that is “historical necessity” of collectiv-
based on functioning effectively ist doctrines. 00

Profound Differences

IT IS MY CONFIRMED OPINION based upon diverse considerations
and upon prolonged thought, that one of the most constructive
and harmony producing moves that we, as inquiring human
beings can make, is to get acquainted with, in the most scientific
manner possible, the inherent differences that exist among mem-
bers of the human family.... Why choose our own schools,
our own amusements, our own books, our own church? Why not
have someone tell us what to eat, what to drink, whom to marry,
and when we can have children? The fundamental reason is that
each of us is a different individual —— with profound differences
— and each of us wants to live his own life. ... There is not the
slightest danger that humanity will put up indefinitely with any
scheme which involves thoroughgoing regimentation. It is not
human nature to tolerate this. There are too many potential
Patrick Henrys, and they will continue to reproduce.

ROGER J. WILLIAMS, ‘Chemical Anthropology=An Open Door”
from American Scientist, March 1968


===== PAGE 13 =====

" Nn ) \/ A_L)_ll .
me__\! i Y nt. [A \L
\ le \ | Li] = RK \ ~
ha =  § J

M. L. Levy

A: A RECENT company training Other than the incongruous use
session for middle-management of a cartoon-comic-book approach
men, a speaker pointed to the need to secure interest in very un-comic-
for statesmanship and breadth in book-like reading material, the
management. He exhorted the speaker's story was logical and
participants to read books on soci- stimulating. Yet, in the discus-
~ ology, politics, philosophy, and the sion period which followed most of
like. His entire talk was embel- the time was spent by participants
lished in the time-honored tradi- justifying the time they spend on
tion with colorful slides. His spe- the sports page, televiewing, lawn-
cific appeal to read was accompa- cutting, and other suburban de-
nied by a cartoon of a harried ex- lights, over and above any new in-
ecutive at his desk, encircled by tellectual excursion.
dancing imps bearing legends like A company executive, under
“inventory control,” ‘sales whose tutelage the training course
quotas,” and “labor costs.” Beyond was conducted, detected the un-
the barrier imps was a stool laden favorable drift of the discussion.
with books on the social sciences. He interjected the comment that
“To understand your place and keeping up with the times, under-
purpose in society is necessary to standing the American ideology
survival,” went the speaker’s plea. and competing ideologies were
“You must speak up in the battle part of management job require-
for men’s minds. To speak you ments today. He pointed out that
must understand. To understand the management of this particular
you must read, in spite of the other company would be measured on
demands for your time. You must how well it met these requirements
read so that you, your children, and would be promoted and paid
and their children, and the way of according to such measurement.
life you believe in, can survive.” The speaker, then, tried to moti-

Mr. Levy is the Manager of the Plant Salary and Wage Administration Division of the General
Electric Company in Schenectady.

11


===== PAGE 14 =====

12 THE FREEMAN May

vate us by saying in effect, “Read A climate of anti-intellectualism
or die.... Read to survive.” What exists. This does not mean failure
the executive in charge really said, to show European-style personal
however, was “Read or you'll fail deference to teachers and scholars,
to get a better job. Read to get an interpretation so often put

more money.” upon the phrase ‘“anti-intellec-
tualism.” Rather is meant the
Anti-Intellectualism lack of respect for what the

Both these appeals, regardless teacher and scholar represent —
of their worth, were external and the failure of individuals, regard-
material in nature. No one — less of their own ability, to marvel
speaker, executive, nor partici- at what man’s mind can do and
pants — suggested that love of has done and to desire to emulate
learning, curiosity, or the individ- to whatever degree possible, those
ual satisfaction of being more at who earnestly apply their mental
home in one’s time and place were ability.
appropriate or sufficient motiva- Changing the climate of this
tion in themselves to explore un- kind of anti-intellectualism re-
familiar fields through the written quires changes in attitudes which
word. Why not? That an apparent have been a long time in the mak-
lack of awareness of such motiva- ing. Meaningful, lasting changes
tion even exists is a frightening in attitude will not come from
commentary on current attitudes. threats of destruction or promises
Study for the sheer joy of learn- of more money. They will come
ing, study for the thrill of using only out of sincere respect for the
a God-given endowment denied to significance of the individual, out
species other than man, study for of wonderment and awareness of
the satisfaction it brings to the the miracle of the human mind.
curious, restless, questioning,
broadly-ranging mind seems too Correction Begins at Home
frequently forgotten, or if remem- Creation of the desired attitudes
bered, considered a little peculiar cannot be effectively delegated to
and unfashionable. The pure fun teachers, clergy, training course
of intellectual achievement is be- orators, or executives. The founda-
ing overlooked in our catalog of tion of such attitudes is in the
joys. home, in the conscious and un-

Motorcycle jackets and basket- conscious shaping by parents of a
ball have greater appeal and accept- set of values for their children.
ance than book jackets and study. Some efforts of these others do


===== PAGE 15 =====

1958 THE SHEER JOY OF LEARNING 13

help, but the receptiveness and the result of the desires of the
understanding of their audiences supporters of those institutions or
is a function of the parental in- of their apathy.

fluence which long preceded it. Observation of the practices,
And to the extent that certain attitudes, and habits of their par-
efforts of others do not help, par- ents can instill in children the
ents have only themselves to blame. strong desire to think and an
The emphasis on group harmony appreciation of the satisfaction of
at the expense of intellectual activ- intellectual accomplishment. The
ity in our schools, the increas- wrong parental example can do
ing devotion to “togetherness” and just the opposite beyond any hope
“sociability” in our churches are of correction. LCI

FREEDOM OF (Jpottind

DARRYL W. JOHNSON, JR.

K

\/

NE of the characteristics of our pounded and perpetuated the

educational system in the difficulty.
past decade or so has been its Concentration on the poor stu-
preoccupation with the welfare of dent has been accomplished only
the “slow learner,” or poorer stu- by a corresponding neglect of the
dent. This has resulted in ‘“pass- better student, and this neglect
ing” many who should have failed. has been costly. The lesson to be
We are now beginning to realize learned is that excessive concentra-
that the granting of such unearned tion on the welfare of the intel-
benefits to the intellectually poor lectually poor has not only failed
or the plain lazy has only com- to help him but that such policies

Mr: Johnson teaches mathematics at Hialeah Senior High School in Florida. He described this
article as ‘“‘one of the three-minute lectures I generally give at the beginning of each math class.”


===== PAGE 16 =====

14 THE FREEMAN May

have had an effect of causing the argument which is beginning to
intellectually rich to lose initiative wear rather thin. No amount of
in providing brain power for commendable reasons behind cer-
progress. tain actions can excuse the actions

There is no way for schools to themselves, especially when such
“give” an education. An education actions have proven destructive
must be earned. Schools provide for century upon century. If we
the opportunity for education, but really want to help the poor have
that is all. If schools “guarantee” adequate housing, good medical
that you will pass, why learn? If service, and other advantages,
God guaranteed heaven, why be let's try something that works. . .
virtuous? If government guaran- which involves keeping the dead
tees a living, why work? Of course, hand of government out of these
none of these things can be guar- things and making sure that pri-
anteed. The schools and the gov- vate enterprise is not paralyzed
ernment are incapable, and God is by taxation.

too wise. All that can reasonably The next time anyone says, “We
be provided is opportunity. ought to tax the corporations more

and spare the people,” let us re-
The Same Holds for Government mind him that you cannot tax a

These policies and the lessons to corporation as such, or a state, or
be learned from them have an anything else except people, and
important parallel in the field of that his words really mean, “We
government. Socialism, with its ought to tax those who were frugal
pretended concern with the wel- and saved and took the risk of in-
fare of the poor, “social equity,” vesting those savings so that a
and the like, hag the same results. corporation could be formed, so
Progressive taxation and other that jobs could be created, and so
schemes supposedly designed in that the things we all want and
the interest of the poor do not need could be produced.” Viewed
actually aid the .poor at all, but in this light, such policies appear
result in loss of initiative on the to be what they actually are —a
part of the better and more suc- direct attack on the very main-
cessful members of society, so that springs of our welfare.
the total contribution to the mate-
rial welfare of the whole is To promote true welfare, let's
diminished. do all we can to preserve the one

The alleged humanitarian mo- characteristic that only freedom
tives of socialism constitute an can provide — OPPORTUNITY. ® ©


===== PAGE 17 =====

WAGES “The wage earner, like every

TT oC other citizen, is firmly interested
UN EM P L 0 YMENT in the preservation of the dollar's

LW SN Im AVR N_ = 0B EVE FoR) purchasing power.”

| AND INFLATION! LUDWIG VON MISES

ox ECONOMIC SYSTEM — the not recover his outlays from the
market economy or capitalism purchasers; he would suffer losses
—1is a system of consumers’ su- and would finally go bankrupt. In
premacy. The customer is sover- paying wages, the employer acts
eign; he is, says a popular slogan, as a mandatory of the consumers,
“always right.” Businessmen are as it were. It is upon the con-
under the necessity of turning out sumers that the incidence of the
what the consumers ask for and wage payments falls. As the im-
they must sell their wares at mense majority of the goods pro-
prices which the consumers can af- duced are bought and consumed by
ford and are prepared to pay. A people who are themselves receiv-
business operation is a manifest ing wages and salaries, it is obvious
failure if the proceeds from the that in spending their earnings
sales do not reimburse the busi- the wage earners and employees
nessman for all he has expended themselves are foremost in deter-
in producing the article. Thus the mining the height of the compen-
consumers in buying at a definite sation they and those like them
price determine also the height of will get.
the wages that are paid to all those The buyers do not pay for the
engaged in the industries. toil and trouble the worker took
It follows that an employer can- nor for the length of time he spent
not pay more to an employee than in working. They pay for the prod-
the equivalent of the value the ucts. The better the tools are
latter's work, according to the which the worker uses in his job,
judgment of the buying public, the more he can perform in an
adds to the merchandise. (This is hour, the higher is, consequently,
the reason why the movie star gets his remuneration. What makes
much more than the charwoman.) wages rise and renders the mate-
If he were to pay more, he would rial conditions of the wage earners

Dr. Mises is Visiting Professor of Economics at New York University. This article is reprinted by
permission from Christian Economics, March 4, 1958.

15


===== PAGE 18 =====

16 THE FREEMAN May

more satisfactory is improvement What Makes Wages Rise?
in the technological equipment. The fundamental question is:
American wages are higher than Is it possible to raise wage rates
wages in other countries because for all those eager to find jobs
the capital invested per head of above the height they would have
the worker is greater and the attained on an unhampered labor
plants are thereby in the position market?
to use the most efficient tools and Public opinion believes that the
machines. What is called the Amer- improvement in the conditions of
ican way of life is the result of the the wage earners is an achieve-
fact that the United States has ment of the unions and of various
put fewer obstacles in the way of legislative measures. It gives to
saving and capital accumulation unionism and to legislation credit
than other nations. for the rise in wage rates, the
The economic backwardness of shortening of hours of work, the
such countries as India consists disappearance of child labor, and
precisely in the fact that their many other changes. The preva-
policies hinder both the accumula- lence of this belief made unionism
tion of domestic capital and the in- popular and is responsible for the
vestment of foreign capital. As the trend in labor legislation of the
capital required is lacking, the last decades. As people think that
Indian enterprises are prevented they owe to unionism their high
from employing sufficient quan- standard of living, they condone
tities of modern equipment, are violence, coercion, and intimida-
therefore producing much less per tion on the part of unionized labor
man-hour, and can only afford to and are indifferent to the curtail-
pay wage rates which, compared ment of personal freedom inherent
with American wage rates, appear in the union-shop and closed-shop
as shockingly low. clauses. As long as these fallacies
There is only one way that leads prevail upon the minds of the
to an improvement of the stand- voters, it is vain to expect a reso-
ard of living for the wage-earning lute departure from the policies
masses —the increase in the that are mistakenly called pro-
amount of capital invested. All gressive.
other methods, however popular Yet this popular doctrine mis-
they may be, are not only futile, construes cvery aspect of economic
but are actually detrimental to the reality. The height of wage rates
well-being of those they allegedly at which all those eager to get
want to benefit. jobs can be employed depends on


===== PAGE 19 =====

1958 WAGES, UNEMPLOYMENT, AND INFLATION 17

the marginal productivity of labor. the industries’ technological equip-
The more capital — other things ment possible, thus raises the mar-
being equal —is invested, the ginal productivity of labor and
higher wages climb on the free consequently also wage rates. But
labor market, i. e.,, on the labor credit expansion, whether it is ef-
market not manipulated by the fected by issuing additional bank-
government and the unions. At notes or by granting additional
these market wage rates all those credits on bank accounts subject
eager to employ workers can hire to check, does not add anything to
as many as they want. At these the nation’s wealth of capital
market wage rates all those who goods. It merely creates the illu-
want to be employed can get a job. sion of an increase in the amount
There prevails on a free labor mar- of funds available for an expan-
ket a tendency toward full employ- sion of production. Because they
ment. In fact, the policy of letting can obtain cheaper credit, people
the free market determine the erroneously believe that the coun-
height of wage rates is the only try’s wealth has thereby been in-
reasonable and successful full-em- creased and that therefore certain
ployment policy. If wage rates, projects that could not be executed
either by union pressure and com- before are now feasible. The in-
pulsion or by government decree, auguration of these projects en-
are raised above this height, last- hances the demand for labor and
ing unemployment of a part of the for raw materials and makes wage

potential labor force develops. rates and commodity prices rise.
These opinions are passionately An artificial boom is kindled.
rejected by the union bosses and Under the conditions of this

their followers among politicians boom, nominal wage rates which
and the self-styled intellectuals. before the credit expansion were
The panacea they recommend to too high for the state of the mar-
fight unemployment is credit ex- ket and therefore created unem-
pansion and inflation, euphemis- ployment of a part of the potential
tically called ‘an easy money labor force are no longer too high

policy.” and the unemployed can get jobs
again. However, this happens only
Credit No Substitute for Capital because under the changed mone-

As has been pointed out above, tary and credit conditions prices
an addition to the available stock are rising or, what is the same ex-
of capital previously accumulated pressed inother words, the purchas-
makes a further improvement of ing power of the monetary unit


===== PAGE 20 =====

18 THE FREEMAN May

drops. Then the same amount of came frightened. They know that
nominal wages — wage rates ex- inflation cannot go on endlessly.
pressed in terms of money — means If one does not stop in time, the
less in real wages — in terms of com- pernicious policy of increasing the
modities that can be bought by the quantity of money and fiduciary
monetary unit. Inflation can cure media, the nation’s currency sys-
unemployment only by curtailing tem collapses entirely. The mone-
the wage earner’s real wages. But tary unit’s purchasing power sinks
then the unions ask for a new in- to a point which for all practical
crease in wages in order to keep purposes is not better than zero.
pace with the rising cost of living This happened again and again,
and we are back where we were in this country with the Conti-
before, in a situation in which nental Currency in 1781, in France
large scale unemployment can only in 1796, in Germany in 1923. It is
be prevented by a further expan- never too early for a nation to
sion of credit. realize that inflation cannot be
considered as a way of life and
that it is imperative to return to
This is what happened in this sound monetary policies. In recog-
country as well as in many other nition of these facts the Admin-
countries in the last years. The istration and the Federal Reserve
unions, supported by the govern- Authorities some time ago discon-
ment, forced the enterprises to tinued the policy of progressing
agree to wage rates that went be- credit expansion.
yond the potential market rates,
that is, the rates which the public Sound Money Doesn’t Cause Slump
was prepared to refund to the em- It is not the task of this article
ployers in purchasing their prod- to deal with all the consequences
ucts. This would have inevitably which the termination of infla-
resulted in rising unemployment tionary measures brings about. We
figures. But the government poli- have only to establish the fact that
cies tried to prevent the emergence the return to monetary stability
of serious unemployment by credit does not generate a crisis. It only
expansion — inflation. The out- brings to light the malinvestments
come was rising prices, renewed and other mistakes that were made
demands for higher wages and under the hallucination of the il-
reiterated credit expansion; in lusory prosperity created by the
short, protracted inflation. easy money. People become aware
But finally the authorities be- of the faults committed and, no

Protracted Inflation


===== PAGE 21 =====

1958 WAGES, UNEMPLOYMENT, AND INFLATION 19

longer blinded by the phantom of At the present juncture the
cheap credit, begin to readjust unions try to rake up the old
their activities to the real state of hundred-times-refuted purchasing
the supply of material factors of power fable. They declare that
production. It is this — certainly putting more money into the hands
painful, but unavoidable —read- of the wage earners —by raising
justment that constitutes the de- wage rates, increasing the benefits
pression. to the unemployed, and embark-
One of the unpleasant features of ing upon new public works — would
this process of discarding chimeras enable the workers to spend more
and returning to a sober estimate and thereby stimulate business
of reality concerns the height of and lead the economy out of the
wage rates. Under the impact of recession into prosperity. This is
the progressing inflationary policy the spurious pro-inflation argu-
the union bureaucracy acquired ment to make all people happy
the habit of asking at regular in- through printing paper bills.
tervals for wage raises, and busi- Of course, if the quantity of the
ness, after some sham resistance, circulating media is increased,
yielded. As a result these rates those into whose pockets the new
were at the moment too high for fictitious wealth comes —whether
the state of the market and would they are workers or farmers or
have brought about a conspicuous any other kind of people — will in-
amount of unemployment. But the crease their spending. But it is
ceaselessly progressing inflation precisely this increase in spending
very soon caught up with them. that inevitably brings about a gen-
Then the unions asked again for eral tendency of all prices to rise.
‘new raises and so on. Thus the help that an inflationary
action could give to the wage
earners is only of a short duration.
It does not matter what kind of To perpetuate it, one would have
justification the unions and their to resort again and again to new
henchmen advance in favor of their inflationary measures. It is clear
claims. The unavoidable effects of that this leads to disaster.
forcing the employers to remuner- There is a lot of nonsense said
ate work done at higher rates than about these things. Some people
those the consumers are willing assert that wage raises are “in-
to restore to them in buying the flationary.” But they are not in
products are always the same: themselves inflationary. Nothing
rising unemployment figures. is inflationary except inflation,

The Purchasing Power Argument


===== PAGE 22 =====

20 THE FREEMAN May

i. e., an increase in the quantity of mand for a considerable rise in
of money in circulation and credit wage rates. As conditions are to-
subject to check (checkbook day, the unions have the power to
money). And under present con- make the employers submit to
ditions nobody but the govern- their dictates. They can call
ment can bring an inflation into strikes and, without being re-
being. What the unions can gener- strained by the authorities, re-
ate by forcing the employers to sort with impunity to violence
accept wage rates higher than the against those willing to work.
potential market rates is not in- They are aware of the fact that
flation and not higher commodity the enhancement of wage rates
prices, but unemployment of a part will increase the number of job-
of the people anxious to get a job. less. The only remedy they suggest
Inflation is a policy to which the is more ample funds for unemploy-
government resorts in order to ment compensation and a more
prevent the large scale unemploy- ample supply of credit, i. e., in-
ment the unions’ wage raising flation. The government, meekly

would otherwise bring about. yielding to a misguided public
» } opinion and worried about the
Political Dilemma outcome of the impending elec-

The dilemma which this country tion campaign, has unfortunately
and many others have to face is already begun to reverse its at-
very serious. The extremely popu- tempts to return to a sound mone-
lar method of raising wage rates tary policy. Thus we are again com-
above the height the unhampered mitted to the pernicious methods
labor market would have estab- of meddling with the supply of
lished would produce catastrophic money. We are going on with the
mass unemployment if inflationary inflation that with accelerated
credit expansion were not to res- speed makes the purchasing power
cue it. But inflation has not only of the dollar shrink. Where will it
very pernicious social effects. It end? This is the question which
cannot go on endlessly without re- Mr. Reuther and all the rest never
sulting in the complete break- ask.
down of the whole monetary Only stupendous ignorance can
system. call the policies adopted by the

Public opinion, entirely under self-styled progressives ‘‘pro-
the sway of the fallacious labor labor” policies. The wage earner
union doctrines, sympathizes more like every other citizen is firmly
or less with the union bosses’ de- interested in the preservation of


===== PAGE 23 =====

1958 WAGES, UNEMPLOYMENT, AND INFLATION 21

the dollar’s purchasing power. If, interested than any other groups
thanks to his union, his weekly or classes in a return to sound
earnings are raised above the mar- money. A lot has been said in the
ket rate, he must very soon discover last months about the harm fraud-
that the upward movement in ulent officers have inflicted upon
prices not only deprives him of the union membership. But the
the advantages he expected, but havoc done to the workers by the
besides makes the value of his wunion’s excessive wage boosting
savings, of his insurance policy, is much more detrimental.

and of his pension rights dwindle. It would be an exaggeration to
And, still worse, he may lose his contend that the tactics of the
job and will not find another. unions are the sole threat to mone-

tary stability and to a reasonable
economic policy. Organized wage
All political parties and pres- earners are not the only pressure
sure groups protest that they are group whose claims menace today
opposed to inflation. But what the stability of our monetary sys-
they really mean is that they do tem. But they are the most power-
not like the unavoidable conse- ful and most influential of these
quences of inflation, namely, the groups and the primary responsi-
rise in living costs. Actually they bility rests with them.
favor all policies that necessarily
bring about an increase in the The Need for Monetary Stability
quantity of the circulating media. Capitalism has improved the
They ask not only for an easy standard of living of the wage
money policy to make the unions’ earners to an unprecedented ex-
endless wage boosting possible but tent. The average American fam-
also for more government spend- ily enjoys today amenities of
ing and — at the same time — for which, only a hundred years ago,
tax abatement through raising the not even the richest nabobs
exemptions. dreamed. All this well-being is
Duped by the spurious Marxian conditioned by the increase in
concept of irreconcilable conflicts savings and capital accumulated;
between the interests of the social without these funds that enable
classes, people assume that the in- business to make practical use of
terests of the propertied classes scientific and technological prog-
alone are opposed to the unions’ ress the American worker would
demand for higher wage rates. In not produce more and better things
fact, the wage earners are no less per hour of work than the Asiatic

Against Inflation, But . . .


===== PAGE 24 =====

22 THE FREEMAN May

coolies, would not earn more, and siderable part of the capital work-
would, like them, wretchedly live ing in American business is the
on the verge of starvation. All counterpart of the savings of the
measures which — like our income masses. Millions of wage earners
and corporation tax system —aim own saving deposits, bonds, and
at preventing further capital ac- insurance policies. All these claims
cumulation or even at capital de- are payable in dollars and their
cumulation are therefore virtually worth depends on the soundness
antilabor and antisocial. of the nation’s money. To preserve

One further observation must the dollar’s purchasing power is
still be made about this matter of also from this point of view of
saving and capital formation. The vital interest to the masses. ln
improvement of well-being brought order to attain this end, it is not
about by capitalism made it pos- enough to print upon the banknotes
sible for the common man to save the noble maxim, In God we trust.
and thus to become a capitalist One must adopt an appropriate
himself in a modest way. A con- policy. ooo

Woo oi ooag Unlimited Power

IF CONGRESS can apply money indefinitely to the general welfare

and are the sole and supreme judges of the general welfare, they
may take the care of religion into their hands; they may estab-
lish teachers in every state, county and parish, and pay them
out of the public treasury; they may take into their hands the
education of children, establishing in like manner schools
throughout the Union; they may undertake the regulation of all
roads other than post roads. In short, everything from the high-
est object of state legislation down to the most minute objects
of police, would be thrown under the power of Congress. For
every object I have mentioned would admit the application of
money, and might be called, if Congress pleased, provisions for
the General Welfare.

HUGH WILLIAMSON of N. Carolina, Member
of the Constitutional Convention, 1787


===== PAGE 25 =====

NFLATION has become almost a The: econothic_ problem is ap-
modern way of life. Only a few parent enough.-Once national cur-
years ago Greek money dropped in rency loses its fixed purchasing
purchasing power until the Ameri- power, the ensuing breakdown of
can dollar exchanged for 30,000 public trust contributes swiftly to
drachma. For less than thirty-five an undermining of confidence in
dollars any American tourist could national policy and integrity. It
be a millionaire. The American may take more than a sound mone-
dollar is a victim of creeping in- tary policy to assure a nation’s
flation also, and its value in terms survival, but that survival is not
of purchasing power continues to long possible in the absence of such
decline. a policy. Historians will find lit-
Every one of the larger countries tle difficulty in tracing a connec-
in Europe, Africa, and America tion between inflation and the fall
has suffered seriously from infla- of ancient Greece, of Crete, and of
tion. In the last ten years, the pur- Rome. The day came inevitably in
chasing power in these countries these countries when the effects
has declined all the way from 19 of inflation were obvious; then the
per cent in the case of Switzer- masses lost confidence in the cur-
land to 95 per cent in Chile. rency, considered savings futile,
The problem of inflation is not and stopped work. Even in our day
an economic problem alone, it is people cease to save dollars with
also a political and moral problem. which to purchase insurance and
The ills of inflation are reaching bonds as soon as inflation eats
epidemic proportions in modern away their equity at a rate ap-
society. West Germany, where proaching their returns of interest
sobering memories remain of the or payments. The link between a
dreadful consequences of the in- sound monetary policy and public
flation of the mark after World confidence, industry, and thrift is
War I, is making a heroic effort to undeniable.
avoid the temptations of a further In the days of Greece and Rome,
unsound monetary policy. This inflation was accomplished by
self-imposed monetary discipline “clipping the coins.” This was
is earning West Germany world done by taking the coins then in
respect. circulation, reminting them so

23


===== PAGE 26 =====

24 THE FREEMAN May

that they contained less gold or of inflation than wet streets are
silver, and alleging that they had the cause of rain. High prices may
the same nominal value as there- be the result of inflation, just as
tofore. wet streets may be the result of
Many centuries later, with the rain. There are, however, many
advent of the printing press, kings factors which affect price, but
and dictators, desirous of obtain- there is Only one economic cause
ing a larger income than they for inflation — that cause is the
could conveniently acquire by taxa- increase in the quantity of money
tion, resorted to the simple proc- and credit.
ess of printing more paper money, What of the spiral of wage-cost-
alleging that this money had the price-inflation which now seems to
same nominal value as did the less- loom as a permanent feature of
er amount of money which previ- American life? Many people be-
ously existed. lieve that inflation results when
A number of years ago our gov- industry is compelled to raise its
ernment compelled the American prices in order to meet its in-
people to give up their gold in ex- creased labor costs. But such is not
change for a piece of paper hav- the case. If wages and prices are
ing an alleged value equal to the increased excessively and are not
gold. Today credit is used largely accompanied by an increase in the
in place of money, and the govern- money supply, then the supply of
ment, through bank control of money will be insufficient to make
credit, can and does increase the possible the payment of these
supply of credit at will. higher costs, and unemployment
Thus we see that all down will ensue. Obviously at this point
through the corridors of time in- the process must be reversed if un-
flation has been due to the increase employment is to be stopped. This
in the quantity of money; first by is accomplished by reducing wages,
clipping coins, then by the use of then costs, and finally prices. It
the printing press, and finally by now becomes clear that govern-
governments using banks for in- ment must be held strictly account-

creasing money and credit. able for inflation because govern-
ment, and government only, is re-
High Prices Are a Consequence sponsible for the money supply.

It is commonly thought that What really concerns us is not
anything that raises prices is in- the wage-cost-price spiral, but the
flation, but this is simply not true. wage-cost-price-money increase
High prices are no more the cause spiral. This spiral has been re-


===== PAGE 27 =====

1958 INFLATION IS A MORAL PROBLEM 25

peated many times and will con- into the safe deposit box of every
tinue to be repeated unless and un- individual and reduces the value
til the government takes a firm of that which is within the box.

action designed to stop the in- The existence of unsound money
crease in the money supply. Un- is one of the socially demoralizing
less this is done, the dollar will factors in any civilization. It de-
become worthless and anarchy will prives the aged, who have long
stalk the land. Thus far the pro- practiced the virtues of industry
ductive efficiency of American in- and thrift, of their proper reward.
dustry has, by expanding the vol- It discourages the young from ex-
ume of goods produced per worker, ercising their ingenuity, resource-
kept prices far below what they fulness, and industry because they
would have been had they been in- see no way by which they can be

fluenced solely by inflation. rewarded for their efforts. Once
} it is clear that the intrinsic value
Root of Other Evils of money is compromised, men will

Inflation is primarily a moral turn from savings and insurance
problem in that the increase in and other provision for the future,
the quantity of money and expand- in order to spend the earnings be-
ing of credit makes it possible for fore purchasing power further de-
the government to meet its expen- clines. The people lose hope in their
ditures with money of a constantly future. Moral deterioration follows
decreasing nominal value. Covet- the debasement of the dollar. The
ing is also involved, because the government’s weakening of faith
politicians covet the wealth in the in honest currency exacts the cost-
country and use inflation as a ly toll of encouraging a wider
means of acquiring it for the de- range of dishonesty in economic
velopment of an ever-increasing affairs. The moral law flouted at
bureaucracy. Inflation is also bear- one level weakens regard for the
ing false witness. Those who are moral law at other levels. Trusted
responsible for it claim that paper money is a critical concern for any
is money when it is not money. It nation that marks its currency, In
is simply not true to say that a God we trust. For the distrust of
piece of paper backed by nothing such currency will surely lead to a
is worth as much as a piece of distrust of God, the end of repre-
paper backed by gold. Plainly sentative government, and enslave-
stated, inflation involves an ele- ment of people. © 0 0
ment of lying, coveting, and steal- Excerpted from Christianity Today, Jan-
ing. Under it government reaches ry 6, 1958.


===== PAGE 28 =====

KEY TO PROSPERITY

If profits are denied, who will carry out
their function?

WILLIAM HENRY CHAMBERLIN

\Y ee prejudices contami- posing that some form of profit
nate many who never read sharing with employees be intro-
Das Kapital and never voted the duced and that the companies re-
socialist ticket. One such prejudice duce the prices of their cars. He
is that there is something immoral was careful to avoid any commit-
and disreputable about profits. ment to moderate wage demands
These are regarded as earnings if prices are reduced. Nor did his
without moral justification, filched scheme for profit sharing include
by the idle rich from the men and any provision for sharing losses
women who are doing the actual which companies sometimes incur
work. A trade union leader, de- in years of slack business activity.
manding a new boost in wages, This attitude reveals a curious
can always arouse sympathy with ignorance or singular indifference
the suggestion that the sums nec- in regard to the economic history
essary for this increase need not of the automobile industry. A main
be compensated by higher prices; factor in its vast postwar expan-
they can come out of profits. sion, which has provided hundreds
It is with this line of argument of thousands of new jobs at record
that Mr. Walter Reuther has been wage scales, has been the plowing
building up the demands for wage back into the industry of a large
increases and “fringe” benefits part of the profits earned by Ford,
which he will present to the auto- General Motors, and Chrysler in
mobile companies. He has been of- prosperous years.
fering several variants on the Profit is one of the principal
theme that profits are too high, dynamos of the individualist eco-
suggesting that higher wages could nomic system. Without the pros-
be paid out of profits without pect of profit, especially in new
necessitating price increases, pro- untried fields of enterprise, initia-

Mr. Chamberlin is the author of numerous books, lecturer, and contributor to the Wall Street
Journal! and many nationally known magazines.

26


===== PAGE 29 =====

1958 PROFITS. KEY TO PROSPERITY 27

tive would disappear, stagnation world, could anticipate trends in
would set in, and a nation with a demand with the unfailing auto-
growing population would face a matic accuracy of the free market,
bleak prospect of continual grow- so far as it is left free from the
ing unemployment. meddling and distortions intro-
A favorite catchword of the old duced by state planning and mo-
intercollegiate socialist society nopolistic devices.
meeting was: Production for use, Socialism, with its elimination
not profit. But, like another catch- of private ownership and designa-
word, “Human rights above prop- tion of the State as the omnipotent
erty rights,” this one proves on ex- and omnicompetent planner, pro-
amination, to be devoid of content. ducer, and supplier, does not and
Where there is no production for cannot eliminate the need for the
profit, there will be no effective impartial barometer of the mar-

production at all. ket system. For under socialism,
: no one knows or can know how

The Free Market Yardstick much any given article is worth.
Ability to earn a profit is the When I was in Yugoslavia in

surest test of the health of an 1955, IT found the state economic
economic enterprise, of its right to planners racking their brains try-
survive in a competitive free eco- ing to introduce some kind of free
nomic system. The free market market method of price judgment
system developed spontaneously. into their collectivist economic
Had it been invented by any single system. When I was in Poland last
individual, this man would have year, I was told of case after case
the right to be considered one of of absurd underpricing, causing
the greatest geniuses in history. the wildest distortions in the econ-
For it is the element of free choice omy, just because nothing had been
in the free market system that found to replace the free market
assures the most effective use of yardstick.
labor and resources. Ability to earn a profit, under
Those goods for which there is the free enterprise system, is a
growing demand normally rise in certificate of efficiency and of real
price, encouraging larger produc- need for the existence of an enter-
tion. Those articles for which de- prise. Prolonged and consistent in-
mand is slack fall in price, dis- ability to earn a profit means the
couraging production. No state bankruptcy court, the sanction for
planning board, even if its mem- failure to meet the test of a com-
bers were the wisest men in the petitive method of operation.


===== PAGE 30 =====

28 THE FREEMAN May

Capital for Industrial Expansion and stocks of raw material, replac-
Some critics seem to assume ing damaged and obsolescent ma-
that profits represent vast sums chinery.
paid out to social parasites to en- With normal sources of capital
able them to go on luxury binges almost completely closed, German
at Miami and Palm Springs. Noth- firms resorted on a large scale to
ing could be more inaccurate. Re- so-called self-financing, compelling
tained profits play an enormous their stockholders to wait for divi-
role in making possible industrial dends as they plowed back most of
expansion and thereby creating their profits into projects for ex-
more jobs for workers and more pansion. The speed and scope of
products for consumers. the German recovery proved that
In the year 1956, for instance, this policy paid off. Had all profits
American corporations reported been distributed to workers or
earnings — which may be over- stockholders, the German economic
stated, as we shall discuss later — recovery would have lagged badly.
of $43.4 billion. What became of The amount of profits earned by
this sum? Corporate income taxes industrial corporations and the ex-
took $21.9 billion. Stockholders re- tent of their availability under any
ceived $12.0 billion, on which they “share the wealth” plan are gross-
in turn paid taxes of about $3.5 ly exaggerated in the public im-
billion. $9.6 billion were reinvested agination. What stockholders got,
—a very considerable stimulus to after taxes, from dividends in
industrial development and output. 1956 was about $8.5 billion, or
This element of industrial re- about $50 for every man, woman,
construction and expansion and child in the United States.
through retained profits has been This figure of $8.5 billion was
of still greater significance in Ger- less than one-fifth of the $43.4
many where liquid capital was al- billion which corporations earned.
most wiped out by the drastic cur- Of this larger sum, about three-
rency devaluation of 1948 — itself fifths was taken away in taxes and
a consequence of an inflation that more than one-fifth was reinvested
was set in motion by Nazi war fi- in business. Many of the stockhold-
nancing and carried farther by the ers are people of very modest
negative policies of the occupation means, often workers in the in-
powers in the first years after the dustries which they partially own
end of the war. German industrial as stockholders. Incidentally, em-
companies had to start from ployee stock ownership, which ex-
scratch, building up inventories ists widely in the United States,


===== PAGE 31 =====

1958 PROFITS: KEY TO PROSPERITY 29

is a means by which workers can In the ten-year period 1947-56
benefit personally and directly American corporations earned a
from the earnings of industry. net profit of $362 billion. They

To abolish or unduly curtail never saw $175 billion of this
profits would have the effect of amount, which was taken for
drying up new investment, which taxes. Stockholders received $91
is indispensable if the pace of billion and business was able to
American industrial development retain $96 billion for its capital

is to be maintained. needs in a time of unprecedented
demand which required continual
A Look at the Record expansion. During this period

A brief refresher course in wages and salaries rose by 80 per
American economic history will cent, whereas after-tax profits in-
show that the conception of profit- creased by only 18 per cent and re-
less prosperity, however appealing tained earnings were actually $2
it may be to some trade union billion a year less at the end of
leaders, has never been realized the period than at the beginning,
in practice. High profits, high em- despite an investment level three-
ployment, and high wages are in- fourths greater.
separably associated. The converse The New England Letter of the
of this proposition is equally true. First National Bank of Boston of
Low profits, or losses in business March, 1957, brings out three im-
enterprise, mean either low wages portant and sometimes overlooked
or high unemployment, or both, points about profits:
and a depressed level of output. “First, profits are being greatly

This is certainly no accidental overstated. A substantial amount
coincidence. Profits, retained and of inventory appreciation, arising
put back into further development, from the higher replacement costs
are one of the more important dy- which have prevailed, has been in-
namos of industrial progress. cluded in profits. In only two years
When these profits disappear, the of the 1947-56 period were there
pace of this progress slows down, any inventory losses, while the
or ceases altogether. The following aggregate net gains reached $17
facts and figures help to place in billion. This amount was taxed as
perspective the allegations of un- profits, resulting in less tangible
duly high profits which are the funds for business use. The sec-
stock-in-trade of shortsighted ond cause of overstatement may
trade union leaders and demagogic be found in the inadequacy of de-
politicians: preciation charges in view of the


===== PAGE 32 =====

30 THE FREEMAN May

large volume of assets currently tax burden on profits are closely
valued far below replacement cost. linked to the inflationary trend
Under-depreciation of the physical which has been running with vary-
assets of all American business is ing degrees of intensity since be-
estimated at $6 billion for 1957 by fore World War II. Inflation tends
the Machinery and Allied Products to destroy capital values.”
Institute. With current reproduc-
tion cost so far in excess of histori- National vs. Private Ownership
cal cost, income is not sufficiently A good deal of confusion of
charged, with the result that in thought has been induced by cal-
effect industry is paying profits culations that, in the United
taxes on this amount of capital States, a small percentage of
consumption. This is not only wealthy individuals own a much
grossly inequitable but it is an in- more than proportionate share of
calculable drag on progress. national productive resources. In
“Secondly, profit dollars have conclusions drawn from such cal-
been shrinking in purchasing culations, however, no distinction
power. Business capital goods, ac- is made between the minuscule
cording to reliable estimates, were proportion of a large income —
37 per cent above their 1947-49 even after taxes — which is spent
costs early this year. The upward on personal consumption and the
sweep of prices of such goods has enormously larger share which
been under way since 1933 almost flows back in the form of rein-
without interruption. On this basis vestment or investment in other
the business dollar of 1947-49 has industries.

a current purchasing power of 73 Perhaps the best illustration of
cents, compared with that of 8 this issue of national versus pri-
cents for the consumer’s dollar. vate ownership is a humorous

“Thirdly, business profits are story which originated behind the
taxed excessively. In view of the iron curtain, in Czechoslovakia.
52 per cent rate of the federal in- An international commission, vis-
come tax, the treatment of inven- iting a Czech factory, notes a few
tory profits and depreciation and cars parked outside.

the double taxation on dividends “To whom does this factory be-

paid out to stockholders, this con- long?” is the inquiry.

clusion is inescapable. . . . “To the workers because this is
“The overstatement of profits, a workers’ state.”

the shrinkage in purchasing power “To whom do the cars belong?”

of profit dollars, and the excessive “To the bosses — those who man-


===== PAGE 33 =====

1958 PROFITS : KEY TO PROSPERITY 31

age the factory in the workers’ less profit squeeze, either through
state.” excessive taxation or through de-

The commission visits the mands for wage increases so out
United States and finds, outside a of proportion to productivity as to
similar factory, a large number of push prices beyond the consumer

cars. sales resistance point.
“To whom does this factory be-
long?” Two Indispensable Functions
“To the private owners.” Far from representing an ex-
“And to whom do the cars be- pendable luxury or “surplus value,”
long 7” profits fulfill two indispensable
“To the workers.” functions in a free economy. The

Some people give the impression expectation of profit operates on
of wanting the fruits of a highly millions of entrepreneurs, from
developed industrial system — the man who puts his savings into
more and more cars, telephones, a restaurant, a service station, or
plumbing installations, electrical a truck, to the big corporation that
appliances — without paying the sets aside millions for a promising
price, which is a steady flow of laboratory research project or an
new investment capital. The dif- expedition into some rugged ter-
ference between sufficient and in- ritory in search of some new
sufficient capital is one of the most source of needed mineral. This is
important reasons for the differ- the main force that sustains gen-
ence in the standard of living of eral employment at a high stand-
the average man of Western Eu- ard of living.
rope or North America as compared Second in importance is the
with that of Asia, Africa, and function of retained profits in
Latin America. Estimates of the making small businesses grow and
amount of new capital investment big businesses become bigger The
required to provide a worker with link between profits and prosperity
the tools of his job vary, but $10,- is clear and unbreakable. Only
000 seems to be a conservative fig- through profits can we hope to
ure. As our labor force increases achieve that freedom of enter-
by about one million a year, ten prise and risk-taking which will
billion dollars of new investment produce sustained economic
is a rough estimate of the figure growth of a magnitude to match
required to keep up a high level that which has brought us the
of employment. This figure will highest standard of living the
never be reached if there is a ruth- world has ever known. © oo


===== PAGE 34 =====

ORGANIZED [INCENTIVES
NOT (0 won

F. A. HARPER
HEN visiting Sweden recently States “ordinarily are opposed to
to study the impact of their wage incentive plans.” \
advancing socialism, I was sur- The AFL-CIO argues that in-

prised to find almost universal ac- centive pay “puts a strain on the

ceptance of the principle of paying entire collective bargaining proc-

workers on a piecework basis. And ess . . . creates friction between

I recall that early in World War II workers.” It charges that such

a political leader of the United schemes are “based on the notion

States was severely criticized by that workers will not perform an

our Russian allies because he op- ‘honest’ day’s work unless they are |

posed bonuses to individuals for ‘bribed’ by the promise of ‘extra’ |

extra output in the war plants. money,” and that employers, in |
These anomalies were brought hope of higher profits, promise

to mind recently by the assertion monetary reward to induce

in an issue of the AFL-CIO Collec- workers to “produce more than a

tive Bargaining Report (Vol. 2, ‘fair day’s work.” Then comes

No. 12) that unions in the United the frank admission: “When

Dr. Harper is a member of the staff of the Foundation for Economic Education.

Te uaa Rr Sg

vA



===== PAGE 35 =====

“1958 ORGANIZED INCENTIVES NOT TO WORK 33

workers are paid according to sible. Incentive plans may be one
their individual efforts, the union’s way to do this.
function of securing high guar- It will be readily admitted that
anteed wages for all workers be- in some instances the fruits of an
comes more difficult. The local incentive pay system may not be
union’s ability to present a unified worth its cost. Many of the points
position for base rate increases is raised by the AFL-CIO report are
weakened.” important questions. But whether
In other words, incentive pay in an incentive pay system the
plans take over the presumed cargo will be worth the freight, is
union function of getting a fair a matter which management must
and reasonable wage and thus judge in each case. To say that no
threaten the maintenance of industrial plants should design
union power. “Wage incentives de- and use an incentive plan is as
emphasize the union’s role in secur- foolish as to say that all should
ing higher wages,” according to use them. The former is the posi-
the report, and “may threaten the tion of the AFL-CIO and of most

union’s entire existence.” other unions in the United States,

whereas even socialist Russia and

A Continuing Problem Sweden reject this form of
There is no denial, of course, equalism.

that incentive pay plans are often When unions oppose the general

difficult to design. But this prob- policy of extra pay for extra work,
lem is not peculiar to incentive pay under incentive or piecework pay-
plans. It is a problem with any ment, they are merely extending
plan of pay determination. Incen- the practice of featherbedding
tive pay involves the question of which is so common in union con-
how much Jones produces relative tracts. The difference is only one
to Smith, his co-worker. This is of degree — equal pay for less work
the same sort of question that is is like equal pay for no work at all.
involved in deciding how much of

a product is “produced” by tool Something for Nothing

operators vs. tool investors vs. the Labor unions are not alone in
electrical power and telephone demanding equal pay for less work.
suppliers, etc. This is a policy which has been

Problems of accurate determina- adopted again and again in our
tion of a fair wage exist, to be sure. economy. Farmers demand a price
But that only emphasizes that they for products not produced and a
should be solved as fairly as pos- rent for land not farmed. Teachers


===== PAGE 36 =====

34 THE FREEMAN May

demand about equal pay for un- On the question of incentive pay,
equal jobs of teaching, with salary it would appear that union leaders
based almost entirely on hours find it to their advantage in main-
spent in training and in the class- taining themselves in power to up-
room rather than on proficiency at hold the principle of pay for not
the task. Many other illustrations working. This is just another in-
could be given, too. stance where personal rights are

The whole question of incentive being sacrificed for the further-
pay needs a point of focus. And, to ance of personal power. When in-
me, it is this: So long as economic centive pay is denied in principle,
goods and services are to be made the least diligent worker gets as
available for exchange in our soci- an excess part of what the most
ety, they will be made available diligent worker has earned but is
either with or without incentive not tobe allowed to receive, accord-

to the one who receives them. ing to the union policy propounded
There is no avoidance of this in this report.
choice, no possible compromise. A It is a late day for individual

person gets goods in exchange for justice in the United States when
something, or he gets them in ex- we have to look to Russia and
change for nothing. A “laborer” Sweden for some leadership in re-
receives pay for working, or he jecting equalism — for leadership
receives pay for not working. in upholding the rights of the
What other alternative can there more productive employee to re-
be? ceive the fruits of his handiwork.

Fooaas OK 1006097 Toil Not — Eat Not

HE that will not work, shall not eat, for the labours of 30 or 40
honest and industrious men shall not be consumed to maintain

1560 idle loiters... When our people were fed out of the common
store and labored jointly, glad was he could slip from his labours
or slumber — neither cared they for the increase — presuming
that howsoever the harvest prospered, the general store must
maintain them — so that we reaped not so much corne from 30
men as now 3 or 4 doe provide for themselves.

CAPTAIN JOHN sMIiTH (1680-1631)—0of the Jamestown settlement


===== PAGE 37 =====

TIRIENTVIUNG! [THE TGA
rrr C1111 11 BL |

BEN W. HEINEMAN

SOMETHING is the matter automobile at the current com-
with the railroads is perfectly muting average of 1.5 passengers
plain. Intrinsically a railroad is per automobile, the additional
the most efficient method of mass parking space required would pre-
transportation yet known to man. cisely cover the Chicago Loop.
The underlying efficiency of a steel With these inherent advantages,
wheel turning on a steel rail has one would assume that the railroad
not yet been surpassed. The lack of industry was outstripping its com-
friction is such that the same petitors. But what has actually
amount of fuel will propel a loaded happened? Our competitors in re-
freight car five times the distance cent years have outstripped us.
that it will propel a truck carrying While our freight tonnage has in-
the same load. creased somewhat, our proportion
This efficiency extends to the of revenue tons has been steadily
railroad right-of-way. For exam- shrinking.
ple, in commuting we can move For years the railroads as an in-
48,000 riders by rail in one hour dustry have had so little appeal for
on one passenger line compared investors that with the exception
with 6,720 by bus and 2,250 by of equipment trust certificates they
automobile on one express lane. A have been unable to finance capi-
study by the Brookings Institute tal needs from external sources.
has found that it would take Moreover, today we learn that
twenty highways of four lanes responsible and serious leaders of
each to carry the same number of our industry feel that we will be
persons that can be carried on two unable to finance even our equip-

railroad tracks. ment needs without the assistance
The North Western Railroad of government credit.
carries 80,000 commuters a day — Now this is of course a serious

40,000 each way. It is estimated matter to the railroad industry.
that if these were to commute by But the implications go far beyond

Mr. Heineman is Chairman of the Chicago and North Western Railway Company. This article is
from an address of October 17,1957 before the Illinois State Chamber of Commerce.

35


===== PAGE 38 =====

36 THE FREEMAN May

the immediate industry. For what we have been forced to seek higher
I have said is that the most in- and higher freight rates; that in
herently efficient form of mass the case of many commodities we
transportation presently known is have priced ourselves out of the
fighting a losing battle when it market; that in the case of many

should be the winner in a walk. more we are in the process of do-
ing so; and that in this process we
Wasting a Precious Asset are holding an umbrella over the

Put still differently, what it heads of what is inherently less
means is that our economy is wast- efficient competition, to the detri-
ing one of its greatest assets. For ment not only of every segment of
efficient, cheap, volume transporta- the railroad industry — manage-
tion of goods and raw materials is ment, labor, and capital — but to
an asset beyond price. Few things, the immediate detriment of car-
if any, are more essential to our load shippers, and the ultimate
economy. detriment of the public.

The ambition — the aim — of
every one of us within and without Labor Is Deeply Involved
the railroad industry should be the What is the matter with the
manufacture of mass transporta- railroads?
tion service in increasing volume The answer, I believe, is rela-
and at an ever-decreasing cost. tively simple. The railroads as an

This aim should be the aim not industry set an example of sheer
merely of management, but of economic waste that is, in my opin-
labor as well. For if we have ion, without parallel in the eco-
learned anything since the Indus- nomic history of our country.
trial Revolution, we have learned There is no single villain. Labor
that by producing more cheaply, is deeply involved. Federal, and
more efficiently, and in increasing particularly state, regulatory com-
volume, we are able to pay higher missions must bear an important

and higher wages. share of the responsibility. And so
And this should be the aim and must you, the public.
ambition of the legislatures, the Now let me give you some spe-

regulatory bodies, and the public, cific examples of what I mean by
for the cheapest possible transpor- waste. We run fast passenger
tation is integral to a growing and trains to Minneapolis, a distance
expanding economy. of just over 400 miles. We run

But what are the realities? The them with six-man crews — two
realities are that, as an industry, men in the engine crew and four in


===== PAGE 39 =====

1958 REVIVING THE RAILROADS 37

the train crew. We run the dis- is apparent to anyone that if we
tance in approximately seven could run our crews through, we
hours. In those seven hours we could sharply increase their take-
use three engine crews, and each home pay — perhaps even double it

time we change engine crews we — and still make real economies to
pay that crew approximately a full the benefit of all.
day’s pay, and in the case of one There are literally hundreds of

crew, two days’ pay. On the trip other examples. But I don’t want
to Minneapolis we run from Chi- to dwell unduly on the labor side,
cago to Milwaukee in 81 minutes. nor do I want to be guilty of using
There we change engine crews and labor as a whipping boy.

pay the first crew approximately

a full day’s pay. We change our The Regulatory Commissions

train crews twice on this run, or Let us consider the regulatory
pay them a full day’s pay for less commissions. The Chicago &
than a half-day’s work. North Western has some 700 to

Put somewhat differently, we 800 one-man stations. These are
are paying the equivalent of four approximately seven to eight miles
days’ pay to our engine crews for apart. They were laid out 100

seven hours’ work. years ago at about the distance
that one could move a wagonload

Featherbedding of wheat and return in a day.
Now let us talk about freight We recently have made time

service. One of our finest time studies of the work performed in
freights is what we call our CC-7 these stations. We have found that
— Chicago to Omaha. It should run agents work as little as four to ten
that distance in about twelve minutes for each eight hours on
hours. The distance from Clinton, duty. It isn’t their fault, of course;
Towa, to Boone, Iowa, is 200 miles changed economic circumstances
and ordinarily requires five hours have simply made such stations
and ten minutes. largely unnecessary.

Yet, as a carryover from steam Translated into terms of pay for
engine days, 12.5 miles an hour is hours actually worked, as distin-
provided as the basis for compen- guished from hours on duty, we
sating freight crews, 100 miles be- find that we are paying such men
ing equivalent to a base day. as much as $150 and $160 an hour.
Therefore, we pay two days’ pay Thirty to forty dollars an hour is
for the 200-mile run which occu- not unusual.
pies five hours and ten minutes. It Now, plainly, we should consoli-


===== PAGE 40 =====

38 THE FREEMAN May

date the stations. We should use Fundamentally, the losing pas-
modern technological methods — senger service that I am describ-
perhaps a moving office in a panel ing serves no economic need what-
truck — and where we have several soever. The public has voluntarily
stations, have either none, one, or chosen to pay its tax dollars for
a moving station. hard roads and for municipal air-
Only recently a state commis- ports so as to make available com-
sion denied us permission to close peting forms of transportation,
a station where the uncontested the most significant of which is, of
record disclosed that we were pay- course, the private automobile.
ing the agent a full day’s pay and But when the railroads seek to
that he was working 59 minutes a take off losing and unneeded pas-
week. In that case, a court reversed senger trains, who is it that ap-
the decision. pears and opposes this elementary
But that is not the point. The managerial decision? Local cham-
point is that a regulatory agency bers of commerce, deeply involved
of one of our major states would in their community pride, and, of
be so little concerned with the course, labor, concerned over the
basic economics and so responsive possible loss of jobs.

to local political pressure as to I could go on and on. These ex-
override the most obvious mana- amples are not exceptional; they
gerial decision. are typical. Each in its own way

reflects in a measure what is

The General Public Must wrong with the railroads. Each in

Share in the Blame its own way is a conspicuous ex-
Now let me talk about you, the ample of waste.
public. Much of this difficulty springs

It is reasonably well-known, I from an ancient image, uncon-
suppose, that railroads are operat- sciously held by nearly everyone,
ing their passenger businesses at of the railroad as a natural mo-
a loss. There is, of course, no Santa nopoly. The original thought was
Claus. In other words, these losses that for the privilege of occupying
and others from other uneconomic the preferential position as a mo-
services are being paid for by nopoly, railroads should perform
someone. In our case it is the car- all transportation services — car-
load shippers in the form of higher load and less-than-carload, passen-
rates, poorer service, less cquip- ger and suburban, through freight
ment, less money for technological and way freight — whether or not
improvement and improvisation. at a loss.


===== PAGE 41 =====

1958 REVIVING THE RAILROADS 39

Labor’s attitude, formed in the public, and it doesn’t belong to our
years before hard roads, the air- investors. It is ours inescapably.
plane, the barge, the bus, the truck, And if we fail to convince our
the pipeline, or the private auto- friends from labor that fundamen-
mobile, has also displayed an un- tal revisions of their contracts are
yielding rigidity to changed eco- required to restore the railroads’.
nomic conditions. competitive position so as to enable

But the fact is that today there us to realize upon our inherent ef-
is no major business that is as ficiency, increase our volume, and
competitive as the railroad busi- pay steadily higher wages on a
ness. Not only do railroads com- sound economic basis—that failure
pete actively with each other — is ours, as managers.
there are at least five good rail- If we fail to persuade the com-
roads between Chicago and the missions that they must permit us
Twin Cities, and six or seven be- to operate efficiently, to eliminate
tween Chicago and Omaha — but unnecessary or costly service in
also they are engaged in bitter the interest of providing efficiently
competition with such other modes and cheaply that mass service for
of transportation as the rivers, the which we are uniquely qualified —
pipelines, the trucks — both com- that failure is ours, the managers.

mon carrier and contract—the bus, If we fail to convince the legis-

the airplane, and the ever-present latures that it is not in the interest

passenger automobile. of their states or their constitu-

ents for railroads to continue to be

Management Responsibility a happy hunting ground, then we
I have said that there is no sin- have failed as managers.

gle villain responsible for the rail- And if we fail to convince you,

roads’ dilemma. But I am not so the public, that your interest is
sure that I was right. For in the identical with ours in having us
last analysis, we, the managers, provide quantity service at the
must assume final responsibility. lowest possible rates, rather than
We alone, of all the many interests, costly and economically obsolete
have the responsibility for the service, then that failure is ours
over-all efficient operation of our and no one else’s.
properties. And so, in my opinion, in the
This responsibility cannot be next decade the railroads will
delegated. It doesn’t belong to la- again be pioneers. This time,
bor; it doesn’t belong to the gov- though, the pioneering will be over
ernment; it doesn’t belong to the a more difficult terrain than when


===== PAGE 42 =====

40 THE FREEMAN May

100 years ago they pioneered the The stakes are high — high for
frontiers of this country. The dif- all of us in the railroad industry
ficulties will be far greater than — but even higher for you, the
those that faced our survey parties public. For, if we are successful,
in Indian territory; more difficult as I am confident that we shall be,
than when our lines were being I hold before me a vision of the
built across teeming rivers and railroads stripped down and mus-
over unconquered plains and cular, performing their mass
mountains. transportation function more
This time we must remake, not cheaply and more efficiently than
the physical frontiers of our coun- has ever been known before.
try, but the frontiers of thought. I see an industry that will be
We must bridge, and in bridging continuing to pay — not spend —
change, rivers of established and tax dollars. I see an industry that
obsolete economic and governmen- will be making competition — not
tal thinking. We must dynamite merely meeting competition. And
not mountains of rock but moun- finally, I see an industry growing
tains of inertia — inertia in the in volume, increasing — not los-
legislatures, inertia in labor, iner- ing — its employment, and inévit-
tia in the regulatory agencies, and ably growing in the service that it
last, but by no means least, inertia renders to the shipper, to the pub-
in the public. lic, and to the country. ® © ©

| IDEAS @0 10880 | A Powerful Entry . . .

WHAT IS THERE in this power situation that should receive the
active attention of businessmen generally? Powe: is the ener-
gizing force of all industry. Control of this force by government
operation affords a powerful entry by government into the re-
mainder of the industrial activity of the country.

Any act, therefore, on the part of business which condones
expansion in the power field can well be an act which, in the
end, will be inimicable to the business world itself. You cannot
have just a little bit of socialism. You either have it or you
don’t. We must realize that this trend is on the march and that
our action with respect to it will be the determining factor in
the form our government will assume in the years to come.

DR. 8. C. HOLLISTER, Dean of the College
of Engineering at Cornell University


===== PAGE 43 =====

BOB AND ANN SIGNOR

Sueeons

Here's a story of success achieved without benefit of minimum wage legislation or limitation of
hours of work or sit-down strikes or price supports or other “privileges,” any one of which might
have prevented what the Prokupeks have been able to do for themselves through service to others.

THE
MEASURE
OF

Ame is still the land of op- they opened negotiations with its
portunity for those willing to owner and today are buying that
meet its challenge, to barter the business, using their hands to
commodities of hard work and in- mold a combination of thrift, in-
telligently directed ambition in ex- tegrity, and hard-working ambi-

change for success. tion into their version of the
The United States today, for American Success Story.
instance, still affords a man the But because the Prokupeks had

opportunity of entering business an unusually clear vision of the
on a small scale, with every hope road conditions which led to their
of ultimate success. But he’ll have goal, they may have had a head
to begin by scrapping all that he start on some of our native-born
may have believed of the “we’ll do Americans, at that. For it happens
it for you” school of ideas that has that the golden lure of “planned
been foisted on a gullible public. security” as prescribed by labor, a
For example, take the Milan benevolent government, and at-
Prokupek family. With no assets tendant disciples, has consistently
but themselves, no subsidies, and failed to attract certain people.
no special concessions they built All of these kind organizations
another man’s business from its have found it necessary to support
beginning into a successful enter- their “benevolence” with more laws
prise within a year’s time. Then and heavier taxation of those of us

Mr. and Mrs. Robert H. Signor, whose families came to America before the Revolutionary War,
hope you'll share their admiration for their new-found friends.

41


===== PAGE 44 =====

42 THE FREEMAN May

who haven't yet fallen under the the proverbial on-the-go American.
spell of such questionable ideals. Together with his wife, Manka,
To these certain people, all this a delightfully diminutive lady who
sounds terribly familiar, for does all the lodge’s cooking, the
they've been forced to live under doctor runs a teeming establish-
similiar doctrines, and the golden ment. Their children, Alena, a
lure seems more like the glint of lovely college student, and Milan,
cheap tinsel to their eyes. Jr. are a very necessary part of
They have left their respective the team, however. They do K.P.
countries in search of freedom, Alena, who is achieving her long-
and once arrived on American soil, sought dream of becoming a doc-
they set about seeking their for- tor, doubles in brass as a waitress
tunes in the old-fashioned pre- on the weekends. During the week
“deal” American way. They can- she attends a nearby university
not afford to be blinded by that where she is studying medicine on
glint, so they waste little time a scholarship. Milan, Jr. is general
chasing a will-o’-the-wisp of some- factotum, but in his spare mo-
thing for nothing through the ments, can be found cruising
back alleys of welfare-statism. The around Tomales Bay in his small
majority of them are highly suc- boat, with or without his father.

cessful in their business ventures In 1947, however, Dr. Prokupek
for this reason, as are the Pro- was a top-flight member of the
kupeks. Foreign Trades Ministry of Czecho-

slovakia. He was Chief of Trans-
The Doctor Is Everywhere portation for his government. His

Dr. Prokupek is the intensely wife was a leading hostess in the
warm, friendly host of an un- glittering diplomatic circles of
usually good restaurant and lodge Prague. They lived in the city but
near San Francisco, California.The spent much of their time on the
doctor who can be found person- vast model farm which the doctor
ally greeting and seating each of ran as a pastime. Their children
his guests, is a rather harried look- had all the advantages that a well-
ing gentleman, with red-blonde to-do home could give them. One
hair and vividly clear blue eyes. of Dr. Prokupek’s last official acts
He wears an old shirt and slacks was to lead his country’s delega-
as he lopes around his domain, tion that year to the UNRRA Con-
seeing into everything at once. No ference of Paris.
one has seen him sit down for long Then early in 1948 after years
at a time, and he could be called of undermining, the communists


===== PAGE 45 =====

1958 THE MEASURE OF SUCCESS 43

suddenly staged their coup of In the meantime, the Prokupeks
state. Dr. Prokupek was forced to began casting around for ways
make a choice. He made it, and of making more money. Manka's
within hours was stripped of of- recipes, which are centuries old,
fice, labeled “a friend of Western had attracted considerable atten-
powers,” and compelled to flee for tion in the hospital. That, and her
his life. A deeply religious man, pastries which were in demand,
he took with him and his family gave them the answer to their
what he considered most impor- money problem. Manka began mak-
tant. In his words :“We left Prague ing pastries to sell from her home,
within the hour. We had only time and the children delivered orders
to pack one suitcase, and we car- while she spent the evenings bak-

ried my Czech language Bible.” ing. They plowed what earnings
were necessary back into the busi-
Escape to Canada ness and saved the rest. With

In due course the refugee family some of what Milan earned they at
found themselves embarked for length achieved their goal of five-
British Columbia where, it was hundred painstakingly saved dol-
said, existed boundless oppor- lars. With that nest egg, they
tunities for those willing to work. opened a small tearoom.
However, once arrived, they found It represented a momentous
that opportunities were not quite step for them, although it con-
so boundless for non-English tained exactly three tables. Man-
speaking iron-curtain refugees. ka’s cooking, essentially the same
But necessity breeds adaptability, as the fare she prepares now,
so ex-minister Prokupek became a quickly earned them a name as far
lumberyard worker. In time, with away as Washington, D. C. From
a smattering of English which he there, the Diner's Club wrote a
learned on the job, and with his letter of commendation to the
previous experience, he obtained a proud family.
position as manager of a small
farm. But the family barely made Thence to California
ends meet, so Manka went to work When Alena finally got her
too, cooking for a large hospital. scholarship, it meant that the fam-
Alena, who already knew she ily would have to come to northern
wanted to be a doctor, had her California to be near her. The tea-
hands full studying for the schol- room was quite successful, and
arship she knew she must earn in Manka had to be persuaded to
order to get her training. leave it, but the doctor figured if


===== PAGE 46 =====

44 THE FREEMAN May

they had done it once, they could cisco broadcaster, Jim Grady, de-
do it again. So they pulled up voted an enthusiastic program to
stakes once more, for the second the intricacies of Manka’s genius
time in eight years. with Wiener Schnitzel, Sauer-

When they arrived, they had braten, Czech Suzettes, and other
no money with which to start a European delights.
business, hence they were looking
for a situation as managers or Work and Thrift
caretakers when Charles Mel, the As it is written, all this may
president of Calo Dog and Cat sound simple, and a little as if
Foods, heard of them. Mr. Mel, someone waved a magic wand. But
who knew of their astounding suc- the Prokupek day begins at 5:00
cess with the tearoom, decided, in a.m. and seldom ends before 11:00
company with his son-in-law, Stan atnight. Theintervening hours pro-
Culp, that the Prokupeks repre- vide ample opportunity for an inti-
sented a good investment. Accord- mate acquaintance with bone-labor,
ingly, the two men bought a small and any incidental help receives
lodge situated on a heavily wooded its introduction to the same.
hillside overlooking Tomales Bay Thrifty use of good food and ma-
just thirty-eight miles north of terials is a by-word in this regime,
San Francisco. and the result is always Quality,

But the lodge had seen better as any of their numerous cus-
days, so the two men offered Dr. tomers can point out — a reserva-
Prokupek and his family the job tion is always needed for their
of bringing new life and a new Sunday dinners. It takes work and
day to it. They accepted the offer ingenuity to avoid waste and even
with enthusiasm. The Prokupeks, more work and planning to save
who believe in doing things for money. But the Prokupeks are do-
themselves, set to with a will, put ing it. Today they own a small car
the lodge and adjoining cabins in and the little boat. Last September
order, painted, cleaned, and cooked. they began purchase of the lodge
Within a short time Manka’s Ex- from Mr. Mel and Mr. Culp—a far
clusive Dinners and Pastry were cry from the one suitcase and a
making culinary history. Bible of ten years ago.

Manka's recipes, handed down It is obvious that this family,
in her family for generations, with nothing more at its disposal
represented the very finest in Con- than industrious hands and a will-
tinental Cuisine. Shortly after ingness to give an honest value
their opening, the noted San Fran- for money received, has literally


===== PAGE 47 =====

1958 THE MEASURE OF SUCCESS 45

“worked itself to remarkable suc- which has assumed the role of
cess not only once, but twice with- comforter extraordinaire. They
in ten years. They haven't made take the opposite view of such
use of secret formulae, unless the matters, with its foreordained
earnest application of what used results.

to be called American know-how Thinking and planned action by
could be considered secret. They the individual forms the very basis
simply have taken advantage of of successful free enterprise. To
the tremendous opportunities for delegate that responsibility to
individual action that always have someone else or a group of some-
abounded, and still do, in these one elses means that when the
United States should one wish to profits are handed out, the hand

look for them. on the receiving end will not be

that of the deputator. The success

America’s New Frontiersmen of the Inverness Lodge is proof of
The fact that fewer and fewer that.

natural-born Americans look for In the Prokupek scrapbook is a

these chances, makes the Proku- photograph showing the doctor,
peks and those like them America’s who is a graduate Doctor of Law
new frontiersmen. They are pio- from the world-famous Karlova
neering a badly needed rediscovery University of Prague. It is a worn
of the challenge that made this group picture of the Czech dele-
country great. They are not afraid gates to that 1947 Paris confer-
of hard work and humble begin- ence. Ten years have gone under
nings; nor are they afraid they the bridge, and with it, a whole
might give something for nothing family’s might-have-been future,
in return. They know what our fortune, and possessions. They
forefathers knew; that true ability were rudely juggled in the chang-
and good service is always recog- ing kaleidoscope of the world com-
nized and rewarded in a free so- munistic ambitions, and today the
ciety. Such a society depends on doctor’s face and slight stoop show
men of ability for its existence! it. But ten years ago the Proku-
Such people are strongly inclined peks made the choice. Let us not
to resist the insidious crutches of forget that they chose freedom
a closed shop and of a government and all that that implies! eo eo eo


===== PAGE 48 =====

Recipe

for a Good

2 Meal
LEONARD E. READ

There's more to this recipe than gourmets or culinary artists usually
talk about, for this salmagundi has a bit of social philosophy in it.

"TWAS a Sunday morning. The two in the way of main-course fare ex-
of us had given no thought to any cept a cup of canned tuna and per-
eating for the day except the con- haps a cup and a half of left-over
ventional orange juice and coffee fricasseed chicken — not much of a
and the unconventional sautéed start for a table of five. Yet, it was
chicken livers and bean soup for this paucity of supplies that pre-
breakfast. Let the rest of the day sented the challenge. The Chinese
take care of itself! Then the not- approach came to mind — a little
too-unconventional thing hap- meat for flavor and many vege-
pened: three guests for dinner! tables for good diet and bulk.

What to do? Westchester County Two utensils were brought forth
abounds with restaurants of mod- from the gadgetry closet and
erate quality. Why not the five of placed on the stove. One was an
us dine out? That’s the expedient enameled cast iron casserole, an art
even if the expensive thing to do — of the French, Dutch, and Belgians
sort of the escapist way. But to the —lost for years —in production
gent who likes to cook, this is also again as the finest cooking ware
to run from a challenge; it is to there is. The other was a large,
accept commonplace check-writing shallow, steel bowl used in Chinese
while rejecting exciting culinary kitchens for numerous kinds of
creation. cookery and called a ‘“woc.”

An inventory of the refrigerator A tablespoon each of butter and
revealed some staples but nothing flour went into the casserole for a

46


===== PAGE 49 =====

1958 RECIPE FOR A GOOD MEAL 47

roux. To the well-blended roux was It is important that all vegetables
added one cup of an excellent be crunchy and not mushy.
chicken stock made by a gal in Con- Well, there’s the concoction, call
necticut, and a cup of Campbell’s it what you will. I merely turned
consommé. This was further thick- on the heat under the casserole,
ened with a mixture of cornstarch mixed it with a kitchen fork,
and water, giving the glistening brought it to simmer, and served it
effect found in all Chinese sauces. over rice in soup plates. I an-
Added were two tablespoons of soy nounced to my four hoped-for ad-
sauce, one heaping teaspoon of mirers: “We're in business.”
brown sugar, and a teaspoon of Anyway, this dish came off first-
lemon juice. The heat at this point rate and it was pronounced “De-
was turned off under the casserole. lectable!” Wanting at least to af-
Now to the woc. Four slices of fect modesty, and seeing an oppor-
bacon were chopped and sautéed, tunity unobtrusively to make an
the reasonably crisp pieces being economic point, I demurred by say-
scooped into the casserole. A half ing: “I had very little to do with
teaspoon of finely chopped garlic this Chinese hash. Many tens of
was half cooked in the woc’s bacon thousands of persons had a hand
grease, all but a modicum of it in its making.” This remark
spooned into a small dish for use evoked more in the way of aston-
as needed in a series of rapid sau- ishment than did the savoriness in
téeing. the way of “ums” and “ahs.”
With the heat high, the 114 cups I tried to explain: “Consider the
of cut-up chicken were quickly persons who made my utensils, the
browned and added to the casser- ones who found out how to enamel
ole. Added also, and without any cast iron, all of those who had to
cooking, were the cup of tuna and do with the facilities of manufac-
a can of bean sprouts, rinsed and ture. Who grew and milled and
drained. Two bunches of scallions packaged the rice? From whence
were chopped and half cooked and came the vegetables, and who
added to the casserole. The same brought them to market, and who
with 1% cups of sliced mushrooms. had a part in all of the transpor-
The final sautéeing job for the woe, tation and communication appara-
and all together, were: one-half tus? The gal in Connecticut who
green pepper, chopped; two cups processed the chicken stock had a
celery, chopped; and one can water part in this dish, as did the fisher-
chestnuts, sliced. These were not men who caught the albacore and
thoroughly cooked by a long shot. the folks who made their equip-


===== PAGE 50 =====

48 THE FREEMAN May

ment. Reflect, too, on all those who no longer necessarily confined to
saved, thus providing the capital kings and commissars and monop-
for all of the enterprises. Think of olists, the special privileged, or
the army of people who brought successful thieves. The formula is
the gas to my stove. Above all, known that can make a meal like
bear in mind that not one ingre- this the fare of anyone who is will-
dient used in this preparation was ing to work. It is this formula that
grown, mined, fabricated, or trans- constitutes by far the most im-
ported by me. Numberless thou- portant part of this or any other
sands, perhaps millions, through good recipe.”

space and time, lent their services “What is this formula in its
for this which you declare delect- briefest form?”
able.” “Adherence to free market, pri-

“But,” retorted one of my vate property, limited government
guests, “it has always been thus. principles.”
What you speak of as if it were a “You have carried brevity too
phenomenon is really common- far. Can't you expand on your prin-
place. Aren't you making much ciples?”
ado about nothing?” “Not adequately during a din-

“Indeed, I am not. To get a full ner hour. In essence, however, it is
appreciation of my point, you simply to leave everybody totally
should read Weaver's Mainspring. free to act creatively as they
There you will get the history of please, to let anyone and everyone
freedom and its meaning to you as exchange their goods and services
a person. You will see that most of with whomever they please on
the people of the world for all time whatever terms can be mutually
have been faced with famine and agreed upon, to let the fruits of
starvation; that in most countries, one’s labor be one’s own, and to
regardless of how backward, a cer- limit government — society’s
tain few have always been able to agency of force —to the protec-
command the services of others. tion of everyone equally in these
The historical rarity is where per- freedoms.”

sons, in moderate circumstances “Do you mean that government
like ourselves, exercising no coer- should not play Robin Hood?”
cion over any others, can obtain “That is precisely what I mean.

the services of millions in ex- Political Robin Hoodism is like
change for some minor specializa- taking 20 points from the student
tions of our own. The abundance who got a grade of 95 and giving
we are experiencing at this table is the 20 points to the one who got a


===== PAGE 51 =====

1958 RECIPE FOR A GOOD MEAL 49

grade of 55. The first will produce ative lives of people within a so-
less because his incentive has been ciety. And, remember, everyone
removed. The latter won’t produce else, no matter how skilled in other
because he has become the object ways or how well educated, is just
of something for nothing.” as incompetent as you are when it

“You go too far in limiting gov- comes to controlling the productive
ernment. Imagine the chaos there lives of others.”

would be in a complex society like “But, under your system how
ours if government were not man- are the poor fed?”
aging the economy at all.” “You are now witnessing the

“When you say I go too far, you answer. The principles I have but
are really saying you favor some casually touched upon have been
predation, providing it is legal, practiced in the U.S.A. more than
and that I am wrong for being op- elsewhere, and we, the poor, are
posed to all of it. And as to govern- better fed here than in countries
ment management of the economy, where these principles are less
could you manage it or organize its practiced. All five of us started
management? Let me make this with no inheritance beyond what
easier for you. Could you have di- God gave us. We are the benefi-
rected the creative activity that ciaries of liberty. We not only have
went into the making of the woc good food by reason of it; we have
that sautéed our food? Or that life and the opportunity to enrich
went into the other ingredients our lives intellectually and spiritu-
employed by us today? Could you ally by reason of it.”
direct just one person in invention, “Why, though, do you dwell so
discovery, ingenuity ? Why, direct- passionately on the subject? Your
ing your own self in this respect is talk would imply that liberty is
a bigger chore than you can fulfill. precariously held; that it's some-
And what makes you think that thing we are in imminent danger
voting you into or appointing you of losing.”
to some political office betters your “We are in danger of losing
capacities? By doing this, we would liberty. You and millions of others
make you less capable. If we give are taking liberty for granted, so
you power to direct us, that will much so that you embrace authori-
corrupt you. Examine yourself and tarian ideas as long as they are
your limitations, add a dose of cor- legally clothed and “democrati-
ruption, and you will see the true cally” implemented. Only. now and
nature of an authoritarian, the one then can a skilled expositor of the
who presumes to direct the cre- free market, private property,


===== PAGE 52 =====

50 THE FREEMAN May

limited government concept be think I have been talking irrele-
found. Socialism (authoritarian- vantly. I only want you to know
ism) — liberty’s opposite — ison the whole recipe and to realize that
the increase, and dangerously so.” numberless thousands of others
“I did not know this.” were ‘cheffing’ for you this day.
“Without an understanding of Here's a toast to their health and
liberty, you couldn’t possibly know happiness, all of them, with a wine
this.” from California — and to the folks
“Anyway, I enjoyed your dish.” through the ages who brought it to
“Well, thanks. And, please don’t perfection and to our table.” o ¢

IDEAS ®F LIBERTY Tools

WE FIND RELATIVELY HIGH WAGES in a country where the pro-
ductivity of the workers is high. Where we find an extremely
low level of wages, we can be sure that the productivity of the
workers is low. Here, of course, we are speaking of real wages —
what the wages will purchase — rather than of money wages.
In a country experiencing great inflation, money wages may
climb to astronomical heights and yet buy very little.

Why there is such a tremendous difference in the production
of workers in different countries can be summed up very briefly
in the one word, tools. The term tools includes plant and equip-
ment, as well as the actual machines the worker operates. A man
who has good tools with which to work is more productive than
one who has poor tools.

To provide the tools for the workers, a part of the past pro-
duction of individuals must be saved. There is no other way.
Workers compete with one another for the use of tools; the more
plentiful the supply of tools, the better each worker's chance of
being highly paid for using them. Workers who use their or-
ganized power to frustrate production, thus preventing the sav-
ing for new tools — new capital — tend to cut off their only

avenue to progress.
w, M, curTi88, The Tariff Idea


===== PAGE 53 =====

Falke God

What are the prospects for freedom
in countries that cast off communism?

REGINALD JEBB

RL RTS
OMMUNISM is like the hydrogen to Hungarian refugees and to

bomb, which, when it explodes Poles, now able to express their
and falls to pieces (as communism opinions under the milder regime
will undoubtedly one day), leaves of Gomulka, it is not unusual to
behind it a lethal radioactivity learn that, while they repudiate
that affects future generations. communism they look forward to

It is the firm purpose of the a socialist State after their libera-
Atlantic Alliance eventually to free tion has been effected. The reasons
the nations that are at present un- for this are pretty clear. The reli-
der the yoke of the USSR. But gious faith of some of them has
what sort of form will that free- been dulled by years of atheist
dom be apt to take? How much indoctrination; they have almost
communist radioactivity will per- lost sight of what a really free so-
sist after the explosion is over? ciety means; and they see socialist

It might seem that a com- regimes or at least socialistic prac-
munist dominated country, once it tices at work in many western
has won its freedom, would dis- countries that have never felt the
card every vestige of the chains heel of Moscow. There is a tend-
that bound it, and, in its loath- ency to think, not so much in terms
ing of the persecution it has suf- of natural law and human responsi-
fered from totalitarian state prac- bility, as those of a choice between
tices, revert to the kind of society false gods. It is a case of the
in which personal liberty and initi- fable of King Log and King Stork
ative flourish. in reverse. King Stork who de-

Such a hope does not sufficiently voured the frogs has been killed.
take into account the radioactive The new frogs welcome King Log,
poison that communism has spread unaware that he will provide a
abroad. place for a second King Stork to

From answers to questions put perch upon. That mentality is due

Mr. Jebb is a British educator, editor, and journalist.

51


===== PAGE 54 =====

52 THE FREEMAN May

to the radioactive poison that com- portant factor — private property
munism leaves behind it. was safeguarded. Poor and rich
Does this adaption of the fable alike were left largely undisturbed
appear extravagant, topsy-turvy? by state interference.
But that is exactly what a rever- If, then, these two countries are
sion to socialism from communism now contemplating a collectivist
would be. To adopt voluntarily a regime when liberation gives them
system that has in it the seeds of the choice, it is not through prior
one’s present persecution is indeed active experience of socialism, but
so extravagant as to denote a kind rather on account of the postwar
of madness. It is like seeking a wave of proletarian propaganda
cure for rabies in the hair of the which purports to show that social-
dog that bit you. It seems prob- ism benefits the poorer members
able, however, that that is what of society.

may happen. For all those who believe in a
free society, this is an alarming
They Once Knew Freedom outlook. It is no use pretending

If we look back to the years be- that, because socialism is less
tween the two wars when Poland tyrannous than Soviet communism,
had been freed from her long parti- a movement from the latter to the
tion and had become independent, former may mean a gradual re-
and when the Austro-Hungarian turn to freedom. It is no more a
Empire had been dismembered and way back to freedom than would
Hungary was a separate independ- be a leap back from the fire into
ent state, we see little socialism in the frying pan, there to await a
the government of either country slow death.

(save for the few months of com-

munist rule under Bela Kun in The Philosophy of Christendom
Hungary in 1919). On thecontrary, Can anything be done to avoid
the composition of the government such a calamity? Since the cause
in both countries — though some- of it is a choice between two false
what authoritarian, with a power- and closely allied gods, the first
ful president elected every seven and fundamental remedy is a re-
years in Poland, and a regent in turn to the philosophy of Chris-
Hungary pending a return to the tendom from which all the western
monarchy — was by no means cen- nations have sprung. The second
tralized in practice. Much local isa practical exposure of the grow-
administration was entrusted to ing perils of statism.

regional authorities And — an im- The essence of socialism is war-


===== PAGE 55 =====

1958 FALSE GODS h3

fare against private property. person. Nor is the fact that some-
That is contrary to Christian times an owner of property is
philosophy. If we refer to the rapacious and rides roughshod
works of St. Thomas Aquinas, per- over the needs of those less fortu-
haps the greatest theologian and nate than himself any argument
philosopher who has ever lived, against the principle of private
we find that his arguments run ownership. Whatever the social
somewhat as follows: system adopted, there will always
The earth was given by God to be people of this kind, and, as has
mankind for all to use. But if all been said, St. Thomas insists on
land is held in common, so that no the duties as well as the rights
one possesses any part of it as his of ownership.
own, two things are likely to hap- The roots of private property
pen: there will be strife between thus lie deep in the soil of
two or more persons seeking to Christendom.
derive wealth from the same piece
of land; and if no one is personally Baiting the Trap
responsible for the working of any The socialist attack on this
particular piece of land, there will Christian principle is insidious —
be little incentive for individual an ambush for the unwary. In the
effort, each man being inclined to assumption of control of the means
leave to another the production of of production by the State the
wealth. St. Thomas therefore de- socialist argues that justice will be
cides, after laying down the essen- done to all and that inequalities will
tials of just ownership and the be leveled out. The State, he af-
duties incumbent on the owner, firms, is impartial, whereas the
that personal possession is in ac- private owner thinks only of him-
cordance with the Divine order of self. Under socialism, therefore,
things. exploitation of one man by another
That is a generally accepted will end.
tenet of Christian philosophy. Its That is the bait laid in the trap.
truth is in no way affected by such If we are to prevent ourselves and
an argument as that the Religious others from being caught, we must
Orders and some other voluntary make perfectly clear what this
bodies relinquish personal owner- means in practice.
ship and hold their goods in com- It means first of all burden-
mon. Such exceptions are both some and ever-increasing taxa-
voluntary and ordered. The com- tion, for if a great part of the
munity agrees to act as a single normal expenditure of a nation is


===== PAGE 56 =====

54 THE FREEMAN May

to be undertaken by the State, human affairs, men would have
the money must be found by taxa- been mass-produced from a single
tion. This creates two major evils blueprint, and they would have
for the individual. His opportuni- been denied the faculty of free
ties for exercising personal choice will.
are reduced to the vanishing point, If we turn to relations with
so that initiative dies; and, sec- foreign countries, we see similar
ondly, he loses all incentive to evils arising from controls by the
save, relying upon the government State. There is no resilience when
to amass the capital without which trade depends upon state bargain-
all production comes to a stand- ing. Every transaction takes on a
still. But unlike the private in- political flavor which spells death
dividual or the firm whose liveli- to economic give and take. What
hood depends upon saving for the private firms can thresh out to-
provision of capital, the State gether in a boardroom to their
does not save. On the contrary, it mutual satisfaction becomes a mat-
carries an ever-rising debt, which ter of high policy affecting the
demands further taxation to cover prestige of governments. What-
the interest due on it. The explana- ever bargaining takes place runs
tion is simple. Centralized direc- the risk of estranging the two
tion on this scale requires a vast countries concerned and possibly
unproductive bureaucracy to ad- even leading to war. For wars are
minister its planning, a bureauc- almost always the result of fear
racy whose only incentive is to or jealousy of a state govern-
hold its job and to receive the pay ment that has so tightened its con-
squandered upon it. trol over the people of its country
As to the argument that the that it is able to implement any
State deals impartially with every- decision it may come to, however
one, whatever the motives of those unpopular. It thus becomes a po-
in power may be (and who can tential danger to the world —a
deny that they are usually influ- power unit divorced from the aims
enced by pressure groups and vote and desires of its people.
catching?) impartiality in this
connection means reducing to a Socialism Breeds Apathy
dull level all the varied ingenuity It is this last characteristic of a
of human beings. It is a colossal socialist government that makes
attempt to fit square pegs into any relapse into socialism by coun-
round holes. If socialism had been tries freed from the tyranny of
the system intended to govern communism a matter of serious


===== PAGE 57 =====

1958 FALSE GODS 55

moment to all those nations that the nation and so lulls it into a
believe in a free society. If, for somnolent lethargy, until the gov-
example, Poland were to adopt a ernment has consolidated its con-
socialist regime, all the vigor of trol and all power of resistance is
that courageous and talented na- dead. After that, a return to com-
tion would bit by bit give place to munism is the only logical sequel.
subservient indolence. And if it be

asked why then the Poles, who If the satellite nations are in-
have suffered communism for so tending, after their liberation, to
many years, have still maintained replace the false god they hate by
so much of their fighting spirit, another false god that they have
the answer is that communism ac- not experienced, it is more im-
tively persecutes a people and by portant than ever that free men
its very tyranny keeps alive in strongly resist encroachments in
brave hearts the determination to their own countries on the liberty
resist; whereas socialism, by its and initiative of the individual.
milder methods and subtle prop- Freedom is contagious, and it
aganda, gives the impression that breeds creativity just as surely
it is working for the betterment of as control breeds apathy. eo eo e

WHAT'S THE SCORE?

REPORTED: That the Soviet government is spending more than the United
States government on respective exhibits at the 1958 World's Fair in
Brussels.

RUMOR: That some persons are concerned, lest visitors to the Fair conclude
from these exhibits that the Russian way of life is superior to the American
way of life.

SUGGESTION: That for such persons, there be erected a large scoreboard
with a running tally of visitors to the Fair:

From Russia

From The United States


===== PAGE 58 =====

CONOMY IN [yovermmen

ARTHUR KEMP

NE MAJOR OBSTACLE to achiev- priorities in our objectives. It re-
ing true economy in govern- quires a constant reappraisal and
ment is the willingness of many restatement of the raison d’ étre of
people to accept superficially plaus- our political and economic society.
ible programs having multiple, and For example, some groups wish to
often mutually incompatible, ob- increase the degree of centralized
jectives. There is literally no end direction of political and economic
to the number of socially desirable affairs — in brief, they seek a high
projects governments can dream degree of socialization. In other
up. Each one can be clothed in the words, some persons desire enough
most fetching garments and sur- power to impose their values on
rounded by such an aura of right- other persons. They do not fear in-
eousness that opposition to it can flation, or a government deficit; in
be made to resemble attacking: fact, they welcome both, for such
one’s sister and setting fire to the conditions are quite likely to lead
old homestead. But, if the ends we to demands for price-fixing, priori-
seek include the retention of our ties, rationing, allocations, and so
traditional liberties and self-re- on, all of which are excellent in-
spect, as well as the multitude of struments of social control and
socially desirable projects, we may economic subjugation.
end up by achieving none of them There are others who believe an
in an effort to have all of them! individual's income is spent most
Like Don Quixote, we seem deter- efficiently, and most properly,
mined to ride off madly in all when he spends it himself in such
directions. a manner as he may choose. This
To overcome this kind of obsta- second group, in contrast to the
cle requires the establishment of first, favors greater economy in
The author is Professor of Money and Credit at Claremont Men's College, California. This is an

excerpt from his address to the California Taxpayers’ Association at Los Angeles, February 18,
1958.

b6


===== PAGE 59 =====

-

1958 ECONOMY IN GOVERNMENT 57

government as a means of reduc- than a decentralized system
ing taxes and thus minimizing the with its division of sovereignty
proportion of everyone's income and separation of powers, I should
disposed of by political decision. still prefer the latter. Fortunately,
Unfortunately, there also exists this is not presently the case; in-
a third group that does not aim at stead, we can probably have our
socialized control and favors econ- cake and eat it too. If we desire
omy in government in the abstract, efficient production of the things
but seeks to use the coercive pow- people want to have, it is almost
ers of government for its own beyond dispute that a free and
particular advantage or special voluntary society is much more
privilege. In this group lies the capable of accomplishing that goal
prime obstacle to economy in gov- than a directed, centralized system
ernment. To call upon government of imposed values.
to exercise its powers on behalf of It should be recognized, too,
one group — whether labor, or that there are two kinds of econ-
farmers, or businessmen, or school omy in government; two ways,
teachers, or whatever — inevitably therefore, to economize. One is to
leads to further interference on achieve greater efficiency in the
behalf of others. The end product, operations of government — in pro-
as Henry Simons sagely pointed ducing better defense for less
out two decades ago, is an accumu- money, in performing governmen-
lation of governmental regulation tal services of all kinds at lower
and interference which produces cost, in reducing employee turn-
all of the disadvantages and none over, and so forth. The second way
of the advantages of either a free is to reduce the functions per-
society or socialism itself. We are formed by government and to keep
running the danger, today more all government activity as close
than ever before, of drifting into a to the individual as practicable.
society which, in performance, is This means avoiding government

the worst of both worlds. ownership and operation of enter-
prises, avoiding subsidies whether
A Matter of Principle direct or indirect, and whether or

From the standpoint of moral not they have pleasant names like
principle I find it difficult to sub- aid to education, school lunches,
scribe to the glorification of econ- or pensions for unmarried
omy per se. If it could be demon- mothers.
strated that a centralized system There is, in my opinion, no ex-
was more efficient in all respects cuse for the agricultural subsidies,


===== PAGE 60 =====

58 THE FREEMAN May

the TVA and public power sub- “Our country is too large to
sidies, the public assistance pro- have all its affairs directed by a
grams, the vast aid to education single government... . if the prin-

programs, the housing subsidies, ciple were to prevail of a common
the subsidies for water transpor- law being in force in the United
tation, the hidden and open subsi- States (which principle possesses
dization in many items of public the General Government at once of
works, and the amazing subsidies all the powers of the State govern-
to users of mail services. And if ments and reduces us to a single
someone wishes to raise the ques- consolidated government) it would
tion, I am prepared to argue that become the most corrupt govern-
the largest part of the $60 billion ment on the earth. . . .
of postwar foreign aid, instead of “Let the General Government be
protecting this nation’s defense, reduced to foreign concerns only,
has weakened our ability to achieve and let our affairs be disentangled
peace and to wage war, has lost us from those of all other nations, ex-
the respect of a large part of the cept as to commerce, which the
world, and has seriously under- merchants will manage the better
mined the political and moral bases the more they are left free to man-
of our very existence. age for themselves, and our Gen-
As early as 1800, Thomas Jef- eral Government may be reduced to
ferson wisely observed in a letter a very simple organization and a
to Gideon Granger: very inexpensive one. ...” eo o eo

OITA SRO NE 10088 YY | Despotic Government

IT COVERS THE SURFACE of society with a network of small, com-
plicated rules, minute and uniform, through which the most
original minds and the most energetic characters cannot pene-
trate, to rise above the crowd. The will of man is not shattered,
but softened, bent, and guided: men are seldom forced by it
to act, but they are constantly restrained from acting: such a
power does not destroy, but it prevents existence; it does not
tyrannize, but it compresses, enervates, extinguishes, and stupe-
fies a people, till each nation is reduced to be nothing better than
a flock of timid and industrious animals, of which the govern-
ment is the shepherd.

ALEXIS DB TOCQUEVILLE, Democracy tn America


===== PAGE 61 =====

John Chamberlain

“WAGE PUSH” AND LABOR "PULL"

CURRENTLY POPULAR theory has plays a significant role in the main-
it that the inflationary prices tenance of “market power” by big
of recent years have grown out of firms which presumably set prices
something known as the “wage at arbitrary high points and make
push.” The theory is plausible on them stick there by artificial
the face of things. Witness what means. Believing as he does in the
happens in steel: first, the steel power of organized Bigness to
union insists on an increased wage dictate to the customer, Professor
— and gets it; then, with the “law Chamberlin is quite logical when
of cost” breathing down their he attributes to Big Labor its own
necks, the steel companies feel they “market power” to ‘“‘administer”
must incorporate wages in final the price of work.
prices. Otherwise their profits will Just how is the Chamberlin
sag to the point where they will theory compatible with F. A, Har-
not be able to pay for new steel per’s beautifully lucid — and quite
capacity at the present inflationary conclusive — study of the secular
rates. trend of wages since the Civil War,
The seemingly definitive time Why Wages Rise? On the surface
sequence of the wage-price spiral it is not compatible at all. What
is such that it is hard to argue Harper demonstrates is that wages
against the “wage push” theorists. have tended to rise with produc-
It is hard to argue against Edward tivity, as a “reflex” responds to a
H. Chamberlin’s recent The Eco- “condition.” The state of union or-
nomic Analysis of Labor Union ganization has had nothing what-
Power (American Enterprise As- soever to do with the broad under-
sociation, Inec., 46 pp. $1.00), to lying generality. Labor, whether
pick one specific example. . Big or Little, can’t get more than
A Harvard professor who there is — and it must always leave
fathered the theory of “monopo- something for the entrepreneur
listic competition” some thirty and the investor, or it won't be
years ago, Chamberlin believes in able to command the use of the
the reality of “administered” more productive machinery. The
prices. He also believes that cal- price of labor has been determined
culated “product differentiation” competitively, both in periods of

59


===== PAGE 62 =====

60 THE FREEMAN May

strong organization and weak. to the customer. It all works very
On a deeper level, however, nicely, just so long as the State is
Chamberlin and Harper have their willing to add to its periodic flush-
moments of compatibility. For, ing of the money supply.
with political help, it is entirely
possible for some wage earners to A Response to Inflation
gain, at least for the short run, The “wage push,” coming as a
at the expense of other wage reflex of the money flood, is a re-
earners. Harper does not deny this sponse to inflation, not a cause.
— and it is as a gloss on the phrase, And the “administered” prices
“with political help,” that Cham- which anyone can collect in certain
berlin’s little book has its validity. phases of the supply-demand cycle
One does not have to believe at are a normal competitive expres-
all in the “wage push” explana- sion of a “seller's market.” Why
tions of high prices or in the should anyone lower his prices
reality of “administered” prices to when his plant is working at full
credit the truth of much that is capacity?
in Chamberlin’s extended pam- Does this invalidate Chamber-
phlet. Quite obviously, the “wage lin’s “economic analysis” of labor
push” and the “wage-price spiral” union power as something that
take effect within the far more reaches monopolistic proportions?
fundamental reality of a de- No, for a union which has the
bauched currency-cum-credit sys- power of organized politics behind
tem. it can defend a privileged position
Responding to pressures, the by political means at the expense
government has been busy for a of those who lack political power.
generation expanding the money Where a union has a closed or
supply without regard to any cor- union shop understanding, it will
responding increases in produc- tend to keep its own members em-
tivity. Naturally, with more money ployed at high hourly rates, even
in his pocket for use in bidding though a decrease in manufactur-
up the price of products, the cus- ing volume may cut into total take-
tomer provokes an increased ac- home pay. The main sufferers will
tivity among producers. Since a be nonunion men who are excluded
producer, in a time of inflated de- from employment at lower rates.
mand, doesn’t have to worry par- And the customer will not get a
ticularly about price, he will tend quick price cut as long as the em-
to give in to union demands and ployer feels able to recover high
then turn around and charge it wages in the final price.


===== PAGE 63 =====

1958 “WAGE PUSH’’ AND LABOR “PULL” 61

Professor Chamberlin obviously mobiles can use an “administered”
intends to include the pricing of price to compel anybody to pay a
labor within his larger theory of fixed amount for basic transporta-
the administered price. But the tion. The illusion of the “admin-
two things are not aspects of the istered” price may stand. But in
same basic problem. In a union any period of declining business
shop industry it is impossible for the reality of price “administra-
a man to get a job unless he will tion” will be exposed as hollow.
agree to accept the union as his
bargaining agent. He has no Influence of Teamsters
- power of making an alternative Not so when we come to the
contract; and the arm of the State power of the Teamsters Union, for
stands ready to discipline him if example, to gain its ends. The
he tries. teamsters’ slogan is: “If you got

If a man is in the market for it, a truck brought it.” In New
a car, however, he has a choice of York City, as Professor Chamber-
many alternative contracts. True, lin points out, the Teamsters Joint
if he insists on the trade name or Council has the power to grant or
the distinctive features of a Chev- withhold strike sanction to the
rolet, he may be compelled to limit fifty-seven teamster locals. But
his bargain-seeking to getting al- more importantly, the Joint Coun-
ternative quotes on the trade-in cil also decides on the validity of
value of his old car, or he may be requests from other unions, not
forced to wait for falling prices teamsters, for recognition of their
at the end of the year. But if the picket lines. On the West Coast
purchaser cares less for “differen- the power of the Teamsters Union
tiated” esthetic or engineering has been used most sweepingly
values than he does for basic trans- against other unions. By refusing
portation, he can always buy a to carry an employer’s products,
used car, or a foreign make, or an a Teamsters Union local can effec-
American Motors. Company Ram- tively put an entrepreneur out of

bler. business, or dictate the type of
Lacking the political power to union with which he must deal.

seal off the used car market, or In all of this it is political power

to put an excessive tariff on Hill- — not economic power — which is

mans and Volkswagens, or to com- the crux of the matter. The streets
pel the American Motors Company over which the Teamsters Union
to cease making a cheap car, no members drive their trucks belong
member of the Big Three in auto- to the public. Yet the servants of


===== PAGE 64 =====

62 THE FREEMAN May

the public — whether in Washing- Only a few short years ago Sena-
ton, or in the state capital, or in tor Robert Taft, working in con-
the city hall, or merely in the local junction with Senator Joseph Ball
police precinct — do not protect the and Representative Hartley,
unorganized individual in his right thought he had succeeded in de-
to use the public thoroughfares signing “a body of law appropriate
which he pays for with his taxes. to the labor market” in the Taft-
Professor Chamberlin’s little Hartley Act. Aimed at eliminating
book is suggestive. It is also sound a whole host of common compul-
in its suggestion that legal im- sions practiced by unions against
munities which enable a union to workers, the Taft-Hartley Act
deprive people of the right to make supposedly outlawed the union
alternative bargains should be shop except in certain specified
thoroughly reviewed. There should areas; and it tried to limit the use
be “a body of law appropriate to of the strike and peaceful picket-
the labor market,” just as there is ing to the legitimate end of gain-
a body of law designed to protect ing concessions in wages, hours,
people against “monopoly power” and conditions of employment.

in the product market. Though the language of the
Taft-Hartley Act is seemingly un-
Coercive Power equivocal, it is Sylvester Petro’s

The only flaw in Professor contention, in How the NLRB Re-
Chamberlin’s analysis lies in his pealed Taft-Hartley (Labor Policy
frequently implied confusion of Association, 140 pp., $2.00.) that
economic and political power. He the National Labor Relations
sometimes speaks of the economic Board has deliberately misinter-
power of unions as if it were a preted much of it, largely by the
mere reflection of numerical Big- device of assuming that it was
ness. But labor has no overween- never meant to outlaw “any of the
ing or dangerous power that is not primary means which unions tra-
political in its origins. Bigness by ditionally use to press their de-
itself would be subject to the con- mands on employers.” Inasmuch as
trol and the erosion of competition unions have used many methods
if it did not have the compulsion both “primarily” and “tradition-
of the State behind it. It is not ally” which are specifically banned
the unions’ economic power, then, by Taft-Hartley, the result is a
which is of primary concern; it wilderness of interpretive and
is the unions’ power to coerce — judicial cross-purposes.
and make use of — the State. Dr. Petro’s pamphlet bristles


===== PAGE 65 =====

1958 OTHER BOOKS 63

with many separate instances of Concerned primarily with our
muddle, the whole adding up to a own society in its present state,
terrific indictment of ‘“administra- Mr. Marrs nonetheless points out
tive” law in general. The upshot that the supposed communist cru-
of the pamphlet would seem to be sade against parasitism is itself
this: let the NLRB be limited in parasitic, for the communistic
its power to the certification of society would be made up “of ex-
bargaining units, and let all other actly what it proposes to destroy:
decisions affecting the rights, du- a mass of consumers living di-
ties, and responsibilities of em- rectly upon a mass of producers,
ployers and employees be left to without supplying them with any-
the courts. e ¢ ¢ thing of equivalent value in
return.”

There are those — like the im-
mature, the aged, the chronically
ill, and the congenitally defective
— who must be considered nor-
mally dependent upon the produc-
tive members of society. Those
able-bodied persons who should

YATT MARRS, a sociologist, contribute to the well-being of

asserts the simple but widely their fellows but do not are the
overlooked truth that the funda- ones here identified. Chronic de-
mental relationship in society is pendents such as beggars — para-
the mutual interchange of goods sites who take without giving,
and services. He has the blunt hon- such as thieves — and those whose
esty of Captain John Smith who contribution serves no special pur-
made the first important economic pose, such as drug pushers and
statement on American soil: the prostitutes, form an obvious class.
able-bodied who will not work Not so obvious are those who ex-
should not eat — a proposition that ploit entrenched positions in the
might stand. as a motto for Pro-
fessor Marrs’ book. Yet it is evi-
dent that hordes of people the } oo
this simple truth, and it is the pur- mail. You pay only the bookstore price. We
pose of this book to aid in the | Betas on muon here nthe world.
identification of them for what | rye BooKMAILER, Box 101, New York 16
they are: social parasites.

+> The Man on Your Back: A
Preface to the Art of Living
Without Producing in Mod-
ern Society.

By Wyatt Marrs. Norman, Okla-
homa: University of Oklahoma
Press, 1958. 289 pp. $3.95.



===== PAGE 66 =====

64 THE FREEMAN May

interstices of charitable and reli- must stand around watching while
gious organizations, in family a plumber sweats a joint. The man
membership, marital status, or on your back is the executive who
political position. entertains his personal friends on
The author points out that his company expense account. The
“government, with its power to man on your back is the profes-
tap the economic resources of sional manager of charity drives
cach individual through taxation, who takes two-thirds of the pro-
with its enormous expenditures, ceeds as overhead. Of these we
and with its vast array of posi- hear nothing.
tions to be filled, naturally attracts Theoretically, the most valuable
a veritable army of the parasiti- part of the book is the develop-
cally inclined.” But he does not go ment of the idea of parasitism it-
far enough in analyzing the sub- self. Because of custom and tradi-
species of this and other tion, neither the law nor the moral
categories. code offer sociological concepts
The man on your back is also that apply universally to all
the union official who decides the peoples at all times. But, as Mr.
quota of bricks a bricklayer can Marrs declares, social parasitism
lay in a day, who limits the size “is a clear-cut and universally
of the painter's paintbrush, who valid criterion of antisocial be-
featherbeds extra brakemen on havior.” This book is a clear state-
every train that leaves the station, ment of many of its dangers.
and who decrees how many boys CHARLES BOEWE

We invite your subscription to

MODERN AGE

A CONSERVATIVE REVIE
Vou. 2, No. 2 (Spring 1958) Edited by Rossen Kirk
Contains Symposiums on:
“American Diplomacy” and “The Condition of Europe”
Three dollars per year One dollar per copy
Address: FounpaTioN ror ForeicN Arratrs, INC.
64 East Jackson Boulevard, Chicago 4, Illinois
Free sample copy



===== PAGE 67 =====

Q, BEDROOM

FAMILY ROOM

DINING AREA

~~ ma >
~

ld

Scene:
The Nelson home

Time:
A Saturday evening

The case of the crumpled letter !

1 The desk where Mr. Nelson opened 6 The TV, with Junior riding herd.
his bills and wrote a letter to the elec-
tric company, protesting against their
advertising that electricity gives more
value for every dollar than any other 8 The all-electric kitchen, where
item in the family budget. dinner was cooking and Mrs. Nelson
2 Where Mr. Nelson looked at the was taking ice cubes from the refrig-
electric clock to see if he had time crator—and where the electric dish.
to mail his letter before dinner. washer and clotheswasher and dryer

were waiting to do the chores ahead.
3 The hi-fi set he turned off as he

9 The back porch, where Mr. N.
left the room. . . .
paused to think —realizing that his
4 Where Mr. N. paused to check the family was putting electricity to work
thermostat setting on the air condi- in dozens of ways all over the housc
tioning system. .. . ways he often forgot. So maybe the
electric company was right about the
value of his service.

7 The electric coffeemaker and the
toaster, ready to do dinner duty.

5 His daughter’s bedroom where he
watched her drying her hair with the
electric hair dryer and admired the 10 The trash can into which he tossed
dress she had just ironed for her date. his crumpled letter.

America’s Independent Electric Light and Power Companies*

* Company names on request through this magazine


===== PAGE 68 =====

FROM A LIBERTARIAN’'S LIBRARY

Soca REFORMS which require the citizen to depend too directly
on his government for food, occupation, employment, crops,
clothes, and homes, compel abrogation or abandonment of con-
stitutions and bills of rights....The false laudation of the
strength of these instruments naturally creates an impression
that they constitute an unbreakable barrier against oppression.
But nothing could be farther from the truth. They are futile in
every respect if the general principles of government are not ob-
served. They have value only in an economic structure of free
enterprise and private property.

The Constitution was built around the principle that the re-
sponsible taxpayer should exercise the franchise. However, an
economic situation may reduce the taxpayers to want. Then,
unless a statute divests them of the right to vote, the control of
the ballot is in the hands of the discouraged, the disappointed, the
destitute, the paupers, the misinformed, the ignorant, the desper-
ate, and the unscrupulous.

A selection from “Liberals” and the Constitution by Henry
Plowdeeper (Spitsbergen), Liberty and Freedom Press, Washington,
D. C. 301 pp. $3.00.