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

JUNE 1958

The Police Power .

Bread or Post Offices?

The Ballot and the Constitution
The Early Quakers

The Marriage of the Farmer's Daughter
The Catastrophe of Confusion .
Russia Faces Food Crisis

A World Divided Is a World Lost .
Free Enterprise — Why? .

Justice .

The Power To Tax

The Admiral‘s Log

Other Books

IDEAS ON LIBERTY

Leonard E. Read 3
Oscar W. Cooley 1A!
H. E. Spitsbergen 13
Frederick Walker 17
Frederic Bastiat 20
E. Merrill Root 22
Lawrence Sullivan 27
Hendrik Van Loon 32
Leonard W. Martin 37
Kenneth W. Sollitt 46
U. S. Steel 50
John Chamberlain 57

él

THE FOUNDATION
FOR ECONOMIC EDUCATION, INC.

Irvington-on-Hudson, New York


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

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Would you call this fair play?

Number 5 has to take the high hurdles bills that you pay in yours. These

—number 3 gets by with the low. are the people who get their electricity
Would you call this a fair race? from federal government electric sys-

Hardly—but you face that same kind lems. Like runner number 3, they
of unfairness every day as far as your ~~ enjoy lower tax hurdles while you
taxes are concerned. Here's how: strain over the high ones.

Part of every dollar you pay for This kind of tax favoritism is a far
electricity goes for taxes. But a strange cry from American standards of fair
twist in federal laws exempts several play. That’s why we believe it should
million families and businesses from be made widely known and given criti-

paying all the taxes in their clectric cal study.

America’s Independent Electric Light and Power Companies*

wCompany nomas on request through this magatine


===== PAGE 3 =====

mane

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tiga

Tapping the Open Hearths at J&L

Jones & Laughlin

STEEL CORPORATION -PITTSBURGH

STEEL



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

THE

[ICCHI A MONTHLY JOURNAL OF IDEAS ON LIBERTY

JUNE 1958 Vol. 8 No. 6

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 $12.60 a year
per person on the mailing list. Donations are invited
in any amount — $5.00 to $10,000 — as the means of
maintaining and extending the Foundation’s work.

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 copies, 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 Catastrophe

of Confusion,” “A World Dlvided,” and “The Power To Tax."
Any current article wlll be supplied in reprint form if there are enough
FE

Inquiries to justify the cost of the printing.


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

LEONARD E. READ

THE

POLICE (x)
POWER

NJ

TV Luton of Americans are con- goods and services, is a primitive
cerned lest our present creep- economic device. It is a negligible
ing inflation turn into hyperinfla- element in our own complex so-
tion. (“Creeping” may not be lusty ciety, for obvious reasons. If we
enough to describe a dollar that had to rely on barter, we would be
has lost 51 per cent of its purchas- able to exchange no more than the
ing power since 1939!) This con- tiniest fraction of the goods and
cern is warranted, for the conse- services we are capable of produc-
quences of hyperinflation here ing. A farmer in Utah, for ex-
would be unbelievably awful — ample, can hardly exchange one of
much worse for the citizens of the his lambs for the product of a
U.S.A. than for those in other workman in an Akron tire factory.
countries or at other times who Exchange in such a complex econ-
are being or have been victimized omy as ours relies on a circulatory
and shorn of the fruits of their system, one able to convey the
own labor. fruits of our tens of thousands of
- In our highly specialized society, specializations to all parts of the
nearly all persons are utterly de- society. The circulatory system
pendent on the free, uninhibited that performs this amazingly com-
exchange of their respective spe- plex function is the medium of ex-
cializations. There is a marked and change — our money.
dangerous unawareness of the ex- The economic circulatory system
tent of this interdependency. can be likened to the circulatory
Barter, the exchange of goods system of the body, in many re-
and services directly for other spects. The bloodstream carries

R


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

4 THE FREEMAN June

oxygen from the lungs and in- medium of exchange can be in-
gested food to trillions of cells and creased in such volume that it be-
carries off waste matter. Here, comes worthless. (We have in-
again, is a performance so amaz- creased our own money supply by
ingly complex that the mind of about 700 per cent since 1932.)

man can comprehend it only in a Example: Two German brothers,
general way. during 1919, inherited 500,000

But, look! One's bloodstream marks each from their father. One
could be thinned or diluted to the was frugal and never spent a
point where it would cease en- mark. The other spent the whole
tirely to perform this function on of his share on champagne parties.
which life depends. The patient The inflation in Germany pro-
would die. gressed so far by 1923 that 30 mil-

Similarly, the economic blood- lion marks would not buy a loaf
stream — the medium of exchange of bread. At this point the frugal
— can be thinned or diluted to the lad had nothing. The other was
point where it will no longer dis- able to exchange his empty cham-
tribute our millions of specialties. pagne bottles for a dinner. The ex-
This would be far more disastrous change system was reduced to
to us than to the peoples of other barter!
countries because we are far more
specialized; because each of us is Government Feeds on Inflation
80 far removed from self-subsis- Observe the history of all hyper-
tence. Ours is the most advanced inflations. In every instance they
division-of-labor society that has were preceded by “creeping” in-
ever existed. flations.

Inflation is a thinning or dilut- The question is: Are we headed
ing process. It comes about by in- for hyperinflation? The answer
creasing the volume of money.! It comes clear if we recognize the
is a form of coin clipping. Coins nature and cause of inflation. In-
have been clipped to the point flation is a form of taxation, re-
where little of value remained in sorted to by government as a
the hands of coin owners. The means of obtaining revenue. When
' Private credit by no means is to be the activities of government be-
dismissed as an inflation device. How- oome go expensive that it is no

ever, government either condones or en- ] liticall dient t b
courages those aspects of private credit onger politically expedient to ob-

which, like all inflation, temporarily aids tain the needed revenue by direct

some at the expense of others. At the ¢yyation, inflation will be invoked.
very least, government fails to restrain

them. The whole historical record con-


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

1958 THE POLICE POWER : 5

firms this conclusion. Inflation in- cific and name the things that
heres in overextended government, ought to be abandoned. Who, I ask,
and there is no remedy whatever will publicly proclaim that TVA,
except to shrink the activities of compulsory social security, govern-
— and thus the expenses of — gov- ment housing, subsidies to farmers

ernment. and to thousands of other groups
To answer the question — Are and undertakings should be re-
we headed for hyperinflation? — pealed —as of right now? Few,

only requires that we answer the indeed.
question — Are we headed toward
the extension or the shrinking of Time for Reappraisal
governmental activities? The an- Why this almost unanimous re-
swer is clear: We are, as of now, luctance to be specific, to turn the
politically committed to the furth- spotlight on the only areas of po-
er extension of governmental ac- litical activity that will do any
tivities. All proposals from Wash- good? The reason is becoming in-
ington confirm this. Unless the creasingly apparent to me. Once
political design is reversed, we are government takes over the respon-
hopelessly bound for hyperinfla- sibility for any activity — the de-
tion. livery of the mails, for example —

Now, there isn’t a single Ameri- it becomes a sacred cow, so to
can who favors hyperinflation ex- speak. Why this sacredness? Be-
cept one bent on the destruction of cause it is an officially proclaimed
our economy. Many will advocate commitment. And, what honorable
the increase of governmental activ- man isn’t reluctant to recommend
ities, but they will not favor the the breaking of a commitment?
inflation which the increased activ- We need to take a new look at
ities make inevitable. As they these commitments. What if they
view the inflationary aftermath of are evil? Suppose, for instance,
their work they will all wail, “But, that we had traditionally condoned
I didn’t mean this.” cooks and housemaids stealing

Those who would keep America from the home larder as a means
from the disaster of hyperinfla- of compensation? Would we hesi-
tion have but one course to recom- tate to recommend that the prac-
mend: The outright abandonment tice be stopped? On the contrary,
of excessive governmental activi- we would probably attack the prac-
ties. tice with some fervor.

Here, however, is the rub. Here is my point: Until more of
Hardly anyone is willing to be spe- us understand better than now


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

6 THE FREEMAN June

what is and is not the proper func- certain aims, and succeed in get-
tion of government; until we know ting the police force behind their
that government, too, can do evil; collective, they bring into exist-
until we can identify and explain ence the social structure we call
what specifically is evil, and why; government. Their resolutions be-
until then will we hesitate to do come decrees. When they resolve
anything worth-while toward keep- that you and I shall be hung for
ing our country free from hyper- murder or go to jail for stealing
inflation and disaster. Let's take a or be fined for speeding or pay the
fresh look at government in that deficits of TVA or build public

light. bath tubs for camel-riding Egyp-
} tians or guarantee the income of
Backed by Police Power farmers, we obediently respond —

What distinguishes an individ- or else reckon with the police
ual as a private citizen from the force! Government, properly so-
same person as an agent of gov- called, can never be reduced below
ernment? Is it other than this: An two elements: a collective affixed
agent of government is formally, to a police force.
officially, and, quite properly, in Imagine, for example, all gov-
league with the police power. Let ernment personnel — federal, state,
the police force backing be re- and local; legislative, executive,
moved from any public servant — and judicial — organized exactly as
an agent of government — and he they now are but without any po-
is, presto chango, a private citizen lice force backing whatever. Their
again, pronouncements would be reduced

Private citizens Hoover and to those of private citizens; merely
Truman differ from President advisory, not compulsive. Without
Hoover and President Truman by the police force their resolutions
virtue of their altered relationship would be on a par with those issu-
with society’s police force. The ing from a chamber of commerce
same can be said of the difference or from the League of Women
between Mayor Bowron and Mr. Voters. They might resolve that
Bowron or Congressman Buffet all of us should donate to the pros-
and Mr. Buffet. Once they were as- perity of farmers, and their reso-
sociated with the police force; lution would have no more com-
now they are not. pulsive weight than an advertise-

Consider the significance of this ment urging us to buy a certain
altered relationship. When men or- brand of beans. It is the absence
ganize a collective to accomplish of the police force backing which


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

1958 THE POLICE POWER 7

explains why Mr. Truman's cur- clenched fist accomplish? It can
rent deliverances, for instance, are hurt or punish; it can penalize, re-
taken so much less seriously than strain, inhibit, destroy. What, in
were President Truman’s pontifi- good conscience, ought to be pun-
cations. ished, inhibited, destroyed? Vio-
In sum, it is only when a police lence would appear to qualify. So
force is affixed to a collective that would fraud, thievery, misrepre-
government exists.? Therefore, it sentation.
is the police force element which What can the clenched fist not
is the essential, distinctive feature accomplish? It cannot discover, in-
of government. To determine what vent, produce, create. Nor can its
government ought to do, then, striking power cause others to dis-
would seem to require nothing cover, invent, produce, create’? It
more than a reasonable determina- is, by its very nature, a repellent
tion of what the police force ought or defensive, not an attractive or

or ought not to do. creative, force.
Consider man’s energies. They
The Clenched Fist manifest themselves either de-

But first, what in essence is a structively or creatively. What de-
police force? When correctly de- fensible code will deny that any
fined, is it anything more or less individual has a moral right to in-
than the striking power in each of hibit the destructive actions of
us organized into a collective strik- another or others? And, what de-
ing power? Striking power can be fensible code will assert that any
symbolized in its most rudimen- individual has a moral right to use
tary form by the clenched fist. his striking power against the pro-
More advanced symbols would be ductive or creative actions of
billy clubs, knives, guns, subma- another or others. Isn’t it plain
rines, fighter planes, atom bombs. that a repellent force cannot be

Examining striking power in its made to create, that it has only
simplest form, what can the this inhibitory quality?

— 3 This striking power does not produce a
* Corporations and trade associations are TVA or a housing project, for instance.
collectives. However, they are voluntary It merely gives the appearance of pro-
collectives if all police power elements ducing something. Looking through the
are absent. In this case they are not “magic,” one sees a transfer of *“choos-
governments. Labor unions are also col- ing power.” Your and my freedom to
lectives. If they obtain the backing of a choose what is to be done with the fruits
police force, be it the official constabulary of our own labor is taken from us and
gained through laws or be it their own the say-so bestowed on others. These
mob in violent action, they are, in fact, others may choose a TVA or a housing
governments. project or whatever.



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

8 THE FREEMAN June

A police force, it would seem, is individual? No right, any more
nothing but organized striking than immortality, is to be ascribed
power employed by a collective. It to an abstraction, organization
has no features to distinguish it being no more than this.
from the striking power of the in-
dividual beyond size, power, and The Right To Defend
organization. It is merely the We often hear that government
clenched fist multiplied, mechan- —a collective linked to a police
ized, organized, and embellished force — has the function of doing
with titles, uniforms, and other for individuals that which they
trappings. Its proper boundaries cannot do for themselves. This is
of action are derived from and correct in a sense, but is open to
prescribed by precisely the same easy misconstruction. The indi-
principles that pertain to the in- vidual cannot protect himself
dividuals who compose and organ- against pirates or mobs or organ-
ize it. The individual has the moral ized thievery or countless other
right to inhibit the destructive forms of destructive actions.! Gov-
actions of another or others. ernment should do for all of us
Morally, his striking power is that which we have a right to do,
limited to this right. This right but cannot do, for ourselves.
is in no sense widened by two or However, we have no right as
any other number of individuals individuals to use striking power
combining and organizing. Or, so against the productive or creative
it seems to me. actions of others for the purpose of

Those who argue to the contrary feathering our own or anyone
— who contend that the collective else’s nest. By the same token, we
striking force is morally war- have no rights callectively to use
ranted in extending itself beyond striking power for these purposes.
the area consonant with individual To use a not too far-fetched ex-
rights — must, if their contentions ample: At this juncture in our de-
aren't to be groundless, point out velopment we probably would not
the source from which any extra freely donate enough funds to
rights derive. If not from the in- build a missile that would photo-
dividual, then, from whom or graph the other side of the moon.
what? Surely, not from God as There are among us some persons
the divine-right-of-kings theory ——
had it! Are not rights, such as the ¢ See my Government: An Ideal Concept
right to life and the right to sus- (Irvington-on-Hudson, N. Y.: Founda-

> : ; tion for Economic Education. 1954, pp.
tain life, exclusively vested in the 33-40).


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

1958 THE POLICE POWER 9

who want this done. They lack the in every “civilized” country.’ Fur-
resources to do it themselves. ther, these uneconomic and im-
Therefore, they call on the con- moral uses of striking powers
stabulary to forcibly take the within nations account for the in-
fruits of the labor of others in sane employment of striking
order to gratify their wish. All powers between nations — wars!
subsidies and all federal grants- Let’s assume that we agree on
in-aid, whether to farmers or busi- what is the proper use of striking
nesses or to communities or to for- power: only for defense against
eign countries, fall into this cate- destructive force; never for in-
gory — a misconstruction of the terference with productive or crea-
idea that government should do tive actions, individually or col-
for us that which we are unable lectively, with the fist or with the
or unwilling to do for ourselves. police force. Would this agreement
on principles resolve all of our
Immoral Use of Power social problems? Of course not!
Police-ism — police power run Our judgments vary greatly. It
riot, the uneconomic and the im- would be difficult in many in-
moral use of striking power — is stances to agree on whether cer-
man attempting to usurp the role tain actions were destructive or
of the Creator on the grand scale. creative. Yet, having an ideal, gen-
Police-ism — government out-of- eral principle as a common point
bounds — known popularly as state of reference would help to direct
interventionism, communism, so- our energies and our thoughts
cialism, nazism, fascism, Fabian- toward the ideal. We would more
ism, the Welfare State, the likely demand the same moral rec-
planned economy, the new deal, the titude of our collective actions as
fair deal, and so on, features the we insist is proper for our indi-
private gain of some at the ex- vidual actions. We can hardly ex-
pense of others. Its advocates are pect to behave better collectively
in all walks of life, ranging from than individually. Yet, there isn’t
seekers after office or after welfare much excuse for behaving worse.
or after prosperity to clergymen Double standards of morality?
who have lost their faith in ——F—— . ,
brotherly love. It is, in my view, (i 15 sad oy adhakrishnan's transla:
gavadgite that sin is not
the most glaring sin of our age the violation of a law or a convention but
and it accounts, more than any- the central source of all finiteness: ig-
) . . norance—that assertion of the.indepen-
thing else, for the social disinte- gence of the ego which seeks its own
gration now so easily observable private gain at the expense of others.


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

10 THE FREEMAN June

Imagine American farmers per- social, like being put in jail or per-
sonally robbing everyone from the sonal, like a loss of self-respect.
Widow Doakes to Mr. Gotrocks, Now, legalizing the process in no
justifying the robberies on the way alters its morality nor the
grounds of being reimbursed for certainty of retribution. Yet, after
raising less food than they could. years of legalized plunder, few of
It is unthinkable. Yet, there is us discern any penalties for our
hardly a respectable segment of political waywardness. The popu-
the population that is not urging lar chant, “We have never had it
the police force — the collective so good,” seems only to say, “At
striking power — to do this same last, we know how to do wrong and
unthinkable thing for them. Thus, to get away with it.”

by failing to apprehend a prin- It is naive, however, to assume
ciple, we descend deeper and that retribution for wrong appears
deeper into police-ism, the final only in forms that are obvious. If
stage of which is dictatorship. Cowper was right in saying that
“Dictatorship,” according to “God moves in a mysterious way
Lenin, “if scientifically considered, his wonders to perform,” it is
means neither more nor less than equally valid to assume that he
unlimited power resting directly moves in a mysterious way his
on the police, not limited by any- penalties to inflict. It is absurd to
thing; not restrained by any laws, acknowledge the former without
nor by any constitutional limita- any expectation of the latter.

tions of any kind.” Excessive governmental activi-
ties may for years give outward
Certainty of Retribution appearances of making us healthy,

Most of us realize, deep down wealthy, and wise. However, those
in our hearts, that error brings actions which have really been
its own retribution. Nor does wrong must be building up quite
ignorance absolve us in any meas- an account on the retributive side
ure. One who is unaware of grav- of our economic, moral, and social
itation and jumps off the Empire ledger. The fact that most of us
State Building hits the pavement haven't taken the pains to look
no less resoundingly than does one for this page in the ledger doesn’t
who jumps and knows. mean that it isn’t quietly — almost

We believe it to be immoral to secretly — recording the data for
advance our own private gain by later reference, for balancing the
thieving from others. We would accounts. As I look at this page, I
expect penalties in some form — see material retribution taking the


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

1958 THE POLICE POWER 11

form of a thinner and thinner cir- sible citizens to identify activities
culatory medium — a progressive of this sort which government has
economic anemia! arrogated to itself and to explain

The only cure for this dread attractively and persuasively why
disease is to withdraw govern- they should be returned to private
mental interference from the pro- enterprise. This will require the
ductive and creative activities of best — nothing less — that each of
people. The first step is for respon- us has to give. eo 0

Instead of pump-primed prosperity, it may be only a choice between —

ane) POST

Oscar W. COOLEY

WASHINGTON (AP) — President steak, more beans. The whole
Eisenhower, moving to shore family tightens its belt.
up the slumping economy, sent . h
to Congress today a two-billion And the government gives the
dollar program to modernize people a lot of new post offices!
post offices and postal services. Doesn’t it seem a bit queer to
give threadbare, hungry, re-
URING A RECESSION like this, trenched people a post office? Or
many people retrench all along a courthouse? Or even a brand
the line. Dad makes the old suit new sewer?
do another winter. Mother re- Actually, the government does
decorates the living room instead not give these post offices. They all
of hiring a paper hanger. They have to be paid for, with taxes
patch up the old car. They eat less collected from the recession-beset

Mr. Cooley is Assistant Professor of Economics at Ohio Northern University.


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

12 THE FREEMAN June

people, either directly or through second or third or umpteenth pref-
the insidious process of inflation. erence. The right of property,
The people really build the post which is the right of using a re-
offices with their own sweat, at a source as the owner desires, is de-
time when they are already strain- nied. And the resources are wasted.
ing every nerve to put food in the The objective of the government
larder. officials is to put people to work,
When a carload of bricks is regardless of what they do, as
taken to build a post office, it though there were some virtue in
means that people have a carload mere activity, whether or not it
fewer bricks with which to build yields results that people want.
homes. “But, they are not building The assumption is that the peo-
the homes,” runs the argument. ple are stupid. Because of their
“That’s why we have a recession.” stupidity, we have a recession.
If the people are not using the They need to be told what is best
bricks to build homes, it means for them. They think they need
they are using, or reserving, them food and clothing and a new auto-

for other, more urgent purposes — mobile — but what they really need
which should be their privilege in is a new post office!
a free choice system. In a free This they have to be told — by

economy the people use the re- government officials, who differ
sources according to their own from ordinary people only by rea-
best judgment. The very fact that son of their being in office.

the government acts to force these So, let’s pull in our belts another
resources into a certain use, is evi- hole and go down town to see the
dence that such use is not the one new post office. They say it's a
most desired by the people. It is a dandy! CCI

| vocas [oI] 108600Y | A Precarious Life

ANY COMMUNITY which depends for its economic growth upon
the whims of succeeding Congresses is in economic jeopardy.
Someday, the taxpayers might say “no,” and then where is the
life of that region which ‘has become wholly dependent upon

federal help?
From an address in 19556 by CLARENCE A, DAVIS,
Under Secretary of the Interior


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

UNEmp

FARM PENSATION
o¢) AY | FEDERAL | STATE Oger) AL
S allt 10 ITs
eC oe {LENDING |

SALA ee = CONSTITOTION

The independence once declared and imple-
mented by Americans can also be voted away.

H. E. SPITSBERGEN

HE CONSTITUTION of the United and the indentured acquired prop-
States does not describe the re- erty and education. They qualified
quirements for voting. It was as- for the franchise. They exercised
sumed that the state requirements their own judgment, energy, and
would continue, which limited the integrity to build economic secu-
privilege of voting to citizens who rity and freedom from dependence
owned property (freeholds) and upon government for the necessi-
who had certain academic attain- ties of life. A Federal Welfare Bu-
ments. About one person in twenty reau would have been rejected.
could qualify. At that time the ballot was not
The limitations were grounded tied to welfare legislation. Farm
on the elementary rule that voters subsidies, unemployment compen-
have adequate knowledge of the sation, public housing projects,
subject matter, a common interest, were not being offered. There were
and equal responsibility. Strict ob- no billion-dollar programs to sway
servance of that rule is necessary or bribe the voters. They were on
to maintain the proper checks on equal footing as to benefits and
public sentiment, voting majori- responsibilities.
ties, and the taxing power. Subsequent social welfare legis-
Open and unrestrained competi- lation broke the rule of equal re-
tion was relied upon to meet the sponsibility, making voters eligi-
demands of commerce. Under such ble for government benefits with-
a free enterprise system a new so- out corresponding taxpaying re-
cial order evolved. Servants, slaves, sponsibilities. That gave the fed-

Mr. Spitsbergen (Plowdeeper) is the author of “Liberals” and the Constitution. This article is
from a radio broadcast of April 5, 1958.

13


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

14 THE FREEMAN June

eral politicians a new constituency. ing collapse, dangerous to inter-
The overwhelming voting majori- fere with the benefits. And so long
ties now were to be found among as there are benefits, the voters
the irresponsible, the dissatisfied, and the politicians will make them-
the jobless, the misinformed, the selves believe that what they are
ignorant, and the unscrupulous. doing promotes public welfare. The
It was not intended by the Fore- ballot instead of being a retarder
fathers that the Ship of State becomes an accelerator of politi-
should be directed by those groups. cal corruption.
Human beings under such condi- The most demoralizing aspect is
tions of strain and stress do not that the citizens who do not want
exercise the best kind of judg- to be dependent upon government
ment. Neither was it intended find themselves forced into the
that the politicians — also human same category as the unscrupu-
beings — should be subjected to lous, shiftless, and thriftless. They
such pressure, or be in a position represent a minority. Their pro-
to take advantage of it. tests are ignored and their ballots
By vote of these irresponsible are without significance. Under a
majorities, the government was vicious application of majority
changed, with adverse effect on rule they have, in fact, been rela-
such inalienable rights as free tively disfranchised, notwithstand-
speech, the ballot, an independent ing the Constitution and statutes

judiciary, and private property. to the contrary.
. Under such circumstances free
Paralyzing Free Speech speech cannot survive, ballot in-

Free speech —the primary check tegrity is destroyed, and economic
on political corruption — is seldom security is a mirage.
abolished by laws which declare
that purpose. The abolition is likely Ballot-Created Court Perversion
to occur through welfare legisla- Under the present social legis-
tion which, of course; does not lation, ballot pressure seriously
mention free speech. But the pos- impairs court independence. It re-
sibility of losing welfare benefits quires the judges to solve problems
instills enough fear to discourage relating to prices, wages, hours of
criticism of corruption. In fact, work, management of business,
it will excite unstinted praise of and social revolutions. Every de-
such conduct, so that it becomes cision in these areas takes effect
futile to call attention to the cor- in the political realm and brings
ruption or the evidence of impend- the judges under political control.


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

1958 THE BALLOT AND THE CONSTITUTION 15

If the judges uphold the Consti- kenstein of voting majorities, and
tution, the government’s political under the guise of taxation, has
social plans are thrown into con- brought income, property, and in-
fusion. A decision that a farmer dustry under political control. It
need not comply with a govern- is in a position to confiscate all
ment imposed quota, or an adverse wealth in the name of security.
ruling on a labor matter, may re- Today, even a threat of a depres-
sult in party-shaking political re- sion brings to Congress a load of
percussions. Even one decision bills which tend in that direction.
can antagonize enough voters to Citizens are taxed on the theory
defeat the party in power — and that the government is authorized
the judges. Every aspect of busi- to invest, speculate with, and
ness is now afflicted with political “save” their money to keep them
overtones. economically secure; that it may

The voting majority drives con- give their money to so-called
gressmen to enact unconstitutional friendly nations to help “contain”
legislation. The President, con- unfriendly ones; that it may obli-
fronted with political expediency, gate them to support the needy at
concurs. The responsibility is home and abroad, and, moreover,
shifted to the courts. The judges may tax them on the ground that
do not care to antagonize the they have more than they need or
President, Congress, public senti- are entitled to — taxation imposed
ment, and voting majorities. But for speculation and so-called moral
even if they did declare the legis- purposes.
lation unconstitutional, it would Under elementary law, as well
be re-enacted. They, therefore, as in common sense, the relation-
sustain the legislation. Could a ship of a government official to the
more unconstitutional or security-' fund in the Treasury disqualifies
destroying concept of government him to collect or disburse tax
be devised? money for such purposes: legally,
because of his lack of financial re-
sponsibility for misconduct, mis-

It is an ancient theory that the takes, waste, or poor judgment; in
demands of the needy override pri- common sense, because one does
vate property rights and that the not even give a friend such un-
government may tax until all eco- limited spending authority.
nomic needs are satisfied. Yet the politician, in spite of

With such theories the federal the record, has persuaded respon-
government has built up a fran- sible persons to believe that to give

Confiscation by Ballot


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

16 THE FREEMAN June

him such unlimited taxing author- brew political friction abroad and
ity will serve public welfare. The bespeak catastrophe at home. Such
idea controverts every principle in coddling of those with poor rec-
the Constitution, and has never ords discourages and penalizes in-
failed to destroy the nations which tegrity and efficiency.
accept it. These policies now confront the
It appears that the money in government with a dilemma. If it
the Treasury (a most sacred trust discontinues buying the surpluses
fund) is the only fund where the or disregards the demands of
beneficiaries can force the trustees labor, it will go out of office. If it
(congressmen )to make the bene- continues its present course, the
factors (taxpayers) destitute; and ever-increasing debt and foreign
the trustees can dissipate the fund trade invasions will overwhelm it.
without any limitation on their Politicians blame the wars. But
judgment with respect to invest- the wars, cold and hot, are the off-
ing it, speculating with it, or using spring of the welfare state con-
it for charitable purposes. cepts of government. Such policies
There is the further objection make it easy to discredit our con-
that this leaves a minority of the stitutional form of government
citizens without protection. Con- not only at home but also in the
gressmen cannot recognize such eyes of foreign observers.
minority rights and continue in Developments such as mass pro-
office. The President, for the same duction, improvements in commu-
reason, cannot give ear to their nications and travel facilities, in-
cry. They have no standing in the vestments abroad, depressions,
courts. Judicial assistance would congested industrial areas, big
interfere too much with the polit- corporations, and the conquest of
ical objective of capturing a ma- outer space, do not call for sur-
jority of the votes. render of political or commercial
Today, under ballot pressure, independence, nor for the impair-
the government invests the citi- ment or abandonment of provisions
zen’s tax money in schemes, in- wisely designed to keep in their
cluding mortgages, which disre- proper sphere judges, legislators,
gard the most elementary banking presidents, states, and voters. Let
rules; it calls upon him to sub- us remember that our Constitution
sidize corporations, farmers, and was written when economic dis-
unions to such an extent that what tress was more acute than it is
is produced is priced out of the now and when foes were more
market, piling up surpluses which threatening. eo 0


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

AN EXPERIMENT IN FREEDOM

An account of how a minority can help itself, and everyone else concerned.

FREDERICK WALKER

HE POSSIBILITY that a minority the end of the seventeenth century

will satisfactorily work out its in England because economic free-
own affairs, if allowed economic dom prevailed in large areas of
freedom, is seldom tested today; the national life. The industrial
yet that is exactly what the early revolution had begun, and the
Quakers did in Great Britain. The world of commerce was expanding.
Religious Society of Friends orig- Because of their refusal to take
inally faced almost unanimous hos- oaths, the Quakers were barred
tility from the ruling classes. The from government service, the
early Quakers were mercilessly learned professions, and the uni-
persecuted by the established versities. Their peace testimony
church and the Puritans. Many prohibited service in the army or
were imprisoned, and their prop- navy. Trade and industry were
erty was seized or destroyed by open to them under conditions
the government because of their which were free; and the benefi-
refusal to take oaths, their re- cial results of their economic lives
sistance to the imposition of are still felt in Great Britain.
tithes, and their insistence on free- The Quakers believed in a life
dom of worship. unmolested, with a kind tolerance

Despite religious and social os- toward others. To this way of life
tracism, and restraint and per- their small minority dedicated
secution by the State, the early themselves, and through energy,
Quakers went their quiet way and honesty, and native ability soon
flourished. This was possible at achieved a prosperity and influ-

Mr. Walker is a public relations consultant and journalist much concerned with the methodology
of freedom.

17


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

18 THE FREEMAN June

ence far beyond the usual accomp- who devised the smelting of iron
lishment of a numerically limited ore by coal instead of wood and
group. Drawn into a life of trade made possible the expansion of
by the restrictions which barred the industry. Quaker pre-eminence
them from other occupations, the in iron manufacturing continued
early Quakers used to full advan- until increasing use of iron in arm-
tage the free market of their day aments barred their producing for
to contribute substantially to the that purpose. Quakers built the
commercial prosperity of Great first iron bridge and financed the
Britain at the time of its greatest first railways. They were active in
growth. Their history proves that, copper and lead mining and in
if economic freedom exists, any brass manufacturing.

minority with energy, intelligence, Far-flung operations were con-
and dedication can prosper despite ducted by Quakers in diverse in-
well-organized and popular opposi- dustries: weaving and textiles,

tion. shipping, pottery, pharmaceuti-
cals, scientific instruments, and
Honesty in All Matters clockmaking. Their widespread

Quakers are generally credited reputation for probity led many
with the introduction of uniform people to deposit their savings
pricing. Their one-price system, with them for safekeeping at a
without discrimination according time when banks were virtually
to the status or class of the buyer, nonexistent. This factor, along
won the confidence of the public, with the increasing need for bank-
greatly speeded the processes of ing facilities in their own business
trade, and brought Quaker trades- operations, brought Quakers into
men a large portion of the retail the banking business. During the
business. They were respected for eighteenth century, when Britain
their honesty in all matters, in- was the banking capital of the
cluding business transactions. world, most of the major banks
Quakers who did not keep their were Quaker founded and con-
word were the concern of their trolled. The history of Barclays,
fellow religionists; they were Lloyds, and other great institu-
quick to disown any impostors at- tions demonstrate Quaker banking
tempting to trade as Quakers. enterprise.

Expanding trade practices soon A contemporary example of
led to participation in industry. Quaker business operations is the
They became leaders in iron man- British cocoa and chocolate indus-
ufacturing, for it was a Quaker try dominated by the well-known


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

1958 THE EARLY QUAKERS 19

firms of Cadbury, Fry, and Rown- principles of the Religious Society
tree. of Friends. Quaker records are
The early Quakers were predis- filled with examples of people de-
posed by their philosophy and ex- liberately restricting their busi-
perience, not only to take advan- nesses because increasing pros-
tage of the free market open to perity interfered with spiritual
them, but also to oppose all trade objectives. Anyone who did not ac-
restrictions. Special privileges and cept such procedures was free to
state prerogatives were the posses- withdraw from the Society of
sions of their oppressors. The Friends and continue on his own.
Quakers, as believers and practi-
tioners in the spirit of freedom, Voluntary Efforts and Funds
would not seek special rights at In social actions the early
the expense of others. The eco- Quakers also practiced freedom.
nomic history of the early Quakers The Society of Friends provided
clearly demonstrates how the for poor, unfortunate, or sick
peaceful pursuit of personal in- members without recourse to the
terests in the free market har- government for aid; supplied capi-
monizes with and contributes to tal and counsel to help young mem-
the national welfare. The primary bers get started in business or
concern of Quakers is voluntary trade; maintained schools and edu-
action. Involuntary and coercive cational programs; established
acts and restrictions by the State hospitals, institutions for the
are resisted by them as antitheti- mentally ill, and homes for the
cal to the spirit of Quakerism. aged; and accomplished all of this
It is true that certain trade re- by voluntary efforts and funds, not
strictions were ‘practiced by the with money levied from the tax-
early Quakers, but these were vol- payer nor by “social” legislation
untarily self-imposed and not imposed by the State. Many of
matters of governmental interfer- these efforts were pioneering ven-
ence. Their peace testimony kept tures long afterwards copied, and
them from armament manufac- then perverted by compulsion, in
ture; their growing concern over the name of the Welfare State.
slavery removed them from con- Early Quaker history proves by
nections with slave owning, slave all kinds of results that freedom
dealing, and even the products of is a very practical matter. A phi-
slave labor; they refrained from losophy of freedom, an openness
engaging in businesses which were to innovation, a willingness to ex-
questionable in the light of the periment, led them to outstanding


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

20 THE FREEMAN June

achievements in economic life de- position the Quakers moved in
spite the smallness of their num- their quiet ways until they com-
bers and an unrelenting public hos- manded respect, prosperity, and
tility at the time of the foundation the right to live unmolested. As a
of their Society. They demon- result of their inner dedication
strated to the world that, with a and their beliefs in freedom, con-
free market available, they were cern for their fellow men, and the
able to arrange and carry on their full use of the economic freedom
lives in a most substantial and available, they triumphed. Their
satisfactory manner, even in the record is a light to the inquiring
face of State and Church opposi- spirit today when freedom every-
tion which threw thousands of where is being threatened and en-
them into prison, caused innumer- veloped. What the early Quakers
able deaths, and often brought eco- did shows what can be done again
nomic ruin. if men will have faith in freedom

Above this unconscionable op- and put it into practice. * 0 0

FREDERIC BASTIAT (1801-1850)

HIS is the story of a poor peas- “and buy enough material to en-
ant in France [in 1846], and able you to make a trousseau for
the effect that the tariff had on his our daughter.”
attempts to provide an adequate Our honest peasant took his cask
trousseau for his daughter. of wine to the nearest town. There
This particular peasant had he met an Englishman and a Bel-
planted a few grape vines of his gian, and began to bargain with
own. After much sweat and time, them about exchanging his wine
he harvested enough grapes to for cloth.
make a cask of wine. “I shall sell The Belgian said, “Give me your
this wine,” he said to his wife, wine, and I will supply you with


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

1958 THE MARRIAGE OF THE FARMER'S DAUGHTER 21

15 parcels of the material you The peasant answered, “No, I
want.” don’t understand it at all.”
Then the Englishman entered “Well, I'm sorry I can’t explain

the bargaining with this offer: it,” replied the customshouse of-
“Since we English can manufac- ficial, “but there is no doubt that
ture cloth at less cost than the it’s true. You see, all our govern-
Belgians, I will give you 20 parcels ment officials and journalists have
for your cask of wine.” agreed that the more a nation re-
The peasant was about to sell to ceives in exchange for its products,
the Englishman when a customs- the more it is impoverished.”
house official, who had heard the Thus because of the French tar-
conversation, spoke to the wine iff against low-cost English tex-
owner: “My friend,” he said, tiles, the peasant had no alterna-
“trade with the Belgian if you tive but to trade his wine for high-
wish, but I have orders to stop you cost Belgian textiles. As a result,
from trading with the English- his daughter got only three-
man.” fourths of her trousseau. And
“What!” exclaimed the astounded those unsophisticated countrymen
countryman. “You wish me to be are still wondering to this day how
content with 15 parcels of material it happens that a person is ruined
that come from Brussels when I by receiving four yards of cloth
can get 20 parcels that have come instead of three. They still don’t

from Manchester?” understand why a person with
“Certainly,” answered the cus- nine towels is richer than a person
tomshouse official, “don’t you un- with twelve. eo oo

derstand that France would suffer ——

. . . Translated by Dean Russell from Selected
if you received 20 parcels instead Works of Frederic Bastiat, Volume 1.
of 1567” Paris: Guillaumin, 1863. pp. 62-63.

Winston Churchill — 1903

THE FINISHED PRODUCT of one trade is the raw material of
another. By placing taxes on any of these commodities to raise
their price, you may indeed for a time help this trade or that
trade, but it will only be at the expense of this or that other
trade, and to the impoverishment of the general consumer. You
may by the arbitrary and sterile act of a government... put
money in the pockets of one set of Englishmen, but it will be
money taken from the pockets of another set of Englishmen,
and the greater part will be spilled on the way. It is the right
of robbing Peter to pay Paul, and charging the public a hand-
some commission on the job.


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

THE CATASTROPHE OF Con fopi0™

E. MERRILL ROOT

VERY ERROR in action begins “right” to everything and a “re
with a fallacy in philosophy. sponsibility” for nothing. As
Let us trace juvenile delin- Christ knew, if you assume that
quency from the roots of intellec- you can reap figs from thistles,
tual confusion to the fruits of so- you must not be surprised to find
cial catastrophe. your hands full of thorns.

One can scarcely open a paper Let us look at some of the social
without reading of some unholy axioms that help to condition
little tyke who has just shot his youth into fallacies of philosophy
grandmother because she gra- and error in action. The prevalent
ciously asked him to help with the social fallacy has been that all in-
family chores. In a single issue of dividual evil has been caused by
a paper, just a little while ago, I “social conditions”; if “conditions”
read of a youngster who had are changed, the evil will disap-
liquidated his father because his pear. Juveniles go bad because
dad had asked him to mow the they live in “slums,” because their
family lawn; and of a second boy parents are “poor,” because they
who hanged himself because his are “underprivileged”; if you put
allowance of four dollars a week families in housing projects, raise
was not enough to buy him their wages, give them “social se-
cigarettes. curity” and “economic privileges,”

Now such actions, worse for you will automatically make John-
the teen-agers involved than for ny a good boy.
the adults who involve them by This, of course, is pure economic
the fallacies of their teaching, determinism. Moral standards, a
are the logically inevitable result sense of responsibility and honor,
of the prevailing social philosophy religious faith, an allegiance to a
of the last three or four decades — Kingdom not of this world, are
the philosophy that we have a not necessary and indeed futile —

Dr. Root, eminent poet and author, is professor of English at Earlham Collogo.

22


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

1958 THE CATASTROPHE OF CONFUSION 23

this social philosophy says. The spiritually wise diagnosis of an
seeds you sow, or the weeding you outstanding mind. But our sociolo-
do, are unimportant; the only ne- gists and psychologists by their
cessity is to heap fertilizer on the questionnaires often incite doubt
land (especially synthetic chemi- and even hatred between parents
cal fertilizer), and the good grain and children, and question the
will grow. The modern economic family while they uphold the Big
determinist has never seen —and Brother of the State. And the fal-
does not want to see — the acorn lacy that economic determination
that falls into a cupful of earth on — that social and economic environ-
top of a boulder, yet grows and ment -— must condition and deter-
splits the boulder and lifts its mine, and that individual respon-
might into the century-scorning sibility and vital determination
oak! are unimportant, is prevalent ev-
You can scarcely talk to students erywhere. Where is there the same
just out of contemporary high realization that an increase of
schools without discovering that wealth, instead of satisfying the
these axioms of social conditioning desires of youth, tends to increase
and economic determinism are un- their predatory instincts?
critically wedged in their heads. On the contrary, educationalists
Is it any wonder that such fal- tend not merely to ignore but to
lacies in philosophy lead to errors oppose all attempts to enhance the

in action? moral and spiritual training of
} youth. It has been reported that
The All-Important Family by a vote of 6 to 1 last fall the

Judge Samuel S. Liebowitz, a school board of the village of New
distinguished jurist of King’s Hyde Park, Long Island, agreed to
County, New York, said recently post in the classrooms of its ele-
that on the basis of his observa- mentary schools a version of the
tions at home and abroad he con- Ten Commandments. Thiswascare-
sidered the family the “all-impor- fully phrased to avoid any peculiar
tant weapon” in combating juvenile religious instruction or to offend
delinquency. “We could build play- any faith or church. Yet New
grounds on every corner and dot York State Commissioner of Edu-
the landscape with camps,” he cation, James E. Allen, Jr. for-
said, “but we couldn’t make an bade this, ruling that “the display
appreciable inroad on juvenile of an item which cannot be freely
crime without family guidance.” explained or discussed is unsound

Such is the fact-founded and educational practice.”


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

24 THE FREEMAN June

Thus the use, in education, of the fact that public ownership
classic and world-reverenced moral does not lead to happy use or gra-
and spiritual wisdom is prohibited cious care of “collective” property.
in the State of New York! What What is less “private property”
wonder that juvenile delinquency, than a public school? What is more
based upon the free teaching of idealistically devoted to the group
economic determinism and the pro- or the community as a whole? Yet
hibition of spiritual determina- if there is no training in the rights
tion, grows like weeds in a garden of property — private property
where synthetic fertilizer is first of all — will even public prop-
spread, and good seeds are not erty be safe? The answer is sadly

sown, and hoes are prohibited. clear. The City of Dayton, Ohio,
is a highly cultured community
Attack on Private Property with some of the finest schools in

Take a second social dogma (and the country and a very high stand-
fallacy) that helps to cause error ard of living. Yet in the City of
in action. “Social idealists” con- Dayton the problem of public prop-
stantly attack “private property” erty, the problem of the preserva-
and uphold “collective ownership.” tion of its schools, is serious.
This, they say, will lead to a truly The Dayton Daily News (a quite
social use of resources, to cooper- liberal paper) for July 19, 1957,
ative and gracious action, to broth- reports that teen-age vandals, the
erhood and happiness. If “all” captive victims (they think) of
equally own and share property, the educational masterpieces of
individuals will be happier in its the finest schools, ran amok in
use and more gracious in its pres- fantastic riot, “just” (in their
ervation. This, of course, is based own words) “for the hell of it.”
upon an ignorance of human na- The article says:
ture. Those who wander state- “Just this month, a gang of boys
owned land scatter papers ‘when tossed rocks through the Huffman
they eat their lunch, toss lighted school windows at the same time
cigarettes down carelessly, and in workmen were replacing panes
general treat the use of property broken in a previous stone-tossing
as a “right” but never as a “re- binge.
sponsibility.” Only private owner- “Youngsters like these smash
ship leads to love, to care, to wise 6,000 to 8,000 Dayton school build-
and thoughtful use. That is simply ing windows a year. They've been
human nature. going at that rate for the last three

Take the flagrant example of to four years now, and the annual


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

1958 THE CATASTROPHE OF CONFUSION 25

replacement tab runs to hell of it,” that smashes windows,
$24,000. . . . fills vent pipes with sand, turns a
“Vandals also do other things fire-hose loose in schoolrooms, or
to schools beside break glass. splashes ink, paint, catsup, or mus-
Things like running a fire-hose in- tard over the walls, will be a nat-
side Cleveland school all night and ural result. If “property” is some-
causing thousands of dollars in thing to be treated as the group
damage. Like climbing on the roof wills, and perhaps something evil
and filling vent pipes with gravel. in itself, why not use it as you
Like touching fire to a storage will?
room at Whittier school and caus-
ing $3,000 damage. Like hurling The Social Gospel
ink bottles and art paint con- Has anyone noticed the strange
tainers against walls. Like break- paradox that indicates a funda-
ing into food storage areas and mental falsity in our thinking?
smearing catsup and mustard over The prevailing philosophy of the
desks and walls.” last three or four decades has
Such is the way that, in one of stressed the “social” — history is
our most civilized and cultured now ‘social studies” — education
cities, young people act toward is designed to make young people
public property. “social-minded — religion is to lead
Why do they so act? A clear to “social justice.” We have had
reason, surely, is that once a rev- three to four decades of an educa-
erence for property — private prop- tion that agrees wholly with Adolf
erty and so public property —a Hitler, who said: “True idealism
sense of responsibility, and a is nothing but subjecting the in-
standard of moral right were suc- dividual’s interests and life to the
cessfully taught. But the modern community.”
“social” emphasis makes a falsely But what has been the result of
antithetical contrast beween “hu- this emphasis on the social? The
man rights” and “property rights,” upsurge of the most asocial or anti-
as if property rights are not nec- social groups that we have ever
essarily human rights. If property known in America!
is scorned and attacked, how can The catastrophes of the modern
hasty youth distinguish between world began with the confusions
“private” and “public” property of the modern mind. Relativism,
— and what reverence or care will economic determinism, intellec-
youth have for any property? The tual nihilism (i.e., the assumption
senseless vandalism, “just for the that a spiritual void or nothing


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

26 THE FREEMAN June

underlies the material phenomena even the horror called communism,
of the world), collectivism as an when relativism, economic deter-
ideal, becoming social coercion in minism, and intellectual nihilism
practice, are fallacies. Therefore, have subverted our faith?

a society built upon the quick- The fallacies of our philosophy
sands of such axioms and postu- are most lethal for youth. Youth,
lates will, with logical inevitabil- generous in its idealism but im-
ity, collapse through debacle into mature in its realism, is easily
ruin — like all that we build upon precipitated — by its own zest and
a lie. The absolutes of truth, enthusiasm, or by its own dreams
right, and beauty; the energy of and desires —into confusion in
vital determination; the intellec- thought and calamity in action. At
tual assurance that the visible its best, through its idealism, it
universe is based upon invisible can be misled into a support of
spirit; the self-reliance of the he- cruel men who parade ideals of
roic individual whose little life is peace and social justice in order
founded upon the great Life of to win their own sordid power
God: these are realities. There- over a world they made their satel-
fore, a society founded on such lite; at its worst, through its
axioms and postulates will, with dreams and hot desires, it is mis-
vital certainty, stand firm on the led into asocial or antisocial action

planetary granite of truth. because it is taught that it has a

But relativism, economic deter- “right” to grab and get, but no
minism, and intellectual nihilism “responsibility” to build and give.
have been and still are the favorite The errors in action are factual,

social dogmas of the day — in the clear, and certain. Is it not time

“free” West even more than in that we eradicated the fallacies in

communist countries; and they all, philosophy that lead to them?

by their disintegrating and lethal oo

effect, weaken us against, and —— . oo
This article is reprinted by permission

prepare us for, collectivism. How fn Christian Economics, February 4,
can we understand and withstand 1958.

| ooeas (OIN] £06000Y | Truth or Consequences

For whoever habitually suppresses truth in the interests of
tact will produce a deformity from the womb of his thought.

B. 1. LIDDELL HART, Strategy


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

RUSSIA FACES Food CRISIS

Zon

Socialism’s offering — and warning — to those who would eat.
LAWRENCE SULLIVAN

HY IS Moscow so frantic for Moscow are selling at $6.30 a
an immediate summit confer- dozen in New York equivalent.

ence? Chiefly because the com- Slovenly tailored woolen suits in
munist food crisis is critical. A Moscow sell for fourteen-hundred
gaudy conference with top leaders hours of labor at current Russian
from the lands of plenty is de- wages. Translated into American
manded urgently to restore the wages, the shoddy woolen suit in
sagging prestige of the Kremlin Moscow costs the New York equiv-
planners in the eyes of their own alent of $2,940.
people. A pair of shoes in Moscow re-

Unless Moscow can do some- quires 62 hours of factory wages,
thing spectacular before winter to which is the same as shoes at
improve Russian nutritional stand- $130.20 a pair in Chicago!
ards, an explosive food situation These examples, from a U.S.
will confront the entire communist Department of Agriculture study
world, in both Europe and Asia. published in November 1957, on
Diplomats currently are watching the fortieth anniversary of the
the communist food supply more Bolshevik Revolution, summarize
closely than at anytime since the the acute crisis in Russian farm
Bolshevik Revolution of 1917. production.

Communist agriculture has failed Upon his return from a Russian
for forty years to keep abreast of tour last November, Senator Allen
Russian population growth. J. Ellender of Louisiana reported:

In Russian money today, the ‘Many Russian people today have
average Soviet factory hand must only black bread, cabbage, pota-
work three hours to earn one dozen toes, beets, and a pot of tea.”
eggs. Translated into American Reporting on his 10 years in
wages, this means that eggs in Russian slave labor camps a re-

Mr. Sullivan is Coordinator of Information, U. S. House of Representatives.

27


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

28 THE FREEMAN June

turned American prisoner, John tinues as the first challenge to
Noble, declared: “The Soviet Un- world communism.
ion is a land of shortages and The National Industrial Con-
hungers. The country is insuffi- ference Board confirms this pic-
cient in all respects, in food and ture with its own conclusion from
industry. There simply isn’t a Russian tour by stating that
enough of anything to go around.” “the emphasis given to heavy in-
Prisoners in the Arctic slave dustry has left the bulk of the
labor camps have denuded the population of Russia with living
countryside even of its dog popula- standards that are woefully inade-
tion, Noble reported: “Dog meat, quate.” Steadily mounting pres-
I found, has a taste all its own, but sures for better living standards,
if anything, it is softer and tastier both within Russia and all the
than beef. In all, the doctor and I satellite states, raise grave doubts
ate up two dogs. The pieces, kept concerning the survival of com-
hidden in the snow, fed us for munism.
months.” Before the communist revolu-
Noble reported between 25 and tion, Russia was a principal world
28 million men and women in the exporter of wheat, but in 1956 the
Russian slave camps as of mid- Soviets imported 15 million bush-
1954. The weight of some 100,000 els of wheat from Canada and ad-
slaves in the infamous Vorkuta ditional tonnages from Argentina
camp ranged from 75 to 115 and Australia.
pounds per man. (Normal Euro- Our own Department of Agri-
peans would average 168 pounds.) culture emphasizes that all the
“Our teeth rotted from lack of temperate zones in Russia already

vitamins.” are under collectivist cultivation.
There are no new lands available
An Abundance of Needs for corn and feed grains, as a

The Department of Agricul- basis for more meat and dairy
ture’s World Food Survey for Jan- products. Russia also is totally
uary 1958 estimated food produc- lacking in quality breeding stock.
tion per capita this year in the There is a great shortage and
free world at 4 per cent greater backwardness in refrigeration and
than the 1935-39 average, but the processing equipment. Transpor-
communist nations are still 8 per tation is inadequate everywhere.
cent below their per capita prewar Rugsia’s hunger crisis would
averages. Thus, failure to feed a have developed ten years ago, save
steadily expanding population con- for tremendous lend-lease ship-


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

1958 RUSSIA FACES FOOD CRISIS 29

ments of food, farm machinery, Soviet accepting the premiership,
and fertilizers during the war on March 27 of this year, Khrush-
years. After the war direct food chev devoted more than two hours
shipments from UNRRA sustained of his three-hour speech to agri-
Russian nutritional standards at cultural production and food dis-
the bare subsistence level through tribution. But even here commu-
1948. For the years 1952-53 Rus- nism still was unable to grasp the
sia, on her own for the first time core of the problem—lack of incen-
since 1940, produced annually only tive under collectivism.
86 per cent of her 1935-39 average
farm yield, as measured on a per The Solution Is Clear
capita basis. By 1957 this per cap- All the world sees clearly that
ita food production had been.ad- the solution of Russia’s chronic
vanced slightly to 92 per cent of food crisis lies in a return to pri-
the prewar average. vate ownership of land and produc-
tion machinery, with production-
for-profit as the powerful incen-
Harry Schwartz, Soviet affairs tive to expansion. But that solu-
specialist for the New York Times, tion, of course, would entail com-
attributed the Polish and Hungar- plete abandonment and repudia-
ian uprisings of 1956 primarily “tion of all communism.
to food shortages. “There also has Even Khrushchev now recog-
been the smaller scale, but still nizes that communism cannot de-
interesting, armed revolt in North- liver the goods. But nobody in the
ern Vietnam,” he told the Congres- Kremlin yet has even suggested a
sional Joint Committee on the Eco- practical solution within the terms
nomic Report (page 37). “All of of doctrinaire communist theory.
these are primitive expressions of Hence, a current political and so-
the resentment of the people at cial crisis of the first magnitude.
the sacrifices they have been Gnawing stomachs do not wait on
forced to undergo. ...” refinements of Marxist theory.
The urgency of the food crisis Clocking sputnik in its orbit, all
inside Russia was again under- the communist world still queries,
scored by Khrushchev’'s order last “When do we eat?”
October which abandoned the old Moscow’s successive five-year
Stalinist collectivist tractor sta- plans have emphasized industrial
tions in favor of direct ownership development at the expense of ag-
of tractors by the state farms. In riculture. Many city populations
his address before the Supreme have multiplied by ten since the

Hungry People Rebel


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

30 THE FREEMAN June

1917 revolution, but supporting peasants of incentive, and have so
farm acreage around the mush- mismanaged agricultural affairs in
rooming cities has scarcely dou- Eastern Europe, that the countries
bled. Baku had 150,000 population like Rumania, Hungary, and Po-
in 1917 and 1,000,000 in 1957. No- land are today countries which
vosibirsk had 60,000 in 1917 and badly need imported grain to feed
800,000 in 1957. Omsk had 160,000 their own people.”
in 1939 and 560,000 in 1957. Kui-
byshev had 390,000 in 1939 and Collectivized Famine
800,000 in 1957. On the other side of the world
In part, these new city masses the same tragic story is told in
have been supported recently by China. “It is abundantly clear that
commandeered crops from the sat- the Chinese peasants hate the very
ellites of Eastern Europe. The idea of collectivization,” the U.S.
great Danube Valley, for centuries Department of Agriculture re-
the breadbasket of Central Europe, ported in December 1957. “They
is today a land of rigorously col- showed their contempt by such
lectivized hunger and want. measures as slaughtering their
As Harry Schwartz told the Eco- livestock before they were taken
nomic Joint Committee of Con- away at ridiculously low prices or
gress in December 1956: “The were confiscated outright. The very
chief characteristic of economic few who could, have fled to other
management this past decade in countries. The hundreds of mil-
Poland has been that men sent to lions who remain know that if
run a particular field knew nothing they produce more, the State will
about that field. This was particu- take more; that it is dangerous to
larly true in agriculture. have wealth and safer, if not more
“The second reason is, of course, comfortable, to be poor.... For a
that the peasantry of Eastern Eu- country with limited agricultural
rope has, by and large, been op- resources, negligible surplus stocks
posed to collectivism. ... The peas- and a rapidly growing population
ant’s only possible resistance has of 600 million, this could have the
been passive resistance. He simply most serious implications.
did not do his job as well as he “Moreover, floods and drought
might have. So the really funda- occur frequently, so with a popu-
mental answer to what has hap- lation already living near the brink
pened to the Great Danube Gran- of famine, mismanagement of re-
ary is that the ills of communist sources might bring about un-
management have so deprived paralleled disaster. Regardless, the


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

1958 RUSSIA FACES FOOD CRISIS 31

Chinese communists are deter- antly at a Moscow diplomatic fete
mined to build industry, and they late in 1957: “Those who expect
intend to make the peasants pay us to abandon communism will
the bill.” have to wait until a shrimp learns
Nor does Khrushchev blink at to whistle.” :

the disaster now confronting the :

whole communist world. J. Edgar In an earlier epoch of cataclys-
Hoover reports in Masters of De- mic catastrophe in Europe this
ceit, published in March 1958, that sentiment was rendered: “After
Khrushchev remarked flambuoy- me, the deluge.” * 00

A Man on His Own

WHEN A MAN IS ON HIS OWN, an individual responsible for him-
self, he must earn a character — a personal character that is
perhaps his first necessity. Others may then learn and imitate
his qualities and capabilities. In a planned society he has no need
of a character, for no such thing is wanted. No national or uni-
versal plan can afford to take the least notice of his personal
character.

As an individual responsible for himself, a man must also
acquire credit. Others must be convinced that he is credit-worthy;
that he can be trusted; that what he undertakes he will perform
to the limit of his ability. But when he is planned, nothing so
troublesome is the least necessary.

The individual responsible for himself must try to avoid the
loss that results from mistakes. But if he is the planner or the
planned, the loss comes out of the public purse, and he is relieved
of personal responsibility. He can then waste and lose just as
much as his inherent laziness may dictate.

In a planned society, the only upward route available to a
person is into the ranks of the planners where he can presume
to arrange the affairs of others.

From the Canora (Canada) Courier, April 10, 1958
Ralph D. Davis, editor and publisher


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

FEW YEARS AGO I happened to be lecturing in the good city of New
Orleans, and one day I spent in a small town right in the heart of
that lovely state. The hotel, as sometimes happens in the rural districts,
had a poolroom tucked away somewhere in the basement. Now I am not
much of billiard player and certainly not at nine o’clock in the morning.
But I was in search of a barbershop and that is how I drifted into the
poolroom. Except for one single citizen, it was empty of all human
habitation. And that citizen wanted company. Indeed, he wanted it so
badly that it was enough for me just to poke my nose into that basement
to find myself condemned to at least half an hour of a rather one-sided
conversation.
My 2 new acquaintance was a simple-minded fellow. First of all he

A VOR LB BOVE DE p)
18 & Wo LP LOS,

Heap Rk Wie cem Vv Axl Joona
(1882-1944)

asked me all sorts of questions about myself, my family, my sources
of revenue, and the name, age, and sex of my wife and children.
In return for this he was more than willing to tell me about his own
economic and social antecedents and whereabouts. In short, in less than
five minutes we had become old friends, and after a further ten minutes
I knew more about him than IT know about some of my neighbors in
New York whom I have met in the elevator for the last half dozen years.
At once I realized that he had two special hobbies — he was inordinately
fond of playing pool and he hated all foreigners. Of course, since I have
been a citizen now for a great many years, everything was quite all
right, but he was firmly convinced that most “furriners” had but one
single purpose in life — to interfere with the prosperity of America and
to bring about our immediate economic, social, and political downfall.
Above all things, he resented the fact that he had not succeeded in

32


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

getting rid of a number of surplus bales of cotton which he had not
been able to sell in the domestic market, but in some mysterious way
that too was the fault of the heathen Chinee and the heathen English
and the heathen Roosians . . . all of them combined in one vast plot to
stamp out our hateful democracy, which was so far superior to the rest
of the world as to have evoked the jealousy of every man, woman, and
child among our 1,875,000,000 fellow-passengers on this planet.

He was in the habit of reading the editorials in a certain chain of
newspapers that was the main champion of the pleasant doctrine of
“America for the Americans” and “Buy American” and “A hundred
billions for domestic goods but not a single penny for foreign imports.”
Indeed he proved himself such an excellent pupil that when inadvertently

——
A
-+

I used the expression “international trade as opposed to a strictly na-
tional form of commerce,” he immediately became suspicious and asked
me whether I had been in Russia lately?

By that time, as always happens when I am slightly bored, I had
begun to draw pictures on the back of an old envelope, with the usual
result that the citizen in the poolroom became somewhat mystified, for
people not much given to the arts (even such lowly and primitive forms
of art as mine) always feel slightly embarrassed by something that is
so completely outside of their own spiritual domain, such as doing card
tricks or playing the fiddle or singing a tune a little more complicated
than “Pop Goes the Weasel.” The native leaned over my shoulder.

“What are you doing?” he asked me.

“Oh, nothing much,” I answered, “but I thought that I would draw
you a little fairy story. It might amuse you.” I fished a piece of paper

33


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

34 THE FREEMAN June

out of one of my inside pockets and heart of Africa there lives an ele-
I said, “Now here! We begin right phant. Here is the elephant; I will
at home. You like to shoot a little give you a couple of them for good
pool. Here is your pool table. Now measure. Now
what do you need to play pool? You you cannot pos-
could do it without a table. It sibly go and hunt
would not be easy, but it would be that elephant
possible. You could use the floor. yourself, for you
You could do it without regular have got to stay
cues. It would not be easy, but it right here in
could be done. You could use an Louisiana to
old broom. But the one thing you raise your cotton. You leave the
absolutely need is a couple of ivory elephant hunting to the natives in
billiard balls. You could not use Africa. And so an African native
marble ones, no matter how well- in the heart of the African jungle
polished and how travels for weeks and weeks until
absolutely round he gets himself an elephant. Then
they were. You he travels again for a couple of
could not use weeks to carry the ivory tusks to
rubber ones, for the nearest port. Such tusks are
they would heavy and the going is hard and
bounce all over the chances are that your native
the place like is eaten up by a tiger or a mosquito
tennis balls or ping-pong balls. You before he reaches the coast. But
absolutely must have ivory balls, suppose for the sake of argument
or there is no game. Next question, that he gets there. He then sells
if you don’t mind being examined the tusks to an Arab for just as
a little — where does the ivory come much as he can get. But that
from?” “whatever he can get” will in the

“From Africa,” my unknown last analysis depend upon whatever
friend hastened to inform me, for you here, five thousand miles away,
by this time he was getting sort of are willing to pay him for those
curious to know what I was driv- ivory tusks which meanwhile some
ing at and at least he seemed to manufacturer in England has con-
know something about elephants. verted into nice round billiard

“Correct,” said the professor, balls.
for once a professor...and you “Thereupon the American im-
know the rest of that sentence. porter of billiard balls in New
“Therefore, somewhere in the York, who has been paid by some



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

1958 A WORLD DIVIDED 35

bank in Louisiana to whom your entirely new outfit of cotton shirts
local dealer in billiard balls had and cotton trousers and cotton
sent the money you paid him for coats, and he pays the Arab for
these little bits of ivory, sends the that cotton he is buying (which is
money back to England. The Eng- really your cotton, for your agent
lish manufacturer of your billiard in New Orleans has sold it, via
balls gives it to another banker New York and London, to the Arab
who forwards the money to Zanzi- in Zanzibar or Mombasa) with
bar or Mombasa or wherever your the money which you paid him for
native sold the original tusks to ee his ivory tusks
that Arab dealer in ivory, and the (now clicking
Arab dealer in Zanzibar or Mom- merrily on your
basa, who bought the tusks from billiard table)
the native, gives the native his and so, in the
share and then...” end, while you

“Yes,” said my friend from Lou- think you are
isiana, a little bewildered by this shooting pool
hasty juggling with names and with ivory billiard balls, you are
places and still entirely at sea really shooting pool with bales of
about what I was really driving at, cotton, and very likely with your
“and then? Then what happens?” own bales of cotton.

“And then,” I told him, “the “And now if you will kindly tell
elephant hunting native takes that me where the barbershop is, I
money and goes back to his own shall go and pay the barber with
village and he gathers his family some money I made out of books,
around him. They are all of them printed on Canadian woodpulp and
very much in need of new cotton written with a fountain pen made
garments and so out of rubber that came from the
he takes them to Malay Peninsula and gold that
the Arab’s store came out of the South African
(for every Arab mines and filled with ink that came
in the East runs from heaven knows where and
a miniature de- pushed across the paper by a brain
partment store) imported from Holland, and the
and he uses your barber, who probably was born in
money — your money from Louisi- Sicily and whose wife came from
ana — that he got by way of New Ireland, will lather me with a
York and London to buy himself brush made out of hair he im-
and his family from Uganda an ported from Austria and a razor



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

36 THE FREEMAN June

made out of English steel and...” sort of nutty, but I guess maybe
But at this moment my unknown he was right.”
friend interrupted me once more. Of course, this is a very small
“Stranger,” he world. So small that it is abso-
said, and I de- lutely impossible for any of us to
-L_| tected a note of go through life without ever doing
great sincerity a little business with our neigh-
% | in his voice, “I bors. Just as it is entirely impos-
&...\ beg to apologize. sible for our neighbors to go
I thought at first through their lives without doing
that you were a little business with all the rest
just a little bit crazy. But now I of us. Life is entirely a matter of
am beginning to think that per- give and take. We sometimes give
haps I was a little bit crazy, and foolishly or take foolishly. Then
do you mind if I keep these pic- things are apt to go wrong, but
tures and will you sign them for that is our own
me? I want to take them home for fault. And we
the kids.” can easily over-
And so I signed the pictures come that diffi- 7 yi
and we parted the best of friends culty. All we have [BE
in the world. If he happens to read to do is to learn

this, he will per- now to give and
haps say, “Yeah, take, in such a
and that is the way that both sides shall prosper.

same fellow who |—
talked to me

For that is the only way in which
we can ever hope to establish that
four years ago definite basis for a mutual and
in that pool- [T= lasting prosperity, without which
room.” And he the world will never come to rest.
will probably remark that, after —_— oo

if he is quite honest with himself, Eqgar Smith of the Pamphlet House,
he will perhaps add, “It sounded first publishers of the article in 1935.

| 0000s ON R0BGODY | Abraham Lincoln

Those who deny freedom to others deserve it not for
themselves, and, under a just God, cannot long retain it.


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

A description of the “invisible hand’

Zl Ree enTeRpRISE - Why?

.

+

LEONARD W. MARTIN

N ECONOMY approaches peak nonmaterial wants, the order in

effectiveness, and thus the which he prefers to have them sat-
greatest possible production, to the isfied, and the choice of employ-
extent that each resource, human ment the income from which gives
and physical, is employed in the him limited command over the out-
job at which it is most efficient. put of others’ resources. So long
The subordinate task of guiding as his wants, and those of his wife
resources to their best employ- and children, remain less than
ments, moreover, should be per- completely satisfied, he is impelled
formed economically. The fewer — but through a free decision of
the resources used to facilitate the his own and not of government of-
movement of all other resources to ficials — to raise the economic val-
their best employments, the more ue of his services to society.
will be available for want-satisfy- Although the pursuit of want
ing production. Likewise, it is de- satisfaction in terms of the in-
sirable that this task and its goal centives furnished by free enter-
be accomplished with a minimum prise seems complicated, its
of restraint on human freedom. It achievement is vastly simplified
is the distinction of a free enter- and intelligently directed through
prise economy that it outperforms an intricate system of communica-
all others in the threefold provi- tions known as the price system.
sion of efficiency, economy, and hu- An earlier article by W. Allen

man freedom. Wallis (THE FREEMAN, July 1957)
This feat is founded ultimately showed largely how the system op-
upon the economic incentives — erates. Primary interest here cen-

profit or loss — which a free enter- ters upon why it operates so ef-
prise society employs. Such an econ- fectively through the incentives of
omy leaves to each individual the free enterprise.

determination of his material and A brief review of economic fun-

Dr. Martin is an economist in the Bureau of Medical Economic Research of the American Medical
Association at Chicago.

37


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

38 THE FREEMAN June

damentals will help in this intro- quently the incomes of — money
ductory exposition. The basic need payments received by — their
for economizing stems from the owners arelimited or low. This em-
scarcity of want-satisfying re- phasis on the scarcity of resources
sources. In our economy as well as relative to wants does not, of
in others the complaint that in- course, deny that their coordina-
comes are too low is commonly tion is complicated by their great’
voiced. Since resources are limited number and variety.

in supply, however, their outputs — Since the satisfaction of wants
the society’s income in physical is limited, consumers must satisfy
terms — are .limited, and conse- their wants according to a descend-

EFFECTS OF PRICE FREEDOM

If the price these quantities will be The function
is fixed at wanted offered traded | of orice is
hd hd ww

to encourage

sc |B (000008 | oes

- what is wanted,

SURPLUS
to the extent

oc [I [0000 [88 | momen

be anticipated
SURPLUS

and production

wah 30c (IDL [000 [BRE sommes
20c (JHID (00. [BE

J =
pd
SHORTAGE

0c [HIIID|0____|6

SHORTAGE



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

1958 FREE ENTERPRISE — WHY? 39

ing order of preferences. In this tioning of limited supplies.
way they help establish relative It is apparent not only that these
values — prices — for the goods and three key functions are performed
services in consumer markets. simultaneously, but also that
These preferences are promptly broadly speaking the same people
communicated by the price system who are producers are also con-
back to the markets in which re- summers. Of course, rationing sup-
sources or factors of production plies, distributing incomes, and al-
are employed. Consequently, an- locating resources might conceiv-
other set of relative values or dif- ably not be necessary. Each person
fering prices is established, this might in isolation consume only as
time for productive services but many of the barest necessities of
reflecting, nevertheless, the tastes life as he could or would supply all
expressed in consumer markets. by himself. The satisfaction of
The two related sets of prices human wants would then indeed
then perform the necessary func- be dismal, whereas in our capital-
tion of rationing the limited sup- istic nation such satisfaction has
plies, on the one hand of physical become almost generous through
outputs and on the other of fac- the division of labor and subse-
tors of production. Through the quent technological developments.
prices paid to the factors of pro- But under these circumstances eco-
duction, largely in proportion to nomic activity is complicated by
the value of their contributions to exchange and the necessity for
the economy’s outputs, the price performance of the three key funec-
system performs the necessary tions. The device of markets or
function of distributing incomes. what we call the price system in
Since the prices involved in the dis- combination with the incentives
tribution of incomes are known to of free enterprise and the media
vary, they stimulate movement to- of money and business enterprises
ward employments whose goods does, however, simplify solution of
and services achieve increasing the attendant problems.
consumer favor and away from
those with declining consumer sup- Wartime Experience
port. In this way a third necessary The price system in a free en-
function, allocating the society’s terprise environment performs the
resources or guiding them to their key functions of rationing sup-
most suitable employments, is plies, distributing incomes, and al-
achieved simultaneously with the locating resources so successfully
distribution of income and the ra- and with so little impingement on


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

40 THE FREEMAN June

human freedom that most Ameri- combat —and buttressed by all
cans are unconscious of their oc- kinds of placement devices, could
currence. To demonstrate, con- do. Truck drivers were often
sider the first function, rationing trained to be typists, while typists
limited (scarce) supplies. Many were sent to drivers’ schools.
Americans seem to think that this Not only did this action involve
occurs only during a time of war failure to economize from previ-
“shortages” or “scarcity.” Then ously acquired training and loss of
when a second price and a second constructive employment of the re-
currency system — points and sources while they were being re-
stamps — are imposed, Americans trained, but human beings were
realize that rationing is going on. assigned to work which they pre-

But all goods that carry a price ferred not to do. (Though, of
tag are rationed as the leverage of course, combat assignments are
price serves to keep the quantity relished by no one.) Under such
demanded from exceeding the circumstances even Americans
quantity supplied and vice versa. were prone to “soldier,” a term
“Rationing” through means in ad- aptly coined to characterize that
dition to the price system is em- productive effort which, in the ab-
ployed only when the rise in price sence of economic incentives, pro-
to reduce the quantity demanded vides the lowest rate of output
to a temporarily small supply permissible both to collect a given
would work hardship on lower in- periodic stipend and to stay out of
come families, or would seriously the guardhouse.

distort the general interrelation- These characteristics of military
ship of prices under short-term methods in performing economic
emergency conditions. functions are often passed off cas-

ually as the inevitable snafu of
hasty mobilization. Their persist-

Since Americans are accustomed ence, however, in the calm and
to having resources allocated by comfort of peacetime reveals that
prices determined largely in com- there are inherent defects in the
petitive markets, they hardly know system. The defects are inevitable
of the oppressiveness and inef- when on the one hand both employ-
ficiency of some alternative sys- ment and a given monthly remun-
tem. However, those of us who eration are guaranteed and on the
served in the Armed Forces saw other the individual can increase
what bureaucrats, excused from his income primarily through sen-
other duties — service as well as jority but hardly through merit

Bureaucratic Organization


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

1958 FREE ENTERPRISE — WHY ? 41

or the discovery of alternative em- of enlarging his profits and avoid-
ployment. Such is the character of ing losses — he provides the great-
this essentially noncapitalist or- est quantities of the goods con-
ganization which, typical of gov- sumers want most, and so con-
ernment generally, now threatens tributes to the best possible allo-
through its excessive extravagance cation of resources.
to undermine a capitalistic society A free enterprise economy
such as ours founded ultimately achieves the greatest output of
upon private and voluntary thrift. which its resources are capable,
not only because of the best pos-
Entrepreneurial Leadership sible allocation of resources but
A preferable concept of effective also because of economical per-
demand in a genuinely consumer formance of key functions. The
oriented economy is that each per- entrepreneur, unlike the central
son makes his demand effective by planner, coordinates the output of
exchanging for that which he de- relatively few items rather than
mands a good or service equivalent the totality of goods and services
in value. In this effort in a free the economy wants. Hence, he
enterprise society, the key ener- doesn’t need what is so indispen-
gizer and coordinator of resources sable to the central planner, a de-
is the entrepreneur, the one to tailed inventory of the society's
whom the “profit and loss” incen- resources and wants. This does not
tives apply literally. He makes the and cannot exist because con-
important decisions on what and sumers’ tastes and producers’ tech-
how much shall be produced, not nologies are ever changing in re-
for the entire galaxy of goods and sponse to changes in prices and in-
services the economy provides but comes which in their turn change
for one or a few items competing in response to changes in tastes
for shares of the consumers’ lim- and technologies. Unfortunately
ited incomes. for detailed planning of the econ-
Briefly he strives to market the omy, all of its variables are mu-
goods and services which satisfy tually dependent.
consumers’ higher priority wants
and to price them sufficiently low
that consumers within the limits But component prices in the var-
of their incomes will give priority ious markets of the system, unless
to the wants they satisfy. To the restrained, respond readily to all
extent that he heeds the advice of changes in supply and demand con-
the price system — in the interest ditions, and so to all other prices,

Automatic Inventory Control


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

42 THE FREEMAN . June

as if the illusory “inventory” ex- consumers but upon greater effi-
isted at the disposal of the price ciency, the entrepreneur thereby
system. It is part of the economy conserves resources or, better, re-
of the system in performing its leases them for employment in the
key functions that no resources satisfaction of additional wants.
have to be removed from produc- By implementing his freedom to
tive employment to acquire this improve his own well-being
“inventory” of economic knowl- through production of the right
edge. With the price system, and items with the fewest resources,
this is another feature of its econ- the entrepreneur truly increases
omy, the entrepreneur needs his value to society and thus leads
knowledge only of relatively few the economy to the greatest pos-
prices, of the products and pro- sible satisfaction of its wants.
ductive factors, relevant to his ac-
tivities. He need understand little The Risk of Profit or Loss
about why prices move as they do, Risk-taking, it is sometimes for-
but only know their current and gotten, involves losses as well as
reasonably prospective behavior to profits. How much the fortunes of
decide whether to expand or con- two entrepreneurs may differ can
tract output and which factors of be seen from the lives of William
production to substitute for which. Durant and Henry Ford. They
Again he contributes to the best contributed much to the revolution
possible allocation of resources. that the automobile has wrought
Ultimately, however, the effi- in American life and that would
ciency and economy of the system not have been risked under a cen-
rest upon its freedom. More and trally planned economy. Durant
better satisfaction of wants re- formed General Motors, lost, re-
sults from the entrepreneur's free- won, and relost control of the firm,
dom not only to introduce new entered bankruptcy in 1936, and
products but also to employ new at death was said to be merely
production methods. The discipline well-to-do. Ford developed an orig-
of competition and profits requires inal investment of approximately
him to reduce costs first for surviv- sixty thousand dollars into a busi-
al and further for the increase ness fortune worth about one bil-
of his profits, or income, to im- lion dollars, a magnitude which
prove the satisfaction of his hardly constitutes an overvalua-
wants. Since in a free enterprise tion of his contribution to Ameri-
economy greater profits rest not can society.
upon exploitation of workers or Neither the accumulation of pri-


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

1958 FREE ENTERPRISE — WHY? 43

vate fortune nor the achievement services are not also workers and
of social revolution could have oc- few if any workers are not also
curred if the entrepreneur in the sellers of other productive serv-
first place had not been free to risk ices. It remains to be seen how
production of “economy” rather these other resources, labor illus-
than “luxury” autos and in the trating all three, in responding to
second place had not been free to economic incentives, enjoy free-
reinvest in his business the re- dom, promote the economic per-
wards of his efficiency and enter- formance of key functions, and
prise. Capital, land, and labor, as contribute to the best possible al-
well as enterprise, were invested location of resources and so to the
through his leadership where the greatest possible production.

society preferred to have them. It As the entrepreneur seeks
should be apparent then that the greater profits through greater ef-
efforts of security-minded groups ficiency, so the laborer strives for
today to deny the risk-taker his higher wages through more valu-
due rewards will, if successful, be able production. In a free society
fatal to our way of life and its where employment is available re-

manifold benefits. gardless of race, creed, or sex, op-
portunity is open to every worker
Other Resources Cooperate to increase the value of his serv-

Owners of other resources, in- ices to society. He is free to obtain
terested like entrepreneurs in en- a liberal education, pursue a pro-
hancing their want satisfaction fession, or learn an industrial or
through increased incomes, face commercial skill. In these ways,
far less complicated production de- but not by coercing his employer
cisions. Savers of capital seek the or consumers, he can raise his
highest rates of interest — relative value to society.
to the risk and term to which they The variation in prices (wages)
commit their savings. Owners of offered for different jobs in the
land seek the highest rents among distribution of income provides
varied uses — again allowing for incentive for him in the first place
nonprice considerations. Most com- to be alert to opportunities in the
monly the resource of others is labor market. It also induces him
their labor. Indeed entrepreneurs, to survey his own talents and
landowners, and savers are per- training, general and unique, and
sons who usually provide labor as known best to him. Given his own
well as other production services. occupational inclinations, again
Few sellers of other productive known best to him, he knows where


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

44 THE FREEMAN June

he will be most likely to excel and controls would reduce the effective
again be of greatest value to so- supply of already scarce want-
ciety. Hence, he responds to the satisfying resources and would im-
advice and incentives of the price pinge harshly upon the freedom
system by seeking the position that of the workers. Thus economy and
among those for which he is quali- freedom both enhance efficiency
fied offers the best wage, and which, and have a mutually beneficial
according to his occupational incli- effect upon each other.

nations, does not impose unaccept- The free worker, in contrast to
able nonprice disadvantages. He the soldierer, tends to produce at
offers his services where he can his highest rate because he works
“profit” from higher earnings and where he — not someone else — has
thus enjoy greater satisfaction of decided he shall work, because that
wants. In this way he cooperates work provides the highest net re-
with other factors of production ward of which he is currently
in placing each resource in the job capable, and because the oppor-
at which it is most efficient — in tunity for further reward lies be-
attaining the best possible alloca- fore him who demonstrates ability
tion of resources or the greatest and continues to seek still more

possible output. suitable employment. As the free
worker and his colleagues steadily
The Efficiency of Freedom increase the value of their pro-

Obviously there is again a con- duction in terms of consumer pref-
nection between freedom and effi- ences, they have a continuing,
ciency. There is a further rela- added incentive to work hard be-
tionship between freedom and cause their real incomes continue
economy. The entrepreneur, un- to rise. Therefore, they are re-
like the central planner, needs no warded by the greater satisfac-
diversion of productive factors tion of wants which was originally
from want-satisfying employment sought.
to accumulate a detailed inventory
of the society’s resources and Conclusions
wants. Similarly, it is not neces- The freedoms emphasized in this
sary in a free enterprise economy discussion are those fundamen-
to transfer resources from produc- tally of earning and spending one’s
tive employment to the onerous income according to his own in-
and unproductive bureaucratic clinations and tastes. Even in our
task of assigning others to their advanced age of technology these
jobs. Initiation of governmental unavoidable pastimes consume a


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

1958 FREE ENTERPRISE — WHY? 45

great portion of one’s wakeful the ways in which a free enterprise
hours. Consequently these free- economy through the price system
doms, though mundane, are highly rations supplies, distributes in-
important to human beings. More- comes, and allocates resources.
over, they are accompanied by non- They also set forth some reasons
material values. They contribute why the economic incentives of
to the development of individual free enterprise, through decentra-
self-reliance and private, personal lized rather than centralized deci-
responsibility. It is also a matter sion-making, promote efficiency,
of historical record that where the economy, and especially freedom.
freedoms to earn and spend one’s It is believed that human beings as
income are strongest so are the entrepreneurs, workers, and so on,
freedoms of religion and speech. respond to the freedoms to earn
Although this description of the and spend their incomes in con-
free enterprise system has tended formity with their inclinations
toward the ideal, the market forces and tastes. Moreover, through the
at work have thus far in reality knowledge and incentives the price
proved more powerful than the system provides, they seek steadily
obstacles placed in their path. The to enhance their own well-being by
result is that the system “mostly improving what they offer in ex-
does work as it should.” Admit- change. Actually, the foregoing re-
tedly, no real system conducted by marks amount to little more than
human beings is free from fric- a protracted paraphrase of what
tions and imperfections. With this Smith so eloquently called the “in-
qualification in mind, it would visible hand.” eo oo
seem to be preferable policy to —————— } }

. . Like Wallis’ article, this one also is much
correct imperfections rather than; 4cpted to Knight and Hayek, espe-
to subvert principles. Unfortu- cially the latter’s “The Use of Knowl-
taken the wrong path. It is re- | have always found quite helpful Chan-
grettable, too, that some econ- dler's A Preface to Economics, particu-
omists credit the deviations from arly chapter a Chandler
the system rather than the system Clark. The concept of effective demand

itself for its remarkable achieve- was derived from Wicksteed’s Alphabet
ments of Economic Science. Ultimately we all

. owe more than we often realize to
These remarks describe briefly Smith's Wealth of Nations.


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

Let's re-examine our concepts of

JUSTICE

KENNETH W. SOLLITT

“He hath shewed thee, O man, I wonder what went on in Saul’s
what ts good; and what doth the mind. Did his reasoning run some-
Lord require of thee, but to do thing like this: “I have done what
justly, and to love mercy, and to the Lord commanded in destroying
walk humbly with thy God?” Amalek; but surely God does not
(Micah 6:8) want me to destroy his sheep and

cattle, too. Am I not entitled to
HAT does the Lord require of the spoils of war? I'll make my
us? peace with God for this partial

“To do justly, to love mercy, and disobedience by making a liberal
to walk humbly with your God.” sacrifice. Surely God will see it my
Justice, Mercy, Humility — these way if I do that.”
three — and the most basic of these How ready some people are to
is Justice. sacrifice what never belonged to

The idea that God requires jus- them in the first place! But the
tice of his people was not entirely point was he disobeyed God; and
original with Micah. I think of an on his return, Samuel said, “Hath
instance recorded for us in I the Lord as great delight in burnt
Samuel 15. God had sent Saul to offerings and sacrifices, as in obey-
destroy Amalek. Saul was specif- ing the voice of the Lord? Behold,
ically instructed to kill everything to obey is better than sacrifice. ...”
to the last oxen, camel, sheep, and (I Samuel 15:22)
ass. But Saul was sure that he While the idea expressed in our
knew more than God did; so, text was not original with Micah,
though he destroyed Amalek, he it was Micah, the tiller of the soil,
saved the best of the sheep and the vine dresser, who cast it into
oxen. His excuse was that he its classic and unforgettable form:
wanted them “to sacrifice to the “Wherewith shall I come before
Lord.” the Lord? ... with burnt offerings,

The Reverend Mr. Sollitt is ministor of the First Baptist Church of Midland, Michigan. This
article is from one of his sermons.

46


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

1958 JUSTICE 47

with calves of a year old? Will the I like to think that this is espe-
Lord be pleased with thousands cially true of Americans. Over the
of rams? ...what doth the Lord entrance to our Supreme Court
require of thee, but to do justly, Building is engraved the words
and to love mercy, and to walk ‘Equal Justice for All” We ad-
humbly with thy God?” mire good sportsmanship in ath-
Note this: To Micah, justice letics and fair play in business.
and obedience to God were syno- We stand ready to rush to the aid
nyms. To assume that one knew of any people we feel are being
more than God did was sin, and unfairly treated.
disobedience could not be forgiven Just how deep down the roots of
by bargaining with God through our natural sense of justice go is
the liberal sacrifice of someone revealed by the fact that those

else’s goods. who would pervert justice must
first distort our concept of it. And

Varying Standards that, unfortunately, is not too dif-
What do we mean by justice to- ficult to do. We find it all too easy
day? to rationalize our own injustices

To some, justice is whatever toward others. Governments which
they can reasonably expect to get are unjust must first sell the pub-
away with, To some, it is one thing lic on the idea that this departure
when applied to a white man and from tradition is a new, higher
something else when applied to a type of justice. So strong is our
Negro or a Mexican. To some, it is innate sense of justice that, in
a commodity to be bought and sold order to act unjustly, we must
like hay. To some, it is something convince ourselves that there is
inevitably achieved by majority inordinate provocation, or that
vote or strength of arms or di- the end justifies the means. And
plomacy; and to some, it is obedi- to act unjustly as a society, we go
ence to God who alone is far- to great lengths to appeal to this
sighted enough to see all the im- innate sense of justice itself to ac-
plications of an act, What is your complish our purpose.
definition of justice? For example, in my own life-

One of the glorious things about time there has taken place a vast
the nature of man is his innate change in our concept of justice.
sense of justice. Deep within us How has it been brought about?
there is that which admires and In my youth, justice, reduced to
demands fair play. We instinc- its simplest terms, was a dollar’s
tively abhor inequity. reward for a dollar's work. Then,


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

48 THE FREEMAN June

after a period of carefully laid that’s genuine social justice — or
propaganda, we came to believe so say many of our molders of
that that was really not justice at public opinion.

all. Justice, we have come to be- But to me, it is only Saul sac-
lieve, is not measured by produc- rificing what never belonged to
tivity, but by need; not by our him to appease a God whom he has
contribution to society, but by our disobeyed. How ready we are, in

ability to burden it. the name of justice, to share an-
other man’s lunch with him! In
In Terms of “Need” fact, we will share it with all the

Our reasoning runs something neighbors if there is any left
like this: See how unjustly treated when we are full. Whether we have
is the woman whose husband a right to share what never was
drinks up all the pay check. Some- ours is beside the point. We have
thing must be done about that. allowed our sense of justice to be
See how unjust life is to the child distorted, so that now justice it-
who must eat peanut butter sand- self can be perverted in the name
wiches instead of a hot lunch. We of justice.
love justice, and something must But the point I am making is
be done about that. Notice the in- that so deep-seated is our natural
equity of the laborer who has to sense of justice that we have had
drive a Plymouth while his boss to be given a twisted view of jus-
rides in a Buick. We must have a tice before being unjust. Share-
labor union so laborers can have the-wealth plans are becoming so
Buicks, too. Obviously, life is un- successful that almost every year
just to these poor creatures, and benefits go up a few per cent and
we hate injustice and we long to taxes a higher percentage until,
share somebody else’s wealth with followed to its logical conclusion,
them. someday all our wages will be col-

We have measured justice in lected at the source and we all will
terms of need until every farmer, be wards of the State; and com-
every laborer, every businessman, munism, the most unjust system
and every child who needs (or conceived by the mind of man,
thinks he needs) anything is looked will have fastened itself upon us
upon as a victim of injustice if he in the name of justice.
doesn’t get it. A dollar's reward And what do we mean by jus-
for a dollar's work? That's old- tice? Isn't it time to rethink it?
fashioned. “From each as he is Is justice a commodity to be
able, to cach as he has need.” Now bought by, and sold to, the high-


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

1958 JUSTICE } 49

est bidder, or the group who can must be an equal and opposite re-
deliver the most votes? Is it some- action. The ball hits the bat with
thing inevitably achieved by the the same force that the bat hits the
majority vote of big-hearted peo- ball. The force of God’s retribution
ple who love to share the other is exactly equal to the force of
fellow’s goods with him? Is it jus- man’s sin; and he doesn’t escape
tice or a travesty on justice to that retribution by hiding behind
take what belongs to one man and the fact that it is a social offense
give it to another? And does ac- instead of a personal one. For
" complishing it with ballots instead every miscarriage of justice, the
of bullets alter in the least the in- innocent suffer along with the
justice of it? Can justice ever be guilty. For every sin, someone
determined by the mores of the pays a penalty. For every dollar
people, the political expedients of we receive without earning, some-
the parties in power, the majority one else must earn a dollar with-
vote of a group, the re-interpre- out receiving it. For every break-
tation of the laws of the land by a ing of God’s law, there is a break-
handful of Supreme Court Judges, ing of one’s self or one’s society
or planners with a messianic com- upon God’s law. If the will of God

plex who presume to play God? is not in our justice, it is not jus-
tice — only an attempt to pacify

Obedience to God's Will God with someone else’s sacrifice.
Justice is not something that Samuel was right when he

can be determined by custom, equated justice with obedience to
political expedience, majority vote, God’s will.
or by interpretation of law. It is Micah was right in making
something inherent in God’s uni- justice synonymous with a kindly,
verse as he has created it. You humble walk with God, and woe to
can no more repeal the Ten Com- those who seek to devise a just
mandments by majority vote than and righteous world according to
you can repeal the law of gravity blueprints of their own, which in
by passing a resolution against it. any sense violate the just God’s
Making a thing legal cannot make will.
it right. Call it equity, justice, fair May God forgive us when we act
distribution, or anything else you as if we knew more than he did,
may care to misname it —it is when we are sure that we are right
justice only if it is God’s will. and he is wrong, when we seek to
For in God’s world as he has fashion justice for one out of in-
created it, for every action there justice to many. eo oo


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

LL ARE AWARE that taxes

THE are a crushing burden
on the economy, but few

P 0 W E R realize the extent and
growth of that burden. In

America there are over
100,000 taxing authorities.
The biggest taxes are those

FEDERAL CORPORATION levied by the federal gov-

INCOME TAX RATES* ernment, but the burden of
1913-1957 state and local taxes has

Por Cant also mounted.
Fr p— r ¥ r : T — 60 In the 1920's total taxes

were about $9 billion, or 10
per cent of net national
product; but by 1956 they
f 50 had risen to over $100 bil-
lion, or nearly 30 per cent
of the net product. More-
over, in this troubled world
_— 40 a mounting proportion of
national effort may be
needed for defense while
groups at home and abroad
30 increasingly seek, even de-
mand, aid from our govern-
ment. Taxes cannot end-
lessly mount without de-
20 stroying the productive ini-
tiative and strength upon
which all must rely both in
war and in peace.
1 10 Of significance equal to
or greater than the total
Fi burden itself is the unfor-

tunate manner in which

et pomp pgm 1a 0 federal taxation bears upon
1913 1920 1930 1940 1950 1957 the efficiency and growth of
INCOME YEAR economic endeavor. Since

“Normal plus surian por can) of toxahlo Income axcluding excoss profits
and othor foros


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

1940 the federal tax (nor-

mal plus surtax) on cor-

porate income has risen [| | | A X
from less than 25 per cent

to 52 per cent. And over the

years the taxes on higher
income brackets of individ-
uals have been steepened

until they take up to 91 per FEDERAL INDIVIDUAL

cent of such income. INCOME TAX RATES

Inflation has aggravated 1913, 1926 and 1957
the situation with the re- bor Com
sult that to have the same ims ee - 100
buying power after income
.tax an individual’s $2,000 1957. — oo

income earned in 1940 would
now have to be nearly 2.3
times as great; but a 30
$10,000 income would have
to be 3.2 times and a 70
$50,000 income would have hl
to be 9.8 times as great.

When taxes are low, 60
their injury to progress can | f
be borne in relative disre- f 50

gard of the famous saying,
“The power. to tax involves so
the power to destroy.” But .

when, as now, taxes reach

confiscatory levels, it is | f 30

time to take heed. In war- | 1226

time the effort to survive

obscures tax deterrents. In

postwar decades the big

backlog demands also tem- 10
0 : 1913 p—

porarily obscure the tax

effects. But it now seems BR

prudent to review the tax - FRGM 0 20 40 60 80 100 150 OVER

: TO 20 40 60 80 100 150 200 200
structure in broad perspec- TAXABLE INCOME INCREMENT - thousands of dollars

The chart shows the rates at which couch increment of income is taxed;
e.q..in1957 the increment of income fram $50,000 to $70,000 is toxed 78%


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

b2 THE FREEMAN June

tive. The following facts then capital on which new jobs depend.

emerge. Burdensome taxation also is
profoundly shortsighted because
Individual Income Tax as the sources of new jobs are

The steep progressive taxation dried up, government is called
of individual income systemati- upon to support the unemployed
cally eliminates a principal source and to aid many undertakings such
of venture capital upon which as agriculture, housing, shipping,
progress depends. It should ever be stockpiling, and so on. This we
remembered that a new self-sus- have seen even in the midst of
taining, productive job — of which boom. Thus a steeply graduated in-
we will need millions in years to come tax can energize a spiral into
come — can come into existence some sort of statism.
only when money is risked to pur-
chase tools of production, thus Corporate Income Tax
creating the environment in which Taxation of corporate income
a man may produce the marketable also unhappily tends to impair
values to cover his continuing productive incentive and to dis-
wage and the investor's compensa- sipate the seed corn of progress.
tion. Thus the higher the rate of tax,

Those best able to risk — and the greater is the tendency to im-
often lose — venture capital are pede the very growth that has
those who earn larger incomes. been characteristic of the economy
Some few people are undoubtedly of our country in the past and is
either lucky or unlucky; but the particularly important in this pres-
great truth is that, in the absence ent period of international tension.
of fraud or coercion, those of For each dollar of profit for div-
larger income receive it only as idends or reinvestment at present
they and their property equiva- tax rates more than one dollar
lently serve the community at its must be paid to the government.
own competitive prices. The skilled The company that operates more
machinist gives more and gets efficiently pays a higher tax per
more than the apprentice. Service unit of production and thus in
rendered and income received are effect pays a penalty for being
two sides of the same coin. Taxing more efficient. Taxes levied at high
the more skilled and the more pro- rates against efficiency cannot help
ductive at ever-increasing rates but impair that efficiency, and it
undermines both their incentive may well be time to ask if this
and ability to provide the venture can be in the public interest.


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

1958 THE POWER TO TAX 53

Especially significant is the tax corporation served the community
dissipation of receipts vitally and expanded its operations, the
needed for reinvestment in the more punitive would be the rate at
business, for without this “seed which the tax was levied.
corn” income no company can If this were done, it would fur-
either make good the insufficient ther undermine the incentive of
depreciation allowed on the exist- all corporations to expand their
ing tools of production or have employment and production, and
money to purchase additional job- thus retard the nation’s growth in
creating tools. Nor can it readily times of peace and its defense in
attract outside capital. This works periods of emergency.
especially against corporations
seeking to grow in periods of infla- Effect on Financing
tion when all business, big or little, A company possessed of profit
must seek additional dollars just margin or prospect, and thus in
to finance the same volume of busi- position to seek outside financing,
ness. presumably has the choice of sell-

It is not good sense to tax away ing new stock or of borrowing.
money otherwise destined to pro- The profit tax weights the scales
vide new jobs and products at a against equity financing, and the
time when these may be much greater the tax rate the heavier
needed. This is not money to be the weight, thus encouraging crea-
distributed and dissipated in con- tion of dangerously mounting per-
sumption, to enrich selected petual indebtedness. Thus, for
groups of people. It is, instead, the each dollar obtained, either in
very core of growth in corporate higher prices from customers or
America upon which more than through cost reduction, to pay
three-quarters of all nongovern- bond interest more than two dol-

ment wages and salaries depend. lars must be so obtained to pay a
dollar in dividend.
Progressive Tax on Corporate Income The tax tends to perpetuate in-

As just noted, the corporate in- debtedness. It is true that bor-
come tax already tends to impair rowed money spent for facilities
productive incentive and growth. can be paid off out of depreciation
Despite this, there has been talk recovered, at the end of which
of taxing corporate income in pro- process, however, both the debt and
gressive fashion, which is to say the facilities are retired. If by re-
that the more efficiently a group placement purchases the capacity
of people cooperating through a of facilities is to be perpetuated,


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

54 THE FREEMAN June

then so also must the indebtedness, tax equal to more than 100 per
or else it must be paid off by sale cent of the retained amount has al-
of stock or out of earnings. But ready been paid in the course of
to pay off out of earnings one dol- acquiring it. To pay it out in more
lar that has been borrowed, more dividends would subject it to fur-
than two additional dollars must ther individual income tax dissi-
be obtained from customers or pation to the extent, in the case of
through cost reduction in order to U. S. Steel's stockholders, of not
cover the government's tax take. less than 37 per cent. Thus less
In this respect the tax amounts to than two-thirds of such additional
a more than 100 per cent penalty dividends could actually get to the

on paying off debt. capital market and become availa-
It is, however, to the formation ble for re-use through that market.
and investment of new venture Under this tax influence about

capital — equity money — that the half of all new capital invested by
nation must primarily look for corporations is represented by di-
progress in creating new jobs; rect reinvestment of income. The
bond money, indeed, is unobtain- scope of the capital markets is
able for new enterprises until a thus narrowed, as is also the com-
cushion of risk capital has first petitive opportunity of new
been provided. It surely cannot seekers of capital in that market.
be considered to be in the public
interest heavily to hamper, Toward Extravagant Government
through taxation, the formation The structure of individual and
and investment of venture capital corporate income taxation un-
and thus encourage creation of doubtedly constitutes a serious
dangerous perpetual indebtedness. temptation for government to en-
gage in extravagance. There is
Effect on Capital Markets general resort to the age-old
As the corporate income tax rate fallacy of promising ‘‘abundance
grows, it inevitably and power- for all by robbing selected Peter
fully affects the functioning of the to pay for collective Paul.” But of
nation’s capital markets. The tax what avail if in the process the
strongly influences corporations to seed corn of progress on which all
rely to the maximum extent pos- depend be consumed? And how
sible upon internal financing — different it would be, for example,
that is, to retain and reinvest a if every voter understood that
bigger portion of income instead there could be no added expendi-
of paying it out in dividends. A ture without a proportional in-


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

1958 THE POWER TO TAX 55

crease in the tax he himself would The Tax Passed On
have to pay! It is perhaps in these Neither individuals nor corpor-
attitudes that one may find the ations can or do pay taxes of any
hidden key to ever-mounting tax- sort except as they first receive the
ing and spending. dollars with which to do so in ex-
change for products sold or serv-
ices rendered. In a sense, corpor-
Some companies because of the ate taxes can be assumed to be
nature of their business must be sales taxes passed on to consumers,
heavily invested in long-term facil- even if done so in highly inequit-
ities. The real capital of such com- able fashion because they vary in
panies is eroded away by the pres- amount on similar products de-
ent corporate income tax. This pending upon the efficiency of the
is because it takes many more of respective producers.
today’s dollars to replace equip- But the tax problem cannot be
ment as it wears out than it took dismissed on such an assumption,
originally to purchase the equip- for American hopes for ever more
ment many years ago. But depre- and better living rest squarely
ciation allowed in computing tax- upon ever evoking the initiative,
able income is limited to the the effort, the leadership of its
fewer dollars originally expended. most able and efficient citizens and
The difference between such de- corporations. It cannot be done by
preciation and the larger amount taxing away up to 91 per cent of
needed to recover the purchasing any fruits of the individual's ad-
power expended — and so to keep ditional effort. Nor can innovation
the facilities intact — is arbitrarily of new products and job-creating
called income and taxed as such. investment in facilities be helped
For U. S. Steel alone such tax ero- by taxing away the corporate
sion of capital as it turned over funds for their financing.
through depreciation amounted to - .
over $650 million in the years 1940 This brief review of but a few
to 1957 inclusive. Thus the cor- broad aspects of federal income
porate income tax not only ham- taxation impels one to wonder if
pers the formation of new capital the tax trends in America as they
but also erodes away existing capi- have developed over a long period
tal, and does it in highly inequit- of war and postwar boom do not
able fashion because of the varying point toward making the enter-
importance of depreciation to the prise system unworkable. The
businesses taxed. heart of that system is the com-

Tax Erosion of Capital


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

56 THE FREEMAN June

petitive investment of savings in undermine the incentive of every-
tools of production thus both body to engage in superior effort.
multiplying the jobs of operating The saying, “The power to tax
them and the products that flow involves the power to destroy,” is
from them. Unhappily the taxation not an outworn adage; it is a
of income of both individuals and deadly warning to which, at this
corporations has now come to bear juncture of our history, heed had
most heavily upon that vital crea- best be paid. * eo 0
tion of savings that flow into job- Excerpts from the 1957 Annual Report
creating investment. It tends to of the United States Steel Corporation.

IOGAS @R n0BeaTY | “No Taxation without Representation”

This, of course, cannot mean that each individual taxpayer is
to pay only that which he voluntarily decides to pay. It means
rather that all shall pay uniformly what the most of them volun-
tarily agree they should all pay....

It is far better that the majority surely and voluntarily vote
taxes on itself while a minority escapes, for that is freedom, than
that a majority impose taxes on a minority which the majority
escapes, for that is tyranny. The majority has power to protect
itself, the minority does not, as pointed out by Madison in the
Tenth Federalist paper.

BRADFORD B. SMITH, Liberty and Taxes

We invite your subscription to

MODERN AGE

A CONSERVATIVE REVIEW
VoL. 2, No. 2 (Spring 1958) Edited by RusseLL Kirk
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===== PAGE 59 =====

A REVIEWER'S OTEBOOK JOHN CHAMBERLAIN

THE ADMIRAL'’S LOG

hd

XZ

“7? NF
2 or
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HE Jones and Laughlin Steel ideas, that every social order (in-

Corporation, over whose des- cluding the one in which the Jones
tinies Admiral Ben Moreell pre- and Laughlin Company operates)
sides as Chairman of the Board, ‘derives its sanctions from the
is a material concern which deals prevailing conception of the cos-
in the most solid and tangible stuff mic order.” The buying and selling
imaginable. As for Admiral Mo- of steel and the ingredients there-
reell himself, he is a scientific en- of may seem a very mundane
gineer, with a long history of na- thing. But buying and selling are
val construction supervision culmi- in themselves acts of freedom, and
nating in his work as the organizer freedom itself involves a certain
of the Navy Seabees (Construc- conception of the individual hu-
tion Battalion) in World War II. man will in relation to individual
The Admiral, then, is the epitome responsibility. Accordingly, in a
of practicality or hardheadedness compilation of his speeches called
or pragmatic awareness. He The Admiral’s Log (published by
laughs at the state legislator who the Intercollegiate Society of In-
once suggested that pi, the mathe- dividualists, Inc., $1.00 paper,
matical symbol which denotes the $2.00 cloth), Ben Moreell turns
ratio of the circumference of a his attention primarily to “God,
circle to its diameter, should be Man, Rights, and Government,” as
changed by law from 3.14159 plus mentioned in his subtitle. And he

to an even 3. is, as he knows, being very hard-
Unlike some well-known “prac- headed in doing so.
tical” men, however, the Admiral The Admiral’s immediate con-

does not write off “ideas” as such. cern in this book is to provide a
He knows that capitalism itself is philosophical rationale and justi-
an idea. And he knows that be- fication for free market economics.
hind this idea there stand other But he does not write as most

57


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

58 THE FREEMAN June

people do about the market, seek- ‘‘so devised as to prevent destruc-
ing to test it solely in the light of tion of natural rights by govern-
efficiency. Learned in the lore of ment” —or at least such was the
the eighteenth century, when eco- intention of the Founders, if we
nomics was political economy and are to take expositors like James
close to the moral sentiments of Madison and Thomas Jefferson at
the early philosophers of freedom, their word. But the Founding
the Admiral begins not with eco- Fathers, though reasonably scru-
nomics but with the nature of pulous in their use of language,
man. Does man have certain moral were slipshod at a couple of de-
rights? If so, are these rights God- cisive points. And through the
given or society-given? If they are breaches created by the fuzziness
God-given, then they are not of such phrases as “the general
lightly to be erased by the “posi- welfare,” the enemies of God-given
tive law” of legislators. If, on the moral rights have driven their en-
contrary, they are society-given, gines of destruction. The Ameri-
then they are not really rights. can people, so Admiral Ben Moreell
They are mere permissions, rev- tells us, have “used our newly-
ocable at any time by order of gained political rights to restrict
the entity which Hobbes and Locke or destroy our natural rights. ...
once called the magistrate, wheth- We appear to have decided that
er that magistrate be tyrant, con- ‘might makes right’; that the way
stitutional monarch, oligarchy, or to determine what is ‘right’ is to

plain democratic majority. vote on it; that if a thing is legal,

it is automatically morally right;

The Erosion of Moral Rights that if it is declared illegal, it is
Building his case slowly, the Ad- morally wrong.”

miral notes that the American na- The reason why moral rights

tion was founded on two princi- have become eroded is to be found
ples. One is that men have certain in the blows which nineteenth cen-
moral rights deriving from their tury materialism struck at the re-
Creator; the other is that they ligious certainties of the Consti-
have political rights emanating tution-makers of 1787. A promi-
from the nature of the American nent religious layman, Admiral
social compact. Since the moral Moreell rejoices in the latest view
rights come from God, they sup- of the physicists, that (to quote
posedly constitute an area into Sir James Jeans) “the stream of
which “government is forbidden knowledge is heading toward a
to enter.” The Constitution was nonmechanical reality,” which


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

1958 A REVIEWER'S NOTEBOOK 59

means that “the universe begins iron out all human inequalities and
to look more like a great thought who are willing to invoke the force
than like a great machine.” So- of government to have their way
cialism, says the Admiral, was a in redesigning mankind are, in the
tenable philosophy of political and Admiral’s estimation, guilty of
economic organization as long as “playing God.”
“it seemed as though an honest
reading of the facts pointed to na- Welfare Laws Are Immoral
ture with nothing beyond it.” If Applied to the economic world,
man were a mere collection of Admiral Moreell’s sense of the
molecules, a “thing” within a na- cosmic order leads him to denounce
ture in which “only things pre- much of the “positive law” which
vailed,” it was reasonable to sup- legislators have applied to both in-
pose that he could be ordered dustry and agriculture. He is a
around by anybody who could polite man and he never deals in
achieve the power to do the order- personalities. But this does not
ing. That is the “law” of force. keep him from saying that the
But if man is a creature of a God progressive income tax is an ini-
whose own will is that man must quity which is now being used ‘“‘as
be free to “seek righteousness,” originally intended by Marx, as a
then the individual man must be punitive measure to achieve equali-
permitted the voluntary disposi- zation of status, i.e. to take from
tion of his talents and energies. the thrifty by force.... in order to
Even the “variation” which the give to the thriftless — and to act
Darwinians talked about as the as a powerful deterrent to the for-
“agent” of Natural Selection be- mation of private capital, thus
comes, in the Admiral’s view, a making it easier for government
part of the Creator's foresight. to step in with public capital.”
“The law of variation,” says Ben There is no mincing of words in
Moreell, “permits children to be The Admiral’s Log. Welfare legis-
different from their parents. It lation, when it invokes the political
permits brothers to think differ- seizure of one man’s substance in
ently and to act differently. It per- order to subsidize another, is im-
mits the existence of both misers moral, for when a person is re-
and philanthropists; saints and lieved of responsibility for his own
sinners; rich and poor. It permits welfare, he becomes to all intents
inventors to invent, managers to and purposes a slave. After a few
manage — and purchasing agents years of taking food, clothing,
to purchase.” Those who want to housing, medical care, and educa-


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

60 THE FREEMAN June

tion from a benevolent master, the provided for job security, both
individual must become helpless. within and without its own ranks.
Thus, in the Admiral’s opinion, the “Progressive” members of the
security State winds up by destroy- business community were delight-

ing its citizens. ed, for the “government was their
largest customer,” assuring them
Lessons from History of a “dependable market.” The

The Admiral knows his history. currency inflation, proceeding at a
One of the most vigorous papers rate of about 2 per cent a year
in The Admiral’s Log is devoted to (ah, there, Sumner Slichter!) “in-
the drama, “Of Bread and Cir- stilled confidence and gave every-
cuses,” as it was enacted in Rome one a sense of well-being and pros-
of the second and third centuries, perity.”” No doubt the farmers
A.D. Ben Moreell quotes the ever- were well-pleased, too: they sup-
quotable Albert Jay Nock: “Eighty plied “the grain, the pork, and the
years of continuous effort by five olive oil, at or above parity prices,
of the world’s best and ablest for the government's doles.”
rulers could not prevent the Ro- What's wrong with this picture?
man populace from degenerating Says Admiral Moreell, quoting an
into the very scum of the earth, economic historian: “There were
worthless, vicious, contemptible, no technical improvements in in-
sheer human sculch.” During the dustry after the early part of the
period of Rome’s decay a poll of second century.” With high tax
public opinion, so the Admiral rates, the new enterpriser was
surmises, would have brought out discouraged and the favored ‘“‘well-
a response of “We never had it so established, complacently prosper-
good.” Romans in those days lived ous businessman’ was content to
on “public assistance,” had subsi- live placidly on “a safe, if moder-
dized low-rent dwellings, and were ate, income.”
protected by a “government with Rome was sacked by the Goths
a conscience.” The civil service in 410 A.D. But, as the Admiral
says, it was a “hollow shell of the
once noble Republic” long before
Any book reviowod in this Book Section (or that, As Zor the America that in-
ony other current book) supplied by return cludes Moreell’'s Jones and Laugh-
mail. You pay only the bookstore price. Wo lin Steel Corporation, it is still
pay the postage anywhere in the world, . . .

Catalogue on request. prolific of technical improvements.
THE BOOKMAILER, Box 101, New York 16 | But, as Admiral Moreell asks, in
effect: “For how long?” eo e e



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

1958 OTHER BOOKS 61

t= Radicals and Conservatives. “natural law’ and “natural
rights,” upon heredity and envi-
By William M. McGovern and David ronment, upon collectivism and in-
S. Collier. Chicago: Henry Reg- dividualism, upon the nature of
nery Company. 174 pp. $4.00. man and upon ethics — pretty near
: the whole gamut of ideas that are
The raging Kulturkampf — or war embraced in political philosophy.
of ideas — centers, as usual around And they do it well, that is, suec-
definitions: what is conservatism? cinctly and in a literate manner.
what is radicalism? Two knowl- Their learning is sound and their
edgeable, but not unbiased, intel- writing is pleasant.
lectuals have entered the lists with So far so good. But, when they
a book called Radicals and Con- place the wisdom they have culled
servatives. When you have finished from their learning on display,
reading the book, you still do not you see something that is dis-
find yourself possessed of any tinctly like the middle-of-the-road
clear-cut definitions; rather, you hodgepodge characteristic of mod-
are introduced to something the ern “liberalism” — which the au-
authors call “conservative liberal- thors disown. They are strong for
ism,” which is, on examination, a “democracy,” using the word in
little of that and a little of this, the amorphous sense dear to lib-
" but not too much of either. The eral-collectivist-socialist writers.
blurb on the jacket says that the They espouse “individualism,” but
authors have endeavored ‘to medi- they water down the absoluteness
ate between the opposing parties of private property, laissez faire,
and bring them together.” Their and limited government, without
purpose? To show the way to the which individualism means noth-
“good life.” ing. They give the State — politi-
The reading of the book is not cal power — competence in regu-
unrewarding. When the authors lating the economic process, in
leave the present, and their pre- promoting the “common good” —
dilections, they do an excellent job like compulsory savings — and in
of elucidating the basic ideas of managing public and private
political philosophies; that is, the morals. They sum up the aim and
contributions of Locke, Mill, scope of the State — as they see it
Hobbes, Rousseau, Bentham, and — in one sentence: “As much indi-
several others who have tried to vidualism as possible, but as much
find the formula for the “good state interference as is necessary
society.” Also, they touch upon to maintain the common good.”


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

62 THE FREEMAN June

How much state interference is being so, the only question to de-
that? The authors do not say; but cide is what the State should use
they say enough when they dis- its force for. On that question
miss offhand the Lockean concept hinges the difference between the
of the State as an instrument for various ideological camps. One is
repelling foreign invasion and a statist if one advocates the use
punishing crime. That idea of a of force to interfere in the affairs
limited government, they insist, of men; one is an individualist,
is passé. libertarian, or just plain freedom-
The book thus takes its place lover if one would limit the gov-
with a number of similar screeds ernment to preserving peace.
that have appeared in the last few “Conservative” and “radical” are
years, stressing the middle-of-the- words of indefinite meaning.
road attitude but veering more or FRANK CHODOROV
less to the collectivistic side. These . .
two authors label their philosophy © A Business of Their Own.
as “liberal conservatism’; others By Lavinia Dobler. New York:
have appropriated the word “con- Dodd, Mead & Company. 206 pp.
servatism’ for their output. The $2.75.
suspicion cannot down, therefore, In this age of creeping collectiv-
that there is a purpose in this ism and delinquency on both adult
espousal of a word. Can it be that and juvenile levels, an organiza-
“liberalism” — a euphemism for tion such as Junior Achievement is
collectivism — has lost its prestige as refreshing as the proverbial
value and that those who are more oasis in the desert. Often referred
or less of that frame of mind are to as “industry’s school of free
seeking some less offensive or more enterprise,” J. A. operates in more
glamorous title? than 165 communities stretching
It is interesting to note that coast to coast and extending from
these claimants to the word “con- New England to Florida. In these
servatism” do not define the State various centers, sponsored by in-
as an organization which differs dustries in the respective areas,
from all other organizations in some 50,000 boys and girls be-
that it enjoys a monopoly of legal tween the ages of 15 and 21 are
coercion, That is its only com- learning business by doing busi-
petence. It cannot do anything but ness with the help of adult ad-
use its monopoly privilege to con- visers from the sponsoring com-
trol human behavior by the threat panies.
or employment of force. That Approximately 3,000 J.A. com-


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

1958 OTHER BOOKS 63

panies are functioning throughout task of making shampoo while still
the country. Set up as miniature, trying to find a market for its al-
nonlegal corporations, the mem- ready manufactured cold cream.
bers sell shares of stock to finance The author captures the real
their enterprises. Then they get spirit of the youth who join Junior
down to the business of manufac- Achievement as she shows both
turing and selling some product — the concern and enthusiasm that
chemical, wood, plastic, etc. —or the members display for the suc-
offering a service such as a market cess of their respective businesses
survey, bank, or newspaper. At the and their determined efforts to pay
end of the training program, dividends to the stockholders, usu-
which starts about October and ally composed of family, friends,
terminates in May, the small com- and school personnel. The coopera-
panies liquidate, write annual re- tion, vital to successful corporate
ports, and pay off their stock- enterprise, is forever apparent. Si-
holders if a profit has been shown. multaneously, historical facts, as
If the company has failed, the for instance, that Junior Achieve-
members must then write the ment was founded by Horace A.
stockholders and convincingly ex- Moses in Springfield, Massachu-
plain why no dividend is forth- setts, in 1919 and became a na-
coming. tional organization in 1942, are
With this background, Lavinia neatly injected into the story.
Dobler has written A Business of Some of the sponsors are men-
Their Own, a novel about the tioned and the list reads like a
Junior Achievement Center of Who's Who in American Business:
New York City. Her heroine, Sally General Electric, Ford, Standard
Russell, a high school student, Oil, General Motors, International
joins the Janus Company which is Harvester, Sears Roebuck, and
engaged in manufacturing cold others.
cream every Wednesday night Today’s world is no easier for
from 7:00 to 9:00. The realistic teen-agers than for anyone else. It
problems of financing, producing, is good to know that thousands of
and selling that confront the mem- them are involved in a program
bers of the Janus Company are which makes them aware of the
convincingly handled by Miss responsibilities that are part and
Dobler. The company even expands parcel of freedom and free enter-
during the year as it tackles the prise. BRAD LEE


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

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

_— a. - - memati AMAA ARAM 14 Aen RAS aaa Ant © AA AMAL aed aban

Eri...

Ribbons of Roads for America
that you pay for, but can’t ride on

ID you ever ride on a typewriter that is always a by-product of big gov-

ribbon? Of course not. Yet many ernment bureaus.

of the tax dollars you pay for roads go Some federal tax money is needed to
to pay for thousands of typewriter rib- pay for national defense, postal services
bons in Washington. and other legitimate federal functions.

And that’s only a small part of the That's okay. But wouldn’t it make more
federal tax money earmarked for local sense to let the communities handle
improvements that Washington siphons their own local improvements.
off to pay for the high cost of adminis- It’s the only way to get full value for

tering the huge local aid program. More the money we pay. It’s the only way we
of it goes to pay for offices, typewriters, can keep track of the money.

desks, swivel chairs, salaries and the

like. What's worse, costly red tape tan- The Timken Roller Bearing Company
gles things up. The endless red tape Canton 6, Ohio


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

IDEAS ON LIBERTY

A person's concept of the cosmic order will ultimately dictate his view
of human nature as well as his understanding of the ethical code which
should guide his relationships to others. When men rightly apprehend
their relationship with the nature of things and with each other, there
is harmony and growth. But misunderstanding portends trouble, leading
possibly to the collapse of a civilization if the wrong ideas are widely
shared.

® The Foundation for Economic Education works within the framework of
the spiritual and ethical understanding embodied in the heritage of
Western Civilization. Its conviction is that this heritage, in its social
aspects, spells out into the philosophy of limited government and free
market economics. Political liberty and economic freedom, in turn, are
important in man’s quest for material sufficiency and spiritual growth,

8 The Foundation’s monthly publication, THE FREEMAN, prints articles
dealing mainly with current efforts to restrain economic and political
liberty, with the misunderstandings and fallacies which cause well-
meaning people to invoke these restraints. On the positive side, it
attempts to explore ways in which men in freedom resolve their
economic and political problems.