===== PAGE 1 ===== IDEAS ON LIBERTY JULY 1958 Executive Salaries . . . . . . . . HansF.Sennholz 3 Let the Sun ShineIn . . . . . . . LeonardE. Read 8 Amplitude . . . . . . . . . . . Ann Terrill 12 Twilight of the Republic . . . . . . PalmBeachTimes 13 Why the Government Cannot Control the Business Cycle . . . . . . . Anthony M. Reinach 17 Revolution down on the Farm . . . . William H. Peterson 20 First Grade Economics . . . . . . . Edward Case 25 The Independent Fights Back . . . . . Julian H. Handler 27 Positive Action against Communism . . . Yale Brozen 32 Who Sets the Price? . . . . . . . . ME Cravens 36 The Battle for the Inner Man . . . . . Elmer T. Peterson and Norman Whitehouse 39 A Legend of Lagash . . . . . . . RolphBradford 44 A Question of Defense . . . . . . . Paull. Poirot 55 The Creative Process in Industry. . . . John Chamberlain 59 Other Books . . . . . . . . . . 63 fn THE FOUNDATION FE FOR ECONOMIC EDUCATION, INC. Irvington-on-Hudson, New York ===== PAGE 2 ===== Coast Federal Savings and Loan Association of LOS ANGELES Oers Savings Juvestors MAXIMUM RETURN on their investment with SAFETY, through progressive, yet conservative management—plus in- surance on each account to $10,000. NOTE: Coast Federal has paid over $50,000,000 in dividends since 1935. AVAILABILITY of funds when needed due to high liquidity position. (Over $75,000,000 in Cash and Government bonds as of June 30, 1958). PROMPTNESS in all transactions assured by use of AIRMAIL (We pay postage both ways). LEGAL INVESTMENT for Trust funds RESOURCES over $285,000,000 RESERVES over $27,000,000 VARIETY of Accounts to suit your needs — Individual, Joint, Trust and Corporation Let's get acquainted Write today for this booklet and financial statement to: . COAST FEDERAL SAVINGS Department “H"’— 9th at Hill Los Angeles 14, California MEMBER — FEDERAL HOME LOAN BANK — FEDERAL SAVINGS AND LOAN INSURANCE CORP. "COAST FEDERAL SAVINGS JOE CRAIL, PRESIDENT ¢ Ih ===== PAGE 3 ===== 7 ELECTRICITY MAY DO YOUR YARD WORK. One day, by simply speaking into a microphone, you may be able to command an electric ‘‘gardener” to mow the grass, cultivate the flower beds. trim the hedge and do other yard work. And all the while you'll be relaxing in the shade. Power companies build for your future electric living Your present electric appliances are electric light and power companies just the beginning of real electric liv- are spending 5 billion dollars on plants ing. Already the electronic oven can and lines for your future electric cook your food in seconds. One day living. They plan to double the elec- you may have an electric “gardener” tric supply in 10 short years. like the one pictured above. Your The independent electric companies home will be kept dust-free and clean are willing and able to provide all automatically. And electricity will the electricity you need, now and launder your clothes without water. for the years ahead. You can count You will be putting much more on them for a constant, plentiful sup- power to work — and you’ll have all ply of electricity to make your. life you need. This year alone, America’s more satisfying and enjoyable. a AMERICA’S INDEPENDENT ELECTRIC LIGHT AND POWER COMPANIES * LONE * Company names on request through this magazine ===== PAGE 4 ===== THE X | CCM] A MONTHLY JOURNAL OF IDEAS ON LIBERTY JULY 1958 Vol. 8 No. 7 LEONARD E. READ President, Foundation for Economic Education PAuL L. POIROT Managing Editor THE FREEMAN is published monthly by the Foundation for Economic Education, Ine.,, 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 ‘Twilight of the Republic,” ‘Who Sets the Price?’’ and “The Battie for the Inner Man." Any current article will be supplied in reprint form if there are enough FYE inquiries to justify the cost of the printing. ===== PAGE 5 ===== Major considerations in the determination of . . . EXECUTIVE SALARIES HANS F. SENNHOLZ NET PROFITS FAVORITE POINT of attack the best is often the cheapest in against capitalism is the im- the long run. pressive height of the salaries of The stockholder must hire the top business executives. Labor un- men who do the actual work for ion leaders especially tend to be him. He is aware that the mistakes critical of executive salaries and of corporate executives can con- bonuses amounting to a hundred sume a large percentage of net in- thousand dollars or more. People come or even eliminate it alto- unfamiliar with the principles that gether. On the other hand, the determine wage and salary rates right men may earn large profits are apt to become envious and re- and greatly enhance the value of ceptive to ideas that are hostile to the corporation. Depending on the our free economy. size of the business, the selection The selection of corporate man- of management may mean a differ- agement confronts stockholders ence of millions of dollars in prof- with choices similar to those we all its or losses, which emphasizes must face in our daily purchase the importance of the right man- decisions. Should they look for agement. management at bargain rates? In the history of the automobile Should they shop for medium- industry the stockholders of doz- priced management, or search for ens of independent companies had the best possible men who demand this choice to make. Many of them top salaries? As in everyday life, chose management at bargain Dr. Sennholz is Professor of Economics at Grove City College, Pennsylvania. ===== PAGE 6 ===== 4 THE FREEMAN July rates — and lost their investments The corporation need not neces- when the companies fell by the sarily pay the total amount which wayside. The managerial salaries good management adds to net in those cases, no matter how low, worth, What must be paid to at- proved to be no bargains after all. tract and hold the men may con- At the same time, the obscure and stitute merely a fraction of the failing Maxwell-Chalmers Corpo- amount they actually earn for the ration hired Walter P. Chrysler corporation. who built it into one of the big In bidding for managerial serv- three of the industry. His com- ices in the executive labor market, pensation, no matter how high, each corporation acts in competi- constituted a real bargain to the tion not only with all other exist- corporate owners. ing corporations but also with the Not only the owners but also the opportunities for the manager to workers gain from superior man- organize a business of his own. Of agement. Contrary to much union course, this competition is re- propaganda, the workers’ interests flected not only in salaries but also are served best under superior in pensions, bonuses, and other management. Wages tend to be benefits. And the calculations are higher in a profitable and expand- in terms of met salaries and net ing enterprise than in a failing benefits after taxes. one. Fringe benefits are higher and In order to attract a man from jobs more secure. Rejoicing about other employment a corporation cheap management can be very usually must outbid its corporate shortsighted — and shortlived. competitors. And in order to hold Finally, there are the consumers its man the corporation must pay who, indirectly at least, demand him at least as much as he could efficient management. Production earn in other employment. efficiency makes for better and To move from one employment cheaper products which can meet to another involves a serious deci- the pressures of competition. sion. It often entails a change of residence which is both incon- venient and costly. The home may have to be sold, perhaps at a loss. The important problem of ex- Children may have to change ecutive remuneration is to attract schools, and many other problems and hold the best men. The value arise through resettlement. It is of a company is determined by the obvious that the met inducement men who run it and work for it. in the form of higher salary or ad- Corporations Must Compete for Management ===== PAGE 7 ===== 1958 EXECUTIVE SALARIES b vancement must be great enough without income taxes would allow to exceed the disadvantages of rapid capital accumulation and such a move. business expansion which in turn would intensify corporate bidding Confiscatory Taxes Have for executives and thus raise their Leverage Effect remunerations. But it is doubtful Let us assume that a net salary that salaries soon would reach the improvement of $5,000 annually present figures which are so large- will induce an executive to move ly conditioned by progressive tax- to a different community to work ation. for a different company. And as- We are assuming here that cap- sume further that the man is in able executives who are the entre- the 80 per cent income tax bracket. preneurs in a corporation add far Therefore, his $5,000 net raise will more to the output of the business cost the company $25,000, with than their own employment costs. $20,000 going to the government This assumption seems justified in and $5,000 to the executive. If he the light of corporate experience. should be in the 90 per cent tax Walter P. Chrysler’s salary, for in- bracket, the corporation would stance, undoubtedly was merely a have to boost his gross salary by fraction of the net worth he added $50,000 in order to attract him. to the company. The question is whether or not the As we have said, competition new executive will add at least the largely determines how much the gross amount of his remuneration corporation has to pay for a good to the company output. A skilled manager. When an executive is executive who adds millions to the hired, his future contribution can net worth of his company un- merely be estimated. Economic doubtedly meets this condition. prudence therefore requires that The large salary figures often he be paid merely the amount that criticized by labor union leaders suffices to induce him to accept are the inevitable result of the pro- employment. This minimum is de- gressive taxation of large incomes. termined by competition in the ex- Without this taxation the net sal- ecutive labor market. Once he ary that suffices to attract and proves to be a capable entrepre- hold the executive would consti- neur who adds profits to the com- tute the total salary. The govern- pany, his remuneration tends to ment share in the executive salary go up. For the corporation now would remain in the company as must increase his remuneration profit. Of course, such an economy lest he accept employment with a ===== PAGE 8 ===== 6 THE FREEMAN July competitor who also recognizes his afford the company the maximum ability to create profits. profits on his employment, which To avoid the leverage effect of is the major factor that deter- confiscatory taxation on executive mines the executive selection. salaries, often involving tax rates Of course, these economic prin- higher than the corporation other- ciples of the determination of ex- wise would have to pay on profits, ecutive salaries are moderated and many companies resort to forms of may be frustrated by personal fac- remuneration that are taxed at tors, such as ignorance, inertia, lower rates. For instance, they friendship, hopes and illusions, may grant purchase options that and other feelings. give executives the right to buy from the company a certain num- The Case of Poor Management ber of shares of stock at prices We have been discussing supe- that are lower than the market rior management and its compen- price. Besides the tax advantage, sation, but must not neglect the this method has an additional at- cases of poor management which traction. The executive becomes co- undoubtedly exist. Inferior man- owner, giving him new incentives agement is apt to make costly mis- for doing his utmost in the serv- takes and inadvertently inflict ice of the company. losses on the company. It is ob- vious that the services of such executives are not worth the sala- The upper limit of an executive ries they are paid. In other words, salary ultimately is determined by their productive contributions are the profits which his employment worth less than their costs. Pru- yields to the company. The execu- dent corporate owners will dismiss tive’s productive contribution mi- them without delay. nus his employment costs constitute To unseat an inefficient manage- this profit on his employment. This ment of a huge corporation is dif- explains why an executive is apt ficult when hundreds of thousands to be replaced as soon as another of stockholders are involved. It executive can be found whose pro- may be that no one man or group ductive contribution minus his em- owns enough shares to exert work- ployment costs yields a larger profit ing control. In this case, stock- to the company. The new man may holders seem to have only the be more productive for the same choice of selling their securities. money, or equally productive for Such selling or shunning of shares less money, or in some other way may result for the time being in Company Profits Set Salary Ceilings ===== PAGE 9 ===== 1958 EXECUTIVE SALARIES 7 lower price-earnings ratios and again share with the government. higher yields on the stock. But in Therefore, proxy fights have be- that event, various promoters and come relatively infrequent, and in- speculators may see an opportunity efficient management may stay in for unseating the inefficient execu- office indefinitely. Thus does inter- tives through soliciting the sup- ventionist government encourage port of dissatisfied stockholders. and perpetuate inefficient manage- They wage costly proxy fights and ment. occasionally succeed in obtaining Executive salaries ultimately are working control. determined and paid by the con- But modern interventionism sumers. Through buying or absten- with its confiscatory taxation even tion from buying, consumers de- hampers this last safeguard for termine which corporations are to efficient management. Proxy fights earn profits or suffer losses. They are very costly. Without assurance determine the remuneration of of success they may consume hun- Frank Sinatra, Marilyn Monroe, dreds of thousands of dollars of a and Rocky Marciano. And they man’s own funds. Few men still also determine and pay the can dare to lose these sums for the workers’ wages as well as the ex- sake of corporate control, the ecutive salaries at General Motors eventual fruits of which they must and U.S. Steel. eo 0 The Search for Profits : oN 11 BERTY IT IS THE SEARCH FOR PROFITS which governs the whole delicate fabric of capitalist society. In a capitalist economy if mines are sunk and ores and minerals worked, if trains run along the rail- ways and ships plough their way across the ocean, if iron is beaten at the forge and steel rolled at the mills, if fibers are spun and textiles woven at the loom, it is in order that some person or group of persons may make a profit. It is true that they can make a profit only by satisfying a demand; and the search for profits has in the course of centuries wonderfully enriched and widened the life of men. IVOR THOMAS, Socialism and Communism ===== PAGE 10 ===== . Jr LE] 3.3 LW . - } hy, © \ CL, ow gp \ THE SUN This is the most intimate look at the source of earth’s energy man has yet had. A camera coupled to a 12-inch astronomical telescope - lifted to an elevation of 81,000 feet by a stratoscope balloon —took this picture of the sun, What looks like little globules are enor- mous, turbulent, intensely hot gaseous eddies. Photo by courtesy Genaral Mills, Inc. ===== PAGE 11 ===== SUL SHEL ......... HE MANUFACTURERS of air con- more apparent to all that the ideal ditioners met in annual con- solution was to secure a tariff to clave. The depression had brought equalize the cost differentials. A their business to a sorry state. law to establish “competitive fair- Costs were rising and consumers ness” was the sense of the resolu- just wouldn’t stand for any more tion about to be drafted. price increases; indeed it was be- Then came an interruption in coming apparent that any pickup the day’s deliberations. “Tarry a in sales would require even lower moment,” cautioned an old mem- prices. ber. “Our greatest competition Few of the members had any isn’t coming from these foreigners awareness as to the real cause of with their low wages. The greatest their difficulties: governmental in- competitor of all isn't paying a tervention. They didn’t quite real- cent for wages. Gentlemen, it’s ize that overextended government Nature herself, the biggest sup- was financing itself by increasing plier of fresh air ever known to the volume of money and credit, man, that must command our at- resulting in lower money value and tention. Let me show you how we thus in higher costs. They didn't can turn the law to our own and read any significance into the fact everyone's advantage. Simply that the dollar had lost 51 per cent make it illegal for any home, barn, of its purchasing power since 1939. factory, auto, airplane, truck or No, these producers of condi- locomotive cab, or any other en- tioned air were blaming other in- closure to use any air not proc- fluences for their troubles. Most of essed by a mechanical air condi- the talk dwelt on the evils of for- tioner. Reflect, please, on the merit eign competition with its “cheap of this proposal. Our industry will labor.” “How on earth,” they flourish and the increased demand queried, “can we who pay $3.00 an for workers, for steel, for motors, hour for labor expect to compete and for thousands of other items with those foreigners who pay only will be on an unprecedented scale. \ 39¢ an hour for labor?” This line Why, it may take a million skilled of reasoning made it more and technicians just to service our ma- | 9 ===== PAGE 12 ===== 10 THE FREEMAN July chines. I implore you not to waste of a different breed. They're the time on such trivia as a few minor givers, the ones who not only foreign competitors. Let's go at charge no interest rate at all but, this thing in a big way. We can gentlemen, they don’t even want make the automotive industry look their capital returned. Outlaw giv- puny if you will but follow the ing! Make illegal these gifts to- course I commend.” taling hundreds of millions of dol- The bankers gathered in annual lars annually to schools, colleges, conclave. They had lots of money churches, charities and then we'll to loan but borrowers were scarce. have an active market for money. The bankers were concerned about Demand for money will exceed the competitive interest rates being supply. The borrowers will be com- too low for a “fair profit.” The peting to get our money instead of solution seemed obvious. Just pass our competing to loan it. Need I a law setting a “floor” under in- say more?” terest rates. Make it illegal for The light and power people anyone to charge or pay less. Ov- were assembled in annual conclave. erlooked entirely was the govern- “Costs were rising and the govern- ment’s near-complete cortrdl «of ment commissions just ‘wouldn't the money market and of itheir permit any more increases in rates. business. And, not a word*was said The people, pinched by govern- about the special privilege ex- ment-induced inflation, had the tended by government to credit commissioners on the political hot unions and the outright loaning seat. The commissioners didn’t by government itself. Too touchy dare to do other than refuse the a subject! light and power petitions. Faced Just as they were about to pe- with this dilemma, the delegates tition the Congress for a price con- saw no alternative but to increase trol on loaned money, the dean of the volume of their sales. But how? the financial fraternity rose to his Then came the answer from the feet. “Bankers, listen to my coun- cleverest among them. Said he, sel. You are overlooking the real “The candlemakers we have put offenders. It's not the folks who out of business.! And the electric are running cut-rate money shops lamp has for all practical purposes that should concern us. Yes, one- ______ half or one per cent off the going "The idea for this essay came from The , Candlemakers’ Petition by Frederic rate here and there, but that's Bastiat which appeared in THE FREEMAN, peanuts. I tell you the culprits are March 1968. ===== PAGE 13 ===== 1958 LET THE SUN SHINE IN 11 replaced the gas lamp. We can't nified and presented in the nude make any substantial ground in for easier viewing. these directions. That competition Take the case of keeping out the didn’t amount to anything, any- sunlight. What is this light? It is way. Our real competitor is old but radiant energy supplied by the Sol, the Sun itself! The way to sun. The earth gets its energy handle this competition has al- from the sun; therefore, any prod- ready been pointed out to us. I uct in its natural state or as re- know of a modern hotel that hasn’t shaped by man is as much from a single window and already there the sun as is the light by which are many factories without win- we see. And candlelight, gaslight, dows. All their light is electric electric light are as much from light. Simply pass a law shutting the sun’s radiant energy as is day- out all sunlight from the interior light. of all structures, homes as well as We see by the sun’s radiant en- hotels, stores as well as factories. ergy and we eat and keep warm Do as I suggest and we're in busi- and clothe and otherwise embel- ness.” lish ourselves by it. It is no more . absurd to keep the light of the sun That All May See from shining into the lives and It should not be necessary to environment of human beings than point out that the above accounts it is to inhibit and obstruct other are at once fiction and satire. Nor manifestations of its radiant en- would it be necessary were it not ergy from flowing into their lives. for the fact that millions of Amer- The fact that these other forms icans from all walks of life are may take the shape of bicycles or sponsors of this very brand of pro- facial tissues or soap or corn tectionism. Let not anyone laugh flakes, by whomever processed, at the absurdity of these illustra- does not alter the morality of the tions who supports subsidies to matter nor warrant the feathering farmers or “social security” or of one’s own nest at the expense TVA or who turns to the law to of others. lessen competition in any of count- Protectionism is the obstructing less forms or who stands for feath- of the sun’s radiant energy and/or erbedding and any of the other creative human energy in their compulsions practiced by labor flow to those who wish them. If unions. The above are but carica- protectionists were precise in their tures of things we practice, mag- petitions to government, their res- ===== PAGE 14 ===== 12 THE FREEMAN July olutions would read something as but to aid it in buying more of follows: the prosperous state’s goods and WHEREAS, we are heartily in favor services. And, surely, there would of the sun’s radiant energy by which evolve a class of “economists” who mankind is permitted to exist on this with slide rules, charts, and sta- earth, nonetheless, some of this tistics would “prove” the propriety energy is flowing through the hands of this “foreign aid” hokus pokus. of competitors into the lives of people Bastiat was right in asserting more advantageously than when flow- that “when goods do not cross ing through our own hands; bord . 11 9 ers, soldiers will.” Or, to state THEREFORE, BE IT RESOLVED our own case in positive terms: that the sun’s radiant energy be re- When we fors tectioni stricted from flowing into people’s ol be arr lives to whatever extent is necessary &8 2 principle, we will be able to to keep us in business. forego soldiers as a necessity. To weigh the consequences of Man’s higher role, it would seem, protectionism, imagine its substi- 18 not to use force to board up tution for the uninhibited travel either windows or borders. It is, and the free trade in goods and instead, to aim his genius at help- services that now prevail between ing the sun to shine into the lives the abutting states of Illinois and Of all peoples. When we allow the Wisconsin. Tariffs, quotas, and em- free, uninhibited flow of all cre- bargoes would be invoked, and 2tive and radiant energy, we shall custom and immigration officers aid the true interests of all, for would populate the border. Con- the true interests of all are har- stabularies would be necessary to Monious. ¢ ee enforce the edicts. The people would begin growling at each AMPLITUDE other and, sooner or later, the con- There is no limit to the sky; stabularies would have a go at it And Nature holds no trace, to establish “justice” and to make Nor check-rein on Her Bounty More than God has ended Space. "Tis only man who limits things; His love, his wealth, his mind; the states ‘safe for democracy.” Probably, at some future date, the government of the more prosper- To choose instead, a penury, ous state would tax its people that A stringence hard to find. gifts might be made to the gov- He digs around until he strikes Im ”» The maki f H ernment of the “backward” state For only hen has figured out not only for the purpose of keep- That plenty comes from less! ing it “from going communist” ANN TERRILL ===== PAGE 15 ===== Ww G ni of the Republic? (ize LIFE is not possible without adequate government. Yet government itself can be the greatest of social evils. The his- toric struggle of man to be free has been essentially an effort to subdue the State. His first notable success came with establishment of the United States of America — a decentral- ized republican form of govern- ment under a Constitution de- signed to protect the rights of the people, a system so arranged that its powers could not be used to ex- ploit or enslave them. It was undoubtedly the greatest political advance in the history of the world. And the Republic so founded — for a century and a half — was a model of freedom for the world, and a haven of opportunity for its citizens. It seems incredible that a people so blessed should allow either the word or the spirit of that great Constitution to be debauched or destroyed. But, if we face the truth, we must admit that attempts to destroy it are gaining force while the majority of the people stand idly by, either in apathy or frus- tration. Samuel B. Pettengill, former In- diana congressman who addressed two civic groups in the Palm Beaches recently, raised the vital question of whether the American people were not, in fact, facing the “twilight” of their Republic. And he offered documented evi- dence to indicate that they are. Why ? Simply because the Amer- ican people have abandoned the system of government which made their nation outstanding. They have allowed themselves to be led, bribed, conned, frightened, cajoled, and pushed away from a system of individual initiative and free enterprise into the wasting disease that is the “welfare state.” Some also call it the “nursemaid state,” but both terms are synony- mous with socialism — the gospel of Karl Marx. It Has Happened Here! Socialism in America? It can’t happen here! — we have been told, and are still being told, by many of our political leaders. But, says 13 ===== PAGE 16 ===== 14 THE FREEMAN July Mr. Pettengill, it not only can hap- grant of unlimited power ever con- pen here — it HAS happened! ferred on the federal government. Government ownership of indus- There is nothing now in “the law try is socialism. And when the fed- of the land” to prevent its being eral government of the United used to legally confiscate ALL of States takes 52 per cent of the incomes over a certain amount — profits of a corporation in the form or, for that matter, ALL incomes. of income taxes, it ‘“owns” —in Enforcement procedures of this effect — 52 per cent of the shares law have reversed the basic Ameri- of that corporation. It need not ac- can principle that man is presumed tually own the cow, if it gets the innocent until proven guilty. Any- milk — and it does. one suspected of evading payment If you have any income, the gov- of federal income taxes is pre- ernment owns a “share” of you, sumed to be guilty, until he can too. Depending on the amount of prove his innocence — if he can. your earnings, the federal govern- And perhaps even more impor- ment will demand from 20 per cent tant, in its effect on the American to 91 per cent of it to finance its system of government, the income ever-expanding operations. tax law has provided the weapon This income tax not only is evi- by which all Constitutional limits dence of the existence of socialism on the powers of the central gov- in America; it is the crack in the ernment may be wiped out. Constitution through which social- It is axiomatic that “the power ism slithered into the “land of the to tax is the power to destroy.” free,” and it is the trough at which Marx recognized it. In his Com- “big government” swells and munist Manifesto he advocated the grows fat. steeply graduated income tax as History may record that the an instrument for social revolu- “twilight” of the American Repub- tion. lic began in 1913 when the Six- teenth Amendment to the Consti- The Great Tax Swindle tution was adopted, authorizing It is being used as such an in- the federal government to levy an strument in these United States. income tax, “from whatever source Says Mr. Pettengill: “Modern gov- derived without apportionment ernments...tax away the earn- among the several states, and with- ings of their people, and then dole out regard to any census or cnu- some of it back to them in subsi- meration.” sidies, gifts, grants in aid, and That amendment was the first the award of huge government ===== PAGE 17 ===== 1958 TWILIGHT OF THE REPUBLIC? 15 contracts. By this process they be- paternal state promises to do those come the masters of men, and things for him? cease to be their servants.” The desire for ‘security’ re- The historic relationship is re- places the desire for opportunity, versed. Instead of government which is the mark of a vigorous, coming to.the people for its sup- liberty-loving people. But even port, the people come to the gov- though the citizens of a Welfare ernment for their support. The State give up their liberties one great “power of the purse,” by by one for the protection of a which representatives of this na- paternalistic government, where is tion’s taxpayers once held the their security? executive branch in check, has passed into the hands of a political The Death of Security Santa Claus. And this Santa The tax-and-spend program of Claus does not carry a bag —the such a government is inevitably taxpayers are left holding it. accompanied by its twin — infla- The more money a government tion. And inflation is the death of has to spend, the more it spends; security. and the more it needs — to con- Escalator clauses in labor union solidate its power over those who contracts give a worker a certain must come to it as beggars. In the precarious security during his pro- name of “emergency” and under ductive years. But what happens to increased demands for more and his life insurance policies, his gov- more “benefits,” the government ernment bonds, his bank savings, lives beyond even its swollen in- his pension, his social “security” come, amasses an enormous debt. benefits —on which he must de- And, imbued with the philosophy pend to provide for the sunset of the Welfare State, the govern- years? ment tends to become of, by, and A big chunk of them are stolen for pressure groups. by inflation — stolen by a govern- The promise of cradle-to-grave ment whose policies breed and security weakens economic incen- foster inflation. It has been esti- tive, tends to make men financially mated that during the period from irresponsible and reduce them to 1945-1951, inflation caused pur- the moral level of dependent chil- chasing power losses of $123 bil- dren. Why should a man struggle lion on savings bonds, time de- to provide for himself, to lay some- posits in banks, and life insurance thing by for a “rainy day” to pro- policies alone. That is approxi- tect his family from want, when a mately 65 times the losses incurred ===== PAGE 18 ===== 16 THE FREEMAN July by depositors in banks in the years their duties and responsibilities. 1921-1933. Through a program of educa- One of the surest ways of wreck- tion, the something-for-nothing ing a nation’s economy, Mr. Pet- philosophy that has been spreading tengill pointed out, is to debauch its blight over this nation since its currency. History is replete the days of the “New Deal” can be with instances of this tragedy. For shown in its true light, and the a government to embark on a principles which made America course which will rob the thrifty, what it is brought back to respect- the aged pensioner, the widow, and ability. the orphan by planned inflation is Our youth — yes, and many of just as immoral as armed robbery their elders — must be taught the on a dark street. meaning of the Constitution; they That is what happens when tax- must be taught American history; ation and government spending and they must be taught basic get out of control, as they ob- economics. In short, they must be viously have in the United States taught Americanism, instead of today. The trend has gone so far the foreign “isms” that have al- that neither Congress nor the ready made such dangerous in- people know the full truth about roads. our fiscal affairs. And neither Con- It CAN happen here! gress nor the people have control It can happen that our great of them. This function has been Charter of Freedom, the Constitu- taken over by the Washington tion of the United States of bureaucrats who now wield more America, be restored to its original power — through their control of purity and strength. And it can where and for what tax monies will happen that freedom and oppor- be spent — than either our elected tunity will be thus reborn to bless representatives or the President. our children, and their posterity. et But it can happen only if many "Night" Need Not Fall Americans, like Mr. Pettengill, re- Certainly all of this sounds like fuse to “give up the ship.” o o e the “twilight” of our Constitu- tional Republic. But “night” need Editorial from The Palm Beach Post- not fall if Americans awaken to Times, April 13, 1958. ===== PAGE 19 ===== WHY THE GOVERNMENT CANNOT CONTROL THE BUSINESS ¢eYele ANTHONY M. REINACH T IS a widely accepted theory 1933 through 1943, except.for a that we can rely on the govern- few months during the 1936-37 ment, through manipulation of the boomlet when reserve require- money supply, to alleviate or cor- ments were boosted quite sharply, rect the excesses of the business there were always excess reserves cycle. Nothing could be further — money adjudged superfluous in from the truth. terms of the prudent economic re- Unlike the doctor who can quite quirements at the time. In Janu- accurately predict when a dose of ary 1941, after nearly eight years medicine will affect his patient, of sharp expansion of the supply the money managers have no way of money, almost $7 billion of it of knowing when increases or de- — a record high — lay dormant in creases in the money supply will the banks. In other words, though affect the nation’s economy. In this money had been pumped into fiscal matters, the extent of the the economy, it was not being used time lag between cause and effect when deemed desirable. is virtually impossible to predict. 2. People camnot be forced to The reasons for this are twofold: spend money at a particular rate. 1. People cannot be forced to The rate or speed with which use money. Since 1944, there have people spend money is known as been no appreciable excess bank “velocity,” and refers to the num- reserves, which means that the ber of times a year money changes banking system during this time hands. One indication of velocity has been able to lend and invest is in the figures published by the all its available funds. But not so Federal Reserve showing the an- in the preceding decade. From nual turnover of demand deposits. Mr. Reinach’s insight into economic aflairs is well-known to Freeman readers. 17 ===== PAGE 20 ===== 18 THE FREEMAN July For instance, in New York City, plying that figure by a velocity of the commercial and financial cen- 20 gives $4,400 billion as the ter of the country, the current amount of money work done in a velocity is around 55. Since de- year. It is apparent that a mere mand deposits turn over less fre- velocity reduction from 20 to 19 quently in other parts of the would more than cancel out the country, the national average is anticipated effects of almost $12 perhaps 40. If we include dormant billion of additional “corrective” cash and time deposits, 20 would money. The reverse also holds, so be a minimum estimate for the that an increase in velocity would current national average velocity give just that much additional of our entire money supply. push to the effects of any expan- The current money supply, in- sion of the money supply. cluding bank deposits and cur- If the velocity of money could rency, is about $220 billion. Multi- be held constant, it would be easier MEMBER BANK BALANCES IN EXCESS OF RESERVE REQUIREMENTS 1932-1958 BI1IONS OF DOLLARE siiiony or SOLAN ALL MEMBER BANKS 7 —7 [= ds Sr 5 a EXCESS RESERVES {4 a 43 T 2 1} Nn [1] i i i I i 1 In ld A i A 1 i I | UN 4 : J i I : 1 0 1932 1938 1940 1943 1950 1955 1960 SOURCE) Sedercl Reserve Chart Bock, Miskriend Supplement ===== PAGE 21 ===== 1958 WHY THE GOVERNMENT CAN'T CONTROL THE BUSINESS CYCLE 19 to predict how changes in the a steady decline which lasted 11 quantity of money would affect years and 3 months. A low in ve- the nation’s economy. But the locity of 16.3 was reached in Janu- velocity is far from constant. Be- ary 1941 — the same month in cause it is highly sensitive to pub- which excess bank reserves at- lic psychology, it traditionally re- tained their highest point. sists arbitrary regulatory influ- For the past 17 years, the ve- ences. locity of demand deposits in New York City has been climbing Demand deposit figures for New steadily to its current level of York City, adjusted for seasonal around 55. Another trend reversal variation, reached a peak velocity could render injections of ‘“correc- of 156.8 in October 1929. In defi- tive” money about as effective as a ance and to the dismay of pump- platoon of soldiers charging a priming experts, it then went into swarm of mosquitoes. ® 00 ANNUAL RATE OF TURNOVER OF DEMAND DEPOSITS NEW YORK CITY, 1926.1958 ANNUAL TURNOVER ANNUAL TURNOVER 4120 4100 - 80 [) PUR VT VU RT Sr SUT UR EY WORD YT VT VE KN Tr SR SE SEN NUN SH SN VS TH SUNY UY SI SH SI ES SO SH SH 1926 1930 1935 1940 1945 1950 1955 1960 SOURCE: Banking and Manstory Stalnine end Federal Reserve Bulletin ===== PAGE 22 ===== WILLIAM H. PETERSON Well, I didn't plant any wheat in my wheatfields, and I didn't plant any corn in my cornfields, so, all in all, I ought to have a good year this year. Caption on a New Yorker cartoon . Devaney, Inc, N. Y. REVOBUNION DOWNR ON TRIE FARM T THE TURN of the twentieth self-starter, and perhaps fluid century, the now familiar drive and power steering, has all tractor had yet to make its appear- but displaced the horse and mule. ance on the American farm. The It’s a compact, efficient, quick-mov- engine was the horse and the mule ing, and highly maneuverable — and, in good measure, the farmer power plant. Coupled with attach- himself. Before long the first trac- ments, it not only can perform the tors made their appearance: steam usual field chores but it can also or gasoline-driven, big, slow, awk- pump, lift, pull, carry, dig, push, ward, wheezy, given to frequent and level. With a generator attach- mechanical failures, good for turn- ment, it provides electricity for ing belts and plowing flat stretches, blowers, portable saws, arc-weld- and just marginal at that. Like its ing, and so on. With a pumping at- mechanical brother on the road, it tachment it can pump water and was not uncommonly greeted with spray insecticides and weed-killing “Get a horse.” chemicals. There are now better Today's tractor, with such stand- than 4% million tractors on Amer- ard equipment as headlights, tires, ican farms — an average of nearly Dr. Peterson, Associate Professor of Economics at Now York University, is also a weekly con- tributor to the Wall Street Journal. 20 ===== PAGE 23 ===== 1958 REVOLUTION DOWN ON THE FARM 21 one for every farm. There are also dramatic result of superior hy- on the farm the other horse re- giene, better feeds and injections, placements: 414 million automo- and better breeds. biles, nearly 3 million trucks. In his Atomic Energy in Agri- culture, William E. Dick, a British Technological Improvements research biologist, shows how tech- Just this facet of “horse-power” nology in radio-isotopes and atomic mechanization gives an inkling of energy, as yet in its infancy inso- the technological revolution down far as farming is concerned, al- on the farm. This revolution em- ready can destroy and control in- braces not only mechanical won- sects and plant diseases, speed up ders, but also new animal hus- growing cycles, and open up cross- bandry techniques, planting meth- fertilizations and mutations for ods, animal vaccines, fertilizers, plant varieties and yields hitherto feeds, seeds, plant hormones, weed impossible. Thanks to nuclear sci- killers, insecticides, sprays, ence alone, food spoilage before washes, and even radio-isotopes. In long may be reduced to a point of 1956, to cite an example, the Amer- negligibility, and cheap, whole- ican farmer used 71 per cent more sale preservation of now perish- fertilizer on his fields than he did able foods soon may become pos- in 1948 and better than four times sible. as much as he used in 1930. The technological revolution is As a result, per-acre yields are seen in the statement of Assistant showing an almost certain gain Secretary of Agriculture Earl L. in productivity year after year. As Butz in 1955:2 a further result, lambs and poul- “In the 15 years since the be- try, beef and dairy cattle, pigs and ginning of World War II, Ameri- calves are getting bigger faster can farmers have increased their and — with the exception of layers total production by 35 per cent, and dairy cattle — to market soon- with no increase in acres.” er. Chickens are laying more eggs This increase was accomplished (Terramycin, for instance, boosts despite a drop of 28 per cent in the egg production from 6-to 37 per number of farm workers during cent). Cows are giving more milk. that period. Hogs are giving more meat and The revolution is seen dramati- less fat. Female farm animals of cally in cotton production. Today breeding age accounted for an aver- there are about 850,000 cotton age of 38 per cent more offspring New York: Philosophical Library, 1957. per animal in 1956 than in 1930, a 2Wall Street Journal, July 3, 1957. ===== PAGE 24 ===== 22 THE FREEMAN July growers, just about half the 1,600,- 1940. There has been more change in 000 cotton farmers of 1940; cotton agriculture within the lifetime of acreage is also markedly down. Yet men now living than in the previous cotton technology, along with some two thousand years, shifting to more fertile lands, has The President’s point on the almost made up for the heavy cut- doubling of farm productivity per back in cotton farmers and cotton man hour since 1940 is further em- acreage. Per-acre yields have phasized in the fact that this in- climbed to 400 pounds of cotton in crease is as great as the total in- 1956, well up from the 250 pounds crease in the 120 years between in 1940 and 200 pounds in the 1820 and 1940. Today a farmer early 1930's. Department of Agri- With modern equipment can plow culture figures show the following one acre in 48 minutes as com- improvement for other major crops Pared to 2.6 hours in 1920. He can during the 28-year period from dig 60 post holes in 2.5 hours as 1928 to 1956: compared to 10 hours in 1920. He Yield Per Acre 1928 1956 can harvest and crib one acre of Corn (bu.) 25 41 corn in 17 hours as against 7 Wheat (bu.) 14 19 hours in 1920. Today he can do by Tobacco (lbs.) 771 1333 machine what only recently he did Said President Eisenhower in by hand —bale hay, shuck corn, his 1958 farm message to Con- Pick cotton, chop forage, plant gress :3 seed, cut grain, and fertilize land. The rapid changes taking place in A mechanical cotton picker re- agriculture are largely the result of places 40 to 80 hand pickers. A a major breakthrough in agricultural potato digging machine can out- science and technology. In recent pace 17 men. A green-bean picking years agriculture has been experienc- machine is equivalent to 50 man- ing a veritable revolution in produc- 5] pickers. A mechanical celery tivity. A century ago, an American picker not only does the picking farm worker fed himself and three yt .1o, hacks the celery in cartons others. Today he feeds himself and on the field. twenty others. A century ago, our population was 82 per cent rural. Today it is only one-third rural and only 12 per cent of our population The big economic upshot of this actually live on farms. Farm produc- revolution is that bigger farms tion per man hour has doubled since with fewer workers are feeding more people. In 1930 there were 3New York Times, January 17, 1958. 12,497,000 farm workers, in 1940 Fewer Farmers — More Output ===== PAGE 25 ===== 1958 REVOLUTION DOWN ON THE FARM 23 — 10,979,000, and in 1956 — 7,869,- against the American farmer in 000, including farm families and ways other than cutting back do- hired workers. Technology, in a mestic and foreign markets sense, forces up the size of farms through discouraging demand. —so0 as to get greater utilization Price supports hold an umbrella of farm machinery and reduce per- over foreign agricultural pro- unit overhead. In 1940 the average ducers and domestic synthetic pro- farm was 174 acres, in 1950 — 215 ducers — and thereby spur compe- acres, and in 1956 — 242 acres. In tition. 1935 there were 6,800,000 farmers (including owners, part-owners, Competition from Synthetics and tenants), in 1940 — 6.1 mil- Consider the inroads of syn- lion, in 1950 — 5.4 million, in 1956 thetics, themselves constituting — 4.8 million. quite a technological revolution. The farm technological “break- Until 1930, fibers came almost through” — to use President Eisen- wholly from natural sources — cot- hower’s word — partially accounts ton, wool, flax, hemp, and silk. for the magnitude of today’s Soap was made from agricultural “farm problem.” The tractor and oils and fats. Adhesives originated the other farm machinery has all from starch, glue, and plant gum. but eliminated draft animals and Luggage and shoes were made al- their feed. This development alone most always of leather. Paints has enabled American farmers to originated from vegetable oils. divert 55 million acres to human Alcohol was made from molasses food production. This fact, plus the and corn. soaring per-acre yields and the But this position of agriculture continuing high government farm was not to last. In its interim re- price supports, account for the port, issued in 1957, the U.S. Com- burgeoning Commodity Credit mission on Increased Industrial Corporation hoards. In fact, price Use of Agricultural Products, a support payments almost tripled body created by the 84th Congress, in the four years of President notes that farm fibers have lost Eisenhower’s first administration 45 per cent of their former mar- as compared to the entire twenty kets, to synthetics — rayon, nylon, years of the New and Fair Deals dacron, orlon, acrilan, and so on. — $2.9 billion between 1953 and Synthetic detergents have taken 1957 against $1.1 billion between over two-thirds of the total house- 1933 and 1953. hold soap market, thereby reduc- The price supports boomerang ing the need for the farmer's in- ===== PAGE 26 ===== 24 THE FREEMAN July edible tallow and grease. In 1950, Products provides a lesson in prac- requirements for cattle-hide leath- tical politics. The Commission is a ers could not be met from domestic “safe” answer to farm surpluses. sources and imports were neces- It is noncontroversial. The farm sary. But by 1955 cattle hides were bloc could more simply meet its in surplus, and many hides had to foreign and synthetic competition be exported to less remunerative and actually break the “farm markets overseas. A big reason: problem’ through the simple de- 62 per cent of all domestic shoe vice of lowering or, better, aban- soles in 1956 had materials other doning price supports, and wiping than leather in them. Luggage out all marketing and acreage con- tells the same story; plastics, syn- trols. In short, return to the free thetics, adhesives, alcohol, and market. This is a long run propo- paints are also increasingly made sition, however, and elections are from nonfarm sources. always held in the short run. The Commission on Increased Technology and politics don’t Industrial Use of Agricultural mix. CC) [ | iene ®0 0000aTY | Ask the Man Who Farms One The men who know farming best are not nearly as keen for federal subsidies as the farm-bloc congressmen are. A nationwide poll of all kinds of farmers conducted by Farm Journal, No. 1 farm monthly, among its readers shows: Half of all farmers in the United States want the government to pull out of agriculture lock, stock, and subsidy. Another 11 per cent want less government help than they are now getting. In the South, always an enthusiastic advocate of high price supports, more than half want the government to get out. In the Midwest, 43 per cent are against any government help. The poll is based on the opinions of 4,000 farmers which Farm Journal says is a representative sampling of our five million farmers. Maybe if their wishes were heeded, we could afford more education — and research. Editorial in New York Herald Tribune ===== PAGE 27 ===== EDWARD CASE CIRST-GRADE OWT USIE is six years old. She wants possessively for her piggy bank to be an actress. She asks which contains various quarters questions, not all the time, you un- earned for excellently woven pot- derstand, but only when she is holders together with other capital awake; and because we are her less laboriously acquired, and said, parents, her Mommy and I have to with that ultimate degree of vehe- answer them. Or try to. ment shock which only scornful Mommy and I went to see Sir little girls can summon up: “Do Laurence Olivier in The Enter- you mean that they take your tainer. The next morning Susie de- money away from you and put you manded to know what the play was in jail if you won't give it?” Susie all about. Since even the author tightened up her lips and was had some difficulty in making this plainly prepared to resist. She al- clear, Mommy can’t be blamed for ways gives trouble about swallow- a free interpretation. “Well,” she ing her medicine. offered, “it was about an actor who “Yes, they do.” had a lot of troubles.” Susie thought and said that this “What kind of troubles, Mom- was a terr-ee-bill idea. Her par- my? Was he sick?” Susie, having ents were discretely silent. Put recently had the measles, knows just that way, it is difficult to ob- all about sickness. ject. “No-0-0. He was in trouble be- The conversation, like all long cause, well, for one thing, he sprints with Susie, took a turn. couldn’t pay his taxes and he was “Is Mr. Olivyer a better actor afraid of going to jail.” than Noel Coward? I bet he isn’t. “What are taxes, Mommy?” Oh, I'd love to be an actress with Mommy explained. Noel Coward and wear just beau- Susie was aghast. She reached tiful clothes.” Mr. Case, an executive of a small family business in New York, maintains sideline activities in journalism, editing, and publishing. 25 ===== PAGE 28 ===== 26 THE FREEMAN July Here one must explain that lived near the Queen. Where is when Susie had the measles, Noel Jamaica?” Coward pulled her through. To be Mommy took down the globe and strictly accurate, it was a record- showed where Jamaica is. ing of his that did it. It was the “What kind of a place is Ja- only thing that seemed to relieve maica?” the itching, and Susie played it Mommy said it was sunny, with constantly. It was not only for beautiful beaches and flowers. Susie’s sake that we were glad “But why does he live there, in- when the measles went. stead of England? Don’t they have “That’s a matter of taste, dar- beaches in England?” ling. They're both fine performers. Mommy said she thought it had But, you know, you can wear beau- something to do with paying taxes tiful clothes and sit in the audi- and not having to pay them. ence. You don’t have to be on the “Taxes!” Susie was aghast stage to wear them.” again. “You mean Noel Coward “Ye-e-e-s-s, but there's a whole has to pay taxes, too?” mob of people in the audience and Mommy said he does. only a few people up on the stage.” “You mean when I am an ac- Aha, we thought, Susie is an in- tress, they are going to take my dividualist. That she is rugged we money away or put me in jail?” had learned already. Mommy nodded and, really, it Susie is always curious about did seem a shame. where people live. Susie pondered darkly for a mo- “Where does Noel Coward live, ment, then stamped her foot de- Mommy ?” cisively. She made up her mind. “I think he lives mostly in Ja- “Then I won’t be an actress. I'll maica mow, dear.” just go to Jamaica and sit in the “I thought he was English and sun.” ooo Ji[olAISHOIN] 1000009 | Let Facts Be Submitted He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people, and eat out their substance. Declnration of Independence, July 4, 1776 ===== PAGE 29 ===== Self-help is a key to progress in any competitive situation. The Independent FIGHTS BACK JULIAN H. HANDLER A. Devaney, Inc, N.Y. WO DECADES AGO, the friends of pendent food merchant still ac- the independent food merchant counts for the lion’s share of total were ready to serve as his pall- grocery store sales, more than 60 bearers. The corporate chains were per cent of the total. making such tremendous growth This accomplishment has been that proposed legislation to tax effected through a revolution-with- them to their death seemed to be in-a-revolution in marketing. Fun- the independent’s last hope. The damental, comprehensive, and dy- plan failed and the independent namic changes have completely al- was left to stand or fall on his own tered the nature of the American merits in the battle for survival food distribution field during the under free competition. last 20 years. New efficiencies, with What has happened since is self-service in the forefront, have startling indeed, in view of the sharply reduced gross margins. tremendous odds that were then Merchandising has taken on new seen as stacked against the man forms. Attractive and sanitary who wanted to operate his own packaging has replaced the cracker grocery market down the street barrel and the tub of butter. No from one owned by a big corpora- longer must the housewife go from tion with the comparatively limit- grocery store to bakery to meat less financial resources that could store to dairy to fruit store in run him out of business. order to purchase all her family’s Yet today, as the result of re- food needs. The supermarket has sourceful leadership and progres- become the mecca for convenient sive action at all levels, the inde- one-stop shopping. Mr. Handler is an editor and author on food marketing and merchandising. 27 ===== PAGE 30 ===== 28 THE FREEMAN July The change has been so complete the way to the most desirable lo- that most of us have forgotten cations and financed the building what grocery marketing was like of attractive markets. The chains not too many years ago. The scope could advertise economically since of this revolution in distribution each ad served many stores; to the can perhaps best be grasped by independent, comparable advertis- visualizing the average food store ing for his one store was out of of a quarter-century ago and re- reach. Competent headquarters calling how it operated, while you personnel for the chain could spe- stand in the middle of a super- cialize in each phase of market market — “one of the miracles of operation, providing a team of ex- America,” in the words of a visit- perts that could not be matched ing monarch last year. by the lone wolf. These built-in competitive ad- vantages of the chain appeared to The emergence of the independ- be insurmountable for the inde- ent as an efficient and successful pendent. Since the small merchant businessman under these totally was regarded as basically impor- new conditions constitutes the rev- tant to the American economy, and olution-within-a-revolution that since his position seemed politi- has equal significance in its social cally exploitative, a campaign was and economic aspects. To appreci- started to turn the tide. ate fully the extent of the climb of Tax legislation was introduced the independent from near-obliv- in many states and ultimately in ion, it is only necessary to ex- Congress. The intent of the fed- amine marketing conditions as eral bill was unmistakable. If it they existed in 1938. were enacted, the A & P, which The chains had been gaining an then had 12,000 stores in 40 states, increasing proportion of the total would have been required to pay a business in many retail fields. They tax of $471,000,000 out of its earn- had many natural advantages of ings that year of $9,000,000. The higness. They commanded great Kroger Co., with 4,000 markets in total buying power that could be 19 states, would have faced a bill wielded to effect favorable pur- of $71,000,000 though it earned chases. This, plus efficiencies in op- only $3,700,000. The friends of the erations that stemmed from their independent showed their belief size, enabled the chain stores to that the only way they could keep offer measurably lower prices. him alive was to tax his competi- Their corporate resources opened tion out of business. Competing with Chain Stores ===== PAGE 31 ===== 1958 THE INDEPENDENT FIGHTS BACK 29 Heated controversy raged over independent market owners in one the tax plans. The side of modera- cohesive operation. They are given tion was typified by the views of a common name, so they can ad- the Secretary of Agriculture, who vertise and merchandise collec- noted that some regulations might tively and enjoy other benefits be necessary to maintain fair com- similar to those that the individ- petition where chain practices ual chain store derives from be- were generally detrimental. “How- ing part of a corporate chain or- ever,” he added, ‘“we think it ganization. would be unwise and unnecessary The other principal form has to give up the economies which been the cooperative. In this ar- have been brought about by chain rangement the market operators, store distribution in order to pre- on their own initiative, develop a vent certain practices which may joint organization that owns its not be in the public interest.” warehouse and hires a manager. Although the proponents staged Each market owner has shares in a vigorous battle in support of the the company and any amounts ex- chain tax principle, the movement ceeding the operating costs of the scored only minor successes and warehouse are distributed among eventually was abandoned. the holders. While the ownership and some Without Government Intervention of the procedures vary, the two Denied this legislative support, systems have much in common — how did the independent food mer- particularly their function of keep- chant manage to hold his position ing the independent market op- in a highly competitive field erator a going and successful busi- against such heavy odds? How did ness. he survive the intense pressure of The new concept in marketing is big chains? The key to the inde- symbolized by a statement in an pendent’s story of progress is co- annual report issued this year by operation. By two principal meth- one of the nation’s larger whole- ods, the merchant associated with salers, which listed its sales as other merchants in the common over $100,000,000. cause of survival. “Food distribution has under- One system has been built gone major changes during the around the voluntary group, spon- past ten years. Our role as whole- sored by the wholesaler. The sale supplier is radically different wholesaler supplies the initiative from ten years ago. Our planning and the program for coordinating and thinking is devoted almost en- ===== PAGE 32 ===== 30 THE FREEMAN July tirely to the continued develop- in turn enables the retailer to price ment of modern retail food facili- his food products at the level of ties in prime locations for quali- the chains. fied, proven operators,” the annual In effect, this is enlightened report noted. selfishness at work. The whole- In arrangements such as these, saler works to reduce his costs, so the retailer-owned cooperative and he can supply the retailer at a the voluntary-group-sponsor both lower price so the retailer can sell provide most of the headquarters at a price fully competitive with services that are performed by chain competition. If the whole- chain main offices. Except under saler did not do this, and instead special conditions, however, the in- sought his profit through higher dependent retains ownership of his pricing, the retailer would ulti- own market. In some cases, with mately go out of business and soon large supermarkets the order of thereafter so would the wholesaler. the day, the private owner may Similarly, the retailer concen- have an investment of around a trates his business with his prin- quarter of a million dollars in his cipal wholesaler to help the whole- facilities. saler lower his costs and thus set By being a member of such an the whole cycle into action. organization, cooperative or vol- untary group, the independent can Integrated Services serve his customers under condi- There are adjuncts to this basic tions that enable him to be fully marketing policy that further en- competitive with chain store hance the status of the independ- neighbors. Since the members of ent market. Effective group adver- the organization concentrate their tising programs are conducted on business with the single distribu- the same basis as chain advertis- tor as much as is feasible, the ing. Joint headquarters provide wholesaler can operate economi- technical assistance that independ- cally, on a high-turnover basis, the ents, singly, could not afford. same as a chain warehouse. Simi- The degree of integration of the larly, the wholesaler’s selling costs retailer with his source of supply are reduced since the loyalty of the is indicated by the fact that head- affiliated retailers makes it pos- quarters in some cases keeps the sible for him to eliminate expendi- books for the market owners. In tures for salesmen. The savings addition, headquarters will seek are passed along to the retailer in out new choice locations for mar- lower cost of merchandise, which kets. If the retailer affiliate is not ===== PAGE 33 ===== 1958 THE INDEPENDENT FIGHTS BACK 31 sufficiently capitalized to gain con- true in that it suggested that the sideration as a tenant, the whole- independent was not a fully effi- saler may put its own name on the cient distributor, but instead lease and help the retailer finance needed a brake put on his com- the undertaking. petitor as an equalizer. Such “ ‘Retailer-mindedness’ has be- thinking may still carry over come a by-word the wholesale fra- among financial institutions, for ternity is justly proud of,” R. L.. example, whose assistance in ex- Treuenfels of the National-Ameri- pansion might be helpful at this can Wholesale Grocers’ Associa- time. This may be so even though tion reported to the most recent the character of the industry has International Congress on Food changed completely. Distribution in Rome. Furthermore, the independent has demonstrated that resource- In retrospect, the campaign for fulness and cooperation are surer chain taxation may now be con- ways than government interven- sidered as having been, in the long tion to sustain progress and pros- run, a liability for the cause of perity under the American system the independent. This could be of free competition. 00 Fooaae oln} 000ECHM Strength Through Struggle THE SOMETHING-FOR-NOTHING IDEA grows out of failure to see the purpose behind the struggle for existence. The fullest possible employment of one’s faculties is what makes for strength of body, of character, of spirit, of intellect. Nonuse of faculties leads to atrophy. The story of the wild duck that joined the domestic ducks, was fed, but later couldn’t fly above the barn; of the gulls that fattened up at a shrimp plant but starved when it shut down; of the cattle that became accustomed to pen feeding and died rather than forage any more; of the hand-fed squirrels that laid up no nuts for the winter but bit the hands that had fed them when they no longer held food — these and other stories of nature attest to principles of biology which are as applicable to persons who won't use reason as they are to animals which haven’t the faculty of reason. LEONARD E. READ, Victims of Social Leveling ===== PAGE 34 ===== POSITIVE ACTION A strengt ends, influen ade can help ? duc win fd defensive wn pro ltr ternation® 0 and improve ou OME of the major problems we same time increasing the employ- face today are those in the ment and real wage income of international arena. Among other American workers. things, our foreign aid program First, let us look at what trade is directed toward assisting in the does in accomplishing our inter- solution of our problems in for- national objectives. We are woo- eign relations. Our agricultural ing other nations by many devices program is bound by restrictions — foreign aid, military assistance, stemming from the necessity of treaties of assistance, alliance and avoiding actions which harm and mutual defense, information serv- alienate our allies whose markets ices — all directed toward the end are influenced by our policies in of enlisting their support in main- this sphere. Everywhere we turn, taining a free world and contain- the international problem intrudes. ing the totalitarian threat. How- Even a domestic recession in busi- ever, our firmest friend in South ness and employment has interna- America is one on whom we have tional overtones since “when the exercised few of these means. Bra- United States sneezes, Europe zil is our stanchest supporter in catches cold.” the Southern Hemisphere. One of Foreign trade is our most ef- the important reasons for the sup- fective device for winning friends, port we obtain from her lies in the influencing nations, and develop- fact that we are Brazil's biggest ing their resistance to Soviet customer. We buy more from Bra- blandishments and threats. Trade zil than does any other nation, has the double advantage of being and with the dollars Brazil earns a device for accomplishing our in this way she is one of our more international objectives, and at the important outlets for American Dr. Brozen is a Professor of Economics in the University of Chicago School of Business. This is an excerpt from his statement of February 10, 1958, beforo the Joint Economic Committee. 32 ===== PAGE 35 ===== AINST COMMUNISM YALE BROZEN goods. These sales to Brazil are in turn, are enabled to find large made by our more productive in- export sales. dustries which, as a consequence, This list of friends whose re- are able to provide employment at gard has been fostered by our pur- higher wages than workers in chases could be extended. The im- these industries could obtain if portant point is that trade creates they were forced to turn to al- friendships which are usually ternative occupations in other in- firmer than those based on other dustries. ties. In trade there is mutual gain In North America, our firmest to both sides. Where there is a friend is Canada. Again, we have mutual gain, a mutual regard usu- a stanch friend and ally for rea- ally follows. sons other than foreign aid, since The importance of trade as a none has been extended. We are means of winning friends and Canada’s biggest customer. The gaining allies has also been recog- ties arising from this relationship nized by the communists. They are an important element in creat- courted Egypt by buying her cot- ing this mutuality. Because we buy ton. They wooed India by offering so much from Canada, and U.S. to buy her hemp. They even are private enterprise invests so flirting with Brazil by making heavily in our northern neighbor, noises as if they might be in- Canada is a major customer for terested in purchasing her coffee. the products of U.S. industry, thus And even as firm a friend as Bra- supporting employment at high zil is unable to resist a small twitch wages for many Americans. of interest. The purchase of a Our ties with the United King- country’s goods is a mightier dom rest in large measure on our weapon than many appreciate. trade with her. We buy English This has exceedingly important products in extensive amounts and, implications for our trade policy. 33 ===== PAGE 36 ===== 34 THE FREEMAN July By reducing barriers to imports, The high wage industries are thus we gain both in terms of accom- forced to cut back and release la- plishing our international objec- bor to the low wage industries. tives and in terms of increasing Wage rates in the machinery in- wages, employment, and American dustry (an export industry) in national income. July 1956 were $91.96 per week. The exports whose volume would In the leather industry, one which increase are the very ones pro- asks protection, wage rates were duced by the industries which are $56.47 per week in July 1956. in trouble now. Machinery and construction and mining equip- Reduce Defense Burdens ment — capital goods — are wanted Actions to improve internation- by areas which now lack the means al trade would reduce our defense to purchase. These are now among burdens in three ways. The firmer our softest industries employment- our allies, the less the level of ex- wise. penditures for national defense re- An unappreciated aspect of in- quired to provide any given degree ternational trade is the fact that of security. Secondly, the higher it is our high wage industries our national income, the more which export abroad and compete capable we become in carrying the very effectively with low wage la- defense burden, and the greater bor abroad. They are the export our mobilization potential in case industries because they are rela- of war. Thirdly, an increase in tively our most productive. Since trade strengthens our allies and wages depend on productivity, they gives them greater defense capa- are also our high wage industries. bility just as it increases our de- The industries which ask for fense capabilities. To this extent, protection are our relatively less they become capable of carrying a productive industries. Because greater share of the mutual de- wage rates are driven up by the fense burden. competition for labor of the very If, in the process of reducing productive, export industries, the our own import barriers, we also less efficient industries suffer, in- succeed in obtaining agreement asmuch as they are not productive from other nations to reduce their enough to afford high wage rates. barriers, then trade will increase By getting tariffs imposed, for- all the more and our benefit will eign buying is reduced since for- be even greater. We would bene- eign dollar earnings are cut down. fit by a unilateral reduction of ===== PAGE 37 ===== 1958 POSITIVE ACTION AGAINST COMMUNISM 35 tariffs. This would pay out for us time, England was the world’s even though foreign tariffs were major market. She had a higher not reduced. But bilateral reduc- national income than any other tions give us even greater yields section of the world. The opening in trade, friendship, allies, and de- of her markets to Swedish prod- fense. ucts awakened that country and brought it from feudal misery to the modern, prosperous country We can reduce tariffs, simul- that it now is. The opening of taneously cut foreign aid, and end trade presented economic oppor- by accomplishing more than the tunities to Sweden which attracted present foreign aid program. To English, German, and Dutch en- illustrate this, we might consider trepreneurs who sparked an eco- the experience of Sweden after nomic renaissance. They converted the English repealed their tariffs natural capital in the form of in the 1840's. forests and mines into factories, Sweden, before the middle of railroads, and power plants. The the nineteenth century, was an export of timber and iron to Eng- economically backward country land developed a supply of busi- whose people lived in circum- nessmen who could create produc- stances which cannot be described. tive opportunities for employment Suffice it to say that the condition and who were enabled thereby to of the average man was one of ab- obtain the capital to use in pro- ject misery. Average income per viding equipment and tools with person per year was much less which workers could produce than $50.00. This may appear to abundantly and earn good wages. be absolutely unbelievable and Reductions in our own tariffs shock those who are acquainted would similarly open markets to with modern Sweden. These state- other areas of the world in need ments are well-documented, how- of development. It could similarly ever, and are common knowledge provide economic opportunities among Swedish economic histori- which would develop business and ans. businessmen. These are the men What was it that brought about who will provide the backbone of the economic revolution which oc- resistance to communism. If we curred in the last half of the nine- want economic development abroad teenth century ? In the 1840’s Eng- in ways which will win allies, this land repealed her tariffs. At that is the way to do it. © oo Aid through Trade ===== PAGE 38 ===== PRODUCERS, HANDLERS, CONSUMERS ASK — Who Sets the Price? M. E. CRAVENS FTEN, someone says, “They set the price too high.” He pic- Competitive marketing allows any- tures a mythical “they” as control- one to set a price, but the customer ling the particular product and, is free to decide which is the best buy somehow, saying what consumers from the choices available. must pay for it. But, just how true is this picture? that at a later time he will obtain Most folks have attended an auc- his price. - tion. Perhaps it was the sale of If the owner does not get his pies or boxes at a bazaar, or the price, he may keep the item or sell sale of farm products or household it at a lower price. In either case, goods. Who sets the price at such his setting the minimum price did auctions? not force a sale at the set price. Many factors affect these auc- The bidders placed their own value tion prices, but they are finally de- on the item. termined by the amount and the This simple auction method of quality of goods for sale, the size price setting is in many ways of the crowd, the bidders’ supply similar to that of most American of money, the mood of the occa- businesses today. A good example sion, and similar situations. Some- is the supermarket. times the auctioneer will announce The supermarket operator de- that if he cannot get a certain cides his retail prices — sometimes price, the owner will not sell an at near the wholesale or farm item. If none of the bidders will prices and sometimes at much pay this price, the owner has set higher prices. Anyone who has ob- a price that is above the market, served the relationship between re- and no sale is made. However, the tail and wholesale prices has seen owner has only postponed the sale this in both individual retail and — if he wants to sell—in hopes chain stores. Dr. Cravens is Associate Professor of Agricultural Economics and Rural Sociology at Ohio State University. His article first appeared in the January 1958 issue of ‘Timely Economic Information for Ohio Farmers. 36 ===== PAGE 39 ===== 1958 WHO SETS THE PRICE? 37 Setting Apple Prices current and future actions of the Here is how this pricing system consumer. If she buys at a rapid works for an individual com- rate, the price stays firm or rises. modity. By December, each year, If she does not buy, or buys at a producers and food handlers can slow rate, the price will fall. These estimate fairly accurately the actions, multiplied by the millions quantity of apples available for of potential sellers and consumers, sale until the next crop. Few con- set apple prices. sumers are aware of the size of This example shows briefly how the apple supply. On the basis of prices are set for one product. The experience, farmers and handlers method is simply supply and de- who own apples decide to sell or mand at work. The individual con- not to sell at the current price. sumer does not and cannot know Their decisions may cause this all the factors of supply and de- price to fluctuate, according to the mand for each product. However, number of apples reaching the her influence is the main price- market. : setting force; her rate of purchase The retailer bases his price on forces changes in price. this wholesale price. The consumer looks at the retail price and de- cides whether or not to buy. If her This same basic procedure de- purchases are at a rate too slow to termines the price of almost every move all of the apples from stor- marketed commodity. It even ap- age, handlers must somehow speed plies to refrigerators or pots and up the sales. pans, items for which the con- Usually a lowering of the asking sumer believes the manufacturer price will bring a consequent in- OL, crease in sales. It is a continual trial and error process in which the owner of apples keeps one eye on his apple stocks and the other on the rate of purchase by the con- sumer. He tries to get the highest possible price for his apples, but he must sell them at a price that will move the entire crop out of storage before another harvest. Each day’s price is tentative — it is based on opinions as to the Price-Setting in Industry RL j hs i “or . {| ERY ~ yd A. Devaney, Inc., N. Y. ===== PAGE 40 ===== 38 THE FREEMAN July sets the selling price where he may involve laying off workers and wants it. The manufacturer does losing customers to other com- set the price at which he will sell panies or to other products. In any his product, but he cannot force case the company will either lose the consumer to buy. More and money or make less than its aim. more manufacturers are basing Of course, if sales run ahead of their prices on accurate informa- expectations, the reverse would be tion about production costs and true. probable consumer purchases at The net effect of this action and prices based on these costs. reaction is similar to that for For instance, a company may pricing agricultural products, ex- estimate that at $22 a unit, it can cept for the length of time between sell 1,250,000 units. At $25, it the realization of the need for ad- could sell 1,000,000 units and at justment and the actual adjust- $28, it could sell 750,000 units. Of ment. The difference is largely in course, these figures are based on the degree over which the producer what the competition will probably has control of his production. do. Even though a single grower On the basis of estimated per produced the entire United States unit costs of production and prob- crop, the method of pricing apples able competitive prices, the com- for a particular season would re- pany must decide at which price main much the same as it is today. to start. Actual production costs The apple producer cannot know may vary from the estimate. In until near harvest time how many any case, the company must decide apples he will market. On the other on the price and production sched- hand, the appliance producer can ule it believes will best suit its more closely control production aims. schedules to meet changing situa- If the company has correctly tions. estimated the reaction of the com- In our competitive marketing petition and the customers to these system, anyone can set a price, but prices, it will reach its goal. If it he cannot force the customer to has estimated 1,000,000 unit sales buy, nor can he force others to get at $25, and actual sales are only the same price. The customer is 750,000, something must change. free to select what he, or she, con- The company may either sell the siders the best buy from the many remaining 250,000 units at a loss choices available. The exceptions or stop production short of its to thig principle are almost all due 1,000,000-unit goal. The decision to governmental policies. eo eo eo ===== PAGE 41 ===== On the outcome of the struggle, these observers believe, hangs the destiny of men.... 55” THE BATTLE FOR xy. THE INNER MAN Fa 4 fe ELMER T. PETERSON and NORMAN WHITEHOUSE HREE HUNDRED years ago there anny. Today the doctrine of force was a fork in the road. One is infinitely more dangerous than branch led out in the way of free- ever, for it is not crude, easily dom. The other was the way of discerned. It is often cunningly force. disguised under scores of seduc- Very few people at that time tive signboards and labels. These were able to identify the differ- signboards and labels, in and of ence, for information was too in- themselves, are so numerous as to complete. So do not infer that the add to the confusion. Seldom in people of 1651 chose up sides and all the saga of history has there proceeded to travel, one faction to been a more crucial necessity for the right and the other to the left. man to know where he is and The momentous decision was not where he is going. so simple at that time. Probably To do this, man must, at all not one person in 10,000 was even costs, be clear in his readings of dimly aware of that fork. the signposts of the times. But It is only now, looking back- signposts often become obscured, ward from the perspective of three blurred, even turned around by centuries, that we can realize how impish mischief-makers. How, momentous was the divide. then, can modern man find his The doctrine of force, as such, footing? in 1651, was seen in a compara- The year 16561 marks the crucial tively crude manner. Men set setting in the road. It was then themselves up as political or eco- that the thinking world first en- nomic tyrants and there was little countered a sharp clash of opinion to disguise the fact of such tyr- over the critical question: should Mr. Peterson is a noted author, columnist, and editorial writer for The Daily Oklahoman. The Reverend Mr. Whitehouse is minister of the Mayflower Community Church in Oklahoma City. Their article first appeared in The Rotarian, February 1956 39 ===== PAGE 42 ===== 40 THE FREEMAN July human welfare depend upon a re- subjected to a fork, somewhat in sponsible society or the responsi- the manner in which it happened. ble individual? However, it remained for Hobbes Upon the answer to that ques- and Locke dimly to foresee and tion hangs the destiny of man — academically to declare the basic the life of the free soul. issue which today divides the world, and countries and states Two Paths within that world. No one could The great issues do not burst have fully foreseen that today the suddenly upon the world. Restless planet would be divided into two waves continually pass over the gigantic armed camps, both deeps of conscience, troubling us equipped with weapons of fantas- to take new appraisals of our pat- tic power beyond all human com- terns of human relations. There prehension, or that the seemingly have been profound teachings by insignificant little fork would be Moses, Jesus Christ, Confucius, the beginning of a cataclysmic Plato, Rousseau. The Beatitudes world division. of Jesus, with their obvious lay- ing of burdens on the individual, The Way of Force were epochal. It is only when there First consider the way of force. is a sharp clash between two con- While Hobbes seemed to pay trasting philosophies, however, some lip service to the principle that we can discern the parting of individual worth, he did not of the ways. understand its implications. His Follow briefly each branch of favorite illustration was that of the road from that fork of 1651. the beehive. Here he contended In that year a young English- that the ideal State would be man, Thomas Hobbes, wrote a achieved by formal contracts or book significantly titled Leviathan. covenants, and would consist of a Not long afterward, and in a government, taking this power, great measure a response to Levi- once given, and using it without athan, another Englishman, a phi- any further reference to those who losopher named John Locke, joined had given it. So the State would issue and thereby floodlighted the be as ruthless as the amoral law fork in the road. of the hive. In short, the State True it is that long before 1651, would play the role of the Divine, hints had been dropped to the ef- so inevitably the individual, as fect that the way ahead would be such, would disappear. ===== PAGE 43 ===== 1958 THE BATTLE FOR THE INNER MAN 41 Hegel, a German philosopher, viously not composed of individu- lived in the years 1770-1831. Tak- als as such, but of an imaginary ing up Hobbes’ theme of the om- amorphous mass of impersonal nipotent State, he played the idea authority. How utterly unrealistic to its political limits, not alone such a system is may be grasped vesting it with the attributes of when we see that power, in such a the Divine, but declaring that the climate, invariably gravitates to State was the Divine idea on earth. a single individual, irresistibly Hegel believed and declared that pulled there by a vacuum which the individual should have no an impersonal mass is unable to power except that which might be fill. So this system paraphrases derived from the State. The soul the celebrated formula of Louis of man was nonexistent in this XIV by saying, “I am the people.” philosophy of political power. Obviously, the people have no part Rousseau, a predecessor, had except to accept whatever they are held that man is born good and is &iven — follow wherever they are corrupted only by a bad society — led. To realize this fatal fact all a theory that is persuasively de- one needs to do is to look at the scribed as “unscientific” by Dr. record of all so-called “proletari- Leonard Carmichael, secretary of an’ dictatorships. the Smithsonian Institution. Rous- Moving into the economic sphere seau’s followers believed that a on this Hobbes-Hegel-Marx line, golden age could occur merely by one can readily see the stress, making violent changes in forms whether conscious or otherwise, of government, without any hard given by John Maynard Keynes, struggle against evil by human in- placed upon unlimited state spend- dividuals as such. ing and deficit financing. This theory exemplifies the totalitarian Fellow Travelers line, since its underlying thesis Following eagerly, next along means that the State must be the the roadway of ruthless force, source and sustenance of all hu- Karl Marx and Friedrich Engels man welfare. In America nationa- in the middle of the nineteenth lized industry, dollar socialism, century, became the inheritors of and creeping paternalism concur- the Hobbes-Hegel theme. These rently characterized the services ingrowing minds concocted the and thought of those who were theoretical ‘rule of the prole- captivated by Keynes and blinded . tariat.” This vague entity was ob- to the fatal flaws in his thesis. ===== PAGE 44 ===== 42 THE FREEMAN July Again were seen the seductive three-part government, eventually blandishments of cunningly word- legislative, judicial, and executive. ed signboards. All of this, and While the schism between mote, has been alien to the Amer- Hobbes and Locke did not create ican way. any notable desire to read the road The Way of Freedom signs of the time anew, it did sig- Now let us turn again to the nificantly lead to other cleavages fork in the road, as of 1651, ex- ©n both angles of the fork until ploring the other line — that of today, the cleavage is global. Poli- freedom. ticians may preach appeasement, After reading Hobbes’ treatise and there may be watered-down on government, John Locke shook Variations of the two main themes, his head. He differed vigorously. but the basic division is eternal, Locke, in his writings, held to unchangeable. the principle that freedom is the Applied in America natural state of man — not only The greatest and most signifi- freedom from undue state inter- cant development after Locke was ference, but freedom to assert the American Dream, which had man’s unique talents —his very been stimulated in part by the pio- soul, which cannot be anything neering of Thomas Hooker of Con- but individual. necticut and the leaders of the Vir- Recognizing, as did Hobbes, the ginia Colony who developed the need of the State to regulate in three-part government which be- certain spheres, for the good of the came the pattern for the United whole, he nevertheless drew the States. limits of such power. Here the Outstanding spokesman was break with Hobbes was crucial. Thomas Jefferson whose distrust Locke asserted that there are cer- of the all-powerful and all-perva- tain areas beyond the touch and sive paternalistic State was unal- reach of the State. Among those terable. His speeches and writings listed were the right to enslave, abound in expressions of his trust destroy, or impoverish man. in the soul of the individual man Furthermore, after so limiting the and his enormous solicitude for State, he declared that those en- the freedom of that soul. Within trusted with the framing of the obviously reasonable limits, he laws should not be invested with held that the nation that is least their enforcement. Here was one governed is best governed, and the of the sources of the American best agency for good is the volun- ===== PAGE 45 ===== 1958 THE BATTLE FOR THE INNER MAN 43 tary benevolence of the individual. becomes what Hobbes declared — Adam Smith carried the Locke a mortal God. Compulsion replaces theme into the realm of economics, and then stifles voluntarism. starting with the key thought that In the latter method responsible the individual is the clue to all hu- individuals, the varying talents in- man relationships. Smith stressed herent in each, are allowed to con- the great powers of human inge- tribute richly to the whole. Here nuity and genius. the Christian principle of volun- The Declaration of Independ- tarism is allowed to play in an at- ence, of course, was the climax of mosphere of freedom and the ini- the nascent American Dream. Its tiative which is essential to all doctrine of separation from politi- brotherly effort. cal overlordship was important, but now we see that its assertion We Still Must Choose of the essential individuality of The divergence of 1651, for a the soul of man was even more long time, may have seemed to be significant. Here is another van- an innocuous academic diversion. tage point from which we can see Now, with all its accumulated im- one meaning of an event, long past, plementations, it is seen to be better than the contemporaries of world splitting and cataclysmic. that event. . At present the schism is defined by the words ‘“communism’ and Society or the Individual “capitalism.” But even if these The Beatitudes of Jesus con- words had never been invented, cisely laid down the ideal social the irrepressible conflict would order, in which the responsibility have manifested itself along the of the individual was the complete broad lines of separation. theme and not a word was said The clue is the soul of man. about political kingdoms. The bee Carry out the line from Hobbes to attitudes, in contrast, are con- Marx, thence to modern ruthless cerned solely with what the hive dictatorships, and we see how well State can do for and by means of the way of force was camouflaged the enslaved individual. until it developed a Frankenstein Shall we have a responsible so- monster that is difficult to stop ciety or responsible individuals? when once set in motion. In the former method, voluntary The choice of 1651 is still with cooperation is first neglected, then us. The battle is for the soul of rejected, and the State inevitably man. eee ===== PAGE 46 ===== A Legend J Lagash The sun was hot in Lagash. On the plain Outside the city, stretching far away To where the great Twin Rivers reached the sea, Heat waves arose, and fitful blasts of wind Played dervish with the sands. Within the walls That girt the city round, deep shadows fell Where sacred shrines on terraced zikkurats Were lifted toward the heavens. Deep canals Brought water from afar and filled the pools That cooled and slaked the city. Stately palms, Growing within the garden of the king, Whispered their monotone of rustling fronds Above the song of man-made waterfalls. RALPH BRADFORD It was the time of market. The bazaars Were thronged with buyers from the city homes And filled with sellers from the countryside. Small farmers brought their melons, fowls, and eggs; Fish stalls were redolent of finny food; And butcher shops displayed the new-killed beef That had been bred and fattened on the land Around the city. Craftsmen, too, were there, Each in his booth, with hand-wrought merchandise — Slim shoes of finest leather, earthen jars, Cookpots of metal sealed with melted lead; This picture of a vanished time reveals dramatic parallels with some modern condi- tions. The author, who researched painstakingly, was dealing with certain known facts; but in portraying Lagash he had to use some poetic invention, Hence he found himgelf “dropping into measures,” and finally wrote it all in iambic pentameter, as herd presented. But the political conditions described are not fanciful. These were adapted from actual ancient inscriptions, as deciphered by Dr. Samuel Noah Kramer und other Sumerologists, 44 ===== PAGE 47 ===== 19568 A LEGEND OF LAGASH Fine-woven fabrics; and anon a booth Displayed exotic products from afar, Brought in by merchant ship from distant lands. Yet even in the hour of marketing, Above the haggling and the shouts of trade, Voices were raised in song, and there were heard Soft strains of music from the temple walks, And from the schoolrooms, and from many homes — The sweet-toned rippling harp, the tinkling lyre, Reed instruments and drums and tambourines. For these were happy people, and they lived In joyous rhythm with the sun and stars, And built their lives upon a gay response To nature's promptings and the joy of living. LJ Thus went the life of Lagash, in an age So distant and remote that time and sand Would wipe it out and cover every trace. The terraced temples and the palaces, The walls and streets and turrets and canals — All these would vanish, and the very name Of those who toiled and planned and builded them Would be forgotten; and the waves of time, Century after century, would pound On that forsaken city; and the wind Would blow the hot sand from the desert waste And pile it in the fountains and the streets And on the fallen rooftrees; till at last Nothing was there but drifted dunes that held Their secret while the slow millenniums passed. And when some forty centuries were gone — Four thousand years and more of creeping time! — Behold, men came and dug and thrust away The obliterating sands and brought to light The streets and gardens and the palace walls, The ruined temples and the broken fanes, ===== PAGE 48 ===== 46 THE FREEMAN That once had been a city. And they found Statues of men and women, wrought with skill, So that the semblance of those vanished men Is known to us. But more than all beside, The diggers found the record of that people, Inscribed on tablets made of clay and baked In sun or fire — the wedge-shaped characters That were at last interpreted, to yield The story of those ancient men and women. a The gods were central in their scheme of things: Enki, the god of water; Ki, of earth; Enlil, who ruled the air; An, lord of heaven; Inanna, who controlled the tides of love; And grim Dumuzi, who was god of death. All these were ancient gods, and universal Among the folk who dwelt Between the Rivers. But one was closer to their hearts and lives — Ningirsu, the particular god of Lagash. And as the gods were dominant in their lives, The temple was the center of their city, Lifting its terraced stories toward the skies, Even as the churches of a later age Would raise their spires above the narrow streets Of medieval towns. The temple rulers, The Sangas, who were ministers to the gods, Were potent also in the state’s affairs, And with the freemen of the city chose The man who was to rule them — the Ishakku. But as the desert decades multiplied, A bold Ishakku, selfish beyond the rest, Avid of power, ambitious that his name Should live beyond him in a dynasty, Determined that his own son should succeed him. And in a moment of unwariness, Or of participant venality, July ===== PAGE 49 ===== 1958 A LEGEND OF LAGASH Sangas and freemen let the matter pass, The kingship was declared hereditary, And so Ur-Nanshe’s name became dynastic. What followed was as certain as that night Will follow day. The kings became ambitious For more and greater power. To the north Lay Umma, rich and potent city state, The capital betimes of all Sumeria, And then as ever strong in rivalry Against the Lagashite economy, And strong in might against Ur-Nanshe’s arms. Umma was more than rival; she was threat — Threat to the commerce and the growing wealth Of Lagash and its people — and its kings! The Lagashites must be prepared for war. The border guards must be increased. The king Must have an army capable to meet The best that Umma might equip and train. The city walls must forthwith be rebuilt And strong new bastions added; all the arts And implements and strategies of war Must be employed to strengthen Lagash arms, And guard the sacred temple of Ningirsu. War was the next step, and the Lagashites Swept northward like a scourge across the land To conquer Umma; and there came a time When one bold ruler of the Ur-Nanshe line Would bring all Sumer under vassalage! Great was Ningirsu, patron god of Lagash! Great was the king, the scion of Ur-Nanshe, Rivaling for a time the great Gilgamish, The legendary hero of all Sumer. 5 But all things have their price; and Lagash paid Full measure for her triumph. For to raise The needed armies and secure the arms 47 ===== PAGE 50 ===== 48 THE FREEMAN And food and clothing to supply their wants, And to support them in the field, and pay The soldiers’ wages, and defray the cost Of transport, and to fortify the walls — All this imposed upon the treasury A vast expenditure that never stopped. The spoils of conquest that enriched a few Were never channeled back to pay the cost Of conquest, or reduce the staggering debt That ever mounted as the conquests spread. Under the stress of war no one complained. Their lives were forfeit if their armies failed, And Umma was not merciful. They paid The mounting taxes — and watched hopefully The northward roads for the next messenger Who should bring news of added victory. The good news came — and taxes rose again! Moreover, temple property was seized, And lands belonging to the god Ningirsu Were pledged to meet the costs of war. And then — The wars were finished, and the men came home, Those who remained alive; and with them came An army of the maimed, who must be cared for. And in addition there had come to be Another army of the king's retainers, The palace coterie, who throve on power And had their hands upon the public funds And lived by eating from the treasury. Pe So potent had these grown that even the king, If he had been disposed, could not have stopped Their depredations, which were all excused As necessary functions in the line Of public duty. All the subtle web Of state controls that had been spun about The lives and occupations of the people July ===== PAGE 51 ===== 1958 A LEGEND OF LAGASH 49 Were lucrative emoluments for those Who lived them up. New taxes were devised ] To seize the peoples’ earnings. Men of wealth Were stripped and forced to sell their costly homes. ‘The merchants, too, were victims of duress; => And on the farms the tillers of the soil Were shorn by taxes as they sheared their sheep, And ate their bread despondent. Came a day When money-taxes would no longer meet The appetite insatiable that gnawed Within the grotesque body that had grown Out of a monstrous blend of kingly power And unrestrained bureaucracy, let loose Among a suffering people. Ages later, Upon the tablets that the desert sand Had covered through four thousand years and more, The truth was seen and read. The ancient scribe, Prodding his stylus angrily in the clay, Had set it boldly down for all to see: The inspector of the boatmen seized .the boats. The cattle, too, at pleasure of the king, Were seized; and if a countryman brought in A white sheep to be sheared, a fee was levied — A fee of five good sheckels for the king. And if a poor, unhappy man and wife, Wracked by domestic infelicity, Were driven to divorce, a double fee Was then imposed: five sheckels for the king, And one to pay his vizier. And when The fishermen brought in their catch, behold An officer whose daily task it was To inspect the fisheries, seized, instead, the fish! Or if a man who dealt in sweet perfumes Devised a new scent, for his industry He was assessed a triple penalty: He must disgorge five sheckels for the king, Another sheckel to the vizier, And still another to the palace steward. ===== PAGE 52 ===== 50 THE FREEMAN The king then seized the temple and its lands, So that the pious and indignant scribe Lamented that the oxen of the gods Were used to plow the onions of the king, And that the god’s best fields were now the patch ‘Where grew the king’s cucumbers! And the priests, The temple Sangas or administrators — These had their oxen and their donkeys seized; Their grain likewise was taken for the king. And even death itself brought no relief; For when the family of the dead were come With their beloved burden to the place Of burial, lo, the henchmen of the king Were waiting at the cemetery gates To levy their demands of bread and beer, Tributes of barley — and at times to take Even the household furnishings of the dead! The houses of the king (so wrote the scribe) The houses of his harem, and the fields About his harem, and the nurseries — These crowded one another, side by side. And in a final bitter mood he noted That in the state, from one end to the other, There were the tax collectors to be seen! And save for phrasing that is quaint and simple, What is the difference in this far cry Out of the distant past, from that which rises In every land and age in which the state — Whether it be a king, a parliament, Or pure democracy — devours the substance Of its own people in the name of progress? PF. And then, as always in the lives of men When fate has brought their tide to lowest ebb And misery compounded is their lot, A leader rose in Lagash — a young prince, July ===== PAGE 53 ===== 1958 A LEGEND OF LAGASH Not of the ruling family, but schooled In all the old traditions that had made For happiness and progress. He devised A revolution, and he led its armies Against the entrenched despoilers, and deposed Ur-Nanshe’s dynasty; and in its place By popular acclaim he set himself To be the head of state — a king whose reign Should be devoted to the restoration Of all that had been taken from his people. His name was Urukégina. He lived Two thousand years and more before the dawn Of our own Christian Era; and he gave New meaning to a principle of life That men had cherished, but had never named — The principle of freedom. Hitherto Valid assumptions, never formulated, Had been implicit in their social patterns: That, under God, each several man belonged To his own self; and that he had the right To claim and use the fruit of his own labor; That he could come and go as suited him, Could loaf or labor, farm or sail the seas, Teach, carve, paint, fish — so long as his pursuit Or lack of it wrought injury to none, And left all others also undisturbed In their employments. They had found, indeed, That each must make concessions for the sake Of peace and safety, and that none could live Wholly alone; and for the benefits Of urban life — for streets and for canals, For armies to protect them from the world, And for police to guard them from each other (Since they were men, too) — for all this they gave A portion of their substance, called a tax; And this they looked upon as right and fit Because it gave them what they asked of life, And they were happy in it, and content. 51 ===== PAGE 54 ===== 52 THE FREEMAN But this was lost to them, what time Ur-Nanshe And his descendents drained the country dry. And so, deprived of what they had possessed, A thing intangible, they could but pray To great Ningirsu that he would restore That former way of life which until now They had not thought about, or valued highly, Accepting casually and as their due A thing as precious as the air they breathed. And then came Urukagina, aflame With righteous anger; and the people heard With unbelieving joy his words of wrath Against their wrongs; and when he called to arms They rushed to join him and to spend their lives, If need be, to restore the former ways And rid the land of tyranny. The king Was overthrown. The new king, in his place, Began the restoration; and the scribe, Happily scoring wedge-marks in the clay, And using the repetitive formula Common to ancient writings, set it down That one by one the wrongs which he had listed Were all removed and restitution made: The boats and cattle were no longer seized; The heavy, ruinous taxes were repealed; Industry and initiative and skill — These were no longer stupidly penalized; The profaned, sacred temple was restored, And life in Lagash went its wonted way. Nor was this all; for Urukigina Forbade the rich to treat the poor unjustly, Curbed the rapacity of tax collectors, Revoked the perquisite of high officials To pluck at will fruit from the poor man’s tree, Cleaned out the dens of murderers and thieves, Banished the usurers — and made a pact, A special covenant with the god Ningirsu, That he would not permit the men of power, July ===== PAGE 55 ===== 1958 A LEGEND OF LAGASH No matter what their station in the realm, To victimize the widow and her orphans. Truly a wise and heartful ruler, this — And yet he had his share of vanity, His need for recognition, his desire To be remembered for his noble deeds. And like his peers before and after him, He told the busy scribe to set it down For all to read — what marvels he had wrought, What evils he had righted, and withal How good and great was Urukagina! And in the process something new was added. A new word concept first was introduced Into man’s records. For the eager scribe, Seeking to dramatize the mighty deeds Of Urukagina, at last set down As culmination, that he had established The freedom of his people. Men who know The antique wedge-script used in ancient Sumer Render the phrase in different ways. Some say It could mean “a returning to the mother” — A reference to the universal notion Of intra-womb content and blessedness, Whence comes the concept of the Golden Age. But in the context of the narrative Such imagery might well be rendered “freedom.” Others believe the old Sumerian symbol Has the Semitic meaning of anduru — Freedom from taxes: but that still is “freedom.” Clearly the wedge-shaped symbols meant to say That Urukéagina had freed his people From tyranny and seizure, and the weight Of ruinous taxation, and had set Their feet upon a better way of life, Known to their fathers and to them denied. Truly he had established them their freedom. 53 ===== PAGE 56 ===== b4 THE FREEMAN 5 Thus in that ancient day, so long ago That empires have arisen and declined And gone to ruin with the centuries, A word was written, or a symbol used, An ideogram, or an agglutination Of earlier symbols, or a new-made sign — No matter; in the slow advance of man Here was his earliest record on the theme Of freedom. It was not a nice abstraction, Not speculation on what freedom means, No mention of this freedom or the other, As though it were composed of several parts; But freedom as men knew it in their lives: Freedom to be and do, freedom to live In dignity and decency, and go Unhounded by the state or any man! Freedom from state-extortion; freedom to work And know that what they earned would be secure; Freedom to make or build or to create, And know that they would not be penalized For their inventiveness or skill or genius; Freedom to grow, unpunished for their growth! 4 The sun was hot in Lagash, but canals Brought water from afar, and stately palms Whispered their monotone of rustling frond Above the song of man-made waterfalls. And as the sun sank lower, and the night Began to brood upon the temple walls, Voices were raised in song; and there were heard Soft strains of music on the scented air. For these were happy people, and they lived In joyous rhythm with the sun and stars, And built their lives upon a gay response To nature and their gods — for they were free! July ===== PAGE 57 ===== A QUESTION OF DEFENSE How many jobs should the policeman have? PauL L. POIROT E'RE a fairly independent lot exchange. It's true that each of Wa, our community, though us who more or less specializes perhaps no more so than you and in some field of production depends your neighbors. We have certain heavily on trade with other spe- common interests, of course, but cialists; but we're independent in there are differences, too, in the the sense that each is free to way we earn a living and spend choose from among a tremendous our earnings, how we think and variety of competing goods and behave. I don’t mean that we're services available for his con- independent to the point of self- sideration, and he isn’t really subsistence or isolation, or any- obliged to buy any of these. ‘thing like that. In many respects, On the other hand, there are we rely heavily on the cooperation some things you have to buy in our and help of one another. community if you want to live For instance, when the hot there. You can’t sit back and re- water line in our home sprung a fuse to help pay for the roads and leak, we called the plumber. The streets, for example, or the gov- electrician hooked up the new ernment schools, or the services lighting fixtures in our living of the police department. room. The garage mechanic in- Ask us why we don’t leave such stalled new brake linings in our things as schools and roads and car. The surgeon at the hospital policing to competitive private en- removed our son’s tonsils. We look terprise, and you'd probably get to the milkman, butcher, grocer as many answers as there are local to help get food from the farm residents. Some would contend to our table. And we could extend that government operation in each almost indefinitely this list of of these fields is an absolute neces- goods and services we get from sity — that there is no alternative. others through peaceful voluntary Others might defend them on 55 ===== PAGE 58 ===== 56 THE FREEMAN July grounds of convenience or practi- this service for granted, give little cality. And at least with respect thought to it, find it somewhat to schools, some might even ex- difficult to recall specific instances press a reasonable doubt as to the of actual police activity in defense propriety of government opera- of life or property. tion. The several private schools Most of us have little compre- in the community, supported vol- hension of how and where police- untarily by persons who also pay men, often unseen, quietly perform school taxes, reflect their faith in the defensive and inhibitory func- education by voluntary means. tion assigned to them. If we were Of all local governmental opera- to judge solely from what meets tions, the police function of pro- the eye — from the policemen we tecting life and property undoubt- see at busy intersections or pedes- edly comes nearest to gaining gen- trian crossings, or in patrol cars, eral and unanimous approval. I be- directing traffic or checking park- lieve that most persons in the com- ing on government streets and munity could give a reasonably highways —we might conclude logical explanation of the reasons that traffic control has come to be for codifying and organizing their their most important problem. individual rights of self-defense And, in some cases, that may be into a societal police force financed true. If so, how much of the rea- through taxation. This communal son can be traced to the fact that design for preserving the peace, our protective agency has gotten maintaining law and order, pro- into the business of transporta- tecting the lives and property of tion, the building and maintenance the weak and meek against the of roads and parking areas? How aggressive exercise of brute force come this departure. from the or deception, is widely accepted theory and the tradition of a com- as a necessary requirement for the munity police force that was to be freedom of the individual within limited in scope to the defense of society. life and property? So, we maintain an organized Is it possible that even the local police force —to protect life and policeman, whom citizens can ob- property — and citizens generally serve and check most closely, is are grateful for the security af- actually spending less effort in forded by this agency comprised protecting the lives and property of trusted men from within their of individuals than in directing own community. We tend to take how the lives of peaceful persons ===== PAGE 59 ===== 1958 A QUESTION OF DEFENSE 57 are to be lived and how they are national level? What are the pros- to use the property they have pects of efficient national defense earned and saved? from a national police force grown If the protection of life and so big that the conduct of its property, the preservation of multitudinous operations requires peace, is the prime purpose of an approximately a fourth of the pro- organized community police force, ductive effort of the entire popu- do we not jeopardize the peace and lation —in addition to the costs weaken the protective force when of state and local police action? In- we begin assigning to policemen deed, what happens to the very an ever-lengthening chain of definition and character of the na- duties and responsibilities for tional defense operation as govern- managing a highway system, car- ment grows in this fashion? Is it ing for our children, supervising still to be primarily the protector government parks and housing of the lives of 170,000,000 indi- projects and relief programs and viduals, their personal freedom of miscellaneous activities of all choice, and security in their pos- kinds? At this rate, how much session and use of privately owned longer before we'll be calling a property? Or, as the Welfare policeman rather than a plumber State expands, does national de- to fix a leaky faucet? Or to do the fense change in character so that electrical wiring, or install new the government concentrates brake linings, or perform a tonsil- largely on the preservation and lectomy, or deliver the groceries — perpetuation of its own institu- and collect the taxes levied against tional bureaucracy and the special each and all of us to cover the costs interests of the political pressure of added government “aid” and groups that control the balance of intervention? In that event, may power? not the police force itself become No conscientious American cit- the greatest menace to the lives, izen really enjoys raising such the liberty, and the property it questions with respect to his own was supposed to protect? | government. These are unpleasant The trend we may perceive in questions, and it is regrettable the operations of the local com- that they are made necessary by munity police force also has the national and international broader implications. What of the situations, by the advance of com- protective governmental arrange- pulsory collectivism, and by the ments at the state level? And the precarious status of human liberty ===== PAGE 60 ===== 58 THE FREEMAN July in the world and in the United property, your sacred honor for States of America. the defense of the Welfare State? Just what is the character and Does the possibility that the objective of the national defense Moscow power center may attack of these United States? If the and destroy the comparatively question were posed with regard free way of life we've known con- to Russian defense, does anyone stitute a serious threat to your seriously doubt that the Russians peace of mind and body? If so, are are mainly defending their State you fully satisfied with the kind — the coercive apparatus of col- of police protection — national de- lectivism — at the expense, if fense— that exists or is in pros- necessary, of the life, the liberty, pect at the moment? Are we ex- the property, and the sacred honor pecting too much, even of the of every last Soviet subject? And federal government of the United a moment’s reflection must reveal States, when we ask it to build that national defense will neces- rocket weapons but in the process sarily follow that same pattern in to pay obeisance to the leaders of any communistic or socialistic or organized labor, to cure the de- advanced Welfare State where a pression, to dole out “cheap” elec- majority of the citizens have lost tricity to millions of voters, to pay the faith and the right to practice unemployment compensation to 5 self-control in the peaceful man- or 10 or 15 million idlers, to build agement of their own lives and houses and schools for adult and their own private property. juvenile delinquents, to store mil- What, then, is to be the nature lions of bales of cotton and bushels of the defense program of the of grain on behalf of farmers? United States? Is it to become In short, are we expecting effi- more and more a program of pre- cient protection from a police serving the expanding bureaucracy force that is so busy doing our —a program to be designed and plumbing and wiring and deliver- managed, without limitations, by ing our groceries that it has lost that same bureaucracy? Or is it all competence for defense? If so, to give consideration to the de- isn’t it time to whittle the defense fense of the life, the liberty, and establishment back toward the the property that lone individuals only purpose for which it can most cherish? What is it that you ever be justified — just defense of yourself would defend? Would you life and of the opportunity to sus- willingly offer your life, your tain life — nothing more? e eo o ===== PAGE 61 ===== A REVIEWER'S NOTEBOOK John Chamberlain THE CREATIVE PROCESS IN INDUSTRY N the middle of the nineteenth Reflecting a predominantly pes- century John Stuart Mill, who simistic strain of thought, econo- was capable of taking gloomy mists have often mistaken their views in sunny prose, paused to “equilibrium” models for a reality reflect on the “exceptional” na- that knows no equilibrium. They ture of the cotton textile industry. have thought of profits as some- For years, he remarked, textiles thing that must tend to disappear had benefited from continual as “perfect” competition takes freshets of technological improve- over in all possible fields of en- ment. As a result, England’s eco- deavor. But the one “constant” of nomic well-being had kept pace the past century and a half has with its growth in population. been change, even in fields where But Mill, surveying the industrial “know-how” is as old as capital- landscape, thought it unlikely that ism itself. The textile industry, the experience of the textile trade which is still changing (crease- would be repeated very often in less fabrics, the Sulzer loom), was other lines. merely the first of many “ladder” Since Mill's time, other com- industries which have continually mentators have been afraid that transformed society. An economic new, so-called “ladder” industries model, to be a true reflection, would not be forthcoming to haul must allow for heavy infiltrations the human race out of incipient of disruption. And the pace, the stagnation. During the depression incidence, of disruption must re- of the 1870's in America there main a largely unknown quantity were predictions that the age of unless economists can isolate the invention was nearing its close. causes of invention itself. In the 1930s the Tugwellians When one must allow for an un- among the New Dealers talked of known which can’t be expressed a “mature economy” which would even in terms of likely probabili- fail in the nature of things to ties, the scientists must yield to generate sufficient employment to the hunch player, the artist, the keep free capitalism going. man of intuition. But the scientists 59 ===== PAGE 62 ===== 60 THE FREEMAN July among the economic prophets training in the understanding of haven't yielded; they have merely technology and invention. They left the unknown out of account. don’t know whether there is an Reflecting on this singular state “optimum rate” of invention or of affairs, the three authors of not. But since nobody else has The Sources of Invention, John volunteered to do the job of ex- Jewkes, David Sawers, and Rich- ploring the “sources of inven- ard Stillerman (New York: St. tion,” the Jewkes team has taken Martin’s Press, 428pp. $6.75), be- the bit between its collective teeth. gin their book with a raking The result is an extremely ex- broadside directed at most of hilarating book which assembles their economic brethren. “Future many materials for a first go at historians of economic thought,” generalizations that must be made they say, “will doubtless find it if economics is to allow for the in- remarkable that so little system- novator who, at periodic intervals, atic attention was given in the blows every equilibrium sky high. first half of this century to the causes and consequences of indusg- Some Fallacies Exploded trial innovation. Material prog- The Sources of Invention be- ress, it had long been taken for gins by questioning the big cliché granted, was bound up with tech- of the moment, that under “mod- nical advance and technical ad- ern” conditions invention must in- vance in turn, with change, va- creasingly tend to issue from riety, and novelty ; but whence this giant corporate laboratories. novelty, how closely it was re- While the authors refuse to dog- lated to rising standards of living, matize, they assemble plenty of whether and how it might be stim- evidence that the independent in- ulated or stifled: all this ground ventor is still extremely impor- remained largely untrodden by tant. Conversely, they make the economic historian or the eco- mincemeat of the cliché that the nomic theorist.” inventor in Victorian times Seeking to isolate the reasons tended to be an ignoramus from a for the oversight, Jewkes and his garret or the back room of a coun- collaborators note the complexity try tool shed. The earliest inven- of the subject. But the way to deal tors — James Watt of the steam with complexity is to plunge in engine, Eli Whitney of the cotton and break it down. Jewkes and gin and the first American venture his team admit to their lack of in making interchangeable parts, ===== PAGE 63 ===== 1958 A REVIEWER'S NOTEBOOK 61 W. H. Perkin of the pioneer ani- lieves an hypothesis except its line dye — moved in good univer- originator...a corollary...is sity society, kept up with scien- that a scientist works much better tific development, and compared when pursuing his own hypothesis notes with other pioneers in the than that of someone else....” industrial arts. The authors of The Sources of By assembling fifty modern case Invention do not question the uses histories (which they publish in of large-scale corporate research. Part II of their book) the authors They pay generous tribute to the make it fairly apparent that twen- Du Pont Company for pouring $6 tieth century invention differs million into research and $21 mil- hardly at all from invention going lion into plant investment to pro- back to the time of James Watt duce nylon. They praise General and the many men who turned Motors for its work on antiknock spinning and weaving from a cot- gasoline and safe refrigerants. tage industry into the first ap- They tell the story of the develop- proximation of the modern factory ment of crease-resisting fabrics system. To begin with, even in by the British Lancashire textile days of big corporations inven- firm of Tootal Broadhurst Lee. tion depends not on a team but on (Incidentally, Tootal Broadhurst a brain capable of taking a leap Lee is not a particularly big com- which no other man has ever suc- pany.) Invention and inventors ceeded in taking before. A team would not do very well if corpor- can do the work of testing and ations weren't there to supply de- elaboration once someone has velopment funds, and to provide shown it the way to go. But the broadscale testing and pilot plant point which stands out clearly manufacture. But this is not to from The Sources of Invention is say that inventions can be easily that the inventor is not am or- commanded “on order” by the big ganizable person. He must be free concern. to question, to pursue unlikely look- Du Pont brought nylon into ing leads, to go off at a tangent, being by a massive attack on the to be uncooperative if he thinks chemistry of polymerization. But he knows better than the other the Du Pont Company did not fellow. As W. I. B. Beveridge has bring nylon into being by “team” said in The Art of Scientific In- invention carried out by due proc- vestigation (quoted by Jewkes ess of administration. Du Pont and his colleagues), “No one be- “got” nylon because it had the ===== PAGE 64 ===== 62 THE FREEMAN July good sense to hire Dr. Wallace H. individual, not the administrative Carothers, a 32-year-old chemist team, that is the primary source who had already given a lot of of invention. Major Armstrong, a thought to the structure of sub- lone wolf, developed the famous stances of high molecular weight feed-back circuit which made mod- at Harvard. Moreover, luck played ern commercial radio a possibility its part in Carothers’ discovery -— and it was the same Armstrong that molten polymer could be who developed frequency modula- drawn out into a long fiber that tion. An Englishman, Frank would greatly increase in strength Whittle, who found it impossible and elasticity if it were “redrawn’ to gain the support of either the again after it had cooled off. British Air Ministry or aeroengi- As for General Motors and its neering firms, brought the jet en- antiknock and refrigeration dis- gine into being before Rolls Royce coveries, it was a case of hiring a and the government took it over. known inventor and letting him Individual inventors were respon- continue as he had been doing all sible for the safety razor, the self- along. “Boss” Kettering was a law winding watch, continuous steel unto himself at General Motors, casting, the zip fastener, the Sulzer and it was this stanch individual- loom (which does away with the ist who had hired Thomas clumsy shuttle of tradition), color Midgley, Jr., a mechanical engi- photography (two musicians car- neer, to help him before GM ried this through in a kitchen and bought Kettering’s Dayton, Ohio, between stops on a concert tour company. Going to GM with Ket- before Eastman Kodak hired tering, Midgley proceeded to “get them), synthetic light polarizers, up’ chemistry for himself. Thus penicillin and streptomycin, the we have the odd combination of cyclotron (the first cyclotron was Kettering, an electrical engineer, a homemade contraption of win- Midgley, a mechanical engineer, dow glass, sealing wax, brass, a and GM, an automobile company, clothes tree, and an ordinary making great chemical discoveries kitchen chair). Indeed, after that one might logically have ex- Jewkes and his mates get through pected to come from oil companies with their voluminous run-down, or Du Pont. it is hard to see how the theory What Jewkes and his team of the inevitability of “group” or pound home without even half try- “administrative” invention by ing is that it is the free-wheeling great companies in the “oligopoly” ===== PAGE 65 ===== 1958 A REVIEWER'S NOTEBOOK 63 category (‘few to manufacture ity is the striking originality of and sell”) ever came into existence his thought; for he has carved out in the first place. an elaborate philosophic system Being cautious men, Jewkes and much of which is his own, and he his colleagues fight shy of the all- has pushed these ideas on liberty inclusive statement. Nevertheless, beyond their usual limits to new it may safely be said that The and exciting frontiers. He is per- Sources of Invention proves the haps the first scholar since World case for the free man whether he War I to advocate the supply of works for a big concern, the small defense and other “public” serv- company, or all by his lonesome ices by voluntary methods instead self. As for the economic effects of coercive taxation. Not only that. of freedom, the upshot of the He offers a plan for voluntary fi- Jewkes-Sawers-Stillerman work is nance of defense which is unique, that business upturns will take and which never occurred to the care of themselves as long as in- eminent nineteenth century spon- vention and technology are let sors of “voluntaryism.” alone. John Stuart Mill needn't Heath arrived at his plan in the have worried about the future in process of emerging from the 1850; and, barring interference by Georgist movement, of which he politicos, we needn’t worry about was a prominent member. The it now. eo o o Henry Georgists believed that all “public” services should be fi- By Spencer Heath. Baltimore: The nanced by a single tax on land (es- Science of Society Foundation, pecially urban) rent. Heath, ac- 1957. 259 pp. $6.00. cepting the theory that public services should be paid for by rent, came to ask the question: Why not supplied by private land- lords rather than by government? From this question came Heath’s « Citadel, Market and Altar. FOR MORE THAN two decades, Mr. Spencer Heath has served, un- heralded, the cause of freedom in America. Now, with Citadel, Mar- ket and Altar, this keen and sprightly octogenarian offers his magnum opus after what has been effort, following his retirement as mail. You pay only the bookstore price. We . . . pay the postage anywhere in the world. an eminent aeronautic engineer Catalogue on request. and patent attorney. THE BOOKMAILER, Box 101, New York 16 Heath’s most remarkable qual- ===== PAGE 66 ===== 64 THE FREEMAN July new theory of “proprietary ad- lenging one, and it deserves seri- ministration”: that all the land- ous consideration. lords in a given city should pool There are many other important their assets into one city-wide contributions in this book. Among corporation which would own all them is Heath’s conclusive demon- the land and supply public serv- stration that landlords perform a ices to the tenants for their rent highly worthy and important func- charges. Taxation and all the other tion: that of allocating land sites. trappings of government would Some of the best nuggets are then disappear, and the rights of buried in the appendix. Note persons and private property Heath's unsurpassed definition of would become truly inviolate. The monopoly: only voting would be through the Monopoly exists when government shareholders’ democracy that pre- by its coercive power limits to a par- vails in any corporation, with ticular person or organization, or landowners voting in proportion combination of them, the right to sell to their shares in the corporate particular goods or services, and entity. thereby abrogates the right of any . . other person or organization to com- It is questionable whether the note Neither bigness nor single- free market, if no longer subject o54 can be injurious, so far as it to taxation, would resolve its re- results from the unforced prefer- maining problems in precisely the ences of purchasers and freedom of manner Mr. Heath proposes. His competition prevails. proposal is, at any rate, a chal- MURRAY N. ROTHBARD We invite your subscription to MODERN AGE A CONSERVATIVE REVIEW Vou. 2, No. 3 (Summer 1958) Edited by Russert Kirk ARTICLES BY JOSE ORTEGA Y GASSET, Orro Von Havssure AND FrebErick D. WILHEMSEN Three dollars per year One dollar per copy Address: FounpaTion For ForeicN AFFAIRS; INC. 64 East Jackson Boulevard, Chicago 4, Illinois Free sample copy with each subscription ===== PAGE 67 ===== An economical answer to machining identical pieces in large quantities. Process machines, built by Ingersoll, were used to Ingersoll designed and lower machining costs more than 30 years ago. long built this process machine before the word *‘automation” became so popular. for the Ford Motor Company of Canada, Ltd., Windsor, Ontario plant. Rear axle differential housings are automatically processed Today, Ingersoll Process Machines are used in the production of a wide variety of parts and products such as electric flat irons, bits for oil well drilling, copper bars, aluminum ingots, cylinder blocks, man- through 20 stations and ifolds, transmissions and (like those shown above) completely machined at the rear axle differential housings. rate of 95 per hour, on this rugged equipment. It vd built to take the abuse o THE | N Ce = | = S (® L L continuous operation with in ration wi MILLING MACHINE COMPANY ROCKFORD, ILL. a minimum of downtime ===== PAGE 68 ===== REPEATING THE TRUTH TRUTH must be repeated again and again because error is constantly being preached round about us. And not only by isolated individuals, but by the majority! In the newspapers and encyclopedias, in the schools and universities, every- where error is dominant, safely and comfortably ensconced in public opinion, which is on its side. GOETHE (1749-1832)