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

THE

[eellld

AUGUST 1960 I aa

IDEAS ON LIBERTY

I .

3

How ToWinaWar . . . . . . . . EdLlipscomb 3
A Matter of Common Interest. . . . . Paull. Poirot 14
Commentson inflation. . . . . . . Henry Hazlitt 18
Henry Vill Revisited . . . . . . . Business Review 2
Freedom of Choice . . . . . : . . Arthur Kemp 27
Mass Immunization . . . . . . . . A. Wayne Elsten 30
Subsidized Doctoring . . . . . . . H. P.B. Jenkins 35
The Profit Motive . . . . . . . . Sir Ernest Benn 36
Education and the Market . . . . . . Oscar W. Cooley 53

Book Reviews:
b Behind the Constitution . . . . . . John Chamberlain 57

Other Books . . . . . . . . . . 61

an THE FOUNDATION
FILE FOR ECONOMIC EDUCATION, INC.

Irvington-on-Hudson, New York



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

Modern, all-electric Medallion Home in Tampa, Florida

YOUR NATION OF LIGHT...

40% of all the electricity in the world is used in the U.S., most of it supplied by

One of America’s wonders to foreign visi- The independent electric companies
tors is the wealth of electric power that that turn out over 34 of America’s elec-
we put to work in our homes, on our tricity have doubled the supply every ten
farms, in our jobs. years, and are building now to double it
We use more light and power than the again in the next ten. And because they
next six nations together —three times as and their millions of owners will put up
much as the Russians—and we keep on the money for the new plants and lines,
using more all the time. On the average, You won’t be taxed to pay for them.

you use twice as much as you did just ten These hundreds of companies are ready
years ago and pay 16% less for it per and able to supply all the low-price power
kilowatt-hour. people can conceivably need in the future.

Ore dock, Ashtabula, Ohio. Time exposure shows
streaks from moving lights on loading machinery. Electrified farm, Valley Center, Kansas



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

| Oil refineries at Port Arthur, Texas

AND POWER!

hundreds of independent electric companies

Big-city skyscrapers, New York

This means there is no need for the fed-
eral government to build any more electric
systems that all Americans would be taxed
to pay for.

You can get more facts and figures about
this in a new, free booklet. Write for “Who
Pays?” to Power Companies, Room 1114-Q,
1271 Ave. of the Americas,New York 20,N.Y.

} AMERICA’S INDEPENDENT
ELECTRIC LIGHT AND POWER COMPANIES

Company names on request through this magazine

Nu-Pike Fun Park, Long Beach, California



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

THE

Tecmdn A MONTHLY JOURNAL OF IDEAS ON LIBERTY

AUGUST 1960 Vol. 10 No. 8

LEONARD E. READ President, Foundation for
Economic Education

PAUL L. PoIroT Managing Editor

THE FREEMAN is published monthly by the
Foundation for Economic Education, Inc., a non-
political, nonprofit educational champion of private
property, the free market, the profit and loss system,
and limited government, founded in 1946, with offices
at Irvington-on-Hudson, New York. Any interested
person may receive its publications for the asking.
The costs of Foundation projects and services, in-
cluding THE FREEMAN, are met through volun-
tary donations. Total expenses average $12.00 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, postpald, 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 ‘Comments on
Inflation,” ‘Freedom of Choice,” and “The Profit Motive.”

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


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

How to WIN a War

Ep LIPSCOMB

IF ALL THE WORDS which have been are doing with it. Intelligent ap-
written and spoken about the Cold praisal, however, is extremely diffi-
War with Russia could be placed cult. Consider the matter of Rus-
end to end, they probably would sia’s actual strength. I know, of
match the length of an average course, that the Communists have
satellite’s orbit. been making imposing claims, but
Every newspaper you read, every I also know that with Communists
newscast you hear, gives the Cold it is a matter of fundamental prin-
War day-to-day attention. Authors ciple to lie. They have emphasized
write books about it; politicians in their party literature since the
issue statements about it; and men days of Karl Marx that “truth” is
on public platforms bring it into anything which promotes the cause
every presentation, of communism. Evasion or denial
The reason is simple. Here is an of unwanted facts and the inven-
international conflict which every- tion of plausible replacements for
one agrees will determine the na- them are considered to be proof of
ture of civilization and the condi- patriotism rather than of perfidy.
tions of human life for generations I know that the Soviets have
to come. From the standpoint of launched some satellites, and that
the United States, we must either strategically their progress here
win this war or witness the death has been impressive; but I also
of our nation. have read that their moon shot
I wish I could tell you how we was so arranged that no reputable
tracking station could confirm or

Mr. Lipscomb is Director of Public Relations deny they even tried one; and 1

and Sales Promotion of the National Cotton . .
Council of America. find that a responsible professional

3


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

4 ) THE FREEMAN August

says their moon photographs are one would have to conclude that
entirely a hoax. I know that their we are years behind in missiles,
missiles are a fearful menace, and that our strategic air force is ar-
am confident they fired a big one chaie, that our warships are sit-
into the Pacific, but again their ting ducks, and that in general our
claims of power and accuracy must position is dangerous and deplor-
be accepted or rejected on com- able.
munist word alone. Yet I have heard the Chief of
Surely they have large jets, Naval Operations assure a group
since such a plane brought Khru- of officers that we are. capable of
shchev here; yet I understand that destroying 70 per cent of the total
no airline in the world has ordered population of Russia within 24
one for its own use, which sug- hours; and I have heard another
gests that a major aviation official admiral say that he was criticized
was correct when he said that by a congressional committee for
these planes are too inefficient and insisting that we already have all
uneconomical for serious consid- the submarines we could possibly
eration. a use for the destruction of enemy
They beat their chests and boast shipping.
that they are going to overtake us Adding to the difficulty of intel-
in industrial production, with all ligent appraisal by folks like you
the military capability this sug- and me is the soap opera atmos-
gests; but even their own figures phere of overdramatization which
show that despite claims of mech- has become standard procedure
anization, it still takes one farmer with most of our editorial frater-
to feed himself and one other man, nity. The newscaster must get con-
whereas an American farmer feeds troversy into his program, even to

himself and twenty-two. : his tone of voice; and daily head-

lines must stir the emotions

How Strong Are We? whether anything of importance
It is almost as difficult to feel has happened or not.

reasonably intelligent concerning When I add up the speeches and

our own military strength. Judged statements, the reports in print
on the basis of speeches by Sena- and on the air, a limited amount
tors and Congressmen trying to of actual knowledge, and consider- .
make political capital out of the able thought and study, I still
defense issue —or statements from must admit my earlier statement
military officials seeking larger ap- that I simply cannot give you a
propriations and greater control — very intelligent appraisal of our


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

1960 HOW TO WIN A WAR 5

current status in this fateful con- come so afraid of Moscow that we
flict with communism that means are not sufficiently afraid of Wash-
national survival or servitude for ington. Ce

us all. - This is the war which every ma-
jor communist leader has pre-
On the Home Front dicted we would lose, and in losing

I can, however, tell you posi- it insure our national destruction.
tively how we can win it —the Marx, Lenin, Stalin — even Khru-
only way we can win it — and it is shchev as late as his visit last
not merely by appropriating more year — all have declared again and
billions for defense, or even by again that this would be the pat-
insisting that we get as much de- tern of our disappearance as a
fense as we already are paying for. world power.

We can win it only by winning a I said I could not tell you much
second war — a decisive war — that about how we are doing in the
is. going on inside our own boun- military race with Russia. I find
daries. It is a war between forces no such problem in connection
which would keep us powerful by with the war here at home. We are
maintaining the initiative, the in- losing it. Let me call your atten-
dependence, and the self-respect of tion to just three areas of evi-
our individual citizens, and forces dence. -
which through exaltation of the
godhood of the group would assure We March Toward Insolvency
the economic cataclysm and accom- First is our over-all trend. All
panying ideological collapse on of us know that it is definitely and
which our foreign enemy depends rapidly in the exact direction our
to leave us and our allies incapable communist opponents have so

of successful resistance. often insisted would bring our
Amazingly, we tend to under- total defeat.
emphasize the relationship be- The trend, for example, is toward

tween the intercontinental Cold national insolvency. We take coun-
War and the conflict within our terfeit comfort in the fact that we
own country. We have become so are staying within a so-called
conscious of comparisons in mili- “temporary” debt limit of $295
tary strength and international in- billion — a limit that recently was
fluence that we fail to follow the raised three times in one year.
signs and significance of our vic- There is irony, almost cynicism,
tories and defeats on a far more however, in the fact that this is
important front. We tend to be- merely the acknowledged debt. Our


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

6 ‘ THE FREEMAN August

real federal debt — in the form of ing of others by steep increases in
fixed obligations already definitely imports from abroad.

established — amounts to $750 bil- You know the story — in sewing
lion. machines, in electronic equipment,

Even if we accept the acknowl- in office machines. You know that
edged figure, then add the debts of half the barbed wire and half the
state and local governments, and plywood used by the entire Ameri-
finally private debts, we come out can market now come from over-
with a total equivalent to approxi- seas. You know that imports of
mately twice the current market cotton textiles have increased 216
value of every single tangible as- per cent in five years, and that
set in the United States —the foreign steel is coming into Cleve-
land, the mines, factories, machin- land at $55.00 a ton less than the
ery, office buildings, residences, price of steel produced right there
livestock . . . everything. in the same city.

You would think that such a fi- You would think that the leader-
nancial situation — plus the warn- ship of American labor would be
ing inherent in the loss of half the alarmed. Yet the recent bitter steel
purchasing power of our money — strike was settled on the basis of
plus the fact that foreign coun- a wage increase which, if applied
tries are now holding 17 billion to all. employed persons in the
liquid dollars, half of them subject country, would raise the total cost
to demand in gold — plus the fact of domestically produced goods
that the federal budget contains and services more than $45 billion
built-in increases exceeding $2 bil- a year. )
lion for the year ahead — would
lead to some sort of serious con- Decay of Personal Incentive

cern for economy. The trend also is toward destruc-
On the contrary, in the last ses- tion of incentive.
sion of Congress, there were A man of exceptional competence

twenty major bills introduced and ability finds that the more
which alone would have added be- hours he works the less he earns
tween $50 and $60 billion a year per hour of effort, until he reaches
to the present total of federal the point where he can keep less

spending. than one-tenth of each additional
Our slide toward insolvency is dollar.
being given further impetus by The investor in corporate equi-

the flight of some of our industries ties finds that half his profits are
to foreign lands, and the weaken- absorbed before he sees them and


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

1960 HOW TO WIN A WAR BE

that a further major portion must the design for the nursemaid state
be surrendered after that. —the plan for government by
The factory worker finds that if fairy godmother — the promise of
he exceeds the approved rate of heaven-on-earth through ballots
production, he is disciplined by his cast on Capitol Hill. We are fami-
union or frowned upon by his fel- liar with the philosophy that the
lows, and that his progress de- answer to every difficulty is more
pends on the passage of time legislation or larger figures in ap-
rather than on his energy, his in- propriations bills —that all we
telligence, or the merit of his per- need to do is turn over our prob-
formance. lems, our pay checks, and our inde-
The man who works intermit- pendence to political agents, and
tently qualifies for public compen- everything we should have will be
sation between jobs. If his earn- provided.
ings are small enough, he qualifies Under such a philosophy, we
for admission into a communal have seen federal outlays for ci-
housing unit. If he stops work at vilian programs increase 83 per
65, regardless of health and abil- cent in six years of a so-called con-
ity, he qualifies for Social Security servative Administration; and we
payments. already have reached the point
From the mental anesthesia of where 40 million people — who
the television screen to the use of with their families account for
ever-greater leisure for the mod- roughly half our total population
ern equivalents of stick-whittling — now receive checks from the na-
and cracker-barrel-sitting, we see tional treasury.
around us a glorification of medi-
ocrity and deification of the un- A Vested Interest in Conflict
productive which reflect loss of in- The trend, then — the trend
tellectual ambition, decline of cru- toward national insolvency, toward
sading spirit, and decay of per- destruction of personal incentive,

sonal incentive. toward accomplished but unadmit-
ted socialization and regimenta-
Political Paternalism tion — this is a major reason for

The trend also is toward per- serious, even desperate, concern
petual programs of private life by over our home-front war for sur-
public plan. vival.

Again and again we have seen A second reason is one we do
the whole sorry story of political not hear much about. It is the ex-
paternalism paraded before us — tent of our vested interest in a


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

8 THE FREEMAN August

high level of international tension, entists would no longer be justi-
and in the waste and extravagance fied.
that accompany it. The connection Think of industry — the con-
between our posture of prosperity tracts for airplanes, missile parts,
and a continuation of Russian guns, and equipment — the con-
sword-rattling is so obvious that I tracts for military construction,
* have wondered at times why the housing units, and a multibillion-
coyotes of the Kremlin do not seri- dollar highway system promoted
ously array themselves in sheep’s in the name of defense mobility —
clothing, agree to drastic disarma- the contracts for building ships
ment, abandonment of any form and submarines, and even for
of aggression, and establishment sirens in every city.
of an international atmosphere of Think of labor — the political de-
peace and serenity. Certainly I can mands of the unemployed — the
think of no quicker or surer way quick absorption or bankruptcy of
in which they could throw us into public compensation funds — wage
the financial -tizzy and tail spin scales no longer buttressed by
they so greatly desire. high-priced military buying.
Think about these vested inter- If the economic impact of peace
ests for a moment. The most did not bring promptly the full fi-
powerful, perhaps, is the interest nancial cataclysm Mr. Khrushchev
of our bureaucracy — the hundreds predicts, he would need only to
of thousands of officials and clerks wait a little longer while we
required to give away billions of adopted emergency boondoggling
dollars, prepare multitudinous pro- measures, arranged for displaced
grams, and operate all manner of civil servants and industrial casu-
red tape in the much-maligned alties to be put on public or sub-
name of defense. In a wholly re- sidized payrolls, and brought our
laxed atmosphere, what would hap- national budget back near its pres-
pen to military aid for our allies, ent level. Here would be the mo-
the bulging State Department, the ment in history for him and his
Office of Civil Defense, and the friends to throw off their sheep’s
most extensive peacetime fighting attire and revert to wolfhood, so
establishment we have ever sought that we in turn would undertake
to maintain? Half the federal bud- to pile another major defense pro-
get, more than half our federal em- gram on top of our newly-achieved
ployees, and arguments for every- socialistic utopia, with an outcome
thing from subsidized bomb shelt- he could readily depend upon.
ers to subsidized training for sci- The point here, however, is not


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

1960 HOW TO WIN A WAR 9

to speculate on possibilities, but to community or puts a few tempo-
express the conviction that the rary extra dollars into his personal
tremendous vested interest of in- pocket.

fluential and important American I can cite you illustration after
groups in the maintenance of in- illustration, and you can add more
ternational tension — and the part from your own experience, of the
which that interest plays in giv- howls that go up when a man faces
ing our economy a hue of rosiness the specific application, to his own
— is a second reason for concern pocketbook, of the very principles

on the domestic front. of national strength to which he
} . claims allegiance.
Matching Our Words with Deeds Try to close a military installa-

A third and tremendously sig- tion because of the economies
nificant reason why I say we are which can be made by consolidat-
losing the home war is that prac- ing it with one in another area —
tically nobody is fighting wholly, try to cut a subsidy of any kind —
sincerely, and unreservedly on the try to eliminate the expense of
side of the forces that would keep federal involvement in real estate
us strong. Our defense is depend- mortgages, or pork-barrel proj-
ent largely on men and groups who ects, or loans at less than cost —
either fight on one side one day try even to merge two offices in the
and the other the next, or who same city if the merger reduces
fight with one hand while accept- payrolls . . . and you will hear
ing bribes from the opposition screams from sources that range
with the other. Since such divided from corporation heads and bank
loyalty invites defeat, I want to presidents to the lowliest tenants
explain exactly what I mean. of public apartments, depending

If you will ask around, you will entirely on who is personally
find that practically everybody is touched.
opposed to national insolvency, to I would like to make a state-
destruction of incentive, and to ment here which I want you to
political domination of private and correct, if I am wrong. I do not
economic life. You will find that know of a single businessmen’s or-
he is opposed to pre-emptive stat- ganization, of any kind, which
ism, and to the fiscal irresponsi- customarily passes resolutions on
bility that can bring it upon us. At public policies, whose record will
least he will say he is, and the not reveal support for programs
chances are he really is — except or projects which are part of our
the part that applies to his own trend toward defeat.


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

10 THE FREEMAN August

Here, then, are three reasons it only, if you and I and others
for solid conviction that as of this like us can win still another war —
moment we are losing, and losing a third war. It is the war which
at a fearsome pace, the second each one of us must fight inside
war — the domestic war —on which himself.
the outcome of the Cold War de- We may not have thought about
pends: (1) the trend toward ex- it much — we may balk at even ad-
actly the conditions which our mitting it — but inside each of us,
mortal enemies have predicted way down where we really live,
would bring our defeat; (2) the there is going on a personal minia-
vested interest of large and influ- ture of the domestic war I have
ential groups in the perpetuation just described. It is a war to deter-
of international tension; (3) the mine which side we are really on

absence of sincere, honest, whole- —not which side we say we are
hearted support for the simple on, but the side we really support.
principles and practical policies Here is a war where it is impos-
that would keep us strong. sible for you or me to be specta-

tors or bystanders. It is impossible
The War Inside Each of Us even to be neutral, for we our-

The most vital question which selves are the battleground. Our
confronts us, however, is not that decisions, and ours only, will de-
of losses already sustained in this termine the outcome,
second war, or even the question Arrayed on one front in this
of our current status, but the all- personal war is a tremendous
decisive question, “Can we win force of animal inclinations and
it?” natural desires — the appeal of im-

If we can, and if we do — if we mediate benefits, business advan-
are truly victorious here — we will tages, or personal profits from
defeat foreign Communists and political programs. Here also is the
international gangsters on any power of inertia. Here is reluc-
front they choose, be it military, tance to get involved. Here is
economic, diplomatic, ideological, temptation to kid ourselves into
or what you please. We will con- believing that just one man doesn’t
found the hopes and contradict the make any difference — or that be-
prophecies of our enemies, and cause we don’t get a direct dole or
earn the respect and admiration of handout every month we are not
our friends. a part of the problem — or even

How, then, can we win this sec- that we and our fellow-Americans
ond war? We can win it, and win are somehow immune to the age-


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

1960 HOW TO WIN A WAR 11

old and unchangeable law of cause perance lecturer who gets drunk is
and effect. a greater liability to his cause
On the other side are our con- than is the admitted barfly, so the
- science, our judgment, and our businessman who preaches free
knowledge that throughout all his- enterprise while he participates in
tory no nation has ever survived programs of political intervention
which continued much farther is a greater liability than the ad-
than we already have come down mitted socialist.
the road we are traveling. You can join the WCTU, vote
Neither I nor any other man can for prohibition, circulate resolu-
tell you how you are coming along tions to close liquor stores, and
with your own personal war. I wear a tall black hat and swallow-
can, however, tell you how you can tailed coat complete with cane,
win it, and in winning it achieve but your neighbor still will not
personal invincibility which no think you believe in temperance if
amount of legislation can bring, he sees you staggering around
and no amount of persecution by your yard or patio at cocktail time.
either fellow-citizens or outsiders You cannot convince him that you

can overthrow. are opposed to statism if you sup-
. port resolutions calling for federal
Practice What We Believe funds for local projects, or make

First, you can practice what him think you believe in individual
you profess to believe. You can freedom and independence if you
apply in private and business-life expect Washington to underwrite,
the principles you publicly es- directly or indirectly, your personal
pouse. Three out of every four or business risks.
average Americans, when asked Unless you and I are willing to
about the principles they support, fight and win this very first battle,
will give the answers which you all three of the wars I have men-
and I know to be right. Among tioned are already lost as far as
businessmen, the figure is more we personally are concerned.
likely to be 4 out of 4.

Hence, I say that the first battle We Can Help Those Around Us
you and I must win is to practice The second thing you can do is
what we profess to believe. To do to initiate, in your own particular
otherwise means not only to lose area of influence and knowledge —
our personal war, but through our be it large or small — a conscious
hypocrisy to influence others to effort to help those about you to
lose theirs also. Just as the tem- win their personal wars also.


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

12 THE FREEMAN August

You and I may not be able to the completeness of our personal
do a thing about the personal wars victories and the amount of en-
of people in distant places. We may thusiasm with which that conquest
not be able to help everyone in inspires us. Not many are needed -
our own state, or even our home if we are sufficiently on fire. Karl
town. But there is not one of us Marx, one-man, was a misan-
who cannot be effective, both by thropic ne’er-do-well. Saint Paul

F====ggxample-vand by precept,r-among~+was-anpuny epileptic 0x, OLher wise rms
the people we see and talk to every physically handicapped man. Hit-
day. ler was a psychopathic paper

How much good will you be able hanger in Austria. Certainly no
to do individually? I do not know, reader of these words would
but I know that neither you nor I consider himself inferior to any
nor any other man on earth can do of them — or to any of the twelve
anything except individually. I whom Christ himself assembled —
further know that we cannot wash before these became dedicated
out our responsibility with a sig- men. Perhaps we cannot match
nature on a bank check, when our them in dedication, but the degree
brains and talents and personali- to which we succeed will determine
ties are more important than our the number who are needed.
money. And I know still further
that if you will work among those Personal Victories Needed
about you with the aggressive, in- Here, then, is our war — a war
telligent, result-getting leadership that is going to decide the nature
which is you at your best — if you of civilization, and the conditions
will work with the same crusading of human life for generations to
spirit, the fire and the zeal, the come. I have broken it into three
loyalty and drive which you know parts, but for you and me it is not
to be typical of a dedicated Com- in reality three wars. It is one war.
munist — you will be amazed at The outcome of it is wholly de-
what you can do, and you will be pendent on whether or not you
amazed at how overwhelming will and I and others like us are vic-

be your own inner victory. torious on the battlefront that lies
How many of us will have to win inside ourselves.
our personal wars — in order to I won’t win, no matter how the

win the bigger war on the national domestic front and the interna-
front, and in turn the Cold War tional front come out, if I don’t
itself ? . win my personal war and con-

The answer to that depends on tribute my utmost to similar vic-


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

1960 HOW TO WIN A WAR 13

tories for those around me. And I May I urge that you join me
cannot be beaten, no matter how in the prayer and determination
other fronts come out, if I know that we, each through his own
that I have applied to my daily life victory and the effort which that
the principles in which I believe, victory inspires, may achieve the
and have given my utter best to invincibility of soul which makes
those within my reach. personal defeat impossible — that
For my own part, I can give together we shall make a vital and
you my answer. I am going to win conceivably decisive contribution
my war, and I am going to try so to our cause and to our country —
hard to help others to win theirs and that with others of like pur-
that I am going to know, down in- pose and spirit we may demon-
side, that if everyone who reads strate to all the world that an in-
this did the same, along with others dividual man must be respected,
across this land who feel and pro- when he earns the right to respect
fess exactly what we do, there is himself.
no question as to the outcome of
both our domestic and our Cold This is the war we are in. This
War campaigns. is the way to win it. ~

Reprints of this article are available at 10 for $1.00; 100 for $7.00.

TRUTH

IN THESE DAYS of fear and confusion let us remember that the
endless repetition of a lie or the multiplication of an empty
promise does not make a truth. Truth is something more than
the greatest common denominator of mass ignorance and greed.
It is never determined or demonstrated by majorities or plurali-
ties of popular error and appetite. Ultimately, with God’s aid, it
always emerges and finally prevails, supreme in its power over
the destiny of mankind, and terrible in its retribution for those
who deny, defy, or betray it.

VIRGIL JORDAN



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

Paul L. PoIROT

WHEN PERSONS with a common in- needed to compel anyone to do as
terest cooperate voluntarily, their he pleases, whether by himself or
organized effort constitutes a in concert with others. When
powerful creative force. On the everyone involved in a project is
other hand, some of the world’s truly interested and wants to help,
most perplexing problems stem no effort need be diverted to per-
from attempts to reconcile con- suade the unwilling or to whip
flicting interests by merging them the laggards into line.
into one big organization.! Persuading a person to do other
Why organizational efforts suc- than he chooses seldom resolves
ceed in some cases and fail in conflicting interests but, more
others will continue to puzzle man- often, pushes the conflict into open
kind until the elemental fact is violence. This, in turn, invokes gov-
recognized and accepted that an ernment action. Thus it is, that
individual does best what he un- efforts to merge and organize con-
derstands and wants to do of his flicting interests lead to increasing
own choice. No police force is governmental power over human
—_— affairs.
ho . her diustion of some of One could cite many examples
Leonard E. “On That Day Began Lies,” of the disastrous consequence of
Essays on Liberty, Vol. I. Irvington, N.Y.: trying to organize without a com-
Foundation for Economic Education, Inc., mon objective, including the
1952. p. 231; Brown, W. J. “Imprisoned .
Ideas,” Essays on Liberty, Vol. V, 1958. .Proken treaties and agreements at
p. 18. the international level. Clgser to

14


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

1960 A MATTER OF COMMON INTEREST 15

the experience or observation of a “combination in restraint of
most of us, however, is the ex- trade.” In either case, whether
ample of actively competing sellers through protectionism or through
of a particular commodity or serv- antitrust activities, the govern-
ice trying to combine or organize mental intervention is a conse-
to protect their presumed com- quence of an attempt to merge and
mon interests. What they presume organize conflicting interests. A
to have in common is a right to true commonality of interest exists
supply all of a given market de- between a buyer and a seller — not
mand for their product or service. between sellers who are competing
They hope for a monopoly power for that buyer’s patronage, or be-
to exclude from ‘their’ market tween buyers who are competing
certain other suppliers categorized for the available supply of some
as “unfair competition.” commodity or service.

When competing sellers succumb
to this ancient and hardy tempta- Price Control and Cartels
tion, they overlook the fact that How often one hears the pro-
any organization to control a par- posal: “If only the consumers
ticular segment of a market neces- would organize!” The implication
sarily must include the customers is that consumers would be well
as members of the organization — advised to gang up on suppliers in
because they constitute the de- some way, as though they could
mand side of that market. It is then command twice as much for
" most difficult to explain to an intel- half the price, or something like
ligent customer that it would be that. But what supplier wants to
to his advantage to buy at a high cooperate in such a program?
price from a “fair” seller when Where is the supply to come from
he could get the same thing at a to give every consumer all he
lower price from an “unfair” wants at a price he would like to
seller. If the customers refuse to pay? We have been through all
cooperate voluntarily in the or- that, many times, and especially
ganizational effort, the stage is under the price control and rent
set for coercion — and government control regulations of World War
intervention. Sometimes the gov- II. We should know that consumers
ernment intervenes in behalf of will not stay organized under such
sellers by imposing and enforcing conditions; first one and then an-
tariffs or other trade barriers. In -other will desert the organization
other cases, the government con- and turn to “the black market” for
demns the action of the sellers as supplies.


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

16 THE FREEMAN August

Compulsory Unionism for the same job opportunity ? And
The same thing happens when what could be more logical than
sellers attempt to organize a cartel peaceful cooperation between an
or monopoly. No sooner does such employee who wants to perform a
organized curbing of the supply service and an employer who wants
begin to reflect itself in higher to hire him?
prices than one or more of the Nevertheless, we find labor
~ member suppliers finds an oppor- unions insistent on compulsory
tunity to improve his own posi- union membership, compulsory col-
tion by selling a little bit more lection of union dues, compulsion
than his quota. This is why such over their own members, and com-
combinations in restraint of trade pulsion against their only -cus-
must, and do, quickly fall of their tomers: the employers of labor.
own weight, despite coercive This also is a form of combination
efforts to enforce the monopoly. in restraint of trade. It is quite
Meanwhile, as we have observed, possible that compulsory unionism,
the government will have been directly and indirectly, is account-
drawn in, either to suppress or to able for a larger proportion of the
"sustain the attempted coercion. No growth of government in the
matter which side government United States in the past 30 years
takes, an organized effort that than is any other organized effort,
must rely on force against either including the threat of Soviet com-
its own members or against out- munism.
siders always results in an expan- Lest anyone think this a reck-
sion of government activities — an less and unfounded charge, let him
extension of government control consider some of the following as-
over human affairs. pects or developments of a labor-
The economic and moral case oriented national policy of “full
against business combinations in employment”:
restraint of trade is fairly well un- 1. A Social Security program with

derstood in ‘the United States to- its multibillion-dollar annual tax
day. But not everyone who under- bill. One of the major arguments
stands about cartels in business for the program in 1935 was
is equally aware.that many, if not that it would provide job oppor-
most, of the labor unions are or- tunities for younger workers as
ganized around that same absence the older ones retired.

of a common interest. What can be 2. State and federal unemployment
the common objective of two or compensation payments of bil-

more workers who are competing lions of dollars a year.


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

1960 A MATTER OF COMMON INTEREST 17

3. Billions of dollars of farm price to suggest that organized labor is
supports designed at least in the only pressure-group activity
part to slow the movement of responsible for the inordinate
farm workers into union-con- growth of government in our time.
trolled jobs and to hold down the Nor would it be proper to conclude
cost of living of urban families. that competing workers have no

4. The countless make-work proj- common interest at all around
ects — highways, airports, gov- which to organize. Their true com-
ernment buildings, dams, river mon interest lies in the restora-
and harbor improvements, and tion and preservation of a competi-
other spending programs sup- tive market economy under a gov-
posed to relieve ‘distressed ernment limited to the defense of
areas” from one end of the life and property —an interest
country to the other. that ought to be shared by every

5. Public housing, ‘‘urban re- person in the world concerned for
newal,” and other federal and his own well-being. Trying to or-
state aid programs largely for ganize around a special privilege,
the supposed benefit of low- and at the expense of other persons or

middle-income families. groups, is to forfeit freedom and
6. The damage and cost of strikes, invite government control.
slowdowns, boycotts, featherbed- If ever there were grounds for
ding practices, and other bur- common cause in this nation,
dens of compulsory unionism. surely the paramount common in-

7. The legalized looting of private terest today would lie in a re-ex-
pensions, insurance funds, and amination of our so-called volun-
other savings because of the in- tary associations — all of them —
flationary deficit financing that so that we might support and
inevitably goes with a program strengthen the real ones, withdraw
of “full employment” through from the others, and thereby re-
government intervention. lieve ourselves of excessive gov-
The foregoing list is not meant ernment and taxes. -

IDEAS ON LIBERTY Woodrow Wilson

I HAVE ALWAYS in my own thought summed up individual liberty,
and business liberty and every other kind of liberty, in the
phrase that is common in the sporting world, “A free field and
no favor.”


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

HENRY HAZLITT

on Inflation

- PART 1: Years of Inflation

IN THIS SPACE nearly ten years 113 per cent between the end of
ago (Newsweek, September 17, 1939 and 1959, wholesale prices
1951) I ran a chart comparing increased 136 per cent in the same
the increase in the cost of living, period and the total supply of
in wholesale commodity prices, bank deposits and currency in-
and in the amount of bank de- creased 270 per cent.
posits and currency, from the end If we are to adopt the proper
of 1939 to the middle of 1951.This measures, the only effective meas- .
chart was incidental to pointing ures, to halt inflation and prevent
out that the rise in living costs its resumption, we must clearly
and prices was the result of the recognize that its basic cause is
increase in the supply of money the increase in the supply of
and credit, and not of a “shortage money. :
of goods” or a so-called “cost Two rival theories still persist.
push.” One is that inflation and rising
We are now in a position to prices are caused by a “shortage
compare the same three items over of goods.” The figures refute this
a-full twenty years, from the end on their face. The official index of
of 1939 to the end of 1959. The industrial production was 177 per
accompanying chart gives us a cent higher in 1959 than in 1939;
panoramic view of the inflation in other words, the rate of pro-
during that period. It shows that, duction of goods was almost three
while consumer prices increased times as great. It was in spite of
this enormous increase in produc-
tivity that wholesale. prices in-
This article consists of two of Mr. Hazlitt’s .
columns from Newsweek, the first part from creased 136 per cent — l1.e.,, more
Te rey May 2 and the second from the than doubled — during the period.

18


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

1960 COMMENTS ON INFLATION 19

In other words, the increase in the or quickly followed by an increase
money supply would have caused in the supply of money, would not
an even greater rise in prices if it cause inflation; it would merely
had not been offset by an increase cause unemployment. It is not
in the supply of goods. While the true, as so often assumed, that a
production of goods almost tripled, wage increase in a given firm or
the supply of money and bank industry can be simply “added on

credit almost quadrupled. to the price.” Without an increased
money supply, prices cannot be
Money vs. “Cost Push raised without reducing demand

The other rival theory is that and sales, and hence production
inflation and the rise of prices are and employment. We can stop the
caused by higher wage demands — ‘‘cost push” if we halt the increase
by a “cost push.” But this theory in the money supply and repeal the
reverses cause and effect. “Costs” labor laws that confer irrespon-
are prices. An increase in wages sible private powers on union
above marginal productivity, if it leaders. ->
were not preceded, accompanied, Newsweek, May 2, 1960

{ BANK DEPOSITS diz Att"
2 & CURRENCY J hf 1 | Lp lo]
7 LTT “1 [1 WHOLESALE

TT RY 1 TT —1] COMMODITY }1275
3 - ES Bh ’ . ~

HEY et | | [2°

ATT T1171 cost oF —{150

HC | LIVING 1125

'40 '41 '42'43 '44 '45'46 '47 48 '49 '50 '51 '52 '53 '54 °55 '56 '57 *58 '59
1939.40 equals 100

Newsweek-——Bensi


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

: Inflation vs. Morality

LAST SUMMER (Newsweek, July Inflation, in brief, essentially
27, 1959) my colleague, Raymond involves a redistribution of real
Moley, wrote a column called “In- incomes. Those who benefit by it
flation, a Moral Issue.” This ought do so, and must do so, at the ex-
to be the leading issue in the elec- pense of others. The total losses
tion. through inflation offset the total
Inflation never affects every-~ gains. This creates class or group
body simultaneously and equally. divisions. The victims of inflation
It begins at a specific point, with resent the profiteers from infla-
a specific group. When the govern- tion. Even the moderate gainers
ment puts more money into circu- from inflation envy the bigger
lation, it may do so by paying de- gainers. There is general recogni-
fense contractors, or by increasing tion that the new distribution of
subsidies to farmers or social- income and wealth that goes on
security benefits to special groups. during an inflation is not the re-
The incomes of those who receive sult of merit, effort, or productive-
this money go up first. They be- ness but of luck, speculation, or
gin to buy at the old prices. But political favoritism. It was in the
their additional buying forces up tremendous German inflation of
prices. Those whose money in- 1923 that the seeds of Nazism
comes have not been raised are were sown.
forced to pay higher prices than
before; the purchasing power of Speculation vs. Work
their incomes has been reduced. An inflation tends to demoralize
Eventually, through the play of those who gain by it as well as
economic forces, their own money- those who lose by it. They become
incomes may be increased. But if used to “unearned increment.”
these incomes are increased eéither They want to hold on to their rela-
less or later than the average tive .gains. Those who have made
prices of what they buy, they money from speculation prefer to
never fully make up the loss they continue this way of making
suffered from the inflation. money to the former method of

20



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

1960 COMMENTS ON INFLATION 21

working for it. I remember once, do in principle what kings once
early in 1929, a conversation be- did when they clipped the coins.
tween two friends, both of whom Diluting the money supply with
held prominent posts as book re- paper is the moral equivalent of
viewers but both of whom were diluting the milk supply with
heavily in the stock market. They water. For notwithstanding all the
were exchanging stories about pious pretenses of governments
their profits. “Today your salary,” that inflation is some evil visita-
they agreed, “is just a tip.” People tion from without, inflation is
do not like to work full time just practically always the result of de-
for a tip. The trend in an inflation liberate governmental policy.

is toward less work and produc- This was recognized in 1776 by
tion, more speculation and gam- Adam Smith in The Wealth of Na-
bling. tions. Though I have quoted the

The profiteers from inflation passage before, it bears repeat-
tend to spend freely, frivolously, ing: “When national debts have
and ostentatiously. This increases once been accumulated to a certain
popular resentment. The incentive degree, there is scarce, I believe, a
for ordinary saving, in the form single instance of their having
of savings-bank accounts, insur- been fairly and completely paid.”
ance, bonds, or other fixed-income There is either “an avowed bank-
obligations, tends to disappear. ruptcy’’ or “a pretended payment.”

The spectacle of quick and easy The pretended payment was in-
returns increases temptation to flation. The U.S. government today
corruption and crime. is paying off in 47-cent dollars the

debts it contracted in 1940. Adam
"A Juggling Trick" Smith went on: “The honor of a

It is not merely that inflation State is surely very poorly pro-
breeds the gambling spirit and vided for, when, in order to cover
corruption and dishonesty in a na- the disgrace of a real bankruptcy,
tion. Inflation is itself an immoral it has recourse to a juggling trick
act on the part of government. of this kind, so easily seen
When modern governments inflate through, and at the same time so
by increasing the paper-money extremely pernicious.” -
supply, directly or indirectly, they Newsweek, May 16, 1960


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

HENRY VIII REVISITED

The Problems and Temptations of Money Creation

THE YEAR was 1544. A chilly au- ~~ It'was then that the smile faded
tumn wind chased swirling fingers from his lips. For the first time he
of fog through the stalls of Bil- felt the chill of the morning. What
lingsgate Square, the central fish- once had been a splendid silver
market of London. The old fish- coin was now worn and blotched.
monger smiled with satisfaction Through a thin coating of silver,
at the silver shilling he clutched Henry VIII's nose protruded in
in his hand. In its place just a a dull relief of copper.

moment before had been a string “Blimey,” he thought, “Old Cop-
of plump, fresh herring. He had per Nose ’as been at it again.”
made the morning’s first sale while “Old Copper Nose,” as King

the shadows of night still lingered. Henry was called, had indeed been
The raised edges of the shilling at it again. Between 1526 and
somehow made the old fishmonger 1546, the silver content of the
feel warm and secure. What a English shilling was reduced
pleasant sensation he felt as he nearly 70 per cent. Henry melted
ran his oily thumb over the em- the coins that his tax collectors
bossed profile of Henry VIII. He brought into his mint and added
tilted his head for a closer look base metal such as copper, there-
at the coin in the first grey streaks by creating additional money to
of dawn. finance his spending programs....
Today, as in 1544, when money

This article consists of excerpts reprinted from is created faster than goods can
a 16-page review of currency depreciation and be produced, prices tend to rise.

banking practices appearing under this same

. title in the January 1960 issue of Business Re- h resent
view published by the Federal Reserve Bank Here merge the past, the p ent,
of Philadelphia, Philadelphia 1, Pa. Copies of and the future. Whether the year
that issue are available upon request to the . . .
bank’s Department of Research. is 1544, 1944, or 2044, prices rise.

22


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

1960 HENRY VIII REVISITED 23

Whether the government creating Sovereign Control over Money

money is royal or republican, dic- For hundreds and hundreds of
tatorial or democratic, prices rise. years the power to create money
Whether the money is created by was solely the prerogative of
melting and adding base metals or kings, princes, and emperors. And
by turning on printing presses, this power came in very handy, for
prices rise. Whether the money is the sovereign was continually be-
used to build castles, set by problems of fi-
wage wars, construct nance. He had to fi-
dams, or speed econom- nance wars, to pay the
ic growth, prices rise... expenses of the court,

THE SILVER CONTENT OF ROME'S CURRENCY
AND WHY IT WANED

Reign

began Per cent

(A.D. Emperor silver Reason for debasing

98 Trajan 93 Debauched the currency to extend Rome's boundaries

117 Hadrian 87 Rimmed the empire with elaborate and expensive mili-
tary fortifications

138 Antoninus Pius 75 Great humanist but fiscal failure: lowered taxes; gave
to the poor; debased the currency

161 Marcus Aurelius 68 Fought costly defensive wars on all sides

193 Septimius Severus 50 Came to power and stayed there by lavishing expen-
sive favors on the legions

218 Elagabalus 43 Pursued pleasure with all his might and all Rome's
resources

235 Maximinus 35 Scourged empire brutally for personal gain

238 Gordian 28 Financed the civil and foreign wars of a disintegrating
empire

244 Philip 0.5 Battled contenders for the royal robes under the aegis

of a crumbling currency

268 Claudius Victorinus 0.02 Held invaders in check with strength of sword and
the melting pot of the imperial mint

Sources: Humphrey Michell, “The Edict of Diocletian,” Canadian Journal of Economics and Political
Science, February 1947. Encyclopaedia Britannica.



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

24 THE FREEMAN August

and to meet the many other costs described anything of little value,
of state affairs. including the Continental currency

To meet these expenses, the created to finance the fighting. It
sovereign devised a number of was true in America during the
plans. He taxed, borrowed, em- Civil War when ‘“greenbacks’” de-
barked on elaborate programs of preciated substantially as a result
military conquest, operated state- of overissue; in France during the
owned industries for profit, and Revolution when the assignats be-
when revenues from these other came bits of worthless paper; and
sources were insufficient to cover in Germany during and after
expenses, he debased the currency. World War I, when at one time
Indeed, for every king who main- 300 paper mills worked at top
tained monetary stability there speed to deliver note paper to the
were countless others who adul- Reichsbank while 150 printing
terated the currency in as many companies kept 2,000 note presses
different ways. running night and day solely to

Like Henry VIII, some melted print Reichsbank notes. In short,
the coin of the realm and added when borders are threatened the
base metals. This method was a State reasserts its monetary pre-
favorite not only of medieval rogative.

European monarchs, but also of And World War II was no ex-
the Roman emperors who came ception. It is estimated that total
before them.... military expenditures of the com-

batant nations surpassed $1 tril-
Money Creation during War lion, over 6 times those of World

In one sense, wars in the twen: War I. Remembering that $1 bil-
tieth century have been no dif- lion is a thousand million, and $1
ferent from wars in the past. That trillion a thousand billion, one can
sense: the supply of money and readily realize the astronomical
the extent of the sovereign’s role size of these expenditures. As in
in money creation still tend to the past, this spending was fi-
vary directly with external pres- nanced in the established pattern:
sure on national borders. partly by taxing, partly by selling

So it was in Rome during the bonds to patriotic citizens, and
barbarian invasions; in France partly by creating money.
and England in the 100 Years’ Some of the belligerents created
War; in America during the money just as Germany did during
Revolutionary War when the World War I, by turning on the
phrase “not worth a continental” printing presses. Others used a


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

1960 HENRY VIII REVISITED 256

INA MODERN DEPOSIT BANKING SYSTEM MONEY IS CREATED
IN A ROUND-ABOUT FASHION...

1. When the central
banker decides that the
money supply should be
increased...

. . . he buys government
securities from a govern-
ment securities dealer.

+ GOVT. SEC.
+ COMM. BANK
(RESERVES)

2. He enters his new as-
set — the securities — in his
books and credits the re-
serve account of the com-
mercial bank where the
government securities
dealer keeps his checking
account, thus creating new
bank reserves.

GOVT. SEC.

3. This commercial bank
in turn enters the reserves
in its books as an asset and
credits the securities deal-
er's checking account.

+ RESERVES
+ SEC. DEALER

4. With additional re-
serves, the bank can make
new loans. In lending, the
bank simply credits the bor-
rower's checking account,
thereby creating new de-
mand deposit money.

+ LOANS
+ perosiT


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

26 THE FREEMAN August

more sophisticated technique Currency Debasement
which became possible with de- Still Spells Inflation
velopment of modern deposit bank- It has been said that history re-
ing and a broad securities market. peats itself —that men do met
A simplified illustration of the learn from the errors of the past.
sophisticated system would run Today, it is possible that we have
something like this. The central reached an important juncture in
bank would buy government se- the historical cycle of money crea-
curities in the open market, pay- tion. This juncture involves a
ing for them. with newly created fundamental choice. Will we con-
bank reserves as shown in the il- tinue to insulate the function of
lustration (p. 25) .The banking sys- money creation from the day-to-
tem could use these reserves to day financial pressures that be-
buy new issues of government se- seech the sovereign? Or will we
curities. Some of these new securi- follow the lead of Henry VIII — Old
ties could be sold to the central Copper Nose revisited? These are
bank, new reserves created, and the problems, and the temptations,
so the cycle would begin anew .... of money creation. ~>

Legal Plunder

I po NOT THINK that illegal plunder, such as theft or swindling—
which the penal code defines, anticipates, and punishes—can be called
socialism. It is not this kind of plunder that systematically threatens
the foundations of society.

The war against illegal plunder has been fought since the begin-
ning of the world. The law itself conducts this war, and it is my
wish and opinion that the law should always maintain this attitude
toward plunder.

But it does not always do this. Sometimes the law defends
plunder and participates in it. Thus the beneficiaries are spared the
shame, danger, and scruple which their acts would otherwise in-
volve. Sometimes the law places the whole apparatus of judges,
police, prisons, and gendarmes at the service of the plunderers, and
treats the victim—when he defends himself —as a criminal. In short,

there is a legal plunder.
FREDERIC BASTIAT, The Law


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

ARTHUR KEMP

FREEDOM of
CHOICE

AT ATLANTIC CITY in June, and ingness to do so. Less often, how-
again at Dallas in December, the ever, have men had the patience to
American Medical Association’s devote attention to the less emo-
House of Delegates proclaimed and tional and more mundane restric-
reaffirmed the belief that the “free tions on freedom when these do not
choice of physician is the right of directly affect them. Certainly it
every individual” and that such behooves members of the medical
freedom of choice, together with profession to give attention to the
free competition among physi- broader meaning of the term ‘“free-
cians, constitute prerequisites to dom of choice” and to its implica-
“optimal medical care.” In so do- tions.
ing the House of Delegates, by in- If freedom of choice were to re-
ference, took a position in favor of late merely to the number of
individual freedom of choice in courses of action open to a person,
general and expressed a preference it would be more accurately de-
for maintaining a social, political, scribed as power of choice. But
and economic framework in our so- freedom of choice represents some-
ciety conducive to the preservation thing more fundamental than
of such freedom of choice. power; it represents the right of
All too frequently the term free- the individual person to be a free
dom has been misused or abused. agent in his interhuman relation-
Perhaps this is inevitable when the ships, to make his own decisions, to
concept of freedom is capable of be free from the arbitrary author-
stirring up considerable emotion ity of others, and to be able to
in the human breast; indeed, some choose how he wishes to use his
men have died for it, and many services or property rather than to
others have proclaimed their will- be subject to coercion by others.
Arthur Kemp, Ph.D., is Director of the Eco- Freedom of choice means that the
nomic Research Department of the American the person is able to choose his own
Medical Association. This article is reprinted A .
by permission from the February 27, 1960 course of action and his own pat-

i Th I of the American Medical . .
eeciaion. Journal of the American tern of living, subject to the re-

27


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

28 THE FREEMAN August

quirement that he shall not act so Soviet Union or between the free
as to violate the freedom of choice world and the unfree world. Hu-
of others. man activity can be organized so
Freedom in this sense, it should that the individual person has
be noted, is freedom of, not free- freedom of choice or so that he
dom from or freedom to; the prep- has little or no choice. The latter is
osition is of great importance, for the technique of the totalitarian
the latter represent not different state while the former is the
aspects of the same thing but en- mechanism of the market place
tirely different conditions. This with limited government and the
calls to mind the famous four free- separation of political powers.
doms enunciated by President A freedom-of-choice society in
Franklin D. Roosevelt during the economic sphere is a market
‘World War II-freedom of speech, society. Individual economic trans-
of worship, from want, and from actions are conducted through the
fear—later called “a noble pun” by voluntary cooperation of reason-
the British economist, Joan Robin- ably well-informed persons in such
son, The two pairs of freedoms a way that both parties benefit
were, in fact, of entirely different from them. A free-choice society
character. Mr. Roosevelt meant se- provides a mechanism for bringing
curity from want and fear, not about coordination with a mini-
freedom or liberty. Many philoso- mum of coercion. Human activi-
phers, including Franklin and Jef- ties, so far as possible, are con-
ferson, have pointed out that free- ducted in the market, not in the
dom and security are inconsistent political sphere. In this way coer-
human conditions. Indeed, make cion of individual persons to con-
freedom of choice into freedom form is minimized and freedom of
from choice and one comes close to individual choice is maximized.

a definition of slavery. Each person can choose the color of
Co tie he wants, the architecture of
A Vital Distinction his house, and the cut of his

The struggle and debate of our clothes. He does not have to submit
time is intimately related to this to what the majority wants; he
difference between freedom of may make his own choice and get
choice and from choice. Such a dif- it.
ference relates to the alternative This is, of course, exactly the
methods of organizing human ac- opposite from that organization of
tivity and is not simply a struggle society where decisions which"
between the United States and the could be made by the market are


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

1960 FREEDOM OF CHOICE 29

made on a political yes or no basis. ance and the imperfection of hu-
Even if these decisions are reached man knowledge, and the denial of
by the expedient of democratic a millennium and the aim of estab-
majority rule (which may be lishing conditions that make life
transitory) rather than by dicta- not perfect but workable —all these
torial fiat, the political decisions attributes of a free-choice society
are the results of group pressures constitute a highly sophisticated

instead of individual choices. doctrine.
We live in a society still essen-
tially free, one that gives to the in- It is sobering to see the growing

dividual person the right not only number of so-called leaders of po-
to choose his physician but to make litical thought or politicians who
other choices as well. Indeed, we advocate an ever-growing govern-
have even permitted the individual mental assumption of responsi-
person to choose to use his capital bility for all sorts of complex eco-
and his services to advocate the nomic and social problems — full-
abolition of freedom of choice it- employment, care for the aged,
self. Throughout the history of care for the indigent, government
mankind this sort of society has health services, subsidized hous-
not been the general rule but the ing, and so on and on. Yet the
exception. Perhaps this is inevi- moral ethic on which our civiliza-
table. The totalitarian collectivist tion rests emphasizes individual
principle is simple and straight- responsibility. Can such a civiliza-
forward; it appeals to those who tion survive? Perhaps, but only if
say, “Do something now.” The ne- it recognizes the difference be-
cessity of restraint, group and in- tween freedom of choice and free-
dividual, the recognition of ignor- dom from choice. PN

IDEAS ON LIBERTY “Freedom” From Responsibility

WHEN the Athenians finally wanted not to give to the
State, but the State to give to them, when the freedom
they wished most for was freedom from responsibility,
then Athens ceased to be free and was never free again.

EDITH HAMILTON


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

A doctor explains to his patients, and to
anyone else interested, his views on . ..

IMMUNIZATION

A. WAYNE ELSTEN, M. D.

ALTHOUGH I have not been di- I think it is a protection you
rectly asked by one of my own should have.” Following a few
patients as to my position on the questions which you may not as-
mass polio immunization program sociate with the request you have
which was organized by a com- made, you may get your immuni-
mittee of the UAW-CIO, I have zation and be given a return date
had inquiries from some of the for your succeeding injections.
public-minded citizens who of- You have no reason to reflect on
fered to give aid and assistance ‘the fact that you have called up
to this program. Their questions in my mind an instant review of
are important but a proper answer immunization, its chemistry, its
is so long that it is not practical physiology, and its pathology, as
for me to answer in detail every well as the pathology of polio-
individual who so inquires. In myelitis. My knowledge of your
view of this and in the firm belief own reactions to prior immuniza-
that each of my patients depends tions and medications, the mathe-
on my medical judgment for the matics of polio attack rates, vac-
maintenance of his personal cine reaction rates, a flash review
health, and the health of his of the known reactions to the
family, each deserves to know how different ingredients in Salk vac-
that judgment is applied. cine — monkey kidney protein,

When you or any of my other mercury or quaternary ammonium
patients come into my office and preservatives, penicillin, as well as
asks my advice about a polio shot, polio virus protein, my casual
my answer is.likely to come rather question about asthma and hay
quickly and probably will be, “Yes, fever, hives, and other allergies,
Dr. Elsten is a general practitioner in Ander- penicillin reactions, all have a
son, Indiana. This article was prepared as a place in the formation of my judg-

letter of January 11, 1960, to some of his
patients. ment.

30


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

1960 MASS IMMUNIZATION 31

Suppose my knowledge of you, will also explain that for the past
or your answer to one of my ques- few years I have been carefully
tions, causes me to hesitate — watching the development and
somewhere along the line some- testing of the Sabin vaccine — an-
thing suggests that you should not other product of the research for
have the vaccine. I must remem- better and safer vaccines against
ber that fatal results have fol- poliomyelitis. I will explain that
lowed injections of Salk vaccine we are not in a polio season now
for a number of reasons. I must and that it is possible we may
not forget that a number of cases have a better and safer vaccine
of polio were caused by an earlier soon and that this new product
vaccine. A failure in processing will not contain preservatives. The
could cause a repetition, and this new vaccine of which I speak is
tiny mathematical chance must be given by mouth and does not re-
weighed. You have not had occa- quire any shots at all. The reports
sion to read as I have the reports of millions of tests in some for-
of the extreme sensitivity of some eign countries make me hope for
people to penicillin — so .that only a much improved preventative for
a few molecules have caused criti- polio, and while I reserve judg-
cal illness or even death. The same ment until more reports are in
thing applies to mercury, which from tests taking place now in
some brands of the vaccine con- this country, I am guardedly en-
tain. thusiastic.

Then I have to think of your My knowledge of you, my rec-
chance of actually contracting ords, the answers to my questions,
poliomyelitis, if you are, and if even my judgment of your skin
you are not, inoculated. Perhaps color and general body build, all
at your age, your chance is 1 in combine with the training I have
50,000 of contracting paralytic had to develop a special profes-
poliomyelitis. The full series of sional opinion for you as an in-
Salk vaccine shots at proper in- dividual patient. The same process
tervals would reduce this to 1 in is repeated for any and all pa-
400,000. On the other hand, if my tients and the result may be en-
judgment tells me you have one tirely different. It might even be
chance in a thousand or one in different for you under other cir-
fifty or even one in two of reacting cumstances and at another time.
unfavorably, I would certainly ad- Under very special circum-
vise you not to take the vaccine. stances, mass immunization pro-

When I advise you this way, I grams may be proper. My judg-


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

32 THE FREEMAN August

ment would give me a different whole program has one chance in
answer if we were facing a spread- three of success in avoiding one
ing or imminent epidemic, or if the case of polio (not necessarily
disease in question had a high in- severe or fatal) and two chances
stead of low attack rate, or if a in three of failure to avoid even
sequence of events exposed our one case. On the other hand, the
community to a definite hazard fact remains that in 20,000 in-
at this time. These variations do jections into an unscreened group,
not change the process of the there is a fair chance of some
technical judgment — they simply local infections. There is a mathe-
change the weight of the factors matical chance of severe infection
— so that my best judgment, under from faulty technique and there
different conditions, gives me a is more than a casual chance of a
different conclusion. penicillin or mercury sensitivity.
I sincerely hope this discussion This kind of accident could, of
has given you a better insight into course, happen with the best office
what I mean when 1 speak of in- preparation and technique, but in
dividual, responsible, medical the case of a mass program, I must
judgment. I would like now to dis- add a very husky factor for the
cuss some matters relevant to the type of unexpected happening we
Madison County Polio Immuniza- associate with all such crash and
tion Program itself. production line techniques, where
preparations are minimal, indi-
It is claimed in our local news- vidualization nonexistent, and
papers that between 11,000 and frenzy replaces reason.
12,000 persons have indicated that Other things come to mind, too,
they wish shots in the mass pro- in connection with this question.
gram. This means, according to Madison County is well supplied
the figures, some twenty thousand with good doctors, who can ade-
or more injections are needed to quately take care of their patients.
complete the series. The known The publicity surrounding the
attack rate for poliomyelitis in present polio question sets the
Central Indiana recently plotted stage perfectly, it seems to me,
against a completely immunized for many people to become ac-
group of 12,000 indicates a prob- quainted with their personal phy-
ability of saving 1% of one person sicians, or in the event they have
from contracting the disease. none, to establish a primary, un-
Since we do not save persons from hurried, non-emergency contact.
illness by thirds, it means the I am very certain of one thing,


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

1960 MASS IMMUNIZATION 33

that the most fundamental ele- the present case. The request of
ment in our American system of the UAW Citizens’ Committee was
medical care is mutual responsi- considered, and it was the unani-
bility of a personal physician to mous professional opinion of those
his patient and that individual present that the program could
patient to his physician. This not be given approval. The unani-
mutual interest is not served by mous vote against this proposal
a scramble for “free” production was proof positive that not a
line care, but by a personal visit single member present approved.
by a doctor's personal patient to In my own case, I voted against
his personal doctor. approval because I considered the

While I have advised against project to be an example of poor
Salk vaccine in some cases, I have quality medical care. It is an un-
never refused to give an immuni- necessary, potentially dangerous
zation because of inability to pay. program.

The matter of payment for serv- I am sure that the members of
" ices did not enter into my deci- the Citizens’ Committee thought
sion on this matter. they were being helpful to their

community and humanity. How-
An unusual public impression ever, I would like for you to view
seems to have developed concern- it in this light.
ing the role of the Madison County A group of laymen decided, on
Medical Society. The county so- the basis of nonprofessional judg-
ciety is an educational organiza- ment, that there existed a problem
tion, not a service league or pres- of protecting Anderson and Madi-
sure group. Under no circum- son County's public from the
stances can the society practice threat of a vicious disease. In their
medicine, nor can it dictate to its judgment a “cure” for this threat
members what they shall do pro- was at hand, and they assumed
fessionally. There is absolutely no that the physicians of the com-
mechanism by which the Society munity were withholding this
could provide medical assistance available cure.
to a program, or deliver a doctor Evidently they did not realize
or group of doctors to perform a that the doctors had considered
service. The most it could do the problem, had weighed it in the
would be to report a consensus light of their professional knowl-
that a certain program was or was edge and judgment of the subject,
not deemed proper and desirable. and had abandoned it as a slip-
This is precisely what was done in shod type of medical care to which


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

34 THE FREEMAN August

their patients were not accustomed someone who was not in ignorance
and should not be subjected. of the facts.

I know a number of the mem- The result is that to this day —
bers of the groups who were work- insofar as I know — they have not
ing toward this mass immuniza- asked for medical advice. They
tion program, and I realize it must have asked only for medical hands
have been quite a shock to them to to carry out the mechanics of a
learn that every physician present program of inferior quality which
at the meeting which had this they devised.
program on the agenda disap- I am sure that even now, were
proved. the people to ask for medical ad-

One of man’s most driving mo- vice, they would get it. However,
tivations is to feel superior. He they cannot get it from the County
manifests this in many ways and Medical Society. This organiza-
all too commonly gives advice in tion cannot give advice. Medical
a special field in which he has no organizations can no more give ad-
training. The bookkeeper turns vice than can corporations. Only
sidewalk superintendent, the doc- people can give advice. A request
tor issues legal opinions, the ele- for such help can be channeled by
vator operator offers stock market the Society to one or more of its
advice, and many persons well- members for consideration, or
trained in their own fields turn doctors may be approached person-
amateur doctors. This seems to be ally and individually for such help.
legitimatized in many minds if One thing is clear, any medical
the doctoring includes or touches advice or opinion of value must
upon the social welfare field. eventually come from ah individ-

This is a vast psychological ual —and an individual who has
quicksand which entraps many the training and knowledge from
people. These same people, having which to draw reasoned conclu-
failed in their impassioned and sions. }
fervent enthusiasm to realize that This has been a lengthy letter.
they were completely without However, I want you to know the
basis in technical knowledge for truth about any issue which in-
the action they had entered, now volves you and me as partners in
reason that since their position the health maintenance activities
was public and they were individu- which is the goal of our mutual
ally and collectively in the lime- responsibilities. This letter pre-
light, they would somehow lose sents an outline of the facts as I
face if they requested advice from see them. ~>


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

SUBSIDIZED
DOCTORING

Or —PROGRESS OF THE WELFARE STATE

It was a chilly afternoon
At story-telling time.
Old Kaspar chewed a dead cigar
And thinned his rum-and-lime,
While Peterkin and Wilhelmine
Turned on the futurama screen.

They watched while pairs of burly men
Within a factory yard

Would lift each worker by the heels
And shake him long and hard,

While others sifted through the trash

Collecting all the fallen cash.

“Now tell us what it’s all about!”
The little children cried.
“It is another payroll tax,”
Old Kaspar soon replied.
“The cash will pay the doctor bills
Of older folks with chronic ills.”

“The Welfare State,” said Kaspar then,
“Devours private wealth.

Whatever tax collectors miss
Inflation takes by stealth.

That's why we old retired folks

Have many ills, but empty pokes.”

“Who paid the old folks’ doctor bills . A
Before the Planners came?”

“They paid their own,” Old Kaspar sighed,
“But times were not the same.

A prudent man could always save

Enough to last him to his grave.”

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

35


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

SIR ERNEST BENN

“Profit is nothing but a commission on economy.”



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

SIR ERNEST BENN

Te yr Mote

PART I: PROFIT AND LOSS

THE WORLD of politics just like I am the Lord thy God which
other worlds is governed by fash- teacheth thee to profit, which lead-
ion, and the fashion of the mo- eth thee by the way thou shouldest
ment is to deprecate profit. There go. Isaiah xlviii. v. 17. i
is no recognised political party Of these things, put them in re-

with a word to say for profit.* In
the recent Presidential Election words to no profit, but to the sub-
Mr. Willkie got as near as he dared verting of the hearers.
to a defence of the profit system, II Timothy ii. v. 14.
but even he had to accommodate i .
himself to the fashion which to- And more directly in the same

the Lord that they strive not about

day rules public affairs. The word vein,
“profit” has come to have a nasty, In all labour there is profit, but
sinister, undesirable meaning. the talk of the lips tendeth only to

This is quite new, peculiar to the permry. Proverée iv. v. 22.

last few years. The word “profit” The “unprofitable” servant in the
is not once used in the Bible ex- Parable of the Ten Talents was
cept in the sense of something de- ‘cast into outer darkness.”

sirable, something to strive after, It is just as well to remember
something altogether worthy. that the needs of a political mar-
—s ket are not unlike the needs of any
other market, and that fashion

Sir Emest Benn (1875-1954) was one of the Must vary from time to time, but

outstanding advocates and practitioners of com- : : I"
petitive private enterprise in our time. This the pity is that when political

essay, somewhat condensed here, first appeared * :
as a ‘pamphlet in 1941 and more recently as fashion decrees that a particular

Appendix II of Deryck Abel’s biographical - 1 1
Ernest Benn: Counsel for Liberty (Ernest Benn matter shall be the leading topic
Limited, Bouverie House, Fleet Street, London, 0f the talk of the lips, experience
EC4, 192 pages, $3.00. Reviewed in the April } pp

1960 Freeman, p. 57). shows that the tendency “only to

* 1941.

37

membrance, charging them before -


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

38 THE FREEMAN August

penury”’ is uniform. Land, for ex- Every practical person knows
ample, is in greater difficulties the that Ruskin was mistaken, that his
world over today than ever in his- theory is false, but the unhappy
tory, a curious reflection when one fact is that fifty years of tub-
remembers that every politician in thumping by his followers have
the world has done something done their deadly work, and
about land. Ireland ruled the fash- brought about the present deplor-
ion in politics for years, with re- able state of affairs. In the mod-
sults that are still in question. ern scramble for votes, Conserva-
Similarly, religion and education tives and Liberals alike allow
kept the politicians going with themselves to be swept up into the
more vigour than any subject in fashion, and while offering bribes
my recollection, with results to re- to the poorer classes of society
ligion which do not impress me find it advantageous to round off
and to education of which I enter- the offer by threats against those
tain grave doubts. Coal has suf- higher up the scale who are sup-
fered badly from politics and cot- posed to be fattening on that evil
ton is now faced with the same thing, profit.

danger.

The antiprofit fashion will no Profits in World-Wide Disgrace
doubt pass, but like all the other It is really quite remarkable
political fashions, it will leave its how in these days all the aspirants
trail of destruction and penury. for leadership the world over have

The origin of modern error in selected this antiprofit bias as a
this matter can, I think, be traced good card to play. It might be
to Ruskin, who committed himself imagined, indeed it may be hoped,
to the wholly false theory that that Hitler's insistence on the
profit comes out of wages, a theory antiprofit character of Nazism
which since Ruskin’s time has been would tempt his enemies to adopt
improved by the corresponding another line. It must be highly dis-
fallacy that profit is an addition to tasteful to our own Labour Party -
price. to find the most prominent of their

On the other hand, by the exact enemies preaching the same doc-
sum which is divided among them {yjnes and making the same offers,

(i.e, the employees) more than 1o.4in0 his misguided public to

their present wages, the fortune of believe, as our Socialists profess

the man who, under the present 3 )
system, takes all the profits of the to believe, that the world will be

business, will be diminished. better when profits are abolished.
Time and Tide, Letter I. Wherever one looks the abolition



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

1960 THE PROFIT MOTIVE 39

of profits seems to be the leading ple, whether qualified to judge or
purpose of all politicians. The Su- not, are to have their way simply
preme Economic Council in Japan because they say so, then democ-
set up by Prince Konoye is work- racy will not survive. Unless de-
ing out a new economy based on mocracy gets back to the concep-
public service and the abandon- #ion of its founders and throws up
ment of “liberalistic profit-seek- leaders worthy of the high ideal
ing,” and Roosevelt is putting of self-government, the hope of
America right, or wrong, in pur- the future is indeed very faint.
suance of the same idea.
Faced with such extraordinary No Mention of Loss

unanimity it may be asked what The first thing that strikes any-
can be done about it? It appears one who will reflect on all this
from the recorded opinions of the abuse of profit is the universal ab-
leaders of the greater part of the sence of any mention of loss. We
population of the globe, that the are faced, in fact, with a world-
world is tired of profits, is deter- wide conspiracy to establish a one-
mined to do without them, and in way system of argument. The late
accordance with the principles of Dan Leno in one of his most suc-
democracy must be free to follow cessful sketches impersonated a
its desires. I constantly talk to peo- town councillor, and delivered a
ple who ask me to believe that little speech on the vexed question
something is right because every- of tramways. The main street of
body says so. Six or seven years the town of which Dan was sup-
ago the American public, so easily posed to be a councillor ran up a
swayed by fashion, and with a hill, and the difficulty with which
unanimity that was really remark- he dealt was the fact that while
able, held it to be right that the the trams found no trouble in go-
State, acting through Mr. Roose- ing down the hill, they were less
velt, should abolish unemployment, inclined to mount it. The sketch
and it was and is very difficult to finished, as some readers may re-
argue against a mass movement member, when that inimitable
such as that. One can only sit back comedian, with a peculiar flourish
in the melancholy reflection that of the hands, a twisting of those
experience alone will teach, and expressive legs and a screwing of
the alteration in American opinion the eyebrows, settled the matter
on that particular question is in by making all the trams run down
no doubt. If democracy is a sys- the hill. That is exactly what these
tem under which millions of peo- antiprofit demagogues are propos-


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

40 THE FREEMAN August

ing with the whole of the affairs obliged to refrain from making
of mankind at this moment. One that addition to the price he had
might as well discuss Romeo with- paid. The notion will not bear a
out a mention of Juliet, of the moment's serious reflection; and
characteristics of the moon while yet it prevails. The records show
ignoring the existence of the sun, that the biggest profits are made
as to talk of profit and say nothing by reductions in price. The profits
about loss. of the makers of Rolls Royce motor
If any of the leaders of what cars are paltry by the side of Lord
passes in modern times for Nuffield’s profits, insignificant
thought, Hitler, Konoye, Roosevelt, compared with the profits of Hen-
or Bevin, are to be taken at all ry Ford, and both these million-
seriously, then we are faced with aires have acquired their wealth
a future in which the whole of the by the steady reduction of the
affairs of mankind is run on a price of the article which they of-
basis of loss. There is no escape fer for the public service. The
whatever. Practically everything Woolworth millions have been
in the world of economics produces made, not by adding to, but by
either profit or loss, and seeing lowering price.
that no politician has yet been But we must return to the ques-
bold enough to put forward a plan tion of the origin and composition
for the abolition of loss but all of profits a little later. There are,
are determined to legislate profits of course, cases where suppliers,
away, loss is the obvious order of having secured control of a mar-

the future. ket, need pay no attention to the
. } reduction of price and can indeed
An Addition to Price? impose their own idea of value.

There are various approaches There are profits out of politics.
to this question. It is attacked When the Board of Education,
from various angles. Perhaps the having an effective monopoly,
most common line of argument is schedules a book as a suitable in-
found in the suggestion that prof- strument for the development of
its are an addition to price. Mil- the mind of its protégés, author
lions of decent, well-meaning peo- and publisher are put on clover.
ple are under the impression that Very large profits have, in this
the shopkeeper buys an article at way, been made out of the subver-
a certain price and adds a profit to sive manuals produced by the in-
that price, so that by legislating dustrious Webbs. Another exam-
profits away the dealer would be ple of profit out of politics is seen



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

1960 THE PROFIT MOTIVE 41

when a protective tariff gives a bookkeeping point of view no
monopoly of a market to a trade Profit and Loss Account in the
well enough organised to secure public ledgers. The income is col-
the ear of Parliament. lected by force and spent without
But these are details. We are any direct relation to costs or mar-
concerned not with a book or a kets. But outside politics every job
piece of steel, but with the hun- of work which goes to make up
dreds of millions of sales and pur- the total of the day’s endeavor has
chases, transactions of every sort, within it the prospect of profit and
kind, and description, which take the risk of loss. Council houses,
place every day of the week even nationalised railways, State ship-
in this little island of ours. To ping, have always produced loss.
mention only one example — every There is no exception in all ex-
day of every week, Sundays in- perience in any part of the world
cluded, we are, in our little way to this ascertained fact. But op-
(for after all it is a little way com- erations in the freer market out-
pared with the way of the whole side politics all produce either
world), conducting sixty million profit or loss, and society is kept
transactions involving the manu- together by the fact that having
facture, the sale and the purchase the need for profit and the risk of
of paper. And this is done by some bankruptcy through loss always in
forty million individuals, and mind, the balance in all human ex-
would not and could not be done perience has resulted on the whole
unless we were all free to follow in profit. The profit, as so far as-
our peculiar little fancies, wants, certained, is a small one, two or
and whims in the matter of paper. three per cent upon all the capital
employed. Some speculative trans-

Profit and Loss Accounting actions produce big profits, other
Profit and loss are inseparable. classes of work in more settled or
No person in business or trade standardised fields of endeavour
ever heard of a profit account. produce more moderate profits,
Every tradesman, whatever his and when these are all added to-
line of business, keeps a private gether and the losses put beside
ledger, the chief section of which them, the balance is in the neigh-
is devoted to a Profit and Loss Ac- bourhood of the return to be ob-
count. Politicians and others whose tained from gilt-edged securities.
experience is limited to public af- These are facts; they are not in
fairs, are at a disadvantage in this dispute. The politician gets a hear-
matter because there is from a ing in the matter because it hap-


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

42 THE FREEMAN August

pens that the big profits some- devote his time and attention to
times fall into the hands of per- seeking in all the processes and op-
sons who do not appear on the erations involved, the economical
face of things to be of the most way of doing them. If, as these
worthy or desirable class. antiprofit people profess to desire,
it is decided , that the man in
charge of the making of handker-
The profit system, if that is chiefs shall be free of the profit
what it may be called (although motive, he will automatically be
this talk of ‘system is likely to be relieved of the imperative neces-
very misleading), can be described sity of seeking the economical way
in very simple terms. In the mak- in all the problems associated with
ing of anything, a steam engine, a that interesting business.
bridge, a penholder, a handker- It is true that if the person in
chief, many parties, many mar- charge can succeed in lowering the
kets, numerous processes are in- rate of wages, he will add to his
volved. The complications are immediate profits, if the market
sometimes extremely intricate. In allows him to retain the gain on
connection with every detail of all wages while still exacting from the
these complications there are two consumers the same price for the
ways of achieving the purpose de- article. Seeing, however, that the
sired. There is the economical way rate of wages is in the hands of a
and the extravagant way. The well-established trade union sys-
profit system simply amounts to tem, and that the market price is
this, that someone in charge of still happily governed by the forces
the problem of making a steam en- of competition, and furthermore,
gine, building a bridge, or manu- that in a free country the con-
facturing a handkerchief, depends sumer is still at liberty to spend
for his living upon the balance of his money in some other way, the
the account at the end of the busi- opportunities for the operation of
ness appearing on the right or the crude device visualised by Rus-
profit side, and that dependence is kin are for practical purposes non-
forced upon him by the circum- extant. It must also be remem-
stance that if the balance should bered that the market in handker-
be on the wrong or loss side, he chiefs will be good when the wage
himself will be faced with the level is high and bad when the
Bankruptcy Court. In these cir- level of wages is low. The profit-
cumstances the person in charge makers’ best interests are always
of any of these jobs of work will in high wages.

A Measure of Efficiency


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

1960 THE PROFIT MOTIVE 43

This matter for seeking for the noted, for this is of the utmost
economical way of accomplishing importance, without any expense
the many processes associated with to anybody. If, however the profit
the production of the simplest ar- system, with its necessity for
ticle is far more important to the avoiding loss, is abandoned, then
general well-being than is com- the restraint upon each one of us
monly supposed. All of us by na- is removed; there is hardly any
ture are inclined to rate our own limit to the value we can place
value a little above its true worth. upon our own efforts. The rate of
All of us very naturally and very our remuneration is no longer gov-
properly are inclined to maintain erned by the willingness of the
a consistent pressure for a little market, the free consumer, to pay
more for ourselves. That common the price which we put upon our
human trait is not absent even services, but will depend upon our
from the profit-scorning ranks of ability to organise ourselves in
the bureaucracy itself. It is all to such a way as to browbeat the
the good in a system governed by government into placing us in a
the Profit and Loss Account, be- position of advantage over all the
cause in such a system the pres- rest.
sure which we exercise to secure
more for ourselves will be checked, A Production Problem
restrained, and brought within Private enterprise working with
reason by the limitations of the a view to a profit and facing the
market itself. Working under a risk of loss approaches a produc-
profit system every worker is di- tion problem from the market end.
rectly governed by the consumer It assumes, for example, that
who goes or does not go to the there is a market for shoes at fif-
front of the shop counter, and teen shillings or for houses at £1
does or does not put down his or a week, and starting from these
her money to the extent demanded figures works right back to the be-
by the producers and distributors. ginning of either job, pricing
If, therefore, any of us can give every item from start to finish in
greater satisfaction to the con- the hope of coming within the
sumer, whether by improving the fifteen shillings or the £1. If a
quality or cheapening the price or material or a process is too expen-
increasing the quantity, there sive, other materials and processes
arises the surplus out of which our have to be found, because the con-
own desire for more can be satis- sumer will not pay more and there
fied; and can be satisfied, be it is no other source from which the


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

44 THE FREEMAN August

costs can be recovered. When, how- more money (my money) should
ever, a local authority decides to be spent on advertising. There are
build houses to let for £1 a week, a hundred ways in which the pub-
there may be every desire for lisher, the printer, the bookbinder,
economy, but there is no necessity not to mention the bookseller and
for it, as anything over the £1 will many others, would all be forced
merely be taken from the rate- to increase the cost of production

payers. . and distribution, if once the brake
Co. . of profit and loss were removed
In the Publishing Business from the complicated machine that

I can speak with some authority gives us our books. This part of
about book production and what the argument can be summed up
would happen if the profit and loss by saying that profit is nothing
consideration were removed from but a commission on economy.
the business of publishing. If the The notion still prevails that
publisher were free to give all the there is a fixed national income of
satisfaction sometimes demanded which too great a part is taken by
by his labourer, the author, the those who live by making profits,
price of books would be quad- and that happiness can be secured
rupled. He would, for instance, by legislative arrangements divid-
save the author some little incon- ing this fixed wealth into equal
venience by putting the first draft shares between us all. That very
of the manuscript straight into partial view leaves all progress, all
type, leaving additions, deletions, increase, all advance entirely out
and alterations to be made by the of account. It happens in practice
printer and thus double the com- —and this again is not a matter of
position costs. He could keep type argument, but of recorded fact —
standing for indefinite periods at that the profitowner, held up to
heavy expense. He could give an scorn as he may be, is the least of
index to every book (a favourite the beneficiaries of the system
author’s request), although it is which it is proposed to abolish.
not one book in fifty that justifies For those who would further study
such extravagance. The author this question I have dealt in some
could have a free hand as regards detail with this part of the prob-
illustrations, and there would be lem in the chapter, “Whom Do I
no need to study the wide field of Rob?” in The Confessions of a
choice of processes with greatly Capitalist. The records show that
varying costs. Every author I have high profits, high wages, and low
known has always agreed that prices go together, and are uni-



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

1960 THE PROFIT MOTIVE 45

versally to be found in association, due to the cost-plus-percentage
all three with one another. The system, and this cannot be attrib-
total of all the wealth taken by the uted to any evil motive on the
profit makers is a trifling fraction part of anybody. It arose from the
of the total extra wages earned, simple circumstance that Dr. Addi-
and these extra wages and savings son by a stroke of the pen wiped
would never come into existence out the need for seeking the eco-

without the profits. nomical way in all the complicated
] processes associated with the pro-
Wartime Waste duction of munitions of every sort,

After more than half a century kind, and description. That absurd
of compulsory popular education system has been elaborated and
it is sad to reflect on the gigantic improved by bureaucratic minds
losses recently made by this nation and hands and will add to a far
and indeed by most nations greater extent to the costs of the
through legislative attempts to present war. The point is em-
limit, discourage, or prohibit per- phasised by a glance at America
sonal profit. Popular education has in the latter part of 1940 and the
so far done little to minimise the early part of 1941. In the Kaiser's
age-old human weakness of failure war, before America had at-
to learn from experience. In the tempted to swallow the whole of
Kaiser's War there was, as hap- the socialist pharmacopaeia, we
pens in all wars, the demand for employed Pierpont Morgan to act
the abolition of profit, and one of as agent for the purchase of our
the most muddle-headed of all that supplies, and we were not encum-
muddle-headed class who call bered on the other side, and were
themselves socialists, Dr. Christo- far less encumbered on this side,
pher Addison, then Minister of by bureaucratic devices for ac-
Munitions, set up the absurd sys- complishing economic purposes by
tem of remunerating manufac- uneconomic methods. In the result
turers by the cost of the article it will be found that we secured
plus a small fixed percentage. in 1914-18 at least twice the ma-
Trade unions were satisfied, the terial for half the money.
popular desire to take profit out We really must bring this profit
of war was accommodated, and in question on to a higher intellec-
the result enormous waste was tual level. We are still, for in-
achieved. I estimate that one-third stance, concerned with the notion
of the National Debt left to us by that the fool and his money are
the 1914-1918 war was directly easily parted, but it is not worthy


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

46 THE FREEMAN August

of us, dealing as we are with the lected from the Divorce Court, as
economic welfare of the whole attempt to discuss economic sys-
world, to apply the exaggerated tems using only evidence secured
machinery of bureaucratic govern- from the doings of a small class
ment to the doubtful purpose of that can never be eliminated and
saving the face of the fool. I am whose operations, however objec-
old-fashioned enough to think that tionable, can never amount to more
parting with his money is often than a trifling fraction of the eco-
good for the fool. There are and nomic operations of society as a
must always be plenty of profit- whole.

eers, using the word in the ob-

jectionable sense desired by the The High Cost of Intervention
politician. Starting with the bully Suppose it were possible for the
at school who secures a gramo- advocates of capitalism to attack
phone record as a swap for a few the world of labour in the way in
worthless stamps, we shall always which the agitating politicians,
have the profiteer among us. . .. who have secured the ear of
Some of them serve a useful pur- labour, deal with the employing,
pose in opening up markets that directing, and managing classes.
would otherwise never be dis- At the present moment there are
covered. At their very worst they thousands of misguided working
may be compared to the dung, men unconcerned about the dan-
necessary to the production of gers of the enemy at our gate,
good crops, the best dung being drawing double money to work on
that which is most thoroughly Sundays, and taking as a regular
rotted. But it is unjust, stupid, and holiday two or three weekends
wickedly dangerous to regard the when only normal money is to be
profiteer as typical, or to insist earned. There are others deliber-
through legislation on forcing ately holding the nation to ransom
upon the rest of us restrictions de- and securing far more than their
signed to eliminate him. These re- labour is worth, because in our
strictions never achieve their pur- dire need we must have their as-
pose. Complicated rules and regu- sistance. It would, however, be the
lations give new openings to real grossest of libels, the most obvious
profiteers and tend to increase of lies, to suggest for a moment
their numbers. One might just as that these people are typical of
well discuss the advantages and the British workingman.
disadvantages of marriage, using A word must be said about spec-
only evidence and arguments col- ulators and gamblers, for they



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

1960 THE PROFIT MOTIVE 47

exist and are a vital and essential ing class would feel aggrieved if
part of any good economic system. Monte Carlo were abolished. Here
Here again, we are swayed too we have the profit motive, using
much by the circumstance that the the word in the sense applied so
gambler himself is often a person wrongly by the Socialists to the
with a mentality, an appearance, whole class of entrepreneur. Monte
or a personal motive that does not Carlo, the organisers of football
appeal to us. pools, and the proprietors of every
This is an old question and its casino in the world, live on the
nature can perhaps be seen by losses of what Mr. Bevin has in
looking back a little. It is some mind when he talks of the profit
years since Upton Sinclair fa- motive. But this has as little to do
voured us with his picturesque with the system of economy built
description of the wheat pit at upon the necessity for profit as
Chicago. Now we can notice with have the operations of the scab
amusement that while gamblers in the labour market. The eco-
were making spectacular fortunes nomic function of the genuine
and spectacular losses in Chicago, speculator is, of course, a useful
we ourselves were enjoying the one, for it is he who by evening
cheapest bread in our history. Our out the market saves us all from
bread was in fact so cheap that ups and downs and booms and
Joseph Chamberlain was con- slumps, which without him would
strained to admit that if we be much more numerous and
adopted his scheme for Empire troublesome. Profit has been abol-
Preference, “your food will cost ished in Russia, but the pure-
you more.” The fact is, and all his- minded Socialists in control of
tory proclaims it, a simple one. that unhappy country do not
The gambling class is a losing scruple to make State profits out
class; it loses deliberately, for the of State lotteries maintained to
curious satisfaction to which it satisfy the gambling instincts of
appears to attach importance, of their profitless people.
securing an occasional spectacular
fortune for one of its members. PART Il: THE USES OF PROFIT
One need only think of the for- Quite apart from the considera-
tunes recently made from football tion of how profits arise, whether
pools, or of the State of Monaco, there is really a profit motive,
wealthy beyond the dreams of whether they constitute an addi-
avarice out of the losses of the tion to price, or even whether they
speculator: and yet the speculat- are moral or immoral, there re-


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

48 THE FREEMAN August

mains the other big side of the the main source from which capi-
question, the uses to which profits tal can be secured. The socialist
are put, the things which they do, millennium in Russia has depended
and the problem of whether these all along upon foreign capital, and
things could be done without the would have collapsed years ago but
existence of profit. - for the folly, as I think, of other
One of the many functions of countries in providing the credits
profit is the payment of losses. It and facilities of capitalism for
is evident that there must be losses that degrading business. Capital
as well as profits. Nobody suggests is accumulated wealth, the prod-
that when a buyer pays 1s. for an uct of work done, saved up and
article that 1s. can always have put aside for the purpose of pro-
been made to provide the exact viding the basis on which new
costs of the article, no more or enterprise can be founded. If
less. If it provides more, there is profits are to be abolished, some
profit; if it provides less, there is new source must be found to pro-
a loss. If, therefore, profits were vide capital, and those are not
abolished, some other plan would wanting who argue that that
have to be devised by which the source can be found in public
losses could be paid for. A very credit. They have however to meet
large proportion of these losses is the practical difficulty that, in all
incurred by the State, not only the human experience so far, there is
losses which the State always no such thing as public credit;
makes when it enters into the there is only public debit. The talk
realm of trade and industry, but about profits and credits has so
such losses as are inevitable in the monopolised the political vocabu-
maintenance of criminals and pri- lary that there is no room left for
soners, the provision for the in- discussion of losses or debits.
sane, and so on. However re- In the same category, profits are
garded, these matters are losses, the only source from which to re-
economic charges which produce place all the wear and tear and
no corresponding economic cred- wastage associated with all human

its. . .. endeavour. Among the many
troubles now germinating for the
Capital Formation future is that which will arise

A still more difficult set of prob- when we go too far with the taxa-
lems comes to mind when one con- tion and confiscation of profits
siders that nearly all capital is calculated as the tax-gatherers
provided out of profits. They are now calculate them, without ade-


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

1960 THE PROFIT MOTIVE 49

quate reference to the costs of in advance of supply all the multi-
wear and tear and wastage, or the farious amenities which together
need for adequate reserves. make up civilisation and which it
The basis of security which now enjoys. Voltaire put the truth
profit gives to any society should in its simplest terms when he sug-
also be considered. If, for instance, gested that the first man to wear
the whole of society were depend- a shirt was probably burnt at the
ent upon salaries and wages paid stake as a sorcerer. To come to
by the State, there would be little, modern times, it will be within
if any, basis of security. There the recollection of some of my
would be nothing to fall back upon, readers that an endeavour was
no reserves, and the risk of the made to popularise two ideas at
collapse of the whole world would the same time, the one roller-skat-
always be hanging over such a so- ing and the other the moving pic-
ciety. No such risk on such a scale tures. Capital and labour plumped
can exist so long as we continue for roller-skating. Palaces for the
with the profit system. practice of the sport were erected
by the thousand and the moving
Capital Encourages the Development picture was neglected. Stock Ex-
of New Products Involving Risks change floatations for roller-skat-
One other of the main functions ing enterprises developed into a
of profit may be mentioned. It is minor boom at the time when the
the only way to provide for that Palace Theatre was the only con-
speculation with new ideas which cern to be found willing to experi-
is the beginning and end of eco- ment with the moving picture. The
nomic progress. It is altogether experience here was exactly my ex-
absurd to suppose that the public perience in the publishing trade.
really knows in advance what it The good and the inferior were
wants and that, by State or col- both supplied, the inferior had all
lective action working through re- the experts to recommend it, but
search, that want can be supplied. the public judgment, not the first
This theory entirely overlooks the judgment, working gradually
truth expressed in the title of the through the sense and intelligence
Law of Supply and Demand, which of the individual, has left roller-
is something very different from skating on the scrap heap and has
the shallow notion of demand and brought the moving picture to its
supply. The public judges an arti- present state of perfection.
cle after it is put upon the market. Where would the internal com-
The public has never demanded bustion engine and aviation be


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

50 THE FREEMAN August

today had it not been for the profit pendent upon profit, an admission
system? The Codys, the Wrights, to which official sanction is given
and the Rolls were all regarded as by special arrangements for the
cranks; some of them lost their remission of taxation upon money
lives pursuing their own “cranky” given to charity. . ..

ideas. But one of the greatest of

profit-owners in our time, the late PART III:
Lord Wakefield, took another view, DEMOCRACY AND PROFIT
and spent a large proportion of The Profit and Loss system is

his fortune, a fortune made en- essentially the consumer’s system.
tirely out of economy in oil, to pay Human experience so far has
the expenses of the Malcolm Camp- failed to produce any other plan
bells and the Amy Johnsons to under which the consumer has
whom belongs the credit for the complete freedom of choice and
present state of development in can command or reject at his sole
these matters. whim or pleasure. We are all con-

Here again it is contrary to fact sumers, and if we accept the
to say that the State or the Min- theory of the greatest good of the
istry of Aircraft Production could greatest number, any economic
or would have done the same system controlled by consumers
thing. In 1909 when Blériot first must give us all the benefit of its
crossed the Straits of Dover, no operations. Some consumers have
politician would have had the cour- advantages over others, as in Rus-
age to suggest the allocation of sia, where, as we have seen, the
public money to be spent on what use of the motor car or any sort
everybody regarded as a game. of luxury is the exclusive privilege
The notion that pigs might fly was of the official, for the simple rea-
the commonest of conversational son that there are not enough
illustrations of the wholly impos- motor cars to go all round and
sible. some process of selection is neces-

There would, of course, be no sary. There must be inequalities
charities without profit, no volun- in our country, unless we can visu-
tary hospitals, indeed no hospitals alise a state of affairs in which
at all, because the State has never there are 46,000,000 portions of
yet initiated anything. The best caviar and of everything else. The
that can be said is that it has remedy for such inequality is to
sometimes stepped into an estab- be found in two ways, either to
lished market and taken it over. increase the production of caviar
Charities are admitted to be de- or to abolish it altogether and thus


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

1960 THE PROFIT MOTIVE 51

deprive the Russian fishermen of new and better products, first of
employment. all for experiment by, or the serv-
I find a widespread feeling, ice of, a small minority, and work-
somewhat vague at present, that ing down from them, finally for
by the application of brains, by the service of all.
planning, by organisation, by laws
or by more committees, things Pressure on Producers
could be so arranged as to elimi- There is the admitted objection
nate profit and provide that the that the Profit and Loss system
ample supplies of nature could be maintains a constant pressure on
freely and equally at the service of the producers to produce as much
all. The experience gained in the as possible at the least possible
course of a war is no criterion as expenditure of time and effort. It
to what might be done in peace, makes the producer the slave of
but our war experiences should be the consumer. There are those who
helpful towards an understanding visualise a system under which we
of this very common problem. We shall all work when and as it suits
all know how the consumer has to us, as we shall ourselves direct, in
be relegated to a subsidiary posi- a self-governing democracy, and
tion; how the planning of supplies yet at the same time that we shall
and the: pooling of resources de- enjoy a full consumer life, having
stroy quality, obliterate choice, in- each of us prescriptive rights to
crease cost, and diminish quanti- our share of the general wealth.

ties. That proposition will not stand

Rationing . . . may be said to examination. If indeed it were a
give us a little more equality and practical proposal, it would offer
a lot less of everything else. . . . a life with no attractions to “man

The Profit and Loss or consumer who is man.” We cannot have it
system will never give equality and both ways, and it is good to be
it is as well to be quite clear and clear and definite on the point and
definite on that. Other systems remove from our minds unworthy
may profess to offer equality but thoughts of a life that is unob-
no scrap of evidence has ever yet tainable and even if obtainable
appeared in support of the profes- would not be worth living. The
sion. What this consumer system truth is that as producers we must
has done and will continue to do, be slaves to our consumer selves,
as an essential part of the search or as consumers we must be slaves
after economy and profit, is to to our producer selves. There must
produce an unending stream of be slavery, obligation, necessity,


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

52 THE FREEMAN August

call it what you will, in any the threat of loss millions of men
honourable and workable scheme and women do accept a very real
of life. We must stand in the and personal responsibility for the
market place to be hired as pro- maintenance of economy, expedi-
ducers, or must line up in the tion, and efficiency, out of which
queue to be rationed as consumers. an ever higher standard for all is
In the first arrangement there will provided. Without Profit and Loss
always be more and more (not, of the quality and genius of .all these
course, all that everybody wants), people is put out of use, no others
for general consumption, while in are invited to cultivate any sort
the second scheme there will be a of personal responsibility, and the
steadily decreasing supply of general standard of life is of
everything, until in the end there necessity lowered.
is nothing to share but equality of
poverty. To sum up. The abolition of
It will be evident from the fore- profit will bring about a universal
going that the economic system state of loss. In the process, it will
through which civilisation has first of all abolish all economy,
been developed is essentially a efficiency, and expedition; it will
democratic system. It evolved a place the consumer in slavery; it
practical universal suffrage, in will stop up the source of new
theory at least, long before any capital and dispel all hope of prog-
politician thought of universal ress. The very best that can hap- -
votes. Under it the command is pen if the antiprofit policy is pur-
vested in every individual. The sued, is that we shall go on shar-
Profit and Loss system makes for ing the profits of the past until,
responsibility in the individual, theybeing exhausted, there isnoth-
any other system reduces the in- ing more to share. The old trouble
dividual to a state in which no between the haves and the have-
sense of responsibility is required nots will then disappear, in the
or expected. Nobody, for instance, simplest of all possible ways, by
is responsible for anything in a turning us all into have-nots, with
bureaucratic system. No bureau- consequences that could only be
crat suffers any personal loss if understood by those who have
things go wrong or if the public lived in the Dark Ages following
fail to take advantage of his serv- the political destruction of many
ices. Under the spur of profit and previous civilisations. ~


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

and the MARKET

OsCAR W. COOLEY

WHEN MY WIFE sends me to the to know whether I am getting my
supermarket to buy groceries, I money’s worth?
pay for what I get and get what I At the supermarket I can in-
pay for. The price of each item spect each article, note the price,
purchased is known to me and I and decide whether it is a desirable
agree to it. This is an exchange purchase. My decision to buy a cer-
between two parties, each of whom tain article signals the store man-
knows exactly what he is getting ager to continue to stock it and the
and what he is giving up. manufacturer to make more of it.
How different is the case with My adverse decision, on the other
respect to the services of govern- hand, is a sign that the quality or
ment! I use the public streets and design needs to be improved, the
roads, send my children to the pub- price lowered, or both. Thus, the
lic schools, am protected, presum- production of food is ‘price-
ably, by the local police and fire- guided.” Alas, there is no similar
men and by the national armed guide for the production of most
forces. And periodically I pay government services.
taxes, or suffer them to be taken It is true that market pricing
from me, either directly or indi- might be difficult, if not impos-
rectly (according to the Tax Foun- sible, for services such as police
dation a third of my taxes are protection or court procedures.
hopelessly hidden from sight in But this pricing difficulty does not
the prices of things I buy). Gov- apply to many others in the con-
ernment services seldom are priced tinually growing list of tax-sup-
so that I pay for what I get or get ported services.
what 1 pay for. How, then, am I When we examine a specific ex-
—_— ample, such as elementary schools,
Mr. Cooley is Associate Professor of Economics .
at Ohio Northern University. we find that the enterprise was

63


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

54 THE FREEMAN August

originally socialized, not because Once this theory is accepted, it
of a technical difficulty of pricing would appear only a matter of time
but because of the fear that, if the until all intellectually qualified
“goods” were openly priced and youngsters will be required to go
freely offered in the market, the to college. Increasingly, through
consumers might not “buy” them. education subsidies to veterans,
Education, it was argued, is a good easy government loans, and abun-
of which everyone should partake, dant scholarships, students and
if not for his own sake, then for their parents are being relieved of
“society’s” sake. Those who thus the responsibility to pay for what
reason are not willing to leave to they get in college. In short, the
the individual consumer the ques- market in education is disappear-
tion of whether he should buy edu- ing.

cation, what kind, and how much. If we do not pay for what we get
While they talk democracy, they in education, have we any assur-
practice paternalism. ance that we shall get what we

pay for? Once the market is de-
The Market Is Disappearing stroyed — once getting is divorced

This has long been the philoso- from paying — there is really no
phy with respect to elementary and way of comparing what one pays
secondary education; increasingly with what one gets.
it is being applied to college educa- Assume that this trend con-
tion. The press recently reported tinues and that fifty years hence
the case of 18-year-old Nancy Pass all American colleges and univer-
of Mississippi. Nancy wanted to go sities are socialized. John Smith's
to the state university to study art, two boys will go to college (com-
but her mother, who is divorced pulsory attendance) where they
and living on payments from the will enjoy free tuition, free books,
father, felt that she could not af- free board and room — ‘free’
ford this. The Supreme Court of everything. It is then likely that
Mississippi ruled that the father more than half of John’s income
must increase his support pay- will be taken in taxes, direct and
ments by $90.00 a month to enable indirect; and part of this take —
Nancy to go to college. Said Justice nobody will be able to say just how
James G. Holmes: “College educa- much — will go to help pay the cost
tion is the duty which the parent of running the government-owned
not only owes to his child but the (colleges.
state as well”! The colleges will be standard-

1 Newsweek, April 4, 1960 ized, since all will have to meet


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

1960 EDUCATION AND THE MARKET 55

uniform government specifica- satisfy the consumer as to both
tions. There will be no incentive quality and price, or else lose the
for one institution to be different sale; and the consumer in turn
from another since all will depend, must satisfy the producer by pay-
not upon attracting students who ing an amount sufficient to keep
pay their own way, but upon gov- him from turning his energies to
ernment appropriations. Hence, some other field of production.
the John Smiths will have little if Both producers and consumers
any basis for choosing one school have alternatives. This is what
rather than another — even if they gives them bargaining power —
are still permitted a choice. If the this is what makes a market.
colleges do not teach what John Rather than suppressing the
Smith thinks ought to be taught, market, we should be perfecting it
there will be nothing he can do — — freeing it, making more use of
except write to his congressman. the principle of exchange. Rare, it
The teachers and administrators seems, is the worker who under-
also will have little choice. They stands the disadvantage of receiv-
will not need to produce education ing part of his wages in “fringe
which satisfies students and par- benefits,” who perceives that a
ents; rather they will have to cash dollar he can spend freely in
please bureaucrats and politicians. the market is worth more than a
They will be civil servants, as the dollar in any other form. The
post office employees now are. vogue of trading stamps further
They will not be responsible, ex- demonstrates how little we appre-
cept in an indirect and circuitous ciate spendable cash over merchan-
way, to those who use their serv- dise premiums. Money, after all, is
ices. a great invention; why not use it?
Who can believe that the quality Albert S. J. Baster in The Little
of higher education would be im- Less? says: “The depravity of taste
proved by such a change? Unfor- in modern capitalistic societies is
tunately, we are moving in this di- not due to the fact that life is over-

rection. commercialized but to the fact that
life is not commercialized enough.”
Bargaining and Alternatives We suffer not from too much but

The quality of any good or serv- too little marketing. Consumers do
ice depends on the relationship not take the trouble to inform
which prevails between producer themselves of the “buys” that are
and consumer. In a voluntary available, and producers are not
transaction, the producer must 2 London: Methuen, 1947. p. 124.


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

56 THE FREEMAN August

sufficiently aware of the alterna- their credit. Any young man or
tive outlets for their energies and woman with the physique and men-
resources. The consumer relies on tality to do college work has great
a Federal Trade Commission to potential earning power. A loan to
protect him, while the worker re- enable such a youth to attend col-
clines naively in the arms of his lege would seem to be a productive
union officials. The consumer does loan, even in the banker’s sense of
not know what he is getting, nor that term. If the youth cannot pro-
does the producer know his oppor- vide tangible security for such a
tunity costs. loan, he surely can secure it with
When a new need arises, like the the signature of a parent or other
present need for more and better relative. Where are the bankers
education, many turn to govern- who presumably want to preserve
ment to satisfy the need. Anyone and strengthen the market econ-
who suggests that consumers can omy? Here is a way in which they
get better schools and colleges can well use their talents and re-
more quickly by digging down sources to that end.
deep in their pockets and paying Higher education may be the
for them, directly and forth- most favorable field in which to
rightly, is considered a social an- halt the socializing trend. Private
tiquarian. institutions are still operative in
this field. Let private enterprise
stand firm in the colleges and uni-
Supposedly, many young people versities and youth will be en-
are unable to pay the cost of col- listed in the cause of freedom. It
lege attendance. But the record should not be difficult for univer-
shows that boys and girls from sities and colleges that are dedi-
poor families have secured a col- cated to freedom of thought to
lege education, and some are doing teach the value of freedom of ac-
it today. More could, if their par- tion. But they must practice what
ents were not taxed so heavily. they preach. And they must restore
Many, lacking cash, have used the market in education. ~>

There Are Ways To Be Free

‘John Stuart Mill

THE ONLY FREEDOM which deserves the name, is that of
pursuing: our own good in our own way, so long as we do
not attempt to deprive others of theirs, or impede their ef-
forts to obtain it.


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

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN

BEHIND THR
CONSTITUTION

MoST Americans have heard, at the Constitution of the United
some time or another in their lives, States of America, this view is
that a seventeenth century English sustained by the commentary on
gentleman named John Locke had Locke that is printed along with
something to do with inspiring the Locke’s own second treatise or
colonists who made the Revolution FEssay on Civil Government, the
of 1776. He said something — did essay itself being offered, with a
he not? — about the natural rights pleasant gesture to antiquity, in
of every man to life, liberty, and the original type, spelling, and
property, and something about italics used in 1690. Reading
civil government being instituted through the essay, with its quaint
to protect people in these rights. small s’s that look like f’s, one sees
Jefferson, to be sure, dropped the no reason to quarrel with the idea
word “property” from the Declara- that Locke, along with Montes-
tion of Independence, substituting quieu (also reprinted in The Chris-
for it a vaguer and more grandilo- tian History) was right behind
quent phrase, “the pursuit of hap- James Madison in giving us the
piness.” Nevertheless, the Jeffer- republic that Ben Franklin hoped
sonian insistence on unalienable we could keep. But when one picks
rights was straight out of the up Willmoore Kendall's John Locke
“party line of the American Revo- and the Doctrine of Majority-Rule
lution” as Samuel Adams and (University of Illinois Press, 141
other patriots had lifted it from Pp., $2.50), in which all the ac-
Lockean pamphleteering. cepted views of Locke are turned

The conventional view of Locke, 1 Volume I, “The Development of Self-
then, is that he was the first great government, Introduction by Felix Mor.
formulator of limited government by Joseph Allan Montgomery. The Ameri-
theory. In a sumptuous book ¢an Christian Constitution Press, 210

. 4. . Post Street, San Francisco 8, California.
called The Christian History of 436 pp. $7.50. Available September.

87


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

58 THE FREEMAN August

upside down, one’s head begins to sphere in which government is

whirl. permitted, by compact, to operate.
i But Locke, as a “natural law”
Locke's “Second Treatise” philosopher, had firm opinions

It is Professor Kendall's opinion about prior individual rights
that Locke, far from being a which no human being in his sane
champion of limited government mind would ever cede to govern-
and unalienable rights, was a be- ment if he were truly consulted in
liever in the tyranny of the ma- the making of a compact. These
jority. The idea that a mystic opinions may not be explicit in the
“general will” is created whenever Second Treatise, which, although
51 per cent of the voting popula- it is not a “livre de circonstance,”
tion agrees to something is ordi- was written to clear Locke’s own
narily attributed to Rousseau. But mind about the political troubles
Kendall says that Locke was the of the English realm in the last
first perpetrator of this theory, days of the Stuarts. But they are
and he is doubtful, furthermore, certainly implicit in it.
that Rousseau ever subscribed to
it in any meaningful way. In other Maiorities Can Be Wrong
words, Locke was the first demo- Kendall argues that Locke fell
cratic totalitarian; the Frenchman into the majoritarian tyranny trap
is absolved of the blame for clear- when he assumed that 51 per cent
ing the way for Robespierre and of the people could be trusted to
Hitler! see truths about human nature

Inasmuch as Locke did say that that are, in Jefferson’s phrase,
“when any number of men have “self-evident.” Since we know,

. consented to make one com- from the history of a Germany
munity . . . . the majority have a which voted in the early nineteen
right to act and conclude the rest,” thirties to extinguish its own
Kendall has some sort of case for democracy, that 51 per cent of a
his view. He reaches his conclusion population can be stupid, Locke’s
by a rigorous textual analysis of faith in the continuing good sense
the Second Treatise, excluding all of the majority may seem a bit
other works and words by Locke utopian. Though there are natural
as irrelevant to his purpose. Natu- laws that proceed from the basic
rally, the phrase, “conclude the constitution of man, not everyone
rest,” would have the meaning is given to understand them — and
which Kendall attaches to it in any in times of emotional upset man’s
area which comes within the misapprehension of his own na-


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

1960 BEHIND THE CONSTITUTION 59

ture can be disastrous. Far from to be a monster in its own right.
denying this, however, Locke con- Lloyd George, after all, was still
sidered that the very inability of more than two centuries over the
the human being to understand historical horizon; and no English-
the workings of natural law in all man of the seventeenth century
circumstances was one reason why could have possibly prophesied the
government should be limited in emergence of a Sidney Webb.
its role to acting as policeman, dis-
penser of justice, and military de- Religious Tolerance
fender of the realm. What Locke didn’t put into his
Locke, as everyone knows, wrote Second Treatise he put into his
at a time when the English people letters on toleration and into a
were engaged in their century- preliminary work on civil govern-
long effort to put limitations on ment which he wrote as early as
the power of the crown. The Sec- 1667. Locke was originally in favor
ond Treatise, which was written of the Stuart Restoration for rea-
sometime between 1681 and the sons which Kendall fails to men-
date of the final overthrow of tion: he considered that the Puri-
James II in 1688, did not concern tans, as “popular asserters of pub-
itself with the possibility that the lic liberty,” had turned out to be
House of Commons might, with “the greatest engrossers of it.”
the passage of time, become as Said Locke at the time: “A gen-
tyrannical as any monarch. After eral freedom is but a general
all, in an England which still had bondage .. . all the freedom I can
a judiciary (Coke on Magna wish my country or myself is, to
Charta was well known to Locke’s enjoy the protection of those laws
contemporaries) and a House of which the prudence and providence
Lords, there were formidable ob- of our ancestors established.” Thus
stacles to any assumption of totali- Locke took off from an antimajori-
tarian power by a House of Com- tarian position which Kendall, of
mons majority. Moreover, Locke all people, should be able to under-
must have reckoned with the con- stand.
tinuance of the king’s veto even The Locke argument of 1667
though he wished to curb the was based on a premise that gov-
crown’s role in the making of posi- ernment, as derived from the peo-
tive law. There was no particular ple, could only have the power nec-
reason in the decade of the sixteen essary to “their own preservation.”
eighties for thinking that Com- It followed from this that there
mons would ever gain the power was no necessity for “laws to any


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

60 . THE FREEMAN August )

other end but only for the security says, as Locke did say, that men
of the government and protection in the marketplace are “not to be
of people in their lives, estates, compelled . .. . either by law.or
and liberties.” The corollary of force,” how can such a thinker be
such thinking was admirably termed anything else than an ad-
stated by Locke himself- when he vocate of limited government?
asked, in his defense of religious .
tolerance, “Can it be reasonable No Sure Guarantees Against
‘that he that cannot compel me to Encroachments of Government
buy a house should force me his Kendall is exceedingly harsh
way. to venture the purchase of with Locke: because the Second
heaven?” In other words, govern- Treatise can offer no guarantee
ment had no more right to meddle that “society,” as represented by a
with a man’s religion than it had to 51 per cent majority, will not
meddle in affairs of the market. break faith with its unborn child-
True enough, Locke did not advo- ren who, even before they come in-
cate giving unfettered scope to to the world, are entitled to the
Catholics. But he thought of Cath- natural rights of their forebears.
olics as. being unwilling to abide But who can offer any such guar-
by the terms of a social compact antee? Kings, aristocracies, oli-
which reserved freedom in reli- garchs, theocrats, and judges have
gious matters to the people. It was all broken faith with both their
the mundane politics of seven- children and their ancestors in the
teenth century Catholicism that past. Kendall might retort that re-
bothered him, not purely religious ligious revelation is the proper
aspects of the faith. source of political rights and
Unlike Kendall, the American duties. But who is to guard the
colonists of the 1776 generation people against the possibility that
assumed that Locke meant what he revelation itself won’t be misinter-
said when he argued that civil preted and misconstrued by the
government “relates only to men’s lords spiritual? There is no way of
civil interests . ... and hath noth- guaranteeing a society against the
ing to do with the world to come.” encroachments of government
And they took him at his word short of making it extremely diffi-
when he argued, furthermore, that cult for a majority to change the
“political society is instituted for basic law of the land. When the
no other end, but only to secure House of Lords and the king’s veto
every man’s possessions of the were realities in Britain, the pos-
things of this life.” When a man sibility that the people would tyr-


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

1960 BEHIND THE CONSTITUTION 61

annize over themselves was held p THE FREUDIAN ETHIC, An

firmly in check. And when the Analysis of the Subversion of
check-and-balance system in the American Character
U.S. was supported by a Constitu- By Richard LePiere. Duell, Sloan

tion which severely limited the and Pearce. 299 pp. $5.00
federal taxing power, Washington, .
D.C., could not easily invade the Reviewed by Frank Chodorov
reserved rights of the individual WHAT CAUSES change in social val-
or the reserved powers of the big ues? It is impossible, says the
regional localities and the states. author of The Freudian Ethic, to
trace such change to a simple or
Ideas Shape Our Destinies singular cause; new patterns of
Just how wise our ancestors thought and behavior are prob-
were in translating Locke and his ably the result of a complex of in-
French spiritual ally, Montesquieu, fluences. But, that the ideas pro-
into American terms is apparent mulgated by men of intellectual
in the commentaries reprinted in enterprise do have a bearing on
The Christian History of the Con- the complex of values, sentiments,
stitution of the United States. In and beliefs of a period is a cer-
this beautiful job of bookmaking tainty. The current vogue attained
the basic texts which shaped the by the teachings of Sigmund
thinking of the Founding Fathers Freud, the Viennese psychoana-
are interspersed with long ex- lyst, indicates that they have had
cerpts taken from older historians some influence in shaping the
who believed that it is the “en- Western ethic during the past
croachment of ideas” rather than half century.
‘““‘economic materialism’ that For nearly two hundred years
shapes our destinies. To a genera- previous to the advent of Freudi-
tion which has not been grounded anism, Western social customs and
in such things as the evolution of beliefs emerged from what Max
the English Bible, the commentar- Weber, the German sociologist,
ies of Blackstone, or John Fiske called the Protestant ethic. He
writing on Thomas Hooker's ideas used the word “ethic” to designate
for the Connecticut constitution of a people’s character or ideals of
1639, to say nothing of Locke, character, rather than a code of
Montesquieu, or Bradford’s his- morals. He called it the Protestant
tory of the Plymouth Colony, this ethic because it coincided with the
beautiful book will come with the Protestant movement, not because
force of revelation. « the Reformation alone accounts


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

62 THE FREEMAN August

for the change in social manners it presupposes individual enter-
-and thought. Though the Protes- prise, with the rewards of enter-
tant religion, by doing away with prise following automatically, and
entrenched habits of thought, did the capacity and the willingness of
provide a favorable climate for the individual to abide by his
the acceptance of the new ethic, so promises. But capitalism, and the
did the Industrial Revolution that Protestant ethic, can function only

began about the same time. in a climate of freedom; the in-
i dividual cannot be held respon-
Self-responsible Man sible for his acts unless he is free

At any rate, the Protestant to choose his course. He must be
ethic rested on a concept of the free not only from undue political
nature of man: he is endowed with restraints, but also from inhibi-
free will and can therefore be held tory customs and stultifying class
accountable for his acts; he is a distinctions. Since he is to be
reasoning animal and therefore judged only by his achievements,
capable of mastering his environ- he must not be encumbered with
ment and changing it to suit his rituals that enthrall him nor hin-
circumstances. Since man, in this dered by political yokes.
view, is self-reliant and self-re-
sponsible, the worth of the indi- [Initiative and Enterprise
vidual, to his fellow men and in the /mplement the Protestant Ethic
sight of God, is measured by his In America, the Protestant ethic
accomplishments. The good man is found expression in the Declara-
not one who passively submits to tion of Independence and in the
the hardships of nature, or to Constitution which tried to imple-
ritualistic compunctions, but is ment it, in the homilies of Ben
rather a man of action, strongly Franklin, and in the moral values
motivated, and has both the cour- enunciated in the McGuffey read-
age and the confidence to seek the ers. But, this propaganda was ef-
satisfaction of his desires. fective only because of the high

This view of man’s nature is in- degree of initiative and enterprise
herent in the capitalistic mode of exercised by Americans in the
production, the elements of which building of a nation. They explored
appeared in Western Europe long the West, instituted new techno-
before the Protestant Reforma- logical and organizational meth-
tion. For capitalism, with its mar- ods, exploited new inventions, and
ket place techniques, rests its case altogether subscribed to the idea
on the presumption of free will; that man is a self-reliant and self-


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

1960 OTHER BOOKS 63

responsible being. They asked for Adjust and Conform
no favors from society, but rather Society is always at fault, says
held to the notion that they, indi- Freud, though he refrains from
vidually, made society what it was. pointing out that society is com-
Along came Freud, toward the posed of people, the neurotics;
end of the nineteenth century. Put- from his usage, society becomes
ting aside his novel ideas on the something greater than the sum
composition of man’s psyche, ideas total of its parts. Very little can
which have no basis in empirical be done to correct the faults of so-
knowledge and might well be ciety, so that the best the individ-
placed in the category of pure ual can do to make his struggle
fantasy, and putting aside the through life bearable is to make
therapeutic value of his psychoan- his peace with it. This is the doc-
alysis, which there is no objective trine of adjustment, so popular
way of judging, we come to his no- these days, not only with Freud-
tion of the nature of man, of which ians but also with many who have
he made much in his writings. This been unconsciously influenced by
is his principal contribution, if it Freudianism — the psychologists,
may be so called, to sociology. The the educationists, the social work-
human being, according to Freud, ers, the do-gooders. It is a doctrine
is biologically ill-equipped to face of negation, discouraging initia-
the world into which he is born. tive and enterprise, and removing
Though Freud does not tell us the hope of a better life through
what kind of world he could face action. It robs the individual of all
with some hope of finding the hap- the dignity with which the Prot-
piness to which he is entitled, and estant ethic endowed him.
which he craves, one surmises Though the Freudian idea of the
from Freud's writings that it nature of man — or, in fact, any of
should embody the warmth and his ideas — cannot be validated by
comfort of the womb. But, the scientific investigation, it has been
world is not so constituted, the made valid by faith. It is this
new-born babe experiences a trau- faith in Freudianism that has
matic shock even at birth, and given rise to the Freudian ethic,
from then on, until death relieves now being institutionalized in the
him of this unhappy existence, he West, which promises to replace
suffers from neuroses induced by the Protestant ethic. Thus, we find
the conflict of his nature and his in every field of endeavor an in-
environment. Accordingly, we are clination to modify society to the
all neurotics in various degrees. end that the conflict between it and


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

64 THE FREEMAN August

the individual be mitigated. In the it is well-written, easy to read, and
management of the home, parents holds the reader’s. attention
are inclined, thanks to the propa- throughout. Even though the
ganda of the Freudians, to relieve author warns us several times that
the child of any responsibility to this change in the pattern of
his family or even himself; this is American thought and behavior
the doctrine of the permissive cannot be entirely ascribed to
home. In education, Freudianism Freudianism, the case for causa-
has implemented “progressive” ed- tion is quite convincing. Yet, this
ucation, in which the child .is not reviewer suggests that perhaps a
subjected to any of the disciplines more basic cause must be located
of learning and is permitted to do in our democratic political sys-
very much as he pleases in class. tem, and that the changes wrought
In jurisprudence, the tendency is in the name of democracy found
to blame society for the crimes support in this novel idea of the
committed by individuals, espe- nature of man. Thus, ‘“progres-
cially in the case of juvenile male- sive” education came into vogue
factors; in negligence cases, it is because of our tax-supported
customary to award the injured schools; democracy called for uni-
person some recompense from so- versal education, and because of
ciety for his injury, even though the natural differences in the ca-
the fault may be entirely his own. pacity of youngsters, educating
Our whole system of social secur- everybody meant a lowering of the
ity is based on the Freudian ethic, standard to fit the minds of the
and so is our rubric of political mediocre — which is in line with
controls. Society owes everybody Freudianism. Thus, too, with so-
some sort of a living, regardless of cial security; the politicians found
any contribution he may or may it a good way of getting votes, and
not make to the national welfare. after the system became institu-
As a result, the nation is drifting tionalized, the Freudians made
into a state of mendicancy, and the much of it. Anyhow, regardless of
American character is deteriorat- whether Freudianism is causative
ing. : or not, it certainly has contributed
to the deterioration of American
values, and if it continues to exert

This is altogether a devastating influence, it will bring about a
and frightening book. And withal, stagnant society. >

A Convincing Relationship


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

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 —Effective January 1, 1960, we are paying at the
rate of 412% per annum. Accounts opened or added to by the 10th of
any month earn from the Ist of that month.

ASSETS OF OVER $400,000,000.00, with over $90,000,000.00 in
cash and government bonds and Reserves of over $30,500,000.00 as of
December 31, 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.

SECURITY of principal assured through progressive, conservative manage-
ment and the additional protection of $10,000.00 insurance on each account.

"COAST FEDERAL SAVINGS

LJ
JOU CRAIL. PRESIDENT [)

MEMBER — FEDERAL HOME LOAN BANK — FEDERAL SAVINGS AND LOAN INSURANCE CORP.

——— — — —— — — —— — — — —— — — —— — — — SE SE dm— SE SH S— — — ——— ——_ — —— — — — —— ——

Coast Federal Savings, Department “'H*
855 South Hill St. ot 9th {Please check-mark as desired.)
Los Angeles 14, Calif.

1. [J 1 enclose [] check, [J money order, to open 2. [} Please send me a copy of your

a savings account in the following name or “Coast Federal Savings Guide,”
Savings Account Information
and latest financial statement.

Name
Address
City Zone State



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

= =r c => =. o
. ® oo BS a = Mm @® << ce 3 =
a o FF «a 3 = =>
QQ. - 5 oO — =F — - = = Po) [e+] ©
© o oe S$ @ o 3
3 © Oo = mn © oH = 30 mm
~~ a o = 3 J Fo xo
a = SS oo c a = oo = 2
Q ® oo 2 = 3 2 ex 08 S 2
= o al]
- . = = 3 =a = % Sm 5 © = =
© © = oo 3 9 oO @ __.o ® © —
-~ = a Ea < = 9 =
FT = 3 = 2. a »w = © wn [2] =
L1-] Ise) =a c —_ = TT. =n
— oT =— 3 wv =" Oo m
S38:%3 x258::z¢ ©
<D — ——r ame o oO a oD Q. p44 c= m
So oO fe | -— pe 3 ® 5 24 wv
S3IRTzz IT ~>—3 2238
3 OO ~~ = & oo ov J a 5 o
[=] ad Ps] = OO bh 4 ~~ 3 = w = °
3 © oo @® © o F av Qa 3 =
a = TO = 0 DO <«
LA = 3 a o S = = 38 = 0 =
re) ® OT a 3 Fg += ©
= a» 3 = ® ANS -
= x — c= wn = © oo = m —
as © 3 op o = 3 0 == 92 o
oo 5 a oD =X a © Oo = © oo
~ © oOo =o + 5 —. = oo = S o m
S 2S 3 = 8 ¢ 2 = ec
= = ® SS 4 2 = cE oo > = Ss phi
® ‘ =. x ~~ a OD x @® vw gg =
= oo = ® ~* oo Fo 5 —
Oe 3 TXT MM — a c =
5 TS = m SS 3 2@ ~~ oo 4 —-<
w — (=) Oo — =
© © = B=) — OO
J. © =m = = o
S wv mm ¢, r= SS 3 3 2
8 ® vw LP 3 8 >= a=
oT Sm FT + 3 © 5 = 0
» TS = ao oo om a >
psd [1°] [1°] pa —
o = on 3 = 3 oo = Zo
Ey 354% a323x ~ wv 3 8S o
- p— . —
TTR es = 52 vo _. 3%
3 32 = o - Oo =
® «vw 8 oo I OD =o ~~ Aa
=> a 3 3 SS oo FT oF
— [1°] — - 0) [=1 oy a ©
° a SS vv Oo wn vw 29 ~~