===== PAGE 1 ===== AUGUST 1958 | Value Judgments in the Classroom , . . Patrick M. Boarman 3 ! Government Sets a Pattern . . . . . E.F. Hutton 9 | None So Virtuous . . . . . . . . Richard L. Fruin 10 | No, ThankYou . . . . . . . . . JimPatrick 13 | Campaign Promises. . . . . . . . RaeC.Heiple, ll 15 Why Protection Is Easier To Sell than Competition. . . . . . . . R.C.Hoiles 19 Slums and Mansions . . . . . . . HansF. Sennholz 22 Fighting Fires Privately . . . . . . . F.A Harper 29 Readjustment without Inflation . . . . Lawrence Fertig 32 Commanding the Tides. . . . . . . David Smyth 35 A Woman's View of Farming. . . . . Mrs. H.L Witmer 42 What'sinaName?. . . . . . . . R.C. McCormick 45 European Economic Integration . . . . Wilhelm Roepke 46 | Happiness . . . . . . . . . . . Hughson McBain 57 | DoltYourself . . . . . . . . . King Vidor 59 j Papa Knows Best . . . . . . . . John Chamberlain 60 | Other Books . . . . . . . . . . 64 | THE FOUNDATION FOR ECONOMIC EDUCATION, INC. Irvingfon-on-Hudson, New York ===== PAGE 2 ===== SODAS * CANDY The case of the Unsuccessful Iceman ~ An iceman who took the long way around delivering a cake of ice on a hot day would find that he didn’t have much ice left to be delivered. It’s the same with the tax dollars we send to Washington earmarked for “local improvements’. A lot of the money melts away in Washington before it ever gets back home. It pays the cost of admin- istering the huge local aid program, for bureaucrats’ offices, typewriters, salaries and the inevitable red tape. Doesn’t it make more sense to let Wash- ington handle national affairs such as defense and postal service, and let local communities handle their own local im- provements? That way communities will gain the most from their local improve- ment tax dollars. And we could get rid of some costly, tax-consuming federal agen- cies. If that makes good sense to you, why not write your Congressman about it? The Timken Roller Bearing Company Canton 6, Ohio ===== PAGE 3 ===== Coast Federal Savings and Loan Association Ofers 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 dq ® JOE CRAIL, PRESIDENT ===== PAGE 4 ===== THE Tecmdn | A MONTHLY JOURNAL OF IDEAS ON LIBERTY AUGUST 1958 Vol. 8 No. 8 LEONARD E. READ President, Foundation for Economic Education PAUL L. POIROT Managing Editor THE FREEMAN is published monthly by the Foundation for Economic Education, Inc.,, a non- political, nonprofit educational champion of private property, the free market, the profit and loss system, and limited government, founded in 1946, with offices at Irvington-on-Hudson, New York. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, in- cluding THE FREEMAN, are met through volun- tary donations. Total expenses average $12.50 a year per person on the mailing list. Donations are invited in any amount — $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 coples, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each. Permission Is hereby granted to anyone to reprint any article In whole or In part, providing customary credit Is given, except ‘‘Readjustment . without Inflation,” “European Economic Integration,’ and *‘Do It Yourselt." /\ ! A Any current article will bo supplied in reprint form if there are enough FIE inquiries to justify the cost of the printing. ===== PAGE 5 ===== VALUE JUDGMENTS in the Classroom PATRICK M. BOARMAN T TOOK Sputnik to awaken Ameri- cans to the noxious effects on American secondary schools of a quarter century of ‘progressive education.” Increasingly, we are recognizing that a wrong-headed emphasis on “life adjustment” courses to the neglect of standard disciplines such as mathematics and languages has enabled the Soviet Union to equal and even to overtake us in various crucial areas of science and technology. But in all the ferment about the deficien- cies of our secondary education, relatively little attention has been given to the moral aimlessness of much of American higher educa- tion. While the Soviets are bending every effort to disseminate the values of communism both at home and abroad, not a few professors at American institutions of higher learning are showing increasing Professor Boarman is in the Department of Eco- nomics, University of Wisconsin, Milwaukee. ===== PAGE 6 ===== 4 THE FREEMAN Angus concern at the intrusion of values of which things or events or pe: of any kind into the classroom. sons are judged as good or bad. T Once again we are hearing the believe in the inviolable dignit well-worn cliché about the exclu- and worth of every human being sion of value judgments from the for example, is to make a valu lecture hall and the need to pre- judgment. To believe that man ha serve the scientific objectivity, i.e., certain inalienable rights such a the moral neutrality, of higher ed- life, liberty, and the pursuit c ucation. happiness is to accept without fui “Too many of us [teachers],” ther argument certain “values.” T opined a colleague of mine in a be in favor of honesty, fair pla; student newspaper, “are frustrated and respect for parents, to be oj preachers, frustrated world-savers, posed to murder, robbery, involur forgetting we are not hired for our tary unemployment, and unneces values (hiring criteria which would sary suffering, to stand for huma violate academic freedom). A freedom and against totalitariar teacher who seeks converts from ism — all these constitute valu his captive, receptive audience is judgments or moral judgments. bullying, however kindly. In shap- Is it possible or even desirabl ing values he is doing somebody to exclude such values or valu else’s job (probably the student’s) judgments from classroom discus while neglecting his own... . sion? Should the historian advocate democracy, or the sociologist de- Values in the Physical Sciences plore segregation? Even when the Historically, the movement t instructor is confronted point- eliminate value judgments fro: blank with an answer-demanding scientific inquiry is associated wit student, the answer is NO; educa- the flowering of the physical sc tion and propaganda differ in goals ences in the Renaissance and pos: and therefore in techniques. Hav- Renaissance periods. Advances i ing political, economic, and reli- the physical sciences required a gious views is everyone's right, but open mind and a willingness t not a teacher's classroom privi- throw overboard unproved hy lege.” potheses in the light of new ev What precisely are the ‘‘values” dence. At the same time, certai which are so feared? Values in- cosmological doctrines inherite volve commitments to a priori from the past (e.g., the earth i moral positions. To have values the center of the universe) prove means to have standards in terms extremely difficult to dislodge b« ===== PAGE 7 ===== 1958 VALUE JUDGMENTS IN THE CLASSROOM 5 cause of their association in the the idea that there are some values minds of many with the theology which are valid for all men, as and the system of values of West- men. It was left to nineteenth cen- ern Christianity. A disastrous and tury positivism to attack value thoroughly unnecessary conflict be- judgments per se, to claim that all tween science and religion was pro- values are relative, and to spread voked by the refusal of some ec- the false and irrelevant notion that clesiastical authorities to relin- the ideal scientist is one whomakes quish the erroneous idea that the the fewest possible value judg- truths of Christianity are some- ments. how bound up with the Ptolemaic cosmology (witness Galileo's dif- Man Must Have Values ficulties). Now if there are sound reasons There is, of course, no logical or why value judgments should be essential connection between phys- banished from the pure scientist's ical phenomena or physical laws laboratory (if not from the other and a given set of values, but this areas of his life), this is certainly realization cameonly after a period not true of the social sciences. For of frustration for the pure scien- the social sciences do not deal with tists — hence, the early and per- inorganic materials nor primarily sistent animus in scientific circles with biological functions nor even against value judgments and value with the organization of ant col- systems. On the other hand, not a onies. They deal with man, the few of the most competent scien- source and subject of values. Man tists of the modern era (the names must have values; the “valueless” of Max Planck and Pasteur come man is a monstrosity and he does to mind) were devout Christians, not, in fact, exist. Consequently, that is to say, they held strong the social scientist cannot be in- opinions about man, his place in different to what is “good” or the universe, his ultimate destiny. “bad” for man. These men lived and worked within Indeed, the premises of social the general framework of their scientists are themselves value Christian assumptions though they judgments. The sociologist who en- did not regard these value premi- deavors to trace the causes of dis- ses as immediately relevant to the integration of the family assumes investigation of physical phenom- that “integration” of the family is ena. They saw, at any rate, no in- “good.” The economist who probes compatibility between their belief the causes of business cycles as- in science and their acceptance of sumes throughout that the invol- ===== PAGE 8 ===== 6 THE FREEMAN August untary mass unemployment gen- made for this type of program. erated by cyclical fluctuations is a But there is an alternative solu- social evil. It is the latter assump- tion, viz., more effective mobiliza- tion, indeed, which gives point and tion of the resources of the private significance to his inquiry. The sector of the economy (by increas- political scientist who contrasts ing the scope of private insurance democracy with totalitarianism, or programs and of private pension slavery with freedom, assumes in plans, and the like). If we assume his premises that the human situa- that both types of solution, the tions these words describe are governmental and the private, are either good or bad. In short, the equally economical and efficient, point of departure for the social then the economist who generally scientist is a value judgment of favors big government and takes some kind. a dim view of private enterprise will tend subconsciously to favor Make Known the Premises the governmental solution. A value To say that the social scientist judgment will enter his syllogism necessarily begins with value- even in that portion of it which he loaded premises does not mean, of believes to be “value free.” Like- course, that he has carte blanche wise, the economist who supports to indulge in an emotional orgy of an increase of private activity in mere opinion, for if he did, his ac- the welfare field because he fears tivities would cease to deserve the the ultimate consequences of unre- name of science. His obligation as strained growth of central govern- a scientist is to state his premises, ment, will have admitted a value i.e., his value judgments, clearly judgment to his conclusion as well and explicitly and then to con- as to his premises. struct syllogisms from whose sec- It might be added that economic ond and third terms, at least, value science itself is meaningful only judgments have been excluded. In within the context of a value, to the social sciences, this is some- wit, freedom. The laws of supply times hard to do (which doesn’t ex- and demand presuppose the free- cuse us from making the effort). dom of producers and consumers To illustrate: one way of solving to respond to the stimuli of the the problem of poverty in old age market and thereby to make ef- (note the value premise) is to en- fective their respective value judg- act an all-embracing federal wel- ments. The economist’s diagrams fare program for this purpose. A of the elasticity of demand and the plausible case can certainly be marginal efficiency of capital posit ===== PAGE 9 ===== 1958 VALUE JUDGMENTS IN THE CLASSROOM 7 freedom just as the physicist’s winked, even though unintention- equations posit a finite universe. ally. It is, indeed, disturbing to find Students May Agree or Not increasing numbers of social sci- The point of all this is that it is entists acting as if values had hardly possible to exclude values nothing to do with them. The ex- or value judgments from the so- planation is to be found, partly, in cial sciences. Obviously, every ef- the social scientists’ deep sense of fort should be made to prevent inferiority vis-a-vis the physical their intrusion into the stages of sciences (physicists produced an argument which follow initial atom bomb, after all, but econo- premises. Where this cannot be mists can’t even cure a mild reces- easily done, the values in question sion). This inferiority complex im- should be made explicit and their pels the social scientists to ape the relevancy justified. wholly inappropriate techniques It is far more insidious for a and attitudes of the physical sci- teacher to present his arguments entists (including the latters’ and his position in a classroom as ability to ignore value judgments, if these were completely value free at least in the short run). But not (when in fact they are not) than all the abracadabra of mathemati- for a teacher to state his premises cal formulae and esoteric jargon frankly and openly and then go on with which we fondly imagine we to seek the truth that flows from are conferring exactitude on the these premises. A teacher who social sciences can turn man into a prides himself on his ability to molecule or an atom. Behind the leave his values outside the class- curves and graphs and equations room, who tries to pretend that he and the mysterious terminology is indifferent to infanticide, wife- stand free human spirits, incom-" beating, racial intolerance, and in- parable and unique. And while we voluntary unemployment is prob- can estimate with some precision ably either a monster or a hypo- what man will do as a member of crite. the herd, we cannot, no matter how When values are clearly stated, hard we try, argue away his students are free to agree or dis- values. Values are a part of man agree with them. But where values and therefore a part of the study are concealed in the name of a of man. specious objectivity, students will The idyllic period is past (if it be brainwashed without being was ever justified) in which we aware of it; they will be hood- can abstract from value judgments ===== PAGE 10 ===== 8 THE FREEMAN August in the social sciences. If we persist facts and the development of skill in our ostrich attitude, we may in correct reasoning. Education of discover all too soon that, like the whole man is also moral, that Archimedes, we have been drawing is, it involves the inculcation of geometrical tables in the sand values. To abdicate this responsi- while conquering hordes have been bility in the name of a spurious breaking into the city. Even the scientific objectivity is to create a “purest” of our scientists, the moral vacuum in the minds and atomic physicists, have been doing ‘hearts of our youth. rather considerable moralizing of It was the cult of a misplaced late as they awaken to the horren- objectivity in the German univer- dous possibility of their “science” sities which was partly to blame being used to exterminate the hu- for their being the first instead of man race. the last bastions of freedom to fall » before Hitler's onslaught. And the Avoiding a Moral Vacuum behavior of a not inconsiderable If a list of the most inspiring segment of American youth today and influential teachers of the past has furnished some pretty shock- could be drawn up, it might well ing evidence as to the kind of show that the majority were men “values” that can and do fill the who were strongly and even pas- moral vacuum. It is time that we sionately committed to certain val- learned afresh the truth that if ues and who communicated these liberty, justice, and human dignity values both in the classroom and are to survive in the world or even outside it. Education is, after all, in this country, they cannot be ig- not a one-sided process aimed ex- nored — either outside the class- clusively at the communication of room or in it. e ooo BUT WE MUST FACE the truth, that in the modern world genuine protection is no longer to be found in material safeguards alone. The only real protection remaining is the spirit of man. Con- sequently we cannot afford to compromise with moral principles. In the moral world there is no golden mean between virtue and vice, there can be no averaging of opposites. Our obligation, even in selfish terms of survival, is not to find an accommodation with evil, but to oppose it and in the end to overcome it. DAVID SARNOFF, The Moral Crisis of Our Ags ===== PAGE 11 ===== Government Sets a Pattern E. F. HuTTON As Warner & Swasey has stated in an ad in U.S. News & World Report: “THERE'S NOBODY HERE BUT US CHICKENS” AND WE'RE GETTING MIGHTY CONFUSED In the last 8 years six different agencies of the federal government lent 35 million dol- lars to encourage increased poultry produc- tion. A seventh government agency is spending 12 million dollars to buy surplus eggs to re- move them from an oversupplied market. AND YOU CAN GO ON from there. highways, Uncle is spending bil- Punch drunk Uncle has invested lions, straightening out curves and billions in surplus farm products, grades that are part of the charm and is paying a million dollars a on little-used rural roads. day for the warehouses to store Why is it so necessary to drive them in. : so fast? Where are we going any- But at the same time Uncle is way? bringing thousands of acres of Don’t drunks and fools kill desert land into more cultivation themselves — and others — on four by huge irrigation projects, at a and six-lane highways that are as cost up to $1,000 an acre! straight as a gun-barrel and as With thousands of empty hospi- flat as our pocketbooks? tal beds, Uncle builds more hos- What, in short, is Uncle doing pitals. to the character of our people To make it possible to drive cars when he acts like a drunken sailor 70 miles an hour, even on rural himself? ® 0 0 Mr. Hutton is the well-known industrialist, investment banker, and author of. the column, “Think It Through.” ===== PAGE 12 ===== NONE SO VIRTUOUS Ricuaro L. FRUIN, M. D. Messenger of sympathy and love reported a deficit in all but eight Servant of parted friends of the past 130 years — recently Consoler of the lonely approaching a billion dollars an- Bond of the scattered family nually. And what the cumulative Enlarger of the common life deficit might have totaled, under Carrier of news and knowledge an accurate system of accounting, Instrument of trade and industry is anybody's guess. Promoter of mutual acquaintance Living Americans have wit- of peace and of good will nessed no exception to this monop- among men and nations olistic “enlarger of the common life,” but a study of history re- YOU PONDER THESE LINES. A litany veals that there have been various of the church, perhaps? A paean alternative methods of handling of Greek antiquity, rhapsody to a the mail. god, recitation of an ancient epic, Men have sent messages to one salaam to an Oriental potentate? another from the dawn of civili- Surely no reference to any earthly zation, and out of it have evolved being or business, you judge. mailmen and postal systems. The But you would be wrong; for word post, from the Latin, refers these extravagant phrases refer to to the stations along the roads of that earthly business, the United the Roman Empire where messen- States postal system — carved in gers were kept ready to relay dis- marble on the facade of “your” patches. But the post office as post office in Washington, D. C. known today did not exist in the Who phrased or carved these ancient world. lines is unimportant now, though The beginnings of the modern his acquaintance with the facts postal system go back to the time about the government postal mo- of Charles V (1500-1558), Em- nopoly must have been quite super- peror of Spain, Netherlands, Aus- ficial. tria, parts of Germany, Lombardy, The Post Office Department has and other areas. An administrative Dr. Fruin is a physician and surgoon in the Armod Forces. 10 ===== PAGE 13 ===== 1958 NONE SO VIRTUOUS 11 service was needed to transmit hardheaded Founding Fathers orders to the generals and officials (who created the freest country of this far-flung, overextended em- the world had ever seen) saddled pire. And as a source of revenue us with this deficit-ridden, social- for his ambitious, grandiose ized, governmental monopoly? schemes, Charles had his dispatch They didn’t! In those days, the riders carry messages for the ris- postal service was a fertile source ing class of businessmen. This was of revenue for the infant Republic. an important first step toward the In fact, our early government was development of state monopoly in essentially operated on the revenue European post offices. Such a mo- from Customs and the Postal Serv- nopoly also afforded a convenient ice. Private postal systems were means of spying, information seek- not prohibited and in some places ing, and the reading of letters by they flourished. the minions of the rulers. Adam Smith in his monumental Wealth of Nations published in Early Postal Service 1776 had this to say of the post Formal postal services on a pri- office: “The post office, an institu- vate enterprise basis began in the tion to facilitate commerce, over American colonies as far back as and above defraying its own ex- 1639. In 1706, the British govern- pense, affords in almost all coun- ment took over the privately owned tries a very considerable revenue intercolonial postal service and to the sovereign.... perhaps the made it a branch of the general post office in London. Benjamin Franklin served as Deputy Postmaster General of the British Colonies in America from 1753 to 1774. The Continental Con- | gress at the outset of the Revolu- {MAIL EARLY tion in 1775 appointed Franklin | LET 72S Postmaster General. When our LETTERS Constitution was adopted in 1789, — it gave Congress the power to pry establish post offices and post Ee roads. A law of the same year a : created the office of the Postmaster General of the United States. How did it happen that our ~ oT ===== PAGE 14 ===== 12 THE FREEMAN August only mercantile project which has his operations to Philadelphia and been successfully managed by Baltimore. His cheaper and faster every sort of government. There service threatened to put the post is no mystery in the business. The office out of business. returns are not only certain but Washington was outraged, in- immediate.” sisting that the Constitution au- “Progress,” it appears, has been thorized Congress to establish post made since the days of Adam offices. But Spooner’s rejoinder Smith and our Founding Fathers. was that the Constitution doesn’t Competition with private enter- say a private citizen can’t. Even- prise kept the government’s postal tually, federal harassment and service fairly modest, effective, threats of jail forced him to dis- and efficient until 1860, when that continue operations, but not be- logic of officialdom — force — was fore he’d proved that a cheaper invoked to establish a political mo- postal rate was possible. The gov- nopoly in postal affairs. But in the ernment lowered its rate in 1845 entire history of the U.S. Postal to 5 cents, and in 1851 to 3 cents. Department, the improvements have come only as a result of pri- Political Determination vate initiative and enterprise. Political considerations deter- An interesting example of such mine postal rates. That's why it an improvement was afforded by costs as much to send a letter the efforts of an ingenious New across the street in your home England Yankee more than a cen- town as to send it three thousand tury ago. miles across the continent and have In 1844, discontent with the it delivered to an isolated farm. It postal service was rampant. Rates is said that all Americans should were sky-high, delivery at a snail’'s have this opportunity for cultural pace. It cost 1814 cents to send a and educational purposes. Should letter from Boston to New York, we also bring New Mexico ranch- 26 cents to Washington. ers to the New York Metropolitan Lysander Spooner decided to. Opera and art museums for fifteen enter the business in competition cents, which is the rate New with the U.S. government. His Yorkers pay? American Letter Mail Service Defenders of the postal deficit offered delivery between New York contend that the post office is “not and Boston at 5 cents a letter, re- for money-making but for public gardless of weight. The public re- service.” But profit is the only real sponse encouraged him to extend proof of service rendered. “Public ===== PAGE 15 ===== 1958 NONE SO VIRTUOUS 13 service” is simply a misnomer for least we should learn to resist carv- wasteful political activities that ing in marble the idea that there is are charged off to the taxpayers. anything divine about the way The kind of “public service” ex- government operates a business. emplified by the postal monopoly is Edward Everett (1794-1865) may costing the typical American citi- be forgiven for regarding “the zen a third of his earnings today. Post Office, next to Christianity, as It may be too much to hope that the right arm of our modern civili- postal services be opened to com- zation.” But there is no longer any petitive private enterprise. But at excuse for such illusions. eo eo e The Manager of the New Albany (Indiana) Chamber of Commerce says: No, Thank You! April 29, 1958 federal government, so that both DEAR MR............. : the national debt and taxes may be Indeed we will not support an ef- reduced and the threat of return- fort to bring pressure on the ing inflation may be avoided. House Appropriations Committee We are familiar with the argu- for funds to construct the Cross- ment, usually put forward in situ- Florida Barge Canal. Our con- ations of this kind, that the im- gressman is a member of that com- provement will so stimulate busi- mittee, and we want him to know ness that the resulting increase in we are maintaining a consistent taxes paid to the federal govern- position on federal spending; we ment will soon pay for the original shall send him a copy of this letter. expenditure. The trouble with that There is no greater domestic need argument is that the people have in these times than for a substan- been able to think up new spend- tial reduction in spending by the ing schemes more rapidly than the ===== PAGE 16 ===== 14 THE FREEMAN August income has increased. Why else ceipts of the federal government should federal revenues have fallen were $60,389,743,000 while expen- short of expenditures in all but ditures came to $64,569,973,000, a four or five years since 1930 and deficit of $4,180,230,000. The na- the national debt moved persist- tional debt then stood at $274,374, ently upward? In that respect 000,000, or 454 per cent of reve- Uncle Sam is in somewhat the nues for the year. It would appear same position as the man with an that the financial position of your income of $300 a month whose state may be much more sound wife rushes around spending $350 than Uncle Sam’s. Could it be that a month taking advantage of “sav- the state of Florida could better ings” at bargain sales. afford the construction of the The 1957 edition of the Statisti- Cross-Florida Barge Canal than cal Abstract of the United States, could the federal government? published by the Bureau of the As for us, we have recently Census, shows that for 1955 (latest turned down suggestions that we information available), General exert pressure for federal spend- Revenues of the State of Florida ing right in our own back yard, were $383,944,000 and General Ex- and we are certainly not going to penditures were $383,928,000, jump on the bandwagon and start leaving a surplus of $16,000. The beating the drum for somebody state’s debt was $85,758,000, or elses pet project. 22.3 per cent of the year’s revenue. Yours truly, For the same year the net re- JIM PATRICK IDEAS @X LIBERTY Privilege and Politics WHENEVER the sovereign authority invades the marketplace, it is inevitable that what we naively call “corruption’”’—which is but the political means of acquiring economic goods — will pol- lute the economy. History is so emphatic on this point that one wonders at the persistence of the pollyanish hopes of public- ownership advocates; in the final analysis these hopes must rest on sublime faith in the miraculous mutation of human nature in public office. The partnership of privilege and politics is as natural as the marriage of men and women; the way to dissolve the ensuing monstrosity of “corruption” is to dissolve the partnership by forbidding political meddling in the affairs of the marketplace. FRANK cHoporov, The Myth of the Post Office, published by Henry Regnery Company. ===== PAGE 17 ===== RAE C. HEIPLE II CAMPAIGN . used to win a 1958 Primary fight for State Representative in Illinois HE forgotten man... . A cross tentions, inflation has always of gold. ... Greenbacks for all. brought poverty, not abundance. It . . . Yes, down through the years always will. It is as simple as ABC. we have heard the calls. It is sure as rain. Calls mouthed by even the stam- The reason: man responds to mering tot. . . . A car in the ga- incentives. He will work if re- rage; a chicken in the pot. warded. He will not work without French, Spaniards, Phoenicians, reward. He will save if it is profit- and Greeks — all knew the short- able to save. He will not save if it cut to abundance. Simple? Of does not profit him to save. He will course! Clip the coin, dilute the not save if he can get no interest metal, issue script, and roll the on his money, or if his money de- presses. Money buys things, teriorates in value. We don’t save doesn’t it? Well, make money! old pancakes, and we won’t save More money to circulate to stimu- dollars either if they are going to late trade, for better distribution, be less and less valuable every and employment for all. year. Oh, yes, we've heard the call Saved money is what bought The promises sparkle; they always every diesel railroad locomotive in sound new. the U.S. today. It bought every But the story is as old as time, lathe, broach, and milling machine. as unchanging as human nature. Yet, the men, widows, and chil- No matter how many times it has dren who loaned the money to buy been tried, what name was given these machines to produce our to it, who administered the plan, abundance were fools. Inflation or what the honesty and good in- made them fools. $2,500 in 1939 “4 Mr. Heiple is a young attorney from Washington, Illinois. 1 Le 15 ===== PAGE 18 ===== 16 THE FREEMAN August would have built a house; now it aren’t as smart as they used to be. will barely buy a good automobile. All the smart ones must be in the How long will people save if this legislature. continues? How long before they No longer can we tell for our- “wise up” and stop providing new selves whether an egg is rotten, locomotives and lathes? It will be whether the garbage man can haul when the savers realize inflation is garbage, or whether the shoe stays here for good. We will then have on the horse. Whether there ought had it. : to be a law or not, there is. Inflation destroys ambition and It would be comical if it were creativeness. It defrauds the hon- not so pathetic. est and punishes the thrifty. It is The rationale of this “big caused by government living be- brother” philosophy is based on a yond its means, by deficit, by faulty premise and constructed of manipulation and manufacture of fallacious reasoning. Its absurd money, by tampering with interest reasoning is this: (1) Most people rates and credit expansion, by con- are so dumb that they don’t know fiscation and redistribution. e e what is good for them; (2) The elected officials and appointed bu- FREEDOM OF CHOICE reaucrats are so smart that they SOMEONE figured it out. . . . We know what is good for others; (3) have 143,791 laws to enforce the That by regulation, license, and Ten Commandments. code, everyone is going to get what Suppose you should want to shoe the officials think the people should a horse tomorrow. The policeman have. So runs their argument. won’t let you. If your neighbor Ridiculous? Yes! To say that you wants to haul your garbage to the and I don’t have the judgment to dump, he isn’t permitted. If your choose a competent garbage man, cousin Rachel, on the old farm, horseshoer, barber, or plumber is should continue her egg and cream an insult to our intelligence. Yet route, just bring her next birthday we are permitting ourselves to be " present to the jailhouse. Ridicu- so insulted in each of these fields. lous, you say? Yes! Ridiculous be- To say that 235 men in Spring- cause it is true. field can pick every competent and It used to be that if you were a discard every incompetent barber, good horseshoer, you were in busi- plumber, horseshoer, and garbage ness; and if you sold ripe eggs, man in the whole state of Illinois you weren't. But not anymore. is a statement of absolute and su- Nowadays it seems that people preme arrogance. Yet every time ===== PAGE 19 ===== 1958 CAMPAIGN PROMISES 17 a license is granted or refused, it next. That crackpot scheme worked is state-pronouncement of compe- OK for awhile. It worked just tency or incompetency. about as long as the chain-letter- To say that regulation and li- get-rich scheme. It goes over big cense guarantee good work is in- for the first ones to get in the pro- credible. Just ask your barber or motion, but pretty soon everyone plumber sometime about their in- is promoting and there aren’t any spection and supervision. Ask them “fall guys” left. The idea of an if it assures competent men and above average standard of living qualified work. They'll tell you it’s for everyone is, of course, a con- a joke. All it does is create a lot of tradiction and impossible on its political jobs. face, if you should think about it. Our country is built on freedom What I am trying to say is that —on the right of each individual individuals create their own suc- to choose for himself what he cess and prosperity. If you get the wants — even though we might government to give you something have made a different choice. You it has taxed away from another, cannot protect people from their that fellow and countless others own ignorance. You cannot, by are going to get theirs by taxing legislation, abolish mistakes. Free- you. And you can’t blame them. dom includes the right to make a It's a matter of self-defense. mistake as well as the right to The farmers may be receiving make a wise choice. e ® benefits, but they are in turn be- ing taxed to benefit labor, con- ALL THINGS TO ALL PEOPLE sumer, business, banking, and so IT SEEMS to be the popular trend on. The same is true for each of nowadays to proclaim your devo- the other groups. It is all just a tion to everyone. A candidate just lot of wasted effort applied to a isn’t unless he is for business, for very inefficient machine. You never labor, for farmers, for producers, get out what you put in. °o for consumers, and for everything that costs money. No one is con- RIGHTS OF THE INDIVIDUAL tent to grow up and admit there IN THE PROGRESS of history we is no Santa Claus. have had the Stone Age, the Iron For a good many years we have Age, and the Machine Age. We are been kidding ourselves that the today living in what some have government should and could guar- called the Age of Conformity .... antee every employment and eco- the age in which the quest for se- nomic group a better deal than the curity has displaced opportunity. ===== PAGE 20 ===== 18 THE FREEMAN August The accent today is on the group. lower prices at the same time, edu- The individual is of little concern. cate our children without costs, The mass is all that matters. give us electricity by passing laws, This false doctrine is shot and improve the game of baseball through our whole society. Schools with regulations. We need just are geared in accordance with the pass a law and then stand back norm and ignore individual ability and be overwhelmed with all the and special talent. Law puts social goodness of life. responsibility ahead of individual Let's try to be sensible for rights. Politicians cry for the good awhile. It is the differences in peo- of the greatest number without a ple that make possible our prog- thought of the individuals who suf- ress. The object in education is to fer. Economists study institutions, develop your own special abilities not people. to their utmost, not to conform. The end result of this kind of We as individuals have rights that thinking is the worship of the gov- the majority cannot take away ernment as an idol —to believe from us. that it can do anything except It is time we used our common something wrong — that the un- sense. Hard work, not legislation, failing way to find right, truth, makes production. Production, not and justice is to take a popularity regulation, makes prosperity. The poll. We act as if the State can. legislature cannot amend the laws feed us when we are hungry, heal of economics anymore than it can us when we are ill, raise wages and the law of gravity. ooo Yee 0 Topas Getting Out of Jams THE TENDENCY of a Federal aid operation is by its nature to rigidify. The idea is to help the people, and the simplest way to help people without jobs is to put them on a dole. Beyond that, the attempt is to get them back to doing what they were doing before they lost their jobs, while their real need — and the community's economic need — may be precisely to provide new kinds of jobs or jobs in new places. Nothing will discourage local incentive so fast as Federal intervention, even of an enlightened kind. From the Wall Street Journal, November 9, 1965 ===== PAGE 21 ===== R. C. HOILES That so many of the consequences are unseen explains... why Protection is easier to sell than COMPETITION HERE MUST BE a reason why and concrete, it is easy to see, protection or the Welfare State while the taxes for this particular is so popular and has made such protection are diffused and indirect headway in our country and in most cases. Or when labor throughout the world. unions protect a worker from com- Undoubtedly it is because many petition of other workers and he people believe it is the best way to gets an increased money wage, it relieve poverty and promote more is easy to see. It is also immediate. general prosperity. In short, the benefits are concen- If that is true, then why do they trated and present and thus easy so believe? Could it not be because to see, while the costs, the disad- the material results of protection, vantages, are diffused and paid for in whatever form it takes, are in small amounts by many other both concentrated and obvious, persons and are thus harder to see. while the costs, the consequences, Superficially, the costs may seem are diffused, concealed, spread out to be postponed, as though the re- in small amounts? Force is usually distribution were yielding a so- quicker and more noticeable than cietal advantage for a time; but persuading — getting a person to this is strictly an illusion stem- think and reason. ming from inadequate cost ac- When the State gives a man ma- counting methods. The actual costs, terial assistance or protection from if they could be seen, are as real competition, it relieves him imme- and as immediate as are the pre- diately and temporarily of part of sumed benefits. his problems. It is so concentrated The union member sees he gets Mr. Hoiles is president of the chain of Freedom Newspapers with headquarters at Santa Ana, California. 19 ===== PAGE 22 ===== 20 THE FREEMAN August more dollars in his envelope and The same diffusion that takes thus believes he is benefited. What place in labor unions’ added costs he does not see is that if he can takes place in every protection or get temporary material benefits by subsidy by the government — fed- striking, many other workers will eral, state, county, city, or board do the same thing. Nor does he see of education. The added costs in that the employer has to get all the the form of taxes are diffused and money he pays in wages from his scattered over thousandsof articles customers — other workers. If heis and are not as noticeable as the not able to collect all costs, includ- subsidies or the gain resulting ing wage payments, and if there from government or labor union are no profits or no hopes for protection. profits, there are no jobs. This un- Most people look at immediate employment reduces production wages or prices they get for what and increases prices. On the other they sell under protection as all hand, the more profits, the more benefit, and fail to see the little ad- competition between employers to ditional prices added to hundreds hire help, the higher real wages of items they buy. Nor do they see will be. Also, the more competition that these added costs continue as in selling the product, the lower long as the cause continues. prices the employees have to pay. It is also difficult to see how a This is continuous and diffused free and unhampered market bene- and thus harder to see. fits the worker because the bene- So all these extra labor costs are fits are on everything he buys passed back to other workers, past though small on each item. The or present, along with any extra benefits are not in one lump sum. costs that stem from lower pro- Nor are they temporary, as are ar- duction, unemployment, feather- bitrary wages, but continuous and bedding, seniority, strikes, non- cumulative. productive business agents, lack of The benefit of personal charity individual responsibility, and so on. also is concentrated and easy to see But these costs are diffused — because it is a lump sum. a penny here and there on the Many people believe the donor is hundreds of different items every- benefiting mankind more than the one uses —and they are thus person who puts the same wealth harder to see. Besides, they are into tools that increase production, lumped with all other costs so that thus raising real wages and lower- it is difficult, if not impossible, to ing prices in a continuous process. know how much they total. The benefits from more tools are ===== PAGE 23 ===== 1958 WHY PROTECTION IS EASIER TO SELL 21 so diffused that many people think spectacular nor as easy to see as continuous charity is more bene- the socialist way of temporarily ficial to mankind than furnishing diffusing poverty by eating up the tools that benefit everyone. seed corn — the tools — which will The duty of every person is to increase poverty in the long run. try to understand what means Free enterprise is the surer and so must be used if we are to have far the only known way of con- peace and more and more prosper- stantly improving the well-being of ity for all. mankind. Those with practical experience What we need is not to be in producing the comforts of life blinded by the transitory benefits are convinced that the best way is of protection but to see the bless- for each and every person and the ings that continuously follow the government to have respect and free, private enterprise system, reverence for the creative energy even if it is harder to see — that of all mankind. the gain of one in creating wealth Free, private enterprise isnot as is the gain of all. ooo Saving the X Industry IDEAS ON LIBERTY IF WE HAD TRIED to keep the horse-and-buggy trade artificially alive, we should have slowed down the growth of the automobile industry and all the trades dependent on it. We should have lowered the production of wealth and retarded economic and scientific progress. We do the same thing, however, when we try to prevent any industry from dying in order to protect the labor already trained or the capital already invested in it. Paradoxical as it may seem to some, it is just as necessary to the health of a dynamic economy that dying industries be allowed to die as that growing industries be allowed to grow. The first process is essential to the second. It is as foolish to try to preserve obsolescent industries as to try to preserve obsolescent methods of production: this is often, in fact, merely two ways of describing the same thing. Improved methods of production must constantly supplant obsolete meth- ods, if both old needs and new wants are to be filled by better commodities and better means. HENRY HAZLITT, Economics in One Lesson ===== PAGE 24 ===== WLISIONE HE PRESENT RECESSION has in- in this case the authorities can en- tensified the statist clamor for large or reduce the slums merely more public housing and “slum- by raising or lowering this stand- clearing” on grounds that large- ard. If it is raised high enough, scale construction activity consti- most houses, or even all houses, tutes a make-work measure and may be declared slums because thus alleviates the present reces- probably no house represents the sion. Widely overlooked is the fact best that modern technology can that resources for public housing build. construction are taxed or ‘bor- But government officials are not rowed” from other uses, thus act- alone in setting standards that by ing as ‘“reduce-work” measures in their very nature must be arbi- other sectors of the economy. In- trary. The general public also is sofar as the operation may be fi- influenced by arbitrary standards nanced by government inflation or when defining slums as city dis- monetary depreciation, the “stimu- tricts marked by squalor and lation” must take the customary wretched living conditions. The form of boom and recession. definition obviously depends on the ( What actually is a slum and notions, judgments, and experi- what are the characteristics of the ences of each individual. In the people populating it? According to United States where living condi- one definition, a slum is a city dis- tions are incomparably better than trict that is substandard in living in the so-called underdeveloped conditions. The standard is estab- countries we may describe a slum lished by the city authorities to in terms which to a Chinese or serve as a model. It is obvious that Hindu may sound like a mansion. Dr. Sennhols is Professor of Economics at Grove City College, Pennsylvania. 22 ===== PAGE 25 ===== 1958 SLUMS AND MANSIONS 23 Whatever a slum may be, people two levels. First the whole project create it. It isn’t buildings that with all its tenants is subsidized make slums, but people. Some peo- by the taxpayers. Then the lowest ple tend to create a slum wherever income tenants are subsidized by they move. Others give cleanliness the tenants in higher income and orderliness to any surround- brackets paying higher rents. The ing. This fact also explains why difference in rent is often consider- subsidized housing that actually able. For instance, in Chicago the succeeds in attracting slum dwel- rent for the same facilities varies lers deteriorates quickly into new between $31 and $96 a month. slums. Our experience with subsi- Receiving and paying subsidies dized public housing since 1937 are radically different things. In clearly demonstrates this. this age of welfare state mentality many people indeed are eager to be Public Housing Breeds Slums on the receiving end, but they are Income controls admission to very reluctant to participate in subsidized public housing. To enter subsidizing others. A tenant who a project a person must not earn pays rent at the higher level may more than a certain income with feel that he is “sharing his wealth” allowance being made for the size with his neighbor. In fact, he may of his family. In Chicago, for in- begin to wonder if he hasn’t be- stance, a one or two person family come the victim rather than the must not earn more than $3,600. beneficiary of public housing. Income is not only the basis for To pay more than others do for admission but also it determines the same good or service conflicts the tenant’s rent. Public housing with man’s sense of fairness and projects aim at attracting a spread justice. This is the psychological of tenants in various income reason why public housing projects brackets. Those in higher brackets are crowded with tenants paying pay higher rents for the same fa- minimum rents. The ‘“cross-sec- cilities than do those in lower tional” rent principle does not brackets. When a tenant's income work because renters at the upper rises, his rent also rises. When his end of the scale tend to move out income surpasses the top limit, he long before they have reached the must move out. permissible limit. Consequently, These principles suffer from sev- public housing projects often fail eral shortcomings whose disastrous to earn even the operating costs. effects create vast public slums. In Chicago's projects, half of Subsidies are paid and received on the tenants are paying minimum ===== PAGE 26 ===== 24 THE FREEMAN August rents. In some New York housing tend to move out as soon as the projects a majority of families are maladjusted cases move in. on relief. The ones that cling to Public housing breeds slums of minimum-rent housing are mostly indescribable squalor and horror. problem families without incentive It shuts them up within new walls to increase incomes. Recent studies of brick and steel and thus hides by the New York Times and the them from the eyes of a gullible Wall Street Journal found the con- public. But the same public is told ditions in public housing to be constantly by a host of socialists shocking and appalling. “These and other do-gooders of the cases monstrous aggregates in which of poverty and poor housing con- one family out of twenty in New ditions that existed before the days York now lives,” says Harrison E. of the Welfare State. Capitalism is Salisbury in the New York Times reviled for having created slums of March 26, “have tended to be- which government housing is sup- come new-style ghettoes. . . . By posed to supplant. screening applicants for low-rent One may point to the slum con- apartments to eliminate those with ditions of public housing as one even modest wages the new com- answer to these charges, but a fur- munity is badly handicapped. It is ther answer lies in some elemen- deprived of the normal quota of tary principles of economics. human talents needed for self-or- ganization, self-discipline, and Old Slums self-improvement. A human catch- Before the days of subsidized pool is formed that breeds social public housing, slums only devel- ills and requires endless outside oped in the oldest districts of a assistance.” city. When the houses were new, According to Ray Vicker in the they were occupied by tenants who Wall Street Journal of April 10, paid rent sufficient to cover in- “Public housing attracts a high terest on the owner’s investment, percentage of broken families, compensation for depreciation, and families with big broods of chil- perhaps also a profit. But houses, dren by nameless fathers, other like all other earthly goods, begin welfare cases and shiftless char- to deteriorate as soon as they are acters who prefer unemployment built. Wear, tear, and old age to work as long as government gnaws at them continuously. Of agencies provide handouts.” It can- course, skillful maintenance may not be surprising, therefore, that retard this process, but cannot de- the solid hard-working families feat it entirely. ===== PAGE 27 ===== 1958 SLUMS AND MANSIONS 2b With the deterioration of the declines, the assessed value which houses, the demand for them un- constitutes the basis of taxation dergoes a continuous change. The usually demonstrates a remarkable original tenants move on to newer rigidity. Especially during depres- houses with modern facilities and sions when rents decline rapidly, services. And lest the old houses property taxes usually remain the stay vacant, the rent must decline same, or at least fail to decline in order to attract tenants in the simultaneously and to the same lower income brackets. This proc- degree. Consequently, the rate of ess of deterioration and declining taxation on market value tends to rent continues until the indigent rise. and improvident crowd the prem- The relationship between taxa- ises. Thus do mansions become tion and housing conditions is slums. through the fact that taxes con- stitute one of many factors of cost. Other Factors A man who builds a house for rent Aging buildings are unprofit- expects to be reimbursed by his able. The return on them, as with tenants for these taxes as well as other investments, is all the more for all other costs. Naturally, with- insecure because of the rapidity at out this reimbursement of cost he which the capitalist economy with would refrain from making the its advancing technology improves investment. Nor would he build living conditions. Toward the close the house for his own occupancy of the nineteenth century and dur- unless he expected value or satis- ing the first decade of this century faction greater than the costs, in- numerous improvements, such as cluding taxes. electric lighting, new heating sys- Rent, which is the price for the tems, bathrooms, elevators, and use of someone else's real estate the like, tended to outmode com- or housing facilities, is a market paratively new housing develop- price. Like the prices for all other ments and inflicted losses on land- commodities and services, rent is lords. determined by demand and supply. Another factor that contributes As is well known, costs do not to the unprofitableness of deteri- affect prices directly and immedi- orating houses is the property tax ately. However, when costs decline, which two or more superimposed production becomes more profit- governments —state, county, able, which in turn will increase school district, and others — levy on the supply and push prices down- land and houses. While rent income ward. On the other hand, when ===== PAGE 28 ===== 26 THE FREEMAN August costs rise, production becomes un- in other industries. In other words, profitable, the supply fails to in- the gross return on housing in the crease, and prices are pushed up- form of rent in many cases has to ward. be double the return on other in- The same is true in housing. vestments. This is why rents must When construction costs, real be relatively high before invest- estate taxes, or other costs rise, ment capital begins to flow into the house ownership becomes unprofit- housing industry. able. The supply fails to increase, High property taxes, therefore, which in turn tends to increase hamper construction activity and rent. When taxes are raised on old restrict the supply of housing, houses, it becomes unprofitable to which in turn causes higher rents. own them, or at least less profit- Consequently, housing throughout able, which reduces their market the nineteenth century was expen- value. This is true whether a house sive. While food and clothing be- is occupied by a tenant or by the came cheaper and many other owner himself. Every tax increase items that used to be luxuries be- inflicts on the owner a capital loss came accessible to American that amounts to a multiple of the workers, good housing often re- taxes. mained prohibitive. Therefore, many crowded into cheap housing Property Taxes Worsen Conditions facilities that looked like slums to Throughout the nineteenth cen- the planners. The advocates of pub- tury when government interfer- lic housing never mention this re- ence with other businesses was strictive aspect of property taxes greatly minimized, the general when they denounce capitalism. property tax was the basic local and state tax, and in many cases Rent Controls Hamper Construction amounted to several per cent of the A relatively recent cause of value of land and buildings. And, housing shortages and slum con- of course, property taxes are even ditions is rent control. The enor- more burdensome today than they mous inflation during and after were then. World War II tended to increase The restrictive effects of this all prices, including rent. But rents taxation are enormous. In order were arbitrarily controlled at pre- for a landlord to embark upon war rates while such costs as taxes, housing construction, his return labor, and materials increased must yield the tax rate in addition greatly. One reason why rent con- to a net return comparable to that trol has not been wholly disastrous ===== PAGE 29 ===== 1958 SLUMS AND MANSIONS 27 is that the controls have not ap- Mansions at Bargain Prices plied strictly to new housing built An interesting side aspect of this after the war. Nevertheless, to the problem is the deterioration of degree that rent control has been costly mansions built and occupied effective, it has discouraged the by wealthy people before the days production of housing, and has of redistribution. Confiscation of obliged many tenants to pay higher wealth, through inheritance taxes rather than lower rentals. and 91 per cent income taxes on top The dual burden of increased of 52 per cent corporation taxes, taxes and rent control means a has forced the sale of an increasing dwindling return to the landlord number of mansions. The former and a loss in the market value of occupants have sold their estates his real estate. In terms of depre- at whatever prices they could get ciating money, this may not be and have moved to more modest readily perceptible because his loss homes. may be hidden by inflationary price Heavy property taxes on man- rises. But in terms of purchasing gions and large estates have had power, his loss is real. He loses the twofold political appeal of rais- current income as well as capital. ing revenue and redistributing the Unless he wishes to play ostrich wealth. But instead, they have de- and pretend that nothing is hap- stroyed the object of taxation. pening, he must cut costs in order While taxes rose, prices tumbled, to re-establish the earning power until they amounted to a mere and value of his investment. This fraction of the original construc- is why many landlords have been tion costs. Needless to say, the con- doing so little to maintain or im- struction of mansions practically prove their properties, for such came to a standstill, and old man- expenditures may merely add to sions often fell into the hands of their losses. Houses subject to rent the taxing authorities. Many of the control and rising taxes inevitably old places have lost their splendor, deteriorate. Cities subjected to some standing vacant, others oc- rent control for several decades al- cupied by such tax-exempt organi- ways have deteriorated into huge zations as hospitals, schools, and slums.! charitable institutions. The prop- — erty tax thus failed in its fiscal ob- co pop Cseription of She Sffeets of So jective but eminently succeeded in Jouvenel’s No Vacancies. Single copy, its redistributive end. on request, from the Foundation for The development of a city is such Economic Education, Irvington-on-Hud- . son, N. Y. & that most of the houses in any ===== PAGE 30 ===== 28 THE FREEMAN August given district are of approximately involves large capital investment to the same age. Being subject to the purchase the old city blocks and same taxation and controls, theyde- to construct modern apartment teriorate together. As was pointed buildings. However, accumulation out at the beginning, the old ten- of capital in such amounts, by in- ants move on to more modern quar- dividuals or by companies, becomes ters and thus make room for other increasingly difficult under steeply tenants. It is hopeless for a single progressive income taxes and con- landlord to fight this change. Even fiscatory corporate taxes. The if he were to rebuild and modern- effect of such burdensome taxation ize his facilities, the demand would is to perpetuate the old slums. decline because the section is de- The Welfare State then seeks teriorating. High-rent tenants to solve the problem through hous- shun the most modern apartments ing projects that breed new slums. if they are located in a low-rent Thus government housing is slowly neighborhood. substituted for privately owned homes, and socialism advances an- other step. But socialism neither Rehabilitation of a “slum” usu- improves housing conditions nor ally proceeds by large blocks which otherwise alleviates the poverty of radically changes the appearance people; it enslaves and impover- of the district. Such redevelopment ishes them. ooo Rehabilitation of Slums IOEAS OK 008507 | Enclosures for the Careless THE AUTHORIZED FUNCTION of our government is to restrain those who might attempt to deal coercively with one another. The government was designed to be the defender, not the equalizer, of life and property. If a human being is ingenious and industrious, he can create a house and claim it as his own. If he is careless enough to let the government do it for him, he will live in the kind of walled enclosure which compulsory state socialism affords — public housing for those who serve political masters. PAUL L, POIROT, Public Housing ===== PAGE 31 ===== SPECTACULAR FIRE broke out in the city of New York on Valentine’s Day, and six fire fighters were killed. Two were members of the City Fire Depart- ment, and the other four were members of the Fire Patrol. Who are these Fire Patrolmen? They are men privately employed to fight water damage to property while the City Firemen are fight- ing fire with water. A group of nearly 200 fire insurance com- panies hire 180 patrolmen under an organization called the New York Board of Fire Underwriters. Re- sponding to fire calls from four points of departure and using their own trucks and equipment, patrol- men answer all fire alarms — which number about 20,000 yearly in New York. About $25,000,000 in water damage is said to be pre- vented each year by their efforts — about $140,000 per patrolman. Despite the hazards of such work, the Fire Patrol’s honor roll shows only thirty-two dead during the last hundred years. So four deaths in this one fire is a tragedy of note in their annals. As frequently happens, the pri- vate Fire Patrol on Valentine's Day arrived at the scene of the fire before the City Firemen did. In fact, twelve minutes after the first Dr. Harper is a member of the staff of the Foundation for Economic Education. This ar- ticle first appeared in The American Mercury. EAN. Y. Daily News Photo 29 % Fob. 14, 1958 ===== PAGE 32 ===== 30 THE FREEMAN August fire alarm sounded there was a them all, thereby reducing the cave-in which killed the four pa- cost of damage claims they trolmen. would otherwise all have to But the main point of this story pay. has to do with the processes of It is self-interest that motivates self-interest, self-reliance, and pri- persons to join voluntarily in the vate enterprise. The advocates of mutual insurance plan. It is self- more and more governmental serv- interest that induces the insurance ices frequently cite fire fighting as companies to join voluntarily in a a sure-fire justification for more fire patrol system. No outsiders and more governmental operations. are compelled to carry any of the They deny that private processes costs involved. In fact, as we shall could possibly do such work. see, outsiders also benefit. “What about fire protection?” It would be foolishly expensive they ask. “You wouldn't dare risk for each person to maintain his that social hazard to the whims own fire patrol. It would even be and selfish convenience of private foolishly expensive for each in- citizens, would you? For once a fire surance company to do so, having broke out, it would spread from to wait at the time of each fire to house to house because private see which company’s policy covers citizens would not concern them- the building that is burning — selves about it until their own whose patrol shall go forth to do house became endangered. So the job. The owner probably whenever any O'Leary cow kicked doesn’t remember which company over a lantern, entire communi- it is, and his insurance policy is ties would burn.” probably at the bank or perhaps The work of the New York Fire even in the burning building. The Patrol shows how a voluntary sys- building could burn to the ground tem of dealing with fires can oper- during any such delays, leaving ate under private endeavor. nothing for the patrolmen to do 1. Persons who want to insure when they get there. against fire losses rather than So the patrolmen answer every to carry their own risks take fire alarm promptly without wait- out policies in insurance com- ing to see which company carries panies and pool their risks with the insurance, if any. Such delay others. would negate their function. Un- 2. Insurance companies, banding insured persons thus get protec- together under a mutual inter- tion, too, and commonly reward the est, hire fire patrolmen to serve servers after the service has been ===== PAGE 33 ===== 1958 FIGHTING FIRES PRIVATELY 31 rendered — insurance of a sort, Yet the same persons are presumed with payment after the fact, on a to have sufficient wisdom to select basis somewhat different, to be from among their number a ruler sure, from when a person pays who will use political compulsion regular insurance premiums in ad- unselfishly and wisely. vance. The voluntary way of doing That is how private, voluntary things cannot, of course, perform enterprise takes care of part of the miracle of making people wiser this classic problem of fire pro- than they are. But the alternative tection service even in New York — the involuntary way of monopoly where a city fire department is force — prohibits us from attain- operating under a tax system to ing the full use of the limited wis- pay its costs. Self-interest causes dom with which we are endowed. private enterprise to find ways of One thing the voluntary method doing things more promptly and accomplishes, having almost the effectively than where the force appearance of a miracle, is to in- of monopoly is used to compel par- duce competitors to cooperate in ticipation. Why shouldn't inter- phases of their operations where it ested persons, motivated by self- is mutually advantageous to do so. interest, be more inventive and The fire patrol system is an excel- more sincerely devoted to the lent example of this wholesome as- search for better ways of doing pect of the voluntary way of ren- the job than are disinterested per- dering services. Competition does sons whose search is motivated not blind wise competitors to the primarily by political interests? opportunity of mutual advantage People left to their own devices in cooperation, wherever it is will not allow fire damage to per- deemed to exist. Competition sist without trying their best to means freeing competitors from devise ways of preventing it. the disadvantage of forced co- The miracle of the voluntary operation — a highly important way of pursuing self-interest in right of escape in a progressive no sense denies mutual assistance society of free persons. nor does it even preclude personal As an expression of respect and sacrifice. It may be argued that mourning for those four patrolmen people are too ignorant and short- who were killed rendering fire pro- sighted to serve their own inter- tection in New York on Valentine’s ests through voluntary mutual as- Day, let us ponder this lesson sistance; that this must be which might otherwise have gone accomplished by the political route. unnoticed and unlearned. eo o eo ===== PAGE 34 ===== Though this article was written in early June, based on statistics them available, its point still holds that sound economic policy requires — READJUSTRAENT | F THIS RECESSION should end soon tax cut would be piled on top of the without the government creat- $10-$12 billion deficits already in ing additional $7 to $10 billion in- sight for next year, thus creating flationary deficits financed by the further inflationary tinder of banks, there will be some red faces colossal proportions. It is to the around the country. Important credit of President Eisenhower voices have been warning us that and Secretary of the Treasury An- | catastrophe would strike unless derson that they resisted this pres- the government manufactures sure for a powerful, inflationary more spending money immediately stimulant now and decided to give and adopts “crash” programs. the economy a chance to make vol- Many legislators, including Sen- untary adjustments. | ators Humphrey, Douglas, and Many people have forgotten that Javits, have urged big, across-the- a free enterprise system has the board tax cuts or public works or capacity for self-adjustment if it both. Columbia University econo- is given half a chance. There is mists declared, “The first major now prevalent the theory that no policy step should be to cut federal readjustment of consequence taxes by about $10 billion a year.” should be permitted to take place. (Why not $15 billion — or is this How prevent it? Simply let the | just a number pulled out of a hat?) government print enough new The Committee for Economic De- money and create enough new de- i velopment recommended an across- mand to overcome all the ineffi- the-board tax cut which would ciency, the uneconomic wage rates, come to over $7 billion, and the the overpricing, the overoptimism Rockefeller Brothers Fund Report and malinvestment — in short, all made a similar recommendation. the economic distortion — that de- It must be remembered that def- veloped during the previous period icits resulting from a giant-sized of inflationary expansion. Mr. Fertig is a columnist on economic affairs, New York World-Telegram and Sun and other Scripps-Howard newspapers, in which this column first appeared Juno 9, 1958. 82 ===== PAGE 35 ===== LAWRENCE FERTIG WITHOUT INFLATION The only thing wrong with this published by the U.S. Department solution is that the new inflation- of Commerce says, “Personal in- ary impetus wears off just as the come in April, at a seasonally ad- last one did, and an increasing justed annual rate of $343 billion dose is urged to prevent a bigger was $13 billion above that of depression next time. March and up nearly $2 billion The factors of both demand and from April of last year.” People supply used to be considered of spent over $108 billion on services prime importance in a sound eco- in the first quarter of 1958 — $2 nomic system. But some people talk billion more than during the third as if this is no longer true. “Aggre- quarter peak last year. gate demand” is the only factor Personal consumption expendi- worth considering, they say. When tures in the last quarter were at recession sets in — whatever the the annual rate of over $281 bil- cause — just create enough demand lion, just a shade under $283.6 (by inflation, of course) and every- billion in the peak quarter of 1957. thing will be all right. Furthermore, people are curtailing The fact that current demand is their debts and putting aside more stifled because costs and prices are than ever in liquid savings. For in crying need of adjustment, and the first four months this year the that we have tried to go too far too nation’s 520 mutual savings banks fast, is claimed to be of little im- reported an $811 million deposit portance. gain, which was over 80 per cent Those who have been recom- higher than the same period last mending “crash” programs to in- year. In the face of these facts, can crease consumer income and con- it be claimed that people haven’t sumer demand must explain some enough money? interesting facts. People have Advocates of “crash programs” money, but they are using it in want to bolster the sale of con- their own way. sumer durable goods like automo- The Survey of Current Business biles and capital goods used in ===== PAGE 36 ===== 34 THE FREEMAN August plant and equipment for industry. pushing the cost of living index up. But if the public got a $7 to $10 As a consequence, would there not billion across-the-board tax cut, be a rising clamor for price con- can anyone predict where that trols? money would flow? Since rising costs and rising Consumers might still hesitate prices are a problem even during to buy more automobiles because this recession, the problem would they are not convinced that the be accentuated many times as the value is there. Businessmen might currency is increasingly inflated. still hesitate to spend more for new In this column a month ago we plant and equipment while prices said, “The big question is not will are so high and so much excess we get recovery — but will we get plant capacity exists. One thing it without injuring ourselves vi- is quite certain, though. A large tally in the process?” percentage of the new money “Will our remedies be worse would go into precisely those areas than the disease itself? After all, where rising prices are a grave our remedies adopted in the last concern to every family of workers, readjustment (1953-54) caused the thus increasing the upward pres- conditions which are responsible sure on these prices. for the present decline.” The The new money would seek to American public wants sound buy more services, more foods and progress —not temporary will-o’- soft goods, all of which have been the-wisp, inflationary prosperity. ® & 0° | 1meas om 0006agy | Fido, the State How PLEASED we were with little Fido! His very presence, and an occasional growl, left us free to pursue our interests, un- molested by thieves or other human parasites. But Fido is still growing, and more and more shows streaks of meanness toward us. He's eating us out of house and home, consuming more than ever had been taken by thieves. And worse yet, he considers himself our lord and master, so big and power- ful that we've no idea how to put him back in his place. Now we see where we made our mistake. Knowing little about watchdogs, we had bought ourselves a cub lion! L. E. R. ===== PAGE 37 ===== COMMANDING THE By David Smyth ® We do not expect the government to be able to repeal the laws of nature; why then do we expect it can repeal the laws of economics? THE LAWS OF NATURE MANY OF US who live in Buenos nity. But in a world like ours sub- Aires have only to look out of our ject to time, motion, and change, windows to see the vast expanse nothing can ever escape the gen- of the River Plate stretching away eral flux of things. The water level to the horizon. All of us are aware is constantly being altered by the that the waters of this great estu- interplay of natural forces — the ary, which extends 170 miles in- ebb and flow of the tide, for ex- land from the Atlantic and ample, and the varying volume of stretches 140 miles wide at its water pouring into the River Plate mouth, never stand at one unvary- estuary from its tributary rivers. ing level. Restlessly, ceaselessly, These changes are not capricious the water level rises and falls ev- or arbitrary. They are linked to- ery day. gether in a chain of cause and If somebody should say to us effect by irrevocable natural laws. that this variation is an awful When the attraction of the moon nuisance and ask why nothing is is stronger; the water level rises; done to keep the water at a con- when it is weaker, the level falls. stant level, we would answer that Nevertheless, the water level is the varying water level could only constantly tending toward the final reach the final state of rest he de- state of rest he considers so con- sires if the world were timeless venient; and if it were no longer | and ageless, standing motionless affected by the operation of natural and changeless through all eter- forces, it would in fact achieve | Mr. Smyth works with the Centro de Difusion de la Economia Libre, a libertarian organization in Argentina with aims similar to those of the Foundation for Economic Education in the United States. | 35 ===== PAGE 38 ===== 36 THE FREEMAN August this permanent level of its own place, you can tell him that the accord. But while it continues to irregularity in the variation of the be so affected, we must accept the water level is due to a natural variability of the water level as force of which the intensity is ir- inevitable because it is simply not regular. The height of the River in our power to repeal the laws of Plate answers very promptly to nature. changes in the wind. When a southerly or easterly wind pre- vails, the water piles back up in But suppose that your ques- the estuary, and consequently the tioner is a really persistent sort of level rises. When a northerly or fellow and replies that if the vary- westerly wind prevails, the water ing water level were really caused flows down the estuary faster than by natural laws, then its variation it can be replaced, and conse- could be predicted in advance with quently the level falls. The fact absolute certainty, just as in chem- that we cannot predict the rise or istry and physics the same cause fall of the level with absolute pre- must inevitably bring about the cision does not mean that it hap- same effect. Here, he alleges, it is pens arbitrarily; it simply means not so because sometimes the that we cannot accurately predict water level varies only a few the precise force, direction, and inches, other times several feet, duration of the wind, and conse- and occasionally there is a flood quently its exact effect on the vol- which drives the people living in ume of water pouring in from the the low-lying riverside suburbs out tributary rivers. If a strong south- of their homes and confines the east gale blows up and continues people up in the delta to their for several days, there will inevit- stilted houses. You cannot, he says, ably be a flood, and there is noth- explain such irregular variations ing the government can do about by the regular phases of the moon it. Obviously, the government can- or the fairly constant seasonal not decree that any wind above a variation of the inflow from the certain intensity is henceforth for- tributary rivers. These people, bidden. On the other hand, it is a however, are seriously harmed by simple matter of observation to see such floods, so why doesn’t the that the wind can only drive the government do something to pro- water level up just so far before tect them? its force and its effects are coun- As a matter of fact, this is an teracted by other natural forces, easy one to answer. In the first and that as soon as this happens, Fluctuating Tides ===== PAGE 39 ===== 1958 COMMANDING THE TIDES 37 which in all recorded experience of there will be a flood, law or no law, floods never takes more than a few and that will be the end of that. days, if left free to work itself out, But he may take it into his head to the water always subsides to its pass a law saying, “The govern- usual level. ment hereby guarantees that no But your questioner, as we have more damage will be caused by noted, is an obstinate sort of fel- floods in Buenos Aires.” Then low. He replies that while you are there is no end to the follies he so interested in the causes of the will embark on and the blunders floods, you are heartlessly ignor- he will commit as long as he re- ing their effects —the people fuses to recognize that the effects driven out of their homes in the he wants to eliminate are due to low-lying suburbs and marooned natural laws unrepealable by any on their stilted houses up in the government. delta. He, on the other hand, has He will exhaust the public treas- a social conscience and is inter- ury in building a dyke 170 miles ested only in preventing such mis- long across the mouth of the River fortunes befalling these unlucky Plate, so as to stabilize its level. people. “If I were the govern- He will then discover that the tidal ment,” he mutters, “I'd pass a law variation thus eliminated is only or something.” a couple of feet. He will also dis- cover that he is damming up the Flood Control inflow of water from the tributary Suppose now that this fellow rivers and that his dyke will raise ignores your warning that the laws the level of the River Plate estu- of nature are irrevocable and that ary to almost any level he chooses anything the government does to to block the inflow of water. So try and alter their effects without far from eliminating occasional first studying their causes and ac- floods, his dyke will thus guarantee cepting such causes as unrepeal- a permanent inundation. He will able laws can only bring about then put enormous flood gates in more harm than good. Suppose that his dyke and regulate the rate of by some incredible chance he outflow so as to maintain a con- should succeed in convincing the stant water level —and the next electorate that he can repeal the time a southeast gale blows up, it laws of nature, and that he there- will pile this water back up the upon enacts his law forbidding estuary just as it did before. He floods in Buenos Aires. The next will then run a whole series of in- time a strong southeast gale blows, ner dykes across the estuary to ===== PAGE 40 ===== 38 THE FREEMAN August block the path of the wind-driven ever-changing balance of natural backwash. And when this doesn’t forces and who will not claim gov- work satisfactorily, he will build ernment protection from their ill a wall twenty feet high round the effects. entire coast line. There will then be no end to the But by this time the farmers in- demands made on the government land will be objecting that if the for protection from every passing government is spending such enor- natural phenomenon, and there mous sums of public money —to will be no limit to the government's which they have contributed — on follies and bungling and compro- protecting Buenos Aires from mising and fruitless meddling and floods, why does it not spend a squandering until the total bank- cent on protecting them from ruptcy of the country demon- drought, cyclones, hailstorms, ero- strates once and for all that no sion, and so forth and soon? There government of mortal men can is not a person in the country who ever repeal or ignore or modify is not apt to be harmed by the the irrevocable laws of nature. THE LAWS OF ECONOMICS MANY OF US who live in Buenos less, standing motionless and Aires have only to look out of our changeless through all eternity. windows to see the vast pampas of But in a world like ours subject to Argentina stretching away to the time, motion, and change, nothing horizon. All of us are aware that can ever escape the general flux of the prices of goods in this great things. The price level is constantly country, which extends 1,000 miles being altered by the interplay of from east to west and stretches economic forces — the ebb and flow 2,600 miles from north to south, of demand, for example, and the never stand at one unvarying level. varying volume of goods pouring Restlessly, ceaselessly, the price into the market from the sources level rises and falls every day. of production. If somebody should say to us These changes are not capricious that this variation is an awful or arbitrary. They are linked to- nuisance and ask why nothing is gether in a chain of cause and done to keep prices at a constant effect by irrevocable economic laws. level, we would answer that the When the attraction of demand is varying price level could only reach greater, the price level rises; when the final state of rest he desires if it is weaker, the level falls. Never- the world were timeless and age- theless, the price level is constantly ===== PAGE 41 ===== 1958 COMMANDING THE TIDES 39 tending toward the final state of ment do something to protect rest he considers so convenient; them? and if it were no longer affected by As a matter of fact, this is an the operation of economic forces, easy one to answer. In the first it would in fact achieve this per- place, you can tell him that the manent level of its own accord. But irregularity in the variation of while it continues to be so affected, the price level is due to an eco- we must accept the variability of nomic force of which the intensity the price level as inevitable because is irregular. The height of the it is simply not in our power to price level answers very promptly repeal the laws of economics. to changes in supply and demand. } } When a strong demand prevails, a Fluctuating Prices backlog of unfulfillable orders piles But suppose that your ques- up in the market, and consequently tioner is a really persistent sort the price level rises. When an of fellow and replies that if the abundant supply prevails, goods varying price level were really flow into the market faster than caused by natural laws, then its there are orders for them, and variations could be predicted in consequently the price level falls. advance with absolute certainty, The fact that we cannot predict just as in chemistry and physics the rise or fall of the level with the same cause must inevitably absolute precision does not mean bring about the same effect. Here, that it happens arbitrarily; it he alleges, it is not so because simply means that we cannot ac- sometimes the price level varies curately predict the precise force, only a few cents, other times direction, and duration of the de- several dollars, and occasionally mand, and consequently its exact there is a steep rise which drives effect on the volume of goods pour- people in the lower income groups ing in from the sources of pro- to stop buying and restricts buy- duction. If a strong demand arises ing by people in higher income and continues for some time, there groups. You cannot, he says, ex- will inevitably be a steep rise in plain such irregular variations by prices and there is nothing the gov- regular variation in demand or the ernment can do about it. Obvi- fairly constant variation in the ously, the government cannot de- supply from the sources of pro- cree that any demand above a cer- duction. These people, however, tain intensity is henceforth for- are seriously harmed by such steep bidden. On the other hand, it is a rises, so why doesn’t the govern- simple matter of observation to see ===== PAGE 42 ===== 40 THE FREEMAN August that the demand can only drive the repeal the laws of economics, and price level up just so far before that he thereupon enacts his law its force and its effects are coun: forbidding price rises in Buenos teracted by other economic forces, Aires. The next time a strong de- and that as soon as this happens, mand blows there will be a price which in all recorded experience rise, law or no law, and that will be of rising prices never.takes more the end of that. But he may take than a short period if left free to it into his head to pass a law say- work itself out, the prices always ing, ‘The government hereby subside to their usual level. guarantees that no more harm will But your questioner, as we have be caused by price rises in Buenos noted, is an obstinate sort of fel- Aires.” Then there is no end to low. He replies that while you are the follies he will embark on and so interested in the causes of the the blunders he will commit as price rises, you are heartlessly ig- long as he refuses to recognize that noring their effects — the people the effects he wants to eliminate forced to stop buying in the lower are due to economic laws unrepeal- income groups and restricted in able by any government. the higher income groups. He, on He will exhaust the public treas- the other hand, has a social con- ury in setting up a price control science and is interested only in bureau with 170 separate depart- preventing such misfortunes be- ments across the entire market, so falling these unlucky people. “If I as to stabilize its level. He will were the government,” he mutters, then discover that the variation “I'd pass a law or something.” thus eliminated is only a couple of points. He will also discover that Price Control he is damming up the inflow of Suppose now that this fellow goods from the sources of produc- ignores your warning that the laws tion and that his price control bu- of economics are irrevocable and reau will raise the level of prices that anything the government does to almost any level he chooses to to try and alter their effects with- block the inflow of goods. So far out first studying their causes and from eliminating occasional price accepting such causes as unrepeal- rises, his bureau will thus guaran- able laws can only bring about tee a permanent increase in prices. more harm than good. Suppose He will then put enormous stabi- that by some (not so incredible) lizers in his price control system chance he should succeed in con- and regulate the rate of production vincing the electorate that he can so as to maintain a constant price ===== PAGE 43 ===== 1958 COMMANDING THE TIDES 41 level — and the next time a sudden demand, high interest rates, low strong demand arises, it will pile dividends, insufficient wages, and up a backlog of unfulfillable orders so forth and so on? There is not a in the market just as it did before. person in the country who is not He will then run a whole series of apt to be harmed by the ever- price ceilings across the economy changing balance of economic to block the path of the demand- forces and who will not claim gov- driven backlog. And when this ernment protection from their ill doesn’t work satisfactorily, he will effects. put armies of price inspectors There will then be no end to the 20,000 strong round the entire city demands made on the government limits. for protection from every passing But by this time the population economic phenomenon, and there of the rest of the country will be will be no limit to the government’s objecting that if the government is follies and bungling and compro- spending such enormous sums of mising and fruitless meddling and public money — to which they have squandering until the total bank- contributed — on protecting Bue- ruptcy of the country demon- nos Aires from high prices, why strates once and for all that no does it not spend a cent on pro- government of mortal men can tecting them from monopoly, com- ever repeal or ignore or modify petition, lack of capital, lack of the irrevocable laws of economics. | 10846 ©n wocevY | The Way of Persuasion WHEN WE HEAR a statesman say that no man has a right to be wrong, when we pay those who rely on the method of force the compliment of imitating them as we do when we say that we cannot combat totalitarianism except by totalitarian methods, when in the professed interests of security we are in danger of destroying the way of life which we want to protect and thereby of undermining the national security which we wish to safeguard, freedom and science are in danger and it behooves their friends to gird on their armor. The way of persuasion is hard and long but it is the only way of hope for a tortured and perplexed humanity; for we cannot bring about a desirable state of affairs by means which are inconsistent with the end which we pursue. A. MACBEATH, A Plea for Heretics ===== PAGE 44 ===== MRS. H. L. WITMER These heartening comments by the chairman of the Women’s Committee of the Iowa Farm Bureau Federation were presented at a banquet in Washington on April 15, 1958, for members of the Iowa congressional delegation. E IN THIS ROOM, with the ex- We know what it is to be tired ception of our guests, are ac- and discouraged and the next tively engaged in farming. We thing to broke, but we also know know what the world looks like the thrill of being close to nature, just before sunrise, and we know of working with live animals, of what it is to sit on a bale of straw producing with our own hands and through a long cold night to help the help of God, the food that is save the life of a little calf or of a necessary to the world. And we litter of pigs. We know the feel of know what it is occasionally to hit soil in our hands before it has be- the market when it is up and get come warm in the spring, and we more for a product than we had know what the hot July sun feels anticipated. like beating down on the back of We believe in farming as a a working person. family operation, and we wish that Most of the tractors on our every young person who wants to farms are lady broke. We know make agriculture his career could what is being planted in the north- have the opportunity to do so. east 40 this spring, and we know Of course, we are concerned whether or not the new alfalfa about farm income, but we are seeding came through the winter. even more interested in the future 42 ===== PAGE 45 ===== 1958 A WOMAN'S VIEW OF FARMING 43 we are bequeathing to our sons We are not half as afraid of and daughters and to their sons Russia’s might and productive and daughters. power as we are of the panic dis- Are we going to pass on to them played by many in government and a business hamstrung by ineffec- many citizens with every new blast tive controls and regulations? of propaganda. Will the freedom of farmers to How often have you heard these farm at their best disappear as so statements: many of our freedoms have dis- “Russia is outstripping us. Let appeared, almost unnoticed ? the government take over the edu- Will they have the opportunity cation of our scientists.” to live in a great democracy as we “The government must build have, the right to work and play, more roads.” to win and lose, the right to plan “We must set up trade barriers their own future according to their to keep out competitive foreign individual desires and abilities? goods.” Things are happening in Wash- “We have to have federal aid ington which we feel will destroy to education. We can’t educate our these freedoms if they are not kids ourselves.” checked. And the latest: “Russia has pro- It has become the great Ameri- duced more hogs than America.” can pastime to gripe, and we find Our tremendous inflationary ourselves criticizing as well as spiral has slowed up. We are in praising our government. trouble. Most of us are not educated in We are being out-propagandized economics, but we do not believe by Russia. that it takes an expert to know We are, because the American that none of us can go on year people pick up and echo in mourn- after year spending more than we ful voices the latest claims. earn, and that when certain mem- We are smart enough to know bers of the family keep demanding that you who represent us can give more than the budget will bear, us nothing which we have not first either something has to give or given you and that in the transfer those members will have to get from us to you and back again we busy and figure out how to get losea lot; and we know that if you what they want for themselves, or furnish the money, you will want do without. We know we must con- to help us make decisions, and we stantly cut corners and manage will thus lose a bit more of our better. freedoms. ===== PAGE 46 ===== 44 THE FREEMAN August If we are real honest with our- We believe in America and the selves, we know that so long as we American way of life. have the large sums of money we Agriculture is our business and spend on cosmetics, cigarettes, soft farming is our future. With ad- drinks, liquor, and the like, we justments and changes brought on should be able to finance our by a rapidly changing world, we schools. believe that the family type farm We know that every bureau that is here to stay. is set up, even on the temporary And we believe that there's life basis, is likely here to stay and in the old girl yet, if we take away make big government even bigger. the sedatives and tranquilizers and We want you to know that we give her the stimulus of freedom will do all we can to help you rep- to decide, competitive markets, and resent us in a way that will at least foreign trade. check the loss of our freedoms. This is the future we hope to We believe that you want to keep bequeath to our children, and we America the great free country will help you in any way we can she has always been. to accomplish this goal. ® 00 Get the Government Out! QUESTIONNAIRE returns from 2,016 to a free supply-and-demand sys- readers of Farm and Ranch maga- tem, as soon as possible, with mini- zine, reported in their July 1958 is- mum government control. sue, show the followin Its: © 2 results 85.0% said: Public utilities should be 72.2% said: Cooperatives should be developed and operated by private taxed, nationally and locally, on companies instead of by the gov- same basis as corporations. ernment. 63.2% said: Postal rates should be raised (including rates on maga- zines) to enable the Post Office Dept. to break even. 80.9% said: States should run their own schools without interference from federal government, and fed- eral aid to schools should be 73.1% said: Government should not stopped. guarantee support prices at 90 to 76.3% said: Federal aid to states 100 per cent of parity and control means extravagance, high taxes, production on major crops. waste, and federal control. It 87.6% said: Farming should return should be stopped. ===== PAGE 47 ===== WHAT'S IN A NAME ? R. C. MCCORMICK S YOU VISIT India, you soon be- Nehru was highly successful as come cognizant of the fact the amalgamator of India. But, as that Nehru is a virtual dictator. the dictator of India, his is a hand You read from Nehru’s pen of his of putty. Politicians in high places fascination for communism as the have been woefully dishonest, but only “scientific” plan of living few are punished or even dis- known to him. He does not believe missed. Pay-offs are rampant. A in the sanctity of property though person has no assurance that a history has proven over and over parcel would be delivered safely that whenever a government takes through the mail. The tiger skin from a man his well-earned prop- you wish tanned must be taken erty, it also takes away his free- personally to the tanner in a dis- dom. tant town. A small gift to be sent If you are fortunate, as I was, to a friend is first machine stitched your traveling companion might in a burlap bag, then a row of hand be a former ruler of a large area overcasting around the bag, after in India, an intimate friend of the which the merchant wax-seals the Queen of England and of Nehru corners — all to discourage theft of himself. This man might tell you the contents. The only phrase to how he had questioned Nehru describe such a situation is dis- about allowing the Communist honest government. party to exist openly in India. (One You wish there were some way state today is managed by the to explain to Nehru and his sup- communists, by the precarious porters that it doesn’t necessarily margin of one vote.) Nehru re- discredit communism to practice plied to the effect that communism all of its evils under some “more is an emotion sweeping the world scientific” label. You can steal the and that it would be poor politics communism machine and paint it to try to exclude it from India by a different color. But, strip off the force. He would hope to discredit paint, and it is the same machine, communism by devising a more built to direct the energies of all “scientific’’ plan for social living. men by force. [JC Mr. McCormick, businessman from Wichita, recently completed a trip around the world. This article records some impressions of India. -~ 45 ===== PAGE 48 ===== SOME COMMENTS ON UROPEAN ECONOMIC INTEGRATION WILHELM ROEPKE A generation ago, Alfred Marshall said that it is difficult for an economist to be at once a good patriot and to have the reputation of a good patriot. Economic sense urges the trained mind to seek national welfare in measures that are sure to be rejected by superficial patriots; enlightened patriotism, for instance, often calls for free trade rather than national barriers. What Marshall said is true still; and more, it is not easy for an economist both to be a good European and to have a reputation as a good European. Mere enthusiasm will not suffice efforts toward European economic to accomplish the desired Euro- integration, feels impelled to put pean unity. Enthusiasm, true the case of economic sense without enough, is indispensable for over- a sugar coating. In doing so, I do coming the obstacles that still are not intend to discourage the po- in the way of a united Europe, but litical enthusiasm at work in the here patriotism alone is not European endeavor; but I indulge enough. European patriotism —if the hope of serving the best in- it is not too soon to use this phrase terest of Europe by contending —needs to be guided by good against errors and illusions. sense, lest damage be wrought by a well-intentioned but misguided Regional Free Trade: impatience to see things done. This @ Two-Faced Proposition applies especially to the economic Several questions arise, and are realm; and this is why the present put here in order of their impor- writer, an economist who has sym- tance. The most important is this: pathy and understanding for the In what circumstances will the Professor Roepke teaches at the Graduate School of International Studies, the University of Geneva. This essay was a lecture to the Tenth Anniversary Meeting of the Mont Pelerin Society at St, Morits, Switzerland, and was first publishod in Modern Age, Spring 1958. 46 ===== PAGE 49 ===== 1958 EUROPEAN ECONOMIC INTEGRATION 47 contemplated common market — wvantages over the more ambitious whether it be the economic and one. tariff union of “Little Europe” Moreover, it is obvious that the (the six Messina countries) that benefits of an internal trade liber- is meant by the phrase, or the alization are offset to the extent looser “Free Trade Zone” of all to which barriers are erected OEEC countries — bring about the against third countries. The small- expected benefits from a more ad- er a country and the greater its. vantageous trade, a more advanced dependence on foreign trade be- division of labor, and a general cause of density of population and European increase in wealth? To intensity of economic activity — ask this question is to correct the the rule in Western Europe — the widely-held unqualified view that more such a country will be sub- these benefits are to be expected jected to a wholesome compulsion in any event; and that any re- to encourage free international gional removal of tariff barriers, trade relations and to moderate its in liberating trade and increasing own protective policies. Thus wealth, would differ only in quan- Switzerland, the Netherlands, and tity (not in quality) from a gen- Belgium are known as low-tariff eral abolition of trade barriers. countries. If now several such In point of fact, this view is quite countries unite to form a common erroneous, and it is of the greatest economic area, there is a certain importance that this should be chance — which is yet to be ex- recognized. amined in detail — that a more ad- For one thing, it is quite clear vanced division of labor and econ- that the expected benefits will be omies of scale will help to in- the greater the more countries crease productivity in that area. join in the contemplated exercise. Against this chance, there is the Since the more ambitious proposi- danger that economic nationalism, tion, that of an economic and cus- which is more virulent than ever, toms union, is even in the most will make tariffs and other bar- favorable circumstances not likely riers against the outside world go to be achieved over the whole geo- much higher. graphical area, a Free Trade Zone could well cover it (being a mere Possible Disadvantages preference system without a uni- Where such a disadvantage out- fied external economic policy), it weighs the benefits — and this pos- stands to reason that the less am- sibility is anything but an aca- bitious scheme has decided ad- demic concern in Western Europe ===== PAGE 50 ===== 48 THE FREEMAN August — the whole scheme may prove to line of least resistance — is agreed be a catastrophic misfire. Terms upon. This is exactly what is hap- like “Common Market” and “Free pening, unfortunately, in the ne- Trade Area” become catchwords gotiations about the Common which serve to concentrate our at- Market of the Messina countries, tention on the internal goings-on with France as the country which and — similar to the catchword of pushes the common tariff up. In “Empire Free Trade” which Lord consequence, the Netherlands, Bel- Beaverbrook used to propagate a gium, and Germany, which had closed Commonwealth economy — raised its tariffs —some exces- excuse the suspicion that it is sively, only a few years ago — must their purpose to serve as a red accept not only considerably high- herring or to camouflage the whole er protection against third coun- thing. What happens if the ex- tries but even tariffs for raw ma- ternal tariff of a common market terials which have so far been is higher than the previous na- duty free. If this danger, with its tional tariffs of a number of par- very serious implications, cannot ticipating countries is that the in- be averted, it would be a lot better ternal “common market” (if, in- to drop the whole scheme of a com- deed, it is real and not itself mon external tariff, and try to partly fictitious) comes into ex- achieve European economic inte- istence at the cost of a “less com- gration solely by the OEEC’s mon’ external market. method of establishing a “Free Trade Area,” despite the embar- The Line of Least Resistance rassing complications (continu- It is for several reasons very ance of Intra-European frontier much to be expected that a cus- controls, certificates of origin, and toms union will adopt a common the like) which this less ambitious tariff whose rates are higher than system would entail. they used to be on national levels. The ever-present danger of in- Internal Freedom—External Seclusion creased external barriers is par- A third point requires consider- ticularly grave in cases where one ation if one tries to drop wishful of the uniting countries is greater thinking and get a sober idea of than most others, of considerable the actual possibilities of Euro- political weight, and with a pro- pean economic integration, a point, tectionist tradition, and where this it is true, which is a lot more dif- country refuses to join unless a ficult to render plausible than high common tariff — the natural those made go far. At first sight ===== PAGE 51 ===== 1958 EUROPEAN ECONOMIC INTEGRATION 49 it looks like a paradox: Even with- and 342 of February 5 and 6]) and out external barriers, regional the effect is that the Swiss watch- free trade may disturb rather than making industry can enter into help international trade. The idea free competition with German and seems less paradoxical as soon as French watchmakers in the Ger- . we realize that any system of re- man and French markets. So far, gional free trade —be it a cus- so good. In this event, those two toms union or a preference system competing countries will probably — is two-faced; while it means in- have to put up with a considerable ternal freedom, it brings about ex- curtailment of their watchmaking ternal seclusion. While a producer industries in favor of Switzerland, in country A, who so far had to while in Switzerland the same will overcome the tariff barriers of happen to other industries. These country B, is now able to compete shifts of industries to the most freely with the producers there, a profitable location, though painful producer in country C, which re- to the affected producers, bring mains outside the free trade sys- about that increase in over-all pro- tem, may have to give way to ductivity which is the purpose of country A’s producer in country any economic integration. It is, B’s market as he has to overcome however, quite a different propo- a tariff barrier which does not sition if one Swiss producer found exist for the latter. While one door it more profitable, in the past, to is opened, another is closed. buy crude silk from Japan rather than from Italy, but is now com- pelled to resort to a less advanta- The one thing that matters is geous source of supply, as under thus whether more doors are op- the new arrangement Japanese ened than are closed, whether or silk would be subject to a duty not the effect of liberalization out- while Italian silk would not. In this weighs the effect of seclusion. Let case, regional “free trade” would us take a concrete example. Let us result in the substitution of a less suppose a common market is es- favorable for a more favorable tablished — which Switzerland flow of trade. International divi- could in any case join only as a sion of labor would be less advan- member of a Free Trade Zone (a tageous than before, and “free point made recently in the excel- trade”would be little less than the lent series “Switzerland and the facade of a very clever protec- European Economic Integration” tionism. [Neue Ziircher Zeitung, Nos. 331 The more the average benefits Gains vs. Losses ===== PAGE 52 ===== 60 THE FREEMAN August to be derived from a customs union “inside” producers and not sup- promise to outweigh its setbacks, plant equally or more efficient “out- the greater will be the anticipated side” suppliers; in other words, unshackling of international trade there will be good prospects for and the resulting improvement in an improved international division the international division of la- of labor. If, however, the national bor. But if things work the other economies are complementary way, the fusion will be a mere rather than similar, the outlook make-believe and quite a disap- is not so bright, as.witness the pointment. Which turn events will former economic union of France take depends on the circumstances, and Indochina, under which Indo- which in the case of the present china had to buy the more expen- European integration require very sive industrial output of France thorough examination —more instead of getting cheaper sup- thorough than the heat of prep- plies from Japan. If the sense and arations so far permitted. purpose of international trade is The over-all balance of the in- to allow for a more advanced divi- tegration, when seen from this sion of labor, it stands to reason angle, will be the more favorable, that a customs union of comple- the lower the external tariffs are. mentary economies will result in It has already been mentioned an artificial and wasteful distor- that the contemplated common tion of the already existing inter- market does not look promising in national division of labor, where- this respect, and this will be hard- as a union of competing economies est on those countries which have permits a regrouping of production particularly close trade relations which will ensure the desired high- outside the common market area er efficiency that an improved in- (e.g., the Netherlands). ternational division of labor is ex- pected to bring about. Compatibility of Participants As far as this is concerned, Eu- Another important feature ropean integration certainly seems which will decide whether the ef- promising. But there is something fect of freedom or that of seclu- else to be taken into account: Even " sion will prevail is the economic in favorable circumstances a fu- structure of the countries involved. sion will be trade-diverting rather If there is a great similarity, so than trade-creating if the aboli- much the better, for then it will tion of tariffs is riddled by ex- be likely that “inside” producers emptions, with the result that will take the place of other, weaker goods which are in any case ===== PAGE 53 ===== 1958 EUROPEAN ECONOMIC INTEGRATION b1 bought from third countries are ma of any regional (as against a duty-free, while goods produced in- universal) abolition of tariffs. To side the union’s territory remain mitigate hardships, a very compli- protected. As trade-creating tariff cated apparatus has been designed reductions will hurt inside pro- at Brussels with the purpose of ducers, while trade-diverting re- assisting the necessary adjust- ductions operate against outsiders, ments in the affected industries. it is only to be expected that the Apart from the general considera- items which will be freed in the tion that such a device will add to course of a step-by-step abolition the already strong ‘planning ele- of tariffs will be so selected that ment” in the whole setup, the ex- the over-all effect is trade-divert- perience so far gathered in the ing rather than trade-creating. If coal and steel community with a customs union is to fulfill its such a ‘death-bed insurance” is purpose, namely, to increase the not exactly encouraging. over-all gross regional product, the abolition of tariffs must hurt, Other Major Problems and that is precisely why it is so As any customs union has two difficult to get it done. It follows faces, it becomes understandable that a common market in Europe why this is a proposition in which can in good faith only be advo- both free-traders and protection- cated if it provides for as nearly ists hope to win their case. Who as possible a complete ‘“commu- actually wins depends, as we have nity.” Otherwise, a general reduc- seen, on the way the union is set tion of tariffs for the benefit of up, and it is for this very reason all supplier countries would be that our judgment of the economic preferable. merits of the contemplated com- A nearly complete abolition of mon market — bound up as they tariffs, without which a customs are with the political merits and union will not yield its full eco- demerits — must be kept in abey- nomic benefits, is for political and ance. We will not, however, deny psychological reasons very difficult that there seems to be more ground to achieve; in addition to this it is for pessimism than for optimism. an economic tour de force which If the common market is to fulfill has little to recommend it. On the its promises, if it is to be a real other hand, it has been shown step ahead toward a genuine and that a too timid advance will fail productivity-increasing integra- to produce the full economic effect tion of the various national econo- of the exercise. This is the dilem- mies, then it must meet require- ===== PAGE 54 ===== 52 THE FREEMAN August ments which are far above what to disregard for economic sense. has been planned to date and which Another danger became appar- probably have little chance of be- ent when the French demanded a ing met anyway, as they exceed “harmonization” of labor cost, in the limits of what can possibly be particular welfare burdens, to pre- done in a customs union. If they cede the actual setting up of the cannot be fulfilled (particularly common market; in other words, the requirements of low external all other countries were asked to tariffs and a far-reaching tariff re- hoist their labor costs (wages and duction), it would be better to con- welfare expenditure) up to the fine the present efforts to the less French level. It should not be ambitious scheme of a regional necessary to point out that this preference system (Free Trade demand for an a priori harmoni- Zone) or to devote the more en- zation of labor costs is incompat- ergy to the liberalization of trade ible with the most elementary con- so far pursued in OEEC and clusions of political economy and GATT. No less strange than the is for its economic insight on a fact that preference systems and level with the request of American customs unions are a field where protectionists to be shielded economic nationalism and interna- against imports from countries tionalism meet, is another: the with lower wages by a tariff that project of the common market is makes up the difference. No re- a combination of tendencies to- sponsible economist has ever ward both a market economy and claimed that free trade presup- economic planning. poses equal costs of labor (or capi- tal), as this is not even true in a Protecting the Inefficient national market. On the contrary, The story of the establishment it is free trade that will reduce of the Coal and Steel Community existing differences of labor and repeats itself; it is as necessary capital cost. This applies even now as it was before to be watch- where free movement is limited to ful lest the “common market” turn commodities, and will apply even into a “common dirigism.” It has more when the migration of man- already been stressed in another power and the flow of capital are contact that this danger — par- just as free; this, of course, marks ticularly as regards a European the ultimate highest degree of in- control of investment — must not tegration which Europe, with all be underrated. Here as elsewhere, its good intentions, will be able to political enthusiasm may well lead reach only after long development. ===== PAGE 55 ===== 1958 EUROPEAN ECONOMIC INTEGRATION 53 Let us hope we would wrong the The Basic Problem Remains propagators of this French posi- Thus the French demand for a tion, were we to assume that they “social harmonization” really are lacking this elementary in- means something quite different. sight. The problem is not quite so For one thing, it is guided by the simple. The cost of labor (wages quite correct conclusion that and social benefits) in France, French wage and welfare policies, which today appears higher than highly inflationary because partic- in other countries (on the basis ularly oblivious of economic re- of the existing rates of exchange) ality, have created a serious dis- does not indicate a corresponding equilibrium in the national econ- superiority in productivity; it is omy which must be put right if even less a measure of productiv- there is to be anything like a gen- ity than in other countries. French uine common market. On the other wages and social benefits have hand, it implies that equilibrium rather been pushed up and out of is to be restored along the line of proportion with productivity by least political resistance which political and social forces, partic- happens to be at the same time the ularly in the more recent past, with line of least economic sense. The the result that they have become most reasonable and fair pro- a spearhead of inflation, as in cedure would be for France to ad- other countries, only more so. just its fictitious rate of exchange Since France has thus become the to the inflated internal cost-and- country where this process has price structure — in other words, been going on with most momen- to devalue the franc in the face of tum, inflationary pressure there all political and rhetorical make- has become stronger than else- believe, to abolish the system of where, so that the country suffers import obstacles and export aids from a chronic and quite severe — which will become unnecessary balance of payments disequilib- — and forthwith keep wage rounds rium and its gold and exchange and social benefits within reason- reserves flow to countries with a able limits. Instead, the spokes- lower inflationary pressure, in men of France insist that there particular Germany. How bad this will be no devaluation, that the is will be seen from the fact that system of import obstacles and ex- the situation cannot be even tol- port aids must be retained to the erably redressed by a system of maximum extent even in a common import obstacles, deliberalization, market, and that their own wage and export subsidies. and welfare policies must be imi- ===== PAGE 56 ===== b4 THE FREEMAN August tated by other countries which ugly skeleton has been passed over have so far been more moderate in eerie silence during the recent in sinning. common market negotiations. What this means should be quite clear. It means that the indispens- able minimum of an international It need not be explained to those balance in the union is to be se- Who know the story that the real cured by making the highest in- question is this: How can free flationary pressure —the “mar- trade in Europe be conducted with ginal pressure” of inflation, as one countries which, by their economic might call it—the standard for policies, allow an inflationary all. Thus “social harmonization” pressure to develop that will dis- means in the last analysis “harmo- turb the balance between the vari- nization of inflation.” This would ous national economies and thus set a precedent for all later in- create conditions which are incom- stances in which one single coun- patible with the restoration of free try would be permitted to dictate currency convertibility? That this the pace in inflationary wage and problem has not been solved, not Monetary Discipline Needed welfare policies. even by the European Payments Union will be seen from the fact An Ugly Skeleton that the EPU can only keep itself This example is highly instruc- going by tolerating contraventions tive. It indicates the direction in against the principle of free trade, which a solution will be sought in of which those of France are the the future common market for a most serious; by a continuous flow general problem which has from of gold and foreign exchange from the very beginning been the cen- high-pressure to low-pressure tral problem of European economic countries, and by the not unlim- integration, a most uncomfortable ited compulsory credit granted by subject which has again and again those countries which have ex- been ignored or pushed beneath ternal surpluses; the most im- the surface only to come up again, portant creditor country being like a dead body one throws in the Germany. There just is no ersatz river in the fond belief that that for convertibility, or rather for is the way to get rid of it. It will the conditions which alone render not help either to tie stones to it, the free convertibility of curren- not even as weighty ones as the cies possible, viz.,, equal monetary European Payments Union. It is discipline of all countries, unless, again significant to note that this of course, a hardly tolerable ===== PAGE 57 ===== 1958 EUROPEAN ECONOMIC INTEGRATION 55 amount of obstacles to trade or in an equal and high monetary else freely fluctuating rates of ex- discipline by all parties who would change are preferred. take up a determined fight against In trying to create today a com- the inflationary tendencies of our mon market — even for capital — time and thus get ready for con- in Europe, and in considering it as vertibility. But this is unfortu- substitute for the listlessly aban- nately not likely to happen. Now doned aim of convertibility, one that, furthermore, the latest ex- should realize that it is impossible ample of Germany and France has to have all of the following three shown how hard it is to get a things: free trade, national dif- country to revalue or devalue its ferences in monetary discipline, currency, even if all circumstances and stable rates of exchange. One speak for such a step, it is not of them must be sacrificed, as will likely either that the solution eventually be found out, and we would be sought in an adjustment can only consider which combina- of rates of exchange which would tion is most advisable and likely rank second in the order of desir- to be achieved in practice. In other ability. words: What is the best thing to do and what will probably happen Taking the Brakes Off Inflation if there are serious balance of If, therefore, the common mar- payment difficulties within the ket is not to become a farce but a common market? Should uniform- serious reality without a new “see- ity in monetary discipline be aimed saw of liberalization,” the most at and is it likely to be achieved? likely thing to happen — in par- Or should a restoration of the bal- ticular if we think of France — is ance rather be sought in an ad- a solution sought or at least ac- justment of rates of exchange? cepted along the line of least po- litical and social resistance, name- Little Prospect for Sound Action ly, a general adjustment to the This should be the subject of a highest existing degree of infla- long and useful discussion. How- tion and to the lowest existing ever, there can be hardly any monetary discipline. That is the doubt as to what would be desir- road on which we are already able and what is likely, and it is traveling, albeit with brakes which unfortunately already quite clear will then disappear. Just as there that that will not be one and the is a danger that the common mar- same thing. It is most devoutly to ket will give rise to common regi- be wished that a solution be sought mentation, with so much less ex- ===== PAGE 58 ===== 56 THE FREEMAN August ternal “community” of markets, will run into a balance-of-pay- there is another danger that the ments deficit and external illiquid- outcome may be a common infla- ity as a direct consequence. The tion. smaller a country is — let this be The problem of European eco- repeated —the more it must rely nomic integration should not make on foreign trade, and the less it is us forgetful of the existing threat relieved from its responsibility for of inflation. Fortunately, brakes consequences of its policies, the and counter-forces are not lacking more effectively the brake will op- so far. As Dr. M. W. Holtrop, pres- erate. The credit arrangements of ident of the Bank of Netherlands, the European Payments Union recently pointed out in a remark- served rather to weaken this brake able lecture at Brussels, the most to some extent. The common mar- effective and anti-inflationary im- ket, as it seems at present to take pulse comes from the fact that a shape, threatens to put it alto- country which goes rather too far gether out of operation. Who dares in its lack of monetary discipline take this lightly? CRI We invite your subscription to MODERN AGE A CONSERVATIVE REVIEW VoL. 2, No. 3 (Summer 1958) Edited by RusskLL Kirk ARTICLES BY JOSE ORTEGA Y GASSET, Otro Von Harssunre aN Freperick D. WiLHEMSEN Three dollars per year One dollar per copy Address: FounpaTion ror ForeicN AFraIrs, INc. 64 East Jackson Boulevard, Chicago 4, Illinois Free sample copy with each subscription ===== PAGE 59 ===== OU AND I share with all man- kind a common want —a com- * mon quest. It is the search for hap- C S piness. Buddhist, Christian, Mo- hammedan — we all pursue it in our own fashion. If and when we reach another HuGHSTON M. McBAIN planet inhabited by other beings, I'm sure we'll find they, too, seek If you stop and think, you will happiness — and probably the same discover that you have yourself kind of happiness; for this search often demonstrated my proposition for happiness is reaching for — winning a childhood game, pass- heaven. ing a difficult test, or doctoring a But how define it? How achieve sick puppy back to health — these it? Philosophers have written are simple illustrations. Each about it; great thinkers have pro- brought a measure of happiness pounded its mysteries across the through achievement in the face of many years. difficulties. Why, then, dwell upon it fur- Later on in life perhaps you won ther? Because relatively few of us the girl of your choice when you seem to attain much. I wonder thought you hadn’t a chance, or why? earned a business promotion over The possession of money does hard-fought opposition. Each ini- not bring happiness. Neither do tially represents a struggle, a mo- power or social position, grandeur = ment of fear, of doubt, or discour- or “security.” I should like to sug- agement — and then, if you persist gest a relatively simple approach —realization — and happiness! to happiness. It has worked for me That is why we should seek hap- and many others that I know. Per- piness through the careful selec- haps it may help you. tion of worth-while goals, and then The formula is not complicated. go after them relentlessly. Such an I believe that happiness is attained approach is always possible where by overcoming obstacles to achieve we have freedom of choice. I would any worth-while, constructive goal. hesitate to try it under socialism This may sound oversimple. And or communism where individual yet, all great principles in essence liberties are denied. are simple. Some of these goals will be large Mr. McBain, Chairman of Marshall Field & Company, retired, offered these ideas on happiness before the Chicago Sunday Evening Club, April 27, 1958. 57 ===== PAGE 60 ===== 58 THE FREEMAN August ones and take a long time to fully, and finally solved them — achieve — a lifetime perhaps. then I achieved true happiness. I Others will be simple and quickly believe this is so with everyone. reached. We need to have both Not all of us can be a Schweit- kinds. For the realization of hap- zer, an Edison, or a Henry Ford, piness rests less on the size of the a Salk, a Lincoln, or Madame goal chosen than upon its worthi- Curie. Each of them contributed ness and the effort we expend. much, and each achieved a meas- In choosing our objective, large ure of happiness in the doing. We or small, no realm must be ex- lesser men and women can do like- cluded. Projects may include the wise — no doubt on a smaller scale, spiritual, the artistic, business, but no less importantly to our- family, community, friendship, and selves and for others. countless others. The very fundamental of hap- One of the goals that gave me piness is that its possession comes great happiness when I reached it from the fullest realization of self took 14 years of concentrated ef- in terms of achievement —and most fort in the face of problems that often in behalf of others. seemed insurmountable. In fact, This was Christ’s teaching, ap- my 35 years of business life here pearing again and again in what in Chicago was mostly a series of he said — and more importantly — problems. in what he did. His ageless achieve- Upon looking back, I find that ment in the face of obscurity, big- my happiness fluctuated with the otry, indifference, and vengeful energy and determination I brought stupidity epitomizes our own end- to their solution. When I faced up less search for happiness — and to problems, analyzed them care- shows the way to it. LCI | imas IN] s0BeaY | A Happy Life A HAPPY LIFE is to laugh often and to love much, to win the respect of intelligent persons and the affection of children, to earn the approbation of honest critics and to endure the betrayal of friends, to appreciate beauty, to find the best in everything, to give one’s self, to leave the world a bit better, whether by a healthy child, a garden patch, or a redeemed social condition, to have played and laughed with enthusiasm and to have sung with exaltation, to know even one life has breathed easier because you have lived. RALPI! WALDO EMERSON ===== PAGE 61 ===== To bring out the best in others — DO IT YOURSELF KING VIDOR “The world is a looking glass and I encountered not one unpleasant gives back to every man the reflection taxi driver, elevator operator, or of his own face.” employee! Had New York changed WILLIAM MAKEPEACE THACKERAY or had I? The answer was clear. To abandon excuses for one’s I HAD TO LIVE a long time before own shortcomings is like journey- I found the courage to admit to ing to a distant land where every- myself that we — all of us —make thing is new and strange. Here our own world. The realization you can’t continue to blame some- came to me in a very simple way. one or something else for failures Though I am a Californian, I make or difficulties; you have to assume frequent trips to New York and I the responsibility for them your- had decided that all New York cab self. Of course, outside pressures drivers were impatient, bad-tem- do influence our lives, but they pered, or hated their jobs. And don’t control them. To assume they hotel employees and railroad per- do is sheer evasion — it’s so easy sonnel were the same. I found to say, “It's not my fault!” them all difficult to get along with. Since that day in New York I've Then one day in New York I come to believe that this idea is came upon the words from Thack- the basis of all human relation- eray quoted above. The very same ships. It doesn’t matter whether it day when a “cabbie” and I were is your neighbors, your mother-in- snarling at one another, this law, or the people of a foreign na- thought occurred to me—‘“Could tion. The quickest way to correct this whole situation be the result the other fellow’s attitude is to of my own thinking and outlook?” correct your own. I began to live Thackeray's idea Try it. It works. And it adds and soon it became a part of me. immeasurably to the fun of meet- The result: on my next trip East, ing people and being alive. & © o Mr. Vidor is a motion picture director and producer. This article is reprinted by permission from This Week Magazine. Copyright 1958 by the United Newspapers Magazine Corporation. ===== PAGE 62 ===== A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN PAPA KNOWS BEST TO CLEAR THE GROUND, let us say sociation of Manufacturers or the at once that Professor John Ken- ADA or the “consumers,” which neth Galbraith’s The Affluent So- counts. It is never Joe or Jim, and ciety (Houghton Mifflin, 368 pp. it is never you and me. $5.00) is the most readable book The Affluent Society begins with on economics that has appeared in some sharp analysis of the world years. It is also the most quotable. of yesterday when economics was The author has a genius for para- truly a study of the utilization of dox and for aphorism. His mordant scarce means. With one eye on the and ironic phrases are as telling as agricultural surplus, and the other those of Thorstein Veblen, and he eye on the wonders that can be has what Veblen never did have, done with distribution once mass the ability to write a shapely sen- production rips merrily on past the tence and a winged paragraph. “break-even point” on the fore- As a technical economist, Gal- caster’s graph, Professor Galbraith braith is also quite capable. With rightly argues that our “private all his gifts he should be able to do economy” has killed the poverty- something supremely worth-while. ridden world of Ricardo and Mal- The curious thing, however, is that thus. (Galbraith is, of course, he lets his skills spin off into social speaking of the United States, not essays that betray an essential dis- the immense poorhouse of a totali- respect for individual human be- tarian China or of an India in ings as such. Professing to care which cows are more sacred than for humane goals, he sees people human beings.) The poor we still only in the mass. To Galbraith, it have with us, but they exist in is the “countervailing power” of pockets (as in the uplands of the such large and amorphous entities Qzarks) or in big cities on a “case” as the “farm bloc” or the big in- basis. Instead of praising what the dustrial union or the National As- private economy has done to raise 60 ===== PAGE 63 ===== 1958 A REVIEWER'S NOTEBOOK 61 living standards, however, Profes- erous system of unemployment sor Galbraith proceeds to spray it insurance and old age pensions. with a withering irony. There is just enough truth in Galbraith’s picture of what Amer- ican people have chosen to do with Galbraith begins by turning the their riches to make his quest of concept of marginal utility against ‘social balance” seem plausible. itself. The truth is, he says, that But Galbraith is not willing to people have been so gorged with limit himself to the role of being the cream of affluence that they a critic of taste. Instead of point- have ceased to have any truly spon- ing out to people that they might taneous marginal desires. Not only better put their money into educa- must our manufacturers produce tion on a private basis that would the goods, they must also whip up permit free choice of teachers or the desire for the goods. As Gal- into utility cars with a low gas braith puts it, consumer demand consumption rate and a short must be synthesized by Madison wheel base or into voluntary medi- Avenue. And a huge debt-creating cal cooperatives, all of which would machine must stand ready to prod, permit an individual the mature poke, and cajole people into buying exercise of his own will, Galbraith the cars, the deepfreezes, the falls back into a Papa Knows Best sports jackets, and the hamburger attitude. To protect people against meat which they do not really Madison Avenue, he would send want. the tax collector around to relieve Since, in Galbraith’s opinion, them of a good part of their in- people are so satiated with the come. goods which they don’t really de- sire, the prime need of our society Caring for the Inmates must lie elsewhere. What we Personally, I find this superior, should have, says Galbraith, is bet- top-down attitude offensive. It is ter “social balance.” To Galbraith’s an echo of Thurman Arnold’s old way of thinking, social balance theory that the government should would consist of taking money . treat people as the superintendent away from Detroit and Madison of an insane asylum treats his Avenue and plowing it into new charges, as wards to be watched schools, new roads, better medi- over and provided for. The aim of cine, more efficient police protec- an insane asylum, so Thurman Ar- tion, more public parks and bath- nold used to say, is to make its in- ing beaches, and a far more gen- mates as safe and as comfortable Arousing Our Wants ===== PAGE 64 ===== 62 THE FREEMAN August as possible. To government officials, theocracy, with the God-elected Arnold said: “Go thou and do like- “planner” telling the rest of us wise.” Even granting for the sake what values we should honor. In- of the argument that a lot of peo- stead of letting each and every in- ple do have defective tastes, I dividual human soul do battle as a would stil] take violent issue with free agent with the hosts of Luci- the Arnold-Galbraith theory that fer (conveniently symbolized in men in political office have a The Affluent Society by Madison sounder appreciation of values Avenue), Galbraith would coerce than the rest of us. Indeed, since us all to Goodness. And it would be men in public office make a pro- a Goodness in his own image. Not fession of living on other people’s even John Calvin could have held money, they are apt to include a to a doctrine of the Elect that is higher percentage of irrespon- any more strict than this. sibles than is to be found in most other professional groups. More- An Ingenious Sales Tax over, they bend to mass pressure To pay for social balance, as in- — and on Galbraith’s own theory, terpreted by a “planning” state this means that their stock-in- hierarchy in the name of 51 per trade is catering to the more vocif- cent of the population, Galbraith erous inmates of the universal in- would levy sales taxes on an in- sane asylum. genious basis. He would tax soap I vividly recall a conversation and detergents, for example, to with Ken Galbraith when we were pay the bills incurred by the De- fellow editors of Fortune Maga- partment of Sanitation. He would zine. “You and John Davenport,” tax television sets and cigarettes said Galbraith, “are Puritans in to pay for schools. Thus our in- your attitude toward economics. dulgences and our vices, as defined As for me, I am a Rumanian.” By by Galbraith, would finance our this he meant that he didn’t care a virtues. fig for neatness and consistency in Professor Galbraith’s tax scheme drawing a sharp line between pub- is a clever adaptation of Mande- lic and private sectors of the econ- ville’s Fable of the Bees, that early omy. satire which drew attention to the The truth is, however, that Gal- fact that the manufacture of lux- braith is far more Puritanical in uries provided an income — and his attitude than are any of the many necessities — for the workers partisans of voluntarism in eco- who catered to the vices of the nomics. He believes in an economic rich. Well, if we must be taxed, ===== PAGE 65 ===== 1958 A REVIEWER'S NOTEBOOK 63 Galbraith’s scheme is as good as of questionable “social balance” as any other. Since all taxes come out sending money to Santo Domingo of production, however, it is the or financing Nehru’s experiments general level of taxation, not its in Indian socialism. Far from method of collection, that is the swimming in plenty and having no more important problem. Galbraith “marginal utility” problems, I may differ with most of his so- know what I need without ever called “liberal” friends on the mer- reading an advertisement. its of the sales tax. But he is at Nor is this personal with me. As one with his statist colleagues in I look about, I see practically ev- his insistence that the tax-take re- erybody else in the same predica- main at an extremely high level. ment. Galbraith’s book, then, is built Victims of Overproduction on an entirely defective founda- As for Galbraith’s basic theory tion. It is clever, brilliant in its that we are the victims of too phrasing, an object lesson to all much production, it is, again, a economists who try to write for Papa Knows Best theory. To any- the general public. But it contains one who does a little soul-search- the subtle poison that will someday ing, the theory must seem glitter- drug us into reconstituting society ingly superficial. For myself, I in the image of a public institu- would reject it utterly. With 95,000 tion, with only the “planning” of- miles on a 1954 Chevrolet and ficials exercising the power of 32,000 miles on a Volkswagen, I do choice. If enough people listen to not need Madison Avenue to in- Galbraith, the “underlying popu- form me that I could use a new lation,” to use Veblen’s old phrase, car. (Incidentally, with three girls will simply be on the receiving end of driving age and a home that is of whatever the government wants two miles from the nearest bus to dispense in the name of “social line, I could use two new cars). balance.” And the “social balance” But with my own “social balance” will be maladministered, at that. to pay for (two daughters in col- 00 lege, and two boys at the summer camp age), not all the blandish- ments of Madison Avenue can sell Any book reviewed in this Book Section (or . , ony other current book) supplied by return me anything that is superfluous. mail. You pay only the bookstore price. We When Uncle Sam puts in for his pay the postage anywhere in the world. . Catalogue on request. share of my income, I resent every penny that he takes for such items THE BOOKMAILER, Box 101, New York 16 ===== PAGE 66 ===== 64 THE FREEMAN August t= A Ride to Panmunjom strength or weakness. Those who By Duane Thorin. Chicago: Henry Were strong, even under most ad- verse conditions, had somehow ac- Regnery Co, 1956. 303 pp. $4.00. quired a sound moral and religious As this novel opens, twelve Ameri- philosophy. Those who failed to can prisoners of war are jogging stand up to the communists lacked along in a Chinese truck over the faith, convictions, or beliefs to live roads of North Korea on their way by. to Panmunjom — and to release. It is this novel’s thesis that the One of them had willingly collabo- inner strength men need develops rated with the communists. An- over years of living. It cannot other had capitulated when it merely be applied from outside like seemed to his personal advantage. veneer. Proper training and indoc- Another, a high ranking officer, trination help, so that young men after some pressure, had confessed who have not previously had guid- to “germ warfare.” Several had re- ance, experience, and education sisted considerable mental and may learn a great deal after induc- even physical torture; and these tion in the services. To aid in this are the author’s heroes. task Duane Thorin is now in Wash- All twelve men stand out as in- ington with the armed services. dividuals, some weak, some strong, Let us hope he does not become so some peculiar, some almost un- engrossed in this job, working touched by their experience as through and with the force of gov- prisoners. The novel's author, ernment, that he forgets the true Duane Thorin, a Chief Petty Offi- source of real strength and courage cer in the Navy, knows personally — freedom. When individuals seek from experience as a war prisoner to reach their goals and must con- in Korea, what these men went stantly adjust to unexpected through. He describes clearly the changes, when they suffer from mental and emotional attitude of their own mistakes and strive to each, the moments when their fates make their own solutions, when hung in the balance, the reasons their success or failure is their why some gave in, why others own responsibility and reward, the withstood the test and resisted inner spark, the faith, the strength pressure to the end. Detailed de- which Thorin prizes, are encour- scriptions of the tactics used by aged. For these incentives and for the communists and of the ways in the need to struggle and to solve" which these twelve reacted, dis- one’s problems, there is no sub- close the source of each man's stitute. BETTINA BIEN ===== PAGE 67 ===== Rolling Slabs at J&L Jones & Laughlin STEEL CORPORATION: PITTSBURGH STEEL B-5634 ===== PAGE 68 ===== FROM A LIBERTARIAN'S LIBRARY The AVERAGE PERSONAL INCOME in the United States was about $4,600 in 1955. Of this amount, something like 85 per cent, or $3,910, appears to have been pay for work done currently. The remaining 15 per cent, or about $690, was pay to savers who were providing the tools of pro- duction in one form or another. Were the entire pie to go to wage earners and others as pay for current work — as advocated by Karl Marx — wages could go up from 85 to 100, or about one-sixth. ... Since 1917, wage rates have risen with increased productivity at about 2.5 per cent a year. Thus in six years’ time this rise in wages would equal the 15 per cent increase possible from getting all the remainder of the pie. Or to put it another way, productivity increases during the past working generation have raised wages perhaps six times as much as could possibly come from diverting to wages every cent of current returns for savings. A oelection from Why Wages Rise by F. A. Harper. The Foundation for Eco- nomic Education, Irvington-on-Hudgon, N. Y. 124 pp. $1.60 paper, 82.50 cloth.