===== PAGE 1 ===== THE [eCllld OCTOBER 1960 America Is Many Million Purposes Private Affluence and Public Poverty IDEAS ON LIBERTY W. H. Chamberlin 3 First National City Bank 10 The American Predicament . Perry E. Gresham 18 A Time of Decision . Roger M. Blough 23 Lessons from New Zealand Liberator 29 The Case for Freedom F. A. Hayek 32 No More Socialists Frank Chodorov 42 Antidotes for Tax Resistance . H. P. B. Jenkins 45 Keeping the Peace . W. M. Curtiss 46 Monkey Business . Grey Leslie 58 Book Reviews: What You Should Know About Inflation . . John Chamberlain 59 Other Books 63 an THE FOUNDATION FOR ECONOMIC EDUCATION, INC. Irvington-on-Hudson, New York ===== PAGE 2 ===== THIS RACE IS ALWAYS RIGGED! Wherever the federal government gets THE STORY IS IN A NEW BOOKLET into business, it starts with built-in ad- Published specially for businessmen, vantages — subsidies and various kinds this booklet has facts and figures show- of exemption from taxes. ing how such spending affects your costs, prices and profits. And how unnecessary it is, when the hundreds of independent companies are able and ready to fill the nation’s ever-growing power needs. Please send the coupon below for your free copy. It will be mailed promptly. Thoughtful people —and particularly businessmen who have to compete on a handicapped basis—wonder if this is constructive in any way—or whether it is simply destructive of American busi- ness enterprise. An example is the federal govern- ment’s venture into the electric light America’s Independent and power business. Proponents of Electric Light and Power Companies federal “public power” boast that its r----————--—-=--—-—-———--- 9 rates are lower than those of the inde- | POWER COMPANIES pendent electric companies. And atthe | Room 1130-Q same time, they insist on preserving 1271 Ave. of the Americas, New York 20, N. Y. the special status that makes those rates | Please send promptly the material | possible. | checked below, without charge: | Federal power systems pay no fed- | O “How Federal Government ; eral income taxes and little or no state | Electricity Affects the Businessman ! and local taxes — contrasted with in- | [OO Names of the companies that | vestor-owned systems, which produce | SPOnSOr this message. 23 cents in taxes out of every dollar of I Name - revenue. In fact, federal “public (Please print) | power’s” plants and lines were paid for | 444106 | by more than $5,000,000,000 in tax- | payers’ money. And the spending of | city Zone__ State many billions more is proposed! L — a —— i — — — —— — —————— ——— ——— ===== PAGE 3 ===== Bi way . POT < * od sm . de - x PASE. WOR kd PE FEE op [EN H ce .* REIN Eye . > wo - Tey Gm " pi resus with # Join the thousands of others from all 50 states and many foreign countries who hold individual, joint, trust or corporation savings accounts and get the following outstanding advantages for your invested savings. HIGHEST EARNINGS —Since January 1, 1960, we are paying at the rate of 42% per annum. Accounts opened or added to by the 10th of any month earn from the 1st of that rz1onth. ASSETS OF OVER $438,000,000.00 with over $100,000,000.00 in cash and Government Bonds and Reserves of over $31,500,000.00 as of June 30, 1960. 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 Joe cRAIL, PRESIDENT Tie Ey MEMBER — FEDERAL HOME LOAN BANK — FEDERAL SAVINGS AND LOAN INSURANCE CORP. mt — —— — ——— ————— ————————— i — — — — — ——. a — _— on fn nt} oe. ren tte Coast Federal Savings, Department “'H"’ 855 South Hiil St. at 9th (Please check-mark as desired.) Los Angeles 14, Calif. 1. [J 1 enclose [J check, [J] money order, to open 2. [1 Please send me a copy of your a savings account in the following name or “Coast Federal Savings Guide,” names: Savings Account Information and latest financial statement. Name Address City Zone State ===== PAGE 4 ===== A MONTHLY JOURNAL OF IDEAS ON LIBERTY OCTOBER 1960 Yol. 10 No. 10 "LEONARD E. READ President, Foundation for Economic Education PAuL L. PoIROT Managing Editor THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non- political, nonprofit educational champion of private’ property, the free market, the profit and loss system, and limited government, founded in 1946, with offices ‘at Irvington-on-Hudson, New York. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, in- cluding THE FREEMAN, are met through volun- tary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are invited in any amount — $5.00 to $10,000 — as the means of maintaining and extending the Foundation’s work. Accepted as controlled circulation publication at Irvington, N. Y., with additional entry at New York, N. Y. Copyright, 1960, The Foundation for Economic Education, inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each. Permission is hereby granted to anyone to reprint any article in whole or in part, providing customary credit is given, except “The American Predicament,” “A Time of Decision,” ‘The Case for Freedom.” FVE Any current article will be supplied in reprint form if there are enough inquiries to justify the cost of the printing. ===== PAGE 5 ===== AMERICA IS A MANY ¥ MITLIL.ION F PURPOSES Five-Year Plans and other politically derived national goals are inconsistent with the ideals of limited government and freedom WILLIAM HENRY CHAMBERLIN DEFINING America’s national pur- looked is that in a nation like pose has become a contagious fad. America, “conceived in liberty,” as A considerable number of more or Lincoln said, there is no absolute less distinguished persons have authority, individual or collective, tried their hand at it in long that can prescribe a set of national articles; and it will be surprising goals, binding on all citizens. Na- if there is not, in due course, a tional purpose in America is a spate of books on the subject. But synthesis of millions of individual somehow these attempts at defini- purposes, sometimes conflicting, tion, even when made by men with yet adding up to a very rich na- a scholarly knowledge of American tional total, spiritually, culturally, history and above average aware- materially. The old-fashioned mon- ness of contemporary American archies and aristocracies of Eu- life, have not come off very suc- rope, against which the American cessfully. What often comes out of Revolution was a political revolt these efforts is little more than a and a philosophical protest, did string of platitudes and a list of have their ambitions, aims, and causes with which the writer is “purposes” directed, not toward personally identified. the well-being of their peoples, but A vital point that is often over- toward national aggrandizement by ‘war and seizure of territory. Mr. Chamberlin has written a number of The Founding Fathers of the books, has lectured widely, and is a contribu- American Republic had a radically tor to The Wall Street Journal and man . : nationally known magazines. y different idea. They proposed, first 3 ===== PAGE 6 ===== 4 THE FREEMAN October of all, to guarantee the freedom of Tocqueville, “however directly con- the citizen and his unalienable nected it may be with the welfare rights to life, liberty, property, of society, he never thinks of so- “the pursuit of happiness” (what liciting the cooperation of the cynical sneers that last ideal must government, but he publishes his have excited among European re- plan, offers to execute it himself, actionaries who read the Declara- courts the assistance of other in- tion of Independence) by a scien- dividuals, and struggles manfully tific balancing of power against against all obstacles. Undoubtedly power, so, that no individual, no he is often less successful than group, no instrument of govern- the State might have been in his ment could wield unlimited au- position; but in the end the sum thority. . of these private undertakings far This excluded, so far as was hu- exceeds all that the government manly possible, the exploitation of could have dome.” (Italics sup- the people by any ruling group. It plied) placed on the new republic an in- This streak of self-reliance, of delible stamp of voluntariness, of dependence on one’s own resources, genuine consent of the governed. individually or in voluntary co- It eliminated the possibility that operation with one’s neighbors, any group of Mr. Bigs, however gave to American life a special sure they were right, however ex- and peculiar quality. In times of alted their motives, could order great stress and crisis there have and plan and push around and ap- been ‘leadership and discipline. ply compulsion to their fellow- But it was leadership that was citizens. voluntarily accepted, not imposed One of the wisest and keenest of by fear of a firing squad or a con- the foreign observers of the Amer- centration camp. ican Republic, Alexis de Tocque- ville, was quick to note the differ- An Individualistic Order ence between Europe, with its in- The American Revolution shows stinct for reliance on the State,and no equivalent for the French America, where government inter- Jacobins or the Russian Com- vention was regarded with distrust munists, no highly organized con- and private initiative and self-re- spirative, tightly disciplined party liance were outstanding qualities imposing its will and laying the of the people. groundwork for a tyranny more “When a private individual ruthless and efficient than the one meditates an undertaking,” writes which was being destroyed. It re- ===== PAGE 7 ===== 1960 AMERICA IS MANY MILLION PURPOSES b flects rather both the strength and pectation that retreat, in which I weakness of a revolt against for- promise myself to realize, with- eign arbitrary rule by a highly in- out alloy, the sweet enjoyment of dividualistic frontier society. partaking, in the midst of my From a technical standpoint it fellow-citizens, the benign influ- was a messy affair. Volunteer ence of good laws under a free militia units behaved splendidly government, the ever favorite ob- on some occasions and failed badly ject of my heart, and the happy on others. It required infinite pa- reward, as I trust, of our mutual tience, along with other high qual- cares, labors and dangers.” ities of patriotic leadership, for George Washington to hold to- Moments of Decision gether an army that was usually These same elements of volun- unpaid and sometimes almost tariness, consent of the governed, starving, to cope with the prob- multiple purposes of citizens of lems of limited term enlistments the nation rather than any single and the absence of a regular sys- “national purpose, or purposes,” tem of finance and supply. prescribed from the top, have And yet, when Yorktown sur- marked America’s development rendered and it was all over and from the agrarian society of three the United States took its place millions, clinging to the fringes of among the nations of the world, the Atlantic, to the mighty indus- the foundations of a free society trial nation of 180 millions which had been laid more securely than we know today. if victory had been won by a mili- Of course, there were moments tary leader at the head of troops of decision, as when Jefferson whose allegiance was to him, not made the Louisiana Purchase, or to their country and the republi- when President James K. Polk can cause, or by a fanatical party took measures calculated to round intent on stamping out any oppo- out America’s permanent fron- sition as ‘‘counterrevolution.’” tiers in the Southwest and North- Washington himself, after guid- west. But no one worked out five- ing the destiny of the country year, or any other plans for the during eight years of war and settlement and cultivation and de- eight years of peace, could sound velopment of what was once the a note of sober rejoicing in the frontier area of Kentucky and last sentence of his Farewell Ad- Ohio and of its steady westward dress: extension. This was the work of “I anticipate with pleasing ex- large numbers of individuals, im- ===== PAGE 8 ===== 6 THE FREEMAN October pelled by a great variety of mo- out a typical American philosophy tives, among which acquiring bet- of life, and the fruit of the imagin- ter conditions for themselves and ings of Hawthorne and Melville their families predominated. and the New England poets, with No bureaucratic agency in their more conventional messages. Washington said to the men and These and other similar figures women who moved to the West in were not, like writers in a totali- an endless caravan of covered tarian society, the hired propa- wagons: So many of you shall go gandists of any particular order of this year to this district and you things, political, economic, or so- shall chop down so many trees cial. They were following their and plant so many acres with corn own artistic impulses, expressing and so many with wheat. The win- their own ideas, and thereby add- ning of the American West, one ing stone by stone to the edifice of may be sure, went better because “American culture. these agencies at that time were America offers, along with its few and limited in powers and big and often well-equipped state functions. universities, a unique exhibit of private schools and private liberal Multiple Purposes and arts colleges, often founded as an Unlimited Possibilities expression of religious faith or of It is the glory of America that, devotion to a special educational at least up to the time when it be- or cultural ideal. And this strong came fashionable and popular to concern with education, which has substitute state help for self-help, been marked since the early period it has been a land of multiple pur- of American life, has left its im- poses and unlimited individual op- print, again on a basis of private portunities. America is infinitely initiative, in many foreign lands. many purposes. It is the scientific One thinks of the colleges founded, inventor — like Morse or Alexan- with or without a missionary as- der Graham Bell or Charles P. sociation, in China, Japan, India, Steinmetz or Edison — working in Korea, Turkey, Lebanon. Some of his laboratory on some invention these have been casualties of to- that will change the pattern of talitarian suppression; others are life. still functioning. But here again It is Edgar Allen Poe, with his is a unique example of private dark broodings, and Walt Whit- initiative in the cultural field, man in his ecstatic jubilation, and reaching out and probably win- Ralph Waldo Emerson working ning more friends and exerting ===== PAGE 9 ===== 1960 AMERICA IS MANY MILLION PURPOSES 7 more constructive influence than Libertarian Ideals all the expensive programs of gov- As for ideals, it is doubtful ernment aid and “cultural ex- whether any other nation came change.” into existence in such a ferment of discussion of natural rights and Voluntary Cooperation natural laws and the nature of To suggest that America’s liberty and how liberty can be greatness lies not in trying to effectively implemented. In the frame national goals and purposes, literature of the American Revo- but in making it possible for mil- lution, from weighty essays on po- lions of individual Americans to litical theory like the Federalist realize their goals and purposes is Papers to resolutions of state as- not to intimate that America is semblies and newspapers and peri- devoid of ideals or lacking in the odicals, one finds constant empha- capacity for voluntary cooperation. sis on these five natural rights of Quite the contrary. The American free men: life, liberty, property, pioneer, by his very way of life, conscience, and happiness. These was more self-reliant than the are regarded not as privileges European peasant who was de- which an arbitrary government pendent for his livelihood on the can bestow or withdraw at will, local country squire in England, but as unalienable rights derived or nobleman in France. from the Creator himself. But, in the case of an Indian So John Dickinson wrote to the raid, the lives of the pioneer and Committee of Correspondence in his family might depend on the Barbados: willingness of his neighbors to “Kings or parliaments could not. come to his help. There was also give the rights essential to happi- cooperation in building cabins, in ness....They are created in us by clearing woods, in husking corn. the decrees of Providence, which And this tradition of voluntary establish the laws of our nature. mutual aid finds expression in the They are born with us; exist with very different conditions of mod- us; and cannot be taken from us ern life, in the service club that by any human power, without tak- looks after handicapped children, ing our lives. In short, they are in the alumni group of a small or founded on the immutable maxims medium-sized college that raises of reason and justice.” funds for scholarships for the stu- And Alexander Hamilton pro- dents who have followed them and claimed this same theory of natu- whom they wish to help. ral law and natural rights when he ===== PAGE 10 ===== 8 : THE FREEMAN October issued this flaming refutation of liberty, or even life itself, without the Tory argument that New the enjoyment of them flowing York had no charter and New from property, are of no value.” Yorkers therefore did not possess Indeed the American Revolution charter rights: was in some degree a vindication “The sacred rights of mankind of the rights of property against are not to be rummaged for among the arbitrary incursions of the old parchments or musty records. British Crown. Prominent among They are written, as with a sun- the charges listed in the Declara- beam, in the whole volume of hu- tion of Independence to justify man nature, by the hand of the the severance of the connections Divinity itself, and can never be with Great Britain are that erased or obscured by mortal George III “has cut off our trade power.” with all parts of the world,” “has Most modern revolutions are di- imposed taxes on us without our rected in varying degree against consent,” and “has erected a mul- the rights of private property; titude of new offices and sent hith- but the American colonists never er swarms of officers to harass our doubted that the right to acquire people, and eat out their sub- and own property and to be free stance.” (On this count a new from arbitrary levies on this prop- Declaration of Independence has erty was among the basic unalien- long been overdue.) able rights of free men. So the town of Newburyport gave these Compulsion To Be Avoided instructions to its representatives There is no compatibility be- -in the Massachusetts General As- tween respect for unalienable sembly : rights of man, based on natural “That a people should be taxed law, and establishment of a “na- at the will of another, whether of tional purpose,” binding on all one man or many, without their citizens, or of compulsory economic own consent in person or by repre- planning. It is, of course, anyone's sentatives is rank slavery. For if privilege to say what he thinks their superior sees fit, they may America’s national goals should be deprived of their whole prop- be, or how he would like to see our erty, upon any frivolous pretext, economy develop. The sticking or without any pretext at all. And point is the injection of compul- a people, without property or in sion into either of these processes. the precarious possession of it, are It is sometimes argued that the in no better state than slaves: for challenge of communism makes it ===== PAGE 11 ===== 1960 AMERICA IS MANY MILLION PURPOSES 9 necessary to scrap or greatly at Athens we live exactly as we modify the principles to which the please, and yet are just as ready signers of the Declaration of In- to encounter every legitimate dependence “mutually pledged our danger.... Lives, our Fortunes, and our sa- “We cultivate refinement with- cred Honor.” out extravagance and knowledge Twenty-five centuries ago there without effeminacy; wealth - we was a similar challenge in ancient employ more for use than for Greece. Sparta, the totalitarian show, and place the real disgrace state of that time, was waging war of poverty not in owning to the against Athens, which stood for a fact but in declining the struggle freer way of life. Here is how the against it....We have forced every greatest Athenian statesman of sea and land to be the highway of his time, Pericles, responded to our daring, and everywhere, this challenge as he pronounced a whether for evil or for good, have funeral oration over the first vic- left imperishable monuments be- tims of the war: hind us. Such is the Athens for “The freedom which we enjoy which these men, in the assertion in our government extends also to of the resolve not to lose her, nobly our ordinary life. There, far from fought and died.” exercising a jealous surveillance Pericles believed that Athens over each other, we do not feel would defend itself best not by called upon to be angry with our imitating its enemies, but by re- neighbor for doing what he maining true to its own ideals. likes. ... There is a lesson here for modern “If we turn to our military America. It would be a sorry and policy, there also we differ from ridiculous paradox, in the name of our antagonists. We throw open fighting communism to take over, our city to the world, and never even unconsciously or subcon-. by alien acts exclude foreigners sciously, some of the methods of from any opportunity of learning communism, political or economic. or observing, although the eyes of National ideals, Yes. We should an enemy may occasionally profit become more familiar with them from our liberality. We trust less and live up to them better. in system and policy than in the National purpose, as something native spirit of our citizens. While set apart from the multiple pur- in education, where our rivals poses of millions of ambitious, de- from ‘their very cradles by a pain- voted, capable American citizens, ful discipline seek after manliness, No. - ===== PAGE 12 ===== 8 Private: Affuence and Public Poverty ; BAR SH, pas / 3 iY > red A Jy fey f{~ lh Sl A h NS | Th BLS J oovR ’ 7 AR yd & J 7 7 \ AEN | ~* x \dv 3 Wy / \ 8 os ; a / The real point at issue 18 how much farther — if at all — we can safely go toward discouraging individual initiative, self-reliance, and industrious habits. The barrage of complaints over inade- quate economic growth would seem to suggest that we meed to concern ourselves more, rather than less, with the human as- pirations that make the economy go. IN RECENT YEARS it has become A recent New York Times dis- fashionable to say that the United patch by Edwin L. Dale reported States presents a shocking con- that: “More and more people in trast between private wealth and the capital are convinced that the public poverty. Private citizens most important continuing issue are pictured as so affluent that of American policy and politics they really don’t need all the over the next decade will be the money they have. On the other issue of public spending — what hand, it is argued that government share of America’s total resources s “poverty-stricken” and urgently should be devoted to public as dis- needs more money. Professor John tinct from private purposes.” Mr. Kenneth Galbraith’s presentation Dale summed up the view on “pri- of these views in The Affluent So- vate affluence and public poverty” ciety made the best-seller lists and as follows: became a provocative topic for Our society has reached a level of conversation. Now the issue has private wealth never before seen on been taken to Washington. this earth. From the Monthly Letter of the First Na- Yet at the same time there is pov- tional City Bank of New York, June 1960. erty in the public sector of the econ- 10 ===== PAGE 13 ===== 1960 PRIVATE AFFLUENCE AND PUBLIC POVERTY 11 omy. Education is under-financed. tral underpinning of American Streams are polluted. There remains democracy; it grew out of the re- a shortage of hospital beds. Slums pellion in 1775 against kingly proliferate, and there is a gap in power and led to the writing of a middle-income housing. We could use Constitution of limited powers de- more and better parks, streets, de- oq 40 0 otect the freedom and tention facilities, water supply. The . . . ! PpLy sovereignty of the citizen. This very quality of American life is suf- . fering from these lacks — much more Wa$, perhaps, the “old anarchy, than from any lack of purely private under which, fired by individual goods and services. The share of gov- enterprise in a land of opportunity, ernment in the total economy has a group of agricultural colonies been stable or even declining, while clustered along the eastern sea- private affluence grows. board expanded into the most pros- This is quite an indictment of Perous nation on earth. the free society that has given the Senator Clark’s fears seem rath- masses of the American people er far-fetched. The trend of events wealth and living standards ad- has been in the other direction, mired the world over. toward assumption by government oo of more and more responsibilities. Antigovernment Fixation? If there is anything that could be Senator Joseph Clark of Penn- called “antigovernment fixation” sylvania, addressing a distin- today it is only a small voice in the guished group of citizens at wilderness protesting against bur- Arden House last month, ex- geoning federal bureaucracy and pressed the fear that an “anti- the tax confiscation of the greater government fixation” in America part of the fruits of enterprise. In might lead to a “new anarchy.” April 1957 we presented a calcula- This is a rather shocking thought. tion that if total government civil- Most people have had the impres- ian employment continued to ex- sion that government was taking pand at the same rate as in the on a bigger and bigger role in preceding 25 years we would all be their lives, digging more deeply working for government by the into their pockets for taxes, spend- year 2069. ing so much as to inflate prices, It is hard to see evidences of and offering more and more “fed- the alleged shriveling of the share eral funds for free” about the of government in the total econ- countryside. omy. Such evidences do not appear The idea that the role of govern- in statistics of government em- ment should be limited is the cen- ployment, tax revenues collected, ===== PAGE 14 ===== GOVERNMENT GROWTH Middle Late 1920s 1940 1950's GOVERNMENT EXPENDITURES AND GNP Federal cash expenditures ($ bil.)..... ... $2.8 $9.6 $94.8 State and local government expenditures $ bil.) 77 10.3 48.8 Gross national product $ bil)... 97.6 95.6 463.8 Per cent: Government expenditures to GNP 10.8% 20.8% 31.0% SELECTED PUBLIC EXPENDITURES (in millions of dollars) Social insurance benefits ................ * $1,215 $15,975 Highway expenditures. ................. $1,819 -2,177 8,702 Aid to other transportation . .......... .. 257 377 1,629 Public welfare and assistance ........... 161. 1,314 3,777 Police ........... i. 290 386 1,769 Fire protection . ....................... 203 235 873 Sanitation ........... 312 207 1,505 Local parks and recreation .............. 153 162 © 685 Jails and other correctional ............. 68 105 573 Health . ............................. 84 195 806 Hospitals ............................ 347 537 3,849 Education... 0 2,243 2,827 16,836 OTHER MEASURES (in millions unless otherwise noted) Number of personal income tax returns} ... 4.2 14.8 59.8 Government employment ............... 2.8 4.2 8.1 Educational enrollment} .............. .. 30.7 32.1 46.3 High school graduates, total number ...... n.a. 25.7 51.6 College graduates, total number ... ...... n.a. 3.9 8.1 Paved rural roads (miles) ............... 0.5 1.3 = 2.1 National park acreage ................. 9.6 21.6 24.4 Visitors to national parks ............... 2.1 16.8 65.5 "Social security coverage as percentage of paid employment . ... .. .. 0 64.5% 90.5% Ce 0 60.9 . 444.7 Public housing units- (thousands) n.a. Not available. *Unavailable on comparable basis but minor. tincludes returns of estates and trusts which numbered less than one per cent of individual! returns in 1940 and 1957. includes public and private schools from elementary to university level. SOURCES: Figures are taken from U.S. Census Bureau's Surveys of Governmental Finances in the United States; U.S. Department of Health, Education and Welfare’s Health, Education and Welfare Trends; and other official publications. ===== PAGE 15 ===== 1960 PRIVATE AFFLUENCE AND PUBLIC POVERTY 13 or funds disbursed. As the table come taxes to support themselves shows, there has been no lack of and pay other taxes — is not much spectacular increases in outlays more than four times the level of for social welfare, highways, sani- 1927. The rise for corporate prof- tation facilities, jails, and the rest. its (after taxes) would parallel If we are headed for a “new the retarded gain for personal dis- anarchy,” symptoms might be ex- posable income. pected to appear in refusals of One excuse given for enlarging people to pay what they might re- programs of financial assistance gard as unconscionable tax levies. from the federal government to It is true there has been talk that states and municipalities is that some $8 billion of income is not people cannot or will not provide reported for tax purposes; never- the latter with enough money. No theless, the fact remains that, doubt the weight of federal in- with voluntary filing and report- come taxation leads many people ing by tens of millions of indi- to vote against costly state and viduals and hundreds of thousands local government projects involv- of employers, the federal govern- ing still more taxes; nevertheless, ment is enjoying a bigger flow of state and local government income cash income than any other gov- has risen to more than five times ernment on earth, a cool $100 bil- the level of 1927. lion a year. If the federal govern- ment is indeed impoverished, the The Santa Claus School cause must be profligacy of expen- It is difficult to see in any fig- diture rather than stinginess of ures such as these support for the the citizen. The amazing thing is idea that government is poverty how so much money can be dis- stricken. Nevertheless, it is a fact posed of so fast. of record that the federal govern- Co ment has had a lot of trouble keep- No Stinginess Here ing its budget balanced: The rea- How generous the citizen has son emerges when one looks been with government, compared around at the bewildering variety with what he has kept for himself, of spending programs. Washing- is shown in the chart. There has ton is the natural destination of been a 20 times multiplication of people and local communities want- the federal government’s cash in- ing money, as it has been since take in the past generation. Per- the advent of what the late Jesse sonal disposable income — the Jones, former RFC chairman, money people have left after in- characterized as the “free-spend- ===== PAGE 16 ===== 14 THE FREEMAN October ing, Santa Claus school of govern- be built under New York State’s ment reformers.” Meanwhile, the low-income housing program. purposes for which funds are It might be asked on what prin- sought have come a long way from ciple government should subsidize the emergency relief programs of normal living expenses for people the 1930's. Encouraged by federal with incomes double the national help and example, the states open average. Who but themselves will their purse strings. Only a few pay the bill—with freight charges months ago, a New York State to and from Washington tacked Supreme Court decision held that on? A good deal of manpower gets public housing projects open to wasted, collecting taxes and dol- individuals and families with an- ing out benefits in the paradoxi- nual incomes of as much as $6,200 cally poverty-stricken affluent so- to $14,000 were legally entitled to ciety. 3 INDEX. 1927 = = 100 Receipts, State and Local Gavernme - Personal Disposable: Income, 1927 fo 1959... + After taxes. 1195 8 figure. ER ===== PAGE 17 ===== 1960 PRIVATE AFFLUENCE AND PUBLIC POVERTY 15 The truth seems to be that we call attention to the fact that the are caught in a vicious circle in use of first-class air travel by which people's abilities to take government employees far exceeds care of their own needs are ham- in proportion its use by the gen- pered by the burden of taxes. Pay- eral public, and to urge greater ing so much in taxes, the citizen consideration of less costly facili- is tempted to think it only right to ties.” get something back. Hence the Tail-fins on automobiles are sup- “needs’’ government sees for more posed to prove that people are and bigger subsidy programs foolish in their spending decisions which in turn require to be fi- and cannot be trusted with their nanced by still higher taxes or own money. There are two schools inflation. And inflation, hitting the of thought about tail-fins but it is weak and helpless hardest, creates quite clear that millions of people still more “needs.” have preferred them; otherwise LL the finned vehicle would not be so Matter of Tail-Fins common. Perhaps the surrey with The preachers of the affluent so- the fringe on top was similarly ciety doctrine are fond of using condemned in the Gay Nineties, as tail-fins on automobiles as the ul- a symbol of “conspicuous consump- timate symbol of unnecessary pri- tion.” vate extravagance. They are not Yet it is one of the proud dis- so apt to mention the wheat bins tinguishing marks of a classless holding surplus grain for which democratic society that any citizen taxpayers have put up more than with enough money or credit can $3 billion and which, converted in- have a car, suit, dress, or home to bread, would provide 450 loaves with some seemingly useless orna- for every man, woman, and child mentation; he does not have to be in this country. They say nothing somebody in an official sense. Peo- about misconceived public works ple work hard so that they can projects and the common abuses of enjoy these things and be indi- social welfare programs. On May viduals rather than the drones of 16, Budget Director Maurice H. a master state. Stans found it necessary to revise The New York World-Telegram federal travel regulations to en- & Sun, on May 23, commented edi- courage more flying by coach or torially on the subject: tourist class instead of first class There is much scornful talk of by government employees: “luxury living,” the implication be- “These revisions are issued to ing that people are so stupid they ===== PAGE 18 ===== 16 THE FREEMAN } October throw their money away on gadgets and centralized. Spontaneity withers instead of essentials. Actually, this before the killing frost of public con- national growth has been widely formity. Individual citizens with all spread. The significant effect has their varied relationships, as parents, been to raise millions in America neighbors, churchgoers, workers, from a level of bare subsistence to businessmen, are reduced to the modest comfort that remains far single loyalties of party and state. short of luxury. Older citizens can remember when The School Problem i the “full dinner pail” was an effec- Perhaps the most widely used tive political slogan, meaning the illustration of alleged “public pov- worker should have enough to eat. erty” is our school system. We Today’s trade unionist is no “simple are told that while the American working man” to be patronized with people drive around in “mauve and a few beers at election time. He's a cerigse, air-conditioned, power- substantial citizen who probably steered, and power-braked” auto- owns his own home, auto and TV set, mobiles, their children’s schools with children in college. i» ’ It seems obvious to us that it 2T€ old and overcrowded.” The would be the height of national irres- charge 18 that the states and local ponsibility to trade a system which communities, which in the United has worked so well for a Socialist-in- States are responsible for educa- spired experiment, especially at a tion, just haven’t been doing their time when the early European spon- job. What is needed, the critics sors of socialism are abandoning it say, is federal money for educa- for free enterprise. tion, with some proposals running The author of The Affluent So- to $4 billion a year. As a speaker ciety has been characterized as an at the convention of the American iconoclast although nothing has Association of School Administra- become more common and conven- tors put it: “The federal govern- tional than asking government to ment, that’s where the money is. take over more powers and respon- And that’s where the money must sibilities from the citizen. It is come from.” notable that another member of No country comes close to rival- _ this school of thought, Mr. Adlai ing American spending on educa- Stevenson, does pause to recognize tion. Total public and private ex- that: penditures for: education in the Without individual decision and in- U-S- reached $22 billion in 1959, ventiveness, without widely dispersed almost triple their level 10 years centers of authority and respon- earlier. sibility, the social order grows rigid To say that the nation’s schools ===== PAGE 19 ===== 1960 PRIVATE AFFLUENCE AND PUBLIC POVERTY 17 are “old and overcrowded” collides University, indicated in January: with the fact that the states and “Our public schools and far too local communities have built 680,- many of our colleges have virtu- 000 classrooms since World War ally abdicated their functions in IT, more than half the 1,330,000 society because they are content to now in use. The “classroom short- give their students little more than age,” supposed to justify federal an opportunity to have pleasur- intervention, has been shrinking able social experiences.” Professor steadily. Back in 1955 predictions Richard M. Weaver of the Univer- were heard that we would be 600,- sity of Chicago has put the same 000 classrooms short by 1958. point even more strongly: When 1958 arrived, the U.S. Office of Education estimated the short- an unprecedented amount of aimless- age at 141,900. Although the peak occ and confusion. This is not to demands for high school and col- suggest that education in the United lege facilities lie ahead, we have States, as compared with other coun- passed over the hump of elemen- tries, fails to command attention and tary school enrollments. The job support. In our laws we have en- of building to make up for the de- dorsed it without qualification, and ferral of school construction dur- our provision for it, despite some ing the war, and the bulge in claims to the contrary, has been ona births immediately after the war, lavish scale. But we behold a situa- is largely past. tion. In which, as the educational Some educators suggest that the Panis berome ‘arger and more ney . . . ° appointed, what goes on in them be- trouble with U.S. education is ex- comes more diluted, less serious, less cess emphasis on money and too effective in training mind and char- little emphasis on what we are acter; and correspondingly what getting for the money; excess em- comes out of them becomes less phasis on elaborate new plant and equipped for the rigorous tasks of too many idle hours for existing carrying forward an advanced civili- plant; excess emphasis on quan- Zation. tity of education and too little on quality. Schools which slight sub- Some Fundamental Issues jects with intellectual content in One trouble with the idea of favor of “life adjustment” type turning our affairs over to the courses are not going to be im- dictates of wise men sitting in proved by more money. The prob- government offices is that it lem is one of purpose, as Dr. Gray- clashes with the traditional beliefs son Kirk, president of Columbia of our people. The right to be dif- Education here today suffers from ===== PAGE 20 ===== 18 THE FREEMAN October ferent, the right to live according It is hard to see how political to our own lights. is rooted too freedom can survive if economic deeply in the American soil to be freedom is denied. When people passively given up. The citizen spend their money, they are cast- has no reason to believe that pub- ing ballots for what ought to be lic officials are exempt from hu- produced. They all make mistakes, man frailities. As Mr. Stans, as government does in its procure- speaking before the U.S. Chamber ment, but they may be a bit more of Commerce, said last May: “We careful because, after all, the must not be charmed by the notion money they are spending is their that government is a wiser mana- own. Moreover, the mistakes of ger of our economic fortunes than individuals are small mistakes, is private enterprise.” never the billion-dollar variety. « The American Predicament PERRY E. GRESHAM A BRONZE TABLET in Indianapolis This timely warning calls each records one of the wise and rele- responsible person to assess the vant remarks of a statesman and nature of the present American prophet: “Here February 11, 1861, predicament with an appraising Abraham Lincoln, on his way to eye and a clear head. Three mas- Washington to assume the Presi- sive facts appear. The state is al- dency, in an address said: ‘I ap- ready enormous and is continuing peal to you to constantly bear in to grow. The individual is very mind that not with the politicians, small and growing smaller. Only not with the Presidents, not with a revolutionary action can recover the office seekers, but with you is the autonomy of the individual the question: Shall the union and person and the values of private shall the liberties of this country enterprise. be preserved to the latest genera- War multiplies the size and tion?’ ” power of the State. National sur- Dr Gresham is President of Bethany College, vival demands a dictatorship in a Bethany, West Virginia. This article first ap- time of enemy attack or a time of ared in the May 1959 issue of The Kiwanis . . Magazine. y international warfare. The two re- ===== PAGE 21 ===== 1960 THE AMERICAN PREDICAMENT 19 cent world wars have given most to state use in order to meet the of us experience in totalitarian insatiable demands of Leviathan. citizenship. The wake of World War II has continued the apparent The General Welfare necessity for powerful central au- The State grows because it is thority to withstand the external committed “to promote the general threat of hostile communist pow- welfare.” This concept has come to ers. Consequently, the American mean a Welfare State with social State has taken on colossal propor- security for the aged, unemploy- tions. Approximately four fifths ment compensation for the jobless, of the enormous federal tax reve- support and services for the indi- nue goes to pay for wars past, gent, and health services for the present, and future. The Kremlin many. The needs of man outrun his helps to enhance the size and supply, no matter how vast the power of the American govern- provision, Pressure for more so- ment. cial security, more unemployment Internal American strife has compensation, more pensions, more created larger and larger bureaus health services, and more secure with more and more personnel and easy government jobs builds spending more and more money. up until the Leviathan grows Big labor and big business require apace, whether his strange head big government to serve as referee resembles a pachyderm or a jack- and arbitrator. Each time a labor ass. union cries out for federal help, as Politicians must gain office and in the Wagner Act, a new bureau stay in office, or they are not poli- is formed with its retinue of ticians. The most inviting and the vested interest career people and most venerable means of getting its bureaucratic needs. Each time elected is to make promises. The an industry seeks special advan- exclusive formula for retaining tage through subsidy or legislation office is either to keep the promises to improve its position for sur- or to make bigger promises to ob- vival, or additional consideration scure the failure of performance in protection or profit from the with reference to those already various commissions, or seeks for made. Since giveaway promises ap- regulation to avoid competition, pear to get quick results, they oc- new government agencies appear. cur to parties and candidates alike. As expenses mount, an army of The State grows in proportion to tax collectors must be put in the its programs of expenditure. With field to divert funds from private the colossal greed of military de- ===== PAGE 22 ===== 20 THE FREEMAN October mands and the insatiable pressure nothing to any man, they expect for welfare programs, the State nothing from any man; they ac- must arrogate to itself more and quire the habit of always consider- more functions, power, and pro- ing themselves as standing alone, portions. Parties and persons who and they are apt to imagine that aspire to office out-promise each their whole destiny is in their own other in a race to feed the Levia- hands. Individualism is of demo- than. cratic origin and threatens to Inflationary pressures encourage spread in the same ratio as the the growth of the State. Every- quality of conditions.” This crea- body wants inflation for himself, ture of early American origin is but not for anybody else. As pres- little more than a museum piece. sure builds up for more and more The individual features have be- wages, prices must go up. The come blurred in a collectivist same pressures build up with re- . world. spect to profits. The parties With “security” as a major aim pinched by inflation cry out for for the earning motive and con- government help, and the sensitive formity as the principal considera- politicians respond with the crea- tion for the consuming motive, tion of new administrations, which there is precious little individual- involve more taxes, which require ism left. The virtues of Puritan higher prices, which demand more America — honesty, industry, and wages; and the round repeats it- frugality — are widely ignored as self. The net result is more and irrelevant. People who can attain more government. security by belonging to the asso- } } ciation, the union, or the party are Individualism Discouraged not likely to knock themselves out Alexis de Tocqueville, noted by working and planning for it. French political scientist of the Even wild birds prefer the feeder last century, described individual- to the tent caterpillars in the for- ism as “a mature and calm feeling, est. The responsibility to save for which disposes each member of the a rainy day has been turned over community to sever himself from to Uncle Sam. “Honesty,” which the mass of his fellow creatures; once included payment of debts, and to draw apart from his family has been delegated to posterity. and his friends, so that, after he The conditions of contemporary has thus formed a circle of his society do not encourage individual own, he willingly leaves society at responsibility. large to itself. Individualists owe Keeping up with the Joneses has ===== PAGE 23 ===== 1960 THE AMERICAN PREDICAMENT 21 taken a new turn under the spell learning has been replaced with of mass media. It may be “keeping the “four years and a degree” down with the Joneses,” or “up,” formula, with as little learning as as the case may be, but it must be possible. Individual thought on like the Joneses. Consequently, crucial issues is hard to come by. our coeds move their waist lines up Executives read a few cult papers or down, and our cars get bigger and a few mystery thrillers with and ‘“finnier,” or small and for- very little else to stir up the neu- eign. Our homes grow more auto- rons. matic and our children grow more Even the last citadel of man— nervous in an effort to belong to his religion—has become socialized. the crowd. Deferred payments en- Instead of a vertical answer to able the newlyweds to conform to God, man tends to give horizontal the pattern of their parents. Qur answers to the well-dressed and music tastes level out to match our highly respectable congregation preferences in architecture, drama, that has status. Private prayer has and literature. We have variety become beautifully professional- without great difference. We pre- ized. The multitudes huddle to- fer the organization man to the gether in Jerusalem without much individualist. The dissenter, or the recollection of the lonely vigil on private thinker, is an inconven- a mountain top at midnight or the lence. silent walk by the shores of The individual feels powerless Galilee. against the political organization. As the State grows big, the in- Consequently, the voter tends to dividual becomes small. People join the consumer quest for the huddle together to dispel their candidate who fits the norms of loneliness and increase their share sincerity and federal generosity. in security and advantage. The Only the conformist can belong to family becomes weak as a social the machine, and only the machine unit. The peer group outranks the can elect. The responsible citizen parents in prestige for the young. is obscured. The campaign oratory The conditions that beget autono- becomes perfunctory and dull, mous people have given way to since it has little bearing on the conditions that encourage the election returns. mass society. The private enterpriser in learn- The recovery of private enter- ing has become lost in the crowd prise begins with religion. No per- on the campus. The Benjamin son is an individual until he can Franklin formula of a lifetime of say: “I must obey God rather than ===== PAGE 24 ===== 22 THE FREEMAN October men.” This is the moral basis for Sam is a one-man revolution. The all private judgment. The individ- young man who earns what he can ual human mind which operates in by hard work and spends what he culture, economy, politics, or fam- can afford is a private individual. ily life can be reinforced and sus- The young wife who buys what is tained only by a divine influence practical and beautiful rather than which transcends all society. This what is popular is a true person. 18 no invitation to fanaticism or The executive or statesman who antisocial attitudes. It is rather decides on the basis of his best in- the basis for autonomous self- sight into the will of God rather realization and private enterprise than expediency has found him- in acts and letters, as well as in self. money management and citizen- ship. Robert Frost has a wise old The problem of the ever-grow- Yankee farmer say: “I call you to ing State must be met if any a one-man revolution; the only sphere for individual initiative is revolution that is going to come.” to be maintained. There are two The right to be wise is posited massive social forces that resist on the assumption that a person the encroachment of government. thinks privately. Education must These are resentment against high be restored. Invention, creative taxes and resentment against the art, new developments in the so- loss of individual liberties. The cial‘ order, and new ideas are the man of independent mind can en- result of individual thought rather courage these forces by intelligent than educational conformity. The conversation and astute action. The ‘quest for wisdom is a highly indi- employer has responsibility to vidual matter. The appetite for make employees acutely aware of learning is antecedent to intellec- the tax that is diverted from his tual achievement. pay check. He is responsible to dramatize the loss of liberty that A One-Man Revolution comes with the overwhelming A one-man revolution in the State. The intellectual, the clergy- economy begins when a laborer man, the worker, the homemaker, stands up against his union or an the common man in any vocation is industrialist stands up against his involved in the struggle to recover association in behalf of some the cherished concept of individual worthy moral principle. The man responsibility that is essential to who resourcefully develops his personal fulfillment and the good business without running to Uncle society under God. ~ ===== PAGE 25 ===== A Time of Decision ROGER M. BLOUGH MORAL PRINCIPLE is the foundation material strength has been permit- of all business credit and contract. ted to dwindle far below the Yes, our political freedom and our strength of a powerful and pagan whole free enterprise system — in enemy determined to destroy it. I fact our whole Western civilization would like to discuss some aspects — rests upon the promises men can of that material strength which trust, upon the confidence that men we, as a nation, must have if we have in each other because they wish to earn the good life for our live by, or at least try to live by, families and to defend ourselves moral principles. against possible aggressors. But our security as a nation and I recently returned from a jour- our freedom as individuals de- ney to far away places and I have pends upon more than moral prin- had an excellent chance to compare ciple. It also depends upon our ma- the progress in many other lands terial strength. with the progress in our own. The two are interdependent. What a transformation is going Naturally, the moral strength on around the world! Ore boats comes first. All the material wealth and blast furnaces in the land of in the world will not save a nation the sacred cow! Steel plants rising .whose moral foundations rot away. in the land of the fig tree and the On the other hand, morality camel. Strip mills humming on alone will not save a nation whose shores once filled with sampans. —_— Strip mills, incidentally, that can Mr. Blough is Chairman of the Board of Di- compete with the best we have in a condensation of hie emery” bata the Pittsburgh or Chicago. The Greater Philadelphia Council of Churches, Ma: . 16, 1960. P " ¥ changes taking place around the 23 ===== PAGE 26 ===== 24 THE FREEMAN October world since the last great war are begun or are beginning modern revolutionary on a scale that steel production for the first time. dwarfs all previous conceptions of It would be extremely unwise the word “revolution.” for us in the United States to as- Permit me to paraphrase Mr. sume that these developing na- Churchill. Never have so many na- tions will not one day loom much tions tried to do so much so larger on the industrial horizon. quickly. The great industrial strides of N . Europe since World War II are Our Competitive Position well known to you. Japan has also Where do we stand in respect to done a most remarkable job indus- this economic challenge in this trially in the last ten years. Its changed and changing world? One rate of industrial growth has far way to check our position is to exceeded our own -—a significant compare our steel capacity with accomplishment. that of the rest of the world. Steel We thought we were quite ad- capacity is a fairly reliable indi- vanced when we installed punched cator of the relative industrial card programming of production strength of nations. How do we in our new structural mill in Chi- stand? cago. But Japan has an ultramod- Although the steel industry in ern steel plant being similarly the United States has added 56 equipped. Japanese steelmakers million tons of ingot capacity since have underbid American producers ‘World War II and is still growing, on ship plates and sheet for the many foreign countries have use of the U.S. Navy Department, greatly expanded their steel ca- and on locomotives for the Panama pacity. Total world capacity has Canal. And last year foreign pro- now reached almost 450 million net ducers sold about one-third of all tons of steel. Where the United the nails and staples marketed in States once had more than half of the United States, while their the world’s steel capacity, we now share of the barbed and twisted have about one-third. No longer barbless wire market was more will the United States have the than 60 per cent. preponderance of world steel pro- So, we ‘enter this new decade duction it enjoyed in the past. facing foreign competition revital- Since World War II, at least ized and expanding, and competing twenty nations have more than with the advantage of an employ- trebled their production of steel, ment cost substantially lower than and some seventeen countries have our own. ===== PAGE 27 ===== 1960 A TIME OF DECISION 25 Capital Requirements as it pays out to its creditors. In Now competing against lower other words, our income from for- labor costs is nothing new for us. eign countries must equal or ex- The United States has always ceed our outgo to foreign coun- been able to compete with overseas tries, lest we have to ship out our producers. But we have been able gold to pay our debts and so dan- to do so by accumulating capital gerously deplete our gold reserve. and investing it at a faster pacein’ Our international payments ex- more modern tools and machinery : ceeded our receipts by 3.4 billion — and our superior output of those "dollars in 1958 and by 3.7 billion tools more than offset their lower dollars in 1959. employment costs.” It was the If we continue to lose gold, the greater output per man hour, made international value of the dollar possible in large part by better will decline. This would require a tools, that in turn made possible lowering of the gold content of the the payment of better wages in dollar, or a lowering of our legal America. reserve ratio. That would mean a Today, our major foreign com- new and significant step toward petitors have tools as good — or more inflation. sometimes better — than ours. And, although their raw materials in Balance of Payments some instances may cost more, Why all this struggle to get our they still pay wages which are international payments back into only one-third to one-seventh as balance —a struggle in which we much as we pay in the United appear lately to be making a bit of States. progress? Many people define our present For some strange reason or international predicament as an other this balance of payments “unfavorable balance of payments” problem only seems to be discussed — and describe it as a serious pub- when it arises between nations. It lic problem. Well, I happen to never seems to get much notice be- think it is a private “unfavorable tween individuals. As long as I pay balance of payments” problem as my grocer for the goods I buy, I well as a public one — yours and have no unfavorable balance of mine. payments with him, and that goes As IT understand it, the only pro- for my butcher and baker, too. The tection a nation has against a loss money I “sell” to each one of them of its gold reserves is to be steadily is balanced by the goods he sells to receiving from its debtors as much me in return. Our trade accounts ===== PAGE 28 ===== 26 THE FREEMAN October are balanced — that is, I'm sure Collective Follies yours are and I hope mine are. As individuals we readily sub- But if I squander my money at the mit to the domestic disciplines that race track to the point where I can balance our internal trade; but no longer pay my grocer, it will do when we cease to operate as in- me no good to say that I have an dividuals, and function as collec- unfavorable balance of payments. tives — especially as governments We never hear of an unfavorable — we try to pursue policies which, balance of payments between the if we were functioning as indi- good people of Philadelphia and viduals, the discipline I have de- those of New York. They do busi- scribed would make us correct — ness together constantly, but there and quickly — but which, collec- is an automatic discipline that tively, some of us think we can keeps their trade in balance. If pursue without ever meeting up New York is a high-cost area and with the same consequences. Philadelphia is a low-cost area, Thus, if a government wants to New York will lose business to persist in operating on an unbal- Philadelphia, thus setting the anced budget, it can print the forces in motion that will tend to money to make up the difference correct the cost disparity. This is in its own internal “unfavorable the discipline that exists between balance of payments.” If it wants cities and states in our country. It to subsidize farms and factories it is the sort of discipline that oper- can do so by exacting the resultant ates between me and my grocer. higher cost from the pockets of A similar discipline exists in taxpayers and consumers. If it trade between nations. A high-cost wants to confer on a minority country loses business to a low- group the power to impose un- cost country; and since this re- economic wage costs and thus duces the ability of the high-cost bring about increased prices for country to meet its foreign finan- all to pay, it can do so. And, finally, cial commitments, it is under pres- if it wants to appear to be aiding sure to ship gold to fulfill those any one special interest group, it commitments. This compels the does so at the expense of all other high-cost country to correct its in- taxpayers. flated costs or suffer even more Now the apparent ease with serious consequences — a devalued which a government seems to do currency that will buy less and less these things continues to blind us in the international as well as in to the fact that not even a power- the domestic markets. ful government can keep on doing ===== PAGE 29 ===== 1960 A TIME OF DECISION 27 them indefinitely without paying a one way or another, that balances price. We may imagine we can ig- the “balance of payments.” We can nore the inflation brought about and must do our share. We can in- by a series of unbalanced budgets, crease our research, make better or the depressing effect of a products, improve our marketing mounting tax burden that handi- and work harder at selling — both caps our industry, our transporta- here and abroad. We can do our tion, and our agriculture. best to endure protracted strikes — We may forget temporarily that if they are forced upon us — in labor can price itself out of jobs, order to keep our costs in line. We just as readily as any business- can: work to better our relations man or farmer can price himself with our fellow-employees, and to out of markets — forget, that is, improve our service to customers. until the day we begin to suffer the I'm all for that effort 100 per cent consequences. And that day is plus! here. For we have been outstand- All of this will help to build our ingly successful in pursuing econ- export markets and thus help to omic policies which have made our restore balance in our interna- country just about the highest- tional payments. But American cost country in the world. In more business cannot do this alone, and and more areas of trade we simply it cannot do it with one hand tied are not competitive with the rest behind its back competitively. of the world — and the trend con- Bear in mind that these com- tinues in the same direction. peting nations are our friends. They want to do business with us, The Role of Business and we want to do business with Now what has this to do with them. That way we will both bene- our international balance of pay- fit because we will both produce ments or our private balance of more than if we tried to go it payments or with you and me as alone. Therefore, the solution we businessmen ? Simply this: work out must be geared to the Business has a major role to long pull and must consistently play and a major stake in this in- look toward greater production ternational balance of payments and international trade all around. problem because basically we are One solution, sometimes offered responsible for the production in an attempt to neutralize the ef- which supports the payments. fects of overseas competition upon So if a balance of payments is home producers, is to increase to be achieved, it is business, in tariffs or tighten import quotas. ===== PAGE 30 ===== 28 THE FREEMAN October This may offer temporary help in tive machines of our nation that particular industries. But such the country must rely for the help is, at best, a temporary ex- goods and services, the selling of pedient which does not go to the which abroad is essential to a solu- heart of the problem. And, at tion of the problem. We cannot worst, it can seriously narrow our continuously buy things produced ability to compete. abroad, as we want to, and give We are, in terms of many raw aid abroad as our national policy materials, a “have not” nation. now provides, unless we can pro- For example, we have to import all vide for the payments involved of our tin and natural rubber, with a greater production, com- most of our nickel, bauxite, and petitively self-sufficient both in newsprint. Many of our industries America and off-shore. would be severely handicapped : without imports of such things as Remove Our Handicaps manganese. These imports, like the Is it not proper, then, as a start imports of our coffee, tea, and . toward making the decisions which sugar, must be paid for by exports, will count in the next decade, to or we will, as I said, get out of look first to see what is really balance. handicapping us in international competition? A Fresh Appraisal If corporate taxes are higher I would like, therefore, to sug- than those of foreign competitors, gest — for what it may be worth — and they are in many instances, a way of looking at this unfavor- and if our depreciation allowances able balance of payments problem. for plants and tools are lower, as If we look at it as a matter of pro- they usually are, would it not be ducing and selling — energetically wise to reconsider the matter? and competitively — I think we will If, by following what appears, be making a good start toward at the time, to be the pursuit of understanding how to keep in bal- political popularity, we promote ance. the concentration of unreasonable As far back as I can remember, powers in labor unions, does this it was always an axiom of Ameri- not result in uneconomic wage can industry to mind its own busi- settlements and do not these, in ness. This is basic to a lot of turn, result in pricing products out things, including the solving of an of markets and union members out unfavorable balance of payments. of jobs? And should not these con- For it is upon the private, produc- sequences be examined in the in- ===== PAGE 31 ===== 1960 A TIME OF DECISION 29 terest of the nation and of union questions need answering. And members themselves? none of the answers will be easily If, by lack of economic under- found —or, when found, univer- standing, we suffer a continued at- sally accepted. Answers to tough ~ tack upon the profits earned by questions never are easy. business — if we fail to achieve a popular understanding that profits But whether we like it or not, are the source of our industrial this is certainly a time for deci- strength and that profit at work sion. The choices we make or fail in the form of tools and factories to make in the next few years is the most inviting sight that a could determine, for many decades man looking for a job, or a nation to come, whether this nation shall seeking industrial strength can be- decline to secondary influence in hold — will we not run the risk of the world’s affairs, or whether we undermining the material strength shall go forward — as I believe we that is necessary to give support to can — to greater achievement in a any moral purpose? world that is at peace because our These and many other like nation is strong. > Lessons from New Zealand THE FOLLOWING ITEMS, as instruc- cial journal of The Constitutional tive for Americans as for New Society for the Promotion of Eco- Zealanders, are from the April nomic Freedom and Justice in New 1960 issue of Liberator, the offi- Zealand, Inc. BIGGER PAY MARGINS AMONG COMMUNISTS THE PROCESS of equalizing incomes irrespective of the capacity or will to work has probably gone further in New Zealand than anywhere else in the world. It is very questionable whether this should be a matter of national pride. Complete equality should be the close to achieving it as is New objective in the communist coun- Zealand. tries, but they are nowhere near as In the Soviet army, the pay ===== PAGE 32 ===== 30 THE FREEMAN October scales vary vastly between pri- scientists and technicians, have to vates and generals, the disparity be paid a greater reward than being much greater than in the others, or we lose their services.” western forces. Russian scientists The inference is that salary are paid enormously more than scales are based on the availability laborers. In this way, the Com- of workers in certain professions, munists encourage ability and ap- not on the worth of their services plication, to the community. This might well New Zealand, on the other hand, ' be considered thoughtfully by uni- has come dangerously near to dis- versity staffers who have recently couraging the use of brains. In- gained substantial increases in stead of providing incentives for salaries. ability and application, this coun- If there were more of them of- try has so leveled real earnings fering, or if those already here that it is more difficult to counter were less liable to go overseas for the view that it is comfortable to better rewards, they might not forget ambition and settle into a have received the increase. menial job for which the rewards But apart from the practice of are reasonably satisfactory. reducing margins for skill and At a recent meeting at New ability, to which all recent New Plymouth, the Minister of Finance Zealand governments have con- made some interesting admissions. tributed, the policy of steeply He was asked if the government grading income tax has been effec- party’s policy was still towards the tive in still further reducing mar- equalization of incomes. gins. He said the party was ‘well be- The chief result is to bring yond the stage” of wanting that. ever closer the millennium of But he added, “We have got to mediocrity to which New Zealand face facts. Some people, such as politicians are evidently devoted. SOCIAL SECURITY GONE MAD IN A RECENT BROADCAST, the Minister of Social Security said cash bene- fits were now paid to 1,037,000 people, which meant that almost one in every two New Zealanders was now receiving a cash benefit, quite apart from health benefits. According to the last Budget, mated at £104,000,000 — an in- the cost of social security in the crease of £15,000,000 in one year. financial year just ended was esti- New benefits already announced ===== PAGE 33 ===== 1960 LESSONS FROM NEW ZEALAND 31 for this year promise to put up the The war cannot be blamed for cost at least as much again, so the more than a small portion of the taxpayers will probably have to decline in the value of money. In find at least £120,000,000 to fi- the war years, in fact, inflation nance the scheme. was held in check much more suc- Where does this money come cessfully than it has been since. from? From the pockets of the Unless inflation is checked, age: people, of course. A fair propor- beneficiaries may need £10 a week tion comes from taxation on com- before many more years pass. But panies which cannot benefit in any how can inflation be checked while way. This means that the products taxes amount to more than 30 per of those companies cost more than cent of the national income? they would otherwise, and it is ul- timately the customers who pay These are factors which threaten the company taxes. New Zealand’s economy. While Social security undoubtedly has New Zealand must compete on an inflationary effect in forcing up world markets which owe their prices. Judging from the com- prosperity to free enterprise and plaints by aged beneficiaries pub- which are successfully holding lished in letters to newspapers their price level, continued infla- that the present benefit provides tion in this country must make it only a subsistence, those benefi- difficult to sell overseas success- ciaries are little better off today on fully. £4/5/ —a week than they were Instead of boasting of the on £1/10/ — a week when social achievements of social security, security began in 1939. Inflation New Zealand might better count has eaten up two-thirds of the the cost and the threat to the na- value. tional economy. ~ IDEAS ON LIBERTY Ralph Waldo Emerson GIVE NO BOUNTIES, make equal laws, secure life and property, and you will not need to give alms. Open the doors of oppor- tunity to talent and virtue, and they will do themselves justice and property will not be in bad hands. In a free and just com- monwealth, property rushes from the idle and the imbecile to the industrious, brave, and persevering. ===== PAGE 34 ===== THE CASE FOR FREEDOM F. A. HAYEK THE CASE for individual freedom order to leave room for the un- rests chiefly on the recognition of foreseeable and unpredictable; we the inevitable ignorance of all of want it because we have learned us concerning a great many of the to expect from it the opportunity factors on which the achievement of realizing many of our aims. It of our ends and welfare depends. is because every individual knows If there were omniscient men, if so little and, in particular, because we could know not only all that we rarely know which of us knows affects the attainment of our pres- best that we trust the independent ent wishes but also our future and competitive efforts of many to wants and desires, there would be induce the emergence of what we little case for liberty. And, in turn, shall want when we see it. liberty of the individual would, of Humiliating to human pride as course, make complete foresight it may be, we must recognize that impossible. Liberty is essential in the advance and even the preserva- tion of civilization are dependent Reprinted from The Constitution of Liberty : i by F. A Hayek b y permission of Th . Un upon 2 maximum of opportunity versity o icago Press. y the Uni- o n. ese ac- versity of Chicago. 570 pp., $7.50. . or accidents . appe . . ¢ Friedrich A Hayek is an economic theorist cidents occur in the combination of international reputation, perhaps best known : . for his 1944 classic, The Road to Serfdom. Of knowledge and attitudes, skills Formerly a professor at the University of and habits, acquired by individual Chicago since 1950 as professor of social and i moral science in the Committee on Social men and also when qualified men Thought. } } are confronted with the particular The Constitution of Liberty, his most recent . . book, analyzes the ethical foundations of a circumstances which they are free society, the laws and institutions de- . : veloped to secure individual liberty, and the equipped to deal with. Our neces- modern welfare-state departures from freedom. 3 This (ossay, Jom the second chapter, is a that ignorance ol 80 much eT sampling and appetizer. i The Constitution of Liberty may be ob- that we have to deal argely wi tained from bookstores or from The Founda- probabilities and chances. tion for Economic Education, Irvington-on- op = . Hudson, New York. Of course, it is true of social as 32 ===== PAGE 35 ===== 1960 THE CASE FOR FREEDOM 33 of individual life that favorable The classical argument for tol- accidents usually do not just hap- erance formulated by John Milton pen. We must prepare for them. and John Locke and restated by But they still remain chances and John Stuart Mill and Walter Bage- do not become certainties. They in- hot rests, of course, on the recog- volve risks deliberately taken, the nition of this ignorance of ours. It possible misfortune of individuals is a special application of general and groups who are as meritorious considerations to which a nonra- as others who prosper, the possi- tionalist insight into the working bility of serious failure or relapse of our mind opens the doors. We even for the majority, and merely shall find throughout this book a high probability of a net gain on that, though we are usually not balance. All we can do is to in- aware of it, all institutions of free- crease the chance that some special dom are adaptations to this funda- constellation of individual endow- mental fact of ignorance, adapted ment and circumstance will result to deal with chances and probabili- in the shaping of some new tool or ties, not certainty. Certainty we the improvement of an old one, and cannot achieve in human affairs, to improve the prospect that such and it is for this reason that, to innovations will become rapidly make the best use of what knowl- known to those who can take ad- edge we have, we must adhere to vantage of them. rules which experience has shown } to serve best on the whole, though Imperfect Beings we do not know what will be the All political theories assume, of consequences of obeying them in course, that most individuals are the particular instance. very ignorant. Those who plead for Man learns by the disappoint- liberty differ from the rest in that ment of expectations. Needless to they include among the ignorant say, we ought not to increase the themselves as well as the wisest. unpredictability of events by fool- Compared with the totality of ish human institutions. So far as knowledge which is continually possible, our aim should be to im- utilized in the evolution of a dy- prove human institutions so as to namic civilization, the difference increase the chances of correct between the knowledge that the foresight. Above all, however, we wisest and that which the most ig- should provide the maximum of norant individual can deliberately opportunity for unknown individu- employ is comparatively insignif- als to learn of facts that we our- icant. selves are yet unware of and to ===== PAGE 36 ===== 34 THE FREEMAN October make use of this knowledge in is frequently abused. Freedom their actions. necessarily means that many It is through the mutually ad- things will be done which we do justed efforts of many people not like. Our faith in freedom does that more knowledge is utilized not rest on the foreseeable results than any one individual possesses in particular circumstances but on or than it is possible to synthesize the belief that it will, on balance, intellectually; and it is through release more forces for the good such utilization of dispersed than for the bad. knowledge that achievements are It also follows that the import- made possible, greater than any ance of our being free to do a par- single mind can foresee. It is be- ticular thing has nothing todo with cause freedom means the renun- the question of whether we or the ciation of direct control of in- majority are ever likely to make dividual efforts that a free society use of that particular possibility. can make use of so much more To grant no more freedom than knowledge than the mind of the all can exercise would be to mis- wisest ruler could comprehend. conceive its function completely. The freedom that will be used by The Chance of Error only one man in a million may be From this foundation of the more important to society and argument for liberty it follows more beneficial to the majority that we shall not achieve its ends if than any freedom that we all use. we confine liberty to the particular It might even be said that the instances where we know it will less likely the opportunity to make do good. Freedom granted only use of freedom to do a particular when it is known beforehand that thing, the more precious it will be its effects will be beneficial is not for society as a whole. The less freedom. If we knew how freedom likely the opportunity, the more would be used, the case for it serious will it be to miss it when it would largely disappear. We shall arises, for the experience that it never get the benefits of freedom, offers will be nearly unique. It is never obtain those unforeseeable also probably true that the ma- new developments for which it pro- jority are not directly. interested vides the opportunity, if it is not in most of the important things also granted where the uses made that any one person should be free of it by some do not seem desir- to do. It is because we do not know ~ able. It is therefore no argument how individuals will use their free- against individual freedom that if dom that it is so important. If it ===== PAGE 37 ===== 1960 THE CASE FOR FREEDOM 35 were otherwise, the results of free- ficial to society. This freedom we dom could also be achieved by the can assure to the unknown person majority’s deciding what should be only by giving it to all. done by the individuals. But ma- The benefits of freedom are jority action is, of necessity, con- therefore not confined to the free — fined to the already tried and as- or, at least, a man does not benefit certained, to issues on which mainly from those aspects of free- agreement has already been dom which he himself takes advan- reached in that process of discus- tage of. There can be no doubt sion that must be preceded by dif- that in history unfree majorities ferent experiences and actions on have benefited from the existence the part of different individuals. of free minorities and that today unfreed societies benefit from Freedom for the Unknown what they obtain and learn from The benefits I derive from free- free societies. Of course, the bene- dom are thus largely the result of fits we derive from the freedom of the uses of freedom by others, and others become greater as the num- mostly of those uses of freedom ber of those who can exercise that I could never avail myself of. freedom increases. The argument It is therefore not necessarily free- for the freedom of some therefore dom that I can exercise myself that applies to the freedom of all. is most important for me. It is cer- But it is still better for all that tainly more important that any- some should be free than none and thing can be tried by somebody also that many enjoy full freedom than that all can do the same than that all have a restricted things. It is not because we like to freedom. The significant point is be able to do particular things, not that the importance of freedom to because we regard any particular do a particular thing has nothing freedom as essential to our hap- to do with the number of people piness, that we have a claim to who want to do it: it might almost freedom. The instinct that makes be in inverse proportion. One con- us revolt against any physical re- sequence of this is that a society straint, though a helpful ally, isnot may be hamstrung by controls, al- always a safe guide for justifying though the great majority may not or delimiting freedom. What is im- be aware that their freedom has portant is not what freedom I per- been significantly curtailed. If we sonally would like to exercise but proceeded on the assumption that what freedom some person may only the exercises of freedom that need in order to do things bene- the majority will practice are im- ===== PAGE 38 ===== 36 THE FREEMAN October portant, we would be certain to This process by which the new create a stagnant society with all emerges is best understood in the the characteristic of unfreedom. intellectual sphere when the re- sults are new ideas. It is the field The Nature of Change in which most of us are aware at The undesigned novelties that least of some of the individual constantly emerge in the process steps of the process, where we of adaptation will consist, first, of necessarily know what is happen- new arrangements or patterns in ing and thus generally recognize which the efforts of different in- the necessity of freedom. Most sci- dividuals are coordinated and of entists realize that we cannot plan new constellations in the use of the advance of knowledge, that in resources, which will be in their the voyage into the unknown — nature as temporary as the par- which is what research is — we are ticular conditions that have evoked in great measure dependent on the them. There will be, second, modi- vagaries of individual genius and fications of tools and institutions of circumstance, and that scientific adapted to the new circumstances. advance, like a new idea that will Some of these will also be merely spring up in a single mind, will be temporary adaptations to the con- the result of a combination of con- ditions of the moment, while others ceptions, habits, and circumstances will be improvements that increase brought to one person by society, the versatility of the existing tools the result as much of lucky acci- and usages and will therefore be dents as of systematic effort. retained. These latter will consti- Because we are more aware that tute a better adaptation not merely our advances in the intellectual to the particular circumstances of sphere often spring from the un- time and place but to some per- foreseen and undesigned, we tend manent feature of our environ- to overstress the importance of ment. In such spontaneous “forma- freedom in this field and to ignore tions” is embodied a perception of the importance of the freedom of the general laws that govern na- doing things. But the freedom of ture. With this cumulative embod- research and belief and the free- iment of experience in tools and dom of speech and discussion, the forms of action will emerge a importance of which is widely un- growth of explicit knowledge, of = derstood, are significant only in formulated generic rules that can the last stage of the process in be communicated by language which new truths are discovered. from person to person. To extol the value of intellectual ===== PAGE 39 ===== 1960 THE CASE FOR FREEDOM 37 liberty at the expense of the value work and to point to the general of the liberty of doing things principle rather than the specific would be like treating the crown- character of the influences that op- ing part of an edifice as the whole. erate. Men are always concerned We have new ideas to discuss, dif- only with what they know. There- ferent views to adjust, because fore, those features which, while those ideas and views arise from the process is under way, are not the efforts of individuals in ever consciously known to anybody are new circumstances, who avail commonly disregarded and can themselves in their concrete tasks perhaps never be traced in detail. of the new tools and forms of ac- In fact, these unconscious fea- tion they have learned. tures not only are commonly dis- regarded but are often treated as if they were a hindrance rather The nonintellectual part of this than a help or an essential condi- process — the formation of the tion. Because they are not “ra- changed material environment in tional” in the sense of explicitly which the new emerges — requires entering into our reasoning, they for its understanding and appre- are often treated as irrational in ciation a much greater effort of the sense of being contrary to in- imagination than the factors telligent action. Yet, though much stressed by the intellectualist view. of the nonrational that affects our While we are sometimes able to action may be irrational in this trace the intellectual processes that sense, many of the “mere habits” have led to a new idea, we -can and ‘meaningless institutions” scarcely ever reconstruct the se- that we use and presuppose in our quence and combination of those actions are essential conditions for contributions that have not led to what we achieve; they are success- the acquisition of explicit knowl- ful adaptations of society that are edge; we can scarcely ever recon- constantly improved and on which struct the favorable habits and depends the range of what we can skills employed, the facilities and achieve. While it is important to opportunities used, and the par- discover their defects, we could not ticular environment of the main for a moment go on without con- actors that has favored the result. stantly relying on them. Our efforts toward understand- The manner in which we have ing this part of the process can go learned to order our day, to dress, little further than to show on sim- to eat, to arrange our houses, to plified models the kind of forces at speak and write, and to use the The Complexity of Progress ===== PAGE 40 ===== 38 THE FREEMAN October countless other tools and imple- important as freedom of thought. ments of civilization, no less than It has become a common practice the “know-how” of production and to disparage freedom of action by trade, furnishes us constantly with calling it “economic liberty.” But the foundations on which our own the concept of freedom of action is contributions to the process of much wider than that of economic civilization must be based. And it liberty, which it includes; and, is in the new use and improvement what is more important, it is very of whatever the facilities of civili- questionable whether there are zation offer us that the new ideas any actions which can be called arise that are ultimately handled merely “economic” and whether in the intellectual sphere. any restrictions on liberty can be Though the conscious manipula- confined to what are called merely tion of abstract thought, once it “economic” aspects. Economic con- has been set in train, has in some siderations are merely those by measure a life of its own, it would which we reconcile and adjust our not long continue and develop different purposes, none of which, without the constant challenges in the last resort, are economic that arise from the ability of peo- (excepting those of the miser or ple to act in a new manner, to try the man for whom making money new ways of doing things, and to has become an end in itself). alter the whole structure of civili- zation in adaptation to change. The Goals Are Open The intellectual process is in effect Most of what we have said so only a process of elaboration, selec- far applies not only to man’s use of tion, and elimination of ideas al- the means for the achievement of ready formed. And the flow of new his ends but also to those ends ideas, to a great extent, springs themselves. It is one of the char- from the sphere in which action, acteristics of a free society that often nonrational action, and ma- men’s goals are open, that. new: terial events impinge upon each ends of conscious effort can spring: other. It would dry up if freedom up, first with a few individuals, to- were confined to the intellectual become in time the ends of most. sphere. It is a fact which we must recog+- The importance of freedom, nize that even what we regard as. therefore, does not depend on the good or beautiful is changeable — elevated character of the activities: if not in any recognizable-manner: it makes possible. Freedom of ac- that would’ entitle us totake a rela-- tion, even in humble things, is as tivistic position, then in the sense" ===== PAGE 41 ===== 1960 THE CASE FOR FREEDOM 39 that in many respects we do not than the fact that new ends con- know what will appear as good or stantly arise with the satisfaction beautiful to another generation. of old needs and with the appear- Nor do we know why we regard ance of new opportunities. Which this or that as good or who is right individuals and which groups suc- when people differ as to whether ceed and continue to exist depends something is good or not. It is not as much on the goals that they only in his knowledge, but also in pursue, the values that govern his aims and values, that man is their action, as on the tools and the creature of civilization; in the capacities at their command. last resort, it is the relevance of Whether a group will prosper or these individual wishes to the per- be extinguished depends as much petuation of the group or the spe- on the ethical code it obeys, or the cies that will determine whether ideals of beauty or well-being that they will persist or change. guide it, as on the degree to which It is, of course, a mistake to be- it has learned or not learned to lieve that we can draw conclusions satisfy its material needs. Within about what our values ought to be any given society, particular simply because we realize that groups may rise or decline accord- they are a product of evolution. ing to the ends they pursue and But we cannot reasonably doubt the standards of conduct that they that these values are created and observe. And the ends of the suc- altered by the same evolutionary cessful group will tend to become forces that have produced our in- the ends of all members of the so- telligence. All that we can know is ciety. that the ultimate decision about At most, we understand only what is good or bad will be made partially why the values we hold not by individual human wisdom or the ethical rules we observe are but by the decline of the groups conducive to the continued exist- that have adhered to the “wrong” ence of our society. Nor can we be beliefs. sure that under constantly chang- ing conditions all the rules that Measures of Success have proved to be conducive to the It is in the pursuit of man’s attainment of a ‘certain end will aims of the moment that all the remain so. Though there is a pre- devices of civilization have to sumption that any established so- prove themselves; the ineffective cial standard contributes in some will be discarded and the effective manner to the preservation of civ- retained. But there is more to it ilization, our only way of confirm- ===== PAGE 42 ===== 40 THE FREEMAN October ing this is to ascertain whether it prevalent at a given time may be- continues to prove itself in com- come an obstacle to the advance- petition with other standards ob- ment of knowledge. served by other individuals or The argument for liberty is not groups. an argument against organization, which is one of the most powerful Competition Affords Alternatives means that human reason can em- The competition in which the ploy, but an argument against all process of selection rests must be exclusive, privileged, monopolistic understood in the widest sense. It organization, against the use of involves competition between or- coercion to prevent others from ganized and unorganized groups no trying to do better. Every organi- less than competition between in- zation is based on given knowl- dividuals. To think of it in con- edge; organization means commit- trast to cooperation or organization ment to a particular aim and to would be to misconceive its nature. particular methods, but even or- The endeavor to achieve certain ganization designed to increase results by cooperation and or- knowledge will be effective only in- ganization is as much a part of sofar as the knowledge and beliefs competition as individual efforts. on which its design rests are true. Successful group relations also And if any facts contradict the prove their effectiveness in com- beliefs on which the structure of petition among groups organized the organization is based, this will in different ways. The relevant dis- become evident only in its failure tinction is not between individual and supersession by a different and group action but between con- type of organization. ditions, on the one hand, in which Organization is therefore likely alternative ways based on differ- to be beneficial and effective so ent views or practices may be long as it is voluntary and is im- tried and conditions, on the other, bedded in a free sphere and will in which one agency has the exclu- either have to adjust itself to cir- sive right and the power to pre- cumstances not taken into account vent others from trying. It is only in its conception or fail. To turn when such exclusive rights are the whole of society into a single conferred on the presumption of organization built and directed ac- superior knowledge of particular cording to a single plan would be individuals or groups that the to extinguish the very forces that process ceases to be experimental shaped the individual human and beliefs that happen to be minds that planned it. ===== PAGE 43 ===== 1960 THE CASE FOR FREEDOM 41 It is worth our while to consider rests on freedom and the unpre- for a moment what would happen dictability of human action. Those if only what was agreed to be the who extol the powers of human best available knowledge were to reason usually see only one side of be used in all action. If all at- that interaction of human thought tempts that seemed wasteful in the and conduct in which reason is at light of generally accepted knowl- the same time used and shaped. edge were prohibited and only such They do not see that, for advance questions asked, or such experi- to take place, the social process ments tried, as seemed significant from which the growth of reason in the light of ruling opinion, man- emerges must remain free from its kind might well reach a point control. where its knowledge enabled it to predict the consequences of all con- Freezing the Process vertional actions and to avoid all There can be little doubt that disappointment or failure. Man man owes some of his greatest suc- would then seem to have subjected cesses in the past to the fact that his surroundings to his reason, for he has not been able to control so- he would attempt only those things cial life. His continued advance which were totally predictable in may well depend on his deliber- their results. We might conceive ately refraining from exercising of a civilization coming to a stand- controls which are now in his still, not because the possibilities power. In the past, the spontane- of further growth had been ex- ous forces of growth, however hausted, but because man had suc- much restricted, could usually still ceeded in so completely subjecting assert themselves against the or- all his actions and his immediate ganized coercion of the state. With surroundings to his existing state the technological means of control of knowledge that there would be now at the disposal of government, no occasion for new knowledge to itis not certain that such assertion appear. is still possible; at any rate, it The rationalist who desires to may soon become impossible. We subject everything to human rea- are not far from the point where son is thus faced with a real di- the deliberately organized forces lemma. The use of reason aims at of society may destroy those spon- control and predictability. But the taneous forces which have made process of the advance of reason advance possible. > ===== PAGE 44 ===== No More Q . p: « An astute observer of the current political scene finds socialism in theoretical bankruptcy, though there remains the lust for power to control others. FRANK CHODOROV I was A SHAVER of ten or twelve interpretation of that ideology when I learned about Grand Street. enunciated by some self-appointed This was, and is, a thoroughfare pundit who had got a following. in downtown New York, but at the There was a “saloon” which only turn of the century it was also an the true-believers frequented, institution, made so by a number their principal pastime, aside from of establishments along the street discussing moot questions in Marx- called “coffee saloons.” These, I ist “science,” being to castigate presume, served other articles of the revisionists who held forth in food, but when I patronized them another “saloon.” The latter, called in the afternoons the principal the Social Democrats, had a ren- viands they purveyed were a mug dezvous of their own where they .- of coffee and a hunk of cake — for delighted in concocting reform a dime. The customers, or habitués, measures which, incidentally, were seemed to be less interested in eat- later taken over by the Democrats ing and drinking than in arguing and the Republicans. But, on the the metaphysics of Karl Marx or whole, these socialists were evo- Kropotkin. The arguments went on lutionary, rather than revolution- all afternoon and, I was later told, ary; they dreamed of the day when all evening well into the night. capitalism will have decayed, from Each of these establishments ac- its internal deficiencies, and a mere quired a character of its own, de- push from the proletariat would riving from the particular ideol- topple it. They were willing to let ogy of its clientele, or from an the forces of history do the job, 42 ===== PAGE 45 ===== 1960 NO MORE SOCIALISTS . 43 and contented themselves with motive, has disproven Karl Marx talking; there was little inclina- on every point. To be sure, the tion to help the forces of history economists of the Austrian School along. That was before Lenin came had done in the labor theory of along with his doctrine of dyna- value — that the value of a thing mism. is determined by the amount of There are very few of the Grand labor time put into its production Street type of socialists around — by showing that value is purely these days, either in this country subjective and has nothing to do or in Europe, unless, perhaps, in with labor; but capitalism, disre- the Kremlin. Gone are the doctri- garding all the textbooks, went naires, the “scientific” socialists, about disproving the labor theory with whom I delighted to argue on of value by simply heeding the dic- the campus of Columbia College, tates of the market place; if peo- or whom I heckled on the soapbox ple did not want or buy a thing, it in Union Square, New York. All was not produced, and that was all the theories of Karl Marx have there was to it. The surplus value been laid to rest by experience. theory held that capitalists paid There are few to say a good word labor subsistence wages and re- for his laboriously concocted labor tained as profits all that labor pro- theory of value, or to give lip serv- duced above this subsistence level; ice to his many-worded theory of but capitalism proved that wages surplus value, which was the key- come out of production and that stone of his theory of exploitation, the more capital in use the greater which in turn was the basis of his will be the output of labor and indictment of capitalism. The Rus- therefore the greater its rewards. sian “experiment” has shown that Capitalism has raised wages, not the State, far from being a man- lowered them, as Marx predicted. aging committee for the capitalist So much so, that the worker with a class, can be superimposed on the washing machine and an automo- proletariat, and his “withering bile has lost every vestige of away of the state” theory has gone “working class consciousness”; he the way of all his other theories. even plays golf. But, that is the way of empiri- Even the nationalization of in- cal knowledge: it makes a mess of dustry, once the top priority of all theories advanced by long-winded socialistic programs, has lost its economists and ivory-tower social lure. In England, the labor unions, scientists. Capitalism, operating which furnish the bulk of the fi- effectively on the mundane profit nances for the Labor Party, have ===== PAGE 46 ===== 44. THE FREEMAN October learned that a strike against a sire, and by being more profligate nationalized industry is a strike with promises than the opposition. against the government, or a revo- Thus, socialism has become welfar- lution; besides, the inefficiency of a ism, and with welfarism, of course, bureaucratically controlled plant is comes control of the economy. But, too obvious to warrant discussion. while Marxism aimed to control So, what is socialism without the economy for the grander pur- Marx? I put that question to an pose of destroying capitalism, official of the French Socialist modern socialism seems bent on Party and received this answer: controlling the economy for the “Marx could not have anticipated sake of control. the technological advances of the last hundred years and, therefore, In short, socialists have become while his theories were correct in “liberals.” In Europe those of the his day, they do not apply to pres- socialistic persuasion maintain ent conditions. Nevertheless, Marx their allegiance to the name, since did much for the working class there the word “liberal” still re- movement in his time and he still tains its original meaning, as de- gives our movement direction and fining one who would remove laws, inspiration.” That is to say, there not proliferate them, while the so- is no theoretical position for so- cialistically-minded in this coun- cialists; they have no postulates to try have perverted the word into guide them and must play “by its opposite. But the European so- ear.” As a matter of necessity they cialist and the American “liberal” are reduced to expediencies and as are both energumens for govern- such have become mere politicians, ment intervention in the affairs of not revolutionaries. In every coun- men, both have an overpowering try (save, perhaps, Russia) the desire for office, and both offer to socialists have become office seek- buy votes with tax money. The ers, aiming to get hold of the reins programs and tactics of the two of government by parliamentary are identical. methods, and for no other purpose And neither one has any theo- than to enjoy the prerogatives and retical position, any philosophy of perquisites of office. Power for the either government or economics, sake of power is their aim. by which it can be judged. Both Well, how does one acquire pow- are opportunistic. Only capitalism er in a country ruled by popular — or conservatism or libertarian- suffrage? By promising the elector- ism — has a theory to go by. But, ate everything their hearts de- that is another story. - ===== PAGE 47 ===== ANTIDOTES FOR TAX RESISTANCE or — PROGRESS IN TRANQUILIZING TAXPAYERS It was a rainy afternoon At story-telling time. Old Kaspar chose a strong cigar And spiked his rum-and-lime, While Peterkin and Wilhelmine Looked at the historama screen. They saw a hill where points of flame Were sparkling on the ground, Below the wispy clouds of smoke That drifted all around; While lines of men in red and white Were moving up toward the height. “It was a battle,” Kaspar said, “That shook a tyrant’s reign. When folks resisted his controls And started to complain, He sent the famous Lobsterbacks To force the payment of a tax.” “The folks entrenched upon the hill Believed in laissez faire; And what a working man could earn They called his rightful share. They’d rather fight the Lobsterbacks Than pay the royal tyrant’s tax.” “With folks like that,” cried Wilhelmine, “The taxes couldn't rise!” “But taxes now,” Old Kaspar said, “Have grown to monstrous size. They swallow wealth and business firms Just like a robin gobbles worms.” “Can freedom last,” cried Peterkin, “With taxes up so high?” “There’s little talk of freedom now,” Said Kaspar with a sigh, “When folks are waiting on their knees For bigger federal subsidies.” H. P. B. JENKINS Economist at Fayetteville, Arkansas 45 ===== PAGE 48 ===== WwW. M. CURTISS KEEPING the PEACE THE SPOTLIGHT has been on rockets 25 pages in four issues. Investiga- to the moon, outer space, and sum- tions are going on at all levels of mit meetings. But these bold head- government and the conclusion is lines divert our attention from im- invariably the same: Pass more portant things going on right in laws; tighten up on law enforce- our front yard. ment; expand the police force; In the less conspicuous parts of give police more power; have the our newspapers and magazines we churches and schools instill more read that crime is increasing at an reverence for laws. alarming rate. J. Edgar Hoover In contrast to these solutions, it says that since 1950, the crime is here suggested that much of to- rate has increased four times as day’s crime is directly caused by fast as population. It has been es- government action of one kind or timated that crime costs this na- another. In other words, the gov- tion some $22 billion a year — $12 ernment, whose function is to pro- for every dollar spent in our tect life and property, to prevent churches. Without going into tech- fraud and stealing, to enforce con- nical and legal definitions, crime tracts, and the like, in many cases is used here simply to mean the actually promotes the very crimes breaking of laws. it is supposed to suppress. No doubt about it, crime is big By nature, most men are law- business and a threat to our com- abiding — they want to live ac- fortable way of life. Earlier this cording to the rules. Only a mi- year, Lifemagazine carried a story nority are lawbreakers who seem on world crime that covered about to gain satisfaction by flouting ac- — cepted modes of behavior. There Dr. Curtiss is a member of the staff of the . Foundation for Economic Education. comes a time, of course, when nor- 46 ===== PAGE 49 ===== 1960 KEEPING THE PEACE 47 mally law-abiding citizens feel acts of government encourage moved to violate laws which seem criminal behavior as when the fol- unduly oppressive. A classic ex- lowing conditions prevail: ample was the American Declara- 1. A product or service is des- tion of Independence. The colonists perately wanted by some of the believed that men are endowed by population. their Creator with such unalien- 2. A law prohibits free and open able rights as life, liberty, and the trade in the product or service. pursuit of happiness, and that 3. A chance of a high profit from “whenever any Form of Govern- the trade if one is not caught by ment becomes destructive of these the police. ends, it is the Right of the People As a rule, the greater the pos- to alter or to abolish it, and to in- sibility of profit and the more stitute new Government. . . . Pru- severe the penalty if caught, the dence, indeed, will dictate that more likely are those in the busi- Governments long established ness to be desperate and venture- should not be changed for light some persons with few qualms and transient causes; and accord- about lawbreaking. The problem ingly all experience hath shewn, grades down to the very small pos- that mankind are more disposed to sible profit for a very tiny risk suffer, while evils are sufferable, such as fudging on one’s income than to right themselves by abol- tax about how much went into the ishing the forms to which they are church collection plate. accustomed. But when a long train A motivation back of these of abuses and usurpations . . . crimes is similar to that which evinces a design to reducethemun- moves honest men to become great der absolute Despotism, it is their merchants and industrialists. The right, it is their duty, to throw off hope for profits is a tremendous such Government.” force which may be directed The Declaration is quoted merely toward good or evil.} to show that lawbreakers are not 1 “Profits” include all sorts of satis- always the thugs and gangsters factions and not only monetary or ma- . . terial gains. In the nonmaterial area, commonly associated with the some men gain great satisfaction from term. ‘ having power over others—in enslaving their fellow men. Such a drive must have Some Examples played an important role in the lives of Napoleon, Hitler, Stalin, and many A number of examples, some in others. At the other extreme, we find a the United States and some inter- Schweitzer, a Pasteur, a Gandhi, and numberless unknown persons whose prof- ===== PAGE 50 ===== 48 THE FREEMAN October Smuggling the German autos or levies an ex- A number of “crimes for profit” orbitant duty on them. So, in order involve smuggling. According to to take advantage of what appears the Life story: “More people are to be a fine profit, the trader re- engaged in it [smuggling] than in sorts to smuggling, and runs the any other form of international risk of being caught and assessed chicanery and, in terms of sheer a high penalty — a kind of business dollar volume, no illegal practice likely to be taken over by the so- in the world can match the total called outcasts of society. _ profits from smuggling. Wherever In an open society where there local regulations create the right is relative freedom to engage in conditions, there the smuggler can manufacturing, trade, or the serv- be found at work. Because of his ice industries, there is a tendency activities, billions of dollars change for man to engage in those busi- hands each year, and sometimes nesses that appear profitable. Com- the entire economy of a nation is petition with others seeking the seriously affected.” same ends assures reasonable Among the smuggled items are prices and a modest profit for gold into India, chocolate from those who are most efficient. The Switzerland into Italy, nutmegs, profit motive is at work. While precious stones and jewelry, tropi- considered a noble force in the free cal fish, refrigerators, television market economy, the profit motive tubes, Salk vaccine, paintings and also may encourage men to break statues, U. S. cigarettes, coffee, laws, in which case it becomes an gasoline, and people. evil force to be dealt with by gov- One can hardly be critical of the ernment. police whose job is to apprehend The buying of a car in Genanany lawbreakers. One might be con- and re-selling it in a South Ameri- cerned, however, about laws pre- can country would appear on the venting the free movement of surface to be an ordinary transac- goods and services. For example: tion useful to all parties concerned. An automobile may be purchased But, if the urge for profit leads to in Germany, taken to South Amer- broken laws and smuggling, then ica, and sold for six to eight times it becomes a dirty business, en- its purchase price. Profits of this gaged in by the underworld, a case magnitude could not long continue for Interpol — International Police. in a free market. But, in this case, Smuggling occurs when a U. S. the South American government citizen returns from a trip to either wholly restricts imports of Canada with goods exceeding a ===== PAGE 51 ===== 1960 KEEPING THE PEACE 49 certain value, which he has not de- drawn into the business with rival clared and on which he has not gangs competing for the right to paid duty. Though the law clearly serve certain territories. Under defines this a crime, one may still such conditions, crime was ram- ask why it is a crime to do that. pant. And the same question might well To make matters worse, many be asked wherever smuggling oc- consumers thought the restriction curs. violated their rights, and much of the law enforcement was only half- Prohibition hearted. The setting was perfect The prohibition of the sale of for lawbreaking by consumers, for alcoholic beverages in the United crime among the suppliers, and for States in the 1920's is a classic ex- corruption of the law enforcement ample of how government inter- agencies. vention may increase crime. It is As is so often the case, once gov- not our purpose here to pass judg- ernment assumes responsibilities ment on the evils of “demon rum.” which individuals have theretofore Certainly, intemperance takes assumed, the tendency is for in- many forms, and when associated dividuals to relax and assume the with alcohol, it is demonstrably government will do the job. Before evil. How to correct such intem- Prohibition, many educational perance is not being debated here. forces in the country, including The point is that the attempt to schools, churches, and the home, control the situation by law was a emphasized the evils of the exces- source of a considerable increase sive use of alcohol. Even with the in crime. Involved was a product repeal of Prohibition, these forces many persons wanted. Some, who apparently have not regained their weren’t interested before Prohibi- former effectiveness. tion, began drinking only because In looking back over the history it was illegal or the “smart” thing of the United States, it appears to do. that the advent of Prohibition When the transportation and brought a general winking at law sale of alcoholic beverages became violation that has since spread in- illegal, this gave rise to the new to other fields. and highly profitable trade of boot- Liquor law violations did not legging. The profits were sufficient end with repeal of the Eighteenth to cover the pain of getting caught. Amendment. It has been estimated In fact, the potential profits were that 55 million gallons of unlaw- so large that an “underworld” was ful hooch were produced by U. S. ===== PAGE 52 ===== 50 THE FREEMAN October moonshiners during the past year, harmful to its citizens, since it en- accounting for about one-fourth of courages betting at race tracks. all liquor consumed in the country. Nor are the organized churches This illegal business grosses a unanimous in opposing gambling. fabulous amount of money and is In New York State some churches said to be operated by organized use bingo and other games of gangs which means considerable chance to raise money for their crime. activities. A special license from What accounts for this illegal the State is required, which fur- business that engages such a siz- ther proves the point: The evils of able part of our law-enforcement gambling are removed if the State efforts? The obvious answer is that supervises it and gets a share of avoiding the exorbitant tax on the proceeds. liquor yields such “profits” that There can be no doubt that some lawbreakers are drawn into the individuals have a tremendous business, much as they were dur- urge to gamble, however foolish ing the days of Prohibition. this may seem to others. If gam- The tax on liquor is designed not bling is prohibited by law, ways so much to raise revenue as to will be found .to circumvent the regulate people. It has become so law. And persons will pay a goodly high a percentage of the selling sum to wager, even though it is price of the product that a high unlawful. As a result, it is highly premium is placed on tax-avoid- profitable for “bookies” or others ance. : who handle bets to provide the ma- . chinery for betting. The potential Gambling profits are sufficiently great to at- It is not our intent here to pass tract nefarious characters who are judgment on the morality of gam- willing to risk the heavy penalties bling. The fact that gambling is of getting caught. the source of frightful tragedies Governor Rockefeller recently in some families is too well known stated that illegal gambling is now to require elaboration. Our point, big business in New York State, rather, is that much of the crime conducted by criminal syndicates associated with gambling stems which use the revenue for other or- from the government regulations ganized rackets. A special commis- surrounding the practice. sion to.investigate gambling dis- It may be inferred that the closed that one ring in central New State does not consider gambling York grossed $250 million a year, as such to be either immoral or had tie-ins in 14 states, and netted ===== PAGE 53 ===== 1960 KEEPING THE PEACE 51 a profit of 10 per cent or $25 mil- against gambling; repeal of such lion. The chairman of the commis- laws would remove much of the sion testified that “huge profits cause of crime, reduce the costs of from bookmaking led to their con- law enforcement, eliminate much trol by organized criminal groups of the prevailing corruption of who too often can be found making government officials, and greatly substantial contributions to sym- help to restore respect among citi- pathetic public officials.” This un- zens for their government. savory situation was confirmed by the Superintendent of the New Narcotics York State Police. As a source of crime in the The commission concluded with United States, the narcotics traf- suggestions for stronger laws, fic is of first rank. Innumerable ex- better-trained police, more severe perts — medical, social, religious, penalties, more efficient court pro- and economic — have written on the cedures — in other words, more subject to little avail. Most of them and better use of present methods reach the same conclusion: more of control. A more realistic apprai- laws and stricter enforcement. sal of the problem by New York The narcotics addict certainly City’s police commissioner Ken- merits the concern and pity of all, nedy suggested that the citizens of and particularly in a country where the state are understandably con- addiction is a crime. Qur purpose fused when presented with our here is to help reduce the incidence double standard with regard to of addiction and the crime asso- betting. It is legal to bet on the ciated with the traffic. horses at the track but illegal to Because much of the narcotics bet away from the track. traffic in this country is illegal, What is needed, of course, is to many of the facts can only be esti- remove the exorbitant profits mated. which draw the underworld into A Turkish farmer produces illegal gambling. Some say that if opium from poppy plants which we will just enforce our income he can grow legally. He receives tax laws, we will take care of the about $500 for ten kilograms (22 high profit motive in this business. pounds) which is worth some $16,- True, once in a while an Al Capone 000 at dockside in New York. This will be caught by this method, but amount in turn is “cut” and proc- this is hardly a realistic solution essed to make 70,000 “fixes” of for such a problem. heroin (a derivative of opium) High profits stem from the laws which will sell at around $5 each ===== PAGE 54 ===== 52 THE FREEMAN October or a total of $350,000 in the illegal it is understandable why crime market. goes with the drug traffic. It is re- Thus, the Turkish farmer re- ported that addicts need from $20 ceives less than one cent for a to $100 a day to satisfy their crav- product for which some teen-ager ings. Few employed persons could may eventually pay $5. The risk to afford this, to say nothing of the the smugglers and handlers is unemployed teen-agers and the great but the potential “profits” unemployables among the addicts. are enormous. The opium trade No wonder, then, that such has been called “the cruelest busi- crimes as stealing and prostitution ness on earth.” “The criminal rings are committed by narcotics users. are masterminded by some of the These, however, are petty crimes most malicious characters on compared with the eriminal activi- earth.” “The final result is always ties of organized rings, under- misery and devastation.” ground smugglers, and others who Contrary to the beliefs of many, market the product and compete the actual use of most narcotics for territories to serve. does not directly stimulate crime. The creation of new addicts is a In one of its most common forms, business in itself. The profits to opium is a depressant; it induces the “pusher” are so high that he sleep, allays anxiety, and relieves constantly seeks new customers. ‘pain. In countries where it can be Once a new customer is “hooked,” used legally, an addict may be per- he becomes a slave to the pusher. fectly respectable and pursue a To get money for his daily “fix,” fairly normal life. It is said that he may become a pusher himself. crimes are rarely if ever commit- And so, the vicious circle continues. ted by persons under the influence The number of addicts in the of heroin. It is the dread of with- United States is unknown, but the drawal symptoms which enslaves U. S. Bureau of Narcotics esti- one to the drug. : mates 46,000, nearly half of whom In the United States, the use of are in the New York area, and narcotics is generally illegal, and more than half of whom are col- the crimes are committed to obtain ored persons. money to get the drugs. A person is listed as an addict It is said that the use of heroin once he has run afoul of the law. is so habit-forming that an addict And, of course, many are not will risk his life to get a single caught. The New York City May- “fix.” Couple this with the rela- or’s Commission on Narcotics esti- tively high price he must pay and mated 90,000 addicts in New York ===== PAGE 55 ===== 1960 KEEPING THE PEACE 53 City alone. A president of the the treatment of addicts are a tre- Medical Society of the City of New mendous expense, to say nothing York said that 200,000 is probably of the heartbreak and anguish of no exaggeration for the number of ruined lives. addicts for the country as a whole.? A solution, rarely mentioned, is Prior to 1925, with the passage of to take the profit out of dope traf- a federal law prohibiting the im- fic. This would quickly eliminate portation and manufacture of the criminal rings of smugglers heroin in the United States, even and handlers and the “pushers” for medicinal use, heroin was who live by creating new addicts. hardly used by addicts. Now, about The disadvantages of addiction 86 per cent of those apprehended ought to be known by everyone, are heroin users. and especially young people. With The United States is said to be an educational system that reaches the best market for dope in the practically every teen-ager in the world. By contrast, France and United States, it should not be dif- Italy report little addiction, de- ficult to accomplish this. spite the fact that much of the drug traffic goes through these Price Control countries. Some might conclude Those who remember price con- that our wealth accounts for the trol and rationing during World great market here; where else War II will remember that black could persons afford $100 a day tc markets and crime accompanied support the habit? But since the them. Little of this remains today, addicts are not necessatily the but we still have rent control in wealthy, such an explanation is too some areas. The result is some simple. One must look behind this form of rationing of space along to the laws which relate to the with inadequate maintenance and traffic. servicing of the property by Much serious study has gone in- owners. to methods of treating narcotic Whenever an item is priced, by addicts. This is certainly impor- law, below the figure derived by tant. Smuggling of narcotics is willing buyers and sellers in a free given great attention by national market, there is certain to be a and international police. Thecrimes shortage of that item. In that case, associated with drug traffic and people have more than enough EE— Co. money to spend on that item to 2 Berger, Dr. Herbert. “Addiction Is ) it f th ket. S An Tlness” in The Freeman, October C!€ATr Il Irom the market. So some 1956, method of rationing must be used ===== PAGE 56 ===== 54 THE FREEMAN October to allocate the supply. If it is ra- “smart” to get away with what- tioned by tickets, there is always ever one can? the temptation to cheat or steal or It has been reported that Inter- seek favoritism from the rationing nal Revenue has paid out $3,000,- board. The amount of crime will 000 over the past five years in in- be in direct relation to the poten- former fees — to persons who “tat- tial “profits” from dealing outside tle” on persons they think have the law. lied on their returns. One man was } reported to have turned in his Tax Evasion brother because the brother re- Most persons would look on tax fused to-contribute to the support evasion as a minor crime and so it of their father. Another case in- would appear unless one could volved a young woman who paid an clearly see the ramifications and abortionist $75 for an illegal op- tragic effects extending through eration that was not effective. In time. spite, and on a hunch, she reported Historically, most American peo- her doctor to Internal Revenue and ple are law-abiding and willingly he was allegedly fined $125,000 pay their taxes, even while grum- and sent to jail. bling a bit. A sizable portion of A society which encourages our taxes are hidden in the price cheating, informing, and the like we pay for things, and if we don’t is well on the road to moral de- know, we don’t grumble. gradation. More than one-third of the in- come of most of us now goes for Politics , taxes. This affords considerable in- In the days when most govern- centive for tax-avoidance and a ment income was collected and great deal of time, effort, and spent locally, citizens were able to money is spent in figuring either keep fairly close watch over ex- legal or illegal ways to cut down penditures. Besides, the total the take. amount collected by all govern- While some may think it smart ment agencies then amounted to to cheat on taxes, the effect on less than 5 per cent of total in- that person’s character can be tre- come. Now, with governments tak- mendous. How will a child react ing more than one-third of the in- who knows his parents fudge on come — the largest share going to their income tax return? How Washington, and billions spent all much juvenile delinquency may be over the world — it is no wonder traced to a home where it is that crimes frequently involve ===== PAGE 57 ===== 1960 KEEPING THE PEACE 55 politicians and government offi- are tempted to collect unemploy- cials. The power that goes with ment benefits while on vacation the control of money in such vast and Workmen’s Compensation for amounts is a great temptation. questionable injuries. School chil- Mink coats, deep freezers, padded dren receive “free” books and other expense accounts, and the like un- equipment, and miss the lessons of doubtedly are minor items. proper care of personal property. In spite of repeated attempts to Many students take education for curb it, “patronage” continues to granted, because it is free, and grow as government gets bigger waste their own time as well as and bigger. And how could it be that of teachers and serious stu- otherwise? Government, among dents. other things, is today a huge busi- There are so many ways in ness, handing out contracts,award- which the “something for nothing” ing franchises, and filling jobs of philosophy has permeated our influence all over the world. These lives. One could hardly call it a are often rich rewards for favors major source of crime, but any- conferred. It is not surprising that thing which encourages lying and crime finds its way into such an discourages thrift and self-suffi- arrangement. ciency must certainly be listed Government has conferred on among the causes of the moral labor organizations and their lead- breakdown of our society. ers tremendous political and eco- nomic power. It would be strange Conclusion indeed if crime did not accompany Practically everyone is alarmed efforts to grasp and wield this over the increase in crime in this power, country and elsewhere. Much of it is highly organized and truly ter- Welfare rifying. The story of “How We Various types of welfare pay- Bagged the Mafia” told to Stanley ments — “something for nothing’ Frank by Milton R. Wessel, and — encourage crime in varying de- published in two issues of the grees, For example, to remain eli- Saturday Evening Post during gible for low-rent housing, a fam- July 1960, will convince the most ily may lie about its gross income. naive that organized criminal Welfare payments to unwed moth- gangs operate on a big scale, in ers encourage the birth of children deadly earnest, and are deeply en- out of wedlock and discourage trenched. thrift and self-sufficiency. Workers Whenever a crime is threatened ===== PAGE 58 ===== 56 THE FREEMAN October or committed, the usual response officers, scientists, and researchers is: “Call a Cop!” But in spite of sincerely interested in reducing more laws, more police, and heav- crime and in contributing to the ier penalties, crime seems to be on general welfare of individuals. the increase. Why? And what can Rather, the point here is that in be done about it? several important instances gov- In 1956 a Federal Narcotic Con- ernment has created its own en- trol Act imposed. heavier penalties forcement problems by passing with imprisonment up to 20 years laws which actually encourage on first offenders in dope cases. rather than decrease crime. Mr. Wessel says that this con- When government passes a vinced the Mafia that they should “thou shalt not” law and at the get out of the dope business and same time creates a situation concentrate on gambling. This where violators (if not caught) probably would serve only to shift stand to make enormous profits, the traffic from one gang to an- then an increase in crime can be other. When a noted medical doc- expected. Glaring examples in- tor reports: “Heroin addicts will clude: obtain heroin, ban or no ban,” 1. Extremely high taxes on lig- then it becomes imperative that we uor which foster bootlegging; seek another remedy. 2. Import duties, quotas, restric- It is contended here that much tions, and other barriers to for- of the increase and severity of eign goods which encourage smug- crime in this country is brought gling; about by unwise legislation which 3. Promotion and prohibition of aggravates the problem rather gambling by the same unit of gov- than alleviates it. This is not a ernment, with heavy penalties and proposal to get rid of all police- huge profits for illegal promoters; men and all government. It is 4. Taxation in such amounts and properly the function of govern- with such complexities as to place ment to defend the lives and prop- a high premium on dishonesty and erty of all citizens equally; to sup- tax-evasion; press and penalize all fraud, all 5. Qutlawing of the narcotic misrepresentation, all violence, all trade, which makes it highly prof- predatory practices; and to invoke itable for suppliers and pushers a common justice under written and expensive for users, with re- law. sultant crime, including the cor- Neither is it the purpose here to ruption of police officials. disparage honest law enforcement In general, the greater the ex- ===== PAGE 59 ===== 1960 KEEPING THE PEACE 57 pansion of government through child gets older, he may be influ- the Welfare State, the more its enced by his school, his church, citizens will rely on “something for and by other families in the com- nothing,” and the greater is the munity. It would appear that the temptation for some individuals amoral State would be the last to accomplish their objectives place one would turn for guidance through deception, stealing, and in conduct. Nevertheless, that is other forms of violence. exactly what we do in much of Individuals and families may be our crime-prevention activity. Not harmed in a great many ways. Of only does the State pass judgment course, it is foolish to gamble or to on what is right and wrong, but use narcotics. But it doesn’t nec- in some of the instances discussed, essarily follow that the State creates a situation where crime is should pass laws against such practically assured because of the foolishness. One may also be potential profits available to the harmed by overeating, by lack of lawbreakers. sleep, or in innumerable other ways, against which we have no The solution then is to remove protective laws. Not only would the temptation of very high profits such laws be ineffective, but, as for engaging in illegal business. shown in connection with gambling This means restricting govern- and the narcotic trade, the laws ment to its proper function of pro- themselves set the stage for crime tecting life and property and in- which may be far worse than the suring equal justice under law for practice that is forbidden. all individuals. It means the return As a rule, no others are more of moral problems to individuals seriously and sincerely interested and families, or to other agencies in the welfare of children than are of society like the church and the their parents. From the very be- school, where these problems can ginning, they try to instruct the be handled in an intelligent man- children in proper conduct. As a ner. > To ARGUE against any breach of liberty from the ill use that may be made of it, is to argue against liberty itself, since all is capa- ble of being abused. ===== PAGE 60 ===== GREY LESLIE Monkey Business of the cheese, first from one piece and then from the other, until, eventually, there were only two small pieces remaining. “What is left,” said the monkey, as he popped them into his mouth, Once upon a time, as an old ‘is just enough to pay my fee.” Arabian legend has it, there were If the present rate of govern- two cats who could not agree on a ment taxation is allowed to con- fair division of a chunk of tasty tinue and grow, careful observers cheese. After a lot of argument, can see a direct parallel between one said: “Let’s go to the all-wise the record of taxation and this monkey and let him divide our ancient parable of the trusting cheese fairly.” cats, the greedy monkey, and the So, they went to the monkey and tasty cheese. agreed to abide by his judicial de- If the government is to rule on cision. The monkey broke the the disposition of the earnings of cheese into two parts and put the individuals and industry, by tak- pieces on his judicial scales. ing ‘bite after bite out of the He found that one piece was shares of both, initiative will be slightly heavier than the other, so stifled, industrial growth will be he nibbled a piece of it and put it seriously impeded, and the again on his scale. He then found strength of our vaunted free en- that it was lighter than the other, terprise system will be seriously so he shrewdly bit off a piece of threatened. the other, only to find that there Unless Americans become alert was still an imbalance. and articulate about the socialistic While the two anxious cats trends of our government, we shall watched this judicial performance, find ourselves in the position of the monkey kept biting off pieces the two cats in the legend, when —-— the monkey decides: “What's left Mr. Leslie is a free-lance reviewer and jour- . +s i) nalist from Washington, D. C. is too small to divide. LZ 58 ===== PAGE 61 ===== A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN WHAT YOU SHOULD KNOW ABOUT INFLATION For YEARS Henry Hazlitt, emulat- supply (or, in modern usage, of ing the Dutch boy of the fable, has paper and bank credit). The in- been trying to plug the ever-widen- crease in the money supply is what ing hole in the dike that has been causes a rise in prices and in wages holding back the waters of infla- as the extra cash in pockets and tion. He has not only had to thrust bank accounts provokes a spirited a finger into the hole; he has, as is bidding for existing goods and evident from his What You Should services. The idea that inflation Know About Inflation (D. Van is a result of a “cost-push” is un- Nostrand, 151 pages, $3.50), felt sound, for there can be no cost- compelled to get into the hole vir- push if the credit does not exist tually up to his neck. to support it. A rise in wages or in What You Should Know About prices without an antecedent or Inflation is good, sober stuff, much supporting increase in the money of it as incontrovertible as New- supply would simply serve to cut ton’s Law of Gravity. Mr. Hazlitt off business and to provoke un- is strong on precise definitions, but employment. when a definition won’t do by it- Mr. Hazlitt presents this as self he knows how to assemble sta- theory and as logic. But, lest the tistics in the best modern manner theory and logic be suspect, he also to show the relationships and includes an eye-opening table, In operational characteristics which 1939 our money supply (floating make a distinction pertinent. cash and bank credit) amounted to Dogmatically, he maintains that $64.7 billion; in 1959 this figure inflation is due to one thing and had jumped to $251.6 billion — an one thing alone: it results from an increase of 289 per cent. During undue expansion of the money the same twenty-year period there 59 ===== PAGE 62 ===== 60 THE FREEMAN October was a wholesale price of 138 per tial increase in employment, wages, cent. The reason why the price rise and prices. Predictions that there didn’t gallop out of sight was due would be eight million unemployed to the ability of the American in- if the federal government stopped dustrialist and businessman to ex- “supporting” the economy by pand production and to make tech- spending at wartime levels simply nological innovations. The rate of failed to materialize. In the light industrial production during the of what has happened to produc- two decades of our inflation tripled tion in periods of contraction in as the money supply quadrupled. federal outlays, what becomes of The difference between the rates the Seymour Harris theory that of expansion is what accounts for inflation is necessary to spur a the price rise. lagging economy ? . . To make the question even more Does Inflation Increase Production? relevant, Mr. Hazlitt reminds us Mr. Hazlitt is quite aware that — in another statistical display — Professor Seymour Harris, among that the inflationary pump-prim- others, thinks the inflation caused ing of the nineteen thirties failed the increase in production, and utterly to mop up the huge pools was therefore a cheap price to of unemployment. One reason why pay for a more fruitful economic ‘easy money” fails to bail out an system. Since it is statistically economy is that businessmen, in demonstrable that both the infla- times of inflation, have to borrow tion and the increased productivity more money to sustain the same occurred within the same time volume of business that they are span, there might be reason to doing already. The dollar figures think Harris has logic on his side. attached to goods .and services But some of Mr. Hazlitt’s tables change, but the realities underly- would tend to dispute the point. ing the figures may not jump suf- In 1944 the federal government ficiently to give the economy the fed $95 billion into the economy needed spur. for purposes generally related to fighting the war. The inflation rep- Some Fallacies Exploded resented by federal borrowing cer- Having established the broad tainly “caused” the war production. outlines of his primer, Mr. Hazlitt But in 1947, when the federal gov- turns to some specific fallacies of ernment was spending only $39 bil- inflationary thinkers. First, there lion — a drop of $56 billion within is the theory, advocated by J. Ken- three years — there was a substan- neth Galbraith, that the cost-push ===== PAGE 63 ===== 1960 WHAT YOU SHOULD KNOW ABOUT INFLATION 61 troubles of an inflationary period talked in terms of a controlled 2 should be attacked by “selective” or 3 per cent price expansion dur- price fixing in industries like steel ing a given year. But Mr. Hazlitt and automobiles. But Mr. Hazlitt notes that a promised 3 per cent observes that selective price and rise would cause such spirited bid- wage controls add to shortages of ding for goods and services that the very things whose production the inflation would soon outpace the government wishes to encour- the intentions of the controllers. age. Profit margins in controlled Labor unions would add 3 per cent sectors lag behind the margins in to the demands they already had uncontrolled “luxury” production. in mind; industrialists, racing to The result is a distortion of invest- beat the price rise, would over- ment. To get things in hand again, stock on inventories. the government is forced to extend In other words, if you wish suc- its areas of control — and we are cessfully to inflate by a small de- on our way to a more or less total- gree, you must hide your intention ly managed economy. — i.e., you must lie to the people. Well, why not? Again Mr. Haz- Thus Sir Stafford Cripps denied litt has the appropriate answer: at least a dozen times in 1948 and In an economy in which there are 1949 that England intended to de- some 9 million different prices, and value the pound. He had to do this some 40 trillion interrelationships to forestall “sure thing” gambling of prices, total management would in the pound. When the British lead to fearful messes. Nobody government finally set a price for knows enough to set 9 million dif- the pound, it made Sir Stafford a ferent prices, or even a small pro- twelve-times liar. But Sir Staf- portion thereof. And even if it ford had only done what any states- were possible to “administer” the man bent on “controlling” the totality of an economy with eco- price level must do. nomic wisdom, the price in compul- sion would lead to a serious de- Gold Standard — Gold Morality terioration in the moral character To protect the people against the of the citizens. fraudulent expropriations caused Another specific fallacy which by inflation, Mr. Hazlitt would like Mr. Hazlitt attacks is the theory, to see a return to the gold stand- set forth on frequent occasions by ard, which used to act as an auto- the late Sumner Slichter of Har- matic check against the vote-buy- vard, that a little bit of inflation ing proclivities of politicians. is all right. Professor Slichter Much of Mr. Hazlitt’s discussion of ===== PAGE 64 ===== 62 THE FREEMAN October ways and means of resuming specie lic morality, it is difficult to believe payments for paper money is tech- that we are likely to return to the nical. But the best part of it is gold standard in the forseeable moral; indeed, the argument sug- future. But that does not mean gests that if one is to have a gold that Mr. Hazlitt is wrong in either standard, one must have a gold his economics or his morality. = morality to go with it. To maintain a gold standard even for the short ) A SHORT HISTORY OF MONEY run requires, first of all, that the By George Winder (London: conversion rate be set at the natu- Newman Neame Ltd. and the In- ral market level. But to keep it go- stitute of Economic Affairs. 188 ing in relative perpetuity demands ~~ PP- 15 shillings.) Available from congruous policies of a fundamen- 1he Foundation for Economic Ed- tally moral nature. The government XN Sd 5 Lrving ton-on-Hudson, must cease to regard the people's Re . p20! ’ W. H. Pet income as its own to be dribbled eviewed by WW. 4. reterson back to groups in conformancewith TO THE LATE Irving Fisher of Yale political pressures. It must return it was for great numbers of the to budgets that remain reasonably people an “illusion.” To Ben in balance. There must be lower Franklin of Poor Richard's Alma- taxes, less governmental competi- 7nac it was “time.” And to St. Paul tion with the exercise of private its love was “the root of all evil.” voluntary social power, and an “It” is money, which most of us end to the use of the banking sys- work hard to come by. Money — tem to buy and peg U.S. bonds at a intimate, necessary, ubiquitous, fixed rate. The legal reserve re- Yet so little understood, even, per- quirements of banks must be in- mit me to say, by bankers and creased from 25 per cent to, say, 40 economists. Consult the textbooks per cent, to make inflationary bor- on the subject, for example, and rowing impossible, and the Federal you'll find the term somewhat cir- Reserve must not use the redis- cuitously defined usually in terms count rate to promote an artificial of functions. Money, we're told, is easy money atmosphere. All of this a medium of exchange, a standard would necessarily depend on a re- of value, a store of value, and a vival of integrity that would make standard for deferred payments. any individual or group ashamed Money is, in other words, what of “gimme” raids on the federal money does. Consult the textbooks treasury. on inflation and the circumlocution Given present standards of pub- gets even more roundabout. ===== PAGE 65 ===== 1960 OTHER BOOKS 63 But —hang it all— what is oursis a money economy. Money is money? What is inflation? What the lifeblood of our complicated forces create money? What forces system of exchanges. It makes — in terms of inflation — destroy buying and selling possible. It per- money? Is it true that banks can mits division of labor while bind- manufacture money out of thin ing society together. It fosters in- air? If so, how? And, from the ternational trade. long-run viewpoint of society, how Yet money is a two-edged sword. good is bank money? Can inflation While it can create, it also can be controlled? Better, can inflation destroy. Inflation is money gone be stopped? wrong, a once-healthy tissue Some very intelligent answers turned, at its worst, into a fester- can be found in this brief work on ing cancer. And it is to Mr. money by George Winder, an Eng- Winder’s credit that he shows how lish economist and associate of deposit money — i.e. bank credit — London’s Institute of Economic especially when hooked to govern- Affairs. Mr. Winder’s approach is refreshingly straightforward, sound, and not evasive or esoteric. His grasp of the subject is thor- JUST PUBLISHED Mia of history is What You Should This is not to say the Winder Know About book is on a par with Walter Bage- n a I on hot’s Lombard Street (1873) or brillianily cites the Causes for the Ludwig von Mises’ The Theory of sound, constructive anti-inflation- Money and Credit (1912). 1t is pos- 217 Policies t0 protect the Purchas- sible to quibble with some of Mr. By HENRY HAZLITT $3.50 Winder’s discussions — for ex- ope ample, with his discussion of the phe Critics of quantity theory of money. Still, for E y i n what Mr. Winder sets out to do, conomics his book is a contribution, and I A Comprehensive 2nalysis of hope an American publisher will outstanding economists as JEAN bring out an edition here. WIG VON MISES, and ARTHUR When Mr. Winder sets out to BURNS. Edited by HENRY describe the role of money in our HAZLITT your bookstore $7.00 society, by way of illustration, he VAN NOSTRAND succeeds admirably. He sees that ===== PAGE 66 ===== 64 THE FREEMAN October ment deficit finance, becomes an basis of society than to debauch enormous engine of inflation. the currency. The process engages The author scores again when he all the hidden forces of economic shows how inflation contributes to law on the side of destruction, and the business cycle, exaggerating does it in a manner which not one profit margins and producing man in a million is able to diag- warpages between prices and costs. nose.” Perhaps the most significant item of cost is wages. Mr. Winder says p THE MOVEMENT OF WORLD rigid and excessive wage rates REVOLUTION lead to unemployment, This unem- By Christopher Dawson. Sheed & ployment, in turn, induces govern- Ward, New York. 179 pp. $3.00 ments to wash out the effects of DAWSON has explored our Euro- uneconomical wage rates with in- pean heritage in a dozen or so vol- flation. This is not infrequently wumes.. Here, he issues a call to done under the Keynesian aegis of action: “Return to the tradition “spending ourselves into prosper- on which Europe was founded and ity.” set about the immense task of the The author takes to task those restoration of Christian culture.” who say that deficit finance and For although Asiatic and African consequent inflation is inevitable nations may be led by anti-West- in financing war. Nonsense, says erners, this leadership undermines Mr. Winder: There is no reason the traditional Oriental cultures in why a government should not fight. favor of Western innovations. a war without inflation. Even Na- What emerges is a cosmopolitan poleon managed to carry out his society which is Western, at least vast military adventures without in its devotion to such items as resorting to the printing press. science, technology, mass educa- His money was gold, and he stuck tion, and mass democracy. The real to it. To be sure, this called for threat to the West, therefore, is very steep taxation. But it can be not external; it is the threat of in- done. ternal disintegration. This will Sound money is the basis of a continue until our culture regains sound civilization, says George contact with the two great tradi- Winder. Or as Graham Hutton tions, Christianity and humanism, quotes Keynes (the saner Keynes which shaped it during the cen- of 1919) in the foreword: turies between the fall of Rome “There is no subtler, nor surer, and the dawn of the modern pe- means of overturning the existing riod. E. A. O. ===== PAGE 67 ===== | Freeman b7 2 /{] Binders “Eternal vigilance is the price of liberty” — and $2.25 is the price for this handy cloth-covered 12-blade binder and permanent file for your copies of THE FREEMAN. Back issues of THE FREEMAN are available from January 1956 to date, each year indexed in the December issue — 768 pages a year of the latest expression of timeless ideas on liberty. 12 issues, with binder, $6.25, postpaid! Handy for reference, attractive for your library, ideal for gifts. ORDER FROM: fy THE FOUNDATION FOR ECONOMIC EDUCATION FEE/ IRVINGTON-ON-HUDSON, NEW YORK ===== PAGE 68 ===== w ~~