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

THE

[reed

MARCH 1961

IDEAS ON LIBERTY

Armaments and Our Prosperity . . . . Edmund A. Opitz 3
Interest Rate Control . . . . . . . H.P.B. Jenkins 9
The Lessons of Lost Week-Ends . . . . Melvin D. Barger 10
Foreign Spokesmen for Freedom . . . . Ludwig von Mises 14
Conscience of the Majority. . . . . . Leonard E. Read 16
Majority Rule. . . . . . . . . . FrankB. Keith 30

What Education Should Business Support? . Merryle Stanley Rukeyser 31

Liberals Versus Statist “Liberals” . . . William Henry Chamberlin 38
Selected Facts in the British

Nationalized Coal Industry. . . . . George Winder 44
The Changing Iron Ore Industry . . . . Robert M. Lloyd 51

Book Reviews:
A Future Not Worth Having . . . . . John Chamberlain 58
Other Books . .. . . . . . . . . 62

THE FOUNDATION
FOR ECONOMIC EDUCATION, INC.

Irvington-on-Hudson, New York



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

Olen omy aeons mith

Coast Federal Savings and Loan Association

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 month.

ASSETS OF OVER $449,000,000.00 with over $99,000,000.00 in
cash and Government Bonds and Reserves of over $32,700,000.00 as of
December 31, 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

e
JOt CRAIL, PRESIDENT e

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

— — — OT — —— —— SR EE S—  —— SE WE S—  — —— —  S— — — — — — V— —— — — — — — —— — —

Coast Federal Savings, Department HY
855 South Hill St. at 9th (Please check-mark as desired.)
los Angeles 14, Calif. " }

1. [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 3 =====

The Law

By FREDERIC BASTIAT (1801-1850)

“No society can exist unless the laws
are respected to a certain degree.
The safest way to make laws respected
is to make them respectable. When law and
morality contradict each other,
the citizen has the cruel alternative
of either losing his moral sense

or losing his respect for the law.”

For DEAN RUSSELL’s 70-page modern translation of Bastiat's

classic explanation of limited government, send coupon below.
65¢ PAPER, $1.25 CLOTH 16-page Study Guide, 25¢

| THE FOUNDATION FOR EcoNomiIc EDUCATION
| IRVINGTON-ON-HUDSON, NEW YORK

! Please send me Bastiat's THE LAW.

| MY NAME —_ copies paper @ 65¢

! STREET copies cloth @ $1.25

| — Study Guides @ 25¢

| city AND zONE
| AMOUNT ENCLOSED $____ _

| STATE PLEASE BILL ME (|


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

THE . . '

Téemdl A MONTHLY JOURNAL OF IDEAS ON LIBERTY

MARCH 1961 - © Vol 11, No. 3

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, 1961, 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 Changing
Iron Ore Industry.”
FE

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


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

EDMUND ‘A. OPITZ

Two FEARS fill us with dread. The whose first term is a natural de-
first fear is that war will break sire for well-being, but whose last
out, killing millions of people, de- term cancels out everything which
stroying .billions worth of prop- precedes it. This hardly sounds
erty, and wrecking what’s left of like progress, but if —as many
the institutions of a once free so- people believe — the vitality of the
ciety. The second fear is that civilian economy is so dependent
peace will break-out and bring our on military spending that a de-
vaunted material prosperity crash- pression looms if this spending
ing to earth. There is an untenable stops, this is-the logic of events.
assumption in this fear of peace, Let us examine these two fears
but if it be accepted, the dilemma which have so many of us walking
is a cruel one. The desire for ma- a razor’s edge, held in balance by
terial well-being is legitimate, but the terrors on either side.

the dilemma spells out into some- We are in the Cold War, we are
thing like the following three told, and the Cold War is not war
stages: Material well-being de- in the old sense. War used to be a
pends on an arms race; an arms thing of bombs dropping, tanks
race is likely to eventuate in a hot maneuvering, and infantry slug-
war; a hot war is a device'guaran- ging it out in the mud; but war is
teed to end prosperity and threat- now an engagement in another di-
en very survival. Here is a series mension — the psychological. The
The Reverend Mr. Opitz is a member of the aim of war, then and now, is the

staff of the Foundation for Economic Educa- . .
tion. same — to impose our will on the

3


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

4 THE FREEMAN March

enemy, or at least to resist the animal survival may become the
imposition of his will on our own highest good.

— but the means have changed.

Formerly, we damaged his prop- Many Are Mistaken

erty or the bodies of his soldiers The fear that war may break
until the will to resist was broken; out appears to be well grounded.
but now we are done with such What about the fear that peace
crudities, having discovered subtle may break out?

ways of getting at the will directly The fear that peace will have a
to bend or break it. In the old days, disastrous effect on the civilian
a victor nation or coalition was one economy is not a delusion of the
which possessed a preponderance unlettered. This fear, on the con-
of military might, as demon- trary, afflicts and is fostered by
strated in the field. On the eve of the sophisticated who have un-
a war the question of which na- learned the capacity for taking a
tion actually had such a prepon- common sense view of things.
derance might be a matter of de- Turn, for example, to an article in
bate, to be settled only by fighting a recent issue of the Bulletin of
it out. But the matter of prepon- the Atomic Scientists, a journalis-
derance is now hardly ever posed. tic outlet for writers who stress
“Preponderance” has been over- the social responsibilities of scien-
come by “sufficiency.” If several tists. The article is entitled “The
nations each possess a sufficiency Economics of Disarmament,” and
of military might — armament opens with a question: “Can the
enough to clobber rival nations no U.S. peacetime economy maintain
matter who strikes the first blow its high prosperity without heavy
— the possession of a preponder- governmental spending in the
ance confers only the most dubious arms economy?’ To which, the
of advantages. The apparatus of author returns a gloomy answer.
civilization reduced to rubble, the “So long as armament is not used,”
victor nation stands astride a bone he says, “it serves its economic
yard. The desire for mere physical purpose in an ideal way. The in-
survival is a primordial instinct come created in the development
which, in civilized man, may some- and production of arms represents
times conflict with certain values a clear net gain to the total pur-
which take precedence over it. But chasing power available to sustain
in the aftermath of the next war the consumer economy.”

the civilized values may well be Good Keynesian doctrine so far,
the first casualties so that mere but now the catch: An arms race,


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

1961 ARMAMENTS AND OUR PROSPERITY 5

the author points out, heads na-
tions toward a disastrous military
conflict which must be avoided. It
is equally necessary to fend off the
economic collapse which threatens
if the arms race slows. What is
"needed, says the author, is an
“economic equivalent of arma-
ment” — some prescription which
promises to sustain present levels
of civilian prosperity without
theatening to bring on World War
III. The author's. remedy, in-
creased government spending, has
a familiar ring: “No stretching of
the terms of this elementary dis-
course is needed to show that pub-
lic works and public services pro-
vide the economic equivalent of
armament.”

Some industries are totally com-
mitted to military production
while others are committed in
part. The “prosperity” of these
segments of society is irrevocably
yoked to military spending. It is
easy to imagine a factory for the
making of an essential weapon,
the Gismo, being erected in 1942
in the sleepy little village of Rural-
area. The plant now employs 5,000
people, three times the number of
citizens who responded to the
town’s 1940 census. The plant pay-
roll now sustains those who work
there plus bankers, butchers,
teachers, ministers, and one inte-
rior decorator. Peace breaks out,
military spending stops, and it is

not hard to imagine what happens
to Ruralarea. Admittedly, in this
and similar situations, there will
be hardships and some painful but
necessary readjustments. But Ru-
ralarea is not the United States,
and it is not permissible to gen-
eralize its problems as if they
afflicted a whole nation. The argu-
ment we are considering is that
the prosperity of the society as a
whole depends on national spend-
ing for arms.

Production Comes First

This argument is a modern ver-
sion of the fable of the emperor’s
new clothes. It contains a glaring
fallacy which is easily grasped,
but this fallacy in turn rests upon
a faulty premise of a more subtle
nature. The fallacy first: Prosper-
ity is equivalent to an abundance
of the things people consume and
enjoy — houses, clothing, food, au-
tomobiles, recreation, gadgets, and
so on. These items come into exist-
ence as the result of economic pro-

duction. A few individuals here’

and there may live well on stolen
goods, but society is provisioned
in only one way — by human effort,
augmented by tools, applied to
raw materials. Thus, and in no
other way, are produced the goods
and services we now have in abun-
dance and which constitute our
prosperity. Our prosperity would
cease if we stopped producing, and


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

6 THE FREEMAN March

we can’t produce without working. lower than it might otherwise be
Some 61 million people are pres- by the amount of civilian goods
ently at work to produce the which the 6 million would produce
things which make up our pros- if they weren't engaged in produec-
perity. ing arms. If the withdrawal of six
Alongside this abundance of million is the cause of the high
consumer goods which constitute level of civilian prosperity, why
the civilian economy are jet fight- not withdraw 60 million and have
ers, aircraft carriers, tanks, rock- a real boom? Thus, we would de-
ets, and the like. There is no civil- feat our old enemy Work, that
ian market for these items; Uncle built-in curse of every economic
Sam and his satellites are the only system of the past.?
customers. Even though you and The 6 million now engaged in
I are not in the market for mili- armament production are not sim-
tary hardware, some six million ply off to one side, a neutral factor.
of our people are engaged in pro- They are consumers of civilian
ducing it according to the same goods without producing any
old economic equation —by the ap- themselves or even producing
plication of human effort and tools things which might be exchanged
to raw materials. While thus en- for them. Millions of producers of
gaged they cannot produce goods food, clothing, housing, and other
for their own consumption. They services work to provide these
must be supported, in this respect, necessities for the 6 million en-
by the rest of society. Further- gaged in armament production.
more, there are large quantities Far from thé arms race sustain-
of machines, tools, and other capi- ing the civilian economy, the re-
tal tied up in defense projects verse is true; it is the incredible
which otherwise might be em- productivity of the civilian econ-
ployed to make things for con- ___ : :
sumers. °° 1 This is not to deny the need for mili-
Putting these two segments to- tary hardware nor to minimize the im-
gether, it is obvious that the total portance of. our defense establishment.
oo. . Perhaps we should divert twice as much
active labor force in the country pp anpower and capital for these purposes,
is roughly 67 million people. Is it but that is another argument. The only
that 67 million workers — other purposes are not available for civilian
things- being equal — will produce Production and diminish the latter by
J : that much. Every dollar spent for guns is
more than 61 million? Therefore, a dollar less that might be spent for
the present level of prosperity is bread, housing, travel, and the like,


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

1961 ARMAMENTS AND OUR PROSPERITY 1

omy which makes it possible to ence may be correct and still con-
spend our substance so prodigally ceal a fallacy if the inference is
in military hardware! Not so drawn from an unsound premise.
many centuries ago, in subsistence The unsound premise in the pres-
days, nations called off their wars ent instance is based upon the sup-
so the folks could get in the har- position that the late Lord Keynes
vest. Our present mastery of eco- had refuted Say’s Law — a suppo-
nomic problems is so nearly com- sition shared by the master him-
plete that the productive sector of self. Keynesians acknowledge this
our economy can maintain a high as a critical question and admit
level of civilian prosperity even that if the validity of Say’s Law
though it is forced to support a be conceded much of Keynes’ theo-
swollen governmental structure ry becomes untenable. So let's
along with its bureaucracies and argue this fallacy out in terms of
its military establishments. Pros- Say’s Law — although a matter so
perity supports the arms race, not complex can hardly be thrashed

vice versa! out in any space short of a book
: or a series of books.
Despite Keynes, the “Law of Crudely put, Say’s Law of Mar-
Markets” Stands kets — named after the French
When things are put in straight- economist who advanced it in 1803
forward economic terms without — holds that aggregate supply cre-

introducing the complicating fac- ates aggregate demand, that pur-
tor of money, the glaring fallacy chasing power grows out of pro-
of the thesis that Americans are duction. Benjamin M. Anderson in
prosperous because their govern- his Economics and the Public Wel-
ment is spending so much on arm- fare opens his chapter 60, “Digres-
aments is obvious. It is equally sion on Keynes,” with this descrip-
obvious that such an inversion of tion of what he calls “the equilib-
the facts would hardly find general rium doctrine”:

acceptance if men based their con- “The twentieth century world
clusions on primary observations consumes vastly more than the
of the facts. At this level fallacies eighteenth century world because
are relatively easy to detect. The it produces vastly more. Supply of
detection of fallacies is more diffi- wheat gives rise to demand for
cult if the discussion is conducted automobiles, silks, shoes, cotton
at the secondary level of infer- goods, and other things that the
ences. An inference may be incor- wheat producer wants. Supply of
rect, and that’s that. But an infer- shoes gives rise to demand for


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

8 THE FREEMAN March

wheat, for silks, for automobiles, liberty, and justice.” This is the
and for other things that the shoe system of liberty, one of whose
producer wants. Supply and de- facets is the free market. Econ-
mand in the aggregate are thus omics, ostensibly the study of
not merely equal, but they are market operations, is really con-
identical, since every commodity cerned with the stewardship of
may be looked upon either as sup- the earth’s scarce goods, such as
ply of its own kind or as demand human energy, time, material re-
for other things. But this doctrine sources, and natural forces. These
is subject to the great qualifica- scarce goods are our natural birth-
tion that the proportions must be right. Use them wisely, as natural
right; that there must be equilib- piety dictates — that is, provi-
rium.” dently and economically — and hu-
Keynes’ alleged success in dis- man well-being is the result. Turn
posing of Say’s Law consisted in a blind eye to them and one con-
ignoring the qualification; he “re- sequence is the promulgation of
futed” a proposition which had such nonsense as that the arms
never been seriously advanced. race which makes us billions of
“Say’s Law of Markets,” writes dollars poorer is actually the cause
Henry Hazlitt, “is based on the of our prosperity! Men act upon
assumption that a proper equi- their beliefs, even when beliefs
librium exists among different are fallacious, and acting upon
kinds of production, and among this one we careen ominously
prices of different products and toward the Total State and war.
services. And it of course assumes A tiny leak in the dike, if not
proper relationships between plugged, can open up and let the
prices and costs, between prices flood through. What begins as a
and wage-rates. It assumes the ex- simple economic fallacy can end
istence of competition and free with a bang or a whimper. a
and fluid markets by which these ——mm—
proportions, price relations, and The fallacies of John Maynard

Nilyed : Keynes have been fully orchestrated
other equilibria will be brought and demolished in a recent book by
about. Henry Hazlitt, The Failure of the

Say’s Law is not regarded as a “New Economics” (D. Van Nostrand,
central doctrine of classical econ- 498 PP., $7.50). More recently he has
. ] ; compiled an anthology containing
omics, but by disposing of a fal- Say’s original statement together
lacy it paved the way for the es- with critical essays on Keynesian eco-

. . nomics, The Critics of Keynesian
tablishment of what Adam Smith pou mics (D. Van Nostrand, 427

called “the liberal plan of equality, pp., $7.00).


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

INTEREST
RATE
CONTROL

or — THE COST OF EASY MONEY

It was a day in early spring
At story-telling time.
Old Kaspar chewed a dead cigar
And sipped his rum-and-lime,
While Peterkin and Wilhelmine
Looked at the television screen.

They saw a giant printing press
Behind a guarded door
And heaps of crispy dollar bills
Upon the marble floor,
Where men were piling them in stacks
Or stuffing them in plastic sacks.

“Is that a counterfeiting gang?”
The little children cried.
“It’s called the Interest Rate Control,”
Old Kaspar soon replied.
“That printing press, the Planners say,
Will drive the interest rates away.”

“What sort of harm,” asked Wilhelmine,
“Can rates of interest do?”

“It’s said they strangle business growth,
And strain the budget, too.

They always grow and multiply

Where cash is kept in tight supply.”

“There was a time,” Old Kaspar said,
“When loans on easy terms

Were all reserved for prudent folks
Or wisely managed firms.

But now a loan is guaranteed

To anyone who shows a need.”

“It seems a very helpful change,”
Breathed little Wilhelmine.
“One bad effect,” Old Kaspar sighed,
“Was wholly unforeseen.

Inflated prices cost us more
Than interest burdens did before.”

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

9


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

The Lessongp: ’ “ ve
of Lost Weekends sa

MELVIN D. BARGER

IT’S FAIRLY AXIOMATIC nowadays don’t want to step over cliffs, walk
that alcoholics cannot get well un- in front of automobiles, or grab
less they fully accept the fact that high tension wires. These would
recovery hinges on total abstin- be exciting experiences, momen-
ence. It is possible, of course, that tarily, but survival seems much
: future break-throughs in drug more preferable.
and therapy techniques may alter Recovery from this distressing
this flat rule, But at the present problem doesn’t make a person
time few responsible people who immune to future folly of various
know anything about it would kinds, but it-does give one a pro-
dare dispute this point'— for the tective sort of wariness. Like a
alcoholic, one drink is always too once-scalded cat who now .fears
many. anything resembling a teakettle, I
As a recovered alcoholic with search everything for hidden
almost eleven years’ continuous booby traps. And it’s a long jump,
sobriety, I’ve made a lot of head- but I've even been able to relate
way since I gave up the vain hope the lessons of my own “boom-and-
that I might be able to “handle a bust” experiences to such matters
little beer now and then.” Though as monetary inflation, deficit
an occasional drink seems to be a spending, foreign aid, and kindred
delightful beverage to the next ideas. I did not arbitrarily do
man, it’s poison for me, and I this; the similarities just seemed
don’t take it, I want to stay away to be immediately self-evident.
from it for the same reasons I Here they are. By a stretch of
Mr. Barger is Editor of The Flying A, company the imagination, they might even

f the A Corporation at Jack- . .
ion. Aeroquip Corporation at Jack- 4, o1jad “ideas on liberty.”

10


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

1961 THE LESSONS OF LOST WEEKENDS 11

Monetary Inflation — It doesn’t Reserve. So his deficit money is of
even take too much imagination to a cruder nature — usually 1.0.U.’s
realize that here’s the almost per- plastered in the various bars
fect parallel. Most alcoholics start where he’s still able to get credit.
out drinking with the idea of This “fiat money” causes no end
“taking only a few.” Past dis- of trouble. For a short-term gain,
asters and the grim prospect of he takes on long-term liabilities.
sickness and hang-over don’t seem Often, these debts are never paid
to be an effective deterrent. Now, back.
today we could, if we cared to :
look, see the long-run result of Foreign Aid — Social workers
monetary inflation; we could see who have experience in the field
that runaway inflation, which al- will certainly agree that ‘“econ-
ways results in ruin, gets its start omic evangelism’ is almost a total
when we accept the first seem- failure in rehabilitating alcohol-
ingly harmless doses of it. So far, ics. It is easy to be misled on this
our national inflation has been on point. Many alcoholics have mon-
a fairly moderate scale and we're strous financial problems, and this
confident that we can control it. causes them no end of worry and
But we may be hooked already. grief. But money problems are not
Many of us have a vested interest the cause of drinking, nor will
in inflation; we denounce it pub- money stop it. Real recovery be-
licly, but enjoy it privately. We gins when the alcoholic changes
fail completely to profit by the his thinking. After that, he will
wretched experiences of other most likely earn his own way.
countries who have gone the full What does this have to do with
inflation route. foreign aid? Well, it may be that

: we're trying to solve, with money,

Deficit Spending — There are problems which lie much deeper
few alcoholics now alive who — problems which stem from basic
could not list the perils of deficit attitudes and philosophies of liv-
spending. Governments do it by ing. We may even be doing much
issuing more money, ‘savings harm without realizing it. We
bonds, or creating bank deposits have vastly overrated the power of
with notes. The alcoholic doesn’t money, and underestimated the
have access to the printing power of individual responsibility.
presses at the federal mints, and Certain ingredients must be pres-
he’s usually not able to swing ent before economic growth can
much influence with the Federal occur. Are we sure that we are not


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

12 THE FREEMAN March

asking other countries to succeed Ilunchroom-size milk cartons are
in spite of themselves, and in spite smaller, and much furniture has
of governments that stamp out been cheapened where it doesn’t
every promising bud of economic show. We still get only what we

growth? pay for when the free market op-
erates.
Hidden Inflation — I learned
about this from Japanese boot- Wage and Price Controls — 1

leggers in late 1945. One of my once heard a fantastic tale about
first happy discoveries in occupied a very affluent alcoholic who hired
Japan was the availability of bodyguards to keep him from tak-
“sake,” the country’s excellent rice ing a drink. This ‘“save-me-from-
wine. The Japanese drink it in an myself” experiment soon failed,
almost ritualistic manner, often because the bodyguards could not
heating it in small vaselike con- keep the man from doing some-
tainers. Ignoring local custom, I thing he really wanted to do.
guzzled it by the jugful. One Many forms of government con-
thing did puzzle me: on some days, trol seem to be along the same
I could demolish with ease the order. The very people who advo-
contents of three jugs. On other cate wage and price controls are
days, even one jug placed me high likely to be the ones who also
on a cloud over Mt. Fujiyama. cheat on their own procedure.
Later I learned that an alcoholic They are trying to enlist body-
tends to obtain an amazingly con- guards to keep themselves and
stant amount of actual alcohol per others from “sinning.” This point
spree. Hence, the three-jug days gained, they then work with equal
didn’t indicate a greater capacity zeal to outwit the bodyguards!
for alcohol; they only meant that

the bootleggers had been espe- Subsidies and Taxation — “Set-
cially bold in “watering theirstock.” ting up one on the house” has
It was simply the working-out of long been established as congenial
natural economic laws, and in this barroom etiquette in states where
case the seller chose to deceive it is not against the law. It is pos-
the customer rather than to pass sible that few beneficiaries of this
along his own costs through high- occasional largess ever fully real-
er prices. Since then, I've seen ize that they, the customers, ac-
“hidden inflation” at work in our tually pay for this generosity.
own consumer products field; 5- They do not realize that the
cent candy bars have shrunk, “house” could not hand out free


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

1961 THE LESSONS OF LOST WEEKENDS 13

drinks unless it had received rev- out just what it is that’s hurting
enues from themselves or previous us and do something about it.
customers. Toward the end of my It would, of course, be a costly
mottled career with the bottle, I lesson — but it would be cheap at
was beginning to recognize the thrice the price if it taught us
“house’” favors for what they how to establish our economy on
really were: subsidized handouts. foundations of rock instead of
I don’t resent the custom, but I sand. The real danger would not
am at war with the notion that be in the collapse; it would be in a
people, collectively, can receive blindly stubborn refusal to accept
anything that they don’t pay for the truth about it, and to realize
in the first place. the nature of the errors that pro-
duced it.

The Threat of Economic Col-
lapse — There seems to be a lot of Blame the Sellers — Lately I've
nonsense in the air nowadays read several books which indict
about our depression-proof econ- the marketing approach of our
omy, and its various “automatic economy, blaming almost every-
stabilizers” such as unemployment thing from juvenile delinquency to
insurance and wage scales. It mental breakdowns on the nation’s
sounds to me a lot like schemes advertisers and marketers. The
for going on a binge without suf- arguments seem to imply that self-
fering the effects of a hang-over. ish, irresponsible interests are
Competent economic historians causing us to do things we don’t
warn us that economic collapses want to do. We should harness
inevitably follow inflationary these oily rogues before they've
booms (or binges). The resulting destroyed the last remnants of our
collapse is nothing but Nature's social values.
way of warning us that we were This is nonsense. It’s simply a
doing things the wrong way . .. variation of the old pattern I prac-
just as a hang-over and other ticed often myself: blaming my
troubles warn the alcoholic that hang-over on the bartenders, It is
he’s not living correctly. But a true, of course, that our country
series of good headsplitting, belly- has a lot of delinquency and neu-
curdling, throat-scalding hang- rosis, but the fault doesn’t lie with
overs were good, since they made our marketing systems, anymore
him want to stop. Perhaps we than it does in the stars. The fault
have to suffer our economic hang- is still in ourselves.
overs, too, until we decide to find This completes my random list


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

14 THE FREEMAN March

of observations. I like to think
that they have. a “horse sense”
sound, and that they aren’t too
unreasonable. They are relatively
“unbiased,” because.- they devel-
oped during .years when I paid
little attention at all to any of the
competing forms of economic and
political thought. I ‘was almost
outraged to learn that my ideas
stamp me as a “conservative” in-

LUDWIG VON MISES

stead of a. “liberal.” But, I've
learned to live with that stigma!

It is- curious that when I cross
verbal ‘swords with “liberals;”
they frequently accuse me of not
dealing with reality, of living in
a dream world. This is odd, be-
cause their ideas were mostly
mine when I..was.in a world that
was mostly dreams, mostly un-
reality. Pe

Be TR 2a ee Ee et

Foreign Spokesmen for Freedom

H
EH)

ARN

THE GREAT CATASTROPHES that be-
fell .Germany in the first part of
our century were. the inevitable
effect of its political and economic
policies. They would not have hap-
pened at all or they would have
been much less pernicious if there
had been .in the country any no-
ticeable resistance to the fatal
drift in the official policies. But
the characteristic mark of Ger-
many in the age of Bismarck as
well as:later in that of Ludendorff
and Hitler was strict conformity.
Dr. Mises is Visiting Professor of Economics at
New York University and part-time: advisor,

consultant, and staff member of the Founda-
tion for Economic: Education.

SE OU a Arm Sen Aan mA Aer ARAYA Sym An LA 5 rs A ren

There was practically no criticism
of the interventionist economic
policies and still less of inflation-
ism. The great British economist,
Edwin Cannan, wrote that if any-
one had the impertinence to ask
him what he did in the Great War,
he would answer, “I protested.”
Germany’s plight consisted in the
fact that it did not have, either
before the armistice of 1918 or
later, anybody to protest against
the follies of its monetary and fi-
nancial management. Before 1923
no German newspaper or magazine
ever mentioned, in dealing with
the rapidly progressing fall in the


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

1961 FOREIGN SPOKESMEN FOR FREEDOM 15

Mark’s purchasing power, the lavish bounties doled out to agri-
boundless increase in the quantity culture at the expense of the ur-
of banknotes printed. It was ban population, the immense ma-
viewed as un-German not to ac- jority. They are keen critics of the
cept one of the “loyal” interpreta- cheap demagogy of the govern-
tions of this phenomenon that put ment’s alleged antimonopoly cam-
all the blame upon the policies of paign. They unmask the dangers
the Allies and the Treaty of Ver- inherent in the privileges granted
sailles. to the labor unions. In matters of
In this regard conditions in Ger- taxation, a balanced budget,
many certainly changed. There is sound money, and “social” poli-
in Germany. today at least one cies they follow a line of thought
monthly magazine that has both similar to. that of the American
the courage and the insight to Goldwater-Republicans. They pre-
form an independent judgment on fer the Adenauer regime to the
the economic and social policies of only possible alternative, a cab-
the government and the aims of inet of Social-Democrats, but they
the various parties and pressure do not close their eyes to the
groups. It is the Monatsblitter shortcomings of the Chancellor’s
fiir fretheitliche Wirtschaftspoli- policies. And they are not afraid
tik, edited now already for six of repeating again and again that
years by Doctor Volkmar Muthe- it. is only thanks to the United
sius. It is published by the Fritz States that West Berlin is still
Knapp Verlag in Frankfurt. Ex- free from Soviet rule.
cellent articles written by the edi-
tor and a carefully selected group A periodical that openly and
of external contributors analyze without any reservations endorses
every aspect of contemporary eco- the free enterprise system and the
nomic and social conditions. market economy, this is certainly
Doctor Muthesius and his a remarkable achievement in the
friends are unswerving supporters classical land of socialism whether
of free trade both in domestic and imperial or social-democrat or na-
in foreign affairs. They reject the tionalist. Pe


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

16

In his Education for Privacy Marten ten Hoor,
Dean of the College of Arts and Sciences, Uni-
versity of Alabama, decries dictatorships in these
appropriate terms:

“We are living in a world and in a time when
powerful leaders with millions of fanatical fol-
lowers are committed to the forcible regimenta-
tion of their fellow men, according to formulas
which have no initial authority but that of their
own private dogmatism. They not only refuse to
recognize the right of private thought and per-
sonal conscience to be considered in the manage-
ment of public affairs, but they have abolished
the concept of the individual as a private per-
sonality and have reduced him to the level of the
bee in the hive. To restore the individual to his
former dignity as a human being is the urgent
need of the day.”

Are majorities, when unlimited as to the areas of
life they control, leading us down the same dis-
astrous road as dictatorships? If so, what are the
principles, the understanding of which would
answer “the urgent need of the day”? These
questions are the subject of this inquiry.


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

CONSCIENCE
of the MAJORITY

LEONARD E. READ

DECLARED A PROFESSOR of econom- ernment is elusive. Even some of
ics at one of our larger universi- the very men who wrote the prin-
ties: “What government should do ciple into the Declaration of Inde-
is whatever a majority of the pendence in terms of the inalien-
people vote that it should.” able rights of individuals,

This teacher of young America promptly defied this principle by
was speaking the conviction of a unlimiting majority rule, that is,
vast segment of today’s voting by not applying the limiting prin-
public: The sole criterion of what ciple to the democratic state. They
government should do is whatever reasoned that the rule of the ma-
the voting majority demands of it. jority (democracy) could not be
This belief that sovereignty exists intelligent without a well-educated
exclusively in “the will of the ma- electorate, so they proceeded to
jority” is the same as a belief in “secure” the required wisdom by
unlimited democratic government. a system of government educa-
Regardless of the popularity of tion.! By doing this, they lowered
this view, its shortcomings must the barriers they themselves had
be understood and explained un- erected, permitting majority rule,
less we want the majority to be in this precedent-setting instance,
the ruler of our affairs, the manip- to get out-of-bounds, to possess
ulator of our lives, the shaper of powers over individuals never in-
our destinies. For, according to tended in their own distinctive de-
this notion, the majority is al- sign for limited government. Like
mighty; there is no moral author- their progeny down to this day,
ity above the majority; the scope "1 4He [Thomas Jefferson] was the
of government is not limited by first American statesman to make edu-

SE i cation by the state a fundamental article
any principle, but only by the will of democratic faith.” Encyclopedia Bri-

of the majority. tannica, Vol. XII, Chicago: Encyclopedia
The principle of limited gov- Britannica, Inc. 1946.

17


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

18 THE FREEMAN March

these sponsors of state education right; moral judgment that pro-
must have concluded that any hibits or opposes the violation of
goodness of which an individual is a previously recognized ethical
capable would show forth in the principle.”
majority if all were educated in Second, what or who is capable
goodness. of having a conscience? Is it not
These men failed to see that self-evident that this is a quality
goodness is never evoked by coer- or characteristic that only an in-
cion.2 And they overlooked one dividual human being can possess?
striking fact: Whatever goodness Third, what is a majority? It is
may be manifested in individual the greater part of a number in
action tends to be lost in mass ac- excess of two.
tion. The majority, regardless of
the people who compose it, is an Obeying One’s Own Conscience
amoral mechanism; a majority Let us now take a minimum
conclusion is a concentration — an grouping of three individuals —
amalgam — of views which doesnot any three on earth — and reflect on
include the voice of individual con- their “knowledge or feeling of
science. This is a serious charge right and wrong,” that is, let us
considering that we as a people take note of their several con-
are submitting ourselves to ma- sciences. Our first discovery is
jority rule: a whole nation’s des- that no two are absolutely identi-
tiny in the grip of a conscienceless cal; no two among all who live are
force, an amoral mechanism that alike; no two have precisely the
knows not right from wrong, in- same concept of goodness or right-
capable of learning, and powerless ness or truth!
to think or reason — like putting This is not to suggest that truth
ourselves under the rule of a itself is variable, but that fallible
robot! So, let us examine the human beings will vary in their
charge that majority action dis- knowledge of and proximity to
places individual conscience. truth, even though each were to do
First, what is conscience? “A his very best at all times. A per-
knowledge or feeling of right and son behaves conscientiously only
wrong, with a compulsion to do insofar as he obeys his own con-
2 The three distinguishing features of science, wherever it leads. His
government education are coercive: only alternative would be to act
compulsory attendance, curricula dic- unconscionably, Therefore, except
tated by government, and the forcible in matters where no controversy

collection of the wherewithal to pay the . )
educational bill, exists — like two plus two equals


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

1961 CONSCIENCE OF THE MAJORITY 19

four or the blending of blue and tage over home products (or any
yellow makes green — the averag- one of countless other possible
ing of two varying consciences compromises). B and C, of course,
must, perforce, result in a conclu- vote “yea,” A votes “nay.” The
sion which tends to disenfranchise majority carries the day. Their

conscience. compromise becomes the commit-
Example: The chairman ap- tee’s report.
points a committee to prepare a Be it noted that the report —

report on what the nation’s tariff like all majority reports where the
policy should be. It is a foregone issues are in controversy — is not
conclusion that the conceptions of an accurate reflection of what is
right policy are, to some degree, regarded as right by A or B or C.
at variance. For instance: All connection with conscience,
A believes in private property, that is, with the individual's pre-
namely, that each individual has a cise conception of rightness, has
moral right to the fruits of his own been severed. It is this severing
labor, and further believes that this that makes a conscienceless mech-
right includes the right to control the anism of the majority.
exchanges thereof; that any forcible It should be borne in mind that
shifting of control to others is an in- the amorality of a majority is not
fraction of the private property ,yercome by increasing its num-
principle. le stands or ee Se ber, whether it be upped to ten
change and, thus, rejects the tari or to the number in a national
idea. .
plebiscite. Indeed, the more per-

B believes, just as sincerely, that h
domestic producers must be protected SONS involved, the greater is the

against all foreign competitors who likelihood that the majority con-
pay lower wages than are paid at clusions will be worsened — in all
home. events made devoid of conscience.
C accurately reflecting what his
conscience dictates as right, favors Government's Role
“reciprocal trade agreements.” When we consider the extent to
The committee, however, has Which public policy in the U.S.A.
accepted the responsibility of sub- today is decided by majority vote,
mitting a report. Finally, after and when we recognize the con-
discovering that precise agreement sciencelessness of this mechanism,
is impossible, B and C effect a we need not.be surprised at a de-
compromise: Tariffs should be caying individual responsibility
hiked on all foreign products that and at our descent into socialism.
are showing a competitive advan- Rather, we should count ourselves


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

20 THE FREEMAN March

blessed in having some remaining and answers the question of who
time to put this conscienceless shall rule, what is it that poses and
force in its proper place. It does answers the question of what shall
have a place. be the extent or the scope of the
Assuredly, it will take a lot of rule?
doing to unfasten the grip of this
amoral force on ourselves. Per- What Is the Nature of
haps the untangling should begin the Limiting Principle?
by reflecting on the basic question As we have observed, it is not
that democracy poses: Who should democracy. The majority, when
rule? The answer it gives is: The operating in its political magni-
majority. There is an enormous tude — a force severed from con-
enthusiasm for this answer, and science and reason — cannot pos-
not without reason. For, the al- sibly know its place. It will steal
ternative, increasingly in evidence, and kill with the same reckless
is the dreaded one-man say-so, dic- abandon as a bank bandit and with
tatorship. Not only is that the way the same ignorance of its crimes
most people see it but, unfortu- as a mob or a runaway truck.?
nately, that is the only way most Democracy or majority rule, as ap-
people see it. Their high prefer- plied to political action, is power-
ence for democracy over dictator- less to limit itself. Popular elec-
ship has effectively blinded them tions in our times attest to this
to a far more important question observation.

than who shall rule: Regardless And, contrary to the claims of
of who rules, what shall be the Ortega, liberalism does not con-
extent of the rule? tain the limiting principle.

If the question as to the extent (Ortega used the term in its
of governmental rule is not posed _—— __ _
and properly answered, the con- 3 This is no exaggeration. A majority

scienceless majority will continue through the instrumentality of the State
will take property without consent for

its rampage unabated. Unre- golf courses, for paying farmers not to

strained, knowing no bounds, this produce, for building baths for Egyptian
] olitical hani camel riders, or for whatever. The par-
amora ! p ca . mec anism can ticipating individuals have no more sense
and will be — indeed, is — as of wrongdoing than does a member of a
. . : “ id it?”
vicious, as tyrannical, and as de- lynching party. If asked, “Who did it?
. . he will reply, “The lynching party.
structive of the rights of man as There is more truth than exaggeration
any culprit having a monopoly of in Aldous Huxley's comment, “Humanity

th li h b is in inverse proportion to numbers; a
€ police power has ever been. mob is no more human than an ava-

Very well. If democracy poses lanche.”


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

1961 CONSCIENCE OF THE MAJORITY 21

classical and finest sense.)¢ Liber- the consciousness of a few persons
alism, which insists on the rights who happened to be Americans —
of the individual and a severe and a miracle was wrought! Peo-
limitation of the State, does not go ple became so fascinated with the
beyond the rationality of man for miracle’s material outpouring that
the source of its strength. While they failed to reflect on the mys-
the genuine brand of liberalism terious concept which conferred
does pose and satisfactorily an- these blessings. The concept flitted
swers the question in an arbitrary in and out of consciousness so
way, the answer is founded more rapidly —like a dream or an idea
on a splendid opinion than on a that is promptly forgotten — that
fundamental principle. no one ever gave it a name.

Nor does the term ‘“American-
ism” indicate the principle that
prescribes governmental limita- More often than not the good
tion. Americanism has almost as things which happen to us are
many meanings as there are peo- ©ver and beyond our own creation.
ple who use the term. It means Minor inadvertencies or happen-
everything from constitutional stances, of little significance when
government to vacations with pay viewed separately, sometimes com-
to a democratic attitude of people bine or occur in certain sequences
toward each other to TVA to pri- With the most unexpected, as-
vate enterprise to a melting pot. tounding, and efficacious results. If
Americanism neither theoretically We are observant enough to take

nor practically explains what shall note or discover what minor events
be the extent or scope of govern- combined to form the grand re-
ment sult, perhaps we can, by their

What we are searching for may repetition, continue to enjoy the
be said to have no name at all. A blessings they confer. Stated an-
certain something — an idea or a other way, mankind advances by
concept — momentarily, almost developing laws or theories on the
fleetingly, insinuated itself into basis of observed fact and success-
"1 See pp. 125-26 of Invertebrate Spain ful practice. A splendid example
by Jose Ortega y Gassett. New York: of theory devised after the fact
W. W. Norton & Co., Inc., 1937. , : 2 _

5 For an example of this type of ra- was cited by Eugen von Bohm
tionality at its best, see F. A. Hayek’s DBawerk. Said this wise theoreti-

reasoning on ‘the rule of law” in his ¢jan of free market economics:
The Constitution of Liberty. Chicago:

The University of Chicago Press, 1960. “ - . he [the common man | prac-
570 pp. ticed the doctrine. of marginal

A Happy Sequence


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

22 THE FREEMAN March

utility before economic theory dis- demonstrate, the outburst of
covered it.” energy was the effect of the limi-
It is my contention that a se- tation. But, what was responsible
quence of seeming inadvertencies for the limitation?
—an at-random combination — Part one of the unforeseen com-
taking place between 1620 and bination probably occurred during
1791, if viewed in their wholeness, the first three decades of the sev-
contains the answer we are seek- enteenth century. An excellent
ing. We shall find in the combina- case in point followed the landing
tion of these events the only prin- of our Pilgrim Fathers at Ply-
ciple for the proper limitation of mouth Rock. The members of this
government or, in other words, little Colony began their life to-
the answer to the question, What gether in a state of communism.

shall be the extent of the rule? For, regardless of what each Pil-
i grim produced, all the produce
Communism at Plymouth Rock went into a common warehouse

Two facts, relevant to this under authority, and the proceeds
thesis, stand out: (1) For a time, of the warehouse were doled out
government in the U.S.A. was as the need seemed to require. In
more limited than ever before in short, they tried to live by a prin-
any other country, and (2) there ciple which, more than two cen-
followed an outburst of creative turies later, Karl Marx set forth
energy and an acceptance of per- as the ideal of the Communist
sonal responsibility unprecedented Party, “from each according to
in all history. As in so many cases, ability, to each according to need.”
most of us have attributed these
phenomena to something pecul- Return fo Freedom
iarly brilliant in our own makeup. There was a compelling reason
But such credit has no more why the Pilgrims threw overboard
validity than did the observation this communal or communistic
of the fly on the chariot wheel, practice. Many of them were starv-
“Look at all the dust I am mak- ing and dying! It seemed that
ing.” As I believe, and hope to when they organized themselves

in this manner, the warehouse
well phrased by Adam Ferguson: “how WAS always running out of proven-
nations stumble upon establishments der. The needy became everyone.
which are indeed the result of human During the third winter Gov-
action but not the execution of human .
design.” Quoted by Hayek in his The €rnor Bradford met with the re-
Constitution of Liberty, p. 57. maining members of his Colony.


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

1961 CONSCIENCE OF THE MAJORITY 23

They agreed to quit the idea of would aledg weaknes, and inabilitie;
“from each according to ability, whom to have compelled would have
to each according to need” and bene thought great tiranie and op-
would, come spring, try the idea Pression’
of to each according to merit. The result of practicing the pri-
To each according to merit! It vate property principle:
is inconceivable that these people
were fully aware of what they By this time harvest was come, and
were saying. In the Old World it in stead of famine, now God gave
had never been that way. Govern- them plentle, and ye face of things
. was changed, to ye rejoysing of ye
ments were sovereign. One kept harts of many, for which they
whatever of his product the State blessed God. And ye effect of their
allowed. It can be assumed that £0 particuler [private] planting was
each according to merit was con- well seene, for all had, one way &
jured up in desperation. Perhaps other, pretty well to bring ye year
it can be said that famine uncov- aboute, and some of ye abler sorte
ered one of the principles leading and more industrious had to spare,

to plenty. and sell to others, so as any generall -
wante or famine hath not been
The Private Property Principle amongest them since to this day.8
Using hindsight — which we can One cannot read this statement

do and Governor Bradford could by Governor Bradford without de-
not — to each according to merit tecting his sense of amazement
is an excellent definition of the that any such “plentie” had come
private property principle. It is about. These colonists attributed
another way of saying that each the outcome, if you please, to God,
individual has a right to the fruits a confession that it was not of
of his own labor. “Each of you is their own creation. This practice
to have what you yourselves pro- of the private property principle,
duce” was the sense of the Gov- I am submitting, was but the first
ernor’s conclusion that third in a sequence of happy actions
winter. which made for a combination

What happened came the 7 Taken from Bradford's History “of
spring ? Read Governor Bradford's Plimoth Plantation” from the original
own words: manuscript. Printed under the direction

of the Secretary of the Commonwealth

Th wente willingly int by order of the General Court. Boston:
€ women now gly o Wright & Potter Printing Company,

ye feild, and tooke their little-ons State Printers, 1901. p. 162.
with them to set corne, which before 8 Ibid., p. 1617.


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

24 THE FREEMAN March

that contains the key to a princi- appreciate the fundamental na-
pled limitation of the State. ture of this revolutionary princi-
Had Governor Bradford been ple, it is necessary to keep in mind
able to glimpse the latter half of that in other lands and during
the next century he would have previous times mankind had been
seen that his words, “so as any contending with and slaying each
generall wante or famine hath not other by the millions over the age-
, been amongest them since to this old question of which among the
day,” were, indeed, prophetic. For, numerous forms of authoritari-
after him and the other Plymouth anism — that is, man-made author-
colonists, and by reason of the ity — should preside as sovereign
practice of the private property over man.
principle which they had so for- Then, in 1776, in a fraction of
tunately hit upon, came decades one sentence, was recorded the
of growth, development, progress. real essence of the American Rev-
Here was something new, but olution — concisely and solemnly
something which could not be pre- stating for the first time in any
served under any of the Old-World significant political action? — the
forms of unlimited government. idea which rejected the ancien re-
Early Americans were keenly con- gime: “... they [men] are en-
scious of this fact. It was this con- dowed by their Creator with cer-
sciousness, a magnificent political tain unalienable rights; that
skepticism, inspiring a dread of among these are life, liberty, and
state interventionism —to use a the pursuit of happiness. . . .”10
present-day term—which accounted There you have it! This is The
for their long delay in forming a Principle, the very essence of the
government. American miracle,
Endowed by their Creator! Was
this an at-random action, that is,
Then came the second in the se- an action which was not con-
quence of happy actions — the sciously related to the grand com-
American Revolutio n! . 9 The Declaration of Independence, in
The real American Revolution , sense, was a climax to the Whig revo-
was not the armed conflict with lution that had been under way in Eng-
King George IIL That was a rela- ion. ine tresrotical break “nin sh.
tively unimportant incident. It solutism.
was, instead, a concept which, 10 There seems little doubt that the
fundamental principle. To fully property of utmost importance, equiva-

“Endowed by Their Creator”


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

1961 CONSCIENCE OF THE MAJORITY 25

bination? There appears little evi- by itself, without the third action
dence to the contrary. For decades which was to come later, “endowed
American thinkers had been ex- by their Creator” was, from a
amining and rejecting one form of practical and a political stand-
authoritarian government after point, little more than graceful
another. From what form, among phrasing.
them all, was man endowed with
his right to life, liberty, and prop- 4A Spiritual, Political,
erty? What previous form of gov- and Economic Principle
ernment would preserve “to each Before going to the third action
according to merit”? Not a single in our remarkable sequence, let us
one! From where, then, come reflect further on this revolution-
these rights? There are such ary concept, this break with all
things as rights. Therefore, there political history. Men are endowed
must be a source. Ah, the Creator; by their Creator with certain in-
that’s it. Some of the eighteenth alienable rights; that among them
century clergy were saying this. are the right to life, liberty . . . is
That would dispense with the at once a spiritual, a political, and
whole squabble over the forms of an economic principle. It is spirit-
authoritarian governments. ual in that it proclaims the Crea-
This is no attempt to belittle tor as the endower of men’s rights
the spiritual faith of our Found- and, thus, as sovereign; political
ing Fathers. Some were devoutly in the sense that such an acknowl-
spiritual; others, it has been sug- edgment implicitly denies the
gested, were agnostic or deistic. State as the endower of men’s
No, this claim that “endowed by rights and, thus, the State — be it
their Creator” was, in a sense, an managed by a dictator or a ma-
inadvertency is based on the con- jority — is not sovereign; and eco-
viction that the writers of the nomic in this way: If a man has a
Declaration were not wholly aware right to his life, it follows that
that they had written the prin- he has a right to sustain his life,
ciple on which all sound political the sustenance of life being noth-
thinking must be premised! They ing more nor less than the fruits
could not have been aware of the of one’s own labor. Note the rela-
significance of their act because, tionship here to the private prop-
lent to their “pursuit of happiness.” See erty principle — “to each accord-
Pittman, R. Carter, “Equality Versus jing to merit.”

Liberty: The Eternal Conflict.” Amer- .
ican Bar Association Journal. August The first in the sequence of re-

1960, vealing actions took place in


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

26 THE FREEMAN March

1623,11 the second in 1776. The of ours, a political acknowledg-
third came to pass during the fol- ment that each individual had a
lowing fifteen years. right to the fruits of his own
The Constitution and the Bill of labor. In 1776, the Declaration of
Rights may not be generally Independence, a political docu-
thought of as an at-random action. ment, identified the Creator as the
Nearly everyone will claim that source of this and other rights,
the framers of these documents thus denying the State or any
were fully conscious of what they other human authority as the
were doing. In a way, yes. But source. Practically, the Creator
were they not thinking more about as the endower of rights has no
how best to implement “That gov- meaning unless men and their
ernment is best which governs political agencies abdicate the role
least” than deductively reasoning of Creator, that is, remove from
from the premise, “Men are en- themselves any pretense of serv-
dowed by their Creator”? There ing as the endower of rights.
is no evidence that they were
aware that their work was the A Set of Prohibitions
last in a series of three political That the Constitution and the
moves which, separately, were Bill of Rights — the third in the
more or less insignificant and un- sequence — were perfect comple-
enduring but which, if pieced to- ments to the right to the fruits of
gether, understood and believed in one’s own labor and to the concept
by their progeny, would present a that the Creator is the endower of
picture making perfect political rights, there can be no doubt.
sense. Their progeny could use These political instruments were
hindsight in assaying the signifi- essentially a set of prohibitions
cance of their actions; they could not against the citizenry but
not. : against the thing the citizens had
To recapitulate: In the early learned from their Old-World ex-
1600’s, the principle of private perience to fear, namely, over-ex-
property took its root in this land tended government.!2 They more
TIL I is not my contention that the severely limited government than
Plymouth Colony experience was the — — — -
sole source of the private property idea 12 The words “no” and “not,” employed
but, rather, to represent it as typical of in restraint of governmental power, oc-
what was going on in early seventeenth cur 24 times in the 7 original articles of
century America — at Jamestown and, no our Constitution. In the Bill of Rights
doubt, in many other circles, The Ply- the words “no” and “not” and the cor-

mouth experience is used because its relatives “or” and “nor” —all in re-
records are so well preserved. straint of government — appear 22 times.


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

1961 CONSCIENCE OF THE MAJORITY 27

government had ever before been A Burst of Creative Energy
limited. They deposed government It was this freeing of creative
as the endower of rights. Further- human energy on an unprece-
more, government was shorn of dented scale, among a self-reliant
the responsibility for the people’s people, that accounted for the
security, welfare, and prosperity. greatest outburst of productive
Thére were remarkable benefits and creative energy ever known.
which flowed from this severe The American miracle came about
limitation of government. First, as a consequence of three political
when government is so limited actions taking place in a fortui-
that it has nothing on hand to dis- tous sequence, a sequence that
pense nor the power to take from Americans did not contrive nor
some that it may give to others, to plan, nor even name.4
whom or to what do a people turn? Suffice it to say, government to-
They turn to themselves! As a day in the U.S.A. is again un-
result, there developed among limited. The rights of man are
early Americans a quality of char- now thought to derive from the
acter which Emerson later praised, State. Democracy reigns! The
“self-reliance.” Americans earned answer it gives to the question as
a world-wide reputation for being to who shall rule is the majority.
a self-reliant people. The extent of the rule, today, is
Second, when government is whatever the conscienceless ma-
limited to the only principled jority decides. That the road we
function it possesses, that is, are on must lead to disasters com-
when it is limited to restraining mon to all Old-World political ar-
and penalizing fraud, violence, rangements is evident enough. In
predation, misrepresentation, and principle, there is no distinction —
to the invoking of a common jus- none whatsoever — between our
tice, there follows as a conse- form of many men playing the
quence of that limitation a free- Creator role and their form of one
ing, a releasing, of such creative man playing the Creator role. Ask
energies as are in the people. yourself, what precisely are the
When government duly inhibits "14 America’ fortuitous combination
the destructive actions of people, left nameless, accounts for the wide

there is no force inhibiting the variety of incorrect and misleading titles

creative actions. used to identify the American ideal: De-

mocracy, Republican Form of Govern-

ment, System of Checks and Balances,

13 Violence, as here used, is meant to Constitutional Government, and so on.

include foreign as well as domestic Any one of these, at best, is but a part
threats to life and property, of something much more profound.


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

28 THE FREEMAN March

essential differences between the possess the moral right to deprive
-divine right of the majority and anyone of life and liberty and the
the “divine right of kings”? If means to sustain them?15

finding no differences, why, then, Once the Creator concept is
should we not suffer the fate of settled on, the rights which are
the Old-World arrangements? socially inalienable become quickly

apparent. Society, regardless of
The Simple Lesson how it organizes itself, cannot

However, it is not necessary take life, liberty, or the means to
that we suffer the fate of Old- sustain them. People are free to
World societies. Our own history act creatively as they please. The
has a lesson to teach us if we will moral questions, so far as they
but open our minds to it. The les- pertain to society, are settled in
son is simple: The Creator, mot the acceptance of the Creator
the State, is the endower of men’s Principle. There are no moral
rights. As in other aspects of life, principles remaining for the
so in the political aspect of life, ____
this is the primary principle 15 This is a tricky point and, at first

around which all else must be blush, would seem to deny government
. the right to impose penalties of any kind
built. whatsoever. My own thoughts on the
This concept, with a minimum matter go like this: if a man has a right

. to life, liberty, and property, he has a

of reflection, should be acceptable right to defend his life, liberty, and
to most people. For, the alterna- property. Also, it is not improper that

tive to this is the State, a man- he delegate this right of defense to a

formal agency — government. In short,
concocted arrangement, as the en- man, or the government which man or-

dower of men’s rights. Is it not ganizes, has a right to employ defensive
clear that man does not obtain his ©r repellent force against aggressive

. . : force, that is, against any person or per-
right to life, for instance, from sons who would take life, liberty, and

any particular Joe Doakes or from property. Those who employ aggressive
any two Joes or from any 182 mil- force initiate the action. Any truly de-

Ii J | h fensive force remains inactive until ag-
on Joes: ow, then, can any gressive force appears. Thus, if aggres-

Joe-contrived agency, government sors are killed or otherwise penalized in
: : : the employment of defensive action

or otherwise, gan an endowership against them, they are killed or pena-
which does not exist in the Joes lized by an action which they initiated —
who form the agency? Goin by their own hands, as in suicide. -Gov-
. g y g ane ernment has no moral right to take

step further, if the State or the (aggress against) anyone's life, liberty,

majority does not and cannot or property any more than has an indi-

| . . . vidual. It has only the moral right to
grant the right to life, does it not inhibit aggressive actions, as has an in-

follow, logically, that they do not dividual.


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

1961 CONSCIENCE OF THE MAJORITY 29

amoral mechanism, the conscience- of us, in 1860, have detailed the
less majority, to vote on. pattern for delivering the human
Left for democracy, for ma- voice around the earth in one
jority vote, will be questions twenty-seventh of a second? In-
where conscience does not come deed, not. But it came to pass. Not
into play — for instance, who shall a man on earth knows how to
be elected to manage the agencies make an ordinary wooden lead
limited fo the defensive fune- pencil, let alone an automobile or
tions? An amoral mechanism to a jet airliner.l® But we do have
decide amoral questions! Splen- them!
did! But do not let the amoral If the remedy for our plight re-
mechanism decide moral ques- quired any measure of mass un-

tions. derstanding, a reversal in national
. form would be impossible. But im-
Faith and Freedom possibilities such as that have

Considering the extent to which never been obstacles to progress.
interventionism has insinuated it- Required only is a leadership in
self into our lives in a cancerous reaffirmation of the Creator Prin-
manner, it looks, on the face of it, ciple —and faith that right ideas
as if our social situation were be- radiate and do, indeed, perform
yond repair. Certainly, there is miracles. -
not one of us who can detail the “5g 4 ihe reader question the
remedial pattern. It is utterly baf- point that no person knows how to make
fling. a pencil, send for a copy of my I, Pencil.

Yet, what miracles may right Foundation for Economic Education,

’ : Inc.,, Irvington-on-Hudson, N. Y. (No
thinking bring about? Could any charge)

A DEMOCRACY cannot exist as a permanent form of Government.
It can only exist until the voters discover they can vote them-
selves largess out of the public treasury. From that moment
on the majority always votes for the candidate promising the
most benefits from the public treasury with the result that
Democracy always collapses over a loose fiscal policy, always to
be followed by a Dictatorship and then a Monarchy.

(Written by PROFESSOR ALEXANDER FRASER TYTLER, nearly two centuries ago
while our thirteen original states were still colonies of Great Britain. At the

time he was writing of the decline and fall of the Athenian Republic over two
thousand years before.)

Reprints of Conscience of the Majority are available at 10 cents each.


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

MAJORITY RULE

FRANK B. KEITH

ON A TABLE in the foyer of a small school stood a beautiful decora-
tion for the annual open house. It consisted of an elaborate ar-
rangement of wax fruit and dried flowers.

One day it was noted that the grapes in the display were
disappearing rapidly. A quick check revealed they were providing
free after-lunch chewing gum for the students.

The student leaders were assembled and given the project of
raising among the 90 students the nine dollars necessary to replace
the grapes.

The student body split on the question of who should pay for
the grapes. One group thought those who took the grapes ought to
confess and pay. The other group wanted everyone to pay, arguing
that this would be-a good lesson in honesty for everyone, espe-
cially those who had seen grapes taken but had done nothing about
it. Further, they doubted that the dishonest would confess anyway.
After all, if anyone were dishonest enough to take the grapes, he'd
probably lie about it rather than confess. Besides, ten cents
wouldn’t really hurt anyone.

When this matter came to a vote in one class of 30 students, 16
thought all should pay and 14 thought the grape eaters only
should have to pay.

Informal investigation later revealed that those who voted for
everyone to pay were themselves grape eaters (or controlled by
grape eaters) whereas all others voted that grape eaters only
should pay.

Mr. Keith is a school teacher.

30


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

WHAT
EDUCATION
SHOULD
BUSINESS
SUPPORT?

MERRYLE STANLEY RUKEYSER

THE CONGRESSMAN, who favored phisticated approach to the adven-
free enterprise, was berating busi- ture of living, and stands in sharp
ness executives for their failure contrast to the techniques of
to flood the House of Representa- primitive tribes who implement
tives with mail and propaganda their will with clubs.
equal in size and weight to that Accordingly, it would be a cor-
from labor unions and sundry ruption of the management func-
other critics of the modern cor- tion to regard itself as the op-
poration. posite number of misguided pres-
I could not accept the view that sure groups. Its mission is not
personalities in management, who through brute force to offset a
are trustees for share owners, wrong push in one direction with
should throw their weight around. an equally potent and ill-con-
Executives. in the nature of sidered pull in the opposite direc-
things, are a numerically small tion. Management’s opportunity is
group — at best a minority, but to promote civilization through in-
potentially an elite group. culcating in men’s minds and
As the brain or intelligence cen- hearts principles of creativity and
ter of the economic system, man- self-discipline which enlarge their
agement should rely for support potentials for better living. Thus,
on the merit of its basic ideas and expressions from management
philosophy — not on its compara- should at all times be responsible,
tively slight brute force. The phi- and should be guided by a respect
losophy of management is a so- for the public interest.
_— Whether or not adversaries dis-
Mr. Rukeyser is a business consultant, lecturer, torted Charles E, Wilson’s re-

and writer of the nationally syndicated column, ° . .
“Everybody's Money.” marks about the identity of the

31


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

32 THE FREEMAN March

interests of the nation and those to endow ideologies designed to
of General Motors, it is essential destroy voluntary institutions.
for industrial generalissimos to
understand the impact of their Conflicting Principles
private or company decisions on The modern business or financial
the public interest. corporation, bank or trust com-
High in public interest are the pany, investment dealer or in-
problems of education and of cor- surance enterpriser is part and
porate giving for that purpose. parcel of a voluntary system. By
Corporate and individual respon- the same token, these instrumen-
sibility cannot glibly be dis- talities are in mortal conflict with
charged through indiscriminate the theory that government can do
giving, to colleges and universi- everything better and more effi-
ties, of funds belonging to the ciently than can the citizen. Volun-
stockholders. This delicate subject tary enterprise is the antithesis
should be carefully delineated. A of compulsion and force. Contem-
businessman must distinguish be- porary advertising and selling are
tween standards for personal phi- social symbols of the individual's
lanthropy, on the one hand, and of right to choose, and are based on
contribution of corporate funds, the gentle art of persuasion — the
on the other. Unless the donation opposite of state-imposed compul-
can be justified in terms of the en- sion,
lightened self-interest of those Accordingly, it is worse than
who own the company, then it is muddleheaded to use stockholders’
better to leave the giving to the funds to finance propaganda de-
individual recipients of corporate signed to destroy the foundations
dividends or interest rather than of a free economic society. Cer-
to tap the corporate till. tainly, the blueprint of a dictated
Obviously, if any corporation of- society, seductively and falsely
ficer or director is so emotionally labeled as a Welfare State, is in-
confused that he feels disposed to harmonious with the competitive
finance movements and ideologies market economy of which the mod-
which will destroy a free economy, ern corporation is an example, If
he should use his personal funds a corporate executive is to play his
— not those of his stockholders. If optimum role as a leader of public
one of the objects of corporate opinion, he should understand the
giving is to gain good will or cre- external environmental factors
ate a more friendly environment which create his opportunity. He
for business, it is clearly improper is unfit to serve if he wears


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

1961 WHAT EDUCATION SHOULD BUSINESS SUPPORT? 33

blinders which exclude from his with human betterment and “wel-
consciousness the broad social, po- fare-state’” regimentation with
litical, economic, and cultural personal freedom.
forces which create the climate in Practitioners of the enterprise
which he operates. system should take pride in their
respect for merit, for craftsman-
Enlightened Self-Interest ship, and for creative and original
To be blunt, the explanation for thinking. They should join hands
meager sales of motor cars in the with the trend-bucking scholars
United States in 1931, 1932, and who hold high the banner of in-
1933 was no reflection of any in- dividual free choice and personal
ternal loss of management skill in responsibility. Certainly, they
the design or production of motor should not use stockholders’ funds
cars. The trouble was external and to subsidize those who adulterate
lay in subtle causes which unbal- the recipes of progress by glorify-

anced the national economy. ing concepts of slavery and com-
By participation not only as a pulsion.
provider of funds but as an active Selective corporate giving to ed-

fellow student in scientific and ucational institutions can be of im-
mature efforts to formulate the mense value, but those who handle
ideas and techniques which make “other people’s money” — to bor-
for fulfillment of the desires of row Mr. Justice Brandeis’ historic
free men and women, the execu- phrase — should relate the gift to
tive furthers general well-being the enlightened self-interest of the
and serves his own higher self- corporate donor. Certainly, a cor-
interest as well. If a businessman poration that depends on the serv-
takes everything out of the system ices of engineers, chemists, or
and puts back nothing, he is as physicists, for example, can justi-
antisocial as the backward farmer fy liberal endowment of their hu-
who mines the soil. man supply depots — the engineer-
The educated businessman ing schools and the universities
learns, in the phrase of Wilhelm training scientists.
Ropke, that prudent money man- Similarly, the principle can
agement and a free open market properly be extended to liberal
system provide “A Humane Econ- arts colleges, where the quid pro
omy.” It is high time that mature quo is less direct. In an expand-
business leaders learn to reject the ing society, business needs to re-
spurious attempts by academic cruit executives from able person-
racketeers to associate inflation alities who have been trained as to


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

34 THE FREEMAN March

the humanities and an affirmative intent is to destroy the voluntary
philosophy of life. But such giv- system on which business survival
ing should be on an annual, or an depends.

income, basis rather than in the Any financial or other help man-
form of an unrestricted capital agement can give toward dissemi-
endowment. The promise of a re- nation of scientific and objective
current gift gives the donor with understanding of a free society is
high social conscience an oppor- a good investment. Such expendi-
tunity to be selective. This pro- tures of corporate income are a
cedure reserves the privilege of prudent transfer of funds to capi-
cutting off gifts to those educa- tal account for “franchise protec-
tional institutions which fail to tion.” Promotion of popular un-
achieve scientific objectives and derstanding is a cost-reducing out-
scholarly approaches to the dy- lay, just as much so as automatic
namic problems of contemporary machinery. Popular understanding

civilization. of the social and economic forces
at work prevents the economic
Room for Honest Differences waste growing out of friction,

This standard should not be cor- fallacious legislation, or emotional
rupted to discourage honest dis- prejudice.
sent. The essence of a free society No one questions the right of
and the foundation for the Ameri- management to expend corporate
can economic system is individual funds for burglary insurance or
free choice — free choice as to for various protective devices. But
goods and services, as to voca- the threat to private property
tions, and as to ideas, spiritual from direct stealing is picayune
beliefs, and attitudes. The very compared to confiscatory processes
structure of competition is based which result from biased thinking
on respect for individual differ- and ideas rooted in ignorance. It
ences. It would thus be a perverse is nonsensically shortsighted to
and antisocial abuse of corporate expect any bright long-term fu-
trust for a chief executive to be ture in growth stocks if the pri-
guided in company giving solely vate property system is to go by
by his own prejudices and dogmas. the boards.
But at the same time it would not Such astigmatism to the eco-
be justifiable in terms of the en- nomic consequences of dissident
lightened self-interest of the cor- social and political ideas is a de-
porate giver to endow propagand- terrent to advancement in spirit-
ists — Marxian or what not —whose ual and material well-being. When


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

1961 WHAT EDUCATION SHOULD BUSINESS SUPPORT? 35

a distinguished and suave Har- seeks to substitute that system by
vard graduate was debating with one based on the principle of co-
me in Town Hall in New York operative labor and equitable dis-
whether there should be a ceiling tribution of the product. He ex-
of $25,000 on personal income, I pects that system to be brought
admonished the dowagers in the about by a series of economic and
audience, who were living on divi- legal reforms on a national, even
dends and interest, not to get any an international scale and not
false sense of security from the through individual practices. The
utter politeness and courtesy of economic system operates equally
my differing colleague. “Though on all persons, regardless of the
my opponent will liquidate you in political or social views held by
a most courteous and courtly man- them. A Socialist or Radical can-
ner,” I explained, “you will be not by his own individual act with-
liquidated, nevertheless.” draw himself from the operation
of the system while it lasts. He
“Notas Do....” can find place only in the estab-
In my own salad days, nearly lished economic categories as em-
four decades ago, I asked the bril- ployer, worker, professional, and
liant legal counsel and important so forth. If he earns or otherwise
stockholder of the Burns Brothers’ acquires money, he can put it only
Coal Company how he reconciled to such uses as the system affords
his being a millionaire with his to him. He would accomplish no
adherence to the Socialist Party. good by throwing it away or keep-
The late Morris Hillquit, outstand- ing it in a strong box. If he has
ing socialist leader and unsuccess- any money to invest, he must look
ful candidate for Mayor in New for safe and profitable investment
York City, showed mental resil- in the ordinary way.
iency in his reply. “Purely as a matter of senti-
“Individual investments and ment, a Socialist or Radical,
choice of securities, in my opin- would, in my opinion, ordinarily
ion,” Mr. Hillquit explained, “pre- discriminate against securities of
sent exactly the same question to particularly odious concerns such,
Socialists and Radicals as they do for instance, as are largely based
to individualists and reactionaries. on the exploitation of labor, pur-
The Socialist is opposed to the suit of notorious antiunion policy,
economic system which permits of and so forth.”
unearned revenues in the shape So be it.
of rent, interest, and profits. He Perhaps the late Mr. Hillquit


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

36 THE FREEMAN March

unwittingly gave a practical yard- revolutionary leader naively called
stick for corporate giving. Certain- in consultants to counsel with him
ly Mr. Hillquit’s criterion of dis- as to why Cuba’s hitherto profit-
criminating against the particu- able tourist trade had dried up.
larly “odious” would obviously Castro’s innocence resembled the
estop muddled corporate manage- situation of the man who mur-
ment from subsidizing socialist or dered his mother and his father
communist academies which would and then went into court to plead
be set up to destroy such phil- for clemency on the ground that
anthropic supporters. So doing he was an orphan.
would be as misguided as if the
American Medical Association Misappropriation of Funds
should decide to endow a School Thus, it seems to me a misuse
for Charlatans. of stockholders’ funds to give cor-
There was sophistry, of course, porate gifts which can’t be sanc-
in Mr.Hillquit’s attempt to defend tioned directly or indirectly in
his theoretical and practical schiz- terms of enlightened self-interest.
ophrenia. Obviously, securities Contributions to bona fide educa-
must be selected by yardsticks tional institutions which maintain
other than those he highlighted. scholarly and objective standards
First of all, the long term in- are a wise investment. They help
vestor wants to know whether to preserve the spiritual and in-
a given corporation has the ca- tellectual foundations for a free
pacity to survive in competition, society, the only kind of society in
whether it can operate profitably, which custodians of voluntary
and whether its shares are priced companies in finance and business
competitively on a price-to-earn- can hope to survive.
ings ratio. These bear more on in- Scholars should, of course, have
vestment values than does the de- wide freedom in exploring ideas,
gree of management affection for information, and points of view.
labor unions. Control of funds should not in-
The effort to deal with social clude narrow-minded restrictions
ideas in isolation from economic on academic freedom. But aca-
principles leads to absurdity. This demic freedom is not threatened
was demonstrated when the global by a refusal to support those with
leader of the revolt against the closed minds who oppose the phi-
razor, Fidel Castro, repelled tour- losophy of free inquiry and free
ists from Havana by his lawless expression. To be specific, card-
procedures. After the event, the carrying members of the com-


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

1961 WHAT EDUCATION SHOULD BUSINESS SUPPORT? 37

munist conspiracy should not be because it is itself an expression
eligible for support, for they have of the libertarian point of view.
an allegiance other than to their In the competition against an-
own conscience, cient ideas of slavery and regimen-
Businessmen can with confi- tation “in modern dress,” it is a
dence support pursuit of the ideals duty of management to lead and
of liberty, particularly since their energize those committed to en-
own function of supervision is larging the horizons of the indi-
linked with the conditions of a vidual. Such freedom is right up
free society. Freedom includes the the alley of properly conceived
right of dissent, and even the right business enterprises. And in the
to be wrong. But freedom recog- process of helping, the business-
nizes the human personality as man himself will be educated to a
something created in the image of better understanding of the social,
God, each person with his own in- economic, and political forces
alienable rights. Business is po- which make possible such success
tentially progressive and liberal as he may enjoy. -

The Law and Education

You say: “There are persons who lack education,” and you turn
to the law. But the law is not, in itself, a torch of learning which
shines its light abroad. The law extends over a society where
some persons have knowledge and others do not; where some
citizens need to learn, and others can teach. In this matter of
education, the law has only two alternatives: It can permit this
transaction of teaching-and-learning to operate freely and with-
out the use of force, or it can force human wills in this matter by
taking from some of them enough to pay the teachers who are
appointed by government to instruct others, without charge. But
in this second case, the law commits legal plunder by violating
liberty and property.

BASTIAT, The Law (1850)


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

Liberals
0,

Statist “Liberals”

WILLIAM HENRY CHAMBERLIN

IT IS REMARKABLE how the mean- How very different would be the
ing of a word can change by the atmosphere of a convention of the
simple process of crossing the At- Americans for Democratic Action
lantic Ocean. Take the good old or any group that would call itself
once respectable word liberal, for liberal in the United States. Here
instance. Should an inquiring all the emphasis would be on hav-
American walk into a session of ing the state act as a rescue opera-
Europe’s Liberal International, he tor for everything from delinquent
would be among people who believe youths to worked-out mines, on
in private initiative and free en- government as the proper agency
terprise, who recognize the or- for relieving communities, fami-
ganic connection between freedom lies, individuals of their obliga-
from state planning and meddling tions, and taxpayers of an ever
and all other kinds of freedom, larger slice of their hard-earned
personal, political, economic. The incomes.

European liberal is by definition Here is a good sample of what
strongly, on principle, against so- passes for liberalism in the United
cialism, and for the individualistic, States, as reflected in a news re-
not the socialistic approach to port of the program of an organi-
solving economic and social prob- zation which calls itself the Lib-
lems. eral Party in the State of New

Mr. Chamberlin is a skilled observer and re- York:

porter of economic and political conditions at “The Liberals went far beyond
home and abroad. He has written a number of . .

books, has lectured widely, and is a contributor the spending and social welfare
to The Wall Street Journal and many nation- .

ally known magazines. proposals of the Democratic Ad-

38


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

1961 LIBERALS VERSUS STATIST “LIBERALS” 39

ministration of Governor Harri- the expense of everyone else.” But
man. They outlined in 21,000 in America the term liberal has
words a vast expansion of state been too often appropriated by
spending and activity to meet ‘the those who share the delusion that
urgency of the times.’ the modern state possesses some
“‘We cannot afford economics mysterious power of giving to
as usual and politics as usual,’ the some groups without taking an
Party said. equivalent amount from the same
“The program urged the crea- groups, or from others, either by
tion of agencies to aid small busi- higher taxation or by the still
ness, promote industrial usage of more reprehensible device of in-
atomic power, and protect con- flation.
sumers. It called for improvements
in existing social legislation and Boarded by Pirates
heavy spending on education and The good ship Liberalism in the
welfare.” United States has been boarded by
Or take this definition of ‘“lib- a pirate crew of state interven-
eralism,” statist brand, offered by tionists and near-socialists, whose
Mr. Joseph S. Clark, Jr., former ideals are the reverse of those of
Mayor of Philadelphia, now Sena- the historic pioneers of liberal
tor from Pennsylvania, in The At- thought, and who consider Karl
lantic Monthly for July, 1953: Marx more relevant to modern
“A liberal is here defined as one conditions than Adam Smith. One
who believes in using the full of the first distinctively liberal
force of government for the ad- thinkers was John Locke. His em-
vancement of social, political, and phasis on “the .natural right of
economic justice at the municipal, life, liberty, and property,” on re-
state, national, and international ligious toleration, on a government
levels. . . . A liberal believes that of limited powers deriving its le-
government is a proper tool to use gitimacy from the consent of the
in the development of a society governed drove coffin nails into old
which attempts to carry Christian conceptions of the divine right of
principles of conduct into practical kings to govern as they might see
effect.” fit. His views exercised a powerful
The genuinely liberal French seminal influence both on Britain's
nineteenth century economist, “Glorious Revolution” of 1688 and
Frederic Bastiat, referred to the on the American Revolution a cen-
state as “the great fiction by tury later.
which everyone hopes to live at Locke in his time represented


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

40 THE FREEMAN March

the golden mean between theories they have, and, therefore, they are
of royal absolutism and the crack- to be free. By freedom Locke
pot ideas on religion and property means that men shall not be bound
developed by the so-called Level- without their own consent.”
ers and other wild-eyed groups
that came up during the period of Personal Rights and Responsibilities
strife and confusion that followed What Locke contributed to the
the struggle between Charles I political philosophy of liberalism
and the Parliament. Locke showed was supplemented, on the eco-
how liberty and order could be as- nomic side, by Adam Smith, who
sured under a political and social lived about a century later. His
system which restricted the state classical work, The Wealth of Na-
to the role of guardian and en- tioms, is a magnificent vindication
forcer of man’s natural rights. of the general proposition that hu-
The late Harold J. Laski was a man beings get along best when
radical socialist, not a liberal. Yet, there is the least governmental
in one of his best books, The Rise meddling and coddling. As Smith
of Liberalism, he gives a summary put it, “every man is by nature
of Locke’s ideas on the state first and principally recommended
which, while not meant as praise, to his own care.”
is basically fair and accurate: Smith believed that state action
“For God, as he [Locke] tells should be mainly limited to pro-
us, has given the world to ‘the use tecting the individual citizen
of the industrious and rational’ against injustice and violence.
and the state, by their own con- The main function of what he
sent, is there to protect their ex- called “that insidious and crafty
ploitation of it. He has the full animal vulgarly called the states-
sense of indolence as sin, the cor- man or politician” was to give his
responding insistence on the obli- countrymen peace abroad and or-
gation to labor and the recogni- der at home. He preferred ‘the
tion of the successful man’s good natural rules of justice, independ-
fortune as an enrichment of the ent of all positive institutions” to
commonwealth, If property is the state planning and interference
outcome of labor, clearly it is en- with the natural course of the
titled to security, for it is ‘the economy.
great and chief end, therefore, of If John Locke and Adam Smith
men’s uniting into common- were alive today, they would be
wealths.’ puzzled and distressed by the clam-
“They are to be secure in what or for setting up “national


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

1961 LIBERALS VERSUS STATIST “LIBERALS” 41

goals.” They would hold that a Liberals and Conservatives alter-
society, whose members are free nated in power in England; the
to pursue their lawful interests Liberal Party went to pieces as a
under the normal dictates of the result of a split between the Lloyd
moral law, would fare pretty well, George and Asquith factions in
without the prescription of spe- World War I and has never been
cific goals by the government or able to revive on a significant
any other agency. scale.

Edmund Burke is often claimed Standard principles of classical
as the patron saint of conservative liberalism were the conviction that
thinking. But, although much of the best government governs least,
Burke’s emphasis is on respecting a preference for individual enter-
and preserving what is valuable prise over state action, coolness
in the national heritage, there is toward imperialist adventures, a
a utilitarian element in his think- belief in retrenchment in state ex-
ing that fits in with classical lib- penditure, a zealous regard for the
eralism, as expressed by Locke liberty of the individual against
and Smith. What Burke wrote in the encroachments of censorship
“Thoughts and Details on Scar- and bureaucracy. John Stuart
city” against the conception of Mill's essay On Liberty expressed
government as an omnicompetent perhaps more eloquently than any
provider was good classical liberal other work the Victorian liberal’s
doctrine: creed.

“To provide for us in our neces- By some queer trick of pervert-
sities is not in the power of gov- ed semantics the kind of people
ernment. It would be a vain pre- who in Europe would call them-
sumption in statesmen to think selves socialists or social democrats
they can do it....It is in the power took it into their heads in Amer-
of government to prevent much ica to establish a kind of squat-
evil; it can do very little positive ters’ right to the designation of
good in this, or perhaps in any- “liberals.” The contrast between

thing else.” the authentic liberals of the past
— who may still be found, inci-
Classical Liberalism dentally, in continental Europe —

So liberalism evolved as a politi- and the statist “liberals” of the
cal and economic philosophy be- present is strikingly complete on
fore the British Liberal Party and several important issues of poli-
similar parties on the continent tics and economics.
were organized. For generations The classical liberal believed


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

42 THE FREEMAN March

that the emphasis in economic life Two recent examples may be
should be on individual enterprise, cited as proof that the laissez-
not on state action. The Grand Old faire philosophy is not a product
Man of Victorian liberalism, Wil- of heartlessness or mental laziness.
liam E. Gladstone, regarded the Recurring drought in the thirties
personal income tax as an obnox- caused large numbers of farmers
ious and unjust form of taxation, in Oklahoma and adjacent states
tried at one time to abolish it, and to pull up stakes and migrate,
kept it at a level that now seems mostly to California. In the begin-
incredibly low. “Peace, Retrench- ning there were hardships, diffi
ment, and Reform” was a familiar culties of adjustment. But now the

Liberal slogan. so-called problem of the ‘“Okies”
has long ceased to exist. Cali-
Unlimited Government fornia is giving them a better liv-

But the modern American “lib- ing than did the parched acres of
eral” is apt to be, on principle, a their native states in the thirties.
profligate spender of public funds There was a similar situation,
for any and all purposes and some- on a much bigger scale, in Ger-
times merely for the supposed many after the end of World War
stimulating effect of spending. If II. Many millions of Germans and
he is free from the patented cyni- people of German origin - were
cism of a Harry Hopkins, with his driven from their homes in the
formula for buying the votes of eastern provinces of Germany, in
the people with their own money, the Sudetenland area of Czecho-
he is often a crude Keynesian, con- slovakia, in some of the Balkan
vinced that the cure for all eco- countries. At first, the social prob-

nomic ills is for the government — lem of finding a livelihood for this
the supposed horn of plenty — to inpouring of forced migrants
write a larger check. seemed staggering.

The classical liberal believed in But the German government re-

the wisdom of laissez faire, of let- sisted the temptation to seek a
ting the temporary difficulties and solution by means of regimenta-
frictions in an economy work tion. It did not tell the refugees
themselves out. The modern “lib- that they must go here or work in
eral” wants the government to such and such an industry. It gave
rush to the rescue, at the first sign help, within the limits of its re-
of maladjustment, like a fire de- sources; but it did not dictate.
partment responding to a fire And today, there is practically no
alarm. refugee problem. These new Ger-


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

1961 LIBERALS VERSUS STATIST “LIBERALS” 43

man citizens have taken the places was the climactic phase in the
vacated by the millions of able- emancipation of the individual
bodied Germans who perished in from the injustices of despotism
the war. So successful has been and feudalism and the pressures
the German economic recovery, of a static social order. But the
which began when controls were objective of modern “liberalism”
scrapped and normal private in- is to put the individual in a new
centives restored, that the Ger- strait jacket of state aid and state
man economy not only has ab- control, of state handouts and
sorbed and given employment to state confiscatory taxation.
the vast numbers of refugees, but
also has employed hundreds of What can Americans do who be-
thousands of foreign workers, lieve in the original liberal prin-
Italians, Spaniards, Greeks, and ciples of individualism, self-reli-
others. ance, and opportunity and see
The classical liberal favored these principles flouted by statists
flexibility, letting individuals and masquerading under the name of
industries face up to and make “liberals”? Well, they can use quo-
their own adjustments. The mod- tation marks whenever they refer
ern “liberal” would rather perpet- to false “liberals.” And they can
uate rigidities, encouraging peo- think hard for a term that will
ple to stay where there is no eco- adequately describe their own po-
nomic need for them, underpin- sition. For statism has established
ning cracks in the economy with its squatters’ right so firmly that
an ever-enlarging layer of state no one who believes in the ideas of
subsidies. Locke and Adam Smith and Burke
Classical liberalism was a pow- could call himself a liberal, in
erful instrument in freeing the in- America, without inviting the
dividual from the tyranny of arbi- gravest misconception of what he
trary government. Modern “liber- really stands for.
alism” goes in heavily for laws The last irony was reached
and judicial rulings that override when, in the time before the cold
deep-rooted local sentiments and war had heated up, when the
destroy the right of the individual Soviet Union was still officially a
to dispose of his property as he gallant ally, it was not uncommon
may see fit and to choose his chil- to see, in American left-wing pub-
dren’s environment and associates. lications, the expression: “Com-
Historically, genuine liberalism munists and other liberals.” PY


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

PROPAGANDA is a very respectable
word fallen on evil days. It came
first into general use as the name
for a committee of cardinals
whose object was to spread the
Gospel amongst the heathen. But
it fell into deep disgrace when it
became associated with the out-
pourings of Dr. Goebbels. Many
people then realized that state
propaganda could become one of
the most dangerous instruments
on earth, As a result, there arose
a strong feeling against giving
the government, in times of peace,
any right whatever to communi-
cate to the people anything but
the most innocuous and easily con-
firmable facts.
Ce But what of those semigovern-
v7 LT 8 mental concerns such as TVA in
Ans Il America and the nationalized in-
AAS \ ] B dustries in Great Britain; have
d yy oOR they the right to speak for them-
' selves? Whether they have or not,
they most certainly do. Their pub-
SELECTED FACTS IN THE lic relations officers have the pow-
er to spend a great deal of money,
BRITISH and one result of this is the pro-
duction of beautifully illustrated
booklets little calculated to restore
NATIONALIZED the word propaganda in our es-

Mr. Winder, formerly a Solicitor of the Su-

preme Court in New Zealand, is now farming
R in England. He has written widely on law,
agriculture, and economics, his most recent

book being A Short History of Money.
Hlustration: A coal mine winding head in

: Britain's industrial midlands. Courtesy British
George Winder Information Service.

©



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

1961 BRITISH NATIONALIZED COAL INDUSTRY 45

teem. In Great Britain the object give, by way of illustration, some
of many of these quasi-govern- of the figures concerning the Brit-
mental publications is not to im- ish coal industry that such propa-
part information, but to perpetu- ganda has tended to conceal.
ate the nationalization of the in-
dustry which issues them. Official Report

There is a British Broadcasting Perhaps the most tendentious
Company program called “Any booklet issued by the British Coal
Questions?” in which a panel of Board appeared four years ago
exceptionally well-informed men, under the name, Investing in
including some of the more intelli- Coal. This begins by informing
gent members of Parliament from its readers that “when the Nation-
all sides of the House, discuss al Coal Board took over Britain's
questions of public interest. On mines on January 1, 1947, they
one occasion a question on the became responsible for an indus-
coal industry brought the reply try which had been shrinking for
that coal production had increased more than a quarter of a century.”
since the industry had been na- It then describes the wonderful
tionalized. The discussion, heard way the Coal Board has recon-
by some millions of people, was structed and developed the indus-
then continued on the basis of this try under its “Plan for Coal,” and
assumption, not even the Conserv- “proves” its case by giving figures,
ative Member of Parliament on some of which are those of actual

the panel correcting it. production, while others are the
A possible explanation why these speculations of the planners.
very exceptional men on this “Any Here are some of these figures—
Questions?” program were so ill- Million Tons of
informed is that they may have tons of coal
read some of the booklets issued coal output
by the British Coal Board. Misled produced per man
themselves, they have in turn mis- 1947 = 197 263
led millions of listeners, thus illus- 1955 ..... 221 298
trating the power of a few book- 1960 (Est.) ....... - 228 319
lets. 1965 (Est.) ... 240 342
This article, therefore, has two To make sure these figures are

objects. One is to warn the Ameri- driven home, a graph is provided
can people of the dangers of prop- which, by the device of continuing
aganda from quasi-governmental the upward movement of an illus-
organizations, and the other is to trated mountain of coal until 1965,


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

46 THE FREEMAN March

makes all the more impressive the the British coal industry, far from
apparent rise in production since expanding under nationalization,
nationalization. has not yet caught up to its prewar
Propaganda can often be liter- production, and now looks as if it
ally true, but at the same time never will.
very misleading, In fact some peo- Against the 221 million tons the
ple consider this the very highest booklet displays for production in
form of propaganda, because it 1955, the industry, under private
can be indulged in with impunity. enterprise, can show a higher fig-
These Coal Board figures are of ure in nearly every year of this
this nature. They are literally true, century. In 1913 production was
but they constitute propaganda 287 million tons. In 1923 and 1924
just the same, for they are so se- it was respectively 276 and 267
lective as to be utterly and com- million tons. Even in the three
pletely misleading. The reason for years immediately before the last
this is the choice of 1947 as the war — 1937 to 1939 — when the in-
year on which calculations are dustry suffered many difficulties,
based. production averaged 233 million
At the time, the industry had tons.
been in complete control of the
government since the outbreak of Even Worse than Figures Show
World War II. It had not recov- But even these figures do not
ered from its low wartime produc- express the full extent of the Coal
tion which was due to many of the Board’s failure. In comparing the
miners joining the forces, the in- output of private ownership and
ability to replace miners’ equip- state ownership in the coal indus-
ment, and probably also to the try, we should allow for the fact
very fact of government control. that in its efforts to meet the great
With 1947 as a base, there is postwar demand the Coal Board
hardly another industry in the has made use of open cast or strip
country which has not expanded mining. This has damaged large
its production far more than has areas of agricultural land, and
the coal industry. If, however, originally was only adopted as a
this booklet had based its survey wartime expedient. Coal obtained
on any average year under free in this way is usually of very poor
enterprise before the war, the im- quality and the system was never
pression given would have been used in Britain by private enter-
completely different. Such a com- prise. To obtain a fair comparison,
parison would have disclosed that therefore, with the production of


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

1961 BRITISH NATIONALIZED COAL INDUSTRY 47

private enterprise the quantity Coal Board carefully refrains from
quarried by the strip mining sys- mentioning in its expensive publi-
tem should be deducted from the cations.

figures given for total postwar When the socialist government
production. When this is done, the first took over the mines, they
figure for coal production in 1955 were so sure that they could re-
is not 221 million tons, but 210.2 gain the production attained be-
million tons. The greatest quantity fore the war under free enter-
of deep mined coal the Board has prise that they actually entered
ever been able to produce in any into a solemn contract with the
one year was 213 million tons in United States of America under
1954. Only in 1932 and 1933 in the Marshall Aid arrangements to
the depth of the depression, and in supply 33 million tons of coal to
1921 and 1926 when serious strikes Europe in 1950. This contract was
hindered the industry, has produc- never fulfilled, only 13.5 million
tion under private enterprise been tons being exported in that year
that low during this century. to all overseas markets.

Mr. James Bowman, Chairman Since the Board has taken over,
of the Board, in another beauti- Great Britain's coal export trade,
fully printed brochure, issued in which at one time was considered
1957, tells us that “for every six the very foundation of her great-
tons which it [the coal industry] ness, has virtually disappeared.
produced ten years ago, it now Before 1913, exports amounted to
turns out seven.” He fails to men- over 70 million tons a year. In 1929
tion, however, that for every six it was 60 million tons. In 1931 in
tons it produced in 1913 it now the depth of the great depression

produces 4.3 tons. it was 42 million tons. In 1938 it
was 35 million tons. But the most
The People Pay that the Coal Board has ever been

The British coal mines are now able to export in any one year
the property of the people; the since nationalization has been 13,-
money spent on these beautifully 972,000 tons, in 1953. This has
printed booklets and brochures is, since fallen to less than 5 million
therefore, their money; surely tons in 1958. Furthermore, Great
they are entitled to all the facts, Britain has even been reduced to
not just these selected facts which importing coal from the United
constitute nothing save propa- States. Newcastle has actually re-
ganda for the Coal Board. ceived coal from the United States

Here are a few items which the which had to be unloaded into


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

48 THE FREEMAN March

barges; the cranes on the wharves in regard to control and person-
could not handle it as they were nel, the nationalization of the
built only to load coal outward. mines may well prove a disastrous
Newcastle had never envisaged the failure. It cannot deal with the
day she would be required to im- indiscipline so rampant in the
port coal. Perhaps nothing else mines; it cannot keep an effective
epitomizes the failure of Great check on production costs; it can-
Britain's nationalized coal indus- not give confidence and effective
try quite so much as these “coals leadership to management or men.”
to Newcastle.” There is no sign in the produec-

Under the Coal Board the num- tion figures that the radical alter-
ber of strikes have quadrupled, ation Sir Charles demanded has
and the rate of absenteeism has ever taken place.

doubled.
The one figure that has im- One Intervention Leads to Another
proved in the Coal Board's statis- Perhaps I should point out that

tics is the production per shift. the Coal Board claim that it took
The reason for this is that the over a declining industry is not al-
government by 1955 had spent together wrong. But this was not
£696 million (almost $2 billion) the fault of free enterprise; it
in improving the pits and provid- was due solely to the interferencé
ing new machinery. In addition, a of the government with the indus-
great quantity of machinery was try. In 1930, the socialist govern-
given free of charge to the Coal ment of Mr. Ramsay McDonald,
Board under Marshall Aid. This with a view to securing the sur-
machinery makes it almost impos- vival of the less efficient mines,
sible for a miner not to produce and thus ensuring employment for
more coal per shift, but he fully the workers, passed the Coal Min-
makes up for this by working few- ing Act which fixed for each pit a
er shifts. As Sir Charles Reid, the production quota not to be ex-
most distinguished member of the ceeded.

original Coal Board, once said, The effect of this was to do
“We are putting into the pits day away with the competition that is
by day great masses of machinery, the very essence of free enterprise.
but it does not seem to matter What inducement is there for a
what we do, the output per man is mineowner to put in modern ma-
not rising.” He also said, “With- chinery when he cannot increase
out a more radical alteration in his production thereby? But in
the Coal Board downwards, both spite of this, the nationalized coal


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

\
1961 BRITISH NATIONALIZED COAL INDUSTRY 49

industry has never been able to for coal. For years supply had
overtake the production of the pri- failed to meet demand, and now
vately owned mines even in their demand shrank to meet supply.
admittedly most backward period; This needed a great power of
instead, production has sunk still adaptation on the part of the
further. No public relations officer, Coal Board, but this is about the
as far as I am aware, has ever last thing one can expect from a
pointed this out. board of officials. While the Board
Under nationalization the price studied the situation, stocks of
of coal rose to about six times its coal accumulated, littering the
prewar figure, 16 shillings a ton landscape and running the Board
at the pit head in 1939, against 96 still further into debt.
shillings in 1958. Since then it has
risen still further. While in 1939 [Inevitable Unemployment
a ton of coal cost 23 per cent of But, at last, the Board faced up
the average weekly industrial wage, to the position and the astonished
it cost 39 per cent in 1956. In spite miners discovered that some pits
of this great increase in the price were actually being closed down,
of coal, almost double the rate of and that some of their friends
other necessities, the Board has an were being dismissed as redun-
accumulated deficit of £65 million dant. In Kent, the miners staged
($182 million). a stay-down-the-mine strike; but,
For more than ten years after as it was impossible to go on pay-
the nationalization of the industry ing miners to produce coal nobody
there was an instant demand for wanted, they were inevitably de-
all the coal the Board could bring feated. To many a miner it came
to the surface. In fact, coal had as an astonishing revelation that
to be rationed long after all other the State could not guarantee him
commodities had been freed from a job in his chosen occupation for-
this wartime expedient. Most min- ever. His faith in nationalization
ers believed that this excessive de- received a resounding blow. At the
mand would continue forever, but present time, the coal production
almost unnoticed, possibly because in Great Britain is still further
of the excessive price of coal, a on the decline.
change was taking place in the Investing in Coal promised us
British people’s choice of fuel. 228 million tons of coal in 1960,
The use of oil steadily increased with an output per man of 319
in ships, factories, and in the tons. In 1959 production was 206.1
home, and this reduced the demand million tons of both deep mined


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

50 THE FREEMAN March

and strip mined coal, with an out- price than before. This investment
put per man of 294 tons. This fig- must be one of the worst any peo-
ure for production was some 9 mil- ple have ever made. But perhaps
lion tons below the previous year, the most pernicious feature of the
so the Board’s forecasts now look whole business is the way the
like figments of the imagination. = Coal Board has’served up its prop-
So aganda to conceal the defects of

The - British people’s “Invest- its own conception and organiza-
ment in Coal” amounted to £388 tion. Fortunately, the Coal Board
million in compensation for the is also required by law to produce
previous owners, and by 1960 over an Annual Report and Statement
£877 million had been spent on of Accounts. This humble booklet,
improvements — a total of over $3 known only to the initiated, ‘does
billion. All they have received from have the merit of stating facts;
this investment is a smaller supply otherwise, this article ‘could’ not
of coal at a very much higher have been written. . ->

The Tyrant As Slave

HE WHO IS THE REAL TYRANT, whatever men may think, is the’
real slave, and is obliged to practice the greatest adulation and
servility, and to be the flatterer of the vilest of mankind. He has
desires which he is utterly unable to satisfy, and has more wants
than any one, and is truly poor, if you know how to inspect the
whole soul of him: all his life long he is beset with fear and is
full of convulsions, and distractions, even as the State which he

resembles: and surely the resemblance holds?

Moreover . . . he grows worse from having power: he becomes |
and is of necessity more jealous, more faithless, more unjust,
more friendless, more impious, than he was at first; he is the pur-
veyor and cherisher of every sort of vice, and the consequence is
that he is supremely miserable, and that he makes everybody

else as miserable as himself. .
' PLATO, The Republic


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

ROBERT M. LLOYD

IRON ORE
INDUSTRY

-

HISTORICALLY, steel producing cen- ducing nations have generally also
ters have always been located been leading iron ore producing
with reference to the accessi- nations. Actually, the importation
bility of raw materials — iron ore, of large tonnages of iron ore into
coal, and limestone, This was the major production centers is rela-
case in Britain, in Alsace-Lor- tively new in the long history of
raine, in Birmingham, and Pitts- steelmaking. Only in recent years
burgh. In recent years, however, have improved handling and trans-
other considerations such as mar- portation methods, rising ore
ket potentials and even national prices and labor costs, and the
politics have become of increasing consequent values of the iron pro-
importance in determining the ducing potentials of higher quality
location of new steel plants. This ores in certain market situations
fact is evidenced by the number made it possible for imported ore,
of small steel mills that are in many instances, to compete
springing up in Latin America; with domestic ore in meeting part
the growth of the Japanese steel of the over-all steel demand.

industry, sustained to a large ex- Before World War II, few peo-
tent on imported raw materials; ple would have believed that some
and the geographical dispersion of day iron ore would move from
steel mills within the United Nevada to Japan, from India to
States and Europe to take advan- Western Europe, and even from
tage of local markets. Chile to Lower Lakes ports, such

In the past, leading steel pro- as Detroit.

—— Most of the export ore flows to
United States Steel Corporation. This article States, Great Britain, the six na-

is condensed from a paper presented at the

Pittsburgh Regional Technical Meeting of the tions of the European Coal and
American Iron and Steel Institute, November .
16, 1960. Steel Community, and Japan. How-

51


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

52 THE FREEMAN March

ever, it should not be considered ket. Tomorrow, any of the factors
that the marketing pattern is I have just mentioned may de-
fixed. On the contrary, it is con- stroy an attractive price-quality
tinually changing as consumption ratio and that particular ore will
demands shift from one geo- then cease to flow.

graphic center to another as ocean .

freight rates fluctuate, as new ore Shifting Markets

deposits are discovered and The rapid increase in the use of
equipped for production, and ascur- imported iron ores throughout the
rency controls and exchange regu- world after World War II, and par-
lations affect purchases. Note the ticularly since 1952, can be attrib-
complex crisscrossing of the trade uted to a number of phenomena,
routes. At first sight some of these which differ from country to coun-
seem illogical, but in every case try. In the case of Great Britain
there is a reason behind the move- and Japan, the reason is the sub-
ment, a price-quality ratio that stantial growth in steel capacity
makes that particular ore attrac- which outstripped the economics of
tive today in that particular mar- domestic ore reserves; in the case

ne
SIATLS

Principal steel producing centers of the world. 1958.


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

1961 THE CHANGING IRON ORE INDUSTRY 53

Principal iron ore resources of the world. 1958.

of the United States, the building others are the reasons generally
of new steelmaking facilities to expressed. In every case, however,
service market areas more remote the basic underlying reason for
from domestic ore sources, but the increase in iron ore imports
easily accessible to imported ores, of which all these things are a
plus the furnace benefits realiz- part is that the “price-quality
able at some plants from the gen- ratios” of the iron ores in demand
erally higher quality foreign ores; at these particular times and
in Western Europe, the rapid post- places are more attractive than
war expansion of steel capacity the ‘“price-quality ratios” of the
which would have required large available domestic ores.
uneconomic investments in mining
facilities if only domestic ores
were utilized; and in general, the There are three important fac-
availability of low cost ocean tors that can influence the “price”
transportation as a result of lar- part of the ‘“price-quality ratio,”
ger, specially designed ore carriers namely, mining costs, transpor-
and more efficient dock and ore tation costs and artificial trade
handling facilities. These and restrictions.

Cost Factors



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

54 THE FREEMAN March

Mining costs are an important costs involve the high quality of
item in the over-all delivered cost the ore, in addition to relatively
of every iron ore. They are deter- high labor productivity in terms
mined largely by mining plant ef- of wage costs per unit. Tax costs
ficiency, labor costs, and tax costs. are important items in total min-
Although reasons may vary from ing costs, whether they are local
case to case, it is generally true or national. Unfortunately, they
that the iron ore exporting coun-' are not readily controllable by the
tries enjoy relatively lower mining producer.
costs, in terms of cents per unit of Another important iron ore cost
contained iron, than do-the im- item is transportation. The capital
porting countries. In some cases, investment involved in producing
such as Canada and Venezuela, low cost ocean transportation is
low costs are in a large degree substantial and can only be justi-
attributable to the investments fied if depreciable over a consider-
made in modern and efficient able annual tonnage. Therefore, ex-
plants. In India and Brazil, low port trade will, over the years, tend

Millions of Metric Tons

35

: yo

: ~~

: yy

=

0 Fz" 77>7>"" "= A
1945 : 1950 1955 1960

United States imports of iron ore.



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

1961 THE CHANGING IRON ORE INDUSTRY 5153

swisgns! 2K
ssh

[Lit]

Neo

Major shipments of iron ore in 1956.

to become concentrated in large or quotas have ever been imposed
operations that can support such anywhere to limit this freedom.
capital investments. Certainly no restrictive move
The third important influence would appear to be worth-while in
in determining price and the pat- the case of iron ore. As an ex-
tern of trade in the international ample, let us take a minute to see
market is the factor of artificial just what would happen if a coun-
trade restrictions, such as quotas try were to attempt to restrict the
and tariffs. Many nations or groups flow of iron ore by setting up tar-
of nations have used in the past, iffs. To the extent that the tariff
and still use, these trade restric- is high enough to keep out foreign
tions as a means of enabling do- ores —and it would have to be
mestic industrial production to quite high to make domestic ores
maintain its position in the home competitive in widely dispersed
market in the face of available im- steelmaking centers — the labor in-
ports. Iron ore, however, has tra- volved in mining, processing, and
ditionally moved freely in the mar- transporting the ore from mine
ket; and fortunately, no tariffs to consuming plant would be


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

56 THE FREEMAN March

shifted from foreign to domestic ton of finished steel, and it re-
hands; and taxes assessable on quires 30 times more manhours to
profits realized on these opera- produce a ton of finished steel
tions would be shifted to a greater than to produce a ton of ore, any
or lesser extent from foreign tax- temporary increase in domestic
ing authorities to domestic taxing iron mining employment brought
authorities. On first thought this about by the substitution of lower
shift might appear to be all to the “price-quality ratio” domestic ores
good as far as the domestic econ- for higher ‘price-quality ratio”
omy is concerned. . foreign ores would be offset many
times over by the resultant reduc-
tion in employment in steel produc-
However, looking further into tion and transportation of steel
the matter, it becomes evident products, to say nothing of the loss
that to the extent that the price of employment in the related raw
of the substitute domestic ore de- materials mining and transporting
livered to the steelmaker would industries such as coal, limestone,
then exceed the price of the re- and scrap. However, this is not
placed foreign ore, by just that all, for as steel production might
amount is the cost of steel in- be curtailed, the demand for iron
creased; and this increased steel ore would fall off so that the ap-
cost would in turn be ultimately parent tariff-generated increase of
reflected in increased costs of steel jobs in the domestic ore mining
products. Certainly the major re- industry would prove to be only
sults would be: temporary and actually more il-
1. Decreased exports of steel Ilusory than real.
products which at the higher
costs, and hence prices, find them- The Tax Picture
selves no longer competitive in the A similar situation develops
foreign market; with respect to federal and even
2. Increased imports of steel to state tax revenues. Increased
products from foreign sources federal taxes that might be col-
that have now acquired a new lected from the domestic iron min-
competitive advantage; and ing industry with iron ore import
3. As a consequence of 1 and 2, restrictions could be offset many-
decreased domestic production of fold by decreased collections from
steel and steel products. the steel industry and the other
Inasmuch as approximately 1% industries serving it, as well as
tons of iron ore are used for every from the manufacturers of prod-

Unseen Consequences


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

1961 THE CHANGING IRON ORE INDUSTRY a7

ucts made from steel. Eventually unrestricted flow of iron ore
decreased state tax revenues would throughout the world is essential
also be inevitable, to the best interests of the iron
ore industry, of the steel industry,
In short, while tariffs or other and of the public at large. This
restrictions on iron ore imports is true for individual nations and
might temporarily benefit some for the free world as a whole.
iron ore mining communities, both We as a nation must permit the
labor-wise and tax-wise, the na- natural law of supply and demand
tion as a whole — labor, the tax to operate unhampered by arti-
coffers, and the consuming public ficial restrictions if our steel us-
— would be heavy losers. ing industries, our raw material
For economic reasons, as well producers, our labor force, and
as from the point of view of long our nation as a whole are to
term supply, a continued free and prosper. L 3

Government in Industry

AND EVEN IN CASES where a government may go so far as to start
an industrial enterprise, I think every effort should be made to
put the venture into the hands of private capital and private
management as quickly as possible.

For rare exceptions do not disprove the often illustrated rule
that it is not in the nature of government to act with the flexi-
bility or the attention to business considerations that is required
of good industrial management. And — successful or not — so long
as the enterprise stays in government hands, it does not stimu-
late the growth of similar enterprises, because private investors
who could finance them are not willing to try to compete with
government. The net result of these state ventures, more often
than not, is to restrict the growth of production — or in other
words, to defeat the very purpose they seek.

EUGENE R. BLACK, President of the World Bank,
in Istanbul, November 1955


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

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN

A FUTURE |
NOT WORTH HAVING

IT SEEMS TO BE an article of faith pays Communists the tribute of
that we, as a nation, should always thinking them sincere in their
stand ready to “negotiate” with abiding hostility toward the “bour-
Communists provided they show geois” world. Agreements with
evidence of acting in good faith them would, of necessity, be highly
toward us. But the Marxist-Lenin- provisional, subject to secret sabo-
ist conception of morality — that tage on their part in times of a
anything is “right” just so long as ‘popular front” line and to open
it furthers the Bolshevik aim of abrogation when “hard” considera-
the “Party” to establish a world tions take over. An agreement
dictatorship of the proletariat — with Communists would signify
would seem to rule out the initial nothing more than the fact that
possibility that Communists can they considered they were getting
ever negotiate in good faith with the better of a provisional deal.
anyone. True, they could be wrong in their
There is, of course, the possibil- estimation of the temporary bal-
ity, as expressed by Cyrus Eaton, ance of benefits. Nevertheless,
that the Communists don’t “believe Communists can be most danger-
their own bunk” about world revo- ous when they are seemingly the
lution. But this raises another most amiable.
question: how can one comfortably

accept an agreement, or a treaty, Professional Revolutionaries

signed with professional cynics? F. Scott Fitzgerald once com-
We have had “scraps of paper” be- plained to Ernest Hemingway that
fore. the rich are different from the

In his The Moulding of Com- poor. But rich and poor alike, the
munists: the Training of the Com- West seems not to understand that
munist Cadre (Harcourt, Brace, the hard core Communist is his
214 pp. $5.00), Frank S. Meyer own special type of being. He is

58


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

1961 A FUTURE NOT WORTH HAVING 59

sincere in his implacable insincer- chosen vessel. The single human
ity when dealing with those who being’s will becomes ferocious in
do not accept the aims of the the effort to get forward with an
Marxist revolution. How he gets impersonally willed program.
that way is a study in a special Being a ‘chosen vessel” de-
type of indoctrination and contin- mands an apparatus for deciding
ued supervision in action. Ex-Com- just who is fit to serve the new
munists, such as Koestler and Historical godhead. It demands
Whittaker Chambers, have emerged agents and standards of recruit-
from the shadows of a tortured ment. And it must prescribe the
“breaking” period to warn us that pressures which are necessary to
the indoctrination, save in margin- bring the recruited “chosen vessel”
al instances that have no effect on to a continuing realization of His-
“cadre Communist” decisions, is tory’s demands. :
for keeps. But Mr. Meyer's book is
the first to offer a systematized The “Horse’s Mouth”
explanation of the making of the Mr. Meyer's book takes the
hard core communist man. agents and the standards for
As refined and defined by Lenin, granted: after all, the politburo of
Marxism calls for the creation of the Soviet Union is a going politi-
a group of “inner circle” profes- cal fact, and the standards which
sional revolutionaries who will it enjoins are to be found in the
break completely with the past. great Marxist texts. But taking off
God is rejected and History is from what is granted, Mr. Meyer
put in his place. This new secular proceeds to break new ground. The
god of History has decreed its own first part of his book analyzes the
ultimate end: a world in which the philosophical, psychological, and
community will “own” the means bureaucratic pressures that are
of production. Since this is “pre- brought to bear upon the young
destined” by History’s inner dia- communist recruit to break down
lectic, nobody, presumably, has to his personality and make it over
work for it. But History uses hu- in accordance with an idealized
man beings to express its decrees. type that will be prepared to do
The professional revolutionary is anything and suffer anything to
the one who has been elected to be promote the “line” of the Marxist
the agent of predestination. Like revolution. The second part deals
Calvinism, Marxism-Leninism im- with the men and groups on whom
parts a terrific sense of importance the fearsome pressures are con-
to the man who is the godhead’s tinuously exerted.


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

60 THE FREEMAN March

Because he was himself a Com- makes much of the Communist’s
munist of more than a decade’s ex- insistence that Marxism is “ra-
perience (he worked for the Party tional,” that it believes in science
both in England and in America not as a formulation of expected
during the thirties and escaped regularities but as something
only after a prolonged period of known as “science in control.” To
stocktaking while a member of the achieve the sublime sense of cer-
U. S. armed forces during the tainty that the universe is “lim-
war), Mr. Meyer is in a position ited and knowable” — and there-
to illustrate his points from a fore “controllable” — the Commu-
widely varied personal background. nist has to accept the “thing in it-
But the development of his expo- self” as interchangeable with
sition, while it is pleasantly anec- “the thing to us.” But to achieve
dotal at times, is not in the least this easy identity, the Communist
“subjective,” to use a favorite has to reject what Mr. Meyer calls
communist word. “the glorious human fate of living

Mr. Meyer's stuff comes from with mystery.” To the Communist,
the ‘““horse’s mouth,” but it has there is nothing beyond the “ma-
been carefully related to the ex- terial.” And when it comes to en-
perience of all the other horses, gineering the “material,” opera-
from Marx, Lenin, and Stalin on tions on protoplasm are not to be
down to the newest hawker of distinguished from operations on
communist leaflets or minor trade metals and rock.
union functionary who has been Communist rationality rejects
recruited as a borer-from-within. all the mysterious yearnings of
Lead horse and wheel horse, Mr. man, his desire for goodness and
Meyer has anatomized their words ideal justice, his hope of trans-
and words-in-action to build up his cendent meaning, his feelings of

patient picture. tenderness. Lenin, tempted to play
} with cats or to listen to Beethoven,
Controlling the Universe has to put aside his innate desires

And what a picture of Lucifer- for pets and music as remnants of
ian debasement it is! The very “rotten” bourgeois training. To
word ‘‘moulding” in Mr. Meyer's the Communist, “enjoyment, the
title has a special connotation: satisfaction of curiosity, medita-
Communists remould people by a tion, intellectual achievement, art,
Procrustean process of hacking off and certainly all spiritual aware-
whatever is extraneous to their ness,” says Mr. Meyer, “are empty
rigidly canalized needs. Mr. Meyer except insofar as they derive a


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

1961 A FUTURE NOT WORTH HAVING 61

secondary meaning, positive or having children or to let his indi-
negative, from the essential reality gent uncle starve to death while
of human existence regarded as he contributes his own funds to

control of the universe.” save the revolution in Indo-China.
Sex is permissible, but it must not
Means to an End get in the way of Party duty. To

The sort of “rationality” that the Communist, it is not immoral
can regard the mysterious as non- to take Trotsky’s secretary as
existent does obvious violence to one’s mistress in order to get suf-
the nature of man. To feel truly ficiently close to the Great Rene-
human, man must regard his own gade to poleax him to death. But
life as an end in itself. Politics and it is immoral to remain true to
economics are the secondary con- your wife if it entails absence
siderations: one must work and from agitational work or a four-
one must establish certain political hour unit meeting.
relations with one’s fellows in or-
der to have the time, the substance “‘Reductionism”
and the energy needed to satisfy The aridity of the communist
the more mysterious primary approach to life is summed up by
needs of the human personality. Mr. Meyer in one word: “reduc-
If one can enjoy oneself in one’s tionism.” Like Freudianism, which
work, so much the better. But en- regards ‘the most delicate con-
joyment in work is a spiritual, not structions of reason and of spiri-
a strictly economic, matter. Eco- tual insight” as “nothing but” the
nomics and politics are wholly play of libido, Marxism regards
within the realm of means. And “the most complex reaches of the
man should live by means, not for imaginative mind” as ‘nothing
them. but” the play of class interests. To

The Communist, seeking re- “reduce himself” to communist
cruits to mould (or to hack), is cadre material, the recruit to com-
faced with a job: he has to turn munism must accept the criticism
the natural order of things upside of his peers and superiors in the
down. The recruit, if he is to satis- movement without anger. Further-
fy Party criteria, must submit to more, he must pile “self-criticism”
an expansive course in depersonal- on top of the criticism. He can
ization. If his family gets in the have no individual pride of au-
way of his activity as a Commu- thorship, pride of workmanship,
nist, he must be prepared to put or pride of decision. Pride must be
aside his wife or to refrain from limited to a feeling of satisfaction

/


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

62 THE FREEMAN March

in having served the god of His- isn’t worth having, even if it is
tory. Of course, the dictatorship foreordained to happén. If the Fu-
at the top of it all is permitted to ture is synonymous with the de-
change the line. But the rank and based world of the Marxist texts;
file and the cadres just above the then let us die fighting it. As
rank and file have no business Camus has said, it is sometimes
questioning the top decrees once man’s greatest glory that he can

they are made. History speaks battle against Pate itself. o>
through revelation to the big
bosses in Moscow. ; p THE COST OF: FREEDOM: A

The Communist might, of course, NEW LOOK AT CAPITALISM

try to answer Mr. Meyer by say- by Henry. C. ‘Wallich. Harper. 178

ing that once the classless society pp. $3.75
has been achieved there will be Reviewed by Edwin McDowell
plenty of time: for art, for the THE ANOMALY of this book, by a
satisfaction of curiosity, for medi- former Yale professor. now with
tation, and for play. Pie in the the Council of Economic Advisers,
sky! On Mr. Meyer's incontrovert- is that he presents the libertarian
ible evidence the “moulding” of case for economic freedom as co-
Communists would, by the time gently as do its most ardent sup-
the classless ‘society is finally porters —and then he retreats to
achieved, have so-debased the hu- an ideological middle ground mid-
man: race that it would never re- way between Hayek and Keynes.
cover. Anyway, since no two hu- Again and again, author Wallich
man beings are: precisely alike, points out the advantages of eco-
differentiation must persist —and nomic freedom, yet he nevertheless
with the differentiation there will, places himself in the position of en-
inevitably, be classes. (This does dorsing measures which smack of
not mean -that a certain number of compulsion. For instance, whereas
human beings are destined always he deprecates forced economic
to starve.) So let us take comfort growth as “an attractive new label
in the certainty that the Commu- to paste onan old package of big
nists can’t mould ‘everybody to deficit spending, and easy money
their desires. Human nature,’ in proposals,” ‘he -believes that full-
most humans, will out. . employment ‘policies — which can
If it doesn’t, then to the devil only be effected by government in-
with History. To cooperate with tervention in the market economy
the Marxian idea of predestination’ — are essential to the health of
is to cooperate with a Future that the free enterprise system.


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

1961 OTHER BOOKS 63

It’s ironic, the author notes, that efficiency vis-a-vis collectivism. He
at a time when capitalism is per- cites the Soviet Union as an ex-
forming better than ever before, ample of an efficient collectivist
it is also being challenged more society which has made great eco-
seriously. The challenge emanates nomic strides, yet he underesti-
from those who argue that free- mates the.advantages the Soviets
dom from arbitrary government have been accorded by the free
is not enough; man, they say, also world’s technological and scien-
needs financial independence in tific advances. Russia has been
order to be free. Instead of the able to pluck the fruits of the
traditional “freedom from,” this American industrial .revolution,
“new freedom” is a “freedom to” and yet — by every reliable eco-
— a freedom, observes the author, nomic yardstick — is still woefully
which “points fatally toward col- behind the United States.
lectivism.” On many subjects, Professor

The reason freedom has been Wallich’s conclusions are irrefut-
losing is because its defenders’ able, particularly when he argues
vigilance too often stops where that private property is the back-
their pocketbooks begin. The busi- stop of free enterprise, providing
nessman persuasively defends protection against omnipotent gov-
freedom in one breath and de- ernment, and when he states that
mands a “subsidy” in the next; the the rise of egalitarianism senti-
labor leader declares himself in ment threatens to remove the
favor of freedom and then pro- stamp of approval to financial suc-
ceeds to use coercive union prac- cess. On these, libertarians have
tices; the intellectual, whom the no quarrel, but they can and should
author calls “the number one bene- quarrel with others of his conclu-
ficiary of a free system,” sees no sions. >
connection between liberties of the

mind and freedom of choice in the
tnd an © p WHAT IS POLITICAL PHILOS-

marketplace.
. . . OPHY? AND OTHER STUDIES
Professor Wallich believes capi- by Leo Strauss, Glencoe, Illinois:

talism is not necessarily the most The Free Press, 1959. 315 pp.
efficient system, but because it $6.00.

places the highest evaluation on
individual free choice, it is the
one we should wholeheartedly sup- LEO STRAUSS is professor of
port. The cost of freedom, he main- political science at the University
tains, is free enterprise’s lack of of Chicago, and the author of sev-

‘Reviewed by Jerzy Hauptmann


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

64 THE FREEMAN March

eral influential books on Thomas to all subjects; and historicism —
Hobbes, on natural law, and kin- the notion that the facts of history
dred matters. The present volume generate theories on their own.
contains ten previously published We agree with this diagnosis by
essays and sixteen brief reviews. Strauss. We do need standards of
The essays attempt to establish value for politics which can be pro-
a place for political philosophy on vided only by a sound political
the contemporary scene. Strauss, philosophy. We also recognize that
like many observers, is keenly many of the answers given by
aware of a decline in political phi- classical political philosophers have
losophy; political science and po- timeless value and that the scien-
litical philosophy parted long ago. tistic and historicist criticism of
It is his contention that, by losing political philosophy is largely in-
contact with philosophy, political valid. :
science has lost its basis. It seems to us, however, that
Political philosophy, for Strauss, Strauss creates an unnecessary
is an attempt to know the nature gulf between political philosophy
of political things, an attempt to and political science. He agrees
replace opinions by knowledge. To that political scientists do useful
know the nature of political things, work in collecting data, but he ob-
one needs a basis for reference, a jects to their aspirations toward
standard of value. The love of “scientific” political science. Most
truth and the search for the best political scientists will agree with
political order provide Strauss Strauss that complete objectivity
with such a standard. is impossible, but would contend
He looks to the answers given that their efforts to attain it are
by such men as Plato, Aristotle, nonetheless valuable.
and the medieval writers who dealt Political scientists frequently
with this problem, without refer- look down on philosophers, but the
ence to historical developments, by decline of political philosophy is
appealing to the prehistoric “natu- not due entirely to the onslaught
ral consciousness.” of “scientific” politics. Internal de-
This method in political philos- cay, loss of values, and slips into
ophy is now under attack, if it historicism, are also causes of the
has not disappeared already. The decline. If philosophers and scien-
attackers are guilty, Strauss would tists work together, perhaps polit-
argue, of scientism — the notion ical philosophy may be revived
that the methods of the physical and political science spared many.
scientist are generally applicable errors. >


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

V HEN a devotee of private property, free market, limited govern-
ment principles states his position, he is inevitably confronted with a
barrage of socialistic clichés. Failure to answer these has effectively
silenced many a spokesman for freedom.

The Foundation for Economic Education is developing a series of
suggested answers to the most persistent of these

Clichés of Socialism

Available now are answers to the following:

1. “The more complex the society, the more government control we need.”
2. “If we had no social security, many people would go hungry.”

3. “The government should do for the people what the people are unable to do
for themselves.”

4 “The right to strike is conceded, but. . .”
5. “Too much government? Just what would you cut out?”

6. “The size of the national debt doesn’t matter because we owe it to our-
selves.”

7. “Why, you'd take us back to the horse and buggy.”
8. “The free market ignores the poor.”
9. “Man is born for cooperation, not for competition.”

10. “Americans squander their incomes on themselves while public needs are
neglected.”

11. “Labor unions are too powerful today, but were useful in the past.”
12. “We have learned to counteract and thus avoid any serious depression.”
13. “Human rights are more important than property rights.”

14. “Employees often lack reserves and are subject to ‘exploitation’ by capitalist
employers.”

15. “Competition is fine, but not at the expense of human beings.”
16. “We're paying for it, so we might as well get our share.”

17. “I'm a middle-of-the-roader.”

18. “Customers ought to be protected by price controls.”

Each one is on a separate sheet, 8%” x 11”. Single copies for the ask-
ing. Quantities at 1¢ a sheet. For sample copies (no charge) write to:

THE FounpaTioN For Economic EpucaTioN, INc.
IrviNncTON-ON-HUDSON, N. Y.


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

=