===== PAGE 1 ===== | 018018 ICC MAY 1964 IDEAS ON LIBERTY o Watch That Low, Breaking Stuff . . . . Jess Raley 3 The America We lost . . ., . . . . Mario Pei 7 Hong long: Nothing but Common Sense . Morgan Guaranty Survey 10 Private Property . . . . . . . . . EdwardP.Scharfenberger 21 The Twilight of the Planners . . . . . William Henry Chamberlin 23 Would You Let Them Starve? . . . . . Paul L. Poirot 30 The American Tradition: 14, The Restoration of the Tradition . . Clarence B. Carson 33 Junior's Choice . . . . . . . . . Francis E. Mahaffy 45 Serving Consumers . . . . . . . . W.M. Curtiss 47 Books: Despair Not! . . . . . . . . . . John Chamberlain 59 Other Books . . . . . . . . . . 62 THE FOUNDATION FOR ECONOMIC EDUCATION, INC. lrvington-on-Hudson, New York 10533 ===== PAGE 2 ===== OUTSTANDING ADVANTAGES FOR COAST FEDERAL SAVERS FINANCIAL STRENGTH — Assets over half a billion dollars. Strong reserves and high ratio of cash and government bonds to assure with- drawal of savings immediately on request. HIGHER EARNINGS — Earnings for 1963 paid at 4.9% per year. SAVE-BY-MAIL — We pay postage. MEMBER: Federal Savings and Loan Insurance Corp. Federal Home Loan Bank." IF IT'S SAFETY YOU WANT MOST— OPEN YOUR SAVINGS ACCOUNT AT COAST MAIN OFFICE 9th & Hill, Los Angeles “A Businessman Looks at Communism Vs. Capitalism” For your courtesy copy of President Joe Crail's speech, write to: Coast Federal Savings Post Office Box 5150A Los Angeles 55, California Tr — | COAST FEDERAL SAVINGS | AND LOAN ASSOCIATION } ===== PAGE 3 ===== 100 T0S) ISSUE v» Qur philosopher from Alabama 1» Having previously outlined The takes a look at the other side of the American Tradition, Professor Carson popular pastime of getting out the here offers suggested ways in which vote. P. 3 we might try to restore it. ........ p. 33 »* Pardon the repetition, but it is im- portant to look back now and then at +” What else storks may bring is un- ideals we may be losing. ........... Pp. 7 resolved, but ‘‘Junior’ bears a mes- SAG. p. 45 » From the other side of the world comes a bright example of the prog- ress a little freedom can generate. » When it comes to American foreign RUT p. 10 policy, we could do worse, suggests Dr. Curtiss, than simply serving con- » A specialist in Constitutional law sumers. p. 47 points up the significance of respect for private property. ........... ...... p.- 21 » John Chamberlain explains why » William Henry Chamberlin offers this 1964 edition of Isabel Paterson's new proof that planned coercion yields The God of the Machine is so im- neither prosperity nor peace in other portant. ............................... p. 59 lands... p- 23 » Nor does increasing taxation afford » Robert Thornton finds in the the social security sought by so many life of John Adams the evidence of a persons in the United States. ....p. 30 great American patriot. ............. p. 62 Anyone wishing to communicate with living authors may send first class mail in care of The Freeman for forwarding. ===== PAGE 4 ===== nN THE eeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY MAY 1964 Vol. 14, No. 5 LEONARD E. READ President, Foundation for Economic Education PAUL L. POIROT Managing Editor THE FREEMAN is published monthly by the Foundation for Economic Education, Ine., 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. Copyright, 1964, The Foundation for Economic Education, Inc. Printed in U.S.A, Additional coples, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 25 or more, 20 cents each, Permission is hereby granted to anyone to reprint any article In whole or In part, providing customary credit is glven, except “The America We Lost,” and ‘The American Tradition.” Any current article wlll be supplied In reprint form if there are enough inquiries to justify the cost of the printing. ===== PAGE 5 ===== rT HI + A THAT LOW BREAKING STUFF JESS RALEY THE PARLIAMENTARY PROCEDURES of a dull rasp on a rusty nail. So I to which I'm regularly exposed as forgot my speech to listen. an “after dinner” speaker are usu- Three or four persons spoke ally routine. But last evening was briefly in favor of the motion; the a notable exception. majority didn’t seem to care one Of the forty-six present, all way or another. I was thinking seemed to be men of affairs. The bitterly that it would pass with no food and fellowship were first- word of opposition, when a large, rate. What a fine audience and set- stoop-shouldered man was recog- ting for my speech, I was think- nized by the chair. He seemed to ing, when an item in the order of be just a bit embarrassed but very business caught my attention. determined; and when his purpose A motion to participate in a became clear, I hung on every “get out and vote” campaign was word. being debated on the floor. I hap- “Gentlemen,” he said, “I play pen to believe that an individual's to win, and I'm not one bit right to vote includes his right not ashamed of it. I like to win, hate to vote, if no candidate or issue in- to lose. Now, I don’t always win, volved seems worthy of his en- but I always aim to. There have dorsement. Superficial appeals to been a few times that I beat my- vote for anybody or anything self but I'm not noted for this; it grate on my nerves like the sound generally takes a stronger team to Mr. Raley is a free-lance author, speaker do the job. When I lose to a strong- philosopher from Gadsden, Alabama. "er team, it cuts pretty deep, but 3 ===== PAGE 6 ===== 4 THE FREEMAN May the games I have lost by my own it and go swimming, is going to stupidity are a hundred times hurt you more than he helps. I've worse. seen boys of this type who had a “Of course, most of you gentle- world of talent; but if they have men know this. I am a charter no interest, I don’t want them on member of the club and have my team. It’s the boy who can’t be coached our youth’s baseball teams kept from playing, the one that for many years.” The coach was starts calling the first pretty day perspiring freely by this time. Ob- after Christmas, wanting to know viously, he found it difficult to find when practice starts, that will win the words he wished to use, but his ball games for you. determination had not diminished “In baseball our goal is winning in the least. He unbuttoned his the game, and the only way to do coat, straightened his tie, ran a this is to score more runs than the finger around between his neck opposition. Before a player can and shirt collar, and plunged in score, he must get on base; one of again. the better ways to accomplish this “Gentlemen, if I understand this is a base hit. Now, each batter has motion, it states that we will spend the right to strike at any pitch de- a certain amount on newspaper, livered to the plate, but how many radio, and television advertising games do you think we would win in an effort to persuade people, if players were not taught to who might not do so otherwise, to judge a pitch? What kind of coach vote. In addition to this we would would I be if I inhibited the efforts offer our services on election day of a few determined players by to haul anyone who called to the rounding up a group of boys who polls and back. Well, I am one refused to take time to learn any- hundred per cent opposed to this thing at all about the game, and motion. It’s not that I mind spend- inserted them in my lineup with ing the money, you understand, no instructions except that they and I haul a whole ball team, with had the right to swing at every spikes, in the car, so it’s not that. pitch? But — well —a thing like that could “Sounds stupid, doesn’t it? Not beat you, and I'll show you how. only would we lose every game we “The boy who must be pressured played, but when the opposition into playing baseball, the one you discovered the brand of ball we have to hunt down and take to were playing we would never get practice, call before each game to another decent pitch to hit at. make sure he doesn’t forget about They could afford to walk our ex- ===== PAGE 7 ===== 1964 WATCH THAT LOW, BREAKING STUFF 5 perienced players, knowing the factions. There is also a liberal others would strike out and leave and a conservative element within them stranded. each party and local branch. Even “Gentlemen, I vote to win just more confusing is the fact that the same as I play ball to win, and many liberals wish to maintain the I’m not ashamed of that either. present trend or existing condi- The goal I hope to reach — the tions, while conservatives gener- thing I hope to win by voting or ally hope to change quite a few refusing to vote, is better govern- things. ment. To me, better government is “From the little I have been less government, more individual able to observe, I know there is no responsibility, less restraint on easy way to understand politics. free enterprise, but I am not go- Many people are upset by govern- ing to make a political speech. ment action from time to time and What I do want to say is this: A set out determined to do some- citizen that must be persuaded in- thing about it, but it is not unusual to voting will contribute as much to find these same people voting to winning or maintaining consti- for the very same factors they tutional government ag a disin- have sworn to defeat. terested, uninstructed player will “Personally, I try very hard be- contribute to winning a ball game. cause I am vitally concerned. I “This matter of voting is serious study the issues, ideology, and rec- business, gentlemen. I know from ords, but in spite of this, I still go talking with people and hearing for the low, breaking stuff occa- others talk that the vast majority sionally. Not often, you under- want about the same kind of gov- stand, but often enough to keep ernment I want, but we are not me on my toes. getting it. As a matter of fact, we “Now, if a man who devotes con- are getting further from it all the siderable time to politics finds it time. Now, if there were two difficult to determine how he clearly defined political parties, one should vote, how can you expect for those who favor republicanism one that must be pressured into and one for those who want social- voting to cast an enlightened bal- ism, the voters’ task would be easy, lot? On the other hand, if it makes but this is not the case. no difference to you how a man “Within each major party we votes, as stated in this motion, I find old-line, new-line, and what-a- don’t see how it could possibly line. Then we have the Northern, make any difference if he votes or Eastern, Southern, and Western not. So why should we spend our ===== PAGE 8 ===== 6 THE FREEMAN May time and money to see that he - the kind of government you want does? or winning a ball game?” “Just one more thought, gentle- The motion was killed unani- men, and I'll sit down. You can see, mously. I delivered the briefest I am sure, how stupid this theory talk of a long career, primarily would be in a ball game. I don’t noted for short talks, and drove believe there is a man here who home feeling sure that I knew ex- would think of using it on the ball actly how Elijah felt when he field. Now, gentlemen, it seems to found that his was not the only me the real question is: What is knee that had refused to bow to more important to you, winning Baal. @® | oo BS © cimom0y | Formal Justice A PRINCIPLE of the widest application in ethics and politics as well as in economics, which may be described as the principle of formal justice, has begun to operate in a remarkable manner. A government which lends its power and assistance to one set of people must be prepared to act in a similar manner in all similar cases. If once this principle is abandoned, governmental action becomes either a matter of chance or depends upon clamour and jobbery. It is wonderful how quickly the human mind discovers analo- gies in grievances, and how soon one cry leads to another. Mi- crobes are not more rapid and relentless in their multiplication. A plain man may have his doubts about the similarity of trian- gles and consent to arbitration on the question, but he has no doubt that for the purpose of governmental grants and aids his needs are similar to his neighbour's. And the plain man is right. How can we justify the use of state credit for the purchase of lands in Ireland and fishing boats in Scotland if we are not pre- pared to give similar aid to the poor of England who are simi- larly situated? If we grant judicial rents in the country why not in the towns, and if we fix by law one set of prices why not all prices? From The Reaction in Favour of the Classical Political Economy by Professor J. Shield Nicholson, M.A., Nottingham, September, 1898, ===== PAGE 9 ===== MARIO A. PEI WHEN I first came to America, ernment was everywhere. Wher- many years ago, I learned a new ever one looked, one saw signs of meaning of the word “Liberty” the ever-present government — in — freedom from government. the uniforms of numberless royal, I did not learn a new meaning rural, and municipal policemen, for “democracy.” The European soldiers, officers, gold-braided country from which I came, Italy, functionaries of all sorts. You was at that time as ‘‘democratic” could not take a step without gov- as America. It was a constitutional ernment intervention. monarchy, with a parliament, free Many industries and businesses and frequent elections, lots of were government-owned and gov- political parties and plenty of ernment-run — railroads, tele- freedom of religion, speech, press, graphs, salt, and tobacco among and assembly. them. No agreement, however But my native country was gov- trivial, was legal unless written ernment-ridden. A vast bureauc- on government-stamped paper. If racy held it in its countless ten- you stepped out of the city into tacles. Regardless of the party or the country and came back with coalition of parties that might be a ham, a loaf of bread, or a bottle in power at the moment, the gov- of wine, you had to stop at the —_— internal-revenue barriers and pay Dr. Pei, who came to this country from Italy duty to the government, and so Cotumbia University tn New York Ho ne did the farmers who brought in author of several distinguished books and nu- the city’s food supply every morn- merous magazine articles. . . ing. No business could be started The Foundation was given special permission by the Saturday Evening Post to reprint the or run without the official sanction above article. Copyright 1952 by The Curtis CL © un Without the official s Publishing Company. of a hundred bureaucrats. ===== PAGE 10 ===== 8 THE FREEMAN May Young people did not dream of to state and never be asked what going into business for them- your business was or whether you selves; they dreamed of a modest had anything to declare; that you but safe government job, where could open and conduct your own they would have tenure, security, business, provided it was a legiti- and a pitiful pension at the end mate one, without government in- of their plodding careers. There terference; that you could go from was grinding taxation to support one end of the year to the other the many government functions and never have contact with the and the innumerable public ser- national government, save for the vants. Everybody hated the gov- cheery postman who delivered ernment — not just the party in your mail with a speed and effi- power, but the government itself. ciency unknown today; that there They had even coined a phrase, were no national taxes, save hid- “It’s raining — thief of a govern- den excises and import duties that ment!” as though even the evils you did not even know you paid. of nature were the government's In that horse-and-buggy Amer- fault. Yet, I repeat, the country ica, if you made an honest dollar, was democratically run, with all you could pocket it or spend it the trappings of a many-party sys- without having to figure what tem and all the freedoms of which portion of it you “owed” the gov- we in America boast today. ernment or what possible deduc- America in those days made you tions you could allege against that open your lungs wide and inhale government's claims. You did not great gulps of freedom-laden air, have to keep books and records of for here was one additional free- every bit of income and expendi- dom — freedom from government. ture or run the risk of being The government was conspicu- called a liar and a cheat by some- ous by its very absence. There one in authority. were no men in uniform, save oc- Above all, the national ideal casional cops and firemen, no vis- was not the obscure security of a ible bureaucrats, no stifling re- government job, but the boundless strictions, no government monopo- opportunity that all Americans lies. It was wonderful to get used seemed to consider their birth- to the American system: to learn right. Those same Americans that a contract was valid if writ- loved their government then. It ten on the side of a house; that was there to help, protect, and you could move not only from the defend them, not to restrict, be- city to the country but from state fuddle, and harass them. At the ===== PAGE 11 ===== 1964 THE AMERICA WE LOST 9 same time, they did not look to ment by a breathless search for the government for a livelihood “security” that is doomed to de- or for special privileges and hand- feat in advance in a world where outs. They were independent men nothing, not even life itself, is se- in the full sense of the word. cure. Foreign-born citizens have been Far more than the native-born, watching with alarm the gradual they are in a position to make Europeanization of America over comparisons. They see that Amer- the past twenty years. They have ica is fast becoming a nineteenth- seen the growth of the familiar century-model European country. European-style government octo- They are asked to believe that this pus, along with the vanishing of is progress. But they know from the American spirit of freedom bitter experience that it just isn’t and opportunity and its replace- so. @® Reprints available, 2 cents each. | maas [oN] 00060T%Y Milk on the Doorstep “IT 1S REMARKABLE,” comments George Schwartz, an English writer, in an article in The New York Times Magazine, “how many people can see no sense in the existing order of Western society, the easiest criticism of which is that it is not order but disorder. With the milk on the doorstep every morning, the free economy is denounced as unplanned, uncoordinated, and chaotic.” It is a valid observation. There are countries — notably Russia — that have all the necessary material resources but still can’t get the morning milk to the doorstep. Their society’s system of production and distribution is fully ordered, carefully blueprinted by government experts. But they have the plan and no milk while we have the milk and no plan. The fact is, of course, that our economy does not exist in disorder. In the milk business, to take the everyday example mentioned by Mr. Schwartz, there are literally thousands of individuals — farmers, truckers, processors, and salesmen, and the thousands more who are their suppliers — who make the major or minor decisions that get the milk to the doorstep, and earn a profit in the process. No group of government experts could equal the input of knowledge, industry, flexibility, and efficiency that is the combined total contribution of all of these individuals. From Clip-Sheet, published by C. J. Harris, Toronto, Ontario ===== PAGE 12 ===== With no minerals, no oil, no agriculture, and not even an adequate water supply, Hong Kong 8 bursting with activity and growth. How come? Nothing more than a common-sense faith in a free market unfettered by government intervention! An economic bright spot on the face of the earth where people can freely pro- duce and exchange! What will happen now that these people are prosperous? Will they continue to buck the socialistic tide of the twentieth century? — Or imitate the U. S. A.? Reprinted by permission from The Morgan Guaranty Survey, November, 1963. Illustration: Monkmoyor Pross Photo Service. 10 ===== PAGE 13 ===== 1964 HONG KONG: NOTHING BUT COMMON SENSE 11 PERCHED at a tiny crack in Red about 34 per cent in the past three China's bamboo curtain is a bus- years. The Colony’s 398 square tling, prosperous enclave of free miles (not much more than the enterprise. This is the British area of New York City) are dot- Crown Colony of Hong Kong, a ted with new construction: hotels, “crossroads of the Far East” to high-rise apartments, schools, fac- travelogue audiences and a center tories. And the economy has man- of trade and finance to interna- aged to shelter a million refugees tionally-minded businessmen. from Communist China since Location early made Hong Kong 1949. a main channel for trade between All this has happened in a the Western world and China. A laissez faire environment that tradition of holding governmental contrasts sharply with the gov- regulation to a minimum has made ernment-action formula with it a preferred haven for capital, which most nations of the world a lively center of financial dealing, are pursuing economic growth. and an active and versatile for- Hong Kong's foreign trade is al- eign-exchange market. Over the most entirely free. Import duties past decade or so, the Colony has — imposed to collect revenue, not added important new ingredients to restrict the movement of goods to its economic mix. A busy com- — apply to only five groups of plex of light industry has sprung products: liquor, tobacco, hydro- up, with products running a gam- carbon oils, table waters, and ut from textiles to transistor ra- methyl alcohol. Except for ster- dios. Tourism has taken on a new ling, which is restricted under dimension, aided by regularshore- British Commonwealth rules, cur- leave visitations by personnel of rencies may be transferred read- the United States Asian fleet. And, ily; there are both a “free” and spurred in part by the new di- an “official” market. In the free vergification, there has been a market entry and exit of capital major building boom. are unrestricted; establishment With the new mix has come a of new businesses is not inhibit- marked spurt in economic growth. ed; foreign investors may take Hong Kong does not tot up an out profits and capital at will. The estimate of gross national prod- corporate tax rate on profits uct, but there are ample indica- earned within the Colony is 12% tions that things are going well. per cent; profits earned overseas Foreign trade has risen sharply, are tax-free even when brought with both imports and exports up home. ===== PAGE 14 ===== 12 THE FREEMAN May To accomplish its special brand produced more than half (about of postwar economic wonder, $300 million) of Hong Kong's Hong Kong turned adversity — manufactured exports. Other lines the influx of refugees from Red include plastics, transistor radios, China — into an advantage. Dur- air conditioners, electric fans, ing the two years 1949-50, the plywood, carpets, stainless steel refugee tide added one person to cutlery, clocks, cameras, and bi- the population for every two al- noculars. Machine building —start- ready there —an inflow of 750,000. ed to supply the Colony’s own To compound the problem, Hong manufacturing —has expanded in- Kong’s traditional business of to a substantial export business. serving as a trade vestibule to Hong Kong machinery is now be- and from mainland China was ing sold in 70 countries. soon to be reduced severely. The Colony entrepreneurs have free-world countries put an em- shown considerable ingenuity in bargo on shipments of strategic turning local circumstance into goods to the mainland shortly profitable business operations. after the Chinese Communists Airport modernization — begun in entered the Korean War. 1956 to accommodate the needs But the surge of migrants of the new international jet traf- brought with it the makings of fic —led to the development of an Hong Kong's new economic era. aircraft maintenance industry, Some of those who came were ex- which now overhauls airframes perienced industrialists. Some and engines for both civilian and managed to bring capital from military planes based in 388 coun- the mainland. Some had ordered tries. The floor of Hong Kong's machinery for delivery to Shang- magnificent harbor provided raw hai and had it diverted to Hong material for a new industry. En- Kong. Many were skilled workers. terprising salvagers brought up Applying their capital, equip- ships sunk during the war, tore ment, and know-how, the refugees them up, rolled the scrap into set up a variety of new industries steel reinforcing bars. Shipbreak- that today have Hong Kong hum- ing became an important activity: ming. There were some 2,500 fac- ships are now imported for demo- tories in operation in 1954; by lition, and last year enough steel the end of 1962, there were 7,300. rods and bars were rolled to sup- The textile industry is by far ply a large part of the needs for the largest. Last year it employed local construction and furnish 42 per cent of the labor force and some for export. ===== PAGE 15 ===== 1964 HONG KONG: NOTHING BUT COMMON SENSE 13 Economic growth has spurred growth in demand for capital. On a widespread building boom. Sat- the whole, the demand has been ellite towns, which include indus- well satisfied by the Colony’s trial and commercial as well as banking system. The build-up in residential areas, have sprung up manufacturing has been financed in the New Territories, a 365- principally by the banks, which square-mile block of mainland and have advanced working capital, islands that was attached to the made medium- and longer-term Colony under a 99-year lease loans, and also provided some per- agreement signed by China and manent investment. The banks Great Britain in 1898. In the cap- have stretched themselves over ital city of Victoria, on Hong the whole maturity spectrum, and Kong Island, the commercial dis- even into equity investment, be- trict is being redeveloped, with cause a proper capital market has plans already drawn for improved yet to develop. Individual inves- port facilities and new public and tors in Hong Kong have a marked commercial buildings. The new preference for liquidity; by and airport terminal, opened last year large, they have poured their on the mainland, is to be expand- funds into bank deposits. ed. A terminal for ocean-going All told, there are more than passenger ships is on the draw- 90 “banks” in Hong Kong, includ- ing board. And a dozen hotels ing branches of eight mainland completed last year and under banks, which appear to compete construction this year will more with each other in fine disregard than double the Colony’s room of socialist doctrine. The total is count. swollen by a variety of bullion The pace of building has neces- dealers, sales finance companies, gitated a program of land rec- and security houses that would lamation. In crowded Hong Kong, not be classed as banks by U.S. construction sites are likely to be definition. Even so, the scope of made rather than found. Hills conventional banking activity is are leveled to provide buildable impressive, given the size of the locations. The earth sliced from Colony. Hong Kong does not com- the hills is dumped in the harbors pile comprehensive banking sta- to create other sites from the sea. tistics; but, at the end of 1961, available figures showed that 59 Funds for Growth of the largest banks in the Colony The heady pace of Hong Kong’s had total deposits equivalent to economic development has brought almost $600 million — 44 per cent ===== PAGE 16 ===== 14 THE FREEMAN May in demand deposits, 36 per cent an official from the Bank of Eng- in time accounts, 20 per cent in land was invited to study the savings deposits. All three deposit Hong Kong banking system and categories had shown sharp and to make recommendations for re- steady increases. From 1955 to form. 1961, demand deposits were up 73 The survey led to a new bank- per cent, time money jumped ing code that goes into effect next more than eightfold, and savings year, which for the first time will accounts were up almost fivefold. place Hong Kong banks under a Deposit growth did not come by measure of regulatory control. In accident. The major Hong Kong general, the banks will be required banks have rapidly expanded their to maintain a liquid asset ratio branch systems, now are operat- of 25 per cent in relation to their ing a total of almost 225 offices, liabilities, and over the years will or approximately one for every have to build a cushion of re- 15,600 of population. This com- serves. In addition, a variety of pares with one banking office per lending limits have been estab- 11,600 residents in the five bor- lished, and henceforth banks will oughs of New York City (or one have to keep their books open for for 7,900 if savings banks and sav- examination by a banking com- ings and loan associations are in- missioner. cluded). The banks have bid ag- The new regulations are de- gressively for deposits — interest signed solely for depositor protec- rates on demand money run as tion. There is nothing in the code high as 2 per cent, personal sav- to suggest that the Hong Kong ings bring 3 per cent, time money government plans to use monetary rates generally run from 5 per policy as a lever for controlling cent. the economy. Most Hong Kong This busy banking scene has bankers seem to feel that, while not been entirely trouble-free. In the banking controls are a de- mid-1961, one of the largest lo- parture from the tradition of cally-owned banks suffered a li- laissez faire, the introduction of quidity crisis and had to be helped some gentle discipline will in time with a loan from other banks. The enhance Hong Kong's position as a trouble had stemmed from an financial center in the Far East. overly high proportion of long- But if the Colony’s role as a term loans and illiquid invest- money center is to broaden sig- ments. The incident served as a nificantly, its capital market will warning; as a direct consequence, have to be developed. Despite an ===== PAGE 17 ===== 1964 HONG KONG: NOTHING BUT COMMON SENSE 15 ample supply of funds, there has bility of the Hong Kong dollar been no meaningful flow of equity in the rough and tumble of the offerings to provide the making open market. Today, as for more of a public market. Nor is Hong than a decade, the local unit trades Kong an active market for for- close to its parity of 17.5 U.S. cents eign issues; local opportunities (HK$5.7—=1U.S.$1). have been great, and, with profits The Colony’s balance on mer- taxed at only 12%; per cent, it has chandise trade is chronically ad- been hard to find a richer net re- verse. The value of imports, $1.2 turn overseas. billion last year, runs about one- Meanwhile, the flow of outside third more than export earnings. funds is picking up. It is esti- The Colony has to buy most of its mated that some $500 million a goods abroad. The population, es- year comes in seeking haven — timated last year at 3.5 million mostly sent by Chinese living in (98 per cent Chinese), is not large Southeast Asia. Moreover, the enough to support a full line of rising pace of industry and tour- domestic manufactures. Nor does ism is starting to stimulate direct the tiny territory possess much investment from overseas —espe- in the way of industrial raw ma- cially from the United States. The terials; most primary products — Commerce Department estimates e.g., cotton, metals —are imported. that total American investment With workable land scarce, some in the Colony at the end of 1962 80 per cent of the food supply also was $70 million. Nearly 300 U.S. is brought in from outside. companies are represented there. Imports of these essentials have The principal external investor in mounted at an average annual Hong Kong, of course, is the rate of almost 10 per cent for the United Kingdom. Japan, too, has past four years. The principal been increasing its interest in re- supplier is mainland China, which cent years. — although itself a big importer of food —sells Hong Kong a Balance of Payments large part of the latter's daily No Problem in Hong Kong diet. In recent years the Red Hong Kong does not keep over- Chinese have supplied nearly one- all data on its balance of pay- fifth of the Colony’s imports of ments. But bankers in the Colony all kinds. The next largest supplier are convinced that its interna- is Japan; the United States and tional position is healthy, if only United Kingdom contend for third because of the strength and sta- place. ===== PAGE 18 ===== 16 THE FREEMAN May It is estimated that Hong Kong $400 million in 1959 to $582 mil- pays for one-third of its imports lion last year. With imports grow- with proceeds from “invisible” ing somewhat faster, the trade transactions. Much of this income deficit has widened from $293 mil- arises from commercial services lion in 1959 to $400 million last — chiefly financing and insuring year. trade. Recently tourism has also Thus Hong Kong must continue developed into an importantearner to increase its exports if the total of foreign exchange. Travelers economy, so dependent on imports, come both for shopping and for is to keep growing. Mindful of sightseeing. The impressive bar- this, business leaders in the Col- gains and service offered by Hong ony are expressing concern over Kong tailors and dressmakers, what they believe to be serious along with the luxury and atten- faults in both the structure and tiveness lavished by the Colony’s the style of the export trade. hotels, have helped make a visit Chiefly, they are troubled by the there a high spot of most Far heavy dependence on markets in Eastern tours and cruises. Two the U.S. and U.K., which together years ago, 221,000 tourists left buy nearly half of Hong Kong’s behind some $120 million; all told, manufactured exports. tourism is the Colony’s second In the United States, which largest earner of foreign ex- last year took 26 per cent of the change. total, textiles encounter quanti- Exports have not quite kept tative barriers. Early last year, pace with imports in their per- under an agreement then in force, centage growth: foreign sales of the U.S. government asked Hong all goods — those transshipped and Kong to exercise “restraint” in those manufactured — rose nearly exporting several categories of 34 per cent in the three years textiles. Since then, a five-year 1959-62 while imports registered agreement regulating world trade a 35 per cent increase. The ex- in cotton textiles has been con- port gain has been almost entirely cluded by nineteen countries, in- in goods made in Hong Kong. cluding the U.S. and Hong Kong. Trade of the passing-through It reaffirms the right of import- variety, once the Colony’s main ing countries threatened with reliance, has held to a narrow ‘market disruption” to call for range around the equivalent of restraint by exporters. The ar- $180 million, while exports of lo- rangement went into effect a year cal manufacture have grown from ago October, and the U.S. again ===== PAGE 19 ===== 1964 HONG KONG: NOTHING BUT COMMON SENSE 17 called for restraint. This action an unofficial group called the has had the effect of putting ceil- Hong Kong Working Party on the ings on Hong Kong sales of some Kuropean Common Market. Busi- 30 categories of textile products ness, labor, press, the colonial to the United States. government, and the governments The dominant position of tex- of Britain and four of the Com- tiles in the product list is viewed mon Market countries were repre- as a liability in itself, since most sented. The Working Party re- customer nations practice some viewed steps Hong Kong might degree of protection against tex- take to boost its sales in the total tile imports. But up to now, at European market. least, textiles have been a profit- The group recommended that able enough line to make individ- Hong Kong manufacturers study ual entrepreneurs reluctant to the ways of European buyers risk shifting their capital to less more closely, also that they try tested ventures, even though the to anticipate restrictions likely to need to build a more diversified be placed on their goods. Quotas manufacturing base is generally are more dreaded, apparently, acknowledged in the Colony. than are tariffs at any present or Great Britain, which grants fa- proposed level in the Common vorable rates of duty to Hong Market. Interestingly, the Work- Kong goods under the Common- ing Party proposed that Hong wealth preference system, last Kong eventually might consider year took 22 per cent of the requesting an association with the Colony’s manufactured exports. European Economic Community. Worry about what would happen Meanwhile, it recommended that to this trade if the U.K. were to the Colony publicize its potential join the European Common Mar- usefulness to the industrialized ket was not put to rest by the European countries, emphasizing breakoff of the Brussels negotia- the possibilities of trade with tions early in 1963. Even apart mainland China. from Common Market jitters, there is fear that Britain’s declin- Finding Fault ing benefit from Commonwealth With considerable candor, the markets may lead eventually to panel also turned its attention to abolition of preference. another threat to exports — the What to do about such disturb- shortsighted trading practices of ing possibilities was the subject some Hong Kong producers. For of a study published this year by instance, the report criticized the ===== PAGE 20 ===== 18 THE FREEMAN May tendency of some manufacturers vassing nations in Africa and the to flood foreign markets. It also Middle East that can usefully im- mentioned the penchant for copy- port a wide range of low-priced ing successful products. consumer goods. Closely allied to comments like Long-term improvement in ex- these is the realization that the ports probably will require, in ad- franchise of Hong Kong mer- dition to broadened outlets, great- chandise has been hurt in world er diversification of products. markets by shoddy goods poured Hong Kong has not the capital, into export channels and by obvi- technical proficiency, land, nor ous attempts to deceive foreign economic base on which to build consumers with trade names close- heavy or complicated industries. ly resembling familiar brands But it does have a fast-growing (e.g., one obscure company in the work force in its predominantly Colony has exported a “Coalgate” young population. The best bet, toothpaste). consequently, appears to be fur- Sentiment in favor of curbing ther expansion of light industries such injurious practices is grow- which utilize labor intensively. ing in the business community. The Federation of Hong Kong Industries, long interested in im- The knottiness of the problems proving the quality of exports, involved in trade expansion, plus has begun testing textiles for an uneasy feeling that the “image” standards of acceptability. The of Hong Kong industry needs application of moral suasion is touching up, has prompted some likely to grow more vigorous with businessmen in the Colony to urge increasing awareness that depend- that government take a stronger able overseas markets can be cul- hand in the economy. The advo- tivated only on a basis of repeat cates of such a course seem to orders and satisfied customers. envisage an arrangement in which To push exports, the govern- officials would help lay out a sched- ment has been dispatching trade- ule for orderly diversification of promotion teams abroad. Under output and a program of quality this program, commercial mis- control. sionaries have sought larger pur- Intervention of this type would chases from the rich Common be a drastic departure from the Market countries — which now take traditional attitude of the Colony’s only 7 per cent of Hong Kong's government where business is in- exports — and also have been can- volved. In a different area, how- Should Government Be Drafted? ===== PAGE 21 ===== 1964 HONG KONG: NOTHING BUT COMMON SENSE 19 ever, the government already has within another five years. Official- made a significant departure from ly, the border has been sealed the past. This was in dealing with against further immigration, be- the social problems created by the cause Hong Kong feels it has refugee influx which started in reached the limit of its absorptive 1949. The problems were severe. capacity. Illegal entrants are sent For every immigrant who came back if apprehended; even so, last with means, many others came year net immigration is believed with nothing. They squatted wher- to have amounted to more than ever they could find a foothold. 200,000. On the hills rising from Victoria, Having taken the plunge in pub- and around the peninsula city of lic housing, the government has Kowloon, they built shacks of tin, deepened its involvement in other wood, cardboard, and rags. In activities of the social-benefit places they were jammed as tight type, notably education and pro- as 2,000 to the acre, without sani- grams for health and medical care. tation or piped water. It also has undertaken to do some- At first reluctant to depart thing about the chronic problem from its accustomed hands-off of water supply, which is now so policy, the colonial government acute that taps can be turned on finally assumed what it was frank only every fourth day and some to call the ‘‘strange new role of industries using large quantities financier, contractor and landlord.” of water have had to curtail oper- After fires in 1953 and 1954 had ations. A ten-year project for destroyed the shacks of some building dams, reservoirs, and 75,000 squatters, the government tunnels was begun in 1960. moved in, cleared and leveled the The venture into public works burnt-out sites, and began erect- has been financed almost entirely ing apartment buildings six and from current revenues, which seven stories high, each of which were pushed from the equivalent housed approximately 2,000 per- of $51 million in fiscal 1951 to sons at low rentals. $186 million in 1962 with no sig- By the end of last year, about nificant increase in tax rates. An half a million people had been important element in the growth resettled in such developments. in revenues has been income from Perhaps an equal number are still the government's land monopoly without real housing, but the gov- (it all belongs to the Crown, and ernment expects to get enough leases are auctioned —at prices units built to accommodate them that have soared in recent years). ===== PAGE 22 ===== 20 THE FREEMAN May There has been a budget sur- money sent by Chinese in Hong plus in all but one of the past ten Kong to relatives north of the years, and total public debt was border. Also, any show of undue equivalent to only about $16 mil- abrasiveness toward a British lion at the end of fiscal 1962. colony would cast Red China in a Some help in meeting the heavy hostile confrontation of the one expense of refugee care during major Western power that recog- the past dozen years has come nizes the Peking government. from outside loans and contribu- tions: about $18 million from the For the long, long pull, Hong U.K. since 1945; some $50 million Kong's future is clouded by ter- from the U.S., mostly in surplus ritorial uncertainties. Great Brit- foods; and gifts of undetermined ain has outright ownership of less amount from private relief organ- than 10 per cent of the Colony’s izations. area — the island of Hong Kong and the Kowloon peninsula at the The Red Shadow tip of the mainland. The lease The bustling day-to-day pace of granted on the rest, comprising business and the talented mer- the New Territories where the chandising of luxury give anxiety satellite towns are clustered, is little chance to show through in due to expire in 1997. Hong Kong, but the shadow of the A deadline 33 years away, how- red giant to the north flits rest- ever, seems comfortably remote. lessly over any contemplation of It certainly is. not a noticeable the Colony’s future. Peking thus damper on the optimism that far has carefully avoided striking charges Hong Kong's day-to-day anything like a menacing pose — atmosphere. As time runs on, un- in fact, it is more inclined to play less some prior agreement ig the good-neighbor role. For ex- reached for extension or other ample, it regularly makes one of settlement, there probably will be its reservoirs available to water- an intensification of the present short Hong Kong.The communists reluctance to enter into long-term have sound reasons to avoid fric- commitments, especially where the tion. The Colony’s facilities are New Territories are concerned. no less useful to them than to the But, for the practical people of free world. The Chinese value the Hong Kong, accustomed as they hard currency they earn from ex- are to playing it cool and keeping ports to the Colony. They find mobile, 1997 right now is a prob- welcome the food packages and lem that will have to wait its turn. ===== PAGE 23 ===== FYE, VR, men | rine | ; ry i ZA x 1 v EDWARD P. SCHARFENBERGER The following is an excerpt from a statement by Mr. Scharf- enberger, an attorney of Ridgewood, New York, at Hearings on the Brooklyn Bridge Southwest Urban Renewal Project before the New York Planning Commission, February 11, 1964. I po NOT for one moment doubt citizens to whom it does not be- the integrity of the members of long. Lest there be any mistake, this commission. For this reason, this is not the taking of property I find it difficult to believe that in for a road, a courthouse, or a mis- passing on plans such as these, sile site. This is a matter of de- the commissioners ever fully real- priving some citizens of their ize the implications of their acts, private property so that other citi- and especially the impact upon the zens may use and enjoy it. human beings involved. The men Please think this over for a mo- and women, for example, who own ment. No man or group of men, or rent the premises in the proj- however large, would have the ect area are industrious, self-sup- moral right under these circum- porting, and self-respecting. They stances to seize the property of a have committed no crimes. Yet, we single neighbor, with or without have before us a proposal to take compensation. We nevertheless property from these citizens to have on the statute books of the whom it belongs and transfer it State of New York a law which to the use and ownership of other cloaks with legality this admitted- 21 ===== PAGE 24 ===== 22 THE FREEMAN May ly wrongful act. Under color of perior force is notably one of this law, some men (we could not, them. Civilization, too, has its ear- of course, permit every man to ac- marks, and the orderly disposition quire property in this manner) of property through the medium now seek to enlist the coercive of deeds, leases, wills, and other mechanism of government to ac- contractual arrangements is not quire property belonging to their only an earmark of civilization but neighbors. The victims, who in an absolute prerequisite. Leases, former years might have called deeds, wills, and other contracts upon the court or a policeman for will all fall under the stroke of protection, now find the court and the proposed condemnation. With the policeman on the side of the them will fall the personal secur- aggressor. We may not be able to ity, the hopes, the plans, and — yes measure the damaging effect on — the dreams of the many human respect for law and order; but the beings who have placed their faith damage is done, nevertheless. in their worth. Here, as always, The Commission has been told the failure upon the part of large by proponents of the plan that, segments of any given society to among other things, the project is understand and respect the rights a big step forward. I believe it of ownership can only result in more accurate to call it a sizable the rise of innumerable pressure step backward. Barbarism has its groups, all trying to suggest what earmarks, and the acquisition of should be done with other people’s property through conquest or su- property. @ I0GEAS ®M LIBRATY Ownership SOCIETY can freely leave the care for the best possible employ- ment of capital goods to their owners. In embarking upon definite projects these owners expose their own property, wealth, and social position. They are even more interested in the success of their entrepreneurial activities than is society as a whole. For society as a whole the squandering of capital invested in a defi- nite project means only the loss of a small part of its total funds; for the owner it means much more, for the most part the loss of his total fortune. LUDWIG YON MISES, Human Action (1949) ===== PAGE 25 ===== + I 8 AL ML Yn A a THE TWILIGHT Uhh bets ee Any op Sm A © sn CARN SEI RT Ti AA ud 1b tn abe rrr WY OF THE PLAVAERS By on DEE RA — +m rn TH eda vee ewes nw WILLIAM HENRY CHAMBERLIN THE IDEA that authoritative state what manufactured articles and planning of economic life is the commodities, and how much, road to swift, efficient national de- should be produced. velopment is the grand illusion of The recovery of Europe from the twentieth century. Would-be postwar desolation to its present planners are a stubborn breed and state of booming prosperity would do not give up easily. But, on the never have taken place if early record of practical results, the reliance on rationing, bilateral prestige of planning has never trade, government allocation of been so low. The pragmatic value resources had not been scrapped of such essential instruments of a and replaced by the normal meth- free economy as the unhampered ods of a free economy. And in this operation of the free market and connection much credit is due to the maintenance of an interna- such statesmen as Ludwig Erhard tional system of free exchange in Germany, Reinhard Kamitz in convertibility has never been so Austria, the late Luigi Einaudi high. Planning, of course, substi- in Italy, and to truly liberal (not tutes the arbitrary judgment of statist “liberal”) economists, such bureaucrats for the infinitely surer as Jacques Rueff, Wilhelm Roepke, guideline of market demand as to the late Walter Eucken, and, last Mr. Chamberlin is a skilled observer and but far from least, the late Per reporter of economic and political conditions dacobsson, who by their writings at home and abroad. In addition to writing and official and unofficial reports a number of books (his latest, The German Phoenix: Duell, Sloan & Pearce), he has strongly influenced the return to lectured widely and is a contributor to The oi. . . Wall Street Journal and numerous magazines, traditional economic wisdom. 23 ===== PAGE 26 ===== 24 THE FREEMAN May Jacobsson was a mighty battler against the dangers of inflation and the fallacies of “dirigism,” the European word for state directed economy. His reports for the Bank for International Settlements in Basel were beacon lights of com- mon-sense realism. And in the post which he occupied until his death as Secretary-General of the Inter- national Monetary Fund he was able to strike many blows for three basic economic freedoms, free movement of men, money, and goods across frontiers. Jacobsson’s contacts as repre- sentative of the IMF included the leading statesmen of Europe; and the transformation of the French franc from one of the softest cur- rencies in Europe to one of the hardest may be, at least in part, the result of one of his talks with General de Gaulle. He recalled the fact that not the least of Napo- leon’s achievements was the crea- tion of a stable French currency, an achievement which long out- lasted his empire. De Gaulle showed lively interest at the men- tion of the name of Napoleon and shortly after this talk meas- ures were put into effect which stopped the continual erosion in the value of the franc. Another military head of state, General Franco of Spain, proved amenable to the arguments of Erhard and Rueff, whom he had invited to Spain to offer advice as to how best to revive the Span- ish economy, which had been limp- ing along under a good deal of government interventionism. Con- trols were abolished or relaxed, the currency was stabilized, tour- ists flocked into the country in increasing numbers, and exports boomed. All over the world there are dozens of concrete illustrations of the immediate visible benefits that accrue when planning and control are tossed overboard and the econ- omy is permitted to function freely, One of the latest is in the Philippines where there were strikingly favorable results when President Macapagal decided to take a chance on freedom, struck off controls, and left the national currency, the peso, free to sink or swim. Its head was kept above water and Philippine exports and the entire economy visibly gained as freer relations prevailed in na- tional and international trade. Problems in india Another underdeveloped Asian country, India, has followed the different road of planning, and the results, despite vast injections of American economic aid, have not been encouraging, to put it mildly. A very distinguished Indian econ- omist, Professor B. R. Shenoy, who has served his country on ===== PAGE 27 ===== 196} THE TWILIGHT OF THE PLANNERS 25 several international agencies, in for import licenses which may be recent lectures and articles in the sold on the illegal market. To United States has painted a devas- quote Professor Shenoy in The tating picture of the failure of New Individualist Review: planning in India to promote the “Pree dom-loving people, in the general welfare. } name of preserving and spreading An extreme concentration on freedom, are unwittingly financing heavy industry, to the neglect of ;,4 otherwise sustaining socialist India’s basic occupation, agricul- policies which thus far — sensational ture, has saddled the country with projects and schemes apart — have white elephants — or, as Professor yielded little else than social injus- Shenoy calls them, with reference tice, unemployment, poverty, and to a famous Indian memorial conflict. Though the Indian planners palace, Taj Mahals — expensive to and their overseas supporters are build and keep up and producing full of promises and hope, these goods which could be purchased policies can hold out prospects of far more cheaply abroad. The so- nothing better for the future. . . . . . Statist policies in India might have cial objectives of India’s three five- been abandoned long ago, but for year plans, improvement of living the intervention of foreign aid, conditions for the masses of the hich kept the coffers of the prod- people, and reduction of unemploy- igal replenished as they became de- ment, have not been realized. Per pleted, the moral support lent to capita consumption of food is be- statist policies by visiting “experts” low the ration allotted to prisoners from overseas, and the colossal gains in jail and the per capita con- in money and power which these sumption of cloth, another indica- policies yield to the politician and tor of general well-being, has de- civil servant. clined. Expansion in employment The Indian planners are repeat- has not kept pace with the birth ing a blunder which Soviet plan- rate. ners committed in the first years And, although Prime Minister of the Bolshevik Revolution. At Nehru and his colleagues are com- that time, when Russia was terri- mitted to a somewhat vaguely de- bly devastated by the consequences fined Indian socialism, the effect of World War I, violent revolu- of the planned, controlled economy tion, and civil war, Trotsky and has been to enrich the bureauc- other communist leaders, with the racy and the businessmen who get cooperation of some theoretical in on the ground floor of the big economists, worked out a blueprint racket of paying necessary bribes for recovery based on the restora- ===== PAGE 28 ===== 26 THE FREEMAN May tion first of all of transportation Nationalization does not reduce and heavy industry, with satisfac- costs. Experience has amply dem- tion of consumer desires given a onstrated this. We can imagine that later priority. by saving profits we can reduce This scheme broke down under costs. But the actual cost including the pressure of hard realities wastage increases when there is no . . . room for the profit motive. This has With hunger stalking the cities been seen in numberless cases by the and famine in large rural areas, } Public Accounts Committees of Par- Lenin reversed course by declar- jizment. The market economy in- ing the New Economic Policy, volves profits as well as losses. The which amounted, in substance, to hope of profits attracts enterprise freeing the peasants from the and capital. Loss punishes ineffi- compulsory requisitions of war ciency, error, and lapse of attention, communism and allowing agricul- and it is the individual who suffers, ture and small industry to revive not the taxpayers. Efficiency is before tackling the reconstruction Screened by the profit and loss sys- of such industries as iron and tem and those winning through are steel and machine building. This more efficient managers of resources . ) than persons advanced to manageri- is only one of many examples of al positions by politicians. Going the topsy-turvy effect of trying toy, x to the cliché quoted in the be- regulate economic activity by bu- ginning, if we remove the hope of reaucratic planning. profit we shall not alleviate distress India has at least not gone the or misfortunes, but only increase full way to totalitarianism, with them. its destruction of all freedom of ) ) speech and press and expression, Mistakes of the Red Chinese Professor Shenoy makes no secret The disastrous effects of despot- of his views, but retains his post ic state planning, unalleviated by as director of the School of Social any semblance of free political in- Sciences at Gujarat University, stitutions, are most visible in Red in Ahmedabad. A Freedom Party, China. While gullible visitors may headed by the veteran nationalist bring back rose-colored impres- political figure, C. Rajagopala- sions from carefully guided and chari, is able to function and its controlled trips and while the organ, Swarajya (“Freedom”) Chinese Reds, like Mussolini, seem keeps up a drumfire of criticism, to have made the trains run on of which the following excerpt time and cleaned up to some ex- from an article by Rajagopalachari tent the sketchy sanitation of the is a good example: cities, there is one popular verdict ===== PAGE 29 ===== 196} THE TWILIGHT OF THE PLANNERS 27 on Chinese communism which no worthless. Deep plowing, unsuit- thoughtful student can disregard. able and destructive for China’s This is the mass flight of Chinese, rice fields, was ordered from above many of them poor peasants and and enforced against the practical unskilled laborers, to the haven experience of the peasants. A of free enterprise, Hong Kong — water conservation program, un- a movement on a scale never dupli- dertaken without proper geologi- cated in China in pre-communist cal study, led to the digging of times. canals in unsuitable places, which It is difficult to exaggerate the made large areas of arable land misfortunes which economic plan- alkaline. ning, carried out by ignorant and inexperienced bureaucrats, has brought to the long-suffering Whereas the failures of private Chinese people. There have been enterprise cause loss only to pri- mass uprootings of human beings, vate individuals, the failures of originally for the purpose of compulsory state planning lower bringing peasants to work on in- the standard of living for the dustrial and transportation proj- whole population. This was clear ects. Then, when it was necessary to Emmanuel John Hevi, a student to cut back industrial production from Ghana. He spent over a year sharply after the withdrawal of in Red China and came away with Soviet economic aid, the same peo- a very different impression from ple were thrown back on the vil- that which the Chinese, hoping to lages, where there was neither send him back to Africa as an work nor land for them. indoctrinated communist, had In the “Great Leap Forward,” aimed to give him. His book is the result of which was that the full of concrete examples of over- Chinese economy only escaped a work and undernourishment of the broken neck by large-scale pur- Chinese people, of incredibly chases of grain from capitalist shoddy goods turned out in state Canadian and Australian farmers factories, of extraction from the to relieve famine conditions, there peasants of 70 per cent of their were countless absurdities of di- produce in taxes. Mr. Hevi sums - rection from above. There was an up his case as follows: idiotic effort to force people to Exploitation of man by man may make steel in their own backyards pave been abolished in Red China; with the aid of home forges. Not put in its place they have exploita- surprisingly, the output all proved tion of man by the state. That is Africa, Take Note ===== PAGE 30 ===== 28 THE FREEMAN May Chinese socialism . .. I think three port without an economic hinter- major factors have led to China’s ]and. A huge new steel plant was present plight: first, a myopic agri- pyijlt in Eisenhuettenstadt (origi- cultural policy; secondly, the over- nally Stalinstadt) in the Oder taxing of the peasants; and thirdly, pio. yajley; but the iron ore had a frantic haste to industrialize, to be brought 1.400 miles from ly for i 1 i - eo. . ’ . . partly for Internal economic rea Krivoi Rog, in the Soviet Union, sons, but partly, also, to impress the CO world, and the consequent excessive and coke supplies from Poland are emphasis on heavy industry, to the inadequate. Unit costs of produc- neglect and detriment of other sec- tion are consequently extremely tors of national development.! high. An airplane factory in Dres- den was such a production failure Similar colossal blunders of that it had to be closed down. state planning have taken place in the Soviet Union and its Euro- No Method of Calculation pean satellite states. One of the One of the many defects of a biggest in recent years in Russia planned economy is that it affords was Khrushchev’s decision to put no means of determining what the in grain crops on naturally arid cost of any product or service lands in Central Asia, better suited should be. And one of the surest to grazing. Now, it seems, this is signs that this is the twilight of being reconsidered, after the the planners is the groping Soviet Union found itself obliged around, even in communist-ruled to order large supplies of grain countries, for some effective sub- from the unplanned economies of stitute for the pricing which the Canada, Australia, and the United free market, when allowed to func- States. tion, performs smoothly and effi- The record of the part of Ger- ciently. A Soviet economist named many under Soviet control, the so- Liberman has offered several sug- called German Democratic Repub- gestions pointing in this direc- lic, is also studded with miscalecu- tion; but Khrushchev, vacillating lations, involving big wastage of between centralization and decen- labor and capital investment. Con- tralization of his cumbersome ap- siderable effort was devoted to en- paratus of state economic admin- larging the harbor of Rostock, on istration, cannot make up his mind the Baltic Sea. But Rostock is a whether these can be applied with- "1 See An Africon Student in China out departing from Marxist doc- by Emmanuel John Hevi (Praeger, trine. When 1 visited Yugoslavia 1963), pp. 94, 95. some years ago a communist edi- ===== PAGE 31 ===== 1964 THE TWILIGHT OF THE PLANNERS 29 tor, explaining the attempt to give Germans and people of German more autonomy in production and origin, natives of the German marketing decisions to individual provinces which were turned over enterprises, remarked: “We are to Poland, of the Soviet Zone, of trying to create capitalism — with- Czechoslovakia, Yugoslavia, and out capitalists.” Romania, driven by force from Planning is advocated on the their homes or fleeing before ad- ground that some problems are too vancing Soviet armies or not wish- big and difficult to be solved with- ing to live under communist rule, out an element of state direction came pouring in a destitute tide and compulsion. In this connection of migration into the shrunken two experiences are worth recall- frontiers of Free Germany. The ing. John Steinbeck, in The Grapes social and economic crisis might of Wrath, gives a moving pic- well have been regarded as de- ture of how some poverty-stricken manding state intervention. But and drought-ridden farmers in Economics Minister Erhard had Oklahoma pulled up stakes and made his bet on freedom. The ex- traveled in their battered jalopies pellees were given food and shel- to California in search of greener ter, but were left free to choose pastures. On a visit to Southern their own places of settlement and California I asked what had be- forms of work. And today there is come of these “Okies.” “Oh, most not an unemployed refugee left in of them have become substantial Germany and the danger cloud of citizens, holding good jobs,” was an embittered, pauperized minor- the reply. Would it have been ity has passed entirely from the better for the “Okies” if some horizon. planning agency had possessed Put to the test of practical re- the power to tell them where to go, sults, economic freedom wins over what kind of work to take up? state planning hands down, every- More recently, in the immediate where, under all circumstances. aftermath of the war, the German And planning, even in totalitarian Federal Republic faced an “Okie” states, has entered the twilight problem many times multiplied. zone of frequent and demonstrated Between ten and fifteen million failure. @® ===== PAGE 32 ===== Would You Let Them Starve? PAuL L. PoIROT THOUGH compulsory social se- The social security idea is based curity has been the law of the on the questionable premise that land for little more than a gen- a man’s usefulness ends at age eration, many citizens of the 65. He is supposed to be without United States are now convinced savings and without capacity to that they couldn’t get along with- continue to earn his living, If out it. To express doubts about that premise were correct, it the propriety of the program is would be easy to see how hunger to invite the question: “Would might develop among the aged. you let them starve?” If they’re really good for nothing, Millions of Americans are old who wants to be bothered to look enough to remember things that after the old folks! happened prior to passage of the Lumping people into groups Social Security Act in 1935, but and jumping to conclusions about where is one of them who ever each group — people over 65 would watched a human being starve? go hungry without social security No, we wouldn’t “let them starve.” — is standard socialistic proce- Anyone would have to work hard dure. A corollary socialistic con- at it, in secret, to approach star- clusion is that breadwinners un- vation in this country! So why der 656 must be compelled by force is it so widely believed that, with- of law to respect and care for out social security benefit pay- their elders. These conclusions ments, many people would go rest on false assumptions made hungry? by those so lacking in self-respect 30 ===== PAGE 33 ===== 1964 “WOULD YOU LET THEM STARVE?" 31 that they can have no faith in gry — perhaps starve; we are in- anyone else as an individual. vited to try once again a semi- Their faith is in coercion, and slave system — under benevolent they thus conclude that govern- masters, of course. Well, those ment holds the only answer to socialists are dead wrong. Their every problem. premises are faulty. Free human To those of little faith, it is beings may be counted upon to necessary to explain again and care well for themselves and for again and again that government their fellow men, voluntarily. is noncreative and can distribute only what it first taxes away from An Immoral Practice the productive efforts of individ- What should concern us all is uals. “The people” are — first, that, if we persist under the false last, and always — individuals, premises of the social security some more economically creative idea (socialism), many Ameri- than others, but each worthy of cans will go hungry —not only respect as a human being. To tax physically hungry, but morally and a man’s earnings and savings, for spiritually starved as well. other than defensive purposes, is The prime argument against to reduce his capacity and his in- social security is in the moral centive to care for himself and for realm. Giving to one individual or others, rendering him part slave group the fruits of the labor of to others and thus less than hu- others taken from them by coer- man. Furthermore, he also is en- cion is an immoral procedure, slaved and debased who either with destructive effect upon the volunteers or is forced to look to sense of personal responsibility of the taxing power of government everyone involved. But there are for his livelihood. sufficient reasons for rejecting Slavery has been tried in the the program, even from a strictly United States, unfortunately, and materialistic point of view: a major reason why it failed is 1.It is not old-age insurance; that it was, and is, an unproduc- it is a regressive income tax, tive way of life; it lets people go the greatest burden of which hungry. It also is morally degrad- falls on those earning $4,800 ing to slave and master alike. Yet, or less annually. we are being told that without 2. The so-called social security compulsory social security taxes fund of about $20 billion upon the young and strong, the amounts to nothing more oldsters among us would go hun- than a bookkeeping entry, ===== PAGE 34 ===== 32 THE FREEMAN May showing how much money the employees either through the federal government has reduced wages or through borrowed from itself in the higher prices for goods and name of social security and services. spent for other purposes. 5. Offering a subsidy to those 3. The fact that an individual who retire at age 65 does not has paid social security taxes provide additional savings all his life does not mean for plant and tools and thus that any of that money has create jobs for younger work- been set aside or invested for ers; it increases their taxes. his account; if he ever re- 6. A person now entering the ceives social security bene- social security program at fits, they must come from age 20 is scheduled to pay taxes collected from others $1.69 in taxes for every $1.00 (perhaps even from him) at promised in benefits. * the time. 4. Th tchi t *For a more comprehensive review of ‘ € matching amounts, pre- these and other arguments against sumably paid by employers compulsory security, see “The Social on behalf of individual em- Security Program” in The Freeman, ployees, are in effect paid by November, 1962; copy on request, Reprints available, 2 cents cach. | [OJAI OIN YH BIEIRITAY Do It Yourself! I MAKE this suggestion to young men: When you find something to criticize in business, don’t go to Congress to have it corrected. Don’t bother to write to the editor of your newspaper. Go to the offender and tell him how to eliminate the cause of your criti- cism. If he doesn’t put you on his payroll, and you still think somethink should be done, see if you can’t figure out a way to get into business with your idea. That’s how most good things get started, and that’s how money is made — by doing something better than the other man. WILLIAM FEATHER, The William Feather Magazine March, 1964 ===== PAGE 35 ===== 14. The Restoration of the Tradition CLARENCE B. CARSON CAN the American tradition be re- tion, of government by men, and stored? Supposing it were desir- of direct group action. They have able to do so, has the time not created numerous institutions — passed when it might have been Interstate Commerce Commission, done? Once embarked upon a Federal Communications Commis- course, must a people not pursue sion, welfare and education agen- it to its end? Anyhow, would it cies, and so on — and the bureauc- not be a revolutionary undertak- racy which operates these certain- ing to attempt to restore the tra- ly has become a vested interest. dition? Appearances would indi- It looks as if the task of restoring cate that a new tradition has been the American tradition might be erected upon the remains of the akin to the effort to put Humpty- old in America, that the reform- Dumpty together again—in a ers have succeeded in developing word, impossible. a tradition of positive govern- My opinion is that this way of mental action, of collective secur- formulating the problem greatly ity, of intervention in the econ- exaggerates the difficulties of re- omy, of integration of the popula- storing the tradition. The diffi Dr Co, Professor of American Histo culties are two-fold, not manifold. at Grove City College, Pennsylvania. His serics They consist, in the first place, on The American Tradition is now available as of convincing a sufficient portion ment on side pack covers "of the American people that it Illustration: National Archives would be worth while restoring. 33 ===== PAGE 36 ===== 34 THE FREEMAN May Second, it would involve overcom- century innovations in America ing the tenacious and determined constitute a tradition stems from resistance of the vested interests a confusion of ideology with tra- (that is, those who stand to gain dition. Throughout this work, I personally by a multitude of gov- have tried to keep clear the dis- ernmental programs and practices) tinction between the two. An ide- who will raise a deafening hue and ology, as I understand it, is a cry at every effort to pry them completed version of reality. It is loose from their privileges, per- a product of the mind of a man or quisites, and benefices. As things of the minds of several men. It now stand, they will be given the may begin with some facts drawn maximum aid, comfort, and cover- from experience, though it is more age in their outcries by the press apt to start with an interpreta- and other media of communica- tion of these facts. One might, for tion. The resultant noise might example, start with the observed frighten the timid into supposing facts that some people do not have a revolution was going on, but a as many clothes as others, nor resolute Congress should be able are their houses as warm, their to undo in short order what it salaries as high, their cupboards has done in decades. as well stocked, and ‘so on. So far, so good, but at this point the ideo- logue usually begins to intrude as- Some might suppose that the sumptions and value judgments, above vastly oversimplifies the whose validity he has not tested, problems. But I am not attempt- if they are testable, ing to maintain that the two The ideologue will say, to con- things mentioned above will be tinue the example, that everybody easy to do. They require a reso- ought to have the necessities of luteness in politicians and popu- life. He may insert the notion that lace that has not been in much the universe was created in such evidence lately. What I am saying a way that these things would be is that the restoration of the tra- provided, if no one interfered. dition does not involve any deep Things are not the way they social revolution or profound should be. He casts around for a metaphysical difficulties. There is villain. The villain, of course, is no tradition of interventionism to whoever is doing the exploiting, be uprooted, only forcefully im- and that will be those who have posed restraints to be removed. more than others, possibly those The belief that the twentieth who have the most. Depending Remove the Restraints ===== PAGE 37 ===== 1964 THE RESTORATION OF THE TRADITION 35 upon his predilections and his pa- automatically. But his disciples tience or spare time, the ideologue have had to devise plans. These may spin out his interpretation to plans involve centralized control embrace a philosophy of history and planning of the social and eco- and a vision of what things will nomic life of a people, or all peo- be like when injustice has been ple. (4) Ideologies must always removed and utopia has arrived. be imposed upon a people and Indeed, it is the essence of ideol- maintained by force or threat of ogies that they are utopian and force. Some of the people may co- that they have an implicit philos- operate in their own enslavement, ophy of history. At least, this has but there will always be dissi- been so since around 1850, and dents, and the realization of utopia not many ideologies go back be- requires that everyone participate, fore this time. willingly or not. (5) Ideologies are always collectivist in character. Ideologies Always Collectivist This is made necessary by the Ideologies, then, are the prod- other characteristics. ucts of intellectuals. But so, pos- On the contrary, a tradition sibly, are ideas, philosophies, the- arises out of the lives of a people. ologies, artistic creations, inven- It is not imposed from above; in- tions, discoveries, and so on. It is deed, it is not ordinarily imposed a mistake to confuse even a col- at all. Whereas an ideology is op- lection of ideas which has been erative in the area where force is rounded out into a philosophy with used, traditions stem from the area ideologies, however. Ideologies of freedom available to a people. have distinguishing features by They are the customary ways a which they can almost always be people develop for carrying on re- recognized. (1) They contain a Jlationships with one another, the completed version of reality. habitual forms for conduct and Everything that has or will hap- activity, the usual means for go- pen is already explained. (2) ing about doing something or They are utopian, and Marx’s pro- other. Ideas may contribute to the testations to the contrary should development of a tradition, theolo- mislead no one as to the heady uto- gies may buttress it, philosophies pianism of Marxism. (3) They may comprehend it, but it can no have a plan for the realization of more stem from these than ideas utopia. Marxism is confusing can exert force without the instru- again because he apparently be- mentalities of men. Many tradi- lieved that the change would come tions probably take shape in the ===== PAGE 38 ===== 36 THE FREEMAN May same fashion that a path through not. No law is necessary, ordi- a wooded area will in the country. narily, for them to be observed, Someone discovers that a certain though a law running contrary to route from one point to another is them will be hardly enforced. The the nearest one which will encoun- whole of them, in their complexity ter the fewest obstacles. He cus- and variety, constitute the paths tomarily takes this course until his which men follow in leading their tread has begun to shape the path. lives in a given society. Any large- Others follow it, and in time this scale disruption of the traditions path becomes the way from one Will result in the disorientation of point to another. the populace. In the modern era, the great revolutions —i.e.,, Eng- The Natural Growth of Tradition lish, French, Russian, Chinese, Traditions are apt to lie close to and so forth — have been the ef- the nature of things and to be con- forts to overturn traditions by the stantly modified by experience. use of force under the guidance of Thus, it is easy to understand how ideology. a tradition would be formed of a My point is this: the reverse family consisting of a man and a does not appear to occur. When woman and their progeny. By na- ideology is abandoned or dis- ture, it takes a man and a woman carded, revolution does not occur. to produce a child. It does not ap- When force is removed from be- pear to conflict with any reality hind it, ideology collapses, and that they should assume the re- people resume the tenor of their sponsibility of rearing the child. lives, following old and developing The chances are good that they new traditions. I have in mind will become devoted to the child, Germany and Italy after World and it may well be that they will War II, or England after the col- sacrifice for its benefit. These lapse of the Puritan regime. practices may be, and usually are, Of course, two conditions are given social and religious sanc- probably particularly important to tions, in addition to legal support, a smooth transition from ideology but they accord well with the ex- to tradition. Law and order would perience of mankind. need to be maintained after the Traditions, then, take shape by collapse of the forcefully imposed the efforts of men to cope with cir- ideology. Second, the extent to cumstances and conditions in regu- which the tradition had been dis- lar ways. They exist whether men rupted would determine how read- have a word to stand for them or ily it might be resumed. For ex- ===== PAGE 39 ===== 1964 THE RESTORATION OF THE TRADITION 37 ample, if private property had sired to do so. They acted too been outlawed, there might be con- swiftly and decisively for that. siderable difficulty in re-establish- In America, however, things ing property. Even so, when force have been quite different. There was removed, this is likely to be has been no proclaimed nor bloody one of the first things to which revolution in the twentieth cen- most people would attend today. tury. Instead, changes have oc- Of course, Americans do not face curred gradually, in an evolution- any such difficulties in restoring ary manner, with the possible ex- their tradition. ception of a short period in the early New Deal. Efforts have usu- ally been made to show how each departure from it was really in The validity of two propositions keeping with the American tradi- needs to be established before the tion. When President Franklin D. above analysis can be made rele- Roosevelt made his court reorgan- vant to the present American con- ization proposal, for instance, he dition. First, it must be shown maintained that he was attempt- that Americans have been guided ing to revitalize the “true” Amer- by an ideology in reforming the ican tradition. Moreover, reform- government and its relation to the ers have sought to use the institu- populace. Second, it must be clear tional framework for their changes that the practices informed by rather than simply destroying it. this ideology have been imposed They have even managed to use by force. such institutions as the Supreme It is easy to show that the Soviet Court, whose authority rested Union was founded upon an ideol- upon a profound tradition, to ad- ogy imposed by force. Lenin made vance their programs. The ideol- no secret of the fact that he was a ogy has usually been obscured be- communist. The bloody imposition hind a scientistic and pragmatic of their programs upon the Rus- cover. sians should have left no doubt In consequence, both ideology that brutal force was used to im- and force have been rather well plement the programs. But Lenin hidden from the view of an idle and Stalin were proclaimed revo- onlooker. Nonetheless, there was lutionists. The vast assault upon and is an ideology. It has almost the body of traditions of the Rus- always been just beneath the sur- sian people could not have been face in the speeches of the reform covered up, if the leaders had de- politicians, the writings of the The Ideology of Reform Is Imposed by Force ===== PAGE 40 ===== 38 THE FREEMAN May theorists, and the fulminations of philosophy have made it possible the discontented. Their “four” (or for ideologues to hide from them- “eight”) year plans even burst selves and from others the fact into view and became a part of the that they are. There are advan- language of the people under such tages, too, in avoiding explicit af- interesting names as Square Deal, firmations of the ideology. Most New Freedom, New Deal, Fair of the assumptions upon which it Deal, and New Frontier. Back of is based have been discredited, and these, the ideology is more difficult if the doctrines were openly af- to discern, but it 1s there. firmed they could be debated. No such difficulties are raised when the ideas are kept conveniently be- There is not space here to ex- neath the surface. Ideologues can plore the ideology in detail, but it operate from day to day —“prag- should suffice to call attention to matically and experimentally,” as its outline. Where such ideologies they like to claim — advancing as the Marxist, socialist, and fas- their ideology without having to cist were set forth in detail and defend it. considerable distinctness, the ide- The ideology is made up of a ology of the American reformers composite of ideas drawn from is fuzzy, blurred, implicit, and progressivism, meliorism, utopian- lacking in clarity. It is quite pos- ism, pragmatism, collectivism, sible that some of the most ideo- with overtones of the class strug- logical of the reformers today are gle, elitism, egalitarianism, and unaware that they are ideologues. gscientism. The name for them all Several reasons can be given for taken together is “democracy,” or this state of affairs. Many of the so its proponents would have us progenitors of present-day reform- believe. Those who advance this ers subscribed to rather explicit ideology in America are usually ideologies; they were socialists, called “liberals.” The elements of Marxists, devotees of the Social the ideology are loosely linked to- Gospel, or “sociocrats.” But they gether and some of them are, in were usually repudiated by their fact, antithetical to one another. American contemporaries, and for For example, egalitarianism and various reasons they or their dis- elitism are patently in conflict ciples got out of the organizations with one another, on the surface and parties by which they could anyhow. Beneath the surface have been identified. Too, the de- where they operate, however, they cay of language and the decline of are made compatible by scientism. The Ideology Outlined ===== PAGE 41 ===== 1964 THE RESTORATION OF THE TRADITION 39 Thus, the society would be sup- nomic or military, whether strings posed to move toward equality, should be attached to foreign aid but this would be done by an elite or not, and so forth. In short, of “scientists.” This explains the much of the apparent confusion is myriad experts, braintrusters, and window dressing. There is suffi- college-trained bureaucrats who cient consistency in the general are employed by the politicians to direction to conclude that their develop and advance their pro- programs are informed by ideol- grams. It should be noted, too, ogy. that the great variety of “isms” Programs almost invariably call in the ideology permits a continual for more central government ac- shifting when the programs come tivity, more centralization of pow- under attack. If the “elite” comes er in the federal government, more under attack, it can take shelter power in the hands of the Presi- under progressivism. That is, it dent and of “independent” agen- maintains that its programs are cies, more spending by all gov- progressive. Those who attack ernments, more deficit financing, them are reactionary. more aid to the “underprivileged,” more benefits under Social Secur- ity, more control and regulation We might suppose, then, that over the economy, more uniform- there would be a general lack of ity of practice throughout the consistency in the programs ad- country, and more integration of vanced by the “liberals.” It does the population. The direction is al- not appear. True, there appears to ways toward a diminution of prop- be confusion quite often, and they erty rights and a redistribution of do like to have debates on what wealth. We move further and they are pleased to call “issues.” further away from individual re- But what they usually debate is sponsibility toward collective re- whether or not the federal govern- sponsibility for everything. The ment should do this or that at this direction is almost always away time, whether the minimum wage from government by law toward should be raised to $1.15 or $1.25 the arbitrary decisions of judges, an hour, whether more federal aid boards, commissions, committees, should be given for urban renewal and administrators. The press re- or education, whether foreign aid ported that Attorney General Rob- should be reduced in order to build ert F. Kennedy was unconcerned more federal housing projects, with drawing a precise bill for whether foreign aid should be eco- Civil Rights. Let it be a very gen- Skin-Deep Inconsistencies ===== PAGE 42 ===== 40 THE FREEMAN May eral measure, and let the courts dications are that if a Supreme determine its scope and limits. Court decision went contrary to The result of all these tenden- the wishes of over 90 per cent of cies is arbitrary and authoritarian the populace, and if the decision government. It is arbitrary be- pleased them, they would favor it. cause the powers are vested in ad- Moreover, many “liberals” have ministrators to exercise as they no compunction about belaboring see fit, each case decided accord- the taste of the great majority of ing to its “merits.” It is authori- Americans, their taste in auto- tarian because the decisions are mobiles, consumer goods, recrea- usually made by authorities, i. e., tion, and so forth. experts. It is ideological, because Even if they were consistent the above have been found to be majoritarians, however, it would the conditions for moving toward not change the fact that force is collectivism in this century, and used to impose the programs. Any the programs themselves are col- positive use of government is pred- lectivist. It is antitraditional be- icated upon the use of force upon cause the programs come from in- someone. This is not altered by the tellectuals rather than taking number who would vote for it or shape out of the lives and habits the desirability of the object of the people. It is even anti-in- sought. If everyone would willing- tellectual because it lacks a co- ly contribute to the program or herently articulated philosophy participate in it, no purpose would which could stand the test of be served by enacting a law. If reason. everyone would willingly give of their substance and time to Social Security, to the Tennessee Valley That this ideology has been and Authority, to foreign aid, to the is advanced by force or the threat support of the Peace Corps, to the of force should not need demon- redistribution of the wealth, to stration. But it does. The pro-- the support of education, it would grams, and the force that is used be superfluous to make laws about to impose them, are supposed to it. The fact that it is made a law be legitimated by being “demo- means that force or the threat of cratic.” Now modern “liberals” force is going to be used to make are majoritarians when it suits those comply who would otherwise their purposes, but they do not be unwilling. Those who persist in feel bound to even this require- passing positive legislation pro- ment of “democracy.” Present in- claim their failure at persuasion, Founded on Force ===== PAGE 43 ===== 1964 THE RESTORATION OF THE TRADITION 41 their lack of faith in freedom, or pensive or too troublesome to hire their devotion to the use of force. someone to do them. Remove the The evolutionary manner of the exemptions and protections from imposition of the ideology by labor unions, rigorously and im- force in America has not made the partially enforce the law, and they reformist way into a tradition. It will no longer be able to create is true that many Americans have crises in the nation. acquired habits of dependence up- There has been much talk and on the government, that parents writing since World War II about have come to expect that the popu- the ‘placid decade,” the lethargy lace collectively will pay for the and conformity of youth, the lack education of their children, that of creativity and imaginativeness some foreign governments have of people. This can be readily come to rely on foreign aid, that cured. Remove the restraints upon many groups have become accus- people, the government guarantees tomed to privileged positions. But of security, and people will soon none of this can subsist without be inventive once again. Many a the support of the state. Repeal youth will begin shortly to im- the legislation, maintain law and prove his “image,” and some will order, and the facade of the re- even learn to say ‘yes, sir’ once formist “tradition” will collapse, again. There is no greater spur to revealing nothing behind it. invention, to imaginativeness, to creativeness, than the realization that one is responsible for his own Let me be more specific. Remove well-being. The pressure of cir- the welfare and unemployment cumstances is an invaluable stim- program, and nature will take over ulant to human ingenuity. shortly. For men grow hungry in only a brief interval, and this Voluntary Charity Restored will be a sufficient prod to drive But — and at this point the re- them to seek remunerative em- former plays his ace — what will ployment. Repeal the minimum happen to those who cannot pro- wage laws, and the onerous book- vide for themselves, to the educa- keeping imposed on employers, let tion of the young, to the care of the hungry man make himself at- the sick, to the support of the tractive to an employer, and the widows and orphans, to the aid “unemployed” will soon be busy of the destitute, to the handi- doing the millions of jobs that are capped and the unfortunate? That not now done because it is too ex- so many should ask the question Remove Privileges and Restraints ===== PAGE 44 ===== 42 THE FREEMAN May should be the answer to it. Surely and redeveloped. This does not those who are so concerned that it even depend upon the memory of be done would be willing to con- the tradition, but it might well be tribute to it themselves. If they aided by it. When individuals are devoted all of the energy they put responsible for their well-being into advancing government pro- once more, thrift, frugality, and grams to the care of the needy, industry are almost certain to be- the needy should be well cared for. come virtues again. The conse- There would be some differ- quences of practicing the vices ences, of course. Those who evince which are their opposites would such deep concern might be ex- be apparent even to many sim- pected to put their money where pletons. No one would be likely their mouths now are. Recipients to fall error to the notion more of charity might be expected to than once that he could spend his show some gratitude for it, rather way to prosperity by spending than accepting the property or the his substance on consumer goods. fruits of the labor of others as a Those who did sowould be marked right. The virtue of giving would by the community as wastrels. replace the compulsion of taxation. Professional welfare workers Consequences Revealed would have to convince the popu- It is not for me to say what lace, not just lawmakers, that they particular forms will be devised were doing a good job. Those who in the reassertion of the tradition, believe in foreign aid could pour what will be reborn from the past, their money into other countries, and what will be developed for with or without strings attached. the first time. No one need trou- All of this will not work perfectly ble himself to think of all the ways to relieve all undeserved suffering. people of a like mind might act No program would. What govern- to accomplish things, what might ment programs do is to remove the be developed as aids to the indi- distinction between deserved and vidual in protecting him from the undeserved suffering, take away unscrupulous, how much and in the right of the individual to the what ways religion may be needed disposal of his property, and re- to support virtues and condemn lieve him of the responsibility for vices. Ideologues have to plan managing his affairs well. their programs in infinite detail. What I am saying is that if we Their programs always suffer remove the forcefully imposed ide- from the deficiencies of a single ology, tradition will be reasserted mind, or of a few minds. Their ===== PAGE 45 ===== 1964 THE RESTORATION OF THE TRADITION 43 foresight needs to be good indeed, that another system would be for they involve huge populaces better. America had a system of in their calculation. A society constitutionalism, of local govern- resting on tradition and devoted ment, of government by law, of to liberty does not suffer from private rights, for the civilizing these drawbacks. Every individ- of groups, and so on. ual may have a plan of his own. Most, if not all, of the whole pop- The Framework Still Stands ulation contributes to the provi- Perhaps had is not the right sion of goods, services, ideas, cus- word. Most of the American po- toms, and habits. The failures of litical tradition is still there. foresight hurt most directly the There is still a Constitution, only individual who has made them, significantly altered in two or but the benefits of his plan, if it three instances so far as language is a success, may reach to all is concerned, though greatly al- mankind. tered by misinterpretation. The United States is still a Republic, still has a federal system of gov- The restoration of the Ameri- ernment, still has much of the can tradition does not depend, framework for liberty intact. The then, upon elaborate plans for the major task of restoration is to ordering of peoples’ lives, for what get men to read, understand, and their folkways, customs, patterns observe the Constitution once of behavior, and habits shall be. more, to limit and balance the These will be taken care of by powers of the state and central people themselves, when they are governments once again, to heed let alone. It does depend, however, the rhetoric and forms of the tra- upon the restoration of a frame- dition. This is an educational work for liberty, so that people problem more than anything else. can act freely once more. It is in However, more direct action can this realm that general agreement be taken by unseating those who would be needed to restore the show no understanding or appreci- American tradition. Undoubtedly, ation of the tradition by the elec- there are, or have been, other ways toral process. If judges persist in for protecting the liberty of the ignoring the provisions of the citizen than those developed in Constitution, they can and should America. But they are not viable be impeached. In like manner, alternatives for Americans, nor administrators can and should be has it been demonstrated lately impeached if they will not stay No Need To Plan Details ===== PAGE 46 ===== 44 THE FREEMAN May within the bounds of the Con- sions which it has created to evade stitution. Indeed, my guess is that constitutional and legal limita- it would not take many impeach- tions. ments to make even Presidents By these and similar means the cautious of exceeding their au- tradition might be restored, with- thority. Congress might contrib- out revolution, without severe ute much by cleaning its own dislocation, without violence, and house, resuming its constitution- it might be that the unemploy- ally granted authority for appro- ment of ideologues would be only priations (in the fullest sense, temporary. On the positive side, not in the nominal manner it fre- it would be a return to the path quently does today), and by dis- of liberty which our Founding mantling the boards and commis- Fathers marked out for us. @ ¢ The next article, concluding this series, will offer suggestions for “Building Upon the Tradition.” | iwcas ®6) wBeaoY | Labor for Sale! THE CLAYTON ACT states that “the labor of a human being is not a commodity.” Then what is it? When you trace any product back far enough, it is composed of only two things — labor (mental and physical) and land (all raw materials). Thus when you buy anything, you are neces- sarily buying the human labor that transformed the raw ma- terials into desired product. The labor of human beings is scarce and desired. Thus it has a price like any other commodity. And in a free society, it is bought and sold on terms acceptable to buyer and seller. If human labor were not for sale, you couldn’t choose your job, or bargain for more pay. While a free human being is not himself a commodity, fortun- ately his labor is. DEAN RUSSELL ===== PAGE 47 ===== Junior s Choice FRANCIS E. MAHAFFY FroM the high branches of a roost at night, descending again towering eucalyptus tree in front to the garden in the morning. of our home in Africa a baby stork Then one morning, perched fell from his nest and fluttered to on the top of our roof, he hesi- the ground. We found him un- tated as the children called him. injured but not yet able to fly. To He looked about him at the ma- protect him from the hazards of jestic mountain peaks of solid hyenas, jackals, and other dangers rock and across the beautiful val- we placed him in our walled-in ley sloping gently down to the garden. Our children, fascinated gorge that carries the floods of by thé new pet, searched for in- rain water rushing madly to the formation on the life, habits, and sea. Overhead a flock of storks diet of the stork family. They flew gracefully by. Heedless of the named him Junior and aided him calls of the children, he stretched in his quest for food. Junior re- his wings and flew off to soar sponded to this attention and soon with his fellow storks into the became very tame, answering to freedom of the skies. the call of his name. After some Our children consoled them- weeks he learned to fly. Disdain- selves in their loss with the knowl- ing the shed, he flew to the top edge that Junior was, after all, of the woodpile or to the roof to a stork and they could expect him oT to prefer the freedom of the The Reverend Mr. Mahaffy has served since . . 1945 as a missionary of the Orthodox Presby- clouds and mountains to the con- terian Church in Eritrea, East Africa. finement of our garden wall. 45 ===== PAGE 48 ===== 46 THE FREEMAN May under the welfare state. Having become accustomed to living at the expense of others, dependent upon subsidies, tariffs, relief checks, unemployment compensa- tion, social security, and a host of other government handouts, they lose even the desire for freedom and reject the responsibility of standing on their own feet. Man, the image bearer of God, was created not to live as a do- mesticated animal, a parasite on But that was not the end of others, but to subdue the world, the story. In about two weeks applying his growing intellect and Junior, apparently tired of for- physical powers to the creation aging for himself, flew back into in order to develop his potential, our garden which he has again strengthen his character, and made his home. Now he willingly serve his Maker. The welfare roosts in the shed at night and state pampered life, however, can seems to prefer the security of so benumb his soul that he loses his life as a family pet to the free- even the desire to enjoy and use dom of the mountains and sky. his freedom under his Creator. Never has he attempted even to In the process he becomes some- fly over the garden wall. Instead, thing less than man. Like Junior he walks at the feet of the chil- he finds contentment with a life dren in search for food as they that falls short of a full realiza- hoe in the garden or gracefully tion of his own nature. catches in his beak scraps of meat The exchange of freedom for which they toss to him. While life under the welfare state is a Junior is a favored pet, he seems deliberate choice of man. The con- to have lost something of the na- sequences of that free choice, ture of that large and graceful however, are destructive of his bird by his clear preference for character. In fact, they are also the pampered life of a domestic destructive of human society for animal. society cannot long support an Even the children were quick ever-growing number of unpro- to see the parallel between Jun- ductive dependents who prefer to ior's conduct and that of people be something less than men. ) ; ate pe ate De BOG ===== PAGE 49 ===== From The Freeman, May 1964 N - aoetar LL : oe P LER ees Tal Junior g Choice FRANCIS E. MAHAFFY FrOM the high branches of a roost at night, descending again "towering eucalyptus tree in front to the garden in the morning. of our home in Africa a baby stork Then one morning, perched fell from his nest and fluttered to on the top of our roof, he hesi- the ground. We found him un- tated as the children called him. injured but not yet able to fly. To He looked about him at the ma- protect him from the hazards of jestic mountain peaks of solid hyenas, jackals, and other dangers rock and across the beautiful val- we placed him in our walled-in ley sloping gently down to the garden. Our children, fascinated gorge that carries the floods of | by thé new pet, searched for in- rain water rushing madly to the / formation on the life, habits, and sea. Overhead a flock of storks | 1 diet of the stork family. They flew gracefully by. Heedless of the named him Junior and aided him calls of the children, he stretched | in his quest for food. Junior re- his wings and flew off to soar sponded to this attention and soon with his fellow storks into the became very tame, answering to freedom of the skies. the call of his name. After some Our children consoled them- weeks he learned to fly. Disdain- selves in their loss with the knowl- ing the shed, he flew to the top edge that Junior was, after all, of the woodpile or to the roof to a stork and they could expect him — to prefer the freedom of the The Reverend Mr. Mahaffy has served since 1945 as a missionary of the Orthodox Presby. Cl0UdS and mountains to the con- terian Church in Eritrea, East Africa. finement of our garden wall. 45 ===== PAGE 50 ===== 46 THE FREEMAN May under the welfare state. Having become accustomed to living at the expense of others, dependent upon subsidies, tariffs, relief checks, unemployment compensa- tion, social security, and a host of other government handouts, they lose even the desire for freedom and reject the responsibility of standing on their own feet. Man, the image bearer of God, was created not to live as a do- mesticated animal, a parasite on But that was not the end of others, but to subdue the world, the story. In about two weeks applying his growing intellect and Junior, apparently tired of for- physical powers to the creation aging for himself, flew back into in order to develop his potential, our garden which he has again strengthen his character, and made his home. Now he willingly serve his Maker. The welfare roosts in the shed at night and state pampered life, however, can seems to prefer the security of so benumb his soul that he loses his life as a family pet to the free- even the desire to enjoy and use dom of the mountains and sky. his freedom under his Creator. Never has he attempted even to In the process he becomes some- fly over the garden wall. Instead, thing less than man. Like Junior he walks at the feet of the chil- he finds contentment with a life dren in search for food as they that falls short of a full realiza- hoe in the garden or gracefully tion of his own nature. catches in his beak scraps of meat The exchange of freedom for which they toss to him. While life under the welfare state is a Junior is a favored pet, he seems deliberate choice of man. The con- to have lost something of the na- sequences of that free choice, ture of that large and graceful however, are destructive of his bird by his clear preference for character. In fact, they are also the pampered life of a domestic destructive of human society for animal. society cannot long support an Even the children were quick ever-growing number of unpro- to see the parallel between Jun- ductive dependents who prefer to ior's conduct and that of people be something less than men. & ===== PAGE 51 ===== Cres, Ra 8778 Consumers W. M. CURTISS TRADE between one person and an- untary and peaceful, both parties other probably has been going on think they benefit from the deal. as long as man had something he If not, why trade? could call his own. In a peaceful Now, it’s true, trade gets more society, two neighbors compare complicated when money comes in- their respective supplies and to the picture — and especially so wants, and find opportunity to if each trader uses a different swap to their mutual advantage. kind of money. Distance and time That's really all there is to trade and transportation also complicate — one person giving up something the trade. Still further complica- he has for something he wants tions arise when there are govern- more. So long as the trade is vol- ment licenses to cope with, and Dr. Curtiss is a member of the staff of the import quotas, and exchange Foundation for Economic Education. quotas, and bi-lateral agreements, This article is recorded in the ‘Seminar Library’ series of LP records available from - - i - the Foundation for Economic Education, Irv- and most-favored-nation agree ington-on-Hudson, New York. $3.50. Write ments, and a host of other restric- for complete list. . Also available from the Foundation is a tions. ' detailed 80- iscussi . Cur- . move Qeieiled S0-pags discwsdon by Dr. Cur The first essential to orderly Illustration: A. Devaney, Inc., New York. trade between people is private 47 ===== PAGE 52 ===== 48 THE FREEMAN May ownership of property. A man ful is that most of the material must possess and be able to de- things we want are always in liver what he offers. short supply. There just isn’t Just why do people trade one enough to go round. It is for this thing for another? reason that things command a Man attempts to satisfy his de- price in the market and that per- sires with the least possible ef- sons find it desirable to trade and fort —a worthy trait indeed, so improve their position. long as he does not tread on the equal right of others to do the same. This is the principle of con- The material welfare of an in- servation as applied to human ef- dividual, a family, a group, or a fort —and it is the basis of all nation is determined by the . economic progress. amount of goods and services at In satisfying his desires, mod- its disposal. Neither nations nor ern man is constantly exchanging individuals can consume what they goods and services with other do not have. Thus, the material men. In making these exchanges, level of living which the people of his urge is always to obtain some- a nation enjoy is measured by thing which he values more highly their production — plus or minus than what he gives up. international gifts. But this trait in man’s nature The American family has more sometimes leads to trouble. Some material things than has the Chin- men think that the easiest way to ese or Indian or Russian family satisfy their wants is to steal from because the American worker pro- others. And perhaps this would duces more. The reasons for this be so except for one thing: The greater productivity — capital ac- victims resent it! In most socie- cumulation, private ownership, ties, of course, stealing is con- tools, and the like — are fairly well sidered a violation of the basic known. The point is that high- codes of conduct, ethics, and mo- level consumption is based on rality; and, it is a violation of our high-level production and exchange first assumption, a person has the — on abundance, not on scarcity. right to own property. If stealing Trade between individuals, of is considered wrong in a society, course, would never take place un- it is natural that laws be passed less each party to the trade ex- to punish thieves. pected to benefit from the ex- One of the facts of life that change. When two men voluntarily makes trading desirable and use- agree to trade horses, it is certain Consumption Follows Production ===== PAGE 53 ===== 1964 SERVING CONSUMERS 49 that each believes he is to get Not many decades past, practi- something better than what he is cally every working hour was re- to give up. Why else would either quired just to provide the food, consent to the trade? clothing, and shelter necessary to There seems to be a general keep alive. Most people were farm- feeling that when money is ex- ers. There was precious little be- changed for, say, an automobile, sides the products of the farm it is only the seller of the car who available to families, for the sim- benefits. But doesn’t the buyer ple reason that eight or nine out benefit as well? Doesn’t he value of every ten families had to work the car more than the money he as hard as they could to feed and gives up? If not, why does he clothe the ten families. Specializa- willingly make the exchange? tion? Yes, they had it in a limited Is it any different when the way.Buttoday in the United States bargaining parties happen to live it requires little more than one in different cities? Or in different family in ten to produce enough states? Or in different countries? food and fiber for all ten families. Throughout history, and to a The other nine families can make dramatic degree in the past one television sets, automobiles, house- hundred years, men have become hold furnishings; they can be specialists. Suppose, for instance, teachers, doctors, clergymen, or that each person had to produce producers of a host of other goods his own television set. Life just and services. wouldn’t be long enough for him to do it. He would have to be an Comparative Advantage electronics engineer, a mining en- Specialization is made possible gineer, a metallurgist, a cabinet- by what economists call “compara- maker, a glass manufacturer, a tive advantage.” We see this clear- machine-tool maker — there must ly in athletic events. Some per- be hundreds of skills involved in sons are better than others at building a television set. throwing a ball or batting a ball But while he was mastering the or passing a football or playing skills necessary to produce his tennis or running or jumping. television set, who would provide They have a comparative advan- him with food, clothing, and tage and thus are specialists. The shelter? And how could he learn game is true of writing a novel, of electronics without books and operating a typewriter or a punch the accumulation of years of re- press, or treating a disease. search? Comparative advantage is some- ===== PAGE 54 ===== 50 THE FREEMAN May times the result of geography. A $16,000 to $20,000 to provide one clear example is the production of industrial worker with tools. Some bananas. Bananas can be grown modern industrial plants cost as under glass in the state of New much as $100,000 for each worker York — and a few are. Of course, employed there. Contrast this with they are very expensive when a hoe or wheelbarrow used by a grown this way. Through the co- Chinese worker. operation of nature, bananas are grown at much less cost in Central The Consumer Reigns America. That area, then, has a In an economic sense, the only comparative advantage in the reason for producing anything is growing of bananas. to satisfy the desires of consumers. In a free, competitive market, This idea seems simple enough, the price of a commodity or serv- but it is often lost from sight as ice depends on what someone is an economy becomes more and willing to pay for it. So it is with more complex and specialized. In the wages of labor. The employer a subsistence economy, where the must be willing to pay if he wants producer is also the consumer, men to work for him. How much production is obviously for con- he will pay will depend on the sumption. In such an economy, the labor market and indirectly on family is acutely aware that it how much his workers can pro- must produce food in order to eat; duce. to provide its clothing, sheep must Therefore, we find relatively be raised or fur-bearing animals high wages in a country where hunted. The family is both pro- the productivity of the workers is ducer and consumer of everything high. Where we find an extremely it has. low level of wages, we can be sure The consumer is, in effect, the that the productivity of the work- court of last appeal in a free mar- ers is low. ket. He is the judge who convicts The reason for such a tremen- or acquits. He either accepts or dous difference in the production rejects the goods and services of- of workers in different countries fered — taking into account his can be told very briefly in one own desires, his buying power, word, tools. Tools include plant and the alternate products avail- and equipment, as well as the ac- able. He cares not a whit, at the tual machines the worker oper- moment, what it may have cost ates. In the United States, it now someone to produce the goods. requires an average investment of To ignore these decisions of the ===== PAGE 55 ===== 1964 SERVING CONSUMERS 51 consumer is economic suicide — one has an understanding of them, witness the demise each year of other types of restrictions can be business firms which were guilty more easily understood. of ignoring or misjudging the Probably the most common ar- consumer. gument in defense of tariffs is So, we know why people trade; that they keep our domestic wages we know the importance of special- high; that they keep wages in this ization and trade in providing peo- country from being reduced to the ple with an increasing amount of level of wages in the countries the material things they like; and from which we import. It is often we know that the only reason pro- put this way: “Tariffs protect us duction and trade take place is to against the competition of low- serve the consumer. With this paid foreign labor. If we accept background, let's take a look at their goods, we must accept their some of the road blocks that some- wage levels.” times get in the way of trade — To begin with, we must not lose that prevent a consumer from sight of the reason why wages in making the best possible exchange this country are higher than in of whatever he has to offer for some others. The level of wages whatever it is he wants. depends upon the productivity of the workers. Our workers are highly productive, largely because Years ago, piracy on the high of the tools with which they work. seas was one of the road blocks to In countries where there is a trade. Goods that got through had limited accumulation of capital, to bear the cost of those that did the tools of the workers are not. As a result, consumers got limited. Thus, their productivity less for their money, or whatever is low, and so are wages. it was they traded, than if there The level of living in a nation had been no piracy. depends upon the amount of goods There are many kinds of road and services available for con- blocks today — most of them thrown sumption. If certain individuals up by governments — either in the in a nation voluntarily trade exporting country or the import- some of their possessions for the ing country or both. Tariffs are products of another country, it just one of these road blocks and follows that what they receive is probably not even the most im- worth more to them than what portant at this time. However, they give up. Otherwise, they tariffs are pretty simple and once would not trade. The total value Trade Barriers ===== PAGE 56 ===== 52 THE FREEMAN May of the goods and services available comparative advantage exists. The for consumption is greater after American producer might, for ex- the trade. The level of living has ample, turn to machine production been raised. of an article to replace hand em- Consider, for a moment, a prod- broidery. uct made entirely by hand labor. This is typical of the readjust- Hand embroidery or other needle- ments which would be necessitated work will illustrate. Assume that by a return to free trade. Workers a woman in Italy working for a and management alike, having be- very low wage can turn out hand- come adjusted to production under made needlework comparable to tariffs, would have to improve that produced by an American their efficiency or find other out- woman working for a relatively lets for their skills. high wage. It is obvious that the Tariffs encourage the produc- Italian product can be sold in this tion of some things in which the country for less than it would cost country lacks efficiency and dis- to produce it here. Does that mean courage other lines of production that if we import the Italian prod- in which the country has a com- uct the American woman's wage parative advantage.The total value will necessarily be reduced to the of production, so far as consumers level of the Italian woman's wage? are concerned, is less than it Not at all. Why is the wage of the would otherwise be — and this American woman high? It is be- means that real wages are held cause of the generally high pro- down by reason of tariffs. So, ductivity of American labor, rather than protecting domestic which makes it possible for her to wages generally, tariffs lower real get a high wage in an industrial wages in all countries affected. plant, in an office, in a profession, or in some other type of employ- ment. That is all very well, you may It is true that, without trade say, but wouldn’t a free trade pol- barriers, hand embroidery prob- icy lead to unemployment? The ably would be imported from prevention of unemployment is Italy. The American producer of one of the usual arguments for hand embroidery, unable to pro- tariffs. duce and sell a comparable prod- This argument is expressed in uct at a competitive price, would a number of ways. One is that the have to turn to producing one of removal of a tariff, after an in- the many products for which a dustry has become adjusted to it, The Unemployment Issue ===== PAGE 57 ===== 1964 SERVING CONSUMERS 53 will result in unemployment. An- that farm, but neither would other is that by means of tariffs there be the high level of living we can put our people to work the family now enjoys. If the making the things we now import tariff wall around the farm were and thus create employment. Some removed, no one would necessarily say: “We do not want such-and- be disemployed, and the farmer's such a country exporting its un- household would enjoy a vastly employment to us.” higher level of living —and so We have observed that if a would outsiders. tariff is removed, a protected in- The question of employment or dustry may be forced out of busi- unemployment, except for tempo- ness by foreign competition. If rary adjustments, has no place in this happens, the workers in that a consideration of tariffs. It would industry will have to find employ- be as logical to argue that the ment elsewhere. In the émbroidery buggy whip industry should have illustration, it is not denied that been subsidized in order to keep the existence of the tariff permits its workers employed when there some workers to be employed in no longer was a demand for buggy embroidery manufacturing who whips. would not otherwise be so em- The pattern of production with- ployed. But what is often lost in our own country is perhaps the sight of is that many other job best illustration of how free trade opportunities not now in existence builds a higher level of living. would become available in this Steel is produced in Pittsburgh, country if people could buy the automobiles in Detroit, cotton -in imported embroidery and spend the South, meat and grain in the their tariff money as they please. Midwest and the Great Plains, The money which the consumer shoes in St. Louis, clothing in New formerly had to pay for tariffs England and New York — just to could be spent to purchase or pro- mention a few of the products and duce new products or more of ex- areas of specialization. isting products or services. “Yes,” you may say, “but tariffs Tariffs turn a country toward don’t completely shut off trade.” self-sufficiency. A farm family True, but they shut off trade to might erect such a high tariff whatever extent they are effective. wall around its farm that there The effect of a tariff on wool is could be no trade in goods and that we must employ more of our services with outsiders. Certainly, domestic resources in the produc- no one would be unemployed on tion of wool than would be neces- ===== PAGE 58 ===== bd THE FREEMAN May sary if we imported more of it. A not lose sight of the fact that tariff on Swiss watches encour- consumption is the sole end and ages the production of watches in purpose of all production. our own country because it pre- vents their importation at a lower cost. And by keeping prices What, then, are the chief advan- higher, such tariffs reduce our tages of free trade? consumption of wool and watches. The elimination of trade bar- Another argument for tariffs is riers would have three very im- that new industries cannot survive portant beneficial effects: if they must compete with firmly 1. It would permit our economy established industries in other to gain from the specialization countries, It is said, “Give them and comparative advantage in pro- a chance to get established, and duction to be found all over the they can then compete.” world. History has shown that protec- 2. It would help the so-called tion in the form of tariffs imposed underdeveloped areas of the world to protect infant industries is dif- to help themselves. It would give ficult, if not impossible, to throw them a better chance to produce off. The protected infant never and trade. grows up to attain self-responsi- 3. It would be the best way to bility. And little wonder! In any cement friendly relations between industry, protected or not, there Americans and other peoples all are firms which are barely able to over the world. How can one in- stay in business — even though dividual become angry with an- other firms in the same industry other when they are permitted to are operated profitably. If the trade freely and voluntarily, know- crutch of tariffs is removed, these ing that both parties to the deal marginal producers must either will benefit? In such trade, there improve their efficiency or go out is no danger of secret diplomacy, of business. If they can do the of playing special favorites, of former, why didn’t they do it be- handling other nations as pawns fore the crutch was removed? — pitting one against the other to Those who use the infant-indus- seek a gain or even to attempt a try argument appear to place em- precarious balance. phasis on the virtue of industry, But what can we do about all as such, rather than on the goods these trade restrictions — not only produced. They seem to be con- tariffs but all the others? Isn't it fusing means and ends. We must a difficult political problem? Of Advantages of Free Trade ===== PAGE 59 ===== 1964 SERVING CONSUMERS bb course it is, and it requires politi- tariff protection are illusory — the cal answers — unfortunately. I say only consequence of the tariff be- unfortunately because, too often, ing that the domestic owners and a political solution may not be the workers are competing with one best economic solution. another in an industry erected on The will to remove restrictions a false base. The base is false and on trade can come about only weak because it is supported by through understanding — through the threat of force — force which the realization that restrictions do directs individual spending — in- not yield the benefits claimed for stead of by voluntary choices. The them. Worse than that, they are force is directed against consum- harmful — harmful economically ers, the friends and neighbors of and harmful to the cause of peace, those who seek special privileges friendship, and good will, at home for themselves. But consumers do and abroad. not respond kindly to force or On the surface, tariff protec- threats of force. They have only so tion seems to offer benefits to the much buying power, and they can- owners and workers of a protected not be forced to buy more of industry. When a tariff is first ap- everything. Nor will they buy a plied, the producers of the par- commodity as freely as before if ticular product affected have a its price is forced upward by a price advantage which should be “protective” tariff. Thus, tariffs reflected in higher profits. But serve merely to put the whole tariffs do not prohibit domestic economy on an artificial founda- competition within an industry. tion instead of on a sound business The higher profits attract new- foundation. No one really gains — comers to the field, and competi- and nearly everyone loses — by this tion tends to erase the gains from arrangement. It stifles progress. the special privilege, After this happens, the producers are back The Pain of Adjustment in their former competitive posi- Adjustments such as those tion. In order to maintain any which would be required by the benefit, they will have to continue removal of tariffs are taking place to ask for new privileges as the constantly in a free economy. old ones lose their power — much When the automobile made its ap- as a drug addict must use more pearance, the operators of livery and more of the drug to avoid the stables and the manufacturers of suffering it is supposed to relieve. buggies were inconvenienced. They Thus, the so-called “benefits” of had to turn to something else. But ===== PAGE 60 ===== 56 THE FREEMAN May they soon found themselves bene- this is fairly effective since it is fiting in two ways: First, as con- practically impossible to face the sumers, they benefited generally combined forces of all minority from the automobile; and second, groups. Economically, of course, the new job opportunities within the argument has no validity. The the new and expanding automo- way to begin is to begin. The bile industry were more attractive amount of human energy released than those in a dying industry. by the removal of restrictions will Thus, the removal of trade restric- be astounding. tions would not be as painful as it may at first appear —even to thoge Each Small Exception who think they benefit from them. Justifies the Next To argue that tariffs cannot be Perhaps the greatest obstacle to removed when an industry or a the removal of trade barriers is nation has become adjusted to the belief expressed by small operating under trade restrictions groups of producers: “Yes, but is no different in principle than our case is different; an exception to argue against all technological should be granted in just this one change and advance. instance.” Grant a single excep- Such arguments indicate, how- tion and the floodgates are opened ever, that it is politically difficult to all sorts of pressure groups. to remove restrictions once they The result will be a continuation have become established. Powerful of the political chaos which we minority interests vigorously now find in the area of trade re- withstand changes of this type. strictions. “Tariffs should be removed grad- Basically, the issue of tariffs ually,” say some, “in order not to and other trade restrictions is a offend too severely those who have moral one. This is not to deny a direct interest in the protected that it is also an economic issue. industry.” This overlooks the per- It is merely a matter of emphasis. sons who have long been offended Unless economic principles are in by not being able to exchange to harmony with good moral princi- advantage. It argues that the of- ples, they are not good economics. fense to the consumer may be con- Government grows strong and tinued without injustices. dictatorial by the granting of spe- A familiar argument is: “We cial favors. Trade restrictions are are willing to give up our protec- just another of the handouts tion if all others will give up which a government can grant, theirs.” As a political argument, thereby increasing its power over ===== PAGE 61 ===== 1964 SERVING CONSUMERS 57 individuals — to the detriment of cannot be achieved without a high all. degree of division of labor — spe- The moral basis for free trade cialization. Rather than a jack-of- rests on the assumption that an all-trades, each person is the mas- individual has the right to the ter of one. This calls for a high product of his own labor — steal- degree of cooperative effort and ing is bad because ownership is exchange. Production by this proc- good. This involves property ess rests on the principle of com- rights. Property rights are human parative advantage — of produc- rights, and to try to distinguish tion where conditions are most between them is merely to play favorable. with words — and on emotions. A fallacy of protectionists is The right to own property in- that employment, of itself, is a volves the right to use it, to keep worthy economic objective. Em- it, to give it away, or to exchange ployment, however, is merely a it. Unless this is possible, one does means to an end — and the end not own property. To lay obstacles is production for consumption. in the path of ownership, use, or No doubt employment was high exchange of property is a viola- during the building of the Great tion of the human right to own Wall of China or the Pyramids property. of Egypt. A dictator can always achieve full employment. Hitler did it in Germany; and we had Economists from Adam Smith our leaf-raking projects. down to the present have quite But under freedom — freedom generally agreed that tariffs are to produce and to trade volun- bad economics. And it is not diffi- tarily — men will have just as cult to discover why. much employment as they desire. Tariffs and other trade restric- Actually, tariffs have nothing to tions contribute to scarcity rather do with employment. Employment than to abundance. We are some- can be high or low — with or times fooled by the introduction without such trade restrictions. of money into trade; but basically, Tariffs do not create better jobs it is the abundance of goods and for individuals. They simply tend services, widely distributed, that to keep people working at jobs contributes to a high level of ma- which are less productive of use- terial well-being. ful goods and services than they There is ample evidence that a would be under free trade. high level of living in any country Protectionists have claimed Fallacy and Fact ===== PAGE 62 ===== 58 THE FREEMAN May that wage levels can be main- a temporary inconvenience for a tained or increased by shutting few producers is merely the cor- out imports from areas with low rection of an injustice previously real wages. Wage levels are de- established. termined by the productivity of Free trade is such a simple labor. This, in turn is determined solution for so many of the world’s by the investment of capital in the ills. It doesn’t require endless tools of production. The products hours of debate in the United Na- we import are more valuable to us tions or the International Labor than our exports; otherwise, the Organization or the Food and Ag- trade would not be made. Rather riculture Organization, or any than produce the imported product other world-wide debating society. here, our own labor is released to It requires only that one nation produce something we are better see the light and remove its re- fitted to produce. strictions. The results will be im- Failure to recognize that satis- mediate and widespread. faction of desires is the sole pur- pose and end of production has It isn’t necessary for all nations led protectionists to support to agree jointly and simultane- tariffs, subsidies, and other meas- ously to remove restrictions. If ures. Had we consistently followed only one nation does it, some good such a policy, we would now be is accomplished — both for itself subsidizing 80 per cent of our pop- and for its customers. A great na- ulation in agricultural pursuits, tion, such as the United States, as well as in the manufacture of could do it and thus set an ex- buggy whips and candles. Eco- ample for others to follow. It nomic progress cannot take place would not be meddling in the af- under such a system. fairs of other nations; it would The removal of tariffs restores merely be looking after the best justice to consumers — to millions interests of its own citizens. And and millions of consumers. The instead of being resentful, other fact that it may seem to result in nations would be grateful. @® | ID0AS © 0060 @9v | Ludwig von Mises WHILE government has no power to make people more prosperous by interference with business, it certainly does have the power to make them less satisfied by restriction of production. ===== PAGE 63 ===== A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN | DESPAIR NOT! ~ t The late Isabel Paterson, important book can continue to be whose The God of the Machine ignored by established institu- has just been reprinted by the tions even after it has made its Caxton Printers of Caldwell, way among thinkers who are not Idaho ($4.95) with an appendix linked to the hierarchies that con- which lists the books in Mrs. trol most of our important social Paterson’s library, was neither a and political activities. professional economist, nor a poli- Mrs. Paterson operated in the tical scientist, nor a historian, nor field of logic because she con- yet a sociologist. But she was a sidered that none of our modern superb logician, and because of disciplines could be made worth this fact The God of the Machine while until people had learned remains just what I said it was how to use words and categories when I reviewed it for Harper's with due regard to their actual Magazine in 1943, “the first clear meaning in a world of physical piece of sustained primary poli- reality. Her attack on the fallacies tical thinking that has appeared of socialism, for example, began in ages.” by holding Proudhon’s maxim, Rereading The God of the Ma- “All property is theft,” up to the chine twenty years after its first light. Theft, said Mrs. Paterson appearance, one is particularly in swift rebuttal, presupposes conscious of two things, one hope- rightful ownership, for “an ob- ful, one that is only productive of ject must be property before it despair. The hopeful thing is that can be stolen.” After such a suc- an important seminal book does cinct and powerful demolition of not have to be widely popular to the whole bent of Proudhon’s have a prodigious effect. The de- thought, is there anything more spairful thing is that the same that need be said? 59 ===== PAGE 64 ===== 60 THE FREEMAN May Since such epigrammatic utter- committee, or knows how to get ance is condemned by our self- next to the official dispenser of appointed Best Minds as ‘“shoot- favors. But woe to the individual ing from the hip,” Mrs. Paterson under socialism who is not gaited made it a habit to follow up her to rise in the political world or barbs with some fairly detailed to fawn on those who have already logical analysis. The reason for attained to political power. private property, she told the Proudhonists and the Marxists, goes back to the physical law Twenty years after Mrs. Pater- that says two bodies cannot oc- son wrote her book one still hears cupy the same space at the same labor leaders arguing that prop- time. Individual ownership is dic- erty rights and human rights are tated by the “conditions of physi- mutually exclusive categories, and cal phenomena,” whereas ‘public that production for profit and pro- ownership” must inevitably be a duction for use are at polar ex- fiction simply because its verbal tremes from each other. The de- terms do not correspond to the spairful thing is that, despite conditions of time and space. Mrs. Paterson, the labor leaders Nobody, so Mrs. Paterson re- still carry conviction. The deduc- minded us, could live in a house tion to be made from this is that if the general public were free our schools have been incapable of to go in and out at will, to sleep teaching logical analysis to all the in the beds, or to cook in the generations that have grown up kitchen. There would have to be since 1943, when Mrs. Paterson an allotment of the space and the first demonstrated that produc- facilities. If the allotment were to tion for profit and production for be made in perpetuity, under a use are one and the same thing. theory of inalienability, it would She did this by following a be a mark of private property farmer into his potato patch. creeping back in. Otherwise, the There would be no sense to plant- occupant of bed and kitchen would ing a seed potato in the spring, be sleeping and cooking by per- she said, if it were not to result in mission. Thus Mrs. Paterson many more potatoes in the fall. made her logical point: in a world The multiplication of his potatoes of public ownership, one lives by is the profit the farmer gets from permission. In such a world one his deployment of energy and cap- can make out rather well if he ital. And it is, at the same time, happens to be on an important the source of what the farmer Clichés Examined ===== PAGE 65 ===== 1964 DESPAIR NOT! 61 must use to live and add to his protect a man on his physical base capital. He may not eat the pota- (property), to safeguard him in toes himself, but someone else his contractual relations with will eat them — and by this “use” other individuals, to represent they will sustain their own lives. him in dealing with other nations (the power of the border), and to render impartial justice. In her To Mrs. Paterson, civilization exploration of the function of gov- was to be likened to a “long cir- ernment Mrs. Paterson found her- cuit of energy.” To keep the cir- self talking about money, about cuit operating with complicated the “flaw” of slavery, and about hook-ups, the individual had to be the need for architectural struc- left free to make his own deci- ture (the “motor” of the individ- sions about plugging in. A good ual, the “brake” of the political part of The God of the Machine is power, and the correct combina- devoted to historical exposition, tion of regional and mass repre- accompanied by shrewd analysis sentation). of the contributions of the Phoenicians, the Greeks, the Religious Foundation Romans, the medieval church, the Mrs. Paterson’s book deals ex- English, and the creators of the haustively with mechanisms, but American Federal Constitution, to the fundamental approach is not the making of a free society. mechanistic. Unlike Ayn Rand, Since Mrs. Paterson was one of whose novels appealed to her be- the closest reasoners in the world, cause they had great force as in- it is impossible to put the gist of spiriting fables, Mrs. Paterson such chapters as “Rome Discovers was fundamentally religious. The Political Structure” or “The Second Law of Thermodynamics Function of Government” or “The says that the universe is “run- Meaning of Magna Carta” into a ning down,” and will end as a few paragraphs. dead aggregation of heatless and Briefly, however, a government, motionless particles. But to Mrs. if it is to encourage the inventive Paterson it was only rational to and productive man, must agree suppose that there must be a God that the rights to life, liberty, and (or First Cause) to wind uni- property are inalienable. The man verses up so that they may run who is not free to think, to own, down. She saw the human being and to produce is not free to live. as constituting a continuing ex- The function of government is to ception to the Second Law of A Circuit of Energy ===== PAGE 66 ===== 62 THE FREEMAN May Thermodynamics. It was obvious ings of the Continental Congress; to her that a human being posses- he was on the committee chosen ses the faculty of choice, that he by the Continental Congress to has the power to become a crea- draw up the Declaration of Inde- tive person, and that he is in pendence from Great Britain; he charge of his machines, and not represented the colonies at the vice versa. The principle of the French court, in Holland, and dynamo inheres in nature, but later in drawing up the peace man himself makes the dynamos treaty with Great Britain that and keeps them in running order. ended the war for independence; Thus Mrs. Paterson’s answer to he was our first ambassador to Henry Adams, who saw the the Court of St. James after hos- “Virgin” (the thirteenth century tilities ceased and he wrote at embodiment of grace and free length in favor of forming a na- will) giving way to the mechan- tion of the thirteen colonies un- istic twentieth century. der a constitution; he was the The “Virgin” is still with us. first Vice-President of the United She turns the dynamo on and States of America, and the sec- off. & ond President. After the Revolution he was often accused of being a monarch- ist, of no longer holding to the » JOHN ADAMS by Page Smith eas that led bo the separation ] rom Britain; he retorted tha (New York: Doubleday & Co, 2 not he but some of his fellow-rev- olutionaries were false to the Reviewed by Robert M. Thornton cause of individual liberty. Adams believed (as Page Smith phrased JOHN ADAMS had one of this it) that “only those should make country’s best political minds, and revolutions who cared, next to was one of the few men active justice, for order. The careless, throughout the entire twenty-five the hasty, the fanatical, the reck- years that witnessed the birth of lessly impatient — they brought the Republic, 1764-1789. With destruction and ruin more often James Otis and Cousin Sam he than happiness. Those ardent rev- was among the first to advocate olutionaries who killed particular separation from the British men because they loved Man in Crown; he was a delegate from the abstract put a dark curse on Massachusetts to the first meet- the ideals they professed and com- vols, 1170 pp., 1962, $14.50). ===== PAGE 67 ===== 1964 OTHER BOOKS 63 promised the causes for which which the tyranny of the major- they themselves were quite ready ity might at any moment topple to Sie " a y the safeguards that protected the ' life, liberty and property of a Tyranny of the Majority minority of the community. While Mr. Jefferson and others Page Smith has done a truly were concerned with the dangers fine job of presenting the life of of an all-powerful monarch, our second President— the first Adams (and many framers of the biography of Adams since release Constitution such as James Madi- of the Adams Papers in 1954 and, son) worried about the possible with the exception of Gilbert tyranny of the majority. As his Chinard’s Honest John Adams biographer writes: (1983), the only full treatment To say that they had equal of the man by a historian in this rights before the law and equal century. Were it not so long, one opportunities to advance in the could imagine Smith writing this world was one thing, but this book at one sitting without so querulous contention that breed- much as a pause to catch his ners on henence, man breath — it is that sustained and counted for nothing was troubling steady an effort. It is heartily rec- and dangerous. It was the same ommended to all who might seek Spirit Which held up single-branch some clarification of current af- egislatures as the model of po : ; ular government where the Soil fairs by going back to the early of the people was expressed di- days of our nation which were no rectly, unencumbered by judges less critical than our own. And and executive officers. Indeed, the it is most refreshing to read of “leveling spirit” looked askance this man who of all the giants of on law and lawyers. The will of his time we can perhaps know the people was the magic phrase. vime bp p The people, by this new doctrine, best. If Mr. Jefferson ever put were naturally and inherently his innermost thoughts and feel- good. It thus followed that re- ings in writing, he carefully de- straints and inhibitions on their gtyoved all the papers before his actions were bad. If the people wished this presently and some- death. Adams, on the other hand, thing else tomorrow, what right seems never to have thrown any- had law to gainsay them ? This thing away — letters, diaries, com- was, in Adams’ view, a most in- monplace books all written in per- sidious dogma. It was government fect frankness and unedited by by men, not by laws, government oo in which order and stability the writer! yielded to whim and fashion, in This book should put John ===== PAGE 68 ===== 64 THE FREEMAN May Adams in his rightful place be- and with them the emotionally side Washington, Jefferson, Madi- unstable, the meanly ambitious, son, Franklin, and Hamilton. the zealots and the simple cranks.” Paraphrasing Adams, Page Smith That John Adams was among the writes: “The revolutionary crisis former, this book makes clear drew forth the devoted and able without a doubt. @® RECENT ARTICLES AVAILABLE AS REPRINTS Date of Issue Author Title Price Mar. 1964 ROBERT COULSON Living With a Bomb 3¢ Mar. 1964 AYN RAND The Nature of Government 10¢ Feb. 1964 LEONARD E. READ A Blessing of Extremism 10¢ Jan. 1964 DEAN RUSSELL Play Store Economics 10¢ Jan. 1964 E. W. DYKES Big Wars from Little Errors Grow 2¢ Nov. 1963 LEONARD E. READ To Alleviate Misfortune 2¢ Oct. 1963 W. A. PATON The Beetle and the Centipede 2¢ Sept. 1963 BENJAMIN A. ROGGE The Case for Economic Freedom 10¢ July 1963 CLARENCE MANION Right and Wrong — Not Right and Left 10¢ July 1963 LEONARD E. READ For the Good of Others 2¢ July 1963 PAUL L. POIROT To Abolish Sweatshops 2¢ A full listing of reprints and miscellaneous releases avaliable on request, ===== PAGE 69 ===== CLEARANCE SALE: Back Issues of THE FREEMAN From January 1956 through December 1963 — almost.” A storage problem here, but highly useful to pass along to others as samples of libertarian thinking. Less expensive than reprints. Single copies of different issues, 5 for $1.00 Multiple orders for any one issue: 10 copies for $1.00 25 copies for $2.00 100 copies for $5.00 If particular issues are desired, list preferences. For larger quantities, inquire about rates and availability. *Sorry, but our supply of some issues is low, the following being entirely out of stock: Oct. 1956, Oct. 1958, Mar. 1959, Sept. and Oct. 1960, Jan. 1962. HANDSOME BLUE LEATHERLEX FREEMAN BINDERS Binder only, $2.25 each Special, while they last: Binder, with 1963 issues inserted, $5.00 each ===== PAGE 70 ===== © 12] © Ld [21] .u (a ( -