===== PAGE 1 ===== THE [eed JANUARY 1960 IDEAS ON LIBERTY Paupers in Parity . .-. -. . . . . Lawrence Sullivan 3 Salesmen of Sloth . . . . . . . . Wall Sireet Journal 9 Lawmakers or Robots? . . . . . . . Frederick A. Manchester n Surplus Train Rides . . . . . . . . H.P.B. Jenkins 19 Political Activities and Political Expenditures . . . . . . Sylvester Petro 20 Love That Neighbor . . . . . . . JohnC. Sparks 29 Economics for the Teachable . . . . . leonard E. Read 32 A Short History of Political Power . . . Bernard Iddings Bell 4 European Socialism in Eclipse. . . . . W.H. Chamberlin 42 The European Economic Community. . . Hans F. Sennholz 50 Where ‘’Bigness’’ Is a Blessing . . . . John Chamberlain 58 Other Books . . . . . . . . . . 62 What Free Enterprise Means to Me. . . Keith S. Wood 65 THE FOUNDATION FOR ECONOMIC EDUCATION, INC. Irvington-on-Hudson, New York ===== PAGE 2 ===== Olen rons aecsnnt sh Coast Federal Savings and Loan Association | of LOS ANGELES Join the thousands of others from all 50 states and many foreign countries who hold individual, joint, trust or corporation savings accounts and get the following outstanding advantages for your invested savings. HIGHEST EARNINGS- since October 1, 1959, we are paying at the rate of 4%4% per annum. Accounts opened or added to by the 10th of any month earn from the Ist of that month. ASSETS OF OVER $365 million, with over $117 million in cash and government bonds and Reserves of over $30 million as of June 30, 1959. AVAILABILITY OF FUNDS — Coast Federal has always paid every withdrawal immediately on request. SAVE-BY-MAIL — Airmail postage paid both ways on all transactions. 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Name k : 0 Address _ : To ) oe a a Cy City Zone State ===== PAGE 3 ===== \ to save billions in future taxes Thoughtful people generally ac- heart of this issue is simple: whether knowledge that government spending the money for the inevitable growth policies are going to influence the of electric capacity is to be put up course of U. S. inflation—and by investors or by taxpayers. whether it can be halted at all. Is quite unnecessary for taxpay- There’s lots of talk about *“rea- ers to finance the electric supply. The sons” for spending programs. But jndependent electric companies and there is little public discussion of their millions of investors can fi- federal spending that could be elimi- nance and produce all the power the nated entirely without loss of jobs or nation can conceivably need. national strength and safety. THE TAX NOBODY SEES COSTLY GOVERNMENT VENTURE No issue of such importance in the IN POWER federal budget is so little known to Questionable on every count is the {he American people who pay bil- necessity for the federal govern- lions of dollars in taxes as the cost ment’s continuing venture into the of federal government electric power. electric power business. To date, it This is why informed people are try- has cost taxpayers about $5,500,000,- ing to spread the word. 000, and the “public power” pres- sure groups are after another $10,- Will you help? You can get up-to- 000,000,000—the kind of money that date figures and background quickly could contribute to the difference be- 20d at no cost. Write for the new tween inflation and stability. booklet, “Who Pays for Government- in-the-Electric-Business?”” to Power THE REAL “PUBLIC POWER" ISSUE Companies, Room 1100-Q, 1271 Ave. Cleared of claims and emotion, the of the Americas, New York 20, N. Y. AMERICA'S INDEPENDENT ELECTRIC LIGHT AND POWER COMPANIES Company names on request through this magazine ===== PAGE 4 ===== THE Teemdn . A MONTHLY JOURNAL OF IDEAS ON LIBERTY 5 T JANUARY 1960 Vol. 10 No. 1 LEONARD E. READ President, Foundation for Economic Education PAUL L. POIROT Managing Editor THE FREEMAN is published monthly by the Foundation for Economic Education, Inc, a non- political, nonprofit educational champion of private property, the free market, the profit and loss system, and limited government, founded in 1946, with offices at Irvington-on-Hudson, New York. Any interested ‘person may receive its publications for the asking. The costs of Foundation projects and services, in- cluding THE FREEMAN, are met through volun- tary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are invited in any amount — $5.00 to $10,000 — as the means of maintaining and extending the Foundation’s work. Accepted as controlled circulation publication at Irvington, N. Y., with additional entry at New York, N. Y. Copyright, 1960, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each. Permission is hereby granted to anyone to reprint any article in whole or in part, providing customary credit Is given, except “‘Salesmen of Sloth’ and ‘‘A Short History of Political Power." F'E Any current article will be supplied in reprint form if there are enough inquiries to justify the cost of the printing. ===== PAGE 5 ===== Congress surveys a quarter-century of price-fixing in basic farm crops LAWRENCE SULLIVAN FARM RELIEF broke a political leg “Government price supports have when Congress laid a hand to an not, cannot, and will not solve the official list of all growers who re- American farm dilemma. . . . If ceived government checks for agriculture is to regain its inde- $50,000 or more in price support pendence and be a real factor in loans on their 1958 crops. the cold war, we must get the gov- - One rice producer got a loan of ernment out of the farming busi- $5,369,078; another, $1,331,723. ness. . . . We must eliminate gov- The top barley-loan check was ernment price supports and acre- for $1,140,431; another, $1,115,- age controls.” 860; a third, $951,076. The third largest rice-loan check Many legislators long had re- was $646,379;the fourth, $500,772. garded parity support loans as a Three dry-bean growers got government subsidy calculated to checks for $567,944, $520,039, and shield struggling sons of the soil $441,672. from the on-rushing sheriff. Few The largest loan check in wheat were prepared for individual par- was $515,265; in soybeans, $307,- ity checks ranging into millions of 822: in oats, $247,954; in grain dollars a year. sorghums, $120,885; in flax, $78,- Fairly representative of the in- 766; rye, $44,074; peanuts, $34,- stant reaction on Capitol Hill was 017; honey, $27,324." . the blunt challenge hurled by Con- Individual parity checks in cot- gressman William J. B. Dorn (D., ton, corn, and tobacco were not South Carolina) on August3,1959: itemized in the report of the De- Mr. Sullivan is Coordinator of Information, partment of Agriculture, the tabu- U. S. House of Representatives. lation showing only that 102 corn Hlustrati Government storage bins in Min. nesota. (A. Devaney, Inc., N. ¥.) farmers and 249 tobacco growers 3 ===== PAGE 6 ===== 4 THE FREEMAN January were eligible for loans in the range that year; 9.9 per cent of all loans of $50,000 and up, along with ap- on dry beans; 7.8 per cent of all proximately 2,000 cotton growers. barley loans; roughly 1 per cent of This congressional examination all price-support checks in wheat, of the larger price-support loans oats, and soybeans. was in no sense directed to any hint of corruption or irregularity, Seil-Bank Payments nor to any conduct tinged by moral Another tabulation from the De- turpitude or callous business eth- partment of Agriculture —this one ics. All the parity payments re- filled sixteen pages in the Congres- ported were precisely in accord sional Record — listed individual with the letter of the law. Con- payments of $10,000 or more for gress merely was exploring the acreage temporarily retired from possibility of some legal ceiling on production during the crop-year future loans, on the broad theory 1957. One wheat grower got $322,- that government-guaranteed prices 012; another in the same state, for the basic crops should apply $278,187. A western cotton grower only to needed production, not to got $209,701; another $135,107. In surpluses for dead storage. As one this list was another group of 67 distinguished member of the House farmers who received checks of Committee on Agriculture ex- $50,000 or more, this time for plained, his personal interest in lands withdrawn from production. the blue-chip parity lists had been For the entire country there prodded chiefly by the classic ob- were 2,422 soil-bank payments of servation of the late Will Rogers: $10,000 or more. These payments “We ought not spend money we covered 1,597,661 acres on which haven't got for things we don’t no crops were raised, the govern- need.” ment paying $43,855,793 for the Throughout the country 117 combined nonproduction — an aver- wheat growers received 1958 loans age of roundly $28 per empty acre. in excess of $50,000 each, for a to- Total soil-bank acreage retired tal of $9,117,417. At the end of the for 1957-58 was 23 million, at an crop-year last August all of the average federal cost of $28.55 per 5,257,518 bushels of wheat covered acre. Any farmer eligible to put by these loans (plus a great deal 160 acres into Uncle Sam's soil more) was government surplus. bank that year, at the average Individual loans greater than rate, was assured before the plant- $50,000 each made up 25.3 per ing season a non-harvest check for cent of all funds loaned on rice $4,568. For the year, some 7.1 per ===== PAGE 7 ===== \ 1960 . PAUPERS IN PARITY cent of the total soil-bank funds cluding interest, deterioration, o rd were disbursed in checks of $10,- transportation charges. Govern- 000 or more. ment surplus crops sold for blocked The 1960 soil-bank program calls currency in the overseas disposal for 28 million acres, an increase of programs, as a measure of foreign 5 million acres in our still expand- aid, bring the Commodity Credit ing conservation reserve. Corporation an average of 70 cents on the dollar invested at the farm. The Storage Problem Government holdings of surplus In a special message to Congress farm products at the end of 1959 January 29, 1959, President Eisen- were $8.7 billion, up $1.7 billion hower emphasized that growers over a year ago. who produce some 238 different Some principal items in today’s farm commodities not under gov- rapidly deteriorating, but grow- ernment price-support programs ing, agricultural stockpile: “have generally experienced grow- ing markets rather than a build-up Wheat eemerrt reer earns 1,143,453,837 bushels of stocks in warehouses.” Only the OTM.ceeeenienirreenrnnennns 1,041,248,617 bushels HC COLEON rrr 6.981592 bales twelve to fifteen crops eligible for Tobacco... 859,740,111 pounds federal price-support loans are in Dried milK..oooveenne.. 141,712804 pounds persistent and ever-increasing 1Ce..cviiiicciiirriiriieen, 85,192,300 pounds Butter......cvveeeeneen. 78,166,284 pounds oversupply. 13,982,006 tons “The price-support and produc- tion-control programs have not Approximately 18 million bush- worked,” the President declared. els of this corn surplus was tagged ‘Clearly, the existing price-sup- from the 1955 and 1956 crops. port program channels most of the Other items in today’s surplus dollars to those who store the sur- stock-pile are flaxseed, barley, soy- pluses, and to relatively few pro- beans, oats, cheese, rye, linseed oil, ducers of a few crops. It does little rosin, honey, tung oil, and $14,- to help the farmers in greatest dif- 096,622 in shelled peanuts. ficulty.” For the fiscal year ended June Our present surplus wheat in 30, 1959, the net operating loss on government storage makes very all price support inventories was close to a full two-year normal sup- $821,127,779. Currently, the net op- ply — with another new crop of erating loss averages $100 million roundly a billion bushels coming on per month. Storage costs alone are this summer. Storage facilities are more than $1,000,000 a day, not in- filled to bursting, and 370 surplus ===== PAGE 8 ===== P 6 THE FREEMAN January merchant ships now hold some 100 a time of prosperity, peace, and million bushels of carry-over revolutionary changes in produc- wheat. tion.” “These heavy costs might be Nor do overseas give-aways re- justifiable if they were temporary, duce our mountainous surpluses. if they were solving the problems Since that avenue of escape was of our farmers, and if they were first opened by law in 1954, total leading to a better balance of sup- surplus holdings of the Commodity plies and markets. But unfortu- Credit Corporation have shown a nately this is not true,” the Presi- consistent annual increase rather dent’s message concluded. than a steady diminution equal to total government food sales and Improved Farming Methods gifts abroad. Current price-support theories In a survey of several abortive and equations were formulated in disposal programs, a special advi- the early 1930's when it required sory committee of nongovernment 106 man-hours of farm labor to farm economists reported in mid- produce 100 bushels of wheat. To- 1959: “So long as our support day’s national average is 22 man- prices are such as to guarantee hours per 100 bushels. The 1938 profits, thus providing a most un- support price on wheat was 59 usual incentive, this situation is cents per bushel; the 1959 support likely to continue. . .. A gradual price was $1.81 per bushel. correction of this violation of Our basic wheat area of 55 mil- sound economics and the Ameri- lion acres was established in 1938, can tradition, is indicated.” when the average yield was slight- ly less than 13 bushels per acre. Expanding Yields per Acre Today’s basic wheat allotment area Spectacular advances in farm still is 55 million acres, but our technology are one considerable 1958 yield was 27.3 bushels to the factor in our ever-expanding sur- acre! How long will it take to bal- pluses. In broad terms, we are pro- ance supply and demand under ducing on our farms today almost these fantastic price incentives? 50 per cent more tonnage than in As President Eisenhower sug- 1940, on fewer acres, and with gested in his message last Janu- about one-third less man-hours of ary: “It is small wonder that a labor. Tractors, electricity, ferti- program developed many years lizers, irrigation, and pest sprays ago to meet the problems of de- have combined to more than dou- pression and war is ill-adapted to ble the yield per acre over vast ===== PAGE 9 ===== 1960 PAUPERS IN PARITY 7 areas of grain and fiber production. profitably to specialty crops, lux- Since 1900 we have expanded ury items, and pharmaceutical our harvested acreage by only 14.6 plants. The Department of Agri- per cent, while our population has culture has many times described increased by 138 per cent. In 1900 price supports as a drag upon the we farmed 295 million acres to whole national economy ‘when feed 76 million people. Today we they serve as a stimulant to un- feed 180 million people from 338 wanted and uneconomic produc- million acres — and still the sur- tion.” plus piles ever higher from year “Unfortunately, the high-level to year. supports put into effect during This trend over the last half World War II were kept too long. century is summarized dramati- ... When price supports are set at cally by Marvin L. McLain, As- uneconomic levels, uneconomic sistant Secretary of Agriculture, consequences are bound to follow.” in the statement: “Total crop out- Between 1938 and 1958 our U.S. put for 1958 was the largest of population increased by 32 per record, despite the fact that the cent, and our total farm output by planted acreage was the smallest 50 per cent. in more than forty years.” Assistant Secretary McLain Total crops in 1959 were larger bluntly urges a return to the free than in 1958. market: “We must allow the nor- mal influences of market demand A Persistent Pattern of Failure and price to have greater effect on In the perspective of twenty-five production and marketing. . . . years, government price supports Basic changes in legislation are have tended principally to build up needed to pave the way for pro- unmanageable surpluses in fifteen gram adjustments to meet these basic farm products, while dis- needs.” couraging natural expansion in Congressman Jamie L. Whitten some 235 other agricultural prod- (D., Mississippi), chairman of the ucts, as called for by our steadily Appropriations Sub-committee on expanding national economy. Rep- Agricultural Funds, likewise urges utable scholars have estimated greater reliance on the free mar- that perhaps 50,000,000 acres of ket: “Now, in the first place, for us land now “frozen” in wheat, cot- to ever straighten out this agri- ton, corn, and tobacco production cultural situation, we are going to under government-guaranteed have to do it by sales through nor- prices, might well be diverted mal channels, and by pulling do- ===== PAGE 10 ===== 8 THE FREEMAN January mestic production down to domes- Yet all our heroic billions-a-year tic and world markets.” efforts at parity have not main- Subsidized disposal abroad, Mr. tained farm purchasing power at Whitten regards as “sweeping our the arbitrary government calcula- overproduction under the rug; we tion, The Department of Agricul- are kidding ourselves, for it shows ture reports that during the last up in the losses of the Commodity ten years aggregate farm prices Credit Corporation. . . . It has al- have declined 13 per cent while ag- ready reached something over $6 gregate nonagricultural prices in billion. . . . I think we should be- the parity equation have advanced gin to dry up this approach.” 28 per cent. : Thus, “farm relief” has not, in Unmanageable Surpluses fact, achieved or maintained par- All our fabulous efforts in “farm ity, but our jovial Uncle Sam, nev- relief” over the last twenty-five ertheless, still is holding the bag years have foundered on the rocks on $9 billion worth of surplus of unmanageable surpluses. farm production. Moreover, government price-fix- ing on the farm has stimulated in- Viewed in calm historical per- flation throughout the entire econ- spective, the record appears clear omy. Parity in farm prices re- enough. Some 5,000 individual quires that agricultural products price-support payments each year must advance in price from year in the range of $10,000 to $5,000,- to year, as higher city wages push 000 do not reflect a solid national up the cost of things the farmer program in agriculture. buys. At the same time, the “esca- Every government payment for lator clause” in labor contracts surplus production is a direct automatically advances city wages Treasury bounty for crops we step for step with advancing food don’t need, can’t use, and can’t and living costs. These two poli- dispose of in any direction before cies, together — both literally en- the next harvest. forced by government action in- All reputable economists now volving deficit spending — present are agreed that revised national automatic, built-in inflation. The policies looking to early re-estab- two programs working together lishment of a free market in agri- present economic perpetual motion culture would offer far more solid — farm prices chasing wages, and hope for every farmer in the land wages chasing farm prices, ever — and immeasurable new hope for upward. every taxpayer. > ===== PAGE 11 ===== IN DISPUTE after labor dispute this country, and more prevalent in year, companies have tried to get unions than anywhere else. at the problem of union feather- Throughout American industry bedding. And important though there is a discernible employee this problem of pay for no work apathy. Throughout the American is, it seems to us to reflect an even economy there is featherbedding more serious matter. — railroad firemen paid to tend That is the apparent acceptance nonexistent fires, musicians paid by many Americans of the idea for not playing, farmers paid for that they don’t need to work very not farming, pilots paid for not hard; their apparent preference flying, everywhere men paid for to get by with the least effort and watching machines that do not indeed to demand progressively need watching. higher pay for progressively less At this point it might appro- work. priately be asked: If all this is so, We realize that statement is how come the productivity of la- subject to the perils of any gen- bor is said to be constantly in- eralization. We also realize that creasing? The plain answer is that part of this country’s high ma- the rising productivity of labor is terial standards is this ability of largely a misnomer. Capital in- individuals to live comfortably on vestment in ever more productive the basis of relatively few hours machinery is the answer. of work. We further realize that It is impossible not to wonder many men nonetheless do work ex- about the attitude of people who tremely hard and that some, or so accept pay for no work, year in it is said, thereby drive themselves and year out, or who do the least to early graves. possible — a form of inactivity that But what we are talking about might be called unofficial feather- is shirking on a scale more wide- bedding. It is impossible not to spread than ever before in this wonder what has happened to ——— their self-respect. From The Wall Street Journal, October 14, . . 1959. Here again there is an answer. 9 ===== PAGE 12 ===== 10 THE FREEMAN January Union leaders not only sanction painful clarity. Frequently shoddy and encourage all forms of feath- workmanship. Crippling strikes erbedding: they defend the prac- for whimsical reasons. Disdain for tices with a circuitous reasoning a contract. The enormous econom- that would stun a Sophist. Natu: ic toll of featherbedding which is rally, if the great god at the head rapidly turning this into a high- of the union approves, why should cost economy, as reflected in the a mere union member bother about inability of U.S. products to com- a pang of conscience? Immorality pete as once they did in world exalted, it appears, ceases to be markets. Perhaps most important immorality. And the union ex- of all, the erosion of values once ample is followed elsewhere. held high. Conspiring with and reinfore- We are not calling for some neb- ing this union attitude is the gov- ulous national moral resurgence, ernmental philosophy fashionable though the problem is a moral one. in our time. This would remove We are saying that if there is from the individual many of the softness in America today it is not cares of dealing with life, and primarily inferior education or most particularly remove his sense “inadequate” public spending but of responsibility; in a word, spare this union and statist sponsored him the bother of being a human philosophy of indolence. There are being with inherent dignity and other countries, some friendly and self-respect. It is not so surprising some otherwise, where that phi- if many people are willing to do losophy does not obtain. little when government presumes And we are saying that a little to do all. moral indignation ought to be di- So much for causes. The effects rected at the salesmen of sloth are also evident with increasingly that weaken our society. ~ ‘As a Man Doeth THE WORLD owes no one a living. Every man was born with the God-given right to partake of the world’s goods according to his talent. When one denies himself this right of purposeful opportunity, through laziness and lack of initiative, he sins against himself as well as his fellow man, RICHARD L. SPAHR Lewistown, Pennsylvania ===== PAGE 13 ===== LAWMAKE] RS or ROBOTS ? THE TRUE REPRESENTATIVE PRINCIPLE FREDERICK A. MANCHESTER BEFORE ME lies a copy of the of labor bosses controlling local, August 1959 issue of The National state and national politics. Program Letter, a four-page jour- nal of conservative opinion pub- lished at Searcy, Arkansas. The opening paragraph of the leading editorial contains implications by “nearly all American citizens,” which may well arrest attention. that, though they are aware of Here it is: it, they do nothing about it. An- Nearly all American citizens now Other is that the responsibility agree that the present laws for the for this dangerous state of things control of labor union bosses and rests, not on our representatives racketeers have proved in recent in Congress, but on ourselves, the years to be quite inadequate. But not American people. It is because we enough citizens have said so to their have failed — note the “therefore” representatives in Congress. There- — that the lamentable spectacles fore we have the spectacle of a listed have come into being. powerful labor boss and his gang of Still another implication is (and ex-convict goons openly defying the . . } . . U. S. government and gravely jeop- this I wish to emphasize) that if ardizing the welfare of the people of enough” of us present our views the United States. We have the spec- {0 our representatives they will tacle of union violence, of murder carry them into action — what they and property destruction under the themselves may happen to think eyes of local and state police forces being apparently a matter of no held captive by fear or corrupt polit- mentionable importance. Our rep- ical power. We have the spectacle regentatives, in short, are not con- Dr. Manchester is an educator, formerly of ceived as independent agents, act- the Department of English, University of jing jn accordance with what they Illustration: A. Devaney, Inc., N. Y. believe to be just, necessary, and One implication is, either that our representatives in Congress are strangely unaware of a serious threat to our welfare recognized 11 ===== PAGE 14 ===== 12 THE FREEMAN January desirable, but rather as automatic people’s current views; and it is reflectors of the opinions of their the people, after all, .that deter- constituents. mine who goes to Washington. In this robot conception of our But illustrations are scarcely congressmen The National Pro- needed. So familiar is the idea that gram Letter does not stand alone. representative government is, to Only the other day President all intents and purposes, direct Eisenhower, concluding his radio- government by the people — the TV speech on labor legislation, legendary New England town said: meeting at one physically neces- This business of government —in- Sary remove — that to most of us cluding this question of labor reform the fact that there ever was a dif- —is your business. It is every citi- ferent idea is likely to come as a zen’s business. surprise. Yet according to James Americans want reform legislation M. Beck, onetime Solicitor General which will be truly effective. Itis my of the United States, a sharply earnest hope that the Congress will contrasting, concept was in the be fully responsive to an overwhelm- minds of the framers of our Con- ing national demand. stitution. The framers, he says, A wished-for overwhelming na- ===== PAGE 21 ===== SURPLUS TRAIN RIDES Or — TRAVEL IN THE AGE OF PLENTY It was a sunny afternoon At story-telling time. Old Kaspar settled in his chair And poured a rum-and-lime, While Peterkin and Wilhelmine Looked at the futurama screen. They saw a long and winding stretch Of rusty railroad tracks, And multitudes who trudged along With baggage on their backs; While others turned aside to eat Or rest with elevated feet. “Why don’t those people drive their cars?” Asked little Peterkin. “Because they're in a hurry, Pete,” Said Kaspar with a grin. “The traffic jams have grown so thick That walking now is twice as quick.” “Why aren’t there trains for people now?” Asked little Wilhelmine. “The railroads have them,” Kaspar said, “But now they're seldom seen. The idle coaches gather rust While people walk in mud or dust.” “There was a time,” Old Kaspar sighed, “When railway fares were cheap, Before the unions came of age And taxes took a leap; But now a ride is priced too high A For ordinary folks to buy.” . “How will it end,” asked Peterkin, “Will everybody walk?” “Why, as to that,” Old Kaspar said, “Already there is talk Of handing out a Subsidy To railroads hauling people free.” H. P. B. JENKINS Economist at Fayetteville, Arkansas 19° ===== PAGE 22 ===== SYLVESTER PETRO WITH THEIR EMERGENCE as organ- ful prosecutions to date, and with izations commanding the greatest the grave doubts held from the be- power over the economy in the his- ginning concerning its constitu- tory of the United States, the tionality still unresolved. Now, as large trade unions have emerged the McClellan Committee has dem- also as powerful political organ- onstrated, after twelve years of izations, perhaps the most active the Taft-Hartley Act both the eco- such organizations in the country nomic and the political power and today. activity of the large unions have Their political activities first increased dramatically, and the became a subject of deep concern grounds for apprehension which after World War II, and this con- existed in 1947 have been magni- cern was reflected by Congress in fied accordingly. 1947, when in framing the Taft- The Taft-Hartley Act accepted Hartley Act it included a section the special privileges and the en- broadly . prohibiting contributions suing power which prior legisla- and expenditures in connection tion had accorded labor organiza- with federal elections by both tions. It sought to avoid the polit- labor organizations and corpora- ical consequences of those privi- tions. This legislation has had an leges and power by the direct unhappy career, with no success- method of prohibition of political —_— expenditures. History has shown Professor Petro of the New York University that this was a mistaken approach. School of Law is the author of The Labor Policy of the Free Society (Ronald Press, (Common sense suggests that a 1957) and Power Unlimited: The Corruption . of Union Leadership (Ronald Press, 1959). new approach is called for today. 20 ===== PAGE 23 ===== 1960 POLITICAL ACTIVITIES AND POLITICAL EXPENDITURES 21 I. Experience under the Present 304 in the last twelve years have Legislation produced some interesting, and The legislation presently in confusing, decisions and opinions. force was enacted in 1947 as Sec- The first prosecution was deliber- "tion 804 of the Taft-Hartley Act, ately invited when -Mr. Philip in response to the fears felt in Murray, then president of the Congress and the nation that the CIO, wrote an editorial favoring heightened political activity of the election of one of the candi- labor unions during and after dates for a congressional seat in World War II possessed a grave Maryland, and caused this edito- potential of harm. As a result, to rial to be printed and circulated in the then existing prohibition of the C.I.0. News. Presumably in political contributions by unions order to insure violation of Sec- and corporations Congress added tion 304 and thus to provoke a de- a prohibition of any “expendi- cision on the constitutionality of tures in connection with” elections the section, Mr. Murray had 1,000 to federal office, primary elections, extra copies of the union journal and conventions or caucuses to se- printed and distributed at the ex- lect candidates for federal office. pense of the CIO. Federal Judge The breadth and generality of Moore, sitting in the U.S. District the new prohibition created many Court for the District of Colum- difficulties even before it became bia, held that the printing and law, and its career in the courts distribution of the editorial ob- has been unfortunate. Senator viously involved an “expenditure Robert A. Taft was compelled in connection with” a federal elec- upon several occasions during the tion and therefore violated Sec- Senate debates to hedge his ans- tion 304. wers concerning the reach of the The constitutional issue having section. In some instances he de- been raised, Judge Moore then had clared that an answer to the hypo- to decide it. He held that Section thetical questions posed by oppon- 304 violated the First Amendment ents of the bill could not be given.! as a clear infringement of the The few prosecutions which rights of freedom of speech, of have been brought under Section the press, and of association — and ‘See 2 Legislative History of the Labor dismissed the indictment. On ap- Management Relations Act, 1947, at pp. peal, the Supreme Court affirmed 1526-35, 1546-50, 1601-4; large excerpts the dismissal, but not on constitu- from the debates are quoted in the ma- . . tional grounds. It ruled, instead, jority and dissenting opinions in U.S. ) v. C.1.0., 335 U.S. 106. that the printing and distribution ===== PAGE 24 ===== 22 THE FREEMAN January of Mr. Murray's editorial did not ical convention. The case, involv- constitute an expenditure in vio- ing a Painters Union local which lation of Section 304. After de- had no regular means of com- tailed examination of the wording munication with its members, was of the statute and its legislative distinguishable from the C.1.0. history, Mr. Justice Reed con- News case in that the expenditure cluded for a majority of the Court was not in connection with a regu- that it was not designed to reach larly issued union journal and in political endorsements in regular- that the paid promotions were not ly issued union media of com- confined to the union membership, munication with the membership. but reached the general public. (Somehow the 1,000 extra copies By this decision, Judge Hincks were disregarded.) was called upon to decide the con- In a dissenting opinion, Mr. stitutional issue. The statute did Justice Rutledge (and Justices to some degree infringe upon Black, Douglas, and Murphy with: First Amendment rights, the him) accused the majority of “re- judge recognized; yet, he ob- writing” and ‘“emasculating” the served, it by no means canceled statute in order to avoid the con- those rights, but rather left con- stitutional issue. The dissenters siderable leeway for political ac- would hold the statute unconsti- tivity by unions in the form of tutional, however, even as applied lobbying, discussion of issues, and by the majority, that is, restricted so on. On the other hand, he noted, to election expenditures not in the Congress has a heavy responsibil- ° normal and regular course of a ity to protect the political process union’s communication with its in the interest of the vast mass of membership.2 the general and unorganized At about the same time, Federal electorate, as against powerful Judge Hincks, sitting in Connecti- pressure groups avidly seeking cut, issued one of the most instruc- their own interests. Taking into tive opinions yet handed down con- consideration the fact that trade cerning the meaning and the con- unions have been the beneficiary stitutionality of Section 304. He of substantial special privileges held that the statute prohibited and immunities as a gift from paid political advertisements in Congress, Judge Hincks observed, newspapers and on radio when a reasonable basis existed for they advocated the defeat of cer- some restriction on their First tain delegates to a national polit- Amendment rights, and thus, he :y.S. v. C.1.0., 335 U.S. 106 (1948). concluded, Congress's method of ===== PAGE 25 ===== 1960 POLITICAL ACTIVITIES AND POLITICAL EXPENDITURES 23 exercising its duty and power to trial of the facts, the district regulate the election process did judge having dismissed the indict- not violate the Constitution.? ment before trial as failing to al- On appeal, the Second Circuit lege a violation of the statute. reversed Judge Hincks, just as While holding that the indictment - the Supreme Court had reversed would, if proved, establish a Judge Moore in the C.I.O. News violation of Section 304, the major- case —not on the constitutional ity, in an opinion written by Jus- question, but on the question of tice Frankfurter, refused to pass whether the paid advertisements on the constitutional issue. As Jus- involved an “expenditure in con- tice Frankfurter put it, the Court nection with” a federal election. gets into most of its trouble by Thus, the natural reach of the passing prematurely upon consti- statute's language was further tutional issues, and it would be circumscribed. Speaking for the time enough to pass on that issue Second Circuit, Judge Augustus when a trial actually established Hand declared that “an interpre- the facts alleged in the indictment. tation . . . which would allow ex- He went on to say that the trial penditures in the case of a union would have to establish, before a publication and prohibit them violation could actually be found, when made by a union through (a) that the telecast was financed the use of an independent news- from general membership funds; paper or radio station seems with- (b) that it reached the general out logical justification.”¢ public; (c¢) that it involved actual A majority of the Supreme electioneering rather than a mere Court, in the most recent decision statement of fact or issues; and involving Section 304 which that (d) that it had been sponsored Court has handed down, disagreed “with the intent to affect the re- with Judge Hand’s logic. It held sults of the election.” that the section does prohibit an Justice Douglas, joined by Chief expenditure of general union Justice Warren and Justice Black, funds for a telecast advocating took the position that the dismissal the election of certain congres- of the indictment should have sional candidates. The case came been affirmed. His desire, appar- to the Supreme Court prior to a ently, was to construe the statute TE v Painters Local No. 481, 79 F. out of existence; for otherwise, in Supp. 516 (D.C. Conn. 1948). his opinion, it would have to be +[J.S. v. Painters, 172 Fed. 2d 854, (2d °U.S. v. Automobile Workers Union, 352 Cir. 1949). U.S. (1957). ===== PAGE 26 ===== 24 THE FREEMAN January held unconstitutional. According persons devoted any appreciable to Justice Douglas, Justice Frank- time in support of, or in opposi- furter’s insistence on the estab- tion to, any candidate [for federal lishment of the four facts listed office].”® above could make no difference in- . - sofar as constitutional validity I The Basic Issues was concerned. Justice Douglas The decisions and opinions hold- summarized his conclusions in ing Section 304 unconstitutional these words: “The Act, as con- have brought into sharp focus the strued and applied, is a broadside fact that political activity is an assault on the freedom of political essential part of the public life of expression guaranteed by the any representative government First Amendment. It cannot pos- and that legislative restriction of sibly be saved by any of the facts such activity will always run into conjured up by the Court. The considerable difficulty on constitu- answers to the questions reserved tional grounds. The decisions are quite irrelevant to the consti- which avoid the constitutional is- tutional questions tendered under sue, and the single decision square- the First Amendment.” ly upholding the constitutionality The last decision worth noting of the statute, have emphasized involved grass roots political ac- the weight of the duty which rests tivity on union time by three sal- upon Congress to prevent abuse of aried union agents in behalf of the the elective process, and the dan- local union president, who was gers to that process which large running for Congress. The three and powerful pressure groups agents did such things as ring pose. doorbells, urging registration, and The tension between these op- transport voters to the polls. Dis- posing considerations has pro- missing the indictment, Federal duced two significant results. In Judge Duncan, sitting in Missouri, the first place, the statute has had simply said that he did not believe virtually no effect. It has been re- Section 304 could be so far-reach- strictively interpreted. Each of the ing. If this case involved an illegal cases reviewed has beyond much “expenditure,” he said, “then any question literally involved a union political activity of any person on “expenditure in connection with” the payroll of a labor organization, an election to federal office, but in from its president to its Janitor, SUS. v. Construction & General Labor would render that Union and its op [cal 264, 101 F. Supp. 869 (D.C. Mo. principal officers liable, if such 1951). ===== PAGE 27 ===== 1960 POLITICAL ACTIVITIES AND POLITICAL EXPENDITURES 25 not a single one has there been a tion 304, Judge Hincks acknowl- conviction. Although unions are edged that Congress could have probably the most active political handled the problems posed by ex- organizations in the country to- cessive union political activity in day, there has been only a hand- a manner other than the one it ful of prosecutions under Section adopted in the Taft-Hartley Act. 304. Section 304 seems to be the Congress could have met the prob- statute which you cannot violate, lem “by a major curtailment of no matter how hard you try. the economic power of labor or- In the second place, there has ganizations without at all trench- been an inordinate delay in resolv- ing upon their freedoms.” And if ing the constitutional issue, and Congress had but withdrawn the this suggests that the Supreme special privileges and immunities Court is greatly disturbed on the which it had granted to unions, question. Three of the present jus- according to Judge Hincks, they tices have already indicated that would not have enough power to they will hold the statute uncon- raise much of a problem. But, he stitutional unless it is construed went on to say: into impotency. Not one of the jus- “Congress deemed it preferable tices has yet committed himself to make no major reduction in the to the view that the statute is con- economic power of labor organiza- stitutional, even when interpreted tions, believing, apparently, that as restrictively as it has been. The their continued power in the eco- conclusion indicated is that the nomic field would be of public statute, or any other legislation benefit and not necessarily a source seeking the same objective, will of danger if not supplemented by survive only in a highly restricted unrestricted political power as or in a completely impotent form. well....I hold the Act not invalid In either case there is no likeli- because of its incidental restric- hood that it will serve to reduce tion on the political activities of significantly the dimensions of the aggregations which owe their problems posed by the prodigious strength to special privileges and political activities of the large immunities conferred upon them unions. . for their discharge of a public eco- nomic function.”’? If the political activities of labor unions were properly a cause of lI. Sound Principle as a Way out of the Dilemma In the one opinion squarely up- ———— . cr as . U.S. v. Paint Local 481, 79 F. Supp. holding the constitutionality of Sec- 54. ve Famers Loca upp ===== PAGE 28 ===== 26 THE FREEMAN January concern in 1947, when the Taft- are simply another special-inter- Hartley Act was passed, it goes est group, selfishly concerned with without saying that we must be increasing their share of the na- close to a condition of crisis at tional income, regardless of the present. The political power and consequences to the public welfare. activity of unions was substantial Outstanding economists of this then; in comparison, it is colossal country today are firmly of the now. The Taft-Hartley restriction conviction that the economic pres- of political contributions and ex- sures of unions do not serve even penditures has obviously had no the interests of all working men effect at all. What then is to be and women, let alone the general done? public interests of consumers, re- The experience of the last twelve tired persons, and others on fixed. years indicates that Congress incomes.? made a mistake in attempting to This being true, and it also be- curtail the political power of ing true that the method of direct unions while leaving their econom- prohibition of political activity by ic power, based on special privi- unions has proved a failure, it leges and immunities, alone. The would seem that the only promis- mistake is not surprising when ing alternative is for Congress to one realizes that Congress acted reconsider its assumptions con- on an invalid premise. Judge cerning the role of unions and the Hincks pointed out that Congress decision it made in 1947. Elimina- continued the special privileges of tion of the special privileges and unions on the theory that unions immunities of unions is what the were virtually an arm of govern- situation demands; with that will ‘ment, discharging a “public eco- come a reduction in union power. nomic function.” What the judge Under no circumstances should had in mind was the prevailing as- unions be burdened with restric- sumption that by raising wages tions which other private associa- through collective action unions tions do not bear. To impose such were in effect public servants. restrictions is both undesirable Economists and the public gen- and unnecessary. The principle of erally have come a long way since equal application of all laws is too 1947. More and more persons in all important to the life of society to walks of life are beginning to ap- justify abandonment under almost preciate that far from serving a [_—_— . . . . . See Philip D. Bradley (ed.), The Public public function in their constant Stake in Union Power, (Charlottesville: pressures for higher wages, unions University of Virginia, 1959). ===== PAGE 29 ===== 1960 POLITICAL ACTIVITIES AND POLITICAL EXPENDITURES 27 any conceivable conditions. Cer- this, it will be necessary to repeal tainly the current conditions, bad the Norris-LaGuardia Act, abolish as they may be, do not call for an the National Labor Relations abandonment of that principle. As Board, and specifically overrule a matter of fact, our present the Supreme Court’s pre-emption troubles can be traced to the doctrine.’ wholesale abandonment of that I am aware that there is an in- principle which has occurred in clination to consider these pro- recent years. posals “radical.” That is simply an error in understanding and in per- Remove the Special Privileges spective. It should be remembered There is every reason to believe that we are faced with a seriously that the political and other dan- threatening condition. It should gers which the large unions pose also be remembered that, in per- will be substantially reduced if spective, the proposals advanced the special privileges of compul- here are neither as momentous sion which they now possess are nor as “radical” as the subjects to removed — and if the removal is which they are addressed. The designed in an effective way. Spe- Norris-LaGuardia Act, the Nation- cifically, all stranger picketing and al Labor Relations Board, and the other boycotts, and all forms of pre-emption doctrine were, when compulsory-urionism contracts, they were introduced not very should be prohibited; for they long ago, not only “radical” but give unions a specizl privilege to revolutionary innovations. They restrain and coerce employees in have worked very badly. We are the exercise of the basic right, suffering the consequences now. recognized in federal and state The frank intention of these law, not to join unions. But a mere proposals is to create conditions in paper prohibition will not be which unions will be in fact the enough. The experience of the last voluntary associations which they twelve years, under the Taft- now incorrectly claim to be. When Hartley Act, demonstrates that they are voluntary associations, direct access to all courts, espe- they should have the right, shared cially for immediate injunctive re- ——— } lief from the irreparable injury (ne Supreme Court has held in effect at the state courts may no longer take of unlawful union action, will have jurisdiction in labor cases involving in- to be provided, if the strictures terstate commerce, except in regard to . . violent action. (Garner v. Teamsters, upon union compulsion are to be 346 U.S. 485 (1953); Anheuser-Busch, effective. In order to accomplish Inc. v. Weber, 348 U.S. 593 (1955). ===== PAGE 30 ===== 28 THE FREEMAN January with all other voluntary associa- The only wholesome solution is tions, to run their internal affairs to restore the principle of equality and to spend their money as they under the law by withdrawing the please, subject only to the general special privileges which unions law prohibiting violence, coercion, now have, and to eschew all the fraud, and thievery. At present, restrictions which now exist upon unions are in a position to spend political contributions and expen- funds for political purposes and ditures. Neither those special priv- objectives opposed by some of the ileges nor the restrictions upon very members who contribute political expenditures have a prop- those funds. Worse than that, a er place in a free country whose man may be forced into a union central political institution is rep- by coercive organizing devices, resentative government. Moreover, kept there by a specially privileged they create the kind of trouble compulsory-unionism agreement, which ensues always upon the and be forced to pay dues which abandonment of any sound prin- are spent for purposes in which he ciple. For one of the marks of a has no interest and to which in- sound principle is that it works. deed he may be opposed. In conclusion, I should like to The present situation is one emphasize that I am as greatly largely created by Congress, and disturbed by the present character only Congress can repair it. Con- and scope of political activity by fused and contradictory efforts unions as any man. Yet, I believe have brought Congress to a frus- that direct controls are neither trating impasse. On the one hand, sound in principle nor workable. by according trade unions special In precisely the same way that privileges, Congress has allowed price controls and rationing are them to become an enormous nosound answer to the problems threat to the economic, social, and of shortages and inflation, direct political life of the nation. On the controls upon the political activity other, it has tried to remove the and expenditures of unions — or of political threat, by legislation which any other groups — will not remove threatens First Amendment rights the causes of present concern. The and thus has had considerable history of the present legislation trouble in the courts. Principles vi- proves that. The approach I have tal to the life of the nation are suggested is, I believe, the only being mangled on both sides. effective approach available. ~ ===== PAGE 31 ===== —\ TTY | — Lovie rar 0) NE G/H/BIO|R } i ol ld | A la .- | wet Ll §3 / A father soggests that we “Play Ball’’ with our sons. JOHN C. SPARKS OUR SUBURBAN COMMUNITY near a ognized as a parent’s responsibil- prosperous American city consists ity for his offspring. There also primarily of families like ours was a time when our nation was with incomes substantially above relatively free of socialistic ideas, the national average. Our three but not today, as new laws and children enjoy the gay summer proposals mark continuing social- vacation away from school. One istic inroads on our freedom. son spends a week at camp each These two developments, I believe, summer, his older brother takes are closely related. golf lessons and plays baseball, Most examinations of the col- and our daughter takes swimming lectivist philosophy are concerned lessons — activities which cost with political or governmental in- money, as every parent should tervention in private activities, the know. governnment taking control and Now, what would you think of making decisions for men who me, their father, if I sent them formerly were self-responsible. from door to door among our Collectivism spawns the irrespon- neighbors seeking contributions sible “government-owes-me-a-liv- sufficient to cover the expense of ing” idea. And I agree that the their summer entertainment? I greatest and most immediate think I know your answer — but threat arises in this area of po- let’s further examine the question. litical and governmental interven- Customs and laws have gradu- tion. But I submit that the same ally diluted what used to be rec- treacherous ideas are being sown —_— | } among our youth through private Mr. Sparks is a businessman from Canton, ec eae " Ohio. activities normally considered 29 ===== PAGE 32 ===== 30 THE FREEMAN January breeding grounds for nothing but himself- for this pastime. If he good American ideals. These ideas wishes to attend a church camp or are fostered by well-meaning par- a YMCA camp for one or two ents who thoughtlessly accept weeks in the summer, I am re- “something-for-nothing’’ as a sub- quired to pay the fee for such at- stitute for their own parental re- tendance. Why should summer sponsibilities, the result being a baseball recreation be viewed in new generation without a sense of any different light? Why should individual responsibility for their my neighbor —or, as it usually own welfare — easy prey for the works out, 15 or 20 of my neigh- collectivist philosophy. bors who have no children on the I’m thinking of the way boys’ team — be pressured either direct- baseball is handled in our com- ly or indirectly to provide this munity. An association has been summer baseball recreation for organized with teams of the fa- my son by sending him from door miliar classifications — Little to door attired in a baseball uni- League, Mity Mite, Babe Ruth, form? We call this system the Hot Stove, and so forth. Financing ‘Booster Club Membership” ticket such an enterprise is a problem, sale. The buyer of the ticket has particularly if there is no reliance received nothing in exchange ex- on parental responsibility. It is cept whatever civic joy he may de- most discouraging to witness a rive from knowing he has just meeting of 50 or 60 fathers trying been pressured into giving a dona- to figure out how to persuade tion to the son of his financially others than themselves to finance capable neighbor. these baseball teams made up of It is here that we are projecting their own sons. Each father pay the evil of the socialistic philoso- what it costs for his own son to phy into an area which, while tech- play! What a shocking idea! nically on a voluntary basis, is If my son needs clothing, it is taking on many of the despicable my responsibility to provide it. characteristics of socialism. If I When my son needs food, it is my ask my neighbor to provide for responsibility to provide such food my son’s summer pastime, doesn’t for him. Only in those unusual and he have a corresponding right to dire circumstances when I am un- ask me to help pay for his vaca- able to provide necessities should tion trip? Isn’t he justified in ask- charity enter the picture. If my ing me to contribute to the ex- son wishes to bowl, I pay for his pense of summer camp or singing bowling, or he earns the money lessons for his daughter? ===== PAGE 33 ===== 1960 LOVE THAT NEIGHBOR 31 What does this system do to the who would not otherwise be able boys themselves? These boys, par- to participate in such activities ticularly in the older age groups, due to financial difficulties of their feel they are somehow owed a parents. There even may be a scat- right to play baseball on a team tered few in my particular area. without expense to themselves or In these instances, a modest fund to their families. This often pro- could be established to which duces an attitude that is insincere many of us would happily sub- and tends to cause wasteful use of scribe. A few may warrant char- the materials and uniforms sup- itable consideration. plied. Wouldn't a boy be more ap- preciative knowing that his par- It seems important that civic- ents, rather than some faceless minded people in voluntary com- community association, footed the munity activities take a good look bill for him? His attitude might at their policies lest the disastrous be better still if he had to work idea that “somebody else owes me and earn his own money to pay for something” become the widely ac- his participation on the baseball cepted custom. This could become team. As it is now, how can we ex- a cancerous disease, the next step pect anything but youth ripened being passage of a law providing for socialism? for a tax or levy on the whole com- I realize there are certain com- munity to pay for my son’s base- munity projects of great merit ball playing. If you think not, you supplying recreational activities should have been at the meeting. and other assistance to children Someone suggested it. ~> Prophetic THE DEMANDS of some citizens for installation of watering troughs for horses on Lansing’s streets are a shocking indication that there are no lengths to which people will not go in seeking government services. This great land of ours was not founded by people who expected a Welfare State to solve all their problems, even to the extent of demanding that facilities for quenching the thirst of horses be pro- vided at the public expense. The attitude exemplified by those who are making these unreason- able current demands upon this city’s newly-formed government raise the spectre of even more fantastic demands upon government in the years ahead. Who knows what will happen if our city officials take this step down the road to socialism? From an editorial in a Lansing, Michigan, newspaper of 1858. ===== PAGE 34 ===== HEKCONOMICS for THE TEACHABLE eo The socialistic or governmentally planned system pre-supposes bureaucrats competent to control human action, whereas the market economy requires mo supermen — just ordinary people freely exchanging their goods and serv- ices as they choose. LEONARD E. READ THE TEACHABLE — those who aspire panded their own consciousness, to an ever greater understanding that they progressively exposed — are those with an awareness of themselves to more and more of how little they know.! Lest teach- the unknown. Edison’s fact-packed, ableness and lowliness or inferi- inquiring, ever-curious mind con- ority be associated, consider the cluded that, “We don’t know a case for teachableness and wisdom millionth of one per cent about as having a relationship: anything. We are just emerging Said Socrates, “This man thinks from the chimpanzee state.” These he knows something when he does teachable persons came to realize not, whereas I, as I do not know how little they knew and that, anything, do not think I do, either.” perhaps, is a measure of wisdom. For such acknowledgments of falli- For the studeni of economics, bility, Socrates was acclaimed a this poses an interesting question: wise man. He and many others — Is it possible to have a workable, for instance, Lecomte du Nouy and productive economy premised on a Robert Milliken, scientists of our society of teachable individuals, time — discovered, as they ex- those who are aware that they - . 9 1The teachable shall inherit the earth ap- know very little? pears to be a sensible interpretation of We can assume that such an the Biblical ‘pronouncement, “The meek economy would differ markedly shall inherit the earth.” It is quite obvi- 1 d fet £ ous that “the meek” had no reference to from the planned society OI €go- the Mr. Milquetoasts in society. tists or know-it-alls, those at the 32 ===== PAGE 35 ===== 1960 ECONOMICS FOR THE TEACHABLE 33 other end of the intellectual spec- much of the “take” shall be paid trum, the ones who see no difficul- to each Paul. ties at all in arranging the lives of Government control and owner- everyone else in accord with their ship of the means of production designs. Further, they are quite is socialism, sometimes called willing to resort to the police force “state interventionism” or “com- to implement their schemes for munism,” depending on the degree improving society by nationalizing of disparagement intended. It it. rests on the premise that certain A group of seven economists, persons possess the intelligence to for example, recently voiced this understand and guide all human view: “The federal government is action. Socialism or state interven- our only instrument for guiding tionism is advocated by those who the economic destiny of the coun- sense no lack of this prescience in try.”2 themselves, by the naive followers of such claimants, by the seekers of power over others, by those who Government, in such a role, foresee an advantage to them- must be staffed largely with those gelves in such manipulations, and who are unaware of how little they py the “do-gooders” who fail to know, who have no qualms about distinguish between police grants- their ability to plan and regulate in-aid and the Judeo-Christian the national economic growth, set principles of charity. All in all, wages, prescribe hours of work, they are a considerable number, write the price tags for every- put still a minority of the tens of thing, decide how much of what millions whose lives they would shall be produced or grown, ex- regulate. pand or contract the money supply The most important point to arbitrarily, set interest rates and pear in mind is that socialism pre- rents, subsidize with other peoples’ gypposes that government or offi- earnings whatever activity strikes cigldom is the endower, dispenser, their fancy, lend billions in money and the source of men’s rights, as not voluntarily entrusted to them, ell ag the guide, controller, and allocate the fruits of the labor of (jrector of their energies. This is all to foreign governments of their {he Supremacy of Egotism: The choice — in short, decide what shall State is God; we are the State! be taken from each Peter and how Let us then examine the com- See First National City Bank Letter for petency of a typical egotist. It August 1959. p. 90. matters not whom you choose —a Some of the Problems ===== PAGE 36 ===== 34 THE FREEMAN January professor, a professional politi- skills, by himself, to make any one cian, a Napoleon, a Hitler, a Stalin of them.” It’s a safe bet that the — but the more pretentious the egotist under examination has better. Simply admit some su- never been closer to this company preme egotist into your mind’s eye than a textbook description by and take stock of him. Study his some fellow egotists. Yet, he would private life. You will usually dis- put this intricate, voluntary mech- cover that his wife, his children, anism under the rigid control of his neighbors, those in his hire, government and would have no fail to respond to his dictates in hesitancy at all in accepting the ways he thinks proper.t This is to post of Chief Administrator. He say, the egotist is frequently a fail- would then arbitrarily allocate and ure in the very situations nearest price all raw materials and man- and best known to him. Incongru- power and, after long and com- ously, he.-then concludes that he is plicated statistics of the past, arbi- called to manage whole societies — tirarily allocate and price the more or even the world! Fie on anything than 200,000 items, most of which small enough to occupy an ordi- he never knew existed. Involved in nary man! the operations of this company alone — a mere fraction of the The Planner’s Inccmpetence American economy — are incalcu- Let’s further test the knowledge lable human energy exchanges, of the egotist. He wants to plan many billions of them annually; production; what does he know but the egotist would manage about it? For example, there is a these with a few “big man” ges- company in the U.S.A. which man- tures! Such cursory attention he ufactures well over 200,000 sepa- would find necessary for, bear in rate items. No one person in the mind, he also would have under his company knows what these items control the lives, livelihoods, and are and there is no individual on activities of the 176,750,000 indi- the face of the earth who has the viduals not directly associated %A high-brow is a low-brow plus pre- With this company. tentiousness,” said H. G. Wells. Next, what does the egotist ‘Napoleon's domestic affairs were a mess know about exchange? In a spe- and his numerous family drove him to SL. ve. distraction; Hitler was an indifferent cialized or division-of-labor econ- paper hanger; Stalin tried first theology ——8+— and then train robbery before he elected >See my “I, Pencil” for a demonstration bureaucracy and dictatorship; many bu- that no one person knows how to make reaucrats charged with great affairs have an item even as simple as a wooden lead no record of personal success. pencil. Copy on request. ===== PAGE 37 ===== 1960 ECONOMICS FOR THE TEACHABLE 35 omy like ours, exchange cannot be rights. It holds, instead, that men carried on by primitive barter. It ‘are endowed by their Creator is accomplished by countless inter- with certain unalienable rights, changes interacting on one another that among these are Life, Liberty, with the aid of a generally accepted and the pursuit of Happiness. medium of exchange or money. That to secure these rights, gov- The socialistic philosophy of the ernments are instituted among egotists presupposes that there men. ...” With this as a premise, are persons competent to regulate sovereignty — the source of rights and control the volume and value — rests with the Creator; govern- of money and credit. Yet, surely ment is but a man-made means to no one person or committee is any protect this arrangement between more competent to manipulate the man and his Creator. When Crea- supply of money and credit to at- tivity is assumed to exist over and tain a definite end than he or a beyond the conscious mind of man, committee is able to make an auto- a whole new concept of man’s rela- mobile or a wooden lead pencil! tionship to man emerges. Man, An economy founded on the once he conceives of himself in premise of know-it-allness is pat- this setting, knows that he is not ently absurd. knowledgeable but, at best, is only But, can there be a sensible, teachable. The greatest conscious rational economy founded on the fact of his life is his awareness of premise of know-next-to-nothing- the Unknown. ness? An economy that would run To illustrate, let us observe how rings around socialism? In short, such a person “builds” his own is there a highly productive way house. He does not think of him- of life which presupposes no self as actually having built it. No human prescience, no infallibility, man living could do that. He thinks nothing beyond an awareness that of himself as having done only an it is not the role of man to pattern assembly job. He is aware of nu- others in his own image? There is merous preconditions, two of such a way! which are: 1. The provision of his materi- The Creator as Sovereign als. Others cut trees, sawed Contrary to socialism, this way them into boards which were of life for teachable people, who kiln dried, planed, grooved, concede their fallibility, denies held in waiting, delivered. that government, staffed by fallible Some mined ore, assembled people, is the source of men’s blast furnaces from which ===== PAGE 38 ===== 36 THE FREEMAN January came the metals for saws, reached the point where a planes, pipes, tubs, nails, house was impossible. hardware. There were those The man who knows how little - who assembled the machinery he knows is aware that creative to mine the ore and those who energies, and creative energy ex- assembled the machine tools changes, work miracles if unham- . to make the machinery. There pered. The evidence is all about were those who saved the him. There is his automobile, the fruits of their labor and coffee he drinks, the meat he eats, loaned or invested it that the clothes he wears, the sym- there might be these tools. phony he hears, the books he reads, There were the growers of the painting he sees, the perfume flax and soybeans, the extrac- he smells, the velvet he touches tors of their oils, chemists, and, above all, the insights or in- paint makers. Others wrote spiration or ideas that come to books about mixing concrete, him — from where he does not architecture, engineering, con- know. ’ struction. There were pub- lishers, typesetters— how does Respect for the Unknown one make a linotype machine? The teachable person looks with — on and on, creative energies awe upon all creation. He agrees and energy exchanges through that “only God can make a tree.” time and space, ad infinitum! And he also understands that, in . A reasonable absence of de- the final analysis, only God can structive energies. No thieves build a house. Nature, Creation, stole his supplies. Those who God — use your own term — if not supplied him had not de- interfered with, will combine at- frauded him nor had they mis- oms into molécules which when represented their wares. Vio- configurated in one manner will lence, like coercively keeping form a tree, in another manner a men from working where they blade of grass, in still another chose (strikes) or like coer- manner a rose — mysteries upon cively keeping men from free- mysteries! And, there are demon- ly exchanging the products of Pa ) ow English word to their labor (protectionism) translate A uch nicer old Greek word, had not succeeded in denying ‘wanting-to-know-it-ness’ was their char- interferences with creative ef- Greek by T. R. Glover. New York: The forts and exchanges had not Macmillan Company, 1942. pp. 6-7. ===== PAGE 39 ===== 1960 ECONOMICS FOR THE TEACHABLE 37 strations all around him that the this mysterious, creative power creative energies of men, when not has the potentiality of flowing, interfered with, do, through space concedes that what applies to him and time, configurate, in response must, perforce, apply to other hu- to human necessity and aspiration, man beings; that this same power to form houses, symphonies, foods, has the potentiality of flowing clothes, airplanes — things in end- through them; that his existence, less profusion. his livelihood, his own opportunity The teachable person is likely to to serve as an agency of that pow- be aware of some wonderful cosmic er, depends on how well these force at work —a drawing, at- others fare creatively. He realizes tracting, magnetic power — attend- that he can no more dictate its ing to perpetual creation. He may flow in others than in himself. He well conceive of himself as an knows only that he must not agent through whom this power thwart it. in others and that it is has the potentiality of flowing and, to his interest and theirs, and to to the extent this occurs, to that the interest of all society, that degree does he have an oppor- there be no thwarting of this force tunity to share in the processes of in others by anyone. Leave this creation. As agent, his psychologi- power alone and let it work its cal problem is to rid himself of his miracles! own inhibitory influences — fear, superstition, anger, and the like — in order that this power may Creative action cannot be in- freely flow. He knows that he can- duced by any form of authoritari- not dictate to it, direct it, or even anism, be the commands directed get results by commanding, “Now at oneself or at others. However, I shall be inspired” or “Now I any idiot can thwart these actions shall create a symphony” or “Now in himself or in others, precisely I shall discover a cure for the com- as he can thwart the forces of mon cold” or “Now I shall invent creation from manifesting them- a way of impressing upon others selves as a tree. He can prevent a how little they know.” He is quite tree from being, but he can’t make certain he must not thwart this it be. Coercive force can only in- power as it pertains to his own hibit, restrain, penalize, destroy. personal being. It cannot create! Society-wise, the teachable hu- The teachable individual im- man being, the one who conceives poses no inhibitions, restraints, or of himself as agent through whom penalties on creative actions. He Thwarting Creative Action ===== PAGE 40 ===== 38 THE FREEMAN January leaves them free to pursue their keeping the records incidental miraculous courses. thereto. The man who knows how little Very well. So far, in theory, he knows would like to see the re- creative energies or actions and moval of all destructive obstacles their exchanges are left unham- to the flow of creative energy and -pered. Destructive actions are self- energy exchanges. But, even this, disciplined or, if not, are re- he doesn’t quite know how to ac- strained by the societal agency of complish. He would rely mostly on - law and defensive force. Is that an improved understanding of the all? Does not the person who is Golden Rule, the Ten Command- aware of how little he knows have ments, and other consistent ethical to know a lot of economics? and moral principles. He hopes that more and more persons even- Why Pay for Things tually will see that even their The man, mentioned previously, own self-interest is never served who “built” his own house, has by impairing the creative actions about as much economic under- of others, or living off them as standing as is necessary. He re- parasites. flects on all the countless antece- oo dent services which he assem- Government's Limited Role bled into a finished home: Origi- In summary, then, the teachable nally, all of these items came from person is content to leave creative Nature. They were there when the energies and their exchanges un- Indians foraged this same terri- touched; and he would rely pri- tory. There was no price on them marily on ethical precepts and in their raw state — they were for practices to keep these energy cir- free, so to speak. Yet, he paid — cuits free of destructive invasion. let us say — $10,000 for them. The governmental apparatus would What was the payment for? merely assist these precepts and Well, when we slice through all practices by defending the life and the economic terms, he paid for property of all citizens equally; by the human action that necessarily protecting all willing exchange and had to be applied to things of the restraining all unwilling ex- good earth. He paid for actions change; by suppressing and penal- and energies which he himself did izing all fraud, all misrepresenta- not possess, or possessing, did not tion, all violence, all predatory choose to exert. Were he limited practices; by invoking a common to his own energies to bring about justice under written law; and by the services antecedent to his as- ===== PAGE 41 ===== 1960 ECONOMICS FOR THE TEACHABLE 39 sembly of them, he could not have nomic justice shall be rendered? built such a home in a thousand He has to know only this: Let the lifetimes. payment for each individual's con- These human actions for which {tribution be determined by what he paid took several forms. Gen- others will offer in willing ex- eralizing, his $10,000 covered sal- change. That’s all there is to an aries and wages that had been paid economy for those who know they for judgment, foresight, skill, ini- know not. It is that simple.” tiative, enterprise, research, man- °~ The concept underlying such an agement, invention, physical exer- economy — never formalized until tion, chance discovery, know-how; the year 1870 —is known as the interest that had been paid for self- marginal utility theory of value. denial or waiting; dividends that It also goes by two other names: had been paid for risking; rent ‘the subjective theory of value” that had been paid for locational and “the free market theory of advantage — in short, all of the value.” Testimony to its simplicity $10,000 covered payments for one was given by Eugen von Bohm- or another form of human action. Bawerk, one of its greatest theo- Literally millions of individuals reticians: had a hand in the process. And so the intellectual labor that people have to perform in Let the Market Decide . . ei. . estimating subjective value is The major economic problem — not so astounding as may ap- the root of economic hassles — re- pear . . . incidentally, even if it duced to its simplest terms, re- were a considerably greater task volves around the question of who than it actually is, one could is going to get how much of that still confidently entrust it to $10,000. How is economic justice “John Doe and Richard Roe.” to be determined? What part shall . . . For centuries, long before go to the grower of soybeans, to science set up the doctrine of the investor in a saw mill, to the marginal utility, the common man who tends the machine that man was accustomed to seek pours nails into wooden kegs, to int plant? wh hall one must understand money, the medium owner of a paint plant’ 0s of exchange. This, also, is an impossible determine the answers? requirement. For extended comments on How much economics does one this point of view, see my Government: An Ideal Concept. Irvington-on-Hudson, have to know to settle, in one’s nN. y.. Foundation for Economic Educa- own mind, how and by whom eco- tion, Inc., 1954. pp. 80-91. ===== PAGE 42 ===== 40 THE FREEMAN January things and abandon things ... economics, nonetheless, continues he practiced the doctrine of to gain in popular acceptance. marginal utility before economic Emotional reactions to effort ex- theory discovered it.8 pended and fatigue incurred do The labor theory of value held not readily give way to reason. scholarly sway prior to this free Sentimental thoughts, such as ‘the market theory. It contended that poor, hard-working farmers,” set value was determined by the the political stage for agricultural amount of effort expended or subsidies. Similarly, sympathies fatigue incurred. For example, which emanate from such out- some persons make mud pies, moded and erroneous reflections as others mince pies. The same ef- “the down-trodden laboring man” fort, let us assume, is expended in condition most people to accept the the preparation of each. Under the coercive powers allowed labor labor theory of value the mud pie unions. makers should receive the same Practice of the labor theory of return for their efforts as the value is rationalized by spenders, mince pie makers. The only way to inflationists, Keynesians, egotists, accomplish this — consumers being on the ground that it puts pur- unwilling to exchange the fruits chasing power in the hands of of their labor for mud pies — is for those who will spend it. As set the government to subsidize the forth earlier, this man-concocted mud pie makers by taking from system of forcibly controlling the mince pie makers. Karl Marx creative human action — interven- elaborated upon and helped sys- tionism, socialism, communism — tematize this theory — govern- presupposes all-knowing bureau- ments taking from the productive crats but, to date, not a single one and subsidizing the less produc- has been found, not even a rea- tive. sonable facsimile. The labor theory of value, proved The free market, on the other over and over again to be the hand, is for the teachable, who enemy of both justice and sound know their own limitations, who *From pages 203-4, Vol. II, Capital and 1€€l no compulsions to play God, Interest by Eugen von Bohm-Bawerk. and who put their faith in volun- on the marginal utility theory of value of human relationships that mir- extant. The 3-volume set, $25.00. Avail- aculously works economic wonders able through the Foundation for Eco- for all without requiring infalli- nomic Education, Inc., Irvington-on-Hud- vee son, N. Y. bility of anyone. > ===== PAGE 43 ===== So ES IT IS UNDENIABLE that political his- A Coie ns tory is largely a record of brigand- SHORT HISTORY _ 4 age in state after state, brigand- : age by a few who have been en- oe of POLY rion © trenched in power over the masses, IONE 5 18 - Sa "| brigandage maintained until revo- lution has dislodged the brigands. i The revolutions have resulted in BERNARD IDDINGS BELL the installation of new groups, new classes in the places of authority, and then of the corruption of these new groups by cupidity and conceit. Out of revolution has come new oppression, which in its turn has had to be overthrown. There is no dodging the fact that the stronger the State has been and the more manifold its controls over industry, commerce, agriculture, transportation, the more sure and speedy has been the re- duction of the many to a servile condition, their enslavement by an oligarchy responsible to the holders of special privilege. Nor can anyone doubt that, as H. L.. Mencken has said, in every modern land: The State has taken on a vast mass of new duties and responsibilities; it has to spread out its powers until they penetrate to every act of the citizen, however secret; it has begun to throw around its operations the high dignity and impeccability of a religion; its agents become a sepa- rate and superior caste, with authority to bind and loose, and their thumbs in every pot. It is hard, in short, to avoid the following convictions: that the whole world is today suffering from statecraft prostituted to carry on ignoble and unjust class exploitations; that our own country is no exception to this; that all round the world the puffing up of government to unprece- dented pcwer is sure to result sooner or later in an honest-to-goodness explosion, a revolution nihilistic and anarchic beside which our present social disturbances, waged between various groups of would-be ex- ploiters each entrenched in its imperialistic or nationalistic setup, will seem like a game of tin soldiers. ~ From Crisis in Education. New York: McGraw-Hill, 1949. 41 ===== PAGE 44 ===== Hurropasnim Soclalisean WILLIAM HENRY CHAMBERLIN I BROUGHT BACK two predominant ing, rent control, allocation of ma- impressions from a recent trip of terials, state controls over foreign fifteen weeks to eight countries of trade, and extension of national- Western Europe: Great Britain, ization, they automatically become France, Germany, Italy, Belgium, more prosperous. Indeed, it is re- the Netherlands, Switzerland, and markable how the simple truths Austria. The first was of self-suf- of classical economics, if given a ficient well-being, reflected in full chance to work, prove their valid- shop windows, cities and roads ity in practice. Belgium, for in- jammed to capacity with automo- stance, is the one country in Wes- biles, resort centers crowded, and tern Europe that has. thoroughly figures of GNP (Gross National scrapped rent control. It is also Product), industrial output, ex- the only one where getting an ports, and accumulated gold and apartment is not a major problem. currency reserves all zooming to The British Conservatives, who new heights. The second was that came into power by a narrow ma- socialism as a political and intel- jority in 1951 and have increased lectual force in Europe has gone that majority in the elections of into a deep eclipse. 1955 and 1959, were inclined to Indeed these two impressions tread warily because of the for- are closely interrelated. As people midable Labor Socialist opposi- become more prosperous, they lose tion. It was with considerable interest in socialist dogmas. And heart-searching and misgiving as they discard or at least abate that they first scrapped meat ra- such socialist practices as ration- tioning and later carried out a —_— limited decontrol of rents. But Mr. Chamberlin is the author of numerous books, lecturer, and a contributor to The Wall neither of these measures led to treet al and tionally kn i A agesiien and many nafionafly Xnown the dire consequences which 42 ===== PAGE 45 ===== 1960 EUROPEAN SOCIALISM IN ECLIPSE 43 lovers of state regulation foresaw. the direction of relaxing controls Meat prices did not go into the on foreign imports and encourag- stratosphere. One does not see in ing an inflow of foreign capital. London evicted tenants sleeping in The eclipse of European social- the streets or in the parks. On the ism can best be measured by tak- contrary, the British people today ing a backward look — to Western enjoy the widest range of food Europe as it was immediately af- and consumer goods since the end ter the end of the war. Britain of the war. And private building had rejected its war hero, Winston of apartments, stimulated by the Churchill, as a political leader and partial rent decontrol, has picked swept the Labor Party into power up enormously and helped to alle- with a big parliamentary majority. viate the housing shortage. And it has been said that in Brit- On the other hand, Italy—where ain, where there is no written con- there is a vast amount of state stitution, Parliament can do ev- intervention even though the rul- erything except change a man into ing Christian Democratic Party is a woman. The sky seemed to be opposed to socialism in theory —is the limit on schemes of social and still close to the bottom of the economic reorganization along European heap in poverty. One Marxist lines. should not draw sweeping conclu- In France and Italy at that sions from this. Italy labors under time, communists as well as so- a number of disadvantages: a too cialists sat in coalition govern- prolific population, a late start in ments; this was also true as re- industrialization, a tradition of . gards Belgium, although for a conspicuous misgovernment in the shorter time. In occupied Ger- southern part of the peninsula and many, American military govern- in Sicily. But it can reasonably be ment officials, naively misguided noted that little good has come of or worse, were forcing commu- the government oil monopoly nists on German newspapers and (ENI) and the government control radio stations. of considerable segments of the economy through IRI (the Insti- Away from Socialism tute for the Reconstruction of In- The political changes which one dustry, which took over faltering finds in Europe now are profound. industries in the time of the world The communists have long been depression of 1929-33 and’ has cast into political oblivion. And, hung on to most of them). More although they still rally the votes encouraging are Italian moves in of a good many of the miscellane- ===== PAGE 46 ===== 44 THE FREEMAN January ous discontented in France and economic, decisions are in agree- Italy, there is no more reasonable ment on such points as the desir- fear of a communist coup, or even ability of currency convertibility of a first-rate communist riot. and free movement of men, goods, The socialists are also at a low and capital across frontiers and in ebb. Three times running, in the rejecting direct measures of state two most industrialized countries economic intervention in times of of Europe, England and Germany, economic stress in favor of indi- a socialist party and a moderate rect measures, such as raising in- or conservative party have been terest rates. It is fortunate that the principal contenders in nation- this is the case. For differences al elections. The result in the two between the “Inner Six” (the countries was the same. The con- close-knit European Economic servatives won three straight and, Community of France, Germany, what is perhaps still more signifi- Italy, Belgium, the Netherlands, cant and unusual, they increased and Luxembourg) and the “Outer their majority each time. The Seven” (the looser Free Trade membership of the French Social- bloc of Great Britain, the Scandi- ist Party has declined from 3850,- navian countries, Austria, Switz- 000 to 50,000 and the diminished erland, and Portugal) are much socialist ranks are riddled with less significant than the economic factional feuds. In Belgium and differences that would arise in a the Netherlands, socialists are Europe split between nonsocial- now out of the coalition govern- ist and socialist governments. ments which normally rule these - countries. Conservative Gains in Britain Only in Scandinavia, where a I was in England during the mild brand of socialism has be- last national election campaign -come a habit, and in Austria, and in Germany in 1957, while where a permanent coalition of Chancellor Adenauer was building the evenly balanced moderate Peo- up to his third successive victory ple’s Party and the Austrian So- at the polls. Various factors, some cialists has existed ever since the national, some international in end of the war, do socialists have scope, have contributed to the po- any direct influence on administra- litical downfall of European so- tion. cialism. Europe’s economic orchestra is Prime Minister Macmillan in now in tune. In all the larger coun- Great Britain proved himself a tries, the men who make the vital consummate political leader. He ===== PAGE 47 ===== 1960 EUROPEAN SOCIALISM IN ECLIPSE 45 called the election, as the Prime small shares), they continued ra- Minister in office has a right to do tioning and other controls far be- under the British system, when yond the time when austerity and all the auguries were most favor- hardship were really unavoidable. able. He spiked the guns of the The most impressive proof of this Labor opposition by going to Mos- was when the “conquering” Brit- cow early in the year and starting ons in the military administration a process of high-level negotiation of Germany were living on meager which, whether wise or unwise, is unpalatable rations while the Ger- unmistakably popular in Great mans around them, under Er- Britain. He neatly exploited Eisen- hard’s free market economy, could hower’s visit to Britain early in get as much food as they wanted. September and the opportunity Another unhappy memory associ- presented by a joint television ap- ated with Labor administration is pearance of American President of scores of little frustrations and .and British Prime Minister. inconveniences; without special But the overriding element in permits it was a crime for a man the Conservative victory was the to repair the leaky roof of his own relative ease of British living con- house or to build a garage. ditions after eight years of Con- So Conservative election posters servative administration, com- showing the more comfortable, pared with the bleak austerity less harassed life of the present from 1945 to 1951 when the La- time, with the admonition, “Don’t bor Party, officially committed to let Labor spoil it,” found a recep- a socialist philosophy, was in pow- tive audience. One of the issues of er. In fairness, it should be recog- the campaign was pointed up, per- nized that immediately after the haps unconsciously, in an article war life would have been hard in which Labor's prospective Chan- Great Britain under any govern- cellor of the Exchequer (British ment. The economic wounds in- equivalent of America’s Secretary flicted by the war could not have of the Treasury) contributed to been healed overnight. the British radical weekly, The But what can reasonably be New Statesman. In a very frank charged against the Laborites and exposition of the theory that the what cost them a good many “mar- government, not the individual, ginal” votes at the polls is that, in has the first lien on the taxpayer's line with their theories of state income, Mr. Wilson wrote: planning and assured “fair shares” “Recent budget debates have (which always proved to be very sharpened controversy and pro- ===== PAGE 48 ===== 46 THE FREEMAN January vided what seems to be the acid ity of the voters than socialist ap- test of distinction between the peals to class envy and socialist Tory and the Socialist. The Tory promises. One of the most popular says that all income belongs to its slogans of the winning party in recipient; that all state levies up- Germany, the CDU (Christian on it are at best a regrettable ne- Democratic Union), was Keine cessity; that it is wrong to refer FEzxperimente, “No Experiments.” to a Chancellor's decisions as Germany’s spectacular recovery ‘largesse,’ ‘tax hand-outs,” or to from the ruin and desolation of suggest that the Chancellor is in the war began from the time when any way giving anything away; a stable currency and a free mar- what he is doing is refraining ket economy were established, and from withholding so much. Our there was no desire to tamper approach is different. We say that with either of these bases of pros- all wealth is derived from the com- perity. munity; that the budget is an in- Chancellor Adenauer’s com- strument not for perpetuating the manding personality and his suec- unequal distribution of income and cess in winning the confidence and wealth, but for correcting it. We respect of the leaders of the coun- say, therefore, that a Chancellor tries with which Germany had re- in the happy position of being able cently been at war also contrib- to reduce taxation must apply the uted to the political downfall of welfare test — where can I do the the German Social Democrats. most good, add most to the total Still another factor was the vague, happiness?” (Italics supplied.) cloudy program of the Social It is a safe guess that most Democrats in foreign affairs, Britons, like most other people, which suggested the possibility prefer the idea that “all income that, if they should come into belongs to the recipient” to Mr. power, they would break or dan- Wilson’s conception that the busi- gerously loosen political ties with ness of a socialist Finance Minis- the West without gaining any real ter is to share and redistribute prospect of German reunion in wealth. freedom. : } Still another special national “No Experiments" in Germany , problem, the protracted guerrilla - In Germany, as in England, war in Algeria, made for the re- proved prosperity under a system turn to power in France of General of comparative free enterprise Charles de Gaulle. A series of was more attractive to the major- weak Cabinets, the result of the ===== PAGE 49 ===== 1960 EUROPEAN SOCIALISM IN ECLIPSE 47 many squabbling and internally tic of the time immediately after divided parties, had brought mat- the end of the war, is riding the ters to such a pass that de Gaulle crest of a wave of prosperity. The was generally recognized as the Soviet Union may continue to send only alternative to such undesir- rockets to the moon and adjacent able prospects as military dictator- planets. But there is no serious ship, anarchy, and civil war. prospect that in any foreseeable It was only a government like future the Soviet standard of liv- de Gaulle’s, stable and mildly au- ing will come anywhere near the thoritarian, that, in all probabil- American. On the other hand, ity, could have imposed the regime there are several European coun- of order and sanity in French eco- tries — Great Britain and Ger- nomics and finance. Here again, many, France (especially if it can old-fashioned economic common shake off the incubus of the Al- sense has worked wonders in giv- gerian war), prosperous little Bel- ing France a stable currency and gium and . Switzerland, always replenishing gold and dollar re- true to the principles of economic serves which had been depleted al- individualism — that could quite most to the vanishing point at the conceivably within the next dec- time when de Gaulle took over ade rival America today in terms power in the spring of 1958. For- of per capita consumption of food eign trade has been considerably and consumer goods, in housing, liberalized and France, as a mem- even in motor transport. ber of the European Economic Intelligent socialists are more Community, has assumed the ob- and more willing to admit the ligation to expose its industry to need for rethinking their princi- the increasingly free competition ples if they talk “off the record of the other members of the Com- and not for attribution.” A promi- munity. nent British trade-unionist, an old acquaintance of the writer, made Socialists without a Cause these remarks on the eve of the Far from being a wave of the recent British election: future, socialism in Western Eu- “Very few workers give a pin rope now looks more and more now about nationalization. Just as like an obsolete relic of the past. a matter of prestige and consist- For Europe today, having turned ency the Labor Party put in a pro- away from the rationing and con- posal to re-nationalize steel and trols and state planning and state motor trucking; but if they lose meddling which were characteris- the election, and I'm afraid they & ===== PAGE 50 ===== 48 THE FREEMAN January will, you will probably hear no Erhard’s ideas of free competition more about it. We don’t sing The better than Erhard could himself. Red Flag any more at Labor meet- The voters were not impressed. ings and there isn’t one person in a thousand in the Labor movement Rising Level of Living who would know the words or the What has been more effective tune of the Internationale. What than any amount of theoretical the workers in Great Britain are argument in destroying Marxism interested in is not socialism in as a vital faith in Europe has been the Marxist sense; it is more so- the penetration into the older con- cial equality — the sort of thing tinent of American ways of life. you have in America — more For the first time in history, the chance, for instance, for the poor European worker, at least in the boy who is bright and capable to more skilled grades, sees the op- go to the best schools and col- portunity of becoming a house leges.” : owner and a car owner, of enjoy- ing an annual vacation in some West German Recovery foreign resort. His wife is getting One finds this same drift away used to such household labor-sav- from conventional socialism in its ing devices as the refrigerator and homeland, Germany. When Erhard the washing machine. And the started his experiment in a free American image of individual op- market economy (after a long pe- portunity and unplanned abun- riod of wage and price control un- dance looks more attractive to the der the Nazis and under the for- modern European worker than the eign military occupation), Social Soviet image of planned scarcity Democratic spokesmen thundered and continual sacrifice of present against it on the ground that it enjoyment for what is represented would make the -rich richer and as the benefit of future genera- the poor poorer. But this line of tions. attack boomeranged as real wages - The “proletariat,” or industrial increased rapidly and steadily. working class, was never as badly Then the Social Democrats shifted off as Marx made out in Capital their intellectual gears and in and other writings. But before 1957 dropped the demand for na- World War I, even up to World tionalization of the coal, iron, and War II, there was a gulf, social steel industries from their elec- and economic, between the manual tion platform. They then took up workers and the middle classes in the line that they would carry out Europe that was not paralleled in ===== PAGE 51 ===== 1960 EUROPEAN SOCIALISM IN ECLIPSE 49 the United States and that pro- who was willing to talk only on a vided fertile soil for socialist prop- “Don’t quote me personally” basis, aganda. It was much more difficult offered what seemed to me, on the to move from one “class” or social basis of my own observation in group into another than it was in this and other countries, a pretty the United States, where it has convincing explanation of what always been taken for granted that has been happening in Western poor boys may become rich men Europe since the end of the war: and that rich men may lose their “Both socialists and liberals wealth. have changed their positions con- Now, however, the European siderably. Socialists have given up “proletariat,” instead of becoming ideas of violent revolution, have poorer, more numerous, and more become indifferent to nationaliza- revolutionary, in line with Marx’s tion and quite disillusioned with predictions, is fully sharing in the rationing and state planning. Lib- generally improved well-being. In- erals are prepared to accept social deed, it is almost disappearing as welfare measures and the neces- a result of the leveling, upward sity of government intervention to and downward, that is a marked ward off major economic crises.” feature of Europe since the end As this remark indicates, to say of World War II. A skilled me- that European socialism is in chanie, in this era of full employ- eclipse does not mean that Euro- ment, can demand and get a wage pean economies are run along lines that puts him, economically, on a which economic libertarians would par with the middle class. endorse. Conservative and moder- oo . ate parties today accept measures Moderation in All Things of government intervention and Against this background of in- social welfare legislation that creasing adoption of American their fathers and grandfathers mechanical conveniences and en- would have vigorously fought, as hanced prosperity two things have socialistic. happened. European socialists The very words socialism, con- have become more moderate and servatism, liberalism are not hard European voters have displayed and fixed and constant in their an inclination to turn away from meanings. All acquire differing even moderate brands of socialism. meanings. in the context of A very intelligent official in one changes of time and country. of the smaller European countries, But what is unmistakably true a member of its socialist party, and significant is that Marxism, ===== PAGE 52 ===== 50 THE FREEMAN January once a powerful faith in Europe, and others who carry on his tra- " has been consigned to the moth- dition in Germany are heard with balls. Europe, at least that larger increasing respect. and more prosperous part of Eu- To the visible considerable bene- rope which is outside the Iron Cur- fit of its economic health and gen- tain, was faced at the end of the eral well-being, Europe, for the war with a choice of two roads, most part, has chosen this second one leading to out-and-out social- road. -~ ism, the other to the mixed econo- mies of the present time, in which EpiTtors NOTE: Though optimistic, the voices of eloquent advocates Mr. Chamberlin recognizes that Eu- of the free economy like Wilhelm 4505 path back to freedom is lined Roepke in Switzerland, John with many stumbling blocks, some of Jewkes in England, Jacques Rueff which are highlighted in the follow- in France, the late Walter Eucken, ing article. pIPIate’ I Bmroposnm JE HEIN AIO IX NE] HANS F. SENNHOLZ THE FORMATION of the European and regulation. Previous attempts Economic Community, or Common took the shape of the Benelux Eco- Market, is another attempt by the nomic Union, the Economic Com- governments of Western Europe mission for Europe, the Organiza- to escape from the detrimental ef- tion for European Economic Co- fects of governmental planning operation, the Council of Europe, Dr. Sennholz heads the Department of Eco- the European Payments Union, nomics, Grove City College, Pennsylvania. A and the European Coal and Steel more elaborate discussion of various efforts at political unification of Europe appears in his Community. All of them reflect the ? j- - - - oo revel Su Europe Survived, D. Van Nos general recognition that high eco- ===== PAGE 53 ===== 1960 THE EUROPEAN ECONOMIC COMMUNITY 51 nomic productivity and living con- to agriculture which will be con- ditions require some international tinued are to be made uniform division of labor and exchange of throughout the Union. goods. 7. The colonies and associated The Common Market, which was territories of the member states established by the Treaty of Rome are to be linked to the Common on March 25, 1957, is to be a free Market. trade area consisting of Belgium, 8. The “Social Fund” is to com- France, West Germany, Italy, pensate workers for economic in- Luxembourg, and the Netherlands. juries resulting from trade lib- Its basic features are determined eralization. by the following provisions of the 9. The member states, which Treaty: agree on the need to improve liv- 1. All foreign trade restrictions ing and working conditions and to among the six member states are equalize such conditions at rising to be abolished gradually over a levels, are to establish two invest- 12 to 15 year transition period. ment funds for the advancement However, where the necessary re- of less developed areas, one to be adjustments are too severe, the employed in Europe, the other in transition period may be extended. the associated territories. 2. The member states will im- pose uniform tariff and other re- A Dubious Terminology strictions on the imports from the Before we enter into a critical rest of the world. analysis of these community pro- 3. The movement of labor, capi- visions, we must question the use tal, and business enterprises of the adjective “European” in the among the member states is to be official name of the Community. permitted, and all payments are to The term “European Economic be freed. Community” implies a community 4. Monopolies, cartels, and other of all or, at least, most European trade restrictions are prohibited nations. It suggests some form of unless they facilitate improve- unification of Europe. In reality, ments in production and distribu- however, it is an organization of tion or in technical or economic only six nations out of a totdl of progress. 18 noncommunist nations in Eu- 5. The monetary and fiscal poli- rope. Such outsiders as Great Brit- cies of the member states are to be ain, Switzerland, Norway, Sweden, coordinated. ’ and others contend, with some jus- 6. The controls of and subsidies tification, that the “European” ===== PAGE 54 ===== 52 THE FREEMAN January terminology is misleading if not tional. For in every instance, gov- an outright usurpation. They bit- ernmental planning means curtail- terly reject the implication that ment of individual freedom, inter- their refusal to join is “non-Euro- ference with the choices and deci- pean” or even “anti-European,” or sions of consumers, and reduction that the Community constitutes in productivity and output. the nucleus around which might But supranational governmental form a more inclusive European planning, which is a fashionable Community. According to most subterfuge from the disastrous critics in England and other non- consequences of national economic member countries, the “European planning, is subject to a number Economic Community” is but a of additional objections. regional organization that harbors It leads to the formation of eco- the danger of trade discrimination nomic blocs which bring on a against nonmembers. further disintegration of the world The critical observer also must division of labor and peaceful co- question the use of the term “mar- operation. Because supranational ket” in the official description of economic planning distributes the the Community. The term ‘“‘com- spoils and privileges of govern- mon market” seems to reflect an ment intervention over different objective of a supranational mar- nationalities, it causes strife and ket economy, that is, a large mar- conflict among the member states. ket where economic phenomena A planning union, therefore, har- are determined and regulated by bors forces that cause its early market forces, such as consumers’ disintegration. choices and free prices. But such When the disastrous effects of an achievement seems threatened national economic planning be- by the existence of numerous non- come apparent to everyone, plan- market factors. Supranational gov- ners seek solace and hope in inter- ernmental planning, in fact, is to national planning. Through inter- prevail in many phases of the eco- national agreements they hope to nomic life in the Community. prevent, or at least delay, the re- ) turn of competitive capitalism. A Subterfuge from the Failure The European Economic Com- of National Planning munity is such a delaying action Individual freedom and free by the planners in Europe. trade are opposed to governmental The imposition of a uniform economic planning on every level, tariff on imports from the rest of be it state, federal, or interna- the world is typical government ===== PAGE 55 ===== 1960 THE EUROPEAN ECONOMIC COMMUNITY 53 planning. Consumption and pro- obviously is a nonmarket institu- duction are to be directed and reg- tion. It is to be financed by the ulated by tariffs. A tariff on Swiss member governments, the funds to watches, for instance, not only will be disbursed in a way government curtail the enjoyment of Swiss officials see fit. As the injury to watches by all EEC consumers but workers is likely to consist of un- also will affect the manufacture of employment caused by market re- watches within the Community. adjustments, the Fund probably The protected industry in Ger- will pay a kind of supranational many, France, or Italy will be unemployment compensation. But more profitable than it would be unfortunately, such payments tend otherwise, and is thus induced to to retard the necessary labor ad- expand. But such an expansion will justments. If they are high, rela- cause the withdrawal of capital, tive to a man’s earnings from labor, and materials from other in- labor, they may in fact prevent the dustries and curtail their produe- readjustment altogether. tion. All these adjustments and The governmental agreement on many indirect effects inevitably the need for development is an- result from the tariff intervention. other indication of the nature of The Common Market Treaty the Economic Union. If govern- does not envisage free trade in ments undertake to improve living agricultural products. This limita- and working conditions, they usu- tion affects a vast number of goods ally resort to labor legislation, which may be called ‘“agricul- such as minimum wage laws, to tural.” It is true, governmental nationalization of industries, for- regulation of agriculture is to be mation of governmental enter- uniform throughout the union. prises and, above all, intensive But this uniformity does not make labor regulations and controls. for free exchange. A uniform sub- The two investment funds for the sidy program that is to help the advancement of less developed grain farmers, for instance, would areas clearly corroborate this con- be a windfall to farmers in those clusion. For when a government countries that now pay no subsidy. embarks upon investments and de- But it would hardly lead to an un- velopments, it either owns, man- hampered market for agricultural ages, or controls the enterprise. products. From the point of view of market The “Social Fund” to compen- adjustment, its investments al- sate workers for economic injuries ways disregard the market; the resulting from trade liberalization fact that the market hitherto had ===== PAGE 56 ===== 54 THE FREEMAN January not provided such investments The Seeds of Failure proves that the government invest- In spite of these new suprana- ments are contrary to the market tional attempts at central plan- order. The same can. be said about ning, there is little prospect for the colonial investment fund. The the development of an effective fact that the governments deem it economic bloc. For EEC faces cer- necessary to develop the colonies tain difficulties on which all previ- indicates rejection of the decisions ous attempts at unification have of the market concerning colonial run aground. It harbors the seeds investments and development; of internal conflict and failure. thus government planning super- Supranational coordination of the sedes the market order. various governmental policies con- Another feature of central con- flicts with national interests as trol over the projected Economic seen by the planners. Each act of Community is the government con- intervention is the result of so- trol over monopolies, cartels, and called social considerations and other trade restrictions. In order special interests. Governmental in- to determine whether such organi- tervention is thought to be identi- zations or restrictions “facilitate cal with “social progress.” There- improvements in production and fore, any attempt at supranational distribution or in technical or eco- coordination necessarily conflicts nomic progress,” extensive govern- with national “social progress.” ment supervision is required. A And “social progress” usually pre- new bureaucracy with investiga- vails over the desire for interna- tors, prosecutors, and judges is tional coordination. needed to decide on the desira- Take, for instance, the Common bility of certain business organi- Market tariff against the outside zations. Judging from the Ameri- world. A supranational agreement can experience with antitrust leg- on the height of the tariff barriers islation and regulation, these anti- is most difficult to attain because trust provisions of the Treaty will any change of the present national constitute a convenient gateway tariff barriers would conflict with for government control of big busi- social considerations and special ness. Meanwhile, it may be as- interests. The French automobile sumed that the numerous govern- industry, for instance, enjoys high ment monopolies, cartels, and tariff protection which safeguards trade restrictions will be exempt its existence within the French from supranational control by the market. On the other hand, Hol- Community. land, which lacks any significant ===== PAGE 57 ===== 1960 THE EUROPEAN ECONOMIC COMMUNITY 55 car production of its own, has no to please a French industry clam- protective trade barriers. How are oring for tariff protection. the two countries to agree on the Common Market tariff? The Immigration Policy? French will want to continue their The same inherent difficulties protective barriers without which exist with regard to the projected their automobile industry prob- freedom of movement of labor, ably could not continue its present capital, and business enterprises. operations. The Dutch, on the While the member states will other hand, will want to import doubtless permit the immigration foreign cars. of capital and enterprises, they Import restrictions always cause may be expected to balk at any gains and losses. In a suprana- emigration. And will a free migra- tional union with outside tariff tion of people ever be permitted? barriers, the losses and gains are Free migration tends to lower the distributed over different nation- standard of living of the people alities. They become a matter of receiving the immigrants because bargaining, bickering, and conflict it lowers the marginal productivity between the member governments. of labor. Of course, it also in- It is true, tariff protection is pos- creases the marginal efficiency of sible within a national economy as capital and therefore increases the long as the majority of the people yields of capital. can be persuaded that some fellow In the Economic Union many * countrymen — for instance, the car Italians, whose living conditions makers, wine growers, or dairy are the poorest in the Union, prob- farmers — deserve special consid- ably would want to seek employ- eration and protection. But it is ment in France, Germany, or Bel- quite a different matter to per- gium where wage rates are higher suade another nation to bear sacri- and living conditions better. Such fices for an alien industry clamor- a migration would reduce wage ing for protection. It is indeed rates in France, Germany, and hard to believe that the French Belgium, although it would im- and Italian people would consent prove conditions in Italy. The cru- to higher goods prices because a cial question is: Are the French, certain German industry demands German, or Belgian workers pre- protection from American imports. pared to accept wage reductions, Conversely, German consumers or suffer unemployment, to accom- would be reluctant to pay higher modate an influx of aliens? In my prices for certain products merely belief, this question must be an- ===== PAGE 58 ===== 56 THE FREEMAN January swered in the negative. The pro- expansion, deficit spending, or jected freedom of migration with- both. Another government may en- in the Economic Union, therefore, deavor to stabilize its currency is illusory like many other provi- through hard-money policies. The sions of the Treaty. former soon will lose its foreign The two investment funds for exchange reserves, the latter will the advancement of less developed accumulate them. A foreign ex- areas will face similar nationalis- change imbalance will arise. Judg- tic resistance. Bearing in mind the ing from past experience, the for- present pressure for government eign exchange shortage probably spending and the resultant govern- will be met with foreign exchange ment deficits, will any government controls, import quotas, and other be willing to contribute to a fund trade restrictions against foreign for the development of a “less de- countries, including the Commun- - veloped” area in another country? ity countries. a - Will the Germans consent to their A coordination of fiscal policies money being spent on the develop- — spending and taxation — would ment of French territories, or the require a readjustment of the French willingly contribute to- whole economy. For economic pro- ward the development of Italy? It duction always adjusts to a given is more likely that the German tax structure. One can readily contribution will be used in “less imagine the public protest and po- developed” German areas, the litical pressure by those people French contributions in France, who would be hurt by a tax coor- and so on. dination. It is unrealistic to as- sume that a Frenchman would Conflicting Monetary Policies consent to new or higher taxes Also, the planned coordination merely to be coordinated with Ger- of monetary and fiscal policies will man taxpayers, or vice versa. probably meet failure because of The foreign aspect of state in- national policies in these matters. tervention is economic nationalism The various member governments which constitutes a continuous tend to expand credit in various source of international conflict. degrees. Depending on the state of Two interventionist systems can- business, on unemployment, on the not be coordinated unless the co- desire for growth, or on mere po- ordination is accompanied by a litical considerations, one govern- political unification. The latter, ment will want to “stimulate” its however, would necessitate a radi- national economy through credit cal change of national policies and ===== PAGE 59 ===== 1960 THE EUROPEAN ECONOMIC COMMUNITY 57 a painful economic readjustment. really want the freedom to trade? It is unlikely that anything but Let each one abolish its own tar- brute force could bring this about. iffs, quotas, foreign exchange con- And a political and economic uni- trols, and other governmental re- fication through force would in strictions. There is no need for turn generate other powerful concerted action. The country that forces that soon would cause dis- would adopt free trade first would integration. benefit immediately. Its economic growth and prosperity would show Free Trade Needs No Agreements the way for others to follow. EEC as a supranational union International agreements tend for central planning must be ex- to hold back the nations most pected to meet with failure. But eager to re-establish the freedom EEC also reflects the growing rec- to trade. The member state most ognition that economic progress reluctant to abandon its controls and prosperity require foreign and restrictions most likely sets trade and markets. This laudable the pace for the projected trade recognition points toward the only liberalization. And all other gov- conceivable future for the Com- ernments then have a welcome ex- munity. As a supranational orga- cuse for a continuation of their nization for the reduction of trade restrictions “because this or that barriers, EEC could indeed be the other government does not partici- forerunner of a growing free pate.” Thus, international agree- trade area. ments tend to shift the responsi- But, are international agree- bility for governmental controls ments and supranational organi- from one country to another and zations necessary for achieving therefore perpetuate them. And free trade? Why do not the mem- this omninous tendency, built into ber governments merely abolish the European Economic Commun- their trade restrictions if they ity, precludes its success. ~ IT IS A maxim founded on the universal experience of mankind that no nation is to be trusted farther than it is bound by its interest. . . GEORGE WASHINGTON Letter to Henry Laurens, 1778 ===== PAGE 60 ===== A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN THE “LIBERALS” of the Brandeis today, are few and far between. It generation were firmly convinced is the small unit — the cotton and that Bigness (which they usually wheat and peanut farmer, the spelled with a capital B) was a building trades contractor with a “curse.” It was a curse because it ‘‘deal” at City Hall — that shelters tended to concentrate power. And itself today behind the strong arm it was a curse because it resulted of the law. And it is the govern- in sluggishness and inefficiency. ment-fostered multi-company labor The Brandeiseans generalized union, not the big manufacturer, from the facts around them. But that can successfully fix the price at this point in time one can see of what it has to offer in the mar- that they generalized altogether ket place. too hastily. They didn’t distinguish The distinctions that tended to sharply between two types of pow- escape the Brandeisean generation er. The big economic unit that op- are uppermost in three recent erated on its own, without govern- books that zero in on the subject ment support in the way of sub- of business size. To Chairman sidies, tariffs, or police protection Roger Blough of the United States for “rackets,” could hardly be Steel Corporation, whose Free Man vicious. To the extent that it and the Corporation (McGraw- served the public, by attracting Hill, 126 pp., $4.50) grew out of a good workers and by dispensing series of McKinsey Foundation useful products at a low price, it lectures delivered at the Colum- was a blessing. To the extent that bia University Graduate School of it became sluggish and inefficient, Business, the “voluntary associa- it was bound to yield ground to tion,” no matter how big, can the lean, hard newcomer in the hardly do wrong for very long field. without losing the sanctions that On the other hand, the big eco- have attracted people to it. To nomic unit that acted with the James C. Worthy, vice-president of power of government behind it Sears, Roebuck and Co., author of could be a menace. But such units, Big Business and Free Men (Har- 58 ===== PAGE 61 ===== 1960 WHERE “BIGNESS’’ IS A BLESSING 59 per, 205 pp., $4.00), the big busi- birds. Though good for organiza- ness that departs from “human tions, these are not stereotyped values” will find it cannot operate “organization men.” in the predominantly ethical Amer- Among the individualistic ty- ican atmosphere. And to Osborn coons interviewed by Mr. Elliott, Elliott, the managing editor of U.S. Steel's Roger Blough emerges Newsweek who interviewed some as a very gentle scholar. Time was two hundred businessmen for his when U. S. Steel — the “corpora- Men at the Top (Harper, 320 pp., tion”'—did seem to prove the $3.95), the big corporation “ty- Brandeisean contention that big- coon” is such a various, individ- ness must result in sluggishness. ualistic, and unpredictable animal Where it once did two-thirds of that it would be senseless to imag- the nation’s business in steel, it ine any large number of his spe- slowly permitted its competitors cies having the docility that is — Bethlehem, Republic, and the needed to concert a conspiratorial rest — to cut themselves bigger and action. bigger pieces of the total steel pie. While the “corporation” may have done this purposefully, with Mr. Elliott’s book is, for the one eye cocked on the antitrust most part, a what-do-they-eat,how- watchdogs in the Department of do-they-talk, where-did-they-come- Justice, the slide could have be- from study in human interest. It come disastrous if it had become yields few generalizations other a habit. But Bigness, in the case than the big one that the Ameri- of U. S. Steel, proved capable of can businessman is far from a developing its own internal anti- standardized product. For exam- bodies. And one of these anti- ple, if Mills Lane of Atlanta, bodies was Roger Blough, the Georgia, president of the biggest farmer, schoolteacher, and lawyer bank in the Southeast, wants to who specializes in the soft ap- beat a competitor into a new terri- proach. tory, he will open up an office in a log cabin while his own architects 4A Big Service are busy with the blueprints for a In his own “soft-sell” book Mr. more permanent building. And Blough argues that the American when Crawford Greenewalt, presi- corporation, like any other volun- dent of du Pont, wants to amuse tary association, can prosper only himself, he is apt to sneak off with as it serves the purposes of those a camera to photograph humming who freely join it — or who freely Unstandardized Businessmen ===== PAGE 62 ===== 60 THE FREEMAN January buy the products it offers. If it of the business pyramid, the prof- does not pay good dividends, it its of the big corporations have will not attract investors. If it represented a declining share of does not provide its workers with our national income during the good “labor-extending’” tools and past thirty years. As for the steel make them happy while using business itself, U. S. Steel has in- them, it will tend to lose its good creased its capacity more than men to competitors both inside and two-and-one-half times in a half- outside its own type of business. century. But during this same If it does not watch its pricing fifty-year span, the competitors of policy, it will soon discover that TU. S. Steel have multiplied their German and Belgian steelmakers, capacity nearly seven times. say, are taking its barbed wire or U. S. Steel, under Roger Blough, tinplate customers away from it. has coped with the problem of in- And if it does not support higher ternal bigness by centralizing its education, it may find itself with policy-making and by decentral- a deficient supply of technicians izing its administration and its and executives in the coming gen- operations. And it has sought to eration. give its individual workers a feel- Mr. Blough is not impressed ing of both creativity and safety with the argument that the big within the organization, mean- must inevitably eat up the small while leaving them alone to be as our industrial development goes ‘citizen men” as they see fit out- its merry way. As he notes, there side of their working hours. are 4.3 million “production groups” All of which brings Mr. Blough of all sizes in the U. S. These “vol- very gingerly to the topic of the untary productive groups’ have'at big compulsory multi-company least 13 million individual owners union. The multi-company union, who are either stockholders or he says, tends to ignore “the need proprietors. Some 900,000 of the for a production unit to compete 4.3 million “production groups” as a cohesive whole.” Where some are incorporated. Each year wit- companies have a productivity that nesses a weeding out of the more would enable them to pay higher inefficient production groups; in wages and still compete “as a 1957, for example, 332,000 units whole,” it does not follow that all shut up shop. But in the same companies can meet the same wage year 365,000 new groups came scale, particularly in a period when “in.” With the continued forma- prices can no longer be pushed tion of small units at the bottom higher with impunity. ===== PAGE 63 ===== 1960 WHERE “BIGNESS’’ IS A BLESSING 61 The Ethics of Mass Marketing ing — or, rather, “labor-extending” Mr. Worthy’s Big Business and — devices. As our ‘cost of labor” Free Men is similar to Mr. Blough’s went down because of ‘“labor-ex- book in its general outline. But, tending” tools, individual wages where Mr. Blough tends to illus- rose. And the mass market became trate his points by citing examples a possibility. from the steel industry, Mr. Mr. Worthy is critical of the Worthy. ranges all over the lot, “scientific management’ movement drawing on his own experience in because of its distrust of sponta- the Department of Commerce and neity. He thinks that managerial from a wide acquaintance with paternalism, trade unionism, and management literature. He argues the Welfare State are all manifes- that American industry developed tations of the same animus against in a certain moral climate, and individual responsibility and cre- that it must stick to “Judeo-Chris- ativity. He supports the profit- tian” concepts if it is to prosper. sharing plan of his own company, The “mass market,” he says, is an Sears, Roebuck, not for reasons of ethical concept even more than it economics or charity, but because is an economic; it rests on the of its symbolic value; it generalizes notion that everybody ought to an “attitude of pride” throughout consume. “The American factory the organization, and thus serves system,” he says by way of am- as a morale-building cement. The plification, “grew up within an important thing about the “pride economy in which workers, con- generalizing” device, he says, is sumers, and the public were all the neither “technique” nor “ritual.” same people.” It was not so in It is the “spirit” behind it. Dif- England, where the workers lived ferent companies will use different in Manchester and the consumers devices, but every company must and the “public” might be in India, find some workable pride-creating in Buenos Aires, or in Timbuktu. “symbol” if it hopes to live in a Another - difference between time when the big multi-company England and America resided in union stands ready to exploit any the nature of the labor market it- manifestation of employee dis- self. Because of the scarcity of satisfaction. workers in America, we had to Mr. Worthy proclaims himself make “better use of the limited an anti-conservative, but it is note- supply of technically trained peo- worthy that his own type of liber- ple.” To “spread these people alism is not that of most self-pro- thinner,” we developed labor-sav- claimed liberals of the modern ===== PAGE 64 ===== 62 THE FREEMAN January breed, who are pushovers for stat- ernment and the people who count ist solutions. For example, Mr. in public affairs recognize and re- Worthy would tackle unemploy- spect, and that it is constantly ment not by federal “tax and changing. The second is a refine- spend” methods but by modifying ment of the first. The author ac- the tax laws to “encourage capital cepts the statement of Chief Jus- formation.” The businessman’s ef- tice Charles Evans Hughes that in fort, he says, “should be directed a great majority of cases the Con- toward finding or developing” non- stitution means what the Supreme governmental solutions wherever Court says it means. So Pritchett possible, and “applying them with has written a book to show how vigor and effectiveness.” As a pro- the Supreme Court has inter- fessional public relations man, Mr. preted the Constitution. Worthy is perhaps overimpressed If we could give full faith and with the uses of semantics. But credit to these assumptions, there when he calls on businessmen to would be little to quarrel with in show “greater initiative in putting this book on the Constitution. Us- forth proposals” of their own in- ing the approach of constitutional stead of waiting to react “to the law rather than constitutional his- proposals of others,” he is not be- tory, the author has done an ex- ing semantical, he is being prac- cellent job of showing how the tical. Action, after all, is the best Supreme Court has interpreted public relations. « the Constitution. After a brief history of the background and ) THE AMERICAN CONSTITU- adoption of the Constitution, TION By Herman Pritchett. New Pritchett concerns himself wit . the structure and powers of the York: McGraw-Hill Book Com- ;,.titutions which make up the pany. 719 pp. $10.75. . federal system—national and state PROFESSOR PRITCHETT has based governments, the judiciary, the his book on two fundamental as- legislature, and the “executive — sumptions. The first is the state- and with the constitutional limita- ment by Charles and William tions on national and state powers. Beard (opposite p. vii) that the The book will be extremely valu- theory that the Constitution is a able to students of both constitu- written document is a legal fic- tional history and constitutional tion, that it cannot be understood law, especially the latter. There by a study of its language and are few problems in constitutional history, that it is what the gov- law that have not been treated ===== PAGE 65 ===== 1960 OTHER BOOKS 63 fully. The historians will probably acts, and the governors in partic- wish that more constitutional his- ular often complained of the re- tory had been included; but in straints imposed on them by co- spite of the author’s contention lonial constitutions. The Revolu- that “the historian cannot re- tion simply allowed Americans to create history and often cannot do without interference what they even explain it,” he has relied had been accustomed to do. heavily on constitutional histori- Secondly, natural rights before ans for his background. This could the Revolution were “life, liberty, not be otherwise, since all knowl- and property,” not “life, liberty, edge is in a sense historical knowl- and the pursuit of happiness” as edge, and since all the cases that Jefferson said in the Declaration have come before the courts have of Independence. He who leaves involved historical investigation. out the protection of property as Granting that the book is valu- a major function of government able does not mean it should not will not understand American so- be read critically. I should like to ciety before 1787 nor the Consti- comment first on the historical tution. A constitution that did not aspects of the work, where I am protect property would never have most competent to judge, and then been adopted. raise some questions about the Thirdly, the struggle over rati- philosophical basis of the book. fication of the Constitution might In Part I dealing with the for- have been bitter among the lead- ‘mation of the Constitution are to ers of the opposing factions, but it be found some errors that give us was not very bitter among the an erroneous conception of the people. A great majority of the Constitution. Unfortunately, Prit- people were either indifferent or chett probably acquired these er- approved of the Constitution. We rors from historians. must remember that as far as we For one thing, the French and can now judge, the Constitution American Revolutions did not in- won a greater popular majority troduce the idea of a written con- than that enjoyed by Roosevelt in stitution, at least not in this coun- 1936 or Eisenhower in 1952. And try. Colonists had long considered if the large number who failed to their charters as written constitu- vote had been very bitter, they tions which safeguarded basic probably would have voted against principles. Assemblies and gov- the Constitution. ernors both consulted these docu- Uncritical reliance on uncritical ments to find sanction for their historians has led the author into ===== PAGE 66 ===== 64 THE FREEMAN January contradictions. He would have us are guided only by interests, not believe (p. 10) that colonial soci- by principles. From this it follows ety was undemocratic because the naturally that fascists and com- lower classes were generally ex- munists have a perfectly valid ar- cluded from political life by prop- gument for opposing the Consti- erty and religious qualifications tution by any effective means, for voting. Then we are to believe since by becoming the important that the new state constitutions people, they can rightfully say after 1776 violated the democratic what the Constitution is. Does not principles of the Declaration of such a concept of the Constitution Independence by retaining these leave us afloat on a boundless and qualifications. Yet the state legis- turbulent sea without either com- latures, undemocratically elected pass or rudder? by a restricted electorate of prop- I doubt very much that this has erty owners, were the cause of the actually been the philosophical move for the Constitution (p. 12). basis for our constitutional devel- But on page 29, the author tells us opment. If it is true that the Con- that “property qualifications for stitution is what the Supreme voting excluded few from the polls, Court says it is, it is equally true and that the Constitution was that the members of the Court adopted by people who were pri- must read the Constitution very marily middle-class property own- carefully and are greatly restricted ers, including farmers.” We will in their actions by what they find not properly understand American there. If the President and Con- constitutional development before gress are constantly changing the 1789 until we realize that it took Constitution, they, too, do so under place in a society composed largely its restraining influence. But when of property owners who could vote. the score is added up, and in spite A final criticism has to do with of the many deviations, the funda- the philosophical assumptions of mental principles still confronting the author. Have we reached the the Supreme Court in its interpre- point of accepting the Beard gen- tation of the Constitution are the eralization that the written docu- protection of life, liberty, and ment itself means nothing and that property. ROBERT E. BROWN all that matters is what the im- ——— ortant people really consider to Professor Brown is in the Department of bo the Constitution? If we have, the other of Chaos Doned ant a Comite . tion: A Critical Analysis of “An Economic then we are confessing that we Analysis of the Constitution.” ===== PAGE 67 ===== regulation, excessive taxation, and from expropriation by government —and government should be so ordered that these desirable con- ditions can be depended upon to exist over a long period of time. From the wellsprings of private property and the free enterprises which it supports spring forth all the ingenious and benevolent un- dertakings with which our country is so generously blessed. Our churches are free enter- prises! So are our private schools and hospitals. Individuals in whatever kind of free enterprise they find them- selves should help those in other kinds defend the freedoms which make their undertakings possible. A free enterprise need not be for profit to its owners (though such an organization is one of the finest examples of free enter- FREE ENTERPRISES are the things prise). The purpose can be any- free people undertake to do—as thing its owners choose for a pur- individuals or in groups. pose — except the destruction of, Before a free enterprise can be oy infringement on, the freedoms undertaken, certain basic human pon which the lives of all free rights must exist and be pro- enterprises depend. tected. The most fundamental of What is “free enterprise”? It these is the human right to the j5 the means used by free people fruits of one’s own labor — private provide for their wants and property. their needs — the only means which This right should exist with as has demonstrated its ability to few restrictions as possible: there provide these things abundantly. should be freedom from excessive [ts endless variety is simply a cee 2] —_— . measure of how uncommon a man Mr. Wood is President of Wood Brothers Man- ufacturing Company, Oregon, Illinois. can be! 5 ===== PAGE 68 =====