===== PAGE 1 ===== IDEAS ON LIBERTY NOVEMBER 1958 Regulatory Taxation . . . . . . . Hans F, Sennholz 3 The American . . . . . . . . . Christopher North 10 The Nature of Socialistic Disaster . . . Leonard E, Read 14 And Then Some . . . . . . . . . E. J Ritter, Jr 2] Buenos Aires — No Place To Live . . . David Smyth 23 How To Increase Tax Revenue . . . . Jay Morrison 27 The Myth of Federal Aid . . . . . . Ralph Bradford 31 Nature's Laws and Man’s Laws . . . . William H. Peterson 39 Engineering Education . . . . . . . Ben Moreell 43 What Right To Strike? . . . . . . . Anthony Lejeune 54 A Tale of Two Nations . . . . . . . Sven Rydenfelt 57 On the Importance of Being Different . . John Chamberlain 61 fn THE FOUNDATION EVE FOR ECONOMIC EDUCATION, INC. lrvington-on-Hudson, New York ===== PAGE 2 ===== AY « t * + ‘ow Li “wn Boge x . NL Poe Fad « rx ‘ . - - £ ne Sy » ) * “ . - 3, M , ae » . vo my st SY sp , WRT | he ~ - ”. Kl ° . ’ Lo Pen FR INE SL SE . ce 3 J JRE TE SLAPS NOY..2 NORA Would you call this fair play? Hardly—yet you face the same kind of unfairness with some of your taxes The referee in this picture is doing million families and businesses escape something no official in his right mind paying most of the taxes in their elec- would do. He's tackling the ball-car- tric bills you pay in yours. They are rier, and thus giving an unfair advan- people whose electricity comes from tage to the opposing team. In a similar ~~ federal government electric systems. way, federal laws give certain people And what’s more, the taxes they an unfair tax advantage over you and escape have to be made up by other most Americans. Here's how: people — including you! About 23 cents out of every dollar Most Americans think everyone you pay for electricity goes for taxes. should pay his own fair share of taxes. But under present tax laws, several Don’t you agree? 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Legal Investment for Trust Funds Resources over $304,000,000.00 (As of June 30, 1958) Reserves over $27,000,000.00 (As of June 30, 1958) Variety of Accounts io suit your needs — Individual, Joint, Trust and Corporation "LET'S GET ACQUAINTED" —Werite today for this booklet and financial statement to: Coast Federal Savings, Department “H"—9th at Hill, Los Angeles 14, California. COAST FEDERAL SAVINGS JOE CRAIL, PRESIDENT MEMBER — FEDERAL HOME LOAN BANK — FEDERAL SAVINGS AND LOAN [INSURANCE CORP. ===== PAGE 4 ===== THE Tema A MONTHLY JOURNAL OF IDEAS ON LIBERTY NOVEMBER 1958 Vol. 8 No. 11 LEONARD E. READ President, Foundation for Economic Education PAuL L. PoIroT Managing Editor THE FREEMAN is published monthly by the Foundation for Economic Education, Ine., a non- political, nonprofit educational champion of private property, the free market, the profit and loss system, and limited government, founded in 1946, with offices at Irvington-on-Hudson, New York. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, in- cluding THE FREEMAN, are met through volun- tary donations. Total expenses average $12.50 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 copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each. Permission is hereby granted to anyone to reprint any article in whole or In part, providing customary credit is given, except ‘The American,” Self-Reliance,’ "Nature's Laws and Man's Laws,’ and '‘What Right To fy Strike?” FE Any current article will be supplied In reprint form If there are enough inquiries to Justify the cost of the printing. ===== PAGE 5 ===== EGULATORY by = AXATION wp 2s HANS F. SENNHOLZ WE OFTEN FORGET that the taxes ing our economic system. In far levied by our governments aim not too many cases, the revenue ac- only at raising revenue but also at cruing to the government treasury other purposes. Taxation today is is an insignificant side-effect of the favorite weapon of interven- taxation. tionism. Federal income taxes, for Taxes intended to control con- instance, undoubtedly are intended sumption include those on alcoholic to yield some revenue but they also beverages and tobacco. Legislators aim to bring about greater equality and government officials, concerned of wealth and income. about the health of taxpayers, try Our legislators have always been to curb consumption by making aware of this “regulatory” aspect these items more expensive. Such of taxation. Regulation through reasoning is dubious, however, be- taxation formerly was limited, by cause the demand for tobacco and and large, to protective tariffs alcoholic beverages is rather in- which restricted the supply of cer- elastic to price changes. People do tain goods in order to benefit cer- not like to be coerced. They con- tain producers. Today the regula- tinue to smoke and drink in spite tory objectives are broader and of taxes on consumption. Many of more far-reaching. Some taxes aim the legislators themselves are at influencing the consumption of known to be notorious consumers certain items. Some affect various of the very items they would tax sectors of production and trade. out of use. These taxes, therefore, Others change business customs merely tend to lead to tax evasion and conduct. And, finally, still and illegal production and trade. others aim at controlling or chang- Another example of taxation —_— aimed at consumption control is the Dr. Sennholz heads the Department of Eco- ' nomics at Grove City College, Pennsylvania. levy on oleomargarine. The pro- 3 ===== PAGE 6 ===== 4 THE FREEMAN November ducers of butter, the dairy farmers, war bond collateral, were taxed induced Congress and several state out of existence by the 10 per cent legislatures to tax oleomargarine tax. The ultimate effect of this because they found it offered se- taxation was the supremacy of the rious competition to butter. They federal government in matters of commanded a bloc of votes which money and banking. directed the government apparatus Finally, the protective tariff is to take action against the margar- a tax that interferes with produc- ine producers. In this case, as in tion and trade. It aims to handi- many others, government force has cap foreign producers and favor been employed to restrict compe- certain domestic producers to the tition in favor of one group to the detriment of all domestic consum- detriment of another. ers. If the rates are high enough, competition from foreign-made To Regulate Production and Trade articles may be wholly denied, giv- Other taxes are imposed to regu- ing domestic producers a monopoly. late certain sectors of production and trade. Almost half of our To Improve the Businessman’s Conduct states levy special taxes on chain Other taxes aim to change busi- stores. The avowed purpose of this ness customs and conduct. Specu- taxation is to handicap chain lation, which is said to constitute stores and restrict competition so harmful business conduct, is op- as to favor small dealers. Again, a posed by the central planners. large bloc of votes directs the gov- They blame speculators for the ernment apparatus against some economic booms and recessions citizens who lack effective repre- which their own intervention has sentation. caused. They charge the speculator Another example of the regula- with impeding and jeopardizing tory objective of taxation was the the government planning and 10 per cent federal tax on state blame him for their own failures. bank note circulation levied in It cannot be surprising, therefore, 1865. In order to further the sale that they try to turn the govern- of war bonds, the federal govern- ment apparatus against the specu- ment chartered national banks lator. Numerous Federal Reserve which were authorized to issue na- regulations restrict his use of tional bank notes against govern- money and credit. Speculation is ment bond collateral. The state further discouraged by taxes on bank notes, which banks could is- short-term capital gains at double sue under state regulation without the rate on long-term gains. ===== PAGE 7 ===== 1958 REGULATORY TAXATION b In order to improve business aim at changing some aspects of conduct in matters of employment, our individual enterprise system. most states apply lower unemploy- But they do not intentionally aim ment tax rates to employers with to substitute interventionism or relatively stable employment rec- socialism for the enterprise sys- ords. Their basic assumption is tem, although they interfere with that business customers and pro- the smooth operation of the econ- cedures are responsible for unem- omy and, therefore, may lead to ployment which can be prevented, more and more intervention until or at least alleviated, through a socialism is realized. The taxes change of conduct. The effect of that are to control or change our this tax discrimination, however, free economic system are directed is quite the opposite of its intent. against its very foundations: the The industries that are most sub- profit incentive and capital accum- ject to losses during recessions are ulation. taxed at higher rates, which This ominous objective came merely adds to their difficulties into the open some 25 years ago and increases unemployment. when Keynesian and institutional A further example of this regu- economics swayed people’s minds. latory objective occurred during Numerous schemes were advanced World War II when all wage in- for “taxing the country out of the creases paid without prior govern- depression.” In order to encourage ment approval were treated as spending and penalize savings, the corporate income subject to tax in tax rates on corporate revenue and order to force businessmen to sub- large personal incomes were raised mit to government wage controls. sharply. A new tax, the undistrib- More recently, in order to fight the uted profits tax of 1936, aimed at “undesirable” business custom of checking the accumulation of cor- rebates through trading-stamps, porate earnings by management. some states imposed heavy taxes It was hoped that there would be on their issue, which in fact suc- greater spending from dividends ceeded in eliminating them in than from corporate earnings held those states. back by management. The disastrous results of this To Abolish the Enterprise System new tax policy clearly reveal its The last objective mentioned at fallacies. The New Deal taxes, to- the outset is the controlling or gether with a great number of changing of our economic system. antibusiness measures, aggravated Of course, the other objectives also and perpetuated the Great Depres- ===== PAGE 8 ===== 6 THE FREEMAN November sion, which held the nation in its accumulated. Heavy death duties grip from 1930 to the outbreak of and highly progressive business World War I1. and income taxes tend to consume accumulated capital. True, such Incentive Reduced taxes do not immediately and vis- Progressive income taxes and ibly destroy such capital equipment business taxes diminish the incen- as steel mills, railroads, or refiner- tive to work. High-income execu- ies. But they force the heirs or tives and professional men whose owners to sell all or part of the services are most urgently needed taxed estate in order to raise the are induced to work less and retire cash demanded by the tax col- sooner than they otherwise would. lectors. This cash or liquid capital Without the pecuniary incentive, then is taken and consumed by fewer young men will choose a governments, thus preventing career requiring long and costly other investments and expansions preparation or connected with un- which would have been made if certainty and risk; and this tends there had been no inheritance tax. to reduce the supply of such labor, In this connection, let us con- thus impeding economic progress. sider two other results of our con- It is no coincidence that through- fiscatory death duties. While still out the capitalist era the most en- in his prime, the man who is both ergetic and ambitious men in successful and responsible pre- America went into business and pares financially for his demise. became founders and promoters of The owner and operator of a successful enterprises. On the highly specialized enterprise tries other hand, socialist and interven- to avoid leaving his business to his tionist societies offer to the ambi- widow or heirs and the tax col- tious little choice beyond the mili- lectors. His widow usually knows tary services, a political career, little of its management and opera- or emigration to a capitalist tion. And she could hardly hope to country. sell it profitably within the short period of time allowed for tax pay- Capital Consumed ment. Therefore, the businessman, The destruction of personal in- while he lives, feels compelled to centive is not the only ominous re- sell out to his competitors. He can sult; the taxes that aim at the sell his business under conditions roots of our individual enterprise as favorable as possible and then system also spend and consume reinvest the proceeds in readily what generations have built and marketable securities, such as U.S. ===== PAGE 9 ===== 1958 REGULATORY TAXATION 7 Treasury bonds. The death duty Business Guideposts Destroyed thus eliminates an independent Business profits and losses are enterprise and channels productive the signals of the free enterprise capital into government debt. system. A profit indicates that the The other result which flows businessman is efficiently satisfy- from the peculiarity of our tax ing the needs of consumers. Profits legislation is the formation of tax- not only encourage but also pro- exempt foundations. Under the vide the means for expansion. present tax laws a man may ir- Losses, on the other hand, indicate revocably hand over all or part of to the businessman that his costs his wealth to a foundation that of production exceed the market spends it or the income for re- price of his products and that he ligious, charitable, or educational must produce more efficiently or purposes. But he may keep and else face bankruptcy. pass on to his heirs the voting Taxes on profits interfere with rights of his wealth. In other these important signals. They words, by forming a foundation, a weaken the signal of encourage- businessman and his heirs may ment to a profitable business and stay in control of the enterprise confiscate the means needed for ex- although the returns are to be pansion. Thus, taxes frustrate the spent by the foundation trustees. adjustment the market demands, Again funds are taken from a pro- destroying the dynamism of com- ductive enterprise and channeled petitive enterprise, protecting in- largely toward consumption. efficient operators at the expense Steeply graduated personal in- of more capable competitors. The come taxes also reduce saving. capitalist economy thus loses its Consumption expenditures of the characteristics of quick adapt- higher income groups usually are ability, managerial efficiency, and less flexible than their saving. keen competition. The fundamental The taxes are paid chiefly out pillars of the free market are dan- of the income which otherwise gerously weakened by the present would have been saved. Often, tax- taxes on business profits. payers find they must draw upon their savings accounts, sell some Contracyclical Taxation of their stock holdings, or borrow There are two other taxation ob- from banks to provide the funds jectives gnawing at the founda- for tax payments, all of which sig- tions of our system. One aims at nifies capital consumption and checking business recessions lower capacity to produce. through tax changes; the other in- ===== PAGE 10 ===== 8 THE FREEMAN November tends to prevent inflation through tions grant consumers would be taxation. offset by a reduction of govern- After every period of active in- ment purchasing power necessi- flation brought about by govern- tated by lower revenues. If both ment deficit spending and credit consumers and government are to expansion, the American economy have more money to spend, only goes through a readjustment. Im- inflation can provide it. So, what mediately, proposals are made to these spendthrifts advocate is in- alter the tax system in order to flation and monetary depreciation. stimulate business. The federal It is true that inflation may al- government is urged to increase ex- leviate recession. It causes product penditures—to “prime the pump”— prices to rise, which tends to make and simultaneously cut taxes. The business profitable again. But at recession is attributed to a myste- the same time, it has a great num- rious reduction of spending on the ber of disastrous effects. The pur- part of consumers and business- chasing power of the money is re- men, and increased government ex- duced. Creditors lose; debtors gain. penditures and reduced taxes are Fixed-income receivers suffer. supposed to put additional spend- Capital is squandered and malin- ing power into the pockets of the vested. And finally, at the end of public. Such spending is supposed the inflation spree there must be to improve markets and stimulate another readjustment, another re- the economy. The tax relief is cession. Inflation is but a tempo- granted only to lower income rary makeshift that breeds more groups, on the theory that they disaster than it can possibly alle- are sure to spend the money, viate. whereas tax reductions for higher Inflation is the increase of the income groups might only lead to money supply by our monetary au- more saving and hoarding. thorities. For our government to fight inflation is a simple matter; The Result Is Inflation it merely must order the Federal There is one aspect of this Reserve authorities to cease and spending program that is seldom desist from further money expan- considered. The additional spend- sions. Any other measures, such ing power is created through in- as price and wage controls or ad- flationary devices on the part of ditional tax burdens on the people, the Federal Reserve System. With- merely aim at the inflation symp- out inflation, the additional pur- toms but leave untouched the chasing power which tax reduc- source of the evil. Higher business ===== PAGE 11 ===== 1958 REGULATORY TAXATION 9 taxes may even intensify the in- There is no prospect of relief flationary effects, inasmuch as they from this situation until the Amer- tend to restrict the output of ican people understand that infla- goods. It is no wonder that Ameri- tion comes from governmental de- can product prices are rising in- preciation of the money, and that cessantly year after year while the the present taxes deny the incen- money supply grows and business tives by destroying the fruits of taxes absorb over 50 per cent of competitive private enterprise. corporate earnings. eo 0 ED FISHER “Frankly, I'd have preferred a tax cut to public works.” Courtesy of LOOK Magazine. Not to be further reprinted without special permission. ===== PAGE 12 ===== AT 45 fi Al ARETE Hoon & & Bi NB OO Badd HE 5 are CHRISTOPHER NORTH < ~ 4 + j WITHIN the chapel I had found that inner peace which I had been seeking — away from the tempest. I had been sitting in a rear pew for a long time — alone. Just how long I did not know — for Time had ceased to exist — seemingly dis- solved into that from which it is made — into eternity as it emerges out of the future and lingers, for a fleeting moment, on its journey SF NT I ce into the past. REY Ce There was no sound save the soft i ERA & BON A JAGR Eh whisper of beauty which came | from the stained glass windows ; depicting memorable events in our — N ny Lo 5 4 OTR history of Freedom — now long I TI 4 since forgotten. SL RAR Suddenly it seemed as if the fig- LL HN ures came to life, as one by one FRR they stepped down. I recognized a ‘] General Washington, the Marquis j J AY de Lafayette, Anthony Wayne, Count Casimir Pulaski, Baron bhi / | il Frederick von Steuben and many ov Ha a others, as they filed past and with } ; Mr, North is a [ree-lanco writer on social, / . economic, and political subjects. This essay, fo. ; inspired by the Washington Memorial Chapel / at Valley Forge, has boon published many wo times, but today’s unpeaceful world demands / . its further consideration. J ane ) ik e000 as | 4 Ji NEY ===== PAGE 13 ===== 1958 THE AMERICAN 11 great dignity strode up to the “I bid you all welcome to my choir where they halted under the house, for I am the peacemaker. massed flags hanging limply from You have spoken of freedom and the walls. you have fought for it — but I say I felt a cold gust of wind chill- unto you that there can be no free- ing the air as the doors opened to dom without peace, and there can admit a host of ragged, frostbitten be mo peace as long as men seek soldiers. Their faces were deadly freedom through force of arms.” pale. They looked haggard and There was .a pause. hungry but in their eyes burned Then this Man looked directly the eternal light of sacrifice and at me and said: selflessness. “My heart bleeds for all of you They were the Liberators who who came after them — for you had fought and died for that Free- are mot worthy of this greater dom which was handed down to be freedom. You know not how to held in trust by the People of cherish it because you do not un- America for all the People of the derstand the real meaning of free- World. dom. To you it means release from It seemed natural and fitting fear of tyranny and want. You that these brave men should return have made of your freedom a goal to attend services in the chapel to be attained for your pleasure erected in honor of their great and your security.You should know leader. that is not the fulfillment of your desires and whenever you think of The chapel now became en- freedom or seek it for these rea- shrouded in semidarkness. sons, you become enslaved to it as, All eyes turned toward the pul- indeed, you are slave to your greed pit which had suddenly become and ambition. Your brass bands illuminated by a ray of light from play, your flags wave and your above. oratory flows freely — but I say In the pulpit now appeared a unto you, that this is mo way to Man in a shimmering white robe. serve freedom.” He was looking out over the I cringed under the penetrating strange and distinguished congre- gaze — but then I rose and heard gation with a grave expression. myself saying: The silence became intense. “But, Master, how then may I A feeling of awe and exultation best serve freedom! 77 came over me as this Man raised And then, once more He spoke: his right arm and spoke: “Freedom, first of all, is the ===== PAGE 14 ===== 12 THE FREEMAN November privilege of choice — and when the soft whisper of beauty into a you choose freedom, it behooves hymn of truth and faith. you to live by it in reality. By so The old man beside me was on doing you will set an example to his knees mumbling in a foreign others who live in ignorance of its tongue. When I inquired what he real meaning. Freedom gives you was doing and why he was here the choice between good and evil. in the George Washington Chapel This nation was created from at Valley Forge, he replied: among men of all races in order “I am a refugee — one of the to demonstrate that peace among millions who pray that they be men 18 attainable. The brave men admitted to your country. I am here assembled bequeathed a doubly fortunate in that this day sacred trust, the terms of which 1 received a certificate accepting call for this mation to dedicate me as a Citizen of the United itself to the fulfillment of its divine States. You ask why I am here. destiny which is to demonstrate I am here to thank God for having the significance of the living spirit heard my prayers.” of freedom and thereby inspire all men to choose freedom through Perhaps the expression on my peace.” face indicated to him that I doubted his word for he handed I felt a hand on my shoulder, me a crisp piece of paper which, opened my eyes, and found an old indeed, certified that Josef man with white hair and a black Kolinsky of Poland had been ad- skull cap leaning over asking per- mitted to citizenship of the United mission to sit by my side. I States of America. nodded and he sat down. “But, tell me, Mr. Kolinsky, how I looked around — the chapel was come that you-—a Jew — chose to again empty — the Man in White worship in this Christian Chapel was no longer in the pulpit. The of George Washington?” great men of the past had returned The old man looked at me with to their places in the stained glass an expression that I shall never windows and the ragged soldiers forget. With tears trickling down had returned to their resting his wrinkled cheeks, he barely places under the green sod on the managed to reply: hillside. “I wish you could understand, The rays of the afternoon sun Mister, that I came here because — now illuminating the stained now I am an American.” glass windows — had intensified I felt ashamed — and humble. ===== PAGE 15 ===== 1958 THE AMERICAN - 13 Then I got up and left the before God, I had left behind a real chapel. American—an American by The battlefields of Valley Forge choice — one who had chosen Free- stretched out before me — with the dom and knew how to cherish it. dogwoods abloom on a distant hill That spring day, at Valley —and beyond lay America — MY Forge, I too became an American country. — through my choice of Freedom Inside the chapel, on his knees as a Divine Spirit within me. Democratic Despotism ;VDEAS ON LIB I HAVE ALWAYS THOUGHT that servi- being in tutelage by the reflection tude of the regular, quiet, and gentle that they have chosen their own kind...might be combined more easily guardians. Every man allows him- than is commonly believed with some self to be put in leading-strings, be- of the outward forms of freedom; cause he sees that it is not a person and that it might even establish it- or a class of persons, but the people self under the wing of the sover- at large that holds the end of his eignty of the people. chain. Our contemporaries are constantly By this system the people shake excited by two conflicting passions; off their state of dependence, just they want to be led, and they wish to long enough to select their master, remain free; as they cannot destroy and then relapse into it again. A either one or the other of these con- great many persons at the present trary propensities, they strive to day are quite contented with this satisfy them both at once. They de- sort of compromise between admin- vise a sole, tutelary, and all-powerful istrative despotism and the sover- form of government, but elected by eignty of the people; and they think the people. They combine the princi- they have done enough for the pro- ple of centralization and that of pop- tection of individual freedom when ular sovereignty; this gives them a they have surrendered it to the power respite: they console themselves for of the nation at large. ALEXIS DE TOCQUEVILLE, Democracy in America, 1835 ===== PAGE 16 ===== THE NATURE OF SOCIALISTIC DISASTER “ . . . until then will we hesitate to do anything worth-while toward keeping our country free from hyperinflation and disaster.”’* LEONARD E. READ OUR COUNTRY has stumbled into so- fair, and therefore intolerant of cialism during the past half cen- disorder. It follows that while we tury; by now — 1958 — we have are free to embody uneconomic and adopted nearly all the things so- immoral practices in our society, cialists stand for. Those of us who we are not free to escape their in- are aware of socialism’s built-in evitable consequences. Our mal- destructiveness have watched this practices will catch up with us and process with apprehension and are bear their fruits in eventual col- forever predicting, or warning lapse and disaster. Thus runs our against, the impending catastrophe reasoning. which we think we see hanging Socialism, as formal, legal Amer- over our society. Under socialism, ican policy, was given its signifi- some men are put at the disposal cant impetus 45 years ago with the of other men, deliberately, legally, adoption of the Sixteenth Amend- and on principle. Socialism, in ment. With that law we proclaimed other words, is premised on an im- that taxation would become pro- moral extension of political power. gressive. We adopted as principle But this is not all; socialism something even worse and less introduces disorder into the eco- idealistic than communism’s “from nomic realm as well. Its economic each according to ability, to each reasoning is shot through with fal- according to need.” The principle lacies — which is why it has to rely we adopted was, “from each ac- on force to transact the business of cording to ability, to each accord- production and exchange. This uni- ing to political expediency.” That verse, we believe, is an orderly af- this principle — once accepted — even though moderately applied *From The Police Power by Leonard E. initially, would be increasingly Read in THE FREEMAN, June 1958. practiced throughout the whole 14 ===== PAGE 17 ===== 1958 THE NATURE OF SOCIALISTIC DISASTER 15 economy was inevitable. That it employment on a vast scale: some has grown enormously is obvious. kind of collective catastrophe, in That it will continue to grow and short. spread is a foregone conclusion — until the principle is abandoned. If Slow Disintegration and when! It is possible that socialism in Yet, where is the debacle? What America will never result in any happened to the predicted dis- easily visible, eruptive cataclysm aster? On the surface, things are that will be described either con- fine. The chatter we hear and the temporaneously or historically as stuff we read seem only to say, “disaster.” There is the probability “We never had it so good!” that the over-all effect will be, as There’s a flaw here somewhere in the Roman Empire, a slow, dis- and we should find it. Certainly, integrating, eroding process over a our dire predictions by themselves period of many decades. We will will effect no remedy. But, where just peter out gradually. As there is the flaw? The prediction that so- isn’t any time when we say, “To- cialism must ultimately bring dis- day, I am old,” so there may not aster appears to be sound enough. be any day or week or year when And yet, we cannot deny that mil- we will announce, “This is it. The lions of people are better supplied America of our fathers is at an than ever before with bathtubs end!” The oscillation of society’s and other gadgetry. Perhaps we pendulum is usually too slow for need to probe beneath the surface any such precise observation. and look at some of the things in The kind of disaster that social- our life we have swept under the ism breeds, we wish to suggest, is rug. Let’s, therefore, examine this not necessarily to be expected in question: Could it be that an im- the form of a sudden, collective portant phase of the disaster is eruption — short of an atomic hell actually taking place more or less breaking loose! Look for its results unobserved ? in the form of disastrous individ- Disaster, in the context here dis- ual experiences now taking place. cussed, is generally thought of asa If disaster is not diagnosed in per- state of social or economic up- sonal terms, there may be no heaval and chaos, a panic, a famine awareness that it is presently encompassing nearly everyone, the wreaking its damage. collapse of law and order or in- To discuss something in personal ternal revolution like the over- terms is to invoke moral values. throw of the government or un- And — to anticipate the thesis of ===== PAGE 18 ===== 16 THE FREEMAN November this article — the socialistic dis- “disaster.” Yet, socialism, financed aster is not so much the debacle by inflation which in turn depre- which the pursuit of antisocial ciates the purchasing power of the policies will someday visit upon us; medium of exchange, has caused it is the immoral procedures we this calamity. Varying degrees of are engaged in right mow. This is this type of individual experience a moral judgment aimed at present exist on an enormous scale, all due practices and not merely a warn- to socialism and the consequent de- ing that we face a depression. To bauching of our money. urge that there is even now a vio- lation of life’s moral dimension is A Matter of Principle different from a prediction that Here is where most of us err: certain consequences will be un- We fail to regard as disaster the pleasant. A moral judgment does forcible extortion of one-tenth of not ignore consequences, but essen- one per cent of an individual's tially it is a judgment rendered be- earned income to finance state in- fore the consequences have ap- tervention and political privilege. peared. For, as an 1846 editorial in This is mere pittance, and a shrug The London Times observed: “The of the shoulders summarizes our greatest tyranny has the smallest feelings. Yet, we would regard, at beginnings. From precedents over- least as an individual disaster, the looked, from remonstrances de- forcible extortion of one’s total in- spised, from grievances treated come. If we are to comprehend dis- with ridicule, from powerless men aster, we must think of the eco- oppressed with impunity and over- nomically minor extortion of one- bearing men tolerated with com- thousandth of a person’s earnings placence, springs the tyrannical as a 100 per cent moral disaster. usage which generations of wise Actually, disaster occurs when- and good men may hereafter per- ever sound principle is surrendered ceive and lament and resist in or violated. As this is a qualitative vain.” judgment, the quantity of money Analyze, with this in mind, the involved matters not one whit. If case of those living on a fixed in- one accepts the commandment, come. When the Widow Doakes ‘Thou shalt not steal,” is the com- can no longer buy the necessities mandment any less surrendered of life with the competence which with the theft of a penny than seemed quite adequate when Joe with the theft of a million dollars? left it to her, her personal problem One of countless examples: Last seems too trivial to merit the label year one farmer was paid $247,000 ===== PAGE 19 ===== 1958 THE NATURE OF SOCIALISTIC DISASTER 17 for not growing wheat. Millions of economic Remainder — those per- us were compelled to chip in to sons and their activities who stay build up the socialistic kitty to fi- topside after all the rest have been nance this disservice. Each chip shaken through the socialistic was an individual disaster — alto- sieve. Unobserved are the millions gether millions of moral disasters who have been the victims of this in fractionized form. Multiply this riddling. These unfortunates are, subsidy by the whole shocking, in effect, out of circulation. growing caboodle of socialistic They're no longer the ones who are subsidies which are doled out to seen in the marts or heard on the some people at others’ expense, and air or read in the press. They are the enormity of the national dis- a forgotten and, for all practical aster can be reckoned. purposes, a silenced people. We can’t weigh them on our scales, and so, more often than not, we It is quite understandable why form our impressions solely from socialistic disaster so largely the Remainder and their activities. evades observation. Most of us If we are among this Remainder evaluate affairs in our own or ourselves, we are a busy and often other countries with the careless a prosperous lot. It is we who paint scrutiny of tourists; that is, with the national picture for popular the hurried, casual, unpenetrating, viewing. The painting is a reflec- sweeping glance. We spend a day tion of what we see. And what we or so, for instance, in the capital see is a reflection of our own still of a country where socialism has favorable experiences. Should dis- for decades wrought its damage: aster overtake us, however, our Paris or Rome or Oslo or Monte- painting days will be at an end. video or Mexico City. We note a This explains, in part, why social- bustle of activity, shops filled with istic disaster does its work in the attractive merchandise, restau- dark, so to speak, hidden from rants serving excellent food, gal- casual observation. leries with invaluable art, build- ings of amazing splendor, and Breakdown of Institutions numerous other tourist delights. Prior to and responsible for the “Isn’t everything wonderful? economic disaster visited on indi- These, for sure, are a happy, pros- viduals is an erosion even less ob- perous people.” served. It is the socialistic demoli- What we don’t realize is that we tion, bit by bit, of our political are viewing only the social and and economic institutions, the pul- Superficial Observation ===== PAGE 20 ===== 18 THE FREEMAN November verizing of their moral and spiri- tual foundations. Gone almost entirely, even from teaching in our schools, is the very essence of Americanism, the con- cept that the Creator, not the State, is sovereign and the en- dower of man’s rights.! No social- ist or statist can, with consistency, say a kind word about our Declara- tion of Independence — except per- haps to praise its literary excel- lence — for this document derives individual rights from the Creator and proposes a government with no functions except to secure each of us in these rights. Once our moral and spiritual foundations are destroyed, it is relatively easy to pervert our politi- cal and economic institutions. The Constitution and the Bill of Rights, designed to protect the in- dividual citizen against the ex- cesses of government and of the majority, have been so twisted by political interpretation that they now promote governmental ex- cesses at the expense of the citizen. And what of the free market? Willing as distinguished from un- willing exchange is its essence. Market exchange is consistent with the moral precept that no person 'See the chapter, “Historical Approaches to Ideal Government” in Why Not Try Freedom? by Leonard E. Read. Irving- ton-on-Hudson, N. Y.: Foundation for Feconomic Education, Inc. Single copy on rcquest. shall do unto others that which he would not have them do unto him. But, what is willing about the forcible exchange of the fruits of one's labor for many thousands of police grants-in-aid disbursed all over the earth through socialist and communist governments? Or, to finance projects in our homeland in which one may have no interest, indeed to which one may be utterly opposed ? The American market to- day is a politically rigged market! Freedom of choice as to what one does with one’s own income no longer exists as a right. The State is sovereign and confers rights and privileges! Government has been turned from its true purpose of protecting citizens against plunder and has become the plunderer it- self. We must bear in mind that the turnabout from moral to socialistic principles has been accomplished by almost imperceptible changes, hardly a one of which has been thought of as disaster — except by a few highly discerning individ- uals. But the cumulative effect is catastrophic. In concluding these ideas about the nature of social- One of these few was the late John W, Burgess, founder and for years the head of the Political Science Department of Columbia University. See his book, writ- ten 35 years ago, Recent Changes in American Constitutional Theory. Irving- ton-on-Hudson, N. Y.: Foundation for Economic Education, Inc. $1.00 paper; 2.00 cloth. a ===== PAGE 21 ===== 1958 THE NATURE OF SOCIALISTIC DISASTER 19 istic disaster, and the darkness in 1.Q.’s — devoting their earthly ex- which it is cloaked, let us reflect istence to this same kind of trade, not merely on the millions of indi- employing their brilliance to keep viduals who have been shorn of the pains of interventionism from their competence and their oppor- their clientele. And, on the other tunities to develop as human hand, we observe vast armies of beings, but on what has happened equally brilliant individuals serv- to those other millions who are still ing in the “influence” trade, help- among the Remainder. It must not ing their clientele “benefit” from be thought that these, even though interventionism. And from our still vigorously active and, to all moral leaders and our clergy, very outward appearances, prosperous, little rebuke for this traffic in po- are getting off unscathed. Indeed, litical privilege. looked at from the long view, Most telling, perhaps, is the what's happening to this Remain- knockout blow dealt the business der may be the sorriest phase of and professional elite. Among this the spreading socialistic disaster. . group are men whose capacity for abstract thought is the equal of the Wasted Talent best academicians. These persons In South America recently, I are students of liberty. They un- came upon one of the most brilliant derstand the rationale of the free persons it has been my privilege market, private property, limited to meet. How is his brilliance in government philosophy, and are the economic sciences being em- sensitive as well to its ethical and ployed? He is selling his services spiritual implications. But however to people of means, demonstrating ably they may articulate this phi- how they can evade the existing in- losophy in private, how few of terventionism and, by so doing, be- their number dare say publicly and come more, not less, wealthy. In- bluntly that which they know to be terventionism has diverted this in- right! They feel compelled to adopt dividual from the creative career a wishy-washy public relations that might have been his to a position aimed at offending no one traffic in wealth by stealth. It is — and make no mistake about it, disaster when the cream of the the forthright spokesman for human crop are seduced thus to liberty does on occasion offend! employ themselves. So what we get on nearly every Here at home there are vast hand from people who are regarded armies of lawyers, accountants, as business spokesmen, are tax experts — with the highest of watered-down endorsements of ===== PAGE 22 ===== 20 THE FREEMAN November qualified “free enterprise”; “safe” other?” asks Wilhelm Roepke. rather than sound counsel, mere ‘The real reckoning,” he says, “is verbalisms and banalities designed made in the consulting rooms of to placate the interventionist our cardiologists and nerve spe- powers. In short, interventionism cialists. Who can measure the sum seriously, widely, and effectively total of content, satisfaction, well- deletes an intellectual and spiritual being, and fulfillment that is daily quality without which a good and hourly being destroyed?” society cannot be maintained. Private gain of some at the ex- Add together all the persons who pense of others — an essential tenet acquire a vested interest in inter- of socialism — is nothing short of vention, their potential moral legalized evil. Its practice, like leadership thus being lost to the widespread grand larceny, can be cause of freedom and righteous- expected to result in overt disaster. ness, and we have here a disaster But if we are unable to discern of incalculable proportions. “Who the present and continuing dis- can measure the nervous strain, aster, let’s not say that the prin- the time and energy spent in the ciple of retribution is no longer in struggle with the market on the operation. Rather, let us look to one hand and officialdom on the . our own myopia. eo 00 IDEAS @F Q0BEATY Self-Reliance add La Many roads may lead my feet But I alone must choose Each lane, each measured, purposed beat From maps which I'll peruse. No other man can truly lead My life instead of me. For I must take my reins in hand The better off to see The reason for the trek I make;’ The purpose; To what end I keep my faith in God and man That I alone must mend. ANN TERRILL By permission from California Farmer ===== PAGE 23 ===== An important key to greater freedom and less control of our lives by others is that each does his best... — Ax ud Then. Some E. J. RITTER, JR. A RETIRED business executive, gles of every day. The big win- asked the secret of his success, re- ners, the ones who scale the peaks plied: “I discovered at an early and bring home the prizes, are age that most of the difference be- those who have the vision, energy, tween average people and top and determination to do the usual, people could be explained in three routine tasks — and then some. The words. The top people did what successful advertiser doesn’t stop was expected of them — and ther or let up when he’s pretty sure his some.” line is well-known. He reminds The ability to rise to the occa- buyers. His products are pre- sion is the mark of champions in sented as attractively and regu- every field. An example is the larly as his competitors’ — and “finishing kick” of the distance then some. Free to do as he runner who has matched his op- pleases, he succeeds and prospers ponent stride for stride into the because he pleases to do more. stretch and then, a few yards Every store owner, too, has almost from the tape — though just as complete freedom of choice in winded and weary — manages to operating his own establishment. continue to run just as fast as his He can close at any hour he rival, and then some. Football pleases, or keep open a little touchdowns are scored by ball car- longer. He can unlock his doors riers who, in the arms of tacklers when others do, or a little earlier. seemingly just as strong, forcing In many respects he is under small them back, are able to push goal- or no obligation to meet competi- ward just as hard, and then some. tion for, if he so desires and acts, The conquerors of Mt. Everest did he need not succeed or prosper. In what many preceding parties had a general way, the same observa- done to a point — and then some. tions apply to clerks, salesmen — So it is with the business strug- inside or outside — stock handlers, Mr. Ritter is an accountant, free-lance jour- carriers, every Individual whose nalist, and author from Flint, Michigan. efforts help make or break a busi- 21 ===== PAGE 24 ===== 22 THE FREEMAN November ness. No one has to succeed; no only as long as his establishment one has to do well or advance; can keep on attracting and hold- everyone can quit or get fired if ing customers and good will. that’s what he prefers. Every business has in it large Every person and every group numbers of do-your-job-only peo- in each industry does more or less ple. Without them, the wheels of the same things a good deal of the industry could not turn, but they time. In every business there is a would spin far more rapidly and certain regular, humdrum, day- smoothly if a change of attitude after-day standard routine — the could be induced by an awakening sort of required activity that is to the opportunities for the big- necessary for simple survival. ger financial rewards and greater Mere existence demands the per- personal satisfactions which ac- formance of certain prescribed company complete willingness, or functions which may be partially alert eagerness, to go beyond or wholly carried out in careless, minimum expectations — to do perfunctory fashion. The nine-to- what is expected, and then some! five employees, the ‘‘clock- And it’s much pleasanter to go watchers,” the workers who do home, after work, with a feeling only — and sometimes considerably of conquest instead of frustration. less than — what they are specifi- A problem solved, a new customer cally paid for will never again acquired, additional good will cre- see the possible customers who ated for one’s establishment — turn away, disappointed, when these are the joys of existence. they find the store doors locked a Nearly everyone goes home tired. few minutes after stated opening How many go home happy? Cer- or before closing time, or who are tainly, the happiest are those who hurried away by some clerk more have done what they were ex- eager to get home or to keep a pected and paid to do, and then personal engagement than to ex- some. tend a welcome and serve with a It has been well said: “Hats off smile. They will not know how to the man who is a little better many potential buyers they have than his word, a little more liberal driven elsewhere, perhaps perma- than his promise, a little larger in nently, or how much good will deed than he is in speech.” they have lost for their employer Hats off to everyone who, every who, through the payment of their single day, in business or out of salaries, is supporting their fami- it, does his or her very best — and lies and who can continue to do so then some! eo 0 ===== PAGE 25 ===== DAVID SMYTH WHEN OUR FOREFATHERS set out group of men, because they knew to define their ideal of a free so- that the special privilege of a ciety in Argentina just over a chosen few means the downfall of hundred years ago, they did not the free society into the anarchy make the mistake of basing the of conflicting groups. Constitution they drew up on the The members of the constituent sovereignty of the government. assembly of 1853, therefore, gave They knew that when the execu- us a Constitution which on the one tive, the judge, or the lawmaker hand strictly defines the limits of are sovereign, the whole structure governmental power, and on the of the free society is balanced pre- other, establishes the equality of cariously on the good intentions all before the law. But what they of those in power and must soon could not foresee was that their fall into the chaos of tyranny. descendants of today, forgetting Neither did they establish the that the limitation of governmen- Constitution upon the sovereignty tal power is the only guarantee of of the workers or the farmers or individual liberty, and that the the businessmen or any particular equality of all before the law is Mr. Smyth is a free-lance journalist in the only hope of social concord, Argentina. would allow these constitutional 23 ===== PAGE 26 ===== 24 THE FREEMAN November principles to be undermined by saved in order to build a house, arbitrary governmental measures only to have it put into the hands on the one hand and by special of their well-to-do tenants. privileges for certain favored groups on the other. Does Rent Control Help Tenants? Nevertheless, so as to give this Property Rights Denied rent law every possible chance of It is sufficient to examine only proving its intrinsic merits, let us one typical violation of these prin- forget for the moment that it is a ciples in order to see what the con- violation of constitutional prin- sequences will be. The Constitu- ciple, let us grant that its enact- tion explicitly states, for example, ment is perfectly justified, let us that every inhabitant of this coun- concede that its application causes try has the right to own and con- no individual wrongs, let us sup- trol his own property. Then one pose that it is not kept in force fine day, about ten years ago, the merely as a vote-catcher, and hav- government enacts a law freezing ing granted all this, let us go all rents at a certain low level and straight to the heart of the mat- forbidding all evictions. In other ter: the purpose of the rent law words, this law flatly denies that is to make things easy for tenants. anyone renting his own house to Does it achieve this purpose or somebody else has the right to use does it not? or control his own property — a Ask anyone who has hunted for clear violation of a constitutional a house or an apartment for rent principle whereby the government, in Buenos Aires or its surround- overstepping its constitutional ings during the last ten years limits, decrees that tenants are to whether he has had an easy time become a privileged group. of it, and you will be answered The justification of this rent with alacrity, and possibly with law is based on two suppositions: profanity as well. The fact is that in the first place, that all tenants people who are unable to pay an are poor, which is not true, be- exorbitant sum cash down as key cause there are many wealthy peo- money, or who are not willing to ple who enjoy the advantage of supplement the controlled rents paying a ridiculously low frozen with hefty extra payments under rent, and in the second place, that the counter, simply don’t find any all house owners are rich, which is place to live. And the reason for not true either, because there are this is very simple — there are no many people who have scraped and new houses for rent. ===== PAGE 27 ===== 1958 BUENOS AIRES — NO PLACE TO LIVE 25 Builders Are Discouraged But this is not the only conse- As long as such a rent law re- quence of the rent law, nor is it mains in force (or even if it is re- the worst. Having admitted that pealed, as long as the suspicion the government is empowered to remains that it might be rein- grant special privileges to a lim- stated) it is obvious that nobody ited group of tenants, why should is going to build any houses for building contractors, construction rent. Only an idiot would invest workers, or would-be home build- 200,000 pesos in a house for a re- ers not be entitled to demand simi- turn of 300 pesos a month, and lar privileges? If the people who this particular kind of idiocy is want to rent a house or an apart- extremely rare in Argentina. No ment are denied the chance of do- new houses are being built, the old ing so, does it not seem right that ones are not being repaired, build- . the government should hand out ers are not getting any contracts, easy credits to enable them to there are no jobs for construction build themselves? If the builders workers, and in the meanwhile are prevented from obtaining pri- there is no solution in sight for vate contracts, does it not seem the housing shortage which is get- right that the government should ting worse and worse as the popu- help them out with public funds? lation increases. If private enterprise is discour- It is evident therefore that, aged from providing jobs for con- quite apart from all the other ob- struction workers, does it not seem jections that might be raised ' right that the government should against it, this rent law does not do so? And if it is right to do all even achieve what it is supposed this, is it not then necessary to to achieve. The tenants who en- increase taxes so as to raise the joy the privilege of controlled rent money needed to finance it all, to become ever fewer as time goes hire an army of bureaucrats to by, the plight of the old owners administer the program, and to becomes worse and worse as the widen the powers of government inflation spirals upward, new even further? owners quite naturally do not come forward to share their plight, and An Endless Chain the ever-increasing multitude of It is all too clear where this is people who want to rent a house taking us — an irresistible current or an apartment get more and more is set in motion whereby all the desperate as the housing problem multifarious groups of special in- worsens. terests in our society are impelled ===== PAGE 28 ===== 26 THE FREEMAN November to run to the government for the the task of building. In the end, solution of all their problems. And we must choose either one or the the government, having created other. most of the problems in the first place, then tries to solve them by handing out the money which it In more general terms, the ulti- must necessarily take from those mate choice before us is this: if same groups either through taxes we do not like the constitutional or through inflation. The govern- guarantee that every inhabitant ment, therefore, becomes more and of this country has the right to more all-powerful as the rent law own and control his own property, leads to the need for easy-build- then we must strike it out and ing credits, and easy-building write a new Constitution putting credits lead to the need for assist- all property into the hands of the ing building contractors, and so government. In the long run, there on and so on in an endless chain, are no halfway solutions. so that more and more groups of On the road we now travel it is special interests are drawn into evident that we shall inevitably the struggle to get in first with fall into the power of the kind of their demands for government government which owns every- handouts. thing and controls everybody. For But in point of fact, privileges the ideal of the free society which granted by the government merely our forefathers enshrined in the aggravate, as we have seen, the Constitution to be demolished, it very problems they set out to is not necessary that tyranny solve. The reason for this is ob- should triumph by armed aggres- vious: halfway solutions are no sion from without or anarchy by solutions at all. If we really want violent subversion from within. to finish with the housing short- All that is needed is that we our- age once and for all, we must take selves should allow the growing one of two courses: either we must power of government to crush in- set private enterprise free to build dividual liberties. Let social con- more houses by unfreezing rents, cord be destroyed by special privi- or else we must put the govern- leges violating the equality of all ment into the building business. before the law, as we are now do- What is absolutely absurd is that ing, and we shall inevitably slide the government should discourage by insensible degrees into anar- private building and at the same chy, bureaucratic tyranny, and time neglect to take upon itself poverty. ooo No Halfway Solutions ===== PAGE 29 ===== Part of the problem when government grows out of bounds: How To Increase Tax Revenue JAY MORRISON MosT great American fortunes maining after subtraction of all have been made, not by sales of deductions and exemptions) is re- high priced goods or services to quired to pay a tax of 20 per cent the rich but by volume sales to of that “net taxable income.” masses of people. This is a fact A taxpayer with a net taxable worthy of further consideration income in excess of $2,000, but by legislators and others responsi- less than $4,000, has to pay 20 per ble for raising the funds needed cent on the first $2,000, i.e., $400, for governmental operations. plus 22 per cent on the amount of What the size and scope of gov- “net taxable income” in excess of ernment ought to be is also a $2,000. Thus, if a taxpayer has a grave question. But, presuming a net taxable income of $3,000, he government of any given size — pays a tax of 20 per cent on his say the government that prevails first $2,000 of income ($400) plus — still leaves the knotty problem 22 per cent of $1,000 ($220) or a of raising the required revenue. total of $620. Many people believe the indi- Of this amount, $600 may be vidual income tax of our federal said to result from the basic tax of government derives a large 20 per cent and $20.00 from the amount of revenue because of its progressive tax. “progressive” nature. By “pro- The rate of the progressive tax gressive” is meant a higher rate steps up rapidly. Thus, for an in- of taxation upon larger incomes. dividual having a net taxable in- For example, under the tax rates come of $30,000 the total tax as they now stand a taxpayer with would be $13,220 of which $6,000 from $1.00 to $2,000 of taxable would be due to the “basic rate” of net income (that is, income re- 20 per cent and $7,220 would re- Mr. Morrison of Seattle has recently retired as sult from the “progressive” tax. an official of Boeing Airplane Company. Let's take another example. 27 ===== PAGE 30 ===== 28 THE FREEMAN November Suppose an individual has a net steeply to the fantastic figure of taxable income of $100,000. His 91 per cent. tax would be $67,320. Of this The attempt “to get a lot of $67,320, only $20,000 would be de- money from a few, people” hasn't rived from the basic rate of 20 worked. per cent, and the remaining $47,- If the “basic rate” were in- 320 would result from the “pro- creased from its present 20 per gressive” portion of the tax. cent to 24 per cent — and all the As the income increases, the “progressive” element repealed — rate of taxation upon the upper the tax would yield a larger reve- increments mounts even higher nue to the treasury than it does until, upon that portion of an in- now. It would do so even if the dividual’s net income in excess of taxpayers in the higher brackets $200,000 in a year, a tax of 91 of income were to continue their per cent is levied. use of all the devices they now use Clearly the federal tax upon in- to avoid payment of the onerous dividual incomes is designed ‘to “progressive” rates of tax. get a lot of money from a few people.” Since there are few people Devices To Avoid Taxes so rich as to have large incomes, There are several such devices it is a tax to fall heavily on the or vehicles of avoidance of indi- few rich. vidual income taxes. One — per- But does it? Does it “get a lot haps the most important one — is of money from a few people”? investment in bonds of states, counties, municipalities, and other Higher Rates Yield Little Revenue quasi-public bodies having the The table opposite shows the legal power to issue bonds the in- yield of the basic tax rate and that come from which is exempt from portion of the total revenue de- federal taxation. rived from the progressive ele- The amount of state and munic- ment of the tax. ipal bonds outstanding exceeds Thus, we see that, of the total 45 billion dollars. Such securities taxes collected, 84 per cent comes are purchased in many cases by from the “basic” rate of 20 per individuals of large income to cent. Only 16 per cent of all the avoid the onerous rates of the money collected on the individual “progressive” tax. income tax is attributable to the For example, the tax exempt “progressive” portion of the tax — bonds of the Water Department of even though the rates increase the City of Seattle recently sold ===== PAGE 31 ===== 14 F 1958 HOW TO INCREASE TAX REVENUE 29 ESTIMATED DISTRIBUTION OF TAX RATES AND YIELDS BY BASIC AND PROGRESSIVE ELEMENTS OF RATE STRUCTURE, FISCAL YEAR 1956 (Tax Amounts in Millions) Net Pro- Pro- Income Bracket Taxable Basic gressive gressive Total (Thousands) Income Rates Tax Element Tax Tax $0- $2 $88,526* 209% $17,705 oe es $17,705 2- 4 13,890 22 2,778 2% $278 3,056 4- 6 5,494 26 1,099 6 329 1,428 6- 8 3,346 30 669 10 334 1,003 8- 10 2,321 34 464 14 324 788 10- 12 1,679 38 336 18 302 638 12- 14 1,309 43 262 23 301 563 14- 16 914 47 183 27 246 429 16 - 18 765 50 153 30 229 382 18- 20 654 53 131 33 215 346 20- 22 519 56 104 36 187 291 22- 26 840 59 168 39 327 495 26 - 32 827 62 165 42 347 512 32- 38 531 65 106 45 239 345 38- 44 383 69 77 49 187 264 44 - 50 284 72 57 52 147 204 50 - 60 272 75 54 55 149 203 60- 70 185 78 37 58 107 144 70 - 80 123 81 25 61 75 100 80- 90 86 84 17 64 55 72 90 -100 62 87 12 67 41 53 100 - 150 185 89 37 69 127 164 150 - 200 74 90 15 70 52 67 200 & over 210%** 91 42 71 149 191 $123,468 $24,696 $4,747 $29,443 83.9% 16.1% *Included on this line is the first $2,000 of each taxable income reported, no matter what the individual's total income, **This figure includes only that portion of taxable incomes exceeding $200,000. The first $200,000 of any income has been apportioned to the preceding brackets. ===== PAGE 32 ===== 30 THE FREEMAN November to yield the investor less than 2.2 able and educational” foundations, per cent per annum. Such a yield and other legal devices to avoid would have little attraction to an the attempt of the government “to investor had the income been sub- get a lot of money from a few ject to tax. But to a man with a people.” These devices would dis- taxable income of, say, $30,000 a appear. year, the 2.2 per cent tax exempt As a measure to achieve reve- net income is the equivalent of a nues, the steeply progressive ele- taxable yield of nearly 6 per cent. ment of our individual income tax Investments of equal safety with is a failure. Its very steepness 6 per cent yields are not available. stimulates its avoidance. The way to get revenue — increased revenue Advantages of a Proportional Tax — to our treasury is to abolish the Were the maximum rate of the progressive feature. income tax reduced to 20 per cent Our treasury can follow the ex- — the present basic rate — there is ample of our successful industries sound reason to believe the reve- and merchants if it will adopt the nue to the treasury would be in- policy of getting “a little money creased — not decreased. from a lot of people.” The billions of dollars now seek- Even now the basic 20 per cent ing and finding refuge from the tax takes in 84 per cent of the confiscatory ‘‘progressive” tax revenue and the entire ‘“progres- rates would cease to hide in tax sive” portion yields only 16 per exempt bonds, tax exempt “charit- cent. eo 0 “IDEAS OF) G0BERIV Killing the Goose A GOVERNMENT can tax people only up to a certain point. Beyond that point the law of diminishing returns sets in with a venge- ance. People need hope and incentive in the struggle for liveli- hood. These are destroyed if taxes are excessive and the produc- tion or business that gives tax revenues is soon killed. I remember reading about the communists’ take-over in Hun- gary. They ordered a tremendous increase of the output from the oil wells. Engineers told them if a well is pumped too fast and not given periods of rest, it is likely to blow into gas and stop the flow of oil. Ignoring the caution of experienced engineers, they got their “increased production” but at the cost of destroy- ing sources. Tax revenue is very much like an oil well. A sensible assessment brings a flow into government coffers. An excessive drain is bound to dry up sources. MARK TENNIEN, No Sccret Is Safe ===== PAGE 33 ===== ) n p THE yr OF FEDERAL AID RALPH BRADFORD “There is no such thing as. federal aid.” To MAKE that statement flatly, as this writer has done frequently of late in addressing audiences of business people and others, is to invite quick challenge, angered denial, or sheer, uncomprehending incredulity. How, in the face of so much physically visible contrary evi- dence, can anyone in his senses make such an assertion? Clearly, the national treasury has been tapped many times; plainly, the federal government has “aided” states, regions, municipalities, in- dividuals, corporations, and eco- nomic groups to the tune of bil- lions. Yet I keep making the state- ment — and having done so I find, as so often happens, that other men have made it also, just as flatly and literally. I refer to no less an imposing group than the members of the House of Repre- sentatives and Senate of the sov- ereign State of Indiana. In January of 1947 they passed a Concurrent Resolution that brought them almost overnight into the limelight of national at- tention and editorial acclaim. The Resolution (see page 33) was a kind of Hoosier Declaration of In- dependence and Self-Reliance — independence from Washington and reliance upon their own skills, energies, labors, and resources. It was not surprising that such a document should issue from the Hoosier State where those prin- ciples of conduct that are usually referred to as the homely virtues have long been emphasized. The ‘philosophy of eat it up, wear it out, make it do, and do without, supposedly a product of the New England mores, is equally at home in Indiana. Partly, this is innate; partly, it is due to good leadership—political and economic. At a time, for in- stance, when many chambers of commerce were hot upon the quest for Washington handouts, the In- dianapolis chamber under the Mr. Bradford is a well-known writer and busi- ness organization consultant. 31 ===== PAGE 34 ===== 32 THE FREEMAN November guidance of its clear-visioned ex- ecutive, William H. Book, was fighting to keep federal funds out of Indiana. At a time when many business organizations were try- ing to wangle all kinds of govern- ment offices for their cities, the Indianapolis chamber waged a notable battle to force the U.S. Department of Commerce to close up its Indianapolis office and go home! A Precedent In such an environment, it is not surprising that the Hoosier legislators, relieved from at least one of the pressures that so often push toward big government and big spending, came out with their precedent-setting Resolution. It is not surprising either that they recognized there is no such thing as federal aid! To be sure, they might with equal pertinence have avowed that there is no such thing as state aid for the counties and communities within the state. Just as they recognized that ‘there is no wealth to tax that is not already within the boundaries of the 48 states,” so they might have seen (and probably did see) with equal clarity that Indiana has no wealth to tax that is not already within ° the boundaries of its 91 counties. However, they were not trying to write a treatise, but to assert a principle; and this they did in ringing terms that might well be heeded by the legislatures of the other states. Nor was it a mere rhetorical gesture; for when the Bill for Federal Aid to Education, refurbished as an “emergency measure,” was recently up for consideration, it remained for Senator Jenner of Indiana to an- nounce that Indiana didn’t need, and therefore didn’t want, the federal money; and to be sure that nobody could mistake his meaning, he put an amendment on the bill specifically excluding In- diana from its so-called “benefits.” Why They Did It Are these Hoosiers crazy people, or is there maybe a very sane and down-to-earth method in their ap- parent madness? Let us examine this question of “aid” for a moment, considering it first in its personal application. If I want to expand a business, enlarge a home, write a book or carry on a research project, but do not have enough funds of my own to see me through, and if you make me a loan or gift of a suf- ficient amount, then you have aided me in accomplishing what 1 wanted to do. Suppose, however, that you have no money of your own and are not capable of earning any, but that you do have a large income by iy ===== PAGE 35 ===== 85th General Assembly STATE O HOUSE CONCURRENT RESOLUTION No. 2 INDIANA needs no guardian and intends to have none. We Hoosiers — like the people of our sister states —were fooled for quite a spell with the magician’s trick that a dollar taxed out of our pockets and sent to Wash- ington, will be bigger when it comes back to us. We have taken a good look at said dollar. We find that it lost weight in its journey to Washing- ton and back. The political brokerage of the bureaucrats has been deducted. We have decided that there is no such thing as federal” aid. We know that there is no wealth to tax that is not already with- in the boundaries of the 48 states. So WE PROPOSE henceforward to tax ourselves and take care of ourselves. We are fed up with subsidies, doles and paternalism. We are no one’s stepchild. We have grown up. We serve notice that we will resist Washington, D. C., adopting us. Be IT RESOLVED by The House of Representatives of The General Assembly of the State of Indiana, The Senate concurring: That we respectfully petition and urge Indiana’s Congressmen and Senators to vote to fetch our county court house and city halls back from Pennsylvania Avenue. We want government to come home. Resolved, further, that we call upon the legislatures of our sister states and on good citizens every- where who believe in the basic principles of Lincoln and Jefferson to join with us, and we with them to restore the American Republic and our 48 states to the foundations built by our fathers. ADOPTED 8¥ MOUSE, JANUAAY 13, 1947 ADOPTED AY SUINATE, JANUARY R2, 1947 INTAQOUCED 8Y MN. GEORGE NENLEY OF SLOOMINGTON AND MR. LOTHAIR TELTOR OF HAGERSTOWN 0 ~ 0 7 0 0 0 0 GS oO This resolution was drafted by the former Hoosler congressman, Samuel B. Pettengill, at the request of Messrs. Henley and Teetor. ===== PAGE 36 ===== 34 THE FREEMAN November virtue of possessing the power of would curb foreign aid spending compelling me and millions of on grounds of economy. others to pay you each year a sub- Without debating the foreign stantial portion of our earnings. aid question as such, I did under- Is it *‘aid” then, when you gra- take to explain to this student that ciously hand me back, earmarked it was not necessarily a sign of for some specific purpose, a por- ignorant selfishness for citizens to tion of the money which I, be concerned about the economic through many years, have been and possible political effects of paying to you? big debt, big deficits, big borrow- This is what happens when the ing, and big inflation; and I de- government “aids” a community fended the anxiety of the average or a state — but it is surprising taxpayer who is worried about the how many people do not under- increasing share of his earnings stand this. A few months ago I that is being taken in taxes. At heard the mayor of a great city this point the student interrupted denounce as reactionaries those me: who expressed doubt as to the “What have taxes got to do with wisdom and justice of using it? The government doesn’t have federal funds for local “urban re- to supply foreign aid out of tax habilitation.” However, he was a money — let it use some of its politician who had been nurtured other income.”” in the grab-gimme-and-charge-it- Its other income! Does this to-our-grandchildren school, and sound unbelievable? Yet I assure his attitude was to have been ex- you it happened — and before you pected. and I begin to condemn our edu- cational system for turning out Disregard the Taxes! such a poor high school product, Of deeper significance was the we'd better recall that a great performance of a high school many adults who have gone senior with whom I recently spent through high school and college, some time. This student was alert and who have subsequently had a and personable but had apparently great deal of practical experience, been exposed to the big-spending express essentially the same atti- ideas of a “liberal” teacher. Our tude. They may not be quite so talk turned one evening to the naive about the sources of gov- matter of foreign aid, and the ernmental revenue; but the net student at once became impatient effect is the same when they say, and spoke scornfully of those who “Our city got this new building ===== PAGE 37 ===== 1958 THE MYTH OF FEDERAL AID 35 erected with federal money —¢t to more liberal loans than com- didn't cost us a cent!” mercial banks are permitted, not Such people might be helped to only by sound economic practice a clearer understanding of finan- but by law, to make them; and so cial reality if they could be the government will go into the brought to remember that govern- banking and lending business. It ments always tend to get bigger will be decided that those who are and grow more complicated. As engaged in certain types of oc- expansion takes place, many people cupation require special assist- are employed — to collect taxes, ance, and so their operations will keep records, act as policemen and be subsidized — which means that soldiers, and staff the constantly the government will take money increasing and proliferating agen- that has been paid in by all the cies. people and use it for the special benefit of some of the people. Pressure To Spend All this will lead to constantly Human nature being what it is, increasing governmental expenses. government is under continual But the services promised sound pressure to provide services addi- pretty good to those who do not tional to those originally contem- think beyond them to their con- plated or implied. Also, while those sequences; and when actually ren- in charge of government —the dered, the services seem pretty men and women who are its cus- good to those receiving them; and todians and administrators from so most people will not object too time to time — will not hesitate to much when it is announced that employ force to collect the imposts their rate of tax payment must be they have levied upon the people, higher to meet the increased costs they will nevertheless desire that which government has been incur- those who must pay shall be kept ring on their behalf. Thus, year as contented as possible; and so by year, the portion of their earn- they will invent and offer new ings that is taken away from them “services” in addition to those de- increases until it exceeds a third manded. of all they make collectively, and Some people will be given a in many individual cases is very guarantee against unemployment. much higher. In some cases, old age pensions will be provided. It will be decided Inevitable Deficits by somebody in the government Presently a point is reached that certain citizens are entitled where the government is spending ===== PAGE 38 ===== 36 THE FREEMAN November more than it is receiving in taxes, good conservative investment; but and it is forced to go into debt when a government by its fiscal for the difference. Forced? Well, policies encourages inflation, the that’s what is said. Of course, the bonds at maturity will be worth government could cut down on the less than their face value in terms services; it could even eliminate of what they will purchase. Fur- some of them entirely. That is thermore, they bear interest, what you and I would do if a which adds still more to the an- similar situation arose in our per- nual cost of running the govern- sonal affairs. But people have ment. grown accustomed to the “bene- Sooner or later, in addition to fits” promised or delivered; so if all the other services and financial the idea of retrenchment is ad- handouts which are being given vanced, it is put resolutely to one to certain individuals and groups, side by government administra- a new method is introduced for tors. transferring money which has They justify their attitude by been collected from all into the uttering one or more of the clichés pockets of some. Perhaps those that have become current. They who are to benefit (as they think) remark scornfully that they don’t dream it up, or maybe government want to go back to the horse and administrators themselves origi- buggy days. They are emphatic nate it in order to forestall dis- about the dire effects of turning satisfaction or criticism. However back the clock. They proclaim that may be, the new idea (or solemnly that we must not worship rather, the added one for it is as at the shrine of a balanced budget old as the pyramids) works out — thus implying that a belief in something like this: solvency is a species of idolatry. The outcome of all this “logic” A Villiage Water Problem is to go into debt. This is done in Jim Brown of Brown’s Corner several ways, the most common and the two hundred people who, being through the sale of bonds with Jim, make up the population to all who can be persuaded to buy of that thriving village, are faced them. In simple terms, the govern- with a problem. The water table ment gives to the bondholders, in in their area has been lowered return for their cash, its promise through a number of drought to repay them at some specified years, and they need a new deep future date. Given a reasonably well for their village water supply. stable currency, these bonds are a Right here it can be argued that ===== PAGE 39 ===== 1958 THE MYTH OF FEDERAL AID 37 it is the responsibility of every the Brown's Cornerites are a householder to provide his own rather influential group in a crit- water and that this is not the ical political area. And anyway, function of government at any if granting their request should level. However, we are not con- run the budget into the red, a few templating a theory but a condi- more bonds can always be issued! tion, and the condition is that the So they get the money. people of Brown’s Corner have elected to provide their water co- Someone Must Pay operatively, through the machin- They get the money — and there ery of their village government. is great and gleeful rejoicing at To have their well drilled and Brown's Corner. “Oh boy,” they cased and fitted with a suitable gloat, ‘“lookit what we did! We deep-well pump and supplied with got our new well and all its equip- an adequate storage and pressure ment free, gratis, and for nothing. tank is going to cost them, say, It was financed with federal money $35,000. They were preparing to and didn’t cost us a cent!” call an election to vote bonds and They entirely overlook the fact assess a special water tax against pointed out by the astute Hoosiers their several pieces of property, in their great Resolution — this being the normal and tradi- namely, that every dollar they re- tional way to finance such facili- ceived had first been paid into the ties. But then one of them has a central government by the people bright idea. of Brown’s Corner and hundreds “Wait a minute,” he cries. “Why of villages like it. Then it had been don’t we apply to the government attenuated by the expense of for the money? We can make a maintaining the huge federal es- case for sanitation and so forth. tablishment. Finally a few anemic Those fellows at Washington put pennies out of each dollar paid in it out for nearly everything else; trickle back wearily to Brown's why shouldn’t we get our share?” Corner to finance the water works Hooray! A Daniel come to judg- — and the Brown’s Cornerites go ment! Here's a chance to get delerious with joy over the “aid” something for nothing! And so they imagine they have secured! they come to that group of fellow And if it be argued that in this human beings who are, for the case the wily citizens of our imagi- moment, “the government.” The nary village, through pressure or need for water at Brown’s Corner chicanery, have actually succeeded is quite apparent, and furthermore in getting back more than they ===== PAGE 40 ===== 38 THE FREEMAN November have paid in — what can be said which must already pay out in of them except that they ought to federal taxes more than half its be ashamed of themselves? profits before it can return any- For what they have done, in thing to those who risked their that case, is to compel the people money to get it started? Is it the of all the other towns and villages carpenter or lathe operator or in the country to help finance a pipe fitter or plasterer whose taxes facility that is of interest and and living costs have been boosted benefit solely and exclusively to and whose dollars have shrunk the people of Brown's Corner. still further in terms of what they The cumulative long-run effect will buy? of such proceedings is that an in- We have considered this matter creasing number of other towns in these paragraphs primarily and villages will try to get even from the surface angle of cost and by putting in their claims; and tax consequences. Actually, the the result is a continuing scramble myth is not so much that of fed- to see which can wangle the big- eral aid as it is the myth of gov- gest piece of change from the ernmental superiority to free mar- federal treasury. More deficits, ket action. It is all part of the more borrowings, more credit, omniscient -and -omnipotent -gov- more money, less value, more in- ernment fable — a fable that has flation, ad infinitum. often led and can lead again to bitter disillusion. Liberty Is Lost But we need not apologize for Who has benefited? Is it Jim our concern with taxes and costs, Brown, whose yearly tax payment for these factors, too, are at the has probably increased while the roots of freedom. There can be no value of his money has almost cer- personal liberty in a bankrupt tainly decreased? Is it the presi- state. dent and stockholders of the There is no such thing as fed- Brown’s Corner Knitting Mill, eral aid. ooo hocas OlN] 100607v The Importance of the Means LET NO MAN turn aside ... from the broad path of honor, on the plausible pretext that he is justified by the goodness of his end. All good ends can be worked out by good means. Those that cannot are bad; and may be counted so at once, and left alone. CHARLES DICKENS, Barnaby Rudge ===== PAGE 41 ===== + nature's laws «4 man’s laws He that tilleth his land shall have plenty of bread: but he that followeth after vain persons shall have poverty enough. PROVERBS 28:19 WILLIAM H. PETERSON « THE LAW OF LIFE works infallibly. break through the tough-shelled In 8 minutes and 20 seconds a life- tomb of the seed; the corn seed, giving ray of the sun hurtles the very much alive, explodes roots 93,000,000 miles (at the fantastic downward and a stem upward. speed of 186,000 miles per second) Against relatively enormous from the sun to the Iowa farm en- weight, the minute stem pushes visioned in Grant Wood's painting, aside tiny stones, dirt, and debris, American Gothic. The ray is one of and pierces the earth’s crust seek- an infinite number which have ing, mysteriously, the life-sustain- made such a trip through the eons ing rays of the sun. of time, drenching and renewing On the ground a small whitish the land of milk and honey in Bib- plant emerges, fragile but alive lical Canaan, the vineyard in Ro- and vibrant, beautiful to the eye man Gaul, the manor in medieval and delicate to the touch. Soon, England, the rice paddy in present- breathing air, absorbing water, de- day Burma, the farm in modern fying gravity, the at-first insignif- Iowa. icant corn stalk soars majestically, In all, the basic biology of life is a triumph of Nature's engineering the same: sun and water, seed and and architecture, turning to the soil. sun and bending with the wind. The Iowa farmer deposits a Then ears and tassel and the seeds kernel of corn, one of countless, an with which to begin again the end- inch or two in the soil, into the less cycle of growth and regrowth, womb of Mother Earth. The elixir and for man the age-old process of of life begins; sun, soil, and water cultivation. Dr. Peterson is Associate Professor of Eco- Meanwhile, locked in the har- nomics at New York University. This article vested ears of corn is the life-giv- forms the epilogue to his just-completed book . : manuscript, The Great Farm Problem. ing energy of the sun transmitted } 39 ===== PAGE 42 ===== 40 THE FREEMAN : November at a level no human eye will ever century of political liberty, free see, probably not even with power- trade, and the gold standard, a ful microscopes yet to be designed. century in which slavery was ban- This is photosynthesis: life, sub- ished almost the world over and stance, energy, transmitted from the British corn laws repealed, a ray to plant and, ultimately, to ani- century of science, a century of mals and humans; life sustaining choice, a century of the inherent life, in strict accord with the laws dignity of the individual. Essen- of Nature. tially, no government burned cof- Do such laws regulate the affairs fee, operated public granaries, is- of men? Some 25,000 years ago, sued fiats on permissible acreages, man — a crude nomadic hunter, a paid farmers not to farm, nor sold garnerer of nuts, a berry picker — surpluses to foreigners more saw the possibilities of harness- cheaply than to its own citizens. ing seed and seasons into a regular The farmer “was a free man, in- pattern of cultivation and harvest, dependent on his own acres, be- and the problem of homo sapien’s holden to no one but his God, as- survival was greatly eased. The sured of a living if he only worked laws of Nature were recognized, hard enough. It was a wonderful understood, and applied. The Agri- dream. It did happen. It is passing. cultural Revolution was born, and, Now it belongs to history and the more than that, the time and en- poets.” ergy and anxiety spent on the The tragedy of ‘“modern” farm eternal hunt for food were released intervention is twofold. One trag- for division of labor, for trade, for edy stems from man’s efforts, in a capital accumulation, and, later, sense heroic, to repeal Nature's for reflection on the meaning of laws, to substitute bureaucratic life and, eventually, for literature, rule for the rule of the market architecture, art, music, and phi- place, to set prices below the mar- losophy. The Agricultural Revolu- ket price and decree, vainly, that tion laid the basis, in short, for there shall be no shortages, and to permanence, for civilization. set prices above the market price More than 24,000 years later, and assert, again vainly, that there from the latter part of the eight- shall be no surpluses. So under the eenth century until World War I, banner of “farm policy,” and came the Industrial Revolution armed with legislative authority, and, relatively speaking, laissez "Haystead, Ladd. The Farmer and his faire. The nineteenth century was Customers. Norman, Oklahoma: Univer- a remarkable century. It was a sity of Oklahoma Press, 1957. p. 92. ===== PAGE 43 ===== 1958 NATURE’S LAWS AND MAN’S LAWS 41 court orders, administrative direc- to the planned society of Imperial tives, and no little courage and Rome. How will the story end? smugness, the interventionists Many farmers bemoan the loss commandeer the market place and of their economic liberty but do “adjust” farm prices and ulti- they bemoan the censorship of a mately the farm itself. Politics movie in Philadelphia or a play in enter. Legislative blocs emerge Boston, the lifting of mailing (e.g., “the farm bloc”). Pressure privileges for a radical weekly? groups pull this way and that. One Does the interest of a Jehovah’s intervention fails. A new one is Witness in freedom of religion ex- tacked on. The jerry-built edifice tend to an interest in the pub- wobbles anew. So still more inter- lisher’s concern for the freedom of vention. the press? Does the publisher A generation of “farm policy” worry over the worker's loss of adds up to hopeless tinkering, fan- civil liberty in having to join a tastic losses, planned chaos, a lost union against his will? Does the war against Nature’s laws. The worker lose any sleep over the sci- battles have names: The Fordney- entist who is denied a passport McCumber Tariff, the McNary- and hence is unfree to travel Haugen Bills, the Farm Marketing abroad? Does the atomic scientist Board, the Smoot-Hawley Tariff, complain when the Japanese- the AAA, Soil Conservation, the American is put into a federal Ever-Normal Granary, the Food concentration camp or the Nazi is Stamp Plan, 90 Per Cent of judged under ex post facto laws? Parity, the Brannan Plan, Flexi- Freedom is total; as long as man ble Parity, the Soil Bank, Overseas exercises neither force nor the Surplus Disposal. The irony is that threat of force against his fellow the farmer to be “saved” wasn’t; man, freedom exists. The duty of since the New Deal, one of every government, then, is to preserve three farmers has quit. The exo- freedom — to use its force only to dus from farming, in a sense a repel force; the spirit of free en- triumph of efficiency over bu- terprise and liberalism will do the reaucracy, continues to this day. rest. The modern dilemma is that The second phase of the tragedy competition, the law of supply and of “modern” farm intervention is demand, however worshiped in the that it is but a chapter in a much abstract, is nowadays shot through longer but unfinished story; it is a © with privileges extended by gov- part of a philosophy, a way of life, ernment and eagerly sought by its a return to mercantilism, a recall citizens. ===== PAGE 44 ===== 42 THE FREEMAN November The farmer is not alone. Gov- “In like manner, an amount of ernment, as Voltaire noted, has money will go farther if expended become the art of taking from by each man and woman for their some and giving to others. The own wants, and in the feeling that businessman looks for a tariff, this is their all, than if expended the veteran for a pension, the ship- by a Great Steward, or National per for a subsidy, the worker for Commissioners of the Treasury. a minimum wage, the periodical “Take away from me the feeling publisher for an artificial mailing that I must depend upon myself, cost, the industrialist for a defense give me the least hint that I have contract, the silver producer for good friends and backers there in the monetization of silver, the reserve who will gladly help me labor official for immunity from and instantly I relax my diligence. the antitrust laws, the elderly for “Give no bounties, make equal Social Security, the bureaucrat laws, secure life and property, and for power, the debtor for inflation, you will not need to give alms. and so on and on, the State ever Open the doors of opportunity to swelling, the individual ever talent and virtue, and they will do shrinking. themselves justice and property It is an age of amorality, an age will not be in bad hands. In a free of seeking Something for Nothing, and just commonwealth, property of shedding private responsibility rushes from the idle and imbecile and becoming wards of the State to the industrious, brave, and per- — the Welfare State. It happened severing. The level of the sea is before. Rome, for instance, had its not more surely kept than is the “bread and circuses.” It tried to equilibrium of value in society by repeal Nature's laws —for example, demand and supply; and artifice the law of self-reliance and the and legislation punish themselves law of supply and demand. Nature by reactions, gluts, and bankrupt- was not denied then. Will she be cies.” denied now? In the words of President Grov- In the words of Ralph Waldo er Cleveland in vetoing federal aid Emerson, more than a century ago: to the Texas drought farmers of “The harvest will be better pre- his day: “It is the business of citi- served and go farther, laid up in zens to support the Government, private bins, in each farmer's corn- not of the Government to support barn, and each woman’s basket, the citizens.” than if it were kept in national Which will triumph, Nature's granaries. laws or man’s laws? 00 ===== PAGE 45 ===== BEN MOREELL “TH. Armstrong Roberts IF ALL THE THINGS that have been that we need more of everything, said and written in recent months more students, more teachers, about scientific and engineering more classrooms, more equipment, education were assembled in one and that all of these deficiencies place, they would constitute the can be eliminated by massive ap- most resplendent “crazy quilt” of plications of that traditional diverse views the world has ever American cure-all — more money. seen. At one extreme are those who Many also seem to believe that if contend that there are glaring de- it is public money, made available ficiencies in the quality of our by the federal government, it will educational processes, beginning be even more effective. Between in the grade school, and that our these two extremes are an almost procedures are such that the least infinite number of gradations of competent are not improved while opinion. those with latent talent remain un- The educational controversy developed. Others hold that what gains heat from the realization we are doing is without fault but that the solutions reached might - spell, ultimately, the difference be- Admiral Moreell, Chairman of the Board, Jones tween living as a free people and & Laughlin Steel Corporation, was wartime : : : chief of the Bureau of Yards and Docks and national extinction. ief of Civil Engineers of the Navy. Organiz- - ing, recruiting, training, equipping, and direct- t seems to me that the first €s ing the activities of the Seabees, an engineering sential is to define our long-range force of some 10,000 officers and 240,000 en- . . . listed men, afforded him a rare opportunity to objective. Certainly we need more appraise the relative values of their educational . : . equipment as measured by quality of perform- scientists and engineers; but we ance. : . are equally in n This article is from an address to the Western q . y eed of superior Society of Engineers at Chicago, May 9, 1958. talents in all other areas of learn- 43 ===== PAGE 46 ===== 44 THE FREEMAN November ing. To say that all of our prob- four foundation stones would take lems, current and prospective, can more time than is available, but I be solved merely by educating venture to set forth certain brief more scientists and engineers is to observations in light of my experi- close our eyes to the lessons of ences and studies. history. “Man shall not live by The education of a scientist or bread alone,” said the Master engineer begins when he enters Teacher; and he asked, “Is not the grade school. I subscribe whole- life more than food and the body heartedly to the poet’s judgment: : 12] than raiment? "Tis education forms the common mind: Just as the twig is bent, the tree's What, then, is the ultimate ob- inclined. jective, the long-range target? I would say that it is the enhance- Good Teachers ment of human values as measured In this light, let us examine our in terms of spiritual and material current situation, first, with re- progress. The real worth of every spect to teachers. Without good human action must be appraised teachers we are sure to waste our in those terms. And, the most im- “raw material,” the students. The portant instrument available to us good teacher is not self-desig- for achieving progress toward that nated; he is designated by the ultimate objective is education. We student. It is not enough that he must then face this question: be learned; he must have learning What are the basic essentials of that can be drawn upon. If I want an effective total educational struc- to learn something, I look for Bases of Sound Education ture? someone who knows more about It seems to me that they are the subject than I do. And the four in number. more his knowledge exceeds mine, First: Good teachers the greater his attraction for me. Second: Good raw materials, Good teachers always attract those i.e.,, a highly selective system for most eager to learn, and they also determining those upon whom the inspire. Teaching is an art, and educational effort is to be expended every genuine teacher is a special Third: Proper curricula kind of an artist. Fourth: Bricks and mortar — When one has something of suitable equipment for use in in- value, it is natural for him to safe- struction guard and protect it. Have we done An adequate discussion of these this with our teachers? ===== PAGE 47 ===== 1958 ENGINEERING EDUCATION 45 I shall not discuss in detail our the standards of compensation are profligate waste of teaching talent. set for the least competent rather It is notorious that we have failed than on the basis of individual to compensate even our best worth. This is indeed profligate teachers for their labors. Also, we waste! have failed to accord them the re- spect and standing in the com- Good Students munity to which they are entitled. The second essential is the raw Coupled with this, we have, in material, i.e, students who are many instances, restricted their able to learn, to mature in under- freedom to teach by confining them standing, and to develop a sensi- in academic strait jackets, devised tive appreciation of the true, the by the entrenched educationist good, and the beautiful. Here in hierarchy. Many of our most able America we have as fine a supply teachers abandon the profession of raw material as can be found each year for more rewarding anywhere. Our children have a fields. Many who stay do so only cultural heritage equal to that of for love of the service, and to our any others and superior to many. own detriment, we take advantage We have the potential if we can of that devotion. It is well-known but avoid the error of assuming that many of our teachers spend that all men are born with the a large part of their energies de- same talents and the same capaci- vising ways and means of making ties to learn and to grow in wis- ends meet, energies which could dom. The law of human variation be better used to increase their is not man-made, it is God-made — knowledge and their service to the a fact of nature. Just as there community. Unless the American were never two human beings born people are willing to pay a fair with the same fingerprints, so do price in terms of money, esteem, no two humans have the same men- and academic freedom for the serv- tal, physical, or moral capacities. ices of our teachers, the quality of If we concede that individuali- education will deteriorate at a ties and inequalities in the physi- time when we can least afford it! cal, mental, and moral character- I do not mean to imply that istics of mankind is God’s intent there are no deficiencies in the (and there is every reason to be- training and talents of those upon lieve this), it is evident that any whom we depend to teach our chil- effort to repeal this natural law dren. I shall have more to say of variation by means of educa- about this later. But I do feel that tional procedures is attempting the ===== PAGE 48 ===== 46 THE FREEMAN November impossible. We might as well try The fundamental reason is that to repeal the law of gravity. each of us is a different individual It is clear that no two students — with profound differences — and have the same capability of learn- each of us wants to live his own ing; and if we treat them as life... . There is not the slightest though they do, we will waste the danger that humanity will put up talents of one or the other or both. indefinitely with any scheme which The insistence that every educa- involves thoroughgoing regimenta- tional system take account of in- tion. It is not human nature to dividual differences is not to rele- tolerate this. There are too many gate certain people to an inferior potential Patrick Henrys, and they status. Every person has aptitudes will continue to reproduce.” which permit him to excel in something. An engineer would Proper Curricula probably make a poor metaphysi- And what of the third essential, cian and vice versa, but it is im- the curriculum, with which I in- proper to label one man inferior clude the method of expounding to the other on this ground. the curriculum? Let me quote here from an au- Specifically, what is our present thority on this subject, Dr. Roger situation with respect to prepara- J. Williams, Director of the world- tory processing of the raw mate- famous Biochemical Institute of rial for our schools of higher the University of Texas. He said: learning? Even before the hys- “It is my confirmed opinion based teria engendered by the Sputniks, upon diverse considerations and those interested in engineering upon prolonged thought, that one and scientific education, many edu- of the most constructive and har- cators, and industrialists who have mony-producing moves that we, as to use the products of our high inquiring human beings can make, schools generally conceded that is to get acquainted with, in the something is amiss in our primary most scientific manner possible, and secondary educational systems. the inherent differences that exist I shall not enter into the details among members of the human of the hotly contested controversy family. . . . Why choose our own over the worth, or lack thereof, of schools, our own amusements, our so-called ‘progressive’ education. own books, our own church? Why T have been studying this subject not have someone tell us what to for the past ten years. My conclu- eat, what to drink, whom to marry, sion is that many, but fortunately and when we can have children? not all, of our preparatory schools ===== PAGE 49 ===== 1958 ENGINEERING EDUCATION 47 are not only failing to improve the gone on to eliminate all coercion, raw material which comes to them, all task-work, and almost all but also in many instances they sharply competitive training. Un- are actually spoiling it. ~ fortunately, this misguided kind- It is impossible to do justice to ness has altogether failed to make such a difficult, complex subject in the lives of teachers, pupils, or a short time. Perhaps I would do parents happier. We do not need well merely to summarize my views psychologists to tell us that the and those of some others. They are child whose will is never crossed that the preparatory schools have is the one who makes himself and in large part abandoned their em- others miserable.” phasis on specific academic dis- The results are inevitable and ciplines designed to develop the might well have been foreseen. capacity of the student for crea- The pupils have acquired smatter- tive thinking, and they have sub- ings of much unrelated informa- stituted an emphasis on social ac- tion of little value as mental train- tivities with attractive labels, such ing and, for the most part, they as group awareness, life adjust- have failed to acquire a capacity ment, and something frequently for that self-discipline which is es- referred to as “togetherness.” sential to learning. ] As for the teachers, the empha- Deterioration in Quality of Education gis has now shifted from profi- Commenting on the deteriora- ciency in their subjects and is di- tion of standards of learning in rected toward acquiring a handi- our public schools, Felix Morley, ness with teaching methods, with noted educator, author, and editor, corresponding neglect of the sub- had this to say in a recent article: stance and content of knowledge. “There is no lack of demand for As Dr. Morley has stated so well: competitive education in the “The whole public school system is United States — the failure is in top-heavy with educationists who the supply. Several factors have know how but not what to teach. combined to create this anomalous Talent is no longer as important as situation. Perhaps the most influ- the mere number of credits which ential is the extreme to which the teachers achieve in mandatory plausible theory of progressive courses concerned with procedures education has been carried. Start- rather than with content. Un- ing from the reasonable thesis doubtedly techniques are useful, that schooling should be enjoyable, but they do not of themselves make the trend in public education has teachers any more than typing ===== PAGE 50 ===== 48 THE FREEMAN November ability of itself creates authors. ... ing the general public to suppose In the assembly line production of that the public schools ought to do, mechanically qualified education- are doing, what in fact they can- ists is found one of the primary not do; encouraging teachers to reasons for the malaise in our pub- neglect what they are able to do in lic schools.” order to dabble about in any num- Four years ago, | participated in ber of tasks at which they are nec- a seminar on scientific education. essarily incompetent.” An assistant high school principal ~~ Father Bell quotes a West Coast and teacher of science in one of high school teacher, one of many our largest cities asserted that in hundreds who wrote to him, as his state, one of the most populous, follows: only 10 per cent of the high school “What do we teach here? Scraps teachers of science had received of literature and art, some unsys- training in the science subjects tematic applied math, bits of his- they taught while all had received tory and geography, in fact, smat- extensive training in the method- terings of almost all things aca- ology of teaching! demic and otherwise. These we try to ‘integrate around vital central "Crowd Culture’ interests’ such as how to date and Canon Bell, the great Episcopal mate and, if possible, avoid di- scholar, and my dear friend, in the vorce; how to reform the City chapter on “The School” of his Hall; how to run the United Na- book, Crowd Culture, has this to tions; how to plan cities; how to say: “There is no getting around provide adequate housing; how to the fact that while our present solve economic problems. All this teachers, and any we are likely to when the pupils are fifteen years get, may be fairly competent to old!” work in old-fashioned subject-mat- There are a great many similar ter and mind-training schools, they statements from conscientious and are simply not up to acting as pre- worried teachers. Perhaps I can in- ceptors, fathers and mothers, dicate what appears to be a fair priests or rabbis or other ministers consensus by quoting from a letter of religion, skilled counselors, recently received from my sister. trained nurses and psychiatrists, Sheis a graduate of the University all these rolled into one. It is not of Missouri with degrees of B.A. honest, not intelligent, for profes- and M.A. Over an elapsed period sional theorists to talk as though of fifty years she has had a total this is not the case, thereby lead- of sixteen years of teaching ex- ===== PAGE 51 ===== 1958 ENGINEERING EDUCATION 49 perience in public and private high Fund at the Institute, at a nominal schools. Her subjects are the now rate of interest and with long pay- largely discarded or neglected ones back period, he was told almost in- — English, Latin, German, Span- variably, “I don’t want a loan. I ish, history, and government. This want a gift.” is what she said: The other incident occurred sev- “The high school youngsters of eral years ago during a visit of today are anything but the ones we Dr. Frank Sparks to Pittsburgh. knew in our high school days. The At that time he was president of teen-ager of today is so aggravat- Wabash College and was promot- ingly opinionated, irresponsible, ing the work of the Council for uninhibited, and completely devoid Financial Aid to Education. of ambition that you feel as though Among other things, he mentioned you are talking to the Tin Man of that the total of the unused loan the Wizard of Oz when you try to funds of all American colleges was instruct him. This philosophy of approximately $52 millions and ‘Don’t frustrate them, don’t give that they had great difficulty plac- them complexes, and don’t hem ing them because the young folks them in’ has bred a gang of un- wanted gifts, not loans! controllable and undisciplined We have heard it said by advo- brats. IT hope the pattern will cates of huge federal government change before my grandchildren appropriations for scientific and reach the teen age. ...” engineering scholarships that too many of our top high school gradu- Student Attitudes ates fail to go to college for lack Confirmation of these views in- of funds. Let me quote some fig- dicating a deterioration of moral ures from a recent bulletin of the standards comes to me from two Engineering Manpower Commis- sources. During the entire war ‘sion of Engineers Joint Council period, my Deputy was Rear Ad- and the Scientific Manpower Com- miral L. B. Combs who since 1948 mission (January 13, 1958): has been head of the Department Of the 1,196,500 senior class of Civil Engineering at Rensselaer population of the country in 1956, Polytechnic Institute. Some five the top 5 per cent were selected to years ago he told me that he was take the first competitive examina- deeply disturbed by the attitudes tion for the National Merit Schol- of many of his students who needed arship Corporation’s awards. Of financial help. When he suggested the 58,158 participants, 556 were that they borrow from the Loan grantedscholarships. Anadditional ===== PAGE 52 ===== 50 THE FREEMAN November 4,226 for whom funds were not of Carnegie Institute of Tech- available were awarded certificates nology and a Director of Jones & of merit in recognition of their Laughlin Steel Corporation, made abilities. this statement: “I have a feeling The 4,226 recipients of certifi- that too much is being said about cates were surveyed ten months the economic barrier to higher later. Of the 73 per cent who re- education. In my opinion, lack of plied, only 40, or less than 1 per motivation is a much more serious cent of the total eligibles, reported barrier. I believe it is just as pos- that they were not then attending sible now as it was when I entered college, and of these, 19 expected college 42 years ago for an able to attend in the near future! young man, strongly motivated The bulletin states: “Although toward a career in science or en- we are not in any way suggesting gineering, to find a way to obtain that these statistical findings have an education. Furthermore, there direct extrapolatable national im- has been a tremendous increase plications, it is remarkable to note since the war in the scholarship that where a valuable mechanism and loan funds available to give of talent identification was pro- financial aid to students. Let me vided, considerable evidence was say it this way: A strongly moti- accumulated showing the highest vated and gifted student can usu- possible current rate of utilization ally find a way to get an educa- of our most talented high school tion.” students.” Dr. H. S. Turner, our vice-presi- Adequate Plant Facilities dent of Research and Development, The fourth essential is adequate commented on this bulletin as fol- plant facilities. It is true that our lows: “I have always contended physical plant is now inadequate that a student who really ‘hits the to meet the demands made upon books’ in high school and comes it. As our population increases and up with good marks can find a way our industrial operations become to go to college. . .. We don’t need more complex technically, the a massive U.S. government schol- number of technical personnel arship program. We do need to measured as a percentage of the build more motivation toward aca- total working force increases. But demic excellence and higher educa- 1 wonder whether we are making tion into those students who have efficient use of the educational the basic mental machinery.” plant we already have. Certainly, And Dr. J. C. Warner, president we must give our teachers the ===== PAGE 53 ===== 1958 ENGINEERING EDUCATION 51 equipment they need to do their of the humanities and social sci- jobs. But we have become so ad- ences in an engineering curricu- dicted to the “numbers game,” i.e., lum. I have long believed that the need for vast numbers of en- while a knowledge of things is im- gineers and scientists that in many portant, it must fall far short of instances we have lost sight of achieving its fullest value unless the importance of quality. Let me it is accompanied by a knowledge quote here again from Dr. Warner. of the meanings of things. Science In a recent address, he said: and engineering are devoted to the “TI have spoken of numbers be- pursuit of the knowledge of things cause we obviously need these while the humanities and social numbers of well-educated engi- sciences, and especially religion, neers and scientists to keep going can be used to learn the meanings our technology-based economy of of those things. True values are ever-increasing complexity... . But measured in terms of the growth we need to think about quality, too. and development of humanity, and An adequate number of truly crea- to achieve those values we must tive scientists and engineers edu- be aware of the meanings of the cated to highest levels of compe- facts which science and engineer- tence may be more important to ing reveal. America than numbers. Actually, The Seabees, which I had the the great new ideas, the break- honor to head during World War throughs, in both pure and ap- II, were called upon to build, main- plied science and in other scholarly tain, and operate naval bases of fields, come from a relatively few all kinds throughout the world. It individuals. How many ordinary was inevitable that they should physicists would it take to make a have to meet challenges in fields contribution equivalent to that far different from those in which made by Fermi? It simply does not they had received specialized train- make sense to expect a reply. As ing. It was my experience, often I have often said, this is an area repeated, that those officers, who in which two half-wits do not make had a broad training in the hu- a wit.” manities and social sciences to sup- plement specialized engineering The Knowledge and Meaning of Things training, were far better equipped Permit me to digress here for to grapple successfully with new a moment to raise a question which and unpredictable circumstances. has been discussed with far more My considered judgment is that heat than light, namely, the place before we yield to the panic en- ===== PAGE 54 ===== 52 THE FREEMAN November gendered by the Sputniks and tics, physics, chemistry, biology, other claimed advances in Soviet geography, Russian language and capabilities, we should make a literature, foreign language, his- thorough and unhurried appraisal tory, and physical culture. As far of the adequacy of our entire edu- as I have been able to ascertain, cational structure in the four areas there is no mention of courses in I have mentioned, beginning with co-educational cooking, personal the grade school and proceeding grooming, automobile driving, the through the graduate schools. De- social graces, esthetic dancing, cisions made under the stress of band, and similar diversionary hysteria are usually wrong. subjects which now infest many of our high school curricula. Education in Russia I do not intend to imply by any- There is no denying the fact thing I have said heretofore that that there is room for improve- we should attempt to imitate the ment in the things we are now do- Russian system of education, ing. We might even learn some- which cannot be wholly divorced thing from Russia. The Soviets, from the brutal authoritarianism early in their history, adopted the of their political and social insti- so-called progressive system of tutions. Our concept of the nature education, probably because it is of the universe and of man’s place egalitarian and socialistic. But therein is fardifferent from theirs, when it comes to military matters, and therefore our social institu- at least, they are hardheaded real- tions must necessarily differ from ists. And it did not take them long theirs. I firmly believe that every to learn that the essential char- gocial order derives its sanctions acteristics of the American system, from the prevailing concept of the as formerly practiced, would yield cosmic order. the best results. There is no doubt that Russia Return to Individualism is using education as an instru- Our American society is based ment of national policy with em- on individualism. But it is not an phasis on quality as well as quan- undisciplined individualism. The tity. In the curriculum which all Founding Fathers held that indi- must follow, the courses required vidual freedom must be exercised during the ten years of elementary within the limitations imposed by and secondary schooling between the moral code which, as a mini- the ages of seven and seventeen mum, I would define as the Ten place great weight on mathema- Commandments and the Sermon on ===== PAGE 55 ===== 1958 ENGINEERING EDUCATION 53 the Mount. If we are to charge in- their labors. This was the incen- dividuals with the responsibility tive for extraordinary effort. The for voluntary self-discipline, we Russians have now adopted this must do our utmost to see that concept for their educational sys- they have sufficient education to tem in which the competition is in- achieve understanding in order tense but the rewards for excelling that they may grow in wisdom. It are very great. is only in this way that each of us can make his maximum contribu- We Americans have taken the tion to that enhancement of hu-. other road in much of our educa- man values which is the ultimate tional work. We have abandoned’ goal of our efforts. the concept of individualism and Our entire social structure at concentrated on the group. We one time was erected on the con- have largely eliminated incentive; cept of the need for individual in- we are educating our youth to be centive, competition, and commen- content to live in an egalitarian so- surate reward. Americans have al- ciety like the ants and the bees. ways been great competitors; and That process produces no giants. they have been anxious to see those Rather it produces a race of intel- who excel receive the fruits of lectual pygmies. oo 0 The Age of Discretion THELWALL thought it very unfair to influence a child’s mind by inculcating any opinions before it had come to years of discretion to choose for itself. I showed him my garden, and I told him it was my botanical garden. “How so?” said he; “It is covered with weeds.” “Oh,” I replied, “that is only because it has not yet come to its age of discretion and choice. The weeds, you sec, have taken the liberty to grow, and I thought it unfair in me to prejudice the soil toward roses and strawberries.” SAMUEL T. COLERIDGE ===== PAGE 56 ===== WOK | Riga [| TO \ [STRiKe f, ANTHONY LEJEUNE THERE HAS BEEN much talk lately are always presented as particular about the trade unions and their limitations of this “right to chief weapon, the strike —a sub- strike,” and we are surely entitled ject which is continually being to ask first what kind of right this forced on the attention of the pub- is. lic; but for the most part such dis- For the sake of argument, let cussion has been less than radical, us assume that we do believe in for like so many modern argu- certain “natural rights” which de- ments, it starts by begging the termine the justice of, rather than real questions altogether. One co- being determined by, man-made lossal assumption in particular be- laws. The right to strike can devils discussion about the trade hardly in itself be that sort of unions: that there exists a funda- right. The noble savage would have mental human right called ‘“the little use for it. It is not one of the right to strike.” elementary freedoms. It has been suggested that ‘“un- Is it then derived by necessary official strikes” (a strange phrase; implication from some more funda- what would an unofficial revolution mental right? Mr. Macmillan, I'm be like, I wonder?) and perhaps sorry to say, recently subscribed to strikes in public services should be the popular fallacy that the right made illegal. It is already illegal to strike is the same as the right for workers engaged in the supply of an individual to withdraw his of gas or electricity to go on strike, labor from an employer, in other and nobody seems to regard this as words, to leave his job, which is an intolerable infringement on indeed a fundamental liberty dis- their liberty. But such suggestions tinguishing free men from slaves. Strikers do not leave their jobs in Mr. Lojoune is Deputy Editor of the British that sense at all; they expect their independent weekly, Timo and Tide, in which : “i this article first appeared on July 13, 1958. jobs to remain open for them. They 54 ===== PAGE 57 ===== 1958 WHAT RIGHT TO STRIKE? 5b do not assert their right as free strikebreaking’’ during the London men to terminate a freely made bus strike as though everyone contract; they assert their power would agree that strikebreaking, if as an organized group to break the proved, was reprehensible. Sir current contract and force their John Elliot's crime, for which 600 employer to make a new one. They busmen are demanding his dismis- are not champions of individual sal, was the “unethical conduct” of liberty; on the contrary, they may asking drivers and conductors to be striking to suppress individual continue working when their union liberty, as they do when they de- told them not to. Whenever an em- mand the dismissal of a nonunion ployer or the public or the govern- worker. ment seeks to alleviate the effects If further proof were needed, it of a strike, the unions seem to re- might be supplied by the complaint gard it as an act of moral turpi- of the American unions that a re- tude and threaten dire new penal- cent Supreme Court .decision un- ties, much as in the old navy a sea- favorable to obstructive picketing man who tried to defend himself threatens to make a strike “noth- against the bosun’s rope’s-end ren- ing more persuasive than a sym- dered himself liable to a flogging. bolic demonstration.” The “right” to behave in this Strikes are not the only feature way cannot therefore be derived of the industrial scene to be talked from the ordinary liberties of the about nowadays in terms of the citizen or the law of free contract. most extraordinary cant. It is Indeed the unions enjoy special im- often said, for instance, that the munity from the law. They cannot reasonable and sensible way of be sued for the torts of their mem- settling a wage dispute is by arbi- bers. The normal protection of the tration, as though a wage dispute courts is withdrawn from citizens were in the same category as a who are damaged by a trade union dispute about boundaries or the in- in the course of an industrial dis- terpretation of a contract or some pute. conflict of rights. But a wage dis- The moral probity of strike ac- pute isn’t that sort of dispute. It tion is by no means self-evident, isn’t properly a dispute at all. It is though there still seems to be a a request or, if you like, a demand general belief that all strikes are by employees that their employer good and noble while all lockouts should pay them more. It is for are unspeakably wicked. The Left- him to say whether he will grant wing Press talked about “flagrant their request and for them to say ===== PAGE 58 ===== 56 THE FREEMAN November whether they will work for him may consider it wiser to employ a under the conditions he offers. number of men to come into my There is nothing for an arbitrator cave and shape the shafts and to decide. spearheads under my directions. This sort of fallacy is encour- The men will be paid an agreed aged by the fashion for talking sum for their help and I shall then about a “partnership between man- sell the spears. agement and labor,” which is a There is nothing dishonorable confusion — and I'm afraid a delib- or degrading in either relation- erate one for political reasons — ship, but the point is that they are between two quite distinct rela- different relationships carrying tionships, that between partners different rights and responsibili- and that between employer and ties, risks, and rewards. What is employee. dishonorable is to confuse the two, Two shepherds may decide to to claim the rights of both rela- amalgamate their flocks in order to tionships and the responsibilities make better use of the available of neither—as the unions do, for in- grass and water. They market the stance, when they expect to share two flocks as one; they share the in a firm's increased prosperity profit or the loss; they consult one but utterly refuse even to hold another and act on agreed deci- wages steady when the firm is los- sions; they are partners. But if a ing money. shepherd finds his flock too large An individual who wants more to handle and hires a man to help money and can’t get it from his him drive it to market, the man present employer goes and looks should not expect to be consulted for another job; a union coerces on marketing policy but he can ex- the employer. That is the differ- pect to be paid his agreed wage ence, and I know which I should whatever price the sheep may regard as the more honorable fetch; he is an employee. course; but a falling away of If I make spears and find that honor is inevitable as soon as you I can’t make them fast enough to reduce individuals to mere ant- satisfy the demand, I may decide members of a collective. to take a couple of young spear- This whole subject has become makers into partnership. They so dangerous that politicians and bring their own tools and we all employers shy away from discus- make and sell spears together. On sing it in realistic terms, which the other hand, my own patent in itself suggests that the subject spears being so very popular, I urgently needs discussing. ® eo e ===== PAGE 59 ===== THE GLORY and prosperity that once was England has often been attributed mistakenly to the size of the Empire and the exploita- tion of the people and other re- sources of the colonies. But the real explanation lies in the enter- prise and initiative of Britons themselves in industry and for- eign trade. Two centuries ago England was the leader of the Industrial Revo- lution that so fundamentally changed the working conditions and the lives of the inhabitants of the western world. Such pioneer- ing activity made England the most productive and prosperous country of that time, and as re- cently as 1850 her national wealth was estimated to be three times that of the United States. Meanwhile, as industrial devel- opment spread throughout the world, England lost position to other nations of greater popula- — tion. A new competitor also has rye ga) Co entered the picture, one that could SL Te scarcely have been anticipated as SVEN RYDENFELT recently as ten years ago when West Germany was just emerging from the destruction, disorganiza- tion, and disaster of a terrible war. West Germany, with about the same population as England’s 51 million, has now surpassed her Dr. Rydenfelt is an economist at the Univer- sity of Lund in Sweden. 57 ===== PAGE 60 ===== 58 THE FREEMAN November in several of the most important 1957, as compared to 414,000 and branches of industry. 550,000 respectively for Great Britain. Steel Production. In 1955, West prior to World War II, England Germany forged ahead of Eng- held incontestable world leader- land in production of steel, the ghin in foreign trade and ship- key raw material of industry: ping. But that picture also has STEEL PRODUCTION changed. After 1945, the leader- (millions of long tons) ship was taken by the United West States. And in the second half of Year England Germany 1957, West Germany moved ahead 1950 18.0 121 of England in the percentage 1952 16.9 15.8 share of international trade in 1953 17.9 15.4 manufactured products: . : PERCENTAGE OF HE V- WORLD TRADE IN MANUFACTURED PRODUCTS Motor Car Production. If steel West is the key raw material of indus- Year England Germany try, the motor car today is per- 1950 22 8 haps the most important symbol tH Hh 19 of economic prosperity. In this 1953 21 13 field, too, West Germany has out- 1954 20 15 distanced England: 1908 20 1 PRODUCTION OF 1957 18 18 PASSENGER CARS (thousands) Unemployment. Of West Ger- Year England Coe many’s 51 million people, at least 1950 523 216 10 million are refugees. This 1951 476 267 stream of refugees to a war-torn 1952 ao 301 land meant heavy unemployment 1954 769 518 in the first years after the war. 1955 898 706 The quick expansion of industry, 1050 1000 iE however, has relieved the situa- tion, and in the past year or more Foreign Trade. West Germany there has been a shortage of is also the world’s leading ex- labor in certain branches of in- porter of passenger cars, with dustry. But while unemployment 485,000 in 1956 and 585,000 in has been diminishing in West ===== PAGE 61 ===== 1958 A TALE OF TWO NATIONS 59 Germany, it has been rising in Political and economic attitudes England in recent years: —strikingly different between Eng- UNEMPLOYMENT (thousands) land and West Germany — also West have played a large part in the de- Year England Germany velopment. Postwar politics in 1950 Sa 1089 England has tended toward state 1952 463 1379 control and socialization. Along 1953 380 1259 with a gigantic welfare program, 1058 a oat the Labour Government from 1956 287 761 1945 to 1951 nationalized the im- 1957 347 662 portant coal and steel industries. 1958 (June) 473 401 Nor has the conservative govern- Though figures of unemploy- ment that followed been able to ment for various countries are alter that course appreciably. Its seldom fully comparable, these hard policy of contraction, aimed United Nations statistics never- at “expansion without inflation,” theless show that the situation in has resulted instead in “inflation West Germany is steadily im- without expansion.” proving. } Other evidence could be cited, The West German “Miracle but this may suffice to illustrate The political economy of Ger- the trend and preface the ques- many has moved in quite another tion: Why is England falling be- direction. Deliberately and ener- hind ? getically, Professor Erhard has Lo cleared away the thicket of state Contributing Factors regulations to afford opportunity Psychological factors have for the growth of a free economy. played their part. It is more dif- With completion of the most press- ficult to maintain a fighting spirit ing work of reconstruction, and in a deposed leader than in a ris- as the German economy gained ing star stimulated by progress strength, a program of successive already made. But even defeat reduction in taxes has been car- can act as a spur; West Germany ried through. This “German mir- seems to have learned after the acle” has done more than any- loss of two wars that “peace has thing else of recent years to prove her victories no less renowned the validity of the free market than war,” and she now proceeds economic theories that the social- at conquering the world by peace- ists had tried so hard to discredit. ful means. Another striking difference be- ===== PAGE 62 ===== 60 THE FREEMAN November tween the two countries is in result of the policies which have their attitudes toward competi- been followed: tion. While the British have long “What has taken place in Ger- sought to escape the pressures of many during the past nine years competition by building protective is anything ‘but a miracle. It is walls around the home market and the result of the honest efforts of the Empire — “imperial prefer- a whole people who, in keeping ence’ — Erhard has pitilessly ex- with the principles of liberty, posed German industry to the were given the opportunity of us- healthful and hardening climate ing personal initiative and human of international competition. energy. If this German example “The German miracle” is not a has any value beyond the fron- favorite term to Professor Er- tiers of the country, it can only be hard. What has happened, as he that of proving to the world at explains in Prosperity Through large the blessings of both per- Competition, (London: Thames & sonal and economic freedom.” Hudson, 1958), is a very natural © 00 The Problem of Inflation THE SAD FACT 18 that inflation is no economic fairy godmother. There is no magic in money to produce something for nothing, and when government creates money faster than its citizens create value, it does not create wealth; it only creates inflation, which is the illusion of wealth. While inflation may seem at first to provide some people something for nothing, it is only trans- ferring value from one group to another, and if continued, eventually robs everyone — even the “smart” boys. When the American people can courageously face up to the fact that there is no such thing as something for nothing; that there is no real security without risk; that money cannot be manipulated to produce wealth; that there is no substitute for human endeavor and individual wisdom and responsibility; then, and only then, can we bring America back to economic reality, which in turn will put our feet on the path to sound growth and true prosperity. SENATOR WALLACE F. BENNETT (Utah) Congressional Record, July 8, 1058 ===== PAGE 63 ===== A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN ON THE IMPORTANCE OF BEING THE NEWS out of China is that Germany which had allowed free Mao Tse-tung is busy forcing 500 play to its creative individuals. By million peasants into communes all the signs, Mao Tse-tung is rid- which will not even leave them ing to a disastrous fall. Chiang private property in homes, cook- Kai-shek may go back to the main- ing pots, gardens, or domestic ani- land yet. . mals. All they will have is the The truth is, as Leonard Read shirts on their backs. This is has often said, that we all have something which the communists a vested interest in each other’s in Russia, in Yugoslavia, and in differences. Individualism, far Poland have never managed to pull from being anarchic, is paradoxi- off: the older communisms have cally the thing which enables us always had to leave a little room to be a more effective team than for private possessions and for in- any system of “communes” that dividuality. has ever been invented. As a na- Can Mao Tse-tung succeed tion, we have tended to lose sight where East. European Marxists of this in recent decades. But the have retreated? Well, there have momentum of the past has saved been slave societies in the past. us. We are not ready for the ant- History teaches us, however, that heap of Mao Tse-tung. ~ their survival value is not par- That we have enough indomita- ticularly high. A mere handful of ble “carriers” of individualism to adventurous Spaniards blew the save us is evident from a “sym- Inca and Aztec slave empires to posium on individuality and per- pieces with a minimum of gun- sonality” sponsored by the Foun- powder. Hitler lasted a few years dation for American Studies and — but he had behind him the tech- edited into book form as E'ssays on nological inheritance of an older Individuality (University of Penn- 61 ===== PAGE 64 ===== 62 THE FREEMAN November sylvania Press, $5.00, 270 pp.) by society where like levels of ability Felix Morley. This book is the segregate out from the whole, and work of twelve scholars, each of where like intelligences have a whom has tackled the subject of greater chance of meeting and individualism from the standpoint mating —has advantages that of his own specialty. Some of the other societies do not have.” In contributors find it “difficult to Mao Tse-tung’s China, says Mr. anticipate that the second half of Zirkle, “the differential butchery the twentieth century will reverse of ‘bourgeois’ Chinese by those the long-standing movement now in power may well have toward collectivism and away from altered the genic endowment of the individualism.” (The quotation is Chinese race.” This same type of from Arthur A. Ekirch’s essay on butchery practiced by Germans “Individuality in American His- and Russians may have altered tory.”) But the general tone of the “genic frequencies” all the way symposium is guardedly optimis- from the Rhine to the Amur tic, at least to the point of arguing River. If so, then the West should that it is natural for human beings be able to turn up a more varied to differ widely. Where nature is assortment of superior individuals left free to work, individualism in the century to come. It would will out. naturally have more in the “gene LL. pool” from which to draw. Scientists Heard From A second biological essay, Roger All of the essays in Mr. Morley’s J. Williams’ “Individuality and Its symposium are commendable. But Significance in Human Life,” is it is the essays by the scientists absolutely astounding for the in- that pack the biggest punch. Take formation it packs about natural Conway Zirkle's “Some Biological human differences. Men differ an- Aspects of Individualism,” for ex- atomically, physiologically, bio- ample. The mathematics of Mr. chemically, and psychologically in Zirkle’s theory of the behavior of a bewildering crisscross of ways. Mendelian “segregants” is beyond The length of the human small in- me, but his words are plain: a testine, for instance, can vary in society has a vested interest in individuals from eleven feet to - keeping its ‘“‘genc pool” as free twenty-five feet nine inches. The and flexible as possible. “Obvi- adrenal cortices of different indi- ously,” says Mr. Zirkle, “an open viduals are said to vary about ten- society —one in which the able fold in thickness. To one individ- may rise and the dim-wits sink, a ual sodium benzoate will taste ===== PAGE 65 ===== 1958 ON THE IMPORTANCE OF BEING DIFFERENT 63 sour, to another it will taste sweet, Morley’s contributors is that free- to a third it will have no taste at dom must result in inequality — all. An Einstein can be a genius and a good thing, too. For without at mathematics and a dullard in inequality, the social, intellectual, language; a Capablanca can be a and economic endowments of the wizard at chess and have only human race would tend toward “moderate intellectual attain- stabilization on a very low level. ments” along other lines. In the nineteenth and early twen- The social upshot of the scien- tieth centuries millionaires got tific essays in Mr. Morley’s sym- rich by increasing the opportuni- posium is that we can all derive ties for everybody. We are still benefits from varied genic endow- living as a people off Mr. Rocke- ments and special physical and feller’s developments in oil refin- mental aptitudes only by letting ing, Mr. Ford's experiments in them flower as they will. As John manufacturing cars, and so on. Dos Passos says in his essay, it’s Would it have been better if the a “question of elbow room.” Pick- Messrs. Ford and Rockefeller had ing up from where Mr. Dos Pas- been restrained from pushing far sos leaves off, Mr. Morley attacks ahead of their fellows? the Rousseauistic concept of the “general will.” He does not attack Progress Rests on Freedom it indiscriminately: men must The justification for leaving abide by a “social contract” which people alone is most cogently restrains them from such things summed up by Friedrich Hayek in as theft and murder if they are to his essay on “The Creative Powers gain any advantage in society of a Free Civilization.” Dr. Hayek from each other’s special apti- argues that civilization is not a tudes. There must, in other words, conscious creation; it results from be a “general will” to respect each the unforeseen experiments and other’s natural rights. But that, experiences of countless individ- says Mr. Morley, is as far as he can go with Rousseau. Divorced from the theory of inalienable |, ook reviewed in this Book Section (or rights, the “general will” becomes ony other current book) supplied by return a monster — and life under its mail. You pay only the bookstore price. We sway is apt to be even more “nasty, pay the postage anywhere in the world. brutish, and short” than it is in | Cetelesve on request. a state of primitive anarchy. THE BOOKMAILER, Box 101, New York 16 A general opinion held by Mr. : ===== PAGE 66 ===== 64 THE FREEMAN November uals. No central board or indi- been protected by the fact that vidual dictator could possibly ‘““as- human beings have not been able sign” the experiments or ordain to control social life. But now, the experiences which, taken to- with technological means of con- gether, spell out human progress. trol at the disposal of States, the Dr. Hayek thinks the case for human race is endangered as it freedom rests largely on the recog- never has been before. “We are,” nition of inevitable and universal says Hayek, ‘“not far from the ignorance of all of us about the point at which the deliberately or- factors which make for achieve- ganized forces of society may snuff ment and well-being. In the past, out those spontaneous forces on this recognition of ignorance has which all advance depends.” o o eo We invite your subscription to MODERN AGE A CONSERVATIVE REVIEW Vou. 2, No. 4 (Fall 1958) Edited by RusseLL Kirk A Special. NUMBER ON THE SOUTH, INTEGRATION AND PRINCIPLE Three dollars per year One dollar per copy Address: FounpatioN For FOREIGN AFFAIRs, INc. 64 East Jackson Boulevard, Chicago 4, Illinois Free copy available on request HOLD IT! Now that you've read it, perhaps you'd like to send this copy of The Freeman to a friend, using the handy mailing device on the outside back cover. Better yet: Why not order and mail several extra copies? ===== PAGE 67 ===== MEMO ON PRIVATE ENTERPRISE No. 2 in a series ¢¢ . . . an unnecessary encroachment on private transportation companies.” The National Association of This would be contrary to the very Motor Bus Operators (NAMBO) basis on which parcel post was es- speaks for nearly 1,000 carriers, tablished by Congress. representing 75% of America’s Reporting favorably on the intercity motor bus transporta- 1951 legislation (P.L. 199), the tion. In an urgent appeal to the House Post Office and Civil Serv- Senate Post Office and Civil Serv- jce Committee said, *“. . . the ice Committee, NAMBO clarified problem of the (P. O. Depart- its stand on proposals to increase ment) competing with private the size and weight limits of puginess to the point that private parcel post moving between first business is being irreparably class post offices, NAMBO states: damaged . . . can be mét by a re- ““(We) must oppose this proposal gtatement of congressional policy to undo the progress Congress with regard to parcel post service has made in this field . . . it and a return in part to the size would produce once again an un- and weight limits originally ap- necessary encroachment on pri- proved by Congress when parcel vate transportation companies.” post was established to provide a NAMBO emphasizes that dis- small parcel delivery service to continuance of package express areas which are not serviced by transport revenues would seri- Other transportation facilities.” ously jeopardize essential regular There can be only one conclu- route operations. The proposed sion. ‘Anyone interested in a parcel post changes would further sound transportationsystem must thrust the Post Office Depart- oppose this legislation and since ment into direct competition with it would not serve recognized private companies . . . would interests of the Postal service result in diversion of private com- there would be no justification pany traffic to the Post Office. for its adoption.” For a free copy of the informative booklet, “The Truth About Parcel Post,” address the Public Relations Division, RAILWAY EXPRESS AGENCY, INC. 219 East 42nd Street, New York 17, N.Y, A PRIVATE ENTERPRISE IN THE PUBLIC SERVICE ===== PAGE 68 ===== FROM A LIBERTARIAN'S LIBRARY How MANY times throughout history this same mistake has been made: Power given to someone who is trusted; then another, to whom the people would never have given power, inherits that which was given to a trusted one. You can guess what happened. Joseph died. An Egyptian in- herited the power that had been Joseph’s. He didn’t assume any power that had not been in the hands of the kind and compassion- ate Joseph. The only difference was that he used it differently. He used it to make of the Israelites the abject slaves described in the Bible. Today we have empowered people in our own government to do things for us without realizing the fearful extent of that power. We don't yet realize it because the people who now hold it have generally not chosen to exercise it in all the awfulness implicit in it. When they do, we will wonder how we could ever have been foolish enough to have given that power to anyone. From the article, “Two Ways to Slavery’ by James M. Rogers in Essays on Liberty, Vol. 11l, Foundation for Economic Education, Irvington-on-Hudson, N. Y. 448 pp. $2.00 paper, $3.00 cloth. THE FREEMAN may be forwarded any- where in the U. S. A. No wrapper required. PLACE 4%4-CENT From: POSTAGE HERE To: streot oT city ong stot