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

IDEAS ON LIBERTY

"JUNE 1959

Apropos of the Presidency . . . . . . Frederick A. Manchester 3
Free Enterprise and European Unity . . George Winder 10
A Merchant's Appraisal of Inflation . . Hughston M. McBain 14
Socialist Propaganda . . . . . . . Reginald Jebb 21
The Growth Objective . . . . . . . Guaranty Survey 25
History Is with Him . . . . . . . . Indianapolis Star 29
Federal Aid for Education . . . . . . H.P.B. Jenkins 31
The Mass Man , . . . . . . . . LleonardE. Read 32
Still Some Individualists . . . . . . LumanN. Nevels, Ir. 38
What Industry Expects of the Engineer . . Marvin M. Schmidt 41
Can This Be Liberty? . . . . . . . Harriet Harper 45
Scarcity, Parking, and the Price System . Norman V. Breckner and
William R. Allen 46
Unemployment and Unionism . . . . Alberto Benegas lynch 51
A Nongovernmental Farm Program . . . Paul Roy 54
Uncertain Landmarks . «. «+ + + + John Chamberlain 57
Other Books . . . . . . . . . . 60

8 THE FOUNDATION
i FOR ECONOMIC EDUCATION, INC.

Irvington-on-Hudson, New York



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

MEMO ON PRIVATE ENTERPRISE

No. 7 in a series ——
An Editorial Comment Reprinted from
the Portland, Ind., Graphic, February 26, 1959

“ess manene Cee oe wom on -

THURSDAY MORNING QUARTERBACK _

A good friend of ours, an executive in a merchandising firm,
fs continually reminding us about the dangers of government in
business. “This country is headed for disaster unless the people
wake up to the fact that you cannot turn to government for a
solution to social and economic problems,” he asserts. “And it's
up to you editors to straighten them out, by plugging free enter-
prise.”

Recently we called on him in his office. We found him in an
ugly mood. Seems he had discovered the shipping department
using Railway Express for shipment of merchandise.

“Those dumbheads never think about costs,” he growled.
“With inflation and high taxes, we've got to cut every corner we
can. They know it's cheaper to ship Parcel Post.”

“But look,” we said, “don’t you know why Parcel Post is
cheaper? It is a subsidized service, operated at a loss by the
Post Office department, or so the boys in Washington tell us.
Seems to me this puts you in an untenable position — patronizing
a government service at the expense of a fellow free enterprise
operation, the Railway Express.”

He glared at us. “Oh go to hell,” he replied. “You news-
paper guys are all alike. You don't understand the problems of
industry.”

For a free copy of the informati

el tive
booklet, “The Truth About Parcel Post.”
address the Public Relations Division,

RAILWAY EXPRESS AGENCY
219 East 42nd Street, New York 17, N.Y.
A PRIVATE ENTERPRISE IN THE PUBLIC SERVICE



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

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

J1 THE

Teemdi | A MONTHLY JOURNAL OF IDEAS ON LIBERTY

JUNE 1959 Vol. 3 No. 6

LEONARD E. READ President, Foundation for
Economic Education

PAuL L. PoiroT Managing Editor

THE FREEMAN is published monthly by the
Foundation for Economic Education, Inec., 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 — $56.00 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, 1959, The Foundation for
Economic Education, Inc. Printed in U.S.A.

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

Permission is hereby granted to anyone to reprint any article in whole
or In part, providing customary credit 1s given, except ‘‘The Growth
Objective’ and *‘What Industry Expects of the Engineer.”

Any current article will be supplied in reprint form If there are enough
Fe E inquiries to justify the cost of the printing.


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

FREDERICK A. MANCHESTER

Pree

Gore a
® an
il 25

APROPOS OF THE PRESIDENCY

FOR MESCIVERT
B33 Hr ie A

THE FOUNDATION for Economic do we really want for President?
Education has recently been rec- and (2) How are we going to get
ommending the disciplines of “con- him? Inevitably, the answer to the
centration, contemplation, medita- second question runs into and all
tion” — in short, I take it, the act but loses itself in the larger ques-
of thinking; and, naturally, what tion: How, in general, are we go-
FEE wants us to think about is ing to get competent leaders?
economic topics or political topics The first question is for me a
or both.? delight. Who does not take pleas-

Well, what follows is the result, ure in sketching an ideal? And in
for better or for worse, of a bit this case the process has its prac-
of meditating I have done on a tical justification, for when we
subject that will or should be oc- have once made up our mind as
cupying the minds of American to what we should like in a Presi-
voters more and more between now dent — though we can never hope
and November 1960. That subject to obtain it completely — we have a
is the American Presidency? I definite standard by which to
pose and attempt to answer two judge any candidate we may be
questions: (1) What sort of man called upon to consider. What then
rte is it we want?

Lee Cake op Tus ED One thing is an outstanding in-
eonar . ead, oles rom ’ . .
January 1959. tellect. By this I mean an intellect

*The framers [of the Constitution] be- addicted to hard fact, trained to
lieved—and wisely too—that the most sound logic in its operations, and

important political duty of the Ameri- impervious to the appeals of senti-
can people is the selection, once in four

years, of a President of the United mentalists, however pure their
States.” James M. Beck, in The Consti- hearts. In political science, as in
tution of the United States. most other subjects, probably not
Dr. Manchester is an educator, formerly of One principle remains unchal-

the Department of English, University of .
Wisconsin. lenged, and amid the fiercely con-

3


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

4 THE FREEMAN June

tending winds of doctrine it is the President should be a close
necessary that our leader, if he is student of the period of American
not to be the passive instrument history in which our own govern-
of others, or else of his own tem- ment took shape, and of the in-
peramental impressions, must him- formed reasoning which guided
self be capable of deep, complex, the Founding Fathers. Having ar-

and prolonged thought. rived at a thorough comprehension
} of the permanently valid princi-
Wide Knowledge of History ples underlying our original Con-

Wide knowledge also I should stitution, he would be in a position
make a requirement. This should to exert his great power and influ-
include an enlightened acquaint- ence intelligently, both toward pre-
ance with literature and with phil- serving what still remains of them,
osophy (including religion) — two and — perhaps even more impor-
main sources of that profound in- tant— toward restoring those
sight into human nature which is which have been discarded.
essential to the highest statesman- It is a melancholy speculation,
ship. It should include familiarity though an instructive one, to con-
with the major works in political sider what ills our country might
science, ancient and modern, and have been spared, if only all of
with whatever has been proved our twentieth-century Presidents
valid in economics. It should in- (to go back no farther) had been
clude a reasonable mastery of the enlightened students of the Con-
recorded history of the world, stitution, and at the same time
East as well as West. Probably all (for without this the enlighten-
conceivable types of government ment would have been useless) had
have been tried, most of them over been scrupulously determined to
and over, and all conceivable social support, to the full extent of their
theories given their chance. Not authority, its positive provisions
to have learned what there is to be and its implied restraints.
learned about the practical work-
ing of these types of government,
and of these social theories, would In all this it is hard to separate
seem a gratuitous and tragic lack intellect from knowledge, since for
in anyone who undertakes to head practical purposes they are mutu-
a great state, especially in a period ally dependent. Intellect divorced
of revolution and innovation such from knowledge operates in a void;
as that in which we live. knowledge divorced from intellect

More specifically, it is clear that is grist without a mill. It is when

Politics Saturated with Thought


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

1959 APROPOS OF THE PRESIDENCY b

the two are combined, and only serving the name of statesman,
then, that effective thinking is pos- would wish to make.
sible.

In the field of government there Experience in Government
is perhaps no better example of But intellect and knowledge are
intellect and knowledge working not everything, important though
together than Edmund Burke. Mat- they are. Substantial experience in
thew Arnold said of him that he government is plainly desirable,
saturated politics with thought. both to provide specific training
The phrase is provocative, and in- in statesmanship and to afford
vites comment. What does it mean close views of political theory re-
to saturate politics with thought? duced to practice. Though such ex-
But, first, what does it not mean? perience is the least indispensable

It does not mean basing politi- of the qualifications I have chosen
cal views on personal “hunches,” for emphasis, and though it be-
nor on what pressure groups de- comes less important in propor-
mand, nor on public opinion polls, tion as the others approach dis-
nor on ingenious calculations as to tinction, it is something one much
the best party strategy for success likes to see among the assets of
in the next election. It is at the any candidate for the Presidency.
antipodes of everything suggested If the candidate is otherwise out-
by the nefarious “tax and tax, standing, it gives the finishing
spend and spend, elect and elect.” touch; if the candidate is other-

What it does mean is basing wise only the prince of medioc-
political views on an analysis of rities, it affords at least a mini-
the immediate problem, with all mum of assurance that his admin-
its special characteristics, in the istration, if unhappily he should
light of the facts of human nature, be elected, will not fail completely.
and — what comes to much the same In the school of experience, as the
thing — in the light of the past familiar proverb suggests, even
experience of mankind. A speech fools can learn.
saturated with thought is a rea- Then, crowning governmental
soned speech, everywhere advanc- experience, there should be a rec-
ing from premises clearly set ord of distinguished accomplish-
forth, and adequately supported, ment. I recall reading somewhere
- to conclusions which are their that when a man was brought to
natural consequence. It is the only the attention of Napoleon, the Em-
kind of speech which any man peror would ask, “Qu’est-ce qu'il
dealing with a great issue, and de- a fait?” — “What has he done?”


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

6 THE FREEMAN June

Prominence alone, whether in poli- We want a President so animated
tics or elsewhere, is totally insuf- by a spirit of fairness that he will
ficient. We want proof, by pertin- never misrepresent an opponent,
ent and significant deed, that the even slightly, whether by direct
man we make our President has speech or by innuendo, for any
the stature appropriate to the job. purpose whatsoever. We want a
We demand nothing spectacular. President who writes his speeches
Conspicuous leadership in a sound (the important ones at least), so
major policy or cause, in House or that the words he uses, as well as
Senate, or in a state governorship, the ideas he expresses, are his
will do, or even a few public own —a President who has heard
speeches — provided only that in that the style is the man, and
these speeches there are displayed wishing the people to know him as
an independence, a courage, a he really is, disdains masking him-
learning, a power of thought, and self in the phrases, however clever
a wisdom, that lift them far above or taking, of some alien person-
the platitudes and prejudices of ality. And we want a President
the hour. with integrity so unassailable that
And, lest we forget, there is no thought of personal gain, tangi-
character: honor, honesty, truth- ble or intangible, direct or indirect,
fulness, straightforwardness, dig- political or otherwise, can ever de-
nity, diligence, fidelity to the given termine his decisions affecting the
word — but let us turn to ex- interests of the state.
amples. We want a President who Our prescription for the Presi-
will keep the promises he made dency might be indefinitely ex-
when appealing for our votes, or tended. Humor, amiability, charm,
who, if he later believes that the and many other qualities or graces
good of the country requires a it would be pleasant to add — but
policy different from that which all are relatively secondary. Let us
he is pledged to carry out, will be reasonable, even in sketching
openly acknowledge and explain our ideal!
his change of mind, and request a
fresh vote of confidence from pub- How To Get Him
lic opinion. We want a President If now we have some notion of
who will cleave devoutly to his the President we want, we are
oath of office, among other things ready for the second and much
refraining from engaging in ac- harder question: How are we go-
tivities, or exercising powers, not ing to get him?
accorded him by the Constitution. Conceivably, I grant, there will


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

1959 APROPOS OF THE PRESIDENCY 7

be no problem. Nature cannot yet and what wise observer would say
be exhausted, and conceivably the that in our time America under-
man we are looking for is even stands greatness in the field of
now in the wings, just off stage. I political science? If it did, how
can imagine him, powerful and should we account for some of the
sharply penetrative of mind, clear men and some of the measures it
and eloquent of speech, profoundly has vigorously promoted or calmly
convinced, as I think he would be, accepted, and for certain aspects
that we are already well advanced of the situation — dangerous or
on a downward path —1 can see ridiculous or both — in which we
him taking directly to all the peo- now stand?
ple, in every state, in every com-
munity, a message calculated to The Remnant that Saves
excite to action whatever remains It would appear, then, that if
in us of our passion for individual we want to have leaders of high
liberty, our feeling for unsophisti- quality, Presidents among them,
cated social justice, and, in gen- we, the American people, shall
eral, our political common sense. have to increase our understand-
Just possibly such a man could ing in politics and related fields. It
arouse enough enthusiasm in is fortunately not necessary that
enough voters to bring about his all of us should become thus edu-
nomination and election, if not in cated, but only a sizable minority
1960, then in 1964. — the remnant that saves. But how
But obviously neither such a are we to build up this sizable
man, nor his success, is to be minority?
counted on. If he should appear, he Begin, says Mr. Read in the
would be rather an accident of his- document I quoted at the begin-
tory than a predictable phenom- ning of these remarks, by genu-
enon. For a recent report on edu- inely enlightening ourselves, as in-
cation is doubtless right in de- dividuals — morally as well as so-
claring: cially, economically, and politi-
With rare exceptions, it is cally. Thereafter, if I understand
probably true that a society him correctly, he would have us
only produces great men in trust mainly to the power of ex-
those fields in which it under- ample. “The power of attraction —
stands greatness? — of attracting others — follows all
— The P z self-improvement,” he says, ‘as
Inc., 1958. In thus asserting this power he


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

8 THE FREEMAN June

undoubtedly has behind him tradi- ethical issues; and obviously, ethi-
tional wisdom. “Example,” says cal issues are to be properly dis-
Burke, comprehensively, “is the posed of only in an ethical state.
school of mankind; it will learn at But can such a state be achieved?
no other.” It would seem so:

I owe this last quotation to a
book which by title and perform-
ance is distinctly pertinent to our
present topic — Democracy and
Leadership by Irving Babbitt (Bos-
ton: Houghton Mifflin Company,
. 1924. 349 pp. $3.50). To the sub-
ject of politics Babbitt brought
great learning and great philo-
sophical and spiritual insight. His
general point of view is excellently
indicated in the first sentences of
his Introduction:

Though one agree with Aris-
totle as to the ethical unsound-
ness of the majority, it does not
follow that the ethical State is
impossible, Human nature, and
this is its most encouraging
trait, is sensitive to a right
example. It is hard, indeed, to set
bounds to the persuasiveness of
a right example, provided only
it be right enough. The ethical
State is possible in which an
important minority ‘is ethically

According to Mr. Lloyd energetic and is thus becoming
George, the future will be even at once just and exemplary.
more exclusively taken up than
is the present with the economic
problem, especially with the re-
lations between capital and
labor. In that case, one is
tempted to reply, the future will
be very superficial. When studied
with any degree of thorough-
ness, the economic problem will
be found to run into the politi-
cal problem, the political prob-
lem in turn into the philosophi-
cal problem, and the philosophi-
cal problem itself to be almost
indissolubly bound up at last
with the religious problem.

Here, of course, the “important
minority” is the saving remnant,
a segment of the population which
sets the national tone, supplies
from itself competent leaders, and
exercises a determining influence
in government.

Babbitt was primarily a univer-
sity teacher, and it was natural
that he should concern himself
with the problem of producing
leaders in its relation to educa-
tion. Of his central ideas on this
subject the following may serve, I
think, as a brief statement. He be-
lieved that “the civilization of a

In a word, economic and politi- community and ultimately the
cal issues tend ultimately to be government of which it is capable


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

1959 APROPOS OF THE PRESIDENCY 9

is closely related to the type of this, in the main, it can scarcely
education on which it has agreed,” be said to have done. “It suggests
and quotes with approval Aris- rather a radical break with our
totle’s saying that “the best laws traditional ethos. ... The new ed-
will be of no avail unless the ucation has been summed up by
young are trained by habit and President Eliot in the phrase:
education in the spirit of the con- training for service and power.”
stitution.” These ideas were expressed
thirty-five years ago. If Babbitt
Training for Wisdom and Character were alive today, would he think
Now our form of government that our higher education had
is a federal and constitutional de- changed significantly in the direc-
mocracy, with agencies such as a tion he would approve? Let those
written Constitution, a Senate, answer who are now in intimate
and a Supreme Court to serve “as contact with it. If my surmise is
a check on the ordinary or im- correct, he would not; and if that
pulsive will of the people.” The is the case it seems clear that
veto power theoretically exercised among the first things he would
by such agencies found a real cor- have his “important minority” do,
relative in the type of training once it had acquired the necessary
given by the older American col- influence, would be to bring our
lege. This “was based on the be- education back to effective corres-
lief that men need to be disciplined pondence with the federal and con-
to some ethical centre.” It “set up stitutional democracy under which
a standard that limited the sup- we long lived and which many of
posed right of the individual to us still cherish.
self-expression as well as the in-
breeding of special aptitudes in the How, then —to return to the
interests of efficiency,” and “thus second of the two questions with
acted restrictively on the mere which we began — are we to get
temperament of the individual.” It the President of our dreams, or at
was, “in intention at least, a train- least, in Carlylean phrase, a “not
ing for wisdom and character.” intolerable approximation” to such
Our new education might have a man? The answer: Accident
made the old more vital, broad- aside, we shall get him only by
ened it, adapted it to changed con- becoming as a nation — or rather
ditions, and at the same time re- as a dominant part of it — politi-
tained its ethical orientation. But cally and ethically wise and sound.


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

Free Enterprise a and European Unity

THE UNIFYING QUALITIES OF TRADE o GEORGE WINDER

OWING to the economic disunity face of the threat of Russia and
of the national states of Western of communism? Why, particular-
Europe, that semicontinent —al- ly, is her economy more divided,
though probably in natural re- and her trade barriers more insur-
sources as rich as the United mountable, than they were fifty
States — has much less economic years ago? Do Europeans, then,
strength, and a standard of liv- hate each other more than they

ing infinitely lower. did? Have two wars taught them
Many Americans believe that nothing?
the interference of their federal No. The answer cannot be found

government with trade is detri- in the fact of political nationalism.
mental to the national economy. European people have never been
How much more would they feel more friendly with one another
this if each of the fifty state gov- than they are today. The increase
ernments controlled their people’s of economic disunity over the last
trading activities? fifty years has not been deliber-
The unhappy position of Europe ately and even consciously brought
is to have all its governments in- about. It is purely the result of
terfering with trade; and, if we internal policies which were pur-
are to judge by results rather than sued with foreign countries only
by the sentiments expressed, every incidentally in mind.
act of interference divides the The increase in the economic
economy of Europe still further disunity of Europe has been
and makes all Europeans poorer. caused solely by the increasing de-
What is to be blamed for this? parture of European governments
What is to be blamed for Europe's from the principles of free enter-
failure to unite her economy in prise. Free enterprise has a unify-
Ea— ing effect on the world’s economy,

Me  aincor in o British farmer, author, and whereas state economic planning

10


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

1959 FREE ENTERPRISE AND EUROPEAN UNITY 11

— which, in a democracy, must The Common Market
necessarily be nothing more than A few of Europe’s more distin-
that evil which our fathers called guished politicians now realize the
“government interference” in eco- dangers of her present economic
nomic affairs —has a distinctly division and try to remedy this,
disintegrating effect. but with little success. The most
To unite Europe in wealth and notable of these attempts is, of
strength, it is not the sovereignty course, the proposed common mar-
of many states which has to be ket to be set up by Belgium, Hol-
destroyed, but the fatal belief of land, Luxemburg, Italy, Germany,
her peoples in state economic plan- and France. Although this has
ning. If such planning were only now been agreed upon, and the
renounced by European govern- slow reduction of tariffs and
ments, so that their peoples were quotas between those six countries
left free to trade with one another has begun, the difficulties which
as they wished, then the difficul- lie ahead are very great. Each
ties which arise from the present country has protected interests
economic disunity would be re- which she is afraid will be de-
solved. stroyed by the flood of goods from
Unity is not brought about by the other five. Our fathers, with
laws to control trade but by the their belief in free enterprise,
absence of such laws. The constitu- knew that such floods spelled
tion of the State of Alabama con- wealth, but today in Europe the
tains the following words: “The fear of such wealth is difficult to
sole and only legitimate end of overcome.
government is to protect the citi- The tariffs between the six na-
zen in the enjoyment of life, tions are to be removed very slow-
liberty, and property, and when ly, and, meantime, new barriers
the government assumes other against the rest of Europe and
functions, it is usurpation and op- the world in general are to be
pression.” erected around their proposed
If the governments of Europe common market. In the case of
would only accept this philosophy Belgium and Holland, this means
for at least as far as it affects that the tariff barriers will be
trade, then the economic unity of higher than ever before. Nobody
Europe would be achieved, and can be sure, as a result of these
the cloud now lowering over arrangements, whether the total
Europe from the East would dis- trade of Europe will be increased
solve. or decreased.


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

12 THE FREEMAN June

Great Britain and some of the from the Thames for a similiar

other European countries have period so as to prevent Britons
tried to form what is described as trading with Canadians?
a free trade area in association Yet this would be no more
with the six common market coun- foolish than the argument that,
tries, but in the end, the opposi- because the government of one
tion of British farmers and French country puts up a tariff barrier
industrialists was too great. To to prevent our merchants trading
the sectional interests of a few with hers, we should retaliate with
farmers and industrialists, the a barrier preventing her mer-
security of the whole of Europe is chants trading with ours.

to be sacrificed. Great Britain should know this
better than any other country be-
One Nation Could Start cause, at one time, she was the

The ironical truth is that it only free trade country of any size
would be possible, and economi- in the world, while, at the same
cally profitable, for any one Euro- time, she was the greatest and
pean nation to abandon the planned wealthiest power in existence.
economy, and abolish the barriers If but one European nation
to the trade of her people, quite would adopt the system of free
irrespective of the actions taken enterprise and grant her people
by her neighbors. Trade is nothing the right to trade freely both at
but an exchange of goods, and if home and abroad, her economy
we admit — as most people do— would be so stimulated that she
that trade is beneficial, then a na- would become an example for
tion is injured by anything that other nations to follow. In this way
prevents that trade. only will the economic unity of

High mountains, tempestuous Europe be achieved.
seas, and unnavigable rivers are
as much barriers to trade as Socialist Dilemma
quotas or customs tariffs. The St. The prevalence of socialist
Lawrence River is sometimes theory among all classes through-
frozen over and becomes a bar- out Europe, however, makes this
rier to the Canadians trade with one road to unity very difficult to
the people of Great Britain. What traverse. Socialists are de-
would we think of a politician who termined to plan the economy in
argued that, because of this, the which they live, and, as national
British Parliament should pass a planners have jurisdiction only in
law barring Canadian shipping their own country, this has a ten-


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

1959 FREE ENTERPRISE AND EUROPEAN UNITY 13

dency to divide Europe into small, governments, or by loans and gifts
tight, hidebound economies more from America. It will be brought
resistant to trade than ever. about only when the people of
Socialists profess a belief in peace Europe accept the immutable
and unity; but when they try to truth that man is endowed by
plan internationally, their na- Providence with certain inalien-
tional planning makes cooperation able rights, and that among these
virtually impossible. To plan the is the right to produce and trade
economy of Europe by a central. freely with whomsoever he wishes.
authority, it would first be neces- Once this truth is accepted —
sary to destroy all national plans once governments repeal their
as well as the sovereignty of every laws against trade — Western
country involved. Europe will become as prosperous

Socialists may be willing to go and as strong and united as
to any length to unite Europe by America, and the cloud of com-
government action, but they will munism gathering over her
do nothing to achieve unity in the Eastern border and threatening
only way it can be achieved — by the existence of her civilization

government inaction. will be dissolved forever.
The economic unity of Europe
will not be brought about by any Europe will be united in free-

assembly of politicians or by in- dom, or not at all. We have forgot-
ternational conferences, or by ten the power and the magic
trade agreements entered into by which lives in freedom. * oo

The Moral Foundations of Freedom

‘MEN ARE QUALIFIED for civil liberty in exact proportion to their
disposition to put chains upon their own appetites; in proportion
as their love of justice is above their rapacity; in proportion as
their soundness and sobriety of understanding is above their
vanity and presumption; in proportion as they are more disposed
to listen to the counsels of the wise and good, in preference to the
flattery of knaves. Society cannot exist unless a controlling.
power upon the will and appetite is placed somewhere; and the
less of it there is within, the more there must be of it without. It
is ordained in the eternal constitution of things, that men of in-
temperate habits cannot be free. Their passions forge their fetters.

EDMUND BURKE


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

Zz.

A Merchant’s
Appraisal of
INFLATION

. gl W :

fo
HuGHSTON M. MCBAIN

IT WAS MIDNIGHT when my cab I spent three months in Berlin
pulled up at the hotel. I had had that year. Prices were rising with
the taxi since early morning. I such rapidity that no merchant
opened my suitcase and counted could open the doors of his estab-
out 71,250 marks. This included a lishment much before noon. He
5,000 mark tip for the driver. He had to reprice each item every
was delighted and thanked me pro- morning!
fusely. How could he know that One evening I took some Ger-
the total cost to me for his cab, man friends to the Adlon Hotel
gasoline, and services for that 16- for dinner. Despite my urging,
hour day was only 57 cents? Nat- they would order no meat. I ex-
urally, he could think only in plained that meat would cost me
terms of his own money. To him practically nothing. To them I
it looked like a fortune for a day’s seemed to be paying $900 for a
work. The time was October 1922 sirloin steak!
~ the place Berlin. The value of I lived through many months of
the paper I had given him ex- German inflation —and I learned
pressed in terms of prewar marks a lot. The German people seemed
was about $14,000! unable to grasp the fact that the
loss in the value of their money

Mr. McBain retired in 1958 as Chairman and was bringing ruin. They thought

Chief Exccutive Officer of Marshall Ficld & only in terms of high prices
Company. As no veteran merchant, a world , .

traveler, and a keen observer of economic af- ascending to astronomical new
fairs, he is well qualified to discuss inflation. . .

This article first nppenred in two installments heights every morning.

in the Chicago Sunday Tribune, March 15 .

and 22, 1959. Years later, another time and

14


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

1959 A MERCHANT'S APPRAISAL OF INFLATION 156

place made an indelible impression security for his wife and children,
upon me. I was having dinner with his entire insurance proceeds
our Italian agent in Florence. The would now buy a supply of food
year was 1947. World War II had for only three weeks!
come and gone. Another country My Italian friend, like my Ger-
had been hit by disastrous inflation man friends, could think only in
— though not of such proportions terms of very high prices.
as the one in Germany during I do not pretend to be an econ-
1922-23. This night in Italy our omist. But I do know something
dinner check totaled 6,000 Italian at first hand about inflation. Per-
lira. To my Italian guest, thinking sonal experiences such as these
in terms of his country’s currency show how tragic its effects can be.
before the war, I was spending Since my vivid experiences in
$1,250 on dinner for two! If in Europe, I have studied the causes
the not too distant future a similar and effects of inflation with com-
situation develops in America, I pelling interest.
am certain most of us will be de-
ploring “high prices” rather than Fiasco in France
correctly blaming our rotting dol- Perhaps the greatest story ever
lar for the disaster. written on the subject is entitled
I asked this Italian agent what Fiat Money Inflation in France:
he had done to protect himself from How It Came; What It Brought,
the scars of inflation. He told me and How It Ended.! It was written
he had saved regularly 20 per cent by Andrew’ D. White, the first
of his earnings during 40 years of president of Cornell University.
business life. I asked him about Despite the fact that the French
life insurance. Yes, he had started inflation described by Dr. White
a program many years ago and occurred in the latter part of the
most of it was paid up. He told me eighteenth century, its closeness
of his expectation that his life in- to our own situation today is
surance would enable him to re- startling.
tire in comfort. Now that retire- The trouble started in 1789
ment was close at hand, he said, when France found itself with a
there was no question of default; heavy debt and a serious deficit
the life Insurance companies were 1A new edition of Fiat Money Inflation
paying their claims in full, as in France with a foreword by Henry

promised, in Italian currency. But Hazlitt is being published by the Founda-

$ _ tion for Economic Education, Irvington-
- and tears came to his eyes on-Hudson, New York. About 128 pages;
instead of providing lifelong $1.25 paper; $2.00 cloth.


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

16 THE FREEMAN June

because of an unbalanced budget. Nevertheless, the vicious cycle
There were grave doubts whether had started; it was politically in-
the French people would place any expedient to stop the subsequent
confidence in paper money not ex- issuance of more and more paper
changeable for gold but backed money. After each new issuance,
merely by government's promise to business improved temporarily and
pay. Therefore, the government prices advanced — but the value of
decided to confiscate all the church all French moneys declined.
lands in France and to use them
as security for paper moneys. The Leads to the Guillotine
church real estate formed about By January 1793, about 3 billion
one-third of the entire real prop- francs had been issued — all pub-
erty in France. It looked like a licly and legally. Prices were con-
solid base for a great financial stantly rising. Committees were
future. (It is now obvious that formed to attack and stop infla-
church lands were a poor backing tion. Orators endeavored to en-
for currency for the simple reason lighten the people by giving every
that no individual could ever ob- reason in the book for this dis-
tain these lands or any portion of aster save the true one. The gov-
them in exchange for his money.) ernment blamed the ministry, the
nobles, the hardhearted rich, the

A Vicious Cycle merchants, the shopkeepers. To-
Against this base, paper money day’s convenient “whipping boy”
was issued. The new credit caused — Big Business — was as yet un-

great joy; the treasury was re- born,

lieved; a portion of the public debt In late 1793, the Law of the
was paid; creditors were encour- Maximum was passed — and price
aged; ordinary expenses were met. ceilings were born. Controls were
Six months later business slumped established on wages, selling
again. Politics again prevailed. prices, profits. The people were
There was less argument than be- overjoyed, but evasion, as always,
fore against issuing more paper quickly followed — then scarcities
money. A few sound thinkers of — then rationing. Manufacturers
that day explained that increasing were crippled, agriculture de-
the quantity of money and credit pressed, shopkeepers were ruined
in any country must soon increase if they obeyed the law. Many shops
prices, disturb values, alarm capi- closed — others were looted. Some
tal, and decrease the demands for evaders were sent to the guillo-
products and labor. tine; others were hanged. (I'm


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

1959 A MERCHANT'S APPRAISAL OF INFLATION 17

grateful not to have been a mer- a claim on goods and services. It
chant in those days!) is the increasing of these purchase
At the end of 1795 more than orders — making more of them
fifty billion francs had been issued. than is properly justified by the
The purchasing power of this economy — that is true inflation.
paper money (despite the enor- People are led to believe, er-
mous value of the lands pledged roneously, that “high prices are
behind it) was practically nothing. inflation.” That is putting the cart
On February 18, 1796 — 9 a.m. before the horse. High prices are
— in the presence of a great crowd merely the effect of inflation. And
in Paris, the machinery, plates, quoting Webster's dictionary: “In-
and paper used to make this “fiat flation always produces a rise in
money” were solemnly broken and the price level, in accordance with
burned. the quantity theory of money.”
.Once more, in our own times,
the subject of inflation is making Through the Banking System
headlines every day. We are del- Our government has a complete
uged with newspaper stories, monopoly of the “money factory.”
magazine articles, and speeches. If you doubt this and care to test
Several intelligent articles on in- it, try manufacturing some money
‘flation have appeared in this news- or government bonds yourself!
paper. But it is true, nevertheless, But you had better not: the gov-
that much of what we read and ernment’s control and monopoly is
hear on the subject is complicated absolute. Only the government can
gibberish. In some cases I believe be a “legal counterfeiter’” in the
it is purposely so. History verifies sense of legally creating more
the statement attributed to Lenin: money and bank credits. It follows
“The surest way to overthrow an logically that under such control
existing social order [government] the government, and only the gov-

is to debauch the currency.” ernment, can prevent inflation.
: How does the government in-
High Prices, an Effect flate our currency? There are
Just what is inflation? “Inflate” several successful methods, the
means ‘‘expand.”’ oldest of which are no longer in

To me, “inflation” means inflat- favor. They would be too easily
ing the money supply. It is just detected by the better educated
that simple. citizens of this generation. In the

Stated another way, each dollar ancient great days of Rome and
is a purchase order; that is, it is Athens, however, inflation was ac-


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

18 THE FREEMAN June

complished by “clipping the coins.” crease the available supply of
This was done by the government's money and credit, the all-impor-
taking the coins then in circula- tant fact is that it is the govern-
tion and reminting them so that ment, and only the government,
they contained less gold or silver. that has the power to cause true
The government then represented inflation.

to the people that they had the The following table quickly
same value as before. (Does any- shows the total amounts of usable
one value our paper dollar of today money available in the U.S.A. at

as equal to a gold one?) year ends:

Many centuries later, govern- 1939 — 64.7 billion dollars
ments resorted to a much easier 1948 — 172.7 ” ”
method made possible by the ad- 1956 — 226.4 ” ”
vent of the printing press. They It is quite obvious that neither

simply printed more paper money, the increase in our population nor
thus increasing the government’s the increase in productivity has
income much more conveniently grown anywhere nearly as fast as
than by raising taxes. In our own the money and credit supply. It
generation many examples come to is also true, however, that if there
mind of the money printing press had not been some considerable in-
route — Chile, Germany, France, creases in our population and in’
Italy, Argentina, Greece, Brazil, our productivity, the value of our
and China, to name a few. Today, currency would have decreased
however, we practice a much more much more severely than the ap-
subtle scheme to accomplish the proximate 50 per cent drop in the
same ends. Our government prints last 20 years.

bonds and sells them to commercial

banks which pay for them by en- And People Demand More

tering deposits (or credits) in the Many of our confused ideas con-
government's bank accounts. Of cerning inflation stem from oft-
course, these deposits may be spent quoted statements that labor
by the government (just as you unions and business cause infla-
or I may draw on our personal tion; the former by gaining higher

bank accounts). wages for employees, the latter by
increasing selling prices. Since
The Quantity of Money Increases high prices are not inflation; since

With its complete monopoly, no inflation only relates to money and
matter what method our federal bank credits; and since only gov-
government elects to use to in- ernment controls the quantity of


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

1959 A MERCHANT'S APPRAISAL OF INFLATION 19

both, it is obvious that neither powerful political pressures on
unions nor business can cause in- government that it will surrender

flation. its responsibility to keep our cur-
However — and this is funda- rency good.
mental — when wages are arbi- People spark inflation. Demands

trarily forced above the market made by “people” for federal
level that would have reflected the funds (no matter what group
existing relationship between the name they use), when excessive
supply of labor and the demand and beyond reasonable limits,
for it, we have the starting point cause a breakdown in the normal

of a vicious cycle: laws of supply and demand. Such

1. Wages increase. demands lead to property destruc-

2. Prices increase. tion, unemployment, and eventu-

3. Products lose competitive posi- ally irresistible pressures on gov-
tion in world trade. ernment to extend its power be-

4. Unemployment results. yond its competence.

5. Pressure on government to Business tends to put the whole
make more money available blame on labor unions because of
tends to become irresistible. their demands for higher and

6. Government gives in to politi- higher wages. But is business —
cal pressure. and other so-called moderate

7. The government creates more groups — blameless? 1 doubt it.
money. When “great conservative leaders”

8. The value of our money drops representing chambers of com-
—and we have inflation. merce, churches, slum clearance

projects, agricultural “security”

Pressure-group Procedures groups, hospital building pro-

In emphasizing the govern- grams, foreign aid devotees, and
ment’s complete responsibility for countless others all demand that
causing inflation, I do not intend their pet projects be included on
to imply that unions and business the “federal gravy train,” I be-
are blameless — quite the contrary. lieve they are just as guilty as the
When a union or a business or an unions.
individual is responsible for rais-
ing wages and/or prices faster [Individuals Can Resist
than the market allows, they are In all these areas — people —
fanning the flames of inflation. you and I — are responsible. The
They are creating the very condi- next time I am asked to lend my
tions that eventually bring such name and support to any project


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

20 THE FREEMAN June

which aims to pressurize govern- ing of the problem of inflation”. is
ment for more federal funds I am all important. I hope the committee
sure my answer will be an em- follows through.
phatic “No!” The federal govern- Other governments in other
ment is already committed to years have lacked the courage to
spend far more than it can prop- reveal the truth about the real
erly afford. cause of inflation. They have
The recent appointment of a lacked the courage to explain that
cabinet committee headed by Vice- all inflation is bad — no matter how
President Richard Nixon to draft small or creeping it may be. Once
plans for combating inflation is en- started and not checked, I firmly
couraging. It will have no difficulty believe that inflation always leads
in ascertaining the facts. The an- to disaster—and it always takes the
nounced intention “to strive to greatest toll from those who can
build a better public understand- least afford it. ° oo

How To Kill Trade

LONG BEFORE the close of 1791 no one knew whether a piece of
paper money representing a hundred livres would, a month later,
have a purchasing power of ninety or eighty or sixty livres. The
result was that capitalists feared to embark their means in busi-
ness. Enterprise received a mortal blow. Demand for labor was
still further diminished; and here came a new cause of calamity:
for this uncertainty withered all far-reaching undertakings.
The business of France dwindled into a mere living from hand
to mouth.

This state of things, too, while it bore heavily upon the
moneyed classes, was still more ruinous to those in moderate
and, most of all, to those in straitened circumstances. With the
masses of the people, the purchase of every article of supply
became a speculation — a speculation in which the professional
speculator had an immense advantage over the ordinary buyer.
Says the most brilliant of apologists for French revolutionary
statesmanship, “Commerce was dead; betting took its place.”

ANDREW DICKSON WHITE, Fiat Money Inflation in France


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

The result is Pr¥asgd taxes on
the peopladitimps

TO CURTAIL the freedom of a prive his people of freedom. So
people so that the lazy or ineffi- long as they remain free, he can-
cient members of the community not succeed. Those who support
should be enabled to remain lazy the State's claim to restrict free-
and inefficient is not only to impair dom of action to itself are equat-
the most precious attribute that ing personal freedom with injus-
mankind possesses, but it is also tice. That there is injustice in the
bound in the long run to destroy world and that undeserved hard-
the economy of the country that ship exists, all will agree; but
practices it. remedies of these evils are not to
When the State curtails indivi- be found by confining freedom
dual freedom, it defends its action to a ruling clique. Nor will any of
by saying that it is helping the the State’s arguments bear ex-
weak against the strong, that its amination.
motives are selfless and therefore What, for example, is the
impartial, and that it is prevent- State's attitude as regards the
ing the exploitation of man by weakness or strength of members
man. of society? It assumes that the
The fallacy in this statement of wage earners of organized labor
aims is seldom pointed out. Per- are the weak members that need
sonal freedom is not oppressive. It help, and it sets itself to national-
is a God-given human right that ize industries and pour money
holds oppression at bay. The first into them, to boost wage rates
thing that a tyrant does is to de- whenever the cost of living rises,
Mr. Jebb is a British educator, editor, and and to solids popularity by de-
journalist. ' ' ferring to union demands. But:

. 21


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

22 THE FREEMAN June

these wage earners are not the of man by man. If a government
weak of today’s world. On the were really to undertake the task
contrary, they are backed and pro- of eliminating this evil (an evil
tected by one of the strongest which in the last resort can be
pressure groups that exist in in- cured only by insistence on human
dustrialized countries. Other rights by the people themselves),
bodies, such as professional men, it would have to sift all grades of
small proprietors, or that hetero- society, for exploitation is liable
geneous section of the population to occur at all levels. It would have
that through misfortune or lack to suppress —to take a single ex-
of opportunity is suffering hard- ample — the many injustices prac-
ship, have none of these advan- ticed by the trade union movement
tages; and the State passes them where, for the supposed benefit of
over. They do not fit the artificial the mass of members or in the
category of those with a claim on dealings of powerful unions with
the country’s taxes. others less amply financed, indi-
Nor can the socialist State just- viduals can be boycotted by their
ly claim that it is impartial in its fellow members and prevented
distribution of favors. Those in from finding work, and the smaller
power are influenced by their de- unions eaten up by their big
sire to remain in power. Their ac- neighbors. But no socialist gov-
tions are therefore dictated more ernment has ever tackled or is
by a determination to stand well ever likely to tackle such instances
with the big battalions who pro- of exploitation as these. It concen-
vide most of the votes at elections trates its efforts on disputes be-
than by an impartial assessment tween management and labor in
of need. Indeed, even if this were industry and turns a blind eye to
not so, the distance at which they the injustices that take place with-
operate from life as it is lived by in the labor ranks. It could hardly
millions of diverse individuals do otherwise, for it owes its ex-
would make it impossible to form istence to pressure groups with
sound judgments. Their disburse- the most numerous following.
ments of other people’s money, so
far from giving encouragement to Socialist Blueprint of Utopia
those ‘that need it, produce only a If we want to examine the aims
spirit of dependence in the recipi- and methods of socialism at first-
ents and of frustration among the hand, there is a booklet recently
rest. issued by the Labour Party of
Consider again the exploitation Great Britain that will enlighten


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

1959 SOCIALIST PROPAGANDA 23

us. It is a glossy document, expen- utterly unjust as well as grossly
sively produced, which sets out wasteful; for, with restricted un-
under fourteen headings what a economic rents, it was impossible
socialist government intends to do for owners to keep their houses
if it comes into power. in repair. Furthermore, the so-
There are two marks that char- cialist proposal is hypocritical
acterize this socialist blueprint of since houses owned by local gov-
utopia. They are, first, big in- ernments have no restriction on
creases in governmental expendi- the raising of rents. In addition to
ture, and, second, a bland assump- this, taxpayers’ money is to be
tion that all the glittering ameni- poured out on the compulsory
ties heralded —in fact, almost purchase and modernizing of
everything that is normally con- houses now privately owned.
sidered to be a matter for deci- Another example occurs in the
sion by individuals according to section entitled “Health.” This
their aptitude and choice — must deals with the State Health Serv-
be organized and handed out by ice which, while converting the

the State. medical profession into what is to
all intents and purposes a civil

Rent Control, Socialized Medicine, service responsible to the State in-
Old Age Pensions stead of a profession entering in-
Let us take a few examples. to a free contract between doctor

Under the heading, ‘Your and patient, has lavished millions
Home,” we read: “The first step of pounds on the doctoring of peo-
must be to repair as far as pos- ple who could well afford to pay for
sible the damage done by the it themselves. The Labour Party
Tories. The Tory Rent Act de- proposes to spend a great deal
controlled 800,000 rented houses more of taxpayers’ money on
and permitted landlords to raise building new hospitals (which
the rents of the rest. We will re- used to be built and supported by
peal it. . . . We shall stop all private initiative) and by abolish-
further decontrol.” That is a good ing altogether charges on prescrip-
instance of currying favor with a tions, dental treatment, and spec-
big section of the population in tacles — charges which are already
defiance of ordinary justice to the utterly uneconomic, In a word, it
smaller number of owners. Rent is going to complete the strangu-
control, which the Conservatives lation of a profession and at the
began to break down by their same time squander the country’s
overdue Rent Act, had long been money.


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

24 THE FREEMAN June

One more example out of the stronger refutation of its claims.
many that might be cited: It is Great Britain has to export some
proposed that old-age pensions 30 per cent of what she manufac-
shall be increased. In addition, tures to pay for food and raw ma-
there is to be a superannuation terials imported, but no govern-
pension for those who have paid ment can compel other nations to
the weekly stamp charge on their buy our goods. Therefore, no gov-
incomes. Much of the extra money ernment can insure that there
needed for these purposes will shall be full employment, for with-
come from the better-off taxpayer. out exports no amount of govern-

mental action could prevent unem-
False Claims of Socialism ployment.

It is not surprising that these It is this kind of socialist propa-
socialist plans should have been ganda that is so dangerous. It
criticized on the grounds that aims at attracting the general pub-
they would necessitate greatly in- lic by what is in fact an exact re-
creased taxation on a country that versal of the truth. Trade, and
is already bearing an almost in- with it the maximum use of the
tolerable tax burden. The plan- industrial population of a coun-
ners’ reply is that this will not try, will succeed in proportion to
be so, because under socialism the excellence of the product com-
there will be a rapid expansion of bined with ability of management.
production. “We shall get the ma- This requires special training and
chines and factories working at a free market in which to exer-
full capacity,” they say. “We shall cise it, both of which requirements
put the unemployed back to work.” are absent when the State steps in

These claims are calculated to to control industry.
influence the ignorant voter in fa-
vor of the Party. They are flatly Two conclusions follow irrevo-
untrue. Unless the State assumes cably: the result of State inter-
control of all the means of pro- ference in industry will be an in-
duction (which would universalize crease, not a decrease, of unem-
the wasteful inefficiency character- ployment; and, therefore, the ex-
istic of the present nationalized tra money the government spends
industries), it would have no on socializing a country will come
power to expand production as it out of increased taxes levied on a
promises. But there is a still people it has impoverished. o o eo


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

the

Objective,

I SN eee, od

“MAN IS A CREATURE who lives
not upon bread alone, but princi-
pally by catchwords,”” wrote
Stevenson three-quarters of a cen-
tury ago. Economic debate is a
running record of the correctness
of his statement. One catchword
after another takes the popular
fancy, is bandied about as if it
were the final expression of truth,
becomes the slogan for a variety
of debatable proposals, is gradual-
ly subjected to the cold light of
analysis, loses its glamor, and
passes into the discard, to be fol-
lowed by another magic phrase.
Among the catchwords in great-
est favor at the moment is ‘‘eco-
nomic growth.” Like other catch-
words, it expresses or implies an
objective which is obviously desir-
able in itself. It is harmful only
to the extent that it comes to be
regarded as describing a new and

From The Guaranty Survey, March 1959.
Albert C. Wilcox, editor.

epoch-making discovery that
supersedes old rules and prin-
ciples, and hence is used to justify
specific measures that violate
these rules and principles.

What Economic Growth Means

Economic growth is usually dis-
cussed in terms of what the De-
partment of Commerce calls the
gross national product, the total
estimated money value of all goods
and services produced in the
United States within a specified
period. Unfortunately, money is
the only common denominator
available to measure the wide
variety of goods and services pro-
duced. Money, however, is a very
imperfect unit of measurement
because the value or purchasing
power of money changes as prices
rise and fall. Variations in the
gross national product, therefore,
reflect two sets of changes:
changes in the amounts of goods
and services produced and changes
in the prices of these goods and
services.

To overcome this difficulty, the
Department of Commerce esti-
mates the gross national product
not only at current prices but also
in terms of a hypothetical dollar
of constant purchasing power.
This is the so-called real national
product, a sort of aggregate of
what may be roughly thought of
as the physical volume of output,

25


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

26 THE FREEMAN June

although no physical unit of meas- of the desire of individuals to bet-
urement is or can be used, and ter the material condition of them-
although physical volume has no selves and their families. In this
literal meaning when applied to endeavor, people save, invest, de-
the output of services. vise new and better tools, invent
The real national product, des- new products and new processes,
pite its admitted vagueness and and employ other people in order
imperfections, is generally ac- to operate more efficiently and on
cepted as a useful concept and a a larger scale. In this respect, in-
fairly good measure of over-all dividual proprietors and corpora-
production, and the increase in this tions behave in essentially the
product from one time period to same way. Under the spur of com-
another is what is usually meant petition and the profit motive, they
by economic growth. strive constantly to produce more
Thus defined, economic growth and better products at a lower cost.
is an objective with which few peo- The result is economic growth.
ple could quarrel. It means more For centuries during and after
useful things to serve the needs the Middle Ages, this natural proc-
and desires of the people. It is ess was retarded, and at times
what men have always striven for halted completely, by the extreme
in their individual lives and what insecurity of life and property and
economists have always pointed to by tight political restrictions on
as the greatest hope for material economic activities. When the sys-
progress in the future. It is an tem of state prohibitions and
idea, an aspiration, and a reality state-protected monopolies now
as old as human history. Despite known as mercantilism gave way
the immense obstacles placed in its to a regime of relatively free en-
way by ignorance, superstition, terprise about two hundred years
physical violence, and political in- ago, the Western world entered
terference, it has been inter- upon a period of unprecedented
rupted only temporarily, because economic growth. Within decades,
it is a product of human nature the material conditions of life
and normal human behavior. changed more than they had done
in centuries of feudalism and mer-
cantilism. This almost explosive
In a free society protected progress is still going on, and it
against violence and fraud, eco- still owes its vitality to the same
nomic growth is an automatic individual initiative, the same de-
process. It takes place as a result sire for personal self-betterment,

Growth in a Free Society


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

1959 THE GROWTH OBJECTIVE 27

the same freedom from paralyzing than 3 per cent a year. This com-
controls that actuated it from the pany’s index of business activity,

beginning. which reflects a long-term rate of
growth approximating that of the
Many Complicating Factors real national product, rose at about

Economic growth in our complex 3.6 per cent a year during the post-
modern society, while automatic in war period 1947-57. It is question-
the sense of being self-generating, able, however, whether such a high
is not completely smooth and un- rate can be maintained over a
interrupted. It requires balance longer term, as the postwar years
among many interrelated and in- were to some extent a “catching-
teracting forces. As saving and in- up” period following the long de-
vestment increase, the supply of pression of the 1930’s and the war-
productive equipment must in- induced shortages of the early
crease accordingly, and the same is 1940’s. Experience so far suggests
true of the relation between con- that 3 per cent is about as high
sumption and the supply of con- an annual rate of growth as can be
sumer goods. Prospective markets reasonably expected over a long
cannot be gauged with perfect ac- period, although any such answer
curacy, nor can prospective costs. must, of course, remain subject
Industry must become familiar- to revision in the light of future
ized with new processes and con- developments.
sumers with new products.

Workers must find and learn new Danger of Arbitrary Goals

jobs. There is a constant need for The essential point is that ex-
readjustments and the correction perience must be the guide. No
of errors, and these corrections arbitrary rate can be postulated
take time. For all these reasons, and treated as a national objec-
total output can never equal theo- tive, This is where the sloganeers
retical capacity. One hundred per of “economic growth” are tread-
cent employment of human and ing on dangerous ground. To them,
material resources is an imprac- economic growth is not merely a
tical dream. natural and desirable occurrence;

How fast can economic growth itis a program. They would set up
occur in practice? Between 1929 a goal based upon theoretical cal-
and 1957, both of which were culations rather than practical
years of generally good business, experience, and in striving to
the real national product increased achieve this goal they would make
at an average rate of slightly less use of fiscal policy, monetary


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

28 THE FREEMAN June

policy, and various forms of cen- cies, would cause other types of
tralized planning. expenditure to increase according-
The most popular objective ly. The increase in total expendi-
among the “economic growth” en- ture would be matched by equiva-
thusiasts seems to be a growth lent increases to output, incomes,
rate of 5 per cent a year, appar- and governmental revenue so that
ently because this is approximate- there would be no price inflation,
ly the average rate for the early no Treasury deficits, no increases
postwar years when industrial re- in tax rates, and no rise in the
conversion from war to peace and ratio between governmental and
the great upsurge in prices were private spending. The only differ-
over. This is below the wartime ence would be that economic
rate of 10 per cent or more growth would proceed steadily at
achieved under obviously abnor- the 5 per cent rate, instead of
mal and highly inflationary condi- varying from year to year and
tions, but it is substantially above averaging out at about 3 per cent,
the 3 per cent rate based on actual as in the past.
long-term experience. The 3 per This program is so full of gra-
cent rate is rejected by the “6 tuitous and unrealistic assump-
percenters’” as inadequate because tions that it would be difficult to
the long span of years on which it know where to begin the list. Its
is based included some periods of weaknesses might be summarized
recession — with the clear implica- by the statement that it assumes
tion that such periods can and the feasibility of an arbitrary rate

should be avoided in the future. of growth at variance with the
testimony of experience, and as-
Blueprint for Inflation sumes further that this rate could

How would recessions be be achieved by inflationary meth-
avoided, according to the 5 per ods that would stimulate without
cent school? Principally by mak- inflating and without causing a
ing the 5 per cent growth rate a “boom-and-bust” cycle.
national objective and shaping fis- Actually, the rate of economic
cal, monetary, and business poli- growth in a free society is deter-
cies around it. To begin with, fed- mined by the same factors that
eral spending would be deliber- cause it, namely, the relative pro-
ately increased at that rate. This pensity of individuals and busi-
rise in federal spending, rein- ness firms to spend, save, and in-
forced by appropriate tax, mone- vest. It is the net resultant of a
tary, price, wage, and profit poli- complex set of powerful forces. It


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

1959 THE GROWTH OBJECTIVE 29

cannot be predetermined, and any offers no solution, because dicta-
plan to increase it by fiscal ma- tors also make mistakes, and their
nipulations is simply a blueprint mistakes not only are on a larger

for inflation. scale but also are beyond the dis-
} i cipline of free markets, the great
Uninterrupted Boom Impossible automatic correctors of mistakes.

It is easy to understand why Dictators’ mistakes may not cause
theorists become impatient when unemployment in the usual sense,
they contemplate the gap between but they are sure to cause hidden
actual output and full capacity, unemployment in the sense of mis-
and why they are prone to devise directed utilization of resources.
schemes for closing this gap. Yet The desirability of economic
it is significant that businessmen growth is not subject to question,
are seldom found among propo- and if the United States can
nents or adherents of such achieve a long-term annual growth
schemes. Businessmen know by rate of 5 per cent or even more,
experience that economic freedom so much the better. But when eco-
includes the freedom to make mis- nomic growth becomes a slogan.
takes and that only in a society for proposals aimed at uninter-
where mistakes are never made rupted business boom, it becomes
can output continuously match full a menace to economic stability and
capacity. Economic regimentation economic freedom as well. o o -o

HISTORY is with ni

TO DATE, no one has accused Presi- He is credited by Life magazine
dent Eisenhower of being a deep with having said at one of his
student of history, but apparently National Security Council con-
he has delivered himself of a com- ferences, “Damn it, when are you
ment which is backed by the going to learn that national se-
weight of a great deal of history. curity and a sound economy are

From The Indianapolis Star, March 10, 1959. the same thing?”



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

30 THE FREEMAN June

This is a rather crude expres- ments of war are designed to pro-
sion of a profound fact which tect.
takes people and nations a long The nation does need military
time to grasp. Yet, this simple protection and it must have the
statement has a great deal of capability of meeting reasonably
validity insofar as history is con- anticipated assaults from external
cerned. enemies. But if the economy

The communists have fully ac- which creates these armed forces
cepted this as a central point in is destroyed in the process of
their attack on the capitalist, or building them, then what is there
free enterprise, systems of the left to defend?
world. They know that more na- The brief history of the Con-
tions have died from the lack of a federate States of America is a
sound economy than haveever been capsule case in point. At the out-
killed off by external enemies. In set of the Civil War, the armies of
fact, history has recorded that the the Confederacy provided it with
assaults by outsiders are not suc- national security; but as the war
cessful until the internal structure wore on, the economy of those
of a nation has been weakened. states was less and less able to

So far, there are some in this sustain the military effort. Some
country who have refused to be- historians will argue that the Con-
lieve what history teaches. They federacy died not so much on the
insist that national security is battlefield as in the failure to
purely "a military endeavor in achieve a sound, productive eco-
which the number, size, and cap- nomic system.
abilities of arms determine the
safety of the State. They refuse President Eisenhower's blunt
to believe that an obsession with statement of the interrelationship
military might can be as damag- between national security and a
ing as direct attack. They are will- sound economy is one of the most
ing to build ever larger armed heartening bits of news to come
forces, even at the risk of destroy- from the nation’s capital in some
ing the system which these instru- time. * oo

taxes; and armies, and debts, and taxes are the known instru-
ments for bringing the many under the domination of the few.


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

FEDERAL AID
for EDUCATION

or, FISCAL LEGERDEMAIN

~

It was a cloudy afternoon
At story-telling time.
Old Kaspar chose a fresh cigar
And poured a rum-and-lime,
While Peterkin and Wilhelmine
Looked at the television screen.

They saw a crowd of laughing men
Go through an open door,

And dump their loads of dollar bills
Upon the Senate floor;

Then all at once without delay

They fought for loads to take away.

“Now tell us what it’s all about!”
The little children cried.

“It’s Federal Aid for public schools,”
Old Kaspar soon replied;

“It pays for schools in every town,

And keeps the local taxes down.”

“There was a time,” Old Kaspar said,
“When folks from east to west
Could not afford a decent school,
But now they have the best;
For when they're short of cash, you see,
They get their federal subsidy.”

“But all the cash those people got
Was what they brought today!” ,

“There are some folks,” Old Kaspar sighed, 7 /
“Who think of it that way; g

But most believe that Federal Aid CL

Is larger when received than paid.” 0 La

~~.

H. P. B. JENKINS
Economist at Fayetteville, Arkansas

31


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

32

LEONARD E. READ

= [.

BE
TN

a Ju
4
C
PAL
pe
SEAR | I

“Cell thoce Mace ae
They have the votes”

TRIN



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

VER AND OVER again the argu- Those who would “sell the
ment is dinned into our ears, masses” don’t give us much of a
“Let's stop talking to each other clue as to the characteristics of
and reach out instead for the un- the mass man except that he is
converted. Sell the masses on low grade intellectually. He is al-
freedom; they have the votes.” ways pointed to as one who needs
This advice is superficially co- vast improvement, so obviously he
gent, with the result that hun- is something of an ignoramus.
dreds of millions of dollars and
untold man-hours have been ex- The Search for “Someone Else”
pended in an effort to “bring Within these popular terms of
light” to the masses. : reference, “the masses” who
But an impartial survey of “don’t understand” would seem to
these efforts fails to turn up even include the finger-pointers them-
one which lived up to its selves. For, pray tell, who among
promises; all have proved dismal us has a monopoly of understand-
failures. Nonetheless, the search ing? Can it be those who insist
for national salvation through that someone else be brought to
“gelling the masses” is as per- a state of wisdom, especially when
sistent today as it ever was.! nearly everyone is pointing to
If there is such a thing as “the someone else? Or, could it be that
masses,” there must be such a those who point their fingers are
thing as a mass man. But who in unwittingly pointing at their own
heaven’s name is he, and where’s reflections? Thinking they see
his hangout? Perhaps he is among someone else, they spend their
those who urge mass reform, for money and time on the reforma-
they are so numerous that the re- tion of reflections and shadows,
maining population can hardly forgetting, as Thackeray put it,
qualify as “the masses”! that “the world is a looking glass
Success in mass production and sale and gives back to every man the
of commodities — autos, watches, soap, reflection of his own face.” Small
corn flakes, cosmetics — has influenced wonder that programs for educat-
important distinction between market- ently met with dismal failure!
ing products — things that satisfy de- There is, though, a real mass
sires of the flesh — and spreading ideas, are wy. .
the latter being accomplishments of the Man — millions of him! And he is
intellect. Commodities, once produced, not necessarily an ignorant fel-
are ready for consumption, whereas low. By all the standards we use

“selling” an idea requires that each . .
“buyer” reproduce it in his own mind. tO measure intelligence, the best

33


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

34 THE FREEMAN June

intellects among us may be of the and definitively a mass man. For,
mass. The real mass man is likely Joe's moral standard when acting
to be found in a position of leader- in mass is inferior to his moral
ship — in the church, in business, standard when acting individually.
in the classroom, on the farm, and Most persons would agree that
even more conspicuously in gov- Joe Doakes fits the definition —
ernment and all committee-type but they themselves have never
organizations. This real mass behaved like that! No, there aren’t
man, I submit, has been escaping many lynching parties in this day
our attention because our natural and age. But, if the definition is
inclination in the face of social accepted, the shoe will come
problems is to seek the culprit nearer to fitting —and pinching —
among those whose behavior dif- as we move on to more common
fers from our own. Using our own examples of mass action.
behaviors as the norm of right- For instance, suppose the fed-
eousness — “our” being the most eral government were to decree
of us—we find it difficult to that all farmers are entitled to
discover the mass man in our- $30.00 for every acre of land taken
selves. It is almost unbelievable out of production and that each
that we could be the masses. farmer, with the help of an armed
officer assigned to him for the
"Mass Man’ Defined purpose, is to call personally on
How are we to recognize the people, rich and poor alike, and
real mass man — in others, or in forcibly collect the booty. Disre-
ourselves? The mass man is any- garding the inefficiency of this
one who lives by a double standard cumbersome method, how many
of morality, who acts in the mass farmers would take advantage of
— the collective, the committee, the such a law? Few indeed, for this
organization — in a manner in- personal, face-to-face procedure
ferior to the way he acts on his would be as revolting to the
own responsibility. farmers as it would be to the
Take Joe Doakes for example: payers of the pelf.
he wouldn't kill a fly, let alone
take the life of a human being. Farmers in the Mass
Yet, Mr. Doakes will join a mob, However, let us give the immor-
hang another by the neck till he’s al conduct sanctioned by this law
dead, and feel no remorse whatso- the appearance of being deperson-
ever. To his mind, the mob, not he, alized, rewriting it in conformity
is responsible, Joe is definitely with the way it now stands on


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

1959 THE MASS MAN 35

our statute books. Let the mass personal standards of morality are
agency — government — do the above such action. Yet, the mere
forcible collection for the farmers. pretense of depersonalizing the
Nearly all feeling of guilt disap- act — doing it in mass, in the col-
pears. Indeed, in most instances, lective, in the organization — re-
what would have been a feeling of duces their souls to the level of
moral revulsion gives way to an robbery. From the pulpit and in
opposite sensation: a right to the countless resolutions from every
property of others. This actually type of organization we hear and
has happened to most of the mil- read solicitations to the federal
lion and more farmers now receiv- pap-wagon, pleas for police grants-
ing such collections for not grow- in-aids. These individuals — every-
ing something. The action of one who acts in this manner —
farmers in the mass is inferior to are mass men, ‘the masses,”
the way each of them would act whether their solicitations be for
personally. hospitals or airports or TVAs or
Of course, it is not right to subsidies for nonproduction or
single out farmers as typical mass for anything else in the socialistic
men. They qualify no more than bag of tricks.
do those of other occupations,
such as the producer of steel prod- Depersonalizing the Act
ucts who wouldn't personally raise Apparently, it is the appearance
his hand to stop an exchange be- of depersonalization that accounts
tween two of his neighbors but for this destructive, inferior
who will solicit the help of the standard of morality. Joe Doakes
mass agency — government — to thinks of the mob as doing the
hinder and penalize certain ex- lynching, and so does each of the
changes in order to improve his others. Everyone considers him-
own chance of getting that busi- self absolved of any evil, as if an
ness. He has a moral standard for abstraction —a mere term, “the
mass action inferior to his moral mob” — could hang a man! But
standard for personal action. does action by a collective absolve
Who in the church or the the individuals who compose it of
chamber of commerce would per- the responsibility for the collec-
sonally take the property of tive action? An affirmative
others by force to satisfy his answer is absurd. The following
charitable or welfare instincts? story illustrates the point:
Except in rare headlines, such per- A person reputed for his liber-
sons simply do not exist. Their tarian views was a visiting guest


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

36 THE FREEMAN June

at a chamber of commerce meet- a member of the board of di-
ing. Favorable action was taken rectors of the Opportunity
on three committee reports, all of Chamber of Commerce, and
which were pleas for the federal that organization sponsored a

government golf course, to men-
tion but one of many irrespon-
sible actions; that required the
coercive extortion of the earn-

government to use its compulsion
to obtain the property of others
that the local community might
be “benefited.” At the conclusion . .

. . ings of widows and orphans to
of the meeting the visitor was benefit would-be golfers.”

invited to “say a word.” This is “Ah. but that was the Op-

all he said: portunity Chamber of Com-

merce that took those actions,
not your humble servant,
Remus Papwagon.”

Saint Peter looked over his
list again and then said, “Mr.
Papwagon, we don’t have any
chambers of commerce or labor
unions or councils of churches
on this list. There is nothing
but individual souls.”

Saint Peter closed the Pearly
Gates.

Remus Pagwagon passed
away and his spirit floated to
the Pearly Gates. The spirit
knocked. Saint Peter responded
and inquired as to the purpose
of the visit.

“I crave admittance,” said
the spirit.

Saint Peter looked over his
list and sadly announced,
“Sorry, Mr. Papwagon, I don’t
have your name.”

“Don’t have my name? How Whereupon, the meeting ad-
come?” journed, but some in attendance

You took money from others, 4}... day are still speculating on
from widows and orphans as (he whereabouts of the soul of
well as the rich, in order to sat-  pemus Papwagon and on the pros-
isfy your personal notions of do- [ots for others who similarly
ing good. deny self-responsibility.

“Saint Peter, you are in
error. I had the reputation of gach of Us Is Guilty

an honest man.” . . .
“You may have had that rep- A painful fact to keep in mind

utation among those who acted 19 that every living person in the
in a manner similar to your- U.S.A. to some extent qualifies as
self, but it was an undeserved # mass man. Let each take note
reputation. Specifically, you that any finger of shame points in
were a financial supporter and part at his own reflection. Abso-


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

1959 THE MASS MAN 37

lute purity in conduct in response employ all the persuasion we can
to the dictates of individual con- muster to explain the fallacies of
science is not attainable; it is only state ownership and control of any
approachable. productive and creative activity.
If one would continue life — an So far as voluntary mass
aim this author commends — there agencies — committees and organ-
is no way to divorce oneself com- izations —are concerned, we can,
pletely from the way of life im- if we are a part of them, act al-
posed by men who act in mass, by ways in accurate response to our
men who act in some manner in- highest individual standard of
ferior to their highest personal morality, realizing that there is
standard or morality. Few, if any never any escape from a personal
of us, know how to live except in responsibility for any collective
the market and in society as it is. action in which the individual
The very bread we eat is from participates. And, one more thing:
subsidized wheat. The mail that We can refuse to be a member or
takes this issue of THE FREEMAN financial supporter of any volun-
to the reader is rank with special tary organization that takes
privilege, as socialistic as any- action for which we are unwilling
thing in the U.S.S.R. Much of the to stand personally responsible.
power and light we use is on the
rob-Peter-to-pay-Paul basis. Our Organizations Often Misrepresent
economic blood stream — the Here is an example of how vol-
money we use to exchange our wuntary collectives all too often
millions of specializations —is misrepresent us: A spokesman for
shot through with the adultera- a business organization appeared
tions which result from the Pap- before a committee of Congress.
wagon way of life. The only alter- By reason of what a small com-
native to life in this smoggy at- mittee had resolved, he claimed to
mosphere is death itself. speak for several million business-
men. His report made concessions
We Can Try to rent control, concessions that
Absolute purity is unattainable. many of the members would dis-
But we can paddle in the direction approve. In short, a lie was told.
of purity. So far as the mass Many businessmen of libertarian
agency — government — is con- views were represented as advo-
cerned, we can refrain from ever cates of rent control, a socialistic
standing sponsor for any social- item. Identity with such organi-
istic activity, and we are free to zations is no way for a man to re-


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

38 THE FREEMAN June

flect accurately that which he be-
lieves to be right.

Nonetheless and more or less,
we are all of the masses. And
what we see as imperfections in
others is little else but a reflection
of how far we are from our own
potential perfections. So, there
may be something to “selling the
masses’’ after all — that is, if each

LUMAN N. NEVELS, JR.

IT IS REMARKABLE that the Junior
Chamber of Commerce has the
courage to continue year by year
to honor individuals. The very con-
cept of extracting from the mass
an individual thought, idea, or
man is becoming more and more
unpalatable in our world. “Indi-
vidualism’’ has become in our day
almost a dirty word. We have seen
the spectacle of the masses, I may
even say, the mob, for all intents
and purposes, taking over. It is
in this respect that the Jaycees
are actually going against the cur-
The Honorable Mr. Nevels, Hawaiian judge,
delivered this address before the Junior Cham-
ber of Commerce. It later appeared as a guest

editoripl in the Hilo (Hawaii) Tribune Herald
of January 25, 1989.

of us correctly identifies the indi-
vidual seen in the looking glass
as part of the mass and thus an
imperfect man. Here is a fact so
dimly appreciated it can be classi-
fied as secret: Further enlighten-
ment of the man reflected in one’s
own mirror is the sole means he
has of bringing more light to

others. . oo
No Gg
\ gh

rent and, I must say, a pleasing
sight it is!

We have all lately suffered ear-
aches listening to this socialist
pap from the so-called experts,
judges, teachers, children, from
psychiatrists, sociologists, and
other technocrats that we must
“learn to get along with one an-
other.” To these people and their
slavish followers the greatest
achievement apparently is to be a
cog in the social wheel; the great-
est attainment is to fit in. All this
is really semantics because what
they really mean is this —don’t


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

1959 STILL SOME INDIVIDUALISTS 39

bother me, don’t upset the apple leisure. We are really fine folk.
cart, don’t be unpredictable. We have become persuaded. We
My, what a dull society we have have given to all without discrimi-
conceived; what a trivial and head- nation the vote and the capacity
less bunch we have nurtured. The to rule us. We salve our con-
vast majority of us get up, go to sciences without trouble by giving
work, come home, and drop off to a pittance for charity — or more if
sleep watching some near-moron Wwe have a guilty conscience — and
over the television name that tune. let the rest of the world go by.
We endure life; we don’t live it. We damn the politicians and cluck
We do as little work as possible, our gums when the inevitable
often because we recognize in- frivolity and stupidity manifests
nately that it’s really not very itself. We dwell in a perfection of
important or very useful work. In neon signs and sexy television
order to keep us at these often dull commercials which flatter our base
and unsatisfying tasks, we have judgment and grant our desire to
to be bribed frequently with pay be anonymous. Now, where has
raises, honors, and platitudes. We this primrose path led us?
must continually be impressed by We are confronted by the de-
people telling us what an impor- lightful spectacle of having a Gar-
tant thing we are doing in order gantuan government — or really a
merely to keep from going mad. series of governments, one tum-
This ego inflation sometimes even bling over the other. These govern-
makes us believe that what we are ments perform all manner of ego-
doing is essential, is important, is satisfying tasks, many of which
something to warrant greater pay are unessential and some of which
and privilege. And thus we be- are even harmful. But by whetting
come greedy and we demand more our appetites for more and more,

and more and more. these governments grow grander
and bigger and more terrifying.
A Materialistic Void We are millions of little dogs chas-

And yet this merry-go-round ing our tails. I learned a couple
provides us material plenty. Most of days ago that we have finally
all of us have our 3,200 calories a reached the fantastic folly of hav-
day and more. We drive around in ing one out of every six persons
monstrous automobiles and spend employed in the United States
many of our working hours plan- working for the governments. And
ning what we shall do with our these do not include the military


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

40 THE FREEMAN June

services and those receiving pub- appreciation, on the part of those
lic assistance. We now have for of us who can still think, for that
every nine workers two people on individual. We have merely to look
the public payroll. And is this back in any stage of history to dis-
ratio growing smaller? This bu- cern that it was great or foolish
reaucratic army in our midst has only insofar as it produced great
developed into a self-perpetuating or foolish citizens. Outstanding
Frankenstein that regulates us to leaders, whether they are great
oblivion, taxes us limp, and robs or infamous, are the only measure

us of our individualism. that we have or will ever have in
I resent this. I abhor it. I rebel appraising an era. For the leaders,
against it. in a very real sense, represent the

Fortunately, I am not alone. greatness of their people — as
Thank the Lord there are a few Winston Churchill did in the Eng-
people yet who put stock in the in- land of 1940, as Abraham Lincoln
dividual. There are a few people did in the 1860’s.
yet who can say no. The real in- I ask that you examine the state
dividualist doesn’t do this for the of affairs in which we dwell. Have
effect. He does it because he can we become suffocated by that
think. He is not doing it merely noxious miasma so ridiculing the
to be obstreperous, nor for the egoist, the individualist, and the
publicity effect which is usually leader that we have become glut-
adverse anyway; but he does it tons for extinction?
because he has a conscience and I say there is yet hope. I say
realizes that it is not necessarily that there are trainable people
true that the majority is always among us. I say there is some rem-
right. nant of the desire of liberty and
freedom and achievement, some
courage yet remaining to decry the

If this sounds like an indictment thought of insured security; some
of our times, let me assure you it place yet there are the makings of
is just that. However, I am grati- a race who can conscientiously as-
fied that there are a few organiza- sume leadership without either
tions which still recognize individ- apologizing for it or doing so for
uality and still praise it. And I sgelf-aggrandizement. I think there
can feel no more comfortable any remain within the airless cocoon
place than in these surroundings we have created still some indi-
to issue my heartfelt plea for the vidualists. LI

An Indictment of Our Times


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

A business leader, vincrea ng

with freedom,’’ expld $. 52

MARVIN M. SCHMI

|

RECOGNIZING its heavy dependence in such competence, by contrast
upon the engineer and scientist, with its economic competitors,
and also knowing that research that lag can and will be overcome
and development are an important without undue difficulty. The ques-
element in the rapidly rising fixed tion here is only one of how much
costs of doing business, manage- time will be needed to reassert un-
ment is properly asking whether questioned supremacy, and I be-
the return is commensurate with lieve it will be less than the pessi-
the investment, whether the Amer- mists fear.
ican engineer and scientist are do- But a growing part of indus-
ing the best job of which they are trial management—and, in my
capable, and whether the quality opinion, the most responsible and
of our scientific and engineering forward-looking part — has fears
knowledge is all that it ought to of a deeper sort about engineers,
be. scientists, and members of the
Industry, of course, expects professions generally. We fear that
technical competence from its en- the engineer, the physicist, the
gineers. To whatever extent, if chemist, the medical specialist, and
any, America may now be lagging the légal expert may feel he has
—_— discharged his full debt to society

article is a condensation of his address on own occupation.

Feb 25, 1959, before the Iowa En- . .
gineering Society in Des Moines. There is a strong temptation for

41


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

42 THE FREEMAN June

the professional man to feel this from every side. Management is
way, as he struggles to assimilate increasingly preoccupied with a
the mass of new knowledge con- concept called “freedom,” which
stantly being introduced into his lies beyond the boundaries of
own specialty and to relate his mathematics and science but has
work to even a few other disci- a greater practical bearing on the
plines that are most closely allied future of American industry than
with it. the blueprints and designs and

There isa strong temptation for testing laboratories. Management
the scientific and technical man to is giving serious heed to words
say to himself, “I have devised the like those of Dr. Charles Malik,
formula — or put together the ma- the great Lebanese philosopher
chine — and that is the end of my and statesman, who said the other
responsibility. What happens af- day at Dallas, Texas, that the
terwards, or what happens outside United States faces three great
the world of formulas and ma- dangers to its survival as a domi-
chines is somebody else’s respon- nant force for good. Dr. Malik
sibility.” listed these dangers as follows:

There is, I suspect, a temptation
for the technically educated man
— trained in mathematical exacti-
tude and the handling of nonhu-
man materials — to feel a secret
scorn for what he understandably,
but shortsightedly, views as the
bunglings of politics and the un-
tidy confusion of humanity out-
side science.

1. A possible weakening in Ameri-
ca’s faith in its own ultimate
values.

2. A wave of complacency, ease,
and comfort.

3. A conspiracy of forces, world-
wide in nature, whose only con-
cern is to blacken the name of
America.

Some will say that engineers

Human Problems in Industry and scientists are doing their full
It may surprise some of you to part to meet these dangers by pro-
learn that industrial management viding America with the means of
becomes more and more convinced out-producing its enemies in ma-
that strictly technological problems terial goods, whether of military
of the kind with which you di- hardware or of civilian well-being.
rectly deal as engineers are now Industrial management is no
of secondary importance to the longer sure that this is a good
far less manageable human prob- enough answer; in fact, it holds
lems that crowd in upon industry the opinion that this is not enough,


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

1959 WHAT INDUSTRY EXPECTS OF THE ENGINEER 43

Believe me, as American indus- selves, we feel we have a right to
trial managers survey the slow ask from the members of that pro-
erosion of freedom in American fessional and technical elite — in-
life, we are painfully aware of our cluding engineers — who are asso-
own shortsightedness in giving too ciated with us in American indus-
little attention to the climate of try. We have awakened to the
political and moral values out of solemn truth that productive ca-
which this erosion has developed. pacity and technological skills do
We, as part of management, are not of themselves spell freedom.
beginning to see that if we occupy And so it is that the real obliga-
our energies entirely with research tion which industry lays upon the
and development, production, mar- engineer is an obligation to put on
keting, and finance, we can build the armor of alert and stalwart
a superlatively excellent economic citizenship, in which you will sally
machine, only to have it seized by forth from the protective cloister
the foes of freedom and trans- of the drafting room, and do battle
formed into an instrument of de- in the hard, tough, and confusing
struction for the liberties of the world of conflicting ideas, swirling

American people. emotions, and highly charged
. propaganda. This is the world
The Armor of Citizenship where America’s destiny will be

We management people now decided. This is the world where
have started to realize that we the issue will be settled: whether
have a bigger responsibility than you and your descendants, along
that of management in the narrow with the rest of us and our descen-
and technical sense if we are to be dants, will be kept and faceless
true to our trust to the millions automatons of a superstate, ruled
who have invested their savings in by force and fear, or whether we
the capital enterprises we operate shall safeguard our heritage of in-
and to the many more millions who dividual choice and personal deci-
look to us for employment as free sion.
men and for goods and services in
a free market. We know now that Understand and Explain
we must find the time in our days Effective participation in this
to break out of our confining shells struggle requires that you under-
as management technicians and stand, and — beyond understand-
assume our proper responsibility ing — speak out, on such issues as
as citizens to help preserve a free taxation, profits, and labor rela-
society. And what we ask of our- tions. It requires that you grasp


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

44 THE FREEMAN June

the significance of a tax load that Effectiveness in the struggle for
has risen from 11 per cent of net freedom requires that you have
national product in 1929 to one- the courage to speak out against
third of that product now. It re- the abuses inherent in labor union
quires that you be prepared to ex- monopoly power, which lead inevi-
plain the significance of this in- tably to the sordid state of affairs
crease to all with whom you come so abundantly documented by the
in contact, and that you join in an McClellan Committee. You must be
organized way with others to prepared to help strip the mask of
check this trend before the tax hypocrisy and apology from the
load grows to 40, 50, or 60 per cent police departments, sheriff's offi-
of all we produce. ces, and — yes —even judges on
Effectiveness in the struggle the bench, who bow to the inordi-
for freedom requires that you take nate political power of union of-
some personal part in rescuing the ficials by blinding their eyes to
honorable word “profit” from the bombings, beatings, arson, and
disrepute into which we have per- physical violence on the picket
mitted designing men to drag it. line. You may need to join with
The trend toward state control has other good citizens in helping to
been accelerated because we have establish local crime commissions
allowed the institutions of free that will concern themselves with
market capitalism to fall into dis- upgrading the whole standard of
repute. Each of us, as part of law enforcement in this country as
American industry, has an obliga- it relates not only to labor hooli-
tion to re-establish profit in the ganism but also to syndicated
minds of men for what it really is: crime, juvenile delinquency, and a
a social institution that provides host of other sores that are eating
one of the foundation stones of away at the vitals of America.
liberty. In a competitive society, it
is the reward for social service The Promise of Freedom
which the community, of its own In short, industry asks of the
free will, bestows on the enter- engineer that, in addition to being
priser. If the concept of profit is the best possible engineer, he be
destroyed, then we must turn our also — and above all else — a true
backs on the whole idea of free American. Industry asks that the
choice in economic affairs, and be engineer first see for himself and
prepared to accept the dictates of then help others to see the glori-
whoever is powerful enough to ous promise that the enterprise
gain and hold control of the State. system holds for the future of our


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

1959 WHAT INDUSTRY EXPECTS OF THE ENGINEER 45

people. The engineer, better than knout, but while preserving liberty
most, can document the record and freedom of choice.

that this system has made and is It is for us who believe in the
making in eliminating poverty and enterprise system — engineers in-
fear of starvation, in conquering cluded — to think and act in terms
disease, in giving people the lei- of its promise, and to interpret
sure for education and cultural it positively as the most depend-
fulfillment. All of these things it is able way to achieve the highest as-
doing, not with the lash and the pirations of the human spirit.  o

Cn his be Liberty 2 HARRIET HARPER

WHAT POWER takes hold of man today
That makes him think it right to say
That all must have an equal share

Of our prosperity ? Beware!

What right have I with subtle stealth
To take a part of others’ wealth?

If one can grab with greedy smirk
To take the fruits of others’ work,
Then what initiative have we

When all will be shared equally?

By whatsoever name it’s called,

I cannot help but be appalled

To think that people’s moral sense
Does not oppose this great pretense
That it is right for one to steal
Since it is for another’s meal;

That it is Christian love when he
Robs you to give some more to me.

For though he aims at noble ends,

My conscience on the means depends.
And is it just by force or might

To make me serve what he thinks right?

So please don’t give or steal from me.
I want to keep my liberty,

Which you are someday bound to lose
If it’s the other path you choose.

Miss Harper is a teacher at the Keith School in Rockford, Illinois.


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

A parking problem analyzed in terms applicable ya?

to all the economic affairs of mankind. YD.

(

/ (s
PARKING, AND THE

Fhice Syston oC

NORMAN V. BRECKNER and WILLIAM R. ALLEN

As the weather bureau is face- infliction, with talk of the present
tiously blamed for inclemency, the or readily attainable “affluent so-
economist is sometimes seriously ciety” apparently do not fully ap-
charged with encouraging a fetish preciate that scarcity is a relative,
of scarcity. It seems widely held not an absolute, matter. If scarcity
that scarcity is essentially a fig- could be abolished by each person
ment of perverted imaginations, a having a certain minimum income
figment which, if taken seriously, at present prices — $50,000? $100,-
can only inhibit efforts for eco- 000? — we could conceive of a time
nomic betterment which otherwise when scarcity would no longer
could succeed. shackle the movement of mankind
Thus Leon H. Keyserling, for- toward perfection. But even if
mer chairman of the Council of each person has an income of
Economic Advisers, has informed $100,000 in Buck Rogers’ time,
us that “we have not had enough doubtlessly scarcity will still pre-
of anything, because we have not vail. For scarcity, be it noted, re-
used fully the fantastic productive fers to available goods and serv-
power which could provide us with ices relative to desires.
enough of everything.” A person who does not have all
Those who have been brain- of everything that he wants is
washed, by others or through self- faced with scarcity, regardless of
_— his absolute level of living. If there
Dr: rocker ie an auisiont profesor (money, were no scarcity, there would be
an associate professor (international trade and NO necessity for sacrificing one

finance) in the Department of Economics, . .
University of California, Los Angeles. thing to obtain another; there

46


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

1959 SCARCITY, PARKING, AND THE PRICE SYSTEM 47

would be no problem of choosing
which desires to satisfy to what
degree, for, by definition, all de-
sires would be fully satisfied; in
short, there would be no costs.

The economist did not invent
scarcity. To be sure, in the ab-
sence of scarcity, there would be
no central “economic problem,”
and there would be no role for the
economist. But who would desire
gainful employment in a world of
no scarcity?

If we do not have all of every-
thing we want, there is a problem
of rationing. This is the major
corollary of scarcity. An individ-
ual cannot escape the requirement
for “economizing.” How shall he
disburse his limited income ? When
he purchases a unit of A, he has
less resources to expend on B, C,
and D. On the aggregate level,
also, the problem of scarcity is
with us. Resources devoted to au-
tomobiles are not available for
refrigerators; the real cost of sub-
marines is the schools, houses, and
other outputs which could have
been produced with the resources
now sunk in the subs.

How shall the rationing be done?
Rationing is painful, so it behooves
the community to do it so as to
minimize the cost and waste.

One might suppose that the
method obvious to a libertarian
would rely on free, individual
choice. Let each person — posses-

sing certain (scarce) resources,
having certain preferences, and
faced with impersonal price tags
on the merchandise — decide how
much, if anything, he will spend
on articles A and B and C and D.

But a method of private deci-
sion-making does not assuage the
longing of many to do something
for mankind. The very impersonal-
ity of the pricing mechanism,
which the advocate of freedom
should consider an asset, does not
appeal to the compassionate person
determined to do good. Thus we
find widely advocated processes of
rationing, founded not on each
person bidding in the open mar-
ket on the basis of his own scale
of priorities, but on direct disposal
of goods and services by some pub-
lic authority on the basis of what
the authority somehow decides are
the relative ‘“needs’’ of the mem-
bers of the community.

The Problem

Basic principles of economics
can often be simply illustrated.
Consider a hypothetical univer-
sity — for convenience, call it
U.C.L.A. — which has 1,500 faculty
members and only 1,000 automo-
bile parking spaces. On the as-
sumption that all 1,500 professors
(or at least more than 1,000) de-
sire a parking space, we have a
rationing problem. In one way or
another, no matter how much the

Q


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

48 THE FREEMAN June

administrative authorities love If distribution by means of cen-
mankind, the spaces inevitably tral authority for the purpose of
must be rationed. But how? better satisfying “needs” were

The spaces could be given away desirable in the case of parking
by U.C.L.A. on a first-come-first- spaces, it is difficult to see why the
served basis. The money price of same system should not be utilized
a space would then be zero; but a in distributing the entire social
price would be paid in getting to output. Most of our would-be bene-
the campus before dawn in an ef- factors seldom go that far. (Nor
fort to be near the head of the do the Russians go that far in
line. The warm-hearted benefactor practice.) What they enthusiasti-
of humanity often neglects the cally champion case-by-case, they
fact that scarcity imposes costs ‘dimly recognize as ridiculous when
and that the costs need not be in applied in the aggregate.
money form. Keeping the money
price of an article at zero does not
necessarily make it free. Return to our parking space

The undignified scramble for problem. The land used for such
parking places may be avoided by spaces is valuable. It almost cer-
prior assigning of the spaces: tainly has potential uses which
some professors will be allotted a could be sold by U.C.L.A. But
space and others will not. Who will whether or not it has alternative
be the lucky ones — or, as the com- uses, the parking spaces them-
mittee dispensing privileges would selves would fetch a price if auc-
say, the deserving ones? tioned in a free market. In short,

There is almost no limit to the so long as U.C.L.A. gives away the
ingenuity of dispensing commit- parking spaces — either first-come-
tees in rationalizing their favors. first-served or by committee desig-
Among the criteria may be: dis- nation — the university is fore-
tance from campus, age, health, going income it could otherwise
rank, initials. have.

Some such criteria for the guid- To Professor Adam Smythe,
ance of the bureaucracy may ini- this seems to be a peculiar situa-
tially appeal to humanitarian tion. Smythe may have no auto-
instincts. Few have any attrac- mobile and wants no parking
tiveness from the standpoint of a space. Or perhaps he does drive
system of social organization con- and will take a space if it is free
ducive to both economic efficiency or priced sufficiently low, but he
and over-all freedom. is not willing to pay the full mar-

Free Market Solution


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

1959 SCARCITY, PARKING, AND THE PRICE SYSTEM 49

ket value. Smythe, a cold-hearted spaces and ‘would be allowed to
but thoroughly impractical econo- rent them, the market-clearing
mist, might reason as follows: price still being $90. However,
Since I put a small (or zero) value there are questionable features. of
on a parking space, would I not be this rationing method: possessors
better off to let U.C.L.A. sell the of certificates who choose not to
space to someone else and then rent have obtained valuable space
give me the proceeds (or at least free; possessors who do rent out
a part of the proceeds greater obtain $90 instead of the pro rata
than my own valuation of the $60; and one-third of the faculty
space) ? Why should U.C.L.A. give receives no dividend at all. Smythe
assets only to certain members of prefers that the renting be done
the faculty, viz.,, those (or some by U.C.L.A.
of those) who want parking (Of course, the selling of the
spaces? If these assets are to be spaces and the disbursing of the
used directly for faculty benefit, receipts are separate acts, and
why shouldn’t the university sell U.C.L.A. might choose to do only
the assets and then disburse the the first and keep the receipts. In-
proceeds among all of the staff? deed, the university might decide
Suppose, for example, that the to set the price which would maxi-
market would be cleared, i.e., the mize receipts — perhaps in order
number of spaces demanded would to accumulate funds for construct-
equal the number available, if the ing a parking garage. This price
annual price is $90. One thousand could not be less than $90, for all
spaces at $90 yields receipts to spaces would be sold at that price,
U.C.L.A. of $90,000. If the receipts and except by coincidence, it would
are disbursed equally among the be higher. But a price higher than
1,500 faculty members, each per- $90 will mean that not all spaces
son, irrespective of whether or are sold; perhaps the best price
not he is a buyer of parking space, from the university’s point of
gets a dividend of $60. view is $110, at which level, we
Instead of U.C.L.A. renting out may suppose, 900 spaces will be
spaces and disbursing receipts, the sold, giving receipts of $99,000.
president of the school could scat- One hundred spaces standing emp-
ter from his office window certifi- ty because of a policy of monopo-
cates of possession of parking listic price-gouging! The inevi-
spaces to the faculty waiting be- table wails of protest are too pite-
low. A random group of professors ous to allow further contemplation
would then control the parking of this alternative.)


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

50 THE FREEMAN June

Weighing the Alternatives though not necessarily smaller in
Professor Smythe is, of course, the estimation of everyone) than
generally known in the faculty paying in terms of a specific re-
club as an ogre who revels in a source, in this case, the energy re-
psychopathic preoccupation with quired in arising early and grop-
scarcity, but it does appear that ing to the parking lot by moon-
his proposal of U.C.L.A. selling- light. That, as Smythe has often
and-disbursing may have some said, is why money was invented.
merit. Who gains and who loses Second, a dispensing bureauc-
by his rationing system? racy — suffering the temptations
a. The purchaser of the parking of frail men, guided by arbitrary
space presumably feels that he is and often nebulous criteria, and
better off as a result of the pur- subject to no rewards for efficiency
chase, or he would not have made or penalties for inefficiency — is
it in the first place. To be sure, he avoided.
would be still happier to get the Third, there is upheld the basic
space free, but someone must bear principle that those who get (in
the cost of scarcity, and it seems this case, the parking spaces)
appropriate that as much of it as shall pay.
possible be borne by those who re- Fourth, there is upheld the
ceive the space. equally basic principle that gifts
b. U.C.L.A. is financially indif- and rewards are best given in
ferent. It is neither better off nor generalized purchasing power.
worse off by selling the space and When U.C.L.A. gives away park-
disbursing the proceeds than by ing spaces, only part of the faculty
giving away the space. gains, and the beneficiaries must
¢. Smythe and the other 499 take the gift in the form of only
professors without parking spaces parking space, whereas Smythe
— and under any rationing scheme, would have everyone gain from the

there will be 500 spaceless men — university's generosity, and re-
are benefited by the proceeds of ceive the gain in money which can
selling the spaces. be used as each recipient sees fit.

The Smythean scheme achieves It all seems quite apparent. But

a number of desirable results. Adam Smythe is not optimistic
First, the rationing is done with that his well-intentioned but mis-,
a minimum cost in time and in- or un-, guided colleagues will even
convenience. Paying a price in seriously consider the advantages
terms of money, i.e. generalized of Adam Smith’s “obvious and
purchasing power, is neater (al- simple system of natural liberty.”


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

AND

ALBERTO BENEGAS LYNCH

A report on the consequences of compulsory unionism
from one whose country is finding where that road leads.

THE MAIN CRITICISM leveled trols altering its natural level,
against economic freedom is the either by the direct action of a
statement that, if things in the State which sets wages arbitrarily
economic field are left to the spon- without ‘regard to the market, or
taneous regulation of the free by indirect governmental action
market, then so-called cyclical through unrepressed trade union
crises will ensue, with their se- violence.
quel of mass unemployment. To ask a higher price for one’s
This is an unjust and baseless product than the prospective
accusation. Sound theory demon- buyer is willing to pay precludes
strates, and practice confirms, that a sale and contributes to a cumu-
in every case unemployment is a lation of unsold products. The
consequence of the direct or in- same thing happens when, instead
direct action of the State. of a product, a service is offered.
Economic liberty presupposes a If the wage demanded by a worker
free market for wages, just as is higher than the person requir-
for all other products and serv- ing this service is willing to pay,
ices. The price or wage paid for then the wage contract is not
work is generally subject to con- made and the worker is unem-
— ployed.
Mr. Benegas Lynch is a business leader in Every time wages are raised
Dian De Lo Eom. brn: seems above the natural level freely es-
tion for the study and teaching of the phil- tablished by supply and demand,

osophy of freedom. This is an excerpt from

his lecture of September 11, 1958, before the unemployment will be the un-
National Academy of Economics in Monte- . .
video, Uruguay. avoidable result. One alternative

51


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

52 THE FREEMAN June

is to lower real wages and at the trade, and to associate. Such ac-
same time raise nominal wages by tion frequently makes it impos-
means of monetary inflation, a sible to enter a wage contract vol-
trick very widely used in the last untarily; the right to abstain
few years. Nominal wages are from working becomes the obliga-
raised, and at the same time tion to take part in strikes against
money in circulation and bank one’s will; and the right to asso-
credit are expanded, whereby real ciate becomes the obligation to
wages are kept at the same level, join this or that union. Coercive
thus avoiding the unemployment force, instead of being reserved
which would otherwise have taken exclusively to the government for
place. That is to say, the raising the protection of the life, liberty,
of wages above their natural level and property of the citizens, is
inevitably brings about either un- employed by these organized
employment or inflation. groups to attack many of those
Man is not an object of trade, same fundamental individual
but his services are -like any rights.
product — when he offers them in It is paradoxical, however, that
the market and expects payment many of those who call themselves
for them. The difference in the supporters of democracy and lib-
case of services is that it is be- erty should claim that the sort of
coming increasingly common in compulsory unionism we have de-
many places for workers, acting scribed is a legitimate manifesta-
in organized groups, to use force tion of democratic life. This kind
to get the price they want for of unionism neither follows demo-
their services. In its tendency to- cratic practices nor contributes to
ward mass action and indifference liberty. On the contrary, trade
to the interest and choice of the unionism that attacks fundamental
individual, trade unionism gives individual rights is an efficient
its leaders tyrannical authority weapon with which to kill liberty.
over members and nonmembers Such unionism generally serves
alike. governments of a totalitarian ten-
dency, and in conjunction with
employers’ associations appointed
Modern trade unionism, by the by the State, works toward a cor-
use of force, not only distorts the porative structure of society.
wage market, causing unemploy- Free elections and democratic
ment or inflation, but also inter- governments are no defense
feres with the liberty to work, to against such developments. In

Coercion Destroys Rights


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

1959 UNEMPLOYMENT AND UNIONISM 53

many cases these governments, on popular vote — as in other ages —
the one hand, interfere where they if effective brakes are not placed
have no business, exceeding their on political power.

powers; and on the other, they Excessive government is the
neglect their basic duty of enforc- usurpation of power by those in
ing respect for the life, liberty, control and the abdication of lib-

and property of the citizens. erty by those who consent. The
tendency toward excessive growth
Democracy Is Not Enough of government is accelerated in the

Against the rising authoritar- West by the common but false be-
ianism of our times, which is at lief that liberty cannot be lost
flood tide where the communist under democracy.
empire holds sway and every trace
of liberty has completely disap- The task before us is to displace
peared, it must be realized that this false hope with the idea of
democracy, of itself, is no guaran- the inviolability of natural rights
tee of liberty for the countries of —to life, liberty, and property —
the West which practice it. In the the only guarantee for human
areas of the world where there is liberty against the constant threat
yet a remnant of liberty, it is in of enslavement by authoritarian
danger of destruction through the governments. LI

IN FRANCE in 1846, a chief argument of the pro-

! tectionists was that tariffs created more work, and
that this was good for the workers. The leader of
the free traders, Frederic Bastiat, answered as
follows:

ORK | In my village, there was a carpenter who worked
six hours a day. .. . One day he went blind. But
being a man of character and energy, he continued

ERE at his trade, even though it took him twelve hours
to do what he had formerly done in six.

EALTH | One of his neighbors consoled him with these
words: Before you went blind, you worked only a
| half day. Now you work all day. Your cataracts are
a blessing because Saint-Cricq [Minister of Com-
merce] has told us that work is wealth. * oo

| Translated by Dean Russell from Qeuvres Completes de Frederic
| Bastiat, Vol. II. Paris: Guillaumin, 1862.


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

An agricultural economist translates

his experience to commend . . .

A
NON GOVERNMENTAL FARM PROGRAM

PAUL Roy

rice, and other crops, with yields
vastly in excess of the quantity
which can be moved at the support
price. This hurts domestic indus-
tries which must buy in this price-
supported market. It also hurts
MANY PERSONS have followed the our prospects in foreign markets,
path of least resistance to the con- where we hold a price umbrella
clusion that the only solution to over competitors, thus increasing
American agricultural problems is any advantage they might other-
for the federal government to pour wise have had.

billions into the farm program. Yet, while economists and others
But I cannot agree that our only have been busy devising and try-
salvation rests in Washington. I ing to enforce unworkable pro-
doubt that the Congress or any grams, a kind of technological
federal agency is capable of enact- revolution has been happening in
ing and administering a compre- many lines of farming — especially
hensive farm program with jus- livestock and poultry. This went
tice or equity. Our agriculture is largely unnoticed in the American
too diversified for that, our farms press until a year ago. The United
varying in size and capitalization, States Department of Agriculture
with wide dispersions in income and many of the agricultural col-
that are aggravated rather than leges failed to realize the extent
corrected by government payments and importance of this potential
to farmers. change in farming patterns.

We have agricultural resources The change involves economic
committed to wheat, corn, cotton, integration, more popularly called
— . . contract farming. However, this
Dr. Roy, Agricultural Economist at Louisiana .

State University, has devoted nearly a decade contract is not between the gov-

studying and helping develop the integrated Lote
farming arrangements described in this article. ernment and the farmer; it is an

b4


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

1959 A NONGOVERNMENTAL FARM PROGRAM 55

economic arrangement between broilers, for example, has been so
businessmen and farmers. The successful that broiler meat con-
businessmen supply all or part of sumption has gained considerably
the credit and the production sup- on competing meats such as beef,
plies and assure a market for the veal, and pork. Broiler prices in
produce. The farmer, in turn, sup- retail food stores are lower than
plies as many resources as he can, during the Depression days. Econ-
including all or part of the produc- omists say the results of economic
tive labor. In exchange, the farmer integration in hogs and table eggs
gets a guaranteed return for his could be just as outstanding. Some
labor plus a share of profits above persons claim that broiler growers

a certain level. on contract work for “starvation”
wages, but the facts refute them.
Broiler Growers on Contract Recent research by Southern land-

Contract farming had its real grant colleges shows that net labor
beginning in the broiler industry returns to broiler growers on con-
where it attained a high degree tract averaged $1.10 per hour.
of perfection and performance. The farmer has always faced
The system is now spreading to the uncertainties of weather, ani-
hogs, beef cattle, table eggs, hatch- mal and insect pests, diseases, and
ing eggs, canning crops, and to income and price fluctuations; and
many other farm enterprises, ex- he is fully justified in trying to
cept those supported by the gov- reduce or eliminate such hazards.
ernment. The crops subject to gov- But the result, when he has turned
ernment price support account for to the government for help, has
less and less of the national agri- been the added aggravation of
cultural income. For example, poul- long debates, red-tape, and a huge
try income is now in first place in bureaucracy. Far better that
Georgia and Alabama, and ranks farmers work out satisfactory pro-
high in the other southern states duction, marketing, and income
of Arkansas, Louisiana, Missis- arrangements with businessmen
sippi, South Carolina, North Caro- who are in business to supply a
lina, and Texas. Economic integra- market rather than to fill a gov-
tion started here because cotton ernment warehouse.
was being price-and-acreage-con-
trolled out of its markets; the Advantages of Integration
price support program indirectly What are the advantages of eco-
led to economic integration. nomic integration in agriculture?

This contract farming in (1) It does not require govern-


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

56 THE FREEMAN June

ment regulation or subsidy because thing new, free to produce and
it is a self-adjusting mechanism trade voluntarily to their mutual
through the market place. (2) It advantage. In whatever you do —
spreads risks, including that of farming, teaching, manufacturing
price fluctuation, among the people — aim for one thing: produce and
who do the integrating. (38) It is offer the goods and services people
based on and builds respect for want and can afford to pay for.

the personal integrity and the Woe to those who produce for
private property rights of all par- a warehouse or cave or mothball
ties involved — farmer, business- fleet far removed from the exact-
man, consumer. (4) It shifts or ing needs of the market, those who
absorbs within its own organiza- teach the tempting but false phi-
tion some of the costs of research, losophy of something-for-nothing,
teaching, and demonstration. (5) those who hide their inefficiencies
It has no monopoly advantage or behind special privileges, subsidies,
power because it relies on eco- and protective trade barriers. Any
nomic and technological efficiency possible short-run gains from such
in its operations and is not a de- tactics are strictly illusory, for

vice for market control. they are at the expense of others,
harmful to society, and in the
Laissez Faire long run destructive of the very

What is the moral taught us by ones who seek them. While the
agricultural economic integration? pains of adjustment to the mar-
It is simple: ket are sometimes acute, they are

Stop interfering; leave people preferable to the chronic and
to their own resources and in- eventually incurable disease of
genuity, free to attempt some- subsidy and control. * oo

| oo ASOT] 2006007 | Free-Market Farming

RESTORING THE FREE MARKET to farm products at a time of un-
precedented industrial activity in this country would benefit
nearly everyone. Taxpayers (and who isn’t?) would avoid the
staggering cost of purchasing and storing commodities; marg-
inal and submarginal farmers would be induced to seek more
profitable employment off the farm; commercial farmers could
go back to producing for a market they know exists; and the
entire economy could once more get back to a steadily rising

productivity, beneficial to everyone.
W. M, CURTISS


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

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN

WHEN Walter Lippman published Mr. Drucker puts it, a “configura-
his A Preface to Morals a genera- tion term.” In psychology, the
tion ago, a witty reviewer re- chatter about “gestalt” and ‘“be-
marked that it was most useful havior patterns’ implies that
where it was most prefatory. Peter theorizing about “wholes” has re-
F.Drucker’s Landmarks of Tomor- placed an older interpretation that
row (Harper, 282 pp., $4.50) would relied on such mechanical things
seem to call for a similar com- as the ‘“pleasure-pain” calculus.
ment. It is first-rate when it comes Biologists use such terms as “im-
to defining problems. But for every munity” and “metabolism,” “ecol-
problem it defines, it creates ten ogy” and “syndrome,” ‘home-
or twelve new ones which it leaves ostasis” and “pattern” — “every
unsolved. one of them describing not so
Mr. Drucker begins by telling much a property of matter or
us that we have left the “Carte- quantity itself as harmonious or-
sian” world behind us. (Descartes, der, every one therefore essentially
if you are hazy about him, was a an esthetic term.” As for the
seventeenth century French phi- physicists, who have led the way
losopher who thought that quanti- in the destruction of Mr. Drucker’s
tative measurement and ‘‘the ‘‘Cartesianism,” they deal in
knowledge of things by their “quantum” items that express
causes” expressed the whole of combinations of mass and energy,
science.) Today, says Mr. Drucker, time and distance, speed and direc-
the universe presents itself to us tion, “all absorbed into a single in-
as mysteriously prolific of patterns divisible process.”
that result from qualitative (and Just where all this is tending in
unmeasurable) purpose. terms of “tomorrow’s” social, eco-
Economists talk about “man- nomic, and political-patriotic
agement,” which is an art even “landmarks” may escape the aver-
more than it is a science; it is, as age reader. Mr. Drucker seems to

- 87


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

58 THE FREEMAN June

be saying that in a world of “pat- diloquently of going ‘beyond col-
terns” and “purposes,” one must lectivism and individualism,” his
have a pluralistic order of society accent on the need for free moral
in order to accommodate every- choice and personally accepted re-
body. Personally, I don’t find this sponsibility is individualistic
vastly different from the old soci- enough for me.

ology and the old political science. A student of industry, Mr.
Between Sumner’s and Spencer's Drucker notes that the day of the
“advancing industrial organiza- ‘assembly line robot” is disap-

tions” and Drucker’s ‘“corpora- pearing. ‘Automation’ — a blend
tions as the socially constitutive of mechanics, electrically operated
units of the new society,” the dis- controls, and electronics — tends to
tinctions are largely matters of displace the “human machine tool”
verbiage. And the effort to adum- of the original Henry Ford. But as
brate a political science that will the factory proletariat diminishes,
allow for many purposes is cer- the professional middle class
tainly as old as Calhoun’s doctrine grows in numbers, “Programing”

of the “concurrent majority.” of work becomes all-important;
the thinker replaces the mechani-
Individualism Recognized cally oriented “doer.” The impera-

“Cartesianism” to one side, tives of modern industrial organi-
however, Mr. Drucker is full of in- zation call for an ‘educated
sights. Under modern organiza- society,” if only to watch dials and
tional “forms” (Mr. Drucker likes to service intricate machinery.
that word) the ordinary individ- Moreover, the ideas of the mod-
ual must belong to a “collective” ern “West” are catching. The
— or a ‘‘social whole” — to be effec- “East” (including Mohammedans,
tive. But Mr. Drucker (though he Buddhists, Shintoists, and African
shies away from the word “in- and Melanesian worshipers of
dividualism”) quite correctly ob- Stone Age gods) insists on imitat-
serves that a modern organization, ing the productivity of the
if it is not to die of inanition or “West.” The “immemorial wisdom
managerial arteriosclerosis, must of the East” gives way to a drive
enable its people to feel creative, to bring stagnating economies “up
to take pride in their status, and to to poverty” — which is riches to
“respect themselves” as part of “a the Egyptian fellahin or the Malay
grand design.” In brief, people coolie.
must be permitted to be persons. In Drucker’s opinion, commu-
Though Mr. Drucker speaks gran- nism, an aberration of the West


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

1959 UNCERTAIN LANDMARKS 59

(Marx got his ideas piecemeal and of the steady slugging away
from such variegated westerners on improvement, adaptation, and
as Hegel, Ricardo, Rousseau, and application.” Innovation ‘makes
Saint-Simon), must prove defec- technology open-ended and capable
tive as a way of organizing an of being designed.”

“educated society.” The reason is Innovation is, in short, an at-
that “communism cannot allow the titude which combines flexibility,
educated to use their education, it disrespect for convention as such,
can only tolerate technicians. ...It and the ability to organize “ignor-
needs the new organization of men ance” until it has yielded new
of skill and knowledge yet cannot knowledge and new tools.

permit responsible judgment, let Again, one wonders where Mr.
alone use the organization to pro- Drucker’s “new” thinking about
mote human freedom.” Because of innovators differs from older
this, the still uncommunized na- thinking about the nature of en-
tions of the “East” must logically trepreneurship. The enterpriser,
tend to side with the mature coun- from James Watt and Matthew
tries of the free world as they de- Boulton on down to Mr. George
velop a middle class capable of Romney of the American Motors
bringing them ‘“up to poverty.” Company, has always been willing
If the “logical” development of the to organize for new departures.
entire noncommunist world is to And economists from Francis
be in the direction of freedom, Amasa Walker to Schumpeter
however, there must, so Mr. have frequently defined profit
Drucker says, be social as well as specifically as a reward for “in-

technological “innovations.” novation.”
When he comes to demonstrate
: Iz Foy) . .
Organized “Innovation what he means by “social innova-

1»

Mr. Drucker uses the word “in- tion,” a certain vagueness hovers
novation” in a special way. “In- about Mr. Drucker’s pages.
novation” is not “the creative act. Though he is far from being a
... the ‘Eureka’ of sudden insight Fabian socialist, Mr. Drucker be-
by the genius.” On the contrary: trays a touching Fabian trust in
Innovation is the art of defining the ‘public corporation” and in
what needs to be done to make what might be described as the
something attainable and then set- semidetached public authority. He
ting out to organize for its accom- thinks that government has a role
plishment. It ‘multiplies the to play in the creation of ‘“spec-
power both of the flash of genius taculars” such as the TVA. (The


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

60 THE FREEMAN June

“spectacular,” he thinks, can help that screams and bluffs take the
galvanize apathetic regions into place of precise diplomatic repre-
doing something for themselves.) sentation, and the whole world is
And, since a certain amount of apprehensive lest a bluff should re-
“social overhead” — the education lease a trigger by mistake.

of managers, the building of From his correct analysis of the
roads, the training of technicians portent of the “absolute” weapon,
— must accompany or even precede Mr. Drucker goes on to say that
economic development, Mr. the “post-modern” task is to deny
Drucker looks with complaisance to governments everywhere the
on U.S. government aid to Asiatic power of inflicting physical and

“social overhead” state projects. moral destruction on their eciti-
zens, Well, the Hungarians tried
The Educational Process to deny just such power to Mr.

At quite another point in his Khrushchev. They did not succeed.
book Mr. Drucker is against gov- And when Mr. Drucker draws the
ernment domination of the educa- correct deduction that communism
tion process. He even argues that “can tolerate only vassals and
education for innovation is incom- satellites,” he reveals the ‘“land-
patible with statist controls over marks of tomorrow” as being
an education system. Yet he seems nothing more than the “landmarks
blithely unaware that if the Indian of yesterday and today” — in brief,
or the Thailand government uses a continuing Cold War. * oo
U.S. government money to educate
local managers, the product of
such education will hardly be on
the side of private entrepreneur- By William Henry Chamberlin.
ship — or real “innovation. )

\ ) Chicago: Henry Regnery Com-

Mr. Drucker is at his least spe-

] : pany. 295 pp. $4.50.

cific when he deals with the gov-

ernmental forms of the future. EXPERIENCE is undoubtedly an ex-
With the rise of the “absolute” cellent teacher. But it is a cer-
weapon, Mr. Drucker sees “irra- tainty that this teacher will not
tionality” invading international prevail unless the student brings
affairs. War can no longer be a to class a capacity for learning
profitable instrument or policy; that permits the lesson to stick.
therefore, politicians on both sides Otherwise, how account for the
of the Iron Curtain have no way different, and sometimes opposite,
of calculating risks. The result is effects of the same experience on

+) The Evolution of a Conserva-
tive


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

1959 OTHER BOOKS 61

different students? Contact with books on conservatism coming off
communism, for instance, does not the presses, this one attempts to
make an anticommunist of every- set down the tenets of the phil-
one who has had the experience, osophy, but as in the others, these
and collectivism has its apologists tenets turn out to be the predilec-
in every country where the dire tions of the author. To be sure, all
economic and social results of the conservatives agree on a few gen-
invasion of private property are eral principles: private property,
all too evident. The student who personal liberty, limited govern-
does not bring along an aptitude ment. Also, conservatives are
for seeing things as they are will marked by a common inclination to
learn little from experience. conserve traditions and institu-
However, that aptitude in good tions that have proven beneficial
measure William Henry Chamber- to mankind, in politics, culture,
lin took with him to Russia in and social life. Beyond these prin-
1922, and as a result of his ex- ciples and this inclination, the
perience he gives us now The Evo- various delineators of conservative
lution of a Conservative. He tells philosophy differ in both emphasis
us that when he undertook his and detail. Some are convinced
journalistic assignment in the that, given a free economy, the
Soviet Union he took with him ideal social life will be attained;
a favorable disposition toward others stress the importance of
communism and the “Russian ex- culture; still others insist that the
periment.” In those days most good life is a matter of self-im-
Americans suffering from welt- provement of the individual.
schmerz were at least sympathetic Chamberlin, who is first of all a
toward the ‘‘experiment,” simply reporter, adds to the orchestra by
because they believed that what- his observations of what is good
ever came of it would be better in American life and what he con-
than the detestable czarism it had siders undesirable. (He has a chap-
replaced. When he came back ter, for instance, on the cultural
twelve years later, Chamberlin was importance of baseball.)
not only completely disillusioned It is altogether a charming, in-
but had learned that, whatever the formative, and readable book, all
faults of conservatism in practice, the more so because it is written
as a philosophy of life it is dis- in the journalistic style of which
tinctly superior to anything its de- the author is a master.
tractors had to offer. Every reader brings to a book
Like the increasing number of his own apperception and there-


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

62 THE FREEMAN June

fore takes away a thought that thought. In it, the author traces
may not be in the book but is the social and political factors
aroused by it. To this reviewer which enabled Adam Smith’s blue-
the question occurs: If Chamber- print, The Wealth of Nations, to
lin had not seen sovietism in ac- fuse with Thomas Jefferson's
tion, would he have been con- revolutionary document, The Dec-
verted to conservatism? Is experi- laration of Independence, into a
ence the necessary teacher? Does workable plan which unleashed man
America have to go the whole way from centuries of oppression and
into collectivism before the mistake subservience. Smith's rationale,
is discovered? FRANK CHODOROV when practiced in the freedom of
Jefferson’s America, demonstrated
how material progress is inevita-
ble if only man is left alone and
ton, N. J.: Van Nostrand. 222 energy is allowed to flow freely.
pp. $5.50. What Smith had uncovered,
Chamberlain tells us, “was a set
THE PRIME ENIGMA of the twen- of principles accepting man as a
tieth century is not that so many self-starter, which is good for any
Americans have willingly em- productive society, whether it uti-
braced collectivist panaceas, which lizes steam, electric, or atomic
promise everything from pie in power or merely depends on horses
the sky to Heaven on earth, but and human muscle.”
that in so doing they have ignored Smith believed, as Yale sociolo-
the one means whereby man can gist William Graham Sumner be-
attain his desired ends. As John lieved after him, that the greatest
Chamberlain points out in his con- good man can perform is to care
summate study, The Roots of for himself, making certain that
Capitalism, it is from the free he exercises prudence, economy,
choices available under capitalism industry, and sound judgment. Or,
whence comes the unexpected, the to use Smith's own words, man,

> The Roots of Capitalism
By John Chamberlain. Prince-

innovation, and the qualitative de- ‘by pursuing his own interest . ..
cision that makes for human bet- frequently promotes that of so-
terment. ciety more effectually than when

Chamberlain’s study, the first in he really intends to promote it.”
a series of books on capitalism Certainly Henry Ford, Eli Whit-
sponsored by the Princeton Panel, ney, and Thomas Edison, without
is a major contribution to the field pretending tounderstand economic
of economic development and theory, bestowed greater benefit


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

1959 OTHER BOOKS 63

upon the individual than all the progress and invention to spring
social planners and do-gooders forth. Whenever government regu-
who ever lived. lations and restraints are em-

Economics is a science of hu- ployed, freedom diminishes. The
man choices, and choice is funda- impetus supplied the Industrial
mental to the moral nature of Revolution by the steam engine
man. Under socialism, man is de- was almost lost when the city of
nied the freedom to own and to Glasgow refused James Watt the
sell what he owns in the market right to open a workshop. The
place or otherwise dispose of it. French textile industry was long
Under capitalism, on the other burdened by the weight of thou-
hand, the consumer, by his count- sands of bureaucratic regulations
less votes in the market place, his which, between 1666 and 1730, re-
decisions to buy or not buy, directs quired more than 2,000 pages to
production, sets prices, and other- print. Since 1914, France's in-
wise decides the fate of the pro- sistence on rent controls has re-
ducer. sulted in a half-million slum dwell-

Like the Mosaic Law, of which it ings and a chronic dearth of ade-
is a by-product, capitalism is a de- quate housing. In our own coun-
fender of the individual. The right try, once the fountainhead of free-
to life, the right to the liberty and dom, our myriad of contradictory
the property necessary to sustain farm controls points up the folly
life, and lack of compulsion are in- of attempting to legislate produc-
tegral parts of this free choice tion. Germany, on the other hand,
system. “If one has a ‘right’ to has rediscovered the mainspring
life,” says Mr. Chamberlain, “one of freedom which our Founding
must be at liberty to work and Fathers so scrupulously sought to
sustain one’s self, and one must preserve. Merely by abolishing
have access to the means of pro- controls, state planning, and
duction — specifically, land and sharply progressive taxation, the
tools. If one can be legally de- West German Republic has man-
prived of the right to acquire
these, the right to life becomes a
permission to be revoked at the Any book reviewed in this Book Section (or

politician’s or the military man’s any other current book) supplied by. return
will.” mail. You pay only the bookstore price. We
g ] . poy the postage anywhere in the world.
There is little doubt that the Catalogue on request.
roots of capitalism are nurtured THE BOOKMAILER, Box 101, New York 16

by the soil of freedom, enabling



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

64 THE FREEMAN June

aged to recover faster than post- “It has been the machine itself —
1945 Britain. $13,000 or more of investment per
Chamberlain trains his per- worker, a multiplication of the in-
spicuous pen on many subjects dividual units, arms, legs, and
which relate to economics, and he brains which has pushed the wage
exposes many popular fallacies. to a point where everyone can
The trouble with Keynesian medi- have his own bit of conspicuous
cine, he tells us, “is that the pre- leisure, and even conspicuous
scriptions can all be refilled with- waste.” Henry Ford, he claims,
out check by the physicians.” “may not have been a master of
Government interference, he says, syllogistic reasoning, but after he
“begins as a policy of robbing rich had lived and worked, nobody
Peter to pay poor Paul (and) ends could claim that Karl Marx was
up by robbing Paul to pay Paul.” anything else but a fool.”
Inflation, he reminds us, does not If this first book is any indica-
finance productivity, but rather “it tion of the caliber of books to fol-
is production which has kept the low, then this series may very well
American inflation from going the prove to be a much needed articu-
way of the German inflation after lation of capitalistic thought. And
World War 1.” Chamberlain's quintessential book,
Such prosperity as we enjoy is lucidly and brilliantly written,
in spite of welfare state policies; may turn out to be the new Wealth
it results from the capital put at of Nations for a new American
the American worker’s disposal. revolution. EDWIN MCDOWELL

We invite your subscription to

MODERN AGE

A CONSERVATIVE REVIEW

Published Quarterly : C2 8 =~ Edited by RusseL. Kirk
VoL. 3, No. 2 (Spring 1959)
“HUMANE LETTERS”

Including contributions by Eric VorceLiN, FrREpeRICK D. WILHELMSEN,
Peter StanLis, Rosert J. NeeoLes, M.D., and “M.T.V.”

$4.00 the year $1.25 the copy
Address: 64 East Jackson Boulevard, Chicago 4, Illinois



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

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

IDEAS ON LIBERTY

WHEN VIOLENCE is covert, legal, and approved by a majority, it
is more deadly by reason of its disguises. It works stealthily to

increase friction in society and to erode and corrupt social bonds.

The shadow lengthens, political intervention and control in-
crease, men rely more and more on violence to gain their ends.
We careen, unwittingly, toward the servile state. This eventuality
is not being forced upon us; we are doing it to ourselves, largely

in ignorance of what it is we are really doing.

From the article, ‘The Lengthening Shadow of Government” by Edmund A. Opitz in
Essays on Liberty, Vol. III, Foundation for Economic Education, Irvington-on-Hudson,
N. Y. 448 pp. $2.00 paper, $3.00 cloth.

THE FREEMAN may be forwarded any-

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